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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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INTEK GLOBAL CORPORATION
(NAME OF SUBJECT COMPANY)
INTEK GLOBAL CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
458134 10 3
(CUSIP NUMBER OF CLASS OF SECURITIES)
ROBERT J. SHIVER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
99 PARK AVENUE
NEW YORK, NEW YORK 10016
(212) 949-4200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
NANCY H. WOJTAS, ESQ.
MANATT, PHELPS & PHILLIPS, LLP
11355 WEST OLYMPIC BOULEVARD
LOS ANGELES, CALIFORNIA 90064
(310) 312-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Intek Global Corporation, a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 99 Park Avenue, New York, New York 10016. The title of the
class of equity securities to which this statement relates is the common stock,
par value $.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF PURCHASER
This statement relates to a tender offer by IGC Acquisition Corp., a
Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Security
Services plc, a public limited company incorporated under the laws of England
and Wales ("Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1,
dated June 16, 1999 (as amended or supplemented, the "Schedule 14D-1"), to
purchase all of the outstanding Shares at a price of $2.75 per Share (the "Offer
Price"), net to the seller in cash, without interest thereon and less any
required transfer and withholding taxes, upon the terms and subject to the
conditions set forth in Purchaser's Offer to Purchase, dated June 16, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together
with any amendments or supplements thereto, collectively constitute the
"Offer"). As set forth in the Schedule 14D-1, the principal executive offices of
each of Purchaser and Parent are located at Sutton Park House, 15 Carshalton
Road, Sutton, Surrey SM1 4LD, United Kingdom.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 9, 1999 (the "Merger Agreement"), among the Company, Purchaser and
Parent. The Merger Agreement provides, among other things, for the commencement
of the Offer by Purchaser and further provides that, subject to the satisfaction
or waiver of certain conditions, Purchaser will be merged with and into the
Company (the "Merger"), with the Company surviving the Merger as a wholly-owned
subsidiary of Parent (the "Surviving Corporation"). In the Merger, each
outstanding Share (other than Shares held in the treasury of the Company, Shares
owned by Parent, Purchaser or any affiliate of Parent, and Shares owned by
stockholders who have properly exercised their appraisal rights under the
Delaware General Corporation Law ("DGCL")) will be converted at the effective
time of the Merger (the "Effective Time") into the right to receive the Offer
Price in cash, without interest and less any required transfer and withholding
taxes (the "Merger Consideration"). A copy of the Merger Agreement is attached
hereto as Exhibit 99.1 and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) Name and Address of the Company. The name and business address of the
Company, which is the person filing this statement, are set forth in Item 1
above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements or
arrangements or understandings and actual or potential conflicts of interest
between the Company and its affiliates and: (i) the Company, its executive
officers, directors or affiliates or (ii) Purchaser, Parent or their executive
officers, directors and affiliates.
(b)(1) Certain Contracts, Etc. Certain contracts, agreements, arrangements,
or understandings between the Company or its affiliates and certain of its
directors and executive officers are described under the captions "SPECIAL
FACTORS -- Interests of Certain Persons in the Offer and the Merger; Share
Ownership -- Security Ownership" and "-- Related Party Transactions" in the
Offer to Purchase and under the captions "How Do We Compensate Directors?,"
"Certain Relationships and Related Transactions," "Summary Compensation Table,"
"Option Grants in Last Fiscal Year," "Employment Agreement with Chairman and
Chief Executive Officer" and "Employment Agreements with Certain Executive
Officers" on pages 8 to 15 of the Company's Proxy Statement, dated February 11,
1999, for the Company's 1999 Annual Meeting of Stockholders (the "1999 Annual
Meeting Proxy Statement"), a copy of which was previously furnished to
stockholders. A copy of such portions of the 1999 Annual Meeting Proxy Statement
is filed as Exhibit 99.2 hereto and is incorporated herein by reference. Each
other material contract, agreement, arrangement and understanding between the
Company or its affiliates and its executive officers, directors or affiliates is
set forth below.
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1988 Key Employee Stock Plan
The Company's 1988 Key Employee Stock Plan (the "1988 Plan") provides that
500,000 Shares will be reserved for issuance upon the exercise of options to be
granted. Options granted pursuant to the 1988 Plan may be intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") or may be "nonqualified stock options" which are
not intended to qualify under any provision of the Code. Incentive stock options
are to be exercisable at a price equal to the fair market value or 110% of fair
market value for persons who have in excess of a 10 percent voting interest in
all classes of the Company's stock prior to the date of grant. No optionee may
be granted options to purchase more than 400,000 Shares under the 1988 Plan.
The 1988 Plan is required to be administered by the Stock Option Committee
of the Board of Directors of the Company (the "Company Board"). The Stock Option
Committee has the authority to designate participants and to determine the terms
and provisions of each option agreement, and interpret and amend the 1988 Plan.
The persons eligible to receive options under the 1988 Plan are all officers or
other key employees of the Company and its subsidiaries.
1994 Stock Option Plan
The Company's 1994 Stock Option Plan (the "1994 Plan") provides for the
granting of stock options for up to an aggregate of 600,000 Shares. The purpose
of the 1994 Plan is to enable the Company and its subsidiaries to attract and
retain officers and other key employees and consultants and provide them with
appropriate incentives and rewards for superior performance. The 1994 Plan is
intended to advance the interests and long-term success of the Company by
encouraging stock ownership among those who participate in the 1994 Plan and
thereby increasing the personal involvement of the participants with the
fortunes of the Company. The 1994 Plan provides for the granting of incentive
stock options and nonqualified stock options. Each grant shall specify the
number of Shares to which it pertains; provided, however, that no optionee shall
be granted stock options for more than 60,000 Shares in any fiscal year of the
Company.
The purchase price per Share that is payable upon the exercise of
nonqualified stock options granted under the 1994 Plan may be equal to or
greater than the fair market value of a Share on the date of grant; provided,
however, that the purchase price per Share payable upon the exercise of
incentive stock options must be at least equal to the fair market value thereof
on the date of grant.
Incentive stock options and nonqualified stock options may be granted under
the 1994 Plan to those officers, including officers who are also directors of
the Company, other key employees or consultants of the Company and its
subsidiaries who are selected by the Stock Option Committee.
1994 Directors' Stock Option Plan
Under the terms of the Company's 1994 Directors' Stock Option Plan (the
"Directors' Plan"), each director who is not a director on September 23, 1994
will receive, on the date of his or her initial election as a director, an
option to purchase 20,000 Shares. Options are exercisable on the first
anniversary of the date of grant, provided the optionee remains a director on
such anniversary. Options may be granted under the Directors' Plan only to
directors of the Company. No person may receive an option pursuant to the
Directors' Plan more than once.
The purpose of the Directors' Plan is to advance the interests of the
Company by providing additional incentive to attract and retain qualified and
competent directors upon whose efforts and judgment the success of the Company
is largely dependent, by encouraging such persons to own stock of the Company. A
total of 300,000 Shares are reserved for issuance under the Directors' Plan.
Stock options under the Directors' Plan will be nonqualified for purposes
of the Code. The purchase price per Share that is payable upon the exercise of
stock options granted under the Directors' Plan must be equal to the fair market
value of a Share on the date of grant.
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1997 Performance and Equity Incentive Plan
The purposes of the Company's 1997 Performance and Equity Incentive Plan
(the "1997 Plan") are to attract, retain and motivate key employees, nonemployee
directors and independent contractors, to compensate them for their
contributions to the Company's growth and profits and to encourage them to own
Shares. The 1997 Plan authorizes the issuance of awards to certain employees,
nonemployee directors and independent contractors selected by the compensation
committee to receive such awards.
A total of 4,000,000 Shares are authorized for issuance under the 1997
Plan. In addition to the overall share limit, two special limits apply: (1) the
maximum number of Shares underlying an award that is measured in stock that can
be granted to any single participant over the life of the 1997 Plan is
3,000,000; and (2) the maximum dollar amount that may be paid to any single
participant with respect to an award measured in cash over the life of the 1997
Plan is $3,000,000.
The compensation committee of the Company Board will administer the 1997
Plan, select participants from among eligible employees, and determine the form,
terms and conditions of awards. Subject to certain limitations, the compensation
committee may from time to time delegate some or all of its authority to other
persons.
The 1997 Plan authorizes the following awards based upon Shares: stock
options, stock appreciation rights, stock awards, stock units, performance
shares, performance units and cash awards. Stock options may be either
nonqualified or incentive stock options.
Generally, the compensation committee will issue stock options at an
exercise price no less than the fair market value of Shares on the date of
grant. However, in special situations, the compensation committee may grant a
nonqualified stock option at less than the fair market value of Shares on the
date of grant.
Stock Option Grants
On February 25, 1999, the compensation committee granted, pursuant to the
1997 Plan, to each of Howard Frank, Robert B. Kelly, Eli M. Noam, John Wareham,
Steven L. Wasserman, Roger Wiggs and Michael G. Wilkinson, all directors of the
Company, and Robert J. Shiver, the Chairman and Chief Executive Officer of the
Company, options to purchase 25,000 Shares at an exercise price of $2.25 per
share.
On February 25, 1999, the compensation committee granted, pursuant to the
1997 Plan, to George Naspo, the Company's Executive Vice President, an option to
purchase 125,000 Shares at an exercise price of $2.25 per share.
(b)(2) The Merger Agreement. The information set forth under "SPECIAL
FACTORS -- The Merger Agreement" in the Offer to Purchase is incorporated herein
by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors
The Company Board, acting on the unanimous recommendation of a special
committee thereof (the "Independent Committee"), has (with abstentions by the
two directors who are employees of affiliates of Parent and Purchaser)
unanimously (i) determined that each of the Offer and the Merger is fair to, and
in the best interests of, the Company's stockholders (excluding Parent,
Purchaser or any affiliate of Parent), (ii) approved the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, (iii)
declared the advisability of the Merger Agreement and the transactions
contemplated thereby, and (iv) recommended that the Company's stockholders
(other than Parent and its affiliates) accept the offer and tender all of their
Shares pursuant to the Offer.
(b) Background of the Transaction
The information set forth under "SPECIAL FACTORS -- Background of the
Offer" in the Offer to Purchase is incorporated herein by reference.
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(c) Reasons for the Recommendation
The information set forth under "SPECIAL FACTORS -- Recommendation of the
Independent Committee and the Company Board; Fairness of the Offer and the
Merger" in the Offer to Purchase is incorporated herein by reference.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to an engagement letter agreement dated February 3, 1999 (the
"Engagement Letter"), Bear, Stearns & Co. Inc. ("Bear Stearns") has been
retained by the Company, on behalf of the Independent Committee, to act as the
Independent Committee's financial advisor with respect to the Independent
Committee's evaluation of strategic alternatives for the Company, including any
proposal received from Securicor plc. Bear Stearns also agreed to render, if
requested by the Independent Committee, an opinion with respect to the fairness
of the Offer Price, from a financial point of view, to the public stockholders
of the Company. Pursuant to the engagement letter between the Company on behalf
of the Independent Committee and Bear Stearns dated February 3, 1999, the
Company has paid Bear Stearns for its services rendered to the Independent
Committee fees of $675,000 (including an opinion fee of $400,000) and has agreed
to pay a transaction success fee, that increases incrementally based on the
amount of the offer price paid for the Shares, of approximately $3.1 million,
less a credit for the fees paid to date. The Company has also agreed to
reimburse Bear Stearns for its reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of counsel and of other consultants and
advisors retained by Bear Stearns, and to indemnify Bear Stearns and certain
related persons against certain liabilities in connection with the engagement of
Bear Stearns, including certain liabilities under federal securities law.
On June 7, 1999, Bear Stearns delivered its written opinion to the
Independent Committee to the effect that, as of such date and based upon and
subject to the assumptions, limitations and qualifications set forth therein,
the Offer Price was fair, from a financial point of view, to the public
stockholders of the Company.
Bear Stearns has not been previously engaged by the Company to provide any
investment banking or financial advisory services in connection with any
mergers, acquisitions or business combinations or in connection with any
offerings of equity or debt. In the ordinary course of business, Bear Stearns
may actively trade the equity securities of the Company for its own account and
for the account of its customers and, accordingly, may at any time hold a long
or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as set forth below, no transactions in the Shares have been
effected during the past 60 days by the Company or, to the Company's knowledge,
by any executive officer, director, affiliate or subsidiary of the Company.
(b) The Company does not have any knowledge about whether any executive
officer and director of the Company currently intends to tender to Purchaser any
Shares over which he has sole dispositive power.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
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(b) Except as described above or in Item 3(b) or 4(b) above, there are no
transactions, Board of Directors' resolutions, agreements in principle or signed
contracts in response to the Offer that relate to or would result in one or more
of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The information set forth under "THE TENDER OFFER -- Certain Legal Matters;
Required Regulatory Approvals" in the Offer to Purchase is incorporated herein
by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
99.1 Agreement and Plan of Merger, dated as of June 9, 1999 by
and among the Company, Purchaser and Parent.
99.2 Relevant portions of the Company's Proxy Statement on
Schedule 14A, dated February 11, 1999.
99.3 Confidentiality Agreement, dated January 19, 1999, by and
between Parent and the Company.
99.4 Opinion of Bear, Stearns & Co. Inc. dated June 8, 1999
(included as Annex A to Exhibit 99.5).
99.5 Offer to Purchase, dated June 16, 1999.
99.6 Letter of Transmittal.
99.7 Press Release issued by Parent and the Company dated June
10, 1999.
99.8 Summary Advertisement, as published in The Wall Street
Journal on June 16, 1999.
</TABLE>
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
INTEK GLOBEL CORPORATION
By /s/ ROBERT J. SHIVER
----------------------------------------
Robert J. Shiver
Chairman and Chief Executive Officer
Dated: June 16, 1999
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EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<C> <S> <C>
99.1 Agreement and Plan of Merger, dated as of June 9, 1999 by
and among the Company, Purchaser and Parent.
99.2 Relevant portions of the Company's Proxy Statement on
Schedule 14A, dated February 11, 1999.
99.3 Confidentiality Agreement, dated January 19, 1999, by and
between Parent and the Company.
99.4 Opinion of Bear, Stearns & Co. Inc. dated June 8, 1999
(included as Annex A to Exhibit 99.5).
99.5 Offer to Purchase, dated June 16, 1999.
99.6 Letter of Transmittal.
99.7 Press Release issued by Parent and the Company dated June
10, 1999.
99.8 Summary Advertisement, as published in The Wall Street
Journal on June 16, 1999.
</TABLE>
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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
dated as of
June 9, 1999
among
Intek Global Corporation,
Security Services plc
and
IGC Acquisition Corp.
[Weil, Gotshal & Manges Logo]
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1 THE OFFER.............................................................1
2 THE MERGER............................................................4
3 THE SURVIVING CORPORATION.............................................8
4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................8
5 REPRESENTATIONS AND WARRANTIES OF PARENT.............................14
6 COVENANTS OF THE COMPANY.............................................16
7 COVENANTS OF PARENT..................................................18
8 COVENANTS OF THE PARTIES.............................................19
9 CONDITIONS TO THE MERGER.............................................21
10 TERMINATION..........................................................21
11 MISCELLANEOUS........................................................23
ANNEX I.......................................................................30
EXHIBIT A DIRECTORS OF THE SURVIVING CORPORATION.............................32
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 9, 1999 (the "AGREEMENT")
among Intek Global Corporation, a Delaware corporation (the "COMPANY"), Security
Services plc, a public limited company incorporated under the laws of England
and Wales ("PARENT"), and IGC Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("MERGER SUB").
WHEREAS, as of the date hereof, the Company's authorized capital stock
consists of shares of common stock, par value $.01 per share ("SHARES"), and
shares of Series A Convertible Preferred Stock, par value $.001 per share
("SERIES A PREFERRED SHARES"), of which 42,303,038 Shares and 12,408 Series A
Preferred Shares are outstanding as of June 7, 1999 and Parent and its
affiliates are the beneficial owners of an aggregate of 25,937,042 Shares and
12,408 Series A Preferred Shares;
WHEREAS, Parent and Merger Sub wish to consummate the transactions
contemplated by this Agreement pursuant to which, subject to the terms and
conditions set forth in this Agreement, Merger Sub will (i) commence an offer to
purchase any and all of the outstanding Shares (the "OFFER") and (ii) merge with
and into the Company (the "MERGER") and the Company will become a wholly owned
subsidiary of Parent;
WHEREAS, the Board of Directors of the Company (at a meeting duly
called and held, and acting on the unanimous recommendation of a special
committee of the Board of Directors of the Company comprised entirely of
non-management independent directors (the "INDEPENDENT COMMITTEE")), has, with
two abstentions, unanimously approved this Agreement and the transactions
contemplated hereby and has declared their advisability and has, with two
abstentions, unanimously determined that the Offer and the Merger are fair to,
and in the best interests of, the holders of Shares (other than Parent and its
affiliates) and that the Merger Consideration is fair to the holders of Shares
(other than Parent and its affiliates) and has resolved to recommend that the
holders of Shares (other than Parent and its affiliates) tender their Shares
pursuant to the Offer and approve and adopt this Agreement and the Merger upon
the terms and subject to the conditions set forth herein; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree as follows:
1 THE OFFER
1.1 (a) Subject to the provisions of this Agreement, and provided this
Agreement shall not have been terminated in accordance with Section
10.1 hereof and that nothing shall have occurred that would result in a
failure to satisfy any of the conditions set forth is paragraphs (a)
and (b) of Annex I hereto, Merger Sub shall, as promptly as practicable
after the date hereof, but in no event later than five business days
following the date of public announcement of the execution of this
Agreement, commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "1934 ACT")) the Offer
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at a price of $2.75 per Share, net to the seller in cash, without
interest and less any required transfer and withholding taxes. The
Offer shall be subject to the condition that there shall be validly
tendered (and not withdrawn) in accordance with the terms of the Offer,
prior to the expiration date of the Offer, at least that number of
Shares (not including Shares tendered by Parent, Merger Sub or any
affiliate of Parent), which is the smallest number of Shares that
represents a majority of the outstanding Shares (excluding for purposes
of this calculation all Shares owned by Parent, Merger Sub or any
affiliate of Parent and any Shares held in Intek employee stock plans
that cannot be tendered pursuant to the terms of those plans) (the
"MINIMUM CONDITION"), and to the other conditions set forth herein and
in Annex I hereto. Notwithstanding the foregoing, Merger Sub expressly
reserves the right to waive any of the conditions to the Offer and to
make any change in the terms or conditions of the Offer; provided,
however, that without the prior written consent of the Company, Merger
Sub shall not waive the Minimum Condition or make any change in the
Offer that changes the form of the Offer or of the consideration or
decreases the price per share, except as provided in Section 2.7
hereof, or that imposes conditions to the Offer in addition to those
set forth herein and in Annex I hereto, or that is otherwise materially
adverse to the holders of Shares (other than Parent and its
affiliates). The Offer shall expire at midnight on the expiration date.
The initial scheduled expiration date of the Offer shall be the date
that is 20 business days following the date of commencement of the
Offer. If on any scheduled expiration date of the Offer all conditions
to the Offer shall not have been satisfied or waived, Merger Sub shall
extend the Offer from time to time until such conditions have been
satisfied or waived; provided that Merger Sub shall have no obligation
to extend the Offer beyond the date 60 days after commencement of the
Offer, nor shall it have the right to extend the Offer beyond the date
60 days after commencement of the Offer without the prior written
consent of the Company (except pursuant to the next sentence). If on
any scheduled expiration date of the Offer all conditions to the Offer
(including the Minimum Condition) shall have been satisfied but the sum
of (i) the number of Shares tendered (and not withdrawn) pursuant to
the Offer plus (ii) the number of Shares held by Parent, Merger Sub or
any other affiliate of Parent that have not been tendered pursuant to
the Offer, including Shares issuable to any of them upon conversion of
Series A Preferred Shares and convertible debt of the Company held by
any of them, represent less than 90% of the outstanding Shares on a
fully-diluted basis (except that unexercised Options shall not be
treated as outstanding for this purpose), Merger Sub shall also have
the right to extend the Offer from time to time without the consent of
the Company (for not more than an aggregate of 10 business days) in
order to permit Merger Sub to solicit the tender of additional Shares
pursuant to the Offer. Notwithstanding anything to the contrary set
forth in this Agreement or in Annex I, if the Offer is extended in
accordance with the foregoing following satisfaction of the Minimum
Condition, the Minimum Condition shall be deemed to remain satisfied
regardless of any withdrawal of previously tendered shares during the
extension period. Subject to the foregoing and to the terms and
conditions of the Offer, Merger Sub agrees to pay, as promptly as
reasonably practicable after the expiration of the Offer, for all
Shares properly tendered and not withdrawn pursuant to the Offer that
Merger Sub is obligated to purchase.
(b) As soon as practicable on the date of commencement of the Offer, Merger
Sub shall file with the Securities and Exchange Commission (the "SEC")
a Transaction Statement on Schedule 13E-3 pursuant to Rule 13e-3 of the
1934 Act ("SCHEDULE 13E-3") and a Tender Offer Statement on Schedule
14D-1 pursuant to Rule 14d-6 of the 1934 Act ("SCHEDULE 14D-1") with
respect to the Offer. Schedule 13E-3 and Schedule 14D-1, together with
the related offer to purchase and the form of the related letter of
transmittal and any supplements or amendments thereto and including the
exhibits thereto, are hereinafter
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<PAGE> 5
collectively referred to as the "OFFER DOCUMENTS." Merger Sub and the
Company each agrees promptly to correct any information provided by it
for use in the Offer Documents if and to the extent that it shall have
become false or misleading in any material respect. Merger Sub agrees
to take all steps necessary to cause the Offer Documents, as so
corrected if applicable, to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. The Company, the
Independent Committee and their respective counsel shall be given a
reasonable opportunity to review and comment on the Offer Documents and
any amendments thereto prior to their being filed with the SEC. Merger
Sub will furnish to the Company a copy of any comments that Merger Sub
may receive from the SEC with respect to the Offer Documents promptly
after receipt thereof.
1.2 COMPANY ACTION. (a) The Company hereby consents to the Offer and
represents that its Board of Directors, at a meeting duly called and
held on June 7, 1999, and acting on the unanimous recommendation of the
Independent Committee, has, with two abstentions, (i) unanimously
determined that the terms and conditions of this Agreement and the
transactions contemplated hereby, including the Offer and the Merger,
are fair to and in the best interest of the holders of Shares (other
than Parent and its affiliates), and that the Merger Consideration is
fair to the holders of Shares (other than Parent and its affiliates),
(ii) unanimously approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, and declared
their advisability and (iii) unanimously resolved to recommend
acceptance of the Offer and approval and adoption of this Agreement and
the Merger by its stockholders. The Company further represents that
Bear Stearns & Co. Inc., the Independent Committee's independent
financial advisor, has delivered to the Independent Committee its
written opinion that the Merger Consideration and the Merger is fair to
the holders of Shares (other than Parent and its affiliates) from a
financial point of view.
(b) In connection with the Offer, the Company will promptly furnish Parent
with mailing labels addressed to the record holders of the Shares and
any available listing or computer file containing the names and
addresses of all record holders of Shares and lists of securities
positions of Shares held in stock depositories, in each case as of the
most recent practicable date, and will provide to Parent such
additional information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) and
such other assistance as Parent may reasonably request in disseminating
the Offer Documents to the record and beneficial holders of the Shares.
Except for such steps as are reasonably necessary to disseminate the
Offer Documents and any other documents as are reasonably necessary in
connection with the Offer and the other transactions contemplated by
this Agreement, Parent and Merger Sub shall hold in confidence the
information contained in any of such lists, labels and files and the
additional information referred to in the preceding sentence; will use
such information only in connection with the Offer and the Merger; and,
if this Agreement is terminated, will, upon request, deliver to the
Company all tangible embodiments of such information, including but not
limited to tangible embodiments in written form or on machine-readable
media, and any copies or extracts therefrom then in its possession;
provided that it is expressly understood that this sentence shall not
limit any rights that Parent or its affiliates may have under
applicable law to obtain and use a list of stockholders of the Company
or any other information pertaining to the Company.
(c) As soon as practicable on the day that the Offer is commenced, the
Company will file with the SEC a Solicitation/Recommendation Statement
pursuant to Rule 14d-9 under the 1934 Act on Schedule 14D-9 ("SCHEDULE
14D-9") which shall reflect the recommendations of
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the Company's Board of Directors referred to above. The Company and
Parent each agrees promptly to correct any information provided by it
for use in Schedule 14D-9 to the extent that it shall have become false
or misleading in any material respect. The Company agrees to take all
steps necessary to cause Schedule 14D-9 as so corrected to be filed
with the SEC and to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws.
Parent and its counsel shall be given a reasonable opportunity to
review and comment on Schedule 14D-9 prior to its being filed with the
SEC. The Company will furnish to Parent and Merger Sub a copy of any
comments that the Company may receive from the SEC with respect to
Schedule 14D-9 promptly after receipt thereof.
2 THE MERGER
2.1 THE MERGER. (a) At the Effective Time, Merger Sub shall be merged with
and into the Company in accordance with the General Corporation Law of
the State of Delaware ("DELAWARE LAW"), whereupon the separate
existence of Merger Sub shall cease, and the Company shall be the
surviving corporation (the "SURVIVING CORPORATION"), shall continue its
existence under Delaware Law and shall be a wholly owned subsidiary of
Parent.
(b) The closing (the "CLOSING") of the Merger shall take place at the
offices of Weil, Gotshal & Manges, London, England, at a time and on a
date specified by the parties (the "CLOSING DATE"), which shall be no
later than the second business day after all conditions to the Merger
set forth in Article 9 have been satisfied or, to the extent permitted
hereunder, waived (other than those conditions that by their nature are
to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions).
(c) As soon as practicable on or following the Closing Date, the Company
and Merger Sub will cause a certificate of merger (the "CERTIFICATE OF
MERGER") to be executed and filed with the Secretary of State of the
State of Delaware as provided in Section 251 of Delaware Law (or, if
applicable, Section 253 of Delaware Law) and will make all other
filings or recordings required by Delaware Law in connection with the
Merger. The Merger shall become effective on the date and at the time
on which the Certificate of Merger has been duly filed with the
Secretary of State of the State of Delaware (or at such later time as
may be agreed in writing by the parties hereto and specified in the
Certificate of Merger); such time is hereinafter referred to as the
"EFFECTIVE TIME."
(d) From and after the Effective Time, the Surviving Corporation shall
possess all the property, rights, assets, immunities, powers,
privileges and franchises and be subject to all debts, obligations,
liabilities, duties, restrictions and disabilities of the Company and
Merger Sub (including obligations to pay all fees and expenses incurred
by the Company in connection with the Offer and the Merger), all as
provided under Delaware Law.
2.2 CONVERSION OF SHARES. At the Effective Time:
(a) each Share (excluding Shares held in the treasury of the Company or
Shares owned by Parent or Merger Sub or any affiliate of Parent)
outstanding immediately prior to the Effective Time shall, except as
otherwise provided in Section 2.2(b) hereof or as provided in Section
2.4 hereof with respect to Shares as to which appraisal rights have
been exercised, be converted into the right to receive $2.75 per Share,
net in cash, without interest and less any required withholding or
transfer taxes (the "MERGER CONSIDERATION");
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(b) each Share held in the treasury of the Company or owned by Parent or
Merger Sub or any other affiliate of Parent immediately prior to the
Effective Time shall be canceled and retired without any conversion,
and no payment shall be made with respect thereto;
(c) each Series A Preferred Share shall be canceled and retired without any
conversion, and no payment shall be made with respect thereto; and
(d) each share of common stock, $.01 par value, of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into and
become one share of common stock, $.01 par value, of the Surviving
Corporation and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
2.3 SURRENDER AND PAYMENT. (a) Prior to the Effective Time, Parent shall
appoint an agent (the "EXCHANGE AGENT") reasonably acceptable to the
Company for the purpose of exchanging certificates representing Shares
for the Merger Consideration. Subject to consummation of the Merger,
Parent will make available to the Exchange Agent, as needed, the Merger
Consideration to be paid in respect of the Shares surrendered for
payment. For purposes of determining the funds to be made available,
Parent shall assume that no holder of Shares will perfect rights to
appraisal of their Shares. Promptly after the Effective Time, Parent
will send, or will cause the Exchange Agent to send, to each holder of
Shares at the Effective Time a letter of transmittal for use in such
exchange (which shall specify that the delivery shall be effected, and
risk of loss and title shall pass, only upon proper delivery of the
certificates representing Shares to the Exchange Agent).
(b) Each holder of Shares that have been converted into a right to receive
the Merger Consideration, upon surrender to the Exchange Agent of a
certificate or certificates representing such Shares, together with a
properly completed letter of transmittal covering such Shares, will be
entitled to receive the Merger Consideration payable in respect of such
Shares. Until so surrendered, each such certificate shall, after the
Effective Time, represent for all purposes, only the right to receive
such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a person
other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, there
shall be a condition to such payment that the certificate or
certificates so surrendered shall be properly endorsed or otherwise be
in proper form for transfer and that the person requesting such payment
shall pay to the Exchange Agent any transfer or other taxes required as
a result of such payment to a person other than the registered holder
of such Shares or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they
shall be canceled and exchanged for the consideration provided for, and
in accordance with the procedures set forth, in this Article 2. From
and after the Effective Time, the holders of certificates representing
Shares shall cease to have any rights with respect to such Shares
except as otherwise provided for herein or by applicable law. Any
Merger Consideration paid upon the surrender for exchange of
certificates representing Shares in accordance with this Article 2
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares represented by such certificates.
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(e) If any certificate representing Shares has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and, if
reasonably required by the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Surviving Corporation
may direct as indemnity against claims that may be made against it with
respect to such certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed certificate the Merger Consideration
to which such person is entitled pursuant to this Article 2.
(f) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to this Section 2.3 that remains unclaimed by the
holders of Shares six months after the Effective Time shall be returned
to the Surviving Corporation, upon demand, and any such holders who
have not exchanged their Shares for the Merger Consideration in
accordance with this Section 2.3 prior to that time shall thereafter
look only to the Surviving Corporation for payment of the Merger
Consideration in respect of those Shares. Notwithstanding the
foregoing, Parent shall not be liable to any holder of Shares for any
amount paid to a public official pursuant to applicable abandoned
property laws. Any stockholders of the Company who have not complied
with Section 2.3(b) hereof shall thereafter look only to the Surviving
Corporation for payment of any claim they may have to receive the
Merger Consideration, but shall have no greater rights against the
Surviving Corporation than may be accorded to general creditors of the
Surviving Corporation under the Delaware Law.
(g) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to this Section 2.3 to pay for Shares for which
appraisal rights have been perfected shall be returned to Parent, upon
demand.
2.4 DISSENTING SHARES. Notwithstanding Section 2.2 hereof, Shares
outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal for such Shares in accordance
with Delaware Law shall not be converted into a right to receive the
Merger Consideration, unless such holder fails to perfect or withdraws
or otherwise loses its right to appraisal. If, after the Effective
Time, such holder fails to perfect or withdraws or loses its right to
appraisal, such Shares shall be treated as if they had been converted
as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any
demands received by the Company for appraisal of Shares, and Parent
shall have the right to participate in all negotiations and proceedings
with respect to such demands, pursuant to the applicable provisions of
Delaware Law. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands.
2.5 TREATMENT OF OPTIONS. (a) Prior to the Effective Time, the Board of
Directors of the Company (or, if appropriate, any committee thereof)
shall use its commercially reasonable efforts to adopt appropriate
resolutions and take all other actions necessary to provide that if the
Closing occurs each outstanding stock option (each, an "OPTION")
granted under the Company's 1988 Key Employee Incentive Stock Option
Plan, the 1994 Stock Option Plan and the 1994 Director's Option Plan,
the 1997 Performance and Equity Incentive Plan (collectively, the
"COMPANY STOCK OPTION PLANS"), whether or not then vested or
exercisable, shall, at the Effective Time, be canceled, and in
consideration thereof, the Company shall offer to pay to the holder of
each such Option promptly after the Effective Time an amount in cash
determined by multiplying (i) the excess, if any, of the amount of the
Merger Consideration over the applicable per-Share exercise price of
such Option by
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(ii) the number of Shares such holder could have purchased (assuming
full vesting of all Options) had such holder exercised such Option in
full immediately prior to the Effective Time; provided, however, that,
with the consent of Parent, the Company may offer to pay alternative
consideration to the holders of options that are "out of the money".
(b) Prior to the Effective Time, each of the Company and Parent will use
its commercially reasonable efforts to obtain such consents, if any, as
may be necessary to give effect to the transactions contemplated by
this Section 2.5. As provided herein and subject to the contractual
rights of participants therein, (i) the Company Stock Option Plans
shall terminate as of the Effective Time and (ii) the Company shall use
commercially reasonable efforts to terminate as of the Effective Time
any other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of the
Company or any of its subsidiaries. The Company will use its
commercially reasonable efforts (i) to take steps necessary to ensure
that none of the Company or its subsidiaries is or will be bound by any
Options, other options, warrants, right or agreements which would
entitle any person, except as otherwise provided in this Section 2.5,
to acquire any capital stock of the Surviving Corporation or to receive
any payment in respect thereof, and (ii) to cause such Options, other
options, warrants, rights or agreements to be cancelled or cause the
holders thereof to agree to such cancellation thereof as provided
herein. Notwithstanding anything herein to the contrary, Parent and
Merger Sub shall not have any right to terminate this Agreement or any
of its obligations hereunder, including, without limitation, the
obligation to consummate the Offer and the Merger, solely based upon
the Company's failure to use its commercially reasonable efforts to
amend, settle, terminate or cancel the option set forth in Section 5 of
the Master Distribution Agreement, dated as of September 14, 1998,
between the Company and NRTC LLC.
2.6 WITHHOLDING RIGHTS. The Surviving Corporation shall be entitled to
deduct and withhold from the consideration otherwise payable to any
person pursuant to this Article (and pay over to the appropriate
governmental authority) such amounts as it is 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 the Surviving Corporation, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction and
withholding was made by the Surviving Corporation.
2.7 CHANGES IN COMPANY SHARES. If, subsequent to the date of this Agreement
but prior to the Effective Time, the Company changes the number of
Shares outstanding as a result of any stock split, stock dividend,
recapitalization or similar transaction, then appropriate adjustments
shall be made in all amounts payable pursuant to this Agreement,
including, without limitation, the cash consideration payable pursuant
to the Offer, the Merger Consideration and the amounts payable pursuant
to Section 2.5 hereof.
3 THE SURVIVING CORPORATION
3.1 CERTIFICATE OF INCORPORATION. The certificate of incorporation of the
Company in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation from and
after the Effective Time until amended in accordance with Delaware Law.
3.2 BYLAWS. The bylaws of Merger Sub in effect at the Effective Time shall
be the bylaws of the Surviving Corporation until amended in accordance
with applicable law.
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3.3 DIRECTORS AND OFFICERS. (a) From and after the Effective Time, the
board of directors of the Surviving Corporation shall consist of the
persons named on Exhibit A hereto. Such directors shall serve until
their respective successors are duly elected or appointed and qualified
or until their resignation, removal or death, if earlier.
(b) From and after the Effective Time, the officers of the Company at the
Effective Time shall be the officers of the Surviving Corporation. Such
officers shall serve until their respective successors are duly elected
or appointed and qualified or until their resignation, removal or
death, if earlier.
4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Notwithstanding anything to the contrary set forth in this Article 4 or
elsewhere in this Agreement, the Company shall not be obligated to include in
the Company Disclosure Schedule disclosures concerning the terms or provisions
of any agreement, note, security, instrument, transaction or undertaking between
the Company or any of its affiliates and Parent or any of its affiliates, or
issued by the Company to Parent or any of its affiliates, and the Company shall
not be considered to be in breach of any representation or warranty in this
Agreement as a result of the failure to include any such disclosure in the
Company Disclosure Schedule.
The Company represents and warrants to Parent and Merger Sub that, except as
disclosed in writing to Parent in the Company's disclosure schedule attached
hereto (the "COMPANY DISCLOSURE SCHEDULE") (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the extent
specified therein) or in the Company SEC Documents (as defined in Section 4.7(a)
hereof):
4.1 CORPORATE EXISTENCE AND POWER. The Company (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware and (ii) has all requisite corporate powers and
authority to own, lease and operate its properties and to conduct its
business as now being conducted, except where the failure to have such
power and authority would not, individually or in the aggregate, have a
material adverse effect on the Company. The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not, individually
or in the aggregate, have a material adverse effect on the Company.
4.2 CORPORATE AUTHORIZATION; REQUIRED VOTE. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby are within the
Company's corporate powers and, except for any required approval by the
Company's stockholders in connection with the consummation of the
Merger, have been duly authorized by all necessary corporate action,
including, without limitation, action by the Board of Directors of the
Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
may be limited by bankruptcy, insolvency, fraudulent transfer and other
similar laws affecting creditors' rights generally and by equitable
principles of general applicability.
(b) The affirmative vote of the holders of a majority of the outstanding
Shares is the only vote of the holders of any class or series of the
Company's capital stock (under applicable law or
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otherwise) necessary to approve the Merger, this Agreement and the
transactions contemplated hereby.
4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby require no action by or filing
with any governmental body, agency, official or authority other than
(a) the filing of the Certificate of Merger in accordance with Delaware
Law, and (b) compliance with the requirements of the 1934 Act
applicable to the Company Disclosure Documents.
4.4 NON-CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (a) contravene or
conflict with the certificate of incorporation or bylaws of the
Company; (b) assuming compliance with the matters referred to in
Section 4.3 hereof, and further assuming the accuracy of the
representations and warranties of Parent and Merger Sub and their
performance of their covenants and agreements under this Agreement,
contravene or conflict with or constitute a violation of any provision
of any law, rule, regulation, judgment, injunction, order or decree
binding upon or applicable to the Company or any of its subsidiaries
which would, in any such case, have a reasonable probability of having
a material adverse effect on the Company; (c) constitute a default
under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Company or any of its
subsidiaries or to a loss of any benefit to which the Company or any of
its subsidiaries is entitled under any provision of any agreement or
other instrument binding upon the Company or any of its subsidiaries or
any license, franchise, permit, certificate, approval or other similar
authorization held by the Company or any of its subsidiaries which
would, in any such case, have a material adverse effect on the Company;
or (d) result in the creation or imposition of any Lien on any asset of
the Company or any of its subsidiaries which would have a reasonable
probability of having a material adverse effect on the Company. "LIEN"
means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest, encumbrance or other adverse claim of any kind in
respect of such property or asset.
4.5 CAPITALIZATION. The authorized capital stock of the Company consists of
60,000,000 Shares and 1,000,000 Series A Preferred Shares. As of June
7, 1999, there were 42,303,038 Shares and 12,408 Series A Preferred
Shares outstanding. As of June 4, 1999, there were Options to purchase
4,135,666 Shares outstanding at exercise prices as disclosed in Section
4.5 of the Company Disclosure Schedule. All outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable. As of the date hereof
there are no outstanding (a) securities of the Company convertible into
or exchangeable for shares of capital stock or voting securities of the
Company, (b) options or other rights to acquire from the Company or
other obligation of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company or (c) equity equivalents,
interests in ownership or earnings of the Company or other similar
rights (including stock appreciation rights) in the Company. There are
no outstanding obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any securities referred to in
clauses (a), (b) or (c) above (collectively referred to as the "COMPANY
SECURITIES"). There are no stockholder agreements, voting trusts or
other agreements or understandings to which the Company or any of its
subsidiaries is a party or to which it is bound relating to the voting
of any shares of capital stock of the Company.
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4.6 SUBSIDIARIES. (a) Each subsidiary of the Company is a corporation duly
incorporated or an entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, as the case may be; and has all corporate powers and
authority to own, lease and operate its properties and to conduct its
business as now being conducted, except where the failure to be so
incorporated or organized, existing and in good standing or to have
such power and authority would not, individually or in the aggregate,
have a material adverse effect on the Company. Each subsidiary of the
Company is duly qualified to do business and is in good standing in
each jurisdiction where such qualification is necessary, except for
those jurisdictions where failure to be so qualified and in good
standing would not, individually or in the aggregate, have a material
adverse effect on the Company. Set forth in Section 4.6 of the
Company's Disclosure Schedule is the name of each of the subsidiaries
of the Company. The outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued
and are fully paid and non-assessable.
(b) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each subsidiary of the Company is owned by the
Company, directly or indirectly, free and clear of any perfected Lien,
free and clear of any unperfected Lien known to the Company and free of
any other limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
voting securities or ownership interests), other than any restrictions
imposed under the Securities Act of 1933 (the "1933 ACT") or similar
state law. Except as set forth in this Section or in Section 4.6 of the
Company's Disclosure Schedule and except for qualifying shares, there
are no outstanding (i) shares of capital stock or other voting
securities or ownership interests in any of the Company's subsidiaries
owned by persons other than the Company or its wholly owned
subsidiaries, (ii) securities of the Company or any of its subsidiaries
convertible into or exchangeable for shares of capital stock or other
voting securities or ownership interests in any of the Company's
subsidiaries, (iii) options or other rights to acquire from the Company
or any of its subsidiaries, or other obligation of the Company or any
of its subsidiaries to issue, any capital stock or other voting
securities or equity ownership interests in, or any securities
convertible into or exchangeable for any capital stock or other voting
securities or equity ownership interests in, any of the Company's
subsidiaries or (iv) equity equivalents, interests in ownership or
earnings of any of the Company's subsidiaries or any other similar
rights (including stock appreciation rights) in any subsidiary of the
Company. There are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company or any of its
subsidiaries is a party or to which it is bound relating to the voting
of any shares of capital stock by any subsidiary of the Company. There
are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the
securities referred to in clauses (i), (ii), (iii) or (iv) above.
(c) Neither the Company nor any of its subsidiaries own, beneficially or of
record, any shares or capital stock or any other security of any
corporation or other legal entity, or has any option or obligation to
acquire any such stock or other security, or has any investments in
securities or owns, directly or indirectly, any interest in any
partnership, joint venture or other business enterprise.
4.7 SEC FILINGS. (a) Since October 1, 1996, the Company has timely filed
all required forms, reports and documents with the SEC required to be
filed by it pursuant to federal securities law and the SEC rules and
regulations thereunder (collectively (including, without limitation,
any financial statements or schedules included or incorporated therein)
the
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"COMPANY SEC DOCUMENTS") all of which have complied as of their
respective filing dates in all material respects with all applicable
requirements of the 1933 Act and the 1934 Act, and the rules
promulgated thereunder.
(b) As of its filing date, each Company SEC Document filed pursuant to the
1934 Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading.
(c) As of its filing date, each Company SEC Document, as amended or
supplemented, if applicable, filed pursuant to the 1933 Act did not, as
of the date such statement or amendment became effective, 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.
4.8 FINANCIAL STATEMENTS. The audited consolidated financial statements and
unaudited consolidated interim financial statements of the Company
included in the Company SEC Documents fairly present, in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its subsidiaries as
of the dates thereof and their consolidated results of operations and
cash flows for the periods then ended (subject to normal year-end
adjustments in the case of unaudited interim financial statements)
except that interim financial statements do not contain all the
footnote disclosures required by GAAP. For purposes of this Agreement,
"BALANCE SHEET" means the consolidated balance sheet of the Company as
of March 31, 1999 set forth in the Company's quarterly report on Form
10-Q for the fiscal quarter ended March 31, 1999 and "BALANCE SHEET
DATE" means March 31, 1999.
4.9 DISCLOSURE DOCUMENTS. (a) Each document required to be filed by the
Company with the SEC in connection with the transactions contemplated
by this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including,
without limitation, Schedule 14D-9 and the information statement of the
Company (the "COMPANY INFORMATION STATEMENT"), if any, to be filed with
the SEC in connection with the Merger, and any amendments or
supplements thereto, will, when filed, comply as to form in all
material respects with the applicable requirements of the 1934 Act.
(b) At the time the Company Information Statement, if one is required, or
any amendment or supplement thereto, is first mailed to stockholders of
the Company, the Company Information Statement, as supplemented or
amended, if applicable, will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances
under which they were made, not misleading. At the time of the filing
of any Company Disclosure Document (other than the Company Information
Statement) or any supplement or amendment thereto and at the time of
any distribution thereof, such Company Disclosure Document will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this
Section 4.9(b) will not apply to statements included in or omissions
from the Company Disclosure Documents based upon information furnished
to the Company in writing by Parent specifically for use therein.
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(c) The information with respect to the Company or any of its subsidiaries
that the Company furnishes to Parent in writing specifically for use in
the Offer Documents will not, at the time of the filing thereof, at the
time of any distribution thereof and at the time of consummation of the
Offer, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order
to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
4.10 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date and through
the date of this Agreement, the business of the Company and its
subsidiaries has been conducted in the ordinary course consistent with
past practices and there has not been:
(a) any event, occurrence, development, facts or state of circumstances
which has had, or would have, individually or in the aggregate, a
material adverse effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company
or its subsidiaries (other than dividends and distributions by a direct
or indirect wholly owned subsidiary of the Company), or any repurchase,
redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of capital stock or other equity
securities of, or other equity ownership interests in, the Company or
any of its subsidiaries;
(c) any offer, sale, issue or grant, or any authorized or proposed
offering, sale, issuance or grant, of any shares of capital stock of,
or other equity interests in, or any securities convertible into or
exchangeable for (or acceleration of any right to convert or exchange
securities for) any shares of capital stock of, or other equity
interests in, or any options, warrants or rights of any kind to acquire
any shares of capital stock of, or other equity interests in, or any
other voting securities of, the Company or any of its subsidiaries, or
any "phantom" stock, "phantom" stock rights, stock appreciation rights
or stock-based performance units, other than issuances of Shares upon
the exercise of the Options outstanding prior to the date of this
Agreement in accordance with the terms thereof;
(d) any amendment of any material term of any outstanding Company
Securities or securities of any of its subsidiaries;
(e) any incurrence, assumption or guarantee by the Company or any of its
subsidiaries of any material indebtedness for borrowed money other than
(i) in the ordinary course of business consistent with past practices,
(ii) under credit facilities of the Company or any of its subsidiaries
as in effect as of the date of this Agreement or (iii) indebtedness of
a wholly owned subsidiary of the Company to the Company or to another
wholly owned subsidiary of the Company or by the Company to a wholly
owned subsidiary of the Company;
(f) any creation or other incurrence by the Company or any of its
subsidiaries of any material Lien on any material asset other than in
the ordinary course of business consistent with past practices;
(g) any making of any material loan, advance or capital contributions to or
investment in any person other than loans, advances, capital
contributions or investments made (i) in the ordinary course of
business consistent with past practices or (ii) by a wholly owned
subsidiary of the Company to the Company or to another wholly owned
subsidiary of the Company or by the Company to a wholly owned
subsidiary of the Company;
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(h) any change in any accounting or tax accounting principle (or the early
adoption of a change required under any accounting principle) by the
Company or any of its subsidiaries, except for any such change required
by reason of a concurrent change in GAAP, Regulation S-X promulgated
under the 1934 Act ("REGULATION S-X") or applicable law or regulation;
or
(i) any (i) grant of any severance or termination pay to any director or
officer of the Company or any president of any of its material
subsidiaries, (ii) increase in benefits payable to any director or
officer of the Company or any president of any of its material
subsidiaries under any existing severance or termination pay policies
or employment agreements, (iii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to
any such existing agreement) with any director or officer of the
Company or any president of any of its material subsidiaries or (iv)
establishment, adoption or amendment (except as required by applicable
law) of any collective bargaining, bonus, profit-sharing, thrift,
pension, retirement, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any
director or officer of the Company or any president of any of its
subsidiaries.
4.11 NO UNDISCLOSED MATERIAL LIABILITIES. To the Company's knowledge, there
are no liabilities of the Company or any of its subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than:
(a) liabilities or obligations reflected, reserved for or otherwise
provided for in the Balance Sheet;
(b) liabilities or obligations reflected in the notes to the Company's
audited financial statements for the fiscal year ended September 30,
1998;
(c) liabilities or obligations which would not, individually or in the
aggregate, have a reasonable probability of having a material adverse
effect on the Company;
(d) liabilities or obligations contemplated by this Agreement, the
Company's Disclosure Schedule, the Offer Documents or the Company
Disclosure Documents or otherwise relating to the Offer, the Merger or
the other transactions contemplated hereby; and
(e) liabilities or obligations incurred in the ordinary course of business.
4.12 LITIGATION; COMPLIANCE WITH LAWS; PERMITS. Except as set forth in the
Company SEC Documents prior to the date hereof, there is no claim,
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries or any of
their properties or assets that, individually or in the aggregate, (a)
has had a material adverse effect on the Company or (b) as of the date
hereof, questions the validity of this Agreement or any action to be
taken by the Company in connection with the consummation of the
transactions contemplated hereby or could otherwise prevent or delay
the consummation of the transactions contemplated by this Agreement,
and the Company and each of its subsidiaries is and has been in
compliance with and, to the knowledge of the Company, is not under
investigation with respect to, and has not been threatened to be
charged with or given notice of any violation of, any applicable law,
rule, regulation, judgment, injunction, order or decree, except for
such matters as would not, individually or in the aggregate, have a
material adverse effect on the Company. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals of all governmental authorities necessary for the lawful
conduct of their respective businesses
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(the "COMPANY PERMITS"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not
have, individually or in the aggregate, a material adverse effect on
the Company and are in compliance with the terms of the Company
Permits, except where the failure to so comply would not have,
individually or in the aggregate, a material adverse effect on the
Company.
4.13 BROKERS' FEES. Except for Bear, Stearns & Company, Inc., which has been
engaged by the Company on behalf of the Independent Committee, and a
copy of whose engagement agreement has been provided to Parent, there
is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of the Company or
any of its subsidiaries who is entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
4.14 NO OTHER REPRESENTATIONS OR WARRANTIES. The Company shall not be deemed
to have made to Parent or Merger Sub any representation or warranty
other than as expressly set forth in this Article 4. Without limiting
the generality of the foregoing, and notwithstanding any
representations or warranties otherwise expressly made by the Company,
the Company does not make any representation or warranty to Purchaser
or Merger Sub with respect to (i) any projections, estimates or budgets
of future revenues, expenses, financial condition or results of
operations of the Company heretofore delivered to or made available to
Parent, or (ii) except as expressly set forth herein, any other
information or documents (financial or otherwise) with respect to the
Company heretofore delivered to or made available to Parent or its
counsel, accountants or advisors.
5 REPRESENTATIONS AND WARRANTIES OF PARENT
Parent and Merger Sub represent and warrant to the Company that:
5.1 CORPORATE EXISTENCE AND POWER; OWNERSHIP OF COMPANY STOCK.
(a) Each of Parent and Merger Sub (i) is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and (ii) has all requisite corporate
powers and authority to own, lease and operate its properties and to
conduct its business as now being conducted, except where the failure
to have such power and authority would not, individually or in the
aggregate, have a reasonable probability of having a material adverse
effect on Parent. Parent is a direct wholly-owned subsidiary of
Securicor plc. All or substantially all of the consolidated operations
of Securicor plc are conducted through Parent and its subsidiaries.
Since the date of its incorporation, Merger Sub has not engaged in any
activities or incurred any liabilities other than in connection with
its incorporation or in connection with or as contemplated by this
Agreement.
(b) As of the date hereof and immediately prior to the consummation of the
Offer, (i) Parent and its affiliates beneficially own and will
beneficially own 25,937,042 Shares and 12,408 Series A Preferred Shares
and (ii) an indirect wholly-owned subsidiary of Parent owns and will
own all of the outstanding shares of Merger Sub.
5.2 CORPORATE AUTHORIZATION. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent
and Merger Sub of the transactions contemplated hereby are within the
corporate powers of Parent and Merger Sub and have been duly authorized
by all necessary corporate action. Parent and Merger Sub each hereby
represents that its Board of Directors has approved the Agreement and
the
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transactions contemplated hereby, including, without limitation, the
Offer and the Merger. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub and constitutes a valid and
binding agreement of each of Parent and Merger Sub enforceable against
each of them in accordance with its terms, except as may be limited by
bankruptcy, insolvency, fraudulent transfer and other similar laws
affecting creditors' rights generally and by equitable principles of
general applicability.
5.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent
and Merger Sub of the transactions contemplated hereby require no
action by or in respect of, or filing with, any governmental body,
agency, official or authority other than (a) the filing of the
Certificate of Merger in accordance with Delaware Law, and (b)
compliance with the requirements of the 1934 Act applicable to the
Offer Documents.
5.4 NON-CONTRAVENTION. The execution, delivery and performance by Parent
and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby do not and will not
(a) contravene or conflict with the charter or bylaws of Parent or
Merger Sub; (b) assuming compliance with the matters referred to in
Section 5.3 hereof, and further assuming the accuracy of the
representations and warranties of the Company and its performance of
its covenants and agreements under this Agreement, contravene or
conflict with, or constitute a violation of, any provision of any law,
rule, regulation, judgment, injunction, order or decree binding upon
Parent or Merger Sub which would, in any case, have a reasonable
probability of having a material adverse effect on Parent or Merger
Sub; or (c) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of
Parent or Merger Sub or to a loss of any benefit to which Parent or
Merger Sub is entitled under any agreement, contract or other
instrument binding upon Parent or Merger Sub which would, in any such
case, have a reasonable probability of having a material adverse effect
on Parent or Merger Sub.
5.5 DISCLOSURE DOCUMENTS. (a) The information with respect to Parent and
its affiliates that Parent furnishes to the Company in writing
specifically for use in the Company Information Statement will not, at
the time the Company Information Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company,
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading.
(b) The information with respect to Parent and its affiliates that Parent
furnishes to the Company in writing specifically for use in any other
Company Disclosure Document will not, at the time of the filing thereof
or of any supplement or amendment thereto and at the time of the
distribution thereof, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading.
(c) The Offer Documents, when filed, will comply as to form in all material
respects with the applicable requirements of the 1934 Act and will not
at the time of the filing thereof, at the time of any distribution
thereof or at the time of consummation of the Offer, contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, provided that
this representation and warranty will not apply to statements
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included in, or omissions from, the Offer Documents based upon
information furnished to Parent or Merger Sub in writing by the Company
specifically for use therein.
5.6 BROKERS' FEES. Except for Lazard Freres & Co. LLC and Lazard Brothers &
Co., Limited, which have been engaged by Parent, there is no investment
banker, broker, finder or other intermediary which has been retained by
or is authorized to act on behalf of Parent or Merger Sub who is
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
5.7 FINANCIAL ABILITY. Parent and its affiliates have the funds necessary
to consummate the Offer and the Merger, and Parent will cause such
funds to be made available to Merger Sub at the time of consummation of
the Offer and at the Effective Time so that Merger Sub will be able to
consummate the Offer and the Merger in accordance with this Agreement.
Parent has delivered to the Company a true and correct copy of its
unconsolidated audited balance sheet as of September 30, 1998 and such
balance sheet gives a true and fair view of the financial condition of
Parent as of that date.
5.8 OPERATIONS AFTER THE MERGER. Parent currently intends that, after the
Effective Time, the Surviving Corporation will be operated as a wholly
owned subsidiary of Parent and Parent has no current intention to sell
the Surviving Corporation.
6 COVENANTS OF THE COMPANY
The Company agrees that:
6.1 CONDUCT OF THE COMPANY. From the date hereof until the Effective Time,
except as set forth in Section 6.1 of the Company's Disclosure
Schedule, as contemplated by this Agreement or as consented to in
writing by Parent, the Company and its subsidiaries shall conduct their
business in the ordinary course consistent with past practices and
shall use their commercially reasonable efforts to preserve intact
their business organizations and relationships with third parties and
to keep available the services of their present officers and employees.
Without limiting the generality of the foregoing, from the date hereof
until the Effective Time, except as set forth in Section 6.1 of the
Company's Disclosure Schedule or as consented to in writing by Parent,
the Company will not do, and will not permit any of its subsidiaries to
do, any of the following:
(a) (i) increase the compensation (or benefits) payable to or to become
payable to any director or employee, except for increases in salary or
wages of employees in the ordinary course of business and consistent
with past practice; (ii) grant any severance or termination pay or
enter into or amend in any respect any employment or severance
agreement with any employee; (iii) establish, adopt, enter into or
amend any collective bargaining agreement or benefit plan of the
Company or any subsidiary; or (iv) take any action to accelerate any
rights or benefits, or make any determinations not in the ordinary
course of business consistent with past practices, under any collective
bargaining agreement or employee benefit plan of the Company or any
subsidiary;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of (whether in cash, stock or property),
outstanding shares of capital stock, except for dividends by a wholly
owned subsidiary of the Company to the Company or another wholly owned
subsidiary of the Company;
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(c) redeem, purchase or otherwise acquire any outstanding shares of capital
stock of, or other equity interests in, or any securities that are
convertible into or exchangeable for, any shares of capital stock of or
other equity interests in, or any outstanding options, warrants or
rights of any kind to acquire any shares of capital stock of or other
equity interests in the Company or any of its subsidiaries (other than
any purchase, forfeiture or retirement of Shares or Options occurring
pursuant to the terms thereof (as in effect on the date of this
Agreement));
(d) effect any reorganization or recapitalization of, or split, combine or
reclassify, any of the capital stock of or other equity interests in
the Company or any of its subsidiaries, or issue or authorize any other
securities in respect of, in lieu of or in substitution for shares of
such capital stock or such equity interests;
(e) offer, sell, issue or grant any shares of capital stock of or other
equity interests in or any securities convertible into or exchangeable
for (or accelerate any right to convert or exchange securities for) any
shares of capital stock of or other equity interests in or any options,
warrants or rights of any kind to acquire any shares of capital stock
of or other equity interests in or any other voting securities of, the
Company or any of its subsidiaries, or any "phantom" stock, "phantom"
stock rights, stock appreciation rights or stock-based performance
units, other than issuances of Shares upon the exercise of the Options
outstanding prior to the date of this Agreement in accordance with the
terms thereof (as in effect on the date of this Agreement);
(f) sell, lease, exchange or otherwise dispose of, or grant any Lien with
respect to, any of the properties or assets of the Company or any of
its subsidiaries that are, individually or in the aggregate, material
to the business of the Company and its subsidiaries, except for
dispositions of excess or obsolete assets and sales of inventories in
the ordinary course of business;
(g) propose or adopt any amendments to its certificate of incorporation or
bylaws or other organizational documents;
(h) settle the terms of any material litigation affecting the Company or
any of its subsidiaries;
(i) make any material tax election (unless required by law or unless
consistent with prior practice) or settle or compromise any material
tax liability except, in each case, if Parent is given reasonable prior
notice thereof; or
(j) agree or commit to do any of the forgoing.
6.2 ACTION BY WRITTEN CONSENT; COMPANY INFORMATION STATEMENT. Unless the
Merger is consummated in accordance with Section 253 of Delaware Law as
contemplated by Section 8.5 hereof, and subject to applicable law,
Parent shall, as soon as reasonably practicable after the consummation
of the Offer, act by written consent as a stockholder of the Company to
approve and adopt this Agreement and the Merger. In connection with
such written consent, the Company (a) will promptly prepare and file
with the SEC, will use its commercially reasonable efforts to have
cleared by the SEC and will thereafter mail to its stockholders as
promptly as practicable, the Company Information Statement and (b) will
otherwise comply with all legal requirements applicable thereto.
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6.3 ACCESS TO INFORMATION. From the date hereof until the Effective Time,
(i) the Company will give Parent, its counsel, financial advisors,
auditors and other authorized representatives reasonable access to the
offices, properties, books and records of the Company and its
subsidiaries; (ii) will furnish to Parent, its counsel, financial
advisors, auditors and other authorized representatives such financial
and operating data and other information as such persons may reasonably
request; and (iii) will instruct the Company's employees, counsel and
financial advisors to reasonably cooperate with Parent in its
investigation of the business of the Company and its subsidiaries;
provided that no investigation pursuant to this Section shall affect
any representation or warranty given by the Company to Parent
hereunder. All information furnished pursuant to this Section 6.3 will
be subject to the Confidentiality Agreement dated January 19, 1999
between Parent and the Company.
6.4 NOTICES OF CERTAIN EVENTS. The Company shall promptly notify Parent of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by
this Agreement; and
(c) any material actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against,
relating to, involving or otherwise affecting the Company or any of its
subsidiaries or which relate to the consummation of the transactions
contemplated by this Agreement.
7 COVENANTS OF PARENT
Parent agrees that:
7.1 OBLIGATIONS OF MERGER SUB. Parent will take all action necessary to
cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this
Agreement.
7.2 INDEMNIFICATION AND INSURANCE. Parent will, and Parent will cause the
Surviving Corporation to, indemnify and hold harmless the present and
former officers, directors and counsel of the Company in respect of
acts or omissions occurring prior to the Effective Time to the fullest
extent permitted under the Company's certificate of incorporation and
bylaws in effect on the date hereof. Parent agrees that prior to the
Closing, it will, at its election, either (i) permit the Company to
purchase officers' and directors' liability insurance from its current
officers' and directors' liability insurer covering claims made during
the period of six years immediately following the Effective Time in
respect of acts or omissions occurring prior to the Effective Time on
terms with respect to coverage and amount substantially similar to
those of the officers' and directors' liability insurance policy of the
Company in effect on the date hereof (the "EXISTING COVERAGE") covering
each such person currently covered by such policy (the "COVERED
EMPLOYEES") or (ii) arrange to be provided to the Covered Employees
officers' and directors' liability insurance covering claims made
during the period of six years immediately following the Effective Time
in respect of acts or omissions occurring prior to the Effective Time
which is at least as favorable to the Covered Employees as the Existing
Coverage. Parent will cause the Surviving Corporation to keep such
insurance in effect for six years after the Effective
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Time. The provisions of this Section are for the benefit of and may be
enforced after the Effective Time by the Covered Employees.
7.3 NOTICES OF CERTAIN EVENTS. Parent shall promptly notify the Company of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by
this Agreement; and
(c) any material actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened, which relate to
the consummation of the transactions contemplated by this Agreement.
8 COVENANTS OF THE PARTIES
The parties hereto agree that:
8.1 BEST EFFORTS. Subject to the terms and conditions of this Agreement and
subject to the fiduciary duties under applicable law of the directors
of the Company or of the directors constituting the Independent
Committee (as determined by such directors in good faith after
consultation with legal counsel), each party will use its reasonable
best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable, including
but not limited to under all applicable laws, rules, regulations,
decrees and orders, to consummate the transactions contemplated by this
Agreement.
8.2 CERTAIN FILINGS. The Company and Parent shall reasonably cooperate with
one another (a) in connection with the preparation of the Company
Disclosure Documents and the Offer Documents; (b) in determining
whether any action by or in respect of, or filing with, any
governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required, to be obtained
from parties to any material agreements or instruments to which the
Company is a party, in connection with the consummation of the
transactions contemplated by this Agreement; and (c) in seeking any
such actions, consents, approvals or waivers or in making any such
filings, furnishing information required in connection therewith or
with the Company Disclosure Documents or the Offer Documents and
seeking timely to obtain any such actions, consents, approvals or
waivers.
8.3 PUBLIC ANNOUNCEMENTS. Except as may be required by applicable law based
on the advice of counsel, neither the Company nor Parent or Merger Sub
will issue any press release or make any public statement with respect
to this Agreement or the transactions contemplated hereby without the
other's consent. In the event that counsel advises that any such press
release is required by law, the party proposing to issue such press
release will, unless impracticable, furnish a draft of the proposed
press release to the other party before issuing it and give the other
party such time as may be reasonable under the circumstances to review
and comment on the press release.
8.4 FURTHER ASSURANCES. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute
and deliver, in the name and on behalf of the Company or Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do,
in the name and on behalf of the Company or Merger Sub, any other
actions
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and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all rights, title and interest in, to and
under any of the rights, properties or assets of the Company or Merger
Sub acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
8.5 SHORT FORM MERGER. In the event that the sum of (i) the number of
Shares tendered (and not withdrawn) pursuant to the Offer plus (ii) the
number of Shares held by Parent, Merger Sub or any other affiliate of
Parent that have not been tendered pursuant to the Offer, including
Shares issuable to any of them upon conversion of Series A Preferred
Shares and convertible debt of the Company held by any of them,
represent 90% or more of the outstanding Shares on a fully-diluted
basis (except that unexercised Options shall not be treated as
outstanding for this purpose), the parties hereto agree to take all
necessary and appropriate action to cause the Merger to be effective as
soon as practicable after (and in any event within seven days after)
the acceptance for payment and purchase of Shares by the Purchaser
pursuant to the Offer in accordance with Section 253 of Delaware Law.
8.6 STATE TAKEOVER STATUTES. The parties acknowledge and agree that this
Agreement, the Offer, the Merger and the other transactions
contemplated thereby are exempt from the requirements of any
"moratorium", "control-share", "fair-price", "affiliate transaction",
"business combination" or other antitakeover laws and regulations of
any state, including, without limitation, Section 203 of Delaware Law.
9 CONDITIONS TO THE MERGER
9.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the
Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) Merger Sub shall have purchased the Shares tendered pursuant to the
Offer;
(b) If required by Delaware Law, this Agreement and the Merger shall have
been approved and adopted by the stockholders of the Company in
accordance with Delaware Law; and
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the
Merger.
10 TERMINATION
10.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining
the Company or Parent from consummating the Merger is entered and such
judgment, injunction, order or decree shall become final and
non-appealable;
(c) by either the Company or Parent, if the Offer shall expire or terminate
in accordance with its terms without any Shares being purchased
thereunder and, in the case of termination by
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Parent, Merger Sub shall not have been required by the terms of the
Offer or this Agreement to purchase any Shares pursuant to the Offer;
(d) by the Company if, prior to the acceptance for payment of Shares by
Parent pursuant to the Offer, (i) any of the representations and
warranties of Parent or Merger Sub contained in this Agreement that are
qualified as to materiality were untrue or incorrect when made or have
since become, and at the time of termination remain, incorrect (except
that with respect to representations and warranties that are made as of
a specified date, such right of termination shall apply only if such
representations or warranties were untrue or incorrect as of such
specified date) or any of the representations and warranties of Parent
or Merger Sub that are not so qualified as to materiality were untrue
or incorrect in any material respect when made or have since become,
and at the time of determination remain, incorrect in any material
respect (except that with respect to representations and warranties
that are made as of a specified date, such right of termination shall
apply only if such representations or warranties were untrue or
incorrect in any material respect as of such date); provided that the
Company may not terminate this Agreement pursuant to this Section (i)
if the Company had knowledge as of the date hereof that the relevant
representation or warranty was untrue or incorrect; or (ii) Parent or
Merger Sub shall have breached or failed to comply in any material
respect with any of their respective obligations under this Agreement,
provided that if such breach is curable by the breaching party and so
long as the breaching party continues to exercise its reasonable
efforts to cure such breach, the Company shall not have the right to
terminate the Agreement pursuant to this Section until the date 30 days
after notice by the Company to the breaching party of such breach only
if the breach has not been cured prior to that date (which cure period
will not apply to a breach by Merger Sub of its obligation to commence
the Offer within the time period specified in the first sentence of
Section 1.1(a)); or
(e) by Parent if, prior to the acceptance for payment of Shares pursuant to
the Offer, (i) any of the representations and warranties of the Company
contained in this Agreement that are qualified as to materiality were
untrue or incorrect when made or have since become, and at the time of
termination remain, incorrect (except that with respect to
representations and warranties that are made as of a specified date,
such right of termination shall apply only if such representations or
warranties were untrue or incorrect as of such specified date) or any
of the representations and warranties of the Company that are not so
qualified as to materiality were untrue or incorrect in any material
respect when made or have since become, and at the time of
determination remain, incorrect in any material respect (except that
with respect to those representations and warranties that are made as
of a specified date, such right of termination shall apply only if such
representations or warranties were untrue and incorrect in any material
respect as of such date); provided that Parent may not terminate this
Agreement pursuant to this Section (i) if Parent had knowledge as of
the date hereof that the relevant representation or warranty was untrue
or incorrect as of that date; (ii) there shall have been a breach of
any covenant or agreement on the part of the Company contained in this
Agreement that shall not have been cured prior to 30 days after notice
by the Company to Parent of such breach; or (iii) the Board of
Directors of the Company (with the approval of the Independent
Committee) shall have withdrawn or modified (including any amendment of
Schedule 14D-9) in a manner adverse to Parent its approval or
recommendation of the Offer, this Agreement or the Merger and shall not
have reinstated such approval or recommendation within three business
days thereof, shall have approved or recommended another offer or
transaction that is inconsistent with the transactions contemplated
hereby or shall have resolved to effect any of the foregoing.
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(f) by the Company or Parent if the Effective Time shall not have occurred
within 120 days (or within seven days in the circumstances contemplated
by Section 8.5) after the purchase of the tendered Shares pursuant to
the Offer, provided that the right to terminate this Agreement under
this Section 10.1(f) shall not be available to a party whose action or
failure to act has been the cause of or resulted in the failure of the
Merger to be consummated on or before such date and such action or
failure to act constitutes a breach of this Agreement.
The party desiring to terminate this Agreement pursuant to this Section
(other than pursuant to Section 10.1(a) hereof) shall give notice of
such termination to the other parties hereto in accordance with Section
11.1 hereof.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 10.1 hereof, this Agreement shall become void and of no effect,
with no liability on the part of any party hereto, except for liability
for damages resulting from any breach by a party of any representation,
warranty, covenant or agreement contained in this Agreement; provided,
however, that if either the Company, on the one hand, or Parent and
Merger Sub, on the other hand, terminates this Agreement as a result
of, or arising from, any material breach by the other of any
representation, warranty, covenant or agreement contained in this
Agreement (including, for these purposes, any termination by the
Company of this Agreement pursuant to Section 10.1(f)), then in such
event Parent or the Company, as the case may be, shall pay or reimburse
the other party for all professional fees and other out-of-pocket costs
incurred by it in connection with the negotiation of, or otherwise
related to, this Agreement and the transactions contemplated hereby;
provided, further, however, that if any party terminates this Agreement
pursuant to Section 10.1 (c) as a result of the Minimum Condition not
having been satisfied, then in such event Parent shall pay or reimburse
the Company for up to $1,000,000 of professional fees and other
out-of-pocket costs incurred by it in connection with the negotiation
of, or otherwise related to, this Agreement and the transactions
contemplated hereby. Any such expense payment or reimbursement shall
not be exclusive but rather shall be in addition to any liability
Parent, Merger Sub or the Company, as the case may be, may have for
other damages resulting from any breach of any representation,
warranty, covenant or agreement contained in this Agreement or any
other rights or remedies that the non-defaulting party may have at law
or in equity. Notwithstanding the foregoing, the agreements contained
in Sections 10.2 and 10.3 hereof and Article 11 hereof shall survive
the termination hereof.
10.3 EXPENSES. Except as set forth in Section 2.1(d) and 10.2, all costs and
expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense.
11 MISCELLANEOUS
11.1 NOTICES. All notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
if to Parent or Merger Sub, to:
Security Services plc
Sutton Park House
Sutton, Surrey SM1 4LD
United Kingdom
22
<PAGE> 25
Attn: Nigel Griffiths, Director and Company Secretary
Telephone: 44-171-770-7000
Telecopier: 44-171-770-1145
with a copy to:
Weil, Gotshal & Manges
One South Place
London EC2M 2WG
United Kingdom
Attn: Douglas Warner, Esq.
Telephone: 44-171-903-1000
Telecopier: 44-171-903-0990
if to the Company, to:
Intek Global Corporation
99 Park Avenue
New York, NY 10016
U.S.A.
Attn:
Telephone:
Telecopier:
with a copy to:
Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, CA 90064
U.S.A.
Attn: Nancy H. Wojtas, Esq.
Telephone: 310-312-4307
Telecopier: 310-312-4224
and to:
Dean Howard Frank
Independent Committee of the Board of Directors
of Intek Global Corporation
Maryland Business School
Van Munching Hall
College Park, MD 20742-1815
Telephone: 301-405-2308
Telecopier: 301-314-9120
with a copy to:
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, NY 10166-0193
Attn: Steven P. Buffone, Esq.
Telephone: 212-351-3936
23
<PAGE> 26
Telecopier: 212-351-4035
or to such other address or telecopy number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each
such notice, request or other communication shall be effective (a) if
given by telecopy, when such telecopy is transmitted to the telecopy
number specified or (b) if given by any other means, when delivered at
the address specified in this Section.
11.2 SURVIVAL. The representations, warranties, covenants and agreements
contained herein and in any certificate or other writing delivered
pursuant hereto shall not survive the Effective Time. Notwithstanding
the foregoing, this Section shall not limit any covenant or agreement
of the parties hereto which by its terms contemplates performance after
the Effective Time.
11.3 AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may be
amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an
amendment, by the Company, Parent and Merger Sub or in the case of a
waiver, by the party against whom the waiver is to be effective. The
approval of the Independent Committee shall be required for any consent
of the Company referred to in Section 1.1 hereof or elsewhere herein,
any amendment or modification of this Agreement, any extension by the
Company of the time for the performance of any obligations or other
acts of Parent or Merger Sub, any waiver of any of the Company's rights
under this Agreement and any other action by the Company pursuant to or
with respect to this Agreement.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or future
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative
and not exclusive of any rights or remedies provided by law.
11.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the other parties hereto except
that Parent may transfer or assign, in whole or from time to time in
part, to one or more of its subsidiaries, the right to purchase shares
pursuant to the Offer, but any such transfer or assignment will not
relieve Parent of its obligations under the Offer or prejudice the
rights of tendering stockholders to receive payment for Shares validly
tendered and accepted for payment pursuant to the Offer.
11.5 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by
reason of this Agreement, except for Sections 2.3, 2.5 and 7.2 hereof
(which are intended to be for the benefit of the persons referred to
therein, and may be enforced by such persons).
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with and
governed by the law of the State of Delaware applicable to agreements
entered into and to be performed wholly within such state.
24
<PAGE> 27
11.7 JURISDICTION. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be
brought in any federal court located in the State of Delaware or any
Delaware state court, and each of the parties hereby consents to
jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably
waives, to the fullest extent permitted by law, any objection which it
may now or hereafter have to the venue of any such suit, action or
proceeding. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without
the jurisdiction of any such court. Without limiting the foregoing,
each party agrees that service of process on such party as provided in
Section 11.1 hereof shall be deemed effective service of process on
such party.
11.8 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by all of the
other parties hereto.
11.9 ENTIRE AGREEMENT. This Agreement and the Confidentiality Agreement
dated January 19, 1999 between Parent and the Company constitute the
entire agreement among the parties with respect to the subject matter
of this Agreement and supersede all other prior agreements and
understandings, both oral and written, between the parties with respect
to the subject matter hereof and thereof.
11.10 CAPTIONS. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
11.11 SEVERABILITY. If any of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated so long as the economic or
legal substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any parties. Upon such a
determination, the offending term, provision, covenant or restriction
shall be deemed to be modified as necessary so as to effect the
original intent of the parties as closely as possible in an enfoceable
manner in order that the transactions contemplated hereby shall be
consummated as originally contemplated to the fullest extent possible.
11.12 DEFINITIONS. (a) For purposes of this Agreement:
"affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common
control with such person.
"beneficial owner" (including the term "beneficially own" or
correlative terms) have the meaning ascribed to such term under Rule
13d-3(a) of the 1934 Act.
"business day" shall have the meaning ascribed to such term under Rule
14d-1 of the 1934 Act.
"group" shall have the meaning ascribed to such term under Section
13(d)(3) of the 1934 Act.
25
<PAGE> 28
"knowledge" of any person that is not an individual means the actual
knowledge of those individuals listed in Section 11.12 of the Company's
Disclosure Schedule.
"material adverse effect" means, when used in connection with Parent or
the Company, (i) a material adverse effect on the business, operations,
assets, liabilities, financial condition or results of operations of
Parent and its subsidiaries, taken as a whole, or the Company and its
subsidiaries, taken as a whole, as the case may be, or (ii) a material
impairment of the ability of the Parent or the Company, as the case may
be, to consummate the transactions contemplated by this Agreement.
"officer" means, in the case of Parent and the Company, each executive
officer of Parent or the Company, as applicable, within the meaning of
Rule 3b-7 of the 1934 Act.
"person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"subsidiary" means, with respect to any person, any entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at any time directly or indirectly owned by such
person.
"wholly owned subsidiary" means, with respect to the Company, any
subsidiary of the Company all of the issued and outstanding voting
securities (other than qualifying shares) of which are beneficially
owned by the Company or a wholly owned subsidiary of the Company.
Any reference in this Agreement to a statute shall be to such statute
as amended from time to time, and to the rules and regulations
promulgated thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
- ---- -------
1933 Act...........................................................4.6(b)
1934 Act...........................................................1.1(a)
Balance Sheet.........................................................4.8
Balance Sheet Date....................................................4.8
Certificate of Merger.................................................2.1
Closing Date..........................................................2.1
Closing...............................................................2.1
Company..........................................................Preamble
Company Disclosure Documents..........................................4.9
Company Disclosure Schedule.....................................Article 4
Company Information Statement.........................................4.9
Company Permits......................................................4.12
Company SEC Documents.................................................4.7
Company Securities....................................................4.5
Company Stock Option Plans............................................2.5
Covered Employees.....................................................7.2
Covered Transactions.................................................4.14
Delaware Law..........................................................2.1
26
<PAGE> 29
Effective Time........................................................2.1
Exchange Agent........................................................2.3
GAAP..................................................................4.8
Independent Committee............................................Preamble
Lien..................................................................4.4
Merger...........................................................Preamble
Merger Consideration..................................................2.2
Merger Sub.......................................................Preamble
Minimum Condition.....................................................1.1
Offer............................................................Preamble
Offer Documents.......................................................1.1
Option................................................................2.5
Parent...........................................................Preamble
Regulation S-X....................................................4.10(h)
Schedule 13E-3........................................................1.1
Schedule 14D-1........................................................1.1
Schedule 14D-9........................................................1.1
SEC...................................................................1.1
Series A Preferred Shares........................................Preamble
Shares...........................................................Preamble
Surviving Corporation.................................................2.1
Takeover Statutes....................................................4.14
Third Party...........................................................6.4
27
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
INTEK GLOBAL CORPORATION
By: /s/ ROBERT J. SHIVER
________________________________
Name: Robert J. Shiver
Title: Chief Executive Officer
SECURITY SERVICES PLC
By: /s/ NIGEL GRIFFITHS
________________________________
Name: Nigel Griffiths
Title: Director and Company Secretary
IGC ACQUISITION CORP.
By: /s/ C. GRICE MCMULLAN JR.
________________________________
Name: C. Grice McMullan Jr.
Title: President
28
<PAGE> 31
ANNEX I
Notwithstanding any other provision of the Offer, Merger Sub (x) shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) promulgated under the 1934 Act
(relating to Merger Sub's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for any Shares, (y)
may delay the acceptance for payment of or payment for any Shares or (z) subject
to the terms of the Merger Agreement, may terminate or amend the Offer as to any
Shares not then paid for, if (i) the Minimum Condition shall not have been
satisfied or (ii) at any time prior to the acceptance for payment of Shares
pursuant to the Offer, any of the following conditions exist or shall occur:
(a) there shall have occurred any general suspension of trading in, or
limitation on prices for, securities on any national securities
exchange or in the over-the-counter market, any declaration of a
banking moratorium by federal or New York authorities or general
suspension of payments in respect of lenders that regularly participate
in the United States market in loans to large corporations, any
material limitation by any federal, state or local government or any
court, administrative or regulatory agency or commission or other
governmental authority or agency in the United States that materially
affects the extension of credit generally by lenders that regularly
participate in the United States market in loans to large corporations,
any commencement of a war involving the United States or any
commencement of armed hostilities or other national or international
calamity involving the United States, that in any such case has a
material adverse effect on bank syndication or financial markets in the
United States or in the case of any of the foregoing occurrences
existing on or at the time of the commencement of the Offer, a material
acceleration or worsening thereof; or
(b) there shall be pending any action or proceeding (or any investigation
or other inquiry that might result in such an action or proceeding) by
any governmental authority or administrative agency before any
governmental authority, administrative agency or court of competent
jurisdiction, domestic or foreign, or there shall be in effect any
judgment, decree or order of any governmental authority, administrative
agency or court of competent jurisdiction, or any other legal
restraint, preventing or seeking to prevent consummation of the Offer,
the Merger or the other transactions contemplated by the Merger
Agreement, prohibiting or seeking to prohibit or limiting or seeking to
limit Parent or Merger Sub from exercising any material rights and
privileges pertaining to the ownership of the Shares or compelling or
seeking to compel any party or any of its subsidiaries to dispose of or
hold separate all or any portion of the business or assets of Parent or
the Company or any of their respective subsidiaries that is material in
relation to the consolidated business or assets of Parent and its
subsidiaries or the Company and its subsidiaries, in each case as a
result of the Offer, the Merger or the other transactions contemplated
by the Merger Agreement; or
(c) Parent, Merger Sub, the Company or their affiliates shall have failed
to make any filings with or to obtain any approvals by or
authorizations from any governmental body, agency, official or
authority, or any applicable waiting period related thereto shall not
have expired or been terminated, which filings, approvals or
authorizations (or the expiration of such waiting periods) are legally
required to be obtained or made by them (or to have expired or
terminated) prior to the consummation of the Offer and which, if not
obtained or made (or expired or terminated) would, individually or in
the aggregate, have a reasonable probability of having a material
adverse effect on Parent or the Company; or
29
<PAGE> 32
(d) the Company shall have failed to perform in all material respects all
of its obligations under the Merger Agreement required to be performed
by it at or prior to the time Shares are accepted for payment pursuant
to the Offer, and shall not have cured such failure prior to 30 days
after notice thereof by Parent to the Company; or
(e) the representations and warranties of the Company contained in the
Merger Agreement shall not be true and correct in all material respects
at and as of the time Shares are accepted for payment pursuant to the
Offer as if made at and as of such time (except as to those
representations and warranties that are made as of a specified date,
which shall be true and correct in any material respect as of such
date), and Parent shall not have had knowledge as of the date hereof
that the relevant representation or warranty was untrue or incorrect in
any material respect as of the date hereof; or
(f) the Merger Agreement shall have been terminated in accordance with its
terms; or
(g) the Board of Directors of the Company shall have withdrawn or modified
its recommendation of the Offer or the Merger;
which, in the reasonable good faith judgment of Parent in any such case, and
regardless of the circumstances (including any action or omission by Parent not
inconsistent with the terms hereof) giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.
30
<PAGE> 33
EXHIBIT A
DIRECTORS OF THE SURVIVING CORPORATION
Robert B. Kelly
Robert J. Shiver
John Wareham
Steven L. Wasserman
Roger Wiggs
Michael Wilkinson
31
<PAGE> 1
HOW DO WE COMPENSATE DIRECTORS?
ANNUAL FEE We compensate directors of Intek Global with
a fee of $4,000 per year plus a one-time
grant of 20,000 shares of Intek Global
common stock under our 1994 Directors' Stock
Option Plan upon election to the Board of
Directors.
MEETING FEES We pay directors a fee of:
- $500 for attendance at each Board
meeting;
- $500 for attendance at each Audit
Committee meeting held at the same
time as a stockholder or Board
meeting; and
- $500 for attendance at each special
committee meeting.
The annual maximum fee per director is
$10,000.
EXPENSES AND BENEFITS We reimburse all directors for reasonable
travel and other related expenses incurred
in attending stockholders, Board and
committee meetings.
8
<PAGE> 2
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 19, 1996, Midland USA, Inc. a wholly owned
subsidiary of Intek Global, entered into an agreement with Midland International
Corporation, whereby Midland International agreed to permit Midland USA to make
use of the services of the supplier liaison office maintained by Midland
International in Japan and Midland International's purchasing representative in
Korea. During fiscal 1998, Midland USA paid $56,000 to Midland International.
This agreement was terminated in January 1998.
On September 19, 1996, Midland USA and Simmonds Capital
entered into a Computer Services Agreement pursuant to which Simmonds Capital
agreed to provide Midland USA access to the IBM AS400 computer system, including
hardware and software, currently owned by Simmonds Capital for data processing
purposes. During fiscal 1998, Midland USA paid $16,000 to Simmonds Capital. This
agreement was terminated on October 31, 1997.
On December 3, 1996, Intek Global entered into a Registration
Rights Agreement to provide certain holders of Intek Global common stock,
including Securicor Communications, with certain demand and "piggy-back"
registration rights with respect to the Intek Global common stock owned by the
holders.
Kohrman Jackson & Krantz, P.L.L., a Cleveland, Ohio law firm,
of which Mr. Wasserman is a partner, performs legal services for Intek Global
and its subsidiaries. Mr. Wasserman is a member of Intek Global's Board of
Directors and is the Secretary of Intek Global. Mr. Wasserman individually
receives $2,000 per month as compensation for his services as the Secretary of
Intek Global. As of December 31, 1998, for services rendered in fiscal 1998,
Intek Global had paid Kohrman Jackson & Krantz, P.L.L. $110,000 in fees.
As of December 31, 1998, Intek Global was indebted to
Securicor Communications in the amount of $69.4 million pursuant to a term loan
with principal payments due beginning July 1, 2001. Mr. Wiggs is Chief Executive
of Securicor plc. Mr. Wilkinson is financial director of Securicor
Communications. Both Messrs. Wiggs and Wilkinson are members of Intek Global's
Board of Directors.
Squire, Sanders & Dempsey, L.L.P., a Washington, D.C. law
firm, of which Mr. Kelly has been a partner since May 1998, performs legal
services for Intek Global and its subsidiaries. Mr. Kelly is a member of Intek
Global's Board of Directors. As of December 31, 1998, for services rendered in
fiscal 1998, Intek Global had paid Squire, Sanders & Dempsey, L.L.P. $38,000 in
fees. Kelly & Povich, P.C., a Washington, D.C. law firm, of which Mr. Kelly was
a 50% shareholder, performed legal services for Intek Global and its
subsidiaries during fiscal 1998. As of December 31, 1998, for services rendered
in fiscal 1998, the Company paid Kelly & Povich, P.C. $170,000.
Wareham Associates, Inc., of which Mr. Wareham is the Chief
Executive Officer, provided executive recruiting and management consulting
services to Intek Global. Mr. Wareham is a member of Intek Global's Board of
Directors. During fiscal 1998, Intek Global paid Wareham Associates, Inc.
$249,000.
During the fourth quarter of fiscal 1998, Intek Global sold
its non-core, U.K.-based land mobile radio distribution and maintenance assets
to Securicor Information Systems Limited, a subsidiary of Securicor
Communications. The sale price for these assets was $8.5 million resulting in a
gain of $3.1 million. The sales price is subject to a post closing adjustment up
to 500,000 pounds equaling approximately $800,000 depending on certain
circumstances.
9
<PAGE> 3
Securicor Radiocoms Limited, a wholly owned subsidiary of
Intek Global, sells its products to Securicor Communications. In fiscal year
1998, revenues from such sales were $3.2 million.
HOW WE COMPENSATE EXECUTIVE OFFICERS
The tables on pages 11 through 13 show salaries and bonuses
paid during the last three years, options granted in fiscal 1998 and fiscal
year-end option values for the Chief Executive Officer and our next four most
highly compensated executive officers.
10
<PAGE> 4
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------------
ANNUAL COMPENSATION SECURITIES
-------------------------- RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) STOCK ($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ---- ---------- --------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Shiver 1998 $300,000 $114,000 -- 1,100,000 --
Chairman, Chief 1997 $25,000(1) $65,000 -- 20,000 $1,000,000(2)
Executive Officer 1996 -- -- -- -- --
Donald Goeltz 1998 $191,322 $ 36,000 -- 100,000 --
Senior Vice 1997 $ 71,111 -- -- 160,000 --
President-Corporate 1996 -- -- -- -- --
Development(3)
D. Gregg Marston 1998 $124,048 $ 7,500 -- 100,000 --
Interim Chief 1997 $104,518 $17,500 -- -- --
Financial Officer and 1996 $105,180 $ 7,500 -- 30,000 --
Vice President -
Finance(4)
Louis J. Monari 1998 $118,683 $31,852 -- 275,000 --
Vice President - 1997 -- -- -- -- --
Administration(5) 1996 -- -- -- -- --
David Neibert 1998 $171,735 $46,368 -- 100,000 --
Executive Vice 1997 $200,405(6) -- -- -- --
President 1996 $153,860 -- -- -- --
</TABLE>
(1) Does not include $4,500 Mr. Shiver received as compensation as a director
of Intek Global. Mr. Shiver began his employment with Intek Global on
August 27, 1997.
(2) Reflects 300,000 shares of Intek Global common stock issued to Mr. Shiver
pursuant to his employment agreement. If the fair market value of such
stock is less than $1,000,000 on December 31, 1998, Intek Global will pay
Mr. Shiver the difference in cash or Intek Global common stock, at Mr.
Shiver's option. Mr. Shiver elected to receive the difference in cash in an
amount equal to $643,750 which was paid in fiscal 1999.
(3) Mr. Goeltz resigned from Intek Global effective November 16, 1998.
(4) Mr. Marston resigned from Intek Global effective December 31, 1998.
(5) Mr. Monari began his employment with Intek Global on December 8, 1997.
(6) Does not include $7,000 Mr. Neibert received as compensation as a director
of Intek Global.
11
<PAGE> 5
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE PRICE PRESENT VALUE
NAME GRANTED (#) EMPLOYEES ($/SH) EXPIRATION DATE ($)(1)
- ---- ----------- --------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Robert J. Shiver 800,000(2) 22.5% $1.97 9/08/07 $1,162,400
300,000(3) 8.4% $2.50 3/12/08 $754,350
Donald Goeltz 100,000(4) 2.8% $2.50 3/12/08 $251,450
D. Gregg Marston 100,000(5) 2.8% $2.50 3/12/08 $251,450
Louis J. Monari 275,000(6) 7.7% $2.50 3/12/08 $691,488
David Neibert 100,000(7) 2.8% $2.50 3/12/08 $251,450
</TABLE>
(1) We calculated the values using the Black-Scholes stock option pricing model
under which we made the following assumptions: volatility of 98.4%,
risk-free rate of return of 5.64%, dividend yield of 0% and an expected
life of 4.8 years. We did not adjust the model for non-transferability,
risk of forfeiture, or vesting restrictions. The actual value (if any) an
executive officer receives from a stock option will depend upon the amount
by which the market price of the Intek Global common stock exceeds the
exercise price of the option on the date of exercise. There can be no
assurance that the amount stated as "grant date present value" will
actually be realized.
(2) Exercisable 20% per year beginning on August 27, 1998 and on each of the
first four anniversary dates thereafter.
(3) Exercisable 50% per year beginning on January 1, 2000 and on the first
anniversary date thereafter.
(4) Exercisable 20% per year beginning on March 12, 1999 and on each of the
first four anniversary dates thereafter.
(5) Exercisable 20% per year beginning on March 12, 1999 and on each of the
first four anniversary dates thereafter.
(6) 55,000 shares exercisable on March 12, 1998 and on each of the first four
anniversary dates commencing on December 8, 1998.
(7) Exercisable 20% per year beginning on March 12, 1999 and on each of the
first four anniversary dates thereafter.
12
<PAGE> 6
EMPLOYMENT AGREEMENT WITH CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Intek Global's employment agreement with Mr. Shiver provides
that he will serve as the Chairman of the Board of Directors and Chief Executive
Officer. The agreement has a two-year term unless earlier terminated by Intek
Global or Mr. Shiver. Such term automatically renews for one year, unless Intek
Global or Mr. Shiver gives notice of its or his desire not to so renew. Mr.
Shiver receives a base salary of $300,000 per annum subject to annual increases
for cost of living adjustments and participates in bonus arrangements under
which he is eligible to earn an annual bonus equal to a maximum of 40% of his
annual salary based on Intek Global's achieving certain performance goals to be
established by the Board of Directors. Mr. Shiver also received a commencement
bonus of $65,000.
Mr. Shiver is entitled to participate in Intek Global's
applicable long-term incentive compensation plan and was granted 300,000 shares
(the "Restricted Stock") of Intek Global common stock. In the event that on
December 31, 1998, at which time any restrictions will be lifted, the Fair
Market Value (as defined in Mr. Shiver's employment agreement) of the Restricted
Stock is less than $1,000,000, Intek Global has agreed to pay Mr. Shiver a sum
equal to the difference between $1,000,000 and such Fair Market Value. Such
payment is due on or before February 28, 1999 and is payable at Mr. Shiver's
option in cash or Intek Global common stock, or a combination of both. Mr.
Shiver elected to receive the difference in cash in an amount equal to $643,750.
Under the terms of Mr. Shiver's employment agreement, Mr. Shiver also has an
option to purchase 800,000 shares of Intek Global common stock, which option
will vest over a five-year period, and which option the Committee granted at an
exercise price of $1.97 per share under the 1997 Performance and Equity
Incentive Plan.
If Mr. Shiver's employment is terminated other than for cause,
or if he resigns for good reason, Mr. Shiver is entitled to:
13
<PAGE> 7
- his base salary earned but not paid to the date of
the termination of his employment;
- all annual incentive compensation awards with respect
to any year prior to the year of the termination of
Mr. Shiver's employment which have been earned but
not paid;
- an amount equal to Mr. Shiver's base salary with
respect to a period equal to 18 months;
- a pro rata annual incentive compensation award for
the year in which Mr. Shiver's employment terminates;
- exercise the exercisable portion of the options held
by Mr. Shiver as of the date of the termination of
his employment until the earlier of (i) the end of
the 90-day period following the date his employment
is terminated and (ii) the date the options would
otherwise expire;
- 100% of the unexercisable portion of the options as
of the date his employment is terminated which shall
become exercisable immediately until the earlier of
(i) the end of the 90-day period following the date
his employment is terminated and (ii) the date the
options would otherwise expire;
- any other amounts earned, accrued or owing to Mr.
Shiver as set forth in his employment agreement;
- continued participation, as if he were still an
employee, in Intek Global's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in other employee benefit
plans, programs and/or arrangements in which he was
participating on the date of the termination of his
employment until the earlier of:
-- the end of the 18-month period following the
date Mr. Shiver's employment is terminated;
and
-- the date, or dates, Mr. Shiver receives
equivalent coverage and benefits under the
plans, programs and/or arrangements of a
subsequent employer (such coverage and
benefits to be determined on a
coverage-by-coverage or benefit-by-benefit
basis); and
- such other or additional benefits, if any, as are
provided under applicable plans, programs and/or
arrangements of Intek Global.
Upon a change-in-control, any unexercisable options granted
pursuant to Mr. Shiver's employment agreement become exercisable. Mr. Shiver is
subject to restrictions prohibiting him from (i) engaging in competition with
Intek Global or any of our subsidiaries for a period commencing on August 27,
1997 and ending on the later of August 27, 1999 or one (1) year after the end of
Mr. Shiver's employment with Intek Global, and (ii) divulging any confidential
or proprietary information he obtained while he was our employee for a period
covering the term of employment and thereafter.
14
<PAGE> 8
EMPLOYMENT AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
As of July 15, 1998, Intek Global entered into an employment
agreement with Robert M. Hardy, pursuant to which Mr. Hardy agreed to serve as
President of U.S. operations of Intek Global until July 15, 2000, with an
automatic one-year renewal. Under the terms of the agreement, Mr. Hardy is
entitled to an annualized base salary of $225,000, and is entitled to
participate in Intek Global's applicable annual incentive compensation and
long-term incentive compensation plans. Under the terms of Mr. Hardy's
employment agreement, Mr. Hardy also is entitled to and has been granted an
option to purchase 250,000 shares of Intek Global common stock, which option
will vest over a five-year period. If Mr. Hardy's employment is terminated other
than for cause, or if he resigns for good reason, Mr. Hardy will receive
benefits substantially similar to those of Mr. Shiver under the same
circumstances. Finally, Mr. Hardy also is subject to restrictions prohibiting
him from (i) engaging in competition with Intek Global or any of our
subsidiaries for a period commencing on July 15, 1998 and ending one (1) year
after the end of Mr. Hardy's employment with Intek Global, and (ii) divulging
any confidential or proprietary information he obtained while he was our
employee for a period covering the term of employment and thereafter.
As of April 27, 1998, Intek Global entered into an employment
agreement with Louis J. Monari pursuant to which Mr. Monari agreed to serve as
Vice President-Administration of Intek Global until December 8, 1999, with an
automatic one-year renewal. Under the terms of the agreement, Mr. Monari is
entitled to an annualized base salary of $145,000, and is entitled to
participate in Intek Global's applicable annual incentive compensation and
long-term incentive compensation plans. Under the terms of Mr. Monari's
employment agreement, Mr. Monari also is entitled to and has been granted an
option to purchase 275,000 shares of Intek Global common stock, which option
will vest over a four-year period. If Mr. Monari's employment is terminated
other than for cause, or if he resigns for good reason, Mr. Monari will receive
benefits substantially similar to those of Mr. Shiver under the same
circumstances. Finally, Mr. Monari also is subject to restrictions prohibiting
him from (i) engaging in competition with Intek Global or any of our
subsidiaries for a period commencing on December 8, 1997 and ending one (1) year
after the end of Mr. Monari's employment with Intek Global, and (ii) divulging
any confidential or proprietary information he obtained while he was our
employee for a period covering the term of employment and thereafter.
Intek Global has entered into an employment agreement with
George A. Valenti dated as of August 27, 1998, pursuant to which Mr. Valenti
agreed to serve as Chief Financial Officer of Intek Global until August 3, 2000,
with an automatic one-year renewal. Under the terms of the agreement, Mr.
Valenti is entitled to an annualized base salary of $180,000, and is entitled to
participate in Intek Global's applicable annual incentive compensation and
long-term incentive compensation plans. Under the terms of Mr. Valenti's
employment agreement, Mr. Valenti also is entitled to and has been granted an
option to purchase 250,000 shares of Intek Global common stock, which option
will vest over a five-year period. If Mr. Valenti's employment is terminated
other than for cause, or if he resigns for good reason, Mr. Valenti will receive
benefits substantially similar to those of Mr. Shiver under the same
circumstances. Finally, Mr. Valenti also is subject to restrictions prohibiting
him from (i) engaging in competition with Intek Global or any of our
subsidiaries for a period commencing on August 3, 1998 and ending one (1) year
after the end of Mr. Valenti's employment with Intek Global, and (ii) divulging
any confidential or proprietary information he obtained while he was our
employee for a period covering the term of employment and thereafter.
15
<PAGE> 1
INTEK GLOBAL CORPORATION
99 PARK AVENUE
NEW YORK, NEW YORK 10016
January 19, 1999
Securicor plc
Sutton Park House
15 Carshalton Road
Sutton, Surrey, SM1 4LD
England
CONFIDENTIALITY AGREEMENT
Gentlemen:
In connection with evaluating various alternatives relating to your debt
and equity interests in Intek Global Corporation ("Intek Global") (herein the
"Evaluation"), you have requested that we or our representatives furnish you or
your representatives with certain information relating to Intek Global. All
such information (whether written or oral) furnished in connection with the
Evaluation by us or our directors, officers, employees, affiliates,
representatives (including, without limitation, investment bankers, financial
advisors, attorneys and accountants) or agents (collectively, "our
Representatives") to you or your directors, officers, employees, affiliates,
representatives (including, without limitation, investment bankers, financial
advisors, attorneys, accountants and financing sources) or agents
(collectively, "your Representatives") and all analyses, compilations,
forecasts, studies or other documents prepared by you or your Representatives
in connection with your or their review of, or your interest in, the Evaluation
which contain or reflect any such information is hereinafter referred to as the
"Information." The term Information will not, however, include information
which (i) is or becomes publicly available other than as a result of a
disclosure by you or your Representatives in breach of this letter agreement or
(ii) is or becomes available to you on a nonconfidential basis from a source
(other than us or our Representatives) which, to the best of your knowledge
after due inquiry, is not prohibited from disclosing such information to you by
a legal, contractual or fiduciary obligation to us.
Accordingly, you agree that:
1. You and your Representatives (i) will keep the information confidential
and will not (except as required by applicable law, regulation or legal
process, and only after compliance with paragraph 3 below), without our
prior written consent, disclose any Information in any manner
whatsoever, and (ii) will not use any Information other than in
connection with the Evaluation or the implementation of one or more of
the alternatives considered in connection therewith; PROVIDED, HOWEVER,
that you may reveal the Information to your Representatives (a) who are
informed by
<PAGE> 2
you of the confidential nature of the Information and (b) you will be
responsible for any breach of this letter agreement by any of your
Representatives.
2. You and your Representatives will not (except as required by applicable
law, regulation or legal process, and only after compliance with paragraph
3 below), without our prior written consent, disclose to any person the
fact that the Information exists or has been made available or the
substance of any discussions between us (the "Other Information").
3. In the event that you or any of your Representatives are requested pursuant
to, or required by, applicable law, regulation or legal process to
disclose any of the Information or Other Information, you will notify us
promptly so that we may seek a protective order or other appropriate
remedy or, in our sole discretion, waive compliance with the terms of
this letter agreement. In the event that no such protective order or other
remedy is obtained, or that Intek Global waives compliance with the terms
of this letter agreement, you will furnish only that portion of the
Information or Other Information which you are advised by counsel is
legally required and will exercise all reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded the
Information.
4. At any time upon the written request of Intek Global or any of our
Representatives, you will, at your option, either (i) promptly destroy all
copies of the written Information in your or your Representatives'
possession and confirm such destruction to us in writing, or (ii) promptly
deliver to Intek Global at your own expense all copies of the written
Information in your or your Representatives' possession. Any oral
Information will continue to be subject to the terms of this letter
agreement.
5. You acknowledge that neither we, nor our other Representatives, nor any of
their respective officers, directors, employees, agents or controlling
persons within the meaning of Section 20 of the Securities Exchange Act of
1934, as amended, makes any express or implied representation or warranty
as to the accuracy or completeness of the Information, and you agree that
no such person will have any liability relating to the Information or for
any errors therein or omissions therefrom.
6. You agree that requests for additional information, facility tours or
management meetings will be first submitted or directed to the undersigned.
7. You acknowledge that remedies at law may be inadequate to protect us
against any actual or threatened breach of this letter agreement by you or
your Representatives, and, without prejudice to any other rights and
<PAGE> 3
remedies otherwise available to us, you agree that we may seek
injunctive relief in our favor without proof of actual damages. In the
event of litigation relating to this letter agreement, if a court of
competent jurisdiction determines in a final, nonappealable order that
this letter agreement has been breached by you or by your
Representatives, then you will reimburse Intek Global for its
reasonable costs and expenses (including, without limitation, legal
fees and expenses) incurred in connection with all such litigation.
8. You agree that no failure or delay by us in exercising any right,
power or privilege hereunder will operate as a waiver thereof, nor
will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or
privilege hereunder.
9. This letter agreement will be governed by and construed in accordance
with the laws of the State of New York applicable to contracts between
residents of that State and executed in and to be performed in that
State.
10. This letter agreement contains the entire agreement between you and us
concerning the confidentiality of the Information, and no
modifications of this letter agreement or waiver of the terms and
conditions hereof will be binding upon you or us, unless approved in
writing by each of you and us.
11. This letter agreement shall terminate upon the earlier to occur of the
consummation of a transaction between Intek Global and Securicor which
has been recommended for approval by the Board of Directors to the
stockholders of Intek Global and eighteen (18) months from the date
hereof.
Please confirm your agreement with the foregoing by signing and returning
to the undersigned the duplicate copy of this letter enclosed herewith.
Very truly yours,
Intek Global Corporation
By: /s/ Robert J. Shiver
--------------------------------
Name: Robert J. Shiver
Title: Chairman of the Board and
Chief Executive Officer
<PAGE> 4
Accepted and Agreed as of the date
first written above:
/s/ Nigel Griffiths
- ----------------------------------
By: Securicor plc
Name: Nigel Griffiths
Title: Director
<PAGE> 1
EXHIBIT 99.5
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
INTEK GLOBAL CORPORATION
AT
$2.75 NET PER SHARE
BY
IGC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
SECURITY SERVICES PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JULY 14, 1999, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF INTEK GLOBAL CORPORATION (THE "COMPANY"), ACTING
ON THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE THEREOF, HAS (WITH
ABSTENTIONS BY THE TWO DIRECTORS WHO ARE EMPLOYEES OF AFFILIATES OF SECURITY
SERVICES PLC ("PARENT") AND IGC ACQUISITION CORP. ("PURCHASER")) UNANIMOUSLY (A)
DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY'S STOCKHOLDERS (EXCLUDING PARENT, PURCHASER OR ANY
AFFILIATE OF PARENT), (B) APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, (C) DECLARED THE
ADVISABILITY OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
AND (D) RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS (OTHER THAN PARENT AND ITS
AFFILIATES) ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES PURSUANT TO THE
OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES OF COMMON STOCK OF THE COMPANY (NOT INCLUDING SHARES OWNED BY PARENT,
PURCHASER OR ANY AFFILIATE OF PARENT) THAT REPRESENTS AT LEAST A MAJORITY OF THE
THEN OUTSTANDING SHARES OF COMMON STOCK (EXCLUDING SHARES OWNED BY PARENT,
PURCHASER OR ANY AFFILIATE OF PARENT AND ANY SHARES HELD IN COMPANY STOCK PLANS
THAT CANNOT BE TENDERED PURSUANT TO THE TERMS OF THOSE PLANS). THE OFFER IS ALSO
SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. THE
OFFER AND THE MERGER ARE NOT CONDITIONAL ON PURCHASER OBTAINING FINANCING. SEE
"INTRODUCTION" AND "THE TENDER OFFER -- Terms of the Offer; Expiration Date" and
"-- Certain Conditions to the Offer".
THE COMPANY HAS INFORMED PARENT THAT AS OF JUNE 9, 1999 (THE DATE OF THE
MERGER AGREEMENT PURSUANT TO WHICH THIS OFFER IS BEING MADE) THERE WERE
42,303,038 SHARES OF COMMON STOCK OF THE COMPANY ISSUED AND OUTSTANDING. AS OF
THAT DATE, CERTAIN AFFILIATES OF PARENT AND PURCHASER OWNED 25,937,042
OUTSTANDING SHARES AND HAD THE RIGHT TO ACQUIRE 13,617,607 SHARES UPON THE
CONVERSION OF CERTAIN CONVERTIBLE DEBT OF THE COMPANY. SEE "INTRODUCTION"
AND -- "SPECIAL FACTORS -- Interests of Certain Persons in the Offer and the
Merger; Share Ownership".
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of his Shares should
either (a) complete and sign the Letter of Transmittal (or a facsimile thereof)
that accompanies this Offer to Purchase in accordance with the instructions in
the Letter of Transmittal, have such stockholder's signature thereon guaranteed
if required by Instruction 1 to such Letter of Transmittal, and mail or deliver
the Letter of Transmittal (or such facsimile) together with the certificate(s)
representing such Shares and any other required documents to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") or tender such Shares pursuant
to the procedures for book-entry transfer set forth under "THE TENDER
OFFER -- Procedures for Accepting the Offer and Tendering Shares" or (b) request
such stockholder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such stockholder. A stockholder whose
Shares are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if such stockholder desires to tender such
Shares.
Any stockholder who desires to tender such stockholder's Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book-entry transfer on a timely basis may
tender such Shares by following the procedures for guaranteed delivery set forth
under "THE TENDER OFFER -- Procedures for Accepting the Offer and Tendering
Shares".
Questions and requests for assistance may be directed to MacKenzie Partners,
Inc. (the "Information Agent") or Lazard Freres & Co. LLC (the "Dealer Manager")
at their respective addresses and telephone numbers set forth on the back cover
of this Offer to Purchase. Additional copies of this Offer to Purchase, the
Letter of Transmittal, the Notice of Guaranteed Delivery and other related
materials may be obtained from the Information Agent or from brokers, dealers,
commercial banks and trust companies.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
June 16, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
INTRODUCTION..................................................... 1
SPECIAL FACTORS.................................................. 4
1. Background of the Offer..................................... 4
2. Recommendation of the Independent Committee and the Company 11
Board; Fairness of the Offer and the Merger.................
3. Opinion of Financial Advisor to the Independent Committee... 14
4. Analysis of Financial Advisor to Securicor.................. 17
5. Purpose and Structure of the Offer and the Merger........... 19
6. Reasons of Parent and Purchaser for the Offer and the 20
Merger; Position of Parent and Purchaser Regarding Fairness
of the Offer and the Merger.................................
7. Plans for the Company After the Offer and the Merger; 21
Certain Effects of the Offer and the Merger.................
8. Rights of Stockholders in the Offer and the Merger.......... 23
9. The Merger Agreement........................................ 24
10. Interests of Certain Persons in the Offer and the Merger; 29
Share Ownership.............................................
THE TENDER OFFER................................................. 34
1. Terms of the Offer; Expiration Date......................... 34
2. Procedures for Accepting the Offer and Tendering Shares..... 35
3. Withdrawal Rights........................................... 38
4. Acceptance for Payment and Payment.......................... 29
5. Price Range of the Shares; Dividends........................ 40
6. Certain Information Concerning the Company.................. 40
7. Certain Information Concerning Purchaser and Parent......... 43
8. Source and Amount of Funds.................................. 44
9. Dividends and Distributions................................. 44
10. Certain Conditions of the Offer............................. 45
11. Certain Legal Matters; Required Regulatory Approvals........ 46
12. Certain Fees and Expenses................................... 48
13. Miscellaneous............................................... 49
Schedule I DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY....... I-1
Schedule II DIRECTORS AND EXECUTIVE OFFICERS OF PARENT, PURCHASER
AND SECURICOR.................................................. II-1
FINANCIAL STATEMENTS OF THE COMPANY.............................. F-1
Annex A OPINION OF BEAR, STEARNS & CO. INC. ..................... A-1
Annex B RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE DGCL......... B-1
</TABLE>
i
<PAGE> 3
To: All Holders of Shares of Common Stock
Intek Global Corporation:
INTRODUCTION
IGC Acquisition Corp., a Delaware corporation ("Purchaser") and a
wholly-owned subsidiary of Security Services plc, a public limited company
incorporated under the laws of England and Wales ("Parent"), hereby offers to
purchase all of the outstanding shares of common stock, par value $.01 per share
(the "Shares") of Intek Global Corporation, a Delaware corporation (the
"Company"), at a price of $2.75 per Share (the "Offer Price"), net to the seller
in cash, without interest thereon and less any required transfer and withholding
taxes, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer").
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the Expiration Date (as defined
below) that number of Shares (not including Shares tendered by Parent, Purchaser
or any affiliate of Parent) that represents at least a majority of the
outstanding Shares (excluding Shares owned by Parent, Purchaser or any affiliate
of Parent and any Shares held in Company employee stock plans that cannot be
tendered pursuant to the terms of those plans) (such minimum number of Shares
being referred to herein as the "Minimum Number of Shares" and such condition
being referred to herein as the "Minimum Tender Condition"). If on any scheduled
expiration date of the Offer all conditions to the Offer (including the Minimum
Tender Condition) shall have been satisfied but the sum of (i) the number of
Shares tendered (and not withdrawn) pursuant to the Offer plus (ii) the number
of Shares held by Parent, Purchaser or any other affiliate of Parent that have
not been tendered pursuant to the Offer, including Shares issuable to any of
them upon conversion of Series A Preferred Stock and convertible debt of the
Company held by any of them, represent less than 90% of the outstanding Shares
on a fully-diluted basis (except that unexercised Options shall not be treated
as outstanding for this purpose), Purchaser has the right to extend the Offer
from time to time without the consent of the Company (for not more than an
aggregate of 10 business days) in order to permit Purchaser to solicit the
tender of additional Shares pursuant to the Offer. If the Offer is extended in
accordance with the preceding sentence, the Minimum Tender Condition shall be
deemed to remain satisfied regardless of any withdrawal of previously tendered
shares during the extension period.
The Company has informed Purchaser that as of June 9, 1999 (which is the
date of the Merger Agreement (as defined below)), there were 42,303,038 Shares
issued and outstanding, none of which were held in Company employee stock plans
that prohibited the tender thereof. As of June 9, 1999, affiliates of Parent
owned 25,937,042 outstanding Shares. Based on the foregoing, the Minimum Number
of Shares would total 8,182,999 Shares. The Company has informed Parent that, as
of June 9, 1999, there were outstanding currently exercisable options to
purchase up to 4,135,666 Shares. If any of those options are exercised, the
Minimum Number of Shares will be adjusted proportionately. The Offer is also
subject to certain other conditions. See "THE TENDER OFFER -- Certain Conditions
to the Offer". The Offer is not conditional on Purchaser obtaining financing.
Securicor plc ("Securicor") is a public limited company incorporated under
the laws of England and Wales and is the ultimate parent corporation of Parent
and Purchaser. Securicor may be deemed to beneficially own the 25,937,042 Shares
referenced above. In addition, certain affiliates of Securicor hold certain
convertible debt of the Company that, as of June 9, 1999, was convertible into
13,617,607 Shares. Securicor may be deemed to beneficially own the Shares
issuable upon conversion of such debt. See "SPECIAL FACTORS -- Interests of
Certain Persons in the Offer and the Merger; Share Ownership".
Tendering stockholders will not be obligated to pay brokerage fees or
commissions on the purchase of Shares by Purchaser pursuant to the Offer.
Purchaser will pay all charges and expenses of the Dealer Manager, the
Depositary and the Information Agent incurred in connection with the Offer. See
"THE TENDER OFFER -- Certain Fees and Expenses".
1
<PAGE> 4
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 9, 1999, among Parent, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, subject to the
satisfaction or waiver of certain conditions, Purchaser will be merged with and
into the Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent (the "Surviving Corporation"). In the Merger,
each outstanding Share (other than Shares held in the treasury of the Company,
Shares owned by Parent, Purchaser or any affiliate of Parent, and Shares owned
by stockholders who have properly exercised their appraisal rights under the
Delaware General Corporation Law ("DGCL")) will be converted at the effective
time of the Merger (the "Effective Time") into the right to receive the Offer
Price in cash, without interest and less any required transfer and withholding
taxes (the "Merger Consideration").
The consummation of the Merger is subject to the satisfaction or waiver of
a number of conditions, including, if required, the approval of the Merger by
the requisite vote or consent of the stockholders of the Company. Under DGCL,
the stockholder vote necessary to approve the Merger will be the affirmative
vote of at least a majority of the outstanding Shares, including Shares held by
Parent and its affiliates. As of the date hereof, affiliates of Purchaser own
25,937,042 outstanding Shares, representing approximately 61.3% of the Company's
total issued and outstanding Shares as of June 9, 1999. Accordingly, those
affiliates have sufficient votes necessary to approve the Merger on behalf of
the stockholders of the Company. The Merger Agreement provides that, unless the
Merger is consummated in accordance with the "short form" merger provisions of
Section 253 of the DGCL, Parent must, as soon as reasonably practicable after
the consummation of the Offer, act by written consent as a stockholder of the
Company to approve and adopt the Merger Agreement and the Merger. However, the
Merger Agreement provides that in the event that the sum of (i) the number of
Shares tendered (and not withdrawn) pursuant to the Offer plus (ii) the number
of Shares held by Parent, Purchaser or any other affiliate of Parent that have
not been tendered pursuant to the Offer, including Shares issuable to any of
them upon conversion of the Company's Series A Preferred Shares, par value $.001
per share (the "Series A Preferred Shares") and convertible debt of the Company
held by any of them, represent 90% or more of the outstanding Shares on a
fully-diluted basis (except that unexercised options shall not be treated as
outstanding for this purpose), the parties thereto are required to effect the
Merger as soon as practicable (and in any event within seven days) after the
acceptance for payment and purchase of Shares by the Purchaser pursuant to the
Offer in accordance with the "short form" merger provisions of Section 253 of
the DGCL. Effecting the Merger under Section 253 of the DGCL will not require
any prior notice to, or any action by, any other stockholder of the Company. See
"SPECIAL FACTORS -- Purpose and Structure of the Offer and the Merger" and
"-- Interests of Certain Persons in the Offer and the Merger; Share Ownership".
The Board of Directors of the Company (the "Company Board"), acting on the
unanimous recommendation of a special committee thereof (the "Independent
Committee"), has (with abstentions by the two directors who are employees of
affiliates of Parent and Purchaser) unanimously (i) determined that each of the
Offer and the Merger is fair to, and in the best interests of, the Company's
stockholders (excluding Parent, Purchaser or any affiliate of Parent), (ii)
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, (iii) declared the advisability of the
Merger Agreement and the transactions contemplated thereby, and (iv) recommended
that the Company's stockholders (other than Parent and its affiliates) accept
the offer and tender all of their Shares pursuant to the Offer.
Bear, Stearns & Co. Inc. ("Bear Stearns"), the Independent Committee's
financial advisor, has delivered to the Independent Committee its written
opinion, dated June 7, 1999, that the Offer Price is fair to the Company's
public stockholders from a financial point of view. A copy of the opinion of
Bear Stearns is attached hereto as Annex A.
The purpose of the Offer and the Merger is to enable Purchaser and Parent
to acquire the entire equity interest in the Company. The Offer, as the first
step in the acquisition of the Company, is intended to facilitate the
acquisition of the remaining Shares of the Company not held by affiliates of
Parent.
2
<PAGE> 5
This Offer to Purchase and the Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to stockholders herewith.
3
<PAGE> 6
SPECIAL FACTORS
1. BACKGROUND OF THE OFFER.
Securicor is a multi-national UK based company that provides a broad range
of security, distribution, communications and business services. Securicor first
became involved with communication systems and technology when it developed its
own private mobile radio system to communicate with its security guards and,
later, its security and parcel vehicle fleets. By the 1970's, Securicor had
developed one of the most extensive private mobile radio communications networks
in the UK. In 1984, Securicor formed a joint venture with British
Telecommunications plc to own and operate "Cellnet", one of the first cellular
telephone networks in the UK.
As part of a plan to capitalize on its extensive experience in business
communications, particularly mobile communications, in the mid 1980's Securicor
began acquiring various businesses involved in mobile radio equipment
distribution and support services and began working to develop spectrally
efficient mobile radio products and solutions as a response to the increasing
congestion of the mobile radio spectrum. In 1995, Securicor formed Securicor
Radiocoms Limited ("Radiocoms") to combine and develop these various
communications businesses. Radiocoms was then a wholly-owned subsidiary of
Securicor Communications Limited ("Securicor Communications").
In April 1995, the Company and one of its affiliates and certain other
parties entered into agreements with an affiliate of Securicor pursuant to which
approximately $7.9 million of mobile radios and base station equipment was sold
to the Company. The agreement provided that, in the event the Company entered
into a certain definitive purchase agreement with the third party, the Company
could purchase up to $4 million of radio equipment from the Securicor affiliate
in exchange for common stock of the Company. On June 29, 1995, the Company
entered into the contemplated definitive agreement and one of the Securicor
affiliates acquired 937,042 Shares in exchange for radio equipment.
In late 1995 and early 1996, the Company, Simmonds Capital Limited and
Securicor had various conversations concerning strategies for the deployment of
narrow band radio equipment in the U.S., the complementary nature of the
businesses of the Company, Midland International Corporation (an indirect
subsidiary of Simmonds Capital) ("Midland International") and Radiocoms and the
possible benefits which might be realized from a combination of the three
businesses. Such discussions ultimately led to the acquisition of Radiocoms by
the Company from affiliates of Securicor on December 3, 1996 in exchange for an
aggregate of 25 million Shares as well as the acquisition of Midland
International's U.S. land mobile radio business (the "U.S. LMR Business") by the
Company from Midland International on September 20, 1996 for additional Shares.
Following the completion of these transactions, affiliates of Securicor owned an
aggregate of 25,937,042 Shares, representing approximately 61.3% of the then
outstanding Shares, and 20,000 Radiocoms Redeemable Preference Shares,
representing all of the then outstanding Radiocoms preference shares.
Since the completion of the U.S. LMR Business/Radiocoms acquisitions,
Securicor has been the principal source of financing for the Company, providing
more than $70 million of debt and equity financing to the Company (including
accrued interest and dividends). Such funds were used to fund the Company's
operating losses and capital expenditures, including relating to the acquisition
of mobile radio licenses.
In connection with the U.S. LMR Business acquisition, on September 20,
1996, Securicor Communications agreed to provide the U.S. LMR Business with a
$15 million credit facility (the "Interim Credit Facility") to fund its
operations until the completion of the acquisition of Radiocoms by the Company.
Upon the completion of the Radiocoms acquisition on December 3, 1996, the
Company assumed the U.S. LMR Business' obligations under the Interim Credit
Facility and such facility was amended (the "Amended Facility") to make the
proceeds of loans under the Amended Facility available for all of the Company's
operations and to release the security previously provided by the Company for
the Interim Credit Facility. Securicor Communications also provided an
additional $12.5 million of loans to the Company during 1997 (the "Other
Loans"). On December 29, 1997, the Company and Securicor Communications amended
the Amended Facility to, among other things, incorporate the Other Loans,
increase the size of the credit facility to $29.5 million (of which
approximately $25.4 million was outstanding at that time, including the Other
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Loans) and increase the interest rate on such facility from 11% to 11 1/2% per
annum. On December 29, 1997, Securicor Communications also agreed to purchase
12,408 shares of the Company's Series A Convertible Preferred Stock (the
"Preferred Stock") for an aggregate of $12.4 million. Such purchase was subject
to approval by the Company's stockholders and the shares were issued effective
March 31, 1998 following such approval. The proceeds of the issuance of the
Preferred Stock were used to repay a portion of the loans outstanding under the
Amended Facility. For a description of the terms of these loans and the
Preferred Stock, see "-- Interests of Certain Persons in the Offer and the
Merger; Share Ownership -- Related Party Transactions".
In August 1998, the Company sold certain assets related to a distribution
business not related to its core business to an affiliate of Securicor for $8.5
million. For a description of such sale, see "-- Interests of Certain Persons in
the Offer and the Merger; Share Ownership -- Related Party Transactions".
In November 1998, the Company was notified by the U.S. Federal
Communications Commission (the "FCC") that it had been awarded 181 licenses in
the FCC's Phase II auction of new 220 MHz spectrum licenses. A portion of the
licenses were assigned to a third party pursuant to a prior arrangement with the
Company. The Company's share of the cost of such licenses was approximately $6.1
million, the payment of which was originally due in December 1998 but was
subsequently postponed until February 1999. The Company needed significant
additional financing to pay the license fees for the new licenses, fund the
build out of the systems for its new and existing licenses and fund its
operating losses. The Company believed, based in part on preliminary discussions
with various unaffiliated third party financing sources, that the Company would
not be able to raise the required funds from unaffiliated parties in a timely
manner, if at all. The Company believed its ability to obtain financing from
unaffiliated parties was limited by, among other things, the developmental
nature of the Company's business plan, the lack of assets to collateralize
substantial borrowings (the Company's licenses cannot be encumbered), the
Company's historic, financial performance and the recent financial difficulties
of a major wireless technology and service provider. Moreover, the Company
needed to obtain a commitment for funding relatively quickly, prior to the
release of its financial statements for the fiscal year ended September 30,
1998, to ensure that the audit report was not subject to a going concern
qualification. As a result, in late 1998, the Company approached Securicor
regarding the possibility of Securicor providing additional financing.
In November 1998, while discussions regarding the funding alternatives were
ongoing, Securicor asked Lazard Freres & Co. LLC and Lazard Brothers & Co.,
Limited (collectively, "Lazard"), its principal corporate financial advisors, to
review the possibility of Securicor providing additional financing and to begin
a strategic review of Securicor's investments in the Company.
On November 16, 1998, representatives of Lazard and Securicor met with
representatives of the Company to discuss recent developments involving the
Company as well as the Company's financing needs.
Following further discussions between the Company and Securicor, on
December 22, 1998, Securicor Communications agreed to provide the Company with
an additional $25.0 million convertible loan facility. Loans made pursuant to
this facility are convertible into shares of common stock of the Company on the
terms provided therein. For a description of the terms of the convertible loan
facility, see "-- Interests of Certain Persons in the Offer and the Merger;
Share Ownership -- Related Party Transactions".
In late December 1998, the Company provided each of its directors with a
copy of the Company's preliminary updated three-year business plan reflecting
the new licenses and other developments in the business. A copy of the plan was
provided to Lazard by Securicor and on January 13, 1999, Securicor (accompanied
by Lazard) met with the Company to discuss the business plan.
On January 18, 1999, Nigel Griffiths, the Group Legal Director of
Securicor, telephoned Robert Shiver, the Chairman of the Board, Chief Executive
Officer and President of the Company, to indicate that Securicor was considering
various alternatives relating to its equity and debt investments in the Company
and had retained a financial advisor to assist it in connection with such
consideration. Mr. Griffiths asked the Company to provide Securicor with certain
due diligence information and to appoint a committee of independent directors to
be prepared to review and evaluate any plan or proposal that Securicor might
make. On
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<PAGE> 8
January 19, 1999, Securicor amended its Schedule 13D to report the information
conveyed to Mr. Shiver and thereafter Securicor and the Company entered into a
confidentiality agreement with respect to the due diligence materials to be
provided by the Company.
On January, 19, 1999, the Company Board held a telephonic meeting to
discuss Mr. Shiver's conversation with Mr. Griffiths and the Schedule 13D
amendment filed by Securicor earlier that day. The Company decided to create the
Independent Committee to evaluate the Company's strategic alternatives, review
and negotiate any proposal that might be received by the Company from Securicor
or any third party and make recommendations to the Company Board. The Company
Board appointed directors Howard Frank, Eli Noam, John Wareham and Mr. Shiver to
the Independent Committee and designated Howard Frank as the Chairman of the
Independent Committee. Such appointments were conditioned on confirmation that
each of these people was independent from Securicor.
Following discussions with each appointee as to any relationships or
contacts they may have had with Securicor, at the January 27, 1999 meeting of
the Independent Committee, it was determined that Messrs. Shiver and Wareham
would not serve on the Independent Committee to avoid the possible appearance of
a conflict of interest due to their relationships with Securicor, including the
fact that Mr. Shiver was then a member of the Board of Directors of Securicor
Communications, and Mr. Wareham had in the past received a speaking fee for a
presentation to Securicor unrelated to the Company's business. The Independent
Committee authorized the appointment of Mr. Shiver as a consultant to the
Independent Committee because of his expertise with respect to the Company and
because his contacts with Securicor were perceived to be immaterial. In
addition, at such meeting, written presentations prepared by Bear Stearns and BT
Wolfensohn regarding their qualifications to act as financial advisor to the
Independent Committee in connection with the Independent Committee's evaluation
of strategic alternatives were discussed, and Bear Stearns was interviewed by
the Independent Committee regarding its qualifications. After considering their
respective qualifications, the Independent Committee retained Bear Stearns to
evaluate the Company's strategic alternatives, including any proposal from
Securicor, primarily due to Bear Stearns' broad-based experience in evaluating
companies and transactions in the wireless industry. The Independent Committee
selected Manatt, Phelps & Phillips, LLP ("MPP"), counsel to the Company, to act
as the Independent Committee's special counsel, primarily due to MPP's prior
representation of and familiarity with the Company and the Independent
Committee's determination that MPP's representation of the Company would not
prevent MPP from effectively representing the Independent Committee.
On January 27, 1999, the Independent Committee began negotiations with Bear
Stearns regarding Bear Stearns' engagement by the Independent Committee. On
February 3, 1999, an engagement letter with Bear Stearns was executed. For a
description of the Bear Stearns engagement letter see "SPECIAL FACTORS --
Opinion of Financial Advisor to the Independent Committee."
On February 4, 1999, Lazard made a presentation to the Securicor Board of
Directors (the "Securicor Board") regarding its preliminary assessment of the
Company's business and the value of the Shares not owned by Securicor's
affiliates, using various valuation methods. Lazard indicated that the Company,
with the assistance of Bear Stearns, was in the process of preparing a five-year
business plan which might impact the valuation. Following such presentation and
discussions among the directors, the Securicor Board appointed a subcommittee of
directors to consider alternatives with respect to Securicor's investments in
the Company (the "Securicor Board Committee").
On February 14, 1999, the Company provided each of the directors with a
copy of the five-year business plan reflecting the most recent financial
performance of the Company, the roll-out of service using the 220MHz radio
spectrum awarded to the Company by the FCC in the Phase II license auction in
November 1998 and the introduction of a VHF product using the Company's existing
technology. This plan contemplated substantial additional financing to maximize
the long term value of the business. At the direction of the Independent
Committee, Bear Stearns provided a copy of the plan to Lazard.
On February 23, 1999, Lazard met with the Securicor Board Committee to
discuss the revised business plan. Lazard explained to the committee that, in
its view, the plan was very speculative because, among other things, it assumed
that the Company would have access to substantial additional financing beyond
the funds
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<PAGE> 9
already committed by Securicor, without consideration as to the likelihood of
the Company being able to obtain such financing from unaffiliated third parties
or the terms of any such financing. It also assumed that the Company would
introduce a VHF product in late 1999 which would produce substantial revenues
and profits relatively quickly notwithstanding that the product was not yet
fully developed and it was not clear that the market would develop to the
extent, and within the time frames, contemplated by the plan.
On February 25, 1999, Bear Stearns circulated to the Independent Committee
a draft of Bear Stearns' preliminary analyses. At a meeting of the Independent
Committee held on that day, Bear Stearns discussed with the committee (i) Bear
Stearns' activities to date relating to its engagement by the Independent
Committee, including its preliminary discussions with Lazard and (ii) the
analyses furnished to the committee. The Independent Committee questioned Bear
Stearns about the various methods of valuation to be used to evaluate the
Company. A copy of the analyses was also provided to the Company Board and
presented by Bear Stearns at a Company Board meeting at which the two directors
who are employees of affiliates of Parent were not present.
On March 4, 1999, Mr. Griffiths reported to the Securicor Board on the
discussions between Lazard and the Securicor Board Committee on February 23.
Following discussion of Mr. Griffiths' report, the Securicor Board authorized
Lazard to explore the receptivity of Bear Stearns and the Independent Committee
to a proposal by Securicor, if it were to be made, to acquire the Shares not
owned by Securicor's affiliates at a price of up to $2.25 per share. The
Securicor Board also authorized Lazard, in the event the $2.25 per share price
was not favorably received, to explore the receptivity to a possible proposal at
a price of up to $2.75 per share.
On March 10, 1999, Lazard and Bear Stearns had discussions regarding the
valuation of the Company and its securities and the possibility that Securicor
might make a proposal to acquire the Shares not owned by Securicor's affiliates.
Lazard indicated that based on its own analysis and discussions with Securicor,
it believed that the appropriate price for such a proposal would be $2.10 per
share. Lazard noted that a proposal to acquire the Shares at such a price, if
made, would represent a premium comparable to premiums paid in other
transactions of this size and would represent a 61% premium over the average
closing market price of the Shares during the 20-day period prior to January 15,
1999 and a 45% premium over the average during the 60-day period to January 15,
1999. Lazard also indicated that Securicor did not intend to make a proposal
unless it believed that it was likely to be favorably received by the
Independent Committee. Bear Stearns stated that based on its preliminary
analyses, it was not likely a proposal at $2.10 per share would be favorably
received by the Independent Committee.
During the March 10 discussions between Lazard and Bear Stearns, Lazard
suggested that it might be advisable for the Independent Committee to consider
using counsel other than MPP in order to foreclose any possible challenge to the
independence of the Independent Committee's legal advisor arising from MPP's
representation of the Company.
At a meeting of the Independent Committee on March 12, 1999, Bear Stearns
reported on its discussions with Lazard concerning valuations and the informal
indication of interest by Securicor in pursuing a possible proposal by it to
acquire the Company's shares not owned by Securicor's affiliates for $2.10 per
share. Bear Stearns also reported concerning the issue raised by Lazard
regarding the use of MPP as counsel to the Independent Committee. MPP reported
that Lazard also sought to confirm the independence of Bear Stearns as a
financial advisor to the Independent Committee in light of Bear Stearns' recent
assistance to the Company in connection with the preparation of the Company's
five-year business plan. The Independent Committee concluded that the assistance
provided by Bear Stearns to the Company's management in connection with the
preparation of its business plan was undertaken by Bear Stearns as financial
advisor to the Independent Committee and that the Independent Committee did not
believe that this assistance by Bear Stearns raised any issue as to Bear
Stearns' independence. At the Independent Committee's request, MPP prepared a
memorandum discussing the duties of the Independent Committee under Delaware law
and the requirement that an Independent Committee counsel be independent.
At a meeting of the Independent Committee on March 18, 1999, Bear Stearns
summarized its preliminary analyses and the methodologies used in making such
analyses. The members of the Independent Committee discussed Bear Stearns'
analyses and considered, among other things, whether such analyses
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<PAGE> 10
properly assessed the risks associated with each part of the Company's business.
Bear Stearns advised the Independent Committee that based on its preliminary
analyses, it would not be able to give a fairness opinion at the valuation
initially indicated by Lazard if a proposal were made at such valuation. The
Independent Committee discussed the Company's business plan and the Bear Stearns
analyses. The Independent Committee concluded that it agreed with the valuation
methodologies used by Bear Stearns and the reasonableness of the operating
assumptions underlying the business plan and that the valuation indicated by
Lazard would therefore be inadequate. At such meeting, the Independent Committee
discussed with MPP its memorandum as it related to the duties of the Independent
Committee under Delaware law. The Independent Committee also discussed MPP's
independence and asked MPP to prepare a memorandum for the committee's
consideration describing MPP's relationship with the Company and Securicor.
On March 19, 1999, Bear Stearns reported the Independent Committee's
negative response to Securicor's initial informal indication of interest to
Lazard. Following further discussions between Lazard and Securicor, on April 6,
1999 Lazard indicated to Bear Stearns that Securicor might be interested in
making a proposal at $2.50 per share.
At an April 7, 1999 Independent Committee meeting, Bear Stearns advised the
Independent Committee of the new informal indication of interest by Securicor at
the higher valuation and described certain factors that Lazard said it
considered in its determination of the Company's value. Bear Stearns advised the
Independent Committee that it believed that the new indication of interest was
still inadequate. Mr. Shiver briefly joined the meeting by telephone in his role
as a consultant to the Independent Committee. Mr. Shiver expressed his general
support for an acquisition of the publicly owned shares by Securicor, but
indicated his view that Securicor's indication of interest was still too low.
The Independent Committee authorized Bear Stearns to take an initial negotiating
position of $3.30 per share to counter Securicor's most recent informal
indication of interest. The Independent Committee authorized the continued
retention of MPP and determined that there was no need to hire separate counsel,
primarily based on the Independent Committee's belief that MPP did not have a
conflict of interest that made it necessary to hire separate counsel and the
Independent Committee's belief that the expense and disruption associated with
the hiring of separate counsel outweighed the benefits, if any.
On April 7, 1999, Bear Stearns told Lazard that the Independent Committee
believed that any proposal to be made by Securicor regarding a purchase of the
Shares not owned by its affiliates should be at $3.30 per share. Following
further discussions between Lazard and Securicor, on April 20, 1999, Lazard
indicated to Bear Stearns that Securicor might be interested in making a
proposal at $2.75 per share. Later that day Bear Stearns communicated to each
Independent Committee member individually Securicor's new informal indication of
interest.
During the week of April 19, 1999 Mr. Shiver received a report prepared
over the prior several months by Richard O'Hare, the member of Company
management responsible for the VHF market. The report contained updated
assumptions regarding the Company's opportunities in the VHF market.
On April 23, 1999, the Company's Board held a meeting. At such meeting, the
Independent Committee updated the Company's Board regarding the discussions held
by Bear Stearns with Lazard relating to Securicor's informal indications of
interest. The two directors who are employees of affiliates of Parent were not
present during this portion of the meeting. The Independent Committee reported
that it would not be in a position to make a recommendation to the Company's
Board to accept a proposal from Securicor, if made, at the level reflected in
the latest informal indication of interest, due to its inadequacy.
On April 29, 1999, at an Independent Committee meeting, Bear Stearns
informed the Independent Committee that the management of the Company had
advised Bear Stearns that certain assumptions in the Company's five-year
business plan needed updating, and had delivered several projected "scenarios"
to reflect the updated assumptions. Mr. Shiver joined the meeting by telephone
and expressed management's view that certain assumptions in such plan needed
updating in light primarily of the then current status of delays in the
anticipated development of the VHF product market as discussed in Mr. O'Hare's
report and reduced margins on the Company's land mobile radio equipment sales
resulting from increased competition. Mr. Shiver expressed management's belief
that its previous forecasts had been aggressive and needed to be revised.
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Mr. Shiver then left the call. The Independent Committee revisited with Bear
Stearns whether, if Securicor made an offer at $2.75 per share, Bear Stearns
would issue a fairness opinion after adjusting its analyses to reflect the
updated information. Bear Stearns indicated that to complete its analyses, it
could not rely on the scenarios presented by the management of the Company, but
would instead need the Company to update its forecasts based on the updated
operating assumptions described by Mr. Shiver.
In early May 1999, the Company prepared the updated forecasts discussed by
Bear Stearns at the April 29, 1999 meeting and provided copies to the Company
Board, Bear Stearns and Securicor.
On May 7, 1999, the Company Board held a meeting at which the management of
the Company made a presentation to the entire Company Board regarding the
Company's recent operating results and management's updated five-year business
plan.
At a May 10, 1999 Independent Committee meeting, the Independent Committee
decided that although ultimately it might recommend a proposal at a price of
$2.75 per share, it would instruct Bear Stearns to communicate to Lazard that
although the Independent Committee was still dissatisfied with the informal
indication of interest at $2.75 per share, the Independent Committee was
prepared to proceed to discuss the other terms that might form a part of an
offer by Securicor, subject to the understanding that any merger agreement
should contain only very limited representations and warranties and minimal
closing conditions.
On May 20, 1999, Mr. Griffiths telephoned Mr. Frank to indicate that given
Securicor's desire to foreclose any possible challenge to the independence of
counsel to the Independent Committee, Securicor would not consider making a
proposal unless the Independent Committee retained independent counsel other
than MPP.
On May 20, Bear Stearns and Mr. Frank discussed the need to retain new
independent counsel. Bear Stearns recommended that the Independent Committee
consider retaining Gibson, Dunn & Crutcher LLP ("GDC"). The Independent
Committee authorized Bear Stearns to make initial contact with GDC. On May 20,
Bear Stearns did so, and delivered various public documents regarding the
Company to GDC. On May 21, 1999, GDC delivered to the Independent Committee
information regarding GDC's qualifications and a form of engagement letter.
At a meeting of the Independent Committee on May 24, 1999, Mr. Frank
reported his May 20 telephone call with Mr. Griffiths. The Independent Committee
authorized the retention of new counsel. Mr. Frank then interviewed GDC
regarding its possible retention and discussed GDC's independence and
qualifications. At the conclusion of the interview, Mr. Frank retained GDC as
independent counsel to the Independent Committee. MPP remained in its role as
counsel to the Company.
From May 27, 1999 through May 31, 1999, (i) GDC had extensive discussions
with Bear Stearns, Mr. Frank and Mr. Noam regarding the possible structure and
terms that the Independent Committee would require in any proposal from
Securicor and (ii) GDC had several discussions with Weil, Gotshal & Manges LLP
("WGM"), counsel to Securicor, concerning the terms of the merger agreement that
would accompany any proposal from Securicor, and reiterated the Independent
Committee's expectation that any proposed merger agreement should contain only
very limited representations and warranties and minimal closing conditions. WGM
indicated that any such merger agreement would include a condition that the
tender offer contemplated therein would be conditioned on, among other things,
at least a majority of the Shares not owned by Securicor affiliates being
validly tendered. WGM also indicated that the merger agreement would require
Securicor, as soon as reasonably possible after completion of the tender offer,
to approve a merger of a subsidiary of Securicor with and into the Company
pursuant to which all the public stockholders of the Company who did not tender
Shares in the offer would receive the same consideration for their Shares in the
merger as that paid in the tender offer.
On June 1, 1999, the Independent Committee, Bear Stearns and GDC received a
draft merger agreement from WGM.
Between June 1 and 3, 1999, numerous discussions regarding the draft of the
merger agreement were held among the Independent Committee members, Bear Stearns
and GDC, between GDC and WGM and between Bear Stearns and Lazard. Bear Stearns
and GDC negotiated several improvements to the draft merger agreement and offer
terms during this period of time, including the elimination of a proposed
provision
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that would have prevented the Company from soliciting or responding to proposals
from anyone other than Securicor to purchase the Shares, the elimination or
modification of several conditions to the offer, the addition of a provision
whereby Parent would reimburse certain expenses of the Company if the merger
agreement is terminated as a result of the Minimum Tender Condition not having
been satisfied, and the agreement of Securicor to extend the expiration date of
its $25 million convertible debt facility with the Company for an additional
year if the merger agreement is terminated.
On June 3, 1999, GDC distributed for review by the members of the
Independent Committee, Bear Stearns, the Company and MPP a draft of the merger
agreement marked to indicate the Independent Committee's proposed changes,
including the improvements noted above. In addition, on June 3, 1999, the
Securicor Board authorized Securicor Communications, as and when determined
appropriate by Mr. Griffiths, to propose a transaction pursuant to which
Securicor would acquire all of the Shares not then owned by its affiliates for
up to $2.75 per share in cash.
On June 4, 1999, (i) numerous discussions were held among the members of
the Independent Committee, Bear Stearns, GDC and MPP, between GDC and WGM and
between Bear Stearns and Lazard regarding the proposed changes to the merger
agreement; (ii) GDC prepared a mark-up of the merger agreement showing the
proposed changes and distributed the draft to WGM; (iii) GDC distributed to the
Independent Committee a summary of the Merger Agreement; and (iv) GDC
distributed to the Independent Committee a memorandum prepared by GDC
supplementing the memorandum previously provided by MPP, regarding the duties of
the Independent Committee under Delaware law.
On June 4, after the close of trading on The Nasdaq Small Cap Market
("Nasdaq"), Securicor Communications delivered a proposal to the Independent
Committee to enter into a merger transaction pursuant to which the Company would
become an indirect wholly-owned subsidiary of Securicor. The proposed
transaction would result in the receipt by all stockholders of the Company other
than Securicor's affiliates of $2.75 per share in cash. The proposal was subject
to: (a) the negotiation and execution of a definitive merger agreement, (b) the
approval of the merger agreement by the Boards of Directors of Securicor
Communications and the Company (following the recommendation of the Independent
Committee), and the satisfaction of all conditions to the closing set forth in
the merger agreement, and (c) the receipt of all necessary governmental and
regulatory approvals. The proposal indicated that although Securicor
Communications was willing to negotiate the terms of the merger agreement, it
did not intend to increase the $2.75 price per share. On June 7, 1999, Securicor
amended its Schedule 13D to report the proposal and the Company issued a press
release announcing its receipt of the proposal.
Between June 4 and 6, 1999, GDC and WGM continued to negotiate the terms of
the merger agreement and various discussions were held among the members of the
Independent Committee, Bear Stearns, GDC and MPP regarding the proposal and
WGM's responses to the Independent Committee's proposed changes to the Merger
Agreement.
On June 7, 1999, GDC received a revised draft of the merger agreement from
WGM and GDC prepared a revised summary of the merger agreement for distribution
to the Independent Committee.
On June 7, the Independent Committee held an eight hour meeting with
representatives of Bear Stearns and GDC present to discuss the advisability and
fairness of the Securicor proposal and to determine whether to recommend it to
the Company Board. At such meeting GDC presented a review of the events which
had occurred since the creation of the Independent Committee. The Independent
Committee then conducted a review of the terms of the proposed merger agreement.
GDC presented its memorandum on the duties of the Independent Committee under
Delaware law and reviewed these duties with the members of the Independent
Committee. Bear Stearns presented its analysis of the proposed transaction,
informing the Independent Committee that it was able to render a fairness
opinion for the proposed transaction. The Independent Committee, Bear Stearns
and GDC discussed a number of factors relevant to the Independent Committee's
decision regarding its recommendation to the Company's Board.
After considerable discussion, the Independent Committee unanimously
resolved that, (i) it had determined that the proposed Securicor transaction is
fair to and in the best interests of the stockholders of the
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Company (other than Securicor and its affiliates), and that the price per Share
to be paid in the transaction was fair to the stockholders (other than Securicor
and its affiliates); and (ii) it recommend to the Company Board that the Company
Board approve the Merger Agreement substantially in the form presented to the
Independent Committee, with such changes therein as Mr. Frank might thereafter
approve, and declared its advisability, subject to the Merger Agreement being
revised to (a) include an obligation of Securicor to reimburse the Company for
expenses to an extent satisfactory to Mr. Frank in the event of a termination of
the Merger Agreement due to the failure of the Minimum Condition to be
satisfied, (b) include appropriate indemnification for the present and former
officers, directors and counsel of the Company with respect to acts or omissions
occurring prior to the Effective Time; (c) include an acceptable agreement
regarding the Company's obligations with respect to existing Company stock
options; and (d) change the Securicor affiliate proposed to act as "Parent"
under the Merger Agreement to an entity with the financial resources required to
consummate the transactions. Securicor subsequently agreed to the requested
revisions and agreed that Security Services plc would act as "Parent" under the
Merger Agreement.
On June 8, 1999, the Company Board held a meeting, with representatives of
Bear Stearns, MPP and GDC present, to discuss the advisability and fairness of
the proposed Securicor transaction and to determine whether to recommend it to
the stockholders of the Company. At such meeting MPP presented a review of the
events which had occurred since the creation of the Independent Committee and
reviewed the duties of the directors under Delaware law. Mr. Frank proceeded to
explain to the Company Board the process the Independent Committee went through
and the factors the Independent Committee considered in reaching its
recommendation. The Company Board then conducted a review of the terms of the
proposed Merger Agreement. Bear Stearns presented its analysis of the proposed
transaction, informing the Company Board that had rendered a fairness opinion
for the proposed transaction.
After considerable discussion, the Company Board, acting on the unanimous
recommendation of the Independent Committee, (with abstentions by the two
directors who are employees of affiliates of Parent and Purchaser) unanimously
(i) determined that each of the Offer and the Merger is fair to, and in the best
interests of, the Company's stockholders (excluding Parent, Purchaser or any
affiliate of Parent), (ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, (iii) declared the
advisability of the Merger Agreement and the transactions contemplated thereby
and (iv) recommended that the Company's stockholders (other than Parent and its
affiliates) accept the Offer and tender all of their Shares pursuant to the
Offer.
Negotiations on the final terms of the Merger Agreement continued on June 8
and June 9, 1999 among GDC, MPP and WGM. On June 9, 1999, after the close of
trading on Nasdaq, the final terms of the transaction were agreed and the Merger
Agreement was signed. The transaction was announced on the morning of June 10,
1999.
Following the Company Board meeting, on June 8, 1999 Mr. Shiver received a
letter via facsimile from The World Team Corporation (the "WorldTeam")
expressing an interest in "beginning due diligence towards possibly making a
more competitive offer" to acquire the Company. In the letter, WorldTeam
describes itself as "a start-up wireless communication venture that is in the
advanced arrangements of securing US$250 million via a single equity investor"
and whose three founders "have more than 30 years of senior management
experience from AT&T, Nextel and McCaw Cellular Communications." Although the
letter seeks a response from the Company only in the event that the Company
decided to turn down Securicor's proposal, the Independent Committee is
endeavoring to contact and schedule a meeting with WorldTeam.
2. RECOMMENDATION OF THE INDEPENDENT COMMITTEE AND THE COMPANY BOARD; FAIRNESS
OF THE OFFER AND THE MERGER.
In resolving to recommend the approval of the Merger Agreement and the
transactions contemplated thereby to the Board, the Independent Committee
considered a number of factors, including:
a) The Company's results of operations and financial condition;
b) The Company's business plan;
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c) The Company's competitive position;
d) The Company's significant capital requirements;
e) The Company's reliance on Securicor for financing and difficulties in
obtaining alternative financing;
f) The disadvantages to the Company of being a small public company, in
that its capital structure as a small public company makes it difficult
to support its capital requirements;
g) The concerns of the Company's customers regarding the instability and
uncertainty inherent in the Company's current financial situation;
h) The consideration to be received by unaffiliated stockholders in the
proposed transaction;
i) The Independent Committee's belief that $2.75 was the highest price
that Securicor was willing to offer;
j) The Independent Committee's belief that no third party would be
willing to offer more than Securicor for the Shares, based on the fact
that Securicor fully understands the Company's business plan, has made
a commitment to the Company's technology and its business, is fully
aware of its future prospects and is in a better position to
appreciate its long-term potential than any other potential buyer;
k) The fact that the proposed price of $2.75 per Share represents a
premium of (i) 26% over the closing market price of the Shares on June
4, 1999 and (ii) 113% over the average closing market price over the
30-day period prior to the filing of the amendment to Securicor's
Schedule 13D on January 19, 1999, which disclosed that Securicor was
considering various alternatives regarding its equity and debt
investments in the Company;
l) The arm's-length nature of the negotiations between the Independent
Committee and its representatives with Parent and its representatives,
evidenced among other things by (i) the Independent Committee having
been given the authority by the Company Board to "just say no" to any
transaction proposed by Securicor, (ii) the four-month process of
informal discussions regarding valuations of the Company and its
securities and terms of a possible offer, (iii) the Independent
Committee's rejection of several of Securicor's informal indications
of interest, (iv) the price increases achieved by the Independent
Committee and its representatives, (v) the fact that the initial draft
of the Merger Agreement received from WGM reflected a majority of the
terms that the Independent Committee and its representatives had
indicated would need to be included in any draft merger agreement and
(vi) the significant improvements to the initial draft of the Merger
Agreement that were negotiated by the Independent Committee and its
representatives;
m) The fact that stockholders who tender their shares and stockholders who
are cashed out in the merger will receive the same price per share;
n) The absence of any proposals from unaffiliated third parties to buy the
Company during the period since the filing of the amendment to Parent's
Schedule 13D on January 19, 1999, which disclosed that it was
considering various strategic alternatives regarding its equity and
debt investments in the Company;
o) The fact that the Independent Committee negotiated an improvement to
the Merger Agreement to eliminate a proposed no solicitation clause and
therefore ensure that the Merger Agreement does not prohibit the
Company from soliciting alternative proposals from third parties or
from negotiating any such proposals that may be made following the
announcement of the transaction;
p) The inability to identify potential buyers other than Securicor in a
context in which Securicor has expressed that it has no current
intention to sell its interest in the Company, and the unlikelihood of
being able to find any buyers other than Securicor in any event;
q) Parent's representation in the Merger Agreement that it has no present
intention to sell the Company following consummation of the
transaction;
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r) The business condition and prospects of the Company if the proposed
Securicor transaction does not proceed, which would involve a
continuous significant need for capital, an unlikelihood of being able
to raise capital other than from Securicor, no assurance that Securicor
would provide capital to implement the Company's current business plan,
and the likelihood of a significant impact on the Company's value if
the current business plan is not implemented;
s) Detailed analyses presented by Bear Stearns, including analysis of
current and historical market prices and trading information relating
to the Company's common stock, valuation based on discounted cash flow
analysis, and consideration, to the extent Bear Stearns deemed
relevant, of comparable transactions and valuation parameters of
comparable publicly traded companies;
t) The range of discount rates used by Bear Stearns in its discounted cash
flow analysis, and the Independent Committee's view that any financial
buyer would be likely to use significantly higher discount factors, and
that any strategic buyer other than Securicor would likely be less
confident than Securicor in the Company's future prospects and would
therefore be likely to use significantly higher discount factors;
u) The opinion of Bear Stearns that the proposed consideration of $2.75 is
fair, from a financial point of view, to the Company's public
stockholders;
v) The fact that it is a condition to Parent's obligations under the
Merger Agreement that a majority of the unaffiliated stockholders
tender their shares in the tender offer, and that this condition may
not be waived without the Company's and the Independent Committee's
consent; and the fact that if both parties so agree, the transaction
could proceed even if this condition is not satisfied;
w) Other terms and conditions of the Merger Agreement, including but not
limited to the following:
(i) The limited number and nature of the other conditions to
consummation of the proposed Securicor transaction including the
absence of a material adverse change condition;
(ii) Parent's representation that it has the financial resources to
consummate the transaction;
(iii) Each party's obligation to reimburse the other for expenses in the
event of termination of the Merger Agreement due to a breach by
such party and the obligation of Parent to reimburse the Company
for up to $1 million of its expenses in the transaction if the
Merger Agreement is terminated as a result of the Minimum Tender
Condition not having been satisfied;
(iv) The treatment of employee and director stock options;
(v) The fact that the representations and warranties made by the
Company do not survive the Closing; and
(vi) The requirement that the Independent Committee's consent be
obtained for all actions of the Company related to the Merger
Agreement;
x) Parent's agreement, negotiated by the Independent Committee, that in
the event of a termination of the Merger Agreement under any
circumstances, the maturity of the $25 million convertible debt
facility between the Company and Securicor Communications will be
extended by Securicor Communications from December 31, 1999 to December
31, 2000;
y) Availability to dissenting stockholders of appraisal rights under the
DGCL;
z) The fact that although unaffiliated stockholders will be unable to
participate in any potential future growth of the Company as a result
of the proposed Securicor transaction, this lost opportunity is
adequately reflected in the $2.75 per share Merger Consideration; and
aa) The degree of certainty associated with the closing of the proposed
Securicor transaction, given that the Company requires a source of
funding to effectuate its business plan.
The foregoing discussion of the information and factors considered by the
Independent Committee is not meant to be exhaustive but includes the material
factors considered by the Independent Committee in
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<PAGE> 16
reaching its conclusions and recommendations. The Independent Committee
determined that the most important factors were the Independent Committee's
belief that $2.75 is the highest price that Securicor is willing to offer and
that no unaffiliated third party would be willing to offer more than Securicor,
and the limited number and nature of the conditions to consummation of the
transaction and the consequent relatively high degree of certainty of closing a
transaction with Securicor. The Independent Committee determined that it was
unable to assign weights to the other factors, and that different members of the
Independent Committee may have given differing weights to the various other
factors.
In reaching its determinations, the Company Board considered the following
factors, each of which, in the view of the Company Board, supported such
determinations:
(i) The conclusions and recommendations of the Independent Committee;
(ii) The factors referred to above as having been taken into account
by the Independent Committee; and
(iii) the fact that the Offer Price and the terms and conditions of
the Merger Agreement were the result of arm's-length negotiations among the
Independent Committee, the Company and Parent and their respective
advisors.
The members of the Company Board, including the members of the Independent
Committee, evaluated Parent's proposal, the Offer and the Merger in light of
their knowledge of the business, financial condition and prospects of the
Company, and based upon the advice of advisors. In light of the number and
variety of factors that the Company Board considered in connection with their
evaluation of the Offer and the Merger, the Company Board did not find it
practicable to assign relative weights to any of the foregoing factors.
3. OPINION OF FINANCIAL ADVISOR TO THE INDEPENDENT COMMITTEE.
The Company, on behalf of the Independent Committee, retained Bear Stearns
on February 3, 1999 after interviewing Bear Stearns regarding its qualifications
to act as the Independent Committee's financial advisor in connection with its
evaluation of strategic alternatives for the Company, including any proposal
received from Securicor.
On June 7, 1999, Bear Stearns delivered its written opinion to the
Independent Committee to the effect that, as of such date and based upon and
subject to the assumptions, limitations and qualifications set forth therein,
the Offer Price was fair, from a financial point of view, to the public
stockholders of the Company (the "Bear Stearns Opinion").
THE FULL TEXT OF THE BEAR STEARNS OPINION, WHICH SETS FORTH A DESCRIPTION
OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS SET OUT IN ANNEX A HERETO AND IS
INCORPORATED HEREIN BY REFERENCE. COMPANY STOCKHOLDERS ARE URGED TO READ THE
BEAR STEARNS OPINION CAREFULLY IN ITS ENTIRETY, ESPECIALLY WITH REGARD TO THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED AND MATTERS CONSIDERED BY BEAR STEARNS, AS
WELL AS THE LIMITATIONS ON THE INFORMATION CONSIDERED AND ANALYSIS PRESENTED.
THE SUMMARY OF THE BEAR STEARNS OPINION SET FORTH IN THIS DOCUMENT IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
The Bear Stearns Opinion, intended for the benefit and use of the
Independent Committee, did not constitute a recommendation to the Independent
Committee or to the Company Board in connection with the Merger Agreement or the
Offer and does not constitute a recommendation to any holder of Shares as to
whether to tender shares in connection with the Offer. Bear Stearns was not
requested to opine as to, and its opinion does not address, the Company's
underlying business decision to proceed with or effect the Merger. The Bear
Stearns Opinion is necessarily based upon economic, monetary, market and other
conditions, and the information made available to it, as of the date of such
opinion. It should be understood that, although
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<PAGE> 17
subsequent developments may affect the conclusions reached in the Bear Stearns
Opinion, Bear Stearns does not have any obligation to, and does not intend to,
update, revise or reaffirm its opinion.
The Offer Price and the form of consideration were determined by
arm's-length negotiations between the Independent Committee and Parent and were
not based on any recommendation by Bear Stearns. Except as noted below, no
limitations were imposed by the Company on Bear Stearns with respect to the
investigations made or the procedures followed by Bear Stearns in rendering the
Bear Stearns Opinion.
In arriving at the Bear Stearns Opinion, Bear Stearns, among other things:
(i) reviewed the Merger Agreement, together with the exhibits and
schedules thereto, in substantially the form proposed to be entered into
among the Company, Purchaser and Parent;
(ii) reviewed the Company's Annual Reports to Shareholders and Annual
Reports on Form 10-K for the fiscal years ended September 30, 1997 and
1998, and the Company's Quarterly Reports on Form 10-Q for the periods
ended December 31, 1998 and March 31, 1999;
(iii) reviewed certain operating and financial information provided to
it by management relating to the Company's business and prospects,
including projections for each business unit and the consolidated entity
for the years 1999 through 2004 and certain other forward-looking
information;
(iv) met with certain members of the Company's senior management to
discuss its operations, historical financial statements and future
prospects;
(v) reviewed the historical prices and trading volume of the Shares;
(vi) considered, to the extent Bear Stearns deemed relevant, publicly
available financial data, stock market performance data and valuation
parameters of companies which it deemed generally comparable to the
Company, or otherwise relevant to its inquiry;
(vii) considered, to the extent Bear Stearns deemed relevant, the
terms of recent acquisitions of companies which it deemed generally
comparable to the Company; and
(viii) conducted such other studies, analyses, inquiries and
investigations as it deemed appropriate.
In connection with its review, Bear Stearns relied upon and assumed,
without independent verification, the accuracy and completeness of the financial
and other information, including, without limitation, the projections, provided
to it by management of the Company. Bear Stearns did not assume any
responsibility for the independent verification of any of the information or of
the projections provided to it by management and relied on such information and
projections being complete and accurate in all material respects. In addition,
Bear Stearns did not perform or obtain any independent evaluation or appraisal
of any of the assets or liabilities (contingent or otherwise) of the Company,
nor was Bear Stearns furnished with any such evaluation or appraisal.
With respect to the financial forecasts and projections relied upon or
provided to Bear Stearns, it assumed that they had been reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
senior management of the Company as to the expected future performance of the
Company. Therefore, Bear Stearns did not make any independent assessment of the
assumptions contained therein. Bear Stearns was not provided with, nor was it
asked to obtain, any financial forecasts or projections prepared by the
management of Securicor. Other than as described herein, the Company did not
place any limitations upon Bear Stearns regarding the procedures to be followed
and the factors to be considered in rendering the Bear Stearns Opinion.
In arriving at the Bear Stearns Opinion, Bear Stearns did not assign any
particular weight to any factor considered by it but rather made qualitative
judgments based upon its experience in providing such opinions and on then
existing economic, monetary, market and other conditions as to the significance
of each factor. Bear Stearns believes that its analysis must be considered as a
whole and that selecting portions of its analysis and the factors considered,
without considering all of the factors, could create a misleading or incomplete
view of the processes underlying the Bear Stearns Opinion. In its analysis, Bear
Stearns made numerous
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<PAGE> 18
assumptions with respect to industry performance, general business conditions
and other matters, many of which are beyond the control of the Company,
Securicor, or Bear Stearns. Any assumed estimates implicitly contained in the
Bear Stearns Opinion or relied upon by it in rendering the Bear Stearns Opinion
are not necessarily reflective of actual values or predictive of future results
or values, which may be significantly more or less favorable than as set forth
therein. Any estimates relating to the value of a business or securities do not
purport to be appraisals or necessarily reflect the prices at which companies or
securities may actually be sold.
Bear Stearns is an internationally recognized investment banking firm
which, as part of its investment banking business, regularly engages in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Independent Committee selected
Bear Stearns on the basis of its experience and independence.
Bear Stearns has not been previously engaged by the Company to provide any
investment banking or financial advisory services in connection with any
mergers, acquisitions or business combinations or in connection with any
offerings of equity or debt. In the ordinary course of business, Bear Stearns
may actively trade the equity securities of the Company for its own account and
for the account of its customers and, accordingly, may at any time hold a long
or short position in such securities.
Pursuant to the engagement letter between the Company on behalf of the
Independent Committee and Bear Stearns dated February 3, 1999, the Company has
paid Bear Stearns for its services rendered to the Independent Committee fees of
$675,000 (including a fee of $400,000 for a fairness opinion) and has agreed to
pay a transaction success fee, that increases incrementally based on the amount
of the offer price paid for the Shares, of approximately $3.1 million, less a
credit for the fees paid to date. The Company has also agreed to reimburse Bear
Stearns for its reasonable out-of-pocket expenses, including the reasonable fees
and disbursements of counsel and of other consultants and advisors retained by
Bear Stearns, and to indemnify Bear Stearns and certain related persons against
certain liabilities in connection with the engagement of Bear Stearns, including
certain liabilities under federal securities law.
On June 7, 1999, Bear Stearns made a presentation to the Independent
Committee with respect to the material valuation and financial analyses
performed by Bear Stearns in arriving at the Bear Stearns Opinion. The following
is a summary of such presentation and valuation and financial analyses.
Due to the Company's distinct mix of businesses, Bear Stearns concluded
that there was a lack of companies comparable to the Company. In addition, due
to the Company's lack of near-term operating income and earnings before
interest, taxes, depreciation and amortization ("EBITDA"), Bear Stearns believed
applying comparable company and comparable transaction multiple benchmarks was
not useful for evaluating the fairness of the Offer Price, as such benchmarks
would result in negative enterprise valuations. Bear Stearns noted that
long-term multiples to forward EBITDA were not reliable or were frequently
unavailable and revenue multiples would be incomplete or misleading as the
Company's three business units have different inherent gross and operating
margins. Bear Stearns therefore concluded that comparable company and comparable
transaction analyses were not meaningful. Accordingly, Bear Stearns employed a
discounted cash flow analysis as the appropriate analytical technique to value
the Company.
Bear Stearns performed a discounted cash flow analysis on the after-tax
cash flows of the Company based on projections provided to Bear Stearns by the
Company. After-tax cash flows for the period beginning April 1, 1999 and ending
on December 31, 2004 were discounted to March 31, 1999 in order to value the
Company based on the most recent available balance sheet information and to
account for the 1999 year-to-date results of operations. After-tax cash flows
were calculated as EBITDA, less "normalized" income taxes and capital
expenditures, as adjusted for changes in net working capital. Bear Stearns
calculated a terminal value by applying to projected 2004 EBITDA a range of
multiples of 7.0x to 9.0x. Bear Stearns' determination of the appropriate range
of multiples was based on the expected growth prospects of the Company in 2004,
taking into account primarily the characteristics of the Company's specialized
mobile radio or RoameR One business and its targeted market opportunities. In
addition, Bear Stearns considered the expected perpetual growth rates in the
after-tax cash flow implied by the selected multiples. Discount rates of 15% to
18% were employed based on several assumptions regarding factors such as
interest rates, business risks and the assumed
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<PAGE> 19
cost of equity and debt capital, which was derived from Bear Stearns' analysis
of other publicly traded wireless companies. Bear Stearns assumed a "normalized"
tax rate of 40% and separately calculated the present value of the tax savings
resulting from utilization of the Company's net operating loss carryforwards.
This discounted cash flow analysis of the Company's financial projections
resulted in a per share equity value range of $2.16 to $3.67.
The full text of Bear Stearns' written presentation delivered to the
Independent Committee has been included as Exhibit (b)(2) to the Schedule 13E-3,
and the foregoing summary is qualified in its entirety by reference to such
exhibit. The full text of Bear Stearns written presentation will be available
for inspection and copying at the principal offices of the Company during
regular business hours by any holder of Shares or such holder's representative
who has been so designated in writing. Also, a copy of Bear Stearns' written
presentation will be delivered to any holder of Shares or such holder's
representative who has been so designated in writing upon written request and at
the expense of such holder.
4. ANALYSIS OF FINANCIAL ADVISOR TO SECURICOR.
Securicor retained Lazard to act as its financial advisor in connection
with a strategic review of Securicor's debt and equity investments in the
Company, including the potential acquisition by Securicor of the Shares held by
the public stockholders of the Company. Securicor did not request that Lazard
provide, nor did Lazard provide, any opinion as to the fairness of the Offer to
Securicor or its stockholders, the Company, the holders of the Shares or any
other person or perform any independent examination or investigation of the
Company's business or assets. Lazard's presentation was for the benefit of and
directed to Securicor and does not constitute a recommendation to the holders of
the Shares as to whether such stockholders should or should not tender the
Shares pursuant to the Offer.
As part of the engagement, Securicor requested that Lazard perform certain
valuation analyses with respect to the Company and make a presentation to the
Securicor Board at a meeting held on February 4, 1999. The Company had no role
in Securicor's selection of Lazard or in formulating any of the terms under
which Lazard was to prepare its presentation.
In preparing its valuation, analysis and presentation to the Securicor
Board, Lazard:
(i) analyzed certain historical business and financial information
relating to the Company;
(ii) reviewed the three-year business plan presented to Securicor by
the Company in December 1998, which was the only plan available to Lazard
at the time of the presentation to the Securicor Board on February 4, 1999,
and other data provided to Lazard by the Company relating to the Company's
business;
(iii) held discussions with members of senior management of the
Company with respect to the business and prospects of the Company;
(iv) reviewed the financial terms of certain business combinations
involving companies in lines of business Lazard believed to be generally
comparable to those of the Company;
(v) reviewed the historical stock prices and trading volumes of the
Shares; and
(vi) conducted such other financial studies, analyses and
investigations as Lazard deemed appropriate.
In preparing its valuation, analysis and presentation, Lazard relied upon
the accuracy and completeness of all the foregoing information and did not
assume any responsibility for any independent verification of such information
or any independent valuation or appraisal of any of the Company's assets or
liabilities or concerning the solvency of or issues relating to solvency
concerning the Company.
With respect to financial forecasts and any financial or operating
information furnished by the Company or during discussions with the Company's
management, Lazard assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the Company's
management as to the future financial performance of the Company. Lazard assumed
no responsibility for such forecasts or the
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assumptions on which they were based. The Lazard presentation was necessarily
based on economic, monetary, market and other conditions as in effect on, and
the information made available to it as of, February 4, 1999.
At the February 4, 1999 meeting with the Securicor Board, Lazard, in order
to assist the Securicor Board in its consideration of the proposed acquisition
of the Shares held by the public stockholders of the Company, delivered a
written and oral presentation analyzing from a financial point of view the
consideration to be offered to the holders of the Shares pursuant to the Offer.
Lazard, prior to making its oral presentation to the Securicor Board,
distributed to members of the Securicor Board copies of its written
presentation. In delivering its presentation to the Securicor Board, Lazard
discussed certain material financial and summary comparative analyses contained
in its written presentation and other matters it deemed relevant. The following
is a summary of Lazard's written presentation to the Securicor Board:
Historical Stock Price Analysis. Lazard compared (i) the 20-day average
trading price of $1.31 per Share, (ii) the 52-week high trading price of $4.75
per Share and (iii) the 52-week low trading price of $1.03 per Share to the
closing price of $1.44 per Share on January 15, 1999, the last trading day
before Securicor filed its most recent Schedule 13D with respect to the Company
on January 19, 1999. These analyses revealed a discount of 9%, a premium of 230%
and a discount of 28%, respectively.
Premiums Paid Analysis. Lazard reviewed the premiums paid in selected
technology transactions of a relatively similar size to the proposed
acquisition. Lazard reviewed the premiums paid over recent trading prices of the
target company stock in each such transaction. The selected transactions
reviewed by Lazard reflected a change of control premium, which would not be
relevant to this transaction. Using this information, Lazard determined a
relevant reference range of premiums paid of approximately 25% to 39%. Lazard
applied this range of premiums to the closing price of $1.44 per Share on
January 15, 1999. This analysis yielded a per Share value ranging from
approximately $1.80 to $2.00.
Minority Transactions Analysis. Lazard reviewed the premiums paid in other
recent transactions in which a parent company acquired the publicly-held shares
of its majority-owned subsidiary. Lazard reviewed the premiums paid over recent
trading prices of the publicly-held shares of the subsidiary in each such
transaction. The selected transactions reviewed by Lazard do not reflect a
change of control premium. Using this information, Lazard determined a relevant
reference range of premiums paid of approximately 22% to 29%. Lazard applied
this range of premiums to the closing price of $1.44 per Share on January 15,
1999. This analysis yielded a per Share value ranging from approximately $1.75
to $1.85.
Discounted Cash Flow Analysis. Lazard performed a discounted cash flow
analysis of the Company's projected cash flows, using the three-year business
plan presented to Securicor by the Company in December 1998. This analysis
yielded a per Share value ranging from approximately $1.75 to $2.25.
Based on each of the foregoing analyses, Lazard determined a per Share
value ranging from approximately $1.75 to $2.25. Lazard did not perform an
analysis of the five-year business plan provided by the Company to each of the
directors on February 14, 1999, because that business plan was not finalized at
the time of Lazard's presentation to the Securicor Board.
The summary set forth above does not purport to be a complete description
of the analyses performed by Lazard, but describes the material elements of the
presentation made by Lazard to the Securicor Board on February 4, 1999. The
preparation of such a presentation is a complex process and is not necessarily
susceptible to partial analysis or summary description. Selecting portions of
the analyses or the summary set forth above without considering the analyses as
a whole could create an incomplete or misleading view of the process underlying
the Lazard presentation. No company or transactions used in the analyses
described above as a comparison is identical to the Company or the Offer. In
preparing its presentation, Lazard considered the results of all such analyses
and did not assign relative weights to any of the analyses. The analyses were
prepared solely for the purpose of Lazard providing its presentation to the
Securicor Board in connection with Securicor's strategic review of Securicor's
debt and equity investments in the Company, including a proposed acquisition of
the Shares held by the minority stockholders of the Company, and do not purport
to be
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<PAGE> 21
appraisals or necessarily reflect the prices at which the Company or its
securities actually may be sold, which may be significantly more or less
favorable than as set forth in these analyses.
The presentation of Lazard to the Securicor Board was only one of many
factors taken into consideration by the Securicor Board in making its
determination to approve the Offer. In addition, the Offer Price and the form of
consideration were determined through arm's-length negotiations between the
Independent Committee and Securicor.
Lazard is an internationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts, and valuations for estate, corporate and other purposes. Lazard was
selected to act as investment banker to Securicor because of its expertise and
its reputation in investment banking and mergers and acquisitions.
In the ordinary course of its business, Lazard and its affiliates may
actively trade in the securities of Securicor or the Company for its own account
and for the account of its customers and, accordingly, may at any time hold a
long or short position in the securities of Securicor or the Company. Lazard has
performed investment banking and other services for Securicor in the past,
including (i) advising Securicor on its restructuring and sponsoring the
introduction of the new Securicor shares to the London Stock Exchange in 1996
and (ii) advising Securicor in connection with the creation of a joint venture
in 1998.
The full text of Lazard's written presentation delivered to Securicor's
Board of Directors has been included as Exhibit (b)(3) to the Schedule 13E-3,
and the foregoing summary is qualified in its entirety by reference to such
exhibit. For a description of the fees payable to Lazard in connection with its
engagement, see "THE TENDER OFFER -- Certain Fees and Expenses." The full text
of Lazard's written presentation will be available for inspection and copying at
the principal offices of Securicor during regular business hours by any holder
of Shares or such holder's representative who has been so designated in writing.
Also, a copy of Lazard's written presentation will be delivered to any holder of
Shares or such holder's representative who has been so designated in writing
upon written request and at the expense of such holder.
5. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER.
Purpose and Structure. The purpose of the Offer and the Merger is for
Parent to acquire the entire equity interest in the Company. The purpose of the
Merger is for Parent to acquire the remaining equity interest in the Company not
acquired pursuant to the Offer. Upon consummation of the Merger, the Company
will become a wholly-owned subsidiary of Parent. The acquisition of the Shares
not owned by Parent and its subsidiaries has been structured as a cash tender
offer followed by a cash merger in order to effect a prompt and orderly transfer
of ownership of the Company from the Company's public stockholders to Parent and
Purchaser and provide such stockholders with cash for all of their Shares.
Under the DGCL, the approval of the Company Board and the affirmative vote
of the holders of a majority of the issued and outstanding Shares are required
to approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger. The Company Board has approved and adopted the
Merger Agreement and the transactions contemplated thereby and has declared the
advisability of the Merger Agreement and such transactions, and the only
remaining required corporate action of the Company is the approval and adoption
of the Merger Agreement and the transactions contemplated thereby by the
affirmative vote of the holders of a majority of the Shares. Affiliates of
Purchaser currently own 25,937,042 outstanding Shares, representing
approximately 61.3% of the Company's total issued and outstanding Shares as of
June 9, 1999. Accordingly, those affiliates have sufficient votes necessary to
approve the Merger on behalf of the stockholders of the Company. The Merger
Agreement provides that, unless the Merger is consummated in accordance with the
"short form" merger provisions of Section 253 of the DGCL, Parent must, as soon
as reasonably practicable after the consummation of the Offer, act by written
consent as a stockholder of the Company to approve and adopt the Merger
Agreement and the Merger. In connection with such written consent, the Company
is required under the Merger Agreement to promptly prepare and file with the
Commission, use its commercially reasonable efforts to have cleared by the
Commission, and thereafter mail to its stockholders as promptly as practicable,
an information statement relating to the Merger. However,
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the Merger Agreement provides that in the event that the sum of (i) the number
of Shares tendered (and not withdrawn) pursuant to the Offer plus (ii) the
number of Shares held by Parent, Purchaser or any other affiliate of Parent that
have not been tendered pursuant to the Offer, including Shares issuable to any
of them upon conversion of Series A Preferred Shares and convertible debt of the
Company held by any of them, represent 90% or more of the outstanding Shares on
a fully-diluted basis (except that unexercised options shall not be treated as
outstanding for this purpose), the parties thereto are required to effect the
Merger as soon as practicable (and in any event within seven days) after the
acceptance for payment and purchase of Shares by the Purchaser pursuant to the
Offer in accordance with the "short form" merger provisions of Section 253 of
the DGCL. Effecting the Merger under Section 253 of the DGCL will not require
any prior notice to, or any action by, any other stockholder of the Company. See
"-- Interests of Certain Persons in the Offer and the Merger; Share Ownership".
6. REASONS OF PARENT AND PURCHASER FOR THE OFFER AND THE MERGER; POSITION OF
PARENT AND PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE MERGER.
Securicor is a multi-national UK based company that provides a broad range
of security, distribution, communications and business services. Securicor first
became involved with communication systems and technology when it developed its
own private mobile radio system to communicate with its security guards and,
later, its security and parcels vehicle fleets. By the 1970's, Securicor had
developed one of the most extensive private mobile radio communications networks
in, the UK. In 1984, Securicor formed a joint venture with British
Telecommunications plc to own and operate "Cellnet", one of the first cellular
telephone networks in the UK.
As part of a plan to capitalize on its extensive experience in business
communications, particularly mobile radio communications, in the mid 1980's,
Securicor began acquiring various businesses involved in mobile radio equipment
distribution and support services and began working to develop spectrally
efficient mobile radio products and solutions as a response to the increasing
congestion of the mobile radio spectrum. In 1995, Securicor formed Radiocoms to
combine and develop these various communications businesses. In an effort to
capitalize on anticipated synergies between the businesses of Radiocoms and the
Company and the wireless radio communications business owned by Simmonds Capital
Limited, these businesses were combined in 1996, resulting in Securicor owning
approximately 61.3% of the combined entity (i.e., the Company).
Since these businesses were combined, Securicor (through its affiliate) has
been the principal source of financing for the Company, providing more than $70
million of debt and equity financing (including accrued interest and dividends).
Parent and Purchaser believe that the Company will require substantial
additional financing and a relatively long period of time to achieve its
potential. Parent and Purchaser do not believe that, in light of, among other
things, the Company's recent financial performance, high leverage and
speculative business plan, the Company will be able to obtain such financing on
reasonable terms and in a timely manner from unaffiliated third parties. Parent
and Purchaser do not believe that it is in Securicor's best interest to continue
to provide substantial funding to a company it does not wholly own. Moreover,
Parent and Purchaser believe that the historic short term focus by the public
market on the Company's business has not been conducive to the long term growth
and development of the business. Finally, Parent and Purchaser believe that in
the future there will be increasing synergies between the Company's
communications technologies and equipment and Securicor's other businesses which
have a need for high quality, reliable and low cost communications.
In light of the foregoing, Parent and Purchaser have determined that
pursuing this transaction in order to own the entire Company is the best way to
maximize the value of Securicor's existing debt and equity investments in the
Company.
Parent and Purchaser believe that the consideration to be received by the
Company's stockholders pursuant to the Offer and the Merger is fair to such
stockholders. Parent and Purchaser base their belief on the following factors:
(i) an Independent Committee that consisted of directors who are neither
designees of Securicor or its affiliates nor officers of the Company was
appointed to represent the interests of the stockholders of the Company (other
than Securicor and its affiliates); (ii) the Independent Committee
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retained and was advised by independent legal and financial advisors; (iii) the
fact that the Independent Committee unanimously concluded that (a) the Offer and
the Merger are fair to and in the best interests of the Company's stockholders
(other than Securicor and its affiliates), and (b) the price per Share to be
paid in the transaction was fair to stockholders (other than Securicor and its
affiliates) and recommended to the full Company Board that the Company Board
approve the Merger Agreement substantially in the form presented to the
Independent Committee; (iv) notwithstanding the fact that Bear Stearns' opinion
was addressed to the Independent Committee and that neither Parent nor Purchaser
is entitled to rely on such opinion, the fact that the Independent Committee
received an opinion from Bear Stearns that, as of the date of such opinion and
based on and subject to certain matters stated in such opinion, the
consideration to be received by the Company's stockholders pursuant to the Offer
and the Merger is fair to such stockholders (other than Securicor and its
affiliates) from a financial point of view; (v) the analysis of Securicor's
financial advisor described above under "-- Analysis of Financial Advisor to
Securicor"; (vi) the fact that the Offer and the Merger provide Company
stockholders (other than Securicor and its affiliates) with liquidity to dispose
of their Shares which may not be available in the public market due to the low
level of trading volume of the Shares on Nasdaq prior to the announcement of the
Securicor proposal; and (vii) the other factors enumerated by the Independent
Committee as supporting their recommendation of the Offer and the Merger. See
"-- Recommendation of the Independent Committee and the Company Board; Fairness
of the Offer and the Merger."
Neither Parent nor Purchaser found it practicable to assign, nor did either
of them assign, relative weights to the individual factors considered in
reaching their conclusions as to fairness.
7. PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF THE
OFFER AND THE MERGER.
Plans for the Company.
Pursuant to the Merger Agreement, promptly upon completion of the Offer,
Parent and Purchaser intend to effect the Merger in accordance with the terms of
the Merger Agreement.
Parent's management has begun, and intends to continue, a review of the
Company and its assets, corporate structure, capitalization, operations,
properties, policies, management and personnel to determine what changes, if
any, would be desirable in order to best organize and integrate the activities
of the Company and Parent. Parent expressly reserves the right to make any
changes that it deems necessary or appropriate in light of its review or in
light of future developments, including selling assets or businesses of the
Company in one or more transactions. Except as otherwise described in this Offer
to Purchase and except for the transactions contemplated by the Merger
Agreement, Parent has no current plans or proposals which relate to or would
result in: (i) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company; (ii) a sale or transfer of
a material amount of assets of the Company; (iii) any change in the management
of the Company or any change in any material term of the employment contract of
any executive officer; or (iv) any other material change in the Company's
corporate structure or business.
The Company has indicated to Securicor that it has been engaged in
discussions with third parties (and in some cases has received indications of
interest) relating to the possible disposition of certain non-core assets such
as certain assets relating to its land mobile radio business and its UK
manufacturing business. Securicor has not made a determination whether or not it
will seek to dispose of these non-core assets or businesses or any other assets
or businesses of the Company in the event the Offer and Merger are consummated.
Certain Effects of the Offer and the Merger.
Interests in the Company. As a result of the Offer, the interest of Parent
in the Company's net book value and net earnings will increase in proportion to
the number of Shares acquired in the Offer. If the Merger is consummated,
Parent's interest in such items and in the Company's equity generally will
increase to 100% and Parent and its subsidiaries will be entitled to all
benefits resulting from that interest, including all income generated by the
Company's operations and any future increase in the Company's value. Similarly,
Parent will also bear the risk of losses generated by the Company's operations
and any decreases in the value of the Company after the Merger. Subsequent to
the Merger, current stockholders of the Company (other than
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affiliates of Parent) will cease to have any equity interest in the Company,
will not have the opportunity to participate in the earnings and growth of the
Company after the Merger and will not have any right to vote on corporate
matters. Similarly, stockholders will not face the risk of losses generated by
the Company's operations or decline in the value of the Company after the
Merger.
Nasdaq Listing. The Shares are currently traded on Nasdaq. See "THE TENDER
OFFER -- Price Range of the Shares; Dividends". Depending upon the number of
Shares acquired pursuant to the Offer, the Shares may no longer meet the
requirements for continued listing on Nasdaq. If, as a result of the purchase of
Shares pursuant to the Offer or otherwise, the Shares no longer meet the
requirements of Nasdaq for continued listing and/or trading and such trading of
the Shares were discontinued, the market for the Shares could be adversely
affected.
In the event that the Shares are no longer listed or traded on Nasdaq, it
is possible that the Shares would trade on other securities markets and that
price quotations would be reported through other sources. Such trading and the
availability of such quotations would, however, depend upon the number of
stockholders and/or the aggregate market value of the Shares remaining at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act as described below and other factors.
Exchange Act Registration. The Shares are currently registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The purchase
of the Shares pursuant to the Offer may result in the Shares becoming eligible
for de-registration under the Exchange Act. Registration of the Shares may be
terminated upon application by the Company to the Commission if the Shares are
not listed on a "national securities exchange" and there are fewer than 300
record holders of Shares. Termination of registration of the Shares under the
Exchange Act would substantially reduce the information required to be furnished
by the Company to its stockholders and the Commission and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirements of furnishing a proxy statement
in connection with stockholders' meetings pursuant to Section 14(a), no longer
applicable to the Company. Furthermore, the ability of "affiliates" of the
Company and persons holding "restricted securities" of the Company to dispose of
such securities pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended, may be impaired or eliminated. If, as a result of the purchase
of Shares pursuant to the Offer or the Merger, the Company is no longer required
to maintain registration of the Shares under the Exchange Act, Parent intends to
cause the Company to apply for termination of registration under the Exchange
Act.
If registration of the Shares is not terminated prior to the Merger, then
following the consummation of the Merger, the Shares will be delisted from the
Nasdaq and the registration of the Shares under the Exchange Act will be
terminated.
Margin Requirements. The Shares are currently "margin securities" under
the regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers. In any event, the Shares will cease to be "margin securities" if
registration of the Shares under the 1934 Act is terminated.
Certain Federal Income Tax Consequences. The summary of Federal income tax
consequences set forth below is for general information only and is based on
Purchaser's understanding of the law as currently in effect, which law could
change, possibly with retroactive effect. The tax consequences to each
stockholder will depend in part upon such stockholder's particular situation.
Special tax consequences not described herein may be applicable to particular
classes of taxpayers, including without limitation, financial institutions,
broker-dealers, persons who are not citizens or residents of the United States
and stockholders who acquired their Shares through the exercise of an employee
stock option or otherwise as compensation. ALL STOCKHOLDERS SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
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CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for Federal income tax purposes under the Code, and may also be a
taxable transaction under applicable state, local or foreign income and other
tax laws. Generally, for Federal income tax purposes, a tendering stockholder
will recognize gain or loss in an amount equal to the difference between the
cash received by the stockholder pursuant to the Offer and the stockholder's
adjusted tax basis in the Shares tendered by the stockholder and purchased
pursuant to the Offer. For Federal income tax purposes, such gain or loss will
be a capital gain or loss if the Shares are a capital asset in the hands of the
stockholder. Stockholders are urged to consult with their own tax advisors
concerning the treatment of capital gain or loss for Federal income tax purposes
(including (i) the holding period requirements to obtain long-term or short-term
capital gain or loss treatment and (ii) the limitations on the deductibility of
capital losses).
A stockholder that tenders Shares may be subject to 31% backup withholding
unless the stockholder provides its Taxpayer Identification Number ("TIN") and
certifies that such number is correct or properly certifies that it is awaiting
a TIN, or unless an exemption applies. A stockholder who does not furnish its
TIN may be subject to a penalty imposed by the IRS. See "THE TENDER
OFFER -- Procedures for Accepting the Offer and Tendering Shares."
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an appropriate income tax return.
The receipt of cash by stockholders pursuant to the Merger should result in
Federal income tax consequences to such stockholders similar to those described
above.
8. RIGHTS OF STOCKHOLDERS IN THE OFFER AND THE MERGER.
No appraisal rights are available in connection with the Offer. If the
Merger is consummated, however, stockholders of the Company who have not
tendered their Shares in the Offer will have certain rights under the DGCL to
dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. Stockholders who perfect such rights by complying with
the procedures set forth in Section 262 of the DGCL ("Section 262") will have
the fair market value of their Shares (exclusive of any element of value arising
from the accomplishment or expectation of the Merger) determined by the Delaware
Court of Chancery and will be entitled to receive a cash payment equal to such
fair value from the Surviving Corporation. In addition, such dissenting
stockholders will be entitled to receive payment of a fair rate of interest from
the date of consummation of the Merger on the amount determined to be the fair
value of their Shares. In determining the fair value of the Shares, the court is
required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the Shares, including, among other things, the Company's
asset values and earning capacity. The value so determined could be more or less
than the per Share consideration to be paid in the Offer and the Merger.
Parent intends to argue in any appraisal proceeding that, for purposes of
that proceeding, the fair value of each share is less than the Merger
Consideration. In this regard, stockholders should be aware that opinions of
investment banking firms as to the fairness of consideration from a financial
point of view (including the opinion of Bear Stearns described herein) are not
necessarily opinions as to "fair value" under Section 262.
THE FOREGOING SUMMARY IS NOT A COMPLETE STATEMENT OF APPRAISAL RIGHTS UNDER
THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262
INCLUDED HEREWITH IN ANNEX B. FAILURE TO FOLLOW THE STEPS REQUIRED
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BY SECTION 262 FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH
RIGHTS.
Several decisions in Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has a
fiduciary duty to other stockholders that requires that the merger be "entirely
fair" to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was "fair dealing" among the parties. The Delaware Supreme Court has
stated that although the remedy ordinarily available to minority stockholders in
a cash-out merger that is found to be not fair to the minority stockholders is
the right to appraisal described above, monetary damages, injunctive relief or
such other relief as the court may fashion may be available if a merger is found
to be the product of procedural unfairness, including fraud, misrepresentation
or other misconduct.
9. THE MERGER AGREEMENT.
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is filed as an exhibit to the Purchaser's
Tender Offer Statement on Schedule 14D-1 relating to the Offer.
The Offer
The Merger Agreement provides for the making of the Offer by Purchaser.
Purchaser's obligation to accept or pay for Shares in the Offer is subject to
the satisfaction of the Minimum Tender Condition and certain other conditions
that are set forth in Annex I to the Merger Agreement. Purchaser expressly
reserves the right, without the consent of the Company, to waive any of the
conditions to the Offer and to make any change in the terms or conditions of the
Offer; provided, however, that without the prior written consent of the Company,
Purchaser may not waive the Minimum Tender Condition or make any change in the
Offer that changes the form of the Offer or of the consideration or decreases
the price per Share (except for appropriate adjustments following changes in the
number of outstanding Shares as a result of any stock split, stock dividend,
recapitalization or similar transaction), or that imposes conditions to the
Offer in addition to those described herein, or that is otherwise materially
adverse to the holders of Shares (other than Parent and its affiliates).
If on any scheduled expiration date of the Offer all conditions to the
Offer shall not have been satisfied or waived, Purchaser must extend the Offer
from time to time until such conditions have been satisfied or waived; provided
that Purchaser shall have no obligation to extend the Offer beyond the date 60
days after commencement of the Offer, nor shall it have the right to extend the
Offer beyond the date 60 days after commencement of the Offer without the prior
written consent of the Company (except pursuant to the next sentence). If on any
scheduled expiration date of the Offer all conditions to the Offer (including
the Minimum Tender Condition) shall have been satisfied but the sum of (i) the
number of Shares tendered (and not withdrawn) pursuant to the Offer plus (ii)
the number of Shares held by Parent, Purchaser or any other affiliate of Parent
that have not been tendered pursuant to the Offer, including Shares issuable to
any of them upon conversion of Series A Preferred Stock and convertible debt of
the Company held by any of them, represent less than 90% of the outstanding
Shares on a fully-diluted basis (except that unexercised Options shall not be
treated as outstanding for this purpose), Purchaser has the right to extend the
Offer from time to time without the consent of the Company (for not more than an
aggregate of 10 business days) in order to permit Purchaser to solicit the
tender of additional Shares pursuant to the Offer. If the Offer is extended in
accordance with the preceding sentence, the Minimum Tender Condition shall be
deemed to remain satisfied regardless of any withdrawal of previously tendered
shares during the extension period.
The Merger
Merger of Purchaser and Company. At the Effective Time, Purchaser will be
merged with and into the Company in accordance with the DGCL, whereupon the
separate existence of Purchaser will cease, and the Company will be the
Surviving Corporation, will continue its existence under the DGCL and will be a
wholly
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owned subsidiary of Parent. From and after the Effective Time, the Surviving
Corporation will possess all the property, rights, assets, immunities, powers,
privileges and franchises and be subject to all debts, obligations, liabilities,
duties, restrictions and disabilities of the Company and Purchaser (including
obligations to pay all fees and expenses incurred by the Company in connection
with the Offer and the Merger), all as provided under the DGCL.
Certificate of Incorporation; Bylaws. The certificate of incorporation of
the Company in effect immediately prior to the Effective Time, and the Bylaws of
Purchaser in effect at the Effective Time, shall be the certificate of
incorporation and bylaws of the Surviving Corporation from and after the
Effective Time until amended in accordance with the DGCL or applicable law.
Directors; Officers. From and after the Effective Time, the board of
directors of the Surviving Corporation shall consist of the current directors of
the Company, other than Messrs. Frank and Noam who are the two directors
constituting the Independent Committee. See Schedule I to this Offer to
Purchase. Such directors shall serve until their respective successors are duly
elected or appointed and qualified or until their resignation, removal or death,
if earlier. From and after the Effective Time, the officers of the Company at
the Effective Time shall be the officers of the Surviving Corporation. Such
officers shall serve until their respective successors are duly elected or
appointed and qualified or until their resignation, removal or death, if
earlier.
Conversion of Shares. At the Effective Time, each Share (excluding Shares
held in the treasury of the Company or Shares owned by Parent or Purchaser or
any affiliate of Parent and Shares as to which appraisal rights have been
validly exercised) outstanding immediately prior to the Effective Time shall be
converted into the right to receive the Merger Consideration. Each Share held in
the treasury of the Company or owned by Parent or Purchaser or any other
affiliate of Parent immediately prior to the Effective Time shall be canceled
and retired without any conversion, and no payment shall be made with respect
thereto. At the Effective Time, each share of Series A Preferred Stock issued
and outstanding immediately prior to the Effective Time shall be canceled and
retired without any conversion, and no payment shall be made with respect
thereto. Each share of common stock, $.01 par value, of Purchaser outstanding
immediately prior to the Effective Time shall be converted, at the Effective
Time, into and become one share of common stock, $.01 par value, of the
Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
Dissenting Shares. Shares outstanding immediately prior to the Effective
Time that are held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Shares in
accordance with DGCL will not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses its right to appraisal. If, after the Effective Time, such holder fails to
perfect or withdraws or loses its right to appraisal, such Shares shall be
treated as if they had been converted as of the Effective Time into a right to
receive the Merger Consideration.
Treatment of Options. Prior to the Effective Time, the Company Board (or,
if appropriate, any committee thereof) shall use its commercially reasonable
efforts to adopt appropriate resolutions and take all other actions necessary to
provide that if the Merger occurs each outstanding stock option (each, an
"Option") granted under the Company's 1988 Key Employee Incentive Stock Option
Plan, the 1994 Stock Option Plan, the 1994 Director's Option Plan, and the 1997
Performance and Equity Incentive Plan (collectively, the "Company Stock Option
Plans"), whether or not then vested or exercisable, shall, at the Effective
Time, be canceled, and in consideration thereof, the Company shall offer to pay
to the holder of each such Option promptly after the Effective Time an amount in
cash determined by multiplying (i) the excess, if any, of the amount of the
Merger Consideration over the applicable per-Share exercise price of such Option
by (ii) the number of Shares such holder could have purchased (assuming full
vesting of all Options) had such holder exercised such Option in full
immediately prior to the Effective Time; provided, however, that, with the
consent of Parent, the Company may offer to pay alternative consideration to the
holders of options that are "out of the money".
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Representations and Warranties
The Merger Agreement contains certain customary representations and
warranties of the parties thereto. These include representations and warranties
of the Company with respect to corporate existence and power, corporate
authorization relative to the Merger Agreement, governmental authorizations,
capitalization, subsidiaries, filings with the Securities and Exchange
Commission (the "Commission"), financial statements, disclosure documents
relating to the Offer and the Merger, the absence of certain changes, no
undisclosed liabilities, litigation, compliance with law, permits, brokers fees
and other matters. Parent and Purchaser have also made certain representations
and warranties with respect to corporate existence and power, corporate
authorization relative to the Merger Agreement, governmental authorizations,
disclosure documents relating to the Offer and the Merger, the availability of
funds to consummate the Offer and the Merger, the absence of any current
intention to sell the Surviving Corporation and other matters.
Covenants
The Merger Agreement contains a number of covenants and agreements on the
part of the Company, Parent and Purchaser. Set forth below is a description of
certain of those covenants and agreements.
Conduct of Business Pending Merger. Until the Effective Time, except as
provided in the specified section of the Company's Disclosure Schedule, as
contemplated by the Merger Agreement or as consented to in writing by Parent,
the Company and its subsidiaries shall conduct their business in the ordinary
course consistent with past practices and shall use their commercially
reasonable efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees. Without limiting the generality of the
foregoing, the Merger Agreement provides that the Company will not do, and will
not permit any of its subsidiaries to do, any of the following:
(i) (A) increase the compensation (or benefits) payable to or to
become payable to any director or employee, except for increases in salary
or wages of employees in the ordinary course of business and consistent
with past practice; (B) grant any severance or termination pay or enter
into or amend in any respect any employment or severance agreement with any
employee; (C) establish, adopt, enter into or amend any collective
bargaining agreement or benefit plan of the Company or any subsidiary; or
(D) take any action to accelerate any rights or benefits, or make any
determinations not in the ordinary course of business consistent with past
practices, under any collective bargaining agreement or employee benefit
plan of the Company or any subsidiary;
(ii) declare, set aside or pay any dividend on, or make any other
distribution in respect of (whether in cash, stock or property),
outstanding shares of capital stock, except for dividends by a wholly owned
subsidiary of the Company to the Company or another wholly owned subsidiary
of the Company;
(iii) redeem, purchase or otherwise acquire any outstanding shares of
capital stock of, or other equity interests in, or any securities that are
convertible into or exchangeable for, any shares of capital stock of or
other equity interests in, or any outstanding options, warrants or rights
of any kind to acquire any shares of capital stock of or other equity
interests in the Company or any of its subsidiaries (other than any
purchase, forfeiture or retirement of Shares or Options occurring pursuant
to the terms thereof (as in effect on the date of the Merger Agreement));
(iv) effect any reorganization or recapitalization of, or split,
combine or reclassify, any of the capital stock of or other equity
interests in the Company or any of its subsidiaries, or issue or authorize
any other securities in respect of, in lieu of or in substitution for
shares of such capital stock or such equity interests;
(v) offer, sell, issue or grant any shares of capital stock of or
other equity interests in or any securities convertible into or
exchangeable for (or accelerate any right to convert or exchange securities
for) any shares of capital stock of or other equity interests in or any
options, warrants or rights of any kind to acquire any shares of capital
stock of or other equity interests in or any other voting securities of,
the Company or any of its subsidiaries, or any "phantom" stock, "phantom"
stock rights, stock appreciation rights or stock-based performance units,
other than issuances of Shares upon the exercise of the Options
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outstanding prior to the date of the Merger Agreement in accordance with
the terms thereof (as in effect on the date of the Merger Agreement);
(vi) sell, lease, exchange or otherwise dispose of, or grant any lien
with respect to, any of the properties or assets of the Company or any of
its subsidiaries that are, individually or in the aggregate, material to
the business of the Company and its subsidiaries, except for dispositions
of excess or obsolete assets and sales of inventories in the ordinary
course of business;
(vii) propose or adopt any amendments to its certificate of
incorporation or bylaws or other organizational documents;
(viii) settle the terms of any material litigation affecting the
Company or any of its subsidiaries;
(ix) make any material tax election (unless required by law or unless
consistent with prior practice) or settle or compromise any material tax
liability except, in each case, if Parent is given reasonable prior notice
thereof; or
(x) agree or commit to do any of the foregoing.
Indemnification and Insurance. Parent will, and Parent will cause the
Surviving Corporation to, indemnify and hold harmless the present and former
officers, directors and counsel of the Company in respect of acts or omissions
occurring prior to the Effective Time to the fullest extent permitted under the
Company's certificate of incorporation and bylaws in effect on the date of the
Merger Agreement. Prior to the Closing, Parent will, at its election, either (i)
permit the Company to purchase officers' and directors' liability insurance from
its current officers' and directors' liability insurer covering claims made
during the period of six years immediately following the Effective Time in
respect of acts or omissions occurring prior to the Effective Time on terms with
respect to coverage and amount substantially similar to those of the officers'
and directors' liability insurance policy of the Company in effect on the date
hereof (the "Existing Coverage") covering each such person currently covered by
such policy (the "Covered Employees") or (ii) arrange to be provided to the
Covered Employees officers' and directors' liability insurance covering claims
made during the period of six years immediately following the Effective Time in
respect of acts or omissions occurring prior to the Effective Time which is at
least as favorable to the Covered Employees as the Existing Coverage. Parent is
required to cause the Surviving Corporation to keep such insurance in effect for
six years after the Effective Time. The provisions of the Merger Agreement
described in this "Indemnification and Insurance" section are for the benefit of
and may be enforced after the Effective Time by the Covered Employees.
Reasonable Best Efforts. Subject to the fiduciary duties under applicable
law of the directors of the Company or of the directors constituting the
Independent Committee (as determined by such directors in good faith after
consultation with legal counsel), each party is required to use its reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable, including but not limited to
under all applicable laws, rules, regulations, decrees and orders, to consummate
the transactions contemplated by the Merger Agreement.
Conditions to the Merger
The obligations of the Company, Parent and Purchaser to consummate the
Merger are subject to the satisfaction of the following conditions: Purchaser
shall have purchased the Shares tendered pursuant to the Offer; if required by
the, the Merger Agreement and the Merger shall have been approved and adopted by
the stockholders of the Company in accordance with the; and no provision of any
applicable law or regulation and no judgment, injunction, order or decree shall
prohibit the consummation of the Merger.
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Termination
Right to Terminate. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of the Merger Agreement by the stockholders of the Company) as follows:
(i) by mutual written consent of the Company and Parent;
(ii) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining the
Company or Parent from consummating the Merger is entered and such
judgment, injunction, order or decree shall become final and
non-appealable;
(iii) by either the Company or Parent, if the Offer shall expire or
terminate in accordance with its terms without any Shares being purchased
thereunder and, in the case of termination by Parent, Purchaser shall not
have been required by the terms of the Offer or the Merger Agreement to
purchase any Shares pursuant to the Offer;
(iv) by the Company if, prior to the acceptance for payment of Shares
by Parent pursuant to the Offer, (i) any of the representations and
warranties of Parent or Purchaser contained in the Merger Agreement that
are qualified as to materiality were untrue or incorrect when made or have
since become, and at the time of termination remain, incorrect (except that
with respect to representations and warranties that are made as of a
specified date, such right of termination shall apply only if such
representations or warranties were untrue or incorrect as of such specified
date) or any of the representations and warranties of Parent or Purchaser
that are not so qualified as to materiality were untrue or incorrect in any
material respect when made or have since become, and at the time of
determination remain, incorrect in any material respect (except that with
respect to representations and warranties that are made as of a specified
date, such right of termination shall apply only if such representations or
warranties were untrue or incorrect in any material respect as of such
date); provided that the Company may not terminate the Merger Agreement
pursuant to this subsection if the Company had knowledge as of the date of
the Merger Agreement that the relevant representation or warranty was
untrue or incorrect; or (ii) Parent or Purchaser shall have breached or
failed to comply in any material respect with any of their respective
obligations under the Merger Agreement, provided that if such breach is
curable by the breaching party and so long as the breaching party continues
to exercise its reasonable efforts to cure such breach, the Company shall
not have the right to terminate the Merger Agreement pursuant to this
subsection until the date 30 days after notice by the Company to the
breaching party of such breach and then only if the breach has not been
cured prior to that date (which cure period will not apply to a breach by
Purchaser of its obligation to commence the Offer within the time period
specified in the Merger Agreement);
(v) by Parent if, prior to the acceptance for payment of Shares
pursuant to the Offer, (i) any of the representations and warranties of the
Company contained in the Merger Agreement that are qualified as to
materiality were untrue or incorrect when made or have since become, and at
the time of termination remain, incorrect (except that with respect to
representations and warranties that are made as of a specified date, such
right of termination shall apply only if such representations or warranties
were untrue or incorrect as of such specified date) or any of the
representations and warranties of the Company that are not so qualified as
to materiality were untrue or incorrect in any material respect when made
or have since become, and at the time of determination remain, incorrect in
any material respect (except that with respect to those representations and
warranties that are made as of a specified date, such right of termination
shall apply only if such representations or warranties were untrue and
incorrect in any material respect as of such date); provided that Parent
may not terminate the Merger Agreement pursuant to this subsection if
Parent had knowledge as of the date of the Merger Agreement that the
relevant representation or warranty was untrue or incorrect as of that
date; (ii) there shall have been a breach of any covenant or agreement on
the part of the Company contained in this Agreement that shall not have
been cured prior to 30 days after notice by the Company to Parent of such
breach; or (iii) the Company Board (with the approval of the Independent
Committee) shall have withdrawn or modified
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<PAGE> 31
(including any amendment of the Schedule 14D-9) in a manner adverse to
Parent its approval or recommendation of the Offer, the Merger Agreement or
the Merger and shall not have reinstated such approval or recommendation
within three business days thereof, shall have approved or recommended
another offer or transaction that is inconsistent with the transactions
contemplated hereby or shall have resolved to effect any of the foregoing;
or
(vi) by the Company or Parent if the Effective Time shall not have
occurred within 120 days (or within seven days where the short form merger
provisions of the Merger Agreement are applicable) after the purchase of
the tendered Shares pursuant to the Offer, provided that the right to
terminate the Merger Agreement under this subsection shall not be available
to a party whose action or failure to act has been the cause of or resulted
in the failure of the Merger to be consummated on or before such date and
such action or failure to act constitutes a breach of the Merger Agreement.
Effect of Termination. If the Merger Agreement is terminated as provided
above, the Merger Agreement shall become void and of no effect, with no
liability on the part of any party thereto, except for liability for damages
resulting from any breach by a party of any representation, warranty, covenant
or agreement contained in the Merger Agreement; provided, however, that if
either the Company, on the one hand, or Parent and Purchaser, on the other hand,
terminates the Merger Agreement as a result of, or arising from, any material
breach by the other of any representation, warranty, covenant or agreement
contained in the Merger Agreement, then in such event Parent or the Company, as
the case may be, shall pay or reimburse the other for all professional fees and
other out-of-pocket costs incurred by it in connection with the negotiation of,
or otherwise related to, the Merger Agreement and the transactions contemplated
thereby; provided, further, however, that if any party terminates the Merger
Agreement pursuant to the rights described under clause (iii) under "Right to
Terminate" above as a result of the Minimum Tender Condition not having been
satisfied, then in such event Parent shall pay or reimburse the Company for up
to $1 million of professional fees and other out-of-pocket costs incurred by it
in connection with the negotiation of, or otherwise related to, the Agreement
and the transactions contemplated thereby. Any such expense payment or
reimbursement shall not be exclusive but rather shall be in addition to any
liability Parent, Purchaser or the Company, as the case may be, may have for
other damages resulting from any breach of any representation, warranty,
covenant or agreement contained in the Merger Agreement or any other rights or
remedies that the non-defaulting party may have at law or in equity.
Certain Fees and Expenses
Except as described under "Termination -- Effect of Termination" above, all
costs and expenses incurred in connection with the Merger Agreement are to be
paid by the party incurring such cost or expense.
Amendments and Waivers
Any provision of the Merger Agreement may be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Parent and Purchaser or in
the case of a waiver, by the party against whom the waiver is to be effective.
The approval of the Independent Committee is required for any consent of the
Company referred to under "The Offer" above or elsewhere in the Merger
Agreement, any amendment or modification of the Merger Agreement, any extension
by the Company of the time for the performance of any obligations or other acts
of Parent or Purchaser, any waiver of any of the Company's rights under the
Merger Agreement and any other action by the Company pursuant to or with respect
to the Merger Agreement.
10. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER; SHARE OWNERSHIP.
In considering the recommendation of the Company Board, stockholders of the
Company should be aware that certain members of the Company Board have certain
interests that present actual or potential conflicts of interest in connection
with the Offer and the Merger. Stockholders should also be aware that Parent and
Purchaser have certain interests that present actual or potential conflicts of
interest in connection
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<PAGE> 32
with the Offer and the Merger. The Independent Committee and the Company Board
were aware of these actual or potential conflicts of interest and considered
them in connection with such recommendation.
Directors and Officers. Under the Merger Agreement, Parent is required to,
and is required to cause the Surviving Corporation to, indemnify and hold
harmless the present and former officers, directors and counsel of the Company
in respect of acts or omissions occurring prior to the Effective Time to the
fullest extent permitted under the Company's certificate of incorporation and
bylaws in effect on the date of the Merger Agreement. In addition, the Merger
Agreement provides for certain directors' and officers' liability insurance. See
"-- The Merger Agreement -- Covenants -- Indemnification and Insurance". In
addition, in connection with Mr. Kelly's initial appointment to the Company
Board, Securicor agreed to indemnify Mr. Kelly for certain liabilities arising
out of his duties as a director of the Company.
The members of the Independent Committee will be compensated by the Company
on a per meeting basis (or, for substantial amounts of time spent on Independent
Committee work outside of meetings, on a "per committee meeting equivalent"
basis) at a rate equivalent to the rate paid to members of the Company Board in
connection with Company Board committee meetings. The members of the Company
Board are each paid $500 per committee meeting.
None of the executive officers or directors of the Company has advised
Parent or Purchaser as to whether any of such persons intends to tender Shares
owned by them in the Offer.
Security Ownership. As of June 9, 1999, affiliates of Securicor, owned
25,937,042 outstanding Shares. Securicor may be deemed to beneficially own those
shares. In addition, affiliates of Securicor hold certain convertible debt of
the Company that, as of June 9, 1999, was convertible into 13,617,607 Shares.
Securicor may be deemed to beneficially own the Shares issuable upon conversion
of such debt. As a result of Securicor's beneficial ownership, representing, in
the aggregate, approximately 70.73% of the outstanding Shares, Securicor may be
deemed to control the Company.
The following table sets forth certain information, as of June 9, 1999,
provided by the Company regarding the beneficial ownership of Shares by each
director and executive officer of the Company and by the directors and such
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------ -------------------- ----------------
<S> <C> <C>
Robert J. Shiver......................................... 520,349(1)(11) 1.2%
Howard Frank............................................. 20,000(2)(11) *
Robert B. Kelly.......................................... 48,000(3)(11) *
George F. Naspo.......................................... 0(4)(11) *
Eli M. Noam.............................................. 20,000(5)(11) *
George Valenti........................................... 50,000(6)(11) *
John Wareham............................................. 45,000(7)(11) *
Steven L. Wasserman...................................... 93,000(8)(11) *
Roger Wiggs.............................................. 45,000(9) *
Michael G. Wilkinson..................................... 45,000(10) *
All directors and executive officers as a group (10
persons)............................................... 886,349 2.1%
</TABLE>
- ---------------
* Less than 1%.
(1) 1,000 Shares are held by BDC Holdings, Inc. Mr. Shiver is the sole owner of
BDC Holdings, Inc. Pursuant to the 1994 Directors' Stock Option Plan, Mr.
Shiver has an option to acquire 20,000 Shares at an exercise price of
$3.125 per share, and pursuant to the 1997 Performance and Equity Incentive
Plan, an option to acquire 800,000 Shares at an exercise price of $1.97 per
share, of which 160,000 shares are exercisable, an option to acquire
300,000 Shares at an exercise price of $2.50 per share, which will become
exercisable in 50% increments beginning on January 1, 2000 and an option to
acquire 25,000 Shares at an exercise price of $2.25 per share, which will
become exercisable on the earlier of February 25, 2000 or the date of the
Company's 2000 Annual Meeting.
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<PAGE> 33
(2) Pursuant to the 1994 Directors' Stock Option Plan, Mr. Frank has an option
to acquire 20,000 Shares at an exercise price of $3.19 per share, which
will become exercisable on August 4, 1999, and pursuant to the 1997
Performance and Equity Incentive Plan, an option to acquire 25,000 Shares
at an exercise price of $2.25 per share, which will become exercisable on
the earlier of February 25, 2000 or the date of the Company's 2000 Annual
Meeting.
(3) Pursuant to the 1994 Directors' Stock Option Plan, Mr. Kelly has an option
to acquire 20,000 Shares at an exercise price of $6.125 per share, and
pursuant to the 1997 Performance and Equity Incentive Plan, an option to
acquire 25,000 Shares at an exercise price of $2.50 per share and an option
to acquire 25,000 Shares at an exercise price of $2.25 per share, which
will become exercisable on the earlier of February 25, 2000 or the date of
the Company's 2000 Annual Meeting.
(4) Pursuant to the 1997 Performance and Equity Incentive Plan, Mr. Naspo has
an option to acquire 125,000 Shares at an exercise price of $2.25 per
share, which will become exercisable on the earlier of February 25, 2000 or
the date of the Company's 2000 Annual Meeting.
(5) Pursuant to the 1994 Directors' Stock Option Plan, Mr. Noam has an option
to acquire 20,000 Shares at an exercise price of $3.19 per share, which
will become exercisable on August 4, 1999, and pursuant to the 1997
Performance and Equity Incentive Plan, an option to acquire 25,000 Shares
at an exercise price of $2.25 per share, which will become exercisable on
the earlier of February 25, 2000 or the date of the Company's 2000 Annual
Meeting.
(6) Pursuant to the 1997 Performance and Equity Incentive Plan, Mr. Valenti has
an option to acquire 250,000 Shares at an exercise price of $2.00 per
share, which will become exercisable in 20% increments beginning on August
3, 1999.
(7) Pursuant to the 1994 Directors' Stock Option Plan, Mr. Wareham has an
option to acquire 20,000 Shares at an exercise price of $3.06 per share,
and pursuant to the 1997 Performance and Equity Incentive Plan, an option
to acquire 25,000 Shares at an exercise price of $2.50 per share and an
option to acquire 25,000 Shares at an exercise price of $2.25 per share,
which will become exercisable on the earlier of February 25, 2000 or the
date of the Company's 2000 Annual Meeting.
(8) Pursuant to the 1994 Directors' Stock Option Plan, Mr. Wasserman has an
option to acquire 40,000 Shares at an exercise price of $3.75 per share,
and pursuant to the 1997 Performance and Equity Incentive Plan, an option
to acquire 25,000 Shares at an exercise price of $2.50 per share and an
option to acquire 25,000 Shares at an exercise price of $2.25 per share,
which will become exercisable on the earlier of February 25, 2000 or the
date of the Company's 2000 Annual Meeting.
(9) Pursuant to the 1994 Directors' Stock Option Plan, Mr. Wiggs has an option
to acquire 20,000 Shares at an exercise price of $1.688 per share, and
pursuant to the 1997 Performance and Equity Incentive Plan, an option to
acquire 25,000 Shares at an exercise price of $2.50 per share and an option
to acquire 25,000 Shares at an exercise price of $2.25 per share, which
will become exercisable on the earlier of February 25, 2000 or the date of
the Company's 2000 Annual Meeting.
(10) Pursuant to the 1994 Directors' Stock Option Plan, Mr. Wilkinson has an
option to acquire 20,000 Shares at an exercise price of $1.688 per share,
and pursuant to the 1997 Performance and Equity Incentive Plan, an option
to acquire 25,000 Shares at an exercise price of $2.50 per share and an
option to acquire 25,000 Shares at an exercise price of $2.25 per share,
which will become exercisable on the earlier of February 25, 2000 or the
date of the Company's 2000 Annual Meeting.
(11) Messrs. Shiver, Frank, Kelly, Noam, Wareham and Wasserman each have agreed
to relinquish, effective at the Effective Time, all rights to options to
acquire Shares at exercise prices exceeding the Offer Price.
Related Party Transactions
In April 1995, the Company and one of its affiliates and a third party
entered into agreements with an affiliate of Securicor pursuant to which
approximately $7.9 million of mobile radios and base station equipment was sold
to the Company. The agreement provided that, in the event the Company entered
into a certain definitive purchase agreement with the third party, the Company
could purchase up to $4 million of
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<PAGE> 34
radio equipment from the Securicor affiliate in exchange for common stock of the
Company. On June 29, 1995, the Company entered into the contemplated definitive
agreement and a Securicor affiliate acquired 937,042 Shares in exchange for
radio equipment. The Securicor affiliate received registration rights in respect
of the Shares received in such transaction.
On September 19, 1996, Securicor Communications and Midland USA, Inc.
("MUSA"), a wholly-owned subsidiary of the Company now known as Intek Global
USA, Inc., entered into a Loan Agreement (the "Interim Credit Facility")
pursuant to which Securicor Communications agreed to extend to MUSA a line of
credit for up to $15 million (the "Interim Facility"). As security for the
Interim Facility, MUSA pledged all of its assets, and the Company pledged all of
its shares of stock in MUSA, to Securicor Communications. Borrowings under the
Interim Facility could be used solely for the operation of the U.S. LMR
Businesses, including the repayment to the Company of certain advances made to
key vendors of Midland International for product purchases. Interest on advances
under the Interim Facility accrued at the rate of 11% per annum. Under the terms
of the Interim Facility, and pursuant to a Loan Assumption Agreement dated
September 19, 1996 between the Company, MUSA and Securicor Communications, upon
the consummation of the transaction contemplated by the 1996 Stock Purchase
Agreement (as defined below), the Company assumed the obligations outstanding
under the Interim Facility (then totaling $5.9 million). In connection with this
assumption, Securicor Communications and the Company entered into the Amended
Facility, pursuant to which the Company could borrow up to $15 million to be
used for general corporate purposes of the Company and its subsidiaries. The
loans under the Amended Facility were unsecured. Interest accrued on such loans
at the Composite Prime Rate (as defined therein) plus 1% until December 31,
1997, and at 11% per annum thereafter until the June 30, 2001 scheduled
maturity. The Amended Facility provided that interest accrued thereunder would
be capitalized as provided in the Amended Facility. Loans outstanding thereunder
were subordinate to the rights of certain senior indebtedness.
On December 3, 1996, pursuant to a Stock Purchase Agreement, dated as of
June 18, 1996, and amended by agreement of the parties as of September 19, 1996
(the "1996 Stock Purchase Agreement"), Securicor Communications exchanged all of
the issued and outstanding securities (other than certain preferred shares) of
Radiocoms for 25 million Shares. The closing of the transactions contemplated by
the 1996 Stock Purchase Agreement resulted in the combination of the narrowband
wireless technology and manufacturing operations of Radiocoms with (i) the air
time services business of Roamer One and (ii) the U.S. LMR Business previously
owned by Midland International and acquired by the Company on September 20,
1996. In connection with that transaction, the Company, Securicor Communications
and certain holders of Shares entered into a Registration Rights Agreement
pursuant to which the Company granted certain demand and incidental registration
rights to Securicor Communications and such holders. In connection with the 1996
Stock Purchase Agreement, on December 3, 1996, the Company, Radiocoms and
Securicor Communications entered into a Support Services Agreement pursuant to
which the Company agreed to obtain certain support and administrative services
for Radiocoms from Securicor and/or its affiliates for the purpose of enabling
the Company to manage an orderly transition in its ownership of Radiocoms during
fiscal 1997. During fiscal 1997, the charges to the Company for such services
were approximately $0.7 million (which to date have not been paid).
On December 29, 1997, the Company and Securicor Communications entered into
a second amended and restated loan agreement (the "Second Amended and Restated
Loan Agreement"). The Second Amended and Restated Loan Agreement amended and
restated the Amended Facility, as well as certain other loans made by Securicor
Communications to the Company (collectively, the "Outstanding Loans"). The
aggregate amount of the Outstanding Loans (including accrued interest thereon)
as of December 29, 1997 was approximately $25.4 million. Pursuant to the terms
of the Second Amended and Restated Loan Agreement, the Company may borrow up to
$29.5 million (which amount includes the Outstanding Loans) and may utilize the
proceeds for general corporate purposes of the Company and its subsidiaries.
Interest on borrowings under the Second Amended and Restated Loan Agreement
accrues at the rate of 11 1/2% per annum. Accrued interest will be capitalized
on June 30 of each year and added to principal outstanding at such time. The
maturity date for loans made under the Second Amended Loan Agreement is June 30,
2003, subject to certain mandatory prepayment provisions, including upon a
change of control as described in the next sentence. In the
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<PAGE> 35
event Securicor Communications ceases to beneficially own more than 50% of the
Shares as a result of any transaction except the direct or indirect transfer of
such Shares by Securicor Communications, the commitment of Securicor
Communications to make advances under the loan agreement shall immediately
terminate and the Company shall immediately pay to Securicor Communications the
full amount of the loan then outstanding together with accrued interest thereon.
Borrowings under the Second Amended Loan Agreement are subordinate to the rights
of certain senior indebtedness.
On December 29, 1997, Securicor Communications and the Company entered into
a Preferred Stock Purchase Agreement pursuant to which the Company sold to
Securicor Communications, effective March 31, 1998, an aggregate of 12,408
shares of the Company's Series A Convertible Preferred Stock, par value $.001
per share and liquidation preference of $1,000 per share (the "Series A
Preferred Stock"), for an aggregate purchase price of $12.4 million. Dividends
accrue on the stock at the rate of 11 1/2% per annum and cumulate quarterly.
Proceeds from the sale of the Series A Preferred Stock were applied against the
principal balance of the loans outstanding under the Second Amended and Restated
Loan Agreement. The holder of the Series A Preferred Stock has the right to
convert the Series A Preferred Stock into Shares, at the rate of one share of
Series A Preferred Stock for each Share, if the market price of the Shares
exceeds $6.00 for 20 consecutive trading days. The Company may cause the Series
A Preferred Stock to be converted if the market price is or exceeds $9.00 for 20
consecutive trading days. In addition, the holder of the Series A Preferred
Stock has the right to convert the Series A Preferred Stock into Shares if the
Company does not redeem the Series A Preferred Stock by June 30, 2003. The
Series A Preferred Stock is subject to adjustments for stock dividends, stock
splits or share combinations of the Shares or distribution of a material portion
of the Company's assets to the holders of the Shares. The Series A Preferred
Stock does not have voting power except as provided by the DGCL.
Pursuant to a Termination and Release, dated as of December 29, 1997, in
accordance with the terms of the 1996 Stock Purchase Agreement, Securicor paid
the Company $2.59 million in respect of certain securities transferred to the
Company as part of the Company's purchase of Radiocoms in 1996. The Termination
and Release also releases Securicor Communications from all liabilities and
obligations under the 1996 Stock Purchase Agreement, except as otherwise set
forth in the Termination and Release.
During the fourth quarter of fiscal 1998, the Company sold its non-core,
UK-based land mobile radio distribution and maintenance assets to Securicor
Information Systems Limited, a subsidiary of Securicor Communications. The sale
price for the assets was $8.5 million, resulting in a gain of $3.1 million to
the Company. The sales price is subject to a post-closing adjustment of up to
500,000 pounds sterling if the revenue generated from the assets during the
period of two years ending September 30, 2000 is less than two times the
aggregate revenue from the assets generated during the year ended September 30,
1998.
On December 22, 1998, the Company agreed with Securicor Communications the
terms of a $25 million convertible subordinated debt facility to be extended by
Securicor Communications to the Company (the "Convertible Debt Facility"). On
February 19, 1999, the Company and Securicor Communications entered into a
definitive loan agreement for the Convertible Debt Facility. The terms of the
Convertible Debt Facility provide that Securicor Communications will make up to
$25 million in loans available to the Company on a revolving basis. Under the
Convertible Debt Facility, interest will accrue on the loans on a quarterly
basis and at a rate of 11.5% per annum. All accrued interest will be capitalized
and added to the principal amount of the loans outstanding on the last day of
each calendar quarter, provided that, the Company has the option under the
Convertible Debt Facility to make any quarterly interest payment in cash or in
Shares. In the event the Company elects to make an interest payment in cash,
Securicor Communications may elect, in lieu of receiving such cash interest
payment, to receive the value of such payment in additional Shares. The loans
advanced under the Convertible Debt Facility originally were scheduled to mature
and become due on December 31, 1999, however, in connection with the execution
and delivery of the Merger Agreement, the Company and Securicor Communications
amended the Convertible Debt Facility to extend the maturity date thereof to
December 31, 2000 in the event the Merger Agreement is terminated.
Under the Convertible Debt Facility, Securicor Communications has the right
at any time to convert all or any part of the unpaid amounts due under the
Convertible Debt Facility into Shares. The first $12,500,000
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<PAGE> 36
of loans under the Convertible Debt Facility are convertible at a conversion
value of $1.49555 per share. All further loans are convertible at a conversion
value per share equal to the average closing price for the Shares on Nasdaq for
the 20 consecutive trading days immediately preceding the date of the loan.
Loans under the Convertible Debt Facility through and including June 9, 1999
aggregated $22.5 million in principal amount, which are convertible into an
aggregate of 13,617,607 Shares. Giving effect to these loans, Securicor
Communications beneficially owns 70.73% Shares. See "Security Ownership" above.
The interest on the outstanding loans, to the extent not paid in cash, will be
capitalized as set forth above and convertible into additional Shares.
In the ordinary course of business, Radiocoms sells equipment to Securicor.
In fiscal years 1998, 1997, and 1996, the Company's revenues from such sales
were $3.2 million, $6.8 million and $6.9 million, respectively.
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and purchase all Shares validly
tendered and not withdrawn in accordance with the procedures for withdrawal set
forth under "-- Withdrawal Rights" below on or prior to the Expiration Date (as
hereinafter defined). The term "Expiration Date" means 12:00 midnight, New York
City time, on Wednesday July 14, 1999, unless and until Purchaser, in its sole
discretion, but subject to the terms and conditions of the Merger Agreement,
shall have extended the period of time for which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Purchaser, shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the provisions of the Merger Agreement), at any time and from time to time,
to extend the period during which the Offer is open, for any reason, by giving
oral or written notice of such extension to the Depositary.
The Merger Agreement provides that, if on any scheduled expiration date of
the Offer all conditions to the Offer shall not have been satisfied or waived,
Purchaser must extend the Offer from time to time until such conditions have
been satisfied or waived; provided that Purchaser shall have no obligation to
extend the Offer beyond the date 60 days after commencement of the Offer, nor
shall it have the right to extend the Offer beyond the date 60 days after
commencement of the Offer without the prior written consent of the Company
(except pursuant to the next sentence). If on any scheduled expiration date of
the Offer all conditions to the Offer (including the Minimum Tender Condition)
shall have been satisfied but the sum of (i) the number of Shares tendered (and
not withdrawn) pursuant to the Offer plus (ii) the number of Shares held by
Parent, Purchaser or any other affiliate of Parent that have not been tendered
pursuant to the Offer, including Shares issuable to any of them upon conversion
of the Series A Preferred Stock and convertible debt of the Company held by any
of them, represent less than 90% of the outstanding Shares on a fully-diluted
basis (except that unexercised Options shall not be treated as outstanding for
this purpose), Purchaser shall also have the right to extend the Offer from time
to time without the consent of the Company (for not more than an aggregate of 10
business days) in order to permit Parent to solicit the tender of additional
Shares pursuant to the Offer. If the Offer is extended in accordance with the
preceding sentence, the Minimum Tender Condition shall be deemed to remain
satisfied regardless of any withdrawal of previously tendered shares during the
extension period.
Consummation of the Offer is conditional upon the satisfaction (or waiver,
with the approval of the Independent Committee) of the Minimum Tender Condition
and the satisfaction or waiver of the other conditions set forth in "-- Certain
Conditions to the Offer".
Subject to the applicable regulations of the Commission, Purchaser
expressly reserves the right, in its sole discretion (but subject to the
provisions of the Merger Agreement), at any time or from time to time, to (i)
delay acceptance for payment of or, regardless of whether such Shares were
theretofore accepted for
34
<PAGE> 37
payment, payment for any Shares or to terminate the Offer and not accept for
payment or pay for any Shares (whether or not any Shares have theretofore been
accepted for payment) if the Minimum Tender Condition shall not have been
satisfied or if any of the other conditions referred to under "THE TENDER
OFFER -- Certain Conditions to the Offer" shall exist or occur, and (ii) waive
any condition or otherwise amend or modify the Offer in any respect, in each
case, by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary. The reservation by Purchaser of the right to delay
acceptance for payment of or payment for Shares is subject to the provisions of
Rule 14e-1(c) under the Exchange Act, which requires that Purchaser pay the
consideration offered or return the Shares deposited by or on behalf of
stockholders promptly after the termination or withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer, or if it
waives a material condition to the Offer, Purchaser will extend the Offer and
disseminate additional tender offer materials to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in percentage of Shares
sought or a change in any dealer's soliciting fee, will depend upon the facts
and circumstances, including the materiality of the changes. With respect to a
change in price or, subject to certain limitations, a change in the percentage
of Shares sought or a change in any dealer's soliciting fee, a minimum ten
business day period from the date of such change is generally required to allow
for adequate dissemination to stockholders. Accordingly, if prior to the
Expiration Date, Purchaser increases (other than increases of not more than two
percent of the outstanding Shares) or decreases the number of Shares being
sought, or increases or decreases the consideration offered pursuant to the
Offer, and if the Offer is scheduled to expire at any time earlier than the
period ending on the tenth business day from the date that notice of such
increase or decrease is first published, sent or given to holders of Shares, the
Offer will be extended at least until the expiration of such ten business day
period. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a U.S. federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
Any extension, delay, termination, waiver, modification or amendment to the
Offer will be followed as promptly as practicable by public announcement
thereof, and such announcement in the case of an extension will be made no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which
Purchaser may choose to make any public announcement, subject to applicable law
(including Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange Act, which
require that material changes be promptly disseminated to holders of Shares),
Purchaser shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to the
Dow Jones News Service.
If Purchaser extends the Offer or if Purchaser (whether before or after its
acceptance for payment of the Shares) delays its acceptance for payment of or
payment for any Shares validly tendered and not withdrawn in the Offer or
Purchaser is unable to accept for payment or pay for such Shares pursuant to the
Offer for any reason, then, without prejudice to Purchaser's rights under the
Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and
such Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in "-- Withdrawal Rights".
The Company has provided to Parent the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal and, if
required, other relevant materials will be mailed to record holders of Shares
and will be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list, or who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
2. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
Valid Tender. Except as set forth below, in order for a stockholder to
validly tender Shares pursuant to the Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-
35
<PAGE> 38
entry delivery of Shares and any other documents required by the Letter of
Transmittal must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase on or prior to the Expiration Date
and either (i) share certificates representing tendered Shares (the "Share
Certificates") must be received by the Depositary, or such Shares must be
tendered pursuant to the procedure for book-entry transfer set forth below and a
Book-Entry Confirmation must be received by the Depositary, in each case on or
prior to the Expiration Date, or (ii) the guaranteed delivery procedures set
forth below must be complied with.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company ("DTC") (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
system of any Book-Entry Transfer Facility may make book-entry delivery of
Shares by causing such Book-Entry Transfer Facility to transfer such Shares into
the Depositary's account at such Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of Shares may be effected through book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility, a Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer, and any other required documents must, in any case, be transmitted to
and received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase on or prior to the Expiration Date, or the
guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at a Book-Entry Transfer Facility as described above is referred to as a
"Book-Entry Confirmation". The term "Agent's Message" means a message,
transmitted by a Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering the Shares which
are the subject of such Book-Entry Confirmation, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchaser may enforce such agreement against such participant.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made to, or
Share Certificates for unpurchased Shares are to be issued or returned to, a
person other than the registered holder, then the tendered certificates must be
endorsed or accompanied by appropriate stock powers, signed exactly as the name
or names of the registered holder or holders appear on the certificates, with
the signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided in the Letter of Transmittal. See Instructions 1 and 5
of the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) must accompany each such delivery.
36
<PAGE> 39
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date, or the procedures for book-entry transfer
cannot be completed on a timely basis, such Shares may nevertheless be tendered
if all of the following guaranteed delivery procedures are duly complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received by the Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal are received by the Depositary, within three
New York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery. A "New York Stock Exchange trading day" is
any day on which the New York Stock Exchange is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the same
time, and will depend upon when Share Certificates for, or Book-Entry
Confirmations with respect to, such Shares are received by the Depositary.
Backup Withholding. Under the U.S. federal income tax laws, the Depositary
will be required to withhold 31% of the amount of any payments made to certain
stockholders pursuant to the Offer. To prevent backup U.S. federal income tax
withholding on payments made to certain stockholders with respect to the
purchase price of Shares purchased pursuant to the Offer, each such stockholder
must provide the Depositary with his correct taxpayer identification number and
certify that he is not subject to backup U.S. federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
Instruction 9 of the Letter of Transmittal.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of Purchaser, and each of them, as
such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment and paid for by Purchaser and with respect
to any and all other Shares and other securities issued or issuable in respect
of such Shares on or after the date of this Offer to Purchase. All such powers
of attorney and proxies shall be considered irrevocable and coupled with an
interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, Purchaser pays for such Shares by depositing the
purchase price therefor with the Depositary. Upon such payment, all other powers
of attorney and proxies given by such stockholder with respect to such Shares
and such other securities prior to such payment will be revoked, without further
action, and no subsequent powers of attorney and proxies may be given by such
stockholder (and, if given, will not be deemed effective). The designees of
Purchaser will, with respect to the Shares for which such appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders, or any adjournment or
postponement thereof. Purchaser reserves the right to require that, in
37
<PAGE> 40
order for Shares to be deemed validly tendered, immediately upon the payment for
such Shares, Purchaser or its designee must be able to exercise full voting
rights with respect to such Shares and other securities, including voting at any
meeting of stockholders.
Determination of Validity. All questions as to the form of documents and
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of Shares will be determined by Purchaser, in its sole discretion,
whose determination shall be final and binding on all parties. Purchaser
reserves the absolute right to reject any or all tenders determined by it not to
be in proper form or the acceptance of or payment for which may, in the opinion
of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right
to waive any of the conditions of the Offer (subject to the Merger Agreement) or
any defect or irregularity in any tender of Shares of any particular stockholder
whether or not similar defects or irregularities are waived in the case of other
stockholders.
Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender of Shares will be deemed to have been validly made until
all defects and irregularities with respect to such tender have been cured or
waived. None of Purchaser, Parent or any of their affiliates or assigns, if any,
the Dealer Manager, the Depositary, the Information Agent or any other person
will be under any duty to give any notification of any defects or irregularities
in tenders or incur any liability for failure to give any such notification.
Purchaser's acceptance for payment of Shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this "Withdrawal Rights" section, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time on or prior to the Expiration Date
and, unless theretofore accepted for payment as provided herein, may also be
withdrawn at any time after August 14, 1999 (or such later date as may apply in
case the Offer is extended).
If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for
payment or pay for Shares tendered pursuant to the Offer, then, without
prejudice to Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares and such Shares may
not be withdrawn except to the extent that the tendering stockholder is entitled
to and duly exercises withdrawal rights as described in this "Withdrawal Rights"
section.
In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share
Certificates have been tendered) the name of the registered holder of the Shares
as set forth in the Share Certificate, if different from that of the person who
tendered such Shares. If Share Certificates have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the tendering stockholder must submit the serial numbers shown on
the particular certificates evidencing the Shares to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Shares tendered for the account of the
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth under "-- Procedures for Accepting the Offer
and Tendering Shares -- Book-Entry Transfer", the notice of withdrawal must
specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will
be deemed not validly tendered for purposes of the Offer, but may be retendered
at any subsequent time prior to the Expiration Date by following any of the
procedures described under "-- Procedures for Accepting the Offer and Tendering
Shares".
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<PAGE> 41
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination shall be final and binding. None of Purchaser, Parent or any
of their affiliates or assigns, if any, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give any
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), Purchaser will purchase, by accepting for payment, and
will pay for, all Shares validly tendered and not withdrawn prior to the
Expiration Date promptly after the later to occur of (i) the Expiration Date and
(ii) the satisfaction or waiver of the conditions to the Offer set forth under
"-- Certain Conditions to the Offer", including without limitation the
satisfaction of any applicable domestic or foreign regulatory requirements. Any
determination concerning the satisfaction or waiver of such terms and conditions
will be within the sole discretion of Purchaser, which determination will be
final and binding. Subject to the applicable regulations of the Commission,
Purchaser expressly reserves the right, in its sole discretion (but subject to
the provisions of the Merger Agreement), at any time or from time to time, to
(i) delay acceptance for payment of or, regardless of whether such Shares were
theretofore accepted for payment, payment for any Shares or to terminate the
Offer and not accept for payment or pay for any Shares (whether or not any
Shares have theretofore been accepted for payment) if the Minimum Tender
Condition shall not have been satisfied or if any of the other conditions
referred to under "-- Certain Conditions to the Offer" shall exist or occur, and
(ii) waive any condition or otherwise amend or modify the Offer in any respect,
in each case, by giving oral or written notice of such delay, termination,
waiver or amendment to the Depositary. The reservation by Purchaser of the right
to delay acceptance for payment of or payment for Shares is subject to the
provisions of Rule 14e-1(c) under the Exchange Act, which requires that
Purchaser pay the consideration offered or return the Shares deposited by or on
behalf of stockholders promptly after the termination or withdrawal of the
Offer.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) Share Certificates
representing such Shares or timely Book-Entry Confirmation pursuant to the
procedures set forth in "-- Procedures for Accepting the Offer and Tendering
Shares", (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer and (iii) any other
documents required by the Letter of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn, if
and when Purchaser gives oral or written notice to the Depositary of Purchaser's
acceptance of such Shares for payment pursuant to the Offer. In all cases, upon
the terms and subject to the conditions of the Offer, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from Purchaser and transmitting payment to
validly tendering stockholders. Under no circumstances will interest on the
purchase price for Shares be paid by Purchaser by reason of any delay in making
such payment. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering stockholders, Purchaser's obligation to make such
payments shall be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed them by reason of the
acceptance for payment of Shares pursuant to the Offer.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Share Certificates are submitted representing more Shares than are
tendered, Share Certificates representing unpurchased or untendered Shares will
be returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility pursuant to the procedures set forth in
"-- Procedures for Accepting the Offer and Tendering Shares", such Shares will
be credited to an account maintained within such Book-Entry Transfer Facility),
as promptly as practicable following the expiration, termination or withdrawal
of the Offer.
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<PAGE> 42
If, prior to the Expiration Date, Purchaser shall increase the
consideration offered to holders of Shares pursuant to the Offer, such increased
consideration shall be paid to all holders of Shares that are purchased pursuant
to the Offer, whether or not such Shares were tendered prior to such increase in
consideration.
Parent reserves (subject to the Merger Agreement) the right to transfer or
assign, in whole or from time to time in part, to one or more of its
subsidiaries the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
Parent of its obligations under the Offer or prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
5. PRICE RANGE OF THE SHARES; DIVIDENDS.
The Shares are listed and traded principally on Nasdaq under the symbol
"IGLC." The following table sets forth, for the periods indicated, the reported
high and low sale prices for the Shares on Nasdaq, all as reported in published
sources.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997
First Quarter............................................... 5 1/2 2 7/16
Second Quarter.............................................. 3 1/8 1 3/8
Third Quarter............................................... 2 11/16 1 5/8
Fourth Quarter.............................................. 2 3/16 1 7/16
1998
First Quarter............................................... 3 3/4 1 17/32
Second Quarter.............................................. 4 3/4 2 19/32
Third Quarter............................................... 4 1/16 1 5/16
Fourth Quarter.............................................. 2 1 1/32
1999
First Quarter............................................... 2 1/2 1 1/8
Second Quarter (through June 15, 1999)...................... 2 3/4 1 1/2
</TABLE>
On June 15, 1999, the last full day of trading prior to the commencement of
the Offer, according to published sources, the reported closing price on Nasdaq
for the Shares was $2 9/16 per Share. Stockholders are urged to obtain a current
market quotation for the Shares.
The Company has informed Purchaser that, as of June 15, 1999, the Company
had approximately 540 record holders of Shares.
The Company has never declared or paid any cash dividend on the Shares.
6. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise stated below, the information set forth below in this
"Certain Information Concerning the Company" section has been taken from the
Company's Annual Report on Form 10-K filed with the Commission for the fiscal
year ended September 30, 1998 (the "1998 Annual Report") and from the Company's
Quarterly Report on Form 10-Q filed with the Commission for the quarter ended
March 31, 1999 (the "1999 Quarterly Report"). The information not so taken has
been otherwise supplied by the Company. The following information is qualified
in its entirety by reference to the 1998 Annual Report and 1999 Quarterly Report
and all other reports and documents filed by the Company with the Commission.
ALTHOUGH NEITHER PARENT NOR PURCHASER HAS ANY KNOWLEDGE THAT ANY SUCH
INFORMATION IS UNTRUE, NEITHER PARENT NOR PURCHASER TAKES ANY RESPONSIBILITY FOR
THE ACCURACY OR COMPLETENESS OF INFORMATION CONTAINED IN THIS OFFER TO PURCHASE
WITH RESPECT TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR AFFILIATES OR FOR ANY
FAILURE BY THE COMPANY TO DISCLOSE
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<PAGE> 43
EVENTS WHICH MAY HAVE OCCURRED OR MAY AFFECT THE SIGNIFICANCE OR ACCURACY OF ANY
SUCH INFORMATION.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and in accordance therewith is
required to file periodic reports, proxy statements and other information with
the Commission relating to its business, financial condition and other matters.
Certain information, as of particular dates, concerning the Company's directors
and officers (including their remuneration and the stock options granted to
them), the principal holders of the Company's securities, any material interests
of such persons in transactions with the Company and certain other matters is
required to be disclosed in proxy statements and annual reports distributed to
the Company's stockholders and filed with the Commission. Such reports, proxy
statements and other information may be inspected and copied at the Commission's
public reference facilities at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and are also available for inspection at the
following regional offices of the Commission: 7 World Trade Center, New York,
New York 10048 and 500 West Madison Street, Chicago, Illinois 60621. Copies of
such reports, proxy statements and other materials may be obtained by mail at
prescribed rates, from the principal office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains an internet
site on the world wide web at http://www.sec.gov that contains reports, proxy
statements and other information. Reports, proxy statements and other
information concerning the Company are also available for inspection at The
Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, DC 20006-1500.
General. The Company is a Delaware corporation incorporated in 1969, with
its principal executive offices located at 99 Park Avenue, New York, New York
10016. The Company is a provider of spectrum efficient wireless communications
technology, products and services.
Directors and Executive Officers. The name, address, principal occupation
or employment, five-year employment history and citizenship of each director and
executive officer of the Company is set forth in Schedule I hereto.
Selected Consolidated Financial Data. Set forth below is certain selected
financial information of the Company and its consolidated subsidiaries. More
comprehensive financial information is included in the 1998 Annual Report and
the 1999 Quarterly Report (including management's discussion and analysis of
results of operations and financial position) and other documents filed with the
Commission. A copy of the financial statements included in the 1998 Annual
Report and the 1999 Quarterly Report is reproduced as Schedule III hereto.
41
<PAGE> 44
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31
-------------------------- --------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues........................ $ 42,284 $ 35,654 $ 17,283 $ 12,766
Total costs and expenses.............. 68,222 97,196 30,187 25,195
----------- ----------- ----------- -----------
Operating loss........................ $ (25,938) $ (61,542) $ (12,904) $ (12,429)
Net loss.............................. (26,999) (64,419) (14,277) (15,036)
Loss applicable to common
shareholders........................ (27,999) (66,463) (14,870) (16,358)
Net loss per share applicable to
common shareholders................. (0.74) (1.58) (0.35) (0.38)
Weighted average number of common
shares outstanding.................. 37,885,371 42,151,142 42,128,258 42,303,038
BALANCE SHEET DATA:
Total assets.......................... $ 112,565 $ 80,114 $ 109,039 $ 84,534
Working capital....................... 21,289 10,928 6,619 (11,541)
Long term debt........................ 24,577 32,836 17,641 31,442
Shareholders' equity (deficit)........ 53,848 (8,454) 38,800 (24,568)
OTHER DATA:
Ratio of earnings to fixed charges.... -- -- -- --
Book value per share.................. $ 1.28 $ (0.20) $ 0.93 (0.58)
</TABLE>
Forecasts
The Company does not, as a matter of course, make public any forecasts as
to its future financial performance. However, the Company has made available
certain non-public projected financial information regarding the Company to Bear
Stearns, the Independent Committee, Lazard and Securicor in connection with
their respective reviews of the transactions contemplated by the Offer and the
Merger. Such information included, among other things, two sets of forecasts
prepared by the Company of consolidated total revenues, gross profit, EBITDA,
operating income and net income to common stockholders for the fiscal years 1999
through 2004, which are set forth in the tables below.
On February 14, 1999, the Company provided a five-year business plan,
including financial forecasts (the "February Forecast"), to each of the
directors of the Company Board and Bear Stearns. Bear Stearns subsequently
provided the February Forecast to Lazard for use in connection with its due
diligence. The February Forecast reflected the most recent financial performance
of the Company, the roll-out of service using the 220 MHz radio spectrum awarded
to the Company by the FCC in the Phase II license auction in November 1998 and
the introduction of a VHF product using the Company's existing technology. The
business plan contemplated substantial additional financing to maximize the long
term value of the business, without consideration as to the likelihood of the
Company being able to obtain such financing from unaffiliated third parties. The
business plan and the February Forecast also assumed that the Company would
introduce a VHF product late in 1999, anticipating rapid and significant growth
in this market prior to the 2005 FCC mandated date established for new equipment
to be more spectrally efficient. At that time, the Company's technology had been
"type accepted," by the FCC to be compliant with its mandated efficiency
standards, although no Company product was then fully developed.
In early May 1999, Company management prepared an updated forecast (the
"May Forecast"), which was subsequently provided to the Independent Committee,
Bear Stearns and Securicor. The May Forecast incorporated revised assumptions in
the five-year business plan to reflect a recent report prepared over a several
month period by the member of Company management responsible for the VHF market
analyzing the Company's opportunities in such market. The May Forecast reflected
a more conservative roll-out of the Company's VHF products. In addition, the May
Forecast also reflected a gradual reduction in the Company's
42
<PAGE> 45
projected gross margins with respect to land mobile radio equipment sales due to
increasing competition in such industry segment.
Set forth below are the February Forecast and the May Forecast.
February Forecast
<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER 30,
--------------------------------------------------------
1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Total Revenues....................... $ 56.9 $ 77.9 $127.5 $190.8 $257.1 $312.8
Gross Profit......................... 11.9 19.6 36.2 64.1 101.5 140.7
EBITDA............................... (10.2) (6.8) (2.8) 13.0 43.3 80.8
Operating Income..................... (16.6) (13.7) (11.6) 0.5 26.5 62.0
Net income to common stockholders.... (23.4) (22.2) (21.6) (11.7) 13.1 53.0
</TABLE>
May Forecast
<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER 30,
--------------------------------------------------------
1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Total Revenues....................... $ 44.5 $ 69.6 $105.0 $153.3 $201.0 $240.3
Gross Profit......................... 11.1 15.8 26.4 48.9 80.3 114.2
EBITDA............................... (12.7) (8.8) (9.2) 2.9 29.5 63.8
Operating Income..................... (18.8) (15.8) (18.0) (9.6) 12.7 45.0
Net income to common stockholders.... (28.8) (25.2) (29.6) (24.3) (3.9) 32.8
</TABLE>
The forecasts reflect the Company's forecast of the enumerated items on a
stand-alone basis and without reflecting any potential synergies from the
acquisition of the Company by Parent and Purchaser.
The forecasts were prepared solely for internal use, were not prepared in
accordance with generally accepted accounting principles or with a view to
public disclosure or compliance with the published guidelines of the Commission
or the American Institute of Certified Public Accountants regarding projections,
and were not prepared with the assistance of, or reviewed by, the Company's
independent accountants. Such forecasts are included in this Offer to Purchase
solely because such information was furnished to Bear Stearns, the Independent
Committee, Lazard and Securicor. None of the Company, Bear Stearns, the
Independent Committee, Lazard or Securicor or any other party to whom the
forecasts were provided assumes any responsibility for the validity,
reasonableness, accuracy or completeness of the projections. While presented
with numerical specificity, the forecasts were based on a variety of assumptions
relating to the businesses of the Company, industry performance, general
business and economic conditions and other matters which are inherently subject
to significant uncertainties and contingencies, many of which are beyond the
Company's control. These assumptions involve judgments with respect to, among
other things, future economic and competitive conditions, availability and cost
of capital, inflation rates and future business conditions. Therefore, such
forecasts are inherently imprecise and there can be no assurance that they will
prove to be reliable. Also, actual future results may vary materially from those
shown in the projections. None of the Company, Bear Stearns, the Independent
Committee, Lazard, or Securicor is under any obligation, or has any intention,
to update the projections at any future time.
7. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT.
Parent is incorporated under the laws of England and Wales. The principal
activities of Parent and its subsidiaries include the transportation and care of
cash and valuables; cash processing; security guards and patrols; custodial
services; recruitment services; container transport, contract distribution and
warehouse management, express parcels, freight haulage, document delivery;
vehicle fleet services; computer services; the manufacture, sale and
installation of communications products; mobile communications and the provision
of
43
<PAGE> 46
communications systems networks. The principal executive offices of Parent are
located at Sutton Park House, 15 Carshalton Road, Sutton, Surrey SM1 4LD, United
Kingdom.
Purchaser was incorporated in June 1999 under the laws of the State of
Delaware for the purpose of acquiring the Company. Purchaser has not engaged,
and is not expected to engage, in any business other than in connection with its
organization, the Offer and the Merger. Purchaser is a wholly-owned subsidiary
of Parent. Parent is a public limited company incorporated under the laws of
England and Wales. Securicor is a public limited company incorporated under the
laws of England and Wales and is the ultimate parent corporation of Parent and
Purchaser.
The name, business address, present principal occupation and five-year
employment history of each of the directors and executive officers of each of
Parent, Purchaser and Securicor are set forth in Schedule II of this Offer to
Purchase.
Except as set forth elsewhere in this Offer to Purchase, (i) none of
Parent, Purchaser or Securicor nor, to the best knowledge of Parent, Purchaser
and Securicor, any of the persons listed in Schedule II hereto nor any associate
or majority-owned subsidiary of any such persons, beneficially owns or has a
right to acquire any Shares or any other equity securities of the Company; (ii)
none of Parent, Purchaser or Securicor nor, to the knowledge of Parent,
Purchaser and Securicor, any of the persons or entities referred to in clause
(i) above or any of their executive officers, directors or subsidiaries has
effected any transaction in the Shares or any other equity securities of the
Company during the past 60 days; (iii) none of Parent, Purchaser or Securicor
nor, to the knowledge of Parent, Purchaser or Securicor, any of the persons
listed in Schedule II hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, the transfer or voting thereof, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies, consents or
authorizations; and (iv) since October 1, 1996, there have been no contacts,
negotiations or transactions between any of Parent, Purchaser or Securicor or
any of their respective subsidiaries or, to the best knowledge of Parent,
Purchaser or Securicor, any of the persons listed in Schedule II hereto, on the
one hand, and the Company or any of its executive officers, directors or
affiliates, on the other hand, that are required to be disclosed pursuant to the
rules and regulations of the Commission.
8. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by Purchaser and Parent to consummate
the Offer and the Merger and to pay related fees and expenses (excluding
payments to be made in respect of options exercised after June 7, 1999 or in
connection with the cancellation of outstanding options and warrants) is
estimated to be approximately $46.7 million. Purchaser intends to obtain the
funds required by it from capital contributions and/or loans from Parent. Parent
intends to fund such capital contributions from its available cash resources.
The Offer and Merger are not conditional on Purchaser obtaining financing.
9. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the terms of the Merger Agreement, prior to the Effective Time,
unless otherwise approved in writing by Parent, the Company may not (i) declare,
set aside or pay any dividend on, or make any other distribution in respect of
(whether in cash, stock or property), outstanding shares of capital stock,
except for dividends by a wholly-owned subsidiary of the Company to the Company
or another wholly-owned subsidiary of the Company; (ii) redeem, purchase or
otherwise acquire any outstanding shares of capital stock of, or other equity
interests in, or any securities that are convertible into or exchangeable for,
any shares of capital stock of or other equity interests in, or any outstanding
options, warrants or rights of any kind to acquire any shares of capital stock
of or other equity interests in the Company or any of its subsidiaries (other
than any purchase, forfeiture or retirement of Shares or Options occurring
pursuant to the terms thereof (as in effect on the date of the Merger
Agreement)); or (iii) effect any reorganization or recapitalization of, or
split, combine or reclassify, any of the capital stock of or other equity
interests in the Company or any of its subsidiaries, or issue or authorize any
other securities in respect of, in lieu of or in substitution for shares of such
capital stock or such equity interests.
44
<PAGE> 47
10. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, Purchaser (x) shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) promulgated under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer), pay for any
Shares, (y) may delay the acceptance for payment of or payment for any Shares or
(z) subject to the terms of the Merger Agreement, may terminate or amend the
Offer as to any Shares not then paid for, if (i) the Minimum Tender Condition
shall not have been satisfied or (ii) at any time prior to the acceptance for
payment of Shares pursuant to the Offer, any of the following conditions exist
or shall occur:
(i) there shall have occurred any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market, any declaration of a banking moratorium by
federal or New York authorities or general suspension of payments in
respect of lenders that regularly participate in the United States market
in loans to large corporations, any material limitation by any federal,
state or local government or any court, administrative or regulatory agency
or commission or other governmental authority or agency in the United
States that materially affects the extension of credit generally by lenders
that regularly participate in the United States market in loans to large
corporations, any commencement of a war involving the United States or any
commencement of armed hostilities or other national or international
calamity involving the United States, that in any such case has a material
adverse effect on bank syndication or financial markets in the United
States or in the case of any of the foregoing occurrences existing on or at
the time of the commencement of the Offer, a material acceleration or
worsening thereof; or
(ii) there shall be pending any action or proceeding (or any
investigation or other inquiry that might result in such an action or
proceeding) by any governmental authority or administrative agency before
any governmental authority, administrative agency or court of competent
jurisdiction, domestic or foreign, or there shall be in effect any
judgment, decree or order of any governmental authority, administrative
agency or court of competent jurisdiction, or any other legal restraint,
preventing or seeking to prevent consummation of the Offer, the Merger or
the other transactions contemplated by the Merger Agreement, prohibiting or
seeking to prohibit or limiting or seeking to limit Parent or Purchaser
from exercising any material rights and privileges pertaining to the
ownership of the Shares or compelling or seeking to compel any party or any
of its subsidiaries to dispose of or hold separate all or any portion of
the business or assets of Parent or the Company or any of their respective
subsidiaries that is material in relation to the consolidated business or
assets of Parent and its subsidiaries or the Company and its subsidiaries,
in each case as a result of the Offer, the Merger or the other transactions
contemplated by the Merger Agreement; or
(iii) Parent, Purchaser, the Company or their affiliates shall have
failed to make any filings with or to obtain any approvals by or
authorizations from any governmental body, agency, official or authority,
or any applicable waiting period related thereto shall not have expired or
been terminated, which filings, approvals or authorizations (or the
expiration of such waiting periods) are legally required to be obtained or
made by them (or to have expired or terminated) prior to the consummation
of the Offer and which, if not obtained or made (or expired or terminated)
would, individually or in the aggregate, have a reasonable probability of
having a material adverse effect on Parent or the Company; or
(iv) the Company shall have failed to perform in all material respects
all of its obligations under the Merger Agreement required to be performed
by it at or prior to the time Shares are accepted for payment pursuant to
the Offer, and shall not have cured such failure prior to 30 days after
notice thereof by Parent to the Company; or
(v) the representations and warranties of the Company contained in the
Merger Agreement shall not be true and correct in all material respects at
and as of the time Shares are accepted for payment pursuant to the Offer as
if made at and as of such time (except as to those representations and
warranties that are made as of a specified date, which shall be true and
correct in any material respect as of such
45
<PAGE> 48
date), and Parent shall not have had knowledge as of the date hereof that
the relevant representation or warranty was untrue or incorrect in any
material respect as of the date hereof; or
(vi) the Merger Agreement shall have been terminated in accordance
with its terms; or
(vii) the Company Board shall have withdrawn or modified its
recommendation of the Offer or the Merger;
which, in the reasonable good faith judgment of Parent in any such case,
and regardless of the circumstances (including any action or omission by
Parent not inconsistent with the terms hereof) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for
payment or payment.
11. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Company with the Commission and other publicly
available information regarding the Company, Purchaser is not aware of any
licenses or regulatory permits that would be material to the business of the
Company and its subsidiaries, taken as a whole, and that might be adversely
affected by Purchaser's acquisition of Shares as contemplated herein, or any
filings, approvals or other actions by or with any domestic, foreign or
supranational governmental authority or administrative or regulatory agency that
would be required prior to the acquisition of Shares by Purchaser pursuant to
the Offer as contemplated herein. Should any such approval or other action be
required, there can be no assurance that any such additional approval or action,
if needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Company's business, or that certain parts
of the Company's or Purchaser's business might not have to be disposed of or
held separate or other substantial conditions complied with in order to obtain
such approval or action or in the event that such approvals were not obtained or
such actions were not taken. Purchaser's obligation to purchase and pay for
Shares is subject to certain conditions, including conditions with respect to
governmental actions. See "INTRODUCTION" and "-- Certain Conditions to the
Offer" for a description of certain conditions to the Offer, including with
respect to litigation and governmental actions.
State Takeover Laws
Section 203 of DGCL provides that a Delaware corporation such as the
Company may not engage in any Business Combination (defined to include a variety
of transactions, including a merger) with any Interested Stockholder (defined
generally as any person that, directly or indirectly, beneficially owns 15% or
more of the outstanding voting stock of the corporation), or any affiliate of an
Interested Stockholder, for three years after the date on which the Interested
Stockholder became an Interested Stockholder. The three-year prohibition on
Business Combinations with Interested Stockholders (the "Business Combination
Prohibition") does not apply if certain conditions, described below, are
satisfied. Section 203 of DGCL provides that a "beneficial owner" of voting
stock includes any person who, individually or together with any of its
affiliates or associates, has (i) the right to acquire voting stock (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options or otherwise, (ii) the
right to vote such stock pursuant to any agreement, arrangement or understanding
or (iii) any agreement, arrangement or understanding for the purposes of
acquiring, holding, voting or disposing of such stock with any other person that
beneficially owns, directly or indirectly, such stock.
The Business Combination Prohibition does not apply to a particular
Business Combination between a corporation and a particular Interested
Stockholder if (i) prior to the date such Interested Stockholder became an
Interested Stockholder, the board of directors of such corporation approves
either the Business Combination or the transaction which resulted in the
stockholder becoming an Interested Stockholder, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
by (x) persons who are directors and also officers and (y) employee stock
46
<PAGE> 49
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer, or (iii) on or subsequent to the date the stockholder
becomes an Interested Stockholder, the Business Combination is approved by the
board of directors of such corporation and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the Interested Stockholder.
The foregoing summary of Section 203 of DGCL does not purport to be
complete and is qualified in its entirety by reference to the provisions of
Section 203 of DGCL.
Pursuant to the 1996 Stock Purchase Agreement, Securicor became an
Interested Stockholder. Prior to the consummation of the transaction
contemplated by such agreement, the Company's Board and its stockholders
approved such agreement and the transactions contemplated thereby. Accordingly,
Section 203 of DGCL does not apply to the Merger.
A number of other states have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, security holders, principal executive offices or principal places of
business therein. To the extent that certain provisions of certain of these
state takeover statutes purport to apply to the Offer, Purchaser believes that
such laws conflict with U.S. federal law and constitute an unconstitutional
burden on interstate commerce.
Except as described herein, Purchaser has not attempted to comply with any
state takeover statutes in connection with the Offer. Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to the Offer, Purchaser
might be unable to accept for payment or purchase Shares tendered pursuant to
the Offer or be delayed in continuing or consummating the Offer. In such case,
Purchaser may not be obligated to accept for purchase, or pay for, any Shares
tendered. See "-- Certain Conditions to the Offer".
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1974,
as amended (the "HSR Act"), and the rules that have been promulgated thereunder
by the Federal Trade Commission (the "FTC"), certain transactions (including
certain transactions involving the proposed acquisition of in excess of 15%, 25%
and 50% of the equity interest of a target corporation) may not be consummated
unless certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the FTC and certain waiting
period requirements have been satisfied (the "HSR Requirements"). Because
Securicor complied with the applicable HSR Requirements in connection with the
acquisition of in excess of 50% of the outstanding equity of the Company, the
HSR Requirements are inapplicable to the acquisition of Shares in the Offer and
to the Merger.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by Purchaser, 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 purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Parent, the Company or
their respective subsidiaries. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to Parent
relating to the businesses in which Parent, the Company and their respective
subsidiaries are engaged, Parent and Purchaser believe that neither the Offer
nor the Merger will violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, what the result would be. See "-- Certain
Conditions to the Offer."
Lawsuits. The Company, Securicor and the Company's directors have been
named as defendants in a class action lawsuit filed on June 8, 1999 in the Court
of Chancery of the State of Delaware following the Company's announcement on
June 7, 1999 of the Offer. The complaint alleges that the Company, Securicor and
the Company Board have suppressed the price of the Shares by among other things,
suppressing material
47
<PAGE> 50
information, so that Securicor can purchase the publicly-held Shares at an
inadequate price. The complaint alleges claims for breaches of fiduciary duty to
the Company's public stockholders and seeks injunctive relief, unspecified
compensatory and/or rescissory damages, attorneys' fees and costs, and other
relief relating to the Offer and the Merger.
The Company, Securicor and the Company's directors have been named as
defendants in another class action lawsuit filed on June 11, 1999 in the Court
of Chancery of the State of Delaware following the Company's announcements on
June 7, 1999 of the Offer and on June 10, 1999 that the Company Board had
approved the Offer. The complaint alleges that Securicor has timed the Offer to
take advantage of the investments made by the Company from its inception through
1998. The complaint alleges that Securicor has breached its fiduciary duties to
the Company's public stockholders by offering to purchase the Shares it does not
already own for grossly inadequate consideration and without adequate procedural
protections customarily afforded public stockholders under such circumstances.
The complaint seeks preliminary and permanent injunctive relief, unspecified
compensatory and/or rescissory damages, and costs and disbursements, including
attorneys' and experts' fees, relating to the Offer.
12. CERTAIN FEES AND EXPENSES.
Lazard acted as financial advisor to Securicor in connection with the
proposed acquisition of, or a business combination with, the Company. In
consideration for these services, Securicor agreed to pay Lazard a cash fee of
$1 million. Such fee will be payable upon the consummation of an acquisition of
the Company by Purchaser. Securicor also agreed to reimburse Lazard for all
out-of-pocket expenses incurred by it, including the fees and expenses of its
counsel, and to indemnify Lazard against certain liabilities and expenses in
connection with the proposed acquisition, including certain liabilities under
the federal securities laws. In addition, Lazard Freres & Co. LLC has been
engaged to act as Dealer Manager in connection with the Offer. The Dealer
Manager has agreed to so act without any additional compensation, except as to
the matters set forth in the second preceding sentence.
MacKenzie Partners, Inc. has been retained by Purchaser as Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee stockholders to forward material
relating to the Offer to beneficial owners. Customary compensation will be paid
for all such services in addition to reimbursement of reasonable out-of-pocket
expenses. Purchaser has agreed to indemnify the Information Agent against
certain liabilities and expenses, including liabilities under the federal
securities laws.
In addition, ChaseMellon Shareholder Services, L.L.C. has been retained as
the Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services in connection with the
Offer, will be reimbursed for its reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith.
Except as set forth above, Purchaser will not pay any fees or commissions
to any broker, dealer or other person (other than the Information Agent and the
Dealer Manager) for soliciting tenders of Shares pursuant to the Offer. Brokers,
dealers, commercial banks and trust companies and other nominees will, upon
request, be reimbursed by Purchaser for customary clerical and mailing expenses
incurred by them in forwarding materials to their customers.
48
<PAGE> 51
The following is an estimate of expenses to be incurred in connection with
the Offer and the Merger:
Expenses to be paid by the Purchaser and its affiliates:
<TABLE>
<S> <C>
Financial Advisor/Dealer Manager............................ $1,000,000
Legal Fees for Counsel to the Financial Advisor/Dealer
Manager................................................... 40,000
Legal Fees for Counsel to Purchaser......................... 350,000
Printing and Mailing........................................ 100,000
Advertising................................................. 60,000
Filing Fees................................................. 10,876
Depositary Fees............................................. 25,000
Information Agent Fees...................................... 30,000
Miscellaneous............................................... 50,000
----------
TOTAL.................................................. $1,665,876
==========
</TABLE>
Expenses to be paid by the Company:
<TABLE>
<S> <C>
Financial Advisor to Independent Committee.................. $3,108,000
Legal Fees for Counsel to the Independent Committee......... 200,000
Legal Fees for Counsel to the Company....................... 250,000
Printing and Mailing........................................ 20,000
Miscellaneous............................................... 20,000
----------
TOTAL.................................................. $3,598,000
==========
</TABLE>
13. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, Purchaser may,
in its discretion, take such action as it may deem necessary to make the Offer
in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of Purchaser by the Dealer Manager or one or more registered
brokers or dealers that are licensed under the laws of such jurisdiction.
Purchaser has filed with the Commission the Schedule 13E-3 pursuant to Rule
13e-3 under the Exchange Act and the Schedule 14D-1 pursuant to Rule 14d-3 under
the Exchange Act, furnishing certain additional information with respect to the
Offer, and may file amendments thereto. Such Schedule 13E-3 and Schedule 14D-1
and any amendments thereto, including exhibits, may be examined and copies may
be obtained from the office of the Commission in the same manner as described in
"-- Certain Information Concerning the Company," with respect to information
concerning the Company, except that they will not be available at the regional
offices of the Commission.
49
<PAGE> 52
No person has been authorized to give any information or to make any
representation on behalf of Purchaser not contained in this Offer to Purchase or
in the Letter of Transmittal and, if given or made, any such information or
representation must not be relied upon as having been authorized. Neither the
delivery of the Offer to Purchase nor any purchase pursuant to the Offer shall,
under any circumstances, create any implication that there has been no change in
the affairs of Purchaser or the Company since the date as of which information
is furnished or the date of this Offer to Purchase.
IGC ACQUISITION CORP.
June 16, 1999
50
<PAGE> 53
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
the Company. Except as otherwise noted, the business address of each such person
is 99 Park Avenue, New York, New York. Messrs. Wiggs and Wikinson are citizens
of the United Kingdom; each other person listed is a citizen of the United
States.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENTS
(WHERE APPLICABLE) FOR THE PAST FIVE YEARS
------------------------- -----------------------
<S> <C>
Robert J. Shiver..................... Mr. Shiver has been a Director of the Company since 1997;
Chief Executive Officer and Chairman of the Board of
Directors of the Company since August 1997; and President of
the Company since April 1999. From 1994 until August 1997,
Mr. Shiver served as Chief Executive Officer and a director
of Centennial Security Holdings, Inc. and Centennial
Security, Inc., a large provider of security systems and
services in North America. Mr. Shiver, since 1992, also has
served as Chairman and director of BDC Holdings, Inc.
Howard Frank......................... Director of the Company. Howard Frank has served as Director
of the Company since 1998. Dean Frank has served as the Dean
of the Robert H. Smith School of Business University of
Maryland, College Park, since September 1997. Dean Frank was
a Senior Fellow at the Wharton School of Business,
University of Pennsylvania from August 1993 until August
1997. As a Senior Fellow, Dean Frank was on loan to the
Defense Advanced Research Projects Agency where he served as
Director of the Information Technology Office. Dean Frank is
also a partner in Howard Frank Associates.
Robert B. Kelly...................... Director of the Company. Mr. Kelly has been a partner in the
Washington, D.C. law firm of Squire, Sanders & Dempsey,
L.L.P. since May 1998. Mr. Kelly was a principal in the
Washington, D.C. law firm of Kelly & Povich, P.C. from its
formation in October 1994 until May 1998. Mr. Kelly was a
partner in the Washington, D.C. firm of Piper & Marbury from
January 1989 to March 1992, was a sole practitioner from
March 1992 to February 1993 and was a principal in the firm
of Kelly, Hunter, Mow & Povich, P.C. from February 1993 to
October 1994. Mr. Kelly is also a director of Telesciences,
Inc.
Eli M. Noam.......................... Director of the Company. Professor Noam is a Professor of
Finance and Economics, and Director of the Columbia
Institute for Tele-Information at the Columbia Business
School, Columbia University. He has served as a Professor
since 1976.
John Wareham......................... Director of the Company. Mr. Wareham is the founder and
Chief Executive Officer of Wareham Associates, Inc., a human
resources consulting firm. Mr. Wareham founded the
organization approximately 30 years ago.
Steven L. Wasserman.................. Director of the Company. Mr. Wasserman has been the
Secretary of the Company since September 1994. Mr. Wasserman
has been an attorney and a partner of the law firm of
Kohrman Jackson & Krantz, P.L.L., Cleveland, Ohio, since
1994. From 1983 to 1994, Mr. Wasserman was a shareholder and
officer of Honohan, Harwood, Chernett & Wasserman Co. LPA,
Cleveland, Ohio. Mr. Wasserman also is a director of
SecurFone America, Inc., a prepaid cellular and network
service provider. He is a member of the State bars of Ohio
and Florida.
</TABLE>
I-1
<PAGE> 54
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENTS
(WHERE APPLICABLE) FOR THE PAST FIVE YEARS
------------------------- -----------------------
<S> <C>
Roger Wiggs.......................... Director of the Company. Mr. Wiggs is a solicitor and is the
c/o Sutton Park House Chief Executive of Securicor. Mr. Wiggs has been a Director
15 Carshalton Road of Parent and of Securicor Omega Holdings Limited (formerly
Sutton, Surrey SM1 4LD Securicor Group plc) since 1977. Since 1988, Mr. Wiggs has
United Kingdom served as Chief Executive of Securicor Group. Since its
formation in 1996, Mr. Wiggs has been a Director and the
Chief Executive of Securicor. Mr. Wiggs is a Director of
Cellnet Group Limited and a non-executive Director of The
Crown Agents Foundation.
Michael G. Wilkinson................. Director of the Company. Mr. Wilkinson has served as the
c/o Sutton Park House Financial Director of Securicor Communications Limited since
15 Carshalton Road 1992. Mr. Wilkinson has served as Director of Securicor
Sutton, Surrey SM1 4LD Communications Limited since 1992.
United Kingdom
George F. Naspo...................... Mr. Naspo has been the Executive Vice President since
October 1998. Mr. Naspo served as Director of Carrier
Sales -- North America for Sierra Wireless from January 1997
until joining the Company. From May 1993 to January 1997,
Mr. Naspo was Director of Sales -- The Americas for Cyplex
Corporation and from January 1988 to May 1997, he was
Regional Sales Director for Motorola/UDS. Mr. Naspo has over
twenty years of experience working in the communications
industry.
George Valenti....................... Chief Financial Officer and Vice President. Mr. Valenti has
been the Chief Financial Officer and Vice President of the
Company since August 1998. Mr. Valenti served as Chief
Financial Officer of Energy One, LLC from September 1997
until August 1998. From June 1994 through April 1997, Mr.
Valenti was the Vice President-Financial Services of TRC
Environmental Corp. From 1985 to June 1994, Mr. Valenti was
the Corporate Controller of Rochester Telephone Corporation.
</TABLE>
I-2
<PAGE> 55
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT,
PURCHASER AND SECURICOR
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
Parent. The business address of each such person is c/o Sutton Park House, 15
Carshalton Road, Sutton, Surrey SM1 4LD, United Kingdom, and each such person is
a citizen of the United Kingdom.
<TABLE>
<CAPTION>
NAME MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -------------------------------------------------------------------------------
<S> <C>
Nigel Griffiths LLB.................. Securicor Group Legal Director and Company Secretary; Mr. Griffiths is a
solicitor. Mr. Griffiths has served as Company Secretary of Parent since 1989
and as a Director of Parent since 1990. Mr. Griffiths was also Company
Secretary of Securicor Group plc (now Securicor Omega Holdings Limited) from
1989 to 1999 and a Director of that company from 1990 to 1999. Since its
formation in 1996, Mr. Griffiths has been Company Secretary and Group Legal
Director of Securicor.
Patrick Howes........................ Chairman, Securicor Distribution Division; In his capacity as Chairman of the
Securicor Group's Distribution Division, Mr. Howes has served as a Director of
Parent since 1991, of Securicor Omega Holdings Limited (formerly Securicor
Group plc) since 1992 and of Securicor since its formation in 1996.
Christopher Shirtcliffe.............. Securicor Group Finance Director; In his capacity as the Securicor Group's
Finance Director, Mr. Shirtcliffe has served as a Director of Parent since
1985, of Securicor Omega Holdings Limited (formerly Securicor Group plc) since
1986 and of Securicor since its formation in 1996.
Roger Wiggs.......................... Chief Executive of Securicor; Mr. Wiggs is a solicitor and is the Chief
Executive of Securicor. Mr. Wiggs has been a Director of Parent and of
Securicor Omega Holdings Limited (formerly Securicor Group plc) since 1977.
Since 1988, Mr. Wiggs has served as Chief Executive of the Securicor Group.
Since its formation in 1996, Mr. Wiggs has been a Director and the Chief
Executive of Securicor. Mr. Wiggs is a Director of the Company and of Cellnet
Group Limited and a non-executive Director of The Crown Agents Foundation.
</TABLE>
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
Purchaser. Messrs. McMullan and Thompson are United States citizens; Mr.
Griffiths is a citizen of the United Kingdom.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
------------------------- -------------------------------------------------------------------------------
<S> <C>
C. Grice McMullan Jr. Chairman of the Board, President and Director of Purchaser; Partner at Thompson
c/o Thompson & McMullan, & McMullan, a Professional Corporation, a law firm, since its formation in
a Professional Corporation 1978.
100 Shockoe Slip
Richmond, Virginia 23219-4140
John B. Thompson Vice President, Treasurer, Assistant Secretary and Director of Purchaser;
c/o Thompson & McMullan, Partner at Thompson & McMullan, a Professional Corporation, since its formation
a Professional Corporation in 1978.
100 Shockoe Slip
Richmond, Virginia 23219-4140
</TABLE>
II-1
<PAGE> 56
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
------------------------- -------------------------------------------------------------------------------
<S> <C>
Nigel Griffiths LLB Securicor Group Legal Director and Company Secretary; Mr. Griffiths is a
c/o Sutton Park House solicitor. Mr. Griffiths has served as Company Secretary of Parent since 1989
15 Carshalton Road and as a Director of Parent since 1990. Mr. Griffiths was also Company
Sutton, Surrey SM1 4LD Secretary of Securicor Group plc (now Securicor Omega Holdings Limited) from
United Kingdom 1989 to 1999 and a Director of that Company from 1990 to 1999. Since its
formation in 1996, Mr. Griffiths has been Company Secretary and Group Legal
Director of Securicor.
</TABLE>
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
Securicor. The business address of each such person is c/o Sutton Park House, 15
Carshalton Road, Sutton, Surrey SM1 4LD, United Kingdom, and each such person is
a citizen of the United Kingdom.
<TABLE>
<CAPTION>
NAME MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
- ---- -------------------------------------------------------------------------------
<S> <C>
Sir James Birrell.................... Non-Executive Director of Securicor; Sir James served as a Director of Parent
and Securicor Group plc (now Securicor Omega Holdings Limited) from 1993 until
1996 and as a Director of Securicor since its formation in 1996. Sir James is
also a member of the Building Societies Commission and a non-executive Director
of Wesleyan Assurance Society.
Nigel Griffiths LLB.................. Securicor Group Legal Director and Company Secretary; Mr. Griffiths is a
solicitor. Mr. Griffiths has served as Company Secretary of Parent since 1989
and as a Director of Parent since 1990. Mr. Griffiths was also Company
Secretary of Securicor Group plc (now Securicor Omega Holdings Limited) from
1989 to 1999 and a Director of that company from 1990 to 1999. Since its
formation in 1996, Mr. Griffiths has been Company Secretary and Group Legal
Director of Securicor.
Patrick Howes........................ Chairman, Securicor Distribution Division; In his capacity as Chairman of the
Securicor Group's Distribution Division, Mr. Howes has served as a Director of
Parent since 1991, of Securicor Omega Holdings Limited (formerly Securicor
Group plc) since 1992 and of Securicor since its formation in 1996.
Lord Imbert.......................... Non-Executive Director of Securicor; Lord Imbert, formerly Sir Peter Imbert,
served as a Director of Parent and of Securicor Group plc (now Securicor Omega
Holdings Limited) from 1993 until 1996 and as a Director of Securicor since its
formation in 1996. Lord Imbert is a non-executive director of Camelot Group plc
and non-executive Chairman of Retainagroup Limited. Lord Imbert was appointed
as Her Majesty's Lord Lieutenant of Greater London in 1998 and was made a Life
Peer in 1999.
Jonathan Kitchen..................... Non-Executive Director of Securicor; Mr. Kitchen was appointed to the board of
Securicor in 1998, following his retirement from Lazard Brothers and Co.,
Limited, where he had served as a Director since 1981. Mr. Kitchen serves as a
non-executive director of The 600 Group plc.
Sir Neil Macfarlane.................. Non-Executive Chairman of Securicor; Sir Neil served as a non-executive
Director of Parent and Securicor Group plc (now Securicor Omega Holdings
Limited) from 1993 to 1996 and as Chairman of those companies from 1995 to
1996. Since its formation in 1996, Sir Neil has served as Chairman and Director
of Securicor. Sir Neil also serves as Chairman of Associated Nursing Services
plc, non-executive Director of RMC plc and Bradford and Bingley Building
Society and trustee of the England and Wales Cricket Foundation.
</TABLE>
II-2
<PAGE> 57
<TABLE>
<CAPTION>
NAME MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
- ---- -------------------------------------------------------------------------------
<S> <C>
David Cowden......................... Director and Chief Executive, Securicor Security Services Division; Mr. Cowden
served as Managing Director of Securicor Guarding Limited from 1991 until 1996
and Executive Chairman of Securicor Cash Services Limited from 1996 until 1998.
In 1998 Mr. Cowden was appointed Chief Executive of Securicor's Security
Services Division and in 1999, Mr. Cowden became a Director of Securicor.
Christopher Shirtcliffe.............. Securicor Group Finance Director; In his capacity as the Securicor Group's
Finance Director, Mr. Shirtcliffe has served as a Director of Parent since
1985, of Securicor Omega Holdings Limited (formerly Securicor Group plc) since
1986 and of Securicor since its formation in 1996.
Roger Wiggs.......................... Chief Executive of Securicor; Mr. Wiggs is a solicitor and is the Chief
Executive of Securicor. Mr. Wiggs has been a Director of Parent and of
Securicor Omega Holdings Limited (formerly Securicor Group plc) since 1977.
Since 1988, Mr. Wiggs has served as Chief Executive of the Securicor Group.
Since its formation in 1996, Mr. Wiggs has been a Director and the Chief
Executive of Securicor. Mr. Wiggs is a Director of the Company and of Cellnet
Group Limited and a non-executive Director of The Crown Agents Foundation.
</TABLE>
II-3
<PAGE> 58
SCHEDULE III
FINANCIAL STATEMENTS OF THE COMPANY
<TABLE>
<S> <C>
Consolidated Statements of Operations and Comprehensive
Income (Loss) for the years ended September 30, 1998, 1997
and 1996.................................................. F-2
Consolidated Balance Sheets at September 30, 1998 and
1997...................................................... F-3
Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended September 30, 1998, 1997 and 1996..... F-4
Consolidated Statements of Cash Flows for the years ended
September 30, 1998, 1997 and 1996......................... F-5
Notes to Consolidated Financial Statements.................. F-6
Consolidated Statements of Operations and Comprehensive Loss
for the three and six months ended March 31, 1999 and
1998...................................................... F-29
Consolidated Balance Sheets at March 31, 1999 and September
30, 1998.................................................. F-30
Consolidated Statements of Cash Flows for the six months
ended March 31, 1999...................................... F-31
Notes to Consolidated Financial Statements.................. F-32
</TABLE>
F-1
<PAGE> 59
INTEK GLOBAL CORPORATION
RADIOCOMS INCLUDED FROM OCTOBER 1, 1995 AND
INTEK, ROAMER ONE, AND MIDLAND USA INCLUDED FROM DECEMBER 3, 1996
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
($'S IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Net product sales.................................... $ 28,509 $ 38,606 $ 22,996
Service income....................................... 7,145 3,678 903
---------- ---------- ----------
Total revenues......................................... 35,654 42,284 23,899
Costs and expenses:
Cost of product sales................................ 20,142 37,846 19,853
Cost of services provided............................ 7,334 1,739 231
Sales and marketing.................................. 8,360 4,214 1,268
Research and development............................. 1,913 3,266 3,154
General and administrative........................... 16,735 16,677 8,301
Depreciation and amortization........................ 6,711 4,480 1,510
Restructuring charges................................ 1,613 -- --
Impairment of long-lived assets...................... 34,388 -- --
---------- ---------- ----------
Operating loss......................................... (61,542) (25,938) (10,418)
Other income (expense):
Interest............................................. (2,862) (2,894) (1,715)
Gain on sale of long term assets..................... -- 324 --
Other................................................ (15) 351 --
---------- ---------- ----------
Loss before income taxes............................... (64,419) (28,157) (12,133)
Income tax benefit..................................... -- 1,158 3,044
---------- ---------- ----------
Net loss............................................... (64,419) (26,999) (9,089)
Less preferred dividends............................... (2,044) (1,000) --
---------- ---------- ----------
Net loss applicable to common shareholders............. $ (66,463) $ (27,999) $ (9,089)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of
tax............................................... 186 (2,588) 749
---------- ---------- ----------
Comprehensive income (loss)............................ $ (66,277) $ (30,587) $ (8,340)
========== ========== ==========
Net loss per share applicable to common shareholders
(basic & diluted).................................... $ (1.58) $ (0.74) $ (0.36)
========== ========== ==========
Weighted average number of common shares outstanding
(basic & diluted).................................... 42,151,142 37,885,371 25,000,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-2
<PAGE> 60
INTEK GLOBAL CORPORATION
CONSOLIDATED BALANCE SHEETS
($'S IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1998 1997
--------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 5,719 $ 1,909
Marketable securities..................................... -- 8,148
Accounts receivable, net of allowance for doubtful
accounts of $993 in 1998 and $863 in 1997............... 3,870 6,488
Inventories............................................... 17,677 12,289
Deposits.................................................. 1,750 --
Amounts due from related parties.......................... 396 4,701
Prepaid expenses and other current assets................. 1,796 894
--------- --------
Total current assets............................... 31,208 34,429
--------- --------
PROPERTY AND EQUIPMENT, NET................................. 23,569 21,555
OTHER ASSETS:
Note receivable........................................... 580 556
Intangible assets, net.................................... 20,961 48,340
Inventory -- long term.................................... 3,189 6,980
Other..................................................... 607 705
--------- --------
Total other assets................................. 25,337 56,581
--------- --------
TOTAL ASSETS................................................ $ 80,114 $112,565
========= ========
CURRENT LIABILITIES:
Accounts payable.......................................... $ 7,062 $ 6,110
Amounts due to related parties............................ 2,499 2,005
Accrued liabilities....................................... 7,420 3,928
Deferred income........................................... -- 977
Notes payable -- third party.............................. 3,299 120
--------- --------
Total current liabilities.......................... 20,280 13,140
--------- --------
LONG TERM DEBT:
Notes payable -- third party.............................. 2,038 --
Notes payable -- related party............................ 30,733 24,223
Other..................................................... 65 354
--------- --------
Total long term debt............................... 32,836 24,577
--------- --------
PREFERRED STOCK -- Mandatorily Redeemable................... 35,452 21,000
--------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 60,000,000 shares authorized
43,305,620 and 42,398,096 shares issued at 1998 and
1997, respectively...................................... 433 424
Capital in excess of par value............................ 108,471 105,220
Treasury stock, at cost, 1,002,582 and 465,582 shares at
1998 and 1997, respectively............................. (2,099) (770)
Accumulated deficit....................................... (113,618) (49,199)
Currency translation adjustment........................... (1,641) (1,827)
--------- --------
Total shareholders' equity (deficit)............... (8,454) 53,848
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $ 80,114 $112,565
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance sheets
F-3
<PAGE> 61
INTEK GLOBAL CORPORATION
RADIOCOMS INCLUDED FROM OCTOBER 1, 1995 AND
INTEK, ROAMER ONE, AND MIDLAND USA INCLUDED FROM DECEMBER 3, 1996
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
($'S IN THOUSANDS, EXCEPT SHARES)
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
CAPITAL TOTAL
COMMON STOCK IN EXCESS CURRENCY SHAREHOLDERS'
------------------- OF PAR TREASURY ACCUMULATED TRANSLATION EQUITY
SHARES AMOUNT VALUE STOCK DEFICIT ADJUSTMENT (DEFICIT)
---------- ------ --------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SEPTEMBER 30, 1995............... 100,000 $250 $ (100) $ -- $ (13,111) $ 12 $(12,949)
Net loss................................. -- -- -- -- (9,089) -- (9,089)
Foreign currency translation
adjustments............................ -- -- -- -- -- 749 749
---------- ---- -------- ------- --------- ------- --------
BALANCE SEPTEMBER 30, 1996............... 100,000 250 (100) -- (22,200) 761 (21,289)
Eliminate stock of Radiocoms............. (100,000) (250) 100 -- -- -- (150)
Purchase Radiocoms for stock............. 25,000,000 250 84,982 -- -- -- 85,232
Intek shares December 3, 1996............ 14,239,416 142 26,383 (770) (11,025) -- 14,730
Intek loss October 1, 1996 through
December 3, 1996....................... -- -- -- -- (3,407) -- (3,407)
Eliminate Intek historic deficit......... -- -- (14,432) -- 14,432 -- --
Adjust shares for Midland assets......... (155,000) (1) (644) -- -- -- (645)
Imputed interest on warrants............. -- -- 652 -- -- -- 652
Shares issued for loan extension fee..... 34,000 -- 203 -- -- -- 203
Exercise of warrants..................... 1,758,776 18 6,495 -- -- -- 6,513
Write off deferred financing cost related
to note converted to stock............. -- -- (215) -- -- -- (215)
Shares issued for interest............... 14,602 -- 60 -- -- -- 60
Shares issued for equipment purchase..... 1,206,302 12 2,176 -- -- -- 2,188
Employee stock grant..................... 300,000 3 560 -- -- -- 563
Preferred stock dividends................ -- -- (1,000) -- -- -- (1,000)
Net loss................................. -- -- -- -- (26,999) -- (26,999)
Foreign currency translation
adjustments............................ -- -- -- -- -- (2,588) (2,588)
---------- ---- -------- ------- --------- ------- --------
BALANCE SEPTEMBER 30, 1997............... 42,398,096 424 105,220 (770) (49,199) (1,827) 53,848
Purchase treasury shares................. -- -- -- (1,329) -- -- (1,329)
Shares issued for licenses............... 506,916 5 968 -- -- -- 973
Shares issued for acquisition of Data
Express................................ 400,608 4 1,272 -- -- -- 1,276
Gain on sale of assets to related
party.................................. -- -- 3,055 -- -- -- 3,055
Preferred stock dividends................ -- -- (2,044) -- -- -- (2,044)
Net loss................................. -- -- -- -- (64,419) -- (64,419)
Foreign currency translation
adjustment............................. -- -- -- -- -- 186 186
---------- ---- -------- ------- --------- ------- --------
BALANCE SEPTEMBER 30, 1998............... 43,305,620 $433 $108,471 $(2,099) $(113,618) $(1,641) $ (8,454)
========== ==== ======== ======= ========= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-4
<PAGE> 62
INTEK GLOBAL CORPORATION
RADIOCOMS INCLUDED FROM OCTOBER 1, 1995 AND
INTEK, ROAMER ONE, AND MIDLAND USA INCLUDED FROM DECEMBER 3, 1996
CONSOLIDATED STATEMENTS OF CASH FLOWS
($'S IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................. $(64,419) $(26,999) $ (9,089)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 6,711 4,480 1,510
Impairment of long-lived assets....................... 34,388 -- --
Interest capitalized into principal................... 3,527 -- --
Stock compensation to employees....................... -- 563 --
Other................................................. -- 350 29
Changes in operating assets and liabilities:
Accounts receivable and amounts due from related
parties............................................. 4,231 1,384 3,477
Allowance for doubtful accounts....................... 252 -- --
Deposits.............................................. (1,735) -- --
Inventories........................................... (2,215) 11,376 (2,984)
Income taxes receivable from related parties.......... -- 2,330 --
Prepaid expenses and other current assets............. (77) 1,375 67
Accounts payable and amounts due to related parties... 2,430 902 (1,513)
Deposits.............................................. (42) -- --
Accrued liabilities................................... 112 (443) (601)
Accrued liabilities to related parties................ -- 342 --
Deferred income....................................... (667) 194 (1,209)
Restructuring reserve................................. 1,424 -- --
Other................................................. 526 (93) --
-------- -------- --------
Net cash used in operating activities.................... (15,554) (4,239) (10,313)
-------- -------- --------
Cash Flows From Investing Activities:
Proceeds from sale of marketable securities.............. 7,458 1,853 --
Expenditures for property and equipment, net............. (7,130) (9,226) (1,657)
Expenditures for FCC licenses............................ (8,257) (2,016) --
Expenditures for other long term assets.................. 71 (6,477) --
Proceeds from sale of long term assets................... 8,500 2,311 96
Other.................................................... 152 (428) --
-------- -------- --------
Net cash provided by (used in) investing activities...... 794 (13,983) (1,561)
-------- -------- --------
Cash Flows From Financing Activities:
Net change in bank overdraft............................. 653 (1,252) (731)
Proceeds from short term debt............................ 2,425 71 --
Proceeds from long term debt............................. 1,694 4,000 --
Proceeds from long term debt-related party............... 15,515 19,452 12,463
Repayment of long and short term debt.................... -- (5,347) --
Purchase of treasury stock............................... (1,329) -- --
Other.................................................... (6) 282 --
-------- -------- --------
Net cash provided by financing activities................ 18,952 17,206 11,732
-------- -------- --------
Effect of foreign exchange rate changes on cash............ (382) 936 (42)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents....... 3,810 (80) (184)
Cash and cash equivalents at beginning of year............. 1,909 417 601
Cash acquired in reverse acquisition....................... -- 1,572 --
-------- -------- --------
Cash and cash equivalents at end of year................... $ 5,719 $ 1,909 $ 417
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest................................... $ 317 $ 578 $ 1,715
Cash paid for income taxes............................... -- -- --
Cash received for income taxes (U.K. group tax relief
received from related party).......................... -- 3,117 285
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-5
<PAGE> 63
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Intek Global Corporation, a Delaware corporation, is a provider of
spectrum-efficient wireless communications technology, products and services. At
the Annual Meeting of Shareholders held on February 18, 1998, the shareholders
approved the change of the Company's name from Intek Diversified Corporation to
Intek Global Corporation.
With the exception of certain products distributed by Midland USA, Inc
("MUSA"), a Delaware corporation, and Securicor Radiocoms Limited ("Radiocoms"),
a corporation formed under the laws of England and Wales, both wholly-owned
subsidiaries of Intek, the communication services and products of the Company
utilize linear modulation technology ("LM Technology" or "LMT"). Roamer One,
Inc., a Delaware corporation and a wholly-owned subsidiary of Intek, is a
provider of high quality wireless voice and data communications services in the
U.S., operating on the 220-222 MHz ("220 MHz") frequency ("Roamer One Network")
and Radiocoms is a manufacturer of the systems and radios used by among others,
the Company's specialized mobile radio ("SMR") sites. In addition, Radiocoms,
through a subsidiary, is involved in the research and development of products
and other applications of LM Technology. During fiscal 1998, the Company formed
Intek License Acquisition Corporation ("ILAC"), a Delaware corporation and a
wholly-owned subsidiary of Intek, to participate in a Federal Communications
Commission ("FCC") auction and to acquire FCC licenses from third parties.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
On December 3, 1996, Securicor Communications Limited ("Securicor"), a
corporation formed under the laws of England and Wales, acquired more than a 50
percent controlling interest in Intek through the Radiocoms Acquisition (Note
4). Accordingly, the Radiocoms Acquisition was treated as a reverse acquisition
for accounting purposes. Radiocoms was considered the acquiring company,
although Intek was the surviving company under corporate law. The consolidated
financial statements for fiscal 1996 include only the accounts of Radiocoms and
its subsidiaries, all of which were wholly-owned. Included in reported results
of operations for fiscal 1996 (pre-reverse acquisition period), are revenues and
cost of sales of $9.0 million and $8.8 million, respectively, from the sales of
products and services by Radiocoms to other current Intek subsidiaries.
Subsequent to the date of the Radiocoms Acquisition (post-reverse
acquisition periods), the consolidated financial statements include the accounts
of Intek and its subsidiaries. All material intercompany accounts and
transactions have been eliminated. Certain prior period amounts have been
reclassified to conform with the current period presentation.
Use of Estimates and Significant Risks
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Company's business, financial condition and future prospects are
subject to a number of risks and contingencies. Those that the Company regards
currently as among the most significant are summarized below.
Risk of Uncertain Market Acceptance. LM Technology is a relatively new
technology and there is a risk that the marketplace may not accept the potential
benefits of the technology or that the technology may not
F-6
<PAGE> 64
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
perform to expectations. The commercial viability of the Roamer One Network is
dependent upon the performance of the LM Technology and acceptance of such
technology by the marketplace. Until products utilizing LM Technology progress
through the commercial development stage, manufacturing costs may be
substantially higher than competing products and the Company may be forced to
sell equipment below its manufactured costs.
If Intek's products using LM Technology are not commercially accepted or do
not have the capabilities the Company believes they have or can have, or
manufacturing costs cannot be reduced, the future results of operations of the
Company could be significantly and negatively impacted.
Competing Services. Competition in the sale of wireless communication
products and services is fierce. Given the wide variety of available wireless
services, new subscribers will only be acquired if the Company has a service
needed by potential subscribers and priced, along with the cost of the necessary
radio equipment, attractively when compared to competing services and products.
As a result, there is no assurance that the services provided on the Roamer One
Network or the technology and products developed by the Company will be
competitive with services, technology and products of other wireless
communications companies.
Supplier Risk. If the Company's Japanese supplier of non-LM Technology
radios and accessories was no longer available, Intek's financial position and
results of operations would be adversely impacted.
Dependence on Governmental Regulation. The current and planned operations
of the Company can be adversely impacted by delayed or adverse actions by
various regulatory authorities and it is impossible to predict, with any
certainty, how the Company's operations will be impacted by the actions of these
regulatory authorities. In most international markets there are similar, and in
some instances, more stringent governmental regulatory overviews regarding
wireless communications services and products including those offered by the
Company.
Need for Additional Capital. The Company will require additional cash
resources to fund operations if its business plan is not realized. There can be
no assurance that additional financing will be available on reasonable terms or
at all.
Revenue Recognition
With respect to the sale of equipment, including systems and site
equipment, revenue is recognized upon acceptance of the equipment by the
customer. The Company recognizes subscriber revenue from airtime billings upon
provision of the service. In those instances where subscribers are billed for
airtime service provided from sites managed by the Company, gross billings are
included in service income and distributions to licensees are included in cost
of services provided.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Marketable Securities
During fiscal 1997, the Company received stock of Transcrypt International
in exchange for its investment in E.F. Johnson Company ("EFJ"). At September 30,
1997, this investment was classified as available for sale and was recorded at
its fair value at that date. Subsequent to September 30, 1997, the Company sold
the investment for approximately $748,000 less than its carrying value. The
Company did not realize a loss on this transaction as the shortfall was
recovered from Securicor.
F-7
<PAGE> 65
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and include manufacturing labor and overhead.
Inventories at September 30 consist of the following ($'s in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Raw materials............................................ $ 5,526 $ 4,020
Work in progress......................................... 2,681 1,311
Finished goods........................................... 12,659 13,938
------- -------
20,866 19,269
Total long term inventories.............................. (3,189) (6,980)
------- -------
Total current inventories................................ $17,677 $12,289
======= =======
</TABLE>
At September 30, 1998 and 1997, the Company has classified approximately
$3.2 million and $7.0 million, respectively, of completed base stations and
components for the manufacture of additional base stations as non-current assets
since there is no assurance that the inventory will be utilized by the Company
or sold to third parties during the subsequent fiscal year.
Property and Equipment
Property and equipment are stated at cost and are depreciated on a
straight-line basis over their estimated useful lives. The Company's policy is
to begin depreciating site equipment at such time as it begins to generate
subscriber revenues. Normal maintenance and repairs are charged to expense as
incurred. Expenditures which increase the useful lives of assets are
capitalized. Gains and losses on disposal are recognized in the year of the
disposition.
Property and equipment at September 30, with their estimated useful lives,
consist of the following ($'s in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS) 1998 1997
------------ ------- -------
<S> <C> <C> <C>
Land........................................ -- $ 423 $ 402
Buildings................................... 11 to 50 2,735 3,008
Site equipment.............................. 10 15,893 13,206
Production & test equipment................. 3 to 10 4,077 3,843
Furniture, fixtures and computers........... 3 to 10 3,190 2,755
Equipment held for rental................... 3 to 5 2,451 4,163
------- -------
Total property and equipment................ 28,769 27,377
Less accumulated depreciation............... (5,200) (5,822)
------- -------
Property and equipment, net................. $23,569 $21,555
======= =======
</TABLE>
Intangible and Long Lived Assets
Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting
for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
of" ("FAS 121") requires that long-lived assets and certain identifiable
intangibles, including goodwill, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Intangible
F-8
<PAGE> 66
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assets consist of goodwill, which represents the excess of the purchase price of
an acquisition over the fair value of the net assets acquired, and costs
allocated to FCC licenses, patents and trademarks as a result of business or
systems acquisitions. These assets are amortized on a straight line basis over
their estimated useful lives (generally not exceeding 15 years).
Intangible assets at September 30, consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Excess of cost over fair value of net assets acquired
(goodwill):
Midland USA, Inc....................................... $ 9,755 $ 9,755
Radiocoms reverse acquisition.......................... -- 38,573
Data Express........................................... 1,386 --
------- -------
11,141 48,328
FCC licenses acquired from third parties................. 11,333 2,899
Trademarks and patents................................... 770 --
------- -------
Total.......................................... 23,244 51,227
Less accumulated amortization............................ (2,283) (2,887)
------- -------
Intangibles, net............................... $20,961 $48,340
======= =======
</TABLE>
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of long-lived and
intangible assets may warrant revision or that the remaining balance of these
assets may not be recoverable. The Company evaluates the recoverability of its
long-lived and intangible assets by measuring the carrying amount of the assets
against the estimated undiscounted future cash flows associated with those
assets. At the time such evaluations indicate that the future undiscounted cash
flows of certain long-lived and intangible assets are not sufficient to recover
the carrying value of such assets, the assets are adjusted to their estimated
fair values.
During the fourth quarter of fiscal 1998, management concluded that
goodwill arising from the Radiocoms reverse acquisition (Note 4), primarily
attributable to Roamer One, was not recoverable. Management reached that
conclusion when the Company revised its strategic plan after the Company's
success at the recent FCC auction. New markets for the Company opened for
spectrum and equipment sales as a result of the FCC auction and the Company's
partnering arrangement with the NRTC (Note 5). While the Phase I licenses
continue to have value as a result of the FCC auction, management forecasts that
Roamer One will operate at a negative cash flow for at least the next five years
because of the significant costs to be incurred in building its subscriber base.
Thus, the Company believes that subscriber growth will be slower than it
originally planned. The amount of goodwill impairment was measured based on the
projected future operating cash flows for Roamer One (which are expected to be
negative). As a result, the Company recorded a charge equal to the unamortized
balance of the Radiocoms reverse acquisition goodwill of approximately $34.4
million. Management determined that the fair value of the Company's remaining
long-lived and intangible assets approximated their carrying value.
F-9
<PAGE> 67
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accrued Liabilities
Accrued liabilities at September 30 consist of the following ($'s in
thousands):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Payroll.................................................... $1,383 $ 591
Restructuring reserve...................................... 1,424 --
Accrual for radio replacement.............................. 1,555 --
Other...................................................... 3,058 3,337
------ ------
Total accrued liabilities........................ $7,420 $3,928
====== ======
</TABLE>
Income Taxes
The Company and its domestic subsidiaries file consolidated Federal and
combined state income tax returns. The Company accounts for income taxes in
accordance with the liability method in computing deferred income taxes.
Radiocoms files its tax returns with local U.K. tax agencies. Prior to the
Radiocoms Acquisition, Radiocoms' losses were compensated for by its parent
company based on the effective corporate tax rate.
The Company provides for deferred income taxes relating to timing
differences in the recognition of income and expense items (primarily relating
to depreciation, amortization and certain leases) for financial and tax
reporting purposes. Such amounts are measured using current tax laws and
regulations.
The Company has recorded valuation allowances against the realization of
its deferred tax assets. The valuation allowance is based on management's
estimates and analysis, which includes tax laws which may limit the Company's
ability to utilize its tax loss carryforwards.
Financial Instruments
The Company's management believes that the fair value of all financial
instruments approximates carrying value.
The Company may periodically hedge firm foreign purchase commitments. The
Company regularly monitors its foreign currency exposures and ensures that hedge
contract amounts do not exceed the amounts of the underlying exposures. Gains
and losses on foreign currency firm commitment hedges are deferred and included
in the basis of the transactions underlying the commitments.
Details of the hedging of firm foreign purchase commitments as of September
30 follows ((Y)'s and $'s in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Firm foreign purchase commitments...................... Y407,771 Y374,817
Outstanding hedge contracts............................ 170,000 210,000
-------- --------
Unhedged position...................................... Y237,771 Y164,817
======== ========
Unhedged position...................................... $1,768 $1,375
======== ========
Outstanding hedge contracts at contract rate........... $1,270 $1,800
Outstanding hedge contracts at fair value.............. $1,264 $1,762
</TABLE>
F-10
<PAGE> 68
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign Currency
The financial statements of the Company's foreign subsidiaries are
translated into U.S. dollars for consolidation and reporting purposes. Assets
and liabilities are translated into U.S. dollars using the exchange rate at each
balance sheet date and a weighted average exchange rate for each period is used
for revenues and expenses. Cumulative translation adjustments are recorded as a
separate component of shareholders' equity (deficit).
Net Loss Per Share
Basic EPS is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period.
Diluted EPS is consistent with the calculation of basic EPS while giving effect
to any dilutive potential common shares outstanding during the period. The
weighted average number of common shares outstanding during fiscal 1998 was
42,148,964. Stock options for 4,251,666 common shares at various prices ranging
from $1.688 to $6.125 were not included in the diluted EPS calculation as the
effect would be anti-dilutive (Note 12). Likewise, warrants for 318,750 common
shares at an exercise price of $4.59 were not included in the diluted EPS
calculation as the effect would be anti-dilutive (Note 10).
New Accounting Pronouncements
During fiscal year 1998, the FASB issued FAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
Intek does not anticipate adopting FAS 133 early. FAS 133 must be adopted no
later than the first quarter of fiscal 2000. Management of the Company has not
yet evaluated the impact FAS 133 will have on the Company's financial position
or results of operations.
3. RESTRUCTURING CHARGES
During the third quarter of fiscal 1998, the Company recorded a
restructuring charge of approximately $1.6 million related primarily to planned
staff reductions, termination of leases associated with the consolidation of
office space and site leases, and equipment removal costs.
In conjunction with the restructuring, the Company has decided to eliminate
and deconstruct certain sites that are not deemed essential to the Company's
growth strategy, consolidate office space and reduce the number of associated
sales force. In addition, the Company has consolidated financial and customer
service functions at its headquarters in Kansas City, Missouri to gain
efficiencies and economies of scale.
During the fourth quarter of 1998, approximately $200,000, related
primarily to severance payments, was charged against the restructuring reserve
resulting in a remaining balance of approximately $1.4 million at September 30,
1998. The remaining amount of the restructuring reserve is expected to be
utilized during fiscal 1999.
4. BUSINESS ACQUISITIONS
Midland USA
On May 2, 1996, Intek formed MUSA. Effective August 1, 1996, MUSA acquired
from Midland International Corporation ("MIC"), a wholly-owned subsidiary of
Simmonds Capital Limited ("SCL"), its U.S. land mobile radio distribution
business and certain other assets (the "Midland Transaction"). The original
purchase price was 2,500,000 shares of Intek common stock. Pursuant to the terms
of the Midland Transaction, a post closing reduction to the purchase price of
155,000 shares, or $645,000, was made.
F-11
<PAGE> 69
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Radiocoms
On December 3, 1996, Intek consummated the acquisition (the "Radiocoms
Acquisition") of all the outstanding common stock of Radiocoms. Radiocoms
designs, develops, manufactures, distributes and installs a range of land mobile
radio equipment, including its own LM Technology equipment. The purchase price
for the Radiocoms Acquisition was 25,000,000 shares of Intek common stock. The
Radiocoms Acquisition, approved by the stockholders of Intek at a Special
Meeting held on December 3, 1996, was consummated on the same date. Upon the
consummation of the Radiocoms Acquisition, the Company became a provider of
spectrum-efficient wireless communications technology, products and services.
The following unaudited proforma income statement information (in
thousands, except per share amounts) is presented as though the Radiocoms
Acquisition and the Midland Transaction had occurred on October 1, 1995:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues............................................ $ 44,475 $ 22,569
Net loss............................................ $ (32,780) $ (20,073)
Proforma net loss per share (basic and diluted)..... $ (0.81) $ (0.53)
Weighted average shares outstanding................. 40,381,715 38,172,732
</TABLE>
The proforma financial information is presented for informational purposes
only and it is not necessarily indicative of the operating results that would
have occurred had the Radiocoms Acquisition and the Midland Transaction been
consummated as of the above date, nor is it necessarily indicative of future
operating results.
As discussed below, the Radiocoms Acquisition has been accounted for as a
reverse acquisition, and the Company's financial statements have been prepared
as if Radiocoms acquired Intek under the purchase method of accounting. The
excess of cost over the fair value of net assets acquired at December 3, 1996,
was being amortized over 15 years. (Note 2 "Intangible and Long Lived Assets").
The purchase price was determined based on the fair value of the Intek common
stock outstanding at the date of the Radiocoms Acquisition and has been
allocated to the underlying Intek assets and liabilities based on fair values at
the date of the Radiocoms Acquisition. A summary of the purchase price
allocation is as follows (in thousands):
<TABLE>
<S> <C>
Net working capital......................................... $(1,138)
Excess of cost over fair value of net assets acquired
(goodwill)................................................ 38,573
Net property, plant & equipment............................. 10,179
Other non-current assets.................................... 12,918
Other non-current liabilities............................... (6,054)
-------
Total............................................. $54,478
=======
</TABLE>
Data Express
In May, 1998, the Company completed the stock acquisition of Mobile Data
Solutions, Inc. ("Data Express"), a developer and provider of wireless data
solutions for the mobile marketplace. Data Express's main product (for which it
holds a non-exclusive license) is a satellite Global Positioning System based
automatic vehicle location system for mobile fleet operators. The system
provides real-time information on the location of all fleet vehicles as well as
a full tracking history of any given vehicle's previous movements. The Company
issued 400,608 shares of its common stock valued at approximately $1.3 million
plus cash for total consideration of $1.5 million. The acquisition was accounted
for under the purchase method of accounting and resulted in goodwill of
approximately $1.4 million. Data Express' results of operation prior to the
acquisition were not material.
F-12
<PAGE> 70
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACQUISITION OF NEW SYSTEMS
Krystal Systems
On November 11, 1996, the Company entered into an agreement to acquire from
Krystal Systems, Inc. up to 25 constructed, but unloaded, 220MHz systems and
related FCC licenses ("Krystal Systems"). The Company acquired a total of 23 of
the Krystal Systems for a total of approximately $4.1 million in cash of which
approximately $3.7 million was paid during fiscal 1997 and the balance was paid
during fiscal 1998.
American Digital Corporation
During September 1997, the Company consummated two agreements with American
Digital Corporation ("ADC") and 22 holders of 220 MHz FCC licenses. The
agreements provided for the Company to acquire the licenses from the licensees
and the equipment from ADC for total consideration equal to approximately $1.9
million. The purchase price paid by the Company was as follows: (a) return of
shares of ADC stock owned by the Company (valued for purposes of the transaction
at $84,000); (b) issuance of approximately 682,735 shares of common stock
(valued for purposes of the transaction at approximately $1.3 million); (c)
transfer of all rights held by the Company to acquire 2,666,666 shares of
Ventel, Inc. ("Ventel"), a publicly traded company in Canada (valued for
purposes of the transaction at $301,000); (d) forgiveness of approximately
$95,000 of debt owed by ADC to Radiocoms; and (e) a cash payment of $119,000.
Closing of the transactions (and payment of the purchase price) occurred upon
receipt of, and uncontested grant by the FCC of, the licenses to Roamer One.
During 1998, the Company issued an aggregate of 465,484 shares of common stock
for the acquisition of those licenses, valued at $807,000 for financial
reporting purposes.
Pagers Plus
During the period July 12, 1997 through August 12, 1997, the Company
entered into purchase and sale agreements with 25 licensees of 220 MHz FCC
licenses managed by the Company on behalf of Pagers Plus Corp ("PPC"). The
agreements provided that the Company would acquire (subject to the satisfaction
of certain conditions) 25 licenses for a purchase price equal to 465,482 shares
of Intek common stock (valued for purposes of the transaction at approximately
$0.9 million) plus cash payments totaling approximately $0.8 million. Closing of
the transactions and payment of the purchase price occurred in December 1997
upon receipt of uncontested grant by the FCC of the licenses to Roamer One.
Ventel, Inc.
Ventel is in the business of providing financing to various 220 MHz SMR
management companies in the United States. During 1997, the Company (a
shareholder of Ventel) entered into an agreement with Ventel (the "Ventel
Agreement"), which provided for the sale and transfer of certain outstanding
loans, security agreements, and the rights related to the collateral for such
security agreements from Ventel to the Company. Such loans were made by Ventel
to PPC and ADC for the purpose of constructing 220MHz systems. These systems are
the subject of purchase agreements (described above) between various licensees,
ADC, PPC and the Company. The Ventel Agreement provided that the Company would
acquire the security agreements and rights to the collateral in exchange for a
payment to Ventel of 787,921 shares of its common stock and $100,000 in cash.
Wireless Plus
In December 1997, Intek completed the acquisition of selected assets of
Wireless Plus, Inc. ("Wireless Plus"), a Hayward, California-based specialized
mobile radio provider. The acquired assets include approximately 2,700
subscriber accounts, 19 five channel FCC licenses for operation of 220 MHz
frequencies, and 12 five-channel and eight single-channel management agreements
with third party licensees within the 220 MHz
F-13
<PAGE> 71
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
spectrum for total consideration of approximately $5.3 million. In addition, two
licenses managed by Wireless Plus were purchased directly from the licensees for
an aggregate purchase price of $106,406. The purchase price paid by the Company
to Wireless Plus was as follows: (a) $100,000 paid as a deposit in November,
1997, (b) $500,000 in cash on February 17, 1998, (c) $106,579 in cash for each
license transfer granted by the FCC to be paid at the time such transfer is
completed, and (d) a secured subordinated note in the amount of approximately
$2.6 million bearing interest at the rate of 8% per annum payable annually. Note
principal is payable in two equal annual installments due in February 1999 and
February 2000. At the date of the acquisition, the radio equipment used by
existing Wireless Plus subscribers was not LMT-compatible. As part of the
acquisition, the Company agreed to provide the subscribers with LMT-compatible
radio equipment and return the old radio equipment to Wireless Plus. As a
result, the Company accrued a liability of $1.7 million for the costs to replace
the radios. As of September 30, 1998, the balance of the accrual for radio
replacement was approximately $1.6 million.
Comtech
In August 1998, the Company entered into an asset purchase agreement (the
"Purchase Agreement") with ComTech Communications, Inc. ("ComTech"), to purchase
eleven licenses granted by the FCC in the 220-222 MHz band spectrum (the
"Licenses") and certain equipment and other personal property, subscription
contracts, accounts and lists and management and purchase option agreements
relating to the Licenses which were owned by ComTech. The purchase price is
$458,039, with $50,000 payable upon execution of the Purchase Agreement and the
balance payable upon the final transfer of the Licenses to the Company by the
FCC in the form of a three-year promissory note of the Company in the amount of
$408,039 and bearing interest at the rate of 9% per annum. The Company will
receive a credit of $41,640 against the purchase price for each License that is
not so transferred to the Company. As part of the same transaction, the Company
and ComTech entered into a management agreement pursuant to which Company
manages the systems subject to ComTech's supervision and control until the final
transfer of the Licences to the Company by the FCC.
In addition to the transactions described above, Roamer One and ComTech
entered into a letter of intent and resale agreement in September 1998 to
provide for the purchase by Roamer One of a 5-channel Phase I national FCC
License from ComTech and the design and construction of a national network by
Roamer One using the License's frequencies for the provision of paging services
and two-way land mobile radio services. Under the resale agreement, Roamer One
will design and construct the radio system in order to resell airtime on the
network. The equipment used for the base station transmitters will be leased by
ComTech from MUSA under a separate equipment lease agreement. Under the resale
agreement, Roamer One is responsible for all operating expenses, including site
leases and taxes, and has agreed to pay ComTech, initially, $284 per month for
each channel of any radio system operated by Roamer One to resell airtime on the
network. Effective as of May 1, 1998, and through June 30, 1999, Roamer One will
pay ComTech the greater of $284 per month per channel in operation or $39,760
per month, and as of July 1, 1999, for the remaining term of the resale
agreement, Roamer One will pay ComTech the greater of $284 per month per channel
in operation or $37,500 per month. The Purchase Agreement may be terminated by
either party if the FCC has not granted any of the Assignment Applications with
respect to Licenses sought to be acquired by the Company from ComTech by March
1, 1999. A termination of the Purchase Agreement terminates the Management
Agreement between the Company and ComTech. The Equipment Lease Agreement between
Midland and ComTech may be terminated upon 30 Days notice by either party and
certain other events. The Resale Agreement between ComTech and Roamer One may be
terminated by Roamer One during the period January 4, 1999 through January 15,
1999 upon notice to ComTech. The Company is evaluating its options under this
agreement as a result of its recent success in the FCC auction. In the event the
Company terminates the Agreement, the Agreement provides that Roamer One will be
obligated to make certain payments to ComTech.
F-14
<PAGE> 72
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FCC Auction
In August 1998, the Company entered into an agreement with National Rural
Telecommunications Cooperative ("NRTC"), subsequently amended in November 1998,
pursuant to which the Company, through its wholly-owned subsidiary, ILAC, and
NRTC agreed to participate jointly in the recent FCC auction (the "Auction") for
certain Phase II licenses in the 220-222 MHz band (the "Licenses"). The
agreement provides for the purchase by ILAC of certain Licenses in the Auction
on a cost-sharing basis and the post-auction partitioning and disaggregation of
awarded Licenses between NRTC and ILAC. As a result of the conclusion of the
Auction in November 1998, ILAC will be awarded two 10-channel nationwide, seven
15-channel regional, and 172 10-channel Economic Area ("EA"), or local, Business
Radio airwave Licenses at a total cost of approximately $12.2 million. The
Company will assign one nationwide and certain EA licenses to NRTC, disaggregate
six regional and one EA licenses and partition certain EA licenses to NRTC.
ILAC's portion of the cost for Licenses awarded in the Auction is approximately
$6.6 million. In addition, ILAC has incurred a penalty charge of $57,200 for
withdrawn high bids on Licenses subsequently awarded at lower bids during the
Auction and has been assessed an additional holdback charge of $25,602 for
withdrawn high bids with respect to Licenses which were not awarded during the
Auction. If such Licenses are subsequently awarded in a later auction (which is
presently scheduled to commence June 15, 1999) at a price equal to or greater
than the withdrawn ILAC bid price, ILAC would be entitled to a return of this
holdback charge. However, if such Licenses are subsequently awarded at less than
the ILAC withdrawn high bid price, ILAC would be liable for the difference,
which the Company estimates its total contingent liability with respect to such
Licenses to be approximately an additional $853,000. At September 30, 1998, the
Company was reflecting a deposit related to the Auction of approximately $1.8
million in the accompanying consolidated balance sheets.
The Company and NRTC entered into a Master Distribution Agreement, dated
September 4, 1998 (the "Distribution Agreement"), to provide for the appointment
of NRTC and the members of its cooperative ("Members") as distributors to
purchase LM-based equipment (the "Contract Products") from the Company for
resale to their customers in certain exclusive geographic areas. The
Distribution Agreement targets the sale of approximately $50 million of Contract
Products to NRTC and its Members over the first five years of the Distribution
Agreement, and as of December 1, 1998, NRTC and its Members have placed orders
for approximately $5 million of Contract Products. NRTC and each of its Members
will be authorized to use the "Roamer One" trademark and trade name in
connection with resales of the Contract Products to their customers and may
further elect to obtain the exclusive right to such use in designated geographic
areas for an annual royalty fee ranging from $15,000 to $25,000, depending on
the number of base stations constructed. The Distribution Agreement permits NRTC
and its Members to purchase the Contract Products at the lowest rate quoted or
charged by MUSA to any of its dealers or customers within the United States and
also provides for a 0.5% discount on future purchases of Contract Products, if
the amount of such purchases for the preceding year exceeds $10 million. In
addition, NRTC has been granted stock options to purchase up to 200,000 shares
of the Company's stock and has been given conditional grants to purchase up to
1,050,000 additional shares of the Company's stock. The conditional stock
options will vest to NRTC, incrementally, based on the amount of Contract
Products purchased over the term of the Distribution Agreement. The exercise
price of stock options vested in the first two years is the lower of (a) $3.00
per share or (b) the average closing price for the 20 trading days immediately
preceding the exercise date and the exercise price of options vested after the
first two years is the average closing price for the 20 trading days immediately
preceding the exercise date.
6. PENSION PLAN
Radiocoms contributes to the pension plan of Securicor, which maintains a
defined benefit pension plan that covers executives and other senior employees.
The plan calls for benefits to be paid to eligible employees at retirement based
primarily upon years of service with the Company and compensation rates near
retirement.
F-15
<PAGE> 73
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Contributions to the plan reflect benefits attributed to employees' services to
date, as well as services expected to be earned in the future. The pension costs
are assessed on the advice of independent qualified actuaries using the
projected unit credit method. Actuarial valuations are performed at least every
three years. The most recent actuarial valuation was April 5, 1997 and in
accordance with the provisions of FAS No. 87, "Employers' Accounting for
Pensions", at September 30, 1998 and 1997, there were no unfunded accumulated
benefit obligations. The assets are held in separate trustee administered funds.
For fiscal 1998, 1997 and 1996, Radiocoms' share of the costs of the Securicor's
defined benefit pension plan amounted to $140,000, $200,000 and $200,000,
respectively.
7. INCOME TAXES
The Company's benefit for the income taxes consists of the following for
the three fiscal years ended September 30 ($'s in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ------ ------
<S> <C> <C> <C>
Current:
Federal.......................................... $-- $ 628 $ --
Foreign.......................................... -- 530 3,044
-- ------ ------
Total Current............................ $-- $1,158 $3,044
Deferred........................................... -- -- --
-- ------ ------
Total.................................... $-- $1,158 $3,044
== ====== ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Management has provided a valuation allowance on the Company's total net
deferred tax assets due to the Company's history of losses. The valuation
reserve was increased by $18,265,000 and $3,866,000 for September 30, 1998 and
1997, respectively.
F-16
<PAGE> 74
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The approximate tax effect of temporary differences which gave rise to
significant deferred tax assets and liabilities at September 30 are as follows
($'s in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Deferred tax items (Federal, state and foreign):
Accrued liabilities................................ $ 1,634 $ 690 $ --
Allowance for doubtful accounts receivable......... 140 16 --
Amortization of Roamer One startup costs........... 28 64 --
Disallowed interest expense........................ 1,256 174 --
Depreciation....................................... (655) (156) --
Depreciation (foreign)............................. 42 (178) (63)
Development costs (foreign)........................ 1,623 (2,779) 3,275
Equipment site reserve............................. 1,011 -- --
General provisions (foreign)....................... 10 -- --
Contributions carryforward......................... 6 -- --
Operating loss carryforwards....................... 14,001 5,453 --
Operating loss carryforwards (foreign)............. 6,392 3,939 145
-------- ------- -------
25,488 7,223 3,357
Valuation allowance................................ (25,488) (7,223) (3,357)
-------- ------- -------
Net deferred tax liability......................... $ -- $ -- $ --
======== ======= =======
</TABLE>
A reconciliation of the provision (benefit) for income taxes to the amount
computed at the Federal statutory rate of 34 percent for the three fiscal years
ended September 30 is as follows ($'s in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Benefit at statutory rate............................ $(23,797) $(9,573) $(4,125)
Statutory rate difference (foreign).................. 102 277 121
Goodwill amortization/write-off...................... 12,620 729 --
Accruals............................................. 1,355 521 --
Operating losses offset by capital Gain (foreign).... 1,189 -- --
Operating losses not currently available for use nor
available for group relief (foreign)............... 2,172 3,660 1,045
Operating losses not currently available for use..... 6,348 3,369 --
Other................................................ 11 (141) (85)
-------- ------- -------
$ -- $(1,158) $(3,044)
======== ======= =======
</TABLE>
At September 30, 1998, the Company had net operating loss carryforwards
available for Federal and State income tax purposes of approximately $36.7
million and $21.9 million, respectively. The net operating loss carryforwards
expire in the year 2008 and thereafter for Federal income tax purposes and in
the year 1999 and thereafter for state income tax purposes. The Company also had
foreign net operating losses of approximately $6.4 million, which do not have an
expiration date.
For Federal income tax purposes, a corporation that undergoes a "change of
ownership" pursuant to Section 382 of the Internal Revenue Code of 1986
("Code"), as amended is subject to limitations on the amount of its net
operating loss carryforwards, which may be used in the future. In addition, the
use of certain other deductions attributable to events occurring in periods
before such an ownership change, that are claimed within the five year period
after such ownership change, may also be limited (such deductions, together with
net operating loss carryforwards, "pre-change losses"). Upon consummation of the
Radiocoms Acquisition, an
F-17
<PAGE> 75
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ownership change under Section 382 did occur. As a result, the Company's annual
limitation for using "pre-change losses" is approximately $0.8 million.
Foreign losses may also be limited due to the change in ownership of the
Company. In addition, Radiocoms will no longer be reimbursed by Securicor for
benefits of Radiocoms losses.
8. DEBT
Third Party Borrowings
In December 1997, MUSA entered into a revolving credit agreement ("Credit
Agreement") with a non-bank lender. The Credit Agreement makes available $5.0
million through December 1999. Borrowings under the Credit Agreement are secured
by the assets of MUSA and bear interest at 1.5% above the lender's base rate (as
defined). The Credit Agreement contains, among other covenants, a covenant
relating to leverage, limitations on MUSA's ability to repay intercompany
indebtedness and repayment provisions related to change in control of MUSA. The
Company uses the Credit Facility for issuance of letter of credit commitments on
behalf of MUSA, and for borrowings for working capital. As of September 30,
1998, there was indebtedness outstanding of approximately $0.7 million and
letter of credit commitments of $0.3 million under this Credit Agreement.
In December 1997, Intek completed the acquisition of selected assets of
Wireless Plus (Note 5). The purchase price paid by the Company to Wireless Plus
included a secured subordinated note in the amount of approximately $2.6 million
bearing interest at the rate of 8% per annum payable annually. The note
principal is payable in two equal annual installments due in February 1999 and
February 2000.
In March 1998, Intek repurchased 352,500 shares of Intek common stock at
$2.75 per share in a private transaction for a total of $969,375 (Note 11). The
purchase price paid by the Company included notes in the aggregate amount of
$440,625. The notes are non-interest bearing and are due and payable on December
15, 1998.
In August 1998, the Company entered into a purchase agreement with ComTech
(Note 5). The purchase price paid by the Company to ComTech included a
three-year promissory note in the amount of $408,039, bearing interest at the
rate of 9% per annum. The note principal is payable in two installments in
fiscal 2000 and 2001.
Radiocoms has an overdraft agreement of 1.0 million pounds sterling
(approximately U.S. $1.6 million) with a bank. Borrowings under the Agreement
are unsecured at an adjustable rate of 1% over the prevailing U.K. base rate.
The year-end rate was 7.75%. The Company uses the overdraft Facility for
borrowings for working capital. As of September 30, 1998, there was indebtedness
of approximately $0.7 million under this overdraft agreement.
In addition, the Company has other borrowings related primarily to the
acquisition of property and equipment from third parties in the aggregate amount
of $410,000.
F-18
<PAGE> 76
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of the above agreements, as of September 30, 1998, third party
borrowings will be repaid as follows ($'s in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1999.............................................. $3,299
2000.............................................. 1,615
2001.............................................. 384
2002.............................................. 102
2003.............................................. 2
Thereafter........................................ --
------
$5,402
======
</TABLE>
Related Party Borrowings
Prior to the Radiocoms Acquisition, Securicor had extended a limited use
$15.0 million line of credit to MUSA. In connection with the Radiocoms
Acquisition, Securicor made available to the Company a $15.0 million line of
credit (which replaced the MUSA $15.0 million line of credit) to fund Intek's
working capital needs. The September 1996 Facility could be drawn upon by Intek
so long as it maintained a net worth of at least $20.0 million. The September
1996 Facility bore interest at the rate of prime (defined as the average of
prime rates announced by certain specified banks), plus 1.0 percent through
December 31, 1997, and thereafter interest was to accrue at the rate of 11.0
percent, compounded annually. The principal balance at September 30, 1997 was
approximately $10.8 million, plus accrued interest of approximately $1.0
million.
In March 1997, the Company borrowed $6.0 million for working capital
purposes from Securicor. The unsecured borrowings was evidenced by an 11 percent
note payable due the earlier of (1) the receipt of funds by Intek from a private
or public offering of Intek common shares; or (2) October 18, 1998.
Additionally, during May 1997, the Company borrowed $4.5 million from Securicor
to retire certain outstanding debentures and an additional $2.0 million in
September 1997. The May and September loans bore interest at 12.5 percent and
were repayable under the same terms as the 11 percent note payable. Interest on
these notes was due upon maturity of the notes. Accrued interest on these loans
at September 30, 1997, was approximately $506,000.
In December 1997, the Company entered into a loan agreement ("December 1997
Facility") with Securicor which replaced all prior loan agreements. The December
1997 Facility provides the Company the ability to borrow up to $29.5 million.
The December 1997 Facility bears interest at 11.5% per annum, payable at June
30, 2003. Interest is accrued each month, and on June 30 of each year, is to be
added to the principal amount outstanding. Principal payments are to be $0.5
million per month for 12 months beginning July 1, 2001, $1.0 million per month
for 11 months beginning July 1, 2002, with the remaining balance due and payable
on June 30, 2003. The obligations under the December 1997 Facility can be
prepaid by the Company at any time in $1.65 million increments without penalty.
The December 1997 Facility has to be repaid if Securicor ceases to be the
beneficial owner of more than 50 percent of Intek common stock as a result of
any transaction except the direct or indirect transfer of the Intek common stock
by Securicor and also is subject to mandatory prepayments at the rate of 50
percent of the net proceeds of any financing by the Company exceeding $8.0
million. At September 30, 1998, the amount payable under the December 1997
Facility totaled $30.7 million, consisting of original principal borrowings of
$29.5 million and capitalized interest of approximately $1.2 million.
F-19
<PAGE> 77
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of the above agreements, as of September 30, 1998, related
party borrowings will be repaid as follows ($'s in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1999............................................. $ --
2000............................................. --
2001............................................. 1,500
2002............................................. 7,500
2003............................................. 21,733
Thereafter....................................... --
-------
$30,733
=======
</TABLE>
In December, 1998 the Company entered into an additional financing
arrangement for $25 million with Securicor (Note 17). During fiscal 1998 and
1997, interest expense for related party borrowings totaled $2.7 million and
$1.4 million, respectively.
9. PREFERRED STOCK
Radiocoms
In December 1996, the Company consummated the Radiocoms Acquisition (Note
4). Prior to the consummation of this transaction, Securicor forgave
approximately $12.0 million due it by Radiocoms and accepted 20,000 shares of
$1,000 par value per share of preferred stock from Radiocoms ("Radiocoms
Preferred Stock") for the remaining balance due. The preferred stock is
mandatorily redeemable on June 30, 2006 at its par value and bears a dividend
rate of 6 percent. During fiscal 1998 and 1997, Radiocoms accrued dividends of
$1.2 million and $1.0 million, respectively, which are included in the total
Radiocoms preferred stock balance at September 30, 1998, of $22.2 million.
Intek Global
Effective March 1, 1998, Securicor purchased, pursuant to a Preferred Stock
Purchase Agreement dated December 29, 1997, 12,408 shares of Series A
Convertible Preferred Stock (the "Series A Preferred Stock") for approximately
$12.4 million. Proceeds from the sale of the Series A Preferred Stock were
applied against the principal balance of the December 1997 Debt Facility (Note
8). The liquidation value of the Series A Preferred Stock is $1,000 per share
and par value is $.001 per share. Dividends accrue at the rate of 11 1/2% of the
original issue price of $1,000 per share and are cumulative. Dividend payments
are due upon the conversion or redemption of the Series A Preferred Stock. The
holder of the Series A Preferred Stock has the right to convert the Series A
Preferred Stock into shares of Intek common stock if the market price of Intek
common stock exceeds $6.00 for 20 consecutive trading days. Intek may cause the
Series A Preferred Stock to be converted if the market price is or exceeds $9.00
for 20 consecutive trading days. The holder of the Series A Preferred Stock has
the right to convert the Series A Preferred Stock into shares of Intek common
stock if Intek does not redeem the Series A Preferred Stock by June 30, 2003.
The Series A Preferred Stock is subject to adjustments for stock dividends,
stock splits or share combinations of Intek common stock or distribution of a
material portion of Intek's assets to the holders of Intek common stock. The
Series A Preferred Stock does not have voting power except as provided by
Delaware corporate law. During fiscal 1998, Intek accrued dividends totaling
$844,000 which are included in the total Intek Global preferred stock balance at
September 30, 1998 of $13.3 million.
F-20
<PAGE> 78
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. SALES OF SECURITIES OUTSIDE THE UNITED STATES UNDER REGULATION S OF THE
SECURITIES ACT
On February 29, 1996, the Company raised $2.5 million through the issuance
of a Senior Secured Debenture ("Senior Debenture") to MeesPierson ICS Limited, a
U.K. limited liability company ("MeesPierson"). The Senior Debenture was secured
by land and a building owned by the Company (the "Property"). Intek also issued
50,000 shares of Intek common stock to MeesPierson as a closing fee for its
investment banking services. The Senior Debenture matured on August 31, 1996. In
exchange for an extension until the earlier of October 31, 1996 or the sale of
the Property, Intek paid to MeesPierson accrued interest through August 1, 1996,
issued 25,000 shares of Intek common stock to MeesPierson and issued 5,000
shares of Intek common stock to Octagon Capital Canada Corporation for an
agent's fee. In exchange for a further extension to January 31, 1997, Intek
issued MeesPierson 34,000 shares of Intek common stock valued at approximately
$0.2 million. The Senior Debenture was paid in full on December 31, 1996.
On April 26, 1996, The Company sold a series of 6.5% Notes in the aggregate
principal amount of $5.0 million (the "Notes"), maturing April 25, 1999. During
fiscal 1997, holders of the Notes exercised warrants to convert all $5.0 million
of the Notes into Intek common stock at an average discount of 18 percent below
market price. This discount, in the amount of approximately $0.9 million, was a
pre-reverse acquisition expense of Intek. A portion of accrued interest was
repaid through issuance of Intek common stock valued at approximately $0.1
million.
On November 1, 1996, the Company sold a series of 6.5% Notes in the
aggregate principal amount of $2.0 million (the "November 1996 Notes") maturing
on October 31, 1999. Net proceeds to the Company, after fees and broker's
commissions, were approximately $2.0 million. All accrued interest is due and
payable at the time the November 1996 Notes mature or upon the exercise of the
warrants. During the quarter ended March 31, 1997, holders of the Notes
exercised warrants to convert all $2.0 million of the Notes into Intek common
stock at an average discount of 28% below market price. This discount, in the
amount of approximately $0.6 million, was charged to interest expense during
fiscal 1997.
On February 6, 1997, the Company sold a series of 7.5% convertible
debentures (the "February 1997 Debentures") and Warrants (the "February 1997
Warrants") to three purchasers. Net proceeds to the Company, after fees and
broker's commissions, were approximately $4.0 million. The February 1997
Debentures matured on February 6, 2000 and bore interest at the rate of 7.5
percent per annum. All accrued interest was due and payable at the time the
February 1997 Debentures matured or upon their conversion to Intek common stock.
The debt conversion price was the lesser of $3.83 million or 80% of the average
closing bid price for the 5 trading days prior to conversion resulting in a
discount of $0.8 million. In May 1997, the Company redeemed the February 1997
Debentures in exchange for a cash payment equal to the principal amount of the
debentures plus a redemption premium of 10 percent and all accrued and unpaid
interest resulting in a $0.4 million reduction in the originally anticipated
discount. The February 1997 Warrants are exercisable at $4.59 per share and are
subject to customary anti-dilution adjustments. The February 1997 Warrants were
estimated by the broker to have a value of $0.1 million, which was included in
interest expense in fiscal 1997. All February 1997 warrants were outstanding and
unexercised at September 30, 1998.
11. COMMON STOCK REPURCHASE PLAN
On November 24, 1997, the Board of Directors of the Company adopted a share
repurchase plan whereby the officers of the Company are authorized to expend up
to $1.0 million to acquire up to 1 percent of Intek common stock. During fiscal
1998, the Company repurchased 184,500 shares of Intek common stock, $0.01 par
value in the open market at a cost of $359,000. In March 1998, the Board of
Directors terminated the share repurchase plan.
In March 1998, Intek repurchased 352,500 shares of Intek common stock at
$2.75 per share from SCL in a private transaction for a total of $969,375.
Pursuant to the terms of the transaction, Intek paid SCL cash in
F-21
<PAGE> 79
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the amount of $528,750 and notes in the aggregate amount of $440,625. The notes
are non-interest bearing and are due and payable on December 15, 1998.
12. STOCK-BASED COMPENSATION PLANS
Executive Stock Grant
In connection with his employment by the Company in August 1997, the chief
executive officer of the Company received, among other things, 300,000 shares of
Intek common stock. The employment agreement provides that in the event the fair
market value of the 300,000 shares on December 31, 1998 ("December Fair Value"),
is less than $1.0 million, the Company will pay the executive an amount equal to
the difference between $1.0 million and the December Fair Value. The payment
will be made, at the executive's option, in cash, Intek common stock or a
combination thereof. In fiscal 1997, the Company recorded compensation expense
of approximately $1.0 million, related to the executive stock grant.
Stock Option Plans
The 1988 Key Employee Incentive Stock Option Plan ("1988 Plan") provides
for the granting of options on up to 500,000 shares of Intek common stock. The
stock options are exercisable over a period determined by the Stock Option
Committee, but no longer than ten years after the date they are granted. The
options are exercisable at a price equal to the average of the closing per share
bid and asked price of the Intek common stock on the date an option is granted
("Fair Market Value") or 110 percent of Fair Market Value for persons who have
in excess of a 10 percent voting interest in all classes of the Company's stock
prior to the date of grant. The dollar amount of options issued under the Plan
in any calendar year is limited to $100,000 per person in value, plus any unused
limit carry-over. At the Annual Meeting of Stockholders held on February 18,
1998, the stockholders approved a modification in the 1988 Plan so that options
granted under this plan qualify as "incentive stock options" within the meaning
of Section of 422 of the Internal Revenue Code (IRC). At September 30, 1998,
there were 436,666 options outstanding under the 1988 Plan, of which
approximately 120,000 options were exercisable.
In September 1994, the Board of Directors approved the 1994 Stock Option
Plan ("1994 Option Plan") and the 1994 Director's Option Plan ("1994 Director's
Plan"). The two plans were approved by Intek's stockholders at the Annual
Meeting of Stockholders held on July 5, 1995. The 1994 Option Plan and the 1994
Director's Plan provide for the granting of options to purchase up to 600,000
and 300,000 shares, respectively, of Intek common stock.
The 1994 Option Plan provides for the granting of "incentive stock options"
and "nonqualified stock options", which are not intended to qualify under any
provision of the Code. No optionee may be granted stock options to purchase more
than 60,000 shares in any fiscal year. At September 30, 1998, there were 350,000
options outstanding under the 1994 Option Plan, of which approximately 250,000
options were exercisable.
Under the terms of the 1994 Directors' Plan, each director is entitled to
receive, on the date of his or her initial election as a director, an option to
purchase 20,000 shares of Intek common stock. No person may receive an option
pursuant to the 1994 Directors' Plan more than once. At September 30, 1998,
there were 160,000 options outstanding under the 1994 Directors' Plan, of which
approximately 80,000 options were exercisable.
Under both 1994 plans, the option exercise price equals the fair market
value of Intek common stock at the date of grant. Historically, under both 1994
plans, options have vested after one year and expire after ten years. The
100,000 options granted under the 1994 Option Plan during fiscal 1998 vest at a
rate of 20% per year.
F-22
<PAGE> 80
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At the Annual Meeting of Stockholders held on February 18, 1998, the
stockholders approved the 1997 Performance and Equity Incentive Plan ("1997
Incentive Plan"). The 1997 Incentive Plan authorized the Compensation Committee
of the Board of Directors to issue up to a total of 4,000,000 shares to attract,
retain and motivate key employees, nonemployee directors and independent
contractors. The 1997 Incentive Plan authorizes the following awards based upon
Intek common stock: stock options, stock appreciation rights, stock awards,
stock units, performance shares, performance units and cash awards. No awards
may be granted under the 1997 Incentive Plan after November 20, 2007. Stock
options issued under the 1997 Incentive Plan may be either nonqualified or
incentive stock options within the meaning of Section 422 of the IRC. The term
of nonqualified stock options may be no longer than twenty years and ten years
for incentive stock options. The Compensation Committee shall specify the
vesting period of each stock option issued. At September 30, 1998, there were
3,305,000 stock options outstanding under the 1997 Incentive Plan, of which
approximately 365,000 options were exercisable. At September 30, 1998, the
Company had not issued any stock appreciation rights, stock awards, stock units,
performance shares, performance units or cash awards under the 1997 Incentive
Plan.
A summary of the stock options issued under the 1988 Plan, the 1994 Option
Plan, the 1994 Directors' Plan and the 1997 Incentive Plan, and changes during
the fiscal years ended September 30 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ------------------
SHARES WTD AVG SHARES WTD AVG SHARES WTD AVG
(000) EX PRICE (000) EX PRICE (000) EX PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year....... 735 $3.67 315 $4.16 475 $3.69
Granted............................ 3,695 2.39 420 3.30 72 5.88
Exercised.......................... -- -- -- -- 225 3.80
Forfeited.......................... 178 3.46 -- -- -- --
Expired............................ -- -- -- -- 7 1.75
------ ----- -----
Outstanding, end of year............. 4,252 2.56 735 3.67 315 4.16
------ ----- -----
Options exercisable at year-end...... 815 3.18 315 4.16 315 4.16
------ ----- ----- ----- ----- -----
Weighted average fair value of
options granted during the year.... $ 2.15 $1.93 $4.22
====== ===== =====
</TABLE>
The 4,251,666 options outstanding at September 30, 1998, have the following
exercise prices and weighted average remaining contractual lives:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING
EXERCISE PRICE SHARES CONTRACTUAL LIFE (YEARS)
- -------------- --------- ------------------------
<S> <C> <C>
$1.688............................... 40,000 9.09
$1.970............................... 800,000 8.95
$2.000............................... 600,000 9.89
$2.500............................... 2,005,000 9.45
$3.000............................... 226,666 6.28
$3.125............................... 20,000 8.40
$3.190............................... 40,000 9.85
$3.750............................... 230,000 5.99
$4.000............................... 210,000 9.67
$5.875............................... 60,000 7.23
$6.125............................... 20,000 8.18
---------
4,251,666
</TABLE>
F-23
<PAGE> 81
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 30, 1998, options available for future grant were as
follows:
<TABLE>
<S> <C>
1988 Plan................................................ 5,834
1994 Stock Option Plan................................... 48,000
1994 Directors' Plan..................................... 85,000
1997 Incentive Plan...................................... 695,000
-------
833,834
</TABLE>
The Company accounts for these plans under Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. As long as the exercise price of the stock options is not less
than the fair value of the Intek common stock at the date of grant, no
compensation expense is recognized. Had compensation expense for these plans
been determined consistent with the requirements of FAS No. 123 "Accounting for
Stock-based Compensation" ("FAS 123"), the Company's net loss and loss per share
would have been increased to the following pro forma amounts during the three
fiscal years ended September 30 ($'s in thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C> <C>
Net loss applicable to common
shareholders:....................... As Reported $(66,463) $(26,999) $(9,089)
Pro Forma (68,941) (27,264) (9,393)
Net loss per share applicable to
common shareholders (basic and
diluted):........................... As Reported (1.58) (0.74) (0.36)
Pro Forma (1.63) (0.75) (0.38)
</TABLE>
Because the FAS 123 method of accounting has not been applied to options
granted prior to October 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for the options granted during the three fiscal years ended
September 30 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- -----
<S> <C> <C> <C>
Risk free interest rate (percent)..................... 5.64 5.85 5.40
Expected dividend yield (percent)..................... 0.0 0.0 0.0
Expected lives of option (years)...................... 4.8 3.0 3.0
Expected volatility (percent)......................... 98.4 84.3 118.1
</TABLE>
13. RELATED PARTY TRANSACTIONS
Related parties of Intek include Securicor and its ultimate parent company,
the directors and officers of Intek and companies that are affiliated with
Directors of the Company. Related party transactions, other than those disclosed
elsewhere in the Notes to the Consolidated Financial Statements, are disclosed
below.
The Company believes that the terms of the transactions and the agreements
described below are on terms at least as favorable as those which it could
otherwise have obtained from unrelated parties. On-going and future transactions
with related parties will be (1) on terms at least as favorable as those which
the Company would be able to obtain from unrelated parties; (2) for bona fide
business purposes; and (3) approved by a majority of the disinterested and
non-employee directors.
F-24
<PAGE> 82
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Securicor
Pursuant to a Support Services Agreement dated December 3, 1996, by and
between the Company and Securicor, the Company agreed, in connection with the
Securicor Transaction, to obtain certain support and administrative services for
Radiocoms from Securicor and/or its affiliates for the purpose of enabling the
Company to manage an orderly transition in its ownership of Radiocoms during
fiscal 1997. During fiscal 1997, approximately $0.7 million of support and
administrative service costs (including services of Edmund Hough, Intek's former
Chief Executive Officer) were billed to Intek by Securicor. As of September 30,
1998, these costs remained unpaid by Intek.
During the fourth quarter of fiscal 1998, Intek sold its non-core,
U.K.-based land mobile radio distribution and maintenance assets ("ESU Assets")
to Securicor Information Systems Limited ("SIS"), a subsidiary of Securicor. The
sale price for the ESU Assets was $8.5 million resulting in a gain of $3.1
million. Due to the related party nature of the sale, the gain was recorded as a
direct increase in shareholders' equity (deficit). The sales price is subject to
a post closing adjustment up to (pound)500,000 (approximately $800,000)
depending on certain circumstances.
Radiocoms sells products to Securicor. In fiscal years 1998, 1997, and
1996, revenues from such sales were $3.2 million, $6.8 million, and $6.9
million, respectively.
Directors, Officers and Affiliated Companies
John Simmonds, a former director of the Company, is affiliated with SCL,
Simmonds Mercantile and Management Inc. ("SMM") which is a company that is
controlled by SCL and MIC. Mr. Simmonds resigned from the Board of Directors in
July 1998. Steven Wasserman, a director and Secretary of the Company, is a
partner of the law firm Kohrman Jackson & Krantz. Robert Kelly, a director of
the Company, is a partner of the law firm Squire, Sanders & Dempsey L.L.P.,
which acquired the practice of Kelly & Povich, P.C. John Wareham, a director of
the Company, is the President of the consulting and executive recruiting firm
Wareham Associates, Inc.
The law firm Kohrman Jackson & Krantz performs legal services for the
Company and its subsidiaries for which it received fees of approximately
$111,000 and $237,000, respectively, during fiscal 1998 and 1997. In addition,
Mr. Wasserman received $1,000 per month as compensation for his services as the
secretary of the Company until January 1, 1997, at which time his compensation
was increased to $2,000 per month.
The law firm Kelly & Povich, P.C. performed legal services for the Company
and its subsidiaries as of December 1996. Mr. Kelly is a member of the Company's
Board of Directors. During fiscal 1998 and 1997, Kelly & Povich, P.C. received
fees of approximately $170,000 and $55,000, respectively. Squire, Sanders &
Dempsey L.L.P. received fees of $38,000 during fiscal 1998 and received no fees
during fiscal 1997.
The firm of Wareham Associates, Inc. provides executive recruiting and
management consulting services to the Company for which it received fees of
$249,000 during fiscal 1998 and no fees during fiscal 1997.
Directors are compensated for services at the rate of $4,000 per year plus
$500 per meeting to a maximum of $10,000 per director. For fiscal 1998, the
Company paid directors fees of $61,000 and as of September 30, 1998, had accrued
$9,000 for unpaid directors fees. For fiscal 1997, the Company paid directors
fees of $48,000 and as of September 30, 1997, had accrued $9,000 for unpaid
directors fees.
The Company has entered into several related party borrowings with
Securicor (Note 8). Roger Wiggs and Michael Wilkinson, directors of the Company,
are also officers of Securicor. Directors fees for Messers. Wiggs and Wilkinson
are paid to Securicor plc.
Pursuant to a consulting agreement, the Company paid $10,000 a month to
Nicholas R. Wilson until the Company notified Mr. Wilson on March 21, 1997 that
it was terminating the agreement. Mr. Wilson was the
F-25
<PAGE> 83
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Chairman of the Board of Directors until his resignation on December 3, 1996.
During fiscal 1997 and 1996, the Company paid Mr. Wilson $80,000 and $120,000,
respectively.
Pursuant to an oral management agreement between SCL and the Company, the
Company paid SCL $10,000 per month and SCL made available to the Company the
services of Messrs. Simmonds, Dunstan and Heinke, each of whom were officers and
directors of the Company. The agreement was terminated effective January, 1997.
During fiscal 1997, the Company paid $40,000 to SCL pursuant to this agreement.
Pursuant to an oral consulting agreement with SMM, the Company paid SMM
$8,000 per month for consulting services. During fiscal 1997, the Company paid
$32,000 to SMM. Effective February 1, 1997, the Company terminated the agreement
and ceased such payments.
In March 1998, Intek repurchased 352,500 shares of Intek common stock at
$2.75 per share from SCL in a private transaction.
During fiscal 1997, the Company entered into two agreements with ADC and 22
holders of 220 MHz FCC licenses (Note 5). John Simmonds and SCL were
shareholders of ADC when the agreements were consummated.
The Company and SCL had an arrangement whereby Roamer One purchased
equipment and installation services from SCL. During fiscal 1997 and 1996,
Roamer One purchased approximately $8,000 and $2.3 million, respectively, of
radio equipment and installation services from SCL. The agreement was terminated
during fiscal 1997.
On September 19, 1996, MUSA entered into an agreement with MIC, whereby MIC
agreed to permit MUSA to make use of the services of the supplier liaison office
maintained by MIC in Japan and MIC's purchasing representative in Korea. During
fiscal 1998 and 1997, MUSA paid $56,000 and $140,000, respectively, to MIC. This
agreement was terminated in January, 1998.
On September 19, 1996, MUSA and SCL entered into a Computer Services
Agreement pursuant to which SCL agreed to provide MUSA access to the IBM AS400
computer system, including hardware and software, currently owned by SCL, for
data processing purposes. During fiscal 1998 and 1997, MUSA paid $16,000 and
$218,000, respectively, to SCL. This agreement was terminated on October 31,
1997.
On December 3, 1996, the Company entered into a Registration Rights
Agreement to provide certain holders of Intek common stock, including SCL, MIC,
Roamer One Holdings, Securicor, Securicor International Limited and Anglo York
Industries, Inc. with certain demand and "piggy-back" registration rights with
respect to the Intek common stock owned by the holders. Each is a stockholder of
the Company and, collectively, such stockholders own approximately 70 percent of
Intek common stock at September 30, 1998.
14. COMMITMENTS AND CONTINGENCIES
Site Leases
The Company has entered into 231 site leases for the housing of radio base
station equipment and antenna systems related to the Roamer One network. These
leases may vary in term from 1 to 5 years with provisions for subsequent
extensions upon the mutual agreement of the parties. In addition, the Company
has
F-26
<PAGE> 84
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
lease commitments for office space, vehicles and office equipment. As of
September 30, 1998, total future minimum lease payments are as follows ($'s in
thousands):
<TABLE>
<S> <C>
1999................................................ $2,362
2000................................................ 1,800
2001................................................ 1,041
2002................................................ 329
2003................................................ 149
Thereafter.......................................... 221
------
$5,902
======
</TABLE>
Purchase Commitments
As of September 30, 1998, MUSA had a purchase commitment with its main
supplier of radios to purchase approximately $3.8 million of inventory (Note 2).
15. LEGAL PROCEEDINGS
The Company, David Neibert, the Company's Executive Vice President, and
Nicholas R. Wilson, a former Chairman of the Company ("Intek Defendants") were
named with forty other defendants in a complaint (Scott, et al. Steingold, et
al.) filed in U.S. District Court for the Northern District of Illinois in
November, 1997. The lawsuit purports to allege claims under the Racketeer
Influenced Corrupt Organizations Act ("RICO"), the Securities Exchange Act of
1934 and various common law state claims in connection with the sale and
marketing of interests in certain partnerships formed to operate specialized
mobile radio ("SMR") systems. Plaintiffs seek rescissory damages with interest
and punitive damages allegedly relating to their purchases of SMR partnership
interests. No specific amount of alleged damages is mentioned in the complaint.
The plaintiffs also had filed, and have now withdrawn against the Intek
Defendants, a motion for a temporary restraining order and preliminary
injunction seeking to freeze the assets of all defendants. The Intek Defendants
filed a motion to dismiss the complaint on various grounds. In response
plaintiffs sought leave to file a second amended complaint, which request was
granted by the court. Intek requested plaintiffs to withdraw all claims against
the Intek defendants on the grounds that they are frivolous. On February 3,
1998, plaintiffs filed an amended complaint which purports to allege claims
under RICO, the Securities Act of 1933, the Securities Exchange Act of 1934 and
various common law state claims in connection with (i) the sale and marketing of
interests in certain SMR partnerships and (ii) purported improper dissipation of
assets of certain of the SMR partnerships. Plaintiffs seek rescissory damages
with interest and punitive damages relating to such asserted claims. No specific
amount of alleged damages is mentioned in the amended complaint.
The Intek Defendants moved to dismiss the amended complaint. On September
30, 1998, the Court granted in part and denied in part the Intek defendants'
motion to dismiss the complaint and dismissed plaintiffs' RICO claims with
prejudice. The Court granted plaintiffs leave to replead all claims (except
their RICO claims) that were timely under the applicable statute of limitations.
On October 23, 1998, the plaintiffs filed a third amended complaint which
purported to allege claims under Section 10(b) and 20 of the 1934 Act and Rule
10b-5 promulgated thereunder, Section 12(1) and 12(2) of the 1933 Act and
control person liability thereunder, and various common law state claims in
connection with the sale and marketing of certain SMR Partnerships and the
purported dissipation of assets of certain of these Partnerships. Plaintiffs
seek rescissory damages with interest and punitive damages in an amount to be
determined. The Intek Defendants have until December 14, 1998 to answer the
third amended
F-27
<PAGE> 85
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
complaint, or otherwise plead. In the opinion of the management of the Company,
this lawsuit will not have a material adverse affect on the Company's
consolidated financial position or results of operations.
In addition, from time to time, the Company is involved in other litigation
relating to claims arising out of its operations in the normal course of
business. In the opinion of the Company's management, after consultation with
outside counsel, the ultimate dispositions of such matters will not have a
materially adverse effect on the Company's consolidated financial position or
results of operations.
16. SEGMENT REPORTING
During fiscal 1998, the Company restructured itself to integrate its
design, manufacturing, distribution and airtime operations. The Company operates
in one industry segment as a provider of spectrum-efficient wireless
communications technology, products and services. Products include LM and non-LM
based radios, and products manufactured under contract for third parties.
Services include subscriber revenues, royalties, equipment rental, and
non-warranty repair. All prior year segment information has been restated to
reflect the current year's structure of the Company's internal organization. The
Company's geographic data from continuing operations for the three fiscal years
ended September 30, are as follows ($'s in thousands):
<TABLE>
<CAPTION>
REVENUES
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
GEOGRAPHIC AREAS
United States
Unaffiliated........................................ $13,563 $16,710 $ --
To foreign affiliates............................... -- 7 --
Foreign
Unaffiliated........................................ 22,091 25,574 23,899
To United States affiliates......................... 1,649 12,442 8,984
Total sales between geographic areas.................. (1,649) (12,449) (8,984)
------- ------- -------
Consolidated Revenues............................... $35,654 $42,284 $23,899
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
LONG TERM ASSETS
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
United States......................................... $44,270 $70,316 $ --
Foreign............................................... 4,636 7,820 16,816
------- ------- -------
Total consolidated long term assets......... $48,906 $78,136 $16,816
======= ======= =======
</TABLE>
17. SUBSEQUENT EVENTS
Subsequent events, other than those disclosed elsewhere in Notes to the
Consolidated Financial Statements, are disclosed below.
In December 1998, the Company entered into an additional financing
arrangement for $25 million with Securicor. The arrangement provides that
amounts outstanding bear interest at 11.5%, payable quarterly in cash or
deferred at the Company's discretion, and is due December 31, 1999. Outstanding
debt under the arrangement is convertible at any time at Securicor's discretion
into the Company's common stock at various conversion prices. The conversion
price for the first $12.5 million will be the average closing price for the last
20 trading days prior to the date the Company's Board of Directors approved the
arrangement and the next $12.5 million will be set at the average closing price
of the Company's common stock for the last 20 trading days prior to the date of
each draw on the facility.
F-28
<PAGE> 86
INTEK GLOBAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
($'S IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Net product sales...................... $ 5,990 $ 5,016 $ 11,343 $ 14,055
Service income......................... 802 3,027 1,423 3,228
----------- ----------- ----------- -----------
Total revenues........................... 6,792 8,043 12,766 17,283
Costs and expenses:
Cost of product sales.................. 4,628 3,890 7,968 10,434
Cost of services provided.............. 1,251 2,602 2,239 3,610
Sales and marketing.................... 1,428 2,229 2,981 4,082
Research and development............... 413 532 1,089 1,165
General and administrative............. 3,746 3,937 7,776 7,948
Depreciation and amortization.......... 1,413 1,619 2,806 2,948
Strategic planning charges............. 336 336
----------- ----------- ----------- -----------
Operating loss........................... (6,423) (6,766) (12,429) (12,904)
Other income (expense):
Interest............................... (1,410) (721) (2,502) (1,404)
Other.................................. (69) 15 (105) 31
----------- ----------- ----------- -----------
Loss before income taxes................. (7,902) (7,472) (15,036) (14,277)
Income tax benefit....................... -- -- -- --
----------- ----------- ----------- -----------
Net loss................................. (7,902) (7,472) (15,036) (14,277)
Less: preferred dividends................ (657) (295) (1,322) (593)
----------- ----------- ----------- -----------
Net loss applicable to common
shareholders........................... (8,559) (7,767) (16,358) (14,870)
Other comprehensive income (loss):
Foreign currency translation
adjustments, net of tax............. (342) (171) 48 (172)
----------- ----------- ----------- -----------
Comprehensive income (loss).............. $ (8,901) $ (7,938) $ (16,310) $ (15,042)
=========== =========== =========== ===========
Net loss per share applicable to common
shareholders (basic & diluted)......... $ (0.21) $ (0.18) $ (0.38) $ (0.35)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding (basic & diluted).......... 42,303,038 42,201,852 42,303,038 42,128,258
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-29
<PAGE> 87
INTEK GLOBAL CORPORATION
CONSOLIDATED BALANCE SHEETS
($'S IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
----------- -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,311 $ 5,719
Accounts receivable, net of allowance for doubtful
accounts of $342 at March 31, 1999 and $993 at
September 30, 1998..................................... 4,270 3,870
Inventories............................................... 20,444 17,677
Deposits.................................................. 73 1,750
Amounts due from related parties.......................... 246 396
Prepaid expenses and other current assets................. 2,001 1,796
--------- ---------
Total current assets.............................. 29,345 31,208
--------- ---------
PROPERTY AND EQUIPMENT, NET................................. 23,584 23,569
OTHER ASSETS:
Note receivable........................................... 142 580
Intangible assets, net.................................... 27,219 20,961
Inventory-long term....................................... 3,549 3,189
Other..................................................... 695 607
--------- ---------
Total other assets................................ 31,605 25,337
--------- ---------
TOTAL ASSETS................................................ $ 84,534 $ 80,114
========= =========
CURRENT LIABILITIES:
Accounts payable.......................................... $ 6,866 $ 7,062
Amounts due to related parties............................ 3,979 2,499
Accrued liabilities....................................... 5,097 7,420
Notes payable -- third party.............................. 7,444 3,299
Notes payable -- related party............................ 17,500 --
--------- ---------
Total current liabilities......................... 40,886 20,280
--------- ---------
LONG TERM DEBT:
Notes payable -- third party.............................. 547 2,038
Notes payable -- related party............................ 30,839 30,733
Other..................................................... 56 65
--------- ---------
Total long term debt.............................. 31,442 32,836
--------- ---------
PREFERRED STOCK -- Mandatorily Redeemable................... 36,774 35,452
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, $0.01 par value, 60,000,000 shares
authorized 43,305,620 shares issued at March 31, 1999
and September 30, 1998................................. 433 433
Capital in excess of par value............................ 107,321 108,471
Treasury stock, at cost, 1,002,582 shares at March 31,
1999 and September 30, 1998............................ (2,099) (2,099)
Accumulated deficit....................................... (128,606) (113,618)
Accumulated other comprehensive income -- currency
translation adjustment................................. (1,617) (1,641)
--------- ---------
Total shareholders' equity (deficit).............. (24,568) (8,454)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $ 84,534 $ 80,114
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-30
<PAGE> 88
INTEK GLOBAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
($'S IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss.................................................. $(15,036) $(14,277)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 2,806 2,948
Interest added to principal............................ 2,170
Stock option expense................................... 317 --
Changes in operating assets and liabilities:
Accounts receivable and amounts due from related
parties............................................... (249) 2,994
Deposits............................................... 1,677 --
Inventories............................................ (3,097) 700
Income taxes receivable from related parties........... -- 261
Prepaid expenses and other current assets.............. (208) (376)
Accounts payable and amounts due to related parties.... 1,101 (161)
Accrued liabilities.................................... (2,242) 1,709
Accrued liabilities to related parties................. -- 304
Deferred income........................................ -- (724)
Other.................................................. (447) (57)
-------- --------
Net cash used in operating activities....................... (15,378) (4,509)
-------- --------
Cash Flows From Investing Activities:
Proceeds from sale of marketable securities............... -- 7,458
Expenditures for property and equipment, net.............. (2,192) (3,453)
Expenditures for FCC licenses............................. (7,017) (5,707)
Collection of note receivable............................. 440 116
Other..................................................... 438 (222)
-------- --------
Net cash used in investing activities....................... (8,331) (1,808)
-------- --------
Cash Flows From Financing Activities:
Net change in bank overdraft.............................. 3,083 893
Proceeds from short term debt............................. 1,633 2,915
Proceeds from long term debt.............................. -- 1,656
Proceeds from notes payable-related party................. 17,186 2,000
Repayment on long and short term debt..................... (1,993) --
Purchase of treasury stock................................ -- (1,329)
Other..................................................... 309 (277)
-------- --------
Net cash provided by financing activities................. 20,219 5,858
-------- --------
Effect of foreign exchange rates on cash.................... 82 18
-------- --------
Net decrease in cash and cash equivalents................... (3,408) (441)
Cash and cash equivalents at beginning of period............ 5,719 1,909
-------- --------
Cash and cash equivalents at end of period.................. $ 2,311 $ 1,468
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 210 $ 60
Cash paid for income taxes................................ $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-31
<PAGE> 89
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) PRESENTATION
The unaudited condensed consolidated financial statements included herein
have been prepared by Intek Global Corporation (the "Company" or "Intek
Global"), pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These unaudited condensed consolidated financial statements should
be read in conjunction with Management's Discussion and Analysis and the
financial statements and the notes thereto included in the Company's latest
annual report on Form 10-K for the period ended September 30, 1998.
These financial statements have been prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") used in the United States ("U.S."). Such
accounting principles differ in certain respects from GAAP used in the United
Kingdom ("U.K."), which is applied by the Company's Securicor Electronics
Limited ("SEL") subsidiary (formerly known as Securicor Radiocoms Limited) for
local and statutory financial reporting purposes.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the condensed
consolidated financial statements for the interim periods presented taken as a
whole. These adjustments are of a normal and recurring nature. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, and expenses.
Actual results may differ from these estimates. The results of the interim
periods are not necessarily indicative of results to be expected for the entire
year.
(2) FINANCIAL INSTRUMENTS
The Company's management believes that fair value of all financial
instruments approximates carrying value.
The Company is exposed to foreign currency exchange risk related to non-LM
technology inventory purchased from its Japanese supplier. The Company
periodically enters into foreign currency forward contracts to minimize the
impact of currency movements on firm purchase commitments from this supplier.
The counter party for these instruments is a major financial institution. The
Company accounts for these foreign currency forward contracts using hedge
accounting. The terms of the derivatives are set to approximate the inventory
purchase dates. The Company regularly monitors its foreign currency exposures
and ensures that the total amount of the foreign currency forward contracts do
not exceed the firm purchase commitments subject to foreign exchange risk. Gains
and losses on the foreign currency forward contracts are deferred and recognized
when the related inventory purchases are recorded. The Company does not enter
into derivative financial instruments for trading or speculative purposes.
F-32
<PAGE> 90
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Details of the hedging of firm foreign commitments as of March 31, 1999
follows (Y's and $'s in thousands):
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
Firm foreign purchase commitments........................... Y144,345
Outstanding hedge contracts................................. 20,000
--------
Unhedged position........................................... Y124,345
========
Unhedged position........................................... $ 1,058
========
Outstanding hedge contracts at contract rate................ $ 172
Outstanding hedge contracts at fair value (based upon market
prices at balance sheet date)............................. $ 170
</TABLE>
(3) INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
----------- -------------
(UNAUDITED)
<S> <C> <C>
Raw materials.............................................. $ 5,820 $ 6,077
Work in progress........................................... 2,995 2,681
Finished goods............................................. 15,178 12,108
------- -------
Subtotal......................................... 23,993 20,866
Inventory not likely to be used or sold within one year.... (3,549) (3,189)
------- -------
Total current inventories........................ $20,444 $17,677
======= =======
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES MARCH 31, SEPTEMBER 30,
(YEARS) 1999 1998
------------ ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land........................................... -- $ 401 $ 423
Buildings...................................... 11 to 50 2,908 2,735
Site equipment................................. 10 16,294 15,893
Production & test equipment.................... 3 to 10 4,088 4,077
Furniture, fixtures and computers.............. 3 to 10 3,275 3,190
Equipment held for rental...................... 3 to 5 3,645 2,451
------- -------
Total property and equipment, at cost.......... 30,611 28,769
Less accumulated depreciation................ (7,027) (5,200)
------- -------
Net property and equipment..................... $23,584 $23,569
======= =======
</TABLE>
F-33
<PAGE> 91
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) INTANGIBLE AND LONG LIVED ASSETS
Intangible assets consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
----------- -------------
(UNAUDITED)
<S> <C> <C>
Excess of cost over fair value of net assets
acquired (goodwill):
Intek Global USA, Inc............................. $ 9,755 $ 9,755
Data Express...................................... 1,386 1,386
------- -------
11,141 11,141
FCC licenses acquired from third parties............ 18,351 11,333
Trademarks and patents.............................. 81 81
------- -------
Total intangibles................................... 29,573 22,555
Less accumulated amortization..................... (2,354) (1,594)
------- -------
Net intangibles..................................... $27,219 $20,961
======= =======
</TABLE>
(6) SEGMENT REPORTING
During fiscal 1998, the Company restructured itself to integrate its
design, manufacturing, distribution and airtime operations. The Company operates
in one industry segment as defined by FAS No. 131, "Disclosures about Segments
of an Enterprise and related Information." The Company is a provider of
spectrum-efficient wireless communications technology, products and services.
This conclusion is based upon how the Company's chief operating decision makers
view the Company's operations and how decisions are made to invest resources and
to assess performance. Products include linear modulation ("LM") and non-LM
based radios, and products manufactured under contract for third parties.
Services include subscriber revenues, royalties, equipment rental, and
non-warranty repair. All prior year segment information has been restated to
reflect the current year's structure of the Company's internal organization. The
Company's geographic data from continuing operations for the six months ended
March 31, 1999 and 1998 are as follows ($'s in thousands):
<TABLE>
<CAPTION>
REVENUES 6 MONTHS
ENDED MARCH 31,
------------------
1999 1998
------- -------
(UNAUDITED)
<S> <C> <C>
Geographic Areas
United States
Unaffiliated........................................... $ 7,225 $ 6,294
To foreign affiliates.................................. -- --
Foreign
Europe (primarily United Kingdom)...................... 5,541 10,989
To United States affiliates............................ 3,154 1,616
Total sales between geographic areas..................... (3,154) (1,616)
------- -------
Consolidated Revenues.................................. $12,766 $17,283
======= =======
</TABLE>
F-34
<PAGE> 92
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
LONG TERM ASSETS
--------------------------
MARCH 31, SEPTEMBER 30,
1999 1998
--------- -------------
(UNAUDITED)
<S> <C> <C>
United States........................................ $51,096 $44,270
United Kingdom....................................... 4,093 4,636
------- -------
Total consolidated long term assets........ $55,189 $48,906
======= =======
</TABLE>
(7) RELATED PARTY TRANSACTIONS
Related parties of Intek Global include Securicor Communications Limited
("Securicor"), a corporation formed under the laws of England and Wales, and its
ultimate parent company, the directors and officers of Intek Global and
companies that are affiliated with Directors of the Company. Related party
transactions, other than those disclosed elsewhere in the Notes to the
Consolidated Financial Statements and in the Company's annual report on Form
10-K, are disclosed below.
The Company believes that the terms of the transactions and the agreements
described below are on terms at least as favorable as those which it could
otherwise have obtained from unrelated parties. On-going and future transactions
with related parties will be (1) on terms at least as favorable as those which
the Company would be able to obtain from unrelated parties; (2) for bona fide
business purposes; and (3) approved by a majority of the disinterested and
non-employee directors.
Securicor
Pursuant to a Support Services Agreement dated December 3, 1996, by and
between the Company and Securicor, the Company agreed to obtain certain support
and administrative services for SEL from Securicor and/or its affiliates for the
purpose of enabling the Company to manage an orderly transition in its ownership
of SEL during fiscal 1997. During fiscal 1997, approximately $0.7 million of
support and administrative service costs (including services of Edmund Hough,
Intek Global's former Chief Executive Officer) were billed to Intek Global by
Securicor. As of March 31, 1999, these costs remained unpaid by Intek Global.
SEL sells products to Securicor. In the first half of fiscal year 1999,
revenues from such sales were $1,025,000. Sales to Securicor during the first
half of fiscal year 1998 were $1,324,000.
Directors, Officers and Affiliated Companies
Steven Wasserman, a director and Secretary of the Company, is a partner of
the law firm Kohrman Jackson & Krantz. Robert Kelly, a director of the Company,
is a partner of the law firm Squire, Sanders & Dempsey L.L.P., which acquired
the practice of Kelly & Povich, P.C. John Wareham, a director of the Company, is
the President of the management consulting and executive recruiting firm Wareham
Associates, Inc.
The law firm Kohrman Jackson & Krantz performs legal services for the
Company and its subsidiaries for which it received fees of approximately $25,000
and $72,000 during the first half of fiscal 1999 and 1998, respectively. In
addition, Mr. Wasserman receives $2,000 per month as compensation for his
services as the secretary of the Company.
The law firm of Squire, Sanders & Dempsey L.L.P., which acquired the
practice of Kelly & Povich, P.C., received fees of approximately $295,000 and
$91,000 during the first half of fiscal 1999 and 1998, respectively. Mr. Kelly
is a member of the Company's Board of Directors.
F-35
<PAGE> 93
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The firm of Wareham Associates, Inc. provides management consulting and
executive recruiting services to the Company for which it received fees of
approximately $66,000 during the first half of fiscal 1999. No fees were paid to
Wareham Associates, Inc. during the first half of fiscal 1998.
In December 1998, the Company retired $440,625 in debt related to the
repurchase in March, 1998 of 352,500 shares of Intek Global common stock from
Simmonds Capital Limited in a private transaction.
Directors are compensated for services at the rate of $12,000 per year plus
$1,000 per board meeting and $500 per committee meeting. Committee chairpersons
receive an additional $2,000 per year.
The Company has entered into several related party borrowings with
Securicor (see note 8). Roger Wiggs and Michael Wilkinson, directors of the
Company, are also officers and directors of Securicor. Directors fees for
Messrs. Wiggs and Wilkinson are paid to Securicor plc.
(8) DEBT
Related Party Borrowings
In December 1997, the Company entered into a loan agreement ("December 1997
Facility") with Securicor replacing all prior loan agreements providing the
Company the ability to borrow up to $29.5 million. The December 1997 Facility
bears interest at 11.5% per annum, payable at June 30, 2003. Interest is accrued
each month, and on June 30 of each year, is to be added to the principal amount
outstanding. Principal payments are to be $0.5 million per month for 12 months
beginning July 1, 2001, $1.0 million per month for 11 months beginning July 1,
2002, with the remaining balance due and payable on June 30, 2003. The
obligations under the December 1997 Facility can be prepaid by the Company at
any time in $1.65 million increments without penalty. The December 1997 Facility
has to be repaid if Securicor ceases to be the beneficial owner of more than 50
percent of Intek Global common stock as a result of any transaction except the
direct or indirect transfer of the Intek Global common stock by Securicor and
also is subject to mandatory prepayments at the rate of 50 percent of the net
proceeds of any financing by the Company exceeding $8.0 million. The December
1997 Facility contains a consolidated net worth covenant with which Securicor
waived compliance until April 2000. Absent such waiver, as of March 31, 1999,
the Company would not be in compliance with such covenant. The amount payable
under the December 1997 Facility totaled $33.7 million at March 31, 1999,
consisting of original principal borrowings of $29.5 million, capitalized
interest of approximately $1.2 million and accrued interest payable of
approximately $3.0 million.
In December 1998, the Company entered into an additional financing
arrangement ("December 1998 Facility") with Securicor providing the Company the
ability to borrow up to $25 million. Loans provided under this convertible
subordinated debt facility will accrue interest at the rate of 11.5 percent per
annum and will mature on December 31, 1999. The rate of conversion, if the
conversion feature is elected by Securicor, will be based on the market value of
Intek Global common stock over specified periods. At March 31, 1999, the amount
payable under the December 1998 Facility totaled $17.8 million, consisting of
original principal borrowings of $17.5 million and accrued interest payable of
approximately $0.3 million.
F-36
<PAGE> 94
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of the above arrangements, as of March 31, 1999, related party
borrowings will be repaid as follows (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1999............................................. $ 1,092
2000............................................. 17,840
2001............................................. 1,500
2002............................................. 7,500
2003............................................. 24,386
Thereafter....................................... --
-------
$52,318
=======
</TABLE>
During the first half of fiscal 1999 and 1998, interest expense for related
party borrowings totaled approximately $2,127,000, and $1,439,000, respectively.
Third Party Borrowings
In December 1997, Intek Global USA entered into a revolving credit facility
("Credit Facility") with a non-bank lender. The Credit Facility makes available
$5.0 million through December 1999. Borrowings under the Credit Facility are
secured by the assets of Intek Global USA and bear interest at 1.5% above the
lender's base rate (as defined). The Credit Facility contains, among other
covenants, a covenant relating to leverage, limitations on Intek Global USA's
ability to repay intercompany indebtedness and repayment provisions related to
change in control of Intek Global USA. The Company uses the Credit Facility for
issuance of letter of credit commitments on behalf of Intek Global USA, and for
borrowings for working capital. As of March 31, 1999, there was indebtedness
outstanding of approximately $2.3 million and letter of credit commitments of
$1.0 million under this Credit Facility.
In December 1997, Intek Global completed the acquisition of selected assets
of Wireless Plus. The purchase price paid by the Company to Wireless Plus
included a secured subordinated note in the amount of approximately $2.6 million
bearing interest at the rate of 8% per annum payable annually. The note
principal is payable in two equal annual installments due in February 1999 and
February 2000. The first installment of $1.5 million was paid in February 1999
consisting of principal in the amount of $1.3 million and accrued interest in
the amount of $0.2 million. As of March 31, 1999 the outstanding balance totaled
$1.3 million.
In March 1998, Intek Global repurchased 352,500 shares of Intek Global
common stock at $2.75 per share in a private transaction for a total of $969,375
(Note 7). The purchase price paid by the Company included notes in the aggregate
amount of $440,625. The notes were non-interest bearing and were repaid on
December 15, 1998.
In August 1998, the Company entered into a purchase agreement with ComTech.
The purchase price paid by the Company to ComTech included a three-year
promissory note in the amount of $408,039, bearing interest at the rate of 9%
per annum. The note principal is payable in two installments in fiscal 2000 and
2001.
SEL has an overdraft agreement of 2.0 million pounds sterling
(approximately U.S. $3.2 million) with a bank. Borrowings under the Agreement
are unsecured at an adjustable rate of 1% over the prevailing U.K. base rate for
borrowings up to the agreement limit. Borrowings in excess of the agreement
limit are at 23%. The rate at March 31, 1999 was 6.5%. The Company uses the
overdraft Facility for borrowings for working capital. As of March 31, 1999,
there was indebtedness of approximately $3.7 million under this overdraft
agreement.
In addition, the Company has other borrowings related primarily to the
acquisition of property and equipment from third parties in the aggregate amount
of $367,000 at March 31, 1999.
F-37
<PAGE> 95
INTEK GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of the above agreements, as of March 31, 1999, third party
borrowings will be repaid as follows ($'s in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1999................................................ $3,659
2000................................................ 3,952
2001................................................ 350
2002................................................ 83
2003................................................ 3
Thereafter.......................................... --
------
$8,047
======
</TABLE>
(9) COMMITMENTS
Site Leases
The Company has entered into site leases for the housing of radio base
station equipment and antenna systems related to the Intek Global USA network.
These leases may vary in term from monthly to 5 years with provisions for
subsequent extensions upon the mutual agreement of the parties. In addition, the
Company has lease commitments for office space, vehicles and office equipment.
As of March 31, 1999, total future minimum lease payments are as follows ($'s in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1999................................................ $1,777
2000................................................ 1,891
2001................................................ 1,174
2002................................................ 381
2003................................................ 162
Thereafter.......................................... 237
------
$5,622
======
</TABLE>
Purchase Commitments
As of March 31, 1999, Intek Global USA had a purchase commitment with its
main supplier of radios to purchase approximately $1.4 million of inventory, and
a second commitment with another supplier of radios for contract manufacturing
totaling approximately $1.0 million.
(10) LEGAL PROCEEDINGS
A discussion of the Company's pending litigation is contained in its
quarterly report filed on Form 10-Q for the quarter ended December 31, 1998.
F-38
<PAGE> 96
ANNEX A
OPINION OF BEAR, STEARNS & CO. INC.
A-1
<PAGE> 97
BEAR, STEARNS & CO. INC.
June 7, 1999
Independent Committee of the Board of Directors of Intek Global Corporation
Intek Global Corporation
99 Park Avenue -- 18th Floor
New York, NY 10016-1601
Attention: Howard Frank, Chairman of the Independent Committee
Gentlemen:
We understand that Intek Global Corporation ("Intek"), IGC Acquisition
Corp. ("Purchaser") and Security Services plc ("Parent") are proposing to enter
into an Agreement and Plan of Merger (the "Merger Agreement") to be dated on or
about June 8, 1999, pursuant to which Purchaser will commence a tender offer for
all the shares of Intek not owned by Parent or its affiliates (the
"Transaction") at a price of $2.75 per share (the "Offer Price"). You have
provided us with a copy of the Merger Agreement, together with the exhibits and
schedules thereto, in substantially the form proposed to be entered into among
Intek, Purchaser and Parent.
You have asked us to render our opinion as to whether the Offer Price is
fair, from a financial point of view, to the public shareholders of Intek.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement, together with the exhibits and schedules
thereto, in substantially the form proposed to be entered into among
Intek, Purchaser and Parent;
2. reviewed Intek's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended September 30, 1997 and 1998, and
its Quarterly Reports on Form 10-Q for the periods ended December 31,
1998 and March 31, 1999;
3. reviewed certain operating and financial information provided to us by
management relating to Intek's business and prospects, including
projections for each business unit and the consolidated entity for the
years 1999 through 2004 and certain other forward-looking information;
4. met with certain members of Intek's senior management to discuss its
operations, historical financial statements and future prospects;
5. reviewed the historical prices and trading volume of the common shares
of Intek;
6. considered, to the extent Bear Stearns deemed relevant, publicly
available financial data, stock market performance data and valuation
parameters of companies which we deemed generally comparable to Intek,
or otherwise relevant to our inquiry;
7. considered, to the extent Bear Stearns deemed relevant, the terms of
recent acquisitions of companies which we deemed generally comparable
to Intek; and
8. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information including, without limitation, the projections provided to us
by management of Intek. With respect to Intek's projected financial results, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the senior management of
Intek as to the expected future performance of Intek. We have not assumed any
responsibility for the independent verification of any such information or of
the projections provided to us, and we have further relied upon the assurances
of the senior management of Intek that they are unaware of any facts that would
make the information or projections provided to us incomplete or misleading.
A-2
<PAGE> 98
In arriving at our opinion, we have not performed or obtained any independent
appraisal of the assets or liabilities of Intek, nor have we been furnished with
any such appraisals. Our opinion is necessarily based on economic, market and
other conditions, and the information made available to us, as of the date
hereof.
We have acted as a financial advisor to the Independent Committee of the
Board of Directors of Intek in connection with the Transaction and will receive
a fee for such services.
Bear Stearns has not been previously engaged by Intek to provide any
investment banking or financial advisory services in connection with any
mergers, acquisitions or business combinations or in connection with any
offerings of equity or debt. In the ordinary course of business, Bear Stearns
may actively trade the equity securities of Intek for its own account and for
the account of its customers and, accordingly, may at any time hold a long or
short position in such securities.
It is understood that this letter is intended for the benefit and use of
the Independent Committee of the Board of Directors of Intek and does not
constitute a recommendation to any holders of Intek Common Stock as to whether
to tender their shares in connection with the Transaction. This opinion does not
address Intek's underlying business decision to pursue the Transaction. This
letter is not to be used for any other purpose, or reproduced, disseminated,
quoted to or referred to at any time, in whole or in part, without our prior
written consent; provided, however, that this letter may be included in its
entirety in any proxy statement or prospectus to be distributed to the holders
of Intek Common Stock in connection with the Transaction.
Based on and subject to the foregoing, it is our opinion that the Offer
Price is fair, from a financial point of view, to the public shareholders of
Intek.
Very truly yours,
BEAR, STEARNS & CO. INC.
A-3
<PAGE> 99
ANNEX B
APPRAISAL RIGHTS UNDER THE DGCL
In view of the complexity of these provisions of the DGCL, any stockholder
who is considering exercising appraisal rights should consult his or her legal
advisor.
Statutory Appraisal Procedures. The following is a brief summary of the
statutory procedures to be followed by a holder of Shares at the Effective Time
who does not wish to accept the per Share cash consideration pursuant to the
Merger (a "Remaining Stockholder") in order to perfect appraisal rights under
Delaware law. THIS SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SECTION 262 OF THE DGCL, THE TEXT OF WHICH IS SET
FORTH IN THIS ANNEX C HERETO. ANY REMAINING STOCKHOLDER CONSIDERING DEMANDING
APPRAISAL IS ADVISED TO CONSULT LEGAL COUNSEL. APPRAISAL RIGHTS WILL NOT BE
AVAILABLE UNLESS AND UNTIL THE MERGER IS CONSUMMATED.
Under Section 262, (i) where a merger of a subsidiary corporation into a
parent corporation is effected pursuant to Section 253 of the DGCL, or (ii)
where a merger of two or more corporations is approved by written consent of a
majority of the outstanding capital stock of a corporation pursuant to Sections
228 and 251 of the DGCL, then either before the effective date of the merger or
within ten days thereafter, the corporation must notify each of its stockholders
entitled to appraisal rights that such appraisal rights are available and
include in such notice a copy of Section 262. If such notice is given after the
effective date of the merger, such notice must also notify such stockholders of
the effective date of the merger. Any Remaining Stockholder who wishes to
exercise such appraisal rights or who wishes to preserve his, her or its right
to do so, should review the following discussion and Exhibit A carefully because
failure to timely and properly comply with the procedures specified will result
in the loss of appraisal rights under the DGCL.
A demand for appraisal in respect of the Shares must be executed by or for
the stockholder of record, fully and correctly, as such stockholder's name
appears on the stock certificates and must state that such person demands
thereby appraisal of his, her or its Shares issued and outstanding immediately
prior to the Effective Time. If Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, such demand must be
executed by the fiduciary. If Shares are 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 appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that in exercising the demand, he is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for others, may
exercise appraisal rights with respect to the Shares held for all or less than
all beneficial owners of Shares as to which the holder is the record owner. In
such case the written demand must set forth the number of Shares covered by such
demand. Where the number of Shares is not expressly stated, the demand will be
presumed to cover all Shares outstanding in the name of such record owner.
Beneficial owners who are not record owners and who intend to exercise appraisal
rights should instruct the record owner to comply strictly with the statutory
requirements with respect to the exercise of appraisal rights within 20 days
following the mailing of the Notice of Merger and Notice of Appraisal Rights in
the case of a merger pursuant to Section 253 of the DGCL, or Notice of Merger,
Notice of Stockholder Action by Written Consent and Notice of Appraisal Rights,
in the case of a merger pursuant to Sections 228 and 251 of the DGCL
(collectively, the "Notice").
Remaining stockholders who elect to exercise appraisal rights must, within
20 days after the mailing of the Notice, mail or deliver their written demands
to: Secretary, Steven L. Wasserman, 99 Park Avenue, NY, NY 10016. The written
demand for appraisal should specify the stockholder's name and mailing address,
the number of Shares covered by the demand and that the stockholder is thereby
demanding appraisal of such Shares.
B-1
<PAGE> 100
In the case of a merger pursuant to Sections 228 and 251 of the DGCL,
Remaining Stockholders electing to exercise their appraisal rights under Section
262 must not consent in writing to the adoption of the Merger Agreement.
Executing a written consent in favor of the adoption of the Merger Agreement
pursuant to Section 228 of the DGCL will constitute a waiver of the
stockholder's right of appraisal and will nullify any written demand for
appraisal submitted by the stockholder.
Within 120 days after the Effective Time, but not thereafter, the Company
or any Remaining Stockholder who is entitled to appraisal rights under Section
262 may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of the Shares. The Company is under no
obligation to and has no present intention to file such a petition. Accordingly,
it is the obligation of the Remaining Stockholder to initiate all necessary
action to perfect their appraisal rights in respect of such Shares within the
time prescribed in Section 262.
Within 120 days after the Effective Time, any Remaining Stockholder who has
complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of Shares not voted in favor of the adoption of the
Merger Agreement and with respect to which demands for appraisal have been
received and the aggregate number of former holders of such shares. Such
statement must be mailed within ten days after a written request therefor has
been received by the Company or within ten days after the expiration of the
period for delivery of demands for appraisal, whichever is later.
If a petition for an appraisal is timely filed by a Remaining Stockholder
and a copy thereof is served upon the Company, the Company will then be
obligated within 20 days to file with the Delaware Register in Chancery a duly
verified list containing the names and addresses of all Remaining Stockholders
who have demanded an appraisal of their Shares and with whom agreements as to
the value of their Shares have not been reached. After notice to such Remaining
Stockholders as required by the Court, the Delaware Court of Chancery is
empowered to conduct a hearing on such petition to determine those Remaining
Stockholders who have complied with Section 262 and who have become entitled to
appraisal rights thereunder. The Delaware Court of Chancery may require the
Remaining Stockholders who demanded payment for their Shares to submit their
stock certificates to the Register in Chancery for notation thereon of the
pendency of the appraisal proceeding; and if any Remaining Stockholder fails to
comply with such direction, the Court of Chancery may dismiss the proceedings as
to such Remaining Stockholder.
After determining the Remaining Stockholders entitled to appraisal, the
Delaware Court of Chancery will appraise the "fair value" of their Shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. Remaining Stockholders considering
seeking appraisal should be aware that the fair value of their Shares determined
by Section 262 could be more than or the same as the consideration they would
receive pursuant to the Merger if they did not seek appraisal of their Shares
and that investment banking opinions as to fairness from a financial point of
view are not necessarily opinions as to fair value under Section 262. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings. In addition, Delaware courts have decided that the statutory
appraisal remedy, depending on factual circumstances, may or may not be a
dissenter's exclusive remedy. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
Shares have been appraised.
The cost of the appraisal proceeding may be determined by the Delaware
Court of Chancery and taxed upon the parties as the Delaware Court of Chancery
deems equitable in the circumstances. Upon application, the Delaware Court of
Chancery may order that all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts, be
charged pro rata against the value of all Shares entitled to appraisal. In the
absence of such determination or assessment, each party bears its own expenses.
Any Remaining Stockholder who has duly demanded appraisal in compliance
with Section 262 of the DGCL will not, after the Effective Time, be entitled to
vote for any purpose the Shares subject to such
B-2
<PAGE> 101
demand or to receive payment of dividends or other distributions on such Shares,
except for dividends or other distributions payable to stockholders of record at
a date prior to the Effective Time.
If any Remaining Stockholder who demands appraisal of his, her or its
Shares under Section 262 fails to perfect, or effectively withdraws or loses,
his, her or its right to appraisal, as provided in the DGCL, the Shares of such
stockholder will be canceled and will be converted into the right to receive the
merger consideration. A Remaining Stockholder will fail to perfect, or
effectively lose or withdraw, his, her or its right to appraisal if no petition
for appraisal is filed within 120 days after the Effective Time, or if the
Remaining Stockholder delivers to the Company a written withdrawal of his, her
or its demand for appraisal and an acceptance of the Merger, except that any
such attempt to withdraw made more than 60 days after the Effective Time will
require the written approval of the Company and, once a petition for appraisal
is filed, the appraisal proceeding may not be dismissed as to any holder absent
court approval.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET
FORTH ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL BE
ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE
ADDITIONAL INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE
FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY
ACTION RELATING THERETO. STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE
ENTITLED TO EXERCISE APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL
RECEIVE THE PRICE PAID IN THE OFFER THEREFOR.
General Corporation Law of the State of Delaware.
262. Appraisal Rights
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Sections 252, 254, 257, 258, 263 or 264 of this
title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent
B-3
<PAGE> 102
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent
B-4
<PAGE> 103
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock
of a constituent corporation that are entitled to appraisal rights. Such
notice may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date
of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice, demand
in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of
the effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders
on or within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
B-5
<PAGE> 104
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
B-6
<PAGE> 105
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
By First Class Mail: By Overnight Delivery: By Hand:
<S> <C> <C>
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, New Jersey 07606 Mail Drop -- Reorg New York, New York 10271
Attn: Reorganization Department Ridgefield Park, New Jersey 07660 Attn: Reorganization Department
Attn: Reorganization Department
By Facsimile Transmission: To Confirm Facsimile Transmission Only, Call:
(For Eligible Institutions Only) (201) 296-4860
(201) 296-4293
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Requests for additional copies of this Offer to Purchase and
the Letter of Transmittal may be directed to the Information Agent. Shareholders
may also contact their brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
The Information Agent for the Offer is:
MacKenzie Partners Logo
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, NY 10020
(212) 632-6717 (call collect)
<PAGE> 1
EXHIBIT 99.6
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
INTEK GLOBAL CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED AS OF JUNE 16, 1999
OF
IGC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
SECURITY SERVICES PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JULY 14, 1999, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
By First Class Mail: By Overnight Delivery: By Hand:
<S> <C> <C>
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, New Jersey 07606 Mail Drop -- Reorg New York, New York 10271
Attn: Reorganization Department Ridgefield Park, New Jersey 07660 Attn: Reorganization Department
Attn: Reorganization Department
By Facsimile Transmission: To Confirm Facsimile Transmission Only, Call:
(For Eligible Institutions Only) (201) 296-4860
(201) 296-4293
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Requests for additional copies of this Offer to Purchase and
the Letter of Transmittal may be directed to the Information Agent. Stockholders
may also contact their brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or if delivery of Shares is to
be made by book-entry transfer to the Depositary's account at The Depository
Trust Company ("DTC") (a "Book-Entry Transfer Facility" and collectively, the
"Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure
described under "The Tender Offer -- Procedures for Accepting the Offer and
Tendering Shares" in the Offer to Purchase (as defined below). DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined under "The Tender Offer -- Terms of the Offer" in the Offer to
Purchase) or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis and who wish to tender their Shares must do so
pursuant to the guaranteed delivery procedure described under "The Tender
Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer
to Purchase. See Instruction 2.
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF NUMBER OF
CERTIFICATE SHARES REPRESENTED SHARES
NUMBER(S)* BY CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Shares
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the
Depositary are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
Check box of applicable book-entry transfer facility:
[ ] The Depository Trust Company
Account No at
Transaction Code No
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
If delivery is by book-entry transfer, check box of applicable book-entry
transfer facility:
[ ] The Depository Trust Company
Account No. at
Transaction Code No
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to IGC Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Security Services
plc, a public limited company incorporated under the laws of England and Wales,
the above-described shares (the "Shares") of common stock, par value $.01 per
share, of Intek Global Corporation, a Delaware corporation (the "Company"), upon
the terms and subject to the conditions set forth in Purchaser's Offer to
Purchase dated as of June 16, 1999 (the "Offer to Purchase") and this Letter of
Transmittal (which, together with any amendments or supplements thereto or
hereto, collectively constitute the "Offer"), receipt of which is hereby
acknowledged. The undersigned understands that Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase all or any portion of the issued and
outstanding Shares tendered pursuant to the Offer.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns and transfers to, or
upon the order of, Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby and all dividends, distributions and
rights declared, paid or distributed in respect of such Shares on or after June
9, 1999 (collectively, "Distributions"), and irrevocably constitutes and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares and all Distributions, with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver Share Certificates evidencing such
Shares and all Distributions, or transfer ownership of such Shares and all
Distributions on the account books maintained by a Book-Entry Transfer Facility,
together, in either case, with all accompanying evidences of transfer and
authenticity, to or upon the order of Purchaser, (ii) present such Shares and
all Distributions for transfer on the books of the Company and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares and all Distributions, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that when such Shares are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title thereto and to all Distributions, free and clear of all liens,
restrictions, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned will, upon
request, execute any additional documents deemed by the Depositary or Purchaser
to be necessary or desirable to complete the sale, assignment and transfer of
the Shares tendered hereby and all Distributions.
In addition, the undersigned shall remit and transfer promptly to the
Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby, or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Nigel Griffiths and Stephen
Lyell, and each of them, as the attorneys and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such attorney
and proxy or his substitute shall, in his sole discretion, deem proper and
otherwise act (by written consent or otherwise) with respect to all the Shares
tendered hereby which have been accepted for payment by Purchaser prior to the
time of such vote or other action and all Shares and other securities issued in
Distributions in respect of such Shares, which the undersigned is entitled to
vote at any meeting of stockholders of the Company (whether annual or special
and whether or not an adjourned or postponed meeting) or consent in lieu of any
such meeting or otherwise. This proxy and power of attorney is coupled with an
interest in the Shares tendered hereby, is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by Purchaser in accordance with other terms of the Offer. Such acceptance
for payment shall revoke all other proxies and powers of attorney granted by the
undersigned at any time with respect to such Shares (and all Shares and other
securities issued in Distributions in respect of such Shares), and no subsequent
proxy or power of attorney shall be given or written consent executed (and if
given or executed, shall not be effective) by the undersigned with respect
thereto. The undersigned understands that, in order for Shares to be deemed
validly tendered, immediately upon Purchaser's acceptance of such Shares for
payment, Purchaser must be able to exercise full voting and other rights with
respect to such Shares, including, without limitation, voting at any meeting of
the Company's stockholders then scheduled.
3
<PAGE> 4
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "The Tender
Offer -- Procedures for Accepting the Offer and Tendering Shares" and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions", please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if Purchaser does not purchase any of the Shares tendered hereby.
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or
Share Certificates evidencing Shares not tendered or not purchased to be
issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer are to be returned by
credit to an account at one of the Book-Entry Transfer Facilities other
than that designated above.
Mail [ ] Check [ ] Share Certificate(s) to:
Name
-------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE W-9 ON REVERSE SIDE)
[ ] Credit Shares delivered by book-entry transfer and not purchased to
the account set forth below:
Check appropriate box:
[ ] DTC
------------------------------------------------------------
ACCOUNT NUMBER
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not purchased are to be
mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered".
Mail [ ] Check [ ] Share Certificate(s) to:
Name
-------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER
------------------------------------------------------------
4
<PAGE> 5
(SEE SUBSTITUTE W-9 ON REVERSE SIDE)
- --------------------------------------------------------------------------------
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
- --------------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated
- ------------------------------------, 199
- -
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing by a person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information and see
Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- --------------------------------------------------------------------------------
(SEE SUBSTITUTE W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED; SEE INSTRUCTIONS 1 AND 5)
Name of Firm
- --------------------------------------------------------------------------------
Authorized Signature
- --------------------------------------------------------------------------------
Dated
- ------------------------------------, 199
- -
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW.
5
<PAGE> 6
PAYER: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I Taxpayer Identification No. -- Enter For All Accounts
FORM W-9 your taxpayer identification number in the --------------------------------------
DEPARTMENT OF THE TREASURY appropriate box. For most individuals and Social Security number
INTERNAL REVENUE SERVICE sole proprietors, this is your social --------------------------------------
security number. For other entities, it is Employer Identification
your Employer Identification Number. If you Number
do not have a number, see How to Obtain a
TIN in the enclosed Guidelines.
Note: If the account is in more than one
name, see the chart on page 2 of the
enclosed Guidelines to Employer
Identification determine what number to
enter.
------------------------------------------------------------------------------------
Payer's Request for PART II -- For Payees Exempt from Backup Withholding (see enclosed Guidelines)
Identification No.
- ------------------------------------------------------------------------------------------------------------------------
CERTIFICATION. -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number or I am waiting for a number to be
issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number
to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not provide a taxpayer identification
number within sixty (60) days, 31% of all reportable payments made to me will be withheld;
(2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding; and
(3) Any other information provided on this form is true, correct and complete.
You must cross item (2) above if you have been notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return and you have not received a notice from the IRS
advising you that backup withholding has terminated.
- -----------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE , 1999.
- -----------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of the Medallion Signature
Guarantee Program, or by any other "eligible guarantor institution", as such
term is defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended (each of the foregoing being referred to as an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth under "The Tender Offer -- Procedures for Accepting the
Offer and Tendering Shares" in the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or a confirmation of a book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility of all
Shares delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth herein prior to the Expiration Date (as defined
in "The Tender Offer -- Terms of the Offer" in the Offer to Purchase). If Share
Certificates are forwarded to the Depositary in multiple deliveries, a properly
completed and duly executed Letter of Transmittal must accompany each such
delivery. Stockholders whose Share Certificates are not immediately available,
who cannot deliver their Share Certificates and all other required documents to
the Depositary prior to the Expiration Date or who cannot complete the procedure
for delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described in under "The Tender
Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer
to Purchase. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three New York
Stock Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery, all as described under "The Tender Offer -- Procedures for
Accepting the Offer and Tendering Shares" in the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER.
SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
7
<PAGE> 8
4. Partial Tenders (not applicable to stockholders who tender by
book-entry transfer). If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered". In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates delivered
to the Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. Stock Transfer Taxes. The registered holder(s) will be responsible for
all stock transfer taxes with respect to the sale and transfer of any Shares to
it or its order pursuant to the Offer. The amount of any stock transfer taxes
(whether imposed on the registered holder(s), such other person or otherwise)
payable on account of the transfer to such other person will be deducted from
the purchase price of such Shares purchased, unless evidence satisfactory to
Purchaser of the payment of such taxes, or exemption therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE
SHARES TENDERED HEREBY.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check
8
<PAGE> 9
or any such Share Certificate is to be sent to someone other than the person(s)
signing this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal but at an address other than that shown in the box entitled
"Description of Shares Tendered" on the reverse hereof, the appropriate boxes on
the reverse of this Letter of Transmittal must be completed. Stockholders
delivering Shares tendered hereby by book-entry transfer may request that Shares
not purchased be credited to such account maintained at a Book-Entry Transfer
Facility as such stockholder may designate in the box entitled "Special Payment
Instructions" on the reverse hereof. If no such instructions are given, all such
Shares not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated on the reverse hereof as the account from which
such Shares were delivered.
8. Questions and Requests for Assistance or Additional Copies. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be obtained from the Information Agent
or from brokers, dealers, commercial banks or trust companies.
9. Substitute Form W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided above, and to certify, under penalty of
perjury, that such number is correct and that such stockholder is not subject to
backup withholding of Federal income tax. If a tendering stockholder has been
notified by the Internal Revenue Service that such stockholder is subject to
backup withholding, such stockholder must cross out item (2) of the
Certification box of the Substitute Form W-9, unless such stockholder has since
been notified by the Internal Revenue Service that such stockholder is no longer
subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the tendering stockholder to 31% Federal income
tax withholding on the payment of the purchase price of all Shares purchased
from such stockholder. If the tendering stockholder has not been issued a TIN
and has applied for one or intends to apply for one in the near future, such
stockholder should write "Applied For" in the space provided for the TIN in Part
I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If
"Applied For" is written in Part I and the Depositary is not provided with a TIN
within 60 days, the Depositary will withhold 31% on all payments of the purchase
price to such stockholder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 below. If such stockholder is an individual, the TIN is such
stockholder's social security number. If the Depositary is not provided with the
correct TIN, the stockholder may be subject to a $50 penalty imposed by the
Internal Revenue Service, and payments that are made to such stockholder with
respect to Shares purchased pursuant to the Offer may be subject to backup
withholding of 31%. If a stockholder makes a false statement that results in no
imposition of backup withholding, and there is no reasonable basis for such
statement, a $500 penalty may also be imposed by the Internal Revenue Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement on Form W-8 (or one of its
variations), signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the Depositary. See
the enclosed Guidelines for Certification of Taxpayer Identification
9
<PAGE> 10
Number on Substitute Form W-9 for additional instructions. A stockholder should
consult his or her advisor as to such stockholder's qualification for exemption
from backup withholding and the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld, provided the required information is
submitted to the Internal Revenue Service. If withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue Service
upon filing an appropriate income tax return.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such stockholder is awaiting a TIN), and that (i) such
stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of a failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified such stockholder
that such stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are held in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder.
Stockholders should contact the Information Agent, the Dealer Manager or
their broker, dealer, commercial bank or trust company for assistance concerning
the Offer. Additional copies of the Offer to Purchase, this Letter of
Transmittal and other related materials may also be obtained from the
Information Agent or the Dealer Manager.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE:
(800) 322-2885
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (call collect)
10
<PAGE> 1
EXHIBIT 99.7
[INTEK GLOBAL LOGO]
[Intek Global Letterhead]
FOR IMMEDIATE RELEASE
Contact: Robert J. Shiver, Chairman and CEO Joel Pomerantz
Intek Global Corporation The Dilenschneider Group
(212) 949-4200 (212) 922-0900
INTEK GLOBAL AND SECURICOR SIGN MERGER AGREEMENT
NEW YORK CITY, June 10, 1999 -- Robert J. Shiver, chairman and chief
executive officer of Intek Global Corporation (NASDAQ:IGLC), today announced the
execution of a definitive agreement providing for the merger of Intek Global
with a wholly owned subsidiary of Securicor plc. Intek Global is an
international provider of spectrum-efficient technology, products and services.
Upon the recommendation of the Independent Committee of the Board of Directors
of Intek Global, the Board of Directors of Intek Global approved the agreement.
Under the terms of the agreement, Securicor will make a cash offer for all
of Intek Global's common stock at a price of $2.75 per share. The offer is
expected to begin on Wednesday, June 16, 1999. The offer will be conditioned
upon, among other things, the tender of a majority of the shares not owned by
Securicor. Securicor is the majority stockholder of Intek Global.
Bear, Stearns & Co. Inc. advised the Independent Committee of the Board
of Directors of Intek Global in connection with the transaction.
Intek Global develops, manufactures, distributes and licenses wireless
communications technology, products and services for the global wireless
communications marketplace.
# # #
<PAGE> 1
EXHIBIT 99.8
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE AND THE
RELATED LETTER OF TRANSMITTAL AND ANY SUPPLEMENTS THERETO, AND IS BEING MADE TO
ALL HOLDERS OF SHARES. THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH
THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE LAWS OF SUCH JURISDICTION. IN THOSE JURISDICTIONS WHOSE LAWS REQUIRE
THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED
TO BE MADE ON BEHALF OF PURCHASER, BY LAZARD FRERES & CO. LLC OR ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Intek Global Corporation
at
$2.75 Net Per Share
by
IGC Acquisition Corp.
a wholly owned subsidiary of
Security Services plc
IGC Acquisition Corp. ("Purchaser"), a Delaware corporation and a
wholly owned subsidiary of Security Services plc ("Parent"), a public limited
company incorporated under the laws of England and Wales, is offering to
purchase any and all outstanding shares (the "Shares") of common stock, par
value $.01 per share, of Intek Global Corporation (the "Company"), a Delaware
corporation, at a price of $2.75 per Share, net to the seller in cash, without
interest thereon and less any required withholding and transfer taxes (the
"Offer Price"), upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated June 16, 1999 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JULY 14, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of June 9, 1999, among Parent, Purchaser and the Company (the "Merger
Agreement"). The Offer is not conditional on Purchaser obtaining financing. The
Merger Agreement provides, among other things, that as promptly as practicable
after the purchase of Shares pursuant to the Offer
<PAGE> 2
and the satisfaction of the other conditions set forth in the Merger Agreement,
in accordance with the Delaware General Corporation Law ("DGCL"), Purchaser will
be merged with and into the Company (the "Merger"), with the Company surviving
the Merger as a wholly owned subsidiary of the Parent. At the effective time of
the Merger (the "Effective Time"), each Share outstanding immediately prior to
the Effective Time (other than Shares held in the treasury of the Company,
Shares owned by Parent, Purchaser or any affiliate of Parent, and shares owned
by stockholders who have properly exercised their appraisal rights under the
DGCL) shall be converted into the right to receive the per Share price paid in
the Offer in cash, without interest and less any required transfer and
withholding taxes.
The Board of Directors of the Company (with abstentions by the two
directors who are employees of affiliates of Parent and Purchaser) unanimously
(i) determined that the Offer and the Merger are fair to and in the best
interests of the holders of Shares (other than Parent, Purchaser or any
affiliate of Parent), and (ii) recommended to the stockholders that the
stockholders (excluding Parent and its affiliates) accept the Offer and tender
all of their Shares pursuant to the Offer. The unanimous vote of the Board of
Directors of the Company is based upon, among other things, the unanimous
recommendation of the Offer by a Special Committee of the Board of Directors,
which is comprised entirely of non-management independent directors.
As of June 16, 1999, affiliates of Parent owned 25,937,042 of the
outstanding Shares, representing approximately 61.3% of the Company's issued and
outstanding Shares.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer such number of
the then issued and outstanding Shares (not including Shares tendered by Parent,
Purchaser or any affiliate of Parent), which represents at least a majority of
the then issued and outstanding Shares (excluding for purposes of this
calculation all Shares owned by Parent, Purchaser or any affiliate of Parent and
any Shares held in Company employee stock plans that cannot be tendered pursuant
to the terms of those plans).
For purposes of the Offer, Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not withdrawn
as, if and when Purchaser gives oral or written notice to ChaseMellon
Shareholder Services (the "Depositary") of Purchaser's acceptance for payment of
such Shares pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Shares accepted for payment pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payments from Purchaser and transmitting such payments to validly tendering
stockholders whose Shares have been accepted for payment. Under no circumstances
will interest on the purchase price for Shares be paid, regardless of any delay
in making such payment. In all cases, payment for Shares tendered and accepted
2
<PAGE> 3
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (A) the certificates evidencing such Shares (the "Share
Certificates") or timely confirmation (a "Book-Entry Confirmation") of
book-entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility (as defined in the Offer to Purchase), (B) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) and (C) any other
documents required under the Letter of Transmittal. Accordingly, payment may be
made to tendering stockholders at different times if delivery of the Shares and
other required documents occurs at different times.
Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms and conditions of the Merger Agreement), at any time and
from time to time, to extend for any reason the period of time during which the
Offer is open, by giving oral or written notice of such extension to the
Depositary.
Tenders of Shares made pursuant to the Offer are irrevocable except
that such Shares may be withdrawn at any time prior to the expiration of the
Offer and, unless theretofore accepted for payment by Purchaser pursuant to the
Offer, may also be withdrawn at any time after August 14, 1999. For a withdrawal
to be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover page of the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of such Shares, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution (as defined
in the Offer to Purchase), unless such Shares have been tendered for the account
of an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares. However,
withdrawn Shares may be retendered by again following one of the procedures
described in the Offer to Purchase at any time prior to the expiration of the
Offer. All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
3
<PAGE> 4
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
The Company has provided Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies, and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
Questions or requests for assistance may be directed to MacKenzie
Partners, Inc., the Information Agent, or Lazard Freres & Co. LLC, the Dealer
Manager, at their respective addresses and telephone numbers set forth below.
Additional copies of this Offer to Purchase, the Letter of Transmittal and other
related materials may be obtained from the Information Agent or the Dealer
Manager. No fees or commissions will be paid to brokers, dealers or other
persons (other than the Dealer Manager and the Information Agent) for soliciting
tenders of the Shares pursuant to the Offer.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
call toll-free (800) 322-2885
The Dealer Manager for the Offer is:
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (call collect)
4
