<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1997.
REGISTRATION NO. 333-36375
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMPUTER PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 3679 59-1205269
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>
------------------------
7900 GLADES ROAD, SUITE 500
BOCA RATON, FLORIDA 33434-4105
(561) 451-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
JOSEPH M. O'DONNELL
COMPUTER PRODUCTS, INC.
7900 GLADES ROAD, SUITE 500
BOCA RATON, FLORIDA 33434-4105
(561) 451-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
STEPHEN A. OLLENDORFF, ESQ. SHERMAN WINTHROP, ESQ.
Hertzog, Calamari & Gleason Winthrop & Weinstine, P.A.
100 Park Avenue 3200 Minnesota World Trade Center
New York, New York 10017 30 East Seventh Street
(212) 481-9500 (Telephone) St. Paul, Minnesota 55101
(212) 213-1199 (Facsimile) (612) 290-8400 (Telephone)
(612) 292-9347 (Facsimile)
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and the other
conditions under the Merger Agreement are met or waived.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[COMPUTER PRODUCTS, INC. LETTERHEAD]
November , 1997
Dear Shareholder:
You are cordially invited to attend a special meeting (the "CPI Special
Meeting") of the shareholders of Computer Products, Inc. ("CPI") to be held at
10:00 a.m. (local time) on December , 1997, at .
At the CPI Special Meeting, you will be asked to consider and vote upon a
proposal to approve the issuance of shares of CPI common stock pursuant to an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 2,
1997, between CPI, CPI Acquisition Corp., a wholly-owned subsidiary of CPI
("Merger Sub"), and Zytec Corporation ("Zytec"), including shares of CPI common
stock issuable upon the exercise of outstanding options to purchase Zytec common
stock and upon the conversion of a promissory note convertible into Zytec common
stock.
Pursuant to the Merger Agreement, Merger Sub will be merged with and into
Zytec, and Zytec will become a wholly-owned subsidiary of CPI (the "Merger"). As
a result of the Merger, each outstanding share of Zytec common stock will be
converted into the right to receive 1.33 shares of CPI common stock (the
"Ratio"), and all outstanding options to purchase Zytec common stock will be
automatically converted into options to purchase CPI common stock based on the
Ratio. Details of the Merger and other important information are set forth in
the accompanying Joint Proxy Statement/Prospectus, which you are urged to read
carefully. The Merger is subject to the satisfaction of certain conditions,
including, among others, approval of the Merger Agreement by the holders of a
majority of the outstanding shares of Zytec common stock.
Your Board of Directors believes that the combination of CPI and Zytec will
create a world leader in the power supply industry resulting in a unique
platform for growth and significant long-term shareholder value. As you may
know, Zytec is a leading designer and manufacturer of custom electronic power
supplies for original equipment manufacturers in the networking and computing
markets. Zytec and CPI share the same passion for customer service, product
quality and innovative design. Together, we expect that these values will fuel
the growth of your company for years to come.
Additionally, when evaluating this unique opportunity, we have identified
other potential benefits of the Merger that we believe will contribute to the
success of the combined company. These potential benefits include the following:
- By combining the complementary product lines and the financial,
manufacturing and technological resources of CPI and Zytec, the merged
company will be competitively positioned to meet growing demand from our
global customers.
- CPI and Zytec sales channels are highly complementary and should allow the
merged company to expand distribution of each company's products through
each of the other's sales channels.
- The merged company will be better able to meet customers' needs by
creating new and innovative products as a result of the combination of the
proprietary technology and the integration of the engineering expertise of
each company.
- The merged company will have the necessary financial resources to compete
effectively in the face of increasing customer needs for global
communications solutions and anticipated continuing industry
consolidation.
Your Board of Directors has reviewed the terms and conditions of the Merger
Agreement and, after careful consideration, has approved the Merger Agreement
and related transactions and unanimously recommends that you vote FOR the
issuance of shares of CPI common stock pursuant to the Merger Agreement.
<PAGE>
All shareholders are cordially invited to attend the CPI Special Meeting in
person. Your vote is important regardless of how many shares you own. Whether or
not you plan to attend the CPI Special Meeting, you are urged to take the time
now to review the Joint Proxy Statement/Prospectus and complete, sign and date
the accompanying proxy card and return it in the postage pre-paid envelope
provided. If you attend the CPI Special Meeting, you may revoke such proxy and
vote in person if you wish, even if you have previously returned your proxy
card. If you do not attend the CPI Special Meeting, you may still revoke such
proxy at any time prior to the CPI Special Meeting by providing written notice
of such revocation to Richard J. Thompson, Secretary of CPI. Your prompt
cooperation will be greatly appreciated.
Sincerely,
Joseph M. O'Donnell
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
[COMPUTER PRODUCTS, INC. LETTERHEAD]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER , 1997
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "CPI
Special Meeting") of Computer Products, Inc., a Florida corporation ("CPI"),
will be held at 10:00 a.m. (local time) on December , 1997, at .
The CPI Special Meeting is called for the following purposes:
1. To consider and vote upon a proposal to approve the issuance of
shares of CPI common stock, $.01 par value per share ("CPI Common Stock"),
pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), dated
as of September 2, 1997, between CPI, CPI Acquisition Corp., a Minnesota
corporation and a wholly-owned subsidiary of CPI, and Zytec Corporation, a
Minnesota corporation ("Zytec"), including the shares of CPI Common Stock
issuable upon the exercise of outstanding options to purchase Zytec common
stock and upon the conversion of a promissory note convertible into Zytec
common stock. A copy of the Merger Agreement is attached as Annex A to the
Joint Proxy Statement/Prospectus accompanying this Notice.
2. To transact such other business as may properly come before the CPI
Special Meeting or any adjournment(s) or postponement(s) thereof.
The proposed merger and other related matters are more fully described in
the attached Joint Proxy Statement/Prospectus and the Annexes thereto.
The Board of Directors has fixed the close of business on November 11, 1997
as the record date for the determination of the CPI shareholders entitled to
notice of and to vote at the CPI Special Meeting and any adjournment(s) or
postponement(s) thereof. Only holders of record of CPI Common Stock on the
record date are entitled to vote at the CPI Special Meeting.
If you would like to attend the CPI Special Meeting and your shares are held
by a broker, bank or other nominee, you must bring to the CPI Special Meeting a
recent brokerage statement or a letter from the nominee confirming your
beneficial ownership of the shares. You must also bring a form of personal
identification. In order to vote your shares at the CPI Special Meeting, you
must obtain from the nominee a proxy issued in your name.
You can ensure that your shares are voted at the CPI Special Meeting by
signing and dating the enclosed proxy and returning it in the postage pre-paid
envelope provided. Sending in a signed proxy will not affect your right to
attend the CPI Special Meeting and to vote in person. You may revoke your proxy
at any time before it is voted by giving written notice to the Secretary of CPI
at CPI's headquarters, 7900 Glades Road, Suite 500, Boca Raton, Florida 33434,
by signing and returning a later dated proxy or by voting in person at the CPI
Special Meeting.
Whether or not you expect to attend, WE URGE YOU TO SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE POSTAGE PRE-PAID ENVELOPE PROVIDED.
By Order of the Board of Directors
Richard J. Thompson
SECRETARY
Boca Raton, Florida
November , 1997
<PAGE>
[ZYTEC CORPORATION LETTERHEAD]
November , 1997
Dear Shareholder:
As you may be aware, Zytec Corporation ("Zytec") has entered into an
agreement to combine with Computer Products, Inc. ("CPI") in a strategic
business combination (the "Merger"). At a Special Meeting of Shareholders (the
"Zytec Special Meeting") to be held on December , 1997, at , you will
be asked to consider and approve the Agreement and Plan of Merger, dated as of
September 2, 1997, between Zytec, CPI and CPI Acquisition Corp., a wholly-owned
subsidiary of CPI (the "Merger Agreement"). The accompanying Joint Proxy
Statement/Prospectus describes the details of the Merger.
Approval of this important matter will require the affirmative vote of the
holders of a majority of common stock, no par value, of Zytec ("Zytec Common
Stock") outstanding on November 11, 1997, the record date for the Zytec Special
Meeting. After careful consideration, the Board of Directors of Zytec has
unanimously approved the Merger Agreement and recommends that you vote FOR the
approval and adoption of the Merger Agreement. The Board of Directors of Zytec
believes that the combination of the two companies' complementary products and
technologies, manufacturing capabilities and geographic presence, and research
and development capabilities will create a world leader in the power supply
industry.
In the Merger, each issued and outstanding share of Zytec Common Stock will
be converted into the right to receive 1.33 shares of common stock, $.01 par
value per share, of CPI ("CPI Common Stock"). CPI also will assume all
outstanding, but unexercised, options to purchase Zytec Common Stock, and each
outstanding option to acquire one share of Zytec Common Stock will be converted
into an option to acquire 1.33 shares of CPI Common Stock and otherwise will
remain in full force and effect under the same terms and conditions.
It is expected that the Merger will be a tax-free reorganization for Federal
income tax purposes and, accordingly, that no gain or loss will be recognized
for Federal income tax purposes by Zytec shareholders upon the conversion of
Zytec Common Stock into CPI Common Stock in the Merger (except with respect to
any cash received by a shareholder in lieu of a fractional share of CPI Common
Stock).
CPI designs, develops, manufactures and markets standard and custom designed
power conversion products and subsystems for the communications industry and
high-performance single board computers, systems and subsystems for real-time
applications.
CPI's success in the European marketplace, its Far East manufacturing
facilities, its Far East material sourcing capabilities, and its significant
success in the telecommunications and wireless marketplaces complement Zytec's
operations and capabilities.
Zytec's Board of Directors believes that the Merger will offer a number of
potential benefits to Zytec and its shareholders and that by combining the
complementary product lines and financial, manufacturing and technological
resources of the two companies, the merged company will have the resources
necessary to enable it to compete effectively in the face of increasing customer
needs for global communications solutions and anticipated continuing industry
consolidation.
THE ZYTEC BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, ZYTEC AND
ITS SHAREHOLDERS. THE BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
You are urged to review carefully the information contained in the
accompanying Joint Proxy Statement/Prospectus including, in particular, the
information under the captions "Risk Factors," "The Merger--Background of the
Merger," "--Recommendation of the Board of Directors of Zytec; Reasons for the
Merger" and "--Opinion of Zytec's Financial Advisor" prior to making a decision
with respect to voting your Zytec Common Stock.
<PAGE>
All Zytec shareholders are cordially invited to attend the Zytec Special
Meeting in person. However, whether or not you plan to attend the Zytec Special
Meeting, please complete, sign and date the accompanying proxy card and return
it promptly in the enclosed postage pre-paid envelope to assure that your shares
will be represented at the Zytec Special Meeting. You may revoke your proxy at
any time before it has been voted, and if you attend the Zytec Special Meeting,
you may vote your shares in person even if you have previously returned your
proxy card. It is very important that your shares be represented and voted at
the Zytec Special Meeting. Your prompt cooperation will be greatly appreciated.
Sincerely,
Ronald D. Schmidt
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
YOUR PROXY IS IMPORTANT-PLEASE VOTE PROMPTLY
ZYTEC SHAREHOLDERS SHOULD NOT SURRENDER OR OTHERWISE ATTEMPT TO EXCHANGE THEIR
ZYTEC STOCK CERTIFICATES FOR CPI STOCK CERTIFICATES UNLESS AND UNTIL THEY HAVE
RECEIVED APPROPRIATE NOTICE AND INSTRUCTIONS FOR EXCHANGE.
<PAGE>
[ZYTEC CORPORATION LETTERHEAD]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER , 1997
To the Shareholders of Zytec Corporation:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Zytec
Special Meeting") of Zytec Corporation, a Minnesota corporation ("Zytec"), will
be held at 9:00 a.m. (local time) on December , 1997, at .
The Zytec Special Meeting is called for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of September
2, 1997, between Computer Products, Inc., a Florida corporation ("CPI"), CPI
Acquisition Corp., a Minnesota corporation and a wholly-owned subsidiary of
CPI ("Merger Sub"), and Zytec, pursuant to which, among other things, (a)
Merger Sub will be merged with and into Zytec, and Zytec will become a
wholly-owned subsidiary of CPI (the "Merger"), and (b) each outstanding
share of common stock, no par value per share, of Zytec ("Zytec Common
Stock") will be converted into the right to receive 1.33 shares of common
stock, $.01 par value per share, of CPI ("CPI Common Stock"), and each
outstanding option to purchase a share of Zytec Common Stock will be
converted into an option to purchase 1.33 shares of CPI Common Stock.
2. To transact such other business as may properly come before the Zytec
Special Meeting or any adjournment(s) or postponement(s) thereof.
The proposed Merger and other related matters are more fully described in
the attached Joint Proxy Statement/Prospectus and the Annexes thereto.
The Board of Directors has fixed the close of business on November 11, 1997
as the record date for the determination of the Zytec shareholders entitled to
notice of and to vote at the Zytec Special Meeting and any adjournment(s) or
postponement(s) thereof. Only holders of record of Zytec Common Stock on the
record date are entitled to vote at the Zytec Special Meeting.
UNDER SECTIONS 302A.471 AND 302A.473 OF THE MINNESOTA BUSINESS CORPORATION
ACT ("MBCA"), HOLDERS OF ZYTEC COMMON STOCK HAVE THE RIGHT TO DISSENT FROM THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND, IF SUCH TRANSACTIONS ARE
CONSUMMATED, TO OBTAIN PAYMENT OF THE FAIR VALUE OF THEIR SHARES IN LIEU OF THE
CONSIDERATION PROVIDED FOR IN THE MERGER AGREEMENT. SECTIONS 302A.471 AND
302A.473 OF THE MBCA ARE ATTACHED IN FULL AS ANNEX D TO THE ACCOMPANYING JOINT
PROXY STATEMENT/PROSPECTUS, WHICH ALSO INCLUDES A GENERAL DESCRIPTION OF THE
PROCEDURES TO BE FOLLOWED UNDER THOSE SECTIONS BY A SHAREHOLDER WISHING TO
DISSENT. SEE "THE MERGER--APPRAISAL AND DISSENTERS' RIGHTS" AND ANNEX D IN THE
ACCOMPANYING JOINT PROXY STATEMENT/ PROSPECTUS.
If you would like to attend the Zytec Special Meeting and your shares are
held by a broker, bank or other nominee, you must bring to the Zytec Special
Meeting a recent brokerage statement or a letter from the nominee confirming
your beneficial ownership of the shares. You must also bring a form of personal
identification. In order to vote your shares at the Zytec Special Meeting, you
must obtain from the nominee a proxy issued in your name.
You can ensure that your shares are voted at the Zytec Special Meeting by
signing and dating the enclosed proxy and returning it in the postage pre-paid
envelope provided. Sending in a signed proxy will not affect your right to
attend the Zytec Special Meeting and to vote in person. You may revoke your
proxy at any time before it is voted by giving written notice to the Secretary
of Zytec at Zytec's headquarters, 7575 Market Place Drive, Eden Prairie,
Minnesota 55344, by signing and returning a later dated proxy or by voting in
person at the Zytec Special Meeting.
<PAGE>
Whether or not you expect to attend, WE URGE YOU TO SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE POSTAGE PRE-PAID ENVELOPE PROVIDED.
By Order of the Board of Directors
Sherman Winthrop
SECRETARY
Eden Prairie, Minnesota
November , 1997
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 1997
JOINT PROXY STATEMENT
<TABLE>
<S> <C>
COMPUTER PRODUCTS, INC. ZYTEC CORPORATION
SPECIAL MEETING OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD SHAREHOLDERS TO BE HELD
ON DECEMBER , 1997 ON DECEMBER , 1997
</TABLE>
COMPUTER PRODUCTS, INC.
PROSPECTUS
This Joint Proxy Statement and Prospectus ("Joint Proxy
Statement/Prospectus") relates to up to 14,476,983 shares of common stock, $.01
par value per share ("CPI Common Stock"), of Computer Products, Inc., a Florida
corporation ("CPI"), offered hereby to securityholders of Zytec Corporation, a
Minnesota corporation ("Zytec"), upon consummation of a proposed merger (the
"Merger") of CPI Acquisition Corp., a Minnesota corporation and wholly-owned
subsidiary of CPI ("Merger Sub"), with and into Zytec pursuant to an Agreement
and Plan of Merger, dated as of September 2, 1997, between CPI, Merger Sub and
Zytec (the "Merger Agreement"). This Joint Proxy Statement/Prospectus also
serves as the Joint Proxy Statement of CPI and Zytec for use in connection with
the solicitation of proxies by the Board of Directors of CPI for use at a
special meeting of shareholders of CPI (the "CPI Special Meeting") called to
approve the issuance of shares of CPI Common Stock pursuant to the Merger
Agreement and by the Board of Directors of Zytec for use at a special meeting of
shareholders of Zytec (the "Zytec Special Meeting") called to approve and adopt
the Merger Agreement. A copy of the Merger Agreement is attached as Annex A to
this Joint Proxy Statement/Prospectus.
Upon consummation of the Merger, each share of Zytec common stock, no par
value per share ("Zytec Common Stock"), will be automatically converted into the
right to receive 1.33 (the "Exchange Ratio") shares of CPI Common Stock (with
cash in lieu of fractional shares). The Exchange Ratio will be proportionately
adjusted in the event of any recapitalization, reclassification, stock dividend,
stock split or other similar change in capitalization of CPI or Zytec prior to
the Merger. Each option to acquire one share of Zytec Common Stock which is
outstanding at the effective time of the Merger will be converted automatically
in the Merger into a stock option to purchase 1.33 shares of CPI Common Stock.
See "The Merger--Effect on Stock Options." Pursuant to an irrevocable election
to convert, dated September 22, 1997, by BMO Nesbitt Burns Capital (U.S.), Inc.,
such holder of a convertible subordinated promissory note of Zytec, dated
December 23, 1996, in the principal amount of $12,000,000 due 2001 (the
"Convertible Note") has elected to convert, effective as of the consummation of
the Merger and pursuant to the terms of such Convertible Note, the entire
principal amount of the Convertible Note into Zytec Common Stock which will
thereupon be automatically converted into 1,166,666 shares of CPI Common Stock.
The Merger is subject to the approval of the holders of a majority of the
outstanding shares of Zytec Common Stock and to the satisfaction of certain
other conditions, including obtaining certain regulatory approvals. Under the
rules of The Nasdaq National Market ("NNM"), CPI shareholder approval of the
issuance of shares by CPI pursuant to the Merger Agreement is required. Such
approval requires the affirmative vote of a majority of the votes cast by CPI
shareholders on the proposal at the CPI Special Meeting.
For a more complete description of the Merger and the Merger Agreement, see
"The Merger" and "The Merger Agreement."
CPI Common Stock is quoted on the NNM under the symbol "CPRD." The last
reported sales price of CPI Common Stock on the NNM on November , 1997 was
$ and, on September 2, 1997, the last trading day preceding the public
announcement of the proposed Merger, the last reported sales price of CPI Common
Stock on the NNM was $31.69.
Zytec Common Stock is quoted on the NNM under the symbol "ZTEC." The last
reported sales price of Zytec Common Stock on the NNM on November , 1997 was
$ and, on September 2, 1997, the last trading day preceding the public
announcement of the proposed Merger, the last reported sales price of Zytec
Common Stock on the NNM was $29.00.
As of November 11, 1997, there were 24,322,325 shares of CPI Common Stock
and 9,660,228 shares of Zytec Common Stock outstanding. As of November 11, 1997,
there were options to acquire 2,965,902 shares of Zytec Common Stock
outstanding.
All information contained in this Joint Proxy Statement/Prospectus about CPI
and Merger Sub has been provided by CPI. All information contained in this Joint
Proxy Statement/Prospectus about Zytec has been provided by Zytec.
THIS JOINT PROXY STATEMENT/PROSPECTUS AND FORMS OF PROXY ARE FIRST BEING
MAILED TO CPI AND ZYTEC SHAREHOLDERS ON OR ABOUT NOVEMBER , 1997.
SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY SHAREHOLDERS OF CPI AND ZYTEC IN CONNECTION WITH
THEIR CONSIDERATION OF THE MERGER AND RELATED TRANSACTIONS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES OFFERED BY THIS
JOINT PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/ PROSPECTUS NOR THE ISSUANCE
OR SALE OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
INCORPORATED BY REFERENCE SINCE THE DATE HEREOF.
The date of this Joint Proxy Statement/Prospectus is November , 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
FORWARD-LOOKING STATEMENTS................................................................................. 1
AVAILABLE INFORMATION...................................................................................... 1
INCORPORATION OF DOCUMENTS BY REFERENCE.................................................................... 2
SUMMARY.................................................................................................... 3
General.................................................................................................. 3
The Companies............................................................................................ 3
Computer Products, Inc................................................................................. 3
Zytec Corporation...................................................................................... 4
The Meetings............................................................................................. 5
Time, Place and Date................................................................................... 5
Purposes of the Meetings............................................................................... 5
Votes Required; Record Date............................................................................ 6
Change of Vote......................................................................................... 6
The Merger............................................................................................... 7
The Merger............................................................................................. 7
Background............................................................................................. 7
Reasons for the Merger................................................................................. 7
Merger Consideration................................................................................... 7
Exchange of Certificates............................................................................... 7
Conditions to the Merger; Termination; Termination Fees................................................ 8
Dividends.............................................................................................. 8
Appraisal and Dissenters' Rights....................................................................... 9
Governmental Approvals Required........................................................................ 9
Anticipated Accounting Treatment....................................................................... 9
Listing of CPI Common Stock............................................................................ 9
Stock Options; Convertible Note........................................................................ 9
Opinions of Financial Advisors........................................................................... 10
Interests of Certain Persons in the Merger............................................................... 10
Management of Zytec Following the Merger................................................................. 11
CPI Board of Directors Following the Merger.............................................................. 11
Certain United States Federal Income Tax Consequences.................................................... 11
Comparative Rights of Shareholders....................................................................... 12
Restrictions on Resale of Securities Issued in the Merger................................................ 12
Comparative Per Share Prices............................................................................. 12
SELECTED HISTORICAL AND PRO FORMA DATA..................................................................... 13
Selected Historical Financial Data....................................................................... 13
Selected Unaudited Pro Forma Condensed Combined Financial Data........................................... 15
COMPARATIVE PER SHARE DATA................................................................................. 17
MARKET PRICE INFORMATION................................................................................... 20
DIVIDEND POLICY--CPI....................................................................................... 21
RISK FACTORS............................................................................................... 22
Risks Relating to the Merger............................................................................. 22
</TABLE>
ii
<PAGE>
<TABLE>
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<S> <C>
Potential Problems with Integration of Operations...................................................... 22
Non-realization of Beneficial Synergies................................................................ 22
Difficulty with Customers.............................................................................. 22
Non-retention of Employees............................................................................. 23
Volatility of Stock Price.............................................................................. 23
Fixed Exchange Ratio Despite Potential Changes in Stock Prices......................................... 23
Incurrence of Significant Operating Charge and Significant Transaction Expense......................... 23
Risks Relating to CPI, Zytec and the Combined Company.................................................... 24
Fluctuations in Quarterly Operating Results............................................................ 24
Competition; More Significant Competitors due to Increased Industry Consolidation...................... 24
Uncertainty of New Product Development and Timely Introduction of New and Enhanced Products............ 25
Loss of Proprietary Technologies and Intellectual Property Rights...................................... 25
Risks Related to Acquisitions.......................................................................... 25
Risks Related to International Sales and Foreign Manufacturing Operations.............................. 26
GENERAL.................................................................................................... 27
CPI SPECIAL MEETING........................................................................................ 27
Record Date.............................................................................................. 27
Quorum................................................................................................... 27
Required Vote............................................................................................ 27
Voting Rights; Proxies................................................................................... 27
Solicitation of Proxies.................................................................................. 28
ZYTEC SPECIAL MEETING...................................................................................... 29
Purpose of the Special Meeting........................................................................... 29
Record Date.............................................................................................. 29
Quorum................................................................................................... 29
Required Vote............................................................................................ 29
Voting Rights; Proxies................................................................................... 29
Solicitation of Proxies.................................................................................. 30
THE MERGER................................................................................................. 31
General.................................................................................................. 31
Effective Time........................................................................................... 31
Conversion of Shares; Procedures for Exchange of Certificates............................................ 31
Background of the Merger................................................................................. 32
Recommendation of the Board of Directors of CPI; Reasons for the Merger.................................. 35
Recommendation of the Board of Directors of Zytec; Reasons for the Merger................................ 36
Opinion of CPI's Financial Advisor....................................................................... 38
Stock Trading History.................................................................................. 39
Analysis of Selected Public Company Trading and Financial Information.................................. 39
Analysis of Selected Merger Transactions............................................................... 39
Discounted Cash Flow Analysis.......................................................................... 40
Earnings Per Share Impact Analysis..................................................................... 40
Contribution Analysis.................................................................................. 40
Opinion of Zytec's Financial Advisor..................................................................... 41
Contribution Analysis.................................................................................. 42
Comparable Company Analysis............................................................................ 42
Comparable Transaction Analysis........................................................................ 43
</TABLE>
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Stock Trading History.................................................................................. 44
Accretion/Dilution Analysis............................................................................ 44
Discounted Cash Flow Analysis.......................................................................... 44
Interests of Certain Persons in the Merger............................................................... 45
Management of Zytec Following the Merger................................................................. 46
Directors of Zytec..................................................................................... 46
Officers of Zytec...................................................................................... 46
CPI Board of Directors Following the Merger.............................................................. 46
Certain Federal Income Tax Consequences.................................................................. 46
Anticipated Accounting Treatment......................................................................... 48
Listing of CPI Common Stock.............................................................................. 48
Effect on Stock Options.................................................................................. 48
Stock Option and Other Stock Plans..................................................................... 48
CPI Action with Respect to Zytec Stock Plans........................................................... 49
Certain Legal Matters.................................................................................... 49
Federal Securities Law Consequences...................................................................... 50
Dividends................................................................................................ 50
Appraisal and Dissenters' Rights......................................................................... 50
Fees and Expenses........................................................................................ 53
THE MERGER AGREEMENT....................................................................................... 54
Terms of the Merger...................................................................................... 54
The Merger............................................................................................. 54
Effective Time......................................................................................... 54
Certificate of Incorporation and Bylaws................................................................ 54
Directors.............................................................................................. 54
Officers............................................................................................... 54
Conversion of Zytec Common Stock in the Merger......................................................... 54
Conversion of Capital Stock of Merger Sub in the Merger................................................ 55
Adjustments to Exchange Ratio.......................................................................... 55
Fractional Shares...................................................................................... 55
Dissenters' Shares..................................................................................... 55
Stock Option and Other Stock Plans..................................................................... 55
Exchange of Certificates................................................................................. 56
Exchange Agent......................................................................................... 56
Exchange Procedures.................................................................................... 56
Distributions with Respect to Unexchanged Zytec Common Stock........................................... 56
Book Entry............................................................................................. 56
No Liability........................................................................................... 57
Withholding Rights..................................................................................... 57
Lost, Stolen or Destroyed Certificates................................................................. 57
Representations and Warranties........................................................................... 57
Conduct of Business Pending the Merger; Certain Covenants................................................ 58
Additional Agreements.................................................................................... 59
Access to Information; Confidentiality................................................................. 59
Joint Proxy Statement/Prospectus; Registration Statement............................................... 60
HSR Act; Other Regulatory Approvals.................................................................... 60
Shareholders Meetings and Approvals.................................................................... 60
Indemnification and Insurance.......................................................................... 60
Public Announcements................................................................................... 61
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Agreements with Respect to Affiliates.................................................................. 61
Employee Service Credit................................................................................ 61
CPI Action with Respect to Zytec Stock Plans........................................................... 62
Participation in Employee Stock Purchase Plan of CPI................................................... 62
No Solicitation of Transactions........................................................................ 62
CPI Board of Directors................................................................................. 63
Expenses............................................................................................... 63
Best Efforts........................................................................................... 63
Conditions to the Merger................................................................................. 64
Conditions to Obligation of Each Party to Effect the Merger............................................ 64
Additional Conditions to Obligations of CPI and Merger Sub............................................. 64
Additional Conditions to Obligations of Zytec.......................................................... 65
Termination.............................................................................................. 66
Conditions to Termination.............................................................................. 66
Effect of Termination.................................................................................. 68
Termination Fee Upon Breach............................................................................ 68
Termination Fee Upon Superior Proposal or Consummation of Business Combination Proposal................ 68
OTHER AGREEMENTS........................................................................................... 69
Voting Agreement......................................................................................... 69
Non-Solicitation Agreements.............................................................................. 69
Non-Competition Agreement................................................................................ 69
Benefit and Severance Arrangements....................................................................... 69
BUSINESS................................................................................................... 70
Computer Products, Inc................................................................................... 70
Zytec Corporation........................................................................................ 71
DIRECTORS OF CPI........................................................................................... 72
Compensation Committee Interlocks and Insider Participation.............................................. 73
Zytec Personnel to be Included on CPI Board of Directors................................................. 74
Information Regarding Zytec Executive Officers and Directors to be Included on CPI Board of Directors.... 74
COMPENSATION OF CPI........................................................................................ 75
Compensation of Directors................................................................................ 75
Summary Executive Compensation Table..................................................................... 75
Stock Option Grants in Last Fiscal Year.................................................................. 77
Options Exercised in Last Fiscal Year and Fiscal Year-End Option Values Table............................ 77
Employment and Termination Arrangements.................................................................. 78
Compensation of Other Executive Officers................................................................. 79
Compensation of the Chief Executive Officer.............................................................. 80
SECURITY OWNERSHIP OF CPI.................................................................................. 81
Security Ownership of Certain Beneficial Owners.......................................................... 81
Ownership by Management.................................................................................. 82
CERTAIN TRANSACTIONS....................................................................................... 82
COMPENSATION OF ZYTEC...................................................................................... 83
Summary Executive Compensation Table..................................................................... 83
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Stock Options............................................................................................ 83
Compensation Committee Interlocks and Insider Participation.............................................. 84
Compensation of Directors................................................................................ 84
SECURITY OWNERSHIP OF ZYTEC................................................................................ 85
DESCRIPTION OF CPI CAPITAL STOCK........................................................................... 86
Common Stock............................................................................................. 86
Preferred Stock.......................................................................................... 86
Rights Agreement......................................................................................... 87
Transfer Agent and Registrar............................................................................. 87
COMPARISON OF RIGHTS OF SHAREHOLDERS OF CPI AND ZYTEC...................................................... 87
Special Meetings of Shareholders......................................................................... 87
Required Vote for Authorization of Certain Actions....................................................... 87
Actions by Shareholders Without a Meeting................................................................ 88
Business Conducted at Shareholder Meetings............................................................... 88
Inspection Rights........................................................................................ 89
Amendment of Bylaws...................................................................................... 89
Amendment of Articles of Incorporation................................................................... 89
Voluntary Dissolution.................................................................................... 89
Number of Directors...................................................................................... 89
Board Vacancies.......................................................................................... 90
Action by Written Consent of Directors................................................................... 90
Removal of Directors..................................................................................... 90
Conflict of Interest Transactions........................................................................ 90
Liability of Directors................................................................................... 90
Indemnification.......................................................................................... 91
Duties of Directors...................................................................................... 91
Affiliated Business Combinations......................................................................... 92
Control Share Acquisitions............................................................................... 92
Dividends and Other Distributions........................................................................ 93
Rights of Dissenting Shareholders........................................................................ 93
Preemptive Rights........................................................................................ 94
Shareholder Rights Plans................................................................................. 94
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA...................................................... 95
Introduction to Unaudited Pro Forma Condensed Combined Financial Data.................................... 95
EXPERTS.................................................................................................... 103
LEGAL MATTERS.............................................................................................. 103
REPRESENTATIVES OF INDEPENDENT ACCOUNTANTS................................................................. 103
SHAREHOLDER PROPOSALS...................................................................................... 103
Annex A--Agreement and Plan of Merger...................................................................... A-1
Annex B--Opinion of BT Alex. Brown Incorporated............................................................ B-1
Annex C--Opinion of Needham & Company, Inc................................................................. C-1
Annex D--Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act.......................... D-1
</TABLE>
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FORWARD-LOOKING STATEMENTS
Certain statements in this Joint Proxy Statement/Prospectus and in the
documents incorporated by reference herein constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21B of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). For this purpose, statements about the
anticipated impact of the Merger on CPI's earnings per share, business,
financial condition and operations and the extent of the charges related to the
Merger, among others, are forward-looking statements. Further, any statements
contained herein or incorporated herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the operations, business or
financial conditions of CPI or Zytec, or the combined company after the Merger,
to differ materially from those indicated by such forward-looking statements,
specifically including, among others, those set forth in previously filed
reports under the Exchange Act and in this Joint Proxy Statement/Prospectus
under the caption "Risk Factors." Neither CPI nor Zytec undertakes any
obligation to update any forward-looking statements.
AVAILABLE INFORMATION
CPI and Zytec are each subject to the informational requirements of the
Exchange Act and, accordingly, file reports, proxy and information statements
and other information with the Commission. This information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and may be
available at the following Regional Offices of the Commission: Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and New York Regional Office, 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such materials can be obtained at prescribed rates
from the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549. Each of CPI and Zytec makes filings
pursuant to the Exchange Act with the Commission electronically, and such
materials may be inspected and copied at the Commission's web site
(http://www.sec.gov). Material filed by CPI and Zytec can also be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, DC 20006.
This Joint Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement on Form S-4 and exhibits relating
thereto, including any amendments (the "Registration Statement"), of which this
Joint Proxy Statement/Prospectus is a part, and which CPI has filed with the
Commission under the Securities Act. Reference is made to such Registration
Statement for further information with respect to CPI, Zytec and the CPI Common
Stock offered hereby. The Registration Statement is available for inspection and
copying as set forth above. Statements contained herein concerning the
provisions of documents are summaries of such documents, and each statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the Commission or attached as an Annex hereto.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, UPON WRITTEN OR
ORAL REQUEST BY ANY PERSON, INCLUDING ANY BENEFICIAL OWNER TO WHOM THIS JOINT
PROXY STATEMENT/PROSPECTUS IS DELIVERED, IN THE CASE OF DOCUMENTS RELATING TO
CPI TO: COMPUTER PRODUCTS, INC., 7900 GLADES ROAD, SUITE 500, BOCA RATON,
FLORIDA 33434 (TELEPHONE NO.: (561) 451-1000), ATTENTION: SECRETARY, AND IN THE
CASE OF DOCUMENTS RELATING TO ZYTEC TO: ZYTEC CORPORATION, 7575 MARKET PLACE
DRIVE, EDEN PRAIRIE, MINNESOTA 55344 (TELEPHONE NO.: (612) 941-1100), ATTENTION:
SECRETARY.
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INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents, previously filed with the Commission by CPI (File
No. 0-4466) or by Zytec (File No. 0-22428) pursuant to the Exchange Act, are
hereby incorporated by reference:
1. CPI's Annual Report on Form 10-K for the fiscal year ended January 3,
1997;
2. CPI's Quarterly Reports on Form 10-Q for the periods ended April 4,
1997, July 4, 1997 (as amended by Form 10-Q/A, dated October 30, 1997), and
October 3, 1997;
3. CPI's Current Report on Form 8-K, dated July 22, 1997 (as amended by
Form 8-K/A, dated September 22, 1997), CPI's Current Report on Form 8-K,
dated September 2, 1997, and CPI's Current Report on Form 8-K, dated October
30, 1997;
4. Zytec's Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
5. Zytec's Quarterly Reports on Form 10-Q for the periods ended March
30, 1997, June 29, 1997 and September 28, 1997;
6. Zytec's Current Report on Form 8-K, dated September 2, 1997;
7. The description of CPI's Common Stock contained in CPI's Registration
Statement on Form 10 filed under Section 12 of the Exchange Act, including
any amendments or reports filed for the purpose of updating such
description;
8. The description of Zytec's Common Stock contained in Zytec's
Registration Statement on Form 8-A filed under Section 12 of the Exchange
Act, including any amendments or reports filed for the purpose of updating
such description; and
9. All other reports, statements and other documents filed pursuant to
Sections 13(a) or 15(d) of the Exchange Act by CPI or Zytec since December
31, 1996.
In addition, all reports and other documents filed by CPI and/or Zytec
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent
to the date hereof and prior to the date the offering covered hereunder is
terminated shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such reports and documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/ Prospectus to the extent that a
statement contained herein (or in the case of any statement in such an
incorporated document), or in any other subsequently filed document that also is
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement/Prospectus.
The information relating to CPI and Zytec contained in this Joint Proxy
Statement/Prospectus does not purport to be comprehensive and should be read
together with the information in the documents incorporated by reference herein.
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SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus and the Annexes hereto. This summary
does not contain a complete statement of all material information relating to
the Merger Agreement and the Merger and is subject to, and is qualified in its
entirety by, the more detailed information and financial statements and data
contained or incorporated by reference in this Joint Proxy Statement/Prospectus.
Shareholders of CPI and Zytec should read this Joint Proxy Statement/Prospectus
carefully in its entirety.
GENERAL
This Joint Proxy Statement/Prospectus, Notice of CPI Special Meeting to be
held on December , 1997, Notice of Zytec Special Meeting to be held on
December , 1997, and forms of proxy solicited in connection therewith are
first being mailed to holders of CPI Common Stock and to holders of Zytec Common
Stock on or about November , 1997.
At the CPI Special Meeting, CPI shareholders will consider and vote on (i)
whether to approve the issuance of shares of CPI Common Stock pursuant to the
Merger Agreement and (ii) such other matters as may properly be submitted to a
vote at the CPI Special Meeting.
At the Zytec Special Meeting, Zytec shareholders will consider and vote on
(i) whether to approve and adopt the Merger Agreement and (ii) such other
matters as may properly be submitted to a vote at the Zytec Special Meeting.
A copy of the Merger Agreement is attached as Annex A to this Joint Proxy
Statement/Prospectus and incorporated herein by reference.
THE COMPANIES
COMPUTER PRODUCTS, INC.
CPI designs, develops, manufactures and markets power conversion products
for electronic equipment used in commercial and industrial applications
requiring a precise and constant voltage level for proper operation (which
accounted for approximately 91% of CPI's fiscal year 1996 sales from continuing
operations) and high performance single-board computers, systems and subsystems
for real-time applications (which accounted for approximately 9% of CPI's fiscal
year 1996 sales from continuing operations). Below is a summary of each of CPI's
two lines of business.
POWER CONVERSION. CPI is one of the leading suppliers of power supplies,
power converters and distributed power systems to the communications industry.
Product offerings include over 200 standard product families, in addition to
certain custom-designed products, distributed through multiple sales channels.
CPI's power conversion products include AC-to-DC power supplies and modular
DC-to-DC converters that focus on the worldwide communications market including
networking, data communications, telecommunications, and wireless
infrastructure. Computer, industrial and instrumentation markets are also
served. AC-to-DC power supplies are used to convert alternating electric current
(the form in which virtually all electric current is delivered by utility
companies) to a precisely controlled direct current. Direct current is required
to operate virtually all solid state electronic equipment. DC-to-DC converters
are used to convert a particular direct current voltage into another (higher or
lower) direct current voltage that is required by the electronic device to which
it is connected.
CPI currently offers standard power products in over 1,000 configurations
and accommodates a wide variety of customer applications. The products can be
configured as open frames, enclosed or encapsuled. CPI's products are tested by
regulatory agencies for safety and are also tested for compliance with a variety
of international emissions standards.
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COMPUTER SYSTEMS. CPI's computer systems division designs and manufactures
high performance board-level computers and communications controllers,
integrating them with real-time operating system and protocol software to form
complete subsystems for communications and other real-time applications.
These products are designed around and incorporate industry standards which
permit easy portability to a variety of applications. The primary product line
combines both the worldwide industry standard VMEbus, which defines physical
board size and signal characteristics for the interconnection of
microprocessors. Application requirements for these products usually include
environments requiring rapid computer response time with high-quality processing
capabilities, such as telecommunications or data communications.
CPI's computer systems customers are primarily original equipment
manufacturers ("OEMs"), which use CPI's products for high speed
telecommunications applications. These computer systems products are also used
in other application areas such as medical instrumentation, airplane and weapons
training simulators, process control, industrial automation and traffic control
systems.
RECENT DEVELOPMENTS. On July 22, 1997, CPI acquired for a purchase price of
52,000,000 Deutsche Marks (approximately $28,500,000) all of the outstanding
capital stock of the following commonly controlled, privately-held entities:
Elba Electric GmbH, Elba Modul GmbH, Elba Elektronik - Bauelmente AG, Elba
Electronics Ltd., Elba Electric-Produktion s.r.o., Elba Electronique S.A.R.L.,
and KRP Power Source B.V. (collectively, the "Elba Group"), European designers,
manufacturers and marketers of power conversion products. The Elba Group's
fastest growing product line is its medium power AC-to-DC converters (150 to 750
watts) sold to OEM communications customers under the Elba and KRP Power Service
labels. The purchase price paid by CPI for the Elba Group capital stock is
subject to reduction based upon a post-closing audit. Such acquisition has been
accounted for as a purchase transaction.
On July 5, 1997, CPI sold substantially all the assets of its industrial
automation division, RTP Corp. ("RTP"), to RT Acquisition Florida Corp. The sale
price, which is subject to adjustment, included $2,000,000 in cash, a
subordinated unsecured five-year promissory note in the aggregate principal
amount of $2,480,000 bearing interest at the prime rate and the assumption of
certain of RTP's liabilities.
The principal executive offices of CPI are located at 7900 Glades Road,
Suite 500, Boca Raton, Florida 33434, and its telephone number is (561)
451-1000. CPI, a Florida corporation, was incorporated on March 18, 1968.
Additional information concerning CPI and its subsidiaries is included in
the CPI documents filed with the Commission which are incorporated herein by
reference. See "Incorporation of Documents by Reference."
ZYTEC CORPORATION
Zytec conducts business in two main segments: power conversion, which
provides power supply design, manufacture and repair and accounted for
approximately 90% of Zytec's fiscal year 1996 sales, and services and logistics,
which provides repair services and logistics for a variety of products primarily
for a significant customer and accounted for approximately 10% of Zytec's fiscal
year 1996 sales.
In the power conversion segment, Zytec is a leading designer and
manufacturer of custom electronic power supplies for OEMs in the communications,
networking, computer and other electronic equipment markets. Recently, Zytec has
experienced significant sales growth because it has been the sole-source
provider of power supplies to many of the OEMs that provide hardware for the
Internet and the data communications marketplace. Zytec also repairs power
supplies and related products. Zytec's power supply components are sold in North
America and Europe, and its products are used worldwide. In 1996, Zytec
manufactured and delivered over 900,000 power supplies representing over 173
different products.
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The service and logistics segment of Zytec's business provides repair
services and logistics for a variety of products primarily manufactured by
Hewlett-Packard Company. These products include laser and inkjet printers,
facsimile machines, computers, monitors and other equipment.
The principal executive offices of Zytec are located at 7575 Market Place
Drive, Eden Prairie, Minnesota 55344, and its telephone number is (612)
941-1100. Zytec, a Minnesota corporation, was incorporated on August 26, 1983.
Additional information concerning Zytec and its subsidiaries is included in
the Zytec documents filed with the Commission which are incorporated herein by
reference. See "Incorporation of Documents by Reference."
THE MEETINGS
TIME, PLACE AND DATE
The CPI Special Meeting will be held at on December , 1997,
at 10:00 a.m., local time.
The Zytec Special Meeting will be held at on December ,
1997, at 9:00 a.m., local time.
PURPOSES OF THE MEETINGS
CPI SPECIAL MEETING. At the CPI Special Meeting, holders of CPI Common
Stock will consider and vote upon the issuance of CPI Common Stock pursuant to
the Merger Agreement, including shares issuable upon exercise of outstanding
Zytec options (the "CPI Share Proposal"). Pursuant to the Merger Agreement, CPI
is obligated to issue up to 18,125,670 shares of CPI Common Stock, which amount
includes shares issuable in respect of all shares of Zytec Common Stock
outstanding at the closing of the Merger, upon the conversion of the Convertible
Note and upon the exercise of all Zytec stock options outstanding at the closing
of the Merger. The Registration Statement, of which this Joint Proxy Statement/
Prospectus forms a part, covers 14,476,983 shares of CPI Common Stock, which
amount includes shares issuable in respect of all shares of Zytec Common Stock
outstanding at the closing of the Merger, upon the conversion of the Convertible
Note and upon the exercise of outstanding Zytec stock options exercisable on or
prior to December 31, 1997. The aggregate number of shares of CPI Common Stock
issuable to Zytec securityholders pursuant to the Merger Agreement would
represent approximately 40% of the CPI Common Stock to be outstanding
immediately following consummation of the Merger (assuming the exercise of all
outstanding Zytec and CPI stock options). Holders of CPI Common Stock may also
consider and vote upon such other matters as may be properly brought before the
CPI Special Meeting or any postponement(s) or adjournment(s) thereof.
THE BOARD OF DIRECTORS OF CPI HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT AND THE CPI SHARE PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF CPI VOTE FOR THE APPROVAL OF THE CPI SHARE PROPOSAL. SEE "THE
MERGER--BACKGROUND OF THE MERGER," AND "--RECOMMENDATION OF THE BOARD OF
DIRECTORS OF CPI; REASONS FOR THE MERGER."
ZYTEC SPECIAL MEETING. At the Zytec Special Meeting, holders of Zytec
Common Stock will consider and vote upon (i) a proposal to approve and adopt the
Merger Agreement (the "Merger Proposal") and (ii) such other matters as may be
properly brought before the Zytec Special Meeting or any postponement(s) or
adjournment(s) thereof.
THE BOARD OF DIRECTORS OF ZYTEC HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT ZYTEC
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SHAREHOLDERS VOTE FOR THE MERGER PROPOSAL. SEE "THE MERGER--BACKGROUND OF THE
MERGER," "--RECOMMENDATION OF THE BOARD OF DIRECTORS OF ZYTEC; REASONS FOR THE
MERGER" AND "--INTERESTS OF CERTAIN PERSONS IN THE MERGER."
VOTES REQUIRED; RECORD DATE
CPI. Approval of the CPI Share Proposal requires the affirmative vote of a
majority of the votes cast on the proposal at the CPI Special Meeting. Holders
of CPI Common Stock are entitled to one vote per share on this matter. Only
holders of CPI Common Stock at the close of business on November 11, 1997 (the
"CPI Record Date") will be entitled to notice of and to vote at the CPI Special
Meeting. See "CPI Special Meeting." On the CPI Record Date, there were
outstanding 24,322,325 shares of CPI Common Stock. As of the CPI Record Date,
the directors and executive officers of CPI beneficially owned as a group
approximately 6.7% of the outstanding shares of CPI Common Stock. Such directors
and executive officers have indicated that they presently intend to vote all
such shares in favor of the CPI Share Proposal.
ZYTEC. Approval of the Merger Proposal requires the affirmative vote of the
holders of a majority of the outstanding shares of Zytec Common Stock. Holders
of Zytec Common Stock are entitled to one vote per share on this matter. Only
holders of Zytec Common Stock at the close of business on November 11, 1997 (the
"Zytec Record Date") will be entitled to notice of and to vote at the Zytec
Special Meeting. See "Zytec Special Meeting." On the Zytec Record Date, there
were outstanding 9,660,228 shares of Zytec Common Stock. As of the Zytec Record
Date, the directors and executive officers of Zytec beneficially owned as a
group approximately 33% of the outstanding shares of Zytec Common Stock. Such
directors and executive officers have indicated that they presently intend to
vote all such shares in favor of the Merger Proposal.
Three shareholders who own in the aggregate approximately 25% (included
within the 33% described above) of the outstanding shares of Zytec Common Stock
have entered into a voting agreement, dated as of September 2, 1997 (the "Voting
Agreement"), with CPI pursuant to which such holders have agreed to vote in
favor of the Merger Proposal and have granted each of Joseph M. O'Donnell and
Richard J. Thompson, in their capacities as officers of CPI, an irrevocable
proxy to vote their shares of Zytec Common Stock in favor of the Merger
Proposal. See "Other Agreements--Voting Agreement."
CHANGE OF VOTE
CPI shareholders who have executed a proxy may revoke their proxy at any
time prior to its exercise at the CPI Special Meeting by giving written notice
to the Secretary of CPI at CPI's headquarters, 7900 Glades Road, Suite 500, Boca
Raton, Florida 33434, by signing and returning a later dated proxy or by voting
in person at the CPI Special Meeting. ACCORDINGLY, SHAREHOLDERS OF CPI WHO HAVE
EXECUTED AND RETURNED PROXY CARDS IN ADVANCE OF THE CPI SPECIAL MEETING MAY
CHANGE THEIR VOTE AT ANY TIME PRIOR TO OR AT THE CPI SPECIAL MEETING.
Zytec shareholders who have executed a proxy may revoke their proxy at any
time prior to its exercise at the Zytec Special Meeting by giving written notice
to the Secretary of Zytec at Zytec's headquarters, 7575 Market Place Drive, Eden
Prairie, Minnesota 55344, by signing and returning a later dated proxy or by
voting in person at the Zytec Special Meeting. ACCORDINGLY, SHAREHOLDERS OF
ZYTEC WHO HAVE EXECUTED AND RETURNED PROXY CARDS IN ADVANCE OF THE ZYTEC SPECIAL
MEETING MAY CHANGE THEIR VOTE AT ANY TIME PRIOR TO OR AT THE ZYTEC SPECIAL
MEETING.
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THE MERGER
THE MERGER
Pursuant to the Merger Agreement, Merger Sub will be merged with and into
Zytec, with Zytec remaining as the surviving corporation in the Merger (the
"Surviving Corporation"). Upon consummation of the Merger, Zytec will become a
wholly-owned subsidiary of CPI. See "The Merger."
BACKGROUND
For a description of the background of the Merger, see "The
Merger--Background of the Merger."
REASONS FOR THE MERGER
CPI and Zytec believe that the Merger offers significant benefits to each
company and to their respective shareholders. These benefits include:
- The synergies, operating efficiencies and cost reductions created by
combining the two companies;
- Greater resources available to the combined company;
- The ability to sell complementary products to customers of the separate
companies;
- Increased ability to compete with larger competitors; and
- Advantages as a result of the higher market capitalization of the combined
company.
See "The Merger--Recommendation of the Board of Directors of CPI; Reasons
for the Merger" and "--Recommendation of the Board of Directors of Zytec;
Reasons for the Merger."
MERGER CONSIDERATION
Pursuant to the Merger Agreement, each outstanding share of Zytec Common
Stock (other than (i) any shares owned by Zytec, CPI or their respective
subsidiaries, all of which shall be cancelled and (ii) any shares held by a
Zytec shareholder who has duly exercised rights as a dissenting shareholder
("Dissenting Shares") under Sections 302A.471 and 302A.473 of the Minnesota
Business Corporation Act (the "MBCA")) will be converted into the right to
receive 1.33 shares of CPI Common Stock. Zytec shareholders will receive cash in
lieu of any fractional shares of CPI Common Stock to which such Zytec
shareholders would otherwise have been entitled. See "The Merger--Appraisal and
Dissenters' Rights" and "The Merger Agreement--Terms of the Merger--Fractional
Shares."
EXCHANGE OF CERTIFICATES
As soon as practicable after the filing of articles of merger ("Articles of
Merger") with the Secretary of State of the State of Minnesota (the time of the
effectiveness of such filing being the "Effective Time"), The Bank of New York
(the "Exchange Agent") will send a transmittal letter to each Zytec shareholder.
The transmittal letter will contain instructions with respect to the surrender
of certificates representing Zytec Common Stock to be exchanged for certificates
representing CPI Common Stock and a cash payment in lieu of fractional shares,
if any. After the Effective Time, holders of certificates, which prior to the
Effective Time represented shares of Zytec Common Stock, will not be entitled to
receive any payment of dividends or other distributions on or payment for any
fractional share with respect to their Zytec Common Stock certificate until such
certificate has been exchanged for certificates representing shares of CPI
Common Stock. See "The Merger Agreement--Exchange of Certificates."
ZYTEC SHAREHOLDERS SHOULD NOT FORWARD CERTIFICATES OF ZYTEC COMMON STOCK TO
THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL
7
<PAGE>
LETTERS. IN ADDITION, ZYTEC SHAREHOLDERS SHOULD NOT RETURN CERTIFICATES OF ZYTEC
COMMON STOCK WITH THE ENCLOSED PROXY.
Shareholders of CPI will not be receiving new certificates pursuant to the
Merger and therefore need not exchange their CPI certificates for new stock
certificates.
CONDITIONS TO THE MERGER; TERMINATION; TERMINATION FEES
The obligations of CPI, on the one hand, and Zytec, on the other hand, to
consummate the Merger are subject to the satisfaction of certain conditions,
including the approval of the CPI Share Proposal by the shareholders of CPI and
the approval of the Merger Proposal by the shareholders of Zytec, the receipt of
all necessary governmental approvals, the absence of any injunction that
prevents the consummation of the Merger, the qualification of the Merger as a
pooling-of-interests transaction for accounting purposes, the accuracy of the
representations and warranties of the other party set forth in the Merger
Agreement as of the date of the closing of the Merger (the "Closing Date")
(except for inaccuracies which would not have a material adverse effect on such
other party), the performance by the other party in all material respects of all
obligations required to be performed under the Merger Agreement, there having
been no material adverse effect on the other party, the receipt of tax opinions
that the Merger will qualify as a tax-free reorganization for United States
Federal income tax purposes, the receipt of certain material third-party
consents from CPI's primary bank lender and from certain of Zytec's lenders and
lessors, the effectiveness under the Securities Act of the Registration
Statement (of which this Joint Proxy Statement/ Prospectus forms a part), and
the number of shares of Zytec Common Stock which are Dissenting Shares not
constituting more than 7.5% of the number of issued and outstanding shares of
Zytec Common Stock on the Closing Date. At any time prior to the Effective Time,
to the extent permitted by applicable law, certain of the conditions to CPI's or
Zytec's obligations to consummate the Merger may be waived by the other party.
Any determination to waive a condition would depend upon the facts and
circumstances existing at the time of such waiver and would be made by the
waiving party's Board of Directors, exercising its fiduciary duties to such
party and its shareholders. See "The Merger Agreement--Conditions to the
Merger."
The Merger may be terminated under certain circumstances, including: by
mutual consent of CPI and Zytec; by either party if the Merger is not
consummated by January 31, 1998 (other than by the party who is the cause of the
consummation of the Merger not occurring by such date); by either party if the
requisite shareholder approvals are not obtained or if any state or Federal law
or court order prohibits consummation of the Merger; by a non-breaching party if
there occurs a material breach of the Merger Agreement which is not cured within
a specified period of time; or by either party, under certain limited
circumstances, as a result of a more favorable third-party business combination
proposal with respect to such party. The Merger Agreement requires that
termination fees be paid under certain circumstances by the terminating party or
by the breaching party. The aggregate termination fees under these provisions
may not exceed $20,000,000 plus the expenses of the non-terminating or
non-breaching party. See "The Merger Agreement--Termination."
DIVIDENDS
Under the terms of the Merger Agreement, neither Zytec nor CPI is permitted
to declare or pay any dividend or make any other distribution in respect of its
capital stock or split, combine, reclassify, redeem or otherwise acquire any
shares of its capital stock from the date of the Merger Agreement until the
earlier of the termination of the Merger Agreement or the Effective Time,
without the prior written consent of the other party. See "The Merger
Agreement--Conduct of Business Pending the Merger; Certain Covenants."
8
<PAGE>
APPRAISAL AND DISSENTERS' RIGHTS
Under Sections 302A.471 and 302A.473 of the MBCA, holders of record of Zytec
Common Stock who do not wish to accept shares of CPI Common Stock in the Merger
have the right to have the fair value of their shares appraised by judicial
determination and paid to them in cash. In order to perfect such dissenters'
rights, holders of Zytec Common Stock must properly comply with all of the
procedural requirements of the MBCA, including, without limitation, filing
written notice with Zytec prior to the Zytec Special Meeting of such
shareholder's intention to dissent and demand payment of the fair value of his
or her shares, not voting in favor of the Merger Agreement, and, within 30 days
after notice is given by Zytec of the approval of the Merger Proposal at the
Zytec Special Meeting, making a written demand for payment and depositing with
Zytec the certificates representing such shares. See "The Merger--Appraisal and
Dissenters' Rights" and Annex D hereto.
GOVERNMENTAL APPROVALS REQUIRED
The consummation of the Merger is subject to certain regulatory approvals,
including compliance with applicable Federal and state securities laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). On September 11, 1997, CPI and Zytec each separately filed a Notification
and Report Form, together with a request for early termination of the waiting
period, under the HSR Act with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division"). The waiting period under the HSR Act with respect to
such filings expired on October 11, 1997. See "The Merger--Certain Legal
Matters."
ANTICIPATED ACCOUNTING TREATMENT
The Merger is intended to be treated as a pooling-of-interests for
accounting purposes. See "The Merger--Anticipated Accounting Treatment."
Moreover, the receipt by each of CPI and Zytec of a letter from their respective
independent certified public accountants stating that such entity qualifies for
pooling-of-interests accounting treatment under United States generally accepted
accounting principles ("GAAP") and applicable Commission regulations, and the
receipt by CPI of a letter from its independent certified public accountants
that the transactions effected under the Merger Agreement will qualify for
pooling-of-interests accounting treatment under GAAP and applicable Commission
regulations, are conditions precedent to consummation of the Merger. See "The
Merger Agreement--Conditions to the Merger-- Conditions to Obligation of Each
Party to Effect the Merger."
LISTING OF CPI COMMON STOCK
Application will be made for the listing on the NNM of the shares of CPI
Common Stock to be issued pursuant to the terms of the Merger Agreement. The
listing on the NNM of such shares, subject to notice of issuance, is a condition
precedent to the consummation of the Merger. So long as CPI and Zytec continue
to meet the requirements of the NNM, CPI Common Stock, and Zytec Common Stock,
as the case may be, will continue to be listed on the NNM. However, after the
Effective Time, the Zytec Common Stock will be delisted.
STOCK OPTIONS; CONVERTIBLE NOTE
At the Effective Time, each outstanding option to purchase one share of
Zytec Common Stock granted under any Zytec stock option plan will be deemed to
constitute an option to acquire 1.33 shares of CPI Common Stock. As of November
11, 1997, there were outstanding options to acquire an aggregate of 2,965,902
shares of Zytec Common Stock under all of Zytec's stock option plans. See "The
Merger--Effect on Stock Options" and "The Merger Agreement--Terms of the
Merger--Stock Option and Other Stock Plans." In addition, pursuant to the terms
of the Convertible Note and an irrevocable election to convert, dated September
22, 1997, by the holder thereof, the entire principal amount of the Convertible
Note will
9
<PAGE>
be converted into Zytec Common Stock, which will, upon consummation of the
Merger, be automatically converted into 1,166,666 shares of CPI Common Stock.
OPINIONS OF FINANCIAL ADVISORS
BT Alex. Brown Incorporated, financial advisor to CPI ("BT Alex. Brown"),
delivered to the Board of Directors of CPI a written opinion, dated September 2,
1997, and updated to the date of this Joint Proxy Statement/Prospectus, to the
effect that, as of such dates and based upon and subject to certain matters
stated therein, the Exchange Ratio was fair, from a financial point of view, to
CPI. The full text of the written opinion of BT Alex. Brown, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex B to this Joint Proxy Statement/Prospectus and
should be read carefully in its entirety. The opinion of BT Alex. Brown is
directed to the CPI Board of Directors, addresses only the fairness of the
Exchange Ratio from a financial point of view to CPI, and does not constitute a
recommendation to any CPI shareholder as to how such shareholder should vote at
the CPI Special Meeting. See "The Merger--Opinion of CPI's Financial Advisor."
Needham & Company, Inc., financial advisor to Zytec ("Needham"), delivered
to the Board of Directors of Zytec a written opinion, dated September 2, 1997,
and updated to the date of this Joint Proxy Statement/Prospectus, to the effect
that, as of such dates and based upon and subject to certain matters stated
therein, the Exchange Ratio was fair to the Zytec shareholders from a financial
point of view. The full text of the written opinion of Needham, which sets forth
the assumptions made, matters considered, limitations on and scope of the review
undertaken, is attached as Annex C to this Joint Proxy Statement/ Prospectus and
should be read carefully in its entirety. The opinion of Needham is directed to
the Zytec Board of Directors, addresses only the fairness of the Exchange Ratio
from a financial point of view, and does not constitute a recommendation to any
Zytec shareholder as to how such shareholder should vote at the Zytec Special
Meeting. See "The Merger--Opinion of Zytec's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Zytec Board of Directors with
respect to the Merger Agreement and the transactions contemplated thereby, Zytec
shareholders should be aware that certain members of Zytec management and the
Zytec Board of Directors have interests in the Merger that are in addition to
their interests as Zytec shareholders generally.
After consummation of the Merger, certain current members of the Zytec Board
of Directors are to be included on the CPI Board of Directors. See "The
Merger--CPI Board of Directors Following the Merger" and "The Merger
Agreement--Additional Agreements--CPI Board of Directors."
Ronald D. Schmidt, President, Chief Executive Officer and Chairman of the
Board of Directors of Zytec, John M. Steel, Vice President-Marketing and Sales
and a director of Zytec, and Lawrence J. Matthews, a director of Zytec, have
entered into the Voting Agreement pursuant to which they have agreed to vote in
favor of the Merger Proposal and have granted to each of Joseph M. O'Donnell,
the President, Chief Executive Officer and Chairman of the Board of Directors of
CPI, and Richard J. Thompson, Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer of CPI, in their capacities as officers of CPI, an
irrevocable proxy to vote their shares in favor of the Merger Proposal. See
"Other Agreements--Voting Agreement."
The parties have agreed in the Merger Agreement that CPI and the Surviving
Corporation will indemnify, to the fullest extent permitted by applicable law,
the present and former officers, directors and employees of Zytec or any of its
subsidiaries against certain liabilities (i) arising out of actions or omissions
occurring at or prior to the Effective Time that arise from or are based on such
person's service as an officer, director or employee or (ii) that are based on
or arise out of the transactions contemplated by the Merger Agreement, and that
they will maintain policies of directors' and officers' liability insurance for
a period of six years after the Effective Time. To the fullest extent permitted
by law, from and after the
10
<PAGE>
Effective Time, all rights to indemnification existing in favor of the
employees, agents, directors or officers of Zytec and its subsidiaries with
respect to their activities as such prior to the Effective Time shall survive
the Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time. See "The Merger--Interests of Certain
Persons in the Merger" and "The Merger Agreement--Additional
Agreements--Indemnification and Insurance."
As of November 11, 1997, the directors and executive officers of Zytec owned
in the aggregate options to purchase 479,996 shares of Zytec Common Stock which,
pursuant to the Merger Agreement, will be converted into options to purchase in
the aggregate 638,395 shares of CPI Common Stock upon consummation of the
Merger. See "The Merger Agreement--Terms of the Merger--Stock Option and Other
Stock Plans."
MANAGEMENT OF ZYTEC FOLLOWING THE MERGER
As provided in the Merger Agreement, at the Effective Time (i) the current
directors of Zytec will resign, (ii) the directors of Merger Sub (currently,
Joseph M. O'Donnell and Richard J. Thompson, executive officers of CPI)
immediately prior to the Effective Time will become the directors of the
Surviving Corporation and (iii) the officers of the Surviving Corporation will
consist of Joseph M. O'Donnell as President, Richard J. Thompson as Chief
Financial Officer and Secretary, John M. Steel as Vice President and David Libow
as Assistant Secretary. See "The Merger--Management of Zytec Following the
Merger."
CPI BOARD OF DIRECTORS FOLLOWING THE MERGER
As provided in the Merger Agreement, following the Effective Time, the CPI
Board of Directors will be increased from seven to 11 seats. As of the Effective
Time, the additional four seats will be held by Ronald D. Schmidt, John M.
Steel, Dr. Fred C. Lee and Lawrence J. Matthews, all of whom are currently
members of the Board of Directors of Zytec, and Mr. Schmidt will serve as
Co-Chairman of the CPI Board of Directors with Joseph M. O'Donnell. See "The
Merger Agreement--Additional Agreements--CPI Board of Directors."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
It is expected that the Merger will constitute a tax-free reorganization for
Federal income tax purposes and, accordingly, that (i) no gain or loss will be
recognized for Federal income taxes by CPI, Merger Sub or Zytec pursuant to the
Merger and (ii) no gain or loss will be recognized for Federal income tax
purposes by holders of Zytec Common Stock upon the conversion of Zytec Common
Stock into CPI Common Stock in the Merger (except with respect to any cash
received in lieu of a fractional share interest in CPI Common Stock). The
obligation of CPI to consummate the Merger is conditioned on the continued
effectiveness of the opinion received by CPI from Hertzog, Calamari & Gleason,
its counsel, to the effect that the Merger constitutes a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the obligation of Zytec to consummate the Merger is
conditioned on the continued effectiveness of the opinion received by Zytec from
Winthrop & Weinstine, P.A., its counsel, to the effect that the Merger
constitutes a reorganization within the meaning of Section 368(a) of the Code.
See "The Merger--Certain Federal Income Tax Consequences." ZYTEC SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER UNDER FEDERAL, STATE, LOCAL OR OTHER APPLICABLE LAW.
COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of Zytec's shareholders currently are governed by Zytec's
articles of incorporation, as amended (the "Zytec Articles"), and bylaws, as
amended (the "Zytec Bylaws"), and also by the laws of the
11
<PAGE>
State of Minnesota, including the MBCA. Upon consummation of the Merger,
shareholders of Zytec will become shareholders of CPI, which is a Florida
corporation, and their rights as shareholders of CPI will be governed by the
laws of the State of Florida, including the Florida Business Corporation Act
(the "FBCA"), and by CPI's articles of incorporation, as amended (the "CPI
Articles"), and bylaws, as amended (the "CPI Bylaws"). For a discussion of
various differences between the rights of shareholders of Zytec and the rights
of shareholders of CPI, see "Description of CPI Capital Stock" and "Comparison
of Rights of Shareholders of CPI and Zytec."
RESTRICTIONS ON RESALE OF SECURITIES ISSUED IN THE MERGER
Shares of CPI Common Stock issued in the Merger will be freely transferable,
except for shares issued to persons who may be deemed "affiliates" of CPI or
Zytec, which shares will be subject to certain restrictions on resale under Rule
145 promulgated under the Securities Act, in addition to the restrictions on
transfer agreed to by such affiliates in connection with the
pooling-of-interests requirements. See "The Merger--Anticipated Accounting
Treatment" and "--Federal Securities Law Consequences." This Joint Proxy
Statement/Prospectus does not cover the resale of any shares of CPI Common Stock
offered hereby.
COMPARATIVE PER SHARE PRICES
CPI Common Stock is quoted on the NNM under the symbol "CPRD" and Zytec
Common Stock is quoted on the NNM under the symbol "ZTEC." The following table
sets forth the closing sales prices of CPI Common Stock and Zytec Common Stock
on September 2, 1997, the last full trading day before the execution and
announcement of the Merger Agreement, and on November , 1997, the most
recent practicable date for which prices were available prior to printing this
Joint Proxy Statement/Prospectus, and the pro forma equivalent per share value
of Zytec Common Stock based on CPI Common Stock closing sales prices as of such
dates.
<TABLE>
<CAPTION>
CPI ZYTEC ZYTEC
COMMON STOCK COMMON STOCK PRO FORMA
PRICE PRICE EQUIVALENT(1)
--------------- --------------- -------------
<S> <C> <C> <C>
September 2, 1997.................................................. $ 31.69 $ 29.00 $ 42.15
November , 1997.............................................. $ $ $
</TABLE>
- ------------------------
(1) Determined by multiplying the closing sales price of CPI Common Stock on the
dates listed above by the Exchange Ratio. See "Comparative Per Share Data."
12
<PAGE>
SELECTED HISTORICAL AND PRO FORMA DATA
The summary below sets forth certain selected historical financial and
unaudited pro forma financial data. The financial data should be read in
conjunction with the historical consolidated financial statements and related
notes thereto of CPI and Zytec, incorporated herein by reference, and in
conjunction with the unaudited pro forma combined condensed financial statements
and related notes thereto of the combined company after giving effect to the
Merger included elsewhere in this Joint Proxy Statement/Prospectus. See
"Unaudited Pro Forma Condensed Combined Financial Data." Results of operations
for interim periods, which include all adjustments that management of the
respective companies considered necessary for a fair presentation thereof, are
not necessarily indicative of the results for a full year.
SELECTED HISTORICAL FINANCIAL DATA
CPI. The following tables set forth selected historical consolidated
financial data for CPI for each of the five 52- or 53- week fiscal years ending
on the Friday nearest December 31 for the period ended January 3, 1997 and for
each of the 39-week periods ended October 3, 1997 and September 29, 1996. Such
data have been derived from, and should be read in conjunction with, the audited
consolidated financial statements (restated for the fiscal years 1996, 1995 and
1994), including the notes thereto, contained in CPI's reports filed with the
Commission pursuant to the Exchange Act and incorporated by reference herein.
See "Available Information" and "Incorporation of Documents by Reference."
COMPUTER PRODUCTS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS FOR THE YEARS ENDED ON THE FRIDAY NEAREST
ENDED(1) DECEMBER 31,(1)
------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OCTOBER 3, SEPTEMBER 29,
1997 1996 1996(3) 1995 1994 1993(2) 1992
---------- ------------- ---------- ---------- ---------- ---------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA(4):
Sales................................... $ 188,235 $ 149,368 $ 207,563 $ 174,451 $ 136,193 $ 110,554 $ 94,768
Income (loss) from continuing
operations............................ 16,776 13,349 19,074 12,605 4,294 965 (523)
Per share--Primary.................... 0.67 0.55 0.78 0.55 0.21 0.05 (0.02)
Per share--Assuming full
dilution(5)......................... 0.66 0.54 0.76 0.55 0.21 0.05 (0.02)
Net income.............................. 14,714 13,424 19,578 13,720 6,059 2,867 2,676
Per share--Primary.................... 0.59 0.55 0.80 0.59 0.29 0.14 0.13
Per share--Assuming full
dilution(5)......................... 0.58 0.54 0.78 0.59 0.29 0.14 0.13
Common and common equivalent shares
outstanding
Primary............................... 24,971 24,436 24,517 23,078 20,929 20,774 21,003
Fully diluted......................... 25,493 25,008 25,026 24,552 28,584 28,147 28,355
Cash dividends declared................. -- -- -- -- -- -- --
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
AS OF THE FRIDAY NEAREST DECEMBER 31,(1)
OCTOBER 3, ----------------------------------------------------------
1997(1) 1996(3) 1995 1994 1993(2) 1992
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................. $ 74,565 $ 61,085 $ 51,992 $ 40,346 $ 31,122 $ 29,524
Total assets.................................... 209,421 153,841 136,491 114,396 101,436 102,662
Long-term obligations........................... 53,174 29,402 36,050 47,172 45,214 46,491
Shareholders' equity............................ 102,483 84,019 61,522 39,958 32,802 30,806
Book value per common share..................... 4.22 3.52 2.67 1.97 1.63 1.54
</TABLE>
- ------------------------
(1) Effective July 5, 1997, CPI sold substantially all of the assets of its
industrial automation division, RTP, to RT Acquisition Florida Corp., which
also assumed certain liabilities of RTP. All periods have been restated to
give effect to such discontinued operations. RTP's financial position and
results of operations were not significant to CPI for the fiscal year 1996
and the thirty-nine week period ended October 3, 1997.
(2) In 1993, CPI recorded a net positive adjustment of $2,300,000 for the
cumulative effect of adopting Statements of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," and SFAS No. 112, "Employers'
Accounting for Postemployment Benefits."
(3) In August 1996, CPI acquired the capital stock of Jeta Power Systems, Inc.
("Jeta") not then held by it in a transaction accounted for under the
purchase method of accounting. The above financial information includes the
results of Jeta since its acquisition date.
(4) Per share amounts are calculated using the weighted average number of common
shares outstanding during each period, adjusted for the impact of dilutive
common stock equivalents.
(5) In 1992, 1993 and 1994, the fully diluted earnings per share calculations
produced anti-dilutive results; therefore, amounts shown are the same as
those under primary.
14
<PAGE>
ZYTEC. The following tables set forth selected historical consolidated
financial data for Zytec for each of the five fiscal years for the period ended
December 31, 1996 and for each of the nine-month periods ended September 28,
1997 and September 29, 1996. Such data have been derived from, and should be
read in conjunction with, the audited consolidated financial statements,
including the notes thereto, contained in Zytec's reports filed with the
Commission pursuant to the Exchange Act and incorporated by reference herein.
See "Available Information" and "Incorporation of Documents by Reference."
ZYTEC CORPORATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE-MONTHS ENDED(1)
---------------------------- FOR THE YEARS ENDED DECEMBER 31,(1)
SEPTEMBER 28, SEPTEMBER 29, --------------------------------------------------------
1997 1996(2) 1996(2) 1995 1994 1993 1992
------------- ------------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Sales................................. $ 190,850 $ 175,489 $ 228,168 $ 170,518 $ 128,141 $ 90,614 $ 89,639
Income (loss) from continuing
operations.......................... 11,120 8,771 10,481 3,878 3,364 2,671 (3,287)
Per share--Primary.................. 1.00 0.87 1.04 0.42 0.36 0.37 (0.55)
Per share--Assuming full dilution... 0.95 0.87 1.04 0.41 0.36 0.35 (0.55)
Net income (loss)..................... 11,120 8,771 10,481 3,878 3,364 2,671 (3,287)
Per share--Primary.................. 1.00 0.87 1.04 0.42 0.36 0.37 (0.55)
Per share--Assuming full dilution... 0.95 0.87 1.04 0.41 0.36 0.35 (0.55)
Common and common equivalent shares
outstanding:
Primary............................. 11,490 10,026 10,040 9,268 9,324 7,299 6,011
Fully diluted....................... 12,171 10,077 10,040 9,389 9,324 7,555 6,011
Cash dividends declared............... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF THE YEARS ENDED DECEMBER 31,(1)
SEPTEMBER 28, -----------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
Working capital..................................... $ 37,733 $ 30,944 $ 14,457 $ 14,180 $ 10,475 $ (927)
Total assets........................................ 103,877 83,477 66,367 45,475 32,867 24,793
Long-term obligations............................... 20,099 20,861 4,050 4,764 3,902 5,262
Shareholders' equity................................ 44,885 32,987 21,367 17,113 13,331 1,148
Book value per common share......................... 4.67 3.60 2.46 2.02 1.65 0.20
</TABLE>
- ------------------------
(1) All prior years' per share amounts have been restated to reflect the
two-for-one stock split in the form of a 100% stock dividend distributed on
June 3, 1996.
(2) The first nine months of 1996 includes the net income tax benefit related to
the recognition of the net operating loss carryforwards of Zytec's Austrian
subsidiary of $2,626,000, or $.26 per share.
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following tables set forth selected unaudited pro forma condensed
combined financial data for CPI for each of the three 52- or 53- week fiscal
years ending on the Friday nearest December 31 for the period ended January 3,
1997 and for the 39-week periods ended October 3, 1997 and September 27, 1996,
15
<PAGE>
after giving effect to the Merger, as if it had been consummated, with respect
to the statement of operations data, at the beginning of the periods presented,
or, with respect to balance sheet data, as of the date presented. The following
tables present such information as if the Merger had been accounted for as a
pooling-of-interests. In connection with the Merger, CPI anticipates a one-time
pre-tax charge, currently estimated to be in the range of $12,000,000 to
$15,000,000 ($8,000,000 to $10,000,000 after tax), in the period in which the
Merger is consummated. This charge will include the direct costs of the Merger,
certain restructuring costs and other unusual and nonrecurring items. The
estimated charge and the nature of the costs included therein are subject to
change as CPI's integration plan is developed. The unaudited pro forma condensed
combined financial data do not reflect any cost savings or other synergies, nor
any direct costs, restructuring costs or other unusual or non-recurring items,
anticipated by CPI's and Zytec's management as a result of the Merger and such
data are not necessarily indicative of the results of operations or the
financial position which would have occurred had the Merger been consummated at
the beginning of the periods presented or as of the date indicated, nor are they
necessarily indicative of future results of operations or financial position.
The selected unaudited pro forma condensed combined financial data should be
read in conjunction with the historical consolidated financial statements of CPI
and Zytec and the unaudited pro forma condensed combined financial data,
including the notes thereto, incorporated by reference herein or appearing
elsewhere in this Joint Proxy Statement/Prospectus. See "Incorporation of
Documents by Reference" and "Unaudited Pro Forma Condensed Combined Financial
Data."
For ease of reference, all column headings used in the following tables
refer to the period-ended dates of CPI.
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE THIRTY-NINE FOR THE YEARS ENDED ON THE FRIDAY
WEEKS ENDED WEEKS ENDED NEAREST DECEMBER 31,(1)
OCTOBER 3, SEPTEMBER 27, ----------------------------------
1997(1)(2) 1996(1)(2)(5) 1996(2)(5) 1995 1994
------------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS DATA:
Sales.......................................... $ 392,394 $ 344,833 $ 462,366 $ 344,969 $ 264,334
Income from continuing operations.............. 28,570 23,451 31,312 16,483 7,658
Per share--Primary(3)........................ 0.69 0.57 0.77 0.42 0.20
Per share--Assuming full dilution(3)(4)...... 0.68 0.57 0.76 0.42 0.20
Net income..................................... 26,508 23,526 31,816 17,598 9,423
Per share--Primary(3)........................ 0.64 0.57 0.78 0.45 0.25
Per share--Assuming full dilution(3)(4)...... 0.63 0.57 0.77 0.45 0.25
Weighted shares--Primary(3).................... 41,355 40,820 40,901 39,462 37,313
Weighted shares--Fully diluted(3).............. 41,877 41,392 41,410 40,936 44,968
Cash dividends declared........................ -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 3,
1997(1)(2)
----------
<S> <C>
COMBINED BALANCE SHEET DATA:
Working capital....................................................................................... $ 112,298
Total assets.......................................................................................... 313,298
Long-term obligations................................................................................. 61,273
Shareholders' equity.................................................................................. 159,368
Book value per common share(6)........................................................................ 4.16
</TABLE>
16
<PAGE>
- ------------------------
(1) Effective July 5, 1997, CPI sold substantially all of the assets of its
industrial automation division, RTP, to RT Acquisition Florida Corp., which
also assumed certain liabilities of RTP. All periods have been restated to
give effect to such discontinued operations. RTP's financial position and
results of operations were not significant to CPI for the fiscal year 1996
and the thirty-nine week period ended October 3, 1997; therefore, pro forma
financial disclosures have not been presented.
(2) On July 22, 1997, CPI acquired the capital stock of the Elba Group in a
transaction accounted for under the purchase method of accounting. Financial
information for fiscal year 1996 and the interim period includes the pro
forma effects of the Elba Group acquisition.
(3) This calculation assumes the issuance of approximately 16,384,000 shares of
CPI Common Stock, including shares to be issued upon conversion of the
Convertible Note and shares to be issued for assumed exercise of Zytec's
outstanding options. Such calculation is based on the Exchange Ratio of 1.33
shares of CPI Common Stock for each share of Zytec Common Stock. The actual
number of shares of CPI Common Stock issuable in the Merger may vary in
accordance with the terms of the Merger Agreement.
(4) In fiscal year 1994, the fully diluted earnings per share calculation
produced anti-dilutive results; therefore, amounts shown are the same as
those under primary.
(5) The first nine months of 1996 includes the net income tax benefit related to
the recognition of the net operating loss carryforwards of Zytec's Austrian
subsidiary of $2,626,000, or $.26 per share.
(6) Pro forma combined book value per common share was computed by adding
14,015,000 shares of CPI Common Stock estimated to be issued in the Merger
to holders of outstanding shares of Zytec Common Stock and the holder of the
Convertible Note to the actual number of shares of CPI Common Stock
outstanding at October 3, 1997, for a pro forma aggregate number of shares
outstanding of 38,316,000 at October 3, 1997. The actual number of shares of
CPI Common Stock issued in the Merger may vary in accordance with the terms
of the Merger Agreement.
COMPARATIVE PER SHARE DATA
The following table sets forth certain unaudited financial information for
CPI and Zytec on historical and pro forma combined bases. The pro forma
operating income data are derived from the unaudited pro forma condensed
combined statements of operations appearing elsewhere herein, which give effect
to the Merger as a pooling-of-interests as if the Merger had been consummated at
the beginning of the periods presented. The information set forth below should
be read in conjunction with the historical consolidated financial statements of
CPI and Zytec and the unaudited pro forma condensed combined financial
information, including the notes thereto, incorporated by reference or appearing
elsewhere in this Joint Proxy Statement/Prospectus. See "Incorporation of
Documents by Reference" and "Unaudited Pro Forma Condensed Combined Financial
Data." The pro forma financial data are not necessarily indicative of the
results of operations or the financial position which would have occurred had
the Merger actually been consummated at the beginning of the periods presented
or as of the date indicated, nor are they necessarily indicative of CPI's future
results of operations or financial position. The pro forma data do not reflect
any cost savings or other synergies anticipated by CPI's management as a result
of the Merger nor any direct costs, restructuring costs or other unusual or
non-recurring items related thereto.
17
<PAGE>
COMPARISON OF HISTORICAL AND EQUIVALENT STOCK VALUES
COMPUTER PRODUCTS, INC. AND ZYTEC CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED
THIRTY-NINE THIRTY-NINE ON THE FRIDAY NEAREST
WEEKS ENDED WEEKS ENDED DECEMBER 31,(1)
OCTOBER 3, SEPTEMBER 27, ---------------------------------
1997(1)(2) 1996(1)(2) 1996(2) 1995 1994
--------------- --------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
COMPUTER PRODUCTS, INC.:(3)
Historical income from continuing operations per common
share, primary.......................................... $ 0.67 $ 0.55 $ 0.78 $ 0.55 $ 0.21
Historical income from continuing operations per common
share, assuming full dilution(4)........................ 0.66 0.54 0.76 0.55 0.21
Pro forma combined income from continuing operations per
common share, primary(5)................................ 0.69 0.57 0.77 0.42 0.20
Pro forma combined income from continuing operations per
common share, assuming full dilution(4)(5).............. 0.68 0.57 0.76 0.42 0.20
Historical book value per common share.................... 4.22 3.22 3.52 2.67 1.97
Pro forma combined book value per common share(6)......... 4.16 3.15 3.10
</TABLE>
<TABLE>
<CAPTION>
NINE-MONTHS NINE-MONTHS AT OR FOR THE YEAR ENDED DECEMBER
ENDED ENDED 31,
SEPTEMBER 28, SEPTEMBER 29, ---------------------------------
1997 1996(9) 1996(9) 1995 1994
--------------- --------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ZYTEC CORPORATION:(3)
Historical income from continuing operations per common
share, primary(7)...................................... $ 1.00 $ 0.87 $ 1.04 $ 0.42 $ 0.36
Historical income from continuing operations per common
share, assuming full dilution(7)....................... 0.95 0.87 1.04 0.41 0.36
Equivalent pro forma income from continuing operations
per common share, primary(8)........................... 0.92 0.76 1.02 0.56 0.27
Equivalent pro forma income from continuing operations
per common share, assuming full dilution(8)............ 0.90 0.76 1.01 0.56 0.27
Historical book value per common share(7)................ 4.67 3.33 3.60 2.46 2.02
Equivalent pro forma book value per common share(8)...... 5.53 4.19 4.12
</TABLE>
- ------------------------
(1) Effective July 5, 1997, CPI sold substantially all of the assets of its
industrial automation division, RTP, to RT Acquisition Florida Corp., which
also assumed certain liabilities of RTP. All periods have been restated to
give effect to such discontinued operations. RTP's financial position and
results of operations were not significant to CPI for the fiscal year 1996
and the thirty-nine week period ended October 3, 1997; therefore, pro forma
financial disclosures have not been presented.
(2) On July 22, 1997, CPI acquired the capital stock of the Elba Group in a
transaction accounted for under the purchase method of accounting. Fiscal
year 1996 and interim period pro forma financial information includes the
pro forma effects of the Elba Group acquisition.
(3) CPI and Zytec have not paid any cash dividends on their respective capital
stock.
18
<PAGE>
(4) In fiscal year 1994, the fully diluted earnings per share calculation
produced anti-dilutive results; therefore, the amount shown is the same as
that included under primary.
(5) This calculation assumes the issuance of approximately 16,384,000 shares of
CPI Common Stock, including shares to be issued upon conversion of the
Convertible Note and shares to be issued for assumed exercise of Zytec's
outstanding options. Such calculation is based on the Exchange Ratio of 1.33
shares of CPI Common Stock for each share of Zytec Common Stock. The actual
number of shares of CPI Common Stock issuable in the Merger may vary in
accordance with the terms of the Merger Agreement.
(6) Pro forma combined book value per common share was computed by adding
14,015,000 shares of CPI Common Stock estimated to be issued in the Merger
to holders of outstanding shares of Zytec Common Stock and the holder of the
Convertible Note to the actual number of shares of CPI Common Stock
outstanding at October 3, 1997, for a pro forma aggregate number of shares
outstanding of 38,316,000 at October 3, 1997. The actual number of shares of
CPI Common Stock issuable in the Merger may vary in accordance with the
terms of the Merger Agreement.
(7) All Zytec's prior year amounts have been restated to reflect the two-for-one
stock split in the form of a 100% stock dividend distributed on June 3,
1996.
(8) Equivalent pro forma data for Zytec were computed by multiplying the pro
forma combined per share data of CPI by the Exchange Ratio of 1.33 shares of
CPI Common Stock for each share of Zytec Common Stock.
(9) The second quarter of 1996 includes the net income tax benefit related to
the recognition of the net operating loss carryforwards of Zytec's Austrian
subsidiary of $2,626,000, or $.26 per share.
19
<PAGE>
MARKET PRICE INFORMATION
CPI Common Stock is listed for quotation on the NNM under the symbol "CPRD."
Zytec Common Stock is listed for quotation on the NNM under the symbol "ZTEC."
The following table sets forth, for the fiscal quarters indicated, the
reported high and low per share sales prices of CPI Common Stock and Zytec
Common Stock, respectively, as reported on the NNM.
<TABLE>
<CAPTION>
CPI ZYTEC COMMON
COMMON STOCK
STOCK(1)
-------------------- --------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
--------- --------- --------- ---------
1995
First Quarter............................................................ $ 5.00 $ 3.13 $ 4.38 $ 2.75
Second Quarter........................................................... 6.25 4.81 4.06 3.00
Third Quarter............................................................ 8.94 5.88 4.63 3.00
Fourth Quarter........................................................... 13.25 7.50 6.13 4.19
1996
First Quarter............................................................ $ 14.50 $ 9.25 $ 10.00 $ 5.13
Second Quarter........................................................... 23.00 13.25 23.50 9.19
Third Quarter............................................................ 21.75 12.81 20.88 9.00
Fourth Quarter........................................................... 21.88 17.88 15.00 10.00
1997
First Quarter............................................................ $ 18.13 $ 14.00 $ 15.88 $ 10.13
Second Quarter........................................................... 25.00 13.75 20.13 10.25
Third Quarter............................................................ 33.44 23.25 40.75 17.13
Fourth Quarter (through November , 1997)...............................
</TABLE>
- ------------------------
(1) All prior data for Zytec have been restated to reflect a two-for-one stock
split in the form of a 100% stock dividend distributed on June 3, 1996.
On September 2, 1997, the last full trading day prior to the execution and
delivery of the Merger Agreement and the public announcement thereof, the high,
low and closing sales prices of CPI Common Stock on the NNM were $32.00 , $30.25
and $31.69, respectively, and the high, low and closing sales prices of Zytec
Common Stock on the NNM were $29.50, $28.50 and $29.00, respectively. The pro
forma equivalent closing sales price of Zytec Common Stock on September 2, 1997,
determined by multiplying the closing sales price of CPI Common Stock on such
date by the Exchange Ratio, was $42.15.
On November , 1997, the most recent practicable date to obtain market
price data prior to printing this Joint Proxy Statement/Prospectus, the high,
low and closing sales prices of CPI Common Stock on the NNM were $ ,
$ and $ , respectively, and the high, low and closing sales
prices of Zytec Common Stock on the NNM were $ , $ and
$ , respectively. Accordingly, if the Merger had been consummated on
that date, the pro forma equivalent closing sales price of Zytec Common Stock on
such date, determined by multiplying the closing sales price of CPI Common Stock
on such date by the Exchange Ratio, would have been $ .
Because the market price of CPI Common Stock is subject to fluctuation, the
market value of the shares of CPI Common Stock that holders of Zytec Common
Stock will receive in the Merger may increase or decrease prior to the Effective
Time. See "Risk Factors--Risks Relating to the Merger--Fixed Exchange Ratio
Despite Potential Changes in Stock Prices."
CPI AND ZYTEC SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
CPI COMMON STOCK AND ZYTEC COMMON STOCK.
20
<PAGE>
DIVIDEND POLICY--CPI
CPI has not paid cash dividends in the past, and no change in such policy is
anticipated. Future dividends, if any, will be determined by CPI's Board of
Directors in light of the circumstances then existing, including CPI's earnings
and financial requirements and general business conditions. CPI currently
intends to retain any future earnings to fund the development and growth of its
business and does not anticipate paying any cash dividends on CPI Common Stock
in the reasonably foreseeable future.
21
<PAGE>
RISK FACTORS
SHAREHOLDERS OF CPI, IN CONSIDERING WHETHER TO APPROVE THE CPI SHARE
PROPOSAL, AND SHAREHOLDERS OF ZYTEC, IN CONSIDERING WHETHER TO APPROVE AND ADOPT
THE MERGER PROPOSAL, SHOULD CONSIDER THE FOLLOWING MATTERS. THESE MATTERS SHOULD
BE CONSIDERED IN CONJUNCTION WITH THE OTHER INFORMATION INCLUDED AND
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
RISKS RELATING TO THE MERGER
POTENTIAL PROBLEMS WITH INTEGRATION OF OPERATIONS
The success of the Merger will depend in large part upon whether CPI's and
Zytec's respective businesses are integrated in an efficient and effective
manner, and there can be no assurance as to the extent that this will occur.
Failure to successfully integrate the operations of CPI and Zytec could have a
material adverse effect on the business, results of operations and financial
condition of the combined company, including, without limitation, product
development cycles and marketing efforts. The combination of the two companies
will require, among other things, integration of the companies' respective
product offerings, technologies, management information systems, sales channels
and employees, and the coordination of their sales and marketing and research
and development efforts. CPI and Zytec have a large number of employees in
widely dispersed operations, which may increase the difficulty of integrating
their operations. In addition, the integration of CPI and Zytec will require the
dedication of management resources, which may temporarily divert attention from
the day-to-day business of the combined company, the development or acquisition
of new technologies, and the pursuit of other business acquisition
opportunities. If significant difficulties, delays or costs are encountered in
the integration of the existing products or technologies or the development of
new products and technologies, resources could be diverted from new product
development, and delays in new product introductions could occur. Successful
integration of the two companies' sales and marketing organizations will require
the sales and marketing personnel of each company to learn about the often
technically-complex products, services and technologies of the other company.
There can be no assurance that the combined company will be able to take full
advantage of the combined sales forces' efforts. In addition, during the
pre-Merger and integration phases, competitors may undertake initiatives to
attract customers and to recruit key employees through various incentives, which
could have a material adverse effect on the business, results of operations and
financial condition of CPI, Zytec and/or the combined company.
NON-REALIZATION OF BENEFICIAL SYNERGIES
The managements of CPI and Zytec have entered into the Merger Agreement with
the expectation that the Merger will result in beneficial synergies, including
cost reductions from purchasing efficiencies and improved market penetration.
Achieving these anticipated synergies may be limited by a number of factors
including, without limitation, problems and delays in the integration of CPI's
and Zytec's operations and general and industry-specific economic factors. No
assurance can be given that the benefits expected from such integration will be
realized. Even if CPI and Zytec were able to integrate their operations and
economic conditions remain stable, there can be no assurance that the
anticipated synergies will be achieved. The failure to achieve such synergies
could have a material adverse effect on the business, results of operations and
financial condition of the combined company.
DIFFICULTY WITH CUSTOMERS
There can be no assurance that customers of CPI and Zytec will continue
their current and/or historical buying patterns in light of the announced Merger
or following its consummation. Certain customers may defer purchasing decisions
as they evaluate the combined company's future product
22
<PAGE>
strategy and consider the product offerings of competitors. If substantial
numbers of customers determine to defer such purchases or purchase products from
competitors, such deferrals and purchases could have a material adverse effect
on the business, results of operations and financial condition of CPI, Zytec
and/or the combined company. In addition, Zytec and, to a lesser extent, CPI
have each historically depended upon a limited number of customers for a
significant portion of its business. Consequently, decisions by a relatively
small number of these customers to defer their purchasing decisions or to
purchase products elsewhere could have a material adverse effect on the
business, results of operations and financial condition of CPI, Zytec and/or the
combined company.
NON-RETENTION OF EMPLOYEES
The success of the combined company after the Merger will depend in part
upon the efforts of its employees and the retention of key employees of CPI and
Zytec. Competition for qualified personnel in the power supply industry is very
intense. While each of CPI and Zytec is engaged in ongoing efforts to retain key
employees, it may be more difficult to retain such employees after the Merger.
The loss of services of any of the key employees of CPI or Zytec could
materially and adversely affect the combined company's business, financial
condition and results of operations.
VOLATILITY OF STOCK PRICE
The market prices of CPI Common Stock and Zytec Common Stock have been, and,
after the Effective Time, the market price of CPI Common Stock may continue to
be, relatively volatile. Factors such as new product announcements by CPI, Zytec
or the combined company, their customers or their respective competitors,
quarterly fluctuations in operating results, challenges associated with
integration of businesses and general conditions in the markets in which CPI,
Zytec and the combined company compete, such as a decline in industry growth
rates, may have a significant impact on the market price of CPI Common Stock.
These conditions, as well as factors which generally affect the market for
stocks of technology companies, could cause the price of CPI Common Stock to
significantly fluctuate over relatively short periods. See "Market Price
Information."
FIXED EXCHANGE RATIO DESPITE POTENTIAL CHANGES IN STOCK PRICES
The Exchange Ratio is fixed and will not be adjusted due to any increases or
decreases in the market price of either CPI Common Stock or Zytec Common Stock.
The specific dollar value of the consideration to be received by Zytec
shareholders in the Merger will depend on the market price of CPI Common Stock
at the Effective Time. Variations in the market price of Zytec Common Stock or
CPI Common Stock could result from changes in the business, operations or
prospects of CPI or Zytec, market assessments of the likelihood that the Merger
will be consummated, the timing thereof and the prospects of the Merger and
post-Merger operations, regulatory considerations, general market and economic
conditions and other factors. Because the Merger Agreement provides that the
closing of the Merger will occur after the CPI and Zytec Special Meetings, there
can be no assurance that the price of CPI Common Stock on the date of the CPI
and Zytec Special Meetings will be indicative of its price at the closing of the
Merger. Shareholders of CPI and Zytec are urged to obtain current market
quotations for CPI Common Stock and Zytec Common Stock. CPI Common Stock and
Zytec Common Stock historically have both been subject to significant price
volatility. No assurance can be given as to the market prices of CPI Common
Stock or Zytec Common Stock at any time before the Effective Time or as to the
market price of CPI Common Stock at any time thereafter. See "Market Price
Information."
INCURRENCE OF SIGNIFICANT OPERATING CHARGE AND SIGNIFICANT TRANSACTION
EXPENSE
CPI expects to incur pre-tax charges to operations currently estimated to be
between $12,000,000 and $15,000,000 for the period ending January 2, 1998, which
is the period in which the Merger is expected to be consummated, to reflect
costs associated with combining the operations of the two companies. This
23
<PAGE>
amount is a preliminary estimate and is therefore subject to change. Additional
unanticipated costs may be incurred relating to the integration of the
operations of CPI and Zytec. Although CPI expects that the elimination of
duplicative expenses as well as other efficiencies related to the integration of
the operations of CPI and Zytec may offset additional expenses over time, there
can be no assurance that such net benefits will be achieved in the near term, or
at all. The charges to operations described above include direct transaction
costs of approximately $3,000,000, consisting primarily of regulatory filing
costs and the fees of financial advisors, attorneys, accountants, financial
printers and proxy solicitors. See "Unaudited Pro Forma Condensed Combined
Financial Data."
RISKS RELATING TO CPI, ZYTEC AND THE COMBINED COMPANY
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
CPI and Zytec have experienced recent quarterly growth in sales principally
due to increased sales in the communications and internet markets, increased
market acceptance of their products and the expansion of their product lines and
sales channels. Due to the rapidly changing nature of the markets for CPI's and
Zytec's products, as well as the likelihood of increased competition, there can
be no assurance that CPI's or Zytec's rates of growth in sales and positive
operating results will continue. A significant portion of Zytec's sales and, to
a lesser extent, CPI's sales in prior periods have been derived from relatively
large sales to a limited number of customers, and therefore the failure of the
combined company to secure expected large sales may have a material adverse
effect on the results of operations of the combined company. Also, if CPI, Zytec
or the combined company were in production on a limited number of projects at
any given time, the cancellation or curtailment of any such project could have a
material adverse effect on the results of operations and financial condition of
CPI, Zytec and/or the combined company. The future sales of CPI, Zytec and the
combined company will depend on their ability to successfully develop,
manufacture, market and deliver products for customers world-wide. Quarterly
sales and operating results of CPI, Zytec and the combined company will
generally depend on the volume and timing of and ability to fulfill orders
received within the quarter, which are difficult to forecast. Significant
portions of CPI's and Zytec's expense levels are relatively fixed in advance
based in large part on their respective forecasts of future sales. If sales are
below expectations in any given quarter, the adverse impact of any shortfall on
the operating results of CPI, Zytec or the combined company may be magnified to
the extent the respective company is unable to adjust spending to compensate for
the shortfall. CPI, Zytec or the combined company may also increase spending in
response to competition or to pursue new market opportunities. Accordingly,
there can be no assurance that any of them will be able to sustain profitability
in the future, particularly on a quarter-to-quarter basis.
COMPETITION; MORE SIGNIFICANT COMPETITORS DUE TO INCREASED INDUSTRY
CONSOLIDATION
The industries in which CPI and Zytec compete are highly competitive and
characterized by increasing customer demands for product performance, shorter
manufacturing cycles and lower prices. These trends result in frequent
introductions of new products with added capabilities and features and
continuous improvements in the relative price/performance of the products.
Increased competition could result in price reductions, reduced profit margins
and loss of market share, each of which could adversely affect the results of
operations and financial condition of CPI, Zytec and the combined company.
CPI's, Zytec's and the combined company's principal competitors include Lucent
Technologies, Delta Products and Astec (BSR) plc. Competitive factors in the
markets in which CPI, Zytec and the combined company compete or will compete
include core technology, breadth of product features, product quality and
functionality, reliability, pricing, marketing and distribution resources,
international certifications, technical service and customer support. Certain of
CPI's and Zytec's major competitors have also been engaged in merger and
acquisition transactions. Such consolidations by competitors are likely to
create entities with increased market share, customer bases, technology and
marketing expertise, sales force size, and/or proprietary technology in product
markets in which CPI, Zytec and the combined company will compete. These
24
<PAGE>
developments may adversely affect the ability of CPI, Zytec and the combined
company to compete in such markets.
UNCERTAINTY OF NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW AND
ENHANCED PRODUCTS
The markets for CPI's and Zytec's products are, and the markets for the
combined company's products will be, characterized by rapidly changing
technologies, increasing customer demands, evolving industry standards, frequent
new product introductions and, in some cases, short product life cycles. The
development of new, technologically advanced products is a complex and uncertain
process requiring high levels of innovation and cost, as well as the accurate
anticipation of technological and market trends. There can be no assurance that
CPI, Zytec and/or the combined company will successfully develop, introduce or
manage the transition of new products. The failure of or delay by CPI, Zytec or
the combined company in anticipating technological advances or developing and
marketing product enhancements or new products that respond to any significant
technological change could have a material adverse effect on the business,
operating results and financial condition of CPI, Zytec and/or the combined
company. In addition, the inability of products to gain market acceptance could
adversely affect CPI's, Zytec's or the combined company's results of operations,
particularly on a quarterly basis.
LOSS OF PROPRIETARY TECHNOLOGIES AND INTELLECTUAL PROPERTY RIGHTS
Both CPI and Zytec operate in industries in which the ability to compete
depends in part on the development or acquisition of proprietary technologies
which must be protected to preserve the benefits of exclusive use of such
technologies. Both companies rely on a combination of trade secret and other
intellectual property law, copyrights, and other measures to protect their
intellectual property rights, including holding patents and evaluating the
benefits of obtaining patents. Such protection, however, may not preclude
competitors from independently developing products similar or superior to the
products of CPI, Zytec and the combined company or prevent misappropriation of
such intellectual property. In addition, the laws of certain foreign countries
may not protect CPI's, Zytec's or the combined company's intellectual property
rights to the same extent as do the laws of the United States. Although both CPI
and Zytec continue to evaluate and implement protective measures, there can be
no assurance that these efforts will be successful or that third parties will
not assert intellectual property infringement claims against CPI, Zytec and/or
the combined company. No such claims or litigation related to any such matter
are currently pending against CPI or Zytec. However, there can be no assurance
that none will be initiated, that CPI, Zytec and/or the combined company would
prevail in any such litigation seeking damages or an injunction against the sale
of the products of CPI, Zytec or the combined company, or that CPI, Zytec or the
combined company would be able to obtain any necessary licenses on reasonable
terms or at all. In addition, Zytec has a license pursuant to a license
agreement with Galaxy Power, Inc. ("Galaxy") for certain DC-to-DC power supply
technology that gives Zytec rights to designs used by Zytec in a series of power
convertors developed by Galaxy for Zytec. The loss of this license may require
changes in, or otherwise disrupt or delay the distribution of, certain products
manufactured by Zytec and could have an adverse effect on the financial
condition, business and operations of CPI, Zytec or the combined company.
RISKS RELATED TO ACQUISITIONS
Acquisitions of complementary businesses and technologies, including
technologies and products under development, have been an important part of
CPI's business strategy. Acquisitions require significant financial and
management resources both at the time of the transaction and during the process
of integrating the newly acquired businesses or technologies into CPI's
operations. The operating results and financial condition of CPI, Zytec and/or
the combined company could be adversely affected if CPI is unable to
successfully integrate such new businesses and technologies into its operations.
In addition, certain acquisitions or strategic transactions may be subject to
approval by the other party's board of directors and/or shareholders, domestic
or foreign governmental agencies, or third parties, and all required
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approvals may be not obtained as needed. Therefore, there is a risk that
important acquisitions or transactions could fail to be consummated as planned.
Future acquisitions by CPI, Zytec or the combined company could also result in
issuances of equity securities or rights associated with equity securities,
which could potentially dilute the combined company's earnings per share. In
addition, such future acquisitions could result in the incurrence of additional
debt, taxes or contingent liabilities or the amortization of goodwill and other
intangible assets, which could adversely affect CPI's, Zytec's and/or the
combined company's future results of operations and financial condition.
RISKS RELATED TO INTERNATIONAL SALES AND FOREIGN MANUFACTURING OPERATIONS
International sales have been, and are expected to continue to be, an
increasingly important contributor to sales of CPI, Zytec and the combined
company. International sales are subject to certain inherent risks, including
unexpected changes in regulatory requirements and tariffs, difficulties in
staffing and managing foreign operations, longer payment cycles, problems in
collecting accounts receivable and potentially adverse tax consequences. Other
risks of international sales include changes in economic conditions in the
international markets in which the products are sold, political and economic
instability, fluctuations in currency exchange rates, import and export
controls, and the burden and expense of complying with foreign laws. In
addition, sales in developing nations may fluctuate to a greater extent than
sales to customers in developed nations, as those markets are only beginning to
adopt new technologies and establish purchasing practices. These risks may
adversely affect the operating results and financial condition of CPI, Zytec
and/or the combined company.
CPI and, to a lesser extent, Zytec manufacture their products in foreign
locations. Approximately 80% of CPI's products in fiscal year 1996 were
manufactured in foreign locations. Specifically, 58% of CPI's fiscal year 1996
sales were from products manufactured in Hong Kong and China, 22% were from
products manufactured in the Republic of Ireland and the remaining 20% were from
domestic operations. Approximately 30% of Zytec's products in fiscal year 1996
were manufactured in foreign locations. The supply and cost of these products
can be adversely affected, among other reasons, by changes in foreign currency
exchange rates, increased import duties, imposition of tariffs, imposition of
import quotas, interruptions in sea or air transportation and political or
economic changes. In the event of confiscation, expropriation, nationalization
or governmental restrictions in the above-mentioned foreign or other locations,
CPI's, Zytec's and the combined company's results of operations and financial
condition could be adversely affected from business disruption resulting in
delays and/or increased costs in the production and delivery of products.
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GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the shareholders
of CPI in connection with the solicitation of proxies by the Board of Directors
of CPI for use at the CPI Special Meeting to be held at on December ,
1997, at 10:00 a.m., local time, and at any adjournment(s) or postponement(s)
thereof. This Joint Proxy Statement/Prospectus also constitutes the Prospectus
of CPI with respect to the issuance of up to 14,476,983 shares of CPI Common
Stock to be issued by CPI in connection with the Merger, as described below.
This Joint Proxy Statement/Prospectus is also being furnished to the
shareholders of Zytec in connection with the solicitation of proxies by the
Board of Directors of Zytec for use at the Zytec Special Meeting to be held at
on December , 1997, at 9:00 a.m., local time, and at any adjournment(s)
or postponement(s) thereof.
CPI SPECIAL MEETING
At the CPI Special Meeting, holders of CPI Common Stock will consider and
vote upon (i) the CPI Share Proposal, and (ii) such other matters as may
properly come before the CPI Special Meeting or any adjournment(s) or
postponement(s) thereof. Although neither the FBCA, CPI Articles nor CPI Bylaws
requires CPI to obtain the approval of its shareholders of the Merger or the
Merger Agreement, the rules of the NNM require CPI to obtain shareholder
approval of the CPI Share Proposal. Management of CPI does not expect any other
matter to come before the CPI Special Meeting.
THE BOARD OF DIRECTORS OF CPI HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND ALL RELATED TRANSACTIONS AND UNANIMOUSLY RECOMMENDS THAT CPI SHAREHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE CPI SHARE PROPOSAL. SEE "THE
MERGER--BACKGROUND OF THE MERGER" AND "--RECOMMENDATION OF THE BOARD OF
DIRECTORS OF CPI; REASONS FOR THE MERGER."
RECORD DATE
The CPI Board of Directors has fixed the close of business on November 11,
1997 as the CPI Record Date for determining holders entitled to notice of and to
vote at the CPI Special Meeting.
QUORUM
The presence, in person or by properly executed proxy, of holders of a
majority of the issued and outstanding shares of CPI Common Stock shall
constitute a quorum at the CPI Special Meeting. Abstentions will be considered
present for purposes of establishing a quorum.
REQUIRED VOTE
Under NNM rules, approval of the CPI Share Proposal requires the affirmative
vote of a majority of the votes cast on the proposal at the CPI Special Meeting.
Accordingly, abstentions will have no effect on the outcome of the proposal. As
of the CPI Record Date, the directors and executive officers of CPI beneficially
owned as a group approximately 6.7% of the outstanding shares of CPI Common
Stock and have indicated their intention to vote in favor of the CPI Share
Proposal. Approval of the CPI Share Proposal is a condition to consummation of
the Merger.
VOTING RIGHTS; PROXIES
As of the CPI Record Date, there were 24,322,325 shares of CPI Common Stock
issued and outstanding, each of which entitles the holder thereof to one vote.
All shares of CPI Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted
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in accordance with the instructions indicated in such proxies. IF NO
INSTRUCTIONS ARE INDICATED, SUCH SHARES OF CPI COMMON STOCK WILL BE VOTED IN
FAVOR OF THE CPI SHARE PROPOSAL. CPI does not know of any matters other than the
CPI Share Proposal that are to come before the CPI Special Meeting. If any other
matter or matters are properly presented for action at the CPI Special Meeting,
including, among other things, consideration of a motion to adjourn the CPI
Special Meeting to another time and/or place (including, without limitation, for
the purpose of soliciting additional proxies), the persons named in the enclosed
form of CPI proxy and acting thereunder will have the discretion to vote on such
matters in accordance with their judgment. A CPI shareholder giving a proxy
pursuant to this proxy solicitation may revoke it at any time before it is
exercised by giving a subsequently dated proxy, delivering to the Secretary of
CPI a written notice of revocation prior to the voting of the proxy at the CPI
Special Meeting, or attending the CPI Special Meeting and informing the
Secretary of CPI in writing that such shareholder wishes to vote his or her
shares in person. Attendance at the CPI Special Meeting will not in and of
itself have the effect of revoking a previously delivered proxy.
SOLICITATION OF PROXIES
Under the terms of the Merger Agreement, expenses of CPI's solicitation of
proxies, including the cost of printing and mailing this Joint Proxy
Statement/Prospectus to CPI shareholders, will be borne equally by CPI and
Zytec. In addition to solicitation by use of the mails, proxies may be solicited
from CPI shareholders by directors, officers and employees of CPI in person or
by telephone, telegram or other means of communication. Such directors, officers
and employees will not be additionally compensated, but they may be reimbursed
for reasonable out-of-pocket expenses, in connection with such solicitations.
CPI and Zytec have retained D.F. King & Co., a proxy solicitation firm, for
assistance in connection with the solicitation of proxies for the CPI Special
Meeting and the Zytec Special Meeting at a total cost of approximately $10,000,
plus reimbursement of reasonable out-of-pocket expenses. Arrangements will also
be made with brokerage houses, custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such brokerage houses, custodians, nominees and fiduciaries, and
CPI will reimburse such brokerage houses, custodians, nominees and fiduciaries
for their reasonable expenses incurred in connection therewith.
THE MATTER TO BE CONSIDERED AT THE CPI SPECIAL MEETING IS OF GREAT
IMPORTANCE TO SHAREHOLDERS OF CPI. ACCORDINGLY, CPI SHAREHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
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ZYTEC SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING
At the Zytec Special Meeting, holders of Zytec Common Stock will consider
and vote upon (i) the Merger Proposal and (ii) such other matters as may
properly come before the Zytec Special Meeting or any adjournment(s) or
postponement(s) thereof. The MBCA requires that the Merger Proposal be presented
to and approved by Zytec's shareholders. Management of Zytec does not expect any
other matter to come before the Zytec Special Meeting.
THE BOARD OF DIRECTORS OF ZYTEC HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND ALL RELATED TRANSACTIONS AND UNANIMOUSLY RECOMMENDS THAT ZYTEC
SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER PROPOSAL. SEE "THE
MERGER--BACKGROUND OF THE MERGER" AND "-- RECOMMENDATION OF THE BOARD OF
DIRECTORS OF ZYTEC; REASONS FOR THE MERGER."
RECORD DATE
The Zytec Board of Directors has fixed the close of business on November 11,
1997 as the Zytec Record Date for determining holders entitled to notice of and
to vote at the Zytec Special Meeting.
QUORUM
The presence, in person or by properly executed proxy, of holders of a
majority of the issued and outstanding shares of Zytec Common Stock shall
constitute a quorum at the Zytec Special Meeting. Abstentions will be considered
present for purposes of establishing a quorum.
REQUIRED VOTE
Under the MBCA, the approval of the Merger Proposal requires the affirmative
vote of the holders of a majority of the outstanding shares of Zytec Common
Stock. Accordingly, abstentions will have the effect of votes against approval
of the Merger Proposal. Three shareholders who beneficially own in the aggregate
approximately 25% of the Zytec Common Stock outstanding as of the Record Date
have entered into the Voting Agreement with CPI pursuant to which such holders
have agreed to vote in favor of the Merger Proposal and have granted an
irrevocable proxy to each of Joseph M. O'Donnell and Richard J. Thompson, in
their capacities as officers of CPI, to vote all such shares in such manner. See
"Other Agreements--Voting Agreement." As of the Zytec Record Date, the directors
and executive officers of Zytec beneficially owned as a group approximately 33%
of the outstanding shares of Zytec Common Stock (including the 25% covered by
the Voting Agreement) and have indicated their intention to vote in favor of the
Merger Proposal. Approval of the Merger Proposal is a condition to consummation
of the Merger.
VOTING RIGHTS; PROXIES
As of the Zytec Record Date, there were 9,660,228 shares of Zytec Common
Stock issued and outstanding, each of which entitles the holder thereof to one
vote. All shares of Zytec Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH SHARES OF ZYTEC COMMON STOCK WILL BE VOTED IN FAVOR OF THE
MERGER PROPOSAL. Zytec does not know of any matters other than the Merger
Proposal that are to come before the Zytec Special Meeting. If any other matter
or matters are properly presented for action at the Zytec Special Meeting,
including, among other things, consideration of a motion to adjourn the Zytec
Special Meeting to another time and/or place (including, without limitation, for
the purpose of soliciting
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additional proxies), the persons named in the enclosed form of Zytec proxy and
acting thereunder will have the discretion to vote on such matters in accordance
with their judgment. A Zytec shareholder giving a proxy pursuant to this proxy
solicitation may revoke it at any time before it is exercised by giving a
subsequently dated proxy, delivering to the Secretary of Zytec a written notice
of revocation prior to the voting of the proxy at the Zytec Special Meeting, or
attending the Zytec Special Meeting and informing the Secretary of Zytec in
writing that such shareholder wishes to vote his or her shares in person.
Attendance at the Zytec Special Meeting will not in and of itself have the
effect of revoking a previously delivered proxy.
SOLICITATION OF PROXIES
Under the terms of the Merger Agreement, expenses of Zytec's solicitation of
proxies, including the cost of printing and mailing this Joint Proxy
Statement/Prospectus to Zytec shareholders, will be borne equally by Zytec and
CPI. In addition to solicitation by use of the mails, proxies may be solicited
from Zytec shareholders by directors, officers and employees of Zytec in person
or by telephone, telegram or other means of communication. Such directors,
officers and employees will not be additionally compensated, but they may be
reimbursed for reasonable out-of-pocket expenses, in connection with such
solicitations. CPI and Zytec have retained D.F. King & Co. for assistance in
connection with the solicitation of proxies for the Zytec Special Meeting and
the CPI Special Meeting at a total cost of approximately $10,000, plus
reimbursement of reasonable out-of-pocket expenses. Arrangements will also be
made with brokerage houses, custodians, nominees and fiduciaries for forwarding
of proxy solicitation materials to beneficial owners of shares held of record by
such brokerage houses, custodians, nominees and fiduciaries, and Zytec will
reimburse such brokerage houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in connection therewith.
THE MATTER TO BE CONSIDERED AT THE ZYTEC SPECIAL MEETING IS OF GREAT
IMPORTANCE TO SHAREHOLDERS OF ZYTEC. ACCORDINGLY, ZYTEC SHAREHOLDERS ARE URGED
TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE. ZYTEC SHAREHOLDERS
SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXIES.
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THE MERGER
This section of the Joint Proxy Statement/Prospectus, as well as the next
two sections of the Joint Proxy Statement/Prospectus entitled "The Merger
Agreement" and "Other Agreements," describe certain significant aspects of the
proposed Merger and related transactions. To the extent that it relates to the
Merger Agreement, or the other agreements or arrangements described under "Other
Agreements," the following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached as Annex A to this Joint Proxy Statement/Prospectus and is incorporated
herein by reference, and to such other agreements which are filed as exhibits to
the Registration Statement of which this Joint Proxy Statement/Prospectus forms
a part and are incorporated herein by reference. All shareholders are urged to
read the Merger Agreement and such other exhibits in their entireties.
GENERAL
The Merger Agreement provides that the Merger may be consummated if the
required approvals of the Zytec shareholders and CPI shareholders are obtained
and all other conditions to the Merger are satisfied or waived. Upon
consummation of the Merger, Merger Sub will be merged with and into Zytec, and
Zytec will become a wholly-owned subsidiary of CPI. Pursuant to the Merger, each
outstanding share of Zytec Common Stock (other than any shares owned by Zytec,
CPI or their subsidiaries, all of which shall be cancelled, and other than
Dissenting Shares) will be converted into the right to receive 1.33 shares of
CPI Common Stock.
The aggregate number of shares of CPI Common Stock issuable to Zytec
securityholders pursuant to the Merger Agreement would represent approximately
40% of the CPI Common Stock to be outstanding immediately following consummation
of the Merger (assuming the exercise of all outstanding Zytec and CPI stock
options).
EFFECTIVE TIME
Consummation of the Merger will occur upon the filing of the Articles of
Merger with the Secretary of State of the State of Minnesota or such later date
or time as may be specified in the Articles of Merger. The filing of the
Articles of Merger will occur as soon as practicable after the satisfaction or
waiver of all conditions to the closing of the transactions contemplated by the
Merger Agreement. The Merger Agreement may be terminated, under certain
circumstances, by either party if the Merger shall not have been consummated on
or before January 31, 1998. The Merger Agreement may also be terminated by one
or both parties under certain other circumstances. See "The Merger
Agreement--Conditions to the Merger" and "--Termination."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of Zytec Common Stock into the right to receive CPI Common
Stock will occur automatically at the Effective Time. As soon as practicable
after the Effective Time, the Exchange Agent will mail a transmittal letter and
instructions to each Zytec shareholder describing the procedures to follow in
forwarding stock certificates representing Zytec Common Stock to the Exchange
Agent. Upon receipt of such Zytec stock certificates and a duly executed letter
of transmittal, the Exchange Agent will deliver whole shares of CPI Common Stock
to such shareholder and cash in lieu of any fractional shares pursuant to the
terms of the Merger Agreement and in accordance with the transmittal letter,
together with any dividends or other distributions to which such shareholder may
be entitled.
If any issuance of shares of CPI Common Stock in exchange for shares of
Zytec Common Stock is to be made to a person who is not the registered owner in
the transfer records of Zytec as of the Effective Time, the CPI Common Stock and
other consideration may be issued and paid to such transferee if the
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certificate evidencing such shares of Zytec Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer, and by evidencing that any applicable stock transfer taxes have
been paid.
Immediately after the Effective Time, the stock transfer books of Zytec will
be irrevocably closed, and there will be no further transfers of Zytec Common
Stock on the stock transfer books of Zytec. If a certificate formerly
representing Zytec Common Stock is presented for transfer after the Effective
Time, it will be cancelled and exchanged for a certificate representing the
appropriate number of whole shares of CPI Common Stock and cash in lieu of any
fractional shares and any dividends and distributions to which the holder of
such certificate shall be entitled.
After the Effective Time and until surrendered, shares of Zytec Common Stock
will be deemed for all corporate purposes, other than the payment of any
dividends and distributions, to represent the right to receive upon surrender
the number of whole shares of CPI Common Stock into which the cancelled shares
of Zytec Common Stock were converted at the Effective Time and any cash amount
payable in lieu of fractional shares. No dividends or other distributions, if
any, payable to holders of CPI Common Stock will be paid to the holders of any
certificates for shares of Zytec Common Stock until such certificates are
surrendered. Upon surrender of such certificates, the amount of any cash payable
in lieu of fractional shares and any such declared dividends and distributions
which shall have become payable with respect to CPI Common Stock in respect of a
record date after the Effective Time will be paid to the holder of record of the
shares of CPI Common Stock represented by the certificate issued in exchange
therefor, without interest. See "The Merger Agreement--Exchange of
Certificates."
ZYTEC SHAREHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. ZYTEC SHAREHOLDERS SHOULD
NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
BACKGROUND OF THE MERGER
The Board of Directors of CPI has, from time to time, considered various
alternatives to improve its financial position and to enhance shareholder value.
To further these goals, CPI, through internal analyses and the periodic
engagement of financial advisors to assist it, explores on an on-going basis
potential strategic acquisition opportunities and the marketing of non-core CPI
businesses for disposition. Zytec came to the attention of CPI management in the
course of exploring business expansion strategies.
In August 1995, senior management of CPI identified Zytec as the target of a
possible business combination with CPI. On August 21, 1995, Edward S. Croft,
III, a director of CPI and, at that time, a Managing Director of The
Robinson-Humphrey Company, Inc. ("Robinson-Humphrey"), which had been engaged as
financial advisor to CPI, met with Ronald D. Schmidt, Chairman, President and
Chief Executive Officer of Zytec, at Zytec's headquarters in Eden Prairie,
Minnesota generally to discuss possible business combination options and to
assess Zytec's interest in further discussions.
Also in August 1995, Joseph M. O'Donnell, Chairman, Chief Executive Officer
and President of CPI, contacted Mr. Schmidt of Zytec to hold preliminary
discussions regarding the possibility of a business combination between the two
companies. During August 1995, Mr. Croft presented CPI's senior management with
a preliminary assessment of the two companies at CPI's headquarters in Boca
Raton, Florida.
On August 29, 1995, Mr. Croft and senior management of CPI, consisting of
Mr. O'Donnell and Richard J. Thompson, CPI's Chief Financial Officer, Vice
President-Finance, Secretary and Treasurer, met with the senior management of
Zytec, including Mr. Schmidt, John B. Rogers, Zytec's Vice President-Finance,
Treasurer and Chief Financial Officer, and John M. Steel, Zytec's Vice
President-Sales and Marketing and a Zytec director, at Zytec's corporate
headquarters in Eden Prairie, Minnesota to further discuss a possible business
combination between the two companies. A confidentiality and non-disclosure
agreement between CPI and Zytec was executed on that date, as both companies
expressed a desire to
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further explore a possible business combination. In the weeks following this
meeting, representatives from both companies exchanged additional information
and made visits to certain CPI and Zytec facilities.
On October 20, 1995, senior management members of CPI met with its Board of
Directors in Boca Raton, Florida to further evaluate the merits of a business
combination with Zytec. The participants in this meeting had further discussions
via a teleconference meeting held on October 24, 1995.
On October 27, 1995, Zytec's senior management met with its Board of
Directors regarding whether to proceed with discussions relating to a possible
business combination with CPI. After extensive consideration and discussion, no
further negotiations were deemed warranted due to the business judgment of
Zytec's Board of Directors that it could then more effectively increase
shareholder value by having Zytec remain independent.
On October 31, 1995, Mr. Schmidt of Zytec communicated to Mr. O'Donnell of
CPI that Zytec was no longer interested in a business combination.
During the period from October 31, 1995 through June 1997, the senior
management of both companies maintained general communications. CPI expressed
continuing interest in Zytec, but no serious discussions regarding a combination
were had between the companies until July 1997. On July 1, 1997, Mr. O'Donnell
contacted Mr. Schmidt by telephone to determine if Zytec would again consider
the possibility of a business combination. Mr. Schmidt communicated Zytec's
interest in a possible business combination in a telephone conversation with Mr.
O'Donnell on July 18, 1997.
On August 8, 1997, Mr. O'Donnell and Mr. Thompson of CPI along with Mr.
Croft, then a Managing Director of the investment banking firm of Croft & Bender
LLC, which had been retained as financial advisor to CPI, met with Zytec's
senior management including Mr. Schmidt, then Chairman and Chief Executive
Officer of Zytec, Ervin F. Kamm, Jr., then President and Chief Operating Officer
of Zytec, John B. Rogers and John M. Steel. Each of CPI and Zytec presented
respective company overviews which were followed by a general discussion of
potential business combination terms.
On August 12, 1997, the two companies entered into a letter agreement
agreeing to (i) provide the other company with confidential information about
itself in connection with the business combination being discussed between the
two companies, (ii) not disclose or use such information for any purpose not in
connection with the business combination being discussed and (iii) not solicit
or entertain any other business combination proposals from any third parties.
Also on such date, John B. Rogers met with certain financial and accounting
personnel of CPI in Boca Raton, Florida regarding certain financial reporting
matters relating to the proposed business combination.
On August 13, 1997, Mr. O'Donnell of CPI, Mr. Croft of Croft & Bender LLC,
Mr. Schmidt of Zytec and Sherman Winthrop, Secretary and a director of Zytec,
met in Eden Prairie, Minnesota to discuss proposed material economic terms of a
business combination. At such meeting, the parties discussed a transaction
involving a merger between the two companies. In particular, the parties
discussed the benefits and synergies expected to be derived from such a
transaction, the integration of the two companies' respective corporate
cultures, Zytec's request for representation on CPI's Board of Directors and the
role of Zytec's current management in the combined company. In addition, general
economic terms were discussed, including the range of the premium to be included
in an exchange ratio. The discussions also addressed the requirements for
pooling-of-interests accounting treatment and treatment of the proposed merger
as a tax-free reorganization under the Code, and provisions requiring the
payment of fees if a merger agreement were entered into and terminated by Zytec
in connection with a competing transaction or upon the occurrence of certain
other events.
On August 22, 1997, CPI formally retained BT Alex. Brown to render an
opinion as to the fairness, from a financial point of view, of the consideration
to be paid by CPI in the proposed transaction.
On August 22, 1997, the Zytec Board of Directors met in Broomfield, Colorado
to discuss the terms of the proposed transaction. Joseph M. O'Donnell of CPI, at
the invitation of the Zytec Board of Directors, attended parts of such meeting
and addressed the Zytec Board of Directors regarding possible synergies
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and benefits of the proposed combination. At such August 22, 1997 meeting, the
Board of Directors discussed the benefits and risks of the proposed transaction
and the proposed material terms of a merger agreement, including the range of
the proposed exchange ratio, the instances in which such merger agreement could
be terminated and the amount of fees that would be required to be paid upon such
termination. At such meeting, the Zytec Board of Directors authorized the senior
management of Zytec to negotiate the terms of a merger agreement between the two
companies.
On August 22 and 25, 1997, Mr. Schmidt of Zytec conferred with Vincent E.
Gallagher, Managing Director of Needham, regarding a possible retention of
Needham as the financial advisor to Zytec in connection with the proposed
merger. Effective August 29, 1997, Zytec formally retained Needham to act as its
financial advisor with regard to the proposed merger being discussed between the
two companies.
Between August 23 and 25, 1997, the senior management of each of the
companies continued direct and telephonic discussions and negotiations. In the
course of these conversations, various proposals and counterproposals were
advanced by each party regarding the economic terms of the merger, including the
range of the exchange ratio, representation on CPI's Board of Directors by Zytec
management, fees payable upon termination of a merger agreement and the form of
a voting agreement to be entered into by certain principal shareholders of
Zytec. In addition, the effects of a merger on the two companies and the
synergies anticipated to be realized therefrom were extensively discussed.
On August 25, 1997, during a telephone conversation between Mr. O'Donnell of
CPI and Mr. Schmidt of Zytec, a general understanding regarding economic terms
of the transaction was reached. Such understanding included the determination of
the exchange ratio, the mutual intention that the transaction be treated as a
pooling-of-interests for accounting purposes and as a tax-free reorganization
under the Code and that Zytec directors have representation on the CPI Board of
Directors. Such understanding was, however, subject to satisfactory negotiation
of a definitive merger agreement, a draft of which CPI senior management
authorized its counsel to prepare and circulate to Zytec and its counsel for
review and discussion, and the resolution of certain issues, including the
amount of the termination fee payable upon the termination of the merger
agreement, the detailed provisions of which were left open to further
negotiation. In addition, it was tentatively agreed that Zytec would have
representation on the CPI Board of Directors of four out of 11 seats.
Between August 21 and September 1, 1997, attorneys from Hertzog, Calamari &
Gleason, counsel for CPI, conducted legal due diligence regarding Zytec. Between
August 25 and September 1, 1997, attorneys from Winthrop & Weinstine, P.A.,
counsel for Zytec, conducted legal due diligence regarding CPI.
On August 27, 1997, members of senior management of each company and a
representative of each of BT Alex. Brown and Needham met in Chicago, Illinois to
conduct a business and financial due diligence review of the two companies.
On August 28, 1997, Mr. Thompson of CPI and attorneys from the law firm of
Hertzog, Calamari & Gleason met in Minneapolis, Minnesota with John B. Rogers of
Zytec and attorneys from the law firm of Winthrop & Weinstine, P.A. to negotiate
the merger agreement. At such meeting, the conditions under which the proposed
merger agreement would be terminable and the amount of termination fees to be
paid under different circumstances were negotiated. In addition, the terms of
proposed non-solicitation and non-competition agreements were negotiated, and
issues regarding employee benefits and maintenance by CPI of Zytec's facilities
were discussed.
On August 28 and 29, and September 2, 1997, representatives of CPI's
independent certified public accountants and Zytec's independent accountants
reviewed publicly filed reports of Zytec and CPI, respectively, and the other
firm's audit work papers.
From August 29 through September 2, 1997, the attorneys for each of the
companies negotiated and revised the draft merger agreement. The principal areas
of discussion and negotiation included Zytec's representation on the CPI Board
of Directors, transition of employee benefit plans, terms of non-competition and
non-solicitation agreements, and the maintenance by CPI of Zytec's facilities.
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On September 1, 1997, in a telephone conference between Ronald D. Schmidt,
John B. Rogers and Sherman Winthrop of Zytec and representatives of Needham,
Needham discussed with the Zytec representatives its preliminary analysis of the
proposed merger, from a financial point of view.
On September 2, 1997, the Board of Directors of CPI met to consider the
proposed merger. Members of CPI's senior management and financial advisors made
a presentation and reviewed the matters set forth below under "--Recommendation
of the Board of Directors of CPI; Reasons for the Merger." The terms of the
proposed merger agreement and other ancillary agreements were reviewed with the
directors. BT Alex. Brown rendered its oral opinion (subsequently confirmed by
delivery of a written opinion, dated September 2, 1997) to the effect that, as
of such date and based upon and subject to certain matters stated in such
opinion, the Exchange Ratio was fair from a financial point of view to CPI, and
reviewed with the CPI Board of Directors certain financial analyses performed by
BT Alex. Brown in connection with such opinion. See "--Opinion of CPI's
Financial Advisor." After discussion and consideration, the CPI Board of
Directors voted unanimously to approve the Merger Agreement and related
documents for the transaction and the CPI Share Proposal.
On September 2, 1997, the Board of Directors of Zytec met to consider the
proposed merger. Representatives of Zytec's senior management, its legal
advisors and financial advisors made presentations and reviewed the matters set
forth below under "--Recommendation of the Board of Directors of Zytec; Reasons
for the Merger." The terms of the proposed merger agreement and the related
agreements were reviewed with the directors. Needham rendered its oral opinion
(subsequently confirmed by delivery of a written opinion, dated September 2,
1997) to the effect that, as of such date, the Exchange Ratio was fair to the
shareholders of Zytec from a financial point of view. After discussion and
consideration, the Zytec Board voted unanimously to approve the Merger Agreement
and the related agreements and transactions.
After the close of business on September 2, 1997, the parties executed the
Merger Agreement and related documents. On September 3, 1997, the parties issued
a joint press release announcing the execution of the Merger Agreement.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF CPI; REASONS FOR THE MERGER
At its September 2, 1997 meeting, the CPI Board of Directors determined that
the consideration to be paid to Zytec's shareholders in the Merger was fair to
CPI from a financial point of view and in the best interests of its
shareholders. The determination of the CPI Board of Directors was based upon
consideration of a number of factors. The following list includes the material
factors the CPI Board of Directors considered in its evaluation of the Merger:
1. Its conclusion that the Merger would combine the two companies,
thereby creating certain synergies, operating efficiencies and cost
reductions, including reductions through volume purchases and the reduction
of duplicative research and development and certain general administrative
expenses.
2. Its conclusion that the combined company would have greater
resources and be better able to service customers by creating new and
innovative products as a result of the combining of the proprietary
information and technology of each company and the integration of the
expertise of each company.
3. Its conclusion that the Merger would enable the combined companies
to sell complementary products to customers of the separate companies which
prior to the Merger purchased products from only one of the companies and,
in particular, its conclusion that CPI could offer more standardized
products to Zytec's existing customers.
4. Its conclusion that the combined businesses would have significantly
greater financial resources and industry presence, domestically and
internationally.
5. Its receipt of the oral opinion of BT Alex. Brown (subsequently
confirmed by delivery of a written opinion, dated September 2, 1997) to the
effect that, as of the date of such opinion and based
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upon and subject to certain matters stated therein, the Exchange Ratio was
fair to CPI from a financial point of view.
6. Its knowledge of the management, business, properties, financial
condition, operating results and prospects of Zytec.
7. The current industry, economic and market conditions.
8. Its conclusion that the combined company would be better able to
compete with larger competitors and to address supplier reduction programs
by large customers.
9. The presentations by CPI's management with respect to the
acquisition of Zytec, including the anticipation that the combination would
be moderately accretive to CPI's earnings in fiscal year 1998.
10. The terms of the Merger Agreement and the Voting Agreement,
including the circumstances under which CPI and Zytec could terminate the
Merger Agreement and the termination fees payable by Zytec under certain
circumstances.
11. Its conclusion that the higher market capitalization of the combined
company could expand its investor base, reduce trading price volatility,
increase liquidity for its shareholders and result in greater coverage of
CPI Common Stock by analysts.
12. The historical trading prices and trading activity for Zytec Common
Stock and CPI Common Stock.
13. The intended accounting treatment of the transaction as a
pooling-of-interests and the expected tax-free nature of the transaction.
14. The expected positive effect of the Merger on CPI's employees,
suppliers and customers.
The foregoing discussion of the information and factors considered by the
CPI Board of Directors is not intended to be exhaustive but is believed to
include the material factors considered by the CPI Board of Directors. In view
of the wide variety of information and factors considered, the CPI Board of
Directors did not find it practical to, and did not, quantify or otherwise
assign any relative or specific weights to the foregoing factors, and individual
directors may have given differing weights to different factors. The CPI Board
of Directors also considered certain collateral risks relating to the Merger, as
more fully discussed before under "Risk Factors--Risks Relating to the Merger."
THE BOARD OF DIRECTORS OF CPI HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT AND THE CPI SHARE PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT CPI
SHAREHOLDERS VOTE FOR THE CPI SHARE PROPOSAL.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF ZYTEC; REASONS FOR THE MERGER
At its September 2, 1997 meeting, the Zytec Board of Directors determined
that the Exchange Ratio was fair to the shareholders of Zytec from a financial
point of view. The determination of the Zytec Board of Directors was based upon
consideration of a number of factors. The following list includes the material
factors the Zytec Board of Directors considered in its evaluation of the Merger.
1. Its conclusion that the Merger would result in the creation of a
combined company with significantly greater resources, a more integrated and
cohesive multi-technology product offering, greater world-wide manufacturing
presence and capability, and greater sales and marketing capability than
those of Zytec alone, and that it would enable the combined company to
compete more effectively with competitors having greater resources and
broader product offerings than Zytec alone.
2. Its conclusion that Zytec and CPI principally have complementary
rather than competing product offerings in the power supply markets and that
the combined company is expected to provide a broader product offering for
Zytec's customers.
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3. Its conclusion that the combination of CPI and Zytec will
significantly improve the purchasing power of the combined company as
compared to either company standing alone, which the Zytec Board of
Directors believes will result in reduced costs.
4. Its conclusion that the management team of the combined company will
have greater depth of knowledge of the power supply industry and more
business experience than that of either company standing alone.
5. Its conclusion that the Merger will provide Zytec with the potential
to expand the market presence of Zytec's products globally through a larger
combined sales force and geographically more extensive sales and
distribution channels.
6. Its conclusion that the Zytec shareholders will have the opportunity
to participate in the potential growth of the combined company after the
Merger.
In arriving at its unanimous decision to approve the Merger Agreement, the
Zytec Board of Directors considered a number of additional factors, including
(i) information concerning Zytec's and CPI's respective businesses,
technologies, operations and products, including possible future product
releases, competitive positions and business prospects, (ii) the complementary
nature of Zytec's and CPI's product lines and technologies, (iii) the
complementary locations of Zytec's and CPI's respective manufacturing
facilities, (iv) an analysis of the relative contributions that Zytec's and
CPI's respective products and technologies could make to the future business
prospects of the combined company, (v) reports from management and legal and
accounting advisors on the specific terms of the relevant agreements, including
the Merger Agreement, and other matters (including the fact that the Merger is
expected to be accounted for as a pooling-of-interests), (vi) Zytec's and CPI's
historical financial information and the results of operations and estimated
future results, as well as current financial market conditions and historical
market prices, trading information for Zytec Common Stock and CPI Common Stock,
the consideration to be received by Zytec shareholders in the Merger, and the
percentage of the combined company to be owned by Zytec shareholders following
the Merger, (vii) the technical and marketing knowledge of CPI's management and
(viii) the ability of Zytec shareholders to participate, through continued
ownership of CPI Common Stock, in the enhanced prospects of the combined
companies. The Zytec Board of Directors also considered the financial and other
analyses presented by Needham, including the oral opinion of Needham,
subsequently confirmed in writing, that the Exchange Ratio was fair to Zytec's
shareholders from a financial point of view as of the date of such opinion. See
"--Opinion of Zytec's Financial Advisor."
The Zytec Board of Directors over a period of time evaluated the likelihood
of realizing superior benefits through alternative business strategies, which
included evaluations of the business and financial prospects of Zytec if it were
to continue as an independent company. In this connection, the Zytec Board of
Directors considered a number of factors, including market growth, ongoing
industry consolidation, the anticipated emergence of new products and
technologies, Zytec's internal product development strategies, the cost to Zytec
of establishing a manufacturing presence in the Far East, the ability of Zytec
to access new customers and markets, and the fit of Zytec's technologies and
product lines with those of CPI. The Zytec Board of Directors believes that the
technologies, product lines and fundamental business and operating strategies of
Zytec and CPI are complementary and consistent, that Zytec and CPI together can
provide a greater range of products and superior market coverage compared to
Zytec standing alone, and that a combination of the two companies provides a
greater potential for enhanced shareholder value than does the continuation of
Zytec's operations in their present form. Because the consideration to be
received in the Merger consists of CPI Common Stock and not cash or other
non-equity consideration, the Merger will offer the shareholders of Zytec the
opportunity to continue to participate in the growth and appreciation of the
business conducted by the combined company.
The Zytec Board of Directors also considered (i) the risk that the benefits
sought in the Merger would not be obtained, (ii) the risk that the Merger would
not be consummated, (iii) the effect of the public announcement of the Merger on
Zytec's sales, customer relations, operating results and ability to retain
employees and on the trading price of Zytec Common Stock, (iv) the substantial
management time and
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effort that will be required to consummate the Merger and integrate the
operations of the two companies, (v) the impact of the Merger on Zytec and CPI
personnel, and (vi) other risks, including those described herein under "Risk
Factors." In the judgment of the Zytec Board of Directors, the potential
benefits of the Merger clearly outweighed the risks inherent in the transaction.
The foregoing discussion of the information and factors considered by the
Zytec Board of Directors is not intended to be exhaustive but is believed to
include the material factors considered by the Zytec Board of Directors. In view
of the wide variety of information and factors considered, the Zytec Board of
Directors did not find it practical to, and did not, quantify or otherwise
assign any relative or specific weights to the foregoing factors, and individual
directors may have given differing weights to different factors.
THE BOARD OF DIRECTORS OF ZYTEC HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT ZYTEC SHAREHOLDERS VOTE FOR THE
MERGER PROPOSAL.
OPINION OF CPI'S FINANCIAL ADVISOR
CPI engaged BT Alex. Brown to render an opinion as to the fairness, from a
financial point of view, of the consideration to be paid by CPI in the Merger.
On September 2, 1997, at a meeting of the CPI Board of Directors held to
evaluate the proposed Merger, BT Alex. Brown rendered to the CPI Board of
Directors an oral opinion (which opinion was subsequently confirmed by delivery
of a written opinion, dated September 2, 1997, and updated to the date of this
Joint Proxy Statement/Prospectus), to the effect that, as of such dates and
based upon and subject to certain matters stated in such opinion, the Exchange
Ratio was fair to CPI from a financial point of view.
THE FULL TEXT OF THE WRITTEN OPINION OF BT ALEX. BROWN, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN,
IS ATTACHED AS APPENDIX B TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. BT ALEX. BROWN'S OPINION IS DIRECTED TO THE
BOARD OF DIRECTORS OF CPI, ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO
FROM A FINANCIAL POINT OF VIEW TO CPI AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE CPI SPECIAL
MEETING. THE SUMMARY OF THE OPINION OF BT ALEX. BROWN IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In connection with its opinion, BT Alex. Brown reviewed certain publicly
available financial information and other information concerning CPI and Zytec
and certain internal analyses and other information furnished to BT Alex. Brown
by CPI and Zytec. BT Alex. Brown also held discussions with members of the
senior managements of CPI and Zytec regarding the businesses and prospects of
their respective companies and the joint prospects of a combined company. In
addition, BT Alex. Brown (i) reviewed the reported prices and trading activity
for CPI Common Stock and Zytec Common Stock, (ii) compared certain financial and
stock market information for CPI and Zytec with similar information of certain
other companies whose securities are publicly traded, (iii) reviewed the
financial terms of certain recent business combinations which BT Alex. Brown
deemed comparable in whole or in part, (iv) reviewed the terms of the Merger
Agreement, and (v) performed such other studies and analyses and considered such
other factors as BT Alex. Brown deemed appropriate.
As described in its opinion, BT Alex. Brown assumed and relied upon, without
independent verification, the accuracy, completeness and fairness of the
information furnished to or otherwise reviewed by or discussed with BT Alex.
Brown for purposes of its opinion. With respect to the information relating to
the prospects of CPI and Zytec, BT Alex. Brown assumed that such information
reflected the best currently available judgments and estimates of the
managements of CPI and Zytec as to the likely future financial performances of
their respective companies and of the combined company. BT Alex. Brown did not
make
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nor was it provided with an independent evaluation or appraisal of the assets or
liabilities of CPI or Zytec. BT Alex. Brown's opinion was based on market,
economic and other conditions as they existed and could be evaluated as of the
date of its opinion. Although BT Alex. Brown evaluated the Exchange Ratio from a
financial point of view, the type and amount of consideration payable in the
Merger was determined through negotiation between CPI and Zytec. BT Alex.
Brown's opinion does not constitute an opinion as to the price at which the CPI
Common Stock will actually trade at any time.
Set forth below is a summary of the material analyses presented by BT Alex.
Brown to CPI's Board of Directors on September 2, 1997 in connection with its
opinion of such date:
STOCK TRADING HISTORY
BT Alex. Brown reviewed the historical trading volumes and market prices for
CPI Common Stock and Zytec Common Stock and the implied historical exchange
ratio of CPI Common Stock and Zytec Common Stock (the closing price of Zytec
Common Stock divided by the closing price of CPI Common Stock) based on such
market prices over the one-year period preceding September 2, 1997. This
analysis indicated exchange ratios for CPI Common Stock and Zytec Common Stock
for the one day, 10 days, 30 days and 90 days preceding September 2, 1997, of
0.97, 0.89, 0.96 and 0.78, respectively.
ANALYSIS OF SELECTED PUBLIC COMPANY TRADING AND FINANCIAL INFORMATION
BT Alex. Brown compared certain financial and stock market information for
CPI and Zytec with similar information for certain other publicly held
companies, including: ACT Manufacturing, Inc., C&D Technologies, Inc., Jabil
Circuit, Inc., MagneTek, Inc., Plexus Corp., Sanmina Corp., Solectron Corp., and
Vicor Corp. (the "Selected Companies"). BT Alex. Brown calculated market values
based on each company's closing stock price on August 29, 1997, relative to each
company's estimated earnings per share ("EPS") for calendar years 1997 and 1998
as reported in I/B/E/S/, a market research database. This analysis indicated
price to earnings ("P/E") ratios for the Selected Companies of 14.2x to 41.2x
(with a mean of 28.1x) estimated calendar 1997 EPS and 12.2x to 30.3x (with a
mean of 20.0x) estimated calendar 1998 EPS. These multiples compare with
indicated multiples for the Merger of 30.4x and 24.9x Zytec's estimated calendar
1997 and 1998 EPS, respectively, based on internal estimates of the management
of Zytec. Additionally, BT Alex. Brown reviewed (i) movements in the CPI Common
Stock, Zytec Common Stock, the Nasdaq Composite and the common stock of the
Selected Companies and (ii) historical P/E ratios for CPI, Zytec and the
Selected Companies.
ANALYSIS OF SELECTED MERGER TRANSACTIONS
BT Alex. Brown reviewed certain merger transactions which it deemed
comparable in whole or in part to the Merger, based on, among other things,
relative market values, business of the target company and historical stock
price movements. Specifically, BT Alex. Brown reviewed the following
transactions (target/ acquiror): Reliance Electric Co./Rockwell International
Corp., Control Techniques/ Emerson Electric Co., Force Computers/Solectron
Corp., Unitech plc/Siebe plc, Elexsys International, Inc./Sanmina Corp., and
Elba Group/CPI (the "Selected Transactions"). BT Alex. Brown calculated the
percentage premium or discount of the acquisition prices in the Selected
Transactions one day, one week and one month prior to public announcement of the
Selected Transactions, and compared the average premiums paid in the Selected
Transactions with the implied premium payable in the Merger. This analysis
indicated a range of premiums in the Selected Transactions of 3% to 56% over the
target's stock price one day prior, 15% to 55% over the target's stock price one
week prior, and 25% to 51% over the target's stock price one month prior to
public announcement of the Selected Transactions, as compared to premiums of
approximately 35%, 61% and 81%, respectively, to Zytec's stock price one day,
one week and one month prior to September 2, 1997.
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DISCOUNTED CASH FLOW ANALYSIS
BT Alex. Brown performed a discounted cash flow analysis of Zytec to
estimate the present value of the stand-alone, unlevered, after-tax free cash
flows that Zytec could generate over the five- and one-quarter year period
ending December 2002, based on internal estimates of the management of Zytec.
After-tax cash flows were calculated as the after-tax earnings before interest
and taxes ("EBIT") of Zytec, plus depreciation and amortization, less net
investment of non-cash working capital and capital expenditures. The terminal
value for Zytec was calculated by applying multiples ranging from 20.0x to 24.0x
to the projected unlevered net income of Zytec in fiscal year 2002. The cash
flow streams and terminal value were then discounted to present value utilizing
discount rates ranging from 15.0% to 17.0%. This analysis yielded an equity
reference range for Zytec of approximately $43.38 to $56.48 per share.
EARNINGS PER SHARE IMPACT ANALYSIS
BT Alex. Brown analyzed the pro forma effect of the Merger on the EPS of CPI
in fiscal year 1998, based on internal estimates of the managements of CPI and
Zytec. This analysis indicated that the Merger could be accretive to CPI's EPS
in fiscal year 1998, both before and after giving effect to certain cost savings
and other potential synergies anticipated by the management of CPI to result
from the Merger. The actual operating or financial results achieved by the
combined entity may vary from projected results and variations may be material.
CONTRIBUTION ANALYSIS
BT Alex. Brown analyzed the relative contributions of CPI and Zytec to the
estimated revenues, earnings before interest, taxes, depreciation and
amortization ("EBITDA"), EBIT and net income of the combined entity for the
latest 12 months ended July 4, 1997 for CPI and June 29, 1997 for Zytec, and the
estimated net income of the combined entity for calendar years 1997 and 1998,
based on internal estimates of the managements of CPI and Zytec, and compared
such contributions to the pro forma ownership of the combined entity by the
holders of CPI Common Stock. This analysis indicated that (i) for the latest 12
months ended July 4, 1997 for CPI and June 29, 1997 for Zytec, CPI would have
contributed approximately 51% of the revenues, 61% of EBITDA, 61% of EBIT and
62% of the net income of the combined entity, and (ii) in calendar years 1997
and 1998, CPI would contribute approximately 60% and 61%, respectively, of the
net income of the combined entity. Based on the Exchange Ratio, current holders
of CPI Common Stock would own approximately 61% of the combined entity, on a
fully diluted basis, upon consummation of the Merger.
The summary set forth above does not purport to be a complete description of
the opinion of BT Alex. Brown to the CPI Board of Directors or the financial
analyses performed and factors considered by BT Alex. Brown in connection with
its 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 analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. BT Alex. Brown believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or selecting portions of the above
summary, without considering all factors and analyses, could create a misleading
or incomplete view of the processes underlying such analyses and opinion. In
performing its analyses, BT Alex. Brown made numerous assumptions with respect
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of CPI and
Zytec. No company, transaction or business used in such analyses as a comparison
is identical to CPI, Zytec, or the proposed Merger, nor is an evaluation of the
results of such analyses entirely mathematical; rather, such analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
being analyzed. The estimates contained in such analyses and the ranges of
valuations
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resulting from any particular analysis are not necessarily indicative of actual
values or future results, 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, such
analyses and estimates are inherently subject to substantial uncertainty. BT
Alex. Brown's opinion and financial analyses were only one of many factors
considered by the CPI Board of Directors in its evaluation of the proposed
Merger and should not be viewed as determinative of the views of CPI's Board of
Directors or management with respect to the Exchange Ratio or the Merger.
BT Alex. Brown is a nationally recognized investment banking firm and, as a
customary part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, private placements and valuations for estate,
corporate and other purposes. CPI selected BT Alex. Brown to serve as its
financial advisor based on various factors, including BT Alex. Brown's
reputation and expertise. In the ordinary course of business, BT Alex. Brown may
actively trade the securities of both CPI and Zytec for its own account and the
accounts of its customers and, accordingly, may at any time hold a long or short
position in securities of CPI and Zytec.
Pursuant to the terms of BT Alex. Brown's engagement, CPI has agreed to pay
BT Alex. Brown an opinion fee of $500,000, which fee was payable upon delivery
of BT Alex. Brown's opinion. In addition, CPI has agreed to reimburse BT Alex.
Brown for its reasonable out-of-pocket expenses, including reasonable fees and
disbursements of counsel, and to indemnify BT Alex. Brown and certain related
parties against certain liabilities, including certain liabilities under the
Federal securities laws, relating to, or arising out of, its engagement.
OPINION OF ZYTEC'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated August 29, 1997 (the "Engagement
Letter"), Zytec retained Needham to act as exclusive financial advisor to Zytec
in connection with the proposed transaction with CPI and, in this regard, render
an opinion as to whether or not the consideration to be received by the
shareholders of Zytec in the Merger was fair to the shareholders of Zytec from a
financial point of view. Needham was not requested to, and did not, make a
recommendation to the Zytec Board of Directors as to the Exchange Ratio to be
provided for in the Merger, which Exchange Ratio was determined through
arm's-length negotiations between Zytec and CPI.
At a meeting of the Board of Directors of Zytec on September 2, 1997,
Needham rendered to the Zytec Board of Directors an oral opinion (which was
subsequently confirmed by delivery of a written opinion, dated September 2,
1997, and updated to the date of this Joint Proxy Statement/Prospectus), that,
as of such dates, and based upon and subject to certain assumptions and other
matters described in its written opinion, the Exchange Ratio was fair to the
Zytec shareholders from a financial point of view. NEEDHAM'S OPINION IS
ADDRESSED TO THE ZYTEC BOARD OF DIRECTORS, IS DIRECTED ONLY TO THE FINANCIAL
TERMS OF THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER OF ZYTEC AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE ZYTEC SPECIAL
MEETING.
Needham is not expressing any opinion as to what the value of CPI Common
Stock will be when issued to the shareholders of Zytec pursuant to the Merger or
the prices at which CPI Common Stock will actually trade at any time. The
complete text of the September 2, 1997 opinion (the "Needham Opinion"), which
sets forth the assumptions made, matters considered, limitations on and scope of
the review undertaken by Needham, is attached to this Joint Proxy
Statement/Prospectus as Annex C, and the summary of the Needham Opinion set
forth in this Joint Proxy Statement/Prospectus is qualified in its entirety by
reference to the Needham Opinion which is incorporated by reference herein.
ZYTEC SHAREHOLDERS ARE URGED TO READ THE NEEDHAM OPINION CAREFULLY AND IN ITS
ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE FACTORS CONSIDERED,
AND THE ASSUMPTIONS MADE BY NEEDHAM.
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In arriving at its opinion, Needham, among other things, (i) reviewed a
draft of the Merger Agreement, dated August 29, 1997; (ii) reviewed certain
other documents relating to the Merger; (iii) reviewed certain publicly
available information concerning CPI and Zytec and certain other relevant
financial and operating data of CPI and Zytec made available from the internal
records of CPI and Zytec; (iv) reviewed the historical stock prices and trading
volumes of CPI's and Zytec's Common Stock; (v) held discussions with members of
senior management of CPI and Zytec concerning their current and future business
prospects; (vi) reviewed certain financial forecasts and projections prepared by
the respective managements of CPI and Zytec; (vii) compared certain publicly
available financial data of companies whose securities are in the public
markets, which Needham deemed generally comparable to the business of Zytec, to
similar data for Zytec; (viii) reviewed the financial terms of certain other
business combinations that Needham deemed generally relevant; and (ix) performed
and/or considered such other studies, analyses, inquiries and investigations as
Needham deemed appropriate. Needham assumed and relied upon, without independent
verification, the accuracy and completeness of the information it reviewed for
purposes of its opinion. With respect to CPI's and Zytec's financial forecasts
provided to Needham by their respective managements, Needham assumed that such
forecasts had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of such managements, at the time of
preparation, of the future operating and financial performance of CPI and Zytec.
Needham did not assume any responsibility for or make or obtain any independent
evaluation, appraisal or physical inspection of the assets or liabilities of
Zytec or CPI. Needham's opinion states that it was based on economic, monetary
and market conditions existing as of the date of such opinion. Furthermore,
Needham expresses no opinion as to what the value of CPI Common Stock will be
when issued to the shareholders of Zytec pursuant to the Merger or the prices at
which CPI Common Stock will actually trade at any time.
Based on this information, Needham performed a variety of financial analyses
of the Merger and the consideration to be received by the Zytec shareholders.
The following paragraphs summarize the significant financial analyses performed
by Needham in arriving at its opinion presented to the Zytec Board of Directors.
CONTRIBUTION ANALYSIS
Needham performed and analyzed the pro forma contribution of each of CPI and
Zytec to pro forma combined operational and financial information, as of June
29, 1997, and for the twelve months ended June 29, 1996 ("LTM"), projected
fiscal year 1997 operating results, and projected fiscal year 1998 operating
results. Needham reviewed, among other things, the pro forma contributions to
revenues, net income, assets and shareholders' equity. This analysis did not
take into account any transaction adjustments or proposed synergies. Based on
this analysis, Zytec contributed 49.1% of the LTM pro forma combined revenues,
49.1% of the projected fiscal year 1997 pro forma combined revenues, 47.3% of
the projected fiscal year 1998 pro forma combined revenues, 27.6% of the LTM pro
forma combined net income, 37.5% of the projected fiscal year 1997 pro forma
combined net income, and 37.4% of the projected fiscal year 1998 pro forma
combined net income. In addition, Zytec contributed 33.1% of the pro forma
combined assets as of June 29, 1997, and 30.0% of the pro forma combined
shareholders' equity as of June 29, 1997. Based on the Exchange Ratio, Zytec's
shareholders will own approximately 40.0% of CPI after the Merger (on a fully
diluted basis). The results of the contribution analysis are not necessarily
indicative of the contributions that the respective businesses may have in the
future.
COMPARABLE COMPANY ANALYSIS
To provide contextual data and comparative market information, Needham
compared selected historical and projected operating and stock market data and
operating and financial ratios for Zytec to the corresponding data and ratios of
certain publicly traded power supply companies which it deemed generally
comparable to Zytec. Such data and ratios included total market capitalization
to historical and
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projected revenue, price per share to historical and projected earnings per
share and market value to historical book value.
Companies deemed to be generally comparable to Zytec included Astec (BSR)
plc, C&D Technologies, Inc., Computer Products, Inc. and Vicor Corporation
(collectively, the "Power Supply Manufacturers").
Needham calculated multiples for Zytec based on the closing price of CPI
Common Stock on August 29, 1997, of $30.38 and the resulting equivalent price
per share for the Zytec Common Stock of $40.40 based upon the Exchange Ratio.
For the Power Supply Manufacturers, the multiples of total market capitalization
to LTM revenues ranged from 0.9 to 6.6 with a mean of 2.9 and a median of 2.0;
the multiples of market capitalization to projected calendar year 1997 revenues
ranged from 0.8 to 6.3 with a mean of 2.7 and a median of 1.9; the multiples of
market capitalization to projected calendar year 1998 revenues ranged from 0.7
to 5.4 with a mean of 2.3 and a median of 1.6; the LTM price-earnings multiples
ranged from 14.2 to 44.1 with a mean of 27.2 and a median of 25.2; the projected
calendar year 1997 price-earnings multiples ranged from 13.5 to 36.4 with a mean
of 23.5 and a median of 22.0; the projected calendar year 1998 price-earnings
multiples ranged from 11.9 to 31.4 with a mean of 20.0 and a median of 18.3; and
the multiples of market value to historical book value ranged from 2.6 to 7.9
with a mean of 4.8 and a median of 4.4.
These ratios compared with the following ratios for Zytec: total market
capitalization to LTM revenues of 2.1; total market capitalization to projected
calendar year 1997 revenues of 1.9; total market capitalization to projected
calendar year 1998 revenues of 1.6; LTM price-earnings multiple of 52.4;
projected calendar year 1997 price-earnings multiple of 30.4; projected calendar
year 1998 price-earnings multiple of 26.1; and market value to historical book
value multiple of 7.7.
COMPARABLE TRANSACTION ANALYSIS
Needham also analyzed publicly available financial information for 16
selected technology industry mergers and acquisitions which were accounted for
as a pooling-of-interests. In examining these transactions, Needham analyzed
certain income statement and balance sheet parameters of the acquired companies
relative to the consideration offered, such as one-day, one-week and four-week
premiums of the consideration offered to the target's stock price; aggregate
transaction value as multiples of LTM revenues, EBIT and EBITDA; and multiples
of market value to LTM net income and historical book value.
Completed technology transactions analyzed by Needham included: Ontrak
Systems, Inc./Lam Research Corporation; Compression Labs, Inc./VTEL Corporation;
Orbit Semiconductor, Inc./DII Group, Inc.; Network Express, Inc./Cabletron
Systems, Inc.; CIS Technologies, Inc./ National Data Corporation; Convex
Computer Corporation/ Hewlett-Packard Company; Xylogies, Inc./Bay Networks,
Inc.; Megatest Corporation/Teradyne, Inc.; Recognition International, Inc./
BancTec, Inc.; Data Switch Corporation/ General Signal Corporation; M/A-COM,
Inc./AMP, Inc.; Anthem Electronics, Inc./Arrow Electronics, Inc.; Network
Systems Corporation/Storage Technology Corporation; Sunward Technologies,
Inc./Read-Rite Corporation; SuperMac Technology, Inc./Radius, Inc.; and
Radiation Systems, Inc./COMSAT.
For these transactions the one-day stock price premium ranged from (10.6)%
to 52.0% with a mean of 27.0% and a median of 35.7%; the one-week stock price
premium ranged from (5.8)% to 57.6% with a mean of 32.6% and a median of 34.5%;
and the four-week stock price premium ranged from (3.4)% to 70.2% with a mean of
38.8% and a median of 43.4%. The multiples of transaction value to LTM sales
ranged from 0.2 to 5.5 with a mean of 1.9 and a median of 1.2; the LTM EBIT
multiples ranged from 3.9 to 63.5 with a mean of 22.7 and a median of 13.5; and
the LTM EBITDA multiples ranged from 3.6 to 25.2 with a mean of 14.0 and a
median of 13.1. The multiples of market value to LTM net income ranged from 6.9
to 79.6 with a mean of 35.4 and a median of 27.5; and the multiples of market
price value to book value ranged from 0.7 to 13.5 with a mean of 3.4 and a
median of 2.5.
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These premiums and ratios compared with the following for Zytec, calculated
based on the closing price of CPI Common Stock on August 29, 1997, and the
Exchange Ratio: one-day stock price premium of 37.3%, one-week stock price
premium of 56.5%, four-week stock price premium of 78.0%, LTM sales multiple of
2.1, LTM EBIT multiple of 32.0, LTM EBITDA multiple of 20.8, market value to LTM
net income multiple of 52.5, and market to book value multiple of 7.7.
No company or transaction used in any comparable analysis as a comparison is
identical to Zytec, CPI or the Merger. Accordingly, these analyses are not
simply mathematical; rather, they involve complex considerations and judgments
concerning differences in the financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies and transactions to which they are being
compared.
STOCK TRADING HISTORY
Needham examined, for the period beginning on January 1, 1995 and ending on
August 29, 1997, the history of trading prices and volumes for Zytec Common
Stock and CPI Common Stock and the relationship between movements of Zytec
Common Stock and CPI Common Stock and movements of a composite index composed of
the common stocks of the comparable Power Supply Manufacturers. This analysis
showed that the Zytec Common Stock outperformed the composite index at all times
during the period and that the CPI Common Stock outperformed the composite index
at almost all times during the period and at all times since April 1997. Needham
also noted that the average trading volumes of the CPI Common Stock were
significantly higher than those of the Zytec Common Stock.
ACCRETION/DILUTION ANALYSIS
Needham reviewed certain pro forma financial impacts of the Merger on the
holders of Zytec and CPI Common Stock based on the Exchange Ratio, Zytec's and
CPI's respective managements' calendar year 1998 projected financial results,
and assumed post-Merger savings consisting of purchasing savings on combined
cost of goods sold, administrative cost savings due to the elimination of
certain expenses associated with Zytec being a public company, and interest
expense savings due to the conversion of the Convertible Note. Based upon these
projections and assumptions, Needham noted that the Merger would result in
accretion of the equivalent projected earnings per share of Zytec Common Stock
and CPI Common Stock of 13.1% and 4.8%, respectively, in fiscal year 1998.
DISCOUNTED CASH FLOW ANALYSIS
Needham analyzed Zytec based on an unlevered discounted cash flow analysis
of the projected performance of Zytec. Needham used three-year projected
financial statements for Zytec provided by Zytec's management. The discounted
cash flow analysis determined the unlevered after-tax cash flows generated over
the three-year period commencing with calendar year 1998 and then added a
terminal value based upon a range of EBITDA multiples from 8.0x to 12.0x. The
unlevered after-tax cash flows and terminal values were discounted using a range
of discount rates from 12.5% to 17.5%. This analysis resulted in a range of
discounted cash flow values for Zytec from $325,800,000 to $552,100,000, or
$26.09 per share to $44.22 per share, based upon the number of Zytec shares
outstanding as of August 1, 1997, assuming the conversion of the Convertible
Note and the exercise of options outstanding using the treasury stock method at
an implied share price calculated by using the Exchange Ratio.
The summary set forth above does not purport to be a complete description of
the analyses performed by Needham in connection with the rendering of its
opinion. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, Needham believes that its analyses must be
considered as a whole and that considering any portions of such analyses and of
the
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factors considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its opinion. In its
analysis, Needham made numerous assumptions with respect to industry
performance, general business and economic and other matters, many of which are
beyond the control of Zytec or CPI. Any estimates contained in these analyses
are not necessarily indicative of actual values or predictive of future results
or values, which may be significantly more or less favorable as set forth
therein. Additionally, analyses relating to the values of business or assets do
not purport to be appraisals or necessarily reflect the prices at which
businesses or assets may actually be sold.
Pursuant to the terms of the Engagement Letter, Zytec has agreed to pay
Needham a fee of $250,000. None of Needham's fee is contingent on consummation
of the Merger. Zytec has also agreed to reimburse Needham for certain of its
reasonable out-of-pocket expenses and to indemnify it against certain
liabilities relating to or arising out of services performed by Needham as
financial advisor to Zytec.
Needham is a nationally recognized investment banking firm. As part of its
investment banking services, Needham is frequently engaged in the evaluation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities, private
placements and other purposes. Needham was retained by the Zytec Board of
Directors to act as Zytec's financial advisor in connection with the Merger
based on Needham's experience as a financial advisor in mergers and acquisitions
as well as Needham's familiarity with Zytec and the power supply manufacturing
industry. In the normal course of its business, Needham may actively trade the
equity securities of Zytec or CPI for its own account or for the account of its
customers and, therefore, may at any time hold a long or short position in such
securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Zytec Board of Directors with
respect to the Merger Agreement and the transactions contemplated thereby, Zytec
shareholders should be aware that certain members of Zytec management and the
Zytec Board of Directors have interests in the Merger that are in addition to
their interests as Zytec shareholders generally.
After consummation of the Merger, four current members of the Zytec Board of
Directors are to be included on the CPI Board of Directors. See "--CPI Board of
Directors Following the Merger" and "The Merger Agreement--Additional
Agreements--CPI Board of Directors."
The Merger Agreement provides that CPI and the Surviving Corporation will
indemnify, to the fullest extent permitted by applicable law, the present and
former officers, directors and employees of Zytec or any of its subsidiaries
against certain liabilities (i) arising out of actions or omissions occurring at
or prior to the Effective Time that arise from or are based on such person's
service as an officer, director or employee or (ii) that are based on or arise
out of the transactions contemplated by the Merger Agreement, and they are to
maintain policies of directors' and officers' liability insurance for a period
of six years after the Effective Time. To the fullest extent permitted by law,
from and after the Effective Time, all rights to indemnification existing in
favor of the employees, agents, directors or officers of Zytec and its
subsidiaries with respect to their activities as such prior to the Effective
Time shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time. See "The Merger
Agreement--Additional Agreements--Indemnification and Insurance."
As of November 11, 1997, the directors and executive officers of Zytec owned
in the aggregate options to purchase 479,996 shares of Zytec Common Stock which,
pursuant to the Merger Agreement, will be converted into options to purchase in
the aggregate 638,395 shares of CPI Common Stock upon consummation of the
Merger. See "The Merger Agreement--Terms of the Merger--Stock Option and Other
Stock Plans."
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MANAGEMENT OF ZYTEC FOLLOWING THE MERGER
DIRECTORS OF ZYTEC
At or prior to the Effective Time, the current directors of Zytec will
resign. The directors of Merger Sub (currently, Joseph M. O'Donnell and Richard
J. Thompson, executive officers of CPI) immediately prior to the Effective Time
shall be the directors of the Surviving Corporation following the Merger until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified.
OFFICERS OF ZYTEC
The officers of the Surviving Corporation following the Merger shall be
Joseph M. O'Donnell, the current President, Chief Executive Officer and Chairman
of the Board of Directors of CPI, who shall serve as President, Richard J.
Thompson, the current Vice President-Finance, Chief Financial Officer, Secretary
and Treasurer of CPI, who shall serve as Chief Financial Officer and Secretary,
John M. Steel, the current Vice President-Marketing and Sales and a director of
Zytec, who shall serve as Vice President, and David Libow, the current Director
of Corporation Taxation of CPI, who shall serve as Assistant Secretary. All of
the above officers shall serve until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified.
CPI BOARD OF DIRECTORS FOLLOWING THE MERGER
As provided in the Merger Agreement, following the Effective Time, the CPI
Board of Directors will be increased from seven to 11 seats. As of the Effective
Time, the additional four seats will be held by Ronald D. Schmidt, John M.
Steel, Dr. Fred C. Lee and Lawrence J. Matthews, all of whom are currently
members of the Board of Directors of Zytec, and Mr. Schmidt will also serve as
Co-Chairman of the CPI Board of Directors with Joseph M. O'Donnell. See "The
Merger Agreement--Additional Agreements-- CPI Board of Directors."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The respective obligations of CPI and Zytec to consummate the Merger are
conditioned on the continued effectiveness of the opinion received by CPI from
Hertzog, Calamari & Gleason, its counsel, and the continued effectiveness of the
opinion received by Zytec from Winthrop & Weinstine, P.A., its counsel, that the
Merger constitutes a reorganization under Section 368(a) of the Code. Such
opinions of Hertzog, Calamari & Gleason and Winthrop & Weinstine, P.A. are
attached as Exhibits 8.1 and 8.2, respectively, to the Registration Statement of
which this Joint Proxy Statement/Prospectus forms a part. No ruling has been
sought from the Internal Revenue Service as to the Federal income tax
consequences of the Merger, and the opinions of counsel will not be binding upon
the Internal Revenue Service or any court. The opinions referred to above are
and will be based in part upon representations, made as of the date of such
opinions and to be remade as of the Effective Time, by Zytec and CPI, which
counsel has assumed and will assume to be true, correct and complete as of the
Effective Time, as well as other standard assumptions. If the representations
made by Zytec or CPI or the assumptions relied upon by counsel are inaccurate,
the opinions of such counsel could be adversely affected.
The opinion of Hertzog, Calamari & Gleason states that the material United
States Federal income tax consequence of the Merger to CPI is that the Merger
will constitute a reorganization under Section 368(a) of the Code and that no
gain or loss will be recognized by Zytec, CPI or Merger Sub as a result of the
Merger.
The opinion of Winthrop & Weinstine, P.A. states that the material United
States Federal income tax consequences of the Merger are as follows:
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1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code;
2. No gain or loss will be recognized by CPI, Merger Sub, or Zytec as a
result of the Merger;
3. No gain or loss will be recognized by the shareholders of Zytec upon
the exchange of Zytec Common Stock solely for shares of CPI Common Stock in
the Merger;
4. Any cash received by the shareholders of Zytec in lieu of fractional
shares of CPI Common Stock will be treated as received as a distribution in
redemption of such fractional shares, subject to the provisions of Section
302 of the Code, as if such fractional shares had been issued in the Merger
and then redeemed by CPI for cash;
5. The aggregate tax basis of the shares of CPI Common Stock received
by the shareholders of Zytec in the Merger will be equal to the tax basis of
the shares of Zytec Common Stock exchanged therefor in the Merger, reduced
by any basis allocable to a fractional share of CPI Common Stock treated as
sold or exchanged under Section 302 of the Code;
6. The holding period for the shares of CPI Common Stock received by
the shareholders of Zytec in the Merger will include the holding period for
the shares of Zytec Common Stock exchanged therefor in the Merger, provided
that the shares of Zytec Common Stock are held as capital assets at the
Effective Time; and
7. A Zytec shareholder who exercises dissenters' rights with respect to
such shareholder's Zytec Common Stock and receives payment for such shares
in cash will generally recognize gain or loss measured by the difference
between the shareholder's basis in such shares and the amount of cash
received if, as a result of such exercise, the shareholder exercising
dissenters' rights owns no shares of CPI Common Stock (either actually or
constructively within the meaning of Section 318 of the Code).
Certain non-corporate Zytec shareholders may be subject to backup
withholding at a rate of 31% on cash payments received in lieu of a fractional
share interest in CPI Common Stock. Backup withholding will not apply, however,
to a shareholder who furnishes a correct taxpayer identification number ("TIN")
and certifies that he or she is not subject to backup withholding on the
substitute Form W-9 included in the transmittal letter to be sent by the
Exchange Agent, who provides a certificate of foreign status on Form W-8, or who
is otherwise exempt from backup withholding. A shareholder who fails to provide
the correct TIN on Form W-9 may be subject to a $50 penalty imposed by the
Internal Revenue Service.
Each Zytec shareholder will be required to retain records and file with such
holder's United States Federal income tax return a statement setting forth
certain facts relating to the Merger.
A successful Internal Revenue Service challenge to the status of the Merger
as a reorganization under Section 368(a) of the Code would result in each Zytec
shareholder recognizing gain or loss with respect to each share of Zytec Common
Stock surrendered equal to the difference between the shareholder's basis in
such share and the fair market value, as of the Effective Time, of the CPI
Common Stock and the amount of any cash (for fractional shares) received in
exchange therefor. In such event, a shareholder's aggregate basis in the CPI
Common Stock so received would equal its fair market value, and the
shareholder's holding period for the CPI Common Stock would begin on the day
after the Merger.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE
A COMPLETE ANALYSIS OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER
TO VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER PROPOSAL. THE ABOVE
DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A
PARTICULAR ZYTEC SHAREHOLDER SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL
INCOME TAX LAWS, SUCH AS
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DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS,
NON-UNITED STATES PERSONS AND SHAREHOLDERS WHO ACQUIRED ZYTEC COMMON STOCK
PURSUANT TO THE EXERCISE OF ZYTEC OPTIONS OR OTHERWISE AS COMPENSATION, AND DOES
NOT ADDRESS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR
FOREIGN JURISDICTION. MOREOVER, THE TAX CONSEQUENCES TO HOLDERS OF ZYTEC OPTIONS
TO PURCHASE ZYTEC COMMON STOCK ARE NOT DISCUSSED. THE DISCUSSION IS BASED UPON
THE CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT
DECISIONS AS OF THE DATE HEREOF. THE INTERNAL REVENUE SERVICE IS NOT PRECLUDED
FROM ADOPTING A CONTRARY POSITION. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE,
AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY AND ACCURACY OF THIS
DISCUSSION. ZYTEC SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER
TO THEM.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is intended to be treated as a pooling-of-interests for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of CPI and Zytec will be carried forward to
the combined corporation following the Merger at their recorded amounts, subject
to any adjustments required to conform the accounting policies of the two
corporations; operations of the combined corporation will include operations of
CPI and Zytec for the entire fiscal year in which the Merger occurs; and the
reported operations of the separate corporations for prior periods will be
combined and restated as operations of the combined corporations.
The Merger Agreement provides that a condition to the consummation of the
Merger is the receipt of letters by each of CPI and Zytec from the independent
certified public accountants of each of CPI and Zytec as to the qualification of
such entity for pooling-of-interests accounting treatment under GAAP and
applicable Commission regulations and the receipt by CPI of a letter from its
independent certified public accountants that the transactions effected under
the Merger Agreement will qualify for pooling-of-interests accounting treatment
under GAAP and applicable Commission regulations.
Each of the "affiliates" (as such term is used in Rule 145 under the
Securities Act or under any applicable Commission releases with respect to
pooling-of-interests accounting treatment) of CPI and Zytec has executed a
written agreement to the effect that such person will not transfer shares of
common stock of either CPI or Zytec during the period beginning 30 days prior to
the Effective Time and ending on the date that CPI publishes financial
statements which reflect 30 days of operations of the combined corporation
following the Merger (which agreements in part relate to the ability of CPI to
account for the Merger as a pooling-of-interests).
LISTING OF CPI COMMON STOCK
Application will be made for the listing on the NNM of the shares of CPI
Common Stock to be issued pursuant to the terms of the Merger Agreement,
including those offered hereby. The listing on the NNM of such shares, subject
to notice of issuance, is a condition precedent to the consummation of the
Merger. So long as CPI and Zytec continue to meet the requirements of the NNM,
CPI Common Stock and Zytec Common Stock, as the case may be, will continue to be
listed on the NNM. However, after the Effective Time, the Zytec Common Stock
will be delisted.
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EFFECT ON STOCK OPTIONS
STOCK OPTION AND OTHER STOCK PLANS
The Merger Agreement provides that, at the Effective Time, each outstanding
option to purchase shares of Zytec Common Stock (each, a "Zytec Option") will
constitute an option to acquire shares of CPI Common Stock, on the same terms
and conditions as were applicable under such Zytec Option, based on the same
number of shares of CPI Common Stock as the holder of such Zytec Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such Zytec Option in full immediately prior to the Effective Time. The Merger
Agreement also provides that any other outstanding award under an existing Zytec
stock option plan ("Zytec Stock Awards") shall constitute an award based upon
the same number of shares of CPI Common Stock as the holder of such Zytec Stock
Award would have been entitled to receive pursuant to the Merger had such holder
been the absolute owner, immediately before the Effective Time, of the shares of
Zytec Common Stock on which such Zytec Stock Award is based, and otherwise on
the same terms and conditions as governed such Zytec Stock Award immediately
before the Effective Time. See "The Merger Agreement--Terms of the Merger--Stock
Option and Other Stock Plans."
CPI ACTION WITH RESPECT TO ZYTEC STOCK PLANS
With respect to any Zytec plan under which the delivery of Zytec Common
Stock would otherwise be required upon payment of benefits, grant of awards, or
exercise of options (collectively, the "Stock Plans"), CPI has agreed, pursuant
to the Merger Agreement, to take all corporate action necessary to (i) obtain
shareholder approval with respect to such Stock Plan to the extent such approval
is required for purposes of the Code or other applicable law, (ii) reserve for
issuance under such Stock Plan or otherwise provide a sufficient number of
shares of CPI Common Stock for delivery upon payment of benefits, grant of
awards or exercise of options under such Stock Plan, (iii) ensure, to the extent
required by, and subject to the provisions of such Stock Plan, that Zytec
Options which qualify as incentive stock options under Section 422 of the Code
prior to the Effective Time will continue to qualify as incentive stock options
after the Effective Time, and (iv) as soon as practicable after the Effective
Time (but in no event later than 20 business days after the Effective Time),
file registration statements on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of CPI Common
Stock subject to such Stock Plan, to the extent such registration statements are
required under applicable law. CPI further agrees to use its commercially
reasonable efforts to maintain the effectiveness of such registration statements
(and maintain the current status of any prospectuses contained therein) for so
long as such benefits and grants remain payable and such options remain
outstanding. See "The Merger Agreement--Additional Agreements--CPI Action with
Respect to Zytec Stock Plans."
CERTAIN LEGAL MATTERS
Under the HSR Act and the rules promulgated thereunder by the FTC, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the FTC and the Antitrust Division and
specified waiting periods have been satisfied. Pursuant to the requirements of
the HSR Act, CPI and Zytec filed Notification and Report Forms for review under
the HSR Act with the FTC and the Antitrust Division, together with a request for
early termination of the applicable 30-day waiting period. The waiting period
under the HSR Act with respect to such filings expired on October 11, 1997.
At any time before or after the Effective Time, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the
consummation of the Merger or seeking divestiture of substantial assets of CPI
or Zytec. At any time before or after the Effective Time, and notwithstanding
that the HSR Act waiting period has expired, any state could take such action
under the antitrust laws of such state as it deems necessary or desirable in
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the public interest. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of Zytec or businesses or
assets of CPI or Zytec. In addition, private parties (including competitors) may
seek to take legal action under the antitrust laws under certain circumstances.
Consummation of the Merger is conditioned upon, among other things, the
expiration of the waiting period under the HSR Act, and the absence of any
temporary restraining order, preliminary or permanent injunction, or other order
issued by any Federal or state court in the United States which prevents the
consummation of the Merger.
CPI and Zytec do not believe that any material additional governmental
filings in the United States are required with respect to the Merger, other than
the filing of the Articles of Merger with the Secretary of State of the State of
Minnesota and the filing of the Registration Statement (including any amendment
thereto), of which this Joint Proxy Statement/Prospectus forms a part, with the
Commission.
FEDERAL SECURITIES LAW CONSEQUENCES
The CPI Common Stock issued in connection with the Merger will be freely
transferable, except that any CPI Common Stock received by persons who are
deemed to be "affiliates" (as such term is defined in Rule 145 under the
Securities Act) of Zytec or CPI prior to the Merger may be sold by them only in
transactions permitted by the resale provisions of Rule 145 under the Securities
Act with respect to affiliates of Zytec, or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of Zytec or CPI are
individuals or entities that control, are controlled by, or are under common
control with, such corporation and may include certain officers and directors of
such corporation as well as principal shareholders of such corporation.
Affiliates of Zytec or CPI may not sell their shares of CPI Common Stock
acquired in connection with the Merger except pursuant to an effective
registration under the Securities Act covering such shares or in compliance with
Rule 145 or another applicable exemption from the registration requirements of
the Securities Act. In general, under Rule 145, for one year following the
Effective Time, an affiliate of CPI or Zytec (together with certain related
persons) would be entitled to sell shares of CPI Common Stock only through
unsolicited "brokers' transactions" or in transactions directly with a "market
maker," as such terms are defined in Rule 144 under the Securities Act.
Additionally, the number of shares to be sold by an affiliate (together with
certain related persons and certain persons acting in concert) within any
three-month period for purposes of Rule 145 may not exceed the greater of (i) 1%
of the outstanding shares of CPI Common Stock or (ii) the average weekly trading
volume of such stock during the four calendar weeks preceding such sale. Rule
145 would remain available, however, to affiliates only if CPI remained current
with its informational filings under the Exchange Act. One year after the
Effective Time, an affiliate of Zytec (but not of CPI) would be able to sell CPI
Common Stock without such manner of sale or volume limitations but only if CPI
was current with its Exchange Act informational filings and such affiliate was
not then an affiliate of CPI. Two years after the Effective Time, an affiliate
of CPI would be able to sell such shares of CPI Common Stock without any
restrictions so long as such affiliate had not been an affiliate of CPI for at
least three months prior thereto. The Registration Statement of which this Joint
Proxy Statement/Prospectus forms a part does not cover the resale of any
securities offered hereby. The Merger Agreement requires Zytec to use its
reasonable best efforts to cause each of its affiliates to execute a written
agreement to the effect that such person will sell the CPI Common Stock received
by them in the Merger only in compliance with Rule 145 under the Securities Act.
See "The Merger Agreement--Conditions to the Merger--Additional Conditions to
Obligations of CPI and Merger Sub."
DIVIDENDS
Under the terms of the Merger Agreement, neither CPI nor Zytec is permitted
to declare, set aside, make or pay any dividend or other distribution in respect
of its capital stock from the date of the Merger Agreement until the earlier of
the termination of the Merger Agreement or the Effective Time.
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APPRAISAL AND DISSENTERS' RIGHTS
Shareholders of Zytec are entitled to exercise dissenters' rights pursuant
to the provisions of Sections 302A.471 and 302A.473 of the MBCA. In accordance
with these sections, Zytec shareholders have the right to dissent to the Merger
and to be paid in cash the "fair value" of their shares of Zytec Common Stock in
lieu of receiving the consideration provided under the Merger Agreement. In this
context, the term "fair value" means the value of the Zytec shares immediately
before the Effective Time as determined by a court taking into account any and
all factors the court finds relevant and computed by any method that the court
in its discretion sees fit to use. Under Section 302A.473, where a merger is to
be submitted for approval at a meeting of shareholders, the corporation must
notify each of its shareholders of the right to dissent, include in such notice
a copy of Sections 302A.471 and 302A.473 and provide a brief description of the
procedures to be followed under these sections. This Joint Proxy
Statement/Prospectus constitutes such notice to the shareholders of Zytec, and
the following discussion generally describes the procedures to be followed by a
dissenting shareholder.
The following discussion is not a complete statement of the law pertaining
to a dissenting shareholder's rights under Minnesota law and is qualified in its
entirety by the full text of Sections 302A.471 and 302A.473 of the MBCA attached
hereto as Annex D and incorporated herein by reference. Any Zytec shareholder
who wishes to exercise the right to dissent and demand the fair value of his or
her shares, or who wishes to preserve the right to do so, should carefully
review the following discussion and Annex D, because failure to timely and
properly comply with the procedures will result in the loss of a shareholder's
right to dissent under Minnesota law.
If a shareholder of Zytec wishes to exercise the right to demand the fair
value of his or her shares, such shareholder must take the following actions:
- BEFORE THE VOTE OF SHAREHOLDERS IS TAKEN AT THE ZYTEC SPECIAL MEETING, THE
SHAREHOLDER MUST FILE A WRITTEN NOTICE OF INTENT TO DEMAND THE FAIR VALUE
OF HIS OR HER SHARES AND, IN ADDITION, HE OR SHE MUST NOT VOTE IN FAVOR OF
APPROVAL OF THE MERGER AGREEMENT. Because a proxy that does not contain
voting instructions will, unless properly revoked, be voted FOR approval
of the Merger Agreement, a Zytec shareholder who votes by proxy and who
wishes to exercise dissenters' rights must (x) vote AGAINST the approval
of the Merger Agreement or (y) ABSTAIN from voting on the approval of the
Merger Agreement. A vote against the Merger Agreement, in person or by
proxy, will not in and of itself constitute a written notice of intent to
demand the fair value of a holder's shares of Zytec Common Stock
satisfying the requirements of the MBCA.
- A DEMAND FOR FAIR VALUE MUST BE EXECUTED BY OR FOR THE SHAREHOLDER OF
RECORD, FULLY AND CORRECTLY, AS SUCH SHAREHOLDER'S NAME APPEARS ON HIS OR
HER ZYTEC COMMON STOCK CERTIFICATE OR CERTIFICATES. If Zytec Common Stock
is owned of record in a fiduciary capacity such as by a trustee, guardian
or custodian, such demand must be executed by the fiduciary. If the Common
Stock is owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may
execute the demand for a shareholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in
exercising the demand, he or she is acting as agent for the record owner.
- A record owner who holds shares of Zytec Common Stock as a nominee for
others, such as a broker, may demand fair value of the shares held for
all, or fewer than all, of the beneficial owners of such shares. In such a
case, the written demand should set forth the number of shares to which it
relates. When no number of shares is expressly mentioned, the demand will
be presumed to cover all shares of Zytec Common Stock held in the name of
the record owner. BENEFICIAL OWNERS OF ZYTEC SHARES WHO ARE NOT RECORD
OWNERS AND WHO INTEND TO EXERCISE DISSENTERS' RIGHTS SHOULD INSTRUCT THE
RECORD OWNER TO COMPLY WITH ALL OF THE STATUTORY REQUIREMENTS WITH RESPECT
TO THE EXERCISE OF DISSENTERS' RIGHTS BEFORE THE DATE OF THE ZYTEC SPECIAL
MEETING.
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- ZYTEC SHAREHOLDERS WHO ELECT TO EXERCISE DISSENTERS' RIGHTS AND DEMAND
FAIR VALUE, IN ORDER TO PROPERLY ASSERT THEIR DISSENTERS' RIGHTS, MUST
MAIL OR DELIVER THEIR WRITTEN DEMAND TO: SECRETARY, AT ZYTEC CORPORATION,
7575 MARKET PLACE DRIVE, EDEN PRAIRIE, MINNESOTA 55344. The written demand
must specify the shareholder's name and mailing address, the number of
shares owned, and that the shareholder is thereby demanding the fair value
of his or her shares.
- After the Effective Time, Zytec, as the Surviving Corporation, will cause
to be mailed to each shareholder of Zytec who has properly asserted
dissenters' rights, a notice that contains (i) the address to which a
demand for payment and stock certificates must be sent in order to receive
payment and the date by which such demand and stock certificates must be
received; (ii) a form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder
dissents, acquired his or her Zytec shares or an interest in them and to
demand payment; and (iii) another copy of Sections 302A.471 and 302A.473
of the MBCA, together with a brief description of these sections. TO
RECEIVE THE FAIR VALUE OF HIS OR HER ZYTEC SHARES, A DISSENTING
SHAREHOLDER MUST DEMAND PAYMENT AND DEPOSIT HIS OR HER CERTIFICATES WITHIN
30 DAYS AFTER THE ABOVE-REFERENCED NOTICE IS GIVEN.
- After the Effective Time, or after Zytec, as the Surviving Corporation,
receives a valid demand for payment, whichever is later, Zytec must remit
to each dissenting shareholder who has complied with the dissenters'
rights provisions the amount Zytec estimates to be the fair value of the
shares, plus interest, along with (i) Zytec's, as the Surviving
Corporation, balance sheet and statement of income for a fiscal year
ending not more than 16 months before the Effective Time, together with
its latest available interim financial statement; (ii) an estimate by
Zytec of the fair value of the shares and a brief description of the
method used to reach the estimate; and (iii) another copy of Sections
302A.471 and 302A.473 of the MBCA and a brief description of the procedure
to be followed in demanding supplemental payment. If Zytec fails to remit
payment within 60 days of the deposit of certificates, Zytec must return
all deposited certificates. However, Zytec may again give notice and
require deposit of such certificates at a later time.
- IF A DISSENTING ZYTEC SHAREHOLDER BELIEVES THAT THE AMOUNT REMITTED BY
ZYTEC IS LESS THAN THE FAIR VALUE OF HIS OR HER SHARES, PLUS INTEREST,
SUCH DISSENTING SHAREHOLDER MAY GIVE WRITTEN NOTICE TO ZYTEC OF HIS OR HER
OWN ESTIMATE OF THE FAIR VALUE FOR THE SHARES PLUS INTEREST AND DEMAND A
SUPPLEMENTAL PAYMENT FOR THE DIFFERENCE. Any written demand for
supplemental payment must be made within 30 days after Zytec mailed its
original remittance. Otherwise, a dissenter is entitled only to the amount
remitted by Zytec.
- Within 60 days after receiving a demand for supplemental payment, Zytec,
as the Surviving Corporation, must either pay the amount of the
supplemental payment demanded (or agreed to between the dissenting
shareholder and CPI) or file a petition in the appropriate state court of
Minnesota requesting that the court determine the fair value of the shares
plus interest. Any petition so filed must name as parties all dissenting
shareholders who have demanded supplemental payments and who have been
unable to reach an agreement with CPI concerning the fair value of their
shares. The court may appoint appraisers, with such power and authority as
the court deems proper, to receive evidence on and recommend the amount of
fair value of the shares. The jurisdiction of the court is plenary and
exclusive, and the fair value as determined by the court is binding on all
Zytec shareholders, wherever located. A dissenting shareholder, if
successful, is entitled to a judgment for the amount by which the fair
value of his or her shares as determined by the court exceeds the amount
originally remitted by Zytec.
Generally, the costs and expenses associated with a court proceeding to
determine the fair value of the Zytec shares will be borne by Zytec, as the
Surviving Corporation, and/or CPI, unless the court finds that a dissenting
shareholder has demanded supplemental payment in a manner that is arbitrary,
vexatious or not in good faith. Similar costs and expenses may also be assessed
in instances where Zytec has failed to
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comply with the procedures specified in Section 302A.473 of the MBCA discussed
above. The court may, in its discretion, award attorneys' fees to an attorney
representing dissenting shareholders out of any amount awarded to such
dissenters.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 302A.473 OF THE MBCA FOR
ASSERTING DISSENTERS' RIGHTS WILL RESULT IN THE LOSS OF A SHAREHOLDER'S RIGHTS
TO DEMAND THE FAIR VALUE OF HIS OR HER SHARES OF ZYTEC COMMON STOCK.
Shareholders considering seeking appraisal should realize that the fair value of
their shares, as determined under Section 302A.473 of the MBCA in the manner
outlined above, could be more than, the same as or less than the amount of value
of the shares of CPI Common Stock such shareholders would be entitled to receive
as a result of the Merger if they did not seek appraisal of their shares.
Under Subdivision 4 of Section 302A.471 of the MBCA, a Zytec shareholder has
no right, at law or in equity, to set aside the approval of the Merger Agreement
or the consummation of the Merger except if such adoption or consummation was
fraudulent with respect to such shareholder or Zytec.
The obligation of CPI to effect the Merger is subject to the condition,
which may be waived by CPI, that Zytec shall not have received, prior to the
Zytec Special Meeting, notices of intent to demand fair value of their shares
from Zytec shareholders with respect to an aggregate number of shares of Zytec
Common Stock which (assuming perfection of the dissenters' rights by such
shareholders) would exceed 7.5% of the outstanding shares of Zytec Common Stock.
In addition, if a significant number (which number is greater than 7.5%) of
Zytec shareholders exercise their dissenters' rights, pooling-of-interests
accounting treatment would not be available, and either party would have the
right to not effect the Merger. See "The Merger--Anticipated Accounting
Treatment" and "The Merger Agreement--Conditions to the Merger."
The holders of CPI Common Stock are not entitled to any appraisal rights
with respect to the Merger because CPI is not a constituent corporation in the
Merger.
FEES AND EXPENSES
Each of CPI and Zytec will pay its own expenses in connection with the
Merger; provided, however, that CPI and Zytec will share equally those filing
fees incurred in connection with filing their notifications under the HSR Act
and all fees and expenses, other than accountants' and attorneys' fees, incurred
in connection with the printing, filing and mailing of this Joint Proxy
Statement/Prospectus (including any preliminary materials related thereto) and
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
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THE MERGER AGREEMENT
The description of the Merger Agreement set forth below does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached to this Joint Proxy Statement/Prospectus
as Annex A and incorporated herein by reference. All shareholders are urged to
read the Merger Agreement in its entirety.
TERMS OF THE MERGER
THE MERGER
At the Effective Time, and subject to and upon the terms and conditions of
the Merger Agreement and the MBCA, Merger Sub will be merged with and into
Zytec, the separate corporate existence of Merger Sub will cease, and Zytec will
continue as the Surviving Corporation and a wholly-owned subsidiary of CPI.
EFFECTIVE TIME
As promptly as practicable after the Closing Date, the Merger will be
consummated by filing Articles of Merger, together with any required related
certificates, with the Secretary of State of the State of Minnesota in
accordance with the provisions of the MBCA. The time of such filing, or such
later time or date specified in the Articles of Merger as CPI and Zytec shall
have agreed, is referred to herein as the "Effective Time."
CERTIFICATE OF INCORPORATION AND BYLAWS
The Merger Agreement provides that the articles of incorporation and bylaws
of Merger Sub, as in effect immediately prior to the Effective Time, will be the
articles of incorporation and bylaws of the Surviving Corporation until such
articles of incorporation and/or bylaws may be thereafter amended.
DIRECTORS
The directors of Merger Sub immediately prior to the Effective Time
(currently, Joseph M. O'Donnell and Richard J. Thompson) shall be the initial
directors of the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified.
OFFICERS
The officers of the Surviving Corporation following the Effective Time shall
be Joseph M. O'Donnell, the current President, Chief Executive Officer and
Chairman of the Board of Directors of CPI, who shall serve as President, Richard
J. Thompson, the current Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer of CPI, who shall serve as Chief Financial Officer and
Secretary, John M. Steel, the current Vice President-Marketing and Sales and a
director of Zytec, who shall serve as Vice President, and David Libow, the
current Director of Corporate Taxation of CPI, who shall serve as Assistant
Secretary. All of the above officers shall serve until the earlier of their
resignation or removal or until the respective successors are duly elected and
qualified.
CONVERSION OF ZYTEC COMMON STOCK IN THE MERGER
At the Effective Time, each share of Zytec Common Stock (a "Zytec Share")
issued and outstanding immediately prior to the Effective Time (excluding any
shares owned by Zytec, CPI or their subsidiaries, all of which shall be
cancelled, and Dissenting Shares) will be converted into the right to receive
1.33 shares of validly issued, fully paid and nonassessable shares of CPI Common
Stock. Cash will be paid to the Zytec shareholders in lieu of fractional shares
of CPI Common Stock. See "--Fractional Shares" and "The Merger
Agreement--Exchange of Certificates."
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CONVERSION OF CAPITAL STOCK OF MERGER SUB IN THE MERGER
Each share of common stock, $.001 par value per share, of Merger Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and non-assessable share of common stock, $.001
par value per share, of the Surviving Corporation.
ADJUSTMENTS TO EXCHANGE RATIO
The Exchange Ratio shall be adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend or similar event with respect to CPI
Common Stock or Zytec Common Stock occurring after the date of the Merger
Agreement and prior to the Effective Time.
FRACTIONAL SHARES
No certificates or scrip representing less than one whole share of CPI
Common Stock shall be issued in connection with the Merger. In lieu of any such
fractional share, each holder of a certificate for shares of Zytec Common Stock
who would otherwise have been entitled to a fraction of a share of CPI Common
Stock upon surrender of such certificates for exchange shall be paid upon such
surrender cash equal to the product of (i) such fraction and (ii) the average
closing price per share of CPI Common Stock as reported on the NNM for the 10
trading days ending on the day prior to the date on which the Effective Time
occurs. No interest will be paid or will accrue on the cash payable with respect
to such fractional shares.
DISSENTERS' SHARES
Holders of shares of Zytec Common Stock who exercise rights as dissenting
shareholders and properly comply with Sections 302A.471 and 302A.473 of the MBCA
shall not have their shares of Zytec Common Stock converted as of the Effective
Time into rights to receive shares of CPI Common Stock. Such shares of Zytec
Common Stock shall instead be cancelled, and such shareholders shall receive
such consideration as may be determined to be due with respect to such shares of
Zytec Common Stock pursuant to the applicable provisions of the MBCA. If a Zytec
shareholder who attempts to exercise dissenters' rights loses his or her status
as a dissenting shareholder for any reason, CPI will issue and deliver to such
shareholder the number of shares of CPI Common Stock and any cash payment in
lieu of fractional shares (in each case without interest thereon) to which such
shareholder is entitled under the Merger Agreement, but only upon the surrender
by such shareholder of his or her certificate(s) representing Zytec Common
Stock. In that case, the shares of CPI Common Stock shall be delivered to the
shareholder on the later of the Effective Time or the date on which the
shareholder loses his or her dissenters' rights. See "The Merger-- Appraisal and
Dissenters' Rights."
STOCK OPTION AND OTHER STOCK PLANS
The Merger Agreement provides that, at the Effective Time, each outstanding
Zytec Option will constitute an option to acquire shares of CPI Common Stock, on
the same terms and conditions as were applicable under such Zytec Option, based
on the same number of shares of CPI Common Stock as the holder of such Zytec
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such Zytec Option in full immediately prior to the Effective
Time. The Merger Agreement also provides that any other outstanding Zytec Stock
Awards shall constitute an award based upon the same number of shares of CPI
Common Stock as the holder of such Zytec Stock Award would have been entitled to
receive pursuant to the Merger had such holder been the absolute owner,
immediately before the Effective Time, of the shares of Zytec Common Stock on
which such Zytec Stock Award is based, and otherwise on the same terms and
conditions as governed such Zytec Stock Award immediately before the Effective
Time.
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EXCHANGE OF CERTIFICATES
EXCHANGE AGENT
As soon as practicable after the Effective Time, CPI shall deposit with the
Exchange Agent, for the benefit of the holders of shares of Zytec Common Stock,
for exchange in accordance with the Merger Agreement, certificates evidencing
shares of CPI Common Stock issuable in exchange for outstanding shares of Zytec
Common Stock together with cash payable in respect of any fractional shares.
EXCHANGE PROCEDURES
As soon as practicable after the Effective Time, the Exchange Agent will
mail to each holder of record of shares of Zytec Common Stock which immediately
prior to the Effective Time represented outstanding shares of Zytec Common Stock
that were cancelled and became instead the right to receive shares of CPI Common
Stock a letter of transmittal and instructions for use in effecting the
surrender of the Zytec share certificates in exchange for certificates
representing shares of CPI Common Stock. Upon surrender to the Exchange Agent of
a certificate representing shares of Zytec Common Stock for cancellation
together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the holder
of such certificate will be entitled to receive in exchange therefor (i)
certificates evidencing that number of whole shares of CPI Common Stock which
such holder has the right to receive in the Merger, (ii) any dividends or other
distributions on the shares of CPI Common Stock which such holder is entitled to
receive, and (iii) cash in respect of fractional shares of CPI Common Stock (the
CPI shares, distributions and cash described in clauses (i), (ii) and (iii)
being, collectively, the "Merger Consideration"), and the certificate
representing shares of Zytec Common Stock so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of Zytec shares which is not
registered in the transfer records of Zytec as of the Effective Time, the Merger
Consideration may be issued and paid to a transferee if the certificate
evidencing such shares of Zytec Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until so
surrendered, each outstanding certificate that, prior to the Effective Time,
represented shares of Zytec Common Stock will be deemed from and after the
Effective Time, for all corporate purposes (other than payment of dividends or
as described below under "Withholding Rights"), to evidence the ownership of the
number of whole shares of CPI Common Stock into which such shares of Zytec
Common Stock shall have been so converted.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED ZYTEC COMMON STOCK
No dividends or other distributions declared or made after the Effective
Time with respect to CPI Common Stock with a record date after the Effective
Time will be paid to the holder of an unsurrendered certificate representing
shares of Zytec Common Stock with respect to the shares of CPI Common Stock they
are entitled to receive and no cash payment in lieu of fractional shares shall
be paid to any such holder until the holder surrenders such certificate. Subject
to applicable law, following surrender of any certificate representing shares of
Zytec Common Stock, there shall be paid to the record holder of the certificate
representing whole shares of CPI Common Stock issued in exchange therefor,
without interest, at the time of surrender, (i) the amount of any cash payable
in lieu of a fractional share of CPI Common Stock and (ii) the amount of any
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of CPI Common Stock.
BOOK ENTRY
The letter of transmittal from the Exchange Agent may, at the option of CPI,
provide for the ability of a holder of shares of Zytec Common Stock to elect
that the shares of CPI Common Stock to be received in exchange for the shares of
Zytec Common Stock formerly represented by such surrendered shares be issued in
uncertificated form.
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NO LIABILITY
At any time following one year after the Effective Time, CPI shall be
entitled to require the Exchange Agent to deliver to CPI any Merger
Consideration which had been made available to the Exchange Agent by or on
behalf of CPI and which has not been disbursed to holders of certificates of
Zytec Common Stock, and thereafter such holders shall be entitled to look to CPI
only as general creditors thereof with respect to the Merger Consideration
payable upon due surrender of their certificates of shares of Zytec Common
Stock. Neither CPI, Merger Sub nor Zytec will be liable to any holder of Zytec
Common Stock for any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
WITHHOLDING RIGHTS
CPI or the Exchange Agent will be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to the Merger Agreement to any
Zytec shareholder such amounts as CPI or the Exchange Agent are required to
deduct and withhold with respect to the making of such payment under any
provision of Federal, state, local or foreign tax law. To the extent that
amounts are so withheld by CPI or the Exchange Agent, such withheld amounts
shall be treated for purposes of the Merger Agreement as having been paid to the
holder of the shares of Zytec Common Stock in respect of which such deduction
and withholding was made by CPI or the Exchange Agent.
LOST, STOLEN OR DESTROYED CERTIFICATES
In the event any certificates representing shares of Zytec Common Stock have
been lost, stolen or destroyed, the Exchange Agent will issue shares of CPI
Common Stock in exchange for such lost, stolen or destroyed certificates upon
the making of an affidavit of that fact by the owner of such certificates and,
at the request of CPI, upon delivery of a bond in such a sum as CPI may
reasonably direct as indemnity against any claim that may be made against CPI or
the Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed and payment of a nominal transaction fee.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO
ZYTEC SHAREHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME AS TO THE METHOD OF
EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF ZYTEC COMMON STOCK.
ZYTEC SHAREHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES TO THE
EXCHANGE AGENT PRIOR TO RECEIPT OF THE TRANSMITTAL LETTER.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties made by
Zytec, in respect of itself and its subsidiaries, in favor of CPI and Merger
Sub, and made by CPI, in respect of itself and its subsidiaries, in favor of
Zytec, relating, among other things, to the following matters: (i) corporate
organization, standing, qualification, approvals and similar matters and force
and effect of articles of incorporation and bylaws; (ii) subsidiaries and
interests in other entities; (iii) the capital structure of each company; (iv)
the authorization, execution, delivery and enforceability of the Merger
Agreement; (v) no breach or default of certain material agreements; (vi) the
absence of conflict of the execution, delivery and performance of the Merger
Agreement with charter documents, laws or agreements; (vii) government filings
and approvals; (viii) the absence of conflict with, default under or violation
of agreements and laws, and the holding of permits necessary for the conduct of
business; (ix) reports and other documents filed with the Commission and the
fair presentation of the financial statements contained therein in accordance
with GAAP; (x) conduct of business in the ordinary course and the absence of
certain changes; (xi) the absence of pending or threatened litigation and
undisclosed liabilities; (xii) the accuracy of information supplied by each of
Zytec and CPI for use in the Registration Statement of which this Joint Proxy
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Statement/Prospectus forms a part; (xiii) employee benefit matters and stock
options; (xiv) labor matters and claims or threatened claims; (xv) payment of
taxes and certain other tax matters; (xvi) compliance with environmental laws,
possession of all material environmental permits and other environmental issues;
(xvii) the shareholder vote required in connection with the Merger Agreement and
the transactions contemplated thereby being the only vote required; (xviii) that
neither CPI nor Zytec or any of their respective affiliates have taken or agreed
to take any action that would prevent CPI from accounting for the Merger as a
pooling-of-interests; (xix) the non-applicability of certain provisions of the
MBCA relating to changes in control (made by Zytec); (xx) the opinions of
Zytec's and CPI's respective financial advisors as to the fairness of the
transaction; (xxi) maintenance of insurance and other insurance matters; (xxii)
the absence of ownership of each other party's stock; (xxiii) matters with
respect to material contracts; (xxiv) ownership or rights to use and absence of
violations or claims with respect to intellectual property; (xxv) absence of
broker's or finder's fees except for fees stated therein; (xxvi) absence of
knowledge of planned material reduction or termination of business by top five
customers; and (xxvii) absence of any pending discussions or negotiations with
regard to a business combination transaction other than the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER; CERTAIN COVENANTS
Pursuant to the Merger Agreement, each of CPI and Zytec have agreed that,
during the period from the date of the Merger Agreement until the Effective Time
or the earlier termination of the Merger Agreement, except as permitted by the
Merger Agreement or as otherwise consented to in writing by the other party, it
will:
(i) carry on its business in the ordinary course consistent with past
practice;
(ii) not amend or propose to amend its articles of incorporation or bylaws;
(iii) not acquire, agree to acquire or propose to acquire (by merger,
consolidation or other acquisition) a substantial equity interest or substantial
portion of the assets or business of any person or entity other than in the
ordinary course of business consistent with past practice;
(iv) not change its methods or practices of accounting (except as required
by law, rule or GAAP);
(v) not take any action which would prevent CPI from accounting for the
Merger as a pooling-of-interests;
(vi) not take any action that would adversely affect the status of the
Merger as a tax-free transaction;
(vii) not enter into agreements with affiliates (other than wholly-owned
subsidiaries) other than on an arm's length basis;
(viii) cooperate with the other party, confer with the other party regarding
material operational matters and ongoing operations, notify the other party of
any significant changes or material adverse events and provide the other party
with copies of all filings with any governmental agency or authority;
(ix) use all commercially reasonable efforts to obtain third-party consents
required in connection with the Merger;
(x) not take any action that would result in a breach of the Merger
Agreement;
(xi) maintain adequate insurance with financially responsible insurance
companies;
(xii) use reasonable efforts to maintain all existing governmental permits;
(xiii) not declare or pay any dividends on or make other distributions in
respect of any of its capital stock, or split, combine or reclassify any of its
capital stock, or redeem, repurchase or otherwise acquire any shares of its
capital stock;
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(xiv) not issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of its capital
stock of any class or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock other than (a)
issuances by Zytec in connection with the conversion of the Convertible Note,
(b) issuances by Zytec of up to 600,000 shares (of which approximately 475,000
shares are subject to presently outstanding stock options) of Zytec Common Stock
issued pursuant to employee benefit plans, incentive and stock option plans and
director stock plans and (c) issuances by CPI of up to 1,000,000 shares of CPI
Common Stock issued for general corporate purposes, employee benefit plans, and
incentive and stock option plans;
(xv) not make capital expenditures (except as otherwise expressly disclosed
in the Merger Agreement) in excess of $500,000 for Zytec and $2,000,000 for CPI;
(xvi) not incur indebtedness (or guarantees thereof) other than (a)
short-term indebtedness in the ordinary course of business consistent with prior
practice, (b) long-term indebtedness not aggregating more than $3,500,000 for
Zytec and $5,000,000 for CPI and (c) in connection with the refunding of
existing indebtedness at a lower cost of funds;
(xvii) not enter into, adopt or amend or increase the amount or accelerate
the payment or vesting of any benefit or amount payable under any employee
benefit plan or other agreement, commitment, arrangement, plan or policy, except
for normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits;
(xviii) not sell, lease, license, encumber or otherwise dispose of any asset
other than in the ordinary course of business consistent with prior practice;
(xix) not make or rescind any prior material tax election, settle or
compromise any material tax proceedings or change its method of reporting income
or deductions from those employed in the preparation of its last tax returns;
(xx) not pay, discharge or satisfy any material claims, liabilities or
obligations, other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected or
reserved against in such party's most recent financial statements contained in
certain reports previously filed with the Commission or incurred in the ordinary
course of business and consistent with past practice; and
(xxi) not, except in the ordinary course of business, change the status of
any of its material contracts or agreements or waive or release or assign any
material rights or claims.
ADDITIONAL AGREEMENTS
The following additional agreements between CPI and Zytec are included in
the Merger Agreement:
ACCESS TO INFORMATION; CONFIDENTIALITY
Upon reasonable notice, Zytec and CPI shall each (and shall cause each of
their subsidiaries to) afford to the officers, directors, employees,
accountants, counsel, investment bankers, financial advisors and other
representatives (collectively, "Representatives") of the other, reasonable
access, during the period from the date of the Merger Agreement to the Effective
Time, to all of its properties, books, contracts, commitments and records to
make such investigation as such party may request and, during such period, Zytec
and CPI each shall (and shall cause each of their subsidiaries to) furnish
promptly to the other (i) access to each report, schedule or document filed or
received by either party from any Federal, state or foreign regulatory agency or
commission and (ii) access to all information concerning themselves, their
personnel and such other matters requested by either party in connection with
any applications or approvals required or contemplated by the Merger Agreement.
Each party shall keep such information
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confidential in accordance with the terms of that certain Confidentiality
Agreement between CPI and Zytec, dated August 12, 1997.
JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT
The Merger Agreement provides that, as soon as reasonably practicable after
the execution of the Merger Agreement, Zytec and CPI shall prepare and file with
the Commission the Registration Statement on Form S-4 (which shall include this
Joint Proxy Statement/Prospectus) with respect to the CPI Common Stock to be
issued in connection with the Merger, to use all commercially reasonable efforts
to cause the Registration Statement to be declared effective under the
Securities Act, and to take such action as may be reasonably required to cause
the CPI Common Stock received in the Merger to be registered (or be exempt from
registration) under all applicable state laws. The parties further agree to use
reasonable efforts to cause the CPI Common Stock issuable in the Merger to be
approved for quotation on the NNM.
HSR ACT; OTHER REGULATORY APPROVALS
The Merger Agreement provides that Zytec and CPI shall file notifications
under and in accordance with the HSR Act in connection with the Merger and the
transactions contemplated thereby. Zytec and CPI shall respond promptly to any
requests received in connection with such filings for additional information or
documentation. CPI and Zytec additionally agree to cooperate and use their best
efforts to promptly prepare and file all notices and filings and to use
commercially reasonable efforts to obtain all governmental approvals necessary
to consummate the transaction contemplated by the Merger Agreement and discussed
in this Joint Proxy Statement/Prospectus.
SHAREHOLDERS MEETINGS AND APPROVALS
CPI and Zytec each agree to take all required action to duly call, give
notice of and convene the CPI Special Meeting and the Zytec Special Meeting, as
applicable, distribute to their shareholders this Joint Proxy
Statement/Prospectus in accordance with applicable law and their respective
articles of incorporation and bylaws, and recommend to their shareholders to
approve the Merger Proposal, in the case of Zytec, and the CPI Share Proposal,
in the case of CPI.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that, to the fullest extent permitted by
applicable law, the Surviving Corporation and CPI shall indemnify, defend and
hold harmless each person who was at, or who had been at any time prior to,
September 2, 1997, or who becomes prior to the Effective Time, an officer,
director or employee of any of Zytec or any of its subsidiaries (the
"Indemnified Parties") against all losses, expenses (including reasonable
attorneys' fees and expenses), claims, damages or liabilities or, subject to the
proviso of the next succeeding sentence, amounts paid in settlement, arising out
of actions or omissions occurring at or prior to the Effective Time (and whether
asserted or claimed prior to, at or after the Effective Time) that are, in whole
or in part, based on or arising out of the fact that such person is or was a
director, officer or employee of such party, or to the extent they are based on
or arise out of the transactions contemplated by the Merger Agreement. In the
event of any such loss, expense, claim, damage or liability (whether or not
arising before the Effective Time) (i) the Surviving Corporation and CPI shall
pay the reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to CPI, and otherwise
advance to such Indemnified Party (upon such Indemnified Party's undertaking to
repay such advances if such Indemnified Party is ultimately determined not to be
entitled to such indemnification as a matter of law) upon request, reimbursement
of documented expenses reasonably incurred, in either case to the extent not
prohibited by Minnesota law, (ii) the Surviving Corporation and CPI will
cooperate in the defense of any such matter and (iii) any determination required
to be made with respect to whether an Indemnified Party's conduct complies with
the standards set forth under Minnesota
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law and the articles of incorporation and bylaws of the Surviving Corporation
shall be made by independent counsel mutually acceptable to CPI and the
Indemnified Party; provided, however, that neither CPI nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld). The Merger Agreement
further provides that the Indemnified Parties as a group may retain only one law
firm with respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of such Indemnified Party and any other Indemnified Party or Indemnified
Parties.
In addition, the Merger Agreement requires that for a period of six years
after the Effective Time, the Surviving Corporation and CPI shall cause to be
maintained in effect policies of directors' and officers' liability insurance
maintained by Zytec for the benefit of those persons who were covered by such
policies at September 2, 1997, on terms no less favorable than the terms of such
insurance coverage; provided, that the Surviving Corporation and CPI shall not
be required to expend in any year an amount in excess of 200% of the annual
aggregate premiums currently paid by Zytec for such insurance (currently
approximately $46,000 per year) and, if the annual premiums of such insurance
coverage exceed such amount, the Surviving Corporation and CPI shall be
obligated only to obtain a policy with the best coverage available, in the
reasonable judgment of the Board of Directors of CPI, for a cost not exceeding
such amount. The Merger Agreement also provides that to the fullest extent not
prohibited by law, from and after the Effective Time, all rights to
indemnification existing in favor of the employees, agents, directors and
officers of Zytec and its subsidiaries with respect to their activities as such
prior to the Effective Time shall survive the Merger and shall continue in full
force and effect for a period of not less than six years from the Effective
Time.
PUBLIC ANNOUNCEMENTS
Subject to disclosure requirements imposed by law and securities association
listing applications, CPI and Zytec have agreed to consult and cooperate with
each other in the development and distribution of all news releases and other
public information with respect to the Merger or the Merger Agreement and not to
issue any public announcement or statement without the consent of the other
party, which consent will not be unreasonably withheld.
AGREEMENTS WITH RESPECT TO AFFILIATES
Zytec has identified to CPI all persons who are, and are expected to be,
"affiliates" of Zytec or CPI for purposes of Rule 145 under the Securities Act
(or otherwise under applicable Commission releases with respect to
pooling-of-interests accounting treatment). Zytec shall use its reasonable best
efforts to cause each person who is identified as an "affiliate" to deliver,
prior to the Effective Time, a written agreement in connection with the
pooling-of-interests accounting treatment and other restrictions on affiliates
under Rule 145.
EMPLOYEE SERVICE CREDIT
The Merger Agreement provides that for purposes of any CPI employee benefit
plan in which Zytec employees participate from and after the Effective Time and
under which an employee's benefit depends on length of service, credit will be
given to Zytec employees for service previously credited with Zytec.
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CPI ACTION WITH RESPECT TO ZYTEC STOCK PLANS
With respect to any Zytec Stock Plan, CPI agrees to take all corporate
action necessary to (i) obtain shareholder approval with respect to such Stock
Plan to the extent such approval is required for purposes of the Code or other
applicable law, (ii) reserve for issuance under such Stock Plan or otherwise
provide a sufficient number of shares of CPI Common Stock for delivery upon
payment of benefits, grant of awards, or exercise of options under such Stock
Plan, (iii) ensure, to the extent required by, and subject to the provisions of
such Stock Plan, that Zytec Options which qualified as incentive stock options
under Section 422 of the Code prior to the Effective Time will continue to
qualify as incentive stock options after the Effective Time, and (iv) as soon as
practicable after the Effective Time (but in no event later than 20 business
days after the Effective Time), file registration statements on Form S-3 or Form
S-8, as the case may be (or any successor or other appropriate forms), with
respect to the shares of CPI Common Stock subject to such Stock Plan, to the
extent such registration statements are required under applicable law. CPI
further agrees to use its commercially reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of any prospectuses contained therein) for so long as such benefits and grants
remain payable and such options remain outstanding.
PARTICIPATION IN EMPLOYEE STOCK PURCHASE PLAN OF CPI
The Merger Agreement provides that employees of Zytec as of the Effective
Time shall be permitted to participate in the CPI Employee Stock Purchase Plan
commencing as soon as they are permitted thereunder to participate after the
Effective Time.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that no party thereto will, and each such
party will cause its subsidiaries not to, and each such party will not permit
any of its Representatives to, directly or indirectly, initiate, solicit or
encourage, or take any action to facilitate the making of any offer or proposal
which constitutes or is reasonably likely to lead to, any Business Combination
Proposal (as defined below), or, in the event of an unsolicited Business
Combination Proposal, except to the extent required by their fiduciary duties
under applicable law as so advised in a written opinion of outside counsel,
engage in negotiations or provide any non-pubic information to any person
relating to any Business Combination Proposal. As used above, "Business
Combination Proposal" shall mean any proposal or offer from any person relating
to any direct or indirect acquisition or purchase of 20% or more of the assets
or 20% or more of any class of outstanding equity securities of CPI or Zytec, as
the case may be, any tender offer or exchange offer which, if consummated, would
result in any person beneficially owning 20% or more of any class of equity
securities of CPI or Zytec, as the case may be, or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving CPI or Zytec, as the case may be.
The Merger Agreement also provides that neither the Board of Directors of
Zytec or CPI nor any committee thereof shall (i) withdraw or modify, or propose
to withdraw or modify in a manner adverse to the other party, the approval or
recommendation by such Board of Directors or such committee of the Merger or the
Merger Agreement, (ii) approve or recommend, or propose to approve or recommend,
any Business Combination Proposal or (iii) cause Zytec or CPI, as the case may
be, to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement with respect to any Business Combination
Proposal, unless the Board of Directors of Zytec or CPI, as the case may be,
shall have terminated the Merger Agreement in accordance with the termination
provisions set forth in the Merger Agreement. See "--Termination."
The parties further agree to immediately advise the other party hereto
orally and in writing (within 24 hours after the receipt thereof) of any request
for confidential information or of any Business Combination Proposal or any
inquiry regarding the making of a Business Combination Proposal and the material
terms and the conditions of such request, Business Combination Proposal or
inquiry and agree to keep the other
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party fully informed of the status and details (including amendments or proposed
amendments) of any such request, Business Combination Proposal, or inquiry.
CPI BOARD OF DIRECTORS
The Merger Agreement provides that CPI's Board of Directors will take such
action as may be necessary to increase the number of directors comprising the
Board of Directors of CPI at the Effective Time to 11 persons, four of whom
shall be designated by Ronald D. Schmidt, John M. Steel and Lawrence J.
Matthews, who are principal Zytec shareholders (the "Principal Shareholders"),
prior to the Effective Time. The Merger Agreement further provides that so long
as the aggregate percentage of shares of CPI Common Stock received by the
Principal Shareholders pursuant to the Merger (the "Total Shares Received") and
held by them is at least 70% of the total amount of shares of CPI Common Stock
being issued to such Principal Shareholders pursuant to the Merger (the "Total
Amount"), such Principal Shareholders shall be entitled to designate four
persons to serve on the CPI Board of Directors. The Merger Agreement further
provides that if at any subsequent record date for the annual election of
directors of CPI (i) the percentage of Total Shares Received and then held by
the Principal Shareholders is less than 70% of the Total Amount but at least 50%
of the Total Amount, then such Principal Shareholders shall be entitled to
designate only three persons to serve on the CPI Board of Directors, (ii) the
percentage of Total Shares Received and then held by the Principal Shareholders
is less than 50% of the Total Amount but at least 25% of the Total Amount, then
such Principal Shareholders shall be entitled to designate only two directors to
serve on the CPI Board of Directors and (iii) the percentage of Total Shares
Received and then held by the Principal Shareholders is less than 25% of the
Total Amount, then such Principal Shareholders shall be entitled to designate
only Ronald D. Schmidt to serve on the CPI Board of Directors. CPI has agreed to
use its best efforts to cause any person(s) reasonably designated by the
Principal Shareholders to be elected to the CPI Board of Directors. CPI and
Zytec have agreed that the initial designees shall consist of Ronald D. Schmidt,
John M. Steel, Dr. Fred C. Lee and Lawrence J. Matthews, presently Zytec
directors. In addition, CPI has agreed that if during the two-year period
commencing from the Effective Time, the Principal Shareholders are entitled to
designate directors and such Principal Shareholders designate Ronald D. Schmidt
who shall ultimately be elected as a director of CPI by the shareholders of CPI,
then Ronald D. Schmidt shall serve for such two-year period as the Co-Chairman
of the CPI Board of Directors with Joseph M. O'Donnell or his successor. After
such two-year period, if Ronald D. Schmidt is elected to the CPI Board of
Directors, the CPI Board of Directors shall review and consider appointing him
as Co-Chairman of the CPI Board of Directors.
EXPENSES
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses, except filing fees incurred
in connection with filing notifications under the HSR Act and printing and
mailing expenses incurred in connection with the preparation, filing and
distribution of this Joint Proxy Statement/Prospectus and registration fees
relating thereto, which shall be shared equally by Zytec and CPI.
BEST EFFORTS
The Merger Agreement provides that each of Zytec and CPI shall use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable under applicable law to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by the Merger Agreement.
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CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER
The Merger Agreement provides that the respective obligations of each party
to effect the Merger are subject to the satisfaction or, if permitted by
applicable law, the waiver, at or prior to the Closing Date of the following
conditions:
(i) SHAREHOLDER APPROVALS. The Merger Proposal shall have been approved
by the requisite vote of the shareholders of Zytec and the CPI Share
Proposal shall have been approved by the requisite vote of the shareholders
of CPI.
(ii) NO INJUNCTION. No temporary restraining order or preliminary or
permanent injunction or other order by any Federal, state or foreign court
or other legal or regulatory restraint or prohibition preventing
consummation of the Merger shall have been issued and be continuing in
effect, nor shall any proceeding brought by a governmental authority seeking
any of the foregoing be pending, nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal,
and the Merger and the other transactions contemplated thereby shall not
have been prohibited under any applicable Federal or state law or
regulation.
(iii) REGISTRATION STATEMENT. The Registration Statement (of which this
Joint Proxy Statement/ Prospectus forms a part) shall have become effective
in accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceedings for such a stop order shall have been initiated.
(iv) STATUTORY APPROVALS. All required statutory approvals in connection
with the Merger shall have been obtained.
(v) POOLING. Each of Zytec and CPI shall have received a letter from its
respective independent certified public accountants stating that it
qualifies for pooling-of-interests accounting treatment under GAAP and
applicable Commission regulations. In addition, CPI shall have received a
letter from its independent certified public accountants stating that the
transactions to be effected under the Merger Agreement will qualify for
pooling-of-interests accounting treatment under GAAP and applicable
Commission regulations.
(vi) HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(vii) THE NASDAQ NATIONAL MARKET. The shares of CPI Common Stock to be
issued pursuant to the Merger shall have been approved for quotation on the
NNM.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF CPI AND MERGER SUB
The obligations of CPI and Merger Sub to effect the Merger are subject to
the satisfaction or waiver, on or prior to the Closing Date, of the following
additional conditions:
(i) PERFORMANCE OF OBLIGATIONS OF ZYTEC. Zytec (and/or the appropriate
Zytec subsidiary) shall have performed in all material respects its
agreements and covenants contained in or contemplated by the Merger
Agreement required to be performed by it at or prior to the Effective Time.
(ii) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Zytec set forth in the Merger Agreement (without giving effect to any
materiality or similar qualifications contained therein) shall be true and
correct at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date
(except for representations and warranties that expressly speak only as of a
specific date or time, which need only be true and correct as of such date
or time) except for (x) changes expressly contemplated by the Merger
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Agreement, and (y) such failures of representations or warranties to be true
and correct (without regard to any materiality qualifications contained
therein) which could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect (as defined below) for
Zytec.
(iii) ZYTEC MATERIAL ADVERSE EFFECT. No Material Adverse Effect shall
have occurred with regard to Zytec, and there shall exist no fact or
circumstance which is reasonably likely to result in a Material Adverse
Effect with regard to Zytec.
(iv) TAX OPINION. CPI shall have received an opinion of Hertzog,
Calamari & Gleason, reasonably satisfactory in form and substance to CPI, to
the effect that the Merger should be treated as a tax-free reorganization
under Section 368(a) of the Code.
(v) ZYTEC REQUIRED CONSENTS. All material consents of third parties
required to be obtained by Zytec shall have been obtained.
(vi) AFFILIATE AGREEMENTS. CPI shall have received the letters duly
executed by each "affiliate" of Zytec with regard to certain resale
restrictions pursuant to Rule 145 under the Securities Act and pursuant to
Commission regulations relating to pooling-of-interests accounting.
(vii) BOARD RESIGNATIONS. CPI shall have received resignations effective
as of the Effective Time from each of the members of the Board of Directors
of Zytec.
(viii) OPINION OF COUNSEL. CPI shall have received the legal opinion of
Winthrop & Weinstine, P.A., counsel to Zytec, reasonably satisfactory in
form and substance to CPI, as to certain matters regarding Zytec.
(ix) DISSENTERS' RIGHTS. The number of Dissenting Shares shall not
constitute more than 7.5% of the number of issued and outstanding shares of
Zytec Common Stock.
(x) OPINION OF FINANCIAL ADVISOR. Neither the fairness opinion of BT
Alex. Brown delivered to CPI nor the fairness opinion of Needham delivered
to Zytec shall have been withdrawn.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF ZYTEC
The obligation of Zytec to effect the Merger is subject to the satisfaction
or waiver, on or prior to the Closing Date, of the following additional
conditions:
(i) PERFORMANCE OF OBLIGATIONS OF CPI. CPI (and/or the appropriate CPI
subsidiary) shall have performed in all material respects its agreements and
covenants contained in or contemplated by the Merger Agreement required to
be performed at or prior to the Effective Time.
(ii) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of CPI set forth in the Merger Agreement (without giving effect to any
materiality or similar qualifications contained therein) shall be true and
correct at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date
(except for representations and warranties that expressly speak only as of a
specific date or time which need only be true and correct as of such date or
time) except for (x) changes expressly contemplated by the Merger Agreement
and (y) such failures of representations or warranties to be true and
correct (without regard to any materiality qualifications contained therein)
which could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect for CPI.
(iii) CPI MATERIAL ADVERSE EFFECT. No Material Adverse Effect shall have
occurred with regard to CPI, and there shall exist no fact or circumstance
which is reasonably likely to result in a Material Adverse Effect with
regard to CPI.
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(iv) TAX OPINION. Zytec shall have received an opinion of Winthrop &
Weinstine, P.A., reasonably satisfactory in form and substance to Zytec, to
the effect that the Merger should be treated as a tax-free reorganization
under Section 368(a) of the Code.
(v) CPI REQUIRED CONSENTS. All consents of third parties required to be
obtained by CPI, the failure of which to obtain would have a Material
Adverse Effect with regard to CPI, shall have been obtained.
(vi) OPINION OF COUNSEL. Zytec shall have received the legal opinion of
Hertzog, Calamari & Gleason, counsel to CPI, reasonably satisfactory in form
and substance to Zytec, as to certain matters regarding CPI.
(vii) OPINION OF FINANCIAL ADVISOR. The fairness opinion of Needham
delivered to Zytec shall not have been withdrawn.
"Material Adverse Effect" when used herein means a material adverse effect
on the business, assets, condition (financial or otherwise), results of
operations or prospects of Zytec or CPI, as applicable.
TERMINATION
CONDITIONS TO TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval thereof by the shareholders of Zytec or
CPI at the CPI Special Meeting or the Zytec Special Meeting, as applicable:
(a) by mutual written consent of the Boards of Directors of Zytec and CPI;
(b) by either Zytec or CPI, by written notice to the other party, if the
Effective Time shall not have occurred on or before January 31, 1998; provided,
however, that such right to terminate shall not be available to any party whose
failure to fulfill any obligation or condition under the Merger Agreement has
been the cause of, or resulted in, the failure of the Effective Time to occur on
or before such date;
(c) by either Zytec or CPI, by written notice to the other party, if any
required shareholder approval shall not have been obtained at the CPI Special
Meeting or the Zytec Special Meeting, including any adjournment thereof;
(d) by either Zytec or CPI, if any foreign, state or Federal law, order,
rule or regulation is adopted or issued, which has the effect, as supported by
the written opinion of outside counsel for such party, of prohibiting the
Merger, or if any court of competent jurisdiction or any governmental authority
in the United States or any State shall have issued an order, judgment, decree
or ruling or taken any action permanently restraining, enjoining or otherwise
prohibiting the Merger, and such order, judgment, decree or ruling shall have
become final and nonappealable;
(e) by either Zytec or CPI, if an unsolicited Business Combination Proposal
is made in respect of such party, the Board of Directors of such party
reasonably determines that such Business Combination Proposal constitutes a
Superior Business Combination Proposal (as defined below), and the Board of
Directors of such party reasonably determines that it is required by its
fiduciary duties to such party's shareholders under applicable law (as so
advised in a written opinion of such party's outside counsel) to pursue the
Superior Business Combination Proposal notwithstanding the binding nature of the
Merger Agreement and notwithstanding all concessions or modifications which may
be offered by the other party in negotiations referred to in the immediately
succeeding proviso; provided, however, that such party may not terminate the
Merger Agreement as a result of such Superior Business Combination Proposal
unless and until five business days have elapsed following delivery to the other
party of a written notice of such determination by the Board of Directors of
such party (accompanied by a copy of the aforesaid legal opinion) and during
such five-business day period such party (i) shall inform the other party of the
terms
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and conditions of the Superior Business Combination Proposal and shall, and
shall cause its Representatives to, negotiate in good faith with the other party
to make such mutually agreeable modifications to the terms and conditions of the
Merger Agreement as would enable the parties to proceed with the transactions
contemplated hereby on such modified terms and conditions; provided, further,
that such party may not terminate this Agreement unless at the end of such
five-business day period the Board of Directors of such party continues to
believe that such unsolicited Business Combination Proposal constitutes a
Superior Business Combination Proposal and, as a condition subsequent, no later
than two business days following termination, such terminating party pays the
other party the amount set forth below under "--Termination Fee upon Superior
Proposal or Consummation of Business Combination Proposal."
As used above, "Superior Business Combination Proposal" means a bona fide
proposal made by any person (other than the parties to the Merger Agreement) to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the outstanding
securities of, or all or substantially all of the assets of, Zytec or CPI, as
the case may be, that is (i) on terms and conditions which the Board of
Directors of Zytec or CPI, as the case may be, determines in its good faith
judgment (based on the written advice of a financial adviser of nationally
recognized reputation) to be more favorable to Zytec's or CPI's shareholders, as
the case may be, than the terms of the Merger Agreement, (ii) for which
financing, to the extent required, is then committed or which, in the good faith
judgment of the Board of Directors of Zytec or CPI, as the case may be, is
reasonably capable of being obtained by such third party and (iii) for which, in
the good faith judgment of the Board of Directors of Zytec or CPI, as the case
may be, no regulatory approvals would be required, including antitrust
approvals, that could not reasonably be expected to be obtained;
(f) by Zytec, by written notice to CPI, if (i) there exist breaches of the
representations and warranties of CPI made in the Merger Agreement as of the
date thereof which breaches individually or in the aggregate would or would
reasonably be expected to result in a Material Adverse Effect for CPI, and which
breaches shall not have been remedied within 20 days after receipt by CPI of
notice in writing from Zytec, specifying the nature of such breaches and
requesting that they be remedied, (ii) any representations or warranties of CPI
shall have become untrue prior to the Closing Date which breaches individually
or in the aggregate would or would reasonably be expected to result in a
Material Adverse Effect for CPI, and any such representations or warranties
shall remain untrue 10 days after receipt of notice in writing from Zytec, or
(iii) CPI (and/or its subsidiaries) shall not have performed and complied in all
respects with certain agreements and covenants, relating to actions which could
adversely affect the tax-free status of the transaction or the accounting for
the transaction as a pooling-of-interests and to the solicitation of Business
Combination Proposals, or shall have failed to perform and comply with, in all
material respects, its other agreements and covenants under the Merger Agreement
and such failure to perform or comply shall not have been remedied within 20
days after receipt by CPI of notice in writing from Zytec, specifying the nature
of such failure and requesting that it be remedied; or
(g) by CPI, by written notice to Zytec, if (i) there exist breaches of the
representations and warranties of Zytec made in the Merger Agreement as of the
date thereof which breaches individually or in the aggregate would or would
reasonably be expected to result in a Material Adverse Effect for Zytec and
which breaches shall not have been remedied within 20 days after receipt by
Zytec of notice in writing from CPI, specifying the nature of such breaches and
requesting that they be remedied, (ii) any representations or warranties of
Zytec shall have become untrue prior to the Closing Date which breaches
individually or in the aggregate would or would necessarily be expected to
result in a Material Adverse Effect for Zytec and any such representations or
warranties shall remain untrue 10 days after receipt of notice in writing from
CPI, or (iii) Zytec (and/or its subsidiaries) shall not have performed and
complied in all respects with certain agreements and covenants, relating to
actions which could adversely affect the tax-free status of the transaction or
the accounting for the transaction as a pooling-of-interests, absence of changes
in capitalization or issuance of securities and to the solicitation of Business
Combination Proposals, or shall have failed to perform and comply with, in all
material respects, its other agreements and covenants under the Merger
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<PAGE>
Agreement and such failure to perform or comply shall not have been remedied
within 10 days after receipt by Zytec of notice in writing from CPI, specifying
the nature of such failure and requesting that it be remedied.
EFFECT OF TERMINATION
In the event of termination of the Merger Agreement by either Zytec or CPI,
the Merger Agreement shall forthwith become void, and there shall be no
liability or obligation on the part of either Zytec, CPI or Merger Sub or their
respective officers or directors thereunder, except as otherwise set forth in
the Merger Agreement; provided, that no party to the Merger Agreement shall be
relieved of liability for any breach of the provisions thereof.
TERMINATION FEE UPON BREACH
The Merger Agreement provides that if the Merger Agreement is terminated
pursuant to breaches of any representations and warranties or agreements and
covenants contained in the Merger Agreement and described in paragraphs (f) and
(g) under "--Conditions to Termination" above, then: (i) the breaching party
shall promptly (but not later than five business days after receipt of notice
from the non-breaching party) pay to the non-breaching party in cash an amount
equal to all reasonable out-of-pocket expenses and fees incurred by the
non-breaching party (including, without limitation, fees and expenses payable to
all legal, accounting, financial, public relations and other professional
advisors arising out of, in connection with or related to the Merger or the
transactions contemplated by the Merger Agreement) (collectively, "Expenses")
plus an additional amount equal to $10,000,000 (the "Breach Payment"); and (ii)
if (x) there shall have been a Business Combination Proposal in respect of the
breaching party (or any of its affiliates) either made to or known by the
breaching party (or any of its affiliates) as of the termination date, and (y)
prior to September 28, 1998, the breaching party or an affiliate thereof accepts
an offer to consummate or consummates a transaction involving a Business
Combination Proposal with any person or entity, then such breaching party
(jointly and severally with its affiliates), upon the execution of an agreement
relating to such a Business Combination Proposal, or, if no such agreement is
executed, then at the closing (and as an express condition to the closing) of
the transaction in respect of such Business Combination Proposal, will pay to
the non-breaching party an additional amount equal to $20,000,000 in cash (the
"Termination Fee"). The Breach Payment, to the extent paid, shall be applied to
payment of the Termination Fee.
TERMINATION FEE UPON SUPERIOR PROPOSAL OR CONSUMMATION OF BUSINESS
COMBINATION PROPOSAL
The Merger Agreement provides that the Termination Fee and Expenses shall
also be payable by Zytec to CPI upon (i) a termination of the Merger Agreement
by Zytec by virtue of a Superior Business Combination Proposal made with respect
to Zytec or (ii) the termination of the Merger Agreement by either Zytec or CPI
if the Effective Time shall not have occurred by January 31, 1998 or approval of
the Merger Proposal shall not have been obtained if (a) there shall have been a
Business Combination Proposal in respect of Zytec (or any of its affiliates)
either made to or known by Zytec (or any of its affiliates) as of the
termination date and (b) prior to September 28, 1998, Zytec or an affiliate
thereof accepts an offer to consummate or consummates a transaction involving a
Business Combination Proposal with any person or entity.
The Merger Agreement provides that the Termination Fee and Expenses shall
also be payable by CPI to Zytec upon (i) a termination by CPI by virtue of a
Superior Business Combination Proposal made with respect to CPI or (ii) the
termination of the Merger Agreement by either CPI or Zytec if the Effective Time
shall not have occurred by January 31, 1998 or approval of the CPI Share
Proposal shall not have been obtained if (a) there shall have been a Business
Combination Proposal in respect of CPI (or any of its affiliates) either made to
or known by CPI (or any of its affiliates) as of the termination date and (b)
prior to September 28, 1998, CPI or an affiliate thereof accepts an offer to
consummate or consummates a transaction involving a Business Combination
Proposal with any person or entity.
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OTHER AGREEMENTS
The descriptions of the Voting Agreement, Non-Solicitation Agreements and
Non-Competition Agreement set forth below do not purport to be complete and are
qualified in their entirety by reference to such agreements, forms of which are
filed as exhibits to the Registration Statement of which this Joint Proxy
Statement/Prospectus forms a part.
VOTING AGREEMENT
Concurrently with the execution of the Merger Agreement, CPI entered into
the Voting Agreement with the Principal Shareholders. Pursuant to the Voting
Agreement, the Principal Shareholders have agreed to vote all of the shares of
Zytec Common Stock they own of record or beneficially ("Zytec Subject
Securities") in favor of the approval of the Merger Proposal. The Principal
Shareholders have each granted each of Joseph M. O'Donnell and Richard J.
Thompson, in their capacities as officers of CPI, an irrevocable proxy with
respect to the Zytec Subject Shares. The Principal Shareholders collectively
beneficially own approximately 25% of the Zytec Common Stock outstanding as of
the date hereof.
In addition, the Voting Agreement provides that the Principal Shareholders
shall not, directly or indirectly, solicit or respond to any inquiries or the
making of any proposal by any person or entity (other than CPI or any of its
affiliates) with respect to Zytec that constitutes or could reasonably be
expected to lead to a Business Combination Proposal. Each Principal Shareholder
has also agreed not to sell, tender, transfer or otherwise dispose of any shares
of Zytec Common Stock, other than pursuant to the terms of the Merger Agreement.
The Voting Agreement shall terminate upon the earlier of the termination of
the Merger Agreement pursuant to its terms and the Effective Time.
NON-SOLICITATION AGREEMENTS
Simultaneously with entering into the Merger Agreement, CPI entered into
Non-Solicitation Agreements with Lawrence J. Matthews and Ronald D. Schmidt.
Under these agreements, each of Mr. Matthews and Mr. Schmidt has agreed to not,
for two years following the termination of their relationships with CPI, Zytec
or any of their respective subsidiaries, solicit or disrupt certain specified
relationships of CPI, Zytec or any of their respective subsidiaries. In
addition, each has agreed to keep certain information relating to CPI, Zytec or
any of their respective subsidiaries confidential.
NON-COMPETITION AGREEMENT
Simultaneously with entering into the Merger Agreement, CPI entered into a
Non-Competition, Non-Solicitation and Confidentiality Agreement with John M.
Steel. Under this agreement, Mr. Steel has agreed to not, during and for two
years following the termination of his relationship with CPI, Zytec or any of
their respective subsidiaries, (i) engage in certain activities relating to CPI,
Zytec or any of their respective subsidiaries or CPI's or Zytec's or any of
their respective subsidiaries' business or (ii) solicit or disrupt certain
specified relationships of CPI, Zytec or any of their respective subsidiaries.
In addition, Mr. Steel has agreed to keep certain information relating to CPI,
Zytec or any of their respective subsidiaries confidential.
BENEFIT AND SEVERANCE ARRANGEMENTS
CPI has addressed a letter to Zytec in which it has stated its intention to
come to a mutual understanding following the Merger regarding the altering of
compensation and benefit arrangements for the companies' employees who are
retained following the Merger. CPI has indicated its intention to adhere to the
severance arrangements that currently exist at each company for any employee
terminated as a direct result of the Merger.
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<PAGE>
BUSINESS
COMPUTER PRODUCTS, INC.
CPI designs, develops, manufactures and markets power conversion products
for electronic equipment used in commercial and industrial applications
requiring a precise and constant voltage level for proper operation (which
accounted for approximately 91% of CPI's fiscal year 1996 sales from continuing
operations) and high performance single-board computers, systems and subsystems
for real-time applications (which accounted for approximately 9% of CPI's fiscal
year 1996 sales from continuing operations). Below is a summary of each of CPI's
two lines of business.
POWER CONVERSION. CPI is one of the leading suppliers of power supplies,
power converters and distributed power systems to the communications industry.
Product offerings include over 200 standard product families, in addition to
certain custom-designed products, distributed through multiple sale channels.
CPI's power conversion products include AC-to-DC power supplies and modular
DC-to-DC converters that focus on the worldwide communications market including
networking, data communications, telecommunications, and wireless
infrastructure. Computer, industrial and instrumentation markets are also
served. AC-to-DC power supplies are used to convert alternating electric current
(the form in which virtually all electric current is delivered by utility
companies) to a precisely controlled direct current. Direct current is required
to operate virtually all solid state electronic equipment. DC-to-DC converters
are used to convert a particular direct current voltage into another (higher or
lower) direct current voltage that is required by the electronic device to which
it is connected.
CPI currently offers standard power products in over 1,000 configurations
and accommodates a wide variety of customer applications. The products can be
configured as open frames, enclosed or encapsuled. CPI's products are tested by
regulatory agencies for safety and are also tested for compliance with a variety
of international emissions standards.
COMPUTER SYSTEMS. CPI's computer systems division designs and manufactures
high performance board-level computers and communications controllers,
integrating them with real-time operating system and protocol software to form
complete subsystems for communications and other real-time applications.
These products are designed around and incorporate industry standards which
permit easy portability to a variety of applications. The primary product line
combines both the worldwide industry standard VMEbus, which defines physical
board size and signal characteristics for the interconnection of
microprocessors. Application requirements for these products usually include
environments requiring rapid computer response time with high-quality processing
capabilities, such as telecommunications or data communications.
CPI's computer customers are primarily OEMs, which use CPI's products for
high speed telecommunications applications. These computer systems products are
also used in other application areas such as medical instrumentation, airplane
and weapons training simulators, process control, industrial automation and
traffic control systems.
RECENT DEVELOPMENTS. On July 22, 1997, CPI acquired for 52,000,000 Deutsche
Marks (approximately $28,500,000) all of the outstanding capital stock of the
commonly controlled, privately-held Elba Group. The Elba Group's fastest growing
product line is its medium power AC-to-DC converters (150 to 750 watts) sold to
OEM communications customers under the Elba and KRP Power Service labels. The
purchase price paid by CPI for the Elba Group capital stock is subject to
reduction based upon a post-closing audit. Such acquisition has been accounted
for as a purchase transaction.
On July 5, 1997, CPI sold substantially all the assets of its industrial
automation division, RTP, to RT Acquisition Florida Corp. The sale price, which
is subject to adjustment, included $2,000,000 cash, a
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subordinated unsecured five-year promissory note in the aggregate principal
amount of $2,480,000 bearing interest at the prime rate and the assumption of
certain of RTP's liabilities.
The principal executive offices of CPI are located at 7900 Glades Road,
Suite 500, Boca Raton, Florida 33434, and its telephone number is (561)
451-1000. CPI, a Florida corporation, was incorporated on March 18, 1968.
Additional information concerning CPI and its subsidiaries is included in
the CPI documents filed with the Commission which are incorporated herein by
reference. See "Incorporation of Documents by Reference."
ZYTEC CORPORATION
Zytec conducts business in two main segments: power conversion, which
provides power supply design, manufacture and repair and accounted for
approximately 90% of Zytec's fiscal year 1996 net sales, and services and
logistics, which provides repair services and logistics for a variety of
products primarily for a significant customer and accounted for approximately
10% of Zytec's fiscal year 1996 net sales.
In the power conversion segment, Zytec is a leading designer and
manufacturer of custom electronic power supplies for OEMs in the communications,
networking, computer and other electronic equipment markets. Recently, Zytec has
experienced significant sales growth because it has been the sole-source
provider of power supplies to many of the OEMs that provide hardware for the
Internet and the data communications marketplace. Zytec also repairs power
supplies and related products. Zytec's power supply components are sold in North
America and Europe, and its products are used worldwide. In 1996, Zytec
manufactured and delivered over 900,000 power supplies representing over 173
different products.
The service and logistics segment of Zytec's business provides repair
services and logistics for a variety of products primarily manufactured by
Hewlett-Packard Company. These products include laser and inkjet printers,
facsimile machines, computers, monitors and other equipment.
The principal executive offices of Zytec are located at 7575 Market Place
Drive, Eden Prairie, Minnesota 55344, and its telephone number is (612)
941-1100. Zytec, a Minnesota corporation, was incorporated on August 26, 1983.
Additional information concerning Zytec and its subsidiaries is included in
the Zytec documents filed with the Commission which are incorporated herein by
reference. See "Incorporation of Documents by Reference."
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DIRECTORS OF CPI
The following sets forth certain information regarding the directors of CPI,
who will continue to serve as directors of CPI after the Effective Time until
their earlier resignation or removal or until their successors have been duly
qualified and elected:
<TABLE>
<CAPTION>
AGE YEAR OF FIRST PRINCIPAL OCCUPATIONS
(AS OF ELECTION AS DURING PAST FIVE YEARS;
NAME 10/31/97) A DIRECTOR OTHER DIRECTORSHIPS
- --------------------------------------------- ----------- --------------- ---------------------------------------------
<S> <C> <C> <C>
Joseph M. O'Donnell.......................... 50 1994 Since February 1997, Chairman and since July
1994, Chief Executive Officer and President;
from March 1994 to June 1994 and from October
1992 to September 1993, Managing Director of
O'Donnell Associates, a consulting firm; from
October 1993 to February 1994, Chief
Executive Officer of Savin Corporation, an
office products distributor; from June 1990
to September 1992, President and Chief
Executive Officer of Go/Dan Industries, a
manufacturer of automotive parts; director of
Boca Research, Inc., a manufacturer of data
communications, multimedia and networking
products; and director of V-Band Corporation,
a manufacturer of computer systems.
Bert Sager (1)(2)(3)......................... 72 1968 Since 1949, a practicing attorney; director
of Acorn Venture Capital Corporation, a
registered business development company; and
director of Windmere-Durable Holdings, Inc.,
a manufacturer of personal care products.
Edward S. Croft, III (1)(3).................. 55 1980 Since August 1996, managing director of Croft
& Bender LLC, an investment banking and
strategic financial advisory firm; from April
1996 to August 1996, President of Croft &
Co., a financial advisory firm; for more than
five years prior to April 1996, Managing
Director of The Robinson-Humphrey Company,
Inc., an investment banking firm; director of
Acorn Venture Capital Corporation; and
director of Just for Feet, Inc., an athletic
footwear retailer.
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
AGE YEAR OF FIRST PRINCIPAL OCCUPATIONS
(AS OF ELECTION AS DURING PAST FIVE YEARS;
NAME 10/31/97) A DIRECTOR OTHER DIRECTORSHIPS
- --------------------------------------------- ----------- --------------- ---------------------------------------------
<S> <C> <C> <C>
Stephen A. Ollendorff (1)(3)................. 58 1984 Practicing attorney for more than the past
five years; since December 1990, Of Counsel
to Hertzog, Calamari & Gleason; from 1983 to
present, Vice President, then President and
then Chairman and Chief Executive Officer and
director of Acorn Venture Capital
Corporation.
Phillip A. O'Reilly (1)(2)(3)................ 70 1988 Since January 1, 1989, retired executive;
from 1979 to December 31, 1988, President
(then Chairman) and Chief Executive Officer
of Houdaille Industries, Inc., a manufacturer
of industrial products.
Lewis Solomon (1)(2)(3)...................... 64 1995 Since August 1990, Chairman of Liverpool
Industries, a tool and machine parts
manufacturer; director of Anadigics, Inc., a
manufacturer of gallium arsenide
semiconductors; director of Microelectronic
Packaging, Inc., a semiconductor packaging
company; and director of Anacomp, Inc., a
manufacturer of magnetic products.
A. Eugene Sapp............................... 62 1997 Since prior to 1990, President and Chief
Operating Officer of SCI Systems, Inc., an
electronics contract manufacturer; director
of SCI Systems, Inc.; and director of V-Band
Corporation, a manufacturer of computer
systems.
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation and Stock Option Committee.
(3) Member of the Nominating Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the CPI Board of Directors
consists of Bert Sager, Lewis Solomon and Phillip A. O'Reilly. None of the
Compensation and Stock Option Committee members are executive officers or
employees of CPI. None of the executive officers of CPI has served on the board
of directors or on the compensation committee of any other entity, any of whose
officers served on the Board of Directors of CPI.
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ZYTEC PERSONNEL TO BE INCLUDED ON CPI BOARD OF DIRECTORS
Pursuant to the Merger Agreement, the following individuals are to serve on
the Board of Directors of CPI after the Effective Time:
<TABLE>
<CAPTION>
NAME POSITION(S) WITH ZYTEC POSITION(S) WITH CPI
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Ronald D. Schmidt................... Chairman of the Board of Directors Co-Chairman of the Board of
and Chief Executive Officer Directors
John M. Steel....................... Vice President-Marketing and Sales Director
and Director
Dr. Fred C. Lee..................... Director Director
Lawrence J. Matthews................ Director Director
</TABLE>
INFORMATION REGARDING ZYTEC EXECUTIVE OFFICERS AND DIRECTORS TO BE INCLUDED ON
CPI BOARD OF DIRECTORS
The following discussion sets forth certain information regarding the
above-named individuals who are to be members of the Board of Directors of CPI
after the Effective Time.
Ronald D. Schmidt, who is 61 years old, is a co-founder of Zytec and has
served as an executive officer and a director of Zytec since Zytec commenced
operations in January 1984. Until January 1984, he was employed by Control Data
Corporation ("CDC") in many areas of general and product management, including
Vice President and General Manager, Computer Peripherals, Inc., a joint venture
of CDC, and Managing Director for Control Data Portugal. Mr. Schmidt also was
involved with CDC in connection with its divestiture of the Centronics printer
business and the merger of the Sperry disk operations into Magnetic Peripherals,
Inc. Mr. Schmidt is also a director of U-Ship, Inc.
John M. Steel, who is 52 years old, is a co-founder of Zytec and has been an
executive officer and a director of Zytec since January 1984. Until January
1984, he was employed by CDC in numerous positions in marketing and general
management, with his latest position with CDC being General Manager-OEM
Technical Support.
Dr. Fred C. Lee, who is 50 years old, has been a Director of Zytec since
February 1986. He has been a Professor at Virginia Polytechnic Institute and
State University ("VPI") in Blacksburg, Virginia, and director of the Virginia
Power Electronics Center at VPI since 1977.
Lawrence J. Matthews, who is 69 years old, is a co-founder of Zytec, has
been a director of Zytec since January 1984, and was Vice President-Engineering
of Zytec from January 1984 until his retirement in May 1993. Until January 1984,
he was employed by CDC in engineering design and management and operations
management.
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<PAGE>
COMPENSATION OF CPI
COMPENSATION OF DIRECTORS
Directors who are not employees of CPI ("Outside Directors") are compensated
for their services by payment of an annual fee of $12,000 plus $1,000 per day
for each Board of Directors meeting attended and $750 per day for each committee
meeting attended (and an additional $250 per day for each committee meeting at
which such person acted as chairman) with a maximum payment of $2,000 per day
for attendance at all meetings of the Board of Directors and attendance as
chairman at a meeting of a committees of the Board of Directors.
During fiscal year 1996, options to purchase 10,000 shares of CPI Common
Stock, at an exercise price of $16.00 per share, were granted by CPI to each of
the Outside Directors pursuant to the CPI Outside Directors' Plan. Under such
plan, each Outside Director is granted an option, exercisable over 10 years, to
purchase 10,000 shares of Common Stock at the then fair market value for such
Common Stock each time that such person is elected or re-elected by the
shareholders to serve as a director of CPI provided that such Outside Director
owns certain amounts of CPI Common Stock.
Outside Directors who have served for five or more years are entitled to
receive certain annual benefits under the CPI Outside Directors' Retirement
Plan. The annual benefits are based upon the number of years served and the
annual retainer at the time of retirement. Such benefits shall be available only
to present and former Outside Directors who served as such prior to 1997.
SUMMARY EXECUTIVE COMPENSATION TABLE
The following table sets forth certain information for the fiscal years
ended January 3, 1997, December 29, 1995, and December 30, 1994, in respect of
compensation earned by Joseph M. O'Donnell, Chief Executive Officer of CPI, and
by the other four most highly compensated executive officers (whose salary and
bonus earned in fiscal year 1996 exceeded $100,000) of CPI serving at the end of
fiscal year 1996 (the "Named CPI Executives").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
----------------------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($)(2) OPTIONS(#)(3) COMPENSATION ($)
- -------------------------------- --------- --------- ----------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. O'Donnell............. 1996 344,615 238,427 0 54,965 27,751(4)
Chairman, Chief Executive 1995 270,770 231,615 268,375(5) 106,900 28,333(4)
Officer and President 1994 105,770 65,693 14,517(6) 450,000 18,822
Richard J. Thompson............. 1996 170,449 99,305 0 73,312 9,371(7)
Vice President-Finance, Chief 1995 156,966 107,823 0 50,000 10,626(7)
Financial Officer, Secretary 1994 150,850 76,435 0 20,000 6,347
and Treasurer
Louis R. DeBartelo.............. 1996 194,739 61,736 0 51,066 12,619(8)
President, North American Power 1995 176,000 73,441 0 50,000 11,907(8)
Conversion Division 1994 157,226 55,090 69,352(9) 15,000 5,353
Robert J. Aebli................. 1996 156,073 36,741 0 27,500 13,583(10)
President-Heurikon Corporation 1995 146,940 36,180 0 21,750 12,644(10)
(a subsidiary of CPI) 1994 140,000 43,701 37,798(11) 0 7,933
Salvatore R. Provanzano......... 1996 147,297 0 0 5,880 9,862(12)
President of RTP Corp. 1995 143,604 0 0 16,750 11,352(12)
1994 132,723 70,750 5,129(13) 0 6,145
</TABLE>
(FOOTNOTES APPEAR ON NEXT PAGE)
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<PAGE>
- ------------------------
(1) Includes amounts awarded under CPI's annual Executive Incentive Plan to each
of the Named CPI Executives and, for Mr. Provanzano, a starting bonus of
$10,000 for fiscal year 1994.
(2) Includes only those perquisites which are, in the aggregate, greater than or
equal to the lesser of $50,000 or 10% of annual salary and bonus.
(3) Represents options awarded under various stock option plans. See "--Stock
Option Grants in Last Fiscal Year."
(4) Includes insurance premiums paid by CPI in the amount of $20,001 and $19,179
with respect to two life insurance policies for the benefit of Mr.
O'Donnell, including a whole-life policy and a hybrid policy in fiscal years
1996 and 1995, respectively. Also includes $3,000 and $4,534 in premiums
paid by CPI with respect to health insurance for the benefit of Mr.
O'Donnell and contributions of $4,750 and $4,620 to CPI's 401(k) plan for
the benefit of Mr. O'Donnell in fiscal years 1996 and 1995, respectively.
(5) Includes reimbursement for expenses related to Mr. O'Donnell's relocation in
the amount of $149,000, reimbursement for the payment of taxes in the amount
of $115,975 and a car allowance of $3,400.
(6) Represents an additional payment by CPI to reimburse Mr. O'Donnell for
expenses related to his relocation.
(7) Includes a contribution in the amount of $4,750 and $4,620 by CPI to CPI's
401(k) plan for the benefit of Mr. Thompson, and also includes insurance
premiums in the amounts of $4,621 and $6,006 paid by CPI with respect to
term life insurance and health insurance for the benefit of Mr. Thompson in
fiscal years 1996 and 1995, respectively.
(8) Includes a contribution in the amount of $4,750 and $4,620 by CPI to CPI's
401(k) plan for the benefit of Mr. DeBartelo and insurance premiums in the
amounts of $7,869 and $7,287 paid by CPI with respect to term life insurance
and health insurance for the benefit of Mr. DeBartelo in fiscal years 1996
and 1995, respectively.
(9) Represents an additional payment by CPI to reimburse Mr. DeBartelo for
expenses related to his relocation.
(10) Includes a contribution in the amount of $4,750 and $4,620 by CPI to CPI's
401(k) plan for the benefit of Mr. Aebli and insurance premiums in the
amounts of $8,833 and $8,024 paid by CPI with respect to term life insurance
and health insurance for the benefit of Mr. Aebli in fiscal years 1996 and
1995, respectively.
(11) Represents a payment by CPI to reimburse Mr. Aebli for expenses related to
his relocation.
(12) Includes a contribution in the amount of $4,750 and $4,620 by CPI to CPI's
401(k) plan for the benefit of Mr. Provanzano and insurance premiums in the
amounts of $5,112 and $6,732 paid by CPI with respect to term life insurance
and health insurance for the benefit of Mr. Provanzano in fiscal years 1996
and 1995, respectively.
(13) Represents a payment by CPI to reimburse Mr. Provanzano for expenses
related to his relocation.
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STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock options
granted to the Named CPI Executives in fiscal year 1996.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF TOTAL
SECURITIES OPTIONS GRANTED TO EXERCISE GRANT DATE
UNDERLYING EMPLOYEES IN PRICE PER EXPIRATION PRESENT
NAME OPTIONS GRANTED(#) FISCAL YEAR(%) SHARE($) DATE VALUE($)(1)
- ----------------------------- ------------------- ----------------------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Joseph M. O'Donnell.......... 75,000 9.7 16.00 5/02/06 433,035
75,000 9.7 11.25 2/15/06 286,503
4,965 0.6 11.625 1/25/06 22,195
Richard J. Thompson.......... 45,000 5.8 16.00 5/02/06 259,821
25,000 3.2 11.625 1/25/06 100,350
2,312 0.3 11.625 1/25/06 10,335
Louis R. DeBartelo........... 37,500 4.9 16.00 5/02/06 216,517
12,500 1.6 12.75 3/15/06 56,118
1,066 0.1 11.625 1/25/06 4,765
Robert J. Aebli.............. 15,000 1.9 16.00 5/02/06 86,607
12,500 1.6 12.81 7/15/06 46,931
Salvatore R. Provanzano...... 8,550 1.1 16.00 5/02/06 49,365
</TABLE>
- ------------------------
(1) Based upon the Black-Scholes option pricing model adopted for use in valuing
executive stock options. The actual value, if any, that a Named CPI
Executive may realize will depend upon the excess of the market price of the
Common Stock over the exercise price on the date the option is exercised.
There is, therefore, no assurance that the value realized by a Named CPI
Executive will be at or near the value estimated by the Black-Scholes model.
The estimated values under the model are based upon certain assumptions
which CPI believes are reasonable, such as a risk-free rate of return of
5.95%, stock price volatility of .52, future dividend yield of 0% and time
to exercise of 2.5 years. The values do not take into account certain
features of the stock option plans which may affect such values, such as
conditions to exercisability and nontransferability.
OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES TABLE
The following table sets forth information with respect to stock options
exercised by the Named CPI Executives in fiscal year 1996 and information with
respect to exercisable and non-exercisable stock options held on January 3, 1997
by the Named CPI Executives. The table also includes the value of "in-the-money"
stock options, which represents the spread between the exercise price of the
existing stock options and the year-end price of CPI Common Stock.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS HELD AT
OPTIONS HELD AT JANUARY 3, 1997(1) ($)
SHARES VALUE JANUARY 3, 1997 (#) --------------------------
ACQUIRED ON REALIZED ---------------------------- NOT
NAME EXERCISE (#) ($) EXERCISABLE NOT EXERCISABLE EXERCISABLE EXERCISABLE
- ------------------------------------ ------------ ----------- ----------- --------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. O'Donnell................. 100,000 1,636,250 531,900 79,965 7,566,418 231,630
Richard J. Thompson................. 50,000 878,750 198,334 53,978 2,819,177 242,631
Louis R. DeBartelo.................. 70,000 854,678 32,500 43,566 348,437 187,149
Robert J. Aebli..................... 36,750 499,175 20,000 22,500 194,493 161,212
Salvatore R. Provanzano............. 0 0 39,250 16,050 595,825 144,281
</TABLE>
- ------------------------
(1) Based upon the closing sales price of CPI Common Stock on January 3, 1997
($18.625).
77
<PAGE>
EMPLOYMENT AND TERMINATION ARRANGEMENTS
On June 29, 1994, CPI and Joseph M. O'Donnell, Chairman, Chief Executive
Officer and President of CPI, entered into an employment agreement which
provided that Mr. O'Donnell was to receive a base salary at the rate of $250,000
per year for the first year of his employment and $300,000 per year thereafter.
The base salary is to be reviewed by CPI's Board of Directors periodically. In
addition, the agreement provided that Mr. O'Donnell was eligible to receive an
incentive payment each year, determined by the Compensation and Stock Option
Committee of the CPI Board of Directors (the "Committee") in an amount equal to
up to 50% of his base salary for such year, payable 50% in cash and 50% in
stock. Such incentive payment was subsequently increased to up to 60% of his
base salary by the Committee. Mr. O'Donnell is also eligible for additional
payments in the discretion of the Committee, awarded in accordance with the
terms of CPI's annual Executive Incentive Plan ("EIP"). The agreement also
provided for the grant to Mr. O'Donnell of stock options to purchase 400,000
shares of CPI Common Stock as well as additional options, the grant and terms of
which were contingent upon Mr. O'Donnell's purchase of certain amounts of CPI
Common Stock in the open market. Under the terms of the agreement, Mr. O'Donnell
was also entitled to reimbursement of expenses, including reimbursement of
relocation expenses, reimbursement for the payment of certain taxes and a bridge
loan for the purchase of a new home pending the sale of his prior home, of up to
$250,000 (which amount has been repaid), and health, disability and life
insurance benefits. CPI also has agreed to cause Mr. O'Donnell to be nominated
as a director throughout the term of his employment. The initial term of the
employment agreement expired on July 26, 1997, but is renewable each year for an
additional one-year term unless either party provides notice of termination. No
such notice of termination has been given.
Upon any event of earlier termination of the agreement, Mr. O'Donnell is
entitled to receive his base salary through the date of termination. In the
event of Mr. O'Donnell's death or "disability" (as defined in the agreement), he
is entitled to receive his base salary for an additional year from the date of
termination, except that payments for the additional year will be offset by
certain CPI sponsored insurance benefits payable during such period, plus any
pro rated incentive payment under the EIP to which he may be entitled. In the
event that Mr. O'Donnell's employment is terminated by CPI without "cause" (as
defined in the agreement) or by Mr. O'Donnell due to CPI's "substantial breach"
(as defined in the agreement), Mr. O'Donnell is entitled to receive his base
salary for the number of months he was employed by CPI plus six months, but for
no more than 18 months total, except that if CPI terminates the agreement for
"cause" in writing, and makes a lump-sum payment of $50,000 to Mr. O'Donnell,
then the total number of months is 12 unless the termination occurs prior to the
date six months from the date of written notice and payment, in which event the
number of months is set at 18. Mr. O'Donnell is also entitled to receive any pro
rated incentive payment to which he may be entitled and reimbursement of
expenses of outplacement-related services up to $45,000. In the event of CPI's
termination of the agreement without "cause", or termination of the agreement by
Mr. O'Donnell due to CPI's "substantial breach" following a "change of control"
(as defined in the agreement), Mr. O'Donnell is entitled to receive a lump-sum
payment equal to the lesser of (a) the product of the sum of his base salary and
the amount of his last incentive payment multiplied by two and (b) the maximum
amount that would be permitted without the imposition of certain taxes, or the
loss of certain tax deductions, under the Code within 10 days from the date of
termination.
Richard J. Thompson, Vice President-Finance, Secretary, Treasurer and Chief
Financial Officer of CPI, entered into a letter agreement with CPI on April 28,
1994, which provides that if Mr. Thompson's employment is terminated without
"cause" (as defined in the agreement), or if he resigns within 30 days after a
substantial reduction in his responsibilities, duties or compensation, Mr.
Thompson shall be entitled to receive an amount equal to his annual base salary
plus any incentive payment he may have earned, as well as insurance and other
employee benefits, for a period of 12 months from termination. Such payments are
payable to Mr. Thompson as they would have been paid if his employment had
continued without termination. The agreement further provides that upon such
termination all stock options previously granted to Mr. Thompson shall remain
outstanding until the 90th day following the 12-month period
78
<PAGE>
during which he is entitled to receive post-termination compensation, except
that options granted under the CPI 1981 Stock Option Plan shall be reissued
under the CPI Performance Plan (as described below) at an exercise price equal
to the closing price of the Common Stock as of the date of the agreement, and
CPI will compensate Mr. Thompson for any loss caused by such repricing. The
agreement further provides that Mr. Thompson is eligible for the compensation
described therein following his execution of a release of CPI from all claims he
may have against CPI and its officers and directors.
Certain options granted to the Named CPI Executives become immediately
exercisable in the event of a "change of control" or if a Named CPI Executive's
employment is terminated within six months after a "change of control" of CPI
pursuant to the terms of the option plan under which the options were granted.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
CPI's executive compensation program includes two principal elements: annual
cash compensation and long-term awards. CPI uses competitive survey data of
companies in the high-technology industry with comparable revenue levels in
assessing cash compensation and long-term awards.
Annual cash compensation includes both base salaries and annual incentive
awards pursuant to the EIP. Executives' base salaries are evaluated each year
based upon an assessment of competitive market data of comparable companies, as
discussed above. Executives are eligible for adjustments in base salary based
upon an assessment of individual performance and changes in principal job duties
and responsibilities.
Executives are eligible to receive annual incentive awards under the EIP.
Each executive participating in the plan has a targeted annual incentive award,
based upon competitive practice which represents a stated percentage of the
executive's base salary. The performance of executives with corporate-wide
responsibilities is evaluated based upon the achievement of corporate financial
targets measured by CPI's net income and revenue growth. The performance of
executives with divisional and/or subsidiary responsibility is evaluated based
upon the achievement of divisional or subsidiary financial targets measured by
net income, revenue growth and cash flow. The financial targets for fiscal year
1996 were developed from CPI's annual planning process. The Committee reviews
and approves the targets each year based upon fairness, degree of difficulty and
reasonableness. Further, CPI had to achieve a minimum pre-tax net income
performance threshold before corporate executives could receive a financial
target payout under the EIP. For division/subsidiary participants, the division
had to achieve a minimum management net income performance threshold before
division/subsidiary executives could receive a financial target payout under the
EIP. There may be no incentive payout if CPI is not profitable.
The maximum individual annual incentive award is two (2) times the targeted
annual incentive award. In addition, annual incentive awards are limited to no
more than 10% of CPI's net income, excluding extraordinary items, before total
after-tax cost of the executive annual incentive payout, unless otherwise
approved by the Committee or CPI's Board of Directors.
Long-term incentive compensation included the 1990 Performance Equity Plan
(the "Performance Plan"). The Performance Plan permits CPI to grant
non-qualified stock options to selected executives at a price no less than the
fair market value of the Common Stock on the date of grant.
Each year the Committee reviews and approves annual salaries, annual
incentive awards, grants of long-term incentives and the performance targets and
criteria established for both the annual and long-term incentive plans. In
addition, the Committee reviews the performance of CPI and its divisions and
subsidiaries and exercises the final authority in approving the payout of
executive incentive awards. The Committee has engaged executive compensation
consultants and used competitive compensation data.
In the beginning of 1996, the Committee reviewed and approved the financial
targets to be included in the 1996 EIP for the Chief Executive Officer and the
Named CPI Executives. Based upon the Committee's review of CPI's performance by
the Chief Executive Officer and the Named CPI Executives following
79
<PAGE>
conclusion of the 1996 fiscal year, CPI granted awards to the Chief Executive
Officer and the other Named CPI Executives under the 1996 EIP based on the
attainment of Company and divisional objectives.
Based upon assessments of individual performance, CPI awarded an increase in
base salary in 1996 to Messrs. Thompson, DeBartelo and Aebli.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. O'Donnell's base salary during fiscal year 1996 was increased to
$350,000. The base salary of Mr. O'Donnell was based upon an assessment of
competitive market data of comparable companies, as described above. Mr.
O'Donnell received an annual incentive award of $238,427 under the EIP based on
attainment by CPI of certain financial results during fiscal year 1996. On
January 25, 1996, CPI, pursuant to the EIP, granted Mr. O'Donnell a
non-qualified stock option to purchase 4,965 shares of Common Stock at an
exercise price of $11.625 per share, exercisable after January 25, 1998,
provided that Mr. O'Donnell (i) is still employed by CPI on such date and (ii)
owns a number of shares equal to the number of shares granted to him pursuant to
the EIP. On February 15, 1996, CPI, pursuant to CPI's 1996 Executive Stock
Ownership Program, granted Mr. O'Donnell incentive stock options to purchase
75,000 shares of Common Stock, at an exercise price of $11.25 per share,
exercisable as follows: (i) 50% vesting upon the closing price of a share of
Common Stock being equal to $14.0125 for 20 of 30 consecutive trading days, (ii)
50% vesting upon the closing price of a share of Common Stock being equal to
$16.875 per share for 20 of 30 consecutive trading days, and (iii) to the extent
not previously exercisable, 100% on February 15, 2003. All of such options are
currently exercisable. On May 2, 1996, CPI, pursuant to the Performance Plan,
granted Mr. O'Donnell incentive stock options to purchase 75,000 shares of
Common Stock, at an exercise price of $16.00 per share, exercisable as follows:
(i) 50% vesting upon the closing price of a share of Common Stock being at least
equal to $20.00 for 20 of 30 consecutive trading days, (ii) 50% vesting upon the
closing price of a share of Common Stock being at least equal to $24.00 per
share for 20 of 30 consecutive trading days, and (iii) to the extent not
previously exercisable, 100% on May 2, 2003. All of such options are currently
exercisable.
80
<PAGE>
SECURITY OWNERSHIP OF CPI
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER
The following table sets forth, as of the close of business on November 11,
1997, information as to an institutional shareholder which is known by CPI to
beneficially own more than 5% of CPI Common Stock (based solely upon filings by
said holder with the Commission on Schedule 13D or Schedule 13G pursuant to the
Exchange Act).
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED(1) COMMON STOCK
- ---------------------------------------------------------------------------- -------------------- ---------------
<S> <C> <C>
Dresdner Bank AG
RCM Capital Management L.L.C.
RCM Limited L.P.(2)
RCM General Corporation(2)
RCM Capital Funds, Inc.(2)
Four Embarcadero Center
Suite 2900
San Francisco, California................................................. 3,502,000 14.40%
</TABLE>
- ------------------------
(1) Beneficial ownership, as reported in the above table, has been determined in
accordance with Rule 13d-3 under the Exchange Act. Unless otherwise
indicated, beneficial ownership includes both sole voting and sole
dispositive power.
(2) Dresdner Bank AG ("Dresdner") is the parent holding company of RCM Capital
Management L.L.C. ("RCM") and may, therefore, be deemed to beneficially own
3,502,000 shares owned by RCM with respect to which Dresdner has neither
dispositive nor voting power. RCM is a registered investment advisor which
directly and beneficially owns 3,502,000 shares of Common Stock, with sole
dispositive power with respect to 3,334,600 of such shares, shared
dispositive power with respect to 167,400 shares and sole voting power with
respect to 3,076,300 of such shares. In its capacity as investment adviser,
RCM may have discretionary authority to dispose of or to vote securities
that are under its management, and as a result may be deemed to beneficially
own such securities. However, RCM does not have any economic interest in
such securities; clients are the actual owners of the 3,502,000 shares and
have the sole right to receive and the power to direct the receipt of
dividends from or proceeds from the sale of such securities. RCM Limited
L.P. ("RCM Limited") is the managing agent of RCM and RCM General
Corporation ("RCM General") is the general partner of RCM Limited. RCM
Limited and RCM General may be deemed to have beneficial ownership of the
securities beneficially owned by RCM.
81
<PAGE>
OWNERSHIP BY MANAGEMENT
The following table sets forth, as of the close of business on November 11,
1997, information concerning beneficial ownership of CPI Common Stock by each
director of CPI, the Named CPI Executives who are currently serving as executive
officers, and all CPI directors and current executive officers as a group (based
solely upon information furnished by such persons):
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED PERCENT OF
OF BENEFICIAL OWNER(4) (1)(2) COMMON STOCK
- ------------------------------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
Joseph M. O'Donnell...................................................... 621,926 2.50%
Bert Sager............................................................... 341,269(3) 1.40%
Richard J. Thompson...................................................... 234,868 *
Phillip A. O'Reilly...................................................... 141,721 *
Stephen A. Ollendorff.................................................... 40,000 *
Edward S. Croft, III..................................................... 46,081 *
Louis R. DeBartelo....................................................... 51,892 *
Robert J. Aebli.......................................................... 55,676 *
Lewis Solomon............................................................ 20,000 *
A. Eugene Sapp........................................................... 2,000 *
All directors and executive officers as a group (12 persons)............. 1,708,976 6.67%
</TABLE>
- ------------------------
* Represents less than 1%.
(1) Beneficial ownership, as reported in the above table, has been determined in
accordance with Rule 13d-3 under the Exchange Act. Unless otherwise
indicated, beneficial ownership includes both sole voting and sole
dispositive power.
(2) Includes the following shares subject to currently exercisable options
and/or that may be acquired upon the exercise of options within 60 days of
November 11, 1997: Mr. Sager--93,014; Mr. O'Donnell--546,900; Mr.
Ollendorff--36,900; Mr. O'Reilly--91,721; Mr. Croft--40,000; Mr.
Thompson--209,000; Mr. DeBartelo--37,500; Mr. Aebli--42,500; Mr.
Solomon--15,000; and all directors and executive officers as a group (12
persons)--1,223,535.
(3) Includes 53,428 shares which are owned of record by Mr. Sager's wife, with
respect to which Mr. Sager disclaims beneficial ownership.
(4) For purposes hereof, the business address of each person is c/o Computer
Products, Inc., 7900 Glades Road, Suite 500, Boca Raton, Florida 33434-4105.
CERTAIN TRANSACTIONS
Stephen A. Ollendorff, a director of CPI, is Of Counsel to the law firm of
Hertzog, Calamari & Gleason, which acts as counsel for CPI and which received
fees and expenses in fiscal years 1996 and 1997 for various legal services
rendered to CPI. Hertzog, Calamari & Gleason was CPI's counsel in the
preparation and negotiation of the Merger Agreement and the preparation of this
Joint Proxy Statement/ Prospectus.
Edward S. Croft, III, a director of CPI, is currently a Managing Director of
Croft & Bender LLC which provided certain financial advisory services to CPI in
fiscal years 1996 and 1997 and which will be receiving an advisory fee in
connection with the Merger.
Bert Sager, a director of CPI, provided limited legal services to CPI in
fiscal years 1996 and 1997.
82
<PAGE>
COMPENSATION OF ZYTEC
The following table sets forth certain information for the fiscal years
ended December 31, 1996, 1995 and 1994, in respect of compensation earned by
Ronald D. Schmidt, Chief Executive Officer of Zytec, and John M. Steel, Vice
President-Marketing and Sales of Zytec.
SUMMARY EXECUTIVE COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------------
NUMBER OF
NAME AND -------------------- STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) GRANTED COMPENSATION ($)(1)
- ----------------------------------------------------------- --------- --------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Ronald D. Schmidt.......................................... 1996 272,154 0 4,750
Chairman, President and 1995 241,130 0 4,620
Chief Executive Officer 1994 229,664 0 4,620
John M. Steel.............................................. 1996 191,120 0 3,640
1995 182,330 0 3,110
Vice President-Marketing and Sales 1994 173,664 0 3,096
</TABLE>
- ------------------------
(1) Consists of contributions made by Zytec on behalf of the named executive
officer under Zytec's Section 401(k) defined contribution plan.
The above table sets forth the cash and non-cash compensation for 1996, 1995
and 1994 awarded to or earned by Ronald D. Schmidt, Zytec's Chief Executive
Officer, and John M. Steel, Zytec's Vice President-Marketing and Sales, who are
the only two individuals that are to serve on CPI's Board of Directors and who
were among the Zytec executive officers for whom compensation would otherwise be
required to be disclosed.
STOCK OPTIONS
Zytec currently maintains six Employee Incentive Stock Option Plans (the
"ISOPs"). The six ISOPs now in existence were approved by Zytec's Board of
Directors on December 16, 1983, September 24, 1984, October 25, 1985, February
6, 1987, January 29, 1993, and February 16, 1996. All of the existing ISOPs were
approved by Zytec shareholders within one year after their adoption by the Board
of Directors. The ISOPs are intended to assist Zytec in hiring and retaining
well-qualified employees by allowing them to participate in the ownership and
growth of Zytec through the grant of options to purchase Zytec Common Stock.
Options granted under the ISOPs may be options that qualify as "incentive stock
options" within the meaning of Section 422 of the Code, or options that do not
so qualify under the Code. Management feels that the granting of options will
serve as partial consideration for, and give employees an additional inducement
to, remain in the service of Zytec and provide them with an increased incentive
to work for Zytec's success.
The ISOPs are administered by Zytec's Board of Directors or, in certain
circumstances, by the Compensation Committee of the Board of Directors. The
Compensation Committee has authority to select Zytec's executive officers who
will receive options and to determine the number and exercise price of such
options. In all other cases, the Board of Directors determines the employees who
will be granted options under the ISOPs and, subject to the provisions of the
ISOPs, determines the number of shares subject to each option and the exercise
price of the option. In addition, and subject to the authority of the
Compensation Committee as discussed above, the Board of Directors makes any
other determinations necessary or advisable for the administration of the ISOPs
consistent with their terms. Determinations by the Board of Directors or the
Compensation Committee, as the case may be, are final and conclusive.
83
<PAGE>
Grants of options and other decisions of the Board of Directors or the
Compensation Committee are not required to be made on a uniform basis.
At November 11, 1997, an aggregate of 2,965,902 shares were subject to
outstanding options and 183,618 shares were available for future grants under
the ISOPs. The shares to be issued upon the exercise of options granted under
the ISOPs are currently authorized but unissued shares. The number of shares of
Zytec Common Stock available under the ISOPs and purchasable upon the exercise
of options issued under the Plans will be adjusted to prevent dilution in the
event of a stock split, combination of shares, stock dividend or certain other
similar events. During fiscal 1996, neither of the executive officers of Zytec
included in the Zytec Summary Executive Compensation Table exercised any options
or, as of December 31, 1996, held any options to acquire Zytec Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Zytec's Compensation Committee makes recommendations to the Zytec Board of
Directors regarding compensation paid to Zytec's executive officers. The
Compensation Committee for fiscal year 1996 consisted of Lawrence J. Matthews,
Sherman Winthrop, and James S. Womack, each of whom served for the entire year;
John V. Titsworth, who served through the date of his retirement from the Board
of Directors on August 23, 1996; and Ervin F. Kamm, Jr., who was appointed to
the Compensation Committee effective as of December 20, 1996. All members of the
Compensation Committee, during the period in which they served, were
non-employee directors of Zytec. All executive officers who serve on the Board
of Directors abstain from voting on executive officers' compensation affecting
those executive officers who are members of the Board of Directors.
COMPENSATION OF DIRECTORS
Zytec's Board of Directors has authorized payment to all non-employee
directors of a retainer of $7,500 per year, a $500 per meeting fee, and the
reimbursement of all out-of-pocket expenses incurred by them in attending
meetings of the Board of Directors. In 1996, Dr. Fred C. Lee served as a
non-employee director of Zytec for the entire year, and directors' fees of
$10,500 were paid to Dr. Lee.
Zytec's Board of Directors has also authorized the grant to each
non-employee director, as additional compensation for each year of service as a
director commencing with fiscal year 1996, of the sum of $14,500, payable in
shares of Zytec Common Stock. If a non-employee director serves for a period
less than a full calendar year, such additional compensation is payable on a pro
rata basis. The number of shares issuable pursuant to such grants is determined
based on the average of the closing price of said stock as quoted on the NNM for
each of the last five business days of the calendar year (or, if a director's
service is terminated during the year, for each of the last five business days
prior to the date such director's service is completed). In January 1997, 1,312
shares were issued to Dr. Lee for director services rendered in fiscal year
1996.
In April 1990, Dr. Lee, as a non-employee director of Zytec, was granted a
non-qualified option to purchase 20,000 shares of Zytec Common Stock at an
exercise price of $0.50 per share. The option became exercisable to the extent
of 20% of the number of shares underlying each option (or 4,000 shares) on each
anniversary date of the option, beginning April 27, 1991. Dr. Lee exercised his
option in full prior to April 26, 1996, its scheduled termination date.
Sherman Winthrop, a director of Zytec, is a senior member of Winthrop and
Weinstine, P.A., which acts as counsel for Zytec and which received fees and
expenses in fiscal years 1996 and 1997 for various legal services rendered to
Zytec. Winthrop & Weinstine, P.A. was Zytec's counsel in the negotiation of the
Merger Agreement and the preparation of this Joint Proxy Statement/Prospectus.
84
<PAGE>
SECURITY OWNERSHIP OF ZYTEC
The following table sets forth certain information with respect to the
beneficial ownership of Zytec Common Stock as of November 11, 1997 by (i) each
shareholder who is known by Zytec to own beneficially more than 5% of Zytec
Common Stock, (ii) each Zytec director (including all four nominees to the CPI
Board of Directors), (iii) each Zytec executive officer who would be ordinarily
included in the Summary Executive Compensation Table, and (iv) all Zytec
executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) (1) CLASS(2)
- ------------------------------------------------------------------------------ ---------------------- -------------
<S> <C> <C>
BMO Nesbitt Burns Capital (U.S.), Inc.
790 North Milwaukee Street
Milwaukee, WI 53202......................................................... 877,193(3) 8.3%
Navellier & Associates
1 East Liberty Street, 3rd Floor
Reno, NV 89501.............................................................. 744,215(4) 7.7
DIRECTORS AND EXECUTIVE OFFICERS:
Ronald D. Schmidt............................................................. 890,854(5)(6) 9.2
Lawrence J. Matthews
7601 Fifth Avenue
Richfield, MN 55423......................................................... 800,932 8.3
John M. Steel................................................................. 757,606(6) 7.8
Gary C. Flack................................................................. 252,562(5)(6) 2.6
Josef J. Matz................................................................. 150,000 1.6
John B. Rogers................................................................ 87,488(6) *
Sherman Winthrop.............................................................. 61,312 *
James S. Womack............................................................... 40,812 *
Max Davis..................................................................... 39,313(7) *
Dr. Fred C. Lee............................................................... 30,312 *
Thomas J. Kent................................................................ 14,000(7) *
Ervin F. Kamm, Jr............................................................. 43 *
All executive officers and directors as a group (14 persons).................. 3,209,120(8) 32.8%
</TABLE>
- ------------------------
* Less than 1%.
(1) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all outstanding shares. The table includes
shares not outstanding but which may be acquired within 60 days of November
11, 1997 pursuant to the exercise of options to purchase Common Stock. The
business address of each person except as otherwise noted is c/o Zytec
Corporation, 7575 Market Place Drive, Eden Prairie, Minnesota 55344.
(2) The percentage calculation is based upon 9,660,228 shares outstanding at
November 11, 1997. For purposes of computing the percent of class owned by
each person or group, the number of shares which may be acquired by such
person within 60 days of November 11, 1997 pursuant to the exercise of
options referred to in note (7) or (8), or pursuant to the conversion of the
Convertible Note or exercise of the Stock Purchase Warrant referred to in
note (3), is deemed outstanding.
(3) Reflects information as of December 23, 1996 set forth in a Schedule 13D,
dated January 2, 1997, filed with the Commission. The Schedule 13D was
jointly filed by a group (the "BMO Group") which consists of (according to
such Schedule 13D) BMO Nesbitt Burns Capital (U.S.), Inc. ("BMO Cap"),
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<PAGE>
which directly beneficially owns the securities described in the above
table; BMO Nesbitt Burns Equity Group (U.S.), Inc. ("BMO-Equity"), which
owns all of the outstanding common stock of BMO-Cap; Bankmont Financial
Corp. U.S. ("BFC"), which owns all of the outstanding common stock of
BMO-Equity; and Bank of Montreal, which owns all of the outstanding common
stock of BFC. The shares shown in the above table as beneficially owned by
the BMO Group are not presently outstanding but may be acquired upon
conversion of the Convertible Note. The BMO Group also beneficially owns a
warrant (the "BMO Warrant") to acquire the same 877,193 shares of Zytec
Common Stock underlying the Convertible Note; provided, however, the BMO
Warrant is exercisable only upon prepayment of the Convertible Note.
(4) Reflects information as of December 31, 1996, based on a Schedule 13G, dated
February 15, 1997, filed by such company with the Commission, which
indicates that the shareholder has shared voting power and shared
dispositive power with respect to said shares.
(5) Includes shares held by a partnership consisting of the individual and
members of his family, as follows: Mr. Schmidt (400,000 shares) and Mr.
Flack (25,650).
(6) Includes shares held by the individual's spouse and children, as follows:
Mr. Schmidt (2,200 shares), Mr. Steel (200,000), Mr. Flack (95,600) and Mr.
Rogers (44,902).
(7) Includes, for each individual named, the following number of shares subject
to non-qualified options or options granted under the ISOPs: Mr. Davis
(35,000) and Mr. Kent (14,000).
(8) Includes 122,900 shares subject to non-qualified options or options granted
under the ISOPs.
DESCRIPTION OF CPI CAPITAL STOCK
The authorized capital stock of CPI consists of 81,000,000 shares, of which
80,000,000 shares are designated Common Stock, par value $0.01 per share, and
1,000,000 shares are designated Preferred Stock, par value $0.01 per share. The
following summary description of the capital stock of CPI is qualified in its
entirety by reference to the CPI Articles and the CPI Bylaws.
COMMON STOCK
As of the CPI Record Date, there were 24,322,325 shares of CPI Common Stock
outstanding. Holders of CPI Common Stock are entitled to one vote per share on
all matters submitted to a vote of shareholders and to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor, subject to preferences that may be applicable to any
outstanding Preferred Stock. In the event of a liquidation, dissolution or
winding up of CPI, holders of CPI Common Stock are entitled to share ratably in
all assets remaining after payment of liabilities and the liquidation preference
of any outstanding shares of Preferred Stock. Holders of CPI Common Stock have
no preemptive, subscription, redemption or conversion rights. All of the
outstanding shares of CPI Common Stock are, and the shares of CPI Common Stock
to be issued by CPI in connection with the Merger will be, fully paid and
nonassessable. The rights, privileges and preferences of CPI Common Stock are
subject to, and could be adversely affected by, the issuance of Preferred Stock.
PREFERRED STOCK
Pursuant to the CPI Articles, the Board of Directors has the authority to
issue 1,000,000 shares of Preferred Stock. Within the limitations established by
law, the Board of Directors is authorized to fix or alter the dividend rights,
dividend rates, rights and terms of redemption (including sinking fund
provisions), redemption price or prices, liquidation preference, conversion
rights, voting rights and other rights of any unissued shares of Preferred
Stock, and to fix and amend the number of shares constituting any issued or
unissued series and the designation thereof, or any of the foregoing. The
issuance of Preferred Stock in certain circumstances may have the effect of
delaying, deterring or preventing a change in control
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of CPI, may discourage bids for CPI Common Stock at a premium over the market
price of CPI Common Stock and may adversely affect the market price of, and the
voting and other rights of the holders of, the CPI Common Stock. CPI has no
shares of Preferred Stock outstanding and at present CPI has no plans to issue
any shares of Preferred Stock.
RIGHTS AGREEMENT
CPI has adopted a Rights Agreement which could also have the effect of
delaying, deterring or preventing a change in control of CPI. Pursuant to the
Rights Agreement, shareholders of CPI are entitled to purchase shares of CPI
Common Stock at a reduced price if any person or group attains certain threshold
beneficial ownership levels.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for CPI Common Stock is The Bank of New
York.
COMPARISON OF RIGHTS OF SHAREHOLDERS
OF CPI AND ZYTEC
Until the Merger is effective, the rights of Zytec's shareholders will
continue to be governed by the Zytec Articles and the Zytec Bylaws and also by
the laws of the State of Minnesota, including the MBCA. If the Merger is
consummated, holders of Zytec Common Stock will become holders of CPI Common
Stock. Upon consummation of the Merger, the rights of former Zytec shareholders
will be governed by the laws of the State of Florida, including the FBCA, and by
the CPI Articles and the CPI Bylaws. The following is a summary of certain of
the material differences between the rights of holders of CPI Common Stock under
the CPI Articles and the CPI Bylaws and the FBCA and the rights of holders of
Zytec Common Stock under the Zytec Articles and Zytec Bylaws and the MBCA. This
summary does not purport to be complete and is qualified in its entirety by
reference to the corporate statutes of the States of Florida and Minnesota, and
the Articles and Bylaws, respectively, of CPI and Zytec.
SPECIAL MEETINGS OF SHAREHOLDERS
Under the FBCA, a special meeting of shareholders may be called by the board
of directors, any person authorized to do so in the articles of incorporation or
bylaws, or by shareholders when requested in writing by the holders of not less
than 10% of all votes entitled to be cast on any issue proposed to be considered
at the meeting, unless a greater percentage, which may not exceed 50%, is
required by the articles of incorporation. The CPI Bylaws provide that special
meetings of shareholders may be called by the Chairman of the Board of
Directors, the President or the Board of Directors, or any officer instructed by
the Board of Directors or the President to call the meeting, and by the
President or Vice President upon the written request of shareholders pursuant to
the FBCA.
The MBCA provides that special meetings of shareholders may be called by the
chief executive officer, the chief financial officer, two or more directors, a
person authorized by the articles of incorporation or bylaws, or by shareholders
holding 10% or more of the voting power of the shares entitled to vote, except
that 25% or more of the voting power is required to call a special meeting to
consider any action to, directly or indirectly, facilitate or effect a business
combination. The Zytec Bylaws provide that special meetings may be called by the
President, Treasurer, any two directors or by shareholders holding 10% or more
of the shares entitled to vote.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
Under the FBCA, directors are elected by a plurality of the votes cast by
the shareholders entitled to vote at a shareholders' meeting at which a quorum
is present, unless otherwise provided in the articles of incorporation. With
respect to matters other than the election of directors, unless a greater number
of
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affirmative votes is required by the FBCA or the articles of incorporation, if a
quorum exists, action on any matter is generally approved by the shareholders if
the votes cast by the holders of the shares represented at the meeting and
entitled to vote on the matter favoring the action exceed the votes cast
opposing the action. The CPI Articles do not include a provision requiring a
greater vote on any other matter than that required by the FBCA.
Under the MBCA, election of directors by cumulative voting is mandatory
unless the articles of incorporation provide that there shall be no cumulative
voting. The Zytec Articles contain a provision that eliminates cumulative
voting. Except as specifically required otherwise under the MBCA, all matters
submitted to the shareholders are decided by a majority vote of the shares
entitled to vote and represented at a meeting at which there is a quorum. The
approval of the Merger Proposal requires the affirmative vote of a majority of
the outstanding shares of Zytec Common Stock.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
Under the FBCA and in accordance with the CPI Bylaws, any action required or
permitted to be taken by shareholders at any annual or special meeting of the
shareholders may be taken without a meeting, without prior notice and without a
vote, if one or more written consents, setting forth the action so taken, are
dated and signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Within ten (10) days after obtaining such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing to such action which was the subject of such written consent.
Under the MBCA, unless the articles of incorporation provide otherwise, any
action that may be taken by shareholders at any annual or special meeting of
shareholders may be taken without a meeting by written consent signed by all of
the shareholders entitled to vote on that action.
BUSINESS CONDUCTED AT SHAREHOLDER MEETINGS
The CPI Bylaws provide that at a meeting of shareholders, subject to any
other applicable requirements, only such business may be conducted as has been
(i) specified in the notice of meeting, (ii) proposed at the time of the meeting
at the direction of the CPI Board of Directors or the chairman of the meeting,
or (iii) specified in a timely prior written notice to the Secretary of CPI by
or on behalf of any shareholder of CPI. In all cases, to be timely, notice must
be received by CPI not less than 50 days nor more than 75 days prior to the
meeting (or if fewer than 65 days' prior notice or public disclosure of the
meeting date is given or made to shareholders, not later than the 10th day
following the day on which the notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs). The notice must
contain certain information about the proposed business and the shareholder who
proposes to bring the business before the meeting, including a brief description
of the business the shareholder proposes to bring before the meeting, the name
and address of the shareholder proposing such business, the class and number of
shares of stock of CPI beneficially owned by such shareholder, and all other
information which would be required to be included in a proxy statement filed
with the Commission if, with respect to any item of business, such shareholder
were a participant in a solicitation subject to Section 14 of the Exchange Act.
If the Chairman of a meeting of CPI shareholders determines that business was
not properly brought before the meeting in accordance with the foregoing
procedures, such business will not be conducted at the meeting. Nothing in the
CPI Bylaws precludes discussion by any shareholder of any business properly
brought before the annual meeting in accordance with the above-mentioned
procedures.
The Zytec Bylaws provide that a regular meeting of shareholders is to be
held in order to (i) designate the number of directors to constitute the Board
of Directors, (ii) elect qualified successors for directors, and (iii) transact
such other business as may properly come before the meeting. In addition, the
Zytec Bylaws provide that a special meeting of the shareholders may be called
for any purpose or purposes, unless otherwise proscribed by statute or the Zytec
Articles. The Zytec Bylaws do not contain procedures for conduct of
shareholders' meetings.
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INSPECTION RIGHTS
Under both the FBCA and the MBCA, a shareholder is entitled to inspect and
copy the articles of incorporation, bylaws, certain board of director and
shareholder resolutions, certain written communication to shareholders, a list
of the names and business addresses of the corporation's directors and officers,
and the corporation's most recent annual report, during regular business hours
if the shareholder gives prior written notice to the corporation. In addition,
under both the FBCA and the MBCA, a shareholder is entitled to inspect and copy
other books and records of the corporation during regular business hours if the
shareholder gives prior written notice to the corporation and the shareholder's
demand is made in good faith and for a proper purpose.
AMENDMENT OF BYLAWS
Under both the FBCA and the MBCA, unless reserved to the shareholders by the
articles of incorporation, the power to adopt, amend or repeal bylaws is
generally vested in the board of directors, subject to the power of the
shareholders to adopt, amend or repeal bylaws adopted by the board of directors.
The MBCA also contains provisions permitting shareholders holding 3% or more of
the voting power of the shares entitled to vote to propose a resolution for
action by the shareholders to adopt, amend or repeal bylaws.
AMENDMENT OF ARTICLES OF INCORPORATION
An amendment to a Florida corporation's articles of incorporation must be
approved by the corporation's shareholders, except for certain immaterial
amendments specified in the FBCA which may be made by the board of directors.
Unless a specific section of the FBCA or a Florida corporation's articles of
incorporation require a greater vote, an amendment to a Florida corporation's
articles of incorporation must be approved by a majority of the votes entitled
to be cast on the amendment. The CPI Articles do not include any provision
requiring greater than such a majority of votes to amend the CPI Articles.
Under the MBCA, an amendment to the articles of incorporation generally
requires the affirmative vote of the holders of a majority of the shares present
and entitled to vote unless a larger affirmative vote is required by the
corporation's articles of incorporation. The Zytec Articles do not include any
provision requiring greater than such a majority of votes to amend the Zytec
Articles.
VOLUNTARY DISSOLUTION
Under the FBCA, a corporation may be voluntarily dissolved if (i) the board
of directors adopts, and a majority of shares outstanding approve, a proposal
for dissolution, or (ii) shareholders approve dissolution by written consent
without a meeting.
Under the MBCA, subject to certain exceptions, the approval of not less than
a majority of the outstanding shares representing the total voting power of the
corporation is required for the voluntary dissolution of the corporation.
NUMBER OF DIRECTORS
The CPI Bylaws provide that the affairs of CPI are to be conducted by a
board of directors of not fewer than three (3) nor more than twelve (12)
members, the number to be fixed from time to time by the board of directors. In
no case will a decrease in the number of directors reduce the term of any
incumbent director.
The Zytec Bylaws provide that the number of directors that constitute the
Board of Directors is to be not fewer than three (3) nor more than nine (9), the
number to be established by resolution of the shareholders.
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BOARD VACANCIES
The FBCA provides that a vacancy on the board of directors generally may be
filled by the affirmative vote of a majority of the remaining directors or by
the shareholders, unless the articles of incorporation provide otherwise. The
CPI Articles do not alter this provision.
The Zytec Bylaws provide, and the MBCA permits, that a vacancy on the Board
of Directors shall be filled by a majority of the remaining directors.
ACTION BY WRITTEN CONSENT OF DIRECTORS
Under both the FBCA and the MBCA, any action required or permitted to be
taken at a meeting of the Board of Directors may be taken without a meeting if a
consent in writing setting forth the action is signed by all of the directors.
REMOVAL OF DIRECTORS
The FBCA provides that shareholders may remove one or more directors with or
without cause unless the articles of incorporation provide that directors may be
removed only for cause. The CPI Articles do not include such a provision. Under
the FBCA, a director generally may be removed only if the number of votes cast
to remove him exceed the number of votes cast not to remove him. Under the FBCA,
a director may not be removed by the remaining directors.
Under the MBCA, any director or the entire board of directors of a Minnesota
corporation may be removed, with or without cause, by the holders of the
proportion or number of the voting power of the shares of the classes or series
the director represents sufficient to elect him/her. In addition, a director
elected to fill a vacancy may be removed, with or without cause, by the
affirmative vote of a majority of the remaining directors, if the shareholders
have not elected directors since the appointment to fill the vacancy.
CONFLICT OF INTEREST TRANSACTIONS
Under both the FBCA and the MBCA, a transaction between a corporation and
one or more of its directors or between a corporation and an entity in which one
or more of its directors has a financial interest is not void or voidable merely
because of the directors' interest in the transaction or because such director
was present at the directors' or shareholders' meeting where such transaction
was approved, if certain conditions are met. Under both the FBCA and the MBCA,
if the material facts of the transaction and the directors' interest are fully
disclosed and a vote is taken in good faith, such transactions may be approved
by the majority of disinterested directors or by the requisite vote of
disinterested shareholders, which under the FBCA is a majority and under the
MBCA is two-thirds of the outstanding shares. If the transaction is shown to be
fair and reasonable as to the corporation at the time such transaction is
authorized, approved or ratified by the board, separate disinterested
shareholder or director approval is not required.
LIABILITY OF DIRECTORS
The FBCA provides that a director is not personally liable for monetary
damages to the corporation or any other person for any act or omission as a
director unless the director breached or failed to perform his statutory duties
as a director and such breach or failure (i) constitutes a violation of criminal
law, unless the director had reasonable cause to believe his conduct was lawful
or had no reasonable cause to believe his conduct was unlawful, (ii) constitutes
a transaction from which the director derived an improper personal benefit,
(iii) results in an unlawful distribution under the FBCA, (iv) in a derivative
action or an action by a shareholder, constitutes conscious disregard for the
best interest of the corporation or willful misconduct, or (v) in a proceeding
other than a derivative action or an action by a shareholder, constitutes
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recklessness or an act or omission which was committed in bad faith or with
malicious purpose or in a manner exhibiting wanton and willful disregard of
human rights, safety or property.
Under the MBCA, a corporation may include in its articles of incorporation a
provision, which is included in the Zytec Articles, which would, subject to the
limitations described below, eliminate or limit director's liability to the
corporation or its shareholders for monetary damages for breach of a director's
fiduciary duty. Under the MBCA, a director's liability cannot be eliminated or
limited for (i) any breach of the director's duty of loyalty to the corporation
or its shareholders, (ii) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) the making of an
unlawful distribution under the MBCA, (iv) certain violations of Minnesota
securities laws, (v) any transaction from which the director derived an improper
personal benefit, or (vi) any act or omission occurring before the date the
provision in the corporation's articles eliminating or limiting liability became
effective.
INDEMNIFICATION
Under the FBCA, a corporation may generally indemnify its officers,
directors, employees and agents against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement of any proceedings (other than
derivative actions), if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. A similar standard is applicable in
derivative actions, except that indemnification may be made only for (i)
expenses (including attorneys' fees) and certain amounts paid in settlement, and
(ii) in the event the person seeking indemnification has been adjudicated
liable, amounts deemed proper, fair and reasonable by the appropriate court upon
application thereto. The FBCA provides that to the extent that such persons have
been successful in the defense of any proceeding, they must be indemnified by
the corporation against expenses actually and reasonably incurred in connection
therewith. The FBCA also provides that, unless a corporation's articles of
incorporation provide otherwise, if a corporation does not indemnify such
persons, they may seek, and a court may order, indemnification under certain
circumstances even if the board of directors or shareholders of the corporation
have determined that the persons are not entitled to indemnification. The CPI
Bylaws provide that CPI shall indemnify directors and officers to the fullest
extent that is permitted by the FBCA.
Under the MBCA, Minnesota corporations are required to indemnify directors,
officers, employees and agents in their official capacity against certain
liabilities if such person (i) has not been indemnified by another organization
or employee benefit plan for the same liabilities, (ii) has acted in good faith,
(iii) has received no improper personal benefit (and if the section relating to
director conflicts is applicable, its conditions have been satisfied), (iv) in
the case of a criminal proceeding, has no reasonable cause to believe the
conduct was unlawful and (v) reasonably believed his conduct was in (or not
opposed to) the best interests of the corporation. The Zytec Articles provide
that Zytec shall indemnify such persons to the fullest extent permitted by the
MBCA. The MBCA also provides that, unless prohibited by its articles of
incorporation or bylaws, a corporation must make advance payment of expenses
upon request of a person who is eligible for indemnification, if that person
supplies the corporation with an affidavit stating that the person honestly
believes that he or she has met the criteria for mandatory indemnification and
promises to repay the corporation if it is ultimately found that the criteria
were not met. Pursuant to the Merger Agreement, CPI has agreed to provide
indemnification to former directors of Zytec to the fullest extent permitted by
law.
DUTIES OF DIRECTORS
The FBCA provides that directors of a Florida corporation, in discharging
their duties to the corporation and in determining what they believe to be in
the best interests of the corporation, may, in addition to considering the
effects of any corporate action on the shareholders and the corporation,
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consider the effects of the corporate action on employees, suppliers and
customers of the corporation or its subsidiaries and the communities in which
the corporation and its subsidiaries operate.
The MBCA provides that directors of a Minnesota corporation, in discharging
their duties to the corporation, may consider factors in addition to the
interests of the corporation's shareholders, such as the interests of the
corporation's employees, suppliers, creditors and customers; the economy of the
state and the nation; community and societal considerations; the long-term and
short-term interests of the corporation and its shareholders; and the
possibility that these interests may be best served by the continued
independence of the corporation.
AFFILIATED BUSINESS COMBINATIONS
The FBCA contains an affiliated transactions statute which provides that
certain transactions involving a corporation and a shareholder owning 10% or
more of the corporation's outstanding voting shares (an "Affiliated
Shareholder") must generally be approved by the affirmative vote of the holders
of 66 2/3% of the voting shares other than those owned by the Affiliated
Shareholder. The transactions covered by the statute include, with certain
exceptions, (i) mergers and consolidations to which the corporation and the
Affiliated Shareholder are parties, (ii) sales or other dispositions of
substantial amounts of the corporation's assets to the Affiliated Shareholder,
(iii) issuances by the corporation of substantial amounts of its securities to
the Affiliated Shareholder, (iv) the adoption of any plan for the liquidation or
dissolution of the corporation proposed by or pursuant to an arrangement with
the Affiliated Shareholder, (v) any reclassification of the corporation's
securities which has the effect of substantially increasing the percentage of
the outstanding voting shares of the corporation beneficially owned by the
Affiliated Shareholder, and (vi) the receipt by the Affiliated Shareholder of
certain loans or other financial assistance of the corporation. These special
voting requirements do not apply in any of the following circumstances: (i) if
the transaction was approved by a majority of the corporation's disinterested
directors; (ii) if the corporation did not have more than 300 shareholders of
record at any time during the preceding three years; (iii) if the Affiliated
Shareholder has been the beneficial owner of at least 80% of the corporation's
outstanding voting shares for five years; (iv) if the Affiliated Shareholder is
the beneficial owner of at least 90% of the corporation's outstanding voting
shares, exclusive of those acquired in a transaction not approved by a majority
of disinterested directors; or (v) if the consideration received by each
shareholder in connection with the transaction satisfies the "fair price"
provisions of the statute. This statute applies to any Florida corporation
unless the original articles of incorporation, an amendment to the articles of
incorporation or bylaws contain a provision expressly electing not to be
governed by this statute. If a corporation elects not to be governed by this
statute by an amendment to the articles of incorporation, or bylaws, such
amendment must be approved by the affirmative vote of a majority of
disinterested shareholders and is not effective until 18 months after approval.
The CPI Articles and Bylaws do not contain a provision electing not to be
governed by the statute.
The MBCA prohibits a public Minnesota corporation from engaging in a
"business combination" with an "interested shareholder" for a period of four
years after the date of the transaction in which the person became an interested
shareholder ("share acquisition date"), unless the business combination is
approved by a committee of disinterested directors prior to the share
acquisition date. "Business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested shareholder. An
interested shareholder is a person who is the beneficial owner, directly or
indirectly, of 10% or more of the corporation's voting stock. In connection with
such provisions, the non-employee directors of Zytec separately approved the
Merger Agreement and the Voting Agreement.
CONTROL SHARE ACQUISITIONS
The FBCA contains a control share acquisition statute which provides that a
person who acquires shares in an issuing public corporation in excess of certain
specified thresholds will generally not have any voting rights with respect to
such shares unless the voting rights are approved by a majority of the shares
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entitled to vote, excluding the interested shares. This statute does not apply
to acquisitions of shares of a corporation if, prior to such acquisition of
shares, the corporation's articles of incorporation or bylaws provide that the
corporation shall not be governed by the statute. This statute also permits a
corporation to adopt a provision in its articles of incorporation or bylaws
providing for the redemption by the corporation of such acquired shares in
certain circumstances. Unless otherwise provided in the corporation's articles
of incorporation or bylaws prior to such acquisition of shares, in the event
that such shares are accorded full voting rights by the shareholders of the
corporation and the acquiring shareholder acquires a majority of the voting
power of the corporation, all shareholders who did not vote in favor of
according voting rights to such acquired shares are entitled to dissenters'
rights. The CPI Articles and Bylaws do not contain provisions electing not to be
governed by this statute. This statutory provision may have the effect of
delaying, deterring or preventing a change of control of CPI, may discourage
bids for CPI Common Stock at a premium over the market price of CPI Common Stock
and may adversely affect the market price of CPI Common Stock.
Unless otherwise expressly provided in the articles of incorporation or in
bylaws approved by the shareholders of an issuing public corporation, the MBCA
reduces the voting rights of any person acquiring, directly or indirectly,
beneficial ownership of shares that would, when added to all other shares
beneficially owned by the acquiring person, entitle the acquiring person to have
voting power of 20% or more in the election of directors, absent shareholder
approval of such acquisition. The acquiring person whose voting rights are
reduced may demand a shareholders meeting at which the shareholders shall vote
on resolutions to restore full voting rights to such person's shares. If the
shareholders' vote against restoring full voting rights, the MBCA permits the
corporation to redeem a portion of such person's shares at market value. The
Zytec Articles and Bylaws do not contain provisions electing not to be governed
by this statute.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Florida corporation may make distributions to shareholders as long as,
after giving effect to such distribution (i) the corporation would be able to
pay its debts as they become due in the usual course of business, and (ii) the
corporation's total assets would not be less than the sum of its total
liabilities plus (unless the articles of incorporation permit otherwise, which
the CPI Articles do not) the amount that would be needed if the corporation were
to be dissolved at the time of the distribution to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the distribution. Under the FBCA, a corporation's redemption
of its own capital stock is deemed to be a distribution.
Under the MBCA, a corporation may pay dividends and purchase its own shares,
provided the board of directors reasonably determines that such payments would
not render the corporation unable to pay its debts in the ordinary course of
business and would not result in the corporation's total assets being less than
the sum of its total liabilities, plus the amount that would be needed if the
corporation were to be dissolved, to satisfy the rights of preferred
shareholders. The MBCA also restricts a Minnesota corporation's ability to
repurchase shares from certain shareholders. Specifically, a Minnesota
corporation may not purchase or agree to purchase any voting shares from a
person who owns more than 5% of the corporation's voting power for more than the
fair market value of such shares if the shares have been owned for less than two
years, unless the purchase is approved by shareholders who hold a majority of
the voting power of all shares entitled to vote. The corporation may also make
such a purchase if it makes an offer to purchase shares from all of its
shareholders for at least equal value per share.
RIGHTS OF DISSENTING SHAREHOLDERS
Both the FBCA and the MBCA, with certain exceptions, entitle shareholders of
a corporation to dissent from, and obtain payment of the fair value for their
shares, in the event of: (i) a merger or consolidation to which the corporation
is a party; (ii) a sale or exchange of all or substantially all of the
corporation's property other than in the usual and regular course of business;
(iii) the approval of a control
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share acquisition; (iv) a statutory share exchange to which the corporation is a
party as the corporation whose shares will be acquired; (v) an amendment to the
articles of incorporation if the shareholder is entitled to vote on the
amendment and the amendment would adversely affect the shareholder; and (vi) any
corporate action taken to the extent that the articles of incorporation provide
for dissenters' rights with respect to such action. However, the FBCA provides
that unless a corporation's articles of incorporation provide otherwise, a
shareholder does not have dissenters' rights with respect to a plan of merger,
share exchange or proposed sale or exchange of property if the shares held by
the shareholder are either registered on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by 2,000 or more shareholders. The CPI Articles do not alter this statutory
provision.
PREEMPTIVE RIGHTS
Under the FBCA, the shareholders of a corporation do not have a preemptive
right to acquire the corporation's unissued shares except to the extent the
articles of incorporation provide otherwise. The CPI Articles provide that no
shareholder of the corporation shall have a preemptive right to purchase,
subscribe for, or take any part of any securities of the corporation issued,
optioned or sold by it after its incorporation.
Under the MBCA, the shareholders have preemptive rights unless denied or
limited in the articles of incorporation. The Zytec Articles provide that
shareholders of Zytec shall not have preemptive rights to subscribe for or
acquire securities of Zytec.
SHAREHOLDER RIGHTS PLANS
The FBCA has a provision which expressly authorizes corporations to adopt
"poison pill" or "shareholder rights" plans. These plans may be adopted in a
number of forms, but generally involve the distribution by the corporation to
its shareholders of rights or options which are triggered by a hostile takeover
attempt or by a party acquiring a specified percentage of the corporation's
securities. These plans can make changes of control excessively or prohibitively
expensive unless the board of directors terminates the plan. The MBCA also
contains a provision allowing corporations to adopt such shareholder rights
plans, including plans which include terms that prevent the holder of a
specified percentage of the outstanding shares of the corporation from
exercising those rights to purchase additional shares in such corporation. CPI
has adopted a shareholder rights plan. See "Description of CPI Capital
Stock--Rights Agreement." Zytec has not adopted any such plan.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined financial data is
presented to reflect the estimated impact on the historical consolidated
financial statements of CPI of the Merger including the issuance of
approximately 13,863,000 shares of CPI Common Stock pursuant to the Merger.
The following tables set forth selected unaudited pro forma condensed
combined financial data for CPI for each of the three 52- or 53- week fiscal
years ending on the Friday nearest December 31 for the period ended January 3,
1997 and for the 39-week periods ended October 3, 1997 and September 27, 1996
after giving effect to the Merger, as if it had been consummated, with respect
to the statement of operations data, at the beginning of the periods presented,
or, with respect to balance sheet data, as of the date presented. The following
tables present such information as if the Merger had been accounted for as a
pooling-of-interests. The unaudited pro forma condensed combined financial data
do not reflect any cost savings or synergies anticipated by CPI's management as
a result of the Merger and are not necessarily indicative of the results of
operations or the financial position which would have occurred had the Merger
actually been consummated at the beginning of the periods presented, or as of
the date presented, nor are they necessarily indicative of CPI's future results
of operations or financial position. The following pro forma financial data have
been derived from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of CPI and Zytec,
incorporated by reference herein.
In connection with the Merger, CPI anticipates a one-time pre-tax charge
estimated to be in the range of $12,000,000 to $15,000,000 ($8,000,000 to
$10,000,000 after tax) which will include: (i) the costs of plant
rationalizations and employee terminations to eliminate duplicate facilities and
excess capacity; (ii) certain costs of integrating operations of the two
companies; (iii) the direct costs of the Merger (approximately $3,000,000),
including the fees of financial advisors, legal counsel and independent
accountants and mailing, printing and solicitation costs; and (iv) other unusual
and nonrecurring items. The estimated charge and the nature of the costs
included therein are subject to change as CPI's integration plan is developed
and more accurate estimates become possible. The one-time charge directly
attributable to the transaction has not been reflected in the pro forma
condensed combined financial data.
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
1996 ACQUISITION. Effective August 23, 1996, CPI acquired the remaining 90%
of the outstanding capital stock of Jeta for approximately $11,250,000 in cash.
Jeta designs, manufactures and markets medium to high power systems in the 400
watt to 4 kilowatt range for applications in telecommunications, networking,
computing and instrumentation markets. CPI had purchased an initial 10% of
Jeta's capital stock during 1984 for approximately $433,000. CPI used cash on
hand to pay for the acquisition. The transaction was recorded using the purchase
method of accounting. Jeta's financial position and results of operations were
not significant to CPI; therefore, the pro forma effects of such acquisition
have not been presented.
1997 DIVESTITURE. Effective July 5, 1997, CPI sold substantially all the
assets of its industrial automation division, RTP Corp., to RT Acquisition
Florida Corp. The sale price, which is subject to adjustment, included
$2,000,000 cash, a subordinated unsecured five-year note in the aggregate
principal amount of approximately $2,480,000 bearing interest at the prime rate,
and the assumption of certain of RTP's liabilities. An estimated after-tax loss
on the sale of $1,700,000 was recorded in the first quarter of 1997. All periods
presented in the following pro forma tables have been restated to give effect to
such discontinued operations. RTP's financial position and results of operations
were not significant to CPI for the fiscal year 1996 and the 39-week period
ended October 3, 1997; therefore, the pro forma effects of such disposition have
not been presented.
1997 ACQUISITION. Effective July 22, 1997, CPI acquired the capital stock
of the Elba Group, privately-held European designers, manufacturers and
marketers of both AC-to-DC and DC-to-DC power conversion products. CPI purchased
the capital stock of the Elba Group for approximately $28,500,000 in cash
provided by two seven-year term loans from a financial institution bearing
interest at 5.58%. The acquisition was recorded using the purchase method of
accounting. Pro forma effects of the acquisition are included in certain of the
following tables.
95
<PAGE>
COMPUTER PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMBINED
PRO FORMA
CPI ZYTEC PRO FORMA BALANCE
10/3/97 9/28/97 ADJUSTMENTS 10/3/97
--------- --------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents............................................. $ 33,717 $ 7,695 $ -- $ 41,412
Accounts receivable, net......................................... 51,106 37,178 88,284
Inventories...................................................... 39,388 25,101 64,489
Prepaid expenses and other....................................... 2,566 3,658 6,224
Deferred income taxes, net....................................... 1,552 943 2,495
--------- --------- ------------- -----------
Total current assets........................................... 128,329 74,575 202,904
--------- --------- ------------- -----------
Property, Plant & Equipment, Net................................... 34,616 25,087 59,703
--------- --------- ------------- -----------
OTHER ASSETS
Goodwill, net.................................................... 40,614 0 40,614
Deferred income taxes, net....................................... 1,563 2,727 4,290
Other assets, net................................................ 4,299 1,488 5,787
--------- --------- ------------- -----------
Total other assets............................................. 46,476 4,215 50,691
--------- --------- ------------- -----------
Total assets................................................... $ 209,421 $ 103,877 $ -- $ 313,298
--------- --------- ------------- -----------
--------- --------- ------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt............................. $ 4,523 $ 9,392 $ -- $ 13,915
Accounts payable and accrued liabilities......................... 49,241 27,450 76,691
--------- --------- ------------- -----------
Total current liabilities...................................... 53,764 36,842 90,606
--------- --------- ------------- -----------
Long-Term liabilities
Long-term debt................................................... 48,268 2,714 50,982
Convertible note................................................. 0 12,000 (12,000)(A) 0
Lease liabilities................................................ 4,906 5,385 10,291
Other liabilities................................................ 0 2,051 2,051
--------- --------- ------------- -----------
Total long-term liabilities.................................... 53,174 22,150 (12,000) 63,324
--------- --------- ------------- -----------
Total liabilities.............................................. 106,938 58,992 (12,000) 153,930
--------- --------- ------------- -----------
SHAREHOLDERS' EQUITY
Common stock..................................................... 243 127(B)
12(A) 382
Additional paid-in capital....................................... 51,147 15,037 (127)(B) 78,045
11,988(A)
Retained earnings................................................ 53,497 31,286 84,783
Foreign currency translation adjustment.......................... (2,404) (1,438) (3,842)
--------- --------- ------------- -----------
Total shareholders' equity..................................... 102,483 44,885 12,000 159,368
--------- --------- ------------- -----------
Total liabilities and shareholders' equity..................... $ 209,421 $ 103,877 $ -- $ 313,298
--------- --------- ------------- -----------
--------- --------- ------------- -----------
Outstanding shares of common stock................................. 24,301 14,015(B) 38,316
--------- -----------
--------- -----------
Book value per common share........................................ $ 4.22 $ 4.16
--------- -----------
--------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements
96
<PAGE>
COMPUTER PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 3, 1997
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
CPI CPI ZYTEC
THIRTY-NINE THIRTY-NINE NINE MONTHS
WEEKS ENDED ELBA PRO FORMA WEEKS ENDED ENDED PRO FORMA
10/3/97 1/1/97-7/22/97 ADJUSTMENTS 10/3/97 9/28/97 ADJUSTMENTS
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales......................... $ 188,235 $ 13,309 $ -- $ 201,544 $ 190,850 $ --
Cost of Sales................. 121,438 8,154 -- 129,592 156,002
------------- ------------- ------ ------------- ------------- -------------
Gross Profit.................. 66,797 5,155 -- 71,952 34,848
------------- ------------- ------ ------------- ------------- -------------
Other Revenue................. 1,680
------------- ------------- ------ ------------- ------------- -------------
Expenses
Selling, general and
administrative............ 28,129 3,029 589(C) 31,747 9,443
Research and development.... 15,284 372 15,656 8,003
------------- ------------- ------ ------------- ------------- -------------
43,413 3,401 589 47,403 17,446
------------- ------------- ------ ------------- ------------- -------------
Operating Income (Loss)....... 23,384 1,754 (589) 24,549 19,082
Other Income (Expense)
Interest expense............ (2,055) (133) (884)(D) (3,072) (1,428)
Interest income............. 1,073 93 1,166 253
Foreign exchange gain
(loss).................... 579 579 (696)
Other income................ 571 571 592
------------- ------------- ------ ------------- ------------- -------------
(403) 531 (884) (756) (1,279)
------------- ------------- ------ ------------- ------------- -------------
Income (Loss) before Income
Taxes....................... 22,981 2,285 (1,473) 23,793 17,803
Provision (Benefit) for Income
Taxes....................... 6,205 801 (663)(E) 6,343 6,683
------------- ------------- ------ ------------- ------------- -------------
Income (Loss) from Continuing
Operations.................. 16,776 1,484 (810) 17,450 11,120
Discontinued Operations
Loss from operations of RTP,
net of income tax
benefit................... (333) (333)
Estimated loss on disposal
of RTP, net of tax
benefit................... (1,729) (1,729)
------------- ------------- ------ ------------- ------------- -------------
Net income.................... $ 14,714 $ 1,484 $ (810) $ 15,388 $ 11,120 $ --
------------- ------------- ------ ------------- ------------- -------------
------------- ------------- ------ ------------- ------------- -------------
Earnings Per Common and
Equivalent Share
Primary
Income from continuing
operations.............. $ 0.67 $ 0.70
Loss from discontinued
operations.............. (0.01) (0.01)
Estimated loss on disposal
of RTP.................. (0.07) (0.07)
------------- -------------
Net income................ $ 0.59 $ 0.62
------------- -------------
------------- -------------
Assuming Full Dilution
Income from continuing
operations.............. $ 0.66 $ 0.68
Loss from discontinued
operations.............. (0.01) (0.01)
Estimated loss on disposal
of RTP.................. (0.07) (0.07)
------------- -------------
Net income................ $ 0.58 $ 0.60
------------- -------------
------------- -------------
Common and equivalent shares
outstanding
Primary..................... 24,971 24,971 16,384(F)
Fully diluted............... 25,493 25,493 16,384(F)
<CAPTION>
COMBINED
PRO FORMA
BALANCE
10/3/97
-------------
<S> <C>
Sales......................... $ 392,394
Cost of Sales................. 285,594
-------------
Gross Profit.................. 106,800
-------------
Other Revenue................. 1,680
-------------
Expenses
Selling, general and
administrative............ 41,190
Research and development.... 23,659
-------------
64,849
-------------
Operating Income (Loss)....... 43,631
Other Income (Expense)
Interest expense............ (4,500)
Interest income............. 1,419
Foreign exchange gain
(loss).................... (117)
Other income................ 1,163
-------------
(2,035)
-------------
Income (Loss) before Income
Taxes....................... 41,596
Provision (Benefit) for Income
Taxes....................... 13,026
-------------
Income (Loss) from Continuing
Operations.................. 28,570
Discontinued Operations
Loss from operations of RTP,
net of income tax
benefit................... (333)
Estimated loss on disposal
of RTP, net of tax
benefit................... (1,729)
-------------
Net income.................... $ 26,508
-------------
-------------
Earnings Per Common and
Equivalent Share
Primary
Income from continuing
operations.............. $ 0.69
Loss from discontinued
operations.............. (0.01)
Estimated loss on disposal
of RTP.................. (0.04)
-------------
Net income................ $ 0.64
-------------
-------------
Assuming Full Dilution
Income from continuing
operations.............. $ 0.68
Loss from discontinued
operations.............. (0.01)
Estimated loss on disposal
of RTP.................. (0.04)
-------------
Net income................ $ 0.63
-------------
-------------
Common and equivalent shares
outstanding
Primary..................... 41,355
Fully diluted............... 41,877
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements
97
<PAGE>
COMPUTER PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CPI ELBA PRO FORMA CPI ZYTEC
THIRTY-NINE NINE MONTHS THIRTY-NINE NINE MONTHS
WEEKS ENDED ENDED PRO FORMA WEEKS ENDED ENDED PRO FORMA
9/27/96 9/30/96 ADJUSTMENTS 9/27/96 9/29/96 ADJUSTMENTS
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales............................. $ 149,368 $ 19,976 $ -- $ 169,344 $ 175,489 $ --
Cost of Sales..................... 95,900 12,359 108,259 151,076
------------- ------------- ------------- ------------- ------------- -------------
Gross Profit...................... 53,468 7,617 61,085 24,413
------------- ------------- ------------- ------------- ------------- -------------
Other Revenue..................... 1,075
------------- ------------- ------------- ------------- ------------- -------------
Expenses
Selling, general and
administrative................ 22,361 3,250 794(C) 26,405 7,698
Research and development........ 11,453 311 11,764 7,030
------------- ------------- ------------- ------------- ------------- -------------
33,814 3,561 794 38,169 14,728
------------- ------------- ------------- ------------- ------------- -------------
Operating Income (Loss)........... 19,654 4,056 (794) 22,916 10,760
Other Income (Expense)
Interest expense................ (2,036) (161) (1,193)(D) (3,390) (1,456)
Interest income................. 767 61 828 0
Foreign exchange gain (loss).... (345) (345) (313)
Other income.................... 0 366 366 104
------------- ------------- ------------- ------------- ------------- -------------
(1,614) 266 (1,193) (2,541) (1,665)
------------- ------------- ------------- ------------- ------------- -------------
Income (Loss) before Income
Taxes........................... 18,040 4,322 (1,987) 20,375 9,095
Provision (Benefit) for Income
Taxes........................... 4,691 1,898 (894)(E) 5,695 324
------------- ------------- ------------- ------------- ------------- -------------
Income (Loss) from Continuing
Operations...................... 13,349 2,424 (1,093) 14,680 8,771
Discontinued Operations
Income from operations of RTP,
net of income taxes........... 75 75
------------- ------------- ------------- ------------- ------------- -------------
Net income........................ $ 13,424 $ 2,424 $ (1,093) $ 14,755 $ 8,771 $ --
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Earnings Per Common and Equivalent
Share
Primary
Income from continuing
operations.................. $ 0.55 $ 0.60
Income from discontinued
operations.................. 0.00 0.00
------------- -------------
Net income.................... $ 0.55 $ 0.60
------------- -------------
------------- -------------
Assuming Full Dilution
Income from continuing
operations.................. $ 0.54 $ 0.59
Income from discontinued
operations.................. 0.00 0.00
------------- -------------
Net income.................... $ 0.54 $ 0.59
------------- -------------
------------- -------------
Common and equivalent shares
outstanding
Primary......................... 24,436 24,436 16,384(F)
Fully diluted................... 25,008 25,008 16,384(F)
<CAPTION>
COMBINED
PRO FORMA
BALANCE
9/27/96
-------------
<S> <C>
Sales............................. $ 344,833
Cost of Sales..................... 259,335
-------------
Gross Profit...................... 85,498
-------------
Other Revenue..................... 1,075
-------------
Expenses
Selling, general and
administrative................ 34,103
Research and development........ 18,794
-------------
52,897
-------------
Operating Income (Loss)........... 33,676
Other Income (Expense)
Interest expense................ (4,846)
Interest income................. 828
Foreign exchange gain (loss).... (658)
Other income.................... 470
-------------
(4,206)
-------------
Income (Loss) before Income
Taxes........................... 29,470
Provision (Benefit) for Income
Taxes........................... 6,019
-------------
Income (Loss) from Continuing
Operations...................... 23,451
Discontinued Operations
Income from operations of RTP,
net of income taxes........... 75
-------------
Net income........................ $ 23,526
-------------
-------------
Earnings Per Common and Equivalent
Share
Primary
Income from continuing
operations.................. $ 0.57
Income from discontinued
operations.................. 0.00
-------------
Net income.................... $ 0.57
-------------
-------------
Assuming Full Dilution
Income from continuing
operations.................. $ 0.57
Income from discontinued
operations.................. 0.00
-------------
Net income.................... $ 0.57
-------------
-------------
Common and equivalent shares
outstanding
Primary......................... 40,820
Fully diluted................... 41,392
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements
98
<PAGE>
COMPUTER PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 3, 1997
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
CPI ELBA CPI ZYTEC PRO FORMA
YEAR ENDED YEAR ENDED PRO FORMA YEAR ENDED YEAR ENDED PRO FORMA BALANCE
1/3/97 12/31/96 ADJUSTMENTS 1/3/97 12/31/96 ADJUSTMENTS 1/3/97
----------- ----------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales....................... $ 207,563 $ 26,635 $ -- $ 234,198 $ 228,168 $ -- $ 462,366
Cost of Sales............... 132,689 16,478 149,167 196,121 345,288
----------- ----------- ------------- ----------- ----------- ------------- -----------
Gross Profit................ 74,874 10,157 85,031 32,047 117,078
----------- ----------- ------------- ----------- ----------- ------------- -----------
Other Revenue............... 1,582 1,582
----------- ----------- ------------- ----------- ----------- ------------- -----------
Expenses
Selling, general and
administrative.......... 30,877 4,334 1,091(D) 36,302 10,526 46,828
Research and development.. 15,741 415 16,156 9,453 25,609
----------- ----------- ------------- ----------- ----------- ------------- -----------
46,618 4,749 1,091 52,458 19,979 72,437
----------- ----------- ------------- ----------- ----------- ------------- -----------
Operating Income (Loss)..... 28,256 5,408 (1,091) 32,573 13,650 46,223
Other Income (Expense)
Interest expense.......... (2,734) (214) (1,590)(E) (4,538) (1,842) (6,380)
Interest income........... 1,079 81 1,160 8 1,168
Foreign exchange loss..... (825) (825) (134) (959)
Other income.............. 0 488 488 130 618
----------- ----------- ------------- ----------- ----------- ------------- -----------
(2,480) 355 (1,590) (3,715) (1,838) (5,553)
----------- ----------- ------------- ----------- ----------- ------------- -----------
Income (Loss) before Income
Taxes..................... 25,776 5,763 (2,681) 28,858 11,812 40,670
Provision (Benefit) for
Income Taxes.............. 6,702 2,531 (1,206)(F) 8,027 1,331 9,358
----------- ----------- ------------- ----------- ----------- ------------- -----------
Income (Loss) from
Continuing Operations..... 19,074 3,232 (1,475) 20,831 10,481 31,312
Discontinued Operations
Income from operations of
RTP, net of income
taxes................... 504 -- 504 504
----------- ----------- ------------- ----------- ----------- ------------- -----------
Net Income.................. $ 19,578 $ 3,232 $ (1,475) $ 21,335 $ 10,481 $ -- $ 31,816
----------- ----------- ------------- ----------- ----------- ------------- -----------
----------- ----------- ------------- ----------- ----------- ------------- -----------
Earnings Per Common and
Equivalent Share
Primary
Income from continuing
operations............ $ 0.78 $ 0.85 $ .77
Income from discontinued
operations............ 0.02 0.02 .01
----------- ----------- -----------
Net income.............. $ 0.80 $ 0.87 $ .78
----------- ----------- -----------
----------- ----------- -----------
Assuming Full Dilution
Income from continuing
operations............ $ 0.76 $ 0.83 $ .76
Income from discontinued
operations............ 0.02 0.02 .01
----------- ----------- -----------
Net income.............. $ 0.78 $ 0.85 $ .77
----------- ----------- -----------
----------- ----------- -----------
Common and equivalent
shares outstanding
Primary................. 24,517 24,517 16,384(F) 40,901
Fully diluted........... 25,026 25,026 16,384(F) 41,410
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements
99
<PAGE>
COMPUTER PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMBINED
CPI ZYTEC PRO FORMA
YEAR ENDED YEAR ENDED PRO FORMA BALANCE
12/29/95 12/31/95 ADJUSTMENT 12/29/95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales....................................................... $ 174,451 $ 170,518 $ -- $ 344,969
Cost of Sales............................................... 110,833 149,922 260,755
----------- ----------- ----------- -----------
Gross Profit................................................ 63,618 20,596 84,214
----------- ----------- ----------- -----------
Other Revenue............................................... 1,559 1,559
----------- ----------- ----------- -----------
Expenses
Selling, general and administrative....................... 29,904 7,139 37,043
Research and development.................................. 14,057 8,587 22,644
----------- ----------- ----------- -----------
43,961 15,726 59,687
----------- ----------- ----------- -----------
Operating Income............................................ 19,657 6,429 26,086
Other Income (Expense)
Interest expense.......................................... (3,253) (1,053) (4,306)
Interest income........................................... 1,116 0 1,116
Foreign exchange gain (loss).............................. (13) 202 189
Other income.............................................. 0 501 501
----------- ----------- ----------- -----------
(2,150) (350) (2,500)
----------- ----------- ----------- -----------
Income before Income Taxes.................................. 17,507 6,079 23,586
Provision for Income Taxes.................................. 4,902 2,201 7,103
----------- ----------- ----------- -----------
Income from Continuing Operations........................... 12,605 3,878 16,483
Discontinued Operations
Income from operations of RTP
net of income taxes..................................... 1,512 1,512
Extraordinary Item, net of tax benefit...................... (397) (397)
----------- ----------- ----------- -----------
Net Income.................................................. $ 13,720 $ 3,878 $ -- $ 17,598
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings Per Common and Equivalent Share
Income from continuing operations......................... $ 0.55 $ 0.42
Income from discontinued operations....................... 0.06 0.04
Extraordinary item........................................ (0.02) (0.01)
----------- -----------
Net income................................................ $ 0.59 $ 0.45
----------- -----------
----------- -----------
Common and equivalent shares outstanding.................... 23,078 16,384(F) 39,462
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements
100
<PAGE>
COMPUTER PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1994
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMBINED
CPI ZYTEC PRO FORMA
YEAR ENDED YEAR ENDED PRO FORMA BALANCE
12/30/94 12/31/94 ADJUSTMENTS 12/30/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales...................................................... $ 136,193 $ 128,141 $ -- $ 264,334
Cost of Sales.............................................. 88,187 109,847 198,034
----------- ----------- ----------- -----------
Gross Profit............................................... 48,006 18,294 66,300
----------- ----------- ----------- -----------
Other Revenue.............................................. 2,462 2,462
----------- ----------- ----------- -----------
Expenses
Selling, general and administrative...................... 28,997 6,390 35,387
Research and development................................. 9,268 8,144 17,412
----------- ----------- ----------- -----------
38,265 14,534 52,799
----------- ----------- ----------- -----------
Operating Income........................................... 9,741 6,222 15,963
Other Income (Expense)
Interest expense......................................... (3,709) (806) (4,515)
Interest income.......................................... 522 40 562
Foreign exchange loss.................................... (60) (229) (289)
Other income............................................. 0 191 191
----------- ----------- ----------- -----------
(3,247) (804) (4,051)
----------- ----------- ----------- -----------
Income before Income Taxes................................. 6,494 5,418 11,912
Provision for Income Taxes................................. 2,200 2,054 4,254
----------- ----------- ----------- -----------
Income from Continuing Operations.......................... 4,294 3,364 7,658
Discontinued Operations
Income from operations of RTP net of income taxes........ 1,765 1,765
----------- ----------- ----------- -----------
Net Income................................................. $ 6,059 $ 3,364 $ -- $ 9,423
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings Per Common and Equivalent Share (G)...............
Income from continuing operations........................ $ 0.21 $ 0.20
Income from discontinued operations...................... 0.08 0.05
----------- -----------
Net income............................................... $ 0.29 $ 0.25
----------- -----------
----------- -----------
Common and equivalent shares outstanding................... 20,929 16,384(F) 37,313
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements
101
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
The pro forma adjustments with respect to the Elba Group acquisition have
been applied to the pro forma condensed combined balance sheet as if the
acquisition had taken place on October 3, 1997, or as of the beginning of the
periods presented in the case of the pro forma condensed combined statements of
operations for the fiscal year ended January 3, 1997 and the 39-week period
ended October 3, 1997. The adjustments are based upon currently available
information and certain estimates and assumptions described below.
The purchase price of the capital stock of the Elba Group was approximately
$28,500,000 in cash. Such purchase price is subject to reduction based upon a
post-closing audit. Direct transaction costs of $1,600,000 were also incurred.
The purchase price was funded by proceeds from two seven-year term loans
from First Union National Bank, London Branch in the aggregate principal amount
of 52 million Deutsche Marks, or approximately $28,500,000. The loans bear
interest at Libor plus .75%, or approximately 5.58%. Debt issue costs incurred
in connection with securing the loans were capitalized at approximately $100,000
and are being amortized over the lives of the loans. Amortization of such costs
was not reflected in the pro forma statements due to immateriality.
The land and buildings acquired were recorded at their estimated fair market
values based on the result of an independent appraisal. Pro forma adjustment for
depreciation expense was not presented due to immateriality. The excess of the
purchase price over the net assets acquired, after giving effect to the fair
market value for land and buildings, was recorded as goodwill to be amortized
over 20 years.
The following adjustments have been made in the unaudited pro forma
condensed combined statements to give effect to the Merger and the acquisition
of the Elba Group:
(A) To reflect conversion of Zytec's $12,000,000 Convertible Note into
1,166,666 shares of CPI Common Stock.
(B) To reflect the Merger using the pooling-of-interests accounting method
and the CPI Common Stock to be issued in connection with the Merger.
(C) To record amortization of goodwill based on a 20-year life in connection
with the acquisition of the Elba Group.
(D) To record interest expense on the debt incurred to finance the
acquisition of the Elba Group.
(E) To recognize the income tax effect of pro forma adjustments related to
the acquisition of the Elba Group.
(F) To reflect the effect of Zytec stock options outstanding and the shares
of CPI Common Stock to be issued in connection with the Merger.
(G) In 1994, the fully diluted earnings per share calculation produced
anti-dilutive results; therefore, amounts shown are the same as those included
under primary.
The pro forma results have been prepared for comparative purposes only and
do not purport to indicate what necessarily would have occurred had the entities
actually been acquired at the beginning of the periods presented or what results
may be in the future.
102
<PAGE>
EXPERTS
The restated audited consolidated financial statements of CPI incorporated
by reference in this Joint Proxy Statement/Prospectus have been audited by
Arthur Andersen LLP, independent certified public accountants, as indicated in
their report with respect thereto, and have been so incorporated in reliance
upon the authority of said firm as experts in giving said report.
The consolidated financial statements of Zytec incorporated by reference in
this Joint Proxy Statement/Prospectus from Zytec's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, have been audited by Coopers &
Lybrand L.L.P., independent accountants, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the shares of CPI Common Stock to be issued in connection
with the Merger will be passed upon for CPI by Hertzog, Calamari & Gleason, New
York, New York (in reliance upon an opinion of Bert Sager, Florida counsel to
CPI). Each of Stephen A. Ollendorff, Of Counsel to Hertzog, Calamari & Gleason,
and Bert Sager are directors of CPI. See "Directors of CPI" and "Security
Ownership of CPI-- Ownership by Management."
REPRESENTATIVES OF INDEPENDENT ACCOUNTANTS
Representatives of Arthur Andersen LLP and Coopers & Lybrand L.L.P. expect
to be present at the CPI Special Meeting and the Zytec Special Meeting,
respectively, and, while such representatives have stated that they do not plan
to make a statement at such Special Meetings, they will be available to respond
to appropriate questions from shareholders in attendance.
SHAREHOLDER PROPOSALS
Any CPI shareholder who wishes to submit a proposal for presentation to
CPI's 1998 Annual Meeting of Shareholders must submit the proposal to Computer
Products, Inc., 7900 Glades Road, Suite 500, Boca Raton, Florida 33434,
Attention: Secretary in advance of November 20, 1997 for inclusion, if
appropriate, in CPI's proxy statement and form of proxy relating to its 1998
Annual Meeting of Shareholders.
Any Zytec shareholder who wishes to submit a proposal for presentation to
Zytec's 1998 Annual Meeting of Shareholders (if the Merger has not been
consummated prior to the date the meeting is to be held) must submit the
proposal to Zytec Corporation, 7575 Market Place Drive, Eden Prairie, Minnesota
55344, Attention: Secretary in advance of November 25, 1997, for inclusion, if
appropriate, in Zytec's proxy statement and form of proxy relating to its 1998
Annual Meeting of Shareholders.
103
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ZYTEC CORPORATION,
COMPUTER PRODUCTS, INC.
AND
CPI ACQUISITION CORP.
DATED AS OF SEPTEMBER 2, 1997
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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<S> <C> <C> <C>
ARTICLE 1 The Merger....................................................................................... 2
Section 1.1. The Merger.............................................................. 2
Section 1.2. Effects of the Merger................................................... 2
Section 1.3. Effective Time of the Merger............................................ 2
Section 1.4. Directors............................................................... 3
Section 1.5. Officers................................................................ 3
Section 1.6. Tax and Accounting Consequences......................................... 3
Section 1.7. Taking of Necessary Action; Further Action.............................. 3
ARTICLE 2 Treatment of Shares.............................................................................. 3
Section 2.1. Effect of the Merger on Capital Stock................................... 3
Section 2.2. Dissenting Shares....................................................... 4
Section 2.3. Issuance of New Certificates............................................ 5
ARTICLE 3 The Closing...................................................................................... 8
Section 3.1. Closing................................................................. 8
ARTICLE 4 Representations and Warranties of Zytec.......................................................... 9
Section 4.1. Organization and Qualification.......................................... 9
Section 4.2. Subsidiaries; Interests in Other Persons................................ 9
Section 4.3. Capitalization.......................................................... 10
Section 4.4. Authority; Non-Contravention; Statutory Approvals; Compliance........... 10
Section 4.5. Reports and Financial Statements........................................ 13
Section 4.6. Absence of Certain Changes or Events.................................... 13
Section 4.7. Litigation.............................................................. 14
Section 4.8. Registration Statement and Proxy Statement.............................. 15
Section 4.9. Tax Matters............................................................. 15
Section 4.10. Employee Matters; ERISA................................................. 17
Section 4.11. Environmental Protection................................................ 20
Section 4.12. Vote Required........................................................... 22
Section 4.13. Accounting Matters...................................................... 22
Section 4.14. Applicability of Certain Minnesota Law.................................. 22
Section 4.15. Opinion of Financial Advisor............................................ 23
Section 4.16. Insurance............................................................... 23
Section 4.17. Ownership of CPI Common Stock........................................... 23
Section 4.18. Contracts............................................................... 23
Section 4.19. Intellectual Property................................................... 24
Section 4.20. Brokers................................................................. 24
Section 4.21. Certain Customers....................................................... 24
Section 4.22. Interested Party Transactions........................................... 24
Section 4.23. No Discussions Pending.................................................. 24
ARTICLE 5 Representations and Warranties of CPI............................................................ 25
Section 5.1. Organization and Qualification.......................................... 25
Section 5.2. Subsidiaries; Interests in Other Persons................................ 25
Section 5.3. Capitalization.......................................................... 26
Section 5.4. Authority; Non-Contravention; Statutory Approvals; Compliance........... 26
Section 5.5. Reports and Financial Statements........................................ 28
Section 5.6. Absence of Certain Changes or Events.................................... 29
Section 5.7. Litigation.............................................................. 29
Section 5.8. Registration Statement and Proxy Statement.............................. 30
Section 5.9. Tax Matters............................................................. 30
Section 5.10. Employee Matters; ERISA................................................. 31
Section 5.11. Environmental Protection................................................ 34
Section 5.12. Vote Required........................................................... 35
Section 5.13. Accounting Matters...................................................... 35
Section 5.14. Opinion of Financial Advisor............................................ 35
</TABLE>
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Section 5.15. Insurance............................................................... 35
Section 5.16. Ownership of Zytec Common Stock......................................... 36
Section 5.17. Contracts............................................................... 36
Section 5.18. Intellectual Property................................................... 36
Section 5.19. Brokers................................................................. 37
Section 5.20. Interested Party Transactions........................................... 37
Section 5.21. Certain Customers....................................................... 37
Section 5.22. No Discussions Pending.................................................. 37
ARTICLE 6 Conduct of Business Pending the Merger........................................................... 37
Section 6.1. Covenants of the Parties................................................ 37
ARTICLE 7 Additional Agreements............................................................................ 42
Section 7.1. Access to Information................................................... 42
Section 7.2. Joint Proxy Statement and Registration Statement........................ 43
Section 7.3. Regulatory Matters...................................................... 44
Section 7.4. Shareholder Approvals................................................... 44
Section 7.5. Directors' and Officers' Indemnification................................ 45
Section 7.6. Public Announcements.................................................... 47
Section 7.7. Rule 145 Affiliates..................................................... 47
Section 7.8. Credit for Prior Service................................................ 48
Section 7.9. Stock Option and Other Stock Plans...................................... 48
Section 7.10. No Solicitations........................................................ 50
Section 7.11. CPI Board of Directors.................................................. 51
Section 7.12. Expenses................................................................ 53
Section 7.13. Best Efforts............................................................ 53
ARTICLE 8 Conditions....................................................................................... 54
Section 8.1. Conditions to Each Party's Obligation to Effect The Merger.............. 54
Section 8.2. Conditions to Obligation of CPI to Effect the Merger.................... 55
Section 8.3. Conditions to Obligation of Zytec to Effect the Merger.................. 57
ARTICLE 9 Termination, Amendment and Waiver................................................................ 58
Section 9.1. Termination............................................................. 58
Section 9.2. Effect of Termination................................................... 61
Section 9.3. Termination Fee; Expenses............................................... 61
Section 9.4. Amendment............................................................... 63
Section 9.5. Waiver.................................................................. 63
ARTICLE 10 General Provisions.............................................................................. 64
Section 10.1. Non-Survival............................................................ 64
Section 10.2. Brokers................................................................. 64
Section 10.3. Notices................................................................. 64
Section 10.4. Miscellaneous........................................................... 65
Section 10.5. Interpretation; Definitions............................................. 65
Section 10.6. Counterparts; Effect.................................................... 66
Section 10.7. Enforcement............................................................. 66
Section 10.8. No Third Party Beneficiaries............................................ 66
Section 10.9. Assignment.............................................................. 67
</TABLE>
ii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
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<S> <C>
Acquisition Agreement...................................................................................... 50
affiliate.................................................................................................. 56
Affiliate.................................................................................................. 66
Affiliate Agreement........................................................................................ 47
affiliates................................................................................................. 47
Agreement.................................................................................................. 1
Articles of Merger......................................................................................... 2
Associate.................................................................................................. 66
Blue Sky Laws.............................................................................................. 12
Breach Payment............................................................................................. 61
Business Combination Proposal.............................................................................. 50
Cancelled Zytec Shares..................................................................................... 5
Certificates............................................................................................... 5
Closing.................................................................................................... 8
Closing Date............................................................................................... 8
COBRA...................................................................................................... 17
Code....................................................................................................... 3
Confidentiality Agreement.................................................................................. 42
Contracts.................................................................................................. 11
Convertible Note........................................................................................... 40
CPI........................................................................................................ 1
CPI Board.................................................................................................. 51
CPI Common Stock........................................................................................... 4
CPI Employee Plans......................................................................................... 31
CPI Intellectual Property Rights........................................................................... 36
CPI Material Adverse Effect................................................................................ 25
CPI Preferred Stock........................................................................................ 25
CPI Required Consents...................................................................................... 27
CPI SEC Reports............................................................................................ 28
CPI Shareholders' Approval................................................................................. 35
CPI Shares................................................................................................. 5
CPI Special Meeting........................................................................................ 45
CPI Statutory Approvals.................................................................................... 27
CPI Stock Option Plans..................................................................................... 26
CPI Stock Options.......................................................................................... 34
CPI Sub.................................................................................................... 1
CPI Subsidiary............................................................................................. 66
Dissenting Shares.......................................................................................... 4
Effective Time............................................................................................. 3
Employee Benefit Plan...................................................................................... 17
Employee Pension Benefit Plan.............................................................................. 18
Environmental Claim........................................................................................ 21
Environmental Laws......................................................................................... 21
Environmental Permits...................................................................................... 20
Equity Commitments......................................................................................... 10
ERISA...................................................................................................... 17
ERISA Affiliate............................................................................................ 31
ERISA Affiliate............................................................................................ 17
</TABLE>
iii
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<TABLE>
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Exchange Act............................................................................................... 12
<S> <C>
Exchange Agent............................................................................................. 5
Expenses................................................................................................... 61
Final Zytec Purchase Date.................................................................................. 49
GAAP....................................................................................................... 13
Governmental Authority..................................................................................... 12
Governmental Filings and Approvals......................................................................... 12
Hazardous Materials........................................................................................ 22
HSR Act.................................................................................................... 12
Indemnified Liabilities.................................................................................... 45
Indemnified Parties........................................................................................ 45
Indemnified Party.......................................................................................... 45
IRS........................................................................................................ 17
Joint Proxy/Registration Statement......................................................................... 43
Legal Proceedings.......................................................................................... 14
Legal Requirements......................................................................................... 11
Liens...................................................................................................... 9
MBCA....................................................................................................... 2
Merger..................................................................................................... 1
Merger Consideration....................................................................................... 6
Non-Competition Agreement.................................................................................. 1
Non-Solicitation Agreements................................................................................ 1
PBGC....................................................................................................... 18
PCBs....................................................................................................... 22
Permits.................................................................................................... 12
Person..................................................................................................... 65
Phase...................................................................................................... 49
Principal Shareholders..................................................................................... 51
Proxy Statement............................................................................................ 15
Ratio...................................................................................................... 4
Registration Statement..................................................................................... 15
Release.................................................................................................... 22
Representatives............................................................................................ 42
SEC........................................................................................................ 13
Securities Act............................................................................................. 12
Stock Plans................................................................................................ 48
Subsidiary................................................................................................. 65
Superior Business Combination Proposal..................................................................... 59
Surviving Corporation...................................................................................... 2
Tax Return................................................................................................. 16
Taxes...................................................................................................... 15
Termination Fee............................................................................................ 62
Total Amount............................................................................................... 51
Total Shares Received...................................................................................... 51
Treasury Regulations....................................................................................... 3
Violation.................................................................................................. 11
Voting Agreement........................................................................................... 1
Zytec...................................................................................................... 1
Zytec Common Stock......................................................................................... 4
Zytec Corporation.......................................................................................... 2
</TABLE>
iv
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Zytec Employee Plans....................................................................................... 17
<S> <C>
Zytec Intellectual Property Rights......................................................................... 24
Zytec Material Adverse Effect.............................................................................. 9
Zytec Option............................................................................................... 48
Zytec Required Consents.................................................................................... 11
Zytec SEC Reports.......................................................................................... 13
Zytec Shareholders' Approval............................................................................... 22
Zytec Special Meeting...................................................................................... 44
Zytec Statutory Approvals.................................................................................. 12
Zytec Stock Awards......................................................................................... 48
Zytec Stock Option Plans................................................................................... 10
Zytec Stock Options........................................................................................ 20
Zytec Subsidiary........................................................................................... 66
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 2,
1997, by and between Zytec Corporation, a Minnesota corporation ("Zytec"),
Computer Products, Inc., a Florida corporation ("CPI"), and CPI Acquisition
Corp., a Minnesota corporation and wholly-owned subsidiary of CPI ("CPI Sub").
WHEREAS, CPI and Zytec have determined to engage in a business combination;
WHEREAS, in furtherance thereof, the respective Boards of Directors of
Zytec, CPI and CPI Sub, and CPI acting as the sole shareholder of CPI Sub, have
approved the merger of CPI Sub with and into Zytec (the "Merger"), upon the
terms and conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Zytec and CPI have each
determined that the Merger and the other transactions contemplated hereby are in
the best interests of their respective corporations and their respective
shareholders and have adopted resolutions approving the Merger and recommending
to their respective shareholders to vote in favor of the Merger (and related
transactions) and the adoption of this Agreement in order to advance the
long-term business interests of CPI and Zytec;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as an inducement to CPI to enter into this Agreement, certain principal
shareholders of Zytec are entering into a voting agreement (the "Voting
Agreement") providing for, among other things, such shareholders to vote in
favor of the Merger;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as an inducement to CPI to enter into this Agreement, certain principal
shareholders of Zytec who are employed by Zytec are entering into
non-solicitation agreements (the "Non-Solicitation Agreements") and one of such
principal shareholders is entering into a non-competition agreement (the
"Non-Competition Agreement");
WHEREAS, it is intended that the parties hereto and their respective
shareholders recognize no gain or loss for United States Federal income tax
purposes as a result of the consummation of the Merger; and
WHEREAS, for financial reporting purposes it is intended that the Merger
will be accounted for as a pooling-of-interests transaction.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE 1
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.3 hereof), CPI
Sub shall be merged with and into Zytec in accordance with the provisions of the
Minnesota Business Corporation Act (the "MBCA"). Following the Effective Time,
the separate existence of CPI Sub shall cease and Zytec shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Minnesota. Notwithstanding
the foregoing, CPI may elect at any time prior to the Merger, instead of merging
CPI Sub into Zytec as provided above, to merge Zytec with and into CPI Sub. In
such event, the parties hereto agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing and, where appropriate, to provide
that the CPI Sub shall be the Surviving Corporation and will continue under the
name "Zytec Corporation." At the written election of CPI, any direct or indirect
wholly-owned CPI Subsidiary (as defined in Section 10.5 hereof) may be
substituted for CPI Sub as a constituent corporation in the Merger. In such
event, the parties hereto agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing.
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<PAGE>
Section 1.2. EFFECTS OF THE MERGER. At the Effective Time, (i) the articles
of incorporation of CPI Sub, as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation unless
and until thereafter amended as provided by applicable law or such articles of
incorporation, and (ii) the by-laws of CPI Sub, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving Corporation unless
and until thereafter amended as provided by applicable law, the articles of
incorporation of the Surviving Corporation or such by-laws. Subject to the
foregoing, additional effects of the Merger shall be as provided by the
applicable provisions (including Section 302A.641) of the MBCA.
Section 1.3. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, on or as soon as practicable after the Closing Date (as defined in
Section 3.1 hereof), articles of merger (the "Articles of Merger") complying
with the requirements of the MBCA shall be executed by Zytec and CPI Sub and
shall be filed with the Secretary of State of the State of Minnesota. The
parties hereto shall make all such other filings or recordings in connection
with the Merger when and as required under the MBCA and other applicable law.
The Merger shall become effective at the time the Articles of Merger are duly
filed with the Secretary of State of the State of Minnesota, or at such later
time or date specified in the Articles of Merger as CPI and Zytec shall agree
(the time and date that the Merger becomes effective being hereinafter referred
to as the "Effective Time").
Section 1.4. DIRECTORS. The directors of CPI Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
Section 1.5. OFFICERS. The individuals set forth on Schedule 1.5 hereto
shall be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
Section 1.6. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) qualify for accounting treatment as a pooling-of-interests. The parties
hereto hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations ("Treasury Regulations") promulgated under the Code.
Section 1.7. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of CPI, CPI
Sub and Zytec will take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession of all assets, property, rights, privileges, powers
and franchises of Zytec, the officers and directors of Zytec, CPI and CPI Sub
immediately prior to the Effective Time are hereby fully authorized in the name
of their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
ARTICLE 2
TREATMENT OF SHARES
Section 2.1. EFFECT OF THE MERGER ON CAPITAL STOCK. At the Effective Time,
by virtue of the Merger and without any action on the part of any holder of the
capital stock of Zytec or CPI Sub:
(i) CANCELLATION OF CERTAIN SHARES OF ZYTEC STOCK AND CPI OWNED STOCK. Each
share of Common Stock, no par value, of Zytec, ("Zytec Common Stock") that is
owned by Zytec Subsidiaries or by CPI, CPI Sub or any other CPI Subsidiaries (as
defined in Section 10.5 hereof) shall be cancelled and retired and cease to
exist, and no consideration shall be delivered in exchange therefor.
A-2
<PAGE>
(ii) CONVERSION OF ZYTEC COMMON STOCK. Each issued and outstanding share of
Zytec Common Stock (other than shares to be cancelled pursuant to Section 2.1(i)
hereof and Dissenting Shares as defined in Section 2.2 hereof) shall, subject to
Section 2.3(d) hereof, be converted into the right to receive 1.33 (the "Ratio")
(which amount will be proportionately adjusted for any stock split or stock
dividend effected between the date of this Agreement and the Effective Time)
fully paid and non-assessable shares of common stock, par value $.01 per share,
of CPI ("CPI Common Stock"). All such shares of Zytec Common Stock, when so
converted, shall no longer be outstanding and shall be cancelled and retired and
cease to exist, and each holder of a certificate formerly representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive the shares of CPI Common Stock to be issued in accordance with the Ratio
and any cash in lieu of fractional shares of CPI Common Stock to be issued or
paid in consideration therefor upon the surrender of such certificate in
accordance with Section 2.3(d) hereof, without interest, in consideration
therefor upon the surrender of such certificate in accordance with Section 2.3
hereof. Outstanding options to purchase Zytec Common Stock shall be converted
into options to acquire CPI Common Stock as provided in Section 7.9 hereof. If
not previously converted, at the Effective Time the Convertible Note (as defined
in Section 6.1(n) hereof) will be automatically modified, in accordance with the
terms of such Note, to be convertible into CPI Common Stock as provided in
Section 7.9 hereof.
(iii) TREATMENT OF CPI SUB STOCK. Each issued and outstanding share of
common stock, par value $.001, of CPI Sub shall be converted into and become one
fully paid and non-assessable share of Common Stock, par value $.001, of the
Surviving Corporation.
Section 2.2. DISSENTING SHARES. Shares of Zytec Common Stock held by any
holder entitled to relief as a dissenting shareholder under Sections 302A.471
and 302A.473 of the MBCA and who complies with all of the applicable provisions
thereof ("Dissenting Shares") shall not be converted, at the Effective Time,
into the right to receive CPI Common Stock pursuant to Section 2.1(ii) hereof,
but shall instead be cancelled and become the right only to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the applicable provisions of the MBCA. If any holder of Zytec
Common Stock attempts to exercise the rights provided by but does not comply
with all of the provisions of Sections 302A.471 and 302A.473 of the MBCA or
otherwise loses his rights under such Sections, then the Dissenting Shares held
by such holder shall be deemed to have been converted, as of the later of the
Effective Time or the occurrence of such event, into the right only to receive
the consideration set forth in Section 2.1(ii) hereof. Zytec shall give CPI
prompt notice of any demands made by holders of Dissenting Shares under the MBCA
and shall grant CPI the opportunity to participate in and direct all
negotiations and proceedings with respect to such demands. Zytec shall not,
without the prior written consent of CPI or as required by the MBCA, (i)
voluntarily make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands or (ii) take any action prescribed under
Section 302A.473 of the MBCA in respect of such demands other than the action
set forth under Subdivision 2 of such Section.
Section 2.3. ISSUANCE OF NEW CERTIFICATES.
(a) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable after the Effective
Time, CPI shall deposit with The Bank of New York, or such other recognized
financial institution as to which the parties hereto shall agree (the "Exchange
Agent"), for the benefit of the holders of Zytec Common Stock, certificates
representing the number of shares of CPI Common Stock required to effect the
issuances referred to in Section 2.1 hereof, together with cash payable in
respect of fractional shares pursuant to Section 2.3(d) hereof.
(b) ISSUANCE PROCEDURES. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates ("Certificates") which immediately prior to the Effective Time
represented outstanding shares of Zytec Common Stock ("Cancelled Zytec Shares")
that were cancelled and became instead the right to receive shares of CPI Common
Stock
A-3
<PAGE>
pursuant to Section 2.1(ii) hereof ("CPI Shares") (i) a letter of transmittal
(which shall specify that delivery of the Certificates shall be effected, and
risk of loss and title to the Certificates shall pass, only upon actual delivery
of the Certificates to the Exchange Agent and shall be in a form and have such
other provisions as CPI and Zytec may reasonably specify) and (ii) instructions
for use in effecting the surrender of Certificates representing Cancelled Zytec
Shares in exchange for certificates representing CPI Shares. Upon surrender of a
Certificate to the Exchange Agent for cancellation (or to such other agent or
agents as may be appointed by the agreement of CPI and Zytec), together with a
duly executed letter of transmittal and such other customary documents as may be
required by the aforesaid instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor, and the Exchange Agent shall issue
pursuant to instructions given by CPI, (A) certificates evidencing that number
of whole CPI Shares which such holder has the right to receive in accordance
with the Ratio in respect of the Cancelled Zytec Shares formerly represented by
such Certificate, (B) any dividends or other distributions to which such holder
is entitled pursuant to Section 2.3(c) hereof, and (C) cash in respect of
fractional shares as provided in Section 2.3(d) hereof (the CPI Shares,
dividends, distributions and cash being, collectively, the "Merger
Consideration"), and the Certificates so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of Cancelled Zytec Shares
which is not registered in the transfer records of Zytec, a certificate
representing the appropriate number of CPI Shares may be issued to a transferee
if the Certificate representing such Cancelled Zytec Shares is presented to the
Exchange Agent, accompanied by all documents required properly to evidence and
effect such transfer and by evidence satisfactory to the Exchange Agent (and
CPI) that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.3, each Certificate shall be deemed at any
time on and after the Effective Time to represent, subject to Section 2.3(c)
hereof, only the right to receive upon such surrender the number of CPI Shares
into which the Cancelled Zytec Shares represented by such Certificate shall have
been converted pursuant to Section 2.1(ii) hereof and any cash amount (in lieu
of any fractional shares of CPI Common Stock) provided by Section 2.3(d) hereof.
(c) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
CPI Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the CPI Shares
represented thereby pursuant to Section 2.1(ii) hereof and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.3(d) hereof unless and until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of unclaimed property, escheat
and other applicable laws, following surrender of any such Certificate, there
shall be paid to the record holder of whole CPI Shares issued in consideration
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of CPI Common Stock to which such
holder is entitled pursuant to Section 2.3(d) hereof and the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole CPI Shares and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole CPI Shares.
(d) NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, no certificates or scrip representing fractional shares of CPI Common
Stock shall be issued upon the surrender for exchange of Certificates and such
fractional shares shall not entitle the owner thereof to vote or to any other
rights of a holder of CPI Common Stock. Notwithstanding any other provision of
this Agreement, each holder of Zytec Common Stock who would otherwise have been
entitled to receive a fractional share of CPI Common Stock (after taking into
account all Certificates surrendered by such holder) shall be entitled to
receive a cash payment in lieu of such fractional share in an amount equal to
the product of such fraction multiplied by the average closing price per share
of CPI Common Stock as reported on The Nasdaq National Market on each of the ten
trading days immediately prior to the date on which the Effective Time occurs.
No interest will be paid or will accrue on the cash payable hereunder upon the
surrender of any Certificate.
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(e) BOOK ENTRY. Notwithstanding any other provision of this Agreement, the
letter of transmittal referred to in Section 2.3(b) hereof may, at the written
election thereof of CPI, provide for the ability of a holder of one or more
Certificates to elect that the CPI Shares to be received in exchange for the
Cancelled Zytec Shares formerly represented by such surrendered Certificates be
issued in uncertificated form.
(f) CLOSING OF TRANSFER BOOKS. From and after the Effective Time, the stock
transfer books of Zytec shall be irrevocably closed, and there shall be no
further registration of transfers of Zytec Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to CPI, they shall, subject to Section 2.2 hereof, be
cancelled and exchanged for certificates representing the appropriate number of
CPI Shares, as provided in Section 2.1 hereof and this Section 2.3.
(g) NO LIABILITY. At any time following one year after the Effective Time,
CPI shall be entitled to require the Exchange Agent to deliver to CPI any Merger
Consideration which had been made available to the Exchange Agent by or on
behalf of CPI and which has not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to CPI only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates. Notwithstanding the foregoing, neither CPI, CPI
Sub nor the Surviving Corporation shall be liable to any holder of Cancelled
Zytec Shares for any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(h) WITHHOLDING RIGHTS. CPI or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of Cancelled Zytec Shares such amounts as CPI or
the Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by CPI or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of Cancelled Zytec Shares in respect of which
such deduction and withholding was made by CPI or the Exchange Agent.
(i) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such CPI Shares as may be required
pursuant to Section 2.1(ii) hereof; PROVIDED, HOWEVER, that CPI may, in its
discretion, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond as indemnity against any claim that may be made against CPI or
the Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
ARTICLE 3
THE CLOSING
Section 3.1. CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of Winthrop & Weinstine, P.A., 3000 Dain Bosworth Plaza, 60
South Sixth Street, Minneapolis, Minnesota 55402 at 10:00 A.M., local time, on
the second business day immediately following the date on which the last of the
conditions set forth in ARTICLE 8 hereof is fulfilled or duly waived, or at such
other time, date and place as Zytec and CPI shall mutually agree (the "Closing
Date").
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ZYTEC
Zytec represents and warrants to CPI and CPI Sub as follows:
Section 4.1. ORGANIZATION AND QUALIFICATION. Except as set forth on Schedule
4.1 hereto, each of Zytec and each of the Zytec Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now being conducted.
Each of Zytec and the Zytec Subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and properties makes such
qualification necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed could not, individually or in the aggregate,
reasonably be expected to result in a material adverse effect on the business,
assets, condition (financial or otherwise), results of operations or prospects
of Zytec and the Zytec Subsidiaries, taken as a whole (a "Zytec Material Adverse
Effect") or prevent or materially delay the consummation of the Merger. True and
complete copies of the articles of incorporation and by-laws of Zytec, as in
full effect on the date hereof, have been furnished to CPI.
Section 4.2. SUBSIDIARIES; INTERESTS IN OTHER PERSONS. Schedule 4.2 hereto
sets forth a true and complete list of all Zytec Subsidiaries and other Persons
(as defined in Section 10.5 hereof) in which Zytec has a significant equity or
other ownership interest, including the name, state or country of organization
of each such Subsidiary or other Person and Zytec's interest therein. Except as
set forth on Schedule 4.2, all of the issued and outstanding shares of capital
stock of each Zytec Subsidiary are validly issued, fully paid, non-assessable
and free of preemptive rights, and are owned by Zytec free and clear of any
liens, claims, encumbrances, security interests, equities, charges
(collectively, "Liens") or limitations on Zytec's voting rights, voting trusts
or proxies. Except as set forth on Schedule 4.2, there are no outstanding
subscriptions, options, calls, contracts or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such Zytec Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment
(collectively, "Equity Commitments"). With respect to any Person in which Zytec
has an interest that is not a Zytec Subsidiary (i) except as set forth on
Schedule 4.2, neither Zytec nor any Zytec Subsidiary is liable, directly or
indirectly, for any obligations or liabilities of any such Person; and (ii)
neither Zytec nor any Zytec Subsidiary is obligated to redeem or otherwise
acquire any shares of such Person or to provide funds to or make any investments
in such Person in the form of loans, capital contributions or guarantees.
Section 4.3. CAPITALIZATION. The authorized capital stock of Zytec consists
solely of 25,000,000 shares of common stock, no par value. As of the close of
business on August 29, 1997, (i) there were issued and outstanding 9,539,377
shares of Zytec Common Stock and (ii) no shares of Zytec Common Stock were held
by Zytec Subsidiaries. Except as set forth on Schedule 4.3 hereto, there are no
outstanding Equity Commitments in respect of any of the capital stock or other
voting securities of Zytec. All of the issued and outstanding shares of capital
stock of Zytec are, and any shares of Zytec Common Stock issued pursuant to
Zytec Equity Commitments, including Zytec employee stock option plans (the
"Zytec Stock Option Plans"), will be, duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights. There are no outstanding
stock appreciation rights of Zytec or other rights of Zytec redeemable for cash.
Except as set forth on Schedule 4.3, there are no bonds, debentures, notes or
other indebtedness of Zytec having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of Zytec may vote. Except as set forth above, since August 29,
1997, no
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shares of capital stock or other voting securities of Zytec were issued,
reserved for issuance, issuable or outstanding.
Section 4.4. AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
(a) AUTHORITY. Zytec has all requisite power and authority to execute and
deliver this Agreement, and, subject to the Zytec Shareholders' Approval (as
defined in Section 4.12 hereof) and the Zytec Statutory Approvals (as defined in
Section 4.4(c) hereof), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by Zytec of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Zytec, subject only to obtaining the Zytec
Shareholders' Approval. This Agreement has been duly and validly executed and
delivered by Zytec and, assuming the due authorization, execution and delivery
hereof by the other signatories hereto, constitutes the valid and binding
obligation of Zytec enforceable against it in accordance with its terms, except
as such enforceability may be limited by (i) bankruptcy laws and other similar
laws affecting creditors' rights generally and (ii) general principles of
equity, regardless of whether asserted in a proceeding in equity or at law. The
Board of Directors of Zytec has determined that it is advisable and in the best
interest of Zytec's shareholders and Zytec for Zytec to effect the Merger upon
the terms and conditions of this Agreement and has unanimously approved and
recommended that Zytec's shareholders approve and adopt this Agreement and the
Merger. A committee of disinterested directors of Zytec constituted in
accordance with MBCA Section 302A.673(1)(d) separately, has unanimously approved
the transactions contemplated hereby and by the Voting Agreement.
(b) NON-CONTRAVENTION. Except as set forth on Schedule 4.4(b) hereto, the
execution and delivery of this Agreement by Zytec does not, and the consummation
of the transactions contemplated hereby will not violate, conflict with, or
result in a breach of any provision of, or constitute a default (with or without
notice or lapse of time or both) under, or result in the termination or
modification of, or accelerate the performance required by, or result in a right
of termination, cancellation, or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Zytec or any of the Zytec Subsidiaries (any such
violation, conflict, breach, default, right of termination, modification,
cancellation or acceleration, loss or creation, a "Violation" with respect to
Zytec, and such term when used in ARTICLE 5 hereof having a correlative meaning
with respect to CPI) pursuant to or under (i) except as provided in Section 1.2
hereof, the articles of incorporation, by-laws or similar constituent documents
of Zytec or any of the Zytec Subsidiaries, (ii) subject to obtaining the Zytec
Statutory Approvals and the receipt of the Zytec Shareholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license (collectively, "Legal Requirements") of any Governmental
Authority (as defined in Section 4.4(c) hereof) applicable to Zytec or any of
the Zytec Subsidiaries or (iii) subject to obtaining the third-party consents
set forth on Schedule 4.4(b) hereto (the "Zytec Required Consents"), any note,
bond, mortgage, indenture, deed of trust, license, franchise, contract, lease or
other instrument or agreement (collectively, "Contracts") to which Zytec or any
of the Zytec Subsidiaries is a party or by which it or any of its properties or
assets may be bound or affected, except for Violations that could not,
individually or in the aggregate, reasonably be expected to result in a Zytec
Material Adverse Effect or prevent or materially delay the consummation of the
Merger.
(c) STATUTORY APPROVALS. Other than for applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), state securities laws and
the applicable securities laws of any foreign country ("Blue Sky Laws"), the
pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the filing and
recordation of appropriate merger or other documents as required by the MBCA and
as set forth on Schedule 4.4(c) hereto, no declaration, filing or registration
with, or notice to or authorization, consent or approval (collectively,
"Governmental Filings and Approvals") of any court, Federal, state, local,
foreign or transnational governmental or regulatory agency, body
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(including a stock exchange or other self-regulatory body) or authority (each, a
"Governmental Authority") is necessary for the execution and delivery of this
Agreement by Zytec or the consummation by Zytec of the transactions contemplated
hereby, except where the failure to make or obtain such Governmental Filings and
Approvals could not, individually or in the aggregate, reasonably be expected to
result in a Zytec Material Adverse Effect or prevent or materially delay the
consummation of the Merger (the "Zytec Statutory Approvals").
(d) COMPLIANCE. Except as disclosed in the Zytec SEC Reports (as defined in
Section 4.5 hereof), Zytec and the Zytec Subsidiaries are in compliance with all
Legal Requirements of any Governmental Authority applicable to its business and
operations, except for instances of noncompliance that could not, individually
or in the aggregate, reasonably be expected to result in a Zytec Material
Adverse Effect or prevent or materially delay the consummation of the Merger.
Except as set forth on Schedule 4.4(d) hereto, Zytec and the Zytec Subsidiaries
have in effect all permits, licenses, franchises and other similar governmental
authorizations, consents and approvals (collectively, "Permits") necessary to
conduct their businesses as presently conducted, except for the failure to have
such Permits that could not, individually or in the aggregate, reasonably be
expected to result in a Zytec Material Adverse Effect. There has occurred no
default under any Permit, except for defaults under Permits that could not,
individually or in the aggregate, reasonably be expected to result in a Zytec
Material Adverse Effect. No investigation or review by any Governmental
Authority with respect to Zytec is pending or, to the best knowledge of Zytec,
threatened, nor has any Governmental Authority indicated an intention to conduct
any investigation or review, other than, in each case, those the outcome of
which could not, individually or in the aggregate, reasonably be expected to
result in a Zytec Material Adverse Effect or prevent or materially delay the
consummation of the Merger.
Section 4.5. REPORTS AND FINANCIAL STATEMENTS. All filings required to be
made, or otherwise made, by Zytec since January 1, 1995 through the date hereof
under the Securities Act and the Exchange Act have been filed with the
Securities and Exchange Commission (the "SEC"), including all forms, statements,
reports, and other documents (as such documents may have since the time of their
filing been amended or supplemented through the date hereof, the "Zytec SEC
Reports"). As of their respective filing dates, the Zytec SEC Reports (i)
complied in all material respects with the Securities Act or the Exchange Act,
as the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. To the extent so required by applicable law, such
Zytec SEC Reports have been subsequently updated and/or amended. Zytec "meets
the requirements for use of Form S-3" as such phrase is used in Instruction C of
Form S-3 under the Securities Act. The audited consolidated financial statements
and unaudited interim financial statements of Zytec included in the Zytec SEC
Reports complied as to form in all material respects with applicable accounting
rules and regulations of the SEC in respect thereto then in effect, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") then in effect (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q of the SEC) applied on a consistent basis and fairly present in all
material respects the consolidated financial positions of Zytec and its
Subsidiaries as of the dates thereof and the consolidated results of its
operations, cash flows and shareholders' equity for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring audit adjustments which were not material in amount. Except as set
forth in the Zytec SEC Reports and except for liabilities and obligations
incurred in the ordinary course of business consistent with past practice since
the date of the most recent consolidated balance sheet included in the Zytec SEC
Reports and that could not, individually or in the aggregate, reasonably be
expected to result in a Zytec Material Adverse Effect, Zytec does not have any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a balance sheet of Zytec or in
the notes thereto.
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Section 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Zytec SEC Reports or as set forth on Schedule 4.6 hereto, since December 31,
1996, Zytec and each of the Zytec Subsidiaries have conducted their business
only in the ordinary course of business consistent with past practice and there
has not been, insofar as reasonably can be foreseen, (i) a Zytec Material
Adverse Effect; (ii) any damage to, destruction or loss of any asset of Zytec or
of a Zytec Subsidiary (whether or not covered by insurance) that could
reasonably be expected to result in a Zytec Material Adverse Effect; (iii) any
material change by Zytec in its accounting methods, principles or practices;
(iv) any revaluation by Zytec of any of its or of a Zytec Subsidiary's assets
having a Zytec Material Adverse Effect; (v) any other action or event that would
have required the consent of CPI pursuant to ARTICLE 6 hereof had such action or
event occurred after the date of this Agreement and that could, individually or
in the aggregate, reasonably be expected to have a Zytec Material Adverse
Effect; (vi) any sale of a material amount of property or capital stock of Zytec
or any of its Subsidiaries taken as a whole, except in the ordinary course of
business; (vii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
Zytec's capital stock; (viii) any repurchase, redemption, split, combination or
reclassification of any of Zytec's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock; or (ix) (A) any granting by
Zytec to any officer of Zytec of any increase in compensation, except in the
ordinary course of business consistent with prior practice or as was required
under employment agreements in effect as of the date of the most recent audited
financial statements included in the Zytec SEC Reports, (B) any granting by
Zytec to any officer of any increase in severance or termination pay, except as
was required under any employment, severance or termination agreements in effect
as of the date of the most recent audited financial statements included in the
Zytec SEC Reports or (C) any entry by Zytec into any employment, severance or
termination agreement with any officer.
Section 4.7. LITIGATION. Except as disclosed in the Zytec SEC Reports or as
set forth on Schedule 4.7 hereto, there is no claim, suit, action or proceeding
(collectively, "Legal Proceedings") pending or, to the best knowledge of Zytec,
threatened against, relating to or affecting Zytec or any of the Zytec
Subsidiaries, except those that could not, individually or in the aggregate,
reasonably be expected to result in a Zytec Material Adverse Effect or prevent
or materially delay the consummation of the Merger, nor is there any judgment,
decree, injunction, rule or order of any Governmental Authority or arbitrator
outstanding against, relating to or affecting Zytec or any of the Zytec
Subsidiaries having, or which could reasonably be expected to have, any such
effects.
Section 4.8. REGISTRATION STATEMENT AND PROXY STATEMENT. Subject in all
respects to the accuracy of the representations of CPI set forth in Section 5.8
hereof, none of the information supplied or to be supplied by or on behalf of
Zytec for inclusion or incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by CPI in connection with the
issuance of shares of CPI Common Stock in the Merger (the "Registration
Statement") will, at the time the Registration Statement is filed with the SEC
and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and (ii) the joint proxy statement, in definitive form, relating to the meetings
of Zytec and CPI shareholders to be held in connection with the Merger and the
related transactions (the "Proxy Statement") will not, at the dates mailed to
such shareholders and at the times of the meetings of shareholders to be held in
connection with the Merger and the related transactions, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the meetings of Zytec's and
CPI's shareholders which has become false or misleading. If, at any time prior
to the Effective Time, any event relating to Zytec or any of its Subsidiaries,
Affiliates (as defined in Section 10.5 hereof), Associates (as defined in
Section 10.5 hereof), officers or directors is discovered by Zytec which should
be set forth in an amendment to the Registration Statement or a supplement to
the Proxy Statement, Zytec shall promptly
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inform CPI. Notwithstanding the foregoing, Zytec makes no representation or
warranty with respect to any information supplied by or on behalf of CPI which
is contained in or furnished in connection with the preparation of the
Registration Statement or the Proxy Statement. The Registration Statement and
the Proxy Statement will comply as to form in all material respects with the
respective provisions of the Securities Act and the Exchange Act and the rules
and regulations thereunder.
Section 4.9. TAX MATTERS.
(a) "Taxes", as used in this Agreement, means any United States Federal,
state, county, local, transnational or foreign taxes, charges, fees, levies, or
other assessments, including all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom duties,
severance or withholding taxes or charges imposed by any Governmental Authority
and includes any interest and penalties (civil or criminal) on or additions to
any such taxes. "Tax Return", as used in this Agreement, means report, return or
other information required to be supplied to a Governmental Authority with
respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of Persons that includes Zytec or any of its
Subsidiaries, or CPI or any of its Subsidiaries, as the case may be.
(b) Except as set forth in the Zytec SEC Reports or as set forth on Schedule
4.9 hereto: (i) Zytec and each of the Zytec Subsidiaries have filed (or there
has been filed on its behalf) all material Tax Returns required to be filed by
each of them under applicable law and all such Tax Returns were and are in all
material respects complete and correct and were filed on a timely basis, (ii)
Zytec and each of the Zytec Subsidiaries have, within the time and in the manner
prescribed by applicable law, paid all Taxes that were due and payable except
for those contested in good faith and for which adequate reserves have been
taken, and except where any failure to make such payment would not be reasonably
likely to have a Zytec Material Adverse Effect, (iii) Zytec and the Zytec
Subsidiaries have established on their books and records reserves adequate to
pay all unpaid Taxes in accordance with GAAP, (iv) Zytec and each of the Zytec
Subsidiaries have withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, customer, creditor or other Person, except where any failure to make
such withholding would not be reasonably likely to have a Zytec Material Adverse
Effect, (v) neither Zytec nor any of the Zytec Subsidiaries has executed any
outstanding waivers, extensions or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or Tax Returns except
with respect to the 1989-1992 tax years with respect to which Zytec filed a
Federal Form 1120X solely for the purpose of attaching a protective claim
regarding research and experimentation tax credits for such years, (vi) no
audits or other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of Zytec or any of the Zytec
Subsidiaries, and there is (A) no deficiency for any Taxes proposed, asserted or
assessed against Zytec or any of the Zytec Subsidiaries that has not been
resolved and paid in full and (B) no dispute or claim concerning any Tax
liability of Zytec or any Zytec Subsidiary either (x) claimed or raised in
writing by any Governmental Authority or (y) as to which any officer, director
or employee of Zytec or any Zytec Subsidiary who is responsible for Tax matters
has knowledge, (vii) Zytec has made available to CPI complete and accurate
copies of all audit reports, tax rulings and closing agreements received from
any Governmental Authority in any jurisdiction relating to any Tax Return filed
by Zytec or any of the Zytec Subsidiaries as well as all material Tax Returns
and 1996 tax provision work papers and (viii) neither Zytec nor any of the Zytec
Subsidiaries has any liability for Taxes of any Person other than Zytec and the
Zytec Subsidiaries under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.
Section 4.10. EMPLOYEE MATTERS; ERISA.
(a) BENEFIT PLANS. For purposes of this Agreement, "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended, "Employee Benefit
Plan" shall mean any employee
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benefit plan as defined in Section 3(3) of ERISA (including comparable plans
subject to the laws of foreign jurisdictions) or other material fringe benefit,
retirement, bonus, option, stock purchase, or incentive plan or program and for
purposes of this Section 4.10, "ERISA Affiliate" shall mean any entity which is
or, at any time within the preceding six years has been treated as a single
employer with Zytec or any Zytec Subsidiaries for purposes of Code Section 414.
Zytec has made or will make available to CPI true and complete copies of the
plan document and summary plan description, the most recent determination letter
received from the Internal Revenue Service (the "IRS"), the most recent Form
5500 Annual Report, and all related trust agreements, insurance contracts, and
other funding agreements which implement each Employee Benefit Plan currently
maintained, contributed to, or required to be contributed to by Zytec, any of
the Zytec Subsidiaries, or any ERISA Affiliate thereof (collectively, the "Zytec
Employee Plans"). Each of the Zytec Employee Plans (and each related trust,
insurance contract, or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, securities, and
other applicable Federal, state and foreign laws. All required reports
(including Form 5500 Annual Reports, summary annual reports, PBGC-1s and summary
plan descriptions) have been, to Zytec's best knowledge, timely filed and
distributed appropriately with respect to each Zytec Employee Plan. The material
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), have been met with respect to each Zytec Employee Plan which
is an employee welfare benefit plan within the meaning of Section 3(1) of ERISA.
(b) NO MULTIEMPLOYER PLANS, ETC. To the best knowledge of Zytec, there have
been no "prohibited transactions" (within the meaning of ERISA Section 406 and
Code Section 4975) with respect to any Zytec Employee Plan which is an Employee
Pension Benefit Plan within the meaning of Section 3(2) of ERISA (an "Employee
Pension Benefit Plan") that has been maintained or contributed to within the
past five years. No fiduciary of any such Employee Benefit Plan has, to Zytec's
best knowledge, any liability for breach of fiduciary duty or any other failure
to act or comply in connection with the administration or investment of the
assets of any such Plan. Neither Zytec nor any of its ERISA Affiliates
contributes to, ever has contributed to, or has been required to contribute to
any Multiemployer Plan (within the meaning of Section 3(37) of ERISA) or has any
liability under any such Multiemployer Plan. No Zytec Employee Plan that has
been maintained or contributed to within the past five years which is an
Employee Pension Benefit Plan has been completely or partially terminated or
been the subject of a "reportable event" within the meaning of ERISA Section
4043 as to which notices would be required to be filed with the Pension Benefit
Guarantee Corporation (the "PBGC"). No proceeding by the PBGC to terminate any
such Employee Pension Benefit Plan has been instituted.
(c) STATUS. Each Employee Pension Benefit Plan of Zytec or its Subsidiaries
meets the requirements of a "qualified plan" under Code Section 401(a), and has
received an applicable favorable determination letter from the IRS that it is a
"qualified plan" which letter has not been subsequently modified or withdrawn.
No Zytec Employee Plan is currently under investigation, audit or review by the
IRS, nor is such action contemplated, and the IRS has not asserted that any
Employee Pension Benefit Plan of Zytec or its Subsidiaries is not qualified
under Section 401(a) of the Code or that any trust established under any
Employee Pension Benefit Plan of Zytec or its Subsidiaries is not exempt under
Section 501(a) of the Code.
(d) NO LIABILITIES. With respect to each Employee Pension Benefit Plan of
Zytec or its Subsidiaries which is a defined benefit plan under Section 414(j)
of the Code and each defined contribution plan under Section 414(i) of the Code:
(i) no material liability to the PBGC under Sections 4061-4064 of ERISA has been
incurred by Zytec or the Zytec Subsidiaries and all premiums due and owing to
the PBGC have been timely paid, (ii) no event has occurred or, to Zytec's best
knowledge, is threatened or is about to occur which would constitute a
reportable event within the meaning of Section 4043(c) of ERISA for which
reporting has not been made and (iii) no Employee Pension Benefit Plan of Zytec
or its Subsidiaries has any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code) for which a waiver has not
been obtained. Zytec and its ERISA Affiliates have made all required
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contributions to the Zytec Employee Plans as of the last day of each such Plan's
most recent fiscal year, and all accrued benefits, under any unfunded Zytec
Employee Plan have been paid, accrued or otherwise adequately reserved for in
accordance with GAAP.
(e) OTHER ARRANGEMENTS. Except as disclosed in the Zytec SEC Reports or as
set forth on Schedule 4.10(e) hereto, there are no material employee benefit,
welfare or compensation plans or arrangements (written or oral) covering current
or former directors, officers of employees of Zytec which are not Zytec Employee
Plans. Each Zytec Employee Plan (or comparable arrangement) maintained with
respect to Zytec's facilities and operations outside the United States has been
operated, in all material respects, with applicable local law, and no such plan
or arrangement has any material unfunded liability.
(f) PAYMENTS RESULTING FROM MERGER. (i) The consummation or announcement of
any transaction contemplated by this Agreement will not (either alone or upon
the occurrence of any additional or further acts or events) result in any (A)
payment (whether of severance pay, "change of control payment" (including any
gross-up payments) or otherwise) becoming due from Zytec or any of the Zytec
Subsidiaries or any successor thereof to any officer, employee, former employee
or director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (B) benefit under any Zytec Employee Plan or Zytec Benefit
Arrangement being established or becoming accelerated, vested or payable and
(ii) neither Zytec nor any of the Zytec Subsidiaries is a party to (A) any
management, employment, deferred compensation, severance (including any payment,
right or benefit resulting from a change in control), bonus or other contract
for personal services with any officer, director or employee, (B) any consulting
contract with any Person who prior to entering into such contract was a director
or officer of Zytec, or (C) any plan, agreement, arrangement or understanding
similar to any of the foregoing which would result in any payments as a result
of the Merger or the other transactions contemplated by this Agreement.
(g) LABOR AGREEMENTS. Neither Zytec nor any of the Zytec Subsidiaries is a
party to any collective bargaining agreement or other labor agreement with any
union or labor organization. To the best knowledge of Zytec, there is no current
union representation question involving employees of Zytec or any of the Zytec
Subsidiaries, nor does Zytec know of any activity or proceeding of any labor
organization (or representative thereof) or employee group to organize any such
employees. Except as disclosed in the Zytec SEC Reports or as set forth on
Schedule 4.10(g) hereto, (i) there is no unfair labor practice, employment
discrimination or other material complaint against Zytec or any of the Zytec
Subsidiaries pending, or to the best knowledge of Zytec, threatened, (ii) there
is no strike or lockout or material dispute, slowdown or work stoppage pending,
or to the best knowledge of Zytec, threatened, against or involving Zytec, and
(iii) there is no Legal Proceeding pending or, to the best knowledge of Zytec,
threatened, in respect of which any director, officer, employee or agent of
Zytec or any of the Zytec Subsidiaries is or may be entitled to claim
indemnification from Zytec or such Zytec Subsidiary pursuant to their respective
articles of incorporation or by-laws or other similar constituent documents or
as provided in any indemnification agreements.
(h) STOCK OPTIONS. Schedule 4.10(h) hereto sets forth the number of all
outstanding stock options granted pursuant to the Zytec Stock Option Plans (the
"Zytec Stock Options"), as of August 29, 1997. None of the outstanding Zytec
stock options as of the date of this Agreement contain, and no outstanding stock
options of Zytec immediately prior to the Effective Time will contain, any
provision providing for acceleration of, waiver of any conditions to, or vesting
of any options or other awards as a result of the transactions contemplated
hereby.
Section 4.11. ENVIRONMENTAL PROTECTION. Except as disclosed in the Zytec SEC
Reports or as set forth on Schedule 4.11 hereto:
(a) COMPLIANCE; PERMITS. Zytec and each of the Zytec Subsidiaries is in
compliance with all applicable Environmental Laws (as defined in Section
4.11(e)(ii) hereof), except for noncompliance which could not, individually or
in the aggregate, reasonably be expected to result in a Zytec Material Adverse
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Effect. Zytec and each of the Zytec Subsidiaries has obtained or has applied for
all material environmental, health and safety Permits (collectively, the
"Environmental Permits") necessary for the conduct of their operations, and all
such Environmental Permits are in good standing or, where applicable, a renewal
application has been timely filed and is pending agency or other governmental
approval, and Zytec and the Zytec Subsidiaries are in compliance with all terms
and conditions of the Environmental Permits, except for noncompliance which
could not, individually or in the aggregate, reasonably be expected to result in
a Zytec Material Adverse Effect.
(b) ENVIRONMENTAL CLAIMS. To the best knowledge of Zytec, there is no
Environmental Claim (as defined in Section 4.11(e)(i) hereof) pending (i)
against Zytec or any of the Zytec Subsidiaries, (ii) against any Person whose
liability for any Environmental Claim has been retained or assumed by Zytec or
any of the Zytec Subsidiaries either contractually or by operation of law, or
(iii) against any real or personal property or operations which Zytec or any of
the Zytec Subsidiaries owns, leases or manages, in whole or in part, except for
any such Claims which could not, individually or in the aggregate, reasonably be
expected to result in a Zytec Material Adverse Effect.
(c) RELEASES. There has been no Release (as defined in Section 4.11(e)(iv)
hereof) of any Hazardous Material (as defined in Section 4.11(e)(iii) hereof)
that could be reasonably likely to form the basis of any Environmental Claim
against Zytec or any of the Zytec Subsidiaries, or against any Person whose
liability for any Environmental Claim has been retained or assumed by Zytec or
any of the Zytec Subsidiaries either contractually or by operation of law,
except for any Releases which could not, individually or in the aggregate,
reasonably be expected to result in a Zytec Material Adverse Effect.
(d) PREDECESSORS. Zytec has no knowledge, with respect to any predecessor of
Zytec or any of the Zytec Subsidiaries, of any Environmental Claim pending or
threatened, or of any Release of Hazardous Materials that could be reasonably
likely to form the basis of any Environmental Claim, except for those which
could not, individually or in the aggregate, reasonably be expected to result in
a Zytec Material Adverse Effect.
(e) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
Liens, investigations, proceedings or notices of noncompliance or violation
(written or oral) by any Person (or any Governmental Authority) alleging
potential liability (including liability for enforcement, investigatory
costs, cleanup costs, governmental response costs, removal costs, remedial
costs, natural resources damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from (A) the presence, or
Release or threatened Release into the environment, of any Hazardous
Materials at any location, whether or not owned, operated, leased or managed
by Zytec or any of the Zytec Subsidiaries (for purposes of this Section
4.11), or by CPI or any of the CPI Subsidiaries (for purposes of Section
5.11 hereof); or (B) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief resulting from the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all Federal, state, transnational,
foreign, or local Legal Requirements relating to pollution, the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or protection of human health as it
relates to the environment including, without limitation, Legal Requirements
relating to Releases or threatened Releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means any pollutant, contaminant, hazardous,
radioactive or toxic substance, material, constituent or waste, or any other
waste, substance, chemical or material regulated under any Environmental
Law, including (1) petroleum, crude oil and any fractions thereof,
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(2) natural gas, synthetic gas and any mixtures thereof, (3) asbestos and/or
asbestos-containing material, (4) radon and (5) polychlorinated biphenyls
("PCBs"), or materials or fluids containing PCBs.
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
Section 4.12. VOTE REQUIRED. The approval of this Agreement by the holders
of a majority of the outstanding shares of Zytec Common Stock (the "Zytec
Shareholders' Approval") is the only vote of the holders of any of the capital
stock of Zytec required to approve this Agreement, the Merger and the other
transactions contemplated hereby.
Section 4.13. ACCOUNTING MATTERS. Neither Zytec nor, to Zytec's best
knowledge, any of its Affiliates has taken or agreed to take any action that
would prevent CPI from accounting for the transactions to be effected pursuant
to this Agreement as a pooling-of-interests in accordance with GAAP and
applicable SEC regulations.
Section 4.14. APPLICABILITY OF CERTAIN MINNESOTA LAW. Assuming the
representation and warranty of CPI made in Section 5.16 hereof is correct, none
of the control share acquisition provisions of Section 302A.671 of the MBCA, the
business combination and fair price provisions of Sections 302A.673 and 302A.675
of the MBCA or any similar provisions of the MBCA (or, to the best knowledge of
Zytec, any other similar statute) are applicable to the transactions
contemplated by this Agreement, including execution and performance by certain
Zytec shareholders of the Voting Agreement.
Section 4.15. OPINION OF FINANCIAL ADVISOR. Zytec's Board of Directors has
received the oral opinion of Needham & Company, Inc., dated the date of this
Agreement, an executed copy of which opinion will be delivered to CPI promptly
after receipt thereof by Zytec, to the effect that, as of such date, the Ratio
was fair from a financial point of view to the holders of Zytec Common Stock.
Section 4.16. INSURANCE. Except as set forth on Schedule 4.16 hereto, Zytec
and each of the Zytec Subsidiaries is, and has been continuously since January
1, 1992, insured with financially responsible insurers in such amounts and
against such risks and losses as are reasonable and customary for companies
conducting the business as conducted by Zytec and the Zytec Subsidiaries during
such time period. Except as set forth on Schedule 4.16, neither Zytec nor any of
the Zytec Subsidiaries has received any notice of cancellation or termination
with respect to any insurance policy of Zytec or any of the Zytec Subsidiaries
which could reasonably be expected to result in a Zytec Material Adverse Effect.
The material insurance policies of Zytec and each of the Zytec Subsidiaries are
valid and enforceable policies in all material respects and will not terminate
due to, or upon, the consummation of the Merger.
Section 4.17. OWNERSHIP OF CPI COMMON STOCK. Zytec does not "beneficially
own" (as such term is defined for purposes of Section 13(d) of the Exchange Act)
any shares of CPI Common Stock.
Section 4.18. CONTRACTS. Except as disclosed in the Zytec SEC Reports or as
set forth on Schedule 4.18 hereto and copies of which were delivered or made (or
will be made) available to CPI, there are no Contracts that are material to the
business, financial condition or results of operations of Zytec. Neither Zytec
nor any of the Zytec Subsidiaries is in violation of or default under (nor does
there exist any condition which upon the passage of time or the giving of notice
or both would cause such a violation of or default under) any Contract to which
it is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that could not, individually or in the aggregate,
reasonably be expected to result in a Zytec Material Adverse Effect.
Section 4.19. INTELLECTUAL PROPERTY. Except as disclosed in the Zytec SEC
Reports, Zytec or a Zytec Subsidiary owns or is validly licensed or otherwise
has the right to use all patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, service marks, service mark rights, copyrights
and other intellectual property rights and computer programs that are material
to the conduct of the
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business of Zytec and the Zytec Subsidiaries as now operated, taken as a whole
(collectively, "Zytec Intellectual Property Rights"). Except as disclosed in the
Zytec SEC Reports or as set forth on Schedule 4.19 hereto, (i) no claims are
pending or, to the best knowledge of Zytec, threatened that Zytec or a Zytec
Subsidiary is infringing or otherwise adversely affecting the material rights of
any Person and (ii) to the best knowledge of Zytec, no Person is infringing the
rights of Zytec or any Zytec Subsidiary with respect to any material item of
Zytec Intellectual Property Rights.
Section 4.20. BROKERS. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission, other than with respect to the opinion delivered
pursuant to Section 4.15 hereof, in connection with the transactions
contemplated by this Agreement.
Section 4.21. CERTAIN CUSTOMERS. Zytec has received no notice that any of
Zytec's five largest customers (by dollar volume) expects to materially reduce
or terminate its business with Zytec by reason of the transactions contemplated
by this Agreement or for any other reason whatsoever. No such customer is
currently in default under any material obligations or liabilities owed to
Zytec.
Section 4.22. INTERESTED PARTY TRANSACTIONS. Except for transactions
described in the Zytec SEC Reports, no event has occurred that would be required
to be reported as a Certain Relationship or Related Transaction pursuant to Item
404 of Regulation S-K promulgated by the SEC.
Section 4.23. NO DISCUSSIONS PENDING. Zytec is not engaged, directly or
indirectly, in any discussions or negotiations with any Person other than CPI
with respect to a Business Combination Proposal (as defined in Section 7.10(a)
hereof).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CPI
CPI represents and warrants to Zytec as follows:
Section 5.1. ORGANIZATION AND QUALIFICATION. Except as set forth on Schedule
5.1 hereto, each of CPI and each of the CPI Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now being conducted.
Each of CPI and the CPI Subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and properties makes such
qualification necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed could not, individually or in the aggregate,
reasonably be expected to result in a material adverse effect on the business,
assets, condition (financial or otherwise), results of operations or prospects
of CPI and the CPI Subsidiaries, taken as a whole (a "CPI Material Adverse
Effect") or prevent or materially delay the consummation of the Merger. True and
complete copies of the articles of incorporation and by-laws of CPI, as in full
effect on the date hereof, have been furnished to Zytec.
Section 5.2. SUBSIDIARIES; INTERESTS IN OTHER PERSONS. Schedule 5.2 hereto
sets forth a true and complete list of all CPI Subsidiaries and other Persons in
which CPI has a significant equity or other ownership interest, including the
name, state or country of organization of each such Subsidiary or other Person
and CPI's interest therein. Except as set forth on Schedule 5.2, all of the
issued and outstanding shares of capital stock of each CPI Subsidiary are
validly issued, fully paid, non-assessable and free of preemptive rights, and
are owned by CPI free and clear of any Liens or limitations on CPI's voting
rights, voting trusts or proxies and there are no Equity Commitments in respect
of such Subsidiaries' capital stock. With respect to any Person in which CPI has
an interest that is not a CPI Subsidiary (i) except as set forth on Schedule
5.2, neither CPI nor any CPI Subsidiary is liable, directly or indirectly, for
any obligations or liabilities of any such Person; and (ii) neither CPI nor any
CPI Subsidiary is obligated to redeem or otherwise acquire any shares of such
Person or to provide funds to or make any investments in such Person in the form
of loans, capital contributions or guarantees.
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Section 5.3. CAPITALIZATION. The authorized capital stock of CPI consists
solely of 80,000,000 shares of common stock, par value $.01 per share, and
1,000,000 shares of preferred stock, par value $.01 per share (the "CPI
Preferred Stock"). As of the close of business on August 29, 1997, (i) there
were issued and outstanding 24,292,059 shares of CPI Common Stock and no shares
of CPI Preferred Stock, and (ii) no shares of CPI Common Stock were held in
treasury or by CPI Subsidiaries. Except as set forth on Schedule 5.3 hereto,
there are no outstanding Equity Commitments in respect of any of the capital
stock or other voting securities of CPI. All of the issued and outstanding
shares of capital stock of CPI are, and any shares of CPI Common Stock issued
pursuant to CPI Equity Commitments, including CPI employee stock option plans
(the "CPI Stock Option Plans"), will be, duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights. There are no outstanding
stock appreciation rights of CPI or other rights of CPI redeemable for cash.
Except as set forth on Schedule 5.3, there are no bonds, debentures, notes or
other indebtedness of CPI having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of CPI may vote. Except as set forth above, since August 29, 1997,
no shares of capital stock or other voting securities of CPI were issued,
reserved for issuance, issuable or outstanding.
Section 5.4. AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
(a) AUTHORITY. CPI has all requisite power and authority to execute and
deliver this Agreement, and, subject to the CPI Shareholders' Approval (as
defined in Section 5.12 hereof) and the CPI Statutory Approvals (as defined in
Section 5.4(c) hereof), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by CPI of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of CPI, subject only to obtaining the CPI
Shareholders' Approval. This Agreement has been duly and validly executed and
delivered by CPI and, assuming the due authorization, execution and delivery
hereof by the other signatories hereto, constitutes the valid and binding
obligation of CPI enforceable against it in accordance with its terms, except as
such enforceability may be limited by (i) bankruptcy laws and other similar laws
affecting creditors' rights generally and (ii) general principles of equity,
regardless of whether asserted in a proceeding in equity or at law. The Board of
Directors of CPI has determined that it is advisable and in the best interest of
CPI's shareholders and CPI for CPI to effect the Merger upon the terms and
conditions of this Agreement and has unanimously approved and recommended that
CPI's shareholders approve the issuance of CPI Common Stock in connection with
the Merger.
(b) NON-CONTRAVENTION. Except as set forth on Schedule 5.4(b) hereto, the
execution and delivery of this Agreement by CPI does not, and the consummation
of the transactions contemplated hereby will not result in a Violation pursuant
to or default under (i) the articles of incorporation, by-laws or similar
constituent documents of CPI or any of the CPI Subsidiaries, (ii) subject to
obtaining the CPI Statutory Approvals and the receipt of the CPI Shareholders'
Approval, any Legal Requirement of any Governmental Authority applicable to CPI
or any of the CPI Subsidiaries or (iii) subject to obtaining the third-party
consents set forth on Schedule 5.4(b) hereto (the "CPI Required Consents"), any
Contract to which CPI or any of the CPI Subsidiaries is a party or by which it
or any of its properties or assets may be bound or affected, except for
Violations that could not, individually or in the aggregate, reasonably be
expected to result in a CPI Material Adverse Effect or prevent or materially
delay the consummation of the Merger.
(c) STATUTORY APPROVALS. Other than for applicable requirements, if any, of
the Securities Act, the Exchange Act, Blue Sky Laws, the HSR Act, The Nasdaq
Stock Market, and the filing and recordation of appropriate merger or other
documents as required by the MBCA and as set forth on Schedule 5.4(c) hereto, no
Governmental Filings and Approvals of any Governmental Authority is necessary
for the execution and delivery of this Agreement by CPI or the consummation by
CPI of the transactions contemplated hereby, except where the failure to make or
obtain such Governmental Filings and Approvals could not, individually or in the
aggregate, reasonably be expected to result in a CPI
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Material Adverse Effect or prevent or materially delay the consummation of the
Merger (the "CPI Statutory Approvals").
(d) COMPLIANCE. Except as disclosed in the CPI SEC Reports (as defined in
Section 5.5 hereof), CPI and the CPI Subsidiaries are in compliance with all
Legal Requirements of any Governmental Authority applicable to its business and
operations, except for instances of noncompliance that could not, individually
or in the aggregate, reasonably be expected to result in a CPI Material Adverse
Effect or prevent or materially delay the consummation of the Merger. Except as
set forth on Schedule 5.4(d) hereto, CPI and the CPI Subsidiaries have in effect
all Permits necessary to conduct their businesses as presently conducted, except
for the failure to have such Permits that could not, individually or in the
aggregate, reasonably be expected to result in a CPI Material Adverse Effect.
There has occurred no default under any Permit, except for defaults under
Permits that could not, individually or in the aggregate, reasonably be expected
to result in a CPI Material Adverse Effect. No investigation or review by any
Governmental Authority with respect to CPI is pending or, to the best knowledge
of CPI, threatened, nor has any Governmental Authority indicated an intention to
conduct any investigation or review, other than, in each case, those the outcome
of which could not, individually or in the aggregate, reasonably be expected to
result in a CPI Material Adverse Effect or prevent or materially delay the
consummation of the Merger.
Section 5.5. REPORTS AND FINANCIAL STATEMENTS. All filings required to be
made, or otherwise made, by CPI since January 1, 1995 through the date hereof
under the Securities Act and the Exchange Act, have been filed with the SEC,
including all forms, statements, reports and other documents (as such documents
may have since the time of their filing been amended or supplemented through the
date hereof, the "CPI SEC Reports"). As of their respective filing dates, the
CPI SEC Reports (i) complied in all material respects with the Securities Act or
the Exchange Act, as the case may be, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. To the extent so
required by applicable law, such CPI SEC Reports have been subsequently updated
and/or amended. CPI "meets the requirements for use of Form S-3" as such phrase
is used in Instruction C of Form S-3 under the Securities Act. The audited
consolidated financial statements and unaudited interim financial statements of
CPI included in the CPI SEC Reports complied as to form in all material respects
with applicable accounting rules and regulations of the SEC in respect thereto
then in effect, have been prepared in accordance with GAAP then in effect
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q of the SEC) applied on
a consistent basis and fairly present in all material respects the consolidated
financial positions of CPI and its Subsidiaries as of the dates thereof and the
consolidated results of its operations, cash flows and shareholders' equity for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring audit adjustments which were not material in
amount. Except as set forth in the CPI SEC Reports and except for liabilities
and obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent consolidated balance sheet included
in the CPI SEC Reports and that could not, individually or in the aggregate,
reasonably be expected to result in a CPI Material Adverse Effect, CPI does not
have any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a balance sheet of
CPI or in the notes thereto.
Section 5.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the CPI SEC Reports or as set forth on Schedule 5.6 hereto, since January 3,
1997, CPI and each of the CPI Subsidiaries have conducted their business only in
the ordinary course of business consistent with past practice and there has not
been, insofar as reasonably can be foreseen, (i) a CPI Material Adverse Effect;
(ii) any damage to, destruction or loss of any asset of CPI or of a CPI
Subsidiary (whether or not covered by insurance) that could reasonably be
expected to result in a CPI Material Adverse Effect; (iii) any material change
by CPI in its accounting methods, principles or practices; (iv) any revaluation
by CPI of
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any of its or of a CPI Subsidiary's assets having a CPI Material Adverse Effect;
(v) any other action or event that would have required the consent of Zytec
pursuant to ARTICLE 6 hereof had such action or event occurred after the date of
this Agreement and that could, individually or in the aggregate, reasonably be
expected to result in a CPI Material Adverse Effect; (vi) any sale of a material
amount of property or capital stock of CPI or any of its Subsidiaries taken as a
whole, except in the ordinary course of business; (vii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of CPI's capital stock; (viii) any repurchase,
redemption, split, combination or reclassification of any of CPI's capital stock
or any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
(ix) (A) any granting by CPI to any officer of CPI of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the CPI SEC Reports,
(B) any granting by CPI to any officer of any increase in severance or
termination pay, except as was required under any employment, severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the CPI SEC Reports or (C) any entry by CPI
into any employment, severance or termination agreement with any officer.
Section 5.7. LITIGATION. Except as disclosed in the CPI SEC Reports or as
set forth on Schedule 5.7 hereto, there is no Legal Proceeding pending or, to
the best knowledge of CPI, threatened against, relating to or affecting CPI or
any of the CPI Subsidiaries, except those that could not, individually or in the
aggregate, reasonably be expected to result in a CPI Material Adverse Effect or
prevent or materially delay the consummation of the Merger, nor is there any
judgment, decree, injunction, rule or order of any Governmental Authority or
arbitrator outstanding against, relating to or affecting CPI or any of the CPI
Subsidiaries having, or which could reasonably be expected to have, any such
effects.
Section 5.8. REGISTRATION STATEMENT AND PROXY STATEMENT. Subject in all
respects to the accuracy of the representations of Zytec in Section 4.8 hereof,
none of the information supplied or to be supplied by or on behalf of CPI for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the Proxy
Statement will not, at the dates mailed to the CPI and Zytec shareholders
entitled to vote at the times of the meetings of shareholders to be held in
connection with the Merger and the related transactions and at the times of such
meetings, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading or omit to state any material fact necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies for the
meetings of Zytec's and CPI's shareholders which has become false or misleading.
If, at any time prior to the Effective Time, any event relating to CPI or any of
its Subsidiaries, Affiliates, Associates, officers or directors is discovered by
CPI which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, CPI shall promptly inform Zytec.
Notwithstanding the foregoing, CPI makes no representation or warranty with
respect to any information supplied by or on behalf of Zytec which is contained
in or furnished in connection with the preparation of the Registration Statement
or the Proxy Statement. The Registration Statement and the Proxy Statement will
comply as to form in all material respects with the respective provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
Section 5.9. TAX MATTERS. Except as set forth in the CPI SEC Reports or as
set forth on Schedule 5.9 hereto: (i) CPI and each of the CPI Subsidiaries have
filed (or there has been filed on its behalf) all material Tax Returns required
to be filed by each of them under applicable law and all such Tax Returns were
and are in all material respects complete and correct and were filed on a timely
basis, (ii) CPI and each of the CPI Subsidiaries have, within the time and in
the manner prescribed by applicable law, paid all
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Taxes that were due and payable except for those contested in good faith and for
which adequate reserves have been taken, and except where any failure to make
such payment would not be reasonably likely to have a CPI Material Adverse
Effect, (iii) CPI and the CPI Subsidiaries have established on their books and
records reserves adequate to pay all unpaid Taxes in accordance with GAAP, (iv)
CPI and each of the CPI Subsidiaries have withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, customer, creditor or other Person, except
where any failure to make such withholding would not be reasonably likely to
have a CPI Material Adverse Effect, (v) neither CPI nor any of the CPI
Subsidiaries has executed any outstanding waivers, extensions or comparable
consents regarding the application of the statute of limitations with respect to
any Taxes or Tax Returns, (vi) no audits or other administrative proceedings or
court proceedings are presently pending with regard to any Taxes or Tax Returns
of CPI or any of the CPI Subsidiaries, and there is (A) no deficiency for any
Taxes proposed, asserted or assessed against CPI or any of the CPI Subsidiaries
that has not been resolved and paid in full and (B) no dispute or claim
concerning any Tax liability of CPI or any CPI Subsidiary either (x) claimed or
raised in writing by any Governmental Authority or (y) as to which any officer,
director or employee of CPI or any CPI Subsidiary who is responsible for Tax
matters has knowledge, (vii) CPI has made available to Zytec complete and
accurate copies of all audit reports received from any Governmental Authority in
any jurisdiction relating to any Tax Return filed by CPI or any of the CPI
Subsidiaries as well as all material Tax Returns and 1996 tax provision work
papers and (viii) neither CPI nor any of the CPI Subsidiaries has any liability
for Taxes of any Person other than CPI and the CPI Subsidiaries under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise.
Section 5.10. EMPLOYEE MATTERS; ERISA.
(a) BENEFIT PLANS. For purposes of this Section 5.10, "ERISA Affiliate"
shall mean any entity which is or at any time within the preceding six years has
been treated as a single employer with CPI or any CPI Subsidiary for purposes of
Code Section 414. CPI has made or will make available to Zytec true and correct
and complete copies of the plan document and summary plan description, the most
recent determination letter received from the IRS, the most recent Form 5500
Annual Report, and all related trust agreements, insurance contracts, and other
funding agreements which implement each Employee Benefit Plan currently
maintained, contributed to, or required to be contributed to by CPI, any of the
CPI Subsidiaries, or any ERISA Affiliate thereof (collectively, the "CPI
Employee Plans"). Each of the CPI Employee Plans (and each related trust,
insurance contract, or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, securities, and
other applicable Federal, state and foreign laws. All required reports
(including Form 5500 Annual Reports, summary annual reports, PBGC-1's and
summary plan descriptions) have been, to CPI's best knowledge, timely filed and
distributed appropriately with respect to each CPI Employee Plan. The material
requirements of COBRA have been met with respect to each CPI Employee Plan which
is an employee welfare benefit plan within the meaning of Section 3(1) of ERISA.
(b) NO MULTIEMPLOYER PLANS, ETC. To the best knowledge of CPI, There have
been no "prohibited transactions" (within the meaning of ERISA Section 406 and
Code Section 4975) with respect to any CPI Employee Plan which is an Employee
Pension Benefit Plan that has been maintained or contributed to within the past
five years. No fiduciary of any such Employee Benefit Plan has, to CPI's best
knowledge, any liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or investment of the assets
of any such Plan. Neither CPI nor any of its ERISA Affiliates contributes to,
ever has contributed to, or has been required to contribute to any Multiemployer
Plan (within the meaning of Section 3(37) of ERISA) or has any liability under
any such Multiemployer Plan. No CPI Employee Plan that has been maintained or
contributed to within the past five years which is an Employee Pension Benefit
Plan has been completely or partially terminated or been the subject of a
"reportable event" within the meaning of ERISA Section 4043 as to which notices
would be required to be
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filed with the PBGC. No proceeding by the PBGC to terminate any such Employee
Pension Benefit Plan has been instituted.
(c) STATUS. Each CPI Employee Benefit Plan of CPI or its Subsidiaries which
is an Employee Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Section 401(a), and has received an applicable favorable
determination letter from the IRS that it is a "qualified plan" which letter has
not been subsequently modified or withdrawn. No CPI Employee Plan is currently
under investigation, audit or review by the IRS, nor is such action
contemplated, and the IRS has not asserted that any Employee Pension Benefit
Plan of CPI or its Subsidiaries is not qualified under Section 401(a) of the
Code or that any trust established under any Employee Pension Benefit Plan of
CPI or its Subsidiaries is not exempt under Section 501(a) of the Code.
(d) NO LIABILITIES. With respect to each Employee Pension Benefit Plan of
CPI or its Subsidiaries which is a defined benefit plan under Section 414(j) of
the Code and each defined contribution plan under Section 414(i) of the Code:
(i) no material liability to the PBGC under Sections 4061-4064 of ERISA has been
incurred by CPI or the CPI Subsidiaries and all premiums due and owing to the
PBGC have been timely paid; (ii) no event has occurred or, to CPI's best
knowledge, is threatened or is about to occur which would constitute a
reportable event within the meaning of Section 4043(c) of ERISA for which
reporting has not been made and (iii) no Employee Pension Benefit Plan of CPI or
its Subsidiaries has any "accumulated funding deficiency" (as defined in Section
302 of ERISA and Section 412 of the Code) for which a waiver has not been
obtained.
(e) OTHER ARRANGEMENTS. Except as disclosed in the CPI SEC Reports or as set
forth on Schedule 5.10(e) hereto, there are no material employee benefit,
welfare or compensation plans or arrangements (written or oral) which are not
CPI Employee Plans.
(f) PAYMENTS RESULTING FROM MERGER. (i) Other than as expressly contemplated
by this Agreement, the consummation or announcement of any transaction
contemplated by this Agreement will not (either alone or upon the occurrence of
any additional or further acts or events) result in any (A) payment (whether of
severance pay, "change of control payment" (including any gross-up payments) or
otherwise) becoming due from CPI or any of the CPI Subsidiaries or any successor
thereto to any officer, employee, former employee or director thereof or to the
trustee under any "rabbi trust" or similar arrangement, or (B) benefit under any
CPI Employee Plan or CPI Benefit Arrangement being established or becoming
accelerated, vested or payable and (ii) neither CPI nor any of the CPI
Subsidiaries is a party to (A) any management, employment, deferred
compensation, severance (including any payment, right or benefit resulting from
a change in control), bonus or other contract for personal services with any
officer, director or employee, (B) any consulting contract with any Person who
prior to entering into such contract was a director or officer of CPI, or (C)
any plan, agreement, arrangement or understanding similar to any of the
foregoing which would result in any payments as a result of the Merger or the
other transactions contemplated by this Agreement.
(g) LABOR AGREEMENTS. Except as set forth on Schedule 5.10(g) hereto,
neither CPI nor any of the CPI Subsidiaries is a party to any collective
bargaining agreement or other labor agreement with any union or labor
organization. To the best knowledge of CPI, there is no current union
representation question involving employees of CPI or any of the CPI
Subsidiaries, nor does CPI know of any activity or proceeding of any labor
organization (or representative thereof) or employee group to organize any such
employees. Except as disclosed in the CPI SEC Reports or as set forth on
Schedule 5.10(g), (i) there is no unfair labor practice, employment
discrimination or other material complaint against CPI or any of the CPI
Subsidiaries pending, or to the best knowledge of CPI, threatened, (ii) there is
no strike or lockout or material dispute, slowdown or work stoppage pending, or
to the best knowledge of CPI, threatened, against or involving CPI, and (iii)
there is no Legal Proceeding pending or, to the best knowledge of CPI,
threatened, in respect of which any director, officer, employee or agent of CPI
or any of the CPI Subsidiaries is or may be entitled to claim indemnification
from CPI or such CPI Subsidiary pursuant to
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their respective articles of incorporation or by-laws or other similar
constituent documents or as provided in any indemnification agreements.
(h) STOCK OPTIONS. Schedule 5.10(h) hereto sets forth the number all
outstanding stock options granted pursuant to the CPI Stock Option Plans (the
"CPI Stock Options"), or otherwise, as of August 29, 1997.
Section 5.11. ENVIRONMENTAL PROTECTION. Except as disclosed in the CPI SEC
Reports or as set forth on Schedule 5.11 hereto:
(a) COMPLIANCE; PERMITS. CPI and each of the CPI Subsidiaries is in
compliance with all applicable Environmental Laws, except for noncompliance
which could not, individually or in the aggregate, reasonably be expected to
result in a CPI Material Adverse Effect. CPI and each of the CPI Subsidiaries
has obtained or has applied for all material Environmental Permits necessary for
the conduct of their operations, and all such Environmental Permits are in good
standing or, where applicable, a renewal application has been timely filed and
is pending agency or other governmental approval, and CPI and the CPI
Subsidiaries are in compliance with all terms and conditions of the
Environmental Permits, except for noncompliance which could not, individually or
in the aggregate, reasonably be expected to result in a CPI Material Adverse
Effect.
(b) ENVIRONMENTAL CLAIMS. To the best knowledge of CPI, there is no
Environmental Claim pending (i) against CPI or any of the CPI Subsidiaries, (ii)
against any Person whose liability for any Environmental Claim has been retained
or assumed by CPI or any of the CPI Subsidiaries either contractually or by
operation of law, or (iii) against any real or personal property or operations
which CPI or any of the CPI Subsidiaries owns, leases or manages, in whole or in
part, except for any such Claims which could not, individually or in the
aggregate, reasonably be expected to result in a CPI Material Adverse Effect.
(c) RELEASES. There has been no Releases of any Hazardous Material that
could be reasonably likely to form the basis of any Environmental Claim against
CPI or any of the CPI Subsidiaries, or against any Person whose liability for
any Environmental Claim has been retained or assumed by CPI or any of the CPI
Subsidiaries either contractually or by operation of law, except for any
Releases which could not, individually or in the aggregate, reasonably be
expected to result in a CPI Material Adverse Effect.
(d) PREDECESSORS. CPI has no knowledge, with respect to any predecessor of
CPI or any of the CPI Subsidiaries, of any Environmental Claim pending or
threatened, or of any Release of Hazardous Materials that could be reasonably
likely to form the basis of any Environmental Claim, except for those which
could not, individually or in the aggregate, reasonably be expected to result in
a CPI Material Adverse Effect.
Section 5.12. VOTE REQUIRED. The approval of the issuance of CPI Common
Stock and the related transactions in connection with the Merger by the vote of
a majority of all votes entitled to be cast by the holders of the shares of CPI
Common Stock represented at a special meeting (the "CPI Shareholders' Approval")
is the only vote of the holders of any of the capital stock of CPI required to
approve such issuance and such transactions.
Section 5.13. ACCOUNTING MATTERS. Neither CPI nor, to CPI's best knowledge,
any of its Affiliates has taken or agreed to take any action that would prevent
CPI from accounting for the transactions to be effected pursuant to this
Agreement as a pooling-of-interests in accordance with GAAP and applicable SEC
regulations.
Section 5.14. OPINION OF FINANCIAL ADVISOR. CPI's Board of Directors has
received the oral opinion of BT Alex. Brown Incorporated, dated the date of this
Agreement, an executed copy of which opinion will be delivered to Zytec promptly
after receipt thereof by CPI, to the effect that, as of such date, the Ratio was
fair from a financial point of view to CPI.
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Section 5.15. INSURANCE. Except as set forth on Schedule 5.15 hereto, CPI
and each of the CPI Subsidiaries is, and has been continuously since January 1,
1992, insured with financially responsible insurers in such amounts and against
such risks and losses as are reasonable and customary for companies conducting
the business as conducted by CPI and the CPI Subsidiaries during such time
period. Except as set forth on Schedule 5.15 hereto, neither CPI nor any of the
CPI Subsidiaries has received any notice of cancellation or termination with
respect to any insurance policy of CPI or any of the CPI Subsidiaries which
could reasonably be expected to result in a CPI Material Adverse Effect. The
material insurance policies of CPI and each of the CPI Subsidiaries are valid
and enforceable policies in all material respects and will not terminate due to,
or upon, the consummation of the Merger.
Section 5.16. OWNERSHIP OF ZYTEC COMMON STOCK. CPI does not "beneficially
own" (as such term is defined for purposes of Section 13(d) of the Exchange Act)
any shares of Zytec Common Stock.
Section 5.17. CONTRACTS. Except as disclosed in the CPI SEC Reports or as
set forth on Schedule 5.17 hereto and copies of which were delivered or made (or
to be made) available to Zytec, there are no Contracts that are material to the
business, financial condition or results of operations of CPI. Neither CPI nor
any of the CPI Subsidiaries is in violation of or in default under (nor does
there exist any condition which upon the passage of time or the giving of notice
or both would cause such a violation of or default under) any Contract to which
it is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that could not, individually or in the aggregate,
reasonably be expected to result in a CPI Material Adverse Effect.
Section 5.18. INTELLECTUAL PROPERTY. Except as disclosed in the CPI SEC
Reports, CPI or a CPI Subsidiary owns or is validly licensed or otherwise has
the right to use all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights and
other intellectual property rights and computer programs that are material to
the conduct of the business of CPI and the CPI Subsidiaries as now operated,
taken as a whole (collectively, "CPI Intellectual Property Rights"). Except as
disclosed in the CPI SEC Reports or as set forth on Schedule 5.18 hereto, (i) no
claims are pending or, to the best knowledge of CPI, threatened that CPI or a
CPI Subsidiary is infringing or otherwise adversely affecting the material
rights of any Person and (ii) to the best knowledge of CPI, no Person is
infringing the rights of CPI or any CPI Subsidiary with respect to any material
item of CPI Intellectual Property Rights.
Section 5.19. BROKERS. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission, other than with respect to the opinion delivered
pursuant to Section 5.14 hereof, in connection with the transactions
contemplated by this Agreement.
Section 5.20. INTERESTED PARTY TRANSACTIONS. Except for transactions
described in the CPI SEC Reports, no event has occurred that would be required
to be reported as a Certain Relationship or Related Transaction pursuant to Item
404 of Regulation S-K promulgated by the SEC.
Section 5.21. CERTAIN CUSTOMERS. CPI has received no notice that any of
CPI's five largest customers (by dollar volume) expects to materially reduce or
terminate its business with CPI by reason of the transactions contemplated by
this Agreement or for any other reason whatsoever. No such customer is currently
in default under any material obligations or liabilities owed to CPI.
Section 5.22. NO DISCUSSIONS PENDING. CPI is not engaged, directly or
indirectly, in any discussions or negotiations with any Person other than Zytec
with respect to a Business Combination Proposal.
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ARTICLE 6
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. COVENANTS OF THE PARTIES. From the date hereof and through the
Effective Time or the earlier termination of this Agreement in accordance with
ARTICLE 9 hereof, Zytec and CPI each agree, each as to itself and as to each of
the Zytec Subsidiaries and the CPI Subsidiaries, as the case may be, as follows,
except as expressly permitted by this Agreement, or to the extent the other
parties hereto shall otherwise consent in writing:
(a) ORDINARY COURSE OF BUSINESS. Each party hereto shall, and shall cause
its Subsidiaries to, carry on their respective businesses in the usual and
ordinary course, consistent with past practice, and use all commercially
reasonable efforts to preserve intact their present business organizations,
preserve the goodwill and relationships with customers, suppliers and others
having business dealings with them and, subject to prudent management of
workforce needs and ongoing programs currently in force, keep available the
services of their present officers and employees. No party shall, nor shall any
party permit any of its Subsidiaries to, enter into a new line of business or,
subject to Section 6.1(o) hereof, make any change in the line of business it
engages in as of the date hereof involving any material investment of assets or
resources or any material exposure to liability or loss, in the case of Zytec,
to Zytec and the Zytec Subsidiaries taken as a whole, and in the case of CPI, to
CPI and the CPI Subsidiaries taken as a whole.
(b) CHARTER DOCUMENTS. No party shall amend or propose to amend its
respective articles of incorporation, or by-laws except as contemplated in this
Agreement.
(c) NO ACQUISITIONS. No party shall, nor shall any party permit any of its
Subsidiaries to, acquire, or publicly propose to acquire, or agree to acquire,
by merger or consolidation with, or by purchase or otherwise, a substantial
equity interest in or a substantial portion of the assets of, any business or
any Person, nor shall any party acquire or agree to acquire a material amount of
assets of any other Person other than in the ordinary course of business
consistent with past practice, other than in the case of CPI, potential
acquisitions of assets and/or equity interests disclosed in writing to Zytec
prior to the date hereof.
(d) ACCOUNTING. No party shall, nor shall any party permit any of its
Subsidiaries to, make any changes in their accounting methods or practices,
except as required by law, rule, regulation or GAAP.
(e) POOLING. No party shall, nor shall any party permit any of its
Subsidiaries to, take any action which would, or would be reasonably likely to,
prevent CPI from accounting for the transactions to be effected pursuant to this
Agreement as a pooling-of-interests in accordance with GAAP and applicable SEC
regulations, and each party hereto shall use all reasonable efforts to achieve
such result (including taking such actions as may be necessary to cure any facts
or circumstances that could prevent such transactions from qualifying for
pooling-of-interests accounting treatment).
(f) TAX-FREE STATUS. No party shall, nor shall any party permit any of its
Subsidiaries to, take any actions which would, or would be reasonably likely to,
adversely affect the status of the Merger as a tax-free transaction (except as
to Dissenters' Shares and cash payments in lieu of fractional shares) under
Section 368(a) of the Code, and each party hereto shall use all reasonable
efforts to achieve such result.
(g) AFFILIATE TRANSACTIONS. Except as set forth on Schedule 6.1(g) hereto,
no party shall, nor shall any party permit any of its Subsidiaries to, enter
into any material agreement or arrangement with any of their respective
officers, directors, Affiliates or Associates (other than wholly-owned
Subsidiaries) on terms materially less favorable to such party than could be
reasonably expected to have been obtained with an unaffiliated third party on an
arm's-length basis.
(h) COOPERATION, NOTIFICATION. Each party shall, and shall cause its
Subsidiaries to, (i) confer on a regular and frequent basis with one or more
representatives of the other party to discuss, subject to applicable law,
material operational matters and the general status of its ongoing operations;
(ii) promptly notify the other party of any significant changes in its business,
properties, assets, condition
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(financial or otherwise), results of operations or prospects; (iii) advise the
other party of any change or event which has had or, insofar as reasonably can
be foreseen, is reasonably likely to result in, in the case of Zytec, a Zytec
Material Adverse Effect or, in the case of CPI, a CPI Material Adverse Effect;
and (iv) promptly provide the other party with copies of all filings made by
such party or any of its Subsidiaries with any court or other Governmental
Authority in connection with this Agreement and the transactions contemplated
hereby.
(i) THIRD-PARTY CONSENTS. Zytec shall, and shall cause its Subsidiaries to,
use all commercially reasonable efforts to obtain all Zytec Required Consents.
Zytec shall promptly notify CPI of any failure or prospective failure to obtain
any such consents and, if requested by CPI, shall provide copies of all Zytec
Required Consents obtained by Zytec to CPI. CPI shall, and shall cause its
Subsidiaries to, use all commercially reasonable efforts to obtain all CPI
Required Consents. CPI shall promptly notify Zytec of any failure or prospective
failure to obtain any such consents and, if requested by Zytec, shall provide
copies of all CPI Required Consents obtained by CPI to Zytec.
(j) NO BREACH, ETC. No party shall, nor shall any party permit any of its
Subsidiaries to, willfully take any action that would or is reasonably likely to
result in a material breach of any provision of this Agreement, or in any of its
representations and warranties set forth in this Agreement, being untrue on and
as of the Closing Date.
(k) INSURANCE. Each party shall, and shall cause its Subsidiaries to,
maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are customary for companies engaged
in the respective businesses of the parties.
(l) PERMITS. Each party shall, and shall cause its Subsidiaries to, use
reasonable efforts to maintain in effect all existing Permits pursuant to which
such party or its Subsidiaries operate.
(m) DIVIDENDS. No party shall (i) declare or pay any dividends on or make
other distributions in respect of any of its capital stock; (ii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of its capital stock; or (iii) redeem, repurchase or otherwise
acquire any shares of its capital stock.
(n) ISSUANCE OF SECURITIES. No party shall issue, agree to issue, deliver,
sell, award, pledge, dispose of or otherwise encumber or authorize or propose
the issuance, delivery, sale, award, pledge, disposal or other encumbrance of,
any shares of their capital stock of any class or any securities convertible
into or exchangeable for, or any rights, warrants or options to acquire, any
such shares or convertible or exchangeable securities, other than issuances (i)
by Zytec in connection with the conversion of that certain 7 1/2% convertible
subordinated promissory in the principal amount of $12,000,000 due 2001 issued
to BMO Nesbit Burns Capital U.S. (the "Convertible Note"); and up to 600,000
shares (of which approximately 470,000 shares are subject to presently
outstanding stock options) of Zytec Common Stock to be issued pursuant to
employee benefit plans, stock option and other incentive compensation plans and
pursuant to an annual retainer paid in Zytec Common Stock to Zytec's
non-employee directors as adopted by Zytec's Board of Directors in 1995 and (ii)
in the case of CPI, up to 1,000,000 shares of CPI Common Stock to be issued for
general corporate purposes and pursuant to employee benefit plans, stock option
and other incentive compensation plans. Each party shall promptly furnish to the
other party such information as may be reasonably requested, including financial
information, and take such action as may be reasonably necessary and otherwise
fully cooperate with the other party in the preparation of any registration
statement on Form S-8 under the Securities Act and other documents necessary in
connection with issuance of securities as contemplated by this Section 6.1(n),
subject to obtaining customary indemnities.
(o) CAPITAL EXPENDITURES. Zytec shall not, nor shall Zytec permit any of its
Subsidiaries to, make capital expenditures in an amount in excess of $500,000
other than as set forth on Schedule 6.1(o)(A) hereto. CPI shall not, nor shall
CPI permit any of its Subsidiaries to, make capital expenditures in an amount in
excess of $2,000,000 other than as set forth on Schedule 6.1(o)(B) hereto.
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(p) INDEBTEDNESS. No party shall, nor shall any party permit any of its
Subsidiaries to, incur or guarantee any indebtedness (including any debt
borrowed or guaranteed or otherwise assumed including, without limitation, the
issuance of debt securities or warrants or rights to acquire debt) or enter into
any "keep well" or other agreement to maintain any financial statement condition
of another Person or enter into any arrangement having the economic effect of
any of the foregoing other than (i) short-term indebtedness in the ordinary
course of business consistent with past practice (such as the issuance of
commercial paper or the use of existing credit facilities); (ii) long-term
indebtedness not aggregating more than $3,500,000 in respect of Zytec and
$5,000,000 in respect of CPI; (iii) arrangements between either party and its
Subsidiaries or between its Subsidiaries; or (iv) in connection with the
refunding of existing indebtedness at a lower cost of funds.
(q) COMPENSATION, BENEFITS. Except as set forth on Schedule 6.1(q)(A) and
(B) hereto, respectively, or as may be required by applicable law, no party
shall, nor shall any party permit any of its Subsidiaries to, (i) enter into,
adopt or amend or increase the amount or accelerate the payment or vesting of
any benefit or amount payable under, any employee benefit plan or other
contract, agreement, commitment, arrangement, plan or policy maintained by,
contributed to or entered into by a party hereto or any of its Subsidiaries, or
increase, or enter into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any related rights, of
any director, officer or other employee of a party hereto or any of its
Subsidiaries, except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to such party or any of
its Subsidiaries or (ii) enter into or amend any employment, severance or
special pay arrangement with respect to the termination of employment or other
similar contract, agreement or arrangement with any director or officer or other
employee other than in the ordinary course of business consistent with past
practice.
(r) NO DISPOSITIONS. No party shall, nor shall any party permit any of its
Subsidiaries to, sell, lease, license, encumber or otherwise dispose of any of
its assets, other than encumbrances or dispositions in the ordinary course of
its business consistent with past practice.
(s) TAX MATTERS. No party shall make or rescind any material express or
deemed election relating to Taxes, settle or compromise any material Legal
Proceeding, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or change any of its methods of reporting income or
deductions for Tax purposes from those employed in the preparation of its last
Tax Returns, except as may be required by applicable law.
(t) DISCHARGE OF LIABILITIES. No party shall pay, discharge or satisfy any
material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
(which includes the payment of final and unappealable judgments) or in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of such party included in the such party's SEC Reports, or incurred in
the ordinary course of business consistent with past practice.
(u) CONTRACTS. No party shall, except in the ordinary course of business
consistent with past practice, modify, amend, terminate, renew or fail to use
reasonable business efforts to renew any material Contract to which such party
or any of its Subsidiaries is a party or waive, release or assign any material
rights or claims.
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ARTICLE 7
ADDITIONAL AGREEMENTS
Section 7.1. ACCESS TO INFORMATION. Upon reasonable notice, each party
shall, and shall cause its Subsidiaries to, afford to the officers, directors,
employees, accountants, counsel, investment bankers, financial advisors and
other representatives of the other (collectively, "Representatives") reasonable
access, during normal business hours throughout the period from the date hereof
through the Effective Time, to all of its properties, books, contracts,
commitments and records (including, but not limited to, Tax Returns), to make
such investigation as each party shall reasonably request (including the ability
to have discussions with suppliers and customers of each party) and, during such
period, each party shall, and shall cause its Subsidiaries to, furnish promptly
to the other (i) access to each report, schedule and other document filed or
received by it or any of its Subsidiaries pursuant to the requirements of
Federal or state securities laws or filed with or sent to the SEC, the
Department of Justice, the Federal Trade Commission, or any other Federal, state
or foreign regulatory agency or commission, and (ii) access to all information
concerning themselves, their Subsidiaries, directors, officers and shareholders
and such other matters as may be reasonably requested by the other party in
connection with any filings, applications or approvals required or contemplated
by this Agreement or for any other reason related to the transactions
contemplated by this Agreement. Each party shall, and shall cause its
Subsidiaries and Representatives to, hold in strict confidence all documents and
information concerning the other furnished to it in connection with the
transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement, dated August 12, 1997, between Zytec and CPI, as it
may be amended from time to time (the "Confidentiality Agreement").
Section 7.2. JOINT PROXY STATEMENT AND REGISTRATION STATEMENT.
(a) PREPARATION AND FILING. The parties will prepare and file with the SEC
as soon as reasonably practicable after the date hereof the Registration
Statement and the Proxy Statement (together, the "Joint Proxy/Registration
Statement"). The parties hereto shall each use all commercially reasonable
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as practicable after such filing. Each party hereto
shall also take such action as may be reasonably required to cause the shares of
CPI Common Stock issuable in connection with the Merger to be registered or to
obtain an exemption from registration under applicable state "blue sky" or
securities laws; PROVIDED, HOWEVER, that no party shall be required to register
or qualify as a foreign corporation or to take other action which would subject
it to service of process in any jurisdiction where it will not be, following the
Merger, so subject. Subject to Sections 4.8 and 5.8 hereof, each of the parties
hereto shall furnish all information concerning itself which is required or
customary for inclusion in the Joint Proxy/Registration Statement. The parties
shall use reasonable efforts to cause the shares of CPI Common Stock issuable in
the Merger to be approved for quotation on The Nasdaq National Market upon
official notice of issuance. No representation, covenant or agreement is made by
any party hereto with respect to information supplied by any other party for
inclusion in the Joint Proxy Statement/Registration Statement.
(b) LETTER FROM ZYTEC'S ACCOUNTANTS. Zytec shall use its best efforts to
cause to be delivered to CPI letters of Coopers & Lybrand LLP, dated a date
within two business days before the date of the Joint Proxy/Registration
Statement, and addressed to CPI, in form and substance reasonably satisfactory
to CPI and customary in scope and substance for "cold comfort" letters delivered
by independent public accountants in connection with registration statements on
Form S-4.
(c) LETTER FROM CPI'S ACCOUNTANTS. CPI shall use its best efforts to cause
to be delivered to Zytec letters of Arthur Andersen LLP, dated a date within two
business days before the date of the Joint Proxy/Registration Statement, and
addressed to Zytec, in form and substance reasonably satisfactory to Zytec and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements on
Form S-4.
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(d) FAIRNESS OPINIONS. It shall be a condition to the mailing of the Joint
Proxy/Registration Statement to the shareholders of Zytec and CPI that (i) Zytec
shall have received an opinion from Needham & Company, Inc., dated the date of
the Joint Proxy/Registration Statement, to the effect that, as of the date
thereof, the Merger Consideration was fair, from a financial point of view, to
the holders of Zytec Common Stock and (ii) CPI shall have received an opinion
from BT Alex. Brown Incorporated, dated the date of the Joint Proxy/Registration
Statement, to the effect that, as of the date thereof, the Merger Consideration
to be paid to the holders of Zytec Common Stock pursuant to the Merger was fair,
from a financial point of view, to the holders of CPI Common Stock.
Section 7.3. REGULATORY MATTERS.
(a) HSR FILINGS. Each party hereto shall file or cause to be filed with the
Federal Trade Commission and the Department of Justice any notifications
required to be filed under the HSR Act and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such parties
will use all commercially reasonable efforts to make such filings promptly and
to respond promptly to any requests for additional information made by either of
such agencies.
(b) OTHER REGULATORY APPROVALS. Each party hereto shall cooperate and use
its best efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to file and obtain all
Governmental Filings and Approvals of all Governmental Authorities necessary to
consummate the transactions contemplated by this Agreement, including, without
limitation, the Zytec Statutory Approvals and the CPI Statutory Approvals.
Section 7.4. SHAREHOLDER APPROVALS.
(a) APPROVAL OF ZYTEC SHAREHOLDERS. Zytec shall, as soon as reasonably
practicable after the date hereof (i) take all steps necessary to duly call,
give notice of, convene and hold a special meeting of its shareholders (the
"Zytec Special Meeting") for the purpose of securing the Zytec Shareholders'
Approval, (ii) distribute to its shareholders the Proxy Statement in accordance
with applicable Federal and state law and with its articles of incorporation and
by-laws, (iii) recommend (in the Proxy Statement and otherwise) to its
shareholders the approval of the Merger, this Agreement and the transactions
contemplated hereby and (iv) cooperate and consult with CPI with respect to each
of the foregoing matters.
(b) APPROVAL OF CPI SHAREHOLDERS. CPI shall, as soon as reasonably
practicable after the date hereof (i) take all steps necessary to duly call,
give notice of, convene and hold a special meeting of its shareholders (the "CPI
Special Meeting") for the purpose of securing the CPI Shareholders' Approval,
(ii) distribute to its shareholders the Proxy Statement in accordance with
applicable Federal and state law and with its articles of incorporation and
by-laws, (iii) recommend (in the Proxy Statement and otherwise) to its
shareholders the approval of the issuance of CPI Common Stock pursuant to this
Agreement and (iv) cooperate and consult with Zytec with respect to each of the
foregoing matters.
(c) MEETING DATE. The Zytec Special Meeting for the purpose of securing the
Zytec Shareholders' Approval and the CPI Special Meeting for the purpose of
securing the CPI Shareholders' Approval shall be held on such date(s) as CPI and
Zytec shall mutually determine.
Section 7.5. DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) INDEMNIFICATION. The Surviving Corporation and CPI shall, to the fullest
extent permitted by applicable law, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer, director or employee of Zytec
or any Zytec Subsidiary (each an "Indemnified Party" and collectively, the
"Indemnified Parties") against (i) all losses, expenses (including reasonable
attorneys' fees and expenses), claims, damages, costs, judgments or liabilities
or, subject to the proviso of the next succeeding sentence, amounts paid in
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settlement, arising out of actions or omissions occurring at or prior to the
Effective Time (and whether asserted or claimed prior to, at or after the
Effective Time) that are, in whole or in part, based on or arising out of the
fact that such person is or was a director, officer or employee of Zytec or a
Zytec Subsidiary (the "Indemnified Liabilities"), and (ii) all Indemnified
Liabilities to the extent they are based on or arise out of the transactions
contemplated by this Agreement. In the event of any such loss, expense, claim,
damage, costs, judgments or liability (whether or not arising before the
Effective Time), (x) the Surviving Corporation and CPI shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to CPI, promptly after statements therefor are
received and otherwise advance to such Indemnified Party (subject to such
Party's undertaking to repay such advances if ultimately determined that such
Parties are not entitled to such indemnification as a matter of law), upon
request, reimbursement of documented expenses reasonably incurred, in either
case to the extent not prohibited by the MBCA, (y) the Surviving Corporation and
CPI will cooperate in the defense of any such matter and (z) any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under Minnesota law and the articles of
incorporation or by-laws of the Surviving Corporation shall be made by
independent counsel mutually acceptable to CPI and the Indemnified Party;
PROVIDED, HOWEVER, that neither the Surviving Corporation nor CPI shall be
liable for any settlement effected without CPI's written consent (which consent
shall not be unreasonably withheld). The Indemnified Parties as a group may
retain only one law firm to represent them with respect to each related matter
except to the extent there is, in the opinion of counsel to an Indemnified
Party, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of such Indemnified Party and any other
Indemnified Party or Indemnified Parties.
(b) INSURANCE. For a period of six years after the Effective Time, the
Surviving Corporation and CPI shall cause to be maintained in effect policies of
directors' and officers' liability insurance maintained by Zytec for the benefit
of those persons who are currently covered by such policies on terms no less
favorable than the terms of such current insurance coverage; PROVIDED, HOWEVER,
that the Surviving Corporation and CPI shall not be required to expend in any
year an amount in excess of 200% of the annual aggregate premiums currently paid
by Zytec for such insurance; and PROVIDED, FURTHER, that if the annual premiums
of such insurance coverage exceed such amount, the Surviving Corporation and CPI
shall be obligated to obtain a policy with the best coverage available, in the
reasonable judgment of the Board of Directors of CPI, for a cost not exceeding
such amount.
(c) SUCCESSORS; NON-PERFORMANCE. In the event that, after the Effective
Time, the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or Person of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then and in either such case, proper provisions shall be made so that
the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 7.5.
(d) SURVIVAL OF INDEMNIFICATION. To the fullest extent permitted by law,
from and after the Effective Time, all rights to indemnification to be provided
hereby in favor of the employees, agents, directors and officers of Zytec and
its Subsidiaries with respect to their activities as such prior to the Effective
Time shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time. Zytec hereby
represents that, other than through its by-laws or except as set forth on
Schedule 7.5(d) hereto, there are no agreements with any current or former
officer, director or employee of Zytec or any Zytec Subsidiary providing for
indemnification of such person.
(e) BENEFIT. The provisions of this Section 7.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her legal representatives and beneficiaries.
Section 7.6. PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
obligations imposed by law and securities association listing applications,
Zytec and CPI will consult and cooperate with each
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other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto or thereto without the consent of the other party
(which consent shall not be unreasonably withheld).
Section 7.7. RULE 145 AFFILIATES. Within 20 days after the date of this
Agreement, Zytec shall identify in a letter to CPI all Persons who are, in
Zytec's reasonable judgment, and to such party's best knowledge who will be at
the date of the Zytec Special Meeting, "affiliates" of Zytec and/or CPI,
respectively, as such term is used in Rule 145 under the Securities Act (or
otherwise under applicable SEC accounting releases with respect to
pooling-of-interests accounting treatment). Zytec shall use reasonable best
efforts to cause its Affiliates (including any Person who may be deemed to have
become an Affiliate of CPI after the date of the letter referred to in the prior
sentence) to deliver to CPI on or prior to the Closing Date a written agreement
substantially in the form attached as Schedule 7.7 hereto (each, an "Affiliate
Agreement").
Section 7.8. CREDIT FOR PRIOR SERVICE. For purposes of all employee benefit
plans of CPI or its Subsidiaries in which Zytec employees participate from and
after the Effective Time (including all policies and employee fringe benefit
programs, including vacation policies, of CPI or its Subsidiaries) and under
which an employee's benefit depends, in whole or in part, on length of service,
credit will be given to Zytec employees for service previously credited with
Zytec or its Subsidiaries prior to the Effective Time to the extent permitted
under such benefit plans and to the extent that such crediting of service does
not result in duplication of benefits. Nothing contained in this Agreement shall
be construed to confer upon any Zytec employee any right to continued
employment.
Section 7.9. STOCK OPTION AND OTHER STOCK PLANS.
(a) ZYTEC STOCK PLANS AND AGREEMENTS. At the Effective Time (i) each
outstanding option to purchase shares of Zytec Common Stock (each, a "Zytec
Option") shall constitute an option to acquire shares of CPI Common Stock, on
the same terms and conditions as were applicable under such Zytec Option, based
on the same number of shares of CPI Common Stock as the holder of such Zytec
Option would have been entitled to receive pursuant to the Merger in accordance
with ARTICLE 2 hereof had such holder exercised such Zytec Option in full
immediately prior to the Effective Time; PROVIDED, that in the case of any Zytec
Option to which Section 421 of the Code applies by reason of its qualification
under any of Sections 422 or 423 of the Code, the option price, the number of
shares purchasable pursuant to such Zytec Option and the terms and conditions of
exercise of such Zytec Option shall be determined in order to comply with
Section 424(a) of the Code; and (ii) each other outstanding award under the
Zytec Stock Option Plans ("Zytec Stock Awards") shall constitute an award based
upon the same number of shares of CPI Common Stock as the holder of such Zytec
Stock Award would have been entitled to receive pursuant to the Merger in
accordance with ARTICLE 2 hereof had such holder been the absolute owner,
immediately before the Effective Time, of the shares of Zytec Common Stock on
which such Zytec Stock Award is based, and otherwise on the same terms and
conditions as governed such Zytec Stock Award immediately before the Effective
Time. At the Effective Time, CPI shall assume each award agreement relating to
the Zytec Stock Option Plans, as previously provided. As soon as practicable
after the Effective Time, CPI shall deliver to the holders of Zytec Options and
Zytec Stock Awards appropriate notices setting forth such holders' rights
pursuant to the Zytec Options and the underlying stock award agreement, each as
assumed by CPI. Zytec hereby represents and warrants to CPI that no action or
amendment to the Zytec Stock Option Plans is necessary to effectuate the
foregoing provisions.
(b) CPI ACTION. With respect to each of the Zytec Stock Option Plans, the
Convertible Note and any other plans under which the delivery of Zytec Common
Stock would otherwise be required upon payment of benefits, grant of awards,
exercise of options or conversion of the Convertible Note (collectively, the
"Stock Plans"), CPI shall take all corporate action necessary to (i) obtain
shareholder approval with respect to such Stock Plan to the extent such approval
is required for purposes of the Code or other
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applicable law, (ii) reserve for issuance under such Stock Plan or otherwise
provide a sufficient number of shares of CPI Common Stock for delivery upon
payment of benefits, grant of awards or exercise of options under such Stock
Plan and (iii) ensure, to the extent required by, and subject to the provisions
of such Stock Plan, that Zytec Options which qualified as incentive stock
options under Section 422 of the Code prior to the Effective Time will continue
to qualify as incentive stock options after the Effective Time, and (iv) as soon
as practicable after the Effective Time (but in no event later than 20 business
days after the Effective Time), file registration statements on Form S-3 or Form
S-8, as the case may be (or any successor or other appropriate forms), with
respect to the shares of CPI Common Stock subject to such Stock Plan, to the
extent such registration statement is required under applicable law, and CPI
shall use its commercially reasonable efforts to maintain the effectiveness of
such registration statements (and maintain the current status of the
prospectuses contained therein) for so long as such benefits and grants remain
payable and such options remain outstanding. With respect to those individuals
who subsequent to the Merger will be subject to the reporting requirements under
Schedule 16(a) of the Exchange Act, CPI shall administer the Stock Plans, where
applicable, in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act.
(c) EMPLOYEE STOCK PURCHASE PLAN OF ZYTEC. Zytec shall take such action as
is necessary to cause the ending date of the then current "Phase" of the Zytec
Employee Stock Purchase Plan (as such term is defined therein) to be the last
trading day on which the Zytec Common Stock is traded on The Nasdaq National
Market immediately prior to the Effective Time (the "Final Zytec Purchase
Date"); PROVIDED, that, such change in the Phase shall be conditioned upon the
consummation of the Merger. On the Final Zytec Purchase Date, Zytec shall apply
the funds credited as of such date under the Zytec Employee Stock Purchase Plan
within each participants' payroll withholding account to the purchase of whole
shares of Zytec Common Stock in accordance with the terms of the Zytec Purchase
Plan.
(d) PARTICIPATION IN EMPLOYEE STOCK PURCHASE PLAN OF CPI. Employees of Zytec
as of the Effective Time shall be permitted to participate in the CPI Employee
Stock Purchase Plan commencing as soon as they are permitted thereunder to
participate therein after the Effective Time.
Section 7.10. NO SOLICITATIONS.
(a) CPI and Zytec shall not, and each shall not authorize or permit any of
its Representatives, directly or indirectly, (i) to initiate, solicit or
encourage (including by way of furnishing information), or take any action to
facilitate, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, a Business Combination Proposal (as defined
below) or (ii) participate in any discussions or negotiations regarding, or
provide any non-public information to any Person relating to, any Business
Combination Proposal (iii) agree to, approve or recommend any Business
Combination Proposal; PROVIDED, HOWEVER, that to the extent that the Board of
Directors of CPI or Zytec, as the case may be, reasonably determines that it is
required by its fiduciary duties to such corporation's shareholders under
applicable law, as so advised in a written opinion of such corporation's outside
counsel, such corporation may, in response to a Business Combination Proposal
that was unsolicited and which did not otherwise result from a breach of this
Section 7.10(a) and subject to compliance with the obligations contained in
Sections 7.10(b) and (c) hereof, (x) furnish information with respect to itself
to any Person pursuant to a customary and reasonable confidentiality agreement
and (y) participate in discussions and negotiations regarding such Business
Combination Proposal. Without limiting the foregoing, it is understood that any
violation of the restriction set forth in the preceding sentence by any
Representative of CPI or Zytec, as the case may be, shall be deemed to be a
breach of this Section 7.10(a). For purposes of this Agreement, "Business
Combination Proposal" means any proposal or offer from any Person (other than a
party hereto) relating to any direct or indirect acquisition or purchase of 20%
or more of the assets or 20% or more of any class of outstanding equity
securities of CPI or Zytec, as the case may be, any tender offer or exchange
offer which, if consummated, would result in any person beneficially owning 20%
or more of any class of equity securities of CPI or Zytec, as the case may be,
or any merger, consolidation, business
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combination, recapitalization, liquidation, dissolution or similar transaction
involving CPI or Zytec, as the case may be, other than the transactions
contemplated by this Agreement.
(b) Neither the Board of Directors of Zytec or CPI nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify in a manner
adverse to the other party, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose to approve or recommend, any Business Combination
Proposal, or (iii) cause Zytec or CPI, as the case may be, to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (an "Acquisition Agreement") with respect to any Business Combination
Proposal, unless the Board of Directors of Zytec or CPI, as the case may be,
shall have terminated this Agreement in strict accordance with Section 9.1(e) or
9.1(f) hereof, as the case may be. It is hereby acknowledged by the parties
hereto that the taking of a position by a party pursuant to Rule 14e-2(a)(2) or
(3) of the Exchange Act in respect of an unsolicited Business Combination
Proposal in the form of a tender or exchange offer shall not be deemed to be a
withdrawal, a modification or a proposal to do either, of such party's position
with respect to this Agreement or the Merger.
(c) In addition to the obligations of CPI and Zytec set forth in paragraphs
(a) and (b) of this Section 7.10, CPI or Zytec, as the case may be, shall
immediately advise the other party hereto orally and in writing (within 24 hours
after the receipt thereof) of any request for confidential information or of any
Business Combination Proposal or any inquiry regarding the making of a Business
Combination Proposal and the material terms and the conditions of such request,
Business Combination Proposal or inquiry. CPI or Zytec, as the case may be,
will, to the extent reasonably practicable, keep the other party hereto fully
informed of the status and details (including amendments or proposed amendments)
of any such request, Business Combination Proposal, or inquiry.
Section 7.11. CPI BOARD OF DIRECTORS. CPI's Board of Directors will take
such action as may be necessary to increase the number of directors comprising
the Board of Directors of CPI (the "CPI Board") at the Effective Time to 11
persons, four of whom shall be designated by the three principal Zytec
shareholders set forth on Schedule 7.11 hereto (the "Principal Shareholders")
prior to the Effective Time. So long as the aggregate percentage of shares of
CPI Common Stock received by the Principal Shareholders pursuant to the Merger
(the "Total Shares Received") and held by them is at least 70% of the total
amount of shares of CPI Common Stock being issued to such Principal Shareholders
pursuant to the Merger (the "Total Amount"), such Principal Shareholders shall
be entitled to designate four persons to serve on the CPI Board; PROVIDED, THAT,
if at any subsequent record date for the annual election of directors of CPI the
percentage of Total Shares Received and held by the Principal Shareholders is
less than 70% of the Total Amount but at least 50% of the Total Amount, then
such Principal Shareholders shall be entitled to designate only three persons to
serve on the CPI Board; PROVIDED, FURTHER, that if at any subsequent record date
for the annual election of directors of CPI the percentage of Total Shares
Received and held by the Principal Shareholders is less than 50% of the Total
Amount but at least 25% of the Total Amount then such Principal Shareholders
shall be entitled to designate only two directors to serve on the CPI Board; and
PROVIDED, FURTHER, that if at any subsequent record date for the annual election
of directors of CPI the percentage of Total Shares Received and held by the
Principal Shareholders is less than 25% of the Total Amount, then such Principal
Shareholders shall be entitled to designate only Ronald D. Schmidt to serve on
the CPI Board. Notwithstanding the foregoing, if the Principal Shareholders may
no longer, as provided herein, designate up to four directors, CPI may, in its
discretion, request that previous designees of the Principal Shareholders who
are then serving on the CPI Board to continue to serve as directors. CPI shall
use its best efforts to cause any person(s) reasonably designated by the
Principal Shareholders as provided hereunder, if any, to be elected to the CPI
Board; PROVIDED, THAT, if in the reasonable determination of CPI any such
designee is unqualified or unfit to serve as a director of CPI, such designee
shall be replaced by the Principal Shareholders. The parties hereby acknowledge
that the initial designees shall consist of Ronald D. Schmidt, John M. Steel,
Dr. Fred C. Lee and Lawrence J. Matthews. The number of outstanding shares of
CPI Common Stock on the record date set for the determination of holders of CPI
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Common Stock entitled to vote for the election of directors shall be used in
calculating the percentage of CPI Common Stock held by the Principal
Shareholders. In any year that the Principal Shareholders shall be entitled to
designate directors of CPI, CPI shall provide each of the Principal Shareholders
with the initial draft of CPI's proxy statement for the annual election of CPI's
directors at least 30 days prior to the mailing date of such proxy statement.
Prior to the Closing Date and, in any subsequent year that the Principal
Shareholders shall be entitled to designate directors, at least 20 days prior to
the mailing date of CPI's proxy statement for the annual election of CPI's
directors, the Principal Shareholders shall jointly submit a single written list
of its designees with sufficient biographical and other information for
inclusion in CPI's annual proxy statement. If the Principal Shareholders (i)
cannot agree on a slate of designees or on a particular designee or (ii) fail to
submit a written list of designees to CPI in a timely fashion, then the
Principal Shareholders shall forfeit their right to designate such directors or
director for that particular annual election, unless such failure was due to the
failure of CPI to provide the Principal Shareholders with the initial draft of a
proxy statement as provided herein, in which case CPI shall supplement the proxy
statement or take such other reasonable measures as are necessary to allow the
Principal Shareholders to designate directors. If any director of CPI who was a
director designated by the Principal Shareholders shall either resign, be
removed, die or otherwise become unable or unwilling to serve as a director of
CPI during such director's term, CPI shall give notice thereof to the remaining
directors designated by the Principal Shareholder, within five days of such
occurrence. Any such director who shall not or cannot continue to serve shall be
replaced by the remaining members of the CPI Board of Directors with a candidate
designated by the Principal Shareholders and reasonably acceptable to CPI;
PROVIDED, that if the Principal Shareholders do not designate a replacement
candidate within 20 days of such director's last day as a member of the CPI
Board, then the remaining members of the CPI Board shall be entitled to appoint
any person to replace such director. If, during the two year period commencing
from the Effective Time, the Principal Shareholders are entitled to designate
directors pursuant to this Section 7.11 and such Principal Shareholders
designate Ronald D. Schmidt who shall ultimately be elected as a director of CPI
by the shareholders of CPI, then Ronald D. Schmidt shall serve for such two year
period as the co-chairman of the CPI Board with Joseph M. O'Donnell or his
successor. After such two year period, if Ronald D. Schmidt is elected to the
CPI Board pursuant to this Section 7.11 or otherwise, the CPI Board shall review
and consider appointing Ronald D. Schmidt as co-chairman of the CPI Board.
Section 7.12. EXPENSES. Subject to Sections 9.2 and 9.3 hereof, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
that those filing fees incurred in connection with filing notification under the
HSR Act and printing and mailing expenses incurred in connection with the
preparation, filing and mailing of the Joint Proxy/Registration Statement and
registration fees relating thereto shall be shared equally by Zytec and CPI.
Section 7.13. BEST EFFORTS. (a) Subject to the terms and conditions of this
Agreement, each of the parties agrees to use best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable under applicable law to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings and the
taking of all steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or proceeding by, any Governmental Authority, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental
Authority vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
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(b) In connection with and without limiting Section 7.13(a) hereof, Zytec
and CPI shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Merger,
this Agreement or any of the other transactions contemplated by this Agreement
and (ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Merger, this Agreement or any other transaction contemplated
by this Agreement, use reasonable best efforts to ensure that the Merger and the
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
ARTICLE 8
CONDITIONS
Section 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions,
except, to the extent permitted by applicable law, that any of such conditions
may be waived in writing pursuant to Section 9.5 hereof by the joint action of
the parties hereto:
(a) SHAREHOLDER APPROVALS. The CPI Shareholders' Approval and the Zytec
Shareholders' Approval shall have been obtained.
(b) NO INJUNCTION. No temporary restraining order or preliminary or
permanent injunction or other order by any Federal, state or foreign court or
other legal or regulatory restraint or prohibition preventing consummation of
the Merger shall have been issued and be continuing in effect, nor shall any
proceeding brought by a Governmental Authority seeking any of the foregoing be
pending, nor shall there be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger which
makes the consummation of the Merger illegal, and the Merger and the other
transactions contemplated hereby shall not have been prohibited under any
applicable Federal or state law or regulation.
(c) REGISTRATION STATEMENT. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act, and no stop
order suspending such effectiveness shall have been issued and remain in effect
and no proceedings for such a stop order shall have been initiated.
(d) STATUTORY APPROVALS. The Zytec Statutory Approvals and the CPI Statutory
Approvals shall have been obtained at or prior to the Effective Time.
(e) POOLING. Each of Zytec and CPI shall have received a letter of its
respective independent public accountants, dated the Closing Date, in form and
substance reasonably satisfactory, as the case may be, to Zytec and CPI, stating
that it qualifies for a pooling-of-interests accounting treatment under GAAP and
applicable SEC regulations. In addition, Arthur Andersen LLP shall have
delivered a letter to CPI, dated the Closing Date, in form and substance
reasonably satisfactory to CPI, stating that the transactions effected pursuant
to this Agreement will qualify as a pooling-of-interests transaction under GAAP
and applicable SEC regulations.
(f) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(g) The shares of CPI Common Stock to be issued pursuant to the Merger shall
have been approved for quotation on The Nasdaq National Market.
Section 8.2. CONDITIONS TO OBLIGATION OF CPI TO EFFECT THE MERGER. The
obligation of CPI to effect the Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following additional
conditions, except as any of such conditions may be waived by CPI in writing
pursuant to Section 9.5 hereof:
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(a) PERFORMANCE OF OBLIGATIONS OF ZYTEC. Zytec (and/or the appropriate Zytec
Subsidiary) shall have performed in all material respects its agreements and
covenants contained in or contemplated by this Agreement required to be
performed by it at or prior to the Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Zytec set forth in this Agreement (without giving effect to any materiality or
similar qualifications contained therein) shall be true and correct (i) on and
as of the date hereof and (ii) on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that expressly speak
only as of a specific date or time other than the date hereof or the Closing
Date which need only be true and correct as of such date or time) except in each
of cases (i) and (ii) for (x) changes expressly contemplated by this Agreement,
and (y) such failures of representations or warranties to be true and correct
(without regard to any materiality qualifications contained therein) which could
not, individually or in the aggregate, reasonably be expected to result in a
Zytec Material Adverse Effect.
(c) ZYTEC MATERIAL ADVERSE EFFECT. No Zytec Material Adverse Effect shall
have occurred and there shall exist no fact or circumstance which is reasonably
likely to result in a Zytec Material Adverse Effect.
(d) TAX OPINION. CPI shall have received an opinion of Hertzog, Calamari &
Gleason reasonably satisfactory in form and substance to CPI, dated as of the
Closing Date, to the effect that the Merger should be treated as a tax-free
reorganization under Schedule 368(a) of the Code.
(e) ZYTEC REQUIRED CONSENTS. The Zytec Required Consents shall have been
obtained.
(f) AFFILIATE AGREEMENTS. CPI shall have received Affiliate Agreements, duly
executed by each "affiliate" of Zytec, substantially in the form of Exhibit 7.7,
as provided in Section 7.7 hereof.
(g) BOARD RESIGNATIONS. CPI shall have received resignations effective as of
the Effective Time from each of the members of the Board of Directors of Zytec.
(h) OPINION OF COUNSEL. CPI shall have received the legal opinion of
Winthrop & Weinstine, P.A., counsel to Zytec, reasonably satisfactory in form
and substance to CPI.
(i) NON-SOLICITATION AGREEMENTS AND NON-COMPETITION AGREEMENT. CPI shall
have received the Non-Solicitation Agreements and the Non-Competition Agreement,
duly executed by each person set forth on Schedule 8.2(i) hereto.
(j) VOTING AGREEMENT. CPI shall have received the Voting Agreement, duly
executed by each of the shareholders of Zytec who is a party thereto.
(k) DISSENTERS' RIGHTS. The number of Zytec Dissenting Shares shall not
constitute more than seven and one-half (7 1/2%) percent of the number of issued
and outstanding shares of Zytec Common Stock.
(l) OPINION OF FINANCIAL ADVISOR. Neither the fairness opinion of BT Alex.
Brown Incorporated referred to in Section 5.14 hereof, nor the opinion of
Needham & Company, Inc. referred to in Section 4.15 hereof shall have been
withdrawn.
Section 8.3. CONDITIONS TO OBLIGATION OF ZYTEC TO EFFECT THE MERGER. The
obligation of Zytec to effect the Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following additional
conditions, except as any of such conditions may be waived by Zytec in writing
pursuant to Section 9.5 hereof:
(a) PERFORMANCE OF OBLIGATIONS OF CPI. CPI (and/or the appropriate CPI
Subsidiary) shall have performed in all material respects its agreements and
covenants contained in or contemplated by this Agreement required to be
performed at or prior to the Effective Time.
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(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
CPI set forth in this Agreement (without giving effect to any materiality or
similar qualifications contained therein) shall be true and correct (i) on and
as of the date hereof and (ii) on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that expressly speak
only as of a specific date or time other than the date hereof or the Closing
Date which need only be true and correct as of such date or time) except in each
of cases (i) and (ii) for (x) changes expressly contemplated by this Agreement
and (y) such failures of representations or warranties to be true and correct
(without regard to any materiality qualifications contained therein) which could
not, individually or in the aggregate, reasonably be expected to result in a CPI
Material Adverse Effect.
(c) CPI MATERIAL ADVERSE EFFECT. No CPI Material Adverse Effect shall have
occurred and there shall exist no fact or circumstance which is reasonably
likely to result in a CPI Material Adverse Effect.
(d) TAX OPINION. Zytec shall have received an opinion of Winthrop &
Weinstine, P.A. reasonably satisfactory in form and substance to Zytec, dated as
of the Closing Date, to the effect that the Merger should be treated as a
tax-free reorganization under Schedule 368(a) of the Code.
(e) CPI REQUIRED CONSENTS. The CPI Required Consents, the failure of which
to obtain would have a CPI Material Adverse Effect, shall have been obtained.
(f) OPINION OF COUNSEL. Zytec shall have received the legal opinion of
Hertzog, Calamari & Gleason, counsel to CPI (which may rely on Florida counsel
in respect of matters of Florida law), reasonably satisfactory in form and
substance to Zytec.
(g) OPINION OF FINANCIAL ADVISOR. The fairness opinion of Needham & Company,
Inc. referred to in Section 4.15 hereof shall not have been withdrawn.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date, whether before or after approval by the shareholders of the
respective parties hereto contemplated by this Agreement, only:
(a) by mutual written consent of the Boards of Directors of Zytec and CPI;
(b) by any party hereto, by written notice to the other parties, if the
Effective Time shall not have occurred on or before January 31, 1998 ; PROVIDED,
HOWEVER, that the right to terminate the Agreement under this Section 9.1(b)
shall not be available to any party whose failure to fulfill any obligation or
condition under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date;
(c) by any party hereto, by written notice to the other parties, if (i) the
CPI Shareholders' Approval shall not have been obtained at a duly held CPI
Special Meeting, including any adjournments thereof, or (ii) the Zytec
Shareholders' Approval shall not have been obtained at a duly held Zytec Special
Meeting, including any adjournments thereof;
(d) by any party hereto, if any foreign, state or Federal law, order, rule
or regulation is adopted or issued, which has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the Merger, or
by any party hereto if any court of competent jurisdiction or any Governmental
Authority in the United States or any State shall have issued an order,
judgment, decree or ruling or taken any action permanently restraining,
enjoining or otherwise prohibiting the Merger, and such order, judgment, decree
or ruling shall have become final and nonappealable;
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(e) by Zytec, if an unsolicited Business Combination Proposal is made in
respect of Zytec, the Board of Directors of Zytec reasonably determines that
such Proposal constitutes a Superior Business Combination Proposal (as defined
below) and the Board of Directors of Zytec reasonably determines that it is
required by its fiduciary duties to Zytec's shareholders under applicable law
(as so advised in a written opinion of Zytec's outside counsel) to pursue the
Superior Business Combination Proposal notwithstanding the binding nature of
this Agreement and notwithstanding all concessions or modifications which may be
offered by CPI in negotiations referred to in the immediately succeeding
proviso; PROVIDED, HOWEVER, that Zytec may not terminate this Agreement pursuant
to this Section 9.1(e) unless and until five business days have elapsed
following delivery to CPI of a written notice of such determination by the Board
of Directors of Zytec (accompanied by a copy of the aforesaid legal opinion) and
during such five business day period Zytec (i) shall inform CPI of the terms and
conditions of the Superior Business Combination Proposal and (ii) shall, and
shall cause its Representatives to, negotiate in good faith with CPI to make
such mutually agreeable modifications to the terms and conditions of this
Agreement as would enable the parties to proceed with the transactions
contemplated hereby on such modified terms and conditions; PROVIDED, FURTHER,
that Zytec may not terminate this Agreement pursuant to this Section 9.1(e)
unless at the end of such five business day period the Board of Directors of
Zytec continues to believe that such unsolicited Business Combination Proposal
constitutes a Superior Business Combination Proposal and, as a condition
subsequent, no later than two business days following termination pursuant to
this Section 9.1(e), Zytec pays to CPI the amount set forth in Section 9.3(b)
hereof. For the purposes of this Section 9.1(e) and Section 9.1(f) hereof, a
"Superior Business Combination Proposal" means a BONA FIDE proposal made by any
Person (other than a party hereto) to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the outstanding securities of, or all or substantially
all of the assets of, Zytec or CPI, as the case may be, that is (i) on terms and
conditions which the Board of Directors of Zytec or CPI, as the case may be,
determines in its good faith judgment (based on the written advice of a
financial adviser of nationally recognized reputation) to be more favorable to
Zytec's or CPI's shareholders, as the case may be, than the terms of this
Agreement, (ii) for which financing, to the extent required, is then committed
or which, in the good faith judgment of the Board of Directors of Zytec or CPI,
as the case may be, is reasonably capable of being obtained by such third party
and (iii) for which, in the good faith judgment of the Board of Directors of
Zytec or CPI, as the case may be, no regulatory approvals would be required,
including antitrust approvals, that could not reasonably be expected to be
obtained;
(f) by CPI, if an unsolicited Business Combination Proposal is made in
respect of CPI, the Board of Directors of CPI reasonably determines that such
Proposal constitutes a Superior Business Combination Proposal and the Board of
Directors of CPI reasonably determines that it is required by its fiduciary
duties to CPI's shareholders under applicable law (as so advised in a written
opinion of CPI's outside counsel) to pursue the Superior Business Combination
Proposal notwithstanding the binding nature of this Agreement and
notwithstanding all concessions or modifications which may be offered by Zytec
in negotiations referred to in the immediately succeeding proviso; PROVIDED,
HOWEVER, that CPI may not terminate this Agreement pursuant to this Section
9.1(f) unless and until five business days have elapsed following delivery to
Zytec of a written notice of such determination by the Board of Directors of CPI
(accompanied by a copy of the aforesaid legal opinion) and during such five
business day period CPI (i) shall inform Zytec of the terms and conditions of
the Superior Business Combination Proposal and (ii) shall, and shall cause its
Representatives to, negotiate in good faith with Zytec to make such mutually
agreeable modifications to the terms and conditions of this Agreement as would
enable the parties to proceed with the transactions contemplated hereby on such
modified terms and conditions; PROVIDED, FURTHER, that CPI may not terminate
this Agreement pursuant to this Section 9.1(f) unless at the end of such five
business day period the Board of Directors of CPI continues to believe that such
unsolicited Business Combination Proposal constitutes a Superior Business
Combination Proposal and, as a condition subsequent, no later than two business
days following termination pursuant to this Section 9.1(f), CPI pays to Zytec
the amount set forth in Section 9.3(b);
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(g) by Zytec, by written notice to CPI, if (i) there exist breaches of the
representations and warranties of CPI made herein as of the date hereof such
that the condition set forth in Section 8.3(b) would not be satisfied, and which
breaches shall not have been remedied within 20 days after receipt by CPI of
notice in writing from Zytec, specifying the nature of such breaches and
requesting that they be remedied,
(ii) any representations or warranties of CPI shall have become untrue such
that the condition set forth in Section 8.3(b) hereof would not be satisfied and
any such representation or warranty remains untrue 10 days after receipt of
notice in writing from Zytec, or (iii) CPI (and/or its Subsidiaries) shall not
have performed and complied with its agreements and covenants contained in
Sections 6.1(e), 6.1(f), 7.10(a), (b) and (c) hereof or shall have failed to
perform and comply with, in all material respects, its other agreements and
covenants hereunder and such failure to perform or comply shall not have been
remedied within 20 days after receipt by CPI of notice in writing from Zytec,
specifying the nature of such failure and requesting that it be remedied; or
(h) by CPI, by written notice to Zytec, if (i) there exist breaches of the
representations and warranties of Zytec made herein as of the date hereof such
that the condition set forth in Section 8.2(b) would not be satisfied, and which
breaches shall not have been remedied within 20 days after receipt by Zytec of
notice in writing from CPI, specifying the nature of such breaches and
requesting that they be remedied, (ii) any representations or warranties of
Zytec shall have become untrue such that the condition set forth in Section
8.2(b) hereof would not be satisfied and any such representation or warranty
remains untrue 10 days after receipt of notice in writing from CPI, or (iii)
Zytec (and/or its Subsidiaries) shall not have performed and complied with its
agreements and covenants contained in Sections 6.1(e), 6.1(f), 6.1(m), 6.1(n),
7.10(a), (b) and (c) hereof or shall have failed to perform and comply with, in
all material respects, its other agreements and covenants hereunder and such
failure to perform or comply shall not have been remedied within 10 days after
receipt by Zytec of notice in writing from CPI, specifying the nature of such
failure and requesting that it be remedied.
Section 9.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Zytec or CPI pursuant to Section 9.1 hereof, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of either Zytec, CPI or CPI Sub or their respective officers or directors
hereunder, except that the agreement contained in the last sentence of Section
7.1 hereof, Sections 7.6, 7.12, 9.1, this Section 9.2 and Section 9.3 hereof,
and ARTICLE 10 hereof shall survive the termination; PROVIDED, HOWEVER, nothing
herein shall relieve any party of liability for any breach of the provisions of
this Agreement.
Section 9.3. TERMINATION FEE; EXPENSES.
(a) TERMINATION FEE UPON BREACH. If this Agreement is terminated pursuant to
(x) Section 9.1(g) hereof or (y) Section 9.1(h) hereof, then: (i) the breaching
party shall promptly (but not later than five business days after receipt of
notice from the non-breaching party) pay to the non-breaching party in cash an
amount equal to all reasonable out-of-pocket expenses and fees incurred by the
non-breaching party (including, without limitation, fees and expenses payable to
all legal, accounting, financial, public relations and other professional
advisors arising out of, in connection with or related to the Merger or the
transactions contemplated by this Agreement) (collectively, "Expenses") and an
amount equal to $10,000,000 (the "Breach Payment"); and (ii) if (x) there shall
have been a Business Combination Proposal in respect of the breaching party (or
any of its Affiliates) either made to or known by the breaching party (or any of
its Affiliates) as of the termination date, and (y) prior to September 28, 1998,
the breaching party or an Affiliate thereof accepts an offer to consummate or
consummates a transaction involving a Business Combination Proposal with any
Person, then such breaching party (jointly and severally with its Affiliates),
upon the execution of an Acquisition Agreement relating to such a Business
Combination Proposal, or, if no such Agreement is executed, then at the closing
(and as an express condition to the closing) of the transaction in respect of
such Business Combination Proposal, will pay to the non-breaching
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party an additional amount equal to $20,000,000 in cash (the "Termination Fee").
The Breach Payment, to the extent paid, shall be applied to payment of the
Termination Fee.
(b) TERMINATION FEE UPON SUPERIOR PROPOSAL OR CONSUMMATION OF BUSINESS
COMBINATION PROPOSAL. The Termination Fee and Expenses shall also be payable (x)
by Zytec to CPI upon a termination of this Agreement pursuant to (i) Section
9.1(e) hereof or (ii) Section 9.1(b) or Section 9.1(c)(ii) hereof if (A) there
shall have been a Business Combination Proposal in respect of Zytec (or any of
its Affiliates) either made to or known by Zytec (or any of its Affiliates) as
of the termination date and (B) prior to September 28, 1998, Zytec or an
Affiliate thereof accepts an offer to consummate or consummates a transaction
involving a Business Combination Proposal with any Person and (y) by CPI to
Zytec upon a termination of this Agreement pursuant to (i) Section 9.1(f) hereof
or (ii) Section 9.1(b) or Section 9.1(c)(i) hereof if (A) there shall have been
a Business Combination Proposal in respect of CPI (or any of its Affiliates)
either made to or known by CPI (or any of its Affiliates) as of the termination
date and (B) prior to September 28, 1998, CPI or an Affiliate thereof accepts an
offer to consummate or consummates a transaction involving a Business
Combination Proposal with any Person. The Termination Fee and Expenses shall be
paid, in cash (i) immediately upon (but in no event later than two business days
after) termination pursuant to Section 9.1(e) or Section 9.1(f) hereof and (ii)
in the case of termination pursuant to Section 9.1(b) or Section 9.1(c) hereof,
upon the execution of an Acquisition Agreement relating to such a Business
Combination Proposal, or, if no such Agreement is executed, then at the closing
(and as an express condition to the closing) of the transaction in respect of
such Business Combination Proposal.
(c) EXPENSES. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by the
Agreement and constitute, in respect of Section 9.3(a) hereof, liquidated
damages and not a penalty and constitute, in respect of Section 9.3(b) hereof,
an alternative performance provision. If one party fails to timely pay to the
other any amount due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid amount at the
publicly announced prime rate of Citibank N.A. from the date such amount was
required to be paid.
Section 9.4. AMENDMENT. This Agreement may be amended by the parties hereto
(by action taken or authorized by their respective Boards of Directors), at any
time before or after approval hereof by the shareholders of Zytec and CPI and
prior to the Effective Time, but after such approvals, no such amendment shall
(i) alter or change the Ratio, nature or amount of the Merger Consideration,
(ii) alter or change any of the terms and conditions of this Agreement if any of
the alterations or changes, alone or in the aggregate, would materially
adversely affect the rights of holders of Zytec Common Stock or CPI Common
Stock, or (iii) alter or change any term of the articles of incorporation of
Zytec as approved by the shareholders of Zytec, except for alterations or
changes that could otherwise, by law, be adopted by the Board of Directors of
Zytec, without the further approval of such shareholders, as applicable. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 9.5. WAIVER. At any time prior to the Effective Time, by action
taken or authorized by their respective Boards of Directors, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties hereto contained herein or
in any document delivered pursuant hereto and (c) subject to Section 9.4 hereof,
waive compliance with any of the agreements or conditions contained herein for
its benefit alone, to the extent permitted by applicable law. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party.
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ARTICLE 10
GENERAL PROVISIONS
Section 10.1. NON-SURVIVAL. None of the representations, warranties or
covenants (subject to the succeeding sentence) in this Agreement shall survive
the Effective Time. This Section 10.1 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the Effective
Time.
Section 10.2. BROKERS. Zytec represents and warrants that, except for
Needham & Company, Inc. whose fees have been disclosed to CPI prior to the date
hereof, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Mergers or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Zytec. CPI represents and warrants that, except for BT Alex. Brown
Incorporated and Croft & Bender LLC, whose fees have been disclosed to Zytec
prior to the date hereof, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
or the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of CPI.
Section 10.3. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if (i) when delivered, if delivered
personally, (ii) one day after being given if sent by reputable overnight
courier service, (iii) upon being telecopied (which is confirmed), or (iv) five
days after being mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) If to Zytec, to:
Zytec Corporation
7575 Market Place Drive
Eden Prairie, MN 55344
Attn.: Ronald D. Schmidt
Facsimile No.: (612) 903-9688
with a copy to:
Winthrop & Weinstine, P.A.
3200 World Trade Center
30 East 7th Street
St. Paul, MN 55101
Attn.: Sherman Winthrop, Esq.
Facsimile No.: (612) 292-9347
(b) If to CPI or CPI Sub, to:
Computer Products, Inc.
7900 Glades Road, Suite 500
Boca Raton, FL 33434
Attn.: Joseph M. O'Donnell
Richard J. Thompson
Facsimile No.: (561) 451-1050
with a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue, 23rd Floor
New York, New York 10017-5582
Attn.: Stephen Ollendorff, Esq.
Facsimile No.: (212) 213-1199
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Section 10.4. MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement; (ii) shall not be assigned by
operation of law or otherwise; and (iii) shall be governed by and construed in
accordance with the laws of the State of Minnesota applicable to contracts
executed in and to be fully performed in such State, without giving effect to
its conflicts of law, rules or principles and except to the extent the
provisions of this Agreement (including the documents or instruments referred to
herein) are expressly governed by or derive their authority from the MBCA.
Section 10.5. INTERPRETATION; DEFINITIONS. When a reference is made in this
Agreement to Articles, Sections or Schedules, such reference shall be to an
Article or a Section or Schedule of this Agreement, respectively, unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". "Person" shall mean any natural
person, corporation, business trust, joint venture, association, company, firm,
partnership, or other Person. The term "Subsidiary" of a Person shall mean any
corporation or other Person (including partnerships and other business
associations) of which at least a majority of the outstanding capital stock or
other voting securities having voting power under ordinary circumstances to
elect directors or similar members of the governing body of such corporation or
other entity shall at the time be held, directly or indirectly, by such Person.
The term "Zytec Subsidiary" shall mean the Subsidiaries of Zytec. The term "CPI
Subsidiary" shall mean the Subsidiaries of CPI. The terms "Affiliate" and
"Associate" shall have the respective meanings set forth in Rule 405 of the
Securities Act (except as otherwise specifically defined herein).
Section 10.6. COUNTERPARTS; EFFECT. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 10.7. ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal or state court sitting in the State
of Delaware.
Section 10.8. NO THIRD PARTY BENEFICIARIES. Subject to Section 7.5(e)
hereof, nothing contained herein is intended to or shall confer on any Person
which is not a party to this Agreement any rights under this Agreement.
Section 10.9. ASSIGNMENT. Except as expressly set forth herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties hereto. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
Notwithstanding the foregoing, CPI may assign the rights and obligations of CPI
Sub to another, direct or indirect, wholly-owned subsidiary of CPI.
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IN WITNESS WHEREOF, Zytec, CPI and CPI Sub have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
ZYTEC CORPORATION
<TABLE>
<S> <C> <C>
By: /s/ Ronald D. Schmidt
----------------------------------------
Name:
Attest: /s/ Sherman Winthrop Title:
- -------------------------------------------
Secretary
COMPUTER PRODUCTS, INC.
By: /s/ Joseph M. O'Donnell
----------------------------------------
Name:
Attest: /s/ Richard J. Thompson Title:
- -------------------------------------------
Secretary
CPI ACQUISITION CORP.
By: /s/ Joseph M. O'Donnell
----------------------------------------
Name:
Attest: /s/ Richard J. Thompson Title:
- -------------------------------------------
Secretary
</TABLE>
A-41
<PAGE>
[BT Alex. Brown Incorporated Letterhead]
ANNEX B
September 2, 1997
Board of Directors
Computer Products, Inc.
7900 Glades Road
Boca Raton, Florida 33434
Members of the Board:
Computer Products, Inc. ("Computer Products"), Zytec corporation ("Zytec")
and CPI Acquisition Corp., a Minnesota corporation and wholly-owned subsidiary
of Computer Products ("Sub"), have proposed to enter into an Agreement and Plan
of Merger dated as of September 2, 1997 (the "Merger Agreement"). Pursuant to
the Merger Agreement, Sub will be merged with and into Zytec (the "Merger")
pursuant to which each outstanding share of the common stock, no par value, of
Zytec (the "Zytec Common Stock") will be converted into the right to receive
1.33 (the "Exchange Ratio") shares of the common stock, par value $0.01 per
share, of Computer Products (the "Computer Products Common Stock"). We have
assumed, with your consent, that the Merger will qualify for
pooling-of-interests accounting treatment and as a tax-free transaction. You
have requested our opinion as to whether the Exchange Ratio is fair, from a
financial point of view, to Computer Products.
BT Alex. Brown Incorporated ("BT Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of
Computer Products in connection with this opinion and will receive a fee for our
services upon the delivery of this opinion. In the ordinary course of business,
BT Alex. Brown may actively trade the securities of both Computer Products and
Zytec for our own account and the account of our customers and, accordingly, may
at any time hold a long or short position in securities of Computer Products and
Zytec.
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning Computer Products and
Zytec and certain internal analyses and other information furnished to us by
Computer Products and Zytec. We have also held discussions with the members of
the senior managements of Computer Products and Zytec regarding the businesses
and prospects of Computer Products and Zytec and the joint prospects of a
combined company. In addition, we have (i) reviewed the reported prices and
trading activity for Computer Products Common Stock and Zytec Common Stock, (ii)
compared certain financial and stock market information for Computer Products
and Zytec with similar information for certain other companies whose securities
are publicly traded, (iii) reviewed the financial terms of certain recent
business combinations which we deemed comparable in whole or in part, (iv)
reviewed the terms of the Merger Agreement, and (v) performed such other studies
and analyses and considered such other factors as we deemed appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of Computer
Products and Zytec, we have assumed that such information reflects the best
currently avaialbe judgments and estimates of the managements of Computer
Products and Zytec as to the expected future financial performance of their
respective companies and of the combined company. In addition, we have not made
an independent evaluation or appraisal of the assets or liabilities of Computer
B-1
<PAGE>
Products and Zytec, nor have we been furnished with any such evaluations or
appraisals. Our opinion is based on market, economic and other conditions as
they exist and can be evaluated as of the date of this letter.
We have been retained by the Board of Directors of Computer Products as
financial advisor solely for the purposes of rendering this opinion and,
accordingly, we have not been requested to and have not provided any other
services in connection with the Merger.
Our advisory services and the opinion expressed herein were prepared for the
use of the Board of Directors of Computer Products and do not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to matters relating to the proposed Merger. We hereby consent, however,
to the inclusion of this opinioin in its entirety as an exhibit to the
registration/proxy statement of Computer Products and Zytec relating to the
proposed Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio is fair, from a financial point of view,
to Computer Products.
Very truly yours,
BT ALEX. BROWN INCORPORATED
By: /s/ BT ALEX. BROWN INCORPORATED
--------------------------------------
B-2
<PAGE>
[Needham & Company, Inc. Letterhead]
ANNEX C
September 2, 1997
Board of Directors
Zytec Corporation
7575 Market Place Drive
Eden Prairie, MN 55344
Gentlemen:
We understand that Zytec Corporation ("Zytec"), Computer Products, Inc.
("CPI"), and CPI Acquisition Corp., a wholly-owned subsidiary of CPI ("Computer
Products, Inc. Sub"), propose to enter into an Agreement and Plan of Merger (the
"Merger Agreement") whereby Computer Products, Inc. Sub will be merged with and
into Zytec and Zytec will become a wholly-owned subsidiary of CPI (the
"Merger"). The terms of the Merger will be set forth more fully in the Merger
Agreement.
Pursuant to the proposed Merger Agreement, we understand that at the
Effective Time (as defined in the Merger Agreement), each issued and outstanding
share of common stock, no par value, of Zytec will be converted into the right
to receive 1.33 shares (the "Ratio") of common stock, par value $.01 per share,
of CPI (the "CPI Common Stock").
You have asked us to advise you as to the fairness, from a financial point
of view, of the Ratio to the stockholders of Zytec. Needham & Company, Inc., as
part of its investment banking business, is regularly engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities, private
placements and valuations. We have acted as financial advisor to Zytec in
connection with the Merger and will receive a fee for our services, none of
which is contingent on the consummation of the Merger. In addition, Zytec has
agreed to indemnify us for certain liabilities arising out of the rendering of
this opinion.
For purposes of this opinion we have, among other things: (a) reviewed a
draft of the Merger Agreement dated August 29, 1997; (b) reviewed certain other
documents relating to the Merger; (c) reviewed certain publicly available
information concerning CPI and Zytec and certain other relevant financial and
operating data of CPI and Zytec made available from the internal records of CPI
and Zytec; (d) reviewed the historical stock prices and trading volumes of CPI's
and Zytec's common stock; (e) held discussions with members of senior management
of CPI and Zytec concerning their current and future business prospects; (f)
reviewed certain financial forecasts and projections prepared by the respective
managements of CPI and Zytec; (g) compared certain publicly available financial
data of companies whose securities are traded in the public markets, which we
deemed generally comparable to the business of Zytec, to similar data for Zytec;
(h) reviewed the financial terms of certain other business combinations that we
deemed generally relevant; and (i) performed and/or considered such other
studies, analyses, inquiries and investigations as we deemed appropriate.
In connection with our review and arriving at our opinion, we have not
assumed any responsibility to independently verify any of the foregoing
information, have relied on such information, and have assumed that all such
information is complete and accurate in all material respects. In addition, we
have assumed, with your consent, that (i) the Merger will be accounted for under
the pooling-of-interests method of accounting, (ii) the Merger will constitute a
tax-free reorganization, (iii) any material liabilities (contingent or
otherwise, known or unknown) of CPI and Zytec are as set forth in the
consolidated financial statements of CPI and Zytec, respectively, and (iv) the
terms set forth in the executed Merger Agreement will not differ materially from
the proposed terms provided to us in the draft Merger Agreement dated August 29,
1997. With respect to CPI's and Zytec's financial forecasts provided to us by
their respective
C-1
<PAGE>
managements, we have assumed for purposes of our opinion that such forecasts
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of such managements, at the time of preparation, of the
future operating and financial performance of CPI and Zytec. We have not assumed
any responsibility for or made or obtained any independent evaluation, appraisal
or physical inspection of the assets or liabilities of CPI or Zytec. Further,
our opinion is based on economic, monetary and market conditions existing as of
the date hereof, and in rendering this opinion, we have relied without
independent verification on the accuracy, completeness and fairness of all
historical financial and other information which was either publicly available
or furnished to us by CPI and Zytec. Our opinion as expressed herein is limited
to the fairness, from a financial point of view, of the Ratio to the
stockholders of Zytec and does not address Zytec's underlying business decision
to engage in the Merger. Our opinion does not constitute a recommendation to any
stockholder of Zytec as to how such stockholder should vote on the proposed
Merger.
We are not expressing any opinion as to what the value of CPI Common Stock
will be when issued to the stockholders of Zytec pursuant to the Merger or the
prices at which CPI Common Stock will actually trade at any time.
In the ordinary course of our business, we may actively trade the equity
securities of Zytec or CPI for our own account or for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This letter and the opinion expressed herein are provided at the request and
for the information of the Board of Directors of Zytec and may not be quoted or
referred to or used for any purpose without our prior written consent, except
that this letter may be disclosed in connection with any registration statement
or proxy statement used in connection with the Merger so long as this letter is
quoted in full in such registration statement or proxy statement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Ratio is fair to the stockholders of Zytec from a financial
point of view.
Very truly yours,
/s/ Needham & Company, Inc.
Needham & Company, Inc.
C-2
<PAGE>
ANNEX D
SECTIONS 302A.471 AND 302A.473 OF
THE MINNESOTA BUSINESS CORPORATION ACT
302A.471. RIGHTS OF DISSENTING SHAREHOLDERS.--Subdivision 1. Actions creating
rights. A shareholder of a corporation may dissent from, and obtain payment for
the fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption
of the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holders of the shares
to acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter,
or to cumulate votes, except as the right may be excluded or limited through
the authorization or issuance of securities of an existing or new class or
series with similar or different voting rights; except that an amendment to
the articles of an issuing public corporation that provides that section
302A.671 does not apply to a control share acquisition does not give rise to
the right to obtain payment under this section;
(b) A sale, lease transfer, or other disposition of all or substantially all
of the property and assets of the corporation, but not including a transaction
permitted without shareholder approval in section 302A.661, subdivision 1, or a
disposition in dissolution described in section 302A.725, subdivision 2, or a
disposition pursuant to an order of a court, or a disposition for cash on terms
requiring that all or substantially all of the net proceeds of disposition be
distributed to the shareholders in accordance with their respective interests
within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B, to
which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert dissenters'
rights as to less than all of the shares registered in the name of a
shareholder, unless the shareholder dissents with respect to all the shares that
are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
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<PAGE>
Subd. 3. Rights not to apply. (a) Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
(b) If a date is fixed according to section 302A.445, subdivision 1, for the
determination of shareholders entitled to receive notice of and to vote on an
action described in subdivision 1, only shareholders as of the date fixed, and
beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
Subd. 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.--Subdivision 1.
Definitions. (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subd. 2. Notice of an Action. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If the proposed action must be approved by the
shareholders, a shareholder who is entitled to dissent under section 302A.471
and who wishes to exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of intent to demand the
fair value of the shares owned by the shareholder and must not vote the shares
in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30
D-2
<PAGE>
days after the notice required by paragraph (a) was given, but the dissenter
retains all other rights of a shareholder until the proposed action takes
effect.
Subd. 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each dissenting shareholder who has
complied with subdivisions 3 and 4 the amount the corporation estimated to be
the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income for
a fiscal year ending not more than 16 months before the effective date of
the corporate action, together with the latest available interim financial
statements;
(2) an estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision 4
and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a demand under
subdivision 6, it shall, within 60 days after receiving the demand, either pay
to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant,
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<PAGE>
computed by any method or combination of methods that the court, in its
discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs and
expenses of a proceeding under subdivision 7, including the reasonable expenses
and compensation of any appraisers appointed by the court, and shall assess
those costs and expenses against the corporation, except that the court may
assess part or all of those costs and expenses against a dissenter whose action
in demanding payment under subdivision 6 is found to be arbitrary, vexatious, or
not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an attorney
for the dissenters out of the amount awarded to the dissenters, if any.
D-4
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Article IX of the CPI Bylaws, CPI has agreed to indemnify each
director and officer of CPI who it is empowered to indemnify to the fullest
extent permitted by the provisions of the FBCA. Section 607.0850 of the FBCA
generally provides that a corporation has the power to indemnify its officers
and directors against liability incurred in connection with any proceeding
(other than an action by, or in the right of, the corporation) to which he or
she was a party by reason of the fact that he or she is or was a director or
officer of the corporation, if he acted in good faith and in a manner he or she
reasonably believed to be in the best interest of the corporation. Section
607.0850 additionally provides that a corporation shall have the power to
indemnify any person who is a party to any proceeding by or in the right of the
corporation by reason of the fact that he or she is or was a director or officer
of the corporation against expenses and amounts paid in settlement not
exceeding, in the judgment of such corporation's board of directors, the
estimated expenses of litigating the proceeding to conclusion. Such
indemnification shall be authorized if such person acted in good faith and in a
manner he or she reasonably believed to be in the best interest of the
corporation, except that no indemnification shall be permitted if such person
shall have been adjudged to be liable unless, and only to the extent that, a
court of competent jurisdiction shall determine upon application that such
person is fairly and reasonably entitled to indemnity for such expenses as such
court shall deem appropriate. Section 607.0850 further provides that any
indemnification, unless pursuant to a court determination, shall be made by the
corporation only upon a determination that indemnification of the director or
officer was proper in the circumstances because he or she met the applicable
standards of conduct, as described above. Such determination shall be made by
the corporation's board of directors or a committee thereof, by independent
legal counsel or by the shareholders of the corporation.
The CPI Bylaws also provide that the indemnification rights provided thereby
shall not be deemed to be exclusive of any other rights to which CPI's directors
and officers may be entitled, including, without limitation, any rights of
indemnification to which they may be entitled pursuant to any agreement,
insurance policy, or otherwise. CPI maintains a directors' and officers'
liability insurance policy which, subject to the limitations and exclusions
stated therein, covers the officers and directors of CPI for certain actions or
inactions that they may take or omit to take in their capacities as officers and
directors of CPI.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to officers and directors under any of the foregoing
provisions, CPI has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION INCORPORATION BY REFERENCE TO
- ----------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of September Annex A to the Joint Proxy Statement/ Prospectus
2, 1997, between Zytec, CPI and Merger Sub. which forms a part of the Registration Statement.
3.1 Amended By-laws of CPI
5.1 Form of Opinion of Hertzog, Calamari & Gleason as
to validity of issued shares of CPI Common Stock.
8.1 Form of Opinion of Hertzog, Calamari & Gleason with
respect to certain Federal income tax aspects of
the Merger.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION INCORPORATION BY REFERENCE TO
- ----------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
8.2 Form of Opinion of Winthrop & Weinstine, P.A., with
respect to certain Federal income tax aspects of
the Merger.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consents of Hertzog, Calamari & Gleason. Included in Exhibits 5.1. and 8.1.
23.4 Consent of Winthrop & Weinstine, P.A. Included in Exhibit 8.2.
99.1 Form of Proxy to be used by CPI.
99.2 Form of Proxy to be used by Zytec. Previously filed.
99.3 Opinion of BT Alex. Brown Incorporated. Annex B to the Joint Proxy Statement/ Prospectus
which forms a part of the Registration Statement.
99.4 Opinion of Needham & Company, Inc. Annex C to the Joint Proxy Statement/ Prospectus
which forms a part of the Registration Statement.
99.5 Non-Solicitation Agreement, between CPI and Previously filed.
Lawrence J. Matthews, dated September 2, 1997.
99.6 Non-Solicitation Agreement, between CPI and Ronald Previously filed.
D. Schmidt, dated September 2, 1997.
99.7 Non-Competition, Non-Solicitation and Previously filed.
Confidentiality Agreement, between CPI and John M.
Steel, dated September 2, 1997.
99.8 Voting Agreement, dated September 2, 1997, between Previously filed.
CPI and Ronald D. Schmidt, Lawrence J. Matthews and
John M. Steel.
99.9 Consent of BT Alex. Brown Incorporated. Included in Exhibit 99.3
99.10 Consent of Needham & Company, Inc. Included in Exhibit 99.4
99.11 Consent of Ronald D. Schmidt.
99.12 Consent of Fred C. Lee.
99.13 Consent of John M. Steel.
99.14 Consent of Lawrence J. Matthews.
</TABLE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act, the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form
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<PAGE>
with respect to reoffering by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415 of the
Securities Act, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of any
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein; and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this amendment No. 1 to the registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Boca Raton, State of Florida on this 13th day of November, 1997.
<TABLE>
<S> <C> <C>
COMPUTER PRODUCTS, INC.
(Registrant)
By: /s/ JOSEPH M. O'DONNELL
-----------------------------------------
Joseph M. O'Donnell, CHAIRMAN,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment No. 1 to the registration statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman, Chief Executive
/s/ JOSEPH M. O'DONNELL Officer and President
- ------------------------------ (principal executive November 13, 1997
Joseph M. O'Donnell officer)
Vice President of Finance,
Secretary, Treasurer and
/s/ RICHARD J. THOMPSON Chief Financial Officer
- ------------------------------ (principal financial November 13, 1997
Richard J. Thompson officer and principal
accounting officer)
Director
- ------------------------------
Bert Sager
/s/ EDWARD S. CROFT, III Director
- ------------------------------ November 13, 1997
Edward S. Croft, III
/s/ STEPHEN A. OLLENDORFF Director
- ------------------------------ November 13, 1997
Stephen A. Ollendorff
/s/ PHILLIP A. O'REILLY Director
- ------------------------------ November 13, 1997
Phillip A. O'Reilly
/s/ LEWIS SOLOMON Director
- ------------------------------ November 13, 1997
Lewis Solomon
Director
- ------------------------------
A. Eugene Sapp
II-4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION INCORPORATION BY REFERENCE TO
- ----------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of September Annex A to the Joint Proxy Statement/ Prospectus
2, 1997, between Zytec, CPI and Merger Sub. which forms a part of the Registration Statement.
3.1 Amended By-laws of CPI.
5.1 Form of Opinion of Hertzog, Calamari & Gleason as
to validity of issued shares of CPI Common Stock.
8.1 Form of Opinion of Hertzog, Calamari & Gleason with
respect to certain Federal income tax aspects of
the Merger.
8.2 Form of Opinion of Winthrop & Weinstine, P.A., with
respect to certain Federal income tax aspects of
the Merger.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Hertzog, Calamari & Gleason. Included in Exhibits 5.1. and 8.1.
23.4 Consent of Winthrop & Weinstine, P.A. Included in Exhibit 8.2.
99.1 Form of Proxy to be used by CPI.
99.2 Form of Proxy to be used by Zytec. Previously filed.
99.3 Opinion of BT Alex. Brown Incorporated. Annex B to the Joint Proxy Statement/ Prospectus
which forms a part of the Registration Statement.
99.4 Opinion of Needham & Company, Inc. Annex C to the Joint Proxy Statement/ Prospectus
which forms a part of the Registration Statement.
99.5 Non-Solicitation Agreement, between CPI and Previously filed.
Lawrence J. Matthews, dated September 2, 1997.
99.6 Non-Solicitation Agreement, between CPI and Ronald Previously filed.
D. Schmidt, dated September 2, 1997.
99.7 Non-Competition, Non-Solicitation and Previously filed.
Confidentiality Agreement, between CPI and John M.
Steel, dated September 2, 1997.
99.8 Voting Agreement, dated September 2, 1997, between Previously filed.
CPI and Ronald D. Schmidt, Lawrence J. Matthews and
John M. Steel.
99.9 Consent of BT Alex. Brown Incorporated. Included in Exhibit 99.3
99.10 Consent of Needham & Company, Inc. Included in Exhibit 99.4
99.11 Consent of Ronald D. Schmidt.
99.12 Consent of Fred C. Lee.
99.13 Consent of John M. Steel.
99.14 Consent of Lawrence J. Matthews.
</TABLE>
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As Amended, October 23, 1997
BY-LAWS OF
COMPUTER PRODUCTS, INC.
ARTICLE I
Offices
The principal office of the Corporation shall be at 7900 Glades Road, Suite
500, Boca Raton, Florida 33433, or at such other place as the Board of Directors
may from time to time direct. The Corporation may also establish and have such
other offices or places, within or outside the State of Florida or any place in
the world, as may from time to time be designated by the Board of Directors.
ARTICLE II
Shareholders
2.1. Shares.
2.2.1. Certificates. The certificates of stock of the Corporation
shall be numbered and shall be entered in the books of the Corporation as they
are issued. They shall exhibit the holder's name and number of shares, set
forth any other information prescribed by the Florida Business Corporation Act
("Business Corporation Act") and by any other applicable provision of law, and
shall be signed by the President or a Vice President and the Secretary or an
Assistant Secretary of the Corporation. Certificates may be sealed with the
seal of the Corporation or a facsimile thereof. The signatures of the President
or a Vice President and the Secretary or an Assistant Secretary upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a transfer agent or a registrar, other than the Corporation itself or an
employee of the Corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of its
issuance.
No certificate shall be issued for any share until such share is
fully paid.
2.2.2. Uncertificated Shares. Notwithstanding anything to the
contrary contained in Section 2.2.1 hereof, unless the Business Corporation
Act or another statute
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expressly provides otherwise, the Board of Directors may authorize the issue of
some or all of the shares of any or all of its classes or series of stock
without certificates in accordance with the provisions of the Business
Corporation Act.
2.2.3. Lost or Destroyed Certificates. The holder of any
certificate representing shares of stock of the Corporation may notify the
Corporation of any loss, theft or destruction thereof, and the Board of
Directors may thereupon, in its discretion, cause a new certificate for the
same number of shares to be issued to such holder upon satisfactory proof of
such loss, theft or destruction, and the deposit of indemnity by way of bond
or otherwise, in such form and amount and with such surety or sureties as the
Board of Directors may require, to indemnify the Corporation against any loss
or liability by reason of the issuance of such new certificates.
2.2. Fractional Share Interests or Scrip. The Corporation may, when
necessary or desirable in order to effect share transfers, share
distributions or reclassifications, mergers, consolidations or
reorganizations, issue a fraction of a share, make arrangements or provide
reasonable opportunity for any person entitled to a fractional interest in a
share to sell such fractional interest or to purchase such additional
fractional interests as may be necessary to acquire a full share, pay in cash
the fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined, or issue scrip in registered or bearer
form, over the manual or facsimile signature of an officer of the Corporation
or its agent, which shall entitle the holder to receive a certificate for a
full share upon the surrender of such scrip aggregating a full share. A
certificate for a fractional share shall, but scrip shall not unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon and to participate in any of the assets of the
Corporation in the event of liquidation.
The Board of Directors may cause scrip to be issued subject to the
condition that it shall become void if not exchanged for certificates
representing full shares before a specified date, or subject to the condition
that the shares for which scrip is exchangeable may be sold by the Corporation
and the proceeds thereof distributed to the holders of scrip, or subject to any
other conditions which the Board of Directors may deem advisable. Such
conditions shall be stated or fairly summarized on the face of the certificate.
2.3. Share Transfers. Upon compliance with any provisions
restricting the transferability of shares that may be set forth in the
Articles of Incorporation, these By-Laws, or any
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written agreement in respect thereof, transfers of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, or with a transfer
agent or a registrar and on surrender of the certificate or certificates for
such shares properly endorsed and the payment of all taxes thereon, if any.
Except as may be otherwise provided by law, the person in whose name shares
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation; provided that whenever any transfer of
shares shall be made for collateral security, and not absolutely, such fact, if
known to the Secretary of the Corporation, shall be so expressed in the entry of
transfer.
2.4. Record Date for Shareholders. The Board of Directors may
establish in advance a date as the record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders
(including a record date for determining shareholders entitled to demand a
special meeting), or in order to make a determination of shareholders for any
other purpose, provided that such date may not be more than seventy days
before the meeting or action requiring such determination of shareholders.
If no record date is fixed for the determination of shareholders entitled to
notice or to vote at a meeting of shareholders, or shareholders entitled to
receive payment of a dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record
date for the determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section, the determination shall apply to any adjournment
thereof, unless the Board of Directors establishes a new record date under
this Section for the adjourned meeting which new record date will be
established if the meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting.
2.5. Meaning of Certain Terms. As used herein in respect of the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "shareholder" or
"shareholders" refers to an outstanding share or shares and to a holder or
holders of record of outstanding shares when the Corporation is authorized to
issue only one class of shares, and said reference is also intended to
include any outstanding share or shares and any holder or holders of record
of outstanding shares of any class upon which or upon whom the Articles of
Incorporation confer such rights where there are
3
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two or more classes or series of shares or upon which or upon whom the Business
Corporation Act confers such rights notwithstanding that the Articles of
Incorporation may provide for more than one class or series of shares, one or
more of which are limited or denied such rights thereunder.
ARTICLE III
Meetings of Shareholders
3.1. Annual Meetings. The annual meeting of the shareholders of the
Corporation for the election of the Board of Directors and for the
transaction of such other business as may properly come before such meeting
in accordance with Section 3.5 of Article III of these By-Laws shall be held
at 10:00 A.M., Eastern Standard Time, or at such other hour as may be stated
in the notice of the meeting, on the first Tuesday in May of each year or on
such date and at such time as may be determined by the Board of Directors.
3.2. Special Meetings. A special meeting of the shareholders may be
called to conduct such business of the Corporation as set forth in Section
3.5 of Article III of these By-Laws (i) at any time by the Chairman,
President, or the Board of Directors, or any officer instructed by the Board
of Directors or the President to call the meeting, and (ii) shall be called
by the President or a Vice President upon the written request of shareholders
of the Corporation pursuant to Section 607.0702 of the Business Corporation
Act.
3.3. Place of Meetings. The meetings of the shareholders of the
Corporation shall be held at its principal office in the State of Florida or
at such other place within or without the State of Florida as shall be
designated by the Board of Directors.
3.4. Notice of Meetings.
3.4.1. General. Except as otherwise required by statute, notice
of each meeting of the shareholders, whether annual or special, shall be in
writing over the name of the President or the Secretary. Such notice shall state
the place, day and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
prescribed by the Business Corporation Act, a copy of such notice shall be
served, either personally or by mail at the direction of the President or the
officer calling the meeting to each shareholder, upon each shareholder of record
entitled to vote at such meeting not less than ten days nor more than sixty days
before the date of such meeting. The notice of any annual or special meeting
shall also include, or be accompanied by, any additional
4
<PAGE>
statements, information, or documents prescribed by law. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the Corporation, with postage thereon prepaid.
3.4.2. Waiver of Notice. Attendance of a shareholder at a meeting
shall constitute a waiver of notice of the meeting, except where the shareholder
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting was not
lawfully called or convened. Attendance of a shareholder at a meeting shall
constitute a waiver of any objection to consideration of a particular matter
that is not within the purposes described in the meeting notice, except where
the shareholder objects to considering the matter when it is presented. Whenever
any notice is required to be given to any shareholder, a waiver thereof in
writing signed by him or his authorized attorney-in-fact, whether before or
after such meeting, shall be the equivalent to the giving of such notice.
3.4.3. Adjournments. When a meeting is adjourned to another time
or place, it shall not be necessary to give any notice of the adjourned meeting
if the time and place to which the meeting is adjourned are announced at the
meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted on the original date
of the meeting. If, however, the Board of Directors shall fix a new record date
for the adjourned meeting, notice of the adjourned meeting shall be given each
shareholder of record of the new record date.
3.5. Nature of Business.
3.5.1. General. At any meeting, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors or by any shareholder who complies with the procedures
set forth in this Section 3.5.
3.5.2. Business of Meeting. Except as otherwise provided by
Section 3.6 hereof or by law, the only business which shall be conducted at any
meeting of the shareholders shall (i) have been specified in the written notice
of the meeting (or any supplement thereto) given as provided in Section 3.4
hereof; (ii) be brought before the meeting at the direction of the Board of
Directors or the chairman of the meeting; or (iii) have been specified in a
written notice (a "Shareholder Meeting Notice") given to the Corporation, in
accordance with the requirements of Section 3.5.3 hereof, by or on behalf of any
shareholder who shall have been a
5
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shareholder of record on the record date for such meeting and who shall
continue to be entitled to vote thereat. No business shall be brought before
any meeting of shareholders of the Corporation otherwise than as provided in
this Section 3.5 or in Section 3.6 hereof.
3.5.3. Shareholder Meeting Notice. Each Shareholder Meeting
Notice must be delivered personally to, or be mailed to and received by, the
Secretary of the Corporation, at the principal executive offices of the
Corporation, not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event that less than 65 days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder, to be timely, must be received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Each
Shareholder Meeting Notice shall set forth: (i) a description of each item of
business proposed to be brought before the meeting; (ii) the name and address of
the shareholder proposing to bring such item of business before the meeting;
(iii) the class and number of shares of stock held of record, owned beneficially
and represented by proxy by such shareholder as of the record date for the
meeting (if such date shall then have been made publicly available) and as of
the date of such Shareholder Meeting Notice; and (iv) all other information
which would be required to be included in a proxy statement filed with the
Securities and Exchange Commission (the "Commission") if, with respect to any
such item of business, such shareholder were a participant in a solicitation
subject to Section 14 of the Securities Exchange Act of 1934.
3.6. Nomination of Directors.
3.6.1. General. Except as otherwise fixed pursuant to Article
THIRD of the Articles of Incorporation relating to the rights of the holders of
any one or more classes or series of Preferred Stock issued by the Corporation,
acting separately by class or series, to elect, under specified circumstances,
directors at a meeting of shareholders, nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors or by any shareholder entitled to vote in the election of
directors generally. However, any shareholder entitled to vote in the election
of directors generally may nominate one or more persons for election as
directors at a meeting only if written notice (a "Shareholder Nomination
Notice") of such shareholder's intent to make such nomination or nominations has
been delivered personally to, or been mailed to and received by the Secretary of
the Corporation at, the principal executive offices of the Corporation, not less
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than 50 days nor more than 75 days prior to the meeting; provided, however,
that, in the event that less than 65 days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. The presiding
officer of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the procedure set forth in this Section 3.6.
3.6.2. Shareholder Nomination Notice. Each Shareholder Nomination
Notice shall set forth: (i) the name and address of the shareholder who intends
to make the nomination and of the person or persons to be nominated; (ii) the
class and number of shares of stock held of record, owned beneficially and
represented by proxy by such shareholder as of the record date for the meeting
(if such date shall then have been made publicly available) and of the date of
the Shareholder Nomination Notice; (iii) a representation that the shareholder
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (iv) a description of all arrangements or
understandings between such shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such shareholder; (v) such other information
regarding each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Commission; and (vi) the consent of each nominee to serve as a director of the
Corporation if so elected.
3.7. Quorum. At all meetings of the shareholders the presence in
person or by proxy of the holders of record of a majority of the shares then
issued and outstanding and entitled to vote shall be necessary and sufficient
to constitute a quorum for the transaction of business. After a quorum has
been established at a shareholders' meeting, the subsequent withdrawal of
shareholders, so as to reduce the number of shareholders at the meeting below
the number required for a quorum, shall not affect the validity of any action
taken at the meeting or any adjournment thereof. In the absence of a quorum,
a majority in interest of the shareholders entitled to vote, present in
person or by proxy, or, if no shareholder entitled to vote is present in
person or by proxy, any officer entitled to preside at or act as secretary of
such meeting, may adjourn the meeting. At any such adjourned meeting at
which a quorum may be present, any business may be transacted which might
have been transacted at the meeting as originally called.
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3.8. Inspectors of Election. The Board of Directors shall appoint
two persons, who need not be shareholders, to act as Inspectors of Election
at all meetings of the shareholders until the close of the next annual
meeting. No candidate for the office of director shall act as an Inspector
of Election. If there be a failure to appoint Inspectors, or if any
Inspector appointed be absent or refuse to act, or if his office becomes
vacant, the Board of Directors present at the meeting may choose temporary
Inspectors of the number required. The Inspectors appointed to act at any
meeting of the Board of Directors, before entering upon the discharge of
their duties, shall be sworn faithfully to execute the duties of Inspectors
at such meeting with strict impartiality, and according to the best of their
ability.
3.9. Voting. Each shareholder entitled to vote in accordance with
the terms of the Articles of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such shareholder, but
no proxy shall be voted after eleven months from its date unless such proxy
provides for a longer period. Every proxy shall be signed by the shareholder
or by his duly authorized attorney-in-fact, and filed with the Secretary of
the Corporation. Upon the demand of any shareholder, the vote for directors
and the vote upon any question before the meeting, shall be by ballot. At all
meetings of the shareholders, all matters shall be approved if the votes cast
favoring the action exceed the votes cast opposing the action, except as
provided by the Articles of Incorporation or the laws of the State of
Florida. [Amended March 30, 1994]
3.10. Voting List. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten days
before each meeting of shareholders, a complete list, in alphabetical order,
of the shareholders entitled to vote at such meeting or any adjournment
thereof, with the address of and the number and class and series, if any, of
the shares held by each. Such list, for a period of ten days prior to such
meeting, shall be kept on file at the registered office of the Corporation in
the State of Florida, at the principal place of business of the Corporation
or at the office of the transfer agent or registrar of the Corporation and
shall be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder at any time during the meeting. The original stock transfer book
shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
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3.11. Waiver of Irregularities. All informalities and irregularities
in calls, notices of meeting and in the manner of voting, form of proxy,
credentials, and methods of ascertaining those present, shall be deemed
waived if no objection is made thereto at the meeting.
3.12. Written Action. Any action required to be taken or which may
be taken at a meeting of the shareholders may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Within ten (10) days after
obtaining such authorization by written consent, notice shall be given to
those shareholders who have not consented in writing. Such notice shall
fairly summarize the material features of the authorized action and, if the
action be a merger, consolidation or sale or exchange of assets for which
dissenter rights are provided under the Business Corporation Act, the notice
shall also include a clear statement of the right of the shareholders
dissenting therefrom to be paid the fair value of their shares upon
compliance with the provisions of the Business Corporation Act regarding the
rights of dissenting shareholders.
ARTICLE IV
Board of Directors
4.1. General Powers and Qualifications. The property, affairs and
business of the Corporation shall be managed by the Board of Directors. The
Board of Directors may exercise all of the powers of the Corporation, except
such as are by law or by the Articles of Incorporation or by these By-Laws
expressly conferred upon or reserved to the shareholders.
4.2. Number, Election and Term of Office. Until changed as
hereinafter provided, the number of directors shall be not less than three
nor more than twelve (12) as may be from time to time fixed by resolution of
the Board of Directors, but no decrease in the number of directors shall have
the effect of shortening the term of an incumbent director. Subject to the
provisions of Section 4.4.2 of this Article IV, the directors shall be
elected annually by the shareholders entitled to vote at the annual meeting
of shareholders, if the votes cast favoring the action exceed the votes cast
opposing the action. Each director (whether elected at an annual meeting or
to fill a vacancy or otherwise) shall continue in office until the annual
meeting of shareholders held next after his election and until his successor
shall have been elected and qualified
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or until his earlier death, resignation or removal in the manner hereinafter
provided. [Amended March 30, 1994]
4.3. Meetings.
4.3.1. Time. Meetings shall be held at such time as the Board
of Directors shall fix, except that the first meeting of a newly elected
Board of Directors shall be held as soon after its election as the directors
may conveniently assemble.
4.3.2. Place. Meetings shall be held at such place, (within or
without the State of Florida) as shall be fixed by the Board of Directors.
4.3.3. Call. Special meetings of the Board of Directors may be
called by the Chairman of the Board, if any, a Co-Chairman of the Board who
is also the chief executive officer of the Corporation, if any, the
President, or a majority of the directors. [Amended October 23, 1997]
4.3.4. Notice. No notice shall be required for regular
meetings for which the time and place have been fixed. Written, oral or any
other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the director's
thereat but in any event no less than two days before the day on which the
meeting is to be held. Unless otherwise provided herein, the notice or a
waiver of notice of any meeting need not specify the business to be
transacted or the purposes of the meeting. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and a waiver of
any and all objections to the place of the meeting, the time of the meeting,
or the manner in which it has been called or convened, except when a director
states, at the beginning of the meeting, any objection to the transaction of
business because the meeting is not lawfully called or convened. A director
may waive notice of a meeting, before or after such meeting, in writing or by
telegraph, radio, cable or telecopy.
4.3.5. Telephonic Participation. Members of the Board of
Directors may participate in a meeting of said Board by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time, and
participation by such means shall be deemed to constitute presence in person
at a meeting.
4.3.6. Chairman of the Meeting. Meetings of the Board of
Directors shall be presided over by the following directors in the order of
seniority and if present and acting: the Chairman of the Board, if any, a
Co-Chairman of the Board
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who is also the chief executive officer of the Corporation, if any, any other
Co-Chairman of the Board, if any, the President, or any other director chosen by
the Board. [Amended October 23, 1997]
4.3.7. Quorum. The presence, at any meeting, of a majority of
the total number of directors constituting the entire Board of Directors
shall be necessary and sufficient to constitute a quorum for the transaction
of business, and except as otherwise required by statute, the Articles of
Incorporation or these By-Laws, the act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors. In the absence of a quorum, a majority of the directors
present at the time and place of any meeting may adjourn such meeting.
Notice of any adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
4.4. Resignations and Vacancies.
4.4.1. Resignation. Any director may resign at any time by
giving written notice of such resignation to either the Board of Directors,
the President, a Vice President, the Secretary, or an Assistant Secretary of
the Corporation. Unless otherwise specified therein, such resignation shall
take effect upon receipt thereof by the Board of Directors or by any such
officer.
4.4.2. Vacancies. If any vacancy shall occur among the
directors by reasons of death, resignation, disqualification, removal or by
reason of an increase in the number of directors or otherwise, such vacancy
may be filled by a majority vote of the remaining directors, though less than
a quorum. Any such vacancy may also be filled by the affirmative vote of a
plurality of the shareholders present and entitled to vote at any meeting
held during the existence of such vacancy, provided that the notice of such
meeting shall have mentioned such vacancy or expected vacancy.
[Amended March 30, 1994]
4.5. Written Action. Any action required to be taken at a meeting of
directors, or any action which may be taken at a meeting of directors or a
committee thereof, if any, may be taken without a meeting if a consent in
writing, setting forth the action so to be taken, shall be signed by all of
the directors or all the members of the committee, as the case may be, and is
filed in the minutes of the proceedings of the Board or of the committee, as
the case may be.
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4.6. Compensation. The directors shall receive such compensation for
their services as may be authorized by resolution of the Board of Directors,
which compensation may include an annual fee and reimbursement for actual
expenses incurred in connection with the attendance at regular or special
meetings of the Board or any committee thereof. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in
any other capacity and receiving compensation therefor.
4.7. Committees. By resolutions adopted by a majority of the Board
of Directors then in office, the Board may designate an executive committee
and one or more other committees, each such committee to consist of three or
more directors of the Corporation. The executive committee shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation (except as otherwise expressly
limited by statute), including the power and authority to declare dividends
and to authorize the issuance of stock (to the extent permitted pursuant to
Section 607.0825 of the Business Corporation Act), and may authorize the seal
of the Corporation to be affixed to all papers which may require it. Each
such committee shall have such of the powers and authority of the Board as
may be provided from time to time in resolutions adopted by a majority of the
Board then in office.
4.8. Chairman of the Board. The Board of Directors may elect a
Chairman of the Board to perform such duties and have such responsibilities
as from time to time may be assigned to him by the Board of Directors.
4.9 Co-Chairman of the Board. The Board of Directors may elect
Co-Chairmen of the Board, each to perform such duties and have such
responsibilities as from time to time may be assigned to each of them by the
Board of Directors. [Added October 23, 1997]
ARTICLE V
Officers
5.1. Number. The officers of the Corporation shall be a President,
one or more Vice Presidents, a Secretary, a Treasurer, one or more Assistant
Secretaries and Assistant Treasurers, and such other officers and agents as
may be appointed from time to time by the Board of Directors.
5.2. Election, Term of Office and Qualifications. Each officer
specifically designated in Section 5.1 of this Article V shall be chosen by
the Board of Directors and shall hold his office until his successor shall
have been duly chosen and
12
<PAGE>
qualified or until his death or until he shall resign or shall have been
removed.
5.3. Removal, Resignations and Vacancies.
5.3.1. Removal. Any officer may be removed either with or
without cause by vote of a majority of the Board of Directors then in office.
5.3.2. Resignations. Any officer may resign at any time by
giving written notice of such resignation to the Board of Directors or to the
President, a Vice President, the Secretary or an Assistant Secretary. Unless
otherwise specified therein, such resignation shall take effect upon receipt
thereof by the Board of Directors or by the President, a Vice President, the
Secretary or an Assistant Secretary.
5.3.3. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause may be filled for the
unexpired portion of the term by a majority of the directors then in office,
although less than a quorum.
5.4. The President. The President, unless otherwise determined by the
Board of Directors, shall be the chief executive officer of the Corporation.
Subject to the supervision and direction of the Board of Directors, he shall be
responsible for managing the affairs of the Corporation. He shall have
supervision and direction of all of the other officers of the Corporation and
shall have the powers and duties usually and customarily associated with the
office of the President. He shall preside at meetings of the shareholders and,
subject to Section 4.3.6 hereof, the Board of Directors.
5.5. The Vice Presidents. The Vice Presidents shall have such powers
and duties as may be delegated to them by the President.
5.6. Secretary and Assistant Secretary.
5.6.1. Secretary. The Secretary shall attend all meetings of the
Board of Directors and of the shareholders, and shall record the minutes of all
proceedings in a book to be kept for that purpose. He shall perform like duties
for the committees of the Board when required. The Secretary shall give, or
cause to be given, notice of meetings of the shareholders, of the Board of
Directors and of the committees of the Board. He shall keep in safe custody the
seal of the Corporation, and when authorized by the President, an Executive Vice
President or a Vice President, shall affix the same to any instrument requiring
it, and when so affixed it
13
<PAGE>
shall be attested by his signature or by the signature of an Assistant
Secretary. He shall have such other powers and duties as may be delegated to
him by the President.
5.6.2. Assistant Secretary. The Assistant Secretary shall, in
case of the absence of the Secretary, perform the duties and exercise the
powers of the Secretary, and shall have such other powers and duties as may
be delegated to him by the President.
5.7. Treasurer and Assistant Treasurer.
5.7.1. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities, and shall deposit or cause to be deposited under
his direction all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors or pursuant to authority granted by it. He shall render to the
President and the Board whenever they may require it an account of all his
transactions as Treasurer and of the financial condition of the Corporation. He
shall have such other powers and duties as may be delegated to him by the
President.
5.7.2. Assistant Treasurer. The Assistant Treasurer shall, in
case of the absence of the Treasurer, perform the duties and exercise the powers
of the Treasurer, and shall have such other powers and duties as may be
delegated to him by the President.
5.8. Additional Officers. Each other officer appointed by the Board
shall hold office for such period, have such authority and perform such
duties as directed by the Board of Directors.
5.9. Compensation. The salaries or other compensation of the
officers shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving such salary or other compensation
by reason of the fact that he is also a director of the Corporation.
ARTICLE VII
Corporate Seal
The corporate seal shall have inscribed thereon the name of the
Corporation and shall be in such form and contain such other words and/or
figures as the Board of Directors shall determine or the law require.
14
<PAGE>
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall be as determined from time to
time by resolution duly adopted by the Board of Directors.
15
<PAGE>
ARTICLE IX
Indemnification
Each director or officer who the Corporation is empowered to indemnify
pursuant to the provisions of Section 607.0850 of the Business Corporation
Act (or any similar provision or provisions of applicable law at the time in
effect) shall be indemnified by the Corporation to the full extent permitted
thereby. The foregoing right of indemnification shall not be deemed to be
exclusive of any other such rights to which those directors and officers
seeking indemnification from the Corporation may be entitled, including, but
not limited to, any rights of indemnification to which they may be entitled
pursuant to any agreement, insurance policy, other by-law or charter
provision, vote of shareholders or directors, or otherwise. No repeal or
amendment of this Article IX shall adversely affect any rights of any person
pursuant to this Article IX which existed at the time of such repeal or
amendment with respect to acts or omissions occurring prior to such repeal or
amendment.
ARTICLE X
Amendments
These By-Laws may be altered or amended by a majority of the Board of
Directors then in office to the full extent permitted by law or regulation
and may also be altered or amended by a majority of the holders of the
outstanding voting stock of the Corporation present in person or by proxy at
any meeting of the shareholders called for that purpose.
\ 16
<PAGE>
EXHIBIT 5.1
[Hertzog, Calamari & Gleason Letterhead]
November __, 1997
Ladies and Gentlemen:
We have acted as special counsel for Computer Products, Inc., a
Florida corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended (the "Securities Act"), of 14,476,983
shares (the "Shares") of common stock, $.01 par value per share, of the Company
pursuant to the Company's Registration Statement on Form S-4 initially filed
with the Securities and Exchange Commission (the "Commission") on September 25,
1997 and declared effective under the Securities Act on November __, 1997 (the
"Registration Statement"). The Shares are to be issued in exchange for shares
of common stock, no par value per share, of Zytec Corporation ("Zytec") pursuant
to an Agreement and Plan of Merger, dated as of September 2, 1997, between the
Company, Zytec and CPI Acquisition Corp., a wholly-owned subsidiary of the
Company (the "Merger Agreement").
In reaching the opinions set forth herein, we have examined originals,
or copies certified or otherwise identified to our satisfaction, of such
corporate documents and records of the Company and certificates of public
officials and officers of the Company, and have made such other investigations,
as we have deemed necessary or appropriate in connection with rendering this
opinion. As to questions of fact material to this opinion, we have, when
relevant facts were not independently established by us, relied upon
certificates of public officials and information supplied to us by officers of
the Company.
For purposes of this opinion, we have assumed the genuiness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity to authentic originals of all documents submitted to us as
certified, conformed or photostatic copies.
Based on the foregoing, we are of the opinion that the Shares, when
issued in accordance with the Merger Agreement, will be validly issued by the
Company, fully paid and non-assessable.
We are attorneys admitted to practice in the State of New York and
have relied upon the opinion of Bert Sager,
<PAGE>
Esq., whose opinion is attached hereto as Annex I. Our opinion is subject to
all assumptions or qualifications made by, or contained in, the opinion of Mr.
Sager.
No opinion is being rendered by us as to the validity or
enforceability of the Merger Agreement.
This opinion letter may be filed as an exhibit to the Registration
Statement. Consent is also hereby given to the reference to this firm under the
caption "Legal Matters" contained in the prospectus included in the Registration
Statement, as having passed on the validity of the issuance of the Shares. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission promulgated thereunder.
Stephen A. Ollendorff, who is Of-Counsel to this firm, is a director
of the Company and currently owns 40,000 shares of the Company's common stock.
Very truly yours,
HERTZOG, CALAMARI & GLEASON
Zytec Corporation
7575 Market Place Drive
Eden Prairie, MN 55344
2
<PAGE>
Annex I
[Letterhead of Bert Sager, Esq.]
November ___, 1997
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Gentlemen:
I have been requested to render my opinion in connection with the
registration by Computer Products, Inc., a Florida corporation (the
"Company"), under the Securities Act of 1933, as amended (the "Securities
Act"), of 14,476,983 shares (the "Shares") of common stock, $.01 par value
per share, of the Company pursuant to the Company's Registration Statement on
Form S-4 initially filed with the Securities and Exchange Commission on
September 25, 1997 and declared effective under the Securities Act on
November __, 1997 ("Registration Statement"). The Shares are to be issued in
exchange for shares of common stock, no par value per share, of Zytec
Corporation ("Zytec") pursuant to an Agreement and Plan of Merger, dated as
of September 2, 1997, between the Company, Zytec and CPI Acquisition Corp., a
wholly-owned subsidiary of the Company (the "Merger Agreement").
In connection therewith, I have examined the Company's Certificate of
Incorporation, By-laws, and Board of Directors' resolutions authorizing the
issuance of the Shares. I have also examined originals, or copies certified or
otherwise identified to my satisfaction, of such other corporate documents and
records of the Company and certificates of public officials and officers of the
Company, and have made such other investigations, as I have deemed necessary or
appropriate in connection with rendering this opinion. As to questions of fact
material to this opinion, I have, when relevant facts were not independently
<PAGE>
established by me, relied upon certificates of public officials and information
supplied to me by officers of the Company, including a representation of the
Company that the Share Proposal (as described and defined in the Registration
Statement) has been approved.
For purpose of this opinion, I have assumed the genuineness of all
signatures and the authenticity of all documents submitted to me as originals
and the conformity to authentic originals of all documents submitted to me as
certified, conformed or photostatic copies.
Based upon the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Florida.
2. The Company has the requisite corporate power and authority to
issue the Shares.
3. The Merger Agreement has been duly authorized, executed and
delivered by the Company.
4. All of the Shares have been duly authorized for issuance and,
when issued in accordance with the Merger Agreement, will be validly issued by
the Company, fully paid and non-assessable.
No opinion is being rendered by me regarding the enforceability of the
Merger Agreement.
I am an attorney admitted to practice in the State of Florida and do
not purport to be expert in, or to render any opinions concerning, the laws of
any other jurisdiction other than the United States of America and the corporate
law of the State of Florida.
The opinions set forth herein are solely for your benefit and may not
be relied upon in any manner or for any purpose or by any other person, and may
not be quoted in whole or in part, without my prior written consent. I hereby
acknowledge and consent to this opinion being attached to the opinion of
Hertzog, Calamari & Gleason, which is being filed with the Registration
Statement. I am currently a director of the Company and the owner of 341,269
shares of the Company's common stock.
Bert Sager
2
<PAGE>
[Letterhead of Hertzog, Calamari & Gleason]
November 13, 1997
Merger Pursuant to the Agreement and Plan
of Merger by and between Zytec Corporation
(the "Company"), Computer Products, Inc. ("Parent"),
and CPI Acquisition Corp. ("Merger Sub")
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
consequences of the proposed merger (the "Merger") of Merger Sub, a Minnesota
corporation and wholly-owned subsidiary of Parent, with and into the Company,
a Minnesota corporation. The Merger will occur pursuant to the Agreement and
Plan of Merger, dated as of September 2, 1997 (the "Merger Agreement"), by
and between the Company, Parent, a Florida corporation, and Merger Sub. This
opinion is being delivered to you in connection with the filing with the
Securities and Exchange Commission of a registration statement (the
"Registration Statement") on Form S-4, which includes the Joint Proxy
Statement of Parent and the Company and the Prospectus of Parent relating to
the Merger (the "Joint Proxy Statement/Prospectus"). All capitalized terms
used herein, unless otherwise specified, have the meanings set forth in the
Merger Agreement.
In acting as counsel to Parent in connection with the Merger, we
have participated in the preparation of the Merger Agreement and the
preparation and filing of the Registration Statement. In rendering our
opinion, we have assumed with your consent that the Merger will be effected
as described in the Registration Statement and in accordance with the Merger
Agreement and the Minnesota Business
<PAGE>
2
Corporation Act. In addition, we have assumed with your consent the truth
and accuracy at all relevant times of the statements, representations and
covenants contained in the Merger Agreement, the Registration Statement and
the Joint Proxy Statement/Prospectus. We have also assumed with your consent
that the representations made in letters delivered to us by Parent and the
Company, and in letters delivered to Winthrop & Weinstine, counsel to the
Company (and furnished to us by said counsel in connection with this
opinion), by certain shareholders of the Company, are true and accurate as of
the date hereof and will remain true and accurate at the Effective Time and
that no actions have been (or will be) taken which are inconsistent with such
representations. We have also assumed that any representation or statement
made "to the best of knowledge" or similarly qualified is, and will continue
to be, correct without such qualification. As to all matters in which a
person or entity making a representation referred to above has represented
that such person or entity either is not a party to, does not have, or is not
aware of, any plan or intention, understanding or agreement, we have assumed
that there is in fact no such plan, intention, understanding or agreement.
We have examined the documents referred to above and the originals,
or copies certified or otherwise identified to our satisfaction, of such
records, documents, certificates or other instruments and made such other
inquiries as in our judgment are necessary or appropriate to enable us to
render the opinion set forth below. We have not, however, undertaken any
independent investigation of any factual matter set forth in any of the
foregoing.
Subject to the foregoing and to the qualifications and limitations
set forth herein, we are of the opinion that for Federal income tax purposes
the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code and that no gain or loss will be recognized by the
Company, Parent or Merger Sub as a result of the Merger.
Our opinion is based on our interpretation of the Code, applicable
Treasury Regulations, judicial authority, and administrative rulings and
practice, all as in effect as of the date hereof. There can be no assurance
that future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy of the conclusions set
forth herein. We do not undertake to advise you as to any such future
changes or interpretations unless we are specifically retained to do so. Our
opinion will not be binding upon the Internal Revenue Service (the "IRS"),
and the IRS will not be precluded from adopting a contrary position.
<PAGE>
3
No opinion is expressed as to any matter not specifically addressed
above, including, without limitation, the tax consequences of the Merger
under any foreign, state, or local tax law or the tax consequences of the
Merger to any shareholders of the Company. This opinion is rendered solely
to you in connection with the above matter. This opinion may not be relied
upon by you for any other purpose or relied upon by or furnished to any other
person without our prior written consent.
We hereby consent to the filing with the Securities and Exchange
Commission of this opinion as an exhibit to the Registration Statement and to
the use of our name in the section entitled "The Merger--Certain Federal
Income Tax Consequences" of the Joint Proxy Statement/Prospectus. In giving
this consent, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Hertzog, Calamari & Gleason
-------------------------------
Hertzog, Calamari & Gleason
Computer Products, Inc.
7900 Glades Road - Suite 500
Boca Raton, FL 33434-4105
<PAGE>
Exhibit 8.2
WINTHROP & WEINSTINE, P.A.
3000 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55101
(612) 347-0700
November 13, 1997
Zytec Corporation
7575 Market Place Drive
Eden Prairie, Minnesota 55344
Re: Merger Pursuant to Agreement and Plan of Merger by and Between Zytec
Corporation, Computer Products, Inc. and CPI Acquisition Corp.
Gentlemen:
This opinion is being delivered to you in connection with the Agreement and
Plan of Merger dated September 2, 1997 (the "Agreement") by and between Zytec
Corporation, a Minnesota corporation ("Zytec"), Computer Products, Inc., a
Florida corporation ("CPI"), and CPI Acquisition Corp., a Minnesota corporation
and a wholly-owned subsidiary of CPI ("CPI Sub"). Pursuant to such Agreement,
CPI Sub will merge with and into Zytec (the "Merger"). Except as otherwise
provided, capitalized terms not defined herein have the meanings set forth in
the Agreement. All section references, unless otherwise indicated, are to the
Internal Revenue Code of 1986 (the "Code").
In our capacity as counsel to Zytec in the Merger, and for purposes of
rendering this opinion, we have examined and relied upon the Agreement, certain
letters delivered to Winthrop & Weinstine, P.A. by Zytec, CPI, and certain
shareholders of Zytec containing certain representations of Zytec, of CPI, and
of such Zytec shareholders (the "Representation Letters"), that certain
Registration Statement filed by CPI with the Securities and Exchange Commission
on September 25, 1997, as amended, and such other documents as we considered
relevant to our analysis. In our examination of documents, we have assumed the
authenticity of original documents, the accuracy of copies, and the genuineness
of signatures. We have assumed that all parties to the Agreement and to any
other documents examined by us, and all signatories to the Representation
Letters, have acted, and will act, in accordance with the terms of such
Agreement or documents, that all required authorizations and approvals,
including shareholder approvals, will be received prior to or at the Effective
Time, and that the Merger will be consummated at the
<PAGE>
Zytec Corporation
October 31, 1997
Page 2
Effective Time pursuant to the terms and conditions set forth in the Agreement
without the waiver or modification of any such terms and conditions.
Furthermore, we have assumed that all representations contained in the
Agreement, the Representation Letters, the Registration Statement, and other
documents are true and complete in all material respects and will remain true
and complete in all material respects from the date of this opinion through, and
including, the Effective Time. We also have assumed that all representations
made in any of the documents referred to herein "to the knowledge of," or
similarly qualified, of any person or party are correct without such
qualification. We also have assumed that, as to all matters in which a person
or entity making a representation referred to above has represented that such
person or entity either is not a party to, does not have, or is not aware of,
any plan or intention, understanding, or agreement, there is in fact no such
plan, intention, understanding, or agreement. We have not attempted to verify
independently such representations.
In addition, we have assumed that no consideration other than CPI Common
Stock and cash in lieu of fractional shares will be transferred in exchange for
Zytec Common Stock (disregarding cash paid to a Zytec shareholder, if any, who
exercises dissenters' rights), that the Merger will be valid and effective in
accordance with the Minnesota Business Corporation Act, and that each of Zytec,
CPI, and CPI Sub will complete, execute, file, and retain all information,
statements, and records required with respect to the Merger by Section 368 and
the Treasury regulations promulgated thereunder.
The conclusions expressed herein represent our judgment as to the proper
treatment of certain aspects of the Merger under the income tax laws of the
United States based upon the Code, Treasury regulations promulgated under the
Code, case law, and rulings and other pronouncements of the Internal Revenue
Service (the "IRS") as in effect on the date of this opinion. No assurances can
be given that such laws will not be amended or otherwise changed after the date
of this opinion or that such changes will not affect the conclusions expressed
herein. Nevertheless, we undertake no responsibility to advise you of any new
developments in the application or the interpretation of the income tax laws of
the United States.
Our opinions represent our best judgment as to how a court would decide if
presented with the issues addressed herein and are not binding upon either the
IRS or any court. Thus, no assurances can be given that a position taken in
reliance on our opinion will not be challenged by the IRS or rejected by a
court.
This opinion addresses only the specific United States federal income tax
consequences of the Merger set forth below and does not address any other
federal, state, local, or foreign income, estate, gift, transfer, sales, use, or
other tax consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with the Merger). We
express no opinion regarding the tax consequences of the Merger to Zytec
shareholders that are subject to special tax rules, and we express no opinion
regarding the tax consequences of the Merger arising in connection with the
ownership of options, warrants, or other rights to acquire Zytec stock.
<PAGE>
Zytec Corporation
October 31, 1997
Page 3
On the basis of, and subject to, the foregoing, and in reliance upon the
representations and assumptions described above, we are of the opinion that:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(E);
2. No gain or loss will be recognized by CPI, CPI Sub, or Zytec as a
result of the Merger;
3. No gain or loss will be recognized by a Zytec shareholder upon the
exchange of Zytec Common Stock in the Merger solely for CPI Common Stock (except
to the extent of cash received in lieu of receiving a fractional share of CPI
Common Stock);
4. A cash payment received by a Zytec shareholder in lieu of receipt of a
fractional share of CPI Common Stock will be treated as having been received as
a distribution in redemption of the fractional share, subject to the provisions
of Section 302, as if CPI had issued the fractional share in the Merger and then
redeemed it for cash;
5. The aggregate tax basis of the CPI Common Stock to be received by a
Zytec shareholder in the Merger will equal the shareholder's basis in the Zytec
Common Stock surrendered in exchange therefor, reduced by any basis allocable to
a fractional share of CPI Common Stock treated as sold or exchanged under
Section 302;
6. The holding period of the CPI Common Stock received by a Zytec
shareholder in the Merger (including any fractional share of CPI Common Stock
not actually received) will include the period during which the shareholder held
the Zytec Common Stock surrendered in exchange therefor, provided that the
shareholder held the Zytec Common Stock so surrendered as a capital asset at the
Effective Time; and
7. A Zytec shareholder who exercises dissenters' rights with respect to
the shareholder's Zytec Common Stock and receives payment for such stock in cash
generally will recognize gain or loss measured by the difference between the
amount of cash received and the shareholder's basis in such shares if, as a
result of such exercise, the shareholder owns no shares of CPI Common Stock
(either actually or constructively within the meaning of Section 318).
No opinion is expressed as to any federal income tax consequence of the
Merger except as specifically set forth herein, and this opinion may not be
relied upon except with respect to the consequences specifically discussed
herein.
This opinion is delivered to you solely for the purpose of satisfying the
requirements of Section 8.3(d) of the Agreement. It may not be relied upon for
any other purpose or by any other person or entity, and may not be made
available to any other person or entity, without our prior written consent.
<PAGE>
Zytec Corporation
October 31, 1997
Page 4
We hereby consent to the filing of this opinion as an exhibit to that
certain Registration Statement filed by CPI with the Securities and Exchange
Commission on September 25, 1997, as amended, and to the reference to our firm
under the caption "Legal Matters."
Very truly yours,
WINTHROP & WEINSTINE, P.A.
By - /s/ Michele D. Vaillancourt
Michele D. Vaillancourt
MDV:PWM:llh
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
September 15, 1997 on the combined financial statements of the Elba Group
included in Computer Products, Inc.'s Form 8-K/A dated September 22, 1997. We
also consent to the incorporation by reference in this Registration Statement of
our report dated October 28, 1997 on the consolidated financial statements of
Computer Products, Inc. included in Computer Products Inc.'s Form 8-K dated
October 30, 1997 and to all references to our Firm included in this Registration
Statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
November 12, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-4 (File No. 333-36375) of Computer Products, Inc. of our reports, dated
February 18, 1997, on our audits of the consolidated financial statements and
financial statements schedule of Zytec Corporation as of December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996,
which reports are incorporated by reference or included in the Zytec Corporation
Annual Report on From 10-K for the year ended December 31, 1996. We also consent
to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
--------------------------------------
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
November 12, 1997
<PAGE>
Exhibit 99.1
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL.
1. PROPOSAL TO APPROVE THE ISSUANCE OF SHARES OF COMPUTER PRODUCTS, INC.
COMMON STOCK, $.01 PAR VALUE PER SHARE, PURSUANT TO AN AGREEMENT AND
PLAN OF MERGER, DATED AS OF SEPTEMBER 2, 1997, BETWEEN COMPUTER
PRODUCTS, INC., CPI ACQUISITION CORP. AND ZYTEC CORPORATION,
FOR /X/ AGAINST /X/ ABSTAIN /X/
Please check here if you
plan to attend the Meeting /X/
Change of Address and
or Comments Mark Here /X/
IMPORTANT Please sign exactly as name appears to the left. Each joint
owner should sign. Executors, adminstrators, trustees and others signing
in a representative capacity should give full title. If a corporation,
please sign in-full corporate name by an authorized officer. If a
partnership, please sign in full partnership name by an authorized person.
Dated 1997
---------------------------------------------------------------
-------------------------------------------------------------------------
(Signature)
-------------------------------------------------------------------------
(Signature)
Votes MUST be indicated
(x) in Black or Blue Ink. /X/
Please Mark, Date, Sign and Return Promptly in the Enclosed Postage Pre-Paid
Envelope.
COMPUTER PRODUCTS, INC.
PROXY
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS OF COMPUTER PRODUCTS, INC.
TO BE HELD ON NOVEMBER __, 1997
The undersigned stockholder(s) of COMPUTER PRODUCTS, INC., a Florida
Corporation (the "Company"), hereby constitute(s) and appoint(s) JOSEPH M.
O'DONNELL and RICHARD J. THOMPSON, and each of them, with full power of
substitution in each, as the agent, attorneys and proxies of the undersigned,
for and in the name, place and stead of the undersigned, to vote at the
Special Meeting of Stockholders of the Company, to be held at the Marriott
Hotel,___________________________, Boca Raton, Florida, on November __, 1997
at 10:00 A.M. (local time), and any adjournments thereof, all of the shares of
stock which the undersigned would be entitled to vote if then personally
present in the manner specified and on any business as may properly come
before the Meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ON THE
REVERSE SIDE. IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR ITEM
1 AND AT THE PROXIES' DISCRETION, UPON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
(continued and to be signed and dated on the reverse side)
COMPUTER PRODUCTS, INC.
P.O. BOX 11073
NEW YORK, N.Y. 10203-0073
<PAGE>
EXHIBIT 99.11
Computer Products, Inc.
7900 Glades Road, Suite 500
Boca Raton, FL 33434-4105
Attention: Mr. Richard J. Thompson
Ladies and Gentlemen:
Reference is hereby made to that certain Agreement and Plan of Merger dated
September 2, 1997 ("Merger Agreement") by and among Zytec Corporation, a
Minnesota corporation ("Zytec"), Computer Products, Inc., a Florida corporation
("CPI"), and CPI Acquisition Corp., a Minnesota corporation and a wholly-owned
subsidiary of CPI. Reference is also made to that certain Registration Statement
on Form S-4 ("Registration Statement") filed on September 25, 1997 by CPI with
the Securities and Exchange Commission. The undersigned hereby consents to
becoming a member of CPI's Board of Directors following the Merger (as such term
is defined in the Merger Agreement) as provided in Section 7.11 of the Merger
Agreement and as disclosed in the Prospectus portion of the Registration
Statement entitled "The Merger -- CPI Board of Directors Following the Merger."
Dated: October 29, 1997.
/s/ RONALD D. SCHMIDT
- -------------------------------------------
Ronald D. Schmidt
<PAGE>
Exhibit 99.12
Computer Products, Inc.
7900 Glades Road, Suite 500
Boca Raton, FL 33434-4105
Attention: Mr. Richard J. Thompson
Ladies and Gentlemen:
Reference is hereby made to that certain Agreement and Plan of Merger dated
September 2, 1997 ("Merger Agreement") by and among Zytec Corporation, a
Minnesota corporation ("Zytec"), Computer Products, Inc., a Florida corporation
("CPI"), and CPI Acquisition Corp., a Minnesota corporation and a wholly-owned
subsidiary of CPI. Reference is also made to that certain Registration Statement
on Form S-4 ("Registration Statement") filed on September 25, 1997 by CPI with
the Securities and Exchange Commission. The undersigned hereby consents to
becoming a member of CPI's Board of Directors following the Merger (as such term
is defined in the Merger Agreement) as provided in Section 7.11 of the Merger
Agreement and as disclosed in the Prospectus portion of the Registration
Statement entitled "The Merger -- CPI Board of Directors Following the Merger."
Dated: October 29, 1997.
/s/ FRED C. LEE
- -------------------------------------------
Dr. Fred C. Lee
<PAGE>
Exhibit 99.13
Computer Products, Inc.
7900 Glades Road, Suite 500
Boca Raton, FL 33434-4105
Attention: Mr. Richard J. Thompson
Ladies and Gentlemen:
Reference is hereby made to that certain Agreement and Plan of Merger dated
September 2, 1997 ("Merger Agreement") by and among Zytec Corporation, a
Minnesota corporation ("Zytec"), Computer Products, Inc., a Florida corporation
("CPI"), and CPI Acquisition Corp., a Minnesota corporation and a wholly-owned
subsidiary of CPI. Reference is also made to that certain Registration Statement
on Form S-4 ("Registration Statement") filed on September 25, 1997 by CPI with
the Securities and Exchange Commission. The undersigned hereby consents to
becoming a member of CPI's Board of Directors following the Merger (as such term
is defined in the Merger Agreement) as provided in Section 7.11 of the Merger
Agreement and as disclosed in the Prospectus portion of the Registration
Statement entitled "The Merger -- CPI Board of Directors Following the Merger."
Dated: October 30, 1997.
/s/ JOHN M. STEEL
- -------------------------------------------
John M. Steel
<PAGE>
Exhibit 99.14
Computer Products, Inc.
7900 Glades Road, Suite 500
Boca Raton, FL 33434-4105
Attention: Mr. Richard J. Thompson
Ladies and Gentlemen:
Reference is hereby made to that certain Agreement and Plan of Merger dated
September 2, 1997 ("Merger Agreement") by and among Zytec Corporation, a
Minnesota corporation ("Zytec"), Computer Products, Inc., a Florida corporation
("CPI"), and CPI Acquisition Corp., a Minnesota corporation and a wholly-owned
subsidiary of CPI. Reference is also made to that certain Registration Statement
on Form S-4 ("Registration Statement") filed on September 25, 1997 by CPI with
the Securities and Exchange Commission. The undersigned hereby consents to
becoming a member of CPI's Board of Directors following the Merger (as such term
is defined in the Merger Agreement) as provided in Section 7.11 of the Merger
Agreement and as disclosed in the Prospectus portion of the Registration
Statement entitled "The Merger -- CPI Board of Directors Following the Merger."
Dated: October 30, 1997.
/s/ LAWRENCE J. MATTHEWS
- -------------------------------------------
Lawrence J. Matthews
