<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1997
REGISTRATION NO. 333-21977
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HADCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2393279
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
12A MANOR PARKWAY
SALEM, NEW HAMPSHIRE 03079
(603) 898-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ANDREW E. LIETZ
CHIEF EXECUTIVE OFFICER
HADCO CORPORATION
12A MANOR PARKWAY
SALEM, NEW HAMPSHIRE 03079
(603) 898-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO
<TABLE>
<S> <C>
STEPHEN A. HURWITZ, ESQ. PETER B. TARR, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP HALE AND DORR, LLP
HIGH STREET TOWER 60 STATE STREET
125 HIGH STREET BOSTON, MA 02109
BOSTON, MA 02110 (617) 526-6000
(617) 248-7000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 16, 1997
[HADCO LOGO]
2,000,000 SHARES
COMMON STOCK
$100,000,000
% CONVERTIBLE SUBORDINATED NOTES DUE 2004
Hadco Corporation ("Hadco" or the "Company") hereby offers 2,000,000 shares
of Common Stock (the "Common Stock Offering"), and $100,000,000 aggregate
principal amount of % Convertible Subordinated Notes due 2004 (the "Note
Offering"). The % Convertible Subordinated Notes due 2004 (the "Notes") are
convertible into shares of Common Stock at any time through maturity, unless
previously redeemed or repurchased, at a conversion price of $ per
share, subject to adjustment in certain events. Prior to the Note Offering,
there has been no public trading market for the Notes. The Notes are expected to
be traded on the over-the-counter market. The Company's Common Stock is traded
on the Nasdaq National Market under the symbol "HDCO." On April 11, 1997, the
last reported sale price for the Common Stock on the Nasdaq National Market was
$38.125 per share. Each share of Common Stock is accompanied by a Stock Purchase
Right entitling the holder to buy Common Stock at specified prices if certain
events involving the Common Stock should occur. See "Description of Capital
Stock -- Stockholder Rights Plan."
Interest on the Notes is payable on and , commencing
, 1997. Prior to , 2000, the Notes are not redeemable
at the option of the Company. At any time on or after that date, the Notes are
redeemable at the option of the Company, in whole, or in part from time to time,
at the declining redemption prices set forth herein, together with accrued and
unpaid interest. See "Description of Notes -- Optional Redemption by the
Company." In the event of a Designated Event (as defined), each holder may
require the Company to repurchase all or a portion of such holder's Notes at
100% of the principal amount thereof, plus accrued and unpaid interest. The
Notes are unsecured and are subordinated to all existing and future Senior
Indebtedness (as defined) of the Company and effectively subordinated with
respect to the assets and earnings of the Company's subsidiaries to all
indebtedness and other liabilities of such subsidiaries. As of January 25, 1997,
the Company had approximately $218 million of outstanding indebtedness that
would have constituted Senior Indebtedness and the Company's subsidiaries had
outstanding indebtedness and other liabilities of approximately $57 million to
which the Notes would have been effectively subordinated. See "Description of
Notes."
The Common Stock Offering and the Note Offering are referred to collectively
as the "Offerings." The closing of the Common Stock Offering and the closing of
the Note Offering are each conditioned on the closing of the other offering.
Adams, Harkness & Hill, Inc. will be a Representative of the Common Stock
Underwriters in the Common Stock Offering only. See "Underwriting."
------------------------
THE COMMON STOCK AND NOTES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 8.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
=====================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................................... $ $ $
- ---------------------------------------------------------------------------------------------------------------------
Per Note....................................... % % %
- ---------------------------------------------------------------------------------------------------------------------
Total Shares................................... $ $ $
- ---------------------------------------------------------------------------------------------------------------------
Total Notes.................................... $ $ $
- ---------------------------------------------------------------------------------------------------------------------
Total(2)....................................... $ $ $
=====================================================================================================================
</TABLE>
(1) Before deducting expenses payable by the Company, estimated at $1,200,000.
(2) The Company and the Selling Stockholders have granted the Underwriters a
30-day option to purchase up to an additional 300,000 shares of Common
Stock, and the Company has granted the Underwriters a 30-day option to
purchase up to an additional $15,000,000 principal amount of Notes, solely
to cover over-allotments, if any. See "Underwriting." If such options are
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $ , $ and
$ , respectively, and the total proceeds to the Selling Stockholders
will be $ .
------------------------
The Common Stock is offered by the Common Stock Underwriters as stated
herein, and the Notes are offered by the Note Underwriters as stated herein,
subject in each case to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that delivery of
such securities will be made through the offices of Robertson, Stephens &
Company LLC ("Robertson, Stephens & Company"), San Francisco, California on or
about , 1997.
ROBERTSON, STEPHENS & COMPANY
MERRILL LYNCH & CO.
ADAMS, HARKNESS & HILL, INC.
The date of this Prospectus is , 1997.
<PAGE> 3
HADCO
Where Technology and Time To Market Connect(TM)
Tech Centers Volume Manufacturing
- - Hadco provides development, - Hadco can transition production
design and quick-turn prototype from prototype to full-scale
services to customers. commercial production.
- - Tech Center developments - Hadco volume capabilities
include: include:
- Multilayer printed circuits - Multilayer printed circuits of
of 38+ layers 18+ layers
- Embedded discrete components - BGA and TAB
- Multichip modules (MCM) - MCM and SCC
- Single chip carriers (SCC) - Volume manufacturing facilities
are located in California,
- Planar Magnetics New Hampshire, New York
and Malaysia.
- Advanced surface finishes
- Substrates for high-frequency
markets
- - Tech Centers are located in
California, Massachusetts and
New Hampshire.
Includes pictures of various printed circuits.
CERTAIN PERSONS PARTICIPATING IN THESE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK AND
THE NOTES, INCLUDING SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF
PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERINGS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Information by Reference............................... 3
Summary......................................................................... 4
Risk Factors.................................................................... 8
Use of Proceeds................................................................. 16
Dividend Policy................................................................. 16
Price Range of Common Stock..................................................... 17
Capitalization.................................................................. 18
Selected Consolidated Financial Data............................................ 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 21
Business........................................................................ 28
Management...................................................................... 42
Principal Shareholders.......................................................... 44
Description of Capital Stock.................................................... 47
Description of Notes............................................................ 49
Federal Income Tax Considerations............................................... 61
Underwriting.................................................................... 63
Legal Matters................................................................... 65
Experts......................................................................... 65
Additional Information.......................................................... 66
Available Information........................................................... 66
Index to Consolidated Financial Statements...................................... F-1
</TABLE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") are hereby incorporated by reference into this Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended October 26, 1996;
(2) Current Report on Form 8-K dated December 5, 1996; (3) Current Report on
Form 8-K dated January 24, 1997, as amended by Form 8-K/A dated February 14,
1997, and (4) Quarterly Report on Form 10-Q for the period ended January 25,
1997.
All documents subsequently filed by Hadco pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the Offerings shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
Any statement contained herein or in a document incorporated by reference or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that such statement is
modified or superseded by any other subsequently filed document which is
incorporated or is deemed to be incorporated by reference herein. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Hadco hereby undertakes to provide without charge
to each person, including any beneficial owner, to whom this Prospectus has been
delivered, on the written or oral request of such person, a copy of any or all
of the documents referred to above which have been or may be incorporated into
this Prospectus and deemed to be part hereof, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference in
such documents. These documents are available upon request from Timothy P.
Losik, Vice President, Chief Financial Officer and Treasurer, Hadco Corporation,
12A Manor Parkway, Salem, New Hampshire 03079, (603) 898-8000.
3
<PAGE> 5
SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, without limitation, those set forth under "Risk Factors" and
elsewhere in this Prospectus. The following summary is qualified in its entirety
by, and should be read in conjunction with, the more detailed information,
including "Risk Factors," and Consolidated Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus or incorporated by reference
herein. Unless otherwise indicated, all information in this Prospectus assumes
no exercise of the Underwriters' over-allotment options.
As used herein, the terms "Company" and "Hadco," unless otherwise indicated
or the context otherwise requires, refer to Hadco Corporation and its
subsidiaries, including Zycon Corporation ("Zycon"). However, all financial
information for periods ended prior to January 10, 1997, unless otherwise
indicated or the context otherwise requires, is for Hadco Corporation alone and
does not include Zycon.
THE COMPANY
Hadco is the largest manufacturer of advanced electronic interconnect
products in North America. The Company offers a wide array of sophisticated
manufacturing, engineering and systems integration services to meet its
customers' electronic interconnect needs. The Company's principal products are
complex multilayer rigid printed circuits and backplane assemblies. Hadco's
largest customers include many of the leading and fastest growing companies in
the electronics industry, such as Cabletron Systems, Cisco Systems, Intel,
Solectron, Sun Microsystems and U.S. Robotics.
Hadco's advanced manufacturing and assembly facilities are designed to meet
the accelerated time-to-market and time-to-volume requirements of its customers
whose markets and products are characterized by high growth rates, rapid
technological advances and short product life-cycles. To this end, Hadco
(including Zycon) has invested approximately $235 million in state-of-the-art
production facilities and new technologies during the past five fiscal years.
Hadco provides customers with a range of products and services that includes
development, design, quick-turn prototype, pre-production, volume production,
and backplane assembly. Hadco is one of a small number of printed circuit
manufacturers with the technology and advanced production facilities necessary
to offer all of these services. The Company believes its combination of a broad
product offering and advanced technology facilitates long-term relationships
with existing customers, attracts new customers, helps customers meet their
time-to-market and time-to-volume needs, and satisfies a larger share of
customers' electronic interconnect requirements.
Hadco's customers are a diverse group of electronics original equipment
manufacturers ("OEMs") and contract manufacturers in the computing (mainly
workstations, servers, mainframes, storage and notebooks), data
communications/telecommunications and industrial automation industries,
including process controls, automotive, medical and instrumentation. Hadco
(including Zycon) supplied its products and services to a diverse base of
approximately 500 customers in fiscal 1996, including 77 customers with
purchases in excess of $1 million. The Company's ten largest customers accounted
for approximately 43% of net sales in fiscal 1996 on a pro forma basis including
Zycon.
Industry sources estimate that the number of U.S. interconnect
manufacturers has decreased from over 2,100 in 1978 to approximately 700 in 1995
during a period when the market size increased to $8.3 billion for rigid printed
circuits and backplane assemblies. In large part, this decrease in manufacturers
resulted from the increasingly advanced technology and services required by
sophisticated electronics OEMs to meet their needs for complex products and
shorter time-to-market cycles in their industries. As OEMs have narrowed their
supply base, the increased investment necessary for state-of-the-art production
facilities and advanced technologies has accelerated consolidation in the
printed circuit industry and the exit of smaller companies.
4
<PAGE> 6
To capitalize on this consolidation trend and to gain increased economies
of scale, Hadco acquired Zycon on January 10, 1997. This acquisition increased
Hadco's net sales significantly, added approximately 600,000 square feet of
manufacturing space (approximately a 100% increase) and substantially expanded
the Company's manufacturing capabilities and geographic reach. The new
manufacturing capabilities consist of state-of-the-art West Coast facilities for
volume production of complex printed circuits and backplane assemblies, a
quick-turn prototype and design facility on the East Coast, and a newly
constructed facility for volume production in Malaysia. The acquisition of Zycon
has also broadened the Company's customer base, expanded its involvement in many
fast growing industry sectors, added new proprietary technologies, and increased
its sales force.
The Company's strategy takes advantage of other major industry trends such
as the increased customer demand for a single source of integrated services,
accelerating time-to-market and time-to-volume product requirements, and the
increased demand for complex electronic products and new interconnect
technologies. The principal components of Hadco's strategy are size, financial
strength, investment in state-of-the-art facilities and technologies, and a
broad and integrated offering (from development and design through volume
production and backplane assembly). The Company believes this strategy is
responsible for its emergence as the largest manufacturer of advanced electronic
interconnect products in North America.
The Company was incorporated in Massachusetts in 1966. The Company's
principal executive offices are located at 12A Manor Parkway, Salem, New
Hampshire 03079, and its telephone number is (603) 898-8000.
Hadco(TM), Zycon(TM), ResistAIR(TM), Buried Capacitance(TM) and
MicroPath(TM) are trademarks of the Company. This Prospectus also includes the
trademarks of other companies.
THE COMMON STOCK OFFERING
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Common Stock Offered by the Company................................. 2,000,000 shares
Common Stock to be Outstanding after the Common Stock Offering...... 12,444,188 shares(1)
Nasdaq National Market Symbol....................................... HDCO
</TABLE>
- ------------
(1) Based on shares outstanding on January 25, 1997. Excludes options
outstanding as of January 25, 1997 to acquire 1,219,829 shares of Common
Stock at a weighted average exercise price of $15.06 per share and an
additional 843,000 shares of Common Stock reserved for issuance under the
Company's stock option plans. See Note 10 of Notes to the Company's
Consolidated Financial Statements. Also excludes shares of Common Stock
issuable upon conversion of the Notes.
5
<PAGE> 7
THE NOTE OFFERING
Securities Offered......... $100 million principal amount of % Convertible
Subordinated Notes due 2004 (the "Notes") ($115
million principal amount of Notes if the
over-allotment option is exercised in full).
Interest Payment Dates..... and , commencing ,
1997.
Maturity................... , 2004.
Conversion................. Convertible into Common Stock, $.05 par value, of
the Company at any time through maturity, unless
previously redeemed or repurchased, at a conversion
price of $ per share, subject to
adjustment in certain events. See "Description of
Notes -- Conversion."
Optional Redemption........ The Notes are not redeemable at the option of the
Company prior to , 2000. At any time on
or after that date, the Notes are redeemable at the
option of the Company, in whole or in part from
time to time, at the declining redemption prices
set forth herein, plus accrued and unpaid interest
to the redemption date. See "Description of
Notes -- Optional Redemption by the Company."
Repurchase at Option of
Holders upon a Designated
Event...................... In the event of a Designated Event (as defined),
each holder may require the Company to repurchase
all or a portion of such holder's Notes at 100% of
the principal amount thereof plus accrued and
unpaid interest. See "Description of Notes
-- Repurchase at Option of Holders Upon a
Designated Event."
Subordination.............. Subordinate to all existing and future Senior
Indebtedness (as defined) of the Company and will
be effectively subordinated with respect to the
assets and earnings of the Company's subsidiaries
to all indebtedness and other liabilities of such
subsidiaries. As of January 25, 1997, the Company
had approximately $218 million of outstanding
indebtedness that would have constituted Senior
Indebtedness, and subsidiaries of the Company had
outstanding indebtedness and other liabilities of
approximately $57 million (excluding intracompany
liabilities and liabilities of a type not required
to be reflected as liabilities on the balance
sheets of such subsidiaries in accordance with
generally accepted accounting principles) to which
the Notes would have been effectively subordinated.
The Indenture will not limit the amount of
additional indebtedness, including Senior
Indebtedness, which the Company or any of its
subsidiaries can create, incur, assume or
guarantee. See "Description of
Notes -- Subordination."
Trading.................... The Notes are expected to trade on the
over-the-counter market.
USE OF PROCEEDS
The Company intends to use between 80% and 100% of the net proceeds from
the sale of the 2,000,000 shares of Common Stock and the $100 million principal
amount of the Notes to repay a portion of the outstanding indebtedness incurred
in connection with the acquisition of Zycon, and the remainder, if any, for
general corporate purposes, which may include additional acquisitions. See "Use
of Proceeds."
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except ratio and per share data)
<TABLE>
<CAPTION>
THREE
MONTHS
FISCAL YEAR ENDED, ENDED,
------------------------------------------------------------------- -----------
OCTOBER 29, OCTOBER 28, OCTOBER 26, OCTOBER 26, JANUARY 27,
1994 1995 1996 OCTOBER 26, 1996 1996
----------- ----------- ----------- 1996 -------------- -----------
------------ PRO FORMA
PRO FORMA(2) AS ADJUSTED(3)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS:
Net sales..................................... $ 221,570 $ 265,168 $ 350,685 $570,345 $570,345 $76,481
Gross profit.................................. 43,973 64,495 86,148 119,494 119,494 19,482
Write-off of acquired in-process research and -- -- -- -- --
development.................................. --
Income (loss) from operations................. 16,482 33,906 51,532 62,331 62,331 11,534
Net income (loss)............................. $ 9,943 $ 21,374 $ 32,014 $ 27,222 $ 30,513 $ 7,191
Net income (loss) per share(4)................ $ .93 $ 1.98 $ 2.89 $ 2.46 $ 2.33 $ .65
Weighted average shares outstanding(4)........ 10,720 10,806 11,084 11,084 13,084 11,104
OTHER DATA:
Ratio of earnings to fixed charges(5)......... 19.4x 66.2x 156.3x 3.9x 6.1x 125.1x
EBITDA(6)..................................... 31,093 49,100 70,375 98,783 98,783 15,582
Capital expenditures.......................... 19,510 28,865 54,998 107,154 107,154 13,713
Interest expense.............................. 891 537 338 16,197 10,474 95
<CAPTION>
JANUARY 25, JANUARY 25,
1997(1) JANUARY 25, 1997
----------- 1997 --------------
------------
PRO FORMA(2) AS ADJUSTED(3)
<S> <<C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS:
Net sales..................................... $ 111,536 $172,547 $172,547
Gross profit.................................. 24,855 32,941 32,941
Write-off of acquired in-process research and 78,000 --
development.................................. --
Income (loss) from operations................. (62,443) 17,977 17,977
Net income (loss)............................. $ (69,161) $ 7,900 $ 8,715
Net income (loss) per share(4)................ $ (6.64) $ .72 $ .67
Weighted average shares outstanding(4)........ 10,413 10,944 12,944
OTHER DATA:
Ratio of earnings to fixed charges(5)......... -- 4.0x 5.7x
EBITDA(6)..................................... 22,093 25,863 25,863
Capital expenditures.......................... 11,011 17,939 17,939
Interest expense.............................. 933 4,669 3,239
</TABLE>
<TABLE>
<CAPTION>
JANUARY 25, 1997
--------------------------------------
ACTUAL AS ADJUSTED(3)
----------- -------------------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................................... $ 22,072 $ 22,072
Total assets.................................................................. 448,554 452,154
Long-term debt and capital lease obligations, net of current portion.......... 228,168 159,931
Stockholders' investment...................................................... 71,057 142,895
</TABLE>
- ------------
(1) Net loss for the three months ended January 25, 1997 includes a
non-recurring write-off relating to the acquisition of Zycon for in-process
research and development. Before deducting the non-recurring write-off,
income from operations was $15,557,000, net income was $8,839,000, net
income per share was $.81 (based on weighted average shares outstanding of
approximately 10,944,000), and the ratio of earnings to fixed charges was
17.6x.
(2) Gives effect to the acquisition of Zycon assuming such transaction had
occurred on October 29, 1995. See the Company's unaudited Pro Forma
Condensed Consolidated Financial Statements beginning on page F-23 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In connection with the acquisition, Hadco eliminated nine
executive positions at Zycon, which resulted in pre-tax annual savings of
$2,637,000. Taking these savings into account for the year ended October 26,
1996, pro forma net income and pro forma net income, as adjusted, would have
been $28,700,000 and $32,029,000, respectively, and pro forma net income per
share and pro forma net income per share, as adjusted, would have been $2.59
and $2.45, respectively. Taking these savings into account for the quarter
ended January 25, 1997, pro forma net income and pro forma net income, as
adjusted, would have been $8,275,000, and $9,091,000, respectively, and pro
forma net income per share and pro forma net income per share, as adjusted,
would have been $.76 and $.70, respectively.
(3) Adjusted to reflect (i) the sale by the Company of 2,000,000 shares of
Common Stock (at an assumed public offering price of $38.125 per share) in
the Common Stock Offering and the sale of $100 million of principal amount
of Notes in the Note Offering (at an assumed interest rate of 5.75%, and an
assumed conversion price of $47.08), in each case less estimated
underwriting discounts and commissions and offering expenses payable by the
Company, and (ii) the application of the net proceeds from the Common Stock
Offering and the Note Offering. See "Use of Proceeds."
(4) See Note 1 of Notes to the Company's Consolidated Financial Statements for
an explanation of the basis used to calculate net income (loss) per share.
Pro forma, as adjusted fully diluted net income per share is $2.24 and $.64
for the year ended October 26, 1996 and the three months ended January 25,
1997, respectively.
(5) Computed by dividing the sum of net income (loss), before deducting
provisions for income taxes and fixed charges, by total fixed charges. Fixed
charges consist of interest on debt and amortization of debt issuance costs
and a portion of capital lease costs that is intended to represent interest
expense.
(6) EBITDA represents net income before interest, income taxes, depreciation and
amortization, and write-off of acquired in-process research and development.
EBITDA should not be considered an alternative measure of the Company's net
income, operating performance, cash flow or liquidity. It is included herein
to provide additional information related to the Company's ability to
service debt. The EBITDA measures presented herein may not be comparable to
other similarly titled measures of other companies.
7
<PAGE> 9
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, without limitation, those set forth in the following risk factors and
elsewhere in this Prospectus. In addition to the other information included or
incorporated by reference in this Prospectus, the following risk factors should
be considered carefully in evaluating the Company and its business before
purchasing shares of Common Stock or the Notes offered hereby.
DEPENDENCE ON ELECTRONICS INDUSTRY
The Company's principal customers are electronics OEMs and contract
manufacturers in the computing (mainly workstations, servers, mainframes,
storage and notebooks), data communications/telecommunications and industrial
automation industries, including process controls, automotive, medical and
instrumentation. These industry segments, and the electronics industry as a
whole, are characterized by intense competition, relatively short product
life-cycles and significant fluctuations in product demand. In addition, the
electronics industry is generally subject to rapid technological change and
product obsolescence. Discontinuance or modifications of products containing
components manufactured by the Company could have a material adverse effect on
the Company's business, financial condition and results of operations. Further,
the electronics industry is subject to economic cycles and has in the past
experienced, and is likely in the future to experience, recessionary periods. A
recession or any other event leading to excess capacity or a downturn in the
electronics industry would likely result in intensified price competition,
reduced gross margins and a decrease in unit volume, all of which would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business -- Industry Overview and Trends"
and "-- Markets and Customers."
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have varied and may continue to
fluctuate significantly. At times in the past, the Company's net sales and net
income have decreased from the prior quarter. Operating results are affected by
a number of factors, including the timing and volume of orders from and
shipments to customers relative to the Company's manufacturing capacity, level
of product and price competition, product mix, the number of working days in a
particular quarter, trends in the electronics industry and general economic
factors. In recent years, the Company's gross margins have varied primarily as a
result of capacity utilization, product mix, lead times, volume levels and
complexity of customer orders. There can be no assurance that the Company will
be able to manage the utilization of manufacturing capacity or product mix in a
manner that would maintain or improve gross margins or the Company's business,
financial condition and results of operations. The timing and volume of orders
placed by the Company's customers vary due to customer attempts to manage
inventory, changes in customers' manufacturing strategies and variation in
demand for customer products. An interruption in manufacturing resulting from
shortages of parts or equipment, fire, earthquake or other natural disaster,
equipment failure or otherwise would have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
expense levels are relatively fixed and are based, in part, on expectations of
future revenues. Consequently, if revenue levels are below expectations, this
occurrence is likely to materially adversely affect the Company's business,
financial condition and results of operations. Results of operations in any
period are not necessarily indicative of the results to be expected for any
future period. Due to all of the foregoing factors, it is possible that in some
future quarter the Company's operating results may be below the expectations of
public market analysts and investors. Such an event could have a material
adverse effect on the price of the Company's Common Stock and the Notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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VARIABILITY OF ORDERS
The level and timing of orders placed by the Company's customers vary due
to a number of factors, including customer attempts to manage inventory, changes
in the customers' manufacturing strategies and variation in demand for customer
products due to, among other things, technological change, new product
introductions, product life-cycles, competitive conditions or general economic
conditions. Since the Company generally does not obtain long-term purchase
orders or commitments from its customers, it must anticipate the future volume
of orders based on discussions with its customers. A substantial portion of
sales in a given quarter may depend on obtaining orders for products to be
manufactured and shipped in the same quarter in which those orders are received.
The Company relies on its estimate of anticipated future volumes when making
commitments regarding the level of business that it will seek and accept, the
mix of products that it intends to manufacture, the timing of production
schedules and the levels and utilization of personnel and other resources. A
variety of conditions, both specific to the individual customer and generally
affecting the customer's industry, may cause customers to cancel, reduce or
delay orders that were previously made or anticipated. A significant portion of
the Company's released backlog at any time may be subject to cancellation or
postponement without penalty. The Company cannot assure the timely replacement
of canceled, delayed or reduced orders. Significant or numerous cancellations,
reductions or delays in orders by a customer or group of customers could
materially adversely affect the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Released Backlog."
ACQUISITIONS
The Company acquired 100% of the capital stock of Zycon, a manufacturer of
electronic interconnect products, on January 10, 1997 (the "Zycon acquisition").
Zycon currently operates as a wholly-owned subsidiary of the Company. The
Company has limited experience in integrating acquired companies or technologies
into its operations. Therefore, there can be no assurance that the Company will
operate the acquired business profitably during the next year or in the future.
Contemporaneous with the Zycon acquisition, nine senior management personnel of
Zycon were terminated. There can be no assurance that the Company will not be
materially adversely affected by such terminations or that the Company will be
able to retain key personnel at Zycon. Accordingly, operating expenses
associated with the acquired business may have a material adverse effect on the
Company's business, financial condition and results of operations in the future.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- General."
The Company may from time to time pursue the acquisition of other
companies, assets, products or technologies. The Company may incur additional
indebtedness in connection with a future business acquisition, and the
incurrence of substantial amounts of debt in connection with future acquisitions
could increase the risk of the Company's operations. If the Company's cash flow
and existing working capital are not sufficient to fund its general working
capital requirements or to service its indebtedness, the Company would have to
raise additional funds through the sale of its equity securities, the
refinancing of all or part of its indebtedness or the sale of assets or
subsidiaries. There can be no assurance that any of these sources of funds would
be available in amounts sufficient for the Company to meet its obligations. The
cost of debt financing may also impair the ability of the Company to maintain
adequate working capital or to make future acquisitions. In addition, the
issuance of additional shares of Common Stock in connection with future
acquisitions could be dilutive to existing investors. Acquisitions involve a
number of operating risks that could materially adversely affect the Company's
operating results, including the diversion of management's attention to
assimilate the operations, products and personnel of the acquired companies, the
amortization of acquired intangible assets, and the potential loss of key
employees of the acquired companies. Furthermore, acquisitions may involve
businesses in which the Company lacks experience. There can be no assurance that
the Company will be able to manage one or more acquisitions successfully, or
that the Company will be able to integrate the operations, products or personnel
gained through any such acquisitions without a
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material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- The Hadco Strategy."
COMPETITION
The electronic interconnect industry is highly fragmented and characterized
by intense competition. The Company believes that its major competitors are the
large U.S. and international independent and captive producers that also
manufacture multilayer printed circuits and provide backplane and other
electronic assemblies. Some of these competitors have significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than the Company. In addition, these competitors
may have the ability to respond more quickly to new or emerging technologies,
may adapt more quickly to changes in customer requirements and may devote
greater resources to the development, promotion and sale of their products than
the Company.
During periods of recession or economic slowdown in the electronics
industry and other periods when excess capacity exists, electronics OEMs become
more price sensitive, which could have a material adverse effect on interconnect
pricing. In addition, the Company believes that price competition from printed
circuit manufacturers in Asia and other locations with lower production costs
may play an increasing role in the printed circuit markets in which the Company
competes. The Company's basic interconnect technology is generally not subject
to significant proprietary protection, and companies with significant resources
or international operations may enter the market. Increased competition could
result in price reductions, reduced margins or loss of market share, any of
which could materially adversely affect the Company's business, financial
condition and results of operations.
The demand for printed circuits has continued to be affected by the
development of smaller, more powerful electronic components requiring less
printed circuit area. Expansion of the Company's existing products or services
could expose the Company to new competition. Moreover, new developments in the
electronics industry could render existing technology obsolete or less
competitive and could potentially introduce new competition into the industry.
There can be no assurance that the Company will continue to compete successfully
against present and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Industry
Overview and Trends."
TECHNOLOGICAL CHANGE, PROCESS DEVELOPMENT AND PROCESS DISRUPTION
The market for the Company's products and services is characterized by
rapidly changing technology and continuing process development. The future
success of the Company's business will depend in large part upon its ability to
maintain and enhance its technological capabilities, develop and market products
and services that meet changing customer needs and successfully anticipate or
respond to technological changes, on a cost-effective and timely basis. In
addition, the electronic interconnect industry could in the future encounter
competition from new technologies that render existing electronic interconnect
technology less competitive or obsolete, including technologies that may reduce
the number of printed circuits required in electronic components. There can be
no assurance that the Company will effectively respond to the technological
requirements of the changing market. To the extent the Company determines that
new technologies and equipment are required to remain competitive, the
development, acquisition and implementation of such technologies and equipment
are likely to continue to require significant capital investment by the Company.
There can be no assurance that capital will be available for this purpose in the
future or that investments in new technologies will result in commercially
viable technological processes or that there will be commercial applications for
these technologies. Moreover, the Company's business involves highly complex
manufacturing processes that have in the past and could in the future be subject
to periodic failure or disruption. Process disruptions can result in delays in
certain product shipments. There can be no assurance that failures or
disruptions will not occur in the future. The loss of revenue and earnings to
the Company from such a technological change, process development or process
disruption, as well as any disruption of the Company's operations resulting from
a natural disaster such as an earthquake, fire
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or flood, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Industry
Overview and Trends," "-- The Hadco Strategy" and "-- Products and Services."
MALAYSIA FACILITY
Zycon recently completed construction of a volume manufacturing facility
for printed circuits in Malaysia. Hadco's management has no experience in
operating foreign manufacturing facilities, and there can be no assurance that
the Company will be able to operate the new facility on a profitable basis. The
Company expects that the Malaysia facility will incur operating losses during
future quarters of operations as a result of various factors, including, without
limitation, initial operating inefficiencies, other start-up costs, and price
competition for the products which the Company intends to produce at the new
facility. Losses incurred in its Malaysia operations will not be deductible for
United States income tax purposes. International operations are also subject to
a number of risks, including unforeseen changes in regulatory requirements,
exchange rates, tariffs and other trade barriers, misappropriation of
intellectual property, currency fluctuations, and political and economic
instability.
CUSTOMER CONCENTRATION
During the past several years, the Company's sales to a small number of its
customers have accounted for a significant percentage of the Company's annual
net sales. During fiscal 1994, 1995 and 1996, the Company's ten largest
customers accounted for approximately 48%, 46% and 48% of net sales,
respectively, and 43% in fiscal 1996 on a pro forma basis including Zycon. In
fiscal 1996, Sun Microsystems accounted for approximately 10% of the net sales
of the Company (including Zycon). The Company generally does not obtain
long-term purchase orders or commitments from its customers, and the orders
received by the Company generally require delivery within 90 days. See " --
Variability of Orders." Given the Company's strategy of developing long-term
purchasing relationships with high growth companies, the Company's dependence on
a number of its most significant customers may increase. There can be no
assurance that the Company will be able to identify, attract and retain
customers with high growth rates or that the customers that it does attract and
retain will continue to grow. Although there can be no assurance that the
Company's principal customers will continue to purchase products and services
from the Company at current levels, the Company expects to continue to depend
upon its principal customers for a significant portion of its net sales. The
loss of or decrease in orders from one or more major customers could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Markets and Customers."
MANUFACTURING CAPACITY
The Company believes its long-term competitive position depends in part on
its ability to increase manufacturing capacity. The Company may obtain such
additional capacity through acquisitions or expansion of its current facilities.
Either approach would require substantial additional capital, and there can be
no assurance that such capital will be available from cash generated by current
operations. Further, there can be no assurance that the Company will be able to
acquire sufficient capacity or successfully integrate and manage such additional
facilities. In addition, the Company's expansion of its manufacturing capacity
has significantly increased and will continue to significantly increase its
fixed costs, and the future profitability of the Company will depend on its
ability to utilize its manufacturing capacity in an effective manner. The
failure to obtain sufficient capacity or to successfully integrate and manage
additional manufacturing facilities could adversely impact the Company's
relationships with its customers and materially adversely affect the Company's
business, financial condition and results of operations. The Company has a large
manufacturing facility in Santa Clara, California, and an earthquake or other
natural disaster in that area that results in an interruption of manufacturing
at such facility would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Manufacturing
and Facilities."
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MANAGEMENT OF GROWTH
The Company has initiated significant expansion, including geographic
expansion, of its operations, which has placed, and will continue to place,
significant demands on the Company's management, operational, technical and
financial resources. These demands are compounded by the Zycon acquisition. See
"-- Acquisitions." The Company expects that expansion will require additional
management personnel and the development of further expertise by existing
management personnel. The Company's ability to manage growth effectively,
particularly given the increasing scope of its operations, will require it to
continue to implement and improve its operational, financial and management
information systems as well as to further develop the management skills of its
managers and supervisors and to train, motivate and manage its employees. The
Company's failure to effectively manage future growth, if any, could have a
material adverse effect on the Company's business, financial condition and
results of operations. Competition for personnel is intense, and there can be no
assurance that the Company will be able to attract, assimilate or retain
additional highly qualified employees in the future, especially engineering
personnel. The failure to hire and retain such personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations.
ENVIRONMENTAL MATTERS
The Company is subject to a variety of local, state and federal
environmental laws and regulations relating to the storage, use, discharge and
disposal of chemicals, solid waste and other hazardous materials used during its
manufacturing process, as well as air quality regulations and restrictions on
water use. When violations of environmental laws occur, the Company can be held
liable for damages and the costs of remedial actions and can also be subject to
revocation of permits necessary to conduct its business. Any such revocations
could require the Company to cease or limit production at one or more of its
facilities, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, the Company's
failure to comply with present and future regulations could restrict the
Company's ability to expand its facilities or could require the Company to
acquire costly equipment or to incur other significant expenses to comply with
environmental regulations.
Environmental laws could become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with violation.
The Company operates in several environmentally sensitive locations and is
subject to potentially conflicting and changing regulatory agendas of political,
business and environmental groups. Changes or restrictions on discharge limits,
emissions levels, or material storage or handling might require a high level of
unplanned capital investment and/or relocation. There can be no assurance that
compliance with new or existing regulations will not have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Environmental Matters," "-- Legal Proceedings" and Note 9 of
Notes to the Company's Consolidated Financial Statements.
AVAILABILITY OF RAW MATERIALS AND COMPONENTS
While the Company has not entered into any supply agreements and does not
have any guaranteed sources of raw materials or components, it routinely
purchases raw materials and components from several key material suppliers.
Although alternative material suppliers are currently available, a significant
unplanned event at a major supplier could have a material adverse effect on the
Company's operations. Zycon has experienced shortages of certain types of raw
materials in the past. The potential exists for shortages of certain types of
raw materials or components and any such future shortages or price fluctuations
in raw materials could have a material adverse effect on the Company's
manufacturing operations and future unit costs, thereby materially adversely
affecting the Company's business, financial condition and results of operations.
Product changes and the overall demand for electronic interconnect products
could increase the industry's use of new laminate materials, standard laminate
materials, multilayer blanks, electronic components and other materials, and
therefore such
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materials may not be readily available to the Company in the future. Electronic
components used by the Company in producing backplane assemblies are purchased
by the Company and, in certain circumstances, the Company may bear the risk of
component price fluctuations. There can be no assurance that shortages of
certain types of electronic components will not occur in the future. Component
shortages or price fluctuations could have a material adverse effect on the
Company's backplane assembly business, thereby materially adversely affecting
the Company's business, financial condition and results of operations. To the
extent that the Company's backplane assembly business expands as a percentage of
the Company's net sales, component shortages and price fluctuations could, to a
greater extent, materially adversely affect the Company's business, financial
condition and results of operations. See "Business -- Supplier Relationships."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a large extent upon the continued
services of key managerial and technical employees, none of whom, except for the
President/Chief Executive Officer, is bound by an employment agreement or a
non-competition agreement. The President/Chief Executive Officer's
non-competition agreement is for one year after the termination of his
employment with the Company. The loss of the services of any of the Company's
key employees could have a material adverse effect on the Company. The Company
believes that its future success depends on its continuing ability to attract
and retain highly qualified technical, managerial and marketing personnel.
Competition for such personnel is intense, especially for engineering personnel,
and there can be no assurance that the Company will be able to attract,
assimilate or retain such personnel. If the Company is unable to hire and retain
key personnel, the Company's business, financial condition and results of
operations may be materially adversely affected. See "Management."
INTELLECTUAL PROPERTY
The Company's success depends in part on its proprietary techniques and
manufacturing expertise, particularly in the area of complex multilayer printed
circuits. The Company has few patents and relies primarily on trade secret
protection of its intellectual property. There can be no assurance that the
Company will be able to protect its trade secrets or that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets. In addition,
litigation may be necessary to protect the Company's trade secrets, to determine
the validity and scope of the proprietary rights of others or to defend against
claims of patent infringement. If any infringement claim is asserted against the
Company, the Company may seek to obtain a license of the other party's
intellectual property rights. There is no assurance that a license would be
available on reasonable terms or at all. Litigation with respect to patents or
other intellectual property matters could result in substantial costs and
diversion of management and other resources and could have a material adverse
effect on the Company's business, financial condition and results of operations.
SUBORDINATION OF NOTES AND ABSENCE OF FINANCIAL COVENANTS
The Notes will be unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness (as defined) of the Company and will
be effectively subordinated with respect to the assets and earnings of the
Company's subsidiaries to all indebtedness and other liabilities of such
subsidiaries. As of January 25, 1997, the Company had approximately $218 million
of outstanding indebtedness that would have constituted Senior Indebtedness, and
subsidiaries of the Company had outstanding indebtedness and other liabilities
aggregating approximately $57 million (excluding intracompany liabilities and
liabilities of a type not required to be reflected as liabilities on the balance
sheet of such subsidiaries in accordance with generally accepted accounting
principles) to which the Notes would have been effectively subordinated. The
Company's debt service on a pro forma basis (including Zycon) was $25.6 million
and $6.7 million, respectively, for fiscal 1996 and for the first quarter of
fiscal 1997. The Indenture will not limit the amount of additional indebtedness,
including
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Senior Indebtedness, which the Company or any of its subsidiaries can create,
incur, assume or guarantee. During the continuance beyond any applicable grace
period of any default of the payment of principal, premium, if any, interest or
any other payment due on any Senior Indebtedness and upon notice by holders of
Designated Senior Indebtedness (as defined) to the Trustee of a covenant default
on Designated Senior Indebtedness, no payment of principal, or premium, if any,
or interest on the Notes (including, but not limited to the redemption price or
repurchase price with respect to the Notes) may be made by the Company. In
addition, upon any distribution of assets of the Company pursuant to any
dissolution, winding up, liquidation or reorganization, or acceleration of the
maturity of the Notes as a result of an Event of Default (as defined), the
payment of the principal of, or premium, if any, and interest on the Notes is
subordinated to the extent provided in the Indenture to the prior payment in
full of all Senior Indebtedness. By reason of the subordination, in the event of
the Company's liquidation or dissolution, holders of Senior Indebtedness may
receive more, ratably, and holders of the Notes may receive less, ratably, than
the other creditors of the Company.
The Notes are obligations exclusively of the Company. As a significant
portion of the Company's consolidated operations is conducted through
subsidiaries, the cash flow and the consequent ability to service debt,
including the Notes, of the Company is partially dependent upon the earnings of
such subsidiaries and the distribution of those earnings, or upon loans or other
payments of funds by those subsidiaries, to the Company. Such subsidiaries are
separate and distinct legal entities, and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make any funds
available therefor, whether by dividends, distributions, loans or other
payments. In addition, the payment of dividends or distributions and the making
of loans and advances to the Company by any such subsidiaries may be subject to
statutory or contractual restrictions, and may be contingent upon the earnings
of those subsidiaries and subject to various business considerations. Any right
of the Company to receive assets of subsidiaries upon their liquidation or
reorganization (and the consequent right of the holders of the Notes to
participate in these assets) would be effectively subordinated to the claims of
that subsidiary's creditors (including trade creditors), except to the extent
that the Company is itself recognized as a creditor of such subsidiary, in which
case the claims of the Company would be subordinate to any security interests in
the assets of such subsidiary and any indebtedness of such subsidiary senior to
that held by the Company. See "Description of Notes -- Subordination."
The Indenture does not contain any financial performance covenants.
Consequently, the Company is not required under the Indenture to meet any
financial tests such as those that measure the Company's working capital,
interest coverage, fixed charge coverage or net worth in order to maintain
compliance with the terms of the Indenture. No sinking fund is provided for the
Notes.
LIMITATIONS ON REPURCHASE OF NOTES UPON A DESIGNATED EVENT
In the event of a Designated Event, each holder may require the Company to
repurchase all or a portion of such holder's Notes at 100% of the principal
amount thereof plus accrued and unpaid interest to the repurchase date. If a
Designated Event were to occur, there can be no assurance that the Company would
have sufficient funds to pay the repurchase price for all Notes tendered by the
holders thereof. The Company's repurchase of Notes, absent a waiver, would
constitute a default under the terms of the Company's senior revolving credit
loan facility with The First National Bank of Boston. In addition, the Company's
repurchase of Notes as a result of the occurrence of a Designated Event may be
prohibited or limited by the subordination provisions applicable to the Notes,
or be prohibited or limited by, or create an event of default under, the terms
of other agreements relating to borrowings which constitute Senior Indebtedness
as may be entered into, amended, supplemented or replaced from time to time.
Failure of the Company to repurchase Notes at the option of the holder upon a
Designated Event would result in an Event of Default under the Indenture. The
Notes may not be repurchased at the option of holders following a Designated
Event if there has occurred and is continuing an Event of Default (other than a
default in the payment of the repurchase price with respect to such Notes on the
repurchase date). See "Description of Notes -- Repurchase at Option of Holders
Upon a Designated Event."
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ABSENCE OF PUBLIC MARKET FOR THE NOTES; VOLATILITY OF THE NOTES
Prior to the Note Offering, there has been no trading market for the Notes.
The Company expects that the Notes will trade on the over-the-counter market.
However, there can be no assurance that an active trading market for the Notes
will develop or, if such market develops, as to the liquidity or sustainability
of such market. Robertson, Stephens & Company LLC and Merrill Lynch, Pierce,
Fenner & Smith Incorporated have advised the Company that they currently intend
to make a market in the Notes, but they are not obligated to do so and may
discontinue such market making at any time. There can be no assurance that an
active market for the Notes will develop and continue upon completion of the
Note Offering or that the market price of the Notes will not decline. Various
factors such as changes in prevailing interest rates or changes in perceptions
of the Company's creditworthiness could cause the market price of the Notes to
fluctuate significantly. The trading price of the Notes could also be
significantly affected by the market price of the Common Stock, which could be
subject to wide fluctuations in response to a variety of factors, including
quarterly variations in operating results, announcements of technological
innovations or new products by the Company, its customers or its competitors,
developments in patents or other intellectual property rights, general
conditions in the electronics industry and general economic and market
conditions. Factors creating volatility in the trading prices of the Common
Stock could have a significant impact on the trading price of the Notes.
VOLATILITY OF STOCK PRICE
The Company's Common Stock has experienced significant price volatility
historically, and such volatility may continue to occur in the future. Factors
such as announcements of large customer orders, order cancellations, new product
introductions by the Company or competitors or general conditions in the
electronics industry, as well as quarterly variations in the Company's actual or
anticipated results of operations, may cause the market price of the Company's
Common Stock to fluctuate significantly. Furthermore, the stock market has
experienced extreme price and volume fluctuations in recent years, which has had
a substantial effect on the market price for securities issued by many
technology companies, often for reasons unrelated to the operating performance
of the specific companies. These broad market fluctuations may materially
adversely affect the price of the Company's Common Stock. There can be no
assurance that the market price of the Company's Common Stock will not
experience significant fluctuations in the future, including fluctuations that
are unrelated to the Company's performance.
ANTI-TAKEOVER PROVISIONS
The Company's Stockholder Rights Plan and certain provisions of the
Company's Restated Articles of Organization and By-Laws and of Massachusetts
Law, including Massachusetts General Laws Chapter 110D, entitled "Regulation of
Control Share Acquisitions" and Chapter 110F, the so-called Business Combination
Statute, could discourage potential acquisition proposals and could delay or
prevent a change in control or sale of the Company. The rights of holders of
Notes to require the Company to repurchase Notes under certain circumstances
could also have the same effect. Each and all of the above provisions, statutes
and rights could diminish the opportunities for a stockholder to participate in
tender offers, including tender offers at a price above the then current market
value of Common Stock and may render more difficult or discourage a merger,
consolidation or tender offer (even if such transaction is supported by the
Company's Board of Directors or is favorable to the stockholders), the
assumption of control by a holder of a large block of the Company's shares, and
the removal of incumbent management. See "Description of Capital Stock" and
"Description of Notes -- Repurchase at Option of Holders Upon a Designated
Event."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,000,000 shares of Common
Stock (at an assumed public offering price of $38.125 per share) and $100
million principal amount of the Notes, in each case less estimated underwriting
discounts and commissions and offering expenses payable by the Company, are
estimated to be approximately $71.8 million and $96.4 million, respectively, for
an aggregate of approximately $168.2 million ($75.4 million and $111.0 million,
respectively, for an aggregate of approximately $186.4 million, if the
Underwriters' over-allotment options are exercised in full). The closing of the
Common Stock Offering and the closing of the Note Offering are each conditioned
on the closing of the other offering.
The Company expects to use between 80% and 100% of the net proceeds to
repay a portion of the outstanding balance on its senior revolving credit loan
facility with The First National Bank of Boston (the "Credit Facility"). The
Company obtained the Credit Facility (i) primarily to finance the purchase of
the shares of Common Stock of Zycon pursuant to the tender offer completed by
the Company on January 10, 1997, (ii) to refinance Zycon's existing bank credit
agreements, and (iii) for working capital and other general corporate purposes.
Pursuant to the terms of the Credit Facility, the Company may be required to use
$50 million from the net proceeds of the Note Offering to repay a portion of the
outstanding balance thereunder. As of January 25, 1997, the amount outstanding
under the Credit Facility was $215 million. Interest on loans outstanding under
the Credit Facility is, at the Company's election, payable at either (i) the
higher of the lender's base rate, or a floating rate equal to 1.5% over the
prevailing U.S. federal funds rate, or (ii) a Eurodollar Rate, which is a fixed
rate equal to an applicable Eurodollar rate margin plus the prevailing
Eurodollar rate for interest periods of one, two, three or six months. As of
January 25, 1997, the weighted average interest rate on loans outstanding under
the Credit Facility was 6.68%. The Credit Facility matures in January 2002. The
remaining net proceeds will be used for general corporate purposes, including
working capital, product development and capital expenditures. A portion of the
net remaining proceeds, if any, may also be used for the acquisition of
companies, assets, products or technologies. As of the date of this Prospectus,
the Company has no commitments or agreements with respect to any significant
acquisitions, and no portion of the net proceeds has been allocated for any
specific acquisition.
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on its Common Stock,
and it is currently anticipated that the Company will continue to retain its
earnings for use in its business and not pay cash dividends. The Company's
Credit Facility currently contains a covenant prohibiting the Company from
paying a cash dividend.
16
<PAGE> 18
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "HDCO." The following table sets forth, for the periods indicated,
the range of high and low sale prices for the Company's Common Stock on the
Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
Fiscal 1995
First Quarter................................................... $ 9 5/8 $ 8
Second Quarter.................................................. 18 1/8 8 7/8
Third Quarter................................................... 32 1/8 15 3/8
Fourth Quarter.................................................. 33 1/4 22 1/2
Fiscal 1996
First Quarter................................................... 34 15/16 21 1/4
Second Quarter.................................................. 35 3/4 23 3/4
Third Quarter................................................... 30 3/4 18 1/4
Fourth Quarter.................................................. 34 1/8 18 1/2
Fiscal 1997
First Quarter................................................... 59 1/8 27 3/8
Second Quarter (through April 11, 1997)......................... 57 1/8 33 1/16
</TABLE>
As of April 11, 1997, there were approximately 331 holders of record of the
Common Stock. On April 11, 1997, the last sale price reported on the Nasdaq
National Market for the Company's Common Stock was $38.125 per share.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of January 25, 1997, and as adjusted to reflect (i) the sale by the Company of
2,000,000 shares of Common Stock (at an assumed public offering price of $38.125
per share) in the Common Stock Offering and the sale of $100 million aggregate
principal amount of Notes in the Note Offering, in each case less estimated
underwriting discounts and commissions and offering expenses payable by the
Company, and (ii) the application of the net proceeds from the Common Stock
Offering and the Note Offering:
<TABLE>
<CAPTION>
JANUARY 25, 1997
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(In thousands)
<S> <C> <C>
Short-term debt and current portion of long-term debt and capital
lease obligations.................................................. $ 8,116 $ 8,116
======== ========
Long-term debt:
Long term debt and capital lease obligations, net of current
portion......................................................... 228,168 59,931
% Convertible Subordinated Notes due 2004........................ -- 100,000
Stockholders' investment:
Common Stock, $0.05 par value, 25,000,000 shares authorized;
10,444,188 shares issued; 12,444,188 shares issued, as
adjusted(1)..................................................... 523 623
Paid-in capital.................................................... 32,283 104,021
Deferred compensation.............................................. (209) (209)
Retained earnings.................................................. 38,460 38,460
-------- --------
Total stockholders' investment................................ 71,057 142,895
-------- --------
Total capitalization....................................... $299,225 $302,826
======== ========
</TABLE>
- ------------
(1) Excludes options outstanding as of January 25, 1997 to acquire 1,219,829
shares of Common Stock at a weighted average exercise price of $15.06 per
share and an additional 843,000 shares of Common Stock reserved for issuance
under the Company's stock option plans. See Note 10 of Notes to the
Company's Consolidated Financial Statements. Also excludes shares of Common
Stock issuable upon conversion of the Notes.
18
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data for Hadco
and subsidiaries. The selected consolidated financial data for each of the years
ended October 31, 1992, October 30, 1993, October 29, 1994, October 28, 1995 and
October 26, 1996 have been derived from the Company's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, independent public
accountants. The selected consolidated financial data for the three months ended
January 27, 1996 and January 25, 1997 have been derived from the Company's
unaudited Consolidated Financial Statements, which reflect in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for such periods. The results
for the three months ended January 25, 1997 are not necessarily indicative of
results for any future period. The pro forma statements of operations data for
the year ended October 26, 1996 and the three months ended January 25, 1997 have
been derived from the Pro Forma Condensed Consolidated Financial Statements
included elsewhere in this Prospectus. The pro forma statements of operations
data are not necessarily indicative of the actual results that would have been
achieved had the Zycon acquisition occurred at the beginning of the respective
periods nor do they purport to indicate the results of future operations of the
Company. The selected consolidated financial data should be read in conjunction
with the Company's and Zycon's Consolidated Financial Statements and the Notes
thereto appearing elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED, ENDED,
-------------------------------------------------------------------------------- ------------------
OCT. 31, OCT. 30, OCT. 29, OCT. 28, OCT. 26, OCT. 26, OCT. 26, JAN. 27, JAN. 25,
1992 1993 1994 1995 1996 1996 1996 1996 1997(1)
-------- -------- -------- -------- -------- -------------- -------------- -------- --------
PRO FORMA
PRO FORMA(2) AS ADJUSTED(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except ratio and per share data)
CONSOLIDATED STATEMENT OF
OPERATIONS:
Net sales................. $183,408 $189,494 $221,570 $265,168 $350,685 $570,345 $570,345 $76,481 $111,536
Gross profit.............. 34,160 35,393 43,973 64,495 86,148 119,494 119,494 19,482 24,855
Write-off of acquired in-
process research and
development.............. -- -- -- -- -- -- -- -- 78,000
Income (loss) from
operations............... 13,404 13,710 16,482 33,906 51,532 62,331 62,331 11,534 (62,443)
Net income (loss)......... $ 8,075 $ 8,227 $ 9,943 $ 21,374 $ 32,014 $ 27,222 $ 30,513 $ 7,191 $(69,161)
Net income (loss) per
share(4)................. $ .75 $ .76 $ .93 $ 1.98 $ 2.89 $ 2.46 $ 2.33 $ .65 $ (6.64)
Weighted average shares
outstanding(4)........... 10,808 10,819 10,720 10,806 11,084 11,084 13,084 11,104 10,413
OTHER DATA:
Ratio of earnings to fixed
charges(5).............. 6.9x 10.2x 19.4x 66.2x 156.3x 3.9x 6.1x 125.1 x --
EBITDA(6)................. 26,974 27,440 31,093 49,100 70,375 98,783 98,783 15,582 22,093
Capital expenditures...... 10,854 10,978 19,510 28,865 54,998 107,154 107,154 13,713 11,011
Interest expense.......... 2,045 1,402 891 537 338 16,197 10,474 95 933
<CAPTION>
JAN. 25, JAN. 25,
1997 1997
-------------- --------------
PRO FORMA
PRO FORMA(2) AS ADJUSTED(3)
<S> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS:
Net sales................. $172,547 $172,547
Gross profit.............. 32,941 32,941
Write-off of acquired in-
process research and
development.............. -- --
Income (loss) from
operations............... 17,977 17,977
Net income (loss)......... $ 7,900 $ 8,715
Net income (loss) per
share(4)................. $ .72 $ .67
Weighted average shares
outstanding(4)........... 10,944 12,944
OTHER DATA:
Ratio of earnings to fixed
charges(5).............. 4.0x 5.7x
EBITDA(6)................. 25,863 25,863
Capital expenditures...... 17,939 17,939
Interest expense.......... 4,669 3,239
</TABLE>
<TABLE>
<CAPTION>
JANUARY 25, 1997
OCT. 31, OCT. 30, OCT. 29, OCT. 28, OCT. 26, -------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(3)
-------- -------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................ $ 25,215 $ 30,593 $ 31,829 $ 41,043 $ 43,561 $ 22,072 $ 22,072
Total assets................................... 104,035 110,782 126,326 162,991 219,501 448,554 452,154
Long-term debt and capital lease obligations,
net of current portion....................... 11,046 9,382 4,526 2,387 1,515 228,168 159,931
Stockholders' investment....................... 59,363 68,431 77,440 100,774 138,841 71,057 142,895
</TABLE>
19
<PAGE> 21
- ------------
(1) Net loss for the three months ended January 25, 1997 includes a
non-recurring write-off relating to the acquisition of Zycon for in-process
research and development. Before deducting the non-recurring write-off,
income from operations was $15,557,000, net income was $8,839,000, net
income per share was $.81 (based on weighted average shares outstanding of
approximately 10,944,000), and the ratio of earnings to fixed charges was
17.6x.
(2) Gives effect to the acquisition of Zycon assuming such transaction had
occurred on October 29, 1995. See the Company's unaudited Pro Forma
Condensed Consolidated Financial Statements beginning on page F-23 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In connection with the acquisition, Hadco eliminated nine
executive positions at Zycon, which resulted in pre-tax annual savings of
$2,637,000. Taking these savings into account for the year ended October 26,
1996, pro forma net income and pro forma net income, as adjusted, would have
been $28,700,000 and $32,029,000, respectively and pro forma net income per
share and pro forma net income per share, as adjusted, would have been $2.59
and $2.45, respectively. Taking these savings into account for the quarter
ended January 25, 1997, pro forma net income and pro forma net income, as
adjusted, would have been $8,275,000 and $9,091,000, respectively, and pro
forma net income per share and pro forma net income per share, as adjusted,
would have been $.76 and $.70, respectively.
(3) Adjusted to reflect (i) the sale by the Company of 2,000,000 shares of
Common Stock (at an assumed public offering price of $38.125 per share) in
the Common Stock Offering and the sale of $100 million of principal amount
of Notes in the Note Offering (at an assumed interest rate of 5.75%, and an
assumed conversion price of $47.08), in each case less estimated
underwriting discounts and commissions and offering expenses payable by the
Company, and (ii) the application of the net proceeds from the Common Stock
Offering and the Note Offering. See "Use of Proceeds."
(4) See Note 1 of Notes to the Company's Consolidated Financial Statements for
an explanation of the basis used to calculate net income (loss) per share.
Pro forma, as adjusted fully diluted net income per share is $2.24 and $.64
for the year ended October 26, 1996 and the three months ended January 25,
1997, respectively.
(5) Computed by dividing the sum of net income (loss), before deducting
provisions for income taxes and fixed charges, by total fixed charges. Fixed
charges consist of interest on debt and amortization of debt issuance costs
and a portion of capital lease costs that is intended to represent interest
expense.
(6) EBITDA represents net income before interest, income taxes, depreciation and
amortization, and write-off of acquired in-process research and development.
EBITDA should not be considered an alternative measure of the Company's net
income, operating performance, cash flow or liquidity. It is included herein
to provide additional information related to the Company's ability to
service debt. The EBITDA measures presented herein may not be comparable to
other similarly titled measures of other companies.
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, without limitation, those set forth under "Risk
Factors" and elsewhere in this Prospectus.
As used herein, the terms "Company" and "Hadco," unless otherwise indicated
or the context otherwise requires, refer to Hadco Corporation and its
subsidiaries, including Zycon. However, all financial information for periods
ended prior to January 10, 1997, unless otherwise indicated or the context
otherwise requires, is for Hadco Corporation alone and does not include Zycon.
OVERVIEW
Hadco is the largest manufacturer of advanced electronic interconnect
products in North America. The Company offers a wide array of sophisticated
manufacturing, engineering and systems integration services to meet its
customers' electronic interconnect needs. The Company's principal products are
complex multilayer printed circuits and backplane assemblies. Hadco's customers
are a diverse group of electronics OEMs and contract manufacturers in the
computing (mainly workstations, servers, mainframes, storage and notebooks),
data communications/telecommunications and industrial automation industries,
including process controls, automotive, medical and instrumentation.
The Company was incorporated in 1966 and began operations in Cambridge,
Massachusetts as a manufacturer of single and double-sided printed circuits. A
16,000 square foot printed circuit facility was constructed in 1969 in Derry,
New Hampshire, and the Company added multilayer printed circuits to its product
offering in 1975. In 1979, the Company acquired a 33,000 square foot printed
circuit facility in Owego, New York. In 1981, the Company added to its
double-sided and multilayer printed circuit product offerings with the
construction of Tech Center One in Salem, New Hampshire, a quick-turn prototype
operation to serve the prototype printed circuit needs of OEMs. In 1982, the
Company began backplane assembly operations in Salem, New Hampshire. In 1983,
the Company expanded further by adding a second Tech Center in the Silicon
Valley area. In 1984, the Company completed an initial public offering of its
Common Stock.
By fiscal 1991, net sales of the Company were $153 million and grew to $351
million in fiscal 1996, $570 million on a pro forma basis including Zycon.
During this period, the printed circuit industry experienced an increasing
demand for complex products that required a significant investment in
facilities. The Company (including Zycon) has invested approximately $235
million in state-of-the-art production facilities and new technologies during
the past five fiscal years.
ZYCON ACQUISITION
On January 10, 1997, the Company purchased Zycon. The acquisition added
state-of-the-art facilities for volume production of complex printed circuits
and backplane assemblies in the Silicon Valley area, a quick-turn prototype and
design facility in Massachusetts, and a newly constructed facility for volume
production of printed circuits in Malaysia. With this acquisition, Hadco became
the largest manufacturer of advanced electronic interconnect products in North
America. Hadco acquired Zycon for $212 million and recorded the acquisition
under the purchase method of accounting. As a result, a purchase price premium
of $187 million was recorded on the transaction. Approximately $78 million of
the premium was written off as acquired in-process research and development with
no alternative future use as a non-recurring write-off to net income for the
three months ended January 25, 1997. The remaining premium of $109 million was
allocated to identifiable intangibles and goodwill, and will be written off over
12 to 30 years, with an average amortization period of 17 years. The acquisition
was financed from a $250 million senior revolving credit facility, plus existing
cash and short-term investments.
21
<PAGE> 23
The gross profit margin for Hadco for the fiscal year ended October 26,
1996 was 24.6%. The gross profit margin for Zycon for the fiscal year ended
December 31, 1996 was 15.2%. As a result of the Zycon acquisition, the Company
expects that its gross profit margin will be lower in future quarters than has
historically been the case for Hadco.
RESULTS OF OPERATIONS
The following table sets forth certain Consolidated Statements of
Operations data and other data as a percentage of net sales. The table and the
discussion below should be read in conjunction with the Company's and Zycon's
Consolidated Financial Statements and Notes thereto, that appear elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED, THREE MONTHS ENDED,
---------------------------------------------------------- ------------------------------------------------
OCT. 29, OCT. 28, OCT. 26, OCT. 26, OCT. 26, JAN. 27, JAN. 25, JAN. 25, JAN. 25,
1994 1995 1996 1996 1996 1996 1997(1) 1997 1997
-------- -------- -------- ------------ -------------- -------- -------- ------------ --------------
PRO FORMA(2) PRO FORMA PRO FORMA(2) PRO FORMA
AS ADJUSTED(3) AS ADJUSTED(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENT OF
OPERATIONS:
Net sales.......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...... 80.2 75.7 75.4 79.0 79.0 74.5 77.7 80.9 80.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit....... 19.8 24.3 24.6 21.0 21.0 25.5 22.3 19.1 19.1
Selling, general
and
administrative
expenses......... 12.4 11.5 9.9 9.0 9.0 10.4 8.4 7.8 7.8
Write-off of
acquired in-
process research
and
development...... -- -- -- -- -- -- 69.9 -- --
Amortization of
acquired
intangible
assets........... -- -- -- 1.1 1.1 -- -- .9 .9
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations....... 7.4 12.8 14.7 10.9 10.9 15.1 (56.0) 10.4 10.4
Interest income
(expense), net... -- .4 .3 (2.6) (1.6) .3 -- (2.4) (1.6)
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
before provision
for income
taxes............ 7.4 13.2 15.0 8.3 9.3 15.4 (56.0) 8.0 8.8
Provision for
income taxes..... 2.9 5.2 5.8 3.5 4.0 6.0 6.0 3.4 3.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income
(loss)........... 4.5% 8.1% 9.1% 4.8% 5.3% 9.4% (62.0)% 4.6% 5.0%
===== ===== ===== ===== ===== ===== ===== ===== =====
OTHER DATA:
EBITDA(4).......... 14.0% 18.5% 20.1% 17.3% 17.3% 20.4% 19.8% 15.0% 15.0%
Capital
expenditures..... 8.8 10.9 15.7 18.8 18.8 17.9 9.9 10.4 10.4
Interest expense... .4 .2 .1 2.8 1.8 .1 .8 2.7 1.9
</TABLE>
- ---------------
(1) Net loss for the three months ended January 25, 1997 includes a
non-recurring write-off relating to the acquisition of Zycon for in-process
research and development. As a percentage of net sales, income from
operations was 13.9%, income before provision for income taxes was 13.9%,
and net income was 7.9%, all before deducting the non-recurring write-off.
(2) Gives effect to the acquisition of Zycon assuming such transaction had
occurred on October 29, 1995. See the Company's unaudited Pro Forma
Condensed Consolidated Financial Statements beginning on page F-23 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(3) Adjusted to reflect (i) the sale by the Company of 2,000,000 shares of
Common Stock (at an assumed public offering price of $38.125 per share) in
the Common Stock Offering, and the sale of $100,000,000 of principal amount
of Notes in the Note Offering (at an assumed interest rate of 5.75% and an
assumed conversion price of $47.08) in each case less estimated underwriting
discounts and commissions and offering expenses payable by the Company and
(ii) the application of the net proceeds from the Common Stock Offering and
the Note Offering.
22
<PAGE> 24
(4) EBITDA represents net income before interest, income taxes, depreciation and
amortization, and write-off of acquired in-process research and development.
EBITDA should not be considered an alternative measure of the Company's net
income, operating performance, cash flow or liquidity. It is included herein
to provide additional information related to the Company's ability to
service debt. The EBITDA measures presented herein may not be comparable to
other similarly titled measures of other companies.
THREE MONTHS ENDED JANUARY 25, 1997 AND JANUARY 27, 1996
Net sales for the three months ended January 25, 1997 increased 45.8% over
net sales for the three months ended January 27, 1996. The increase resulted
from several factors including the acquisition of Zycon, which added $11.6
million in printed circuit net sales after January 10, 1997, and an increase in
both backplane assembly and printed circuit net sales excluding Zycon. Backplane
assembly net sales increased due to higher product volume and shipments. Printed
circuit net sales increased due to higher production volume and shipments and a
shift towards products with more layers and greater densities. The increase in
printed circuit net sales was partially offset by a decrease in average pricing
of 3.2%. Net sales from backplane assemblies increased to 16.3% of total net
sales, from 10.5% in the first three months of fiscal 1996.
The gross profit margin decreased to 22.3% in the three months ended
January 25, 1997 from 25.5% in the comparable period in fiscal 1996. The
decrease resulted from increased investment in new capacity at certain
facilities, lower overall gross margins from the Zycon operations (including
ongoing start-up expenses associated with the volume production facility in
Malaysia) and the change in product mix related to the increase in backplane
assembly operations.
Selling, general and administrative (SG&A) expenses, as a percent of net
sales, decreased to 8.3% in the three months ended January 25, 1997 from 10.4%
in the comparable period in fiscal 1996, due to increased net sales and the
fixed nature of the Company's SG&A expenses.
Income from operations for the three months ended January 25, 1997 was
reduced by $78 million due to a non-recurring write-off relating to acquired
in-process research and development recorded in connection with the Zycon
acquisition. The remaining goodwill and purchased intangibles will be amortized
over 12 to 30 years, with an average amortization period of 17 years, which will
reduce income from operations by approximately $1.6 million per fiscal quarter.
For the three months ended January 25, 1997, income from operations was reduced
by goodwill and purchased intangibles amortization of $270,000, which
represented the amortization for the 15 day period following the Zycon
acquisition.
Excluding the non-recurring write-off of $78 million for acquired
in-process research and development, operating margins decreased slightly to
13.9% for the three months ended January 25, 1997 from 15.1% in the comparable
period in fiscal 1996, primarily as a result of the same factors affecting gross
profit margins, and of goodwill amortization from the Zycon acquisition.
Interest income increased in the three months ended January 25, 1997 as
compared to the three months ended January 27, 1996, due to higher daily average
cash balances available for investing. Interest expense increased in the three
months ended January 25, 1997 as compared to the three months ended January 27,
1996, due to an increase in outstanding debt as a result of the Zycon
acquisition.
In accordance with generally accepted accounting principles, the Company
provides for income taxes on an interim basis, using its effective annual income
tax rate. Although the Company has incurred a loss before income taxes during
the three months ended January 25, 1997, the Company has recorded an income tax
provision because the write-off of acquired in-process research and development
is not deductible for income tax purposes. Without taking into consideration the
write-off of acquired in-process research and development, the Company
anticipates an effective annual income tax rate for fiscal 1997 of 43%, which is
more than the expected combined federal and state statutory rates. This
difference is caused primarily by anticipated losses incurred by the Company's
Malaysian
23
<PAGE> 25
volume production facility which are not tax deductible. These items are
partially offset by tax advantaged investment income, the tax benefit of the
Company's foreign sales corporation and various state investment tax credits.
The effective tax rate for fiscal 1997 is based on current tax laws.
The Company includes in SG&A expenses charges for actual expenditures and
accruals, based on estimates, for environmental matters. To the extent and in
amounts Hadco believes circumstances warrant, it will continue to accrue and
charge to SG&A expenses cost estimates relating to environmental matters. The
Company believes the ultimate disposition of known environmental matters will
not have a material adverse effect upon the liquidity, capital resources,
business or consolidated financial position of the Company. However, one or more
of such environmental matters could have a significant negative impact on the
Company's consolidated financial results for a particular reporting period. See
"Business -- Environmental Matters," "-- Legal Proceedings" and Note 9 of Notes
to the Company's Consolidated Financial Statements.
The Company believes that excess capacity may exist in the printed circuit
and electronic assembly industries, as well as fluctuating growth rates in the
electronics industry as a whole. Both factors could have a material adverse
effect on future orders and pricing. The Company also believes that the
potential exists for a shortage of materials in such industries, which could
have a material adverse effect on future unit costs.
FISCAL YEARS ENDED OCTOBER 26, 1996 AND OCTOBER 28, 1995
Net sales during 1996 increased 32.3% over 1995. The change was due to a
15.1% increase in the volume of production and shipments and a shift in product
mix to higher layer, higher density products, as compared to 1995. Average
pricing per unit increased 6.1% compared to 1995. Sales of backplane and other
electronic assemblies increased to 17% of the Company's net sales in 1996,
versus 7% for 1995.
The gross profit margin increased to 24.6% in 1996 from 24.3% in 1995. The
increase was a direct result of higher volume of shipments, an increase in the
technology level of product mix, and improved pricing. These increases have been
partially offset by increased costs relating to the implementation of new
production lines and materials and the shift in mix to a higher level of
value-added products.
SG&A expenses, as a percent of net sales, decreased to 9.9% during 1996
from 11.5% during 1995, due to increased revenue. SG&A expenses increased to
$34.6 million in 1996 from $30.6 million in 1995, primarily as a result of
increased variable costs directly attributable to increased net sales. Included
in SG&A expenses are charges for actual expenditures and accruals, based on
estimates, for environmental matters. During 1996 and 1995, the Company made,
and charged to SG&A expenses, actual payments of approximately $680,000 and
$1,111,000 respectively, for environmental matters. In 1996 and 1995, the
Company also accrued and charged to SG&A expenses of approximately $1,825,000
and $2,740,000, respectively, as cost estimates relating to known environmental
matters.
In 1996, interest income decreased as a result of lower cash balances
available for investment. Interest expense decreased in 1996 from 1995 due to
decreased average debt balances during the year.
The annual effective tax rate for 1996 and 1995 was 39.0%, which was less
than the then current combined federal and state statutory rates. This
difference was caused primarily by tax advantaged investments and the tax
benefits of a foreign sales corporation.
FISCAL YEARS ENDED OCTOBER 28, 1995 AND OCTOBER 29, 1994
Net sales during 1995 increased 19.7% over the same period in 1994. The
change was due to an 8.2% increase in the volume of production and shipments and
a shift in product mix to higher layer, higher density products, as compared to
fiscal 1994. Average pricing per unit increased 3.1% compared to the prior year.
24
<PAGE> 26
The gross profit margin increased to 24.3% in 1995 from 19.8% in 1994. The
increase was a direct result of higher volume of shipments, an increase in the
technology level of product mix, improved pricing and improvements in operating
efficiencies. Continued productivity improvements led to increased unit volume
and lower unit costs.
SG&A expenses, as a percent of net sales, decreased to 11.5% during 1995
from 12.4% during 1994, due to increased revenue. SG&A expenses increased to
$30.6 million in 1995 from $27.5 million in 1994, as a result of increased
variable costs directly attributable to increased net sales and charges for
environmental related matters. Included in SG&A expenses are charges for actual
expenditures and accruals, based on estimates, for environmental matters. During
1995 and 1994, the Company made, and charged to SG&A expenses, actual payments
of approximately $1,111,000 and $1,040,000, respectively, for environmental
matters. In 1995 and 1994, the Company also accrued and charged to SG&A expenses
of approximately $2,740,000 and $2,100,000, respectively, as cost estimates
relating to known environmental matters.
In 1995, interest income increased as a result of higher rates of return
earned on investments, and higher cash balances available for investment.
Interest expense decreased in 1995 from 1994 due to decreased average debt
balances during the year.
The annual effective tax rate was 39.0% and 39.5% in 1995 and 1994,
respectively, which was less than the then current combined federal and state
statutory rates. This difference was caused primarily by tax advantaged
investments and the tax benefits of a foreign sales corporation.
QUARTERLY RESULTS
The following table presents certain unaudited consolidated financial
information for each of the Company's nine fiscal quarters for the period ended
January 25, 1997, as well as certain of such information expressed as a
percentage of net sales for the same period. Information for the three months
ended January 25, 1997 includes the results of operations for Zycon from January
10, 1997, the date of the Zycon acquisition. In the opinion of management, this
information has been prepared on the same basis as the audited Consolidated
Financial Statements of the Company appearing elsewhere in this Prospectus and
includes all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the quarterly results when read in conjunction with
the Company's Consolidated Financial Statements. The Company's operating results
have been subject to fluctuations, and thus results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
JAN. APRIL JULY OCT. JAN. APRIL JULY OCT.
28, 29, 29, 28, 27, 27, 27, 26, JAN. 25,
1995 1995 1995 1995 1996 1996 1996 1996 1997(1)
------- ------- ------- ------- ------- ------- ------- ------- --------
(In thousands, except percentages and per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENT OF
OPERATIONS:
Net sales.......... $56,825 $67,637 $67,752 $72,954 $76,481 $88,096 $88,225 $97,883 $111,536
Gross profit....... 11,292 16,261 17,540 19,402 19,482 21,893 21,451 23,322 24,855
Income (loss) from
operations....... 4,770 8,342 9,821 10,973 11,534 12,703 12,910 14,385 (62,443)
Net income
(loss)........... 3,003 5,193 6,152 7,026 7,191 7,895 7,994 8,934 (69,161)
Net income (loss)
per share........ $.29 $.49 $.56 $.63 $.65 $.71 $.72 $.81 $(6.64)
AS A PERCENTAGE OF
NET SALES:
Gross profit....... 19.9% 24.0% 25.9% 26.6% 25.5% 24.9% 24.3% 23.8% 22.3%
Income (loss) from
operations....... 8.4 12.3 14.5 15.0 15.1 14.4 14.6 14.7 (56.0)
Net income
(loss)........... 5.3 7.7 9.1 9.6 9.4 9.0 9.1 9.1 (62.0)
</TABLE>
25
<PAGE> 27
- ------------
(1) Net loss for the three months ended January 25, 1997 includes a
non-recurring write-off relating to the acquisition of Zycon for in-process
research and development. Income from operations was $15,557,000, net income
was $8,839,000, net income per share was $.81 (based on weighted average
shares outstanding of approximately 10,944,000), and, as a percentage of net
sales, income from operations was 13.9% and net income was 7.9%, all before
deducting the non-recurring write-off.
The Company's results of operations have fluctuated and may continue to
fluctuate from period to period, including on a quarterly basis. Variations in
quick-turn prototype and volume production orders, in the average number of
layers per printed circuit, and in the mix of products sold by the Company have
significantly affected both net sales and gross profit. Gross profit declined to
22.3% in the three months ended January 25, 1997 from 26.6% in the three months
ended October 28, 1995 primarily as a result of (i) costs related to increases
in manufacturing capacity, (ii) an increase in backplane assembly net sales as a
percentage of net sales, and (iii) factors related to the Zycon acquisition.
Operating results generally may also be affected by other factors, including the
receipt and shipment of large orders, plant utilization, product mix,
manufacturing process yields, the timing of expenditures in anticipation of
future sales, raw material availability, product and price competition, the
length of sales cycles and economic conditions in the electronics industry. Many
of these factors are outside the control of the Company.
The Company does not obtain long term purchase orders or commitments from
its customers, and a substantial portion of sales in a given quarter may depend
on obtaining orders for products to be manufactured and shipped in the same
quarter in which those orders are received. Sales for future quarters may not be
predictable. The Company relies on its estimate of anticipated future volumes
when making commitments regarding the level of business that it will seek and
accept, the mix of products that it intends to manufacture, the timing of
production schedules and the levels and utilization of personnel and other
resources. A variety of conditions, both specific to the individual customer and
generally affecting the customer's industry, may cause customers to cancel,
reduce or delay orders that were previously made or anticipated. A significant
portion of the Company's released backlog at any time may be subject to
cancellation or postponement without penalty. The Company cannot assure the
timely replacement of canceled, delayed or reduced orders. Significant or
numerous cancellations, reductions or delays in orders by a customer or group of
customers could materially adversely affect the Company's business, financial
condition and results of operations. The Company's expense levels are relatively
fixed and are based, in part, on expectations of future revenues. Consequently,
if revenue levels are below expectations, the Company's business, financial
condition and results of operations are likely to be materially adversely
affected. Due to all of the foregoing factors, it is likely that in some future
quarter or quarters the Company's operating results may be below the
expectations of securities analysts and investors. In such event, the price of
the Company's Common Stock could likely be materially adversely affected. See
"Risk Factors -- Fluctuations in Quarterly Operating Results."
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1996, the Company's financing requirements were satisfied
principally from cash flows from operations. Cash provided by operating
activities was approximately $55.6 million in fiscal 1996. These funds were
sufficient to meet increased working capital needs, capital expenditures of
approximately $54.0 million, and debt and lease payments of approximately $2.1
million in fiscal 1996. Cash provided by operating activities was approximately
$8.3 million in the three months ended January 25, 1997.
At January 25, 1997, the Company had working capital of approximately $22.1
million and a current ratio of 1.20, compared to working capital of
approximately $41.7 million and a current ratio of 1.79 at January 27, 1996.
Cash, cash equivalents and short-term investments at January 25, 1997 were
approximately $12.1 million, a decrease of $22.6 million from approximately
$34.7 million at January 27, 1996.
26
<PAGE> 28
The Company currently anticipates that its capital expenditures for fiscal
1997 will be in excess of $70 million, of which approximately $17.2 million
represents commitments to purchase manufacturing equipment and leasehold
improvements. The majority of these capital expenditures is expected to be
completed by the end of fiscal 1997. The amount of these anticipated capital
expenditures will frequently change based on future changes in business plans
and conditions of the Company and changes in economic conditions.
In January 1997, the Company obtained a senior revolving credit loan
facility for up to $250 million from The First National Bank of Boston (the
"Credit Facility") (i) primarily to finance the purchase of the shares of Common
Stock of Zycon pursuant to the tender offer commenced by the Company on December
11, 1996, (ii) to refinance Zycon's existing bank credit agreements, and (iii)
for working capital and other general corporate purposes. Interest on loans
outstanding under the Credit Facility is, at the Company's election, payable at
either (1) the higher of the lender's base rate or a floating rate equal to 1.5%
over the prevailing U.S. federal funds rate, or (2) a Eurodollar Rate, which is
a fixed rate equal to an applicable Eurodollar rate margin plus the prevailing
Eurodollar rate for interest periods of one, two, three or six months. At
January 25, 1997, $215 million was outstanding under the Credit Facility. The
Credit Facility will terminate in five years. The Company currently expects that
between 80% and 100% of the net proceeds of the Common Stock Offering and the
Note Offering will be used to repay a portion of the outstanding balance on the
Credit Facility.
The Company believes its existing working capital and borrowing capacity,
coupled with the funds generated from the Company's operations, and the net
proceeds from the Offerings, will be sufficient to fund its anticipated working
capital, capital expenditure and debt payment requirements through fiscal 1997.
Because the Company's capital requirements cannot be predicted with certainty,
however, there is no assurance that the Company will not require additional
financing during this period. There is no assurance that any additional
financing will be available on terms satisfactory to the Company or not
disadvantageous to the Company's securityholders, including those purchasing
securities in the Offerings.
27
<PAGE> 29
BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, without limitation, those set forth under
"Risk Factors" and elsewhere in this Prospectus.
GENERAL
Hadco is the largest manufacturer of advanced electronic interconnect
products in North America. The Company offers a wide array of sophisticated
manufacturing, engineering and systems integration services to meet its
customers' electronic interconnect needs. The Company's principal products are
complex multilayer rigid printed circuits and backplane assemblies. Hadco's
largest customers include many of the leading and fastest growing companies in
the electronics industry, such as Cabletron Systems, Cisco Systems, Intel,
Solectron, Sun Microsystems and U.S. Robotics.
Hadco's advanced manufacturing and assembly facilities are designed to meet
the accelerated time-to-market and time-to-volume requirements of its customers
whose markets and products are characterized by high growth rates, rapid
technological advances and short product life-cycles. To this end, Hadco
(including Zycon) has invested approximately $235 million in state-of-the-art
production facilities and new technologies during the past five fiscal years.
Hadco provides customers with a range of products and services that includes
development, design, quick-turn prototype, pre-production, volume production and
backplane assembly. Hadco is one of a small number of printed circuit
manufacturers with the technology and advanced production facilities necessary
to offer all of these services. The Company believes its combination of a broad
product offering and advanced technology facilitates long-term relationships
with existing customers, attracts new customers, helps customers meet their
time-to-market and time-to-volume needs, and satisfies a larger share of
customers' electronic interconnect requirements.
Hadco's customers are a diverse group of electronics OEMs and contract
manufacturers in the computing (mainly workstations, servers, mainframes,
storage and notebooks), data communications/telecommunications and industrial
automation industries, including process controls, automotive, medical and
instrumentation. Hadco (including Zycon) supplied its products and services to a
diverse base of approximately 500 customers in fiscal 1996, including 77
customers with purchases in excess of $1 million. The Company's ten largest
customers accounted for approximately 43% of net sales in fiscal 1996 on a pro
forma basis including Zycon.
Hadco acquired Zycon on January 10, 1997. This acquisition increased
Hadco's net sales significantly, added approximately 600,000 square feet of
manufacturing space (approximately a 100% increase) and substantially expanded
the Company's manufacturing capabilities and geographic reach. The new
manufacturing capabilities include state-of-the-art West Coast facilities for
volume production of complex printed circuits and backplane assemblies, a
quick-turn prototype and design facility on the East Coast, and a newly
constructed facility for volume production in Malaysia. The acquisition of Zycon
has also broadened the Company's customer base, expanded its involvement in many
fast growing industry sectors, added new proprietary technologies, and increased
its sales force.
INDUSTRY OVERVIEW AND TRENDS
Printed circuits are the basic platforms used to interconnect
microprocessors, integrated circuits and other components essential to the
functioning of electronic products. Printed circuits consist of a pattern of
electrical traces etched from copper laminated on an insulated base that is
typically composed of rigid fiberglass or thin flexible circuits. To meet the
increasing requirements of OEMs and contract manufacturers, printed circuit
manufacturers have developed more complex multilayer designs with surface mount
and other attachment technologies, narrower widths and separations of copper
traces, advanced materials, and smaller diameters of vias and through-holes to
connect internal circuitry. Backplane assemblies are generally larger and
thicker printed circuits on which connectors
28
<PAGE> 30
are mounted to receive and interconnect printed circuits, integrated circuits
and other electronic components.
Electronic interconnect products are customized for specific electronic
applications and are sold to OEMs and contract manufacturers in volumes that
range from several units for prototypes and small quantities for pre-production
to large quantities for volume production. In the 1980s, the electronic
interconnect market was largely comprised of military and personal computer
applications. However, the proliferation of electronics and the emergence of new
technologies have significantly broadened this market and reduced the amplitude
of interconnect industry cycles in the 1990s. Electronic interconnects such as
rigid printed circuits, flexible circuits and backplane assemblies are now used
in a wide variety of industries and products, including data
communications/telecommunications, workstations, servers, personal computers,
peripherals, industrial automation, instrumentation, medical, transportation and
defense.
As electronic products have become smaller and more complex, the
manufacture of interconnect products has required increasingly sophisticated
engineering and manufacturing expertise and substantial capital investment.
These advanced manufacturing process and technology requirements have caused
OEMs to rely more heavily on independent manufacturers and to reduce dependence
on their internal captive facilities. Industry sources estimate that 85% of the
domestic printed circuit market was served by independent manufacturers in 1996
(compared to 66% in 1991). Captive manufacturing facilities serve the remaining
15% of the market. Historically, electronics OEMs used independent printed
circuit manufacturers as offload capacity for their captive facilities. During
economic downturns, independent facilities lost production orders as captives
produced a greater percentage of demand internally. However, as a result of
outsourcing of OEM printed circuit production, the Company believes independents
are less affected by unused captive capacity during market downturns than was
previously the case.
Industry sources estimate that in 1996 the world-wide market for rigid
printed circuits was approximately $28.2 billion, and the domestic market for
rigid printed circuits was approximately $7.1 billion. In addition, industry
sources estimate that the market for more complex multilayer printed circuits
(six layers and above) comprised approximately 45% of the total market in 1996,
and has increased an average of 16% per year over the past two years. Despite
its large size, the market for printed circuits remains highly fragmented. The
Company believes that 9 North American rigid printed circuit manufacturers had
annual sales in excess of $100 million in 1996, which together would represent
approximately 32% of the rigid printed circuit market.
According to industry sources, the domestic market for backplane assemblies
was approximately $1.1 billion in 1995. This market is less fragmented than that
of printed circuits. The Company estimates that the ten largest producers of
backplane assemblies accounted for a majority of the backplane assembly
production in 1996. As in the printed circuit market, OEMs have increasingly
come to rely on independent producers of backplane assemblies, allowing OEMs to
reduce their capital investments, improve inventory management and purchasing
power and take advantage of the process technology expertise of manufacturing
specialists.
The Company considers the following trends important in understanding the
electronic interconnect industry:
Industry Consolidation. The Company believes the industry will continue to
consolidate as a result of the substantial capital investment for advanced
production facilities, engineering and manufacturing expertise and technology
required to make increasingly sophisticated electronic interconnect products.
The increased investment requirement for state-of-the-art production facilities
has accelerated consolidation in the electronic interconnect industry and the
exit of smaller companies. In addition, OEMs and contract manufacturers
increasingly recognize that only a few suppliers of interconnect products can
consistently provide timely delivery of required volumes of highly sophisticated
electronic interconnect products. As a result, Hadco believes that companies
with lesser
29
<PAGE> 31
financial and technical resources are likely to exit the industry and larger
interconnect companies with sufficient resources will continue to gain market
share.
Increasing Demand for Single Sourcing. To avoid delays and costs during
the product life-cycle, OEMs are increasingly turning to suppliers capable of
producing electronic interconnect products from development, design, quick-turn
prototype and pre-production through volume production and backplane assembly.
The accelerated time-to-market and time-to-volume needs of OEMs have resulted in
increased collaboration with qualified suppliers capable of providing a broad
and integrated offering. To meet their rapidly changing electronic interconnect
requirements, many OEMs have moved to limit their vendor base to a smaller
number of technically qualified suppliers capable of providing both quick-turn
prototype and pre-production quantities as well as cost-competitive volume
production quantities.
New and Emerging Markets. The markets for electronic products are growing
as a result of new product introductions, technological change, demands for a
wider variety of electronic product features, and increasingly powerful and less
expensive electronic components. New markets have emerged in computing, data
communications/telecommunications and multimedia. Moreover, existing industries
have significantly expanded applications in areas such as computer networking
and peripherals, digital and mobile communications, video-on-demand, the
Internet/World Wide Web, instrumentation and industrial controls. The Company
believes these new and emerging electronic product markets and applications have
also contributed to the reduction in the amplitude of the electronic
interconnect industry cycles.
Greater Demand for Complex Electronic Products. Advanced communication
equipment, as well as next-generation computer chips and microprocessors,
require interconnect systems that operate at greater speeds and higher
frequencies with minimal signal loss and distortion. Further, electronics OEMs
are designing more compact and portable high performance products. The
complexity of these new products requires higher performance, smaller size,
greater circuit and component density, and increased reliability. These
requirements necessitate greater sophistication in printed circuit manufacturing
and process technologies, including advanced materials, more layers, narrower
line widths and spacing, smaller vias to connect internal circuitry, and more
precise positioning of traces and pads to accommodate a greater density of
surface mount components. These products require increasingly advanced packaging
technologies, such as Multichip Module (MCM), Tape Automated Bonding (TAB),
Direct Chip Attach (DCA) and Ball Grid Array (BGA), and high frequency
materials. The trend toward increasingly sophisticated products also requires
greater engineering support and investment in manufacturing and process
technology for suppliers to produce high-quality electronic interconnect
products on-time, in volume, and at acceptable cost.
Shorter Product Life-Cycles for Electronic Products. Rapid changes in
technology have significantly shortened the life-cycle of complex electronic
products and placed increased pressure on OEMs to develop new products as
quickly as possible. The time-to-market considerations of OEMs have increased
emphasis on the engineering and quick-turn production of small unit volumes of
electronic interconnects in the prototype development stage. In addition, the
success of first-to-market products has heightened the emphasis on volume
manufacturing expertise and technologically advanced manufacturing
infrastructure.
THE HADCO STRATEGY
The Company's strategy is to increase sales and profitability by providing
a wide range of electronic interconnect solutions and services to a broad and
diversified customer base. Hadco assists customers in meeting their
time-to-market and time-to-volume requirements by providing a broad and
integrated offering (from development, design, quick-turn prototype and
pre-production through volume production and backplane assembly). The Company
believes this integrated offering gives it an important competitive advantage.
30
<PAGE> 32
The Company's strategy is to capitalize on major industry trends as
follows:
Serve Diversified Customer Base in High Growth Segments. The Company
concentrates its marketing efforts on OEMs and contract manufacturers in
segments of the electronics market characterized by high growth, rapid
technological advances, short product development cycles and accelerated
time-to-market and time-to-volume requirements, such as the computing (mainly
workstations, servers, mainframes, storage and notebooks), data
communications/telecommunications and industrial automation industries,
including process controls, automotive, medical and instrumentation. Hadco
(including Zycon) supplied its products and services to a diverse base of
approximately 500 customers in fiscal 1996, including 77 customers with
purchases in excess of $1 million. The Company's ten largest customers accounted
for approximately 43% of net sales in fiscal 1996 on a pro forma basis including
Zycon.
Provide a Broad and Integrated Offering. Hadco develops and maintains
long-term customer relationships by providing a full range of integrated
services, from development, design, quick-turn prototype and pre-production
through volume production and backplane assembly. The Company believes its broad
range of integrated services adds significant value to its customers by
shortening their new product development cycles, helping them to meet their
time-to-market and time-to-volume requirements, lowering manufacturing costs,
and providing concentrated expertise. By offering development and design
services, the Company also gains early access to volume production sales
opportunities, and its relationships with volume production customers create
additional quick-turn and development and design sales opportunities.
Expand Backplane Assembly Operations. To extend its integrated offering,
the Company expanded backplane assembly operations. The Company believes this
investment will facilitate a broader range of manufacturing services, reduce
customer costs and improve product quality. With this backplane assembly
expansion, the Company intends to position itself to capture an increasing share
of the interconnect requirements of its customers.
Maintain High Levels of Investment. Hadco believes its financial strength
allows it to maintain leadership positions in advanced materials, process
technologies and packaging through both its development activities and
acquisitions. The Company (including Zycon) has invested approximately $235
million in state-of-the-art production facilities and new technologies during
the past five fiscal years. These investments have increased capacity and
operating efficiencies, improved management control and provided more consistent
product quality. As a result, the Company believes it has become one of the few
interconnect manufacturers capable of satisfying volume production,
time-to-market, time-to-volume, and technology requirements of customers in the
electronic interconnect industry.
Develop Advanced Manufacturing and Process Technologies. The Company is
committed to being a leader in the manufacture of advanced materials and the
development of sophisticated process technologies in the electronic interconnect
industry. The Company has invested in leading process technologies that enable
it to cost-effectively produce high quality and technologically advanced
products, thereby attracting fast growing technology customers. The Company
believes its manufacturing and process capabilities provide a competitive
advantage in the manufacture of complex interconnect products.
Increase Geographic Reach. Hadco believes it is the only independent North
American printed circuit manufacturer with a full service offering of quick-turn
and volume printed circuit manufacturing and backplane assembly on both the East
and West Coasts. In addition, its volume production facility in Malaysia, which
recently commenced operations, is intended to provide the Company with access to
U.S. customers expanding into Asian markets. The Company also intends to broaden
its European and other international sales.
Pursue Strategic Acquisitions. The January 1997 acquisition of Zycon
provided Hadco with state-of-the-art volume printed circuit manufacturing and
backplane assembly facilities on the West Coast, a new volume production
facility in Malaysia, a quick-turn prototype and design facility on the East
31
<PAGE> 33
Coast, a broader customer base, new proprietary technologies, and additional
sales personnel. The Company will consider other strategic acquisitions of
companies and technologies that enhance its competitive position.
PRODUCTS AND SERVICES
The Company's products and services are designed to meet its customers'
interconnect needs for complex multilayer printed circuits and backplane
assemblies. Hadco offers complementary processes and capabilities that span the
period from product conception through delivery of volume products. The
Company's offering includes the following:
Development. Through development groups located at various facilities,
Hadco identifies, develops and markets new technologies that benefit its
customers. These development groups work closely with customers during all
stages of product life-cycles. For instance, process design changes and
refinements required for volume production are identified and implemented prior
to production. The development groups also focus on the special requirements of
the Company's customers, including increasing printed circuit densities,
electronic packaging and advanced materials and products. When appropriate, the
development groups have coordinated the acquisition of technology licenses,
filed patent disclosures and applications, and registered trademarks on behalf
of the Company.
Design. The Company provides design and engineering assistance in the
early stages of product development which assures both mechanical and electrical
considerations are integrated to achieve a high quality and cost effective
product. The Company also evaluates customer designs for manufacturability and,
when appropriate, recommends design changes to reduce manufacturing costs or
lead times or to increase manufacturing yields or the quality of finished
printed circuits. The Company believes that this long-term view of manufacturing
and customer relationships distinguishes the Company from many manufacturers
which compete primarily in the quick-turn market. By working closely with its
customers, the Company also gains a better understanding of the future
requirements of OEMs. This cooperative process shortens the time in transition
from the development of the prototype design to volume manufacturing and
facilitates the delivery of high quality products to customer premises in a
timely fashion.
Quick-Turn Prototype. Prototypes typically require lead times of three to
seven days, and as short as 24 hours. The Company provides quick-turn prototype
services to the product development groups of customers that require small test
quantities. Hadco offers these services through its Tech Centers in
Massachusetts, New Hampshire and California. Prototype development at these
Centers has included multilayer printed circuits of up to 38 layers, embedded
discrete components, Multichip Modules (MCM), Single Chip Carriers (SCC), planar
magnetics, advanced surface finishes, and various high performance substrates
for the high frequency microwave market. The Tech Centers also support advanced
attachment technologies such as Tape Automated Bonding (TAB) and Direct Chip
Attach (DCA). In combining the design of a printed circuit with the manufacture
of the prototype, Hadco can reduce the length of the design/manufacture cycle.
By working closely with customers at the design and prototype stage, the Company
believes it strengthens long-term relationships with its customers and gains an
advantage in securing a preferred vendor status when customers begin volume
production.
Pre-Production. Pre-production is the manufacture of limited quantities of
electronic interconnects during the transition period from prototype to volume
production. Pre-production generally requires quick-turn delivery to accommodate
time-to-volume pressures or as a temporary solution for unforeseen customer
demands. Pre-production is done in the Tech Centers and in volume production
facilities.
Volume Production. Volume production is characterized by longer lead times
and increased emphasis on lower cost as the product moves to full-scale
commercial production. As customers increasingly demand a quick transition from
prototype to volume production, few independent manufacturers can provide
complex printed circuits of 18 or more layers in the volume provided by
32
<PAGE> 34
Hadco's larger facilities. During 1996, the Tech Centers transitioned chip
attachment technologies such as Ball Grid Array (BGA), Tape Automated Bonding
(TAB) and Direct Chip Attach (DCA), and other technologies including Multichip
Module (MCM) and Single Chip Carriers (SCC) to volume production. The Company
operates five facilities located in California, New York, New Hampshire and
Malaysia for medium and high-volume printed circuit production.
Backplane Assembly. Backplane assemblies are generally larger and thicker
printed circuits on which connectors are mounted to interconnect printed
circuits, integrated circuits and other electronic components. Hadco
incorporates its own printed circuits in backplane assemblies to provide
customers with a high level of printed circuit technology on a quick-turn and
volume basis. Net sales of backplane assemblies accounted for 6%, 7% and 17% of
total Company net sales during fiscal 1994, 1995 and 1996, respectively, and for
10% on a pro forma basis including Zycon during fiscal 1996. With its backplane
assembly operations, Hadco is one of a few companies that provides its customers
with the strategic advantage of an integrated offering to meet their needs from
development and design through volume production and backplane assembly.
The Company's advanced process capabilities enhance each of the above
services and include:
Manufacture of High Performance Printed Circuits. The Company produces
technologically advanced printed circuits primarily for the high performance
market at the Tech Centers and its volume production facilities. These printed
circuits, used principally in the data communications and telecommunications
industries, are designed to function in high temperature environments and at
higher frequencies. Materials used by the Company for these products include
Teflon(R), cyanate ester, GETEK(R), liquid crystal polymers, polymides, and
bismaleimide triazine epoxies.
Development of Emerging Technologies. The Company undertakes projects to
develop advanced or improved processes, materials and product lines. Buried
Capacitance(TM) and buried resistance are advanced materials being developed by
the Company to provide improved electrical performance and greater interconnect
densities. Sales of Buried Capacitance(TM) products by the Company (including
Zycon) in fiscal 1996 totaled $24.0 million, and the Company believes that
buried resistance materials (ResistAIR(TM)) may generate additional future
revenue. In addition, the Company is developing the MicroPath(TM) family of
micro via processes, which include liquid imaging, dry film imaging, plasma
etching, and laser drilling. Micro vias provide a significant increase in
printed circuit density. During fiscal 1996, the Company also began to produce
rigid flex printed circuit products utilizing licensed HVRFlex(TM) technology.
These products enable customers to fold a printed circuit and reduce the need
for cable connectors in the portable computer and telecommunications markets.
See "-- Manufacturing and Facilities."
33
<PAGE> 35
MARKETS AND CUSTOMERS
Hadco's customers are a diverse group of OEMs and contract manufacturers in
the computing (mainly workstations, servers, mainframes, storage and notebooks),
data communications/telecommunications and industrial automation industries,
including process controls, automotive, medical and instrumentation. The
following table shows, for the periods indicated, the Company's net sales and
percentage of its net sales to the principal end-user markets it serves. Except
for the information under the column "Fiscal Year Ended October 26, 1996 (Pro
Forma)," the information reflected in the table does not include Zycon.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED,
-------------------------------------------------------------------------
OCTOBER 29, OCTOBER 28, OCTOBER 26, OCTOBER 26,
MARKETS 1994 1995 1996 1996
- ------- -------------- ---------------- -------------- --------------
Pro Forma
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Computing................. $ 79.8 36% $ 84.9 32% $119.2 34% $148.3 26%
Contract Assembly......... 46.5 21 69.0 26 112.2 32 193.9 34
Data Communications/
Telecommunications...... 82.0 37 90.2 34 94.7 27 193.9 34
Industrial Automation..... 11.1 5 15.9 6 17.5 5 28.5 5
Other..................... 2.2 1 5.2 2 7.1 2 5.8 1
------ --- ------ --- ------ --- ------ ---
Total Net Sales........... $221.6 100% $265.2 100% $350.7 100% $570.4 100%
====== === ====== === ====== === ====== ===
</TABLE>
The Company (including Zycon) supplied its products and services to a
diverse base of approximately 500 customers in fiscal 1996, including 77
customers with purchases in excess of $1 million. The Company attempts to market
its products to customers who currently have, or have the potential to achieve,
significant market share in their respective industries. The following list sets
forth the Company's largest customers during fiscal 1996:
<TABLE>
<S> <C>
Bay Networks SCI Systems
Cabletron Systems Solectron
Cisco Systems Storage Technology
Compaq Computer Sun Microsystems
Jabil Circuits U.S. Robotics
</TABLE>
During fiscal 1994, 1995 and 1996, no customer accounted for more than 7%,
7% and 15%, respectively, of Hadco's net sales and the Company's ten largest
customers together accounted for approximately 48%, 46% and 48%, respectively,
during the same periods, and 43% in fiscal 1996 on a pro forma basis including
Zycon. In fiscal 1996, one customer, Sun Microsystems, accounted for
approximately 10% of the net sales of the Company (including Zycon).
The Company generally does not obtain long-term purchase orders or
commitments from its customers, and the orders received by the Company generally
require delivery within 90 days. However, many of the Company's customers have
maintained long-term purchasing relationships with the Company. For example, in
1996 the top ten customers of Hadco (not including Zycon) had purchasing
relationships with the Company ranging from four to 15 years.
SALES AND MARKETING
The Company markets its products through its own sales and marketing
organization and independent manufacturers' representatives. As of January 25,
1997, the Company employed 112 sales and marketing employees, of which 55 are
direct sales representatives at eight locations. The Company is also represented
by 17 independent manufacturers' representatives at 28 locations in North
America, Europe, Mexico, Asia, Australia and the Middle East. Regional direct
sales offices are located in the
34
<PAGE> 36
states of Arizona, California, Colorado, Georgia, Minnesota, New Hampshire,
North Carolina, Pennsylvania, Texas and the Province of Ontario, Canada. The
Company's sales organization is divided into four territories, and each direct
sales representative and each manufacturer's representative works within one of
the four territories. Each territory also has a support staff of sales engineers
and technical service personnel responsible for technical liaison and problem
solving, development of product and market opportunities, market research and
marketing communications.
The Company focuses on developing close relationships with customers
beginning at the earliest development and design phases and continuing
throughout all stages of product production. The Company's Advanced Packaging
Development Group identifies, develops and markets new technologies that benefit
its customers and is intended to position the Company as an important source for
these solutions. This group also assists marketing efforts by hosting the
Regional Technology Symposiums at which the Company's technical capabilities are
presented to, and industry technical trends are discussed with, customers of the
Company. These Symposiums attract engineers and designers from electronics OEMs
and facilitate an interactive discussion of the latest technologies in the
manufacture of complex printed circuits.
MANUFACTURING AND FACILITIES
The need for high volume production of dense multilayer printed circuits
has transformed the electronic interconnect industry into one that increasingly
requires complex manufacturing processes and necessitates high levels of
investment in facilities, advanced materials, production processes and product
design capabilities. The Company has invested in production technology to
manufacture large volumes of dense multilayer printed circuits utilizing
advanced attachment strategies such as Surface Mount Technology (SMT), Tape
Automated Bonding (TAB) and Ball Grid Array (BGA). The Company employs numerous
advanced manufacturing techniques and systems, including Computer Aided
Manufacturing (CAM) systems, Computer Integrated Manufacturing (CIM) systems,
computer controlled drilling and routing, dry-film imaging, multi-purpose metals
plating, high volume surface coating, dual-access electrical testing, automated
optical inspection, high-volume photoimageable solder mask processing, and
computer controlled high-volume lamination systems. These techniques enable
Hadco to manufacture complex printed circuits of consistent quality, in high
volume and on a timely basis. All of the Company's North American production
facilities are ISO9002 certified. See "-- Products and Services."
Hadco is able to provide a broad and integrated offering through a focused
manufacturing strategy for each facility. The Company manufactures its products
in ten facilities, consisting of five volume production facilities (in
California, New Hampshire, New York and Malaysia), two backplane assembly
facilities (in California and New Hampshire) and three quick-turn prototype
facilities (in Massachusetts, New Hampshire and California). The production
expertise of some facilities overlap, enabling Hadco to allocate production
based on product type and available capacity. Each facility can focus on
particular product types and respond quickly to customers' specific
requirements.
Hadco has pursued a strategy of expanding the capacity and geographic scope
of its manufacturing facilities to better serve high growth segments of the
electronics industry in key geographic markets. With the acquisition of Zycon,
the Company added a 310,000 square foot volume production facility in
California, a 180,000 square foot volume production facility in Malaysia, a
71,000 square foot quick-turn prototype facility in Massachusetts, and a 29,000
square foot backplane assembly facility in California expected to begin
operations in the first half of calendar 1997. During fiscal 1996, the Company
also expanded its backplane assembly facility from 40,000 to 60,000 square feet,
and added two additional SMT lines, in-circuit testing capability, and numerous
pieces of assembly equipment.
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<PAGE> 37
In total, the Company leases or owns approximately 1.2 million square feet
of manufacturing space. The Company's significant facilities are as follows:
<TABLE>
<CAPTION>
FUNCTION LOCATION SQUARE FEET
- -------- -------- -----------
<S> <C> <C>
Volume Production........................................... Santa Clara and
San Jose, CA 310,000
Owego, NY 282,000*
Derry, NH 199,000
Kuching, Malaysia 180,000
Hudson, NH 52,000
Quick-Turn Prototype........................................ Haverhill, MA 71,000
Watsonville, CA 35,000
Salem, NH 27,000
Backplane Assembly.......................................... Salem, NH 60,000
Santa Clara, CA 29,000**
Administrative.............................................. Salem, NH 35,000
Santa Clara, CA 29,000**
</TABLE>
- ------------
* 27,200 feet of which is under renovation
** Under construction
The Company owns its volume production facilities in Owego, New York and
Derry, New Hampshire. The Company leases its volume production and backplane
assembly facilities in Santa Clara and San Jose, California, which are located
in four adjacent buildings; the leases for these four buildings expire in March
2009 and contain options to extend for up to two additional periods of five
years each. The Company completed construction in calendar 1996 of its volume
production facility in Kuching, Malaysia and leases the land on which this
facility is located for a period of 60 years, expiring in November 2055. The
Hudson, New Hampshire operations are located in two separate buildings, and
their leases expire in December 1997 with options to extend until December 2000.
Leases for the Company's quick-turn prototype facility in Haverhill,
Massachusetts expire in December 2003, with options on two of the leases to
extend for an additional five years and options on the third lease to extend for
an additional ten years. The lease for the Watsonville, California quick-turn
prototype facility expires in December 1999. The lease for the quick-turn
prototype facility in Salem, New Hampshire expires in May 1999, with an option
to extend until May 2004.
The lease for the backplane assembly facility in Salem, New Hampshire
expires in March 2000, with options to extend until March 2006. The leases for
the Santa Clara, California buildings include the 29,000 square feet of
backplane assembly operations.
The administrative and corporate offices in Salem, New Hampshire are
located in two separate buildings, which are covered by leases that expire in
October 2000, with options to extend until October 2006. The leases for the
Santa Clara, California buildings include the 29,000 square feet of
administrative space.
The Company also owns approximately six acres of land in Salem, New
Hampshire, approximately five acres of land in Derry, New Hampshire, and
approximately ten acres of land in Owego, New York.
In fiscal 1996, the Company's capital expenditures relating to its
environmental control facilities and equipment totaled approximately $1 million.
The Company estimates that it will make capital expenditures with respect to its
environmental control facilities and equipment of approximately $1.8 million and
$700,000 in fiscal 1997 and 1998, respectively.
SUPPLIER RELATIONSHIPS
Historically, the majority of raw materials used in the Company's
manufacture of printed circuits and components used in backplane assemblies have
been readily available. However, product changes and the overall demand for
electronic interconnect products could increase the industry's use of new
36
<PAGE> 38
laminate materials, standard laminate materials, multilayer blanks, electronic
components and other materials, and therefore such materials may not be readily
available to the Company in the future. Zycon has experienced shortages of
certain types of raw materials in the past. There can be no assurance that
shortages of certain types of raw materials or components will not occur in the
future. To date, material shortages or price fluctuations have not had a
materially adverse effect on the Company, but there can be no assurance that
material shortages or price fluctuations will not have a material adverse effect
on the Company in the future.
The Company works with its suppliers to develop just-in-time supply systems
which reduce inventory carrying costs. The Company also maintains a Supplier
Certification Program which evaluates potential vendors on the basis of such
factors as quality, on-time delivery, cost, technical capability, and potential
technical advancement. Certification is based on both actual performance and
audits of vendors' manufacturing sites. Key suppliers are reviewed quarterly to
preserve strong relationships with these suppliers and maintain regular dialogue
on quality, cost and technical advancement issues. Many suppliers attend the
Company's Supplier Symposium, where the Company's goals and objectives are
discussed with vendors.
COMPETITION
The electronic interconnect industry is highly fragmented and characterized
by intense competition. The Company believes that its major competitors are the
large U.S. and international independent and captive producers that also
manufacture multilayer printed circuits and provide backplane and other
electronic assemblies. Some of these competitors have significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than the Company. In addition, these competitors
may have the ability to respond more quickly to new or emerging technologies,
may adapt more quickly to changes in customer requirements and may devote
greater resources to the development, promotion and sale of their products than
the Company.
During periods of recession or economic slowdown in the electronics
industry and other periods when excess capacity exists, electronics OEMs become
more price sensitive, which could have a material adverse effect on interconnect
pricing. In addition, the Company believes that price competition from printed
circuit manufacturers in Asia and other locations with lower production costs
may play an increasing role in the printed circuit markets in which the Company
competes. The Company's basic interconnect technology is generally not subject
to significant proprietary protection, and companies with significant resources
or international operations may enter the market. Increased competition could
result in price reductions, reduced margins or loss of market share, any of
which could materially adversely affect the Company's business, financial
condition and results of operations.
The demand for printed circuits has continued to be affected by the
development of smaller, more powerful electronic components requiring less
printed circuit area. Expansion of the Company's existing products or services
could expose the Company to new competition. Moreover, new developments in the
electronics industry could render existing technology obsolete or less
competitive and could potentially introduce new competition into the industry.
There can be no assurance that the Company will continue to compete successfully
against present and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on the Company's business,
financial condition and results of operations.
Hadco competes on the basis of product quality, timeliness of delivery,
price, customer technical support and its integrated offering, from development
and design through volume production and backplane assembly.
PRODUCT PROTECTION
The Company has obtained four United States and one foreign patent with
respect to its buried capacitance technology. Although Hadco seeks to protect
certain proprietary technology and other intangible assets through patents and
trademark filings, it has relatively few patents and relies primarily
37
<PAGE> 39
on trade secret protection. There can be no assurance that the Company will be
able to protect its trade secrets or that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets. The future success of the Company
will depend on the continued development of processes and capabilities. The
Company believes that its accumulated experience with respect to materials and
process technology is also important to its operations.
RELEASED BACKLOG
The Company's released backlog as of January 25, 1997 was $129.1 million
(including Zycon), compared with $96.9 million (excluding Zycon) as of January
27, 1996. The Company anticipates delivering approximately 90% of its released
backlog during its second quarter of fiscal 1997. Released backlog consists of
orders for which artwork has been received, a delivery date has been scheduled
and the Company anticipates it will manufacture and deliver the order.
Cancellation and postponement charges, to the extent they exist with respect to
released backlog, generally vary depending upon the time of cancellation or
postponement, and a significant portion of the Company's released backlog at any
time may be subject to cancellation or postponement without penalty. Variations
in the size, timing and delivery schedules of purchase orders received by the
Company, as well as changes in customers' delivery requirements, may result in
substantial fluctuations in released backlog from period to period. Accordingly,
the Company believes that released backlog is not a meaningful indicator of
future quarterly or annual financial results.
EMPLOYEES
As of January 25, 1997, the Company had 5,410 employees, compared to 2,487
employees as of January 27, 1996. The employees are not represented by a union,
and the Company has never experienced any labor problems resulting in a work
stoppage.
ENVIRONMENTAL MATTERS
The Company is required to comply with all federal, state, county and
municipal regulations regarding protection of the environment. There can be no
assurance that more stringent environmental laws will not be adopted in the
future and, if adopted, the costs of compliance with more stringent
environmental laws could be substantial. Waste treatment and disposal are major
considerations for printed circuit manufacturers. The Company uses chemicals in
the manufacture of its products that are classified by the Environmental
Protection Agency (EPA) as hazardous substances. The Company is aware of certain
chemicals that exist in the ground at certain of its facilities. The Company has
notified various governmental agencies and continues to work with them to
monitor and resolve these matters. During March 1995, the Company received a
Record Of Decision (ROD) from the New York State Department of Environmental
Conservation (NYSDEC), regarding soil and groundwater contamination at its
Owego, New York facility. Based on a Remedial Investigation and Feasibility
Study (RIFS) for apparent on-site contamination at that facility and a Focused
Feasibility Study (FFS), each prepared by environmental consultants of the
Company, the NYSDEC has approved a remediation program of groundwater withdrawal
and treatment and iterative soil flushing. The Company recently executed a
Modification of the Order on Consent to implement the approved ROD. The cost,
based upon the FFS, to implement this remediation is estimated to be $4.6
million, and is expected to be expended as follows: $260,000 for capital
equipment and $4.3 million for operation and maintenance costs which will be
incurred and expended over the estimated life of the program of 30 years. NYSDEC
has requested that the Company consider taking additional samples from a wetland
area near the Company's Owego facility. Analytical reports of earlier sediment
samples indicated the presence of certain inorganics. There can be no assurance
that the Company and/or other third parties will not be required to conduct
additional investigations and remediation at that location, the costs of which
are currently indeterminable due to the numerous variables described in the
fifth paragraph of this "-- Environmental Matters" section.
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<PAGE> 40
From 1974 to 1980, the Company operated a printed circuit manufacturing
facility in Florida as a lessee of property that is now the subject of a pending
lawsuit ("the Florida Lawsuit") and investigation by the Florida Department of
Environmental Protection (FDEP). On June 9, 1992, the Company entered into a
Cooperating Parties Agreement in which it and Gould, Inc., another prior lessee
of the site have agreed to fund certain assessment and feasibility study
activities at the site, and an environmental consultant has been retained to
perform such activities. The cost of such activities is not expected to be
material to the Company. In addition to the Cooperating Parties Agreement, Hadco
and others are participating in alternative dispute resolution regarding the
site with an independent mediator. In connection with the mediation, in February
1992 the FDEP presented computer-generated estimates of remedial costs, for
activities expected to be spread over a number of years, that ranged from
approximately $3.3 million to $9.7 million. Mediation sessions were conducted in
March 1992 but have been suspended during the ongoing assessment and feasibility
activities. Management believes it is likely that it will participate in
implementing a continuing remedial program for the site, the costs of which are
currently unknown. In June 1995, Hadco was named a third-party defendant in the
Florida Lawsuit. See "-- Legal Proceedings."
The Company has commenced the operation of a groundwater extraction system
at its Derry, New Hampshire facility to address certain groundwater
contamination and groundwater migration control issues. Because of the
uncertainty regarding both the quantity of contaminants beneath the building at
the site and the long-term effectiveness of the groundwater migration control
system the Company has installed, it is not possible to make a reliable estimate
of the length of time remedial activity will have to be performed. However, it
is anticipated that the groundwater extraction system will be operated for at
least 30 years. There can be no assurance that the Company will not be required
to conduct additional investigations and remediation relating to the Derry
facility. The total costs of such groundwater extraction system and of
conducting any additional investigations and remediation relating to the Derry
facility are not fully determinable due to the numerous variables described in
the fifth paragraph of this "-- Environmental Matters" section.
The City of Santa Clara has adopted an ordinance that, as of April 1, 1997,
significantly reduces the amount of waste, including copper and nickel, that
companies such as the Company may discharge into the city sanitary sewer. The
new ordinance provides for substantial penalties for intentional or negligent
violations. These penalties include fines ranging from $10,000 to $50,000 per
day, revocation of required business permits, the issuance of a cease and desist
order and, under certain circumstances, up to nine months imprisonment. Under
the new ordinance, the Company is subject to stringent requirements on the
amount of water it can discharge and is required to substantially reduce the
concentrations of certain chemicals, including copper and nickel, which it
currently discharges. Under the new ordinance, the concentration limit for
Hadco's copper discharge is reduced from 2.70 milligrams per liter to 1.02
milligrams per liter, and the concentration limit for Hadco's nickel discharge
is reduced from 2.60 milligrams per liter to 0.02 milligrams per liter. The
Company believes it is currently in compliance with the new copper discharge
limit which became effective April 1, 1997. On March 31, 1997, the San
Jose/Santa Clara Water Pollution Control Plant (the "SJ/SC POTW") issued a new
compliance schedule for the Company with respect to the nickel discharge limit,
in part to allow the Company to complete a new Mass Audit Study for nickel. The
new compliance date is July 31, 1997, and the Company anticipates filing the
updated Mass Audit Study with the SJ/SC POTW by May 31, 1997. Management
believes the Company will be in compliance as of July 31, 1997 through the
implementation of additional changes in technology and raw materials and/or as a
result of the SJ/SC POTW's reconsideration and upward revision of the Company's
nickel discharge limit following completion of the new Mass Audit Study.
However, there can be no assurances that the Company will be able to so comply
or that the costs of complying will not exceed the Company's current estimate.
The Company estimates that the total equipment cost of complying with the new
ordinance will be between $220,000 and $320,000. In addition, the Company
anticipates an annual cost of approximately $110,000 to dispose of spent
electroless nickel plating baths off-site.
39
<PAGE> 41
The Company accrues estimated costs associated with known environmental
matters, when such costs can be reasonably estimated. The cost estimates
relating to future environmental clean-up are subject to numerous variables, the
effects of which can be difficult to measure, including the stage of the
environmental investigations, the nature of potential remedies, possible joint
and several liability, the magnitude of possible contamination, the difficulty
of determining future liability, the time over which remediation might occur,
and the possible effects of changing laws and regulations.
Management believes the ultimate disposition of above known environmental
matters described in this "-- Environmental Matters" section will not have a
material adverse effect upon the liquidity, capital resources, business or
consolidated financial position of the Company. However, one or more of such
environmental matters could have a significant negative impact on the Company's
consolidated financial results for a particular reporting period. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and Note 9 of Notes to the Company's Consolidated Financial
Statements.
The Company plans additional capital expenditures during fiscal 1997 to
further reduce air emissions and reduce waste generation. See discussion under
"-- Manufacturing and Facilities" concerning the Company's capital expenditures
relating to environmental control facilities and equipment, and under "-- Legal
Proceedings" relating to lawsuits regarding environmental matters.
LEGAL PROCEEDINGS
The Company is one of 33 entities which have been named as potentially
responsible parties in a lawsuit pending in the federal district court of New
Hampshire concerning environmental conditions at the Auburn Road, Londonderry,
New Hampshire landfill site. Local, state and federal entities and certain other
parties to the litigation seek contribution for past costs, totaling
approximately $20 million, allegedly incurred to assess and remediate the Auburn
Road site. In December 1996, following publication and comment period, the EPA
amended the ROD to change the remedy at the Auburn Road site from active
groundwater remediation to future monitoring. Other parties to the lawsuit also
allege that future monitoring will be required. The Company is contesting
liability, but is participating in mediation with 27 other parties in an effort
to resolve the lawsuit.
In connection with the Florida Lawsuit pending in the Circuit Court for
Broward County, Florida, Hadco and Gould, Inc., another prior lessee of the site
of the printed circuit manufacturing facility in Florida, was each served with a
third-party complaint in June 1995, as third-party defendants in such pending
Florida Lawsuit by a party who had previously been named as a defendant when the
Florida Lawsuit was commenced in 1993 by the FDEP. The Florida Lawsuit seeks
damages relating to environmental pollution and FDEP costs and expenses, civil
penalties, and declaratory and injunctive relief to require the parties to
complete assessment and remediation of soil and groundwater contamination. The
other parties include alleged owners of the property and Fleet Credit
Corporation, a secured lender to a prior lessee of the property. "See
Business -- Environmental Matters."
In March 1993, the EPA notified Zycon of its potential liability for
maintenance and remediation costs in connection with a hazardous waste disposal
facility operated by Casmalia Resources, a California Limited Partnership, in
Santa Barbara County, California. The EPA identified Zycon as one of the 65
generators which had disposed the greatest amounts of materials at the site.
Based on the total tonnage contributed by all generators, Zycon's share is
estimated at approximately 0.2% of the total weight.
The Casmalia site was regulated by the EPA during the period when the
material was accepted. There is no allegation that Zycon violated any law in the
disposal of material at the site, rather the EPA's actions stemmed from the fact
that Casmalia Resources may not have the financial means to implement a closure
plan for the site and because of Zycon's status as a generator of hazardous
waste.
In September 1996, a Consent Decree among the EPA and 48 entities
(including Zycon) acting through the Casmalia Steering Committee (CSC) was
lodged with the United States District Court in
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<PAGE> 42
Los Angeles, California, which must approve the agreement. Although this
approval is pending, work has started under the Consent Decree. The Consent
Decree sets forth the terms and conditions under which the CSC will carry out
work aimed at final closure of the site. Certain closure activities will be
performed by the CSC. Later work will be performed by the CSC, if funded by
other parties. Under the Consent Decree, the settling parties will work with the
EPA to pursue the non-settling parties to ensure they participate in
contributing to the closure and long-term operation and maintenance of the
facility.
The EPA will continue as the lead regulatory agency during the final
closure work. Because long-term maintenance plans for the site will not be
determined for a number of years, it has not yet been decided which regulatory
agency will oversee this phase of the work plan or how the long-term costs will
be funded. However, the agreement provides a mechanism for ensuring that an
appropriate federal, state or local agency will assume regulatory responsibility
for long-term maintenance.
The future costs in connection with the lawsuits described in the preceding
paragraphs are currently indeterminable due to such factors as the unknown
timing and extent of any future remedial actions which may be required, the
extent of any liability of the Company and of other potentially responsible
parties, and the financial resources of the other potentially responsible
parties.
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<PAGE> 43
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ------------------------------------------------------
<S> <C> <C>
Horace H. Irvine II(3).............. 59 Chairman of the Board of Directors
Andrew E. Lietz(3).................. 58 President, Chief Executive Officer and Director
Timothy P. Losik.................... 38 Vice President, Chief Financial Officer and Treasurer
James R. Griffin.................... 46 Vice President
Richard P. Saporito................. 43 Vice President
James C. Hamilton................... 59 Clerk
Lawrence Coolidge(2)(3)............. 60 Director
J. Stanley Hill(1)(2)(4)............ 82 Director
John F. Smith(1)(4)................. 61 Director
Oliver O. Ward(1)(2)................ 61 Director
Patrick Sweeney..................... 61 Director
John E. Pomeroy..................... 55 Director
James C. Taylor..................... 58 Director
</TABLE>
- ------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Nominating Committee.
(4) Member of Stock Option Committee.
Mr. Horace H. Irvine II is a founder of the Company and has been its
Chairman of the Board since the Company was incorporated in 1966, and its Chief
Executive Officer from 1966 until 1986. He was President of the Company from
1966 until 1980 and Treasurer of the Company from 1966 until 1984. He is
Chairman of the Nominating Committee of the Board of Directors.
Mr. Lietz joined the Company in 1984 and has been President and Chief
Executive Officer of the Company since October 1995. From July 1991 to October
1995 Mr. Lietz was the Chief Operating Officer and a Vice President of the
Company. He has been a director of the Company since February 1993. Prior to
joining the Company, Mr. Lietz spent 20 years employed by IBM where he held
various sales, marketing and management positions.
Mr. Losik joined the Company in 1986 and has been the Chief Financial
Officer, Vice President and Treasurer of the Company since March 1994. He was
the Controller of the Company from June 1992 to March 1994 and a Corporate
Accounting Manager from March 1988 to June 1992. Mr. Losik is a certified public
accountant. From 1979 to 1986, Mr. Losik held various positions, including
partner, in public accounting firms.
Mr. Griffin joined the Company in 1979 and has been a Vice President of the
Company since August 1991. He was the Director of Marketing Programs of the
Company from 1989 to 1991.
Mr. Saporito joined the Company in 1987 and has been a Vice President of
the Company since December 1991. He was the Director of Human Resources of the
Company from 1989 to 1991.
Mr. Hamilton has been the Clerk of the Company since 1966. He is a partner
in the law firm of Berlin, Hamilton & Dahmen, LLP, general counsel to the
Company.
Mr. Coolidge has been a director of the Company since 1995. He is Chairman
of the Long-Term Planning and Strategy Committee of the Board of Directors. He
has been the president and a private trustee of Loring, Wolcott & Coolidge
Office, a fiduciary services provider, since 1962. On August 1,
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<PAGE> 44
1994, Mr. Coolidge became an associate of Loring, Wolcott & Coolidge Fiduciary
Advisors, a registered investment advisor.
Mr. Hill has been a director of the Company since 1981. He is Chairman of
the Audit and Stock Option Committees of the Board of Directors. During the past
27 years, he has been president of Digiplan Inc., a private consultant to the
computer users' industry.
Mr. Smith has been a director of the Company since 1995. He has been the
president of MYCOS International, Inc., a property development corporation,
since April 1993, and president of PerSeptive Biosystems, Inc., a biotechnology
company, since July 1996. In April 1993, Mr. Smith retired as Senior Vice
President and Chief Operating Officer of Digital Equipment Corporation, a
computer company, in which capacities he had served since 1991. He began his
career at Digital Equipment Corporation in 1958 and served in various other
senior management positions from 1976 to 1991. Mr. Smith is also a director of
Ansys Corporation, Instron Corporation, PerSeptive Biosystems, Inc. and Sequoia
Systems, Inc.
Mr. Ward has been a director of the Company since 1987. He is Chairman of
the Compensation, Executive and Finance Committees of the Board of Directors. He
was a founder and has served as chairman of the board, chief executive officer
and president of Germanium Power Devices Corp., a manufacturer and marketer of
germanium semiconductors, since 1973.
Mr. Sweeney has been a director of the Company since 1991. He was President
and Chief Executive Officer of the Company from 1991 until October 1995, and
Chief Operating Officer from July 1990 to July 1991. He is currently a
consultant to the Company.
Mr. Pomeroy has been a director of the Company since September 1996. He has
been president and chief executive officer of Dover Technologies, a group of
manufacturing companies and a subsidiary of Dover Corporation, since 1987. Mr.
Pomeroy is also a director of Adept Technologies, Inc.
Mr. Taylor has been a director of the Company since December 1996. He has
been an advisory director at Downer and Company, an investment banking firm,
since 1995. He was a managing director of Burns Fry Limited, an investment
banking firm, from 1988 to 1994.
Directors are elected annually and hold office until the next annual
meeting of stockholders and until their successors are duly elected and
qualified, or until their earlier removal or resignation. Executive officers are
elected to serve at the pleasure of the Board of Directors. There are no family
relationships among any of the directors and executive officers of the Company.
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<PAGE> 45
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's outstanding Common Stock as of January 24,
1997, and as adjusted to reflect the sale of the Common Stock offered hereby, by
(i) each person who is known by the Company to beneficially own more than 5% of
the Company's Common Stock, (ii) each director and executive officer of the
Company, (iii) the Chief Executive Officer, and (iv) all the directors and
executive officers of the Company as a group. Except as otherwise provided
below, the address of each person listed below is c/o Hadco Corporation, 12A
Manor Parkway, Salem, New Hampshire 03079.
<TABLE>
<CAPTION>
PERCENT OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES -------------------------
BENEFICIALLY PRIOR TO AFTER
NAMES OR GROUP OWNED(1) OFFERING OFFERING(14)
- -------------- ---------------- -------- ------------
<S> <C> <C> <C>
Horace H. Irvine II........................... 923,512(2) 8.8% 7.4%
J&W Seligman & Co. Incorporated............... 702,100+ 6.7 5.6
100 Park Avenue
New York, NY 10017
FMR Corp...................................... 675,800(3) 6.5 5.4
82 Devonshire Street
Boston, MA 02109
Nicholas Applegate Capital Management......... 528,200+ 5.1 4.2
600 West Broadway, 29th Floor
San Diego, CA 03079
Andrew E. Lietz............................... 165,146(4) 1.6 1.3
Patrick Sweeney............................... 27,000 * *
Timothy P. Losik.............................. 26,775(5) * *
James R. Griffin.............................. 39,746(6) * *
Richard P. Saporito........................... 23,650(7) * *
J. Stanley Hill............................... 41,000(8) * *
Oliver O. Ward................................ 3,000(9) * *
Lawrence Coolidge............................. 240,158(10) 2.3 1.9
John F. Smith................................. 9,000(11) * *
John E. Pomeroy............................... 3,000(12) * *
James C. Taylor............................... 3,000(12) * *
James C. Hamilton............................. 241,408(10) 2.3 1.9
All directors and executive officers as a
group (13 persons).......................... 1,517,237(13) 14.2% 12.2%
========= ==== ====
</TABLE>
- ------------
* Represents less than 1% of the outstanding shares of the Company's Common
Stock.
+ Information obtained from a Schedule 13G filed February 4, 1997.
(1) Except as indicated in footnotes to this table, the persons named in this
table have sole voting and investment power with respect to all shares of
Common Stock owned.
(2) Includes 124,855 shares held in a voting trust for the benefit of Andrea P.
Irvine. Horace H. Irvine II, who is the sole trustee of such trust and
retains sole voting power with respect to the shares held in such trust,
disclaims beneficial ownership of such shares. Does not include 229,158
shares held in irrevocable trusts for the benefit of members of Horace H.
Irvine II's family. Horace H. Irvine II, who is not a trustee of such
trusts, disclaims beneficial ownership of such 229,158 shares. James C.
Hamilton, Clerk and a partner in Berlin, Hamilton & Dahmen, LLP, which is
general counsel to the Company, Lawrence Coolidge, a Director of the
Company, and
44
<PAGE> 46
Gilbert M. Roddy, Jr. are co-trustees of these irrevocable trusts. Horace
H. Irvine II retains no voting or dispositive power with respect to these
shares. All voting rights under these trusts reside in Messrs. Hamilton,
Coolidge and Roddy, who have the right to dispose of such shares. Messrs.
Coolidge and Hamilton own 11,000 and 12,250 shares, respectively, as
individuals, in addition to the shares they hold as co-trustees. Mr.
Coolidge's 11,000 shares include 6,000 shares issuable upon the exercise of
stock options that will become exercisable within 60 days after January 24,
1997.
(3) According to information provided to the Company by FMR Corp., as of
January 24, 1997, FMR Corp. beneficially owned 675,800 shares of the Common
Stock of the Company. Includes 608,200 shares beneficially owned by
Fidelity Management & Research Company, as a result of its serving as an
investment adviser to various investment companies registered under Section
8 of the Investment Company Act of 1940 and as an investment adviser to
certain other funds which are generally offered to limited groups of
investors. Also includes 67,600 shares beneficially owned by Fidelity
Management Trust Company as a result of its serving as trustee or managing
agent for various private investment accounts, primarily employee benefit
plans, and as an investment adviser to certain other funds which are
generally offered to limited groups of investors. FMR Corp. has sole voting
power with respect to 11,600 shares and sole dispositive power with respect
to 675,800 shares.
(4) Includes 134,746 shares issuable upon the exercise of stock options granted
to Mr. Lietz that are currently exercisable or will become exercisable
within 60 days after January 24, 1997 and 30,000 shares held by a trust of
which Mr. Lietz is the sole trustee and sole beneficiary.
(5) Includes 21,675 shares issuable upon the exercise of stock options granted
to Mr. Losik that are currently exercisable or will become exercisable
within 60 days after January 24, 1997 and 4,000 shares held jointly with
Mr. Losik's spouse.
(6) Includes 35,700 shares issuable upon the exercise of stock options granted
to Mr. Griffin that are currently exercisable or will become exercisable
within 60 days after January 24, 1997.
(7) Includes 23,450 shares issuable upon the exercise of stock options granted
to Mr. Saporito that are currently exercisable or will become exercisable
within 60 days after January 24, 1997.
(8) Includes 10,000 shares issuable upon the exercise of stock options granted
to Mr. Hill that are currently exercisable or will become exercisable
within 60 days after January 24, 1997. Does not include 20,000 shares owned
by Mr. Hill's wife, as to which Mr. Hill disclaims beneficial ownership.
(9) Consists of 3,000 shares issuable upon the exercise of stock options
granted to Mr. Ward that are currently exercisable or will become
exercisable within 60 days after January 24, 1997.
(10) See footnote (2) above.
(11) Consists of 9,000 shares issuable upon the exercise of stock options
granted to Mr. Smith that are currently exercisable or will become
exercisable within 60 days after January 24, 1997.
(12) Consists of 3,000 shares issuable upon the exercise of stock options
granted to each of Messrs. Pomeroy and Taylor that are currently
exercisable or will become exercisable within 60 days after January 24,
1997.
(13) Includes 229,158 shares held by Mr. Coolidge, Mr. Hamilton, and Gilbert M.
Roddy, Jr., as co-trustees and 124,855 shares held by Horace H. Irvine II
as trustee. Includes 6,000 shares issuable upon the exercise of stock
options granted to Mr. Coolidge that are currently exercisable or will
become exercisable within 60 days after January 24, 1997. See footnote (2)
above. Includes 134,746 shares issuable upon the exercise of stock options
granted to Andrew E. Lietz, that are currently exercisable or will become
exercisable within 60 days after January 24, 1997. See footnote (4) above.
Includes 21,675 shares issuable upon the exercise of stock options granted
to
45
<PAGE> 47
Mr. Losik that are currently exercisable or will become exercisable within
60 days after January 24, 1997. See footnote (5) above. Includes 35,700
shares issuable upon the exercise of stock options granted to Mr. Griffin
that are currently exercisable or will become exercisable within 60 days
after January 24, 1997. See footnote (6) above. Includes 23,450 shares
issuable upon the exercise of stock options granted to Mr. Saporito that
are currently exercisable or will become exercisable within 60 days after
January 24, 1997. See footnote (7) above. Includes 10,000 shares issuable
upon the exercise of stock options granted to Mr. Hill. See footnote (8)
above. Includes 3,000 shares issuable upon the exercise of stock options
granted to Mr. Ward. See footnote (9) above. Includes 9,000 shares issuable
upon the exercise of stock options granted to Mr. Smith that are currently
exercisable or will become exercisable within 60 days after January 24,
1997. See footnote (11) above. Includes an aggregate of 6,000 shares
issuable upon the exercise of currently exercisable stock options granted
to each of Messrs. Pomeroy and Taylor. See footnote (12) above.
(14) The above table assumes no exercise of the over-allotment options. If the
Common Stock Underwriters exercise their over-allotment options in full,
the number of shares offered, the number of shares beneficially owned after
the Common Stock Offering, and the percent of shares beneficially owned
after the offering for each of the Selling Stockholders would be: (a)
Horace H. Irvine II -- 100,000, 823,512, 6.5%; (b) certain trusts for the
benefit of members of Horace H. Irvine II's family -- 35,000, 194,158,
1.5%; (c) Andrew E. Lietz -- 40,000, 125,146, 1.0%; (d) J. Stanley
Hill -- 10,000, 31,000,*%; (e) James C. Hamilton -- 3,000, 203,408, 1.6%;
and (f) Kenneth Ogle -- 14,600,16,400,*%; and the percent of shares
beneficially owned after the Common Stock Offering by all directors and
executive officers as a group will be 10.4% if the Common Stock
Underwriters exercise their over-allotment options in full.
46
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, $.05 par value. As of January 24, 1997, there were 10,444,188
shares of Common Stock of the Company outstanding held by approximately 345
holders of record.
COMMON STOCK
Each outstanding share of Common Stock is entitled to one vote on all
matters submitted to a vote of stockholders. Voting rights are not cumulative,
so that the holders of a majority of the voting power of the Company could elect
all the Directors standing for election at any annual or special meeting of
stockholders, and the holders of the remaining shares may not be able to elect
any Director. Dividends may be paid to the holders of Common Stock only when and
if declared by the Board of Directors out of funds legally available therefor.
No cash dividends have ever been paid by the Company on its Common Stock. See
"Dividend Policy." Holders of Common Stock have no preemptive, conversion or
other rights to subscribe for additional shares of stock or other securities of
the Company. Shares of Common Stock are not subject to any redemption
provisions. No share of Common Stock outstanding on the date hereof, sold in the
Common Stock Offering or issuable on conversion of any Note is or will be
subject to any call or assessment. In the event of any liquidation, dissolution
or winding up of the affairs of the Company, the holders of Common Stock will be
entitled to share ratably in all assets remaining after provision for payment of
creditors.
MASSACHUSETTS LAW
The Company is subject to the provisions of Chapter 110F of the
Massachusetts General Laws, the so-called Business Combination Statute. Under
Chapter 110F, a Massachusetts corporation with over 200 stockholders, such as
the Company, may not engage in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless (i) the interested
stockholder obtains the approval of the Board of Directors prior to becoming an
interested stockholder, (ii) the interested stockholder acquires 90% of the
outstanding voting stock of the corporation (excluding shares held by certain
affiliates of the corporation) at the time it becomes an interested stockholder,
or (iii) the business combination is approved by both the Board of Directors and
the holders of two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder). An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
at any time within the prior three years did own) 5% or more of the outstanding
voting stock of the corporation. A "business combination" includes a merger, a
stock or assets sale, and other transactions resulting in a financial benefit to
the stockholder.
The Company is subject to the provisions of Chapter 110D of the
Massachusetts General Laws, entitled "Regulation of Control Share Acquisitions."
In general, this statute provides that any stockholder of a corporation subject
to this statute who acquires 20% or more of the outstanding voting stock of a
corporation (except in certain transactions) may not vote such stock unless the
stockholders of the corporation so authorize. The statute specifically excludes
situations where any person acquires the triggering 20% ownership "solely by
virtue of a revocable proxy conferring the right to vote." The Board of
Directors may amend the Company's By-laws at any time to exclude the Company
from this statute prospectively.
On April 18, 1990, Massachusetts enacted Chapter 156B sec.50A of the
Massachusetts General Laws which, in general, requires that publicly held
Massachusetts corporations have a classified board of directors consisting of
three classes as nearly equal in size as possible. Once the corporation is
subject to the classified board provisions of this statute, directors may be
removed by a majority vote of the stockholders only for cause. This statute
provides that a corporation may elect to be exempt from the classified board
provisions by a vote of its directors. By vote of the Board of Directors, the
Company has elected to be exempt from the classified board provisions of this
statute.
47
<PAGE> 49
STOCKHOLDER RIGHTS PLAN
On August 22, 1995, the Company's Board of Directors adopted a Stockholder
Rights Plan (the "Rights Plan"), the adoption of which did not require
stockholder approval, under which Common Stock Purchase Rights (the "Rights")
were distributed as a Rights dividend on September 11, 1995 at the rate of one
Right for each share of Common Stock held as of the close of business on that
date.
The Rights Plan is designed to prevent an acquirer from gaining control of
the Company without offering a fair price to all of the Company's stockholders.
The Rights Plan was not adopted by the Board in response to any specific offer
or threat, but rather is intended to protect the interests of stockholders in
the event the Company is confronted in the future with takeover tactics.
Each Right will entitle holders of Common Stock to buy one share of Common
Stock of the Company at an exercise price of $130. The Rights will be
exercisable only after 10 days following a public announcement that a person or
group has acquired more than 20% (exempting the stock ownership of Horace H.
Irvine II, the founder and Chairman of the Board of the Company, and certain
related persons and entities) of the Common Stock (the "Stock Acquisition
Date"), or 10 business days after such person or group announces a tender or
exchange offer which would result in its ownership of 25% or more of the Common
Stock, or 10 business days after a person owning 10% or more of the Common Stock
is determined by the Board to be an "Adverse Person," as defined in the Rights
Plan. The more-than-20% stockholder threshold described above is not triggered
by revocable proxies. Under the Rights Plan, an Acquiring Person is defined as a
Beneficial Owner of more than 20% of Common Stock; however, such definition
excludes any security the ownership of which arises solely from a revocable
proxy given in response to a public proxy or consent solicitation in accordance
with the provisions of the Exchange Act and not also reportable on Schedule 13D.
If any person or group becomes the beneficial owner of 25% or more of the
Company's Common Stock except pursuant to a tender offer for all shares at a
price that a majority of the independent directors determines to be fair; if a
more-than-20% stockholder engages in a merger with the Company in which the
Company survives and its Common Stock remains outstanding and unchanged; if
certain other events involving the Company and a more-than-20% stockholder
occur; or, if under certain circumstances, the Board determines a 10% or more
stockholder to be an Adverse Person, then each Right not owned by such person or
related parties will entitle its holder to purchase, at the then current
exercise price of the Right, Common Stock of the Company (or, in certain
circumstances as determined by the Board, including the failure of the
stockholders to increase the authorized Common Stock as proposed herein, a
combination of cash, property, Common Stock or other securities or a reduction
in the exercise price) having a value of twice the Right's exercise price. In
such circumstances, the Company may also exchange one share of Common Stock for
each Right outstanding. In addition, if the Company is involved in a merger or
other business combination transaction with another person in which its Common
Stock is changed or converted, or sells or transfers more than 50% of its assets
or earning power to another person, each Right that has not previously been
exercised will entitle its holder to purchase, at the then current exercise
price of the Right, shares of Common Stock of such other person having a value
of twice the Right's exercise price.
In general, the Company can redeem the Rights at $0.01 per Right at any
time prior to ten days following the Stock Acquisition Date. The Rights will
expire on September 11, 2005, unless earlier redeemed or exchanged.
The Rights have certain anti-takeover effects, in that they can cause
substantial dilution to a person or group that attempts to acquire a significant
interest in the Company on terms not approved by the Board of Directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is The
First National Bank of Boston.
48
<PAGE> 50
DESCRIPTION OF NOTES
The Notes are to be issued under an indenture to be dated as of ,
1997 (the "Indenture"), between the Company and State Street Bank and Trust
Company, as trustee (the "Trustee"), a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
terms of the Notes will include those stated in the Indenture and those made a
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "TIA"), as in effect on the date of the Indenture. The Notes will
be subject to all such terms, and holders of the Notes are referred to the
Indenture and the TIA for a statement of such terms. The following is a summary
of important terms of the Notes and does not purport to be complete and is
qualified in its entirety by reference to the Indenture and the TIA. Reference
should be made to all provisions of the Indenture, including the definitions
therein of certain terms and all terms made a part of the Indenture by reference
to the TIA. As used in this "Description of Notes," the term "Company," unless
otherwise indicated or the context otherwise requires, refers only to Hadco
Corporation and does not include any of its subsidiaries including Zycon.
GENERAL
The Notes will be general unsecured obligations of the Company subordinate
in right of payment to certain other obligations of the Company as described
under "-- Subordination," and convertible into Common Stock as described under
"-- Conversion." The Notes will be limited to $100,000,000 aggregate principal
amount ($115,000,000 if the over-allotment option is exercised in full), will be
issued in fully registered form only in denominations of $1,000 or any integral
multiple thereof and will mature on , 2004, unless earlier redeemed at
the option of the Company or repurchased by the Company at the option of the
holder upon a Designated Event (as defined).
The Notes will bear interest from , 1997 at the annual rate set
forth on the cover page hereof, payable semiannually on and
, commencing on , 1997, to holders of record at the close of
business on the preceding and , respectively (subject to
certain exceptions in the case of conversion, redemption or repurchase of such
Notes prior to the applicable interest payment date). Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
Principal of and premium, if any, and interest on the Notes will be
payable, and the transfer of Notes will be registrable, and the Notes may be
presented for conversion, at the office or agency of the Company maintained for
such purposes in the Borough of Manhattan, State of New York, which shall
initially be an office or agency of the Trustee. In addition, payment of
interest may, at the option of the Company, be made by check mailed to the
address of the person entitled thereto as it appears in the Note register,
provided that the holder of Notes with an aggregate principal amount in excess
of $2,000,000 shall, at the election of such holder, be paid by wire transfer in
immediately available funds.
No service charge will be made for any registration or transfer or exchange
of Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Company is
not required to exchange or register the transfer of (i) any Note for a period
of 15 days next preceding any selection of Notes to be redeemed, (ii) any Note
or portion thereof selected for redemption, (iii) any Note or portion thereof
surrendered for conversion, or (iv) any Note or portion thereof surrendered for
repurchase (and not withdrawn) in connection with a Designated Event.
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of securities of the Company or the
incurrence of Senior Indebtedness. The Indenture contains no covenants or other
provisions to afford protection to holders of Notes in the event of a highly
leveraged transaction or a change in control of the Company except to the
limited extent described under "-- Repurchase at Option of Holders Upon a
Designated Event" below.
49
<PAGE> 51
CONVERSION
The holders of Notes will be entitled at any time through the close of
business on the final maturity date of the Notes, subject to prior redemption or
repurchase, to convert any Notes or portions thereof (in denominations of $1,000
or multiples thereof) into Common Stock of the Company, at the conversion price
set forth on the cover page of this Prospectus, subject to adjustment as
described below. Except as described below, no adjustment will be made on
conversion of any Notes for interest accrued thereon or for dividends on any
Common Stock issued. If Notes are converted after a record date for the payment
of interest and on or prior to the close of business on the business day prior
to the next succeeding interest payment date, such Notes, other than Notes
called for redemption during such period, when submitted for conversion by the
holder, must be accompanied by funds equal to the interest payable on such
succeeding interest payment date on the principal amount so converted. No such
payment will be required with respect to interest payable on , 2000.
The Company is not required to issue fractional shares of Common Stock upon
conversion of Notes and, in lieu thereof, will pay a cash adjustment based upon
the market price of the Common Stock on the last business day prior to the date
of conversion. In the case of Notes called for redemption, conversion rights
will expire at the close of business on the business day preceding the date
fixed for redemption, unless the Company defaults in payment of the redemption
price in which case the conversion right shall terminate on the date such
default is cured and such Note is redeemed. A Note for which a holder has
delivered a Designated Event purchase notice exercising the option of such
holder to require the Company to repurchase such Note may be converted only if
such notice is withdrawn by a written notice of withdrawal delivered by the
holder to the Company prior to the close of business on the business day
preceding the date fixed for repurchase.
The right of conversion attaching to any Note may be exercised by the
holder by delivering the Note at the specified office of a conversion agent,
accompanied by a duly signed and completed notice of conversion, together with
any funds that may be required as described in the preceding paragraph. The
conversion date shall be the date on which the Note, the duly signed and
completed notice of conversion and any funds that may be required as described
in the preceding paragraph shall have been so delivered. A holder delivering a
Note for conversion will not be required to pay any taxes or duties payable in
respect of the issue or delivery of Common Stock on conversion, but will be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issue or delivery of the Common Stock in a name other than the
holder of the Note. Certificates representing shares of Common Stock will not be
issued or delivered unless all taxes and duties, if any, payable by the holder
have been paid.
The initial conversion price of $ per share of Common Stock is
subject to adjustment (under formulae set forth in the Indenture) in certain
events, including: (i) the issuance of Common Stock as a dividend or
distribution on Common Stock of the Company; (ii) certain subdivisions and
combinations of the Common Stock; (iii) the issuance to all holders of Common
Stock of certain rights or warrants to purchase Common Stock at less than the
current market price of the Common Stock; (iv) the dividend or other
distribution to all holders of Common Stock of shares of capital stock of the
Company (other than Common Stock) or evidence of indebtedness of the Company or
assets (including securities, but excluding those rights, warrants, dividends
and distributions referred to above or paid exclusively in cash); (v) dividends
or other distributions consisting exclusively of cash (excluding any cash
portion of distributions referred to in clause (iv)) to all holders of Common
Stock to the extent that such distributions, combined together with (A) all
other such all-cash distributions made within the preceding 12 months in respect
of which no adjustment has been made plus (B) any cash and the fair market value
of other consideration payable in respect of any tender offers by the Company or
any of its subsidiaries for Common Stock concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds 10% of the
Company's market capitalization (being the product of the then current market
price of the Common Stock times the number of shares of Common Stock then
outstanding) on the record date for such distribution; (vi) the purchase of
Common Stock pursuant to a tender offer made by the Company or any of its
subsidiaries to the extent
50
<PAGE> 52
that the same involves an aggregate consideration that, together with (X) any
cash and the fair market value of any other consideration payable in any other
tender offer by the Company or any of its subsidiaries for Common Stock expiring
within the 12 months preceding such tender offer in respect of which no
adjustment has been made plus (Y) the aggregate amount of any such all-cash
distributions referred to in clause (v) above to all holders of Common Stock
within the 12 months preceding the expiration of such tender offer in respect of
which no adjustments have been made, exceeds 10% of the Company's market
capitalization on the expiration of such tender offer; and (vii) payment in
respect of a tender offer or exchange offer by a person other than the Company
or any subsidiary of the Company in which, as of the closing of the offer, the
Board of Directors is not recommending rejection of the offer. The adjustment
referred to in clause (vii) above will only be made if the tender offer or
exchange offer is for an amount which increases that person's ownership of
Common Stock to more than 25% of the total shares of Common Stock outstanding,
and only if the cash and value of any other consideration included in such
payment per share of Common Stock exceeds the current market price per share of
Common Stock on the business day next succeeding the last date on which tenders
or exchanges may be made pursuant to such tender or exchange. The adjustment
referred to in clause (vii) above will not be made, however, if, as of the
closing of the offer, the offering documents with respect to such offer disclose
a plan or an intention to cause the Company to engage in a consolidation or
merger of the Company or a sale of all or substantially all of the Company's
assets.
Under the terms of the Rights Plan, upon conversion of any Notes prior to
the redemption or expiration of the Rights, the holders of such Notes will
receive, subject to certain limited conditions, an appropriate number of Rights
with respect to the shares of Common Stock issued upon such conversion. In
addition, the Indenture will provide that if the Company amends the Rights Plan
or implements a replacement or successor stockholders' rights plan, such rights
plan must provide that upon conversion of the Notes the holders will receive, in
addition to the Common Stock issuable upon such conversion, such rights whether
or not such rights have separated from the Common Stock at the time of such
conversion.
In the case of (i) any reclassification or change of the Common Stock
(other than changes in par value or resulting from a subdivision or combination)
or (ii) a consolidation, merger or combination involving the Company or a sale
or conveyance to another corporation of the property and assets of the Company
as an entirety or substantially as an entirety, in each case as a result of
which holders of Common Stock shall be entitled to receive stock, other
securities, other property or assets (including cash) with respect to or in
exchange for such Common Stock, the holders of the Notes then outstanding will
be entitled thereafter to convert such Notes into the kind and amount of shares
of stock, other securities or other property or assets which they would have
owned or been entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had such Notes been
converted into Common Stock immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance (assuming, in a case in
which the Company's stockholders may exercise rights of election, that a holder
of Notes would not have exercised any rights of election as to the stock, other
securities or other property or assets receivable in connection therewith and
received per share the kind and amount received per share by a plurality of
nonelecting shares).
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price, the
holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations."
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Notes by any amount for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
decrease, if the Board of Directors has made a determination that such decrease
would be in the best interests of the Company, which determination shall be
conclusive. The Company may at its option, make such reductions in the
conversion price, in addition to those set forth
51
<PAGE> 53
above, as the Board of Directors deems advisable to avoid or diminish any income
tax to holders of Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes. See "Certain Federal Income Tax Considerations."
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to
, 2000. At any time on or after that date the Notes may be redeemed at
the Company's option on at least 20 but not more than 60 days' notice, as a
whole or, from time to time in part, at the following prices (expressed in
percentages of the principal amount), together with accrued interest to, but
excluding, the date fixed for redemption; provided that if a redemption date is
an interest payment date, the semi-annual payment of interest becoming due on
such date shall be payable to the holder of record as of the relevant record
date.
If redeemed during the 12-month period beginning , 2000
(beginning , 2000 and ending , 2001 in the case of the first
such period):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------------------------------------------- -------------
<S> <C>
2000......................................................... %
2001.........................................................
2002.........................................................
2003.........................................................
</TABLE>
and 100% at , 2004.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000 or multiples thereof by lot
or, in its sole discretion, on a pro rata basis. If any Note is to be redeemed
in part only, a new Note or Notes in principal amount equal to the unredeemed
principal portion thereof will be issued. If a portion of a holder's Notes is
selected for partial redemption and such holder converts a portion of such
Notes, such converted portion shall be deemed to be taken from the portion
selected for redemption.
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A DESIGNATED EVENT
The Indenture provides that if a Designated Event (as defined) occurs, each
holder of Notes shall have the right, at the holder's option, to require the
Company to repurchase all of such holder's Notes, or any portion thereof that is
an integral multiple of $1,000, on the date (the "repurchase date") that is 40
calendar days after the date of the Company Notice (as defined below), for cash
at a price equal to 100% of the principal amount of the Notes, together with
accrued interest, if any, to (but excluding) the repurchase date (the
"repurchase price"), provided, however, that if a repurchase date is an interest
payment date, the semi-annual payment of interest becoming due on such date
shall be payable to the holder of record as of the relevant record date.
Within 15 days after the occurrence of a Designated Event, the Company is
obligated to mail to all holders of record of the Notes a notice (the "Company
Notice") of the occurrence of such Designated Event and of the repurchase right
arising as a result thereof. The Company must deliver a copy of the Company
Notice to the Trustee and cause a copy or a summary of such notice to be
published in a
52
<PAGE> 54
newspaper of general circulation in The City of New York. To exercise the
repurchase right, a holder of such Notes must deliver, on or before the 40th day
after the Company Notice, written notice to the Company (or an agent designated
by the Company for such purpose) of the holder's exercise of such right,
together with the Notes with respect to which the right is being exercised, duly
endorsed for transfer. Such notice of exercise may be withdrawn by the holder by
a written notice of withdrawal delivered to the Company at any time prior to the
close of business on the last business day preceding the repurchase date.
"Designated Event" means a Change in Control (as defined) or a Termination
of Trading (as defined).
"Change in Control" means an event or series of events after the original
issuance of the Notes as a result of which (i) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) of shares representing more than 50% of the combined voting power of the
then outstanding securities entitled to vote generally in elections of directors
of the Company ("Voting Stock"); (ii) the stockholders of the Company approve
any plan or proposal for the liquidation, dissolution or winding up of the
Company, (iii) the Company consolidates with or merges into any other
corporation, or conveys, transfers or leases all or substantially all of its
assets to any person, or any other corporation merges into the Company, and in
the case of any such transaction, the outstanding Common Stock of the Company is
changed or exchanged into or for other assets or securities as a result, unless
the stockholders of the Company immediately before such transaction own,
directly or indirectly immediately following such transaction, at least 51% of
the combined voting power of the outstanding voting securities of the
corporation resulting from such transaction in substantially the same proportion
as their ownership of the Voting Stock immediately before such transaction; or
(iv) any time Continuing Directors (as defined) do not constitute a majority of
the Board of Directors of the Company (or, if applicable, a successor
corporation to the Company); provided that a Change in Control shall not be
deemed to have occurred if either (x) the last sale price of the Common Stock
for any five trading days during the ten trading days immediately preceding the
Change in Control is at least equal to 105% of the conversion price in effect on
such day or (y) in the case of a merger or consolidation, at least 95% of the
consideration (excluding cash payments for fractional shares or for dissenters'
appraisal rights) in such merger or consolidation otherwise constituting the
Change in Control consists of common stock traded on a United States national
securities exchange or quoted on the Nasdaq National Market (or which will be so
traded or quoted when issued or exchanged in connection with such Change in
Control) and as a result of such transaction or transactions such Notes become
convertible solely into such common stock.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on , 1997 or (ii) who was
nominated or elected by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or whose election to the
Company's Board of Directors was recommended or endorsed by at least a majority
of the directors who were Continuing Directors at the time of such nomination or
election or such lesser number comprising a majority of a nominating committee
if authority for such nominations or elections has been delegated to a
nominating committee whose authority and composition has been approved by at
least a majority of the directors who were Continuing Directors at the time such
committee was formed. (Under this definition, if the current Board of Directors
of the Company were to approve a new director or directors and then resign, no
Change in Control would occur even though the current Board of Directors would
thereafter cease to be in office.)
A "Termination of Trading" shall have occurred if the Common Stock (or
other common stock into which the Notes are then convertible) is neither listed
for trading on a United States national securities exchange nor approved for
trading on an established automated over-the-counter trading market in the
United States.
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No quantitative or other established meaning has been given to the phrase
"all or substantially all" (which appears in the definition of Change in
Control) by courts which have interpreted this phrase in various contexts. In
interpreting this phrase, courts, among other things, make a subjective
determination as to the portion of assets conveyed, considering such factors as
the value of assets conveyed, the proportion of an entity's income derived from
the assets conveyed and the significance of those assets to the ongoing business
of the entity. To the extent the meaning of such phrase is uncertain,
uncertainty will exist as to whether or not a Change in Control may have
occurred (and, accordingly, as to whether or not the holders of Notes will have
the right to require the Company to repurchase their Notes).
If a Designated Event were to occur, there can be no assurance that the
Company would have sufficient financial resources, or would be able to arrange
financing, to pay the repurchase price for all Notes tendered by holders
thereof. In addition, the terms of certain of the Company's existing debt
agreements prohibit the Company from repurchasing any Notes and also identify
certain events that would constitute Designated Events, as well as certain other
change in control events with respect to the Company or certain of its
subsidiaries, which would constitute an event of default under such debt
agreements. Any future credit agreements or other agreements relating to other
indebtedness (including other Senior Indebtedness) to which the Company becomes
a party may contain similar restrictions and provisions. In the event a
Designated Event occurs at a time when the Company is prohibited from
repurchasing Notes, the Company could seek the consent of its lenders to the
repurchase of the Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company would remain prohibited from repurchasing Notes.
Any failure by the Company to repurchase the Notes when required following a
Designated Event would result in an Event of Default under the Indenture whether
or not such repurchase is permitted by the subordination provisions of the
Indenture. Any such default may, in turn, cause a default under Senior
Indebtedness of the Company. Moreover, the occurrence of a Designated Event may
cause an event of default under Senior Indebtedness of the Company. As a result,
in each case, any repurchase of the Notes would, absent a waiver, be prohibited
under the subordination provisions of the Indenture until the Senior
Indebtedness is paid in full. See "-- Subordination" below and "Risk
Factors -- Subordination of Notes and Absence of Financial Covenants." No Notes
may be repurchased at the option of holders upon a Designated Event if there has
occurred and is continuing an Event of Default described under "-- Events of
Default and Remedies" below (other than a default in the payment of the
repurchase price with respect to such Notes on the repurchase date).
The foregoing provisions would not necessarily afford holders of the Notes
protection in the event of a highly leveraged transaction, a change in control
of the Company or other transactions involving the Company that may adversely
affect holders. The Company could, in the future, enter into certain
transactions, including certain recapitalizations of the Company, that would
increase the amount of Senior Indebtedness (or other indebtedness) outstanding
at such time or result in an actual change in control of the Company but that
would not constitute a Change in Control giving rise to the right of the holders
to cause the Company to repurchase the Notes. There are no restrictions in the
Indenture or the Notes on the creation of additional Senior Indebtedness (or any
other indebtedness) of the Company or any of its subsidiaries and the incurrence
of significant amounts of additional indebtedness could have an adverse impact
on the Company's ability to service its debt, including the Notes. The Notes are
subordinate in right of payment to all existing and future Senior Indebtedness
as described under "-- Subordination" below.
Certain leveraged transactions and transactions involving a change in
control of the Company sponsored by the Company's management or an affiliate of
the Company could constitute a Change in Control that would give rise to the
repurchase right. The Indenture does not provide the Company's Board of
Directors with the right to limit or waive the repurchase right in the event of
any such leveraged transaction or change in control. In addition, the right to
require the Company to repurchase Notes as a result of a Change in Control could
have the effect of delaying, deferring or
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preventing a change of control or other attempts to acquire control of the
Company unless arrangements have been made to enable the Company to repurchase
all of the Notes at the repurchase date. Consequently, the right may render more
difficult or discourage a merger, consolidation or tender offer (even if such
transaction is supported by the Company's Board of Directors or is favorable to
the stockholders), the assumption of control by a holder of a large block of the
Company's shares and the removal of incumbent management. The Designated Event
repurchase right, however, is not the result of management's knowledge of any
specific effort to accumulate shares of Common Stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise. Instead,
the Designated Event repurchase right has resulted from negotiations between the
Company and the Note Underwriters.
No modification of the Indenture regarding the provisions on repurchase at
the option of any holder of a Note is permissible without the consent of the
holder of the Note so affected.
The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act to the extent then
applicable, and otherwise comply with all federal and state securities laws in
connection with any offer by the Company to purchase Notes at the option of the
holders upon a Designated Event. Rule 13e-4 under the Exchange Act requires,
among other things, the dissemination of certain information to security holders
in the event of an issuer tender offer and may apply in the event that the
repurchase option becomes available to holders of the Notes.
SUBORDINATION
The indebtedness evidenced by the Notes is, to the extent provided in the
Indenture, subordinate to the prior payment in full of all Senior Indebtedness
(as defined) whether presently outstanding or hereafter incurred or created.
Upon any distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company, the payment of the principal of,
or premium, if any, and interest on the Notes is to be subordinated to the
extent provided in the Indenture in right of payment to the prior payment in
full, in cash or in such other form of payment as may be acceptable to the
holders thereof, of all Senior Indebtedness. Moreover, in the event of any
acceleration of the Notes because of an Event of Default, the holders of any
Senior Indebtedness then
outstanding would be entitled to payment in full in cash or such other form of
payment as may be acceptable to the holders thereof of all such Senior
Indebtedness before the holders of the Notes are entitled to receive any payment
or distribution in respect thereof.
The Company also may not make any payment upon or in respect of the Notes
if (i) a default in the payment of principal of, premium, if any, interest, or
other payment due on Senior Indebtedness occurs and is continuing beyond any
applicable period of grace or (ii) any other default occurs and is continuing
with respect to Designated Senior Indebtedness (as defined below) that permits
holders of the Designated Senior Indebtedness as to which such default related
to accelerate its maturity and the Trustee and the Company receive a notice of
such default (a "Payment Blockage Notice") from a holder of Designated Senior
Indebtedness or its representative or agent. Payments on the Notes may and shall
be resumed (a) in case of payment default, on the date on which such default is
cured or waived and (b) in case of a nonpayment default, on the earlier of the
date on which such nonpayment default is cured or waived or 179 days after the
date on which the applicable Payment Blockage Notice is received. No new period
of payment blockage may be commenced pursuant to a Payment Blockage Notice
unless (i) 365 days have elapsed since the first day of the effectiveness of the
immediately prior Payment Blockage Notice and (ii) all scheduled payments of
principal, premium, if any, and interest on the Notes that have become due have
been paid in full in cash or the Trustee or the Noteholders shall not have
instituted proceedings to enforce the Noteholders' right to receive such
payments. No default (whether or not such event of default is on the same issue
of Designated Senior Indebtedness) that existed or was continuing on the date of
delivery of any Payment Blockage Notice shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
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The term "Senior Indebtedness" means the principal of, premium, if any,
interest on (including any interest accruing after the filing of a petition by
or against the Company under any bankruptcy law, whether or not allowed as a
claim after such filing in any proceeding under such bankruptcy law), and any
other payment due pursuant to, any of the following, whether outstanding on the
date of the Indenture or thereafter incurred or created: (a) all indebtedness of
the Company for money borrowed or evidenced by notes, debentures, bonds, similar
instruments or other debt securities (including, but not limited to, purchase
money mortgages and any such indebtedness which is convertible or exchangeable
for securities of the Company); (b) all indebtedness of the Company due and
owing with respect to letters of credit, bankers' acceptances or similar credit
transactions (including, but not limited to, reimbursement obligations with
respect thereto); (c) all indebtedness or other obligations of the Company due
and owing with respect to interest rate and currency swap agreements, cap,
floor, collar and option agreements, currency spot and forward contracts and
other similar agreements and arrangements; (d) all indebtedness consisting of
commitment or standby fees due and payable to lending institutions with respect
to credit facilities or letters of credit, bankers' acceptances or similar
credit transactions; (e) all obligations of the Company for payment of money
under leases required or permitted to be capitalized under generally accepted
accounting principles; (f) all indebtedness or obligations of others of the
kinds described in any of the preceding clauses (a), (b), (c), (d) or (e)
assumed by or guaranteed in any manner by the Company or in effect guaranteed
(directly or indirectly) by the Company through an agreement to purchase,
contingent or otherwise, and all obligations of the Company under any such
guarantee or other arrangements; and (g) all renewals, extensions, refundings,
deferrals, amendments or modifications of indebtedness or obligations of the
kinds described in any of the preceding clauses (a), (b), (c), (d), (e) or (f),
unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, deferral, amendment, modification or supplement, the
instrument or other document creating or evidencing the same or the assumption
or guarantee of the same expressly provides that such indebtedness, obligation,
renewal, extension, refunding, deferral, amendment, modification or supplement
is subordinate to, or is not superior to, or is pari passu with, the Notes;
provided that Senior Indebtedness shall not include (i) any indebtedness of any
kind of the Company to any subsidiary of the Company, a majority of the voting
stock of which is owned, directly or indirectly, by the Company, (ii)
indebtedness for trade payables or constituting the deferred purchase price of
inventory, material or services incurred in the ordinary course of business or
(iii) the Notes.
The term "Designated Senior Indebtedness" means all Senior Indebtedness
under the Credit Facility and all other Senior Indebtedness if the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such indebtedness shall be "Designated Senior Indebtedness" for
purposes of the Indenture (provided that such instrument, agreement or other
document may place limitations and conditions on the right of holders of such
Senior Indebtedness to exercise the rights of Designated Senior Indebtedness).
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any of the terms of the Indenture, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Senior Indebtedness is paid in
full in cash or such other form of payment acceptable to the holders of such
Senior Indebtedness, then such payment or distribution will be held by the
recipient in trust for the benefit of the holders of Senior Indebtedness of the
Company, and will be immediately paid over or delivered to the holders of Senior
Indebtedness of the Company or their representative or representatives to the
extent necessary to make payment in full in cash or such other form of payment
acceptable to the holders of such Senior Indebtedness of all Senior Indebtedness
of the Company remaining unpaid, after giving effect to any concurrent payment
or distribution, or provision therefor, to or for the holders of Senior
Indebtedness of the Company.
The Notes are obligations exclusively of the Company. As a significant
portion of the Company's consolidated operations is conducted through
subsidiaries, the cash flow and the consequent ability to
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service debt, including the Notes, of the Company is partially dependent upon
the earnings of such subsidiaries and the distribution of those earnings, or
upon loans or other payments of funds by those subsidiaries, to the Company.
Such subsidiaries are separate and distinct legal entities, and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Notes or to make any funds available therefor, whether by dividends,
distributions, loans or other payments. In addition, the payment of dividends or
distributions and the making of loans and advances to the Company by any such
subsidiaries may be subject to statutory or contractual restrictions, and may be
contingent upon the earnings of those subsidiaries and subject to various
business considerations. Any right of the Company to receive assets of
subsidiaries upon their liquidation or reorganization (and the consequent right
of the holders of the Notes to participate in these assets) would be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such subsidiary and
any indebtedness of such subsidiary senior to that held by the Company.
As of January 25, 1997, the Company had approximately $218 million of
indebtedness outstanding that would have constituted Senior Indebtedness and the
Company's subsidiaries had outstanding indebtedness and other liabilities of
approximately $57 million (excluding intercompany liabilities and liabilities of
a type not required to be reflected as liabilities on the balance sheets of such
subsidiaries in accordance with generally accepted accounting principles) to
which the Notes would have been effectively subordinated. The Indenture will not
limit the amount of additional indebtedness, including Senior Indebtedness,
which the Company can create, incur, assume or guarantee, nor will the Indenture
limit the amount of indebtedness which any subsidiary of the Company can create,
incur, assume or guarantee.
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on, the Notes. The
subordination provisions of the Indenture and the Notes will not prevent the
occurrence of any default or Event of Default or limit the rights of any holder
of Notes to pursue any other rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or a
marshaling of assets or liabilities of the Company and its subsidiaries, holders
of the Notes may receive ratably less than other creditors.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being: (i) a default in
payment of the principal of, or premium, if any, on the Notes (whether or not
such payment is prohibited by the subordination provisions of the Indenture);
(ii) default for 30 days in payment of any installment of interest on the Notes
(whether or not such payment is prohibited by the subordination provisions of
the Indenture); (iii) default by the Company for 45 days after notice given in
accordance with the Indenture in the observance or performance of any other
covenants in the Indenture; (iv) default in the payment of the repurchase price
in respect of the Note on the repurchase date therefor (whether or not such
payment is prohibited by the subordination provisions of the Indenture); (v)
failure to provide timely notice of a Designated Event; (vi) failure of the
Company or any Significant Subsidiary (as defined) to make any payment at
maturity, including any applicable grace period, in respect of Indebtedness
(which term as used in the Indenture means obligations (other than non-recourse
obligations) of, or guaranteed or assumed by, the Company or any Significant
Subsidiary for borrowed money or evidenced by bonds, notes or similar
instruments) in an amount in excess of $10 million and continuance of such
failure for 30 days after notice given in accordance with the Indenture; (vii)
default by the Company or any Significant Subsidiary with respect to any
Indebtedness, which default results in the acceleration of Indebtedness in an
amount in excess of $10 million without such Indebtedness having been discharged
or such acceleration having been rescinded or annulled for 30 days after notice
given in accordance
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with the Indenture; or (viii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered holders of the Notes notice of
all uncured defaults known to it, but the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the best interest of such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on, any of the Notes when due or in the payment of any redemption or
repurchase obligation.
The Indenture provides that if any Event of Default shall have occurred and
be continuing, the Trustee or the holders of not less than 25% in principal
amount of the Notes then outstanding by notice to the Company and the Trustee
may declare the principal of and premium, if any, and accrued interest on the
Notes to be due and payable immediately, but if the Company shall cure all
defaults (except the nonpayment of interest on, premium, if any, and principal
of any Notes which shall have become due by acceleration) and certain other
conditions are met, such declaration may be canceled and past defaults may be
waived by the holders of a majority in principal amount of Notes then
outstanding. If an Event of Default resulting from certain events of bankruptcy,
insolvency or reorganization were to occur, all unpaid principal of and accrued
interest on the outstanding Notes will become due and payable immediately
without any declaration or other act on the part of the Trustee or any holders
of Notes, subject to certain limitations.
The Indenture provides that the holders of a majority in principal amount
of the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, subject to certain limitations specified in the
Indenture. Before proceeding to exercise any right or power under the Indenture
at the direction of such holders, the Trustee shall be entitled to receive from
such holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
The right of a holder to institute a proceeding with respect to the Indenture is
subject to certain conditions precedent, including the written notice by such
holder of an Event of Default and an offer to indemnify the Trustee, along with
the written request by the holders of not less than 25% in principal amount of
the outstanding Notes that such a proceeding be instituted, but the holder has
an absolute right to institute suit for the enforcement of payment of the
principal of, and premium, if any, and interest on, such holder's Notes when due
and to enforce such holder's right to convert such Notes.
The holders of not less than a majority in principal amount of the
outstanding Notes may on behalf of the holders of all Notes waive any past
defaults, except (i) a default in payment of the principal of, or premium, if
any, or interest on, any Note when due, (ii) a failure by the Company to convert
any Notes into Common Stock or (iii) in respect of certain provisions of the
Indenture which cannot be modified or amended without the consent of the holder
of each outstanding Note affected thereby.
The Company is required to furnish to the Trustee annually within 120 days
of the end of the fiscal year a statement of certain officers of the Company
stating whether or not to the best of their knowledge the Company is in default
in the performance and observation of certain terms of the Indenture and, if
they have knowledge that the Company is in default, specifying such default and
its status. The Company is also required, upon becoming aware of any default or
Event of Default, to deliver to the Trustee a statement specifying such default
or Event of Default and the action the Company has taken, is taking or proposes
to take with respect thereto.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another person or group of affiliated persons, unless (i) either (a) the Company
is the surviving
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entity or (b) the resulting, surviving or transferee entity is a corporation
organized under the laws of the United States, any state thereof or the District
of Columbia and expressly assumes by written agreement all of the obligations of
the Company in connection with the Notes and the Indenture; (ii) no default or
Event of Default shall exist or shall occur immediately after giving effect on a
pro forma basis to such transaction; and (iii) certain other conditions are
satisfied.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as the
Company, and the Company will be released from its obligations under the
Indenture and the Notes, except as to any obligations that arise from or as a
result of such transaction.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the Notes at the time outstanding, to modify the Indenture or any
supplemental indenture or the rights of the holders of the Notes, except that no
such modification shall (i) extend the fixed maturity of any Note, reduce the
rate or extend the time for payment of interest thereon, reduce the principal
amount thereof or premium, if any, thereon, reduce any amount payable upon
redemption or repurchase thereof, impair or change in any respect adverse to the
holders of Notes the obligation of the Company to make repurchase of any Note
upon the happening of a Designated Event, impair or adversely affect the right
of a holder to institute suit for the payment thereof, change the currency in
which the Notes are payable, or impair or change in any respect adverse to the
holder of the Notes, the right to convert the Notes into Common Stock subject to
the terms set forth in the Indenture or modify the provisions of the Indenture
with respect to the subordination of the Notes in a manner adverse to the
holders of the Notes, without the consent of the holder of each Note so
affected, or (ii) reduce the aforesaid percentage of Notes, without the consent
of the holders of all of the Notes then outstanding.
TAXATION OF NOTES
See "Certain Federal Income Tax Considerations" for a discussion of certain
federal tax aspects which will apply to holders of Notes.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain outstanding if (i) all outstanding Notes will become due and payable at
their scheduled maturity within one year or (ii) all outstanding Notes are
scheduled for redemption within one year and, in either case, the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
outstanding Notes on the date of their scheduled maturity or the scheduled date
of redemption.
GOVERNING LAW
The Indenture and Notes will be governed by and construed in accordance
with the laws of the State of New York.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the Indenture, has
been appointed by the Company as the initial paying agent, conversion agent,
registrar and custodian with regard to the Notes. The Company may maintain
deposit accounts and conduct other banking transactions with the Trustee or its
affiliates in the ordinary course of business, and the Trustee and its
affiliates may from time to time in the future provide banking and other
services to the Company in the ordinary course of their business.
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During the existence of an Event of Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree of
care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. The Indenture and the
TIA will contain certain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received in respect of any such claim as
security or otherwise. Subject to the TIA, the Trustee will be permitted to
engage in other transactions, provided, however, that if it acquires any
conflicting interest (as described in the TIA), it must eliminate such conflict
or resign.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of material United States federal
income tax considerations relevant to holders of the Notes. This discussion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive effect)
or different interpretations. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and non-United
States persons, may be subject to special rules. In addition, this discussion is
limited to persons that purchase the Notes in the Note Offering and hold the
Notes as a "capital asset" within the meaning of Section 1221 of the Code.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
CONVERSION OF NOTES INTO COMMON STOCK
In general, no gain or loss will be recognized for federal income tax
purposes on a conversion of the Notes into shares of Common Stock. However, cash
paid in lieu of a fractional share of Common Stock will result in taxable gain
(or loss), which will be capital gain or loss, to the extent that the amount of
such cash exceeds (or is exceeded by) the portion of the adjusted basis of the
Note allocable to such fractional share. The adjusted basis of shares of Common
Stock received on conversion will equal the adjusted basis of the Note
converted, reduced by the portion of adjusted basis allocated to any fractional
share of Common Stock exchanged for cash. The holding period of an investor in
the Common Stock received on conversion will include the period during which the
converted Notes were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes -- Conversion." Section 305 of the Code
and the Treasury Regulations issued thereunder may treat the holders of the
Notes as having received a constructive distribution, resulting in ordinary
income (subject to a possible dividends received deduction in the case of
corporate holders) to the extent of the Company's then current and/or
accumulated earnings and profits, if and to the extent that certain adjustments
in the conversion price that may occur in limited circumstances (particularly an
adjustment to reflect a taxable dividend to holders of Common Stock) increase
the proportionate interest of a holder of Notes in the fully diluted Common
Stock, whether or not such holder ever exercises its conversion privilege.
Moreover, if there is not a full adjustment to the conversion price of the Notes
to reflect a stock dividend or other event increasing the proportionate interest
of the holders of outstanding Common Stock in the assets or earnings and profits
of the Company, then such increase in the proportionate interest of the holders
of the Common Stock generally will be treated as a distribution to such Common
Stock holders, taxable as ordinary income (subject to a possible dividends
received deduction in the case of corporate holders) to the extent of the
Company's then current and/or accumulated earnings.
MARKET DISCOUNT
Investors acquiring Notes pursuant to this Prospectus should note that the
resale of those Notes may be adversely affected by the market discount
provisions of sections 1276 through 1278 of the Code. Under the market discount
rules, if a holder of a Note purchases it at a market discount (i.e., at a price
below its stated redemption price at maturity) in excess of a
statutorily-defined de minimis amount and thereafter recognizes gain upon a
disposition or retirement of the Note, then the lesser of the gain recognized or
the portion of the market discount that accrued on a ratable basis (or, if
61
<PAGE> 63
elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount on
a Note may be taxable to an investor to the extent of appreciation at the time
of certain otherwise non-taxable transactions (e.g., gifts). Any accrued market
discount not previously taken into income prior to a conversion of a Note,
however, may (pursuant to Committee Report) carry over to the Common Stock
received on conversion and be treated as ordinary income upon a subsequent
disposition of such Common Stock to the extent of any gain recognized on such
disposition. In addition, absent an election to include market discount in
income as it accrues, a holder of a market discount debt instrument may be
required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry such
debt instrument until the holder disposes of the debt instrument in a taxable
transaction.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Each holder of Notes generally will recognize gain or loss upon the sale,
exchange, redemption, repurchase, retirement or other disposition of those Notes
measured by the difference (if any) between (i) the amount of cash and the fair
market value of any property received (except to the extent that such cash or
other property is attributable to the payment of accrued interest not previously
included in income, which amount will be taxable as ordinary income), and (ii)
the holder's adjusted tax basis in those Notes (including any market discount
previously included in income by the holder). Each holder of Common Stock into
which the Notes are converted, in general, will recognize gain or loss upon the
sale, exchange, redemption, or other disposition of the Common Stock measured
under rules similar to those described in the preceding sentence for the Notes.
Special rules may apply to redemptions of Common Stock which may result in
different treatment. Any such gain or loss recognized on the sale, exchange,
redemption, repurchase, retirement or other disposition of a Note or share of
Common Stock should be capital gain or loss (except as discussed under
"-- Market Discount" above), and would be long-term capital gain or loss if the
Note or the Common Stock had been held for more than one year at the time of the
sale or exchange. An investor's initial basis in a Note will be the cash price
paid therefor.
BACK-UP WITHHOLDING
Certain "reportable payments," including interest payments, and, under
certain circumstances, principal payments on the Notes, as well as dividend
payments on the Common Stock, may be subject to "back-up withholding" at a rate
of 31%. These back-up withholding rules apply if the holder, among other things,
(i) fails to furnish a social security number or other taxpayer identification
number ("TIN") certified under penalties of perjury within a reasonable time
after the request therefor, (ii) furnishes an incorrect TIN, (iii) fails to
report properly interest or dividends, or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN furnished is the correct number and that the holder is not subject to
back-up withholding. A holder who does not provide the Company with its correct
TIN also may be subject to penalties imposed by the IRS. Any amount withheld
from a payment to a holder under the back-up withholding rules is creditable
against the holder's federal income tax liability, provided the required
information is furnished to the IRS. Back-up withholding will not apply,
however, with respect to payments made to certain holders, including
corporations, tax-exempt organizations and certain foreign persons, provided
their exemption from back-up withholding is properly established.
The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
62
<PAGE> 64
UNDERWRITING
The Underwriters named below (the "Common Stock Underwriters"), acting
through their representatives, Robertson, Stephens & Company LLC, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and Adams, Harkness & Hill, Inc. (the
"Common Stock Representatives"), have severally agreed with the Company, subject
to the terms and conditions of the applicable Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock set forth
opposite their respective names below. The Common Stock Underwriters are
committed to purchase and pay for all such shares if any shares are purchased.
The closing of the Common Stock Offering is conditioned upon the closing of the
Note Offering.
<TABLE>
<CAPTION>
COMMON STOCK NUMBER
UNDERWRITER OF SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Robertson, Stephens & Company LLC.........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
Adams, Harkness & Hill, Inc...............................................
---------
Total................................................................ 2,000,000
=========
</TABLE>
The Underwriters named below (the "Note Underwriters"), acting through
their representatives, Robertson, Stephens & Company LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Note Representatives"), have severally
agreed with the Company, subject to the terms and conditions of the applicable
Underwriting Agreement, to purchase from the Company the principal amount of
Notes set forth opposite their respective names below. The Note Underwriters are
committed to purchase and pay for all such Notes if any Notes are purchased. The
closing of the Note Offering is conditioned upon the closing of the Common Stock
Offering.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
NOTE UNDERWRITER OF NOTES
----------------------------------------------------------------------- ------------
<S> <C>
Robertson, Stephens & Company LLC...................................... $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................
---------
Total............................................................. $100,000,000
=========
</TABLE>
The Common Stock Representatives and the Note Representatives are sometimes
referred to collectively as the "Representatives." The Common Stock Underwriters
and the Note Underwriters are sometimes referred to collectively as the
"Underwriters."
The respective Representatives have advised the Company that the respective
Underwriters propose to offer the shares of Common Stock and the Notes to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession of,
respectively, not in excess of $ per share, of which $ may be
reallowed to other dealers, and of not more than % of the principal amount of
the Notes. After the consummation of each Offering, the public offering price,
concession and reallowance to dealers for such Offering may
63
<PAGE> 65
be reduced by the respective Representatives. No such reduction shall change the
amount of proceeds to be received by the Company with respect to such Offering
as set forth on the cover page of this Prospectus.
The Company and the Selling Stockholders have granted to the Common Stock
Underwriters an option, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to 97,400 and 202,600 shares of Common Stock,
respectively, to cover over-allotments, if any, at the same price per share as
the Company receives for the 2,000,000 shares of Common Stock that the Common
Stock Underwriters have agreed to purchase from the Company. The first 202,600
shares of Common Stock purchased by the Common Stock Underwriters pursuant to
this option will be sold by the Selling Stockholders and the subsequent 97,400
shares, if any, purchased by the Common Stock Underwriters pursuant to this
option will be sold by the Company. The Company also has granted to the Note
Underwriters an option, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to $15 million principal amount of Notes to
cover over-allotments, if any, at the same price per Note as the Company
receives for the first $100 million principal amount of Notes that the Note
Underwriters have agreed to purchase from the Company. To the extent that the
Common Stock Underwriters exercise such option for shares of Common Stock, each
of the Common Stock Underwriters will have a firm commitment to purchase
approximately the same percentage of such additional shares of Common Stock as
the number of shares of Common Stock to be purchased by it shown in the above
table represents as a percentage of the 2,000,000 shares offered hereby. If
purchased, such additional shares will be sold by the Common Stock Underwriters
on the same terms as those on which the 2,000,000 shares of Common Stock are
being sold. To the extent that the Note Underwriters exercise such option for
Notes, each of the Note Underwriters will have a firm commitment to purchase
approximately the same percentage of such additional Notes as the principal
amount of Notes to be purchased by it shown in the above table represents as a
percentage of the $100 million principal amount of Notes offered hereby. If
purchased, such additional Notes will be sold by the Note Underwriters on the
same terms as those on which the $100 million principal amount of Notes are
being sold.
The respective Underwriting Agreements contain covenants of indemnity among
the respective Underwriters, the Company and, in the case of the Underwriting
Agreement for the Common Stock Offering, the Selling Stockholders, against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act").
Pursuant to the terms of Lockup Agreements, all executive officers and
Selling Stockholders, and certain directors, of the Company have agreed with the
respective Representatives that, for a period 90 days after the date of the
Offerings (the "Lock-Up Period"), they will not offer to sell, contract to sell
or otherwise sell, dispose of or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase shares of Common Stock or any
securities convertible into or exchangeable for shares of Common Stock now owned
or hereafter acquired directly by such holders or with respect to which they
have the power of disposition, otherwise than with the prior written consent of
Robertson Stephens & Company LLC which may, in its sole discretion and at any
time, without notice, release all or any portion of the securities subject to
Lockup Agreements. The Company has also agreed not to offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or any options
or warrants to purchase Common Stock other than shares or options issued under
the Company's stock option plans and stock issued upon the exercise of
outstanding options and warrants during the Lock-Up Period except with the prior
written consent of Robertson, Stephens & Company LLC.
The respective Representatives have advised the Company that the respective
Underwriters do not intend to confirm any sales to accounts over which they
exercise discretionary authority.
The offering price of the Common Stock will be determined by negotiations
among the Company and the Common Stock Representatives, based largely upon the
market price for the Common Stock as reported on the Nasdaq National Market.
64
<PAGE> 66
Certain persons participating in these Offerings may engage in
transactions, including syndicate covering transactions or the imposition of
penalty bids, which may involve the purchase of Common Stock and Notes on the
Nasdaq National Market, the over-the-counter market or otherwise. Such
transactions may stabilize or maintain the market price of the Common Stock and
the Notes at levels above that which might otherwise prevail in the open market.
A stabilizing bid means the placing of any bid or effecting of any purchase, for
the purpose of pegging, fixing or maintaining the price of the Common Stock or
the Notes. A syndicate covering transaction means the placing of any bid on
behalf of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with the offering. A penalty bid means an
arrangement that permits the Underwriters to reclaim a selling concession from a
syndicate member in connection with the offering when shares of Common Stock or
Notes sold by the syndicate member are purchased in syndicate covering
transactions. Such transactions may be effected on the Nasdaq Stock Market, in
the over-the-counter market, or otherwise. Such stabilizing, if commenced, may
be discontinued at any time.
Prior to the Note Offering, there has been no trading market for the Notes.
The Company expects that the Notes will trade on the over-the-counter market.
However, there can be no assurance that an active trading market for the Notes
will develop or, if such market develops, as to the liquidity or sustainability
of such market. Robertson, Stephens & Company LLC and Merrill Lynch, Pierce,
Fenner & Smith Incorporated have advised the Company that they currently intend
to make a market in the Notes, but they are not obligated to do so and may
discontinue such market making at any time. There can be no assurance that an
active market for the Notes will develop and continue upon completion of the
Note Offering or that the market price of the Notes will not decline. Various
factors such as changes in prevailing interest rates or changes in perceptions
of the Company's creditworthiness could cause the market price of the Notes to
fluctuate significantly. The trading price of the Notes could also be
significantly affected by the market price of the Common Stock, which could be
subject to wide fluctuations in response to a variety of factors, including
quarterly variations in operating results, announcements of technological
innovations or new products by the Company, its customers or its competitors,
developments in patents or other intellectual property rights, general
conditions in the electronics industry and general economic and market
conditions. Factors creating volatility in the trading price of the Common Stock
could have a significant impact on the trading price of the Notes.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and the validity
of the Notes offered hereby and the shares of Common Stock issuable upon
conversion thereof will be passed upon for the Company by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts, special counsel to the Company. The
validity of the shares of Common Stock offered hereby by the Selling
Stockholders will be passed upon for the Selling Stockholders by Berlin,
Hamilton & Dahmen, LLP, Boston, Massachusetts. A member of Testa, Hurwitz &
Thibeault, LLP is the beneficial owner of 100 shares of Common Stock of the
Company. James C. Hamilton, a partner at Berlin, Hamilton & Dahmen, LLP, which
is general counsel to the Company, is the Company's Clerk. He is the beneficial
owner of 12,250 shares of Common Stock of the Company. He is also the co-trustee
of certain irrevocable trusts for the benefit of members of the family of Horace
H. Irvine II, Chairman of the Board of the Company. See "Principal
Shareholders."
Certain legal matters relating to the Common Stock Offering and the Note
Offering will be passed upon for the respective Underwriters by Hale and Dorr,
LLP, Boston, Massachusetts, and the validity of the Notes offered hereby will be
passed upon for the Note Underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The Company's audited consolidated financial statements and schedule
included in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP,
65
<PAGE> 67
independent public accountants, as indicated in its reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
The consolidated financial statements of Zycon Corporation included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as of December 31, 1996 and for the one-year period ended December
31, 1996 to the extent indicated in its report, and are included herein in
reliance upon the authority of such firm as experts in giving said report. The
consolidated financial statements of Zycon Corporation as of December 31, 1995
and for each of the years in the two-year period ended December 31, 1995, have
been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the securities offered hereby (the
"Registration Statement"). This Prospectus, which constitutes part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete.
Reference is made to such contract or other document filed, or incorporated by
reference, as an exhibit to the Registration Statement, and each such statement
is qualified in all respects by such reference. For further information
pertaining to the Company and the Common Stock and Notes, reference is made to
the Registration Statement and the exhibits and schedules thereto, which may be
inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; and at the following Regional Offices of the
Commission: Seven World Trade Center, New York, New York, 10048; and 500 West
Madison Avenue, Suite 1400, Chicago, Illinois 60621.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. All such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 90 Devonshire Street, Suite 700, Boston, Massachusetts 02109; 7
World Trade Center, 13th Floor, New York, New York 10048; and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may also be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its public reference facilities at
Boston, Massachusetts, New York, New York and Chicago, Illinois at prescribed
rates. In addition, the aforementioned materials may also be inspected at the
offices of the Nasdaq National Market at 1735 K Street, N.W., Washington, D.C.
20006. The Commission maintains a World-Wide Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
Web site is http.//www.sec.gov.
66
<PAGE> 68
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
HADCO CORPORATION:
Report of Independent Public Accountants........................................... F-2
Consolidated Balance Sheets at October 28, 1995, October 26, 1996 and January 25,
1997 (Unaudited)................................................................ F-3
Consolidated Statements of Operations for the Years Ended October 29, 1994, October
28, 1995 and October 26, 1996 and for the Three Months Ended January 27, 1996
(Unaudited) and January 25, 1997 (Unaudited).................................... F-4
Consolidated Statements of Stockholders' Investment for the Years Ended October 29,
1994, October 28, 1995 and October 26, 1996 and for the Three Months Ended
January 25, 1997 (Unaudited).................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended October 29, 1994, October
28, 1995 and October 26, 1996 and for the Three Months Ended January 27, 1996
(Unaudited) and January 25, 1997 (Unaudited).................................... F-6
Notes to Consolidated Financial Statements......................................... F-7
PRO FORMA FINANCIAL STATEMENTS:
Pro Forma Condensed Consolidated Financial Statements.............................. F-23
Pro Forma Condensed Consolidated Statement of Operations for the Fiscal Year Ended
October 26, 1996 (Unaudited).................................................... F-24
Pro Forma Condensed Consolidated Statement of Operations for the Quarter Ended
January 25, 1997 (Unaudited).................................................... F-25
ZYCON CORPORATION:
Report of Independent Public Accountants (Arthur Andersen LLP)..................... F-26
Independent Auditors' Report (KPMG Peat Marwick LLP)............................... F-27
Consolidated Balance Sheets as of December 31, 1995 and 1996....................... F-28
Consolidated Statements of Income for the Years Ended December 31, 1994, 1995 and
1996............................................................................ F-29
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1994, 1995 and 1996............................................................. F-30
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995
and 1996........................................................................ F-31
Notes to Consolidated Financial Statements......................................... F-32
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hadco Corporation:
We have audited the accompanying consolidated balance sheets of Hadco
Corporation (a Massachusetts corporation) and subsidiaries as of October 28,
1995 and October 26, 1996, and the related consolidated statements of
operations, stockholders' investment and cash flows for each of the three years
in the period ended October 26, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hadco Corporation as of
October 28, 1995 and October 26, 1996, and the results of their operations and
their cash flows for each of the three years in the period ended October 26,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 15, 1996 (except for the
matter discussed in Note 2, as to
which the date is January 10, 1997)
F-2
<PAGE> 70
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share information)
<TABLE>
<CAPTION>
OCTOBER 28, OCTOBER 26, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 21,307 $ 32,786 $ 8,825
Short-term investments.............................. 15,167 9,401 3,264
Accounts receivable, net of allowance of $850 in
1995, $1,100 in 1996 and $1,830 in 1997.......... 35,797 40,622 72,616
Inventories......................................... 13,304 21,786 34,107
Deferred tax asset.................................. 6,288 7,483 7,483
Prepaid and other expenses.......................... 1,696 1,483 5,607
-------- -------- --------
Total current assets........................ 93,559 113,561 131,902
PROPERTY, PLANT AND EQUIPMENT, NET.................... 67,692 103,735 203,639
DEFERRED TAX ASSET.................................... 1,646 2,117 --
ACQUIRED INTANGIBLE ASSETS, NET....................... -- -- 108,699
OTHER ASSETS.......................................... 94 88 4,314
-------- -------- --------
$162,991 $219,501 $448,554
======== ======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term debt, current portion of long-term debt
and capital lease obligations.................... $ 2,143 $ 1,907 $ 8,116
Accounts payable.................................... 27,002 42,265 69,709
Accrued payroll and other employee benefits......... 16,030 17,592 19,771
Other accrued expenses.............................. 7,341 8,236 12,234
-------- -------- --------
Total current liabilities................... 52,516 70,000 109,830
-------- -------- --------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF
CURRENT PORTION..................................... 2,387 1,515 228,168
-------- -------- --------
DEFERRED TAX LIABILITY................................ -- -- 30,285
-------- -------- --------
OTHER LONG-TERM LIABILITIES........................... 7,314 9,145 9,214
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' INVESTMENT:
Common stock, $.05 par value;
Authorized -- 25,000 shares
Issued and outstanding -- 9,939 shares in 1995,
10,382 in 1996 and 10,444 shares in 1997......... 497 521 523
Paid-in capital..................................... 25,077 30,939 32,283
Deferred compensation............................... (407) (240) (209)
Retained earnings................................... 75,607 107,621 38,460
-------- -------- --------
Total stockholders' investment.............. 100,774 138,841 71,057
-------- -------- --------
$162,991 $219,501 $448,554
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 71
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED, THREE MONTHS ENDED,
------------------------------------- ------------------------
OCTOBER 29, OCTOBER 28, OCTOBER 26, JANUARY 27, JANUARY 25,
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales.................................................. $ 221,570 $ 265,168 $ 350,685 $76,481 $ 111,536
Cost of Sales.............................................. 177,597 200,673 264,537 56,999 86,681
-------- -------- -------- ------- --------
Gross Profit............................................... 43,973 64,495 86,148 19,482 24,855
Selling, General and Administrative Expenses............... 27,491 30,589 34,616 7,948 9,298
Write-off of Acquired in-Process Research and
Development.............................................. -- -- -- -- 78,000
-------- -------- -------- ------- --------
Income (Loss) From Operations.............................. 16,482 33,906 51,532 11,534 (62,443)
Interest and Other Income.................................. 843 1,669 1,287 355 880
Interest Expense........................................... (891) (537) (338) (95) (933)
-------- -------- -------- ------- --------
Income (Loss) Before Provision for Income Taxes............ 16,434 35,038 52,481 11,794 (62,496)
Provision for Income Taxes................................. 6,491 13,664 20,467 4,603 6,665
-------- -------- -------- ------- --------
Net Income (Loss).......................................... $ 9,943 $ 21,374 $ 32,014 $ 7,191 $ (69,161)
======== ======== ======== ======= ========
Net Income (Loss) Per Share................................ $ .93 $ 1.98 $ 2.89 $ .65 $ (6.64)
======== ======== ======== ======= ========
Weighted Average Shares Outstanding........................ 10,720 10,806 11,084 11,104 10,413
======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 72
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
NUMBER $.05 PAR PAID-IN DEFERRED RETAINED
OF SHARES VALUE CAPITAL COMPENSATION EARNINGS
--------- -------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 30, 1993.................... 9,734 $487 $21,953 $ (1,316) $ 47,307
Terminated stock options................... -- -- (225) 225 --
Exercise of stock options.................. 332 16 837 -- --
Tax benefit of exercise of nonqualified
stock options........................... -- -- 319 -- --
Compensation expense associated with
granting nonqualified stock options..... -- -- -- 360 --
Purchase and retirement of common stock.... (328) (16) (121) -- (2,329)
Net income................................. -- -- -- -- 9,943
------ ---- ------- ------- --------
BALANCE, OCTOBER 29, 1994.................... 9,738 487 22,763 (731) 54,921
Terminated stock options................... -- -- (37) 37 --
Exercise of stock options.................. 529 16 1,079 -- --
Tax benefit of exercise of nonqualified
stock options........................... -- -- 1,597 -- --
Compensation expense associated with
granting nonqualified stock options..... -- -- -- 287 --
Purchase and retirement of common stock.... (328) (6) (325) -- (688)
Net income................................. -- -- -- -- 21,374
------ ---- ------- ------- --------
BALANCE, OCTOBER 28, 1995.................... 9,939 497 25,077 (407) 75,607
Terminated stock options................... -- -- (13) 13 --
Exercise of stock options.................. 443 24 1,714 -- --
Tax benefit of exercise of nonqualified
stock options........................... -- -- 4,161 -- --
Compensation expense associated with
granting nonqualified stock options..... -- -- -- 154 --
Net income................................. -- -- -- -- 32,014
------ ---- ------- ------- --------
BALANCE, OCTOBER 26, 1996.................... 10,382 521 30,939 (240) 107,621
Exercise of stock options (unaudited)...... 62 2 326 -- --
Tax benefit of exercise of nonqualified
stock options (unaudited)............... -- -- 1,018 -- --
Compensation expense associated with
granting nonqualified stock options
(unaudited)............................. -- -- -- 31 --
Net loss (unaudited)....................... -- -- -- -- (69,161)
------ ---- ------- ------- --------
BALANCE, JANUARY 25, 1997 (Unaudited)........ 10,444 $523 $32,283 $ (209) $ 38,460
====== ==== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 73
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED, THREE MONTHS ENDED,
--------------------------------------- ---------------------------
OCTOBER 29, OCTOBER 28, OCTOBER 26, JANUARY 27, JANUARY 25,
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ 9,943 $ 21,374 $ 32,014 $ 7,191 $ (69,161)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities--
Write-off of acquired in-process research and
development......................................... -- -- -- -- 78,000
Depreciation, amortization, deferred compensation and
deferred taxes...................................... 12,708 11,218 17,330 3,840 6,531
Gain on sale of fixed assets.......................... (81) (415) (205) (194) --
Changes in assets and liabilities, net of acquisition
of Zycon Corporation--
Increase in accounts receivable................... (2,739) (10,485) (4,825) (465) (7,158)
Increase in inventories........................... (288) (3,009) (8,482) (1,166) (931)
(Increase) decrease in prepaid taxes and other
expenses........................................ (685) (364) 213 (775) (1,053)
Decrease (increase) in other assets............... 55 25 33 15 (628)
Increase in accounts payable and accrued
expenses........................................ 8,661 15,291 17,720 304 2,661
Increase in long-term liabilities................. 1,710 2,714 1,831 700 70
-------- -------- -------- -------- ---------
Net cash provided by operating activities....... 29,284 36,349 55,629 9,450 8,331
-------- -------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (purchases) sales of short-term investments......... (4,095) (2,668) 5,766 1,933 6,137
Purchases of property, plant and equipment.............. (19,510) (28,865) (53,966) (13,713) (11,011)
Proceeds from sale of property, plant and equipment..... 177 429 290 194 --
Acquisition of Zycon Corporation, net of cash acquired
of $2,824............................................. -- -- -- -- (209,661)
-------- -------- -------- -------- ---------
Net cash used in investing activities........... (23,428) (31,104) (47,910) (11,586) (214,535)
-------- -------- -------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligations...... (4,447) (2,584) (2,047) (630) (413)
Principal payments of long-term debt.................... (92) (2,091) (92) (22) (33,690)
Proceeds from issuance of long-term debt................ -- -- -- -- 215,000
Proceeds from exercise of stock options................. 853 1,095 1,738 2,952 328
Tax benefit from exercise of options.................... 319 1,597 4,161 -- 1,018
Purchase and retirement of common stock................. (2,466) (1,019) -- -- --
-------- -------- -------- -------- ---------
Net cash (used in) provided by financing
activities.................................... (5,833) (3,002) 3,760 2,300 182,243
-------- -------- -------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... 23 2,243 11,479 164 (23,961)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............ 19,041 19,064 21,307 21,307 32,786
-------- -------- -------- -------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................. $ 19,064 $ 21,307 $ 32,786 $ 21,471 $ 8,825
======== ======== ======== ======== =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Machinery and equipment acquired under capital
lease obligations..................................... $ -- $ -- $ 1,032 $ -- $ --
======== ======== ======== ======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for--
Interest.............................................. $ 859 $ 576 $ 279 $ -- $ 311
======== ======== ======== ======== =========
Income taxes (net of refunds)......................... $ 8,939 $ 13,609 $ 16,794 $ 3,101 $ 405
======== ======== ======== ======== =========
ACQUISITION OF ZYCON CORPORATION--
Fair value of assets acquired........................... $ 212,509
Liabilities assumed..................................... (114,993)
Cash paid............................................... (204,885)
Acquisition costs incurred.............................. (7,600)
Write-off of acquired in-process research and
development........................................... 78,000
---------
Goodwill................................................ $ (36,969)
=========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 74
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Hadco Corporation's (the "Company") principal products are complex
multilayer rigid printed circuits and backplane assemblies. The consolidated
financial statements reflect the application of certain accounting policies as
described in this note and elsewhere in the accompanying notes to consolidated
financial statements.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Management Estimates
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.
Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investment instruments purchased
with a maturity of three months or less to be cash equivalents. Short-term
investments are carried at cost, which approximates market, and have maturities
of less than one year.
The Company classifies its investments in corporate and government debt
securities as held-to-maturity given the Company's intent and ability to hold
the securities to maturity. In accordance with the statement, held-to-maturity
securities are carried at amortized cost.
The Company's investments in held-to-maturity securities are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----------------- --------------- ---------------
FAIR FAIR FAIR
MARKET MARKET MARKET
COST VALUE COST VALUE COST VALUE MATURITY
------- ------- ------ ------ ------ ------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
US Government Securities..... $ 6,039 $ 6,058 $1,000 $ 999 $1,000 $ 999 within 1 year
State and Local Securities... 1,000 1,000 5,270 5,271 2,264 2,264 within 1 year
Corporate Debt Securities.... 8,128 8,064 3,131 3,069 -- -- within 1 year
------- ------- ------ ------ ------ ------
$15,167 $15,122 $9,401 $9,339 $3,264 $3,263
======= ======= ====== ====== ====== ======
</TABLE>
The Company has no financial instruments requiring disclosure under
Financial Accounting Standards Board issued Statement of Financial Accounting
Standard (SFAS) No. 119, Disclosure About Derivative Financial Instruments and
Fair Value of the Financial Instruments.
Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentration. The Company has no significant off-balance-sheet
F-7
<PAGE> 75
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
concentrations of credit risk such as foreign currency exchange contracts or
other hedging arrangements. Financial instruments that subject the Company to
credit risk consist of cash and cash equivalents, short-term investments and
trade accounts receivable. The Company maintains the majority of its cash and
investment balances with financial institutions. The Company has not experienced
any losses on these investments to date. Substantially all of the Company's
accounts receivable are concentrated in the high technology and electronics
industry. The Company has not experienced significant losses related to
receivables from individual customers or groups of customers in the high
technology and electronics industry or by geographic region. Due to these
factors, no additional credit risk beyond amounts provided for collection losses
is believed by management to be inherent in the Company's accounts receivable.
Depreciation and Amortization of Property, Plant and Equipment
The Company provides for depreciation and amortization by charges to
operations in amounts that allocate the cost of property, plant and equipment on
a straight-line basis over the following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
----------------------------------------------------------------------- -----------
<S> <C>
Land betterments....................................................... 10-18 Years
Buildings and improvements............................................. 10-40 Years
Machinery and equipment................................................ 3-9 Years
Furniture and fixtures................................................. 5-7 Years
Computer software...................................................... 3 Years
Vehicles............................................................... 3 Years
Capital leases......................................................... Lease term
</TABLE>
Net Income (Loss) per Share
Net income (loss) per share was computed based on the weighted average
number of common and common equivalent shares outstanding during each period.
Common equivalent shares include outstanding stock options and are included when
dilutive. Fully diluted net income (loss) per share has not been separately
presented as it would not be materially different from net income (loss) per
share as presented.
Revenue Recognition
The Company recognizes revenue at the time products are shipped.
Research and Development Expenses
The Company charges research and development expenses to operations as
incurred. For the fiscal years ended October 1994, 1995 and 1996 and the quarter
ended January 25, 1997, research and development expenses were approximately
$1,545,000, $2,945,000, $4,307,000, and $1,522,000, respectively, and are
included in cost of sales.
New Accounting Standard
The Company accounts for its stock-based compensation plans under
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees. The Company is required to adopt SFAS No. 123, Accounting for
Stock-Based Compensation, in fiscal 1997. SFAS No. 123 defines a fair-
F-8
<PAGE> 76
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
value-based method of accounting for employee stock options and other
stock-based compensation. The compensation expense arising from this method of
accounting can be reflected in the financial statements or, alternatively, the
pro forma net income and earnings per share effect of the fair-value-based
accounting can be disclosed in the financial footnotes. The Company will adopt
the disclosure-only alternative.
Foreign Currency Translation
The functional currency of the Company's Malaysian subsidiary is the United
States dollar. Accordingly, all remeasurement gains and losses resulting from
transactions denominated in currencies other than United States dollars are
included in the consolidated statements of operations. To date, the resulting
gains and losses have not been material.
Reclassification
The Company has reclassified certain prior year information to conform with
the current year's presentation.
Interim Financial Statements
The accompanying consolidated balance sheet as of January 25, 1997, the
consolidated statements of operations and cash flows for the three-month periods
ended January 27, 1996 and January 25, 1997 and the statement of stockholders'
investment for the three-month period ended January 25, 1997 are unaudited but,
in the opinion of management, include all adjustments (consisting of normal,
recurring adjustments) necessary for a fair presentation of results for these
interim periods. The results of operations for the three months ended January
25, 1997 are not necessarily indicative of results to be expected for the entire
year.
(2) ACQUISITION OF ZYCON
On January 10, 1997, the Company acquired substantially all of the
outstanding common stock of Zycon Corporation ("Zycon"). The acquisition was
financed by a new bank credit facility of up to $250,000,000, of which the
Company borrowed approximately $215,000,000, upon consummation of the
acquisition (see Note 7). The acquisition is being accounted for as a purchase
in accordance with APB Opinion No. 16, and accordingly, Zycon's operating
results since January 10, 1997 are included in the accompanying consolidated
financial statements.
In accordance with APB Opinion No. 16, the Company has allocated the
purchase price based on the fair value of assets acquired and liabilities
assumed. A significant portion of the purchase price, as described below, has
been identified in an independent appraisal as intangible assets using proven
valuation procedures and techniques, including approximately $78,000,000 of
in-process research and development ("in-process R&D"). Acquired intangibles
include developed technology, customer relationships, assembled workforce and
trade names/trademarks. These intangibles are being amortized over their
estimated useful lives of 12 to 30 years. The portion of the purchase price
allocated to the in-process R&D projects that did not have a future alternative
use totaled $78,000,000 and was charged to expense as of the acquisition date.
Due to a difference in the bases of certain assets for financial statement and
income tax purposes, deferred income taxes of $28,800,000 have been provided as
part of the purchase price allocation in accordance with SFAS No. 109.
F-9
<PAGE> 77
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The aggregate purchase price of $212,485,000, including acquisition costs,
was allocated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Current assets........................................................ $ 41,790
Property, plant and equipment......................................... 95,193
Acquired intangibles.................................................. 72,000
In-process R&D........................................................ 78,000
Other assets.......................................................... 3,526
Goodwill.............................................................. 36,969
Liabilities assumed................................................... (114,993)
---------
$ 212,485
=========
</TABLE>
Unaudited pro forma operating results for the Company, assuming the
acquisition of Zycon occurred on October 29, 1995 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED ---------------------------
OCTOBER JANUARY 27, JANUARY 25,
26, 1996 1996 1997
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales..................................... $570,345 $ 129,901 $ 172,547
Net income.................................... 27,222 7,651 7,900
Net income per share.......................... $ 2.46 $ .69 $ .72
</TABLE>
For purposes of these pro forma operating results, the in-process R&D was
assumed to have been written off prior to October 29, 1995, so that the
operating results presented include only recurring costs.
(3) INVENTORIES
Inventories are stated at the lower of cost, first-in, first-out (FIFO), or
market and consist of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials......................................... $ 6,318 $ 8,008 $12,668
Work-in-process....................................... 6,986 13,778 21,439
------- ------- -------
$13,304 $21,786 $34,107
======= ======= =======
</TABLE>
The work-in-process consists of materials, labor and manufacturing
overhead.
F-10
<PAGE> 78
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Land betterments................................ $ 1,838 $ 1,991 $ 2,174
Buildings and improvements...................... 42,885 52,961 97,895
Construction-in-progress........................ 15,173 22,543 23,841
Machinery and equipment......................... 94,611 126,878 228,099
Furniture and fixtures.......................... 11,721 14,082 15,500
Computer software............................... 2,343 2,662 3,581
Vehicles........................................ 141 159 584
Capital leases.................................. 15,048 14,972 16,620
--------- --------- ---------
183,760 236,248 388,294
Accumulated depreciation and amortization....... (116,068) (132,513) (184,655)
--------- --------- ---------
$ 67,692 $ 103,735 $ 203,639
========= ========= =========
</TABLE>
(5) INTANGIBLE ASSETS
The Company assesses the realizability of intangible assets in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. Under SFAS No. 121, the Company is required
to assess the valuation of its long-lived assets, including intangible assets,
based on the estimated cash flows to be generated by such assets. Intangible
assets are amortized on a straight-line basis, based on their estimated lives,
as follows:
<TABLE>
<CAPTION>
ESTIMATED JANUARY 25,
LIFE 1997
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
Developed technology..................................... 12 years $ 30,000
Customer relationships................................... 25 years 19,000
Assembled workforce...................................... 12 years 10,000
Trade names/trademarks................................... 30 years 13,000
Goodwill................................................. 20 years 36,969
--------
108,969
Less -- Accumulated amortization......................... (270)
--------
$108,699
========
</TABLE>
(6) INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes.
F-11
<PAGE> 79
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The provision for income taxes shown in the accompanying consolidated
statements of operations is comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER
---------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal --
Current................................................. $ 6,566 $14,331 $18,341
Deferred................................................ (1,224) (2,954) (1,206)
------- ------- -------
5,342 11,377 17,135
------- ------- -------
State --
Current................................................. 1,440 2,928 3,611
Deferred................................................ (291) (641) (279)
------- ------- -------
1,149 2,287 3,332
------- ------- -------
$ 6,491 $13,664 $20,467
======= ======= =======
</TABLE>
The tax rate used in the computation of the provision for federal and state
income taxes differs from the statutory federal and state rates due to the
following:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Provision for statutory rate................................. 34.0% 34.0% 34.0%
Increase (decrease) in tax resulting from --
State income taxes, net of federal tax benefit............. 4.6 4.5 4.4
Tax-exempt interest income................................. (0.4) (0.5) (0.4)
Other, net................................................. 1.3 1.0 1.0
---- ---- ----
Provision for income taxes.............................. 39.5% 39.0% 39.0%
==== ==== ====
</TABLE>
In accordance with generally accepted accounting principles, the Company
provides for income taxes on an interim basis, using its effective annual income
tax rate. Although the Company has incurred a loss before income taxes during
the three months ended January 25, 1997, the Company has recorded an income tax
provision because the write-off of in-process R&D is not deductible for income
tax purposes. Without taking into consideration the write-off of in-process R&D,
the Company anticipates that the effective annual income tax rate for fiscal
1997 will be 43%, which is more than the expected combined federal and state
statutory rates. This difference is caused primarily by anticipated losses
incurred by the Company's Malaysian subsidiary for which the Company cannot
record any tax benefit, and by amortization of goodwill and acquired intangibles
which is not tax deductible. These items are partially offset by tax advantaged
investment income, the tax benefit of the Company's Foreign Sales Corporation
and various state investment tax credits.
F-12
<PAGE> 80
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The deferred provision for income taxes results from the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Difference between book and tax depreciation........ $ (352) $ (144) $ (46)
Deferred compensation............................... 143 73 266
Reserves and expenses recognized in different
periods for book and tax purposes................. (1,288) (3,506) (1,658)
Other, net........................................ (18) (18) (47)
------- ------- -------
$(1,515) $(3,595) $(1,485)
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the current and long-term deferred tax assets and liabilities at
October 28, 1995 and October 26, 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Assets --
Not currently deductible reserves............................ $ 6,184 $ 7,475
Not currently deductible environmental accruals.............. 3,197 3,907
Deferred compensation from issuance of nonqualified stock
options................................................... 579 275
------- -------
Total gross deferred tax assets...................... 9,960 11,657
Less -- valuation allowance.................................. 290 137
------- -------
9,670 11,520
Deferred Tax Liability --
Property, plant and equipment, principally due to differences
in depreciation........................................... (1,736) (1,920)
------- -------
Net deferred tax asset............................... $ 7,934 $ 9,600
======= =======
</TABLE>
Due to the uncertainty relating to the actual value of the favorable tax
benefits of deferred compensation from stock options, the Company has recorded a
valuation allowance of approximately $290,000 and $137,000 as of October 28,
1995 and October 26, 1996, respectively. The reduction of this allowance for the
year ended October 26, 1996 is a result of the decrease in the deferred tax
asset relating to deferred compensation.
(7) LINES OF CREDIT
Prior to the acquisition of Zycon discussed in Note 2, the Company had an
unsecured Revolving Credit and Term Loan Agreement with a bank. The agreement
provided for up to $15,000,000 in revolving credit until June 30, 1997. The
Company could designate the rate of interest at either the Eurodollar Rate plus
0.6%, or the bank's base rate. As of October 26, 1996, no amounts were
outstanding under this line of credit.
In connection with the Zycon acquisition discussed in Note 2, the Company
entered into a $250,000,000 unsecured Revolving Credit Agreement (the
"Agreement") with a bank, replacing the previous $15,000,000 agreement described
above. The Agreement provides for direct borrowings or letters of credit and
expires January 8, 2002. Borrowings under the Agreement bear interest, at the
Company's option, at either; (i) the Eurodollar rate plus a margin ranging
between .5% and 1.125%, based on a certain financial ratio of the Company, or
(ii) the Base Rate, as defined. The Company is
F-13
<PAGE> 81
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
required to pay a quarterly commitment fee ranging from .2% to .375%, based on a
certain financial ratio of the Company, of the unused commitment under the
Agreement. If the Company obtains certain debt financing, as defined, the bank
may require the Company to repay up to $150,000,000 of amounts outstanding under
the Agreement. At January 25, 1997, borrowings of $215,000,000 were outstanding
under the Agreement at a weighted average interest rate of 6.68%.
The Agreement places several restrictions on the Company, including
limitations on mergers, acquisitions and sales of a substantial portion of its
assets, as well as certain limitations on liens, guarantees, additional
borrowings, changes in the Company's capitalization, as defined, and
investments. The Agreement also requires the Company to maintain certain
financial covenants, including minimum levels of consolidated net worth, a
maximum ratio of funded debt to EBITDA, maximum capital expenditures and
interest coverage, as defined, during the term of the Agreement. At January 25,
1997, the Company was in compliance with all loan covenants.
The Company has a line of credit arrangement with a Malaysian bank
denominated in Malaysian ringgits and U.S. dollars for aggregate borrowings of
approximately $4.4 million for the purpose of acquiring land, facilities and
equipment for the Company's Malaysian subsidiary. The arrangement is renewable
annually. At January 25, 1997, there was $2,929,000 outstanding under this
arrangement at a weighted average interest rate of approximately 10%.
(8) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
OCTOBER
----------------- JANUARY
1995 1996 1997
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Loan agreements in connection with the expansion of a building. The
loans bear interest at rates from 1% to 7% through March 2011 and are
collateralized by property and an irrevocable letter of credit.
Payments of principal and interest are due quarterly................. $1,008 $ 916 $ 893
Revolving credit agreement (Note 7).................................... -- -- 215,000
Loan agreements in connection with the purchase of manufacturing
equipment. The loans bear interest at 7.17% to 11.37%, are payable in
monthly installments of principal and interest through June 2001, and
are collateralized by machinery and equipment........................ -- -- 15,331
Line of credit arrangement with a Malaysia bank (Note 7)............... -- -- 2,929
Obligations under capital leases....................................... 3,522 2,506 2,131
------ ------ --------
4,530 3,422 236,284
Less -- Current portion................................................ 2,143 1,907 8,116
------ ------ --------
$2,387 $1,515 $228,168
====== ====== ========
</TABLE>
F-14
<PAGE> 82
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Maturities of long-term debt and capital lease obligations are as follows
as of October 26, 1996:
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Year Ending October--
1997............................................................. $1,907
1998............................................................. 401
1999............................................................. 474
2000............................................................. 92
2001............................................................. 92
2002 and thereafter.............................................. 456
------
$3,422
======
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases manufacturing equipment and space under noncancelable
operating leases with terms expiring through 2009. Future minimum lease payments
under these leases as of January 25, 1997 (in thousands) are as follows:
<TABLE>
<CAPTION>
REAL
EQUIPMENT ESTATE TOTAL
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Year Ending October --
1997 (nine months)................................ $48 $ 4,804 $ 4,852
1998.............................................. 15 4,728 4,743
1999.............................................. 5 4,641 4,646
2000.............................................. -- 4,395 4,395
2001.............................................. -- 4,088 4,088
Thereafter........................................ -- 26,175 26,175
--- ------- -------
Future minimum lease payments................ $68 $48,831 $48,895
=== ======= =======
</TABLE>
Total rental expense of approximately $1,317,000, $1,447,000, $1,434,000
and $516,000 was incurred for the fiscal years ended October 1994, 1995, 1996
and for the three months ended January 25, 1997, respectively.
These operating leases include office and manufacturing space leased from a
partnership in which the Chairman of the Board has an interest. Two of the
leases are for terms of five years, and expire in October 2000 with options to
extend until October 2006. The remaining lease expires in March 2000 with
options to extend until 2006. For the fiscal years ended October 1994, 1995 and
1996 and the quarter ended January 25, 1997, the related rental expense was
approximately $571,000, $479,000 $529,000 and $140,000, respectively.
Environmental Matters
During March 1995, the Company received a Record of Decision ("ROD") from
the New York State Department of Environmental Conservation ("NYSDEC"),
regarding soil and groundwater contamination at its Owego, New York facility.
Based on a Remedial Investigation and Feasibility Study ("RIFS") for apparent
on-site contamination at that facility and a Focused Feasibility Study ("FFS"),
each prepared by environmental consultants of the Company, the NYSDEC has
approved a
F-15
<PAGE> 83
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
remediation program of groundwater withdrawal and treatment and interactive soil
flushing. The Company recently executed a Modification of the Order on Consent
to implement the approved ROD. The cost, based upon the FFS, to implement this
remediation is estimated to be $4.6 million, and is expected to be expended as
follows: $260,000 for capital equipment and $4.3 million for operation and
maintenance costs which will be incurred and expended over the estimated life of
the program of 30 years. NYSDEC has requested that the Company consider taking
additional samples from a wetland area near the Company's Owego facility.
Analytical reports of earlier sediment samples indicated the presence of certain
inorganics. There can be no assurance that the Company and/or other third
parties will not be required to conduct additional investigations and
remediation at that location, the costs of which are currently indeterminable
due to the numerous variables described in the fifth paragraph of this
Environmental Matters note.
From 1974 to 1980, the Company operated a printed circuit manufacturing
facility in Florida as a lessee of property that is now the subject of a pending
lawsuit (the "Florida Lawsuit") and investigation by the Florida Department of
Environmental Protection ("FDEP"). On June 9, 1992, the Company entered into a
Cooperating Parties Agreement in which it and Gould, Inc., another prior lessee
of the site, have agreed to fund certain assessment and feasibility study
activities at the site, and an environmental consultant has been retained to
perform such activities. The cost of such activities is not expected to be
material to the Company. In addition to the Cooperating Parties Agreement, Hadco
and others are participating in alternative dispute resolution regarding the
site with an independent mediator. In connection with the mediation, in February
1997 the FDEP presented computer-generated estimates of remedial costs, for
activities expected to be spread over a number of years, that ranged from
approximately $3.3 million to $9.7 million. Mediation sessions were conducted in
March 1992 but have been suspended during the ongoing assessment and feasibility
activities. Management believes it is likely that it will participate in
implementing a continuing remedial program for the site, the costs of which are
currently unknown. Also see the seventh paragraph of this Environmental Matters
note relating to the Company's having been named as a third-party defendant in
the Florida Lawsuit.
The Company has commenced the operation of a groundwater extraction system
at its Derry, New Hampshire facility to address certain groundwater
contamination and migration control issues. Because of the uncertainty regarding
both the quantity of contaminants beneath the building at the site and the
long-term effectiveness of the groundwater migration control system the Company
has installed, it is not possible to make a reliable estimate of the length of
time remedial activity will have to be performed. However, it is anticipated
that the groundwater extraction system will be operated for at least 30 years.
There can be no assurance that the Company will not be required to conduct
additional investigations and remediation relating to the Derry facility. The
total costs of such groundwater extraction system and of conducting any
additional investigations and remediation relating to the Derry facility are not
fully determinable due to the numerous variables described in the fifth
paragraph of this Environmental Matters note.
Included in selling, general and administrative (SG&A) expenses are charges
for actual expenditures and accruals, based on estimates, for environmental
matters. During fiscal 1994, 1995, 1996 and for the three months ended January
25, 1997, the Company made, and charged to SG&A expenses, actual payments of
approximately $1,040,000, $1,111,000, $680,000 and $70,000, respectively, for
environmental matters. In 1994, 1995 and 1996, the Company also accrued and
charged to SG&A expenses approximately $2,100,000, $2,740,000 and $1,825,000,
respectively, as cost estimates for environmental matters.
F-16
<PAGE> 84
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The Company accrues estimated costs associated with known environmental
matters, when such costs can be reasonably estimated. The cost estimates
relating to future environmental clean-up are subject to numerous variables, the
effects of which can be difficult to measure, including the stage of the
environmental investigations, the nature of potential remedies, possible joint
and several liability, the magnitude of possible contamination, the difficulty
of determining future liability, the time over which remediation might occur,
and the possible effects of changing laws and regulations. The total reserve for
environmental matters currently identified by the Company amounted to $8.2
million at October 28, 1995 and $10.0 million at October 26, 1996 and January
25, 1997. The current portion of these costs as of October 26, 1995, October 28,
1996 and January 25, 1997, amounted to approximately $900,000 in each period,
and is included in Other accrued expenses. The long-term portion of these costs
amounted to approximately $7.3 million, $9.1 million and $9.2 million as of
October 28, 1995, October 26, 1996 and January 25, 1997, respectively, and is
reported under the caption Other Long-Term Liabilities. Based on its assessment
at the current time, management estimates the cost of ultimate disposition of
the above known environmental matters to range from approximately $7.0 million
to $12.0 million, and is expected to be spread over a number of years.
Management believes the ultimate disposition of the above known environmental
matters will not have a material adverse effect on the liquidity, capital
resources, business or consolidated financial position of the Company. However,
one or more of such environmental matters could have a significant negative
impact on the Company's consolidated financial results for a particular
reporting period.
The Company is one of 33 entities which have been named as potentially
responsible parties in a lawsuit pending in the federal district court of New
Hampshire concerning environmental conditions at the Auburn Road, Londonderry,
New Hampshire landfill site. Local, state and federal entities and certain other
parties to the litigation seek contribution for past costs, totaling
approximately $20 million, allegedly incurred to assess and remedy the Auburn
Road site. In December 1996, following publication and comment period, the U.S.
Environmental Protection Agency (EPA) amended the ROD to change the remedy at
the Auburn Road site from active groundwater remediation to future monitoring.
Other parties to the lawsuit also allege that future monitoring will be
required. The Company is contesting liability, but is participating in mediation
with 27 other parties in an effort to resolve the lawsuit.
In connection with the Florida Lawsuit (as described in the second
paragraph of this Environmental Matters section), pending in the Circuit Court
of Broward County, Florida, Hadco and Gould, Inc., another prior lessee of the
site of the printed circuit manufacturing facility in Florida, was each served
with a third-party complaint in June 1995, as third-party defendants in such
pending Florida Lawsuit by a party who had previously been named as a defendant
when the Florida Lawsuit was commenced in 1993 by the FDEP. The Florida Lawsuit
seeks damages relating to environmental pollution and FDEP costs and expenses,
civil penalties, and declaratory and injunctive relief to require the parties to
complete assessment and remediation of soil and groundwater contamination. The
other parties include alleged owners of the property.
In March 1993, the EPA notified Zycon of its potential liability for
maintenance and remediation costs in connection with a hazardous waste disposal
facility operated by Casmalia Resources, a California Limited Partnership, in
Santa Barbara County, California. The EPA identified Zycon as one of the 65
generators which had disposed the greatest amounts of materials at the site.
Based on the total tonnage contributed by all generators, Zycon's share is
estimated at approximately 0.2% of the total weight.
The Casmalia site was regulated by the EPA during the period when the
material was accepted. There is no allegation that Zycon violated any law in the
disposal of material at the site, rather the
F-17
<PAGE> 85
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
EPA's actions stemmed from the fact that Casmalia Resources may not have the
financial means to implement a closure plan for the site and because of Zycon's
status as a generator of hazardous waste.
In September 1996, a Consent Decree among the EPA and 48 entities
(including Zycon) acting through the Casmalia Steering Committee ("CSC") was
lodged with the United States District Court in Los Angeles, California, which
must approve the agreement. Although this approval is pending, work has started
under the Consent Decree. The Consent Decree sets forth the terms and conditions
under which the CSC will carry out work aimed at final closure of the site.
Certain closure activities will be performed by the CSC. Later work will be
performed by the CSC, if funded by other parties. Under the Consent Decree, the
settling parties will work with the EPA to pursue the non-settling parties to
ensure they participate in contributing to the closure and long-term operation
and maintenance of the facility.
The future costs in connection with the lawsuits described in the above
paragraphs are currently indeterminable due to such factors as the unknown
timing and extent of any future remedial actions which may be required, the
extent of any liability of the Company and of other potentially responsible
parties, and the financial resources of the other potentially responsible
parties. Management currently believes, based on the facts currently known to
it, that it is probable that the ultimate dispositions of the above lawsuits
will not have a material adverse effect on the Company's business and financial
condition; however, there can be no assurance that this will be the case.
Purchase Commitments
The Company had commitments to purchase approximately $15,668,000 of
manufacturing equipment and approximately $1,520,000 of leasehold improvements
as of January 25, 1997. The majority of these commitments is expected to be
completed by the end of fiscal 1997.
F-18
<PAGE> 86
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(10) STOCKHOLDERS' INVESTMENT
Stock Options
The following table summarizes stock option activity with respect to the
nonqualified stock options:
<TABLE>
<CAPTION>
EXERCISE
PRICE RANGE
NUMBER ---------------
OF SHARES
--------------
(IN THOUSANDS)
<S> <C> <C> <C>
Outstanding, October 30, 1993.......................... 1,921 $2.00 - $ 9.00
Options granted...................................... 340 8.00 - 8.81
Options exercised.................................... (332) 2.00 - 4.94
Options canceled..................................... (239) 2.00 - 9.00
----- ---------------
Outstanding, October 29, 1994.......................... 1,690 2.00 - 9.00
Options granted...................................... 223 8.50 - 25.69
Options exercised.................................... (320) 2.00 - 11.06
Options canceled..................................... (147) 2.10 - 8.81
----- ---------------
Outstanding, October 28, 1995.......................... 1,446 2.00 - 25.69
Options granted...................................... 150 27.00 - 31.50
Options exercised.................................... (443) 2.00 - 11.06
Options canceled..................................... (45) 2.00 - 31.50
----- ---------------
Outstanding, October 26, 1996.......................... 1,108 2.00 - 31.50
Options granted...................................... 174 47.44
Options exercised.................................... (62) 2.00 - 31.50
----- ---------------
Outstanding, January 25, 1997.......................... 1,220 $2.00 - $47.44
===== ===============
</TABLE>
The Company has the following nonqualified stock option plans:
DECEMBER 1985 PLAN AND DECEMBER 1986 PLAN
The options under these plans are exercisable immediately, and have various
vesting periods up to 10 years according to each individual option agreement
with an expiration date no later than 10 years and 90 days from the date of
grant. Upon termination of employment under certain circumstances, the Company
may, at its option, repurchase the exercised but unvested shares at the original
purchase price.
DECEMBER 1987 PLAN
The options under this plan become exercisable according to each option
agreement and expire no later than June 30, 1997.
SEPTEMBER 1990 PLAN
This plan provides for the granting of options at a price equal to the fair
market value at the date of grant. The options vest over periods of up to seven
years and become exercisable according to each option agreement, and they expire
no later than 10 years from the date of grant.
F-19
<PAGE> 87
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
DECEMBER 1991 DIRECTOR PLAN
This plan provides for the granting of options to purchase up to 150,000
shares of common stock at a price equal to the fair market value at the date of
grant. These options are exercisable ratably over a five-year period and expire
no later than seven years from the date of grant. The Board of Directors has
amended this plan, subject to the approval of the shareholders in February 1997,
(i) to increase the number of shares available to 300,000, (ii) provide that any
current non-employee director who will have five years of service in such
capacity on February 26, 1997 be automatically granted, on such date and on each
anniversary of service thereafter, a vested option to purchase 3,000 shares and
(iii) provide that any current non-employee director who does not have five
years of service in such capacity on March 15, 1997 and any future non-employee
director each be automatically granted, on the date such non-employee director
achieves five years of service in such capacity and on each anniversary of
service thereafter, a vested option to purchase 3,000 shares.
NOVEMBER 1995 PLAN
This plan provides for the granting of options to purchase up to 1,000,000
shares of common stock at a price equal to fair market value at the date of
grant. The options vest according to each option agreement and they expire no
later than 10 years from the date of grant.
The status of the stock option plans at January 25, 1997 is as follows:
<TABLE>
<CAPTION>
AVERAGE
OPTIONS OPTIONS EXERCISE
PLAN OUTSTANDING EXERCISABLE PRICE
------------------------------------------------ ----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
*December 1985 and 1986 Plans................... 203 203 $ 2.92
*December 1987 Plan............................. 75 75 3.00
*September 1990 Plan............................ 691 263 11.99
December 1991 Director Plan.................... 88 37 18.49
November 1995 Plan............................. 163 -- 46.93
----- --- ------
1,220 578 $15.06
===== === ======
</TABLE>
- ------------
* The Board of Directors has determined to make no further grants under the
December 1985 Plan, December 1986 Plan, December 1987 Plan and September 1990
Plan.
The Company had reserved as of January 25, 1997, a total of 2,062,829
shares of common stock for issuance under the nonqualified stock option plans
listed in the above chart. During fiscal 1994, 1995 and 1996 and the quarter
ended January 25, 1997, approximately $360,000, $287,000, $154,000 and $32,000,
respectively, were charged against income as compensation expense associated
with the granting of these options.
The Company adopted a Stockholder Rights Plan in August 1995 pursuant to
which the Company declared the distribution of one Common Stock Purchase Right
("Right") for each share of outstanding common stock. Under certain conditions,
each Right may be exercised for one share of common stock at an exercise price
of $130, subject to adjustment. Under circumstances defined in the Stockholder
Rights Plan, the Rights entitle holders to purchase stock having a value of
twice the exercise price of the Rights. Until they become exercisable, the
Rights are not transferable apart from the common stock. The Rights may be
redeemed by the Company at any time prior to the occurrence of certain events at
$.01 per Right. The Stockholder Rights Plan will expire on September 11, 2005,
unless the Rights are earlier redeemed by the Company.
F-20
<PAGE> 88
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(11) RETIREMENT PLAN
The Hadco Corporation Retirement Plan (the "Plan"), as amended, covers all
employees with at least six months of continuous service, as defined. Annual
profit sharing contributions are determined at the discretion of the Board of
Directors but cannot exceed the amount allowable for federal income tax
purposes. The Company made profit sharing contributions of $1,074,000,
$2,285,000 and $3,335,000 to the Plan for the years ended October 1994, 1995 and
1996, respectively. The Company has provided $1,100,000 for the three months
ended January 25, 1997 for profit sharing contributions.
The Plan permits participants to elect to have contributions made to the
Plan in the form of reductions in salary under Section 401(k) of the Internal
Revenue Code subject to limitations set out in the Plan. Under the Plan, the
Company will match employee contributions up to a set percentage. Employee
contributions become vested when made, and Company contributions become vested
at the rate of 33 1/3 for each year of service with the Company. The Company
matched employee contributions in the amount of approximately $500,000, $600,000
and $736,000 during fiscal 1994, 1995 and 1996, respectively. The Company has
provided $178,000 for matching contributions during the quarter ended January
25, 1997.
(12) QUARTERLY RESULTS (UNAUDITED)
The following summarized unaudited results of operations for the fiscal
quarters in the years ended October 1995 and 1996 have been accounted for using
generally accepted principles for interim reporting purposes and include
adjustments (consisting of normal recurring adjustments) that the Company
considers necessary for the fair presentation of results for these interim
periods.
F-21
<PAGE> 89
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
First Fiscal Quarter --
Net sales........................................................... $56,825 $76,481
Gross profit........................................................ 11,292 19,482
Net income.......................................................... 3,003 7,191
Net income per share................................................ .29 .65
Weighted average shares outstanding................................. 10,446 11,104
Second Fiscal Quarter --
Net sales........................................................... $67,637 $88,096
Gross profit........................................................ 16,261 21,893
Net income.......................................................... 5,193 7,895
Net income per share................................................ .49 .71
Weighted average shares outstanding................................. 10,626 11,135
Third Fiscal Quarter --
Net sales........................................................... $67,752 $88,225
Gross profit........................................................ 17,540 21,451
Net income.......................................................... 6,152 7,994
Net income per share................................................ .56 .72
Weighted average shares outstanding................................. 11,034 11,100
Fourth Fiscal Quarter --
Net sales........................................................... $72,954 $97,883
Gross profit........................................................ 19,402 23,322
Net income.......................................................... 7,026 8,934
Net income per share................................................ .63 .81
Weighted average shares outstanding................................. 11,124 11,008
</TABLE>
(13) CUSTOMERS
During fiscal years 1994, 1995 and 1996 and the quarter ended January 25,
1997, no customer accounted for more than 7%, 7%, 15% and 14% of consolidated
net sales, respectively. The Company's five largest customers accounted for 28%,
28%, 34% and 33% of consolidated net sales during fiscal 1994, 1995 and 1996 and
the quarter ended January 25, 1997, respectively. For the first quarter of
fiscal 1997 and the 1996 fiscal year, one customer accounted for more than 10%
of consolidated net sales.
F-22
<PAGE> 90
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In January 1997, Hadco purchased substantially all of Zycon's common stock
for approximately $205 million in cash. The Company also incurred approximately
$7.5 million in acquisition related costs resulting in a total purchase price of
approximately $212.5 million. The acquisition was financed by a new Credit
Facility of up to $250 million. The Company borrowed approximately $215 million
under the new Credit Facility, upon consummation of the transaction.
This acquisition is being accounted for as a purchase, and due to the
different bases in certain assets for book and tax purposes, deferred taxes have
been provided for as part of the purchase price allocation in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109. A significant
portion of the purchase price, as outlined in the attached notes to these pro
forma financial statements, has been identified in an appraisal as intangible
assets, including approximately $78 million of in-process R&D (see discussion in
Note 1 to October 26, 1996 Pro Forma Condensed Consolidated Statement of
Operations).
The accompanying Pro Forma Condensed Consolidated Statements of Operations
for the year ended October 26, 1996 and the three months ended January 25, 1997
assume that the acquisition of Zycon took place on October 29, 1995, the
beginning of Hadco's fiscal year ended October 26, 1996. The Pro Forma Condensed
Consolidated Statements of Operations do not include the effect of any
non-recurring write-offs directly attributable to the acquisition.
The accompanying pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the financial position or
results of operations which would actually have been reported had the
acquisition been in effect during the periods presented, or which may be
reported in the future.
The accompanying Pro Forma Condensed Consolidated Financial Statements
should be read in conjunction with the historical financial statements and
related notes thereto for Hadco and Zycon.
F-23
<PAGE> 91
HADCO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 26, 1996
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
HADCO ZYCON PRO FORMA PRO FORMA
YEAR ENDED YEAR ENDED PRO FORMA PRO FORMA EFFECTS OF COMBINED
OCTOBER 26, 1996 DECEMBER 31, 1996 ADJUSTMENTS COMBINED THE OFFERINGS AS ADJUSTED
---------------- ----------------- ----------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales....................... $350,685 $ 219,660 $570,345 $ 570,345
Cost of Sales................... 264,537 186,314 450,851 450,851
-------- --------- -------- ---------
Gross Profit.................... 86,148 33,346 119,494 119,494
Selling, General and
Administrative Expenses....... 34,616 16,079 50,695 50,695
Amortization of Acquired
Intangible Assets............. -- -- 6,468(2) 6,468 6,468
-------- --------- --------- -------- ------- ---------
Income from Operations.......... 51,532 17,267 (6,468) 62,331 62,331
Interest and Other Income....... 1,287 726 (805)(3) 1,208 1,208
Interest Expense................ (338) (2,567) (13,292)(4) (16,197) 5,723(6)(7) (10,474)
Other Expense................... -- (6,019) 6,019 (1) -- -- --
-------- --------- --------- -------- ------- ---------
Income Before Provisions for
Income Taxes.................. 52,481 9,407 (14,546) 47,342 5,723 53,065
Provision for Income Taxes...... 20,467 6,518 (6,865)(5) 20,120 2,432(8) 22,552
-------- --------- --------- -------- ------- ---------
Net Income (Loss)............... $ 32,014 $ 2,889 $ (7,681) $ 27,222 $ 3,291 $ 30,513
======== ========= ========= ======== ======= =========
Net Income per Share:
Primary....................... $ 2.89 $ 2.46 $ 2.33
======== ======== =========
Fully diluted................. $ 2.24
=========
Weighted Average Shares
Outstanding:
Primary....................... 11,084 11,084 2,000(9) 13,084
======== ======== ======= =========
Fully diluted................. 4,124(9) 15,208
======= =========
</TABLE>
NOTE 1:
For purpose of this Pro Forma Condensed Consolidated Statement of
Operations, the acquired in-process R&D was assumed to have been written off
prior to the period presented herein, so that the statement of operations
includes only recurring costs.
NOTE 2: PRO FORMA ADJUSTMENTS
The following is a description of each of the pro forma adjustments.
(1) Eliminate non-recurring acquisition costs incurred by Zycon.
(2) Amortization of acquired intangible assets over lives ranging from 12 to
30 years.
(3) Reduce interest income as a result of utilizing cash for acquisition.
(4) Interest expense on debt issued to finance acquisition, at an assumed
weighted average rate of 7.5%.
(5) Related tax effect of adjustments (1) through (4).
NOTE 3: PRO FORMA EFFECTS OF THE OFFERINGS
The following is a description of each of the pro forma adjustments to
reflect the effects of the Offerings.
(6) Amortization of deferred financing costs of $514,000 relating to the
convertible notes.
(7) Reduction of interest expense of $6,237,000 based on an assumed interest
rate of 5.75% on the convertible notes, and due to the pay down of bank
debt from the sale of 2,000,000 shares of common stock.
(8) Related tax effect of adjustments (6) and (7).
(9) Issuance of 2,000,000 shares offered hereby for purposes of calculating
primary net income per share and an additional 2,124,000 shares for
purposes of calculating fully diluted net income per share.
NOTE 4:
In connection with the acquisition of Zycon, Hadco eliminated nine
executive positions at Zycon, which resulted in pre-tax annual savings of
$2,637,000. Taking these savings into account for the year ended October 26,
1996, pro forma net income and pro forma net income, as adjusted, would have
been $28,700,000 and $32,029,000, respectively and pro forma net income per
share and pro forma net income per share, as adjusted, would have been $2.59 and
$2.45, respectively.
F-24
<PAGE> 92
HADCO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED JANUARY 25, 1997
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
HADCO ZYCON PRO FORMA PRO FORMA
QUARTER ENDED QUARTER ENDED PRO FORMA PRO FORMA EFFECTS OF COMBINED
JANUARY 25, 1997 DECEMBER 31, 1996 ADJUSTMENTS COMBINED THE OFFERINGS AS ADJUSTED
---------------- ----------------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales........................... $111,536 $61,011 $172,547 $ 172,547
Cost of Sales....................... 86,681 52,925 139,606 139,606
-------- ------- -------- ---------
Gross Profit........................ 24,855 8,086 32,941 32,941
Selling, General and Administrative
Expenses.......................... 9,028 4,342 13,370 13,370
Amortization of Acquired Intangible
Assets............................ 270 136 1,188 (3) 1,594 1,594
Write-off of In-process Research and
Development....................... 78,000 -- (78,000)(1) -- --
-------- ------- --------- -------- ------- ---------
Income (Loss) From Operations....... (62,443) 3,608 76,812 17,977 17,977
Interest and Other Income........... 880 167 (496)(4) 551 551
Interest Expense.................... (933) (1,033) (2,703)(5) (4,669) 1,430(7)(8) (3,239)
Other Expense....................... -- (6,019) 6,019 (2) -- --
-------- ------- --------- -------- ------- ---------
Income (Loss) Before Provision for
Income Taxes...................... (62,496) (3,277) 79,632 13,859 1,430 15,289
Provision for Income Taxes.......... 6,665 1,247 (1,953)(6) 5,959 615(9) 6,574
-------- ------- --------- -------- ------- ---------
Net Income (Loss)................... $(69,161) $(4,524) $ 81,585 $ 7,900 $ 815 $ 8,715
======== ======= ========= ======== ======= =========
Net Income (Loss) per Share:
Primary........................... $ (6,64) $ 0.72 $ 0.67
======== ======== =========
Fully Diluted..................... $ 0.64
=========
Weighted Average Shares Outstanding:
Primary........................... 10,413 10,944 2,000(10) 12,944
======== ======== =========
Fully Diluted..................... 4,124(10) 15,068
======= =========
</TABLE>
NOTE 1: PRO FORMA ADJUSTMENTS
The following is a description of each of the pro forma adjustments:
(1) Eliminate non-recurring write-off of in-process R&D.
(2) Eliminate non-recurring acquisition costs incurred by Zycon.
(3) Amortization of acquired intangible assets over lives ranging from 12
to 30 years.
(4) Reduce interest income as a result of utilizing cash for acquisition.
(5) Interest expense on debt issued to finance acquisition, at an assumed
weighted average rate of 7.5%.
(6) Related tax effect of adjustments (1) through (5).
NOTE 2: PRO FORMA EFFECTS OF THE OFFERINGS
The following is a description of each of the pro forma adjustments to
reflect the effects of the Offerings.
(7) Amortization of deferred financing costs of $129,000 relating to the
convertible notes.
(8) Reduction of interest expense of $1,559,000 based on an assumed
interest rate of 5.75% on the convertible notes, and due to the pay
down of bank debt from the sale of 2,000,000 shares of common stock.
(9) Related tax effect of adjustments (7) and (8).
(10) Issuance of 2,000,000 shares offered hereby for purposes of calculating
primary net income per share and an additional 2,124,000 shares for
purposes of calculating fully diluted net income per share.
NOTE 3:
In connection with the acquisition of Zycon, Hadco eliminated nine executive
positions at Zycon, which resulted in pre-tax annual savings of $2,637,000.
Taking these savings into account for the quarter ended January 25, 1997, pro
forma net income and pro forma net income, as adjusted, would have been
$8,275,000, and $9,091,000, respectively, and pro forma net income per share and
pro forma net income per share, as adjusted, would have been $.76 and $.70,
respectively.
F-25
<PAGE> 93
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Zycon Corporation:
We have audited the accompanying consolidated balance sheet of Zycon
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1996,
and the related consolidated statements of income, stockholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Zycon Corporation and
subsidiaries as of December 31, 1996, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
San Jose, California
January 17, 1997
F-26
<PAGE> 94
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Zycon Corporation:
We have audited the accompanying consolidated balance sheet of Zycon
Corporation and subsidiary as of December 31, 1995 and the related consolidated
statements of income, stockholders' equity and cash flows for each of the years
in the two-year period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Zycon
Corporation and subsidiary as of December 31, 1995 and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
San Jose, California
January 19, 1996
F-27
<PAGE> 95
ZYCON CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $11,264 $ 7,549
Receivables, net of allowances of $250 in 1995 and $255 in 1996....... 20,886 28,430
Inventories........................................................... 6,131 11,343
Prepaid expenses and other current assets............................. 1,734 2,569
------- --------
Current assets................................................ 40,015 49,891
PLANT AND EQUIPMENT, net................................................ 52,130 95,297
DEPOSITS AND OTHER ASSETS............................................... 2,830 3,304
EXCESS OF COST OVER NET ASSETS ACQUIRED, net of accumulated amortization
of $272 in 1996....................................................... -- 5,396
------- --------
$94,975 $153,888
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and bank borrowings................. $ 2,567 $ 9,122
Accounts payable...................................................... 17,624 26,192
Accrued liabilities................................................... 5,021 7,479
Income taxes payable.................................................. 1,770 870
------- --------
Current liabilities........................................... 26,982 43,663
LONG-TERM DEBT AND LIABILITIES, net of current portion.................. 5,458 43,777
DEFERRED INCOME TAXES................................................... 6,634 7,003
------- --------
Total liabilities............................................. 39,074 94,443
-------- --------
COMMITMENTS AND CONTINGENCIES (see Note 7)
STOCKHOLDERS' EQUITY:
Preferred stock; $0.001 par value; 20,000,000 shares authorized; none
outstanding........................................................ -- --
Common stock; $0.001 par value; 25,000,000 shares authorized;
11,000,000 and 11,056,600 shares issued and outstanding in 1995 and
1996, respectively................................................. 11 11
Additional paid-in capital............................................ 32,369 33,024
Retained earnings..................................................... 23,521 26,410
------- --------
Total stockholders' equity.................................... 55,901 59,445
------- --------
$94,975 $153,888
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-28
<PAGE> 96
ZYCON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net Sales.................................................. $149,151 $180,944 $219,660
Cost of Sales.............................................. 133,043 153,109 186,314
-------- -------- --------
Gross Profit............................................... 16,108 27,835 33,346
Selling, General and Administrative Expenses............... 8,350 11,233 16,079
-------- -------- --------
Income from Operations..................................... 7,758 16,602 17,267
-------- -------- --------
Other Income (Expense):
Interest Income............................................ 264 711 726
Interest Expense........................................... (2,250) (2,427) (2,567)
Other Expense.............................................. -- -- (6,019)
-------- -------- --------
Other Income (Expense)..................................... (1,986) (1,716) (7,860)
-------- -------- --------
Income Before Income Taxes................................. 5,772 14,886 9,407
Provision For Income Taxes................................. 97 7,409 6,518
-------- -------- --------
Net Income................................................. $ 5,675 $ 7,477 $ 2,889
======== ======== ========
Pro Forma Net Income Data (Unaudited):
Income Before Income Taxes, as reported.................... $ 5,772 $ 14,886
Pro Forma Provision for Income Taxes....................... 2,333 5,925
--------
Pro Forma Net Income....................................... $ 3,439 $ 8,961
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-29
<PAGE> 97
ZYCON CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES
COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
--------------- PAID-IN FROM RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCKHOLDERS EARNINGS EQUITY
------ ------ ---------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AS OF DECEMBER 31, 1993........ 8,000 $ 8 $ 22 $ -- $23,483 $23,513
Stockholder distributions............. -- -- -- -- (3,859) (3,859)
Issuance of stockholder notes......... -- -- -- (575) -- (575)
Collections on stockholder notes...... -- -- -- 45 -- 45
Net income............................ -- -- -- -- 5,675 5,675
------ --- ------- ----- ------- -------
BALANCES AS OF DECEMBER 31, 1994........ 8,000 8 22 (530) 25,299 24,799
Sale of common stock, net of $3,650
issuance costs..................... 3,000 3 32,347 -- -- 32,350
Stockholder distributions............. -- -- -- -- (9,255) (9,255)
Collections on stockholder notes...... -- -- -- 530 -- 530
Net income............................ -- -- -- -- 7,477 7,477
------ --- ------- ----- ------- -------
BALANCES AS OF DECEMBER 31, 1995........ 11,000 11 32,369 -- 23,521 55,901
Issuance of common stock in connection
with Alternate Circuit Technology,
Inc. (ACT) acquisition............. 50 -- 600 -- -- 600
Issuance of common stock pursuant to
the stock option plan.............. 7 -- 55 -- -- 55
Net income............................ -- -- -- -- 2,889 2,889
------ --- ------- ----- ------- -------
BALANCES AS OF DECEMBER 31, 1996........ 11,057 $11 $33,024 $ -- $26,410 $59,445
====== === ======= ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE> 98
ZYCON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... $ 5,675 $ 7,477 $ 2,889
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 9,199 9,691 11,016
Deferred income taxes............................................. -- 5,618 38
Changes in operating assets and liabilities, net of effects from
purchase of ACT:
Increase in receivables.......................................... (4,234) (5,723) (5,538)
(Increase) decrease in inventories............................... 156 (1,661) (3,106)
(Increase) decrease in prepaid expenses, deposits and other
assets.......................................................... 339 (2,491) 2,134
Increase in accounts payable..................................... 772 7,010 7,862
Increase in accrued liabilities.................................. 204 1,708 1,060
Increase (decrease) in income taxes payable...................... -- 1,770 (607)
-------- -------- --------
Net cash provided by operating activities.................... 12,111 23,399 15,748
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of ACT, net of cash acquired................................ -- -- (8,888)
Purchases of plant and equipment..................................... (13,060) (22,365) (52,156)
Sale of short-term investments....................................... 2,026 -- --
-------- -------- --------
Net cash used for investing activities....................... (11,034) (22,365) (61,044)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings, net................................................. 1,000 (7,000) 2,543
Proceeds from long-term debt......................................... 11,378 1,761 46,206
Repayment of long-term debt.......................................... (7,685) (14,863) (7,223)
Proceeds from sale of common stock................................... -- 32,350 55
Issuance of stockholder notes........................................ (575) -- --
Collections on stockholder notes..................................... 45 530 --
Distribution paid to stockholders.................................... (3,185) (10,765) --
-------- -------- --------
Net cash provided by financing activities.................... 978 2,013 41,581
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... 2,055 3,047 (3,715)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR......................... 6,162 8,217 11,264
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................... $ 8,217 $ 11,264 $ 7,549
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................................... $ 2,149 $ 2,427 $ 2,351
Cash paid for income taxes........................................... $ 20 $ 60 $ 6,357
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Issuance of common stock in connection with ACT acquisition.......... $ -- $ -- $ 600
Assets of $8,802 acquired, net of related liabilities of $4,961
assumed from ACT.................................................. $ -- $ -- $ 3,841
Stockholder distributions declared but not paid...................... $ 1,510 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE> 99
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company and Consolidation
Zycon Corporation (the "Company") manufactures multilayer printed circuit
boards for original equipment manufacturers and contract manufacturers of
sophisticated electronic equipment. The Company's principal customers serve
diverse market segments, including data communications, telecommunications,
advanced storage systems, workstation, servers and personal computers.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Cash Equivalents
Cash equivalents consist primarily of money market funds and highly liquid
debt instruments with original maturity dates up to 90 days.
Short-Term Investments
In 1994, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Short-term investments are classified as available for sale under
the provisions of SFAS No. 115 and are stated at fair value. Any unrealized
gains and losses are reported as a separate component of stockholders' equity,
but to date have not been significant.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market.
The Company periodically reviews its inventories for potential slow-moving and
obsolete items and writes down impaired items to net realizable value.
Plant and Equipment
Plant and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, ranging from
3 to 40 years. Leasehold improvements are amortized over the shorter of the
respective lease terms, ranging from 10 to 20 years, or their estimated useful
lives.
Intangible Assets
Excess of cost over net assets acquired (goodwill) from the ACT acquisition
(see Note 5) is amortized using the straight-line method over ten years. In
order to comply with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived
F-32
<PAGE> 100
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assets and for Long-Lived Assets to be Disposed of," the realizability is
evaluated periodically by management as events or circumstances indicate a
possible inability to recover its carrying amount. Such evaluation is based on
various analyses, including cash flow and profitability projections that
incorporate, as applicable, the impact on existing lines of business. The
analysis necessarily involves significant management judgment to evaluate the
ability of an acquired business to perform within projections.
Revenue Recognition
Sales are recognized upon shipment. Product returns and warranty costs have
been insignificant.
Research and Development Expenses
The Company charges research and development expenses to operations as
incurred. For the years ended December 31, 1994, 1995 and 1996, research and
development expenses were approximately $968,000, $1,066,000 and $1,100,000,
respectively, and are included in cost of sales.
Other Expense
The Company incurred other expense of $6,019,000 during the year ended
December 31, 1996 relating to the acquisition of the Company by Hadco
Corporation (see Note 8).
Income Taxes
The Company accounts for income taxes using the liability method under
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
income tax assets and liabilities of changes in tax rates is recognized in
income in the period that includes the enactment date.
The Company was an S corporation for Federal and state income tax reporting
purposes prior to the initial public offering on September 26, 1995. Federal and
state income taxes on the income of an S corporation are generally payable by
the individual stockholders rather than the corporation. Accordingly, only the
California S corporation franchise tax was provided while the Company was as S
corporation.
Upon termination of the Company's S corporation status, the Company
established its net deferred tax liability and recorded an accompanying charge
of $4.5 million to income tax expense in 1995. The accompanying consolidated
statements of income for the years ended December 31, 1994 and 1995 include
provisions for income taxes on an unaudited pro forma basis, using the asset and
liability method, as if the Company had been a C corporation, fully subject to
Federal and state income taxes.
Environmental Remediation Costs
The Company accrues for expenses associated with environmental remediation
obligations when such expenses are probable and can be reasonably estimated.
Accruals for estimated expenses for environmental remediation obligations
generally are recognized no later than completion of the remedial feasibility
study. Such accruals are adjusted as further information becomes available or
F-33
<PAGE> 101
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
circumstances change. Estimates of future expenditures for environmental
remediation obligations are not discounted to their present value.
Concentration of Credit Risk
Financial instruments potentially subjecting the Company to concentration
of credit risk consist primarily of cash equivalents and accounts receivable. By
policy, the Company limits the amounts invested in any one type of investment.
Management believes the financial risks associated with such investments are
minimal. Substantially all of the Company's accounts receivable are derived from
domestic sales to original equipment manufacturers and contract assemblers of
workstations, networking products, computers, telecommunications equipment and
instrumentation devices. A significant percentage of the Company's receivables
are concentrated with a few customers. Historically, the Company has not
incurred material credit-related losses.
Foreign Currency Translation
The functional currency of the Company's Malaysian subsidiary is the United
States dollar. Accordingly, all translation gains and losses resulting from
transactions denominated in currencies other than United States dollars are
included in the consolidated statements of income. To date, the resulting gains
and losses have not been material.
Reclassifications
Certain 1994 and 1995 balances have been reclassified to conform with the
1996 consolidated financial statement presentation.
2. BALANCE SHEET COMPONENTS:
Cash Equivalents
Cash equivalents include certain investments classified as
available-for-sale securities as follows as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- ------
<S> <C> <C>
Money market funds................................................ $ -- $3,574
U.S. governmental treasury bills.................................. 1,995 1,975
Commercial paper.................................................. 11,000 2,000
------- ------
$12,995 $7,549
======= ======
</TABLE>
These securities all have original maturity dates of 90 days or less, with
fair values approximating their cost.
Inventories
A summary of inventories follows as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
Raw materials..................................................... $1,392 $ 5,599
Work in process................................................... 4,739 5,744
------ -------
$6,131 $11,343
====== =======
</TABLE>
F-34
<PAGE> 102
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Plant and Equipment
A summary of plant and equipment follows as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Machinery and equipment......................................... $61,975 $ 98,699
Leasehold improvements.......................................... 23,704 25,744
Building and building improvements.............................. -- 15,458
Office furniture and equipment.................................. 520 553
Construction in progress........................................ 3,250 813
Other........................................................... 580 --
------- --------
90,029 141,267
Less -- Accumulated depreciation and amortization............... (37,899) (45,970)
------- --------
$52,130 $ 95,297
======= ========
</TABLE>
Plant and equipment with a cost of approximately $32 million are located at
the Company's wholly owned subsidiary in Malaysia.
Accrued Liabilities
Accrued liabilities consisted of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Vacation........................................................... $1,883 $2,120
Payroll............................................................ 1,099 1,764
Bonuses............................................................ 1,170 1,104
Health care and workers compensation............................... 530 1,150
Other.............................................................. 339 1,341
------ ------
$5,021 $7,479
====== ======
</TABLE>
Long-Term Debt and Liabilities and Bank Borrowings
Long-term debt and liabilities and bank borrowings consisted of the
following as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Line of credit arrangement with a U.S. bank...................... $ -- $16,136
Line of credit arrangement with a Malaysian bank................. -- 2,543
Notes payable to financial lending companies and banks........... 8,025 32,857
Long-term liabilities............................................ -- 1,363
------- -------
8,025 52,899
Less -- Current maturities....................................... (2,567) (9,122)
------- -------
Long-term debt and liabilities................................... $ 5,458 $43,777
======= =======
</TABLE>
The Company has available a revolving bank line of credit arrangement with
a U.S. bank aggregating the lesser of $28,000,000 or a specified percentage of
eligible accounts receivable. As of December 31, 1996, there was $16,136,000
outstanding under the line of credit agreement. The line of credit agreement
expires on July 1, 1998. Borrowings under the line of credit agreement incur
interest at the bank's prime rate (8.25% as of December 31, 1996) and are
secured by receivables, inventories
F-35
<PAGE> 103
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and machinery and equipment. The maximum balance outstanding during the year
under this arrangement was $20,752,000, and the average outstanding balance
during the year was $10,490,000.
The Company also has a line of credit arrangement with a Malaysian bank for
aggregate borrowings of approximately $4.3 million for the purpose of acquiring
land, facilities and equipment for the Company's Malaysian subsidiary. The
arrangement is renewable annually. As of December 31, 1996, there was $2,543,000
outstanding under this arrangement and the weighted average interest rate was
10%.
Notes payable to financial lending companies and banks are secured by
machinery and equipment and are generally payable in equal monthly installments,
bearing interest ranging from approximately 7.2% to 11.4% (8.3% weighted
average).
Annual maturities of the notes payable are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997.......................................................... $ 6,450
1998.......................................................... 6,788
1999.......................................................... 6,125
2000.......................................................... 5,260
2001.......................................................... 8,234
------
$32,857
=======
</TABLE>
In connection with the acquisition of the Company by Hadco Corporation (see
Note 8), approximately $33.5 million of these notes payable and borrowings under
the line of credit arrangement with the U.S. bank were repaid subsequent to year
end.
The Company has a commitment from a bank for a $15.5 million term loan
facility which expires in 2005 for the purpose of acquiring equipment and for
working capital to be invested in the Company's Malaysia subsidiary. Borrowings
are to be repaid over five years with interest payable at either a fixed rate
equal to the bank's cost of funds at the time of borrowing plus 3.25% or an
adjustable rate equal to the bank's prime rate plus 1.75%. As of December 31,
1996, there were no borrowings outstanding under this facility. Upon the
acquisition of the Company by Hadco (see Note 8), the commitment under this
facility was decreased to $4.4 million.
3. STOCKHOLDERS' EQUITY:
Stockholder Distributions
On September 26, 1995, the Company elected C corporation status for Federal
and state income tax reporting purposes. Simultaneously with the election of C
corporation status, the Company declared a distribution payable to existing
stockholders of the Company. This distribution represented undistributed S
corporation earnings of the Company through the completion of the Company's
initial public offering and the amount of the stockholders' S corporation tax
bases.
Stock-Based Compensation Plan
In 1993, the Company adopted the 1993 Long-Term Equity Incentive Plan (the
"Stock Plan"). The Company accounts for this Stock Plan under APB Opinion No.
25, Accounting for Stock Issued to Employees, under which no compensation
expense has been recognized. Had compensation expense for the Stock Plan been
determined consistent with Statement of Financial Accounting Standards
F-36
<PAGE> 104
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(SFAS) No. 123, Accounting for Stock-Based Compensation, the Company's net
income would have been reduced to the following pro forma amounts (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
As Reported........................................................ $7,477 $2,889
Pro Forma.......................................................... $6,975 $1,579
</TABLE>
The Company may grant up to 1,100,000 shares of stock to its employees and
consultants under the Stock Plan. The Company grants options with an exercise
price at least equal to the fair market price at date of grant. Options granted
under the Stock Plan vest between 20% and 60% at the end of the first year and
ratably thereafter for a period of four years.
There was no activity under the Stock Plan during 1994. A summary of the
activity under the Stock Plan during 1995 and 1996 follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Outstanding at December 31, 1994............................. -- $ --
Granted.................................................... 707,600 10.36
------- ------
Outstanding at December 31, 1995............................. 707,600 10.36
Granted.................................................... 105,200 10.50
Exercised.................................................. (6,600) 8.36
Cancelled.................................................. (36,900) 11.54
------- ------
Outstanding at December 31, 1996............................. 769,300 $10.35
======= ======
</TABLE>
As of December 31, 1996, 765,800 of the 769,300 options outstanding have
exercise prices between $8 and $12.00, with a weighted average exercise price of
$10.34 and a weighted average remaining contractual life of 3.7 years. 230,200
of these options are exercisable as of December 31, 1996. The remaining 3,500
options have an exercise price and a weighted average exercise price of $13.25
and a weighted average remaining contractual life of 3.88 years. 700 of these
options are exercisable as of December 31, 1996. There was no options
exercisable as of December 31, 1995.
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 grants in 1995 and 1996; risk-free interest rate of 6
percent; expected dividend yields of 0 percent; expected lives of 7 years;
expected volatility of 35 percent. Weighted average fair values of options
granted in 1995 and 1996 were $4.30 and $3.00, respectively.
In connection with the acquisition of the Company by Hadco Corporation (see
Note 8), the vesting for all outstanding options as of January 9, 1997 was
immediately accelerated pursuant to the terms of the Stock Plan and then
redeemed for cash equal to the difference between the exercise price of the
vested option and $18.00 per share.
4. INCOME TAXES
The components of income tax expense, as presented in the accompanying
consolidated statements of income, comprise California S corporation franchise
taxes for 1994 and through September 26, 1995, and Federal and state taxes for
the remainder of 1995 and all of 1996. The pro forma provision for income taxes
reflects the income tax expense that would have been reported if the
F-37
<PAGE> 105
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company had been a C corporation in 1994 and all of 1995. The components of the
provision for income taxes and unaudited pro forma provision for income taxes
are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------------
ACTUAL PRO FORMA
-------------------------- -----------------
1994 1995 1996 1994 1995
---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Current
Federal..................................... $-- $1,349 $4,835 $1,431 $3,547
State....................................... 97 342 483 453 975
--- ------ ------ ------ ------
Total current....................... 97 1,691 5,318 1,884 4,522
--- ------ ------ ------ ------
Deferred
Federal..................................... -- 1,123 928 368 1,271
State....................................... -- 116 272 81 132
Termination of S corporation status......... -- 4,479 -- -- --
--- ------ ------ ------ ------
Total deferred...................... -- 5,718 1,200 449 1,403
--- ------ ------ ------ ------
Net tax provision............................. $97 $7,409 $6,518 $2,333 $5,925
=== ====== ====== ====== ======
</TABLE>
The following table reconciles the expected Federal income tax expense to
the Company's actual income tax expense and unaudited pro forma income tax
expense (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------------
ACTUAL PRO FORMA
----------------------------- -----------------
1994 1995 1996 1994 1995
------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Expected Federal income tax expense.......... $1,962 $ 5,061 $3,292 $1,962 $5,061
State income taxes, net of Federal tax
benefit.................................... 97 337 569 352 776
Nondeductible foreign subsidiary loss........ -- -- 721 -- --
Nondeductible acquisition costs.............. -- -- 2,107 -- --
Termination of S corporation status.......... -- 4,479 -- -- --
Effect of S corporation earnings taxable to
stockholders............................... (1,962) (2,557) -- -- --
Other, net................................... -- 89 (171) 19 88
------ ------- ------ ------ ------
$ 97 $ 7,409 $6,518 $2,333 $5,925
====== ======= ====== ====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and liability are presented below as
of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred income tax assets:
Reserves and accruals.................................................. $ 749 $ 1,013
State income taxes..................................................... 167 234
------- -------
Total deferred income tax assets............................... 916 1,247
Deferred income tax liability:
Depreciation and amortization.......................................... (6,634) (7,003)
------- -------
Net deferred income tax liability........................................ $(5,718) $(5,756)
======= =======
</TABLE>
Deferred income tax assets are classified in other current assets in the
accompanying consolidated balance sheets.
F-38
<PAGE> 106
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACQUISITION OF ALTERNATIVE CIRCUIT TECHNOLOGY, INC.:
On June 7, 1996, the Company completed the acquisition of the assets of
Alternate Circuit Technology, Inc. (ACT). ACT was in the business of owning,
operating and managing a quick turnaround printed circuit board manufacturing
facility in Massachusetts. The purchase price consisted of cash of $8,641,000,
50,000 shares of the Company's common stock with a total market value of
$600,000 and a covenant not to compete arrangement to two ACT shareholders
amounting to $200,000. The acquisition has been recorded using the purchase
method of accounting. The excess of the aggregate purchase price over the fair
market value of net assets acquired was $5,668,000, and this goodwill is being
amortized over ten years. The operating results of ACT have been included in the
Company's consolidated financial statements since the date of acquisition.
6. CUSTOMERS:
In 1994, one customer accounted for 15%, one for 11% and one for 10% of
consolidated net sales. In 1995, one customer accounted for 13% and two
companies each accounted for 10% of the Company's consolidated net sales. These
three customers comprised 35% of accounts receivable at December 31, 1995. In
1996, one customer accounted for 12% of the Company's consolidated net sales. Of
the accounts receivable balance at December 31, 1996, 9% is related to this
customer.
7. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Company occupies its facilities under various operating lease
agreements. In addition, the Company leases certain machinery and equipment
under operating leases. Future minimum lease payments required under operating
leases in the years subsequent to December 31, 1996 will be as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1997.................................................. $ 3,984
1998.................................................. 3,830
1999.................................................. 3,926
2000.................................................. 4,022
2001.................................................. 4,091
2002 and thereafter................................... 26,175
-------
$46,028
=======
</TABLE>
Facility and equipment rent expense was approximately $4,452,000,
$4,566,000 and $4,609,000 for the years ended December 31, 1994, 1995 and 1996,
respectively. Approximately $360,000 and $135,000 of these amounts in 1994 and
1995, respectively were paid to a partnership whose partners were also
stockholders of the Company.
Purchase Commitments
Purchase commitments aggregated $4,126,000 as of December 31, 1996,
primarily for the acquisition of machinery and equipment.
F-39
<PAGE> 107
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stockholders' Benefit and Deferred Compensation Plan
The Company has agreements with its original four stockholders providing
for payment aggregating two years salary per stockholder in the event of death
in service or disability and for payments in the event of an adjustment of the
Company's taxable income for any period the corporation was subject to S
corporation status under the Federal or state income tax laws. To date, no
payments have been required under these agreements.
Subsequent to the year end and upon the acquisition of the Company by Hadco
Corporation, the Company entered into a deferred compensation plan with key
executive employees (none of whom was a director of the Company). The plan will
provide these key executive employees with certain deferred compensation under
certain circumstances.
Workers' Compensation
The Company self-insures its workers' compensation plan and accrues for
incurred claims development and estimated incurred but not reported claims. If
future incurred claims development substantially exceeds historical claim
patterns used to estimate the accrual, the Company could incur significant
additional obligations.
Environmental Matters
In March 1993, the U.S. Environmental Protection Agency (EPA) notified
Zycon of its potential liability for maintenance and remediation costs in
connection with a hazardous waste disposal facility operated by Casmalia
Resources, a California Limited Partnership, in Santa Barbara County,
California. The EPA identified Zycon as one of the 65 generators which had
disposed the greatest amounts of materials at the site. Based on the total
tonnage contributed by all generators, Zycon's share is estimated at
approximately 0.2% of the total weight.
The Casmalia site was regulated by the EPA during the period when the
material was accepted. There is no allegation that Zycon violated any law in the
disposal of material at the site, rather the EPA's actions stemmed from the fact
that Casmalia Resources may not have the financial means to implement a closure
plan for the site and because of Zycon's status as a generator of hazardous
waste.
In September 1996, a Consent Decree among the EPA and 48 entities
(including Zycon) acting through the Casmalia Steering Committee ("CSC") was
lodged with the United States District Court in Los Angeles, California, which
must approve the agreement. Although this approval is pending, work has started
under the Consent Decree. The Consent Decree sets forth the terms and conditions
under which the CSC will carry out work aimed at final closure of the site.
Certain closure activities will be performed by the CSC. Later work will be
performed by the CSC, if funded by other parties. Under the Consent Decree, the
settling parties will work with the EPA to pursue the non-settling parties to
ensure they participate in contributing to the closure and long-term operation
and maintenance of the facility.
8. ACQUISITION BY HADCO CORPORATION:
In December 1996, Hadco Corporation ("Hadco") agreed to acquire all of the
outstanding shares of the Company's common stock at a purchase price of $18.00
per share upon the terms and subject to the conditions set forth in the Tender
Offer Statement. The Tender Offer Statement was made pursuant to an Agreement
and Plan of Merger dated as of December 4, 1996 between Hadco and the Company.
The offer expired on January 9, 1997 after which substantially all of the
outstanding shares of the Company's common stock were acquired by Hadco. The
Company incurred costs aggregating $2,869,000 which represented investment
banking, financial advisory and legal fees incurred relating to
F-40
<PAGE> 108
ZYCON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the acquisition by Hadco. These costs have been expensed in the accompanying
consolidated statement of income for the year ended December 31, 1996 as other
expense. The Company paid approximately $2,100,000 of the total costs incurred
to a financial advisory firm in which the president of such firm was also a
member of the Company's Board of Directors.
Prior to entering into the Agreement and the Plan of Merger with Hadco, the
Company and certain of its principal shareholders had entered into an agreement
to sell all of the outstanding shares of the Company's common stock at $16.25
per share to an unrelated party, but the Company subsequently terminated this
agreement. In connection with this termination, the Company incurred break-up
fees and legal costs amounting to approximately $3,150,000, which was expensed
in the accompanying consolidated statement of income for the year ended December
31, 1996 as other expense.
F-41
<PAGE> 109
HADCO
The Largest Interconnect Manufacturer in North America
Backplane Assembly
- Hadco provides backplane assembly services
utilizing advanced automated manufacturing
systems.
- Advanced systems include split axis assembly,
"smart" feeder systems, and optical centering
for high density electronic packages.
- Hadco's backplane assembly facilities are
located in California and New Hampshire.
Includes pictures of various assembled backplane products and a backplane
assembly line.
<PAGE> 110
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following statement sets forth the amounts of expenses in connection
with the offering of the Common Stock and Notes pursuant to this Registration
Statement, all of which shall be borne by the Company.
<TABLE>
<S> <C>
SEC Registration Fee..................................................... $ 72,921
NASD Fee................................................................. 25,064
Nasdaq Listing Fee....................................................... 25,000
Blue Sky Fees and Expenses............................................... 30,000
Printing and Engraving Expenses.......................................... 10,000
Accounting Fees and Expenses............................................. 175,000
Legal Fees and Expenses.................................................. 525,000
Transfer Agent and Registrar Fees........................................ 10,000
Miscellaneous Expenses................................................... 237,015
----------
Total.......................................................... $1,200,000
==========
</TABLE>
All of the expenses listed above, except the SEC Registration Fee and NASD
Fee, represent estimates only.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Article V, Section 2 of the By-Laws of the Registrant
and to Section 67 of the Massachusetts Business Corporation Law.
Article V, Section 2 of the Company's By-Laws provides:
"2. Indemnification. Each Director, officer, employee and other agent
of the corporation, and any person who, at the request of the corporation,
serves as a director, officer, employee or other agent of another
organization in which the corporation directly or indirectly owns shares or
of which it is a creditor shall be indemnified by the corporation against
any cost, expense (including attorney's fees), judgment, liability and/or
amount paid in settlement reasonably incurred by or imposed upon him in
connection with any action, suit or proceeding (including any proceeding
before any administrative or legislative body or agency), to which he may
be made a party or otherwise involved or with which he shall be threatened,
by reason of his being, or related to his status as, a director, officer,
employee or other agent of the corporation or of any other organization in
which the corporation directly or indirectly owns shares or of which the
corporation is a creditor, which other organization he serves or has served
as director, officer, employee or other agent at the request of the
corporation (whether or not he continues to be an officer, director,
employee or other agent of the corporation or such other organization at
the time such action, suit or proceeding is brought or threatened), unless
such indemnification is prohibited by the Business Corporation Law of the
Commonwealth of Massachusetts. The foregoing right of indemnification shall
be in addition to any rights to which any such person may otherwise be
entitled and shall inure to the benefit of the executors or administrators
of each such person. The corporation may pay the expenses incurred by any
such person in defending a civil or criminal action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding, upon
receipt of an undertaking by such person to repay such payment if it is
determined that such person is not entitled to indemnification hereunder.
This section shall be subject to amendment or repeal only by action of the
stockholders."
II-1
<PAGE> 111
Section 67 of the Massachusetts Corporation Law provides:
"Indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, or who serve at its request
in any capacity with respect to any employee benefit plan, may be provided by it
to whatever extent shall be specified in or authorized by (i) the articles of
organization or (ii) a by-law adopted by the stockholders or (iii) a vote
adopted by the holders of a majority of the shares of stock entitled to vote on
the election of directors. Except as the articles of organization or by-laws
otherwise require, indemnification of any persons referred to in the preceding
sentence who are not directors of the corporation may be provided by it to the
extent authorized by the directors. Such indemnification may include payment by
the corporation of expenses incurred in defending a civil or criminal action or
proceeding in advance of the final disposition of such action or proceeding,
upon receipt of an undertaking by the person indemnified to repay such payment
if he shall be adjudicated to be not entitled to indemnification under this
section which undertaking may be accepted without reference to the financial
ability of such person to make repayment. Any such indemnification may be
provided although the person to be indemnified is no longer an officer,
director, employee or agent of the corporation or of such other organization or
no longer serves with respect to any such employee benefit plan.
No indemnification shall be provided for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interest of the corporation or to the extent that such matter relates to service
with respect to any employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan.
The absence of any express provision for indemnification shall not limit
any right of indemnification existing independently of this section.
A corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or other agent of another organization or with
respect to any employee benefit plan, against any liability incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability."
The Registrant's Restated Articles of Organization, as amended, provide:
"The Corporation eliminates the personal liability of each director to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any statutory provision or other law imposing
such liability; provided, that nothing in this paragraph shall eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law, (iii) under Section sixty-one or sixty-two of Chapter 156B of the
Massachusetts General Laws, or (iv) for any transaction from which the director
derived an improper personal benefit."
II-2
<PAGE> 112
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
This Registration Statement includes the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
1.1 Form of Common Stock Underwriting Agreement by and among Registrant, certain
stockholders of the Company and Robertson, Stephens & Company LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Adams, Harkness & Hill, Inc., as
representatives of the several Underwriters.
1.2 Form of Note Underwriting Agreement by and among Registrant and Robertson,
Stephens & Company LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
as representatives of the several Underwriters.
3.1+ Restated Articles of Organization of Registrant.
3.2+ By-laws, as amended, of Registrant.
4 Form of Indenture (including Form of Note).
5* Opinion of Testa, Hurwitz & Thibeault, LLP as to the legality of the securities
to be offered.
10.1+ Leases for premises located at 435-445 El Camino Real, Santa Clara, California,
by and between Zycon Corporation and University Research Center and addenda
thereto dated March 1, 1988; July 8, 1988; February 27, 1989; August 30, 1989;
May 19, 1993; and August 9, 1993.
10.2+ Provisional Lease dated November 14, 1995 for the premises located at the Muara
Tebas Land of Kuching East Malaysia by and between Sudarsono Osman and Zycon
Corporation Sendirian Berhad.
10.3 Construction Agreement dated August 3, 1995 by and between Zycon Corporation
and Hiti Engineering Sdn.Bhd.
10.4+ Facilities Agreement dated February 9, 1996 by and among the Zycon Corporation
Sdn.Bhd., Bank Bumiputra Malaysia Berhad and BBMB Kewangan Berhad.
10.5+ Corporate Guarantee dated February 9, 1996 issued by Zycon Corporation in favor
of Bank Bumiputra Malaysia Berhad and BBMB Kewangan Berhad.
10.6+ Lease for the three acre premises located in Santa Clara, California by and
between Zycon Corporation and Sobrato Interests III, dated January 4, 1996.
10.7 Profit Sharing Plan and Trust of Registrant, as amended and restated effective
January 1, 1988 and as amended June 20, 1990.
10.8 First Amendment and Modification Agreement by and among Registrant and The
First National Bank of Boston (the "Bank of Boston") dated as of February 27,
1997 amending the Revolving Credit Agreement dated January 8, 1997 among
Registrant and the Bank of Boston (the "Revolving Credit Agreement").
10.9 Form of Assignment and Acceptance to Revolving Credit Agreement.
11+ Statement re: Computation of Earnings per Share.
12+ Statement re: Computation of Ratios.
23.1* Consent of Testa, Hurwitz & Thibeault, LLP (included as part of Exhibit 5).
23.2 Consent of Arthur Andersen LLP, Boston.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Authur Andersen LLP, San Jose.
24+ Power of Attorney (included on signature page).
25+ Statement of Eligibility of Trustee on Form T-1.
27+ Financial Data Schedule.
</TABLE>
- ---------------
+ Filed previously.
* To be filed by amendment.
FINANCIAL STATEMENT SCHEDULES:
Report of Independent Public Accountants on Schedule
Schedule II -- Valuation and Qualifying Accounts
II-3
<PAGE> 113
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes as follows:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 114
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Salem, State of New Hampshire, on April 15,
1997.
HADCO CORPORATION
By /s/ TIMOTHY P. LOSIK
----------------------------------
TIMOTHY P. LOSIK
Vice President, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed below by the following persons
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------- -------------------------------------------- ---------------
<C> <S> <C>
* Chairman of the Board and Director April 15, 1997
- ---------------------------------
(HORACE H. IRVINE)
* President, Chief Executive Officer and April 15, 1997
- --------------------------------- Director (Principal Executive Officer)
(ANDREW E. LIETZ)
/s/ TIMOTHY P. LOSIK Vice President, Chief Financial Officer April 15, 1997
- --------------------------------- and Treasurer (Principal Financial Officer
(TIMOTHY P. LOSIK) and Principal Accounting Officer)
* Director April 15, 1997
- ---------------------------------
(LAWRENCE COOLIDGE)
* Director April 15, 1997
- ---------------------------------
(J. STANLEY HILL)
* Director April 15, 1997
- ---------------------------------
(JOHN F. SMITH)
* Director April 15, 1997
- ---------------------------------
(OLIVER O. WARD)
* Director April 15, 1997
- ---------------------------------
(PATRICK SWEENEY)
* Director April 15, 1997
- ---------------------------------
(JOHN E. POMEROY)
* Director April 15, 1997
- ---------------------------------
(JAMES C. TAYLOR)
</TABLE>
By: /s/ TIMOTHY P.
LOSIK
-------------------------
(TIMOTHY P. LOSIK)
ATTORNEY-IN-FACT
II-5
<PAGE> 115
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Hadco Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Hadco Corporation included in this
registration statement and have issued our report thereon dated November 15,
1996 (except with respect to the matter discussed in Note 2, as to which the
date is January 10, 1997). Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule listed
in Item 16(b) is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states, in all material respects, the
financial data required to be set forth therein, in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 15, 1996
S-1
<PAGE> 116
SCHEDULE II
HADCO CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND FROM END OF
OF PERIOD EXPENSES RESERVES(1) PERIOD
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
October 29, 1994........................... $600 234 (109) $ 725
October 28, 1995........................... $725 277 (152) $ 850
October 26, 1996........................... $850 329 (79) $1,100
</TABLE>
- ---------------
(1) Amounts deemed uncollectible.
S-2
<PAGE> 117
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------------------------------------------------------------------- --------
<C> <S> <C>
1.1 Form of Common Stock Underwriting Agreement by and among Registrant,
certain stockholders of the Company and Robertson, Stephens & Company
LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Adams,
Harkness & Hill, Inc., as representatives of the several
Underwriters...........................................................
1.2 Form of Note Underwriting Agreement by and among Registrant and
Robertson, Stephens & Company LLC and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as representatives of the several Underwriters.....
3.1+ Restated Articles of Organization of Registrant. ......................
3.2+ By-laws, as amended, of Registrant.....................................
4 Form of Indenture (including form of Note).............................
5* Opinion of Testa, Hurwitz & Thibeault, LLP as to the legality of the
securities to be offered...............................................
10.1+ Leases for premises located at 435-445 El Camino Real, Santa Clara,
California, by and between Zycon Corporation and University Research
Center and addenda thereto dated March 1, 1988; July 8, 1988; February
27, 1989; August 30, 1989; May 19, 1993; and August 9, 1993............
10.2+ Provisional Lease dated November 14, 1995 for the premises located at
the Muara Tebas Land of Kuching East Malaysia by and between Sudarsono
Osman and Zycon Corporation Sendirian Berhad. .........................
10.3 Construction Agreement dated August 3, 1995 by and between Zycon
Corporation and Hiti Engineering Sdn.Bhd...............................
10.4+ Facilities Agreement dated February 9, 1996 by and among the Zycon
Corporation Sdn.Bhd., Bank Bumiputra Malaysia Berhad and BBMB Kewangan
Berhad.................................................................
10.5+ Corporate Guarantee dated February 9, 1996 issued by Zycon Corporation
in favor of Bank Bumiputra Malaysia Berhad and BBMB Kewangan
Berhad. ...............................................................
10.6+ Lease for the three acre premises located in Santa Clara, California by
and between Zycon Corporation and Sobrato Interests III, dated January
4, 1996. ..............................................................
10.7 Profit Sharing Plan and Trust of Registrant, as amended and restated
effective January 1, 1988 and as amended June 20, 1990.................
10.8 First Amendment and Modification Agreement by and among Registrant and
The First National Bank of Boston (the "Bank of Boston") dated as of
February 27, 1997 amending the Revolving Credit Agreement dated January
8, 1997 among Registrant and the Bank of Boston (the "Revolving Credit
Agreement")............................................................
10.9 Form of Assignment and Acceptance to Revolving Credit Agreement........
11+ Statement re: Computation of Earnings per Share........................
12+ Statement re: Computation of Ratios....................................
23.1* Consent of Testa, Hurwitz & Thibeault, LLP (included as part of Exhibit
5).....................................................................
23.2 Consent of Arthur Andersen LLP, Boston.................................
23.3 Consent of KPMG Peat Marwick LLP.......................................
23.4 Consent of Arthur Andersen LLP, San Jose...............................
24+ Power of Attorney (included on signature page).........................
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------------------------------------------------------------------- --------
<C> <S> <C>
25+ Statement of Eligibility of Trustee on Form T-1........................
27+ Financial Data Schedule................................................
</TABLE>
- ---------------
+ Filed previously.
* To be filed by amendment.
<PAGE> 1
H&D DRAFT
OF 2/24/97
EXHIBIT 1.1
2,000,000 SHARES(1)
HADCO CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
____________, 1997
ROBERTSON, STEPHENS & COMPANY LLC
MERRILL LYNCH & CO.
ADAMS, HARKNESS & HILL, INC.
As Representatives of the several Underwriters
c/o Robertson, Stephens & Company LLC
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
Hadco Corporation, a Massachusetts corporation (the "Company"), and certain
shareholders of the Company named in Schedule B hereto (hereafter called the
"Selling Shareholders" address you as the Representatives of each of the
persons, firms and corporations listed in Schedule A hereto (herein collectively
called the "Underwriters") and hereby confirm their respective agreements with
the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell 2,000,000
shares of its authorized and unissued Common Stock, $0.05 par value per share,
to the several Underwriters. The 2,000,000 shares of Common Stock, $0.05 par
value, of the Company to be sold by the Company are hereinafter referred to as
the "Firm Shares." The Company and the Selling Shareholders also propose to
grant, severally and not jointly, to the Underwriters an option to purchase up
to 300,000
- -----------------
1 Plus an option to purchase up to 97,400 additional shares from the Company and
up to 202,600 additional shares from certain shareholders of the Company to
cover over-allotments.
<PAGE> 2
additional shares of the Company's Common Stock, $0.05 par value, as provided in
Section 7 hereof. Of such shares, 97,400 shares of Common Stock, $0.05 par
value, will be offered by the Company (the "Company Option Shares") and 202,600
shares of Common Stock, $0.05 par value, will be offered by the Selling
Shareholders. The 202,600 shares of Common Stock, $0.05 par value, to be sold by
the Selling Shareholders are hereinafter referred to as the "Selling Shareholder
Shares". The Company Option Shares and the Selling Shareholder Shares are
collectively referred to herein as the "Option Shares". As used in this
Agreement, the term "Shares" shall include the Firm Shares and the Option
Shares. All shares of Common Stock, $0.05 par value, of the Company to be
outstanding after giving effect to the sales contemplated hereby, including the
Shares, are hereinafter referred to as "Common Stock."
2. Representations, Warranties and Agreements of the Company.
---------------------------------------------------------
I. The Company represents and warrants to and agrees with each
Underwriter and each Selling Shareholder that:
(a) A registration statement on Form S-3 (File No. 333-21977) with
respect to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the applicable rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Act and has been filed with the Commission; such
amendments to such registration statement, such amended prospectuses subject to
completion and such abbreviated registration statements pursuant to Rule 462(b)
of the Rules and Regulations as may have been required prior to the date hereof
have been similarly prepared and filed with the Commission; and the Company will
file such additional amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
as may hereafter be required. Copies of such registration statement and
amendments, of each related prospectus subject to completion (the "Preliminary
Prospectuses"), including all documents incorporated by reference therein, and
of any abbreviated registration statement pursuant to Rule 462(b) of the Rules
and Regulations have been delivered to you. The Company and the transactions
contemplated by this Agreement meet the requirements for using Form S-3 under
the Act.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare
and promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) of the Rules and Regulations
pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared
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effective under the Act by the Commission, the Company will prepare and promptly
file an amendment to the registration statement, including a final form of
prospectus. The term "Registration Statement" as used in this Agreement shall
mean such registration statement, including financial statements, schedules and
exhibits, in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the registration
statement pursuant to Rule 430A(a) of the Rules and Regulations) and, in the
event of any amendment thereto or the filing of any abbreviated registration
statement pursuant to Rule 462(b) of the Rules and Regulations relating thereto
after the effective date of such registration statement, shall also mean (from
and after the effectiveness of such amendment or the filing of such abbreviated
registration statement) such registration statement as so amended, together with
any such abbreviated registration statement. The term "Prospectus" as used in
this Agreement shall mean the prospectus relating to the Shares as included in
such Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of the
Registration Statement at the time it became effective pursuant to Rule 430A(b)
of the Rules and Regulations); last provided to the Underwriters by the Company
and circulated by the Underwriters to all prospective purchasers of the Shares
(including the information deemed to be a part of the Registration Statement at
the time it became effective pursuant to Rule 434(d) of the Rules and
Regulations). Notwithstanding the foregoing, if any revised prospectus shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such use.
Any reference to the Registration Statement or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Act, as of the date of the Registration Statement
or the Prospectus, as the case may be, and any reference to any amendment or
supplement to the Registration Statement or the Prospectus shall be deemed to
refer to and include any documents filed after such date under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which, upon filing, are
incorporated by reference therein, as required by paragraph (b) of Item 12 of
Form S-3. As used in this Agreement, the term "Incorporated Documents" means the
documents which at the time are incorporated by reference in the Registration
Statement, the Prospectus or any amendment or supplement thereto.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has
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not included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and at the time the
Registration Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date (hereinafter defined)
and on any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that none of the representations and
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
The Incorporated Documents heretofore filed, when they were filed (or,
if any amendment with respect to any such document was filed, when such
amendment was filed), conformed in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission thereunder;
any further Incorporated Documents so filed will, when they are filed, conform
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder; no such document when it was filed
(or, if an amendment with respect to any such document was filed, when such
amendment was filed), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and no such further amendment will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation with full power and authority
(corporate and other) to own, lease and operate its properties and conduct its
business as described in the Prospectus; the Company owns all of the outstanding
capital stock of its subsidiaries free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest (other than any appraisal
rights resulting from the Company's
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recent acquisition of Zycon Corporation); each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities which are material to the conduct of
its business, all of which are valid and in full force and effect; neither the
Company nor any of its subsidiaries is in violation of its respective charter or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness, or in any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of its subsidiaries or their respective properties
may be bound; and neither the Company nor any of its subsidiaries is in material
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or over
their respective properties of which it has knowledge. The Company does not own
or control, directly or indirectly, any corporation, association or other entity
other than Hadco Foreign Sales Corporation, Zycon Corporation, Zycon Acquisition
Corporation and Zycon Corporation SDN.BHV.
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective properties may be bound (except for such agreement or instrument for
which a waiver or consent has been obtained), (ii) the charter or bylaws of the
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Company or any of its subsidiaries, or (iii) any law, order, rule, regulation,
writ, injunction, judgment or decree of any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over the Company or any
of its subsidiaries or over their respective properties. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective properties is
required for the execution and delivery of this Agreement and the consummation
by the Company or any of its subsidiaries of the transactions herein
contemplated, except such as may be required under the Act, the Exchange Act (if
applicable), or under state or other securities or Blue Sky laws, all of which
requirements have been satisfied in all material respects.
(e) Except as set forth in the Registration Statement and Prospectus
and any Incorporated Document, there is not any pending or, to the best of the
Company's knowledge, threatened action, suit, claim or proceeding against the
Company, any of its subsidiaries or any of their respective officers or any of
their respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in any material adverse change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise or might materially and adversely affect their properties, assets or
rights, (ii) might prevent consummation of the transactions contemplated hereby
or (iii) is required to be disclosed in the Registration Statement or Prospectus
and is not so disclosed. There are no agreements, contracts, leases or documents
of the Company or any of its subsidiaries of a character required to be
described or referred to in the Registration Statement or Prospectus or any
Incorporated Document or to be filed as an exhibit to the Registration Statement
or any Incorporated Document by the Act or the Rules and Regulations or by the
Exchange Act or the rules and regulations of the Commission thereunder which
have not been accurately described in all material respects in the Registration
Statement or Prospectus or any Incorporated Document or filed as exhibits to the
Registration Statement or any Incorporated Document.
(f) All outstanding shares of capital stock of the Company (including
the Selling Shareholder Shares) have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase securities,
and the authorized and outstanding capital stock of the Company is as set forth
in the Prospectus under the caption "Capitalization" and conforms in all
material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus and any Incorporated Document (and
such statements correctly state the substance of the instruments defining the
capitalization of the Company); the Firm Shares and the
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Option Shares to be purchased from the Company hereunder have been duly
authorized for issuance and sale to the Underwriters pursuant to this Agreement
and, when issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be duly and validly issued and
fully paid and nonassessable, and will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of shareholders exists with respect to any of the Firm
Shares or Option Shares to be purchased from the Company hereunder or the
issuance and sale thereof other than those that have been expressly waived prior
to the date hereof and those that will automatically expire upon and will not
apply to the consummation of the transactions contemplated on the Closing Date.
No further approval or authorization of any shareholder, the Board of Directors
of the Company or others is required for the issuance and sale or transfer of
the Shares except as may be required under the Act, the Exchange Act or under
state or other securities or Blue Sky laws. All issued and outstanding shares of
capital stock of each subsidiary of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, and were not issued in
violation of or subject to any preemptive right, or other rights to subscribe
for or purchase shares and are owned by the Company free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest.
Except as disclosed in the Prospectus and the financial statements of the
Company, and the related notes thereto, included or incorporated by reference in
the Prospectus, neither the Company nor any subsidiary has outstanding any
options to purchase, or any preemptive rights or other rights to subscribe for
or to purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted and exercised thereunder, set forth or
incorporated by reference in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(g) Arthur Andersen LLP, which has examined (i) the consolidated
financial statements of the Company, together with the related schedules and
notes, as of October 26, 1996 and for each of the years in the three (3) years
ended October 26, 1996 and (ii) the consolidated financial statements of Zycon
Corporation ("Zycon"), together with the related schedules and notes as of
December 31, 1996 and for the year ended December 31, 1996 filed with the
Commission as a part of or incorporated by reference into the Registration
Statement, which are included or incorporated by reference in the Prospectus,
and KPMG Peat Marwick LLP, which has examined the consolidated financial
statements of Zycon together with the related schedules and notes, as of
December 31, 1995 and for each of the years in the two (2) years ended December
31, 1995 filed with the Commission as part of or incorporated by reference into
the Registration Statement, which are included or incorporated by reference in
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the Report of our independent accountants within the meaning of the Act and the
Rules and Regulations are independent accountants within the meaning of the Act
and the Rules and Regulations; the audited consolidated financial statements of
the Company and Zycon, together with the related schedules and notes, and the
unaudited consolidated financial information, forming part of the Registration
Statement and Prospectus, fairly present the financial position and the results
of operations of the Company and its subsidiaries and Zycon and its subsidiaries
at the respective dates and for the respective periods to which they apply; and
all audited consolidated financial statements of the Company and Zycon, together
with the related schedules and notes, and the unaudited consolidated financial
information, filed with the Commission as part of or incorporated by reference
into the Registration Statement, have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as may be otherwise stated therein. The selected and summary
financial and statistical data included or incorporated by reference in the
Registration Statement present fairly the information shown therein and have
been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be
included or incorporated by reference in the Registration Statement.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i) any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise, (ii) any transaction that is material to the
Company and its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (iii) any obligation, direct or
contingent, that is material to the Company and its subsidiaries considered as
one enterprise, incurred by the Company or its subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of the Company or any of its subsidiaries that
is material to the Company and its subsidiaries considered as one enterprise,
(v) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its subsidiaries, or (vi) any loss or
damage (whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise.
(i) Except as set forth in the Registration Statement and Prospectus
and any Incorporated Document, (i) each of the Company and its subsidiaries has
good and marketable title to all properties and assets described in the
Registration Statement and Prospectus and any Incorporated Document as owned by
it, free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest,
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other than such as would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise, (ii) the
agreements to which the Company or any of its subsidiaries is a party described
in the Registration Statement and Prospectus and any Incorporated Document are
valid agreements, enforceable by the Company and its subsidiaries (as
applicable), except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements, and (iii) each of the Company and its subsidiaries has
valid and enforceable leases for all properties described in the Registration
Statement and Prospectus and any Incorporated Document as leased by it, except
as the enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles. Except as set
forth in the Registration Statement and Prospectus and any Incorporated
Document, the Company owns or leases all such properties as are necessary to its
operations as now conducted or as proposed to be conducted.
(j) The Company and its subsidiaries have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown thereon as due, and there is no tax deficiency that has been or, to
the best of the Company's knowledge, might be asserted against the Company or
any of its subsidiaries that might have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise; and
all tax liabilities are adequately provided for on the books of the Company and
its subsidiaries.
(k) The Company and its subsidiaries maintain insurance with insurers
of recognized financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, insurance covering real and personal property owned or leased by
the Company or its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for; and
neither the Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise.
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(l) To the best of Company's knowledge, no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent; and
the Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, subassemblers, value added
resellers, subcontractors, original equipment manufacturers, authorized dealers
or international distributors that might be expected to result in a material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise. No collective bargaining agreement exists with any of the
Company's employees and, to the best of the Company's knowledge, no such
agreement is imminent.
(m) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration Statement
and Prospectus and any Incorporated Document; the expiration of any patents,
patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise; the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of the Company by others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights; and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of others
with respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise.
(n) The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and is listed on The Nasdaq National Market, and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from The Nasdaq National Market, nor has the Company received any
notification that the Commission or the National Association of Securities
Dealers, Inc. ("NASD") is contemplating terminating such registration or
listing.
(o) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
and has in the past conducted, and intends in the future to conduct, its affairs
in such a manner as to ensure that it will not become an "investment company" or
a company "controlled" by an "investment company" within the
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meaning of the 1940 Act and such rules and regulations.
(p) The Company has not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
(q) Neither the Company nor any of its subsidiaries has at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(s) Each officer and director of the Company and each Selling
Shareholder has agreed in writing that such person will not, directly or
indirectly, without the prior written consent of Robertson, Stephens & Company,
LLC, offer, sell, contract to sell, grant any option to purchase, pledge or
otherwise dispose of or transfer (collectively, a "Disposition") any shares of
Common Stock or any securities convertible into or exchangeable for, or any
rights to purchase or acquire, shares of Common Stock held by such officer,
director or Selling Stockholder, acquired by such officer, director or Selling
Stockholder after the date of the Prospectus or which may be deemed to be
beneficially owned by such officer, director or Selling Stockholder pursuant to
the Rules and Regulations promulgated under the Act (the "Lock-up Shares") other
than pursuant to this Agreement, for a period ending 90 days after the date that
the Registration Statement is declared effective (the "Lock-up Period"). The
foregoing restriction has been expressly agreed to preclude the holder of
Lock-up Shares from engaging in any hedging or other transaction which is
designed to or reasonably expected to lead to or result in a Disposition of
Lock-up Shares during the Lock-up Period, even if such Lock-up Shares would be
disposed of by someone other than such holder. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Lock-up Shares or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from Lock-up
Shares. Notwithstanding the foregoing, the holder may transfer any or all of the
Lock-up Shares (i) as a bona fide gift or gifts, provided the
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donee or donees thereof agrees in writing as a condition precedent to such gift
or gifts to be bound by this restriction, or (ii) as a distribution to partners
or shareholders of the holder, provided that the distributees thereof agree in
writing to be bound by this restriction. The transferor shall notify Robertson,
Stephens & Company LLC in writing prior to the transfer, and there shall be no
further transfer of such Lock-up Shares except in accordance with this
restriction. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the Lock-up Shares held by such person except in compliance with
this restriction. The Company has provided to counsel for the Underwriters true,
accurate and complete copies of all of the agreements pursuant to which its
officers, directors and shareholders have agreed to such or similar restrictions
(the "Lock-up Agreements") presently in effect or effected hereby. The Company
hereby represents and warrants that it will not release any of its officers,
directors or other shareholders from any Lock-up Agreements currently existing
or hereafter effected without the prior written consent of Robertson, Stephens &
Company LLC.
(t) Except as set forth in the Registration Statement and Prospectus
and any Incorporated Document, (i) the Company is in compliance with all rules,
laws and regulations relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment in effect as of the
date hereof ("Environmental Laws") which are applicable to its business, (ii)
the Company has received no notice from any governmental authority or third
party of an asserted claim under Environmental Laws, which claim is required to
be disclosed in the Registration Statement and the Prospectus and any
Incorporated Document, (iii) the Company will not be required to make future
material capital expenditures to comply with Environmental Laws and (iv) no
property which is owned, leased or occupied by the Company has been designated
as a Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(u) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(v) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
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indebtedness by the Company to or for the benefit of any of the executive
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus and any Incorporated Document.
(w) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
II. Each Selling Shareholder, severally and not jointly, represents and
warrants to and agrees with each Underwriter and the Company that:
(a) Such Selling Shareholder now has and on the Closing Date, and on
any later date on which Option Shares are purchased, will have valid marketable
title to the Shares to be sold by such Selling Shareholder, free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable interest
other than pursuant to this Agreement; and upon delivery of such Shares
hereunder and payment of the purchase price as herein contemplated, each of the
Underwriters will obtain valid marketable title to the Shares purchased by it
from such Selling Shareholder, free and clear of any pledge, lien, security
interest pertaining to such Selling Shareholder or such Selling Shareholder's
property, encumbrance, claim or equitable interest, including any liability for
estate or inheritance taxes, or any liability to or claims of any creditor,
devisee, legatee or beneficiary of such Selling Shareholder.
(b) Such Selling Shareholder has duly authorized (if applicable),
executed and delivered, in the form heretofore furnished to the Representatives
an irrevocable Power of Attorney (the "Power of Attorney") appointing Andrew E.
Lietz and Timothy P. Losik as attorneys-in-fact (collectively, the "Attorneys"
and individually, an "Attorney") and a Letter of Transmittal and Custody
Agreement (the "Custody Agreement") with Hadco Corporation, as custodian (the
"Custodian"); each of the Power of Attorney and the Custody Agreement
constitutes a valid and binding agreement on the part of such Selling
Shareholder, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; and each of such Selling
Shareholder's Attorneys, acting alone, is authorized to execute and deliver this
Agreement and the certificate referred to in Section 6(h) hereof on behalf of
such Selling Shareholder, to determine the purchase price to be paid by the
several Underwriters to such Selling Shareholder as provided in Section 3
hereof, to authorize the delivery of the Selling Shareholder Shares under this
Agreement and to duly endorse (in blank or otherwise) the certificate or
certificates representing such Shares or a stock power or powers with respect
thereto, to accept payment therefor,
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<PAGE> 14
and otherwise to act on behalf of such Selling Shareholder in connection with
this Agreement.
(c) All consents, approvals, authorizations and orders required for
the execution and delivery by such Selling Shareholder of the Power of Attorney
and the Custody Agreement, the execution and delivery by or on behalf of such
Selling Shareholder of this Agreement and the sale and delivery of the Selling
Shareholder Shares under this Agreement (other than, at the time of the
execution hereof (if the Registration Statement has not yet been declared
effective by the Commission), the issuance of the order of the Commission
declaring the Registration Statement effective and such consents, approvals,
authorizations or orders as may be necessary under state or other securities or
Blue Sky laws) have been obtained and are in full force and effect; such Selling
Shareholder, if other than a natural person, has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization as the type of entity that it purports to be; and such Selling
Shareholder has full legal right, power and authority to enter into and perform
its obligations under this Agreement and such Power of Attorney and Custody
Agreement, and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Shareholder under this Agreement.
(d) Such Selling Shareholder will not, directly or indirectly, without
the prior written consent of Robertson, Stephens & Company, LLC, effect the
Disposition of any Lock-up Shares during the Lock-up Period. The foregoing
restriction is expressly agreed to preclude the holder of the Lock-up Shares
from engaging in any hedging or other transaction which is designed to or
reasonably expected to lead to or result in a Disposition of Lock-up Shares
during the Lock-up Period, even if such Lock-up Shares would be disposed of by
someone other than the Selling Shareholder. Such prohibited hedging or other
transactions would including, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Lock-up Shares or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from Lock-up
Shares. Notwithstanding the foregoing, the Selling Stockholder may transfer any
or all of the Lock-up Shares (i) as a bona fide gift or gifts, provided the
donee or donees thereof agrees in writing as a condition precedent to such gift
or gifts to be bound by this restriction, or (ii) as a distribution to partners
or shareholders of the Selling Stockholder, provided that the distributees
thereof agree in writing to be bound by this restriction. The transferor shall
notify Robertson, Stephens & Company LLC in writing prior to the transfer, and
there shall be no further transfer of such Lock-up Shares except in accordance
with this restriction. Such Selling Shareholder also agrees and consents to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of the securities held by such Selling Shareholder except in
compliance with this restriction.
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<PAGE> 15
(e) Certificates in negotiable form for all Shares to be sold by such
Selling Shareholder under this Agreement, together with a stock power or powers
duly endorsed in blank by such Selling Shareholder, have been placed in custody
with the Custodian for the purpose of effecting delivery hereunder.
(f) This Agreement has been duly authorized by each Selling
Shareholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Shareholder and is a valid and binding
agreement of such Selling Shareholder, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles; and the
performance of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms and
provisions of or constitute a default under any bond, debenture, note or other
evidence of indebtedness, or under any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or instrument to
which such Selling Shareholder is a party or by which such Selling Shareholder,
or any Selling Shareholder Shares hereunder, may be bound or, to the best of
such Selling Shareholders' knowledge, result in any violation of any law, order,
rule, regulation, writ, injunction, judgment or decree of any court, government
or governmental agency or body, domestic or foreign, having jurisdiction over
such Selling Shareholder or over the properties of such Selling Shareholder, or,
if such Selling Shareholder is other than a natural person, result in any
violation of any provisions of the charter, bylaws or other organizational
documents of such Selling Shareholder.
(g) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(h) Such Selling Shareholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) All information furnished by or on behalf of such Selling
Shareholder relating to such Selling Shareholder and the Selling Shareholder
Shares that is contained in the representations and warranties of such Selling
Shareholder in such Selling Shareholder's Power of Attorney or set forth in the
Registration Statement or the Prospectus is, and at the time the Registration
Statement became or becomes, as the case may be, effective and at all times
subsequent thereto up to and on the Closing Date, and on any later date on which
Option Shares are to be purchased, was or will be, true, correct and complete,
and does not, and at the time
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<PAGE> 16
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined), and on any later date on which Option Shares are to be purchased, will
not, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make such information not
misleading.
(j) Such Selling Shareholder will review the Prospectus and will
comply with all agreements and satisfy all conditions on its part to be complied
with or satisfied pursuant to this Agreement on or prior to the Closing Date, or
any later date on which Option Shares are to be purchased, as the case may be,
and will advise one of its Attorneys and Robertson, Stephens & Company LLC prior
to the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, if any statement to be made on behalf of such
Selling Shareholder in the certificate contemplated by Section 6(h) would be
inaccurate if made as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be.
(k) Such Selling Shareholder does not have, or has waived prior to the
date hereof, any preemptive right, co-sale right or right of first refusal or
other similar right to purchase any of the Shares that are to be sold by the
Company or any of the other Selling Shareholders to the Underwriters pursuant to
this Agreement; such Selling Shareholder does not have, or has waived prior to
the date hereof, any registration right or other similar right to participate in
the offering made by the Prospectus, other than such rights of participation as
have been satisfied by the participation of such Selling Shareholder in the
transactions to which this Agreement relates in accordance with the terms of
this Agreement; and such Selling Shareholder does not own any warrants, options
or similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, rights, warrants, options or other securities from
the Company, other than those described in the Registration Statement and the
Prospectus and any Incorporated Document.
(l) Such Selling Shareholder is not aware that any of the
representations and warranties of the Company set forth in Section 2.I above is
untrue or inaccurate in any material respect; provided that if such Selling
Stockholder is not a natural person, the representation and warranty will be
made without such Selling Stockholder having conducted any investigation or
inquiry.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees, to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite
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<PAGE> 17
the name of such Underwriter in Schedule A hereto (subject to adjustment as
provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the several Underwriters by certified
or official bank check or checks drawn in next-day funds, payable to the order
of the Company agrees not to deposit any such check in the bank on which it is
drawn, and not to take any other action with the purpose or effect of receiving
immediately available funds, until the business day following the date of its
delivery to the Company, and, in the event of any breach of the foregoing, the
Company shall reimburse the Underwriters for the interest lost and any other
expenses borne by them by reason of such breach), at the offices of Testa,
Hurwitz & Thibeault, LLP, 125 High Street, Boston, MA 02110 (or at such other
place as may be agreed upon among the Representatives and the Company), at 7:00
A.M., San Francisco time (a) on the third (3rd) full business day following the
first day that Shares are traded, (b) if this Agreement is executed and
delivered after 1:30 P.M., San Francisco time, the fourth (4th) full business
day following the day that this Agreement is executed and delivered or (c) at
such other time and date not later than seven (7) full business days following
the first day that Shares are traded as the Representatives and the Company may
determine (or at such time and date to which payment and delivery shall have
been postponed pursuant to Section 10 hereof), such time and date of payment and
delivery being herein called the "Closing Date;" PROVIDED, HOWEVER, that if the
Company has not made available to the Representatives copies of the Prospectus
within the time provided in Section 4(d) hereof, the Representatives may, in
their sole discretion, postpone the Closing Date until no later than two (2)
full business days following delivery of copies of the Prospectus to the
Representatives. The certificates for the Firm Shares to be so delivered will be
made available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the Closing Date and will be in such
names and denominations as you may request, such request to be made at least two
(2) full business days prior to the Closing Date. If the Representatives so
elect, delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
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<PAGE> 18
After the Registration Statement becomes effective, the several
Underwriters intend to make a public offering (as such term is described in
Section 11 hereof) of the Firm Shares at an initial public offering price of
$_____ per share. After completion of the public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), on the inside
front cover concerning stabilization and by the Underwriters, and in the
penultimate paragraph under the caption "Underwriting" in any Preliminary
Prospectus and in the Prospectus constitutes the only information furnished by
the Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement or any Incorporated Document, and you,
on behalf of the respective Underwriters, represent and warrant to the Company
and the Selling Shareholders that the statements made therein do not include any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; the Company will use its best efforts to
cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations as may be required subsequent to the date the Registration
Statement is declared effective to become effective as promptly as possible; the
Company will notify you, promptly after it shall receive notice thereof, of the
time when the Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment to
such Registration Statement as originally declared effective which is declared
effective by the Commission if for any reason the filing of the final form of
Prospectus is required under Rule 424(b)(3) of the Rules and Regulations, it
will provide evidence satisfactory to you that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed; it will notify you promptly of any request by the Commission for the
amending or supplementing of the
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<PAGE> 19
Registration Statement or the Prospectus or for additional information; promptly
upon your request, it will prepare and file with the Commission any amendments
or supplements to the Registration Statement or Prospectus which, in the opinion
of counsel for the several Underwriters ("Underwriters' Counsel"), may be
necessary or advisable in connection with the distribution of the Shares by the
Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have occurred
as a result of which the Prospectus or any other prospectus relating to the
Shares as then in effect would include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; in
case any Underwriter is required to deliver a prospectus nine (9) months or more
after the effective date of the Registration Statement in connection with the
sale of the Shares, it will prepare promptly upon request, but at the expense of
such Underwriter, such amendment or amendments to the Registration Statement and
such prospectus or prospectuses as may be necessary to permit compliance with
the requirements of Section 10(a)(3) of the Act; and it will file no amendment
or supplement to the Registration Statement or Prospectus or the Incorporated
Documents, or, prior to the end of the period of time in which a prospectus
relating to the Shares is required to be delivered under the Act, file any
document which upon filing becomes an Incorporated Document, which shall not
previously have been submitted to you a reasonable time prior to the proposed
filing thereof or to which you shall reasonably object in writing, subject,
however, to compliance with the Act and the Rules and Regulations, the Exchange
Act and the rules and regulations of the Commission thereunder and the
provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been
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<PAGE> 20
qualified as above provided, the Company will make and file such statements and
reports in each year as are or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in the
case of the Prospectus and any term sheet or abbreviated term sheet under Rule
434, in no event later than the first (1st) full business day following the
first day that Shares are traded, copies of the Registration Statement (three of
which will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, and the Incorporated Documents (three of which will include all
exhibits,) all in such quantities as you may from time to time reasonably
request. Notwithstanding the foregoing, if Robertson, Stephens & Company LLC, on
behalf of the several Underwriters, shall agree to the utilization of Rule 434
of the Rules and Regulations, the Company shall provide to you copies of a
Preliminary Prospectus updated in all respects through the date specified by you
in such quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its securityholders
as soon as practicable, but in any event not later than the forty-fifth (45th)
day following the end of the full fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12) month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its shareholders as soon as practicable after the end of
each respective period, annual reports (including financial statements audited
by independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and the other several Underwriters hereunder, upon request (i)
concurrently with furnishing such reports to its shareholders, statements of
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's shareholders, (ii) concurrently with furnishing to
its shareholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of shareholders' equity, and of
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent certified public accountants, (iii)
as soon as they are available, copies of all reports (financial or other) mailed
to shareholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or the NASD, (v) every material press release and every material news
item or article in respect of the Company or its affairs which was generally
released to shareholders or prepared by the Company or any of its subsidiaries,
and
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<PAGE> 21
(vi) any additional information of a public nature concerning the Company or its
subsidiaries, or its business which you may reasonably request. During such five
(5) year period, if the Company shall have active subsidiaries, the foregoing
financial statements shall be on a consolidated basis to the extent that the
accounts of the Company and its subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary which
is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock.
(i) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company or any
Selling Shareholder to perform any agreement on their respective parts to be
performed hereunder or to fulfill any condition of the Underwriters' obligations
hereunder, or if the Company shall terminate this Agreement pursuant to Section
11(a) hereof, or if the Underwriters shall terminate this Agreement pursuant to
Section 11(b)(i), the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including fees and disbursements of Underwriters'
Counsel) incurred by the Underwriters in investigating or preparing to market or
marketing the Shares.
(j) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(k) During the Lock-up Period, the Company will not, without the prior
written consent of Robertson Stephens & Company LLC, effect the Disposition of,
directly or indirectly, any Securities other than the sale of the Firm Shares
and the Option Shares to be sold by the Company hereunder and the Company's
issuance of options or Common Stock under the Company's presently authorized
December 1985 Option Plan, December 1986 Option Plan, December 1987 Option Plan,
September 1990 Plan, December 1991 Director Option Plan and November 1995 Stock
Option Plan (collectively, the "Option Plans").
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5. Expenses.
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(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and the Incorporated Documents and any
amendments or supplements thereto; the photocopying of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement, the Preliminary
Blue Sky Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of the
foregoing; the issuance and delivery of the Shares hereunder to the several
Underwriters, including transfer taxes, if any, the cost of all certificates
representing the Shares and transfer agents' and registrars' fees; the fees and
disbursements of counsel for the Company; all fees and other charges of the
Company's independent certified public accountants; the cost of furnishing to
the several Underwriters copies of the Registration Statement (including
appropriate exhibits), Preliminary Prospectus and the Prospectus and the
Incorporated Documents, and any amendments or supplements to any of the
foregoing; NASD filing fees and the cost of qualifying the Shares under the laws
of such jurisdictions as you may designate (including filing fees and fees and
disbursements of Underwriters' Counsel in connection with such NASD filings and
Blue Sky qualifications); and all other expenses directly incurred by the
Company and the Selling Shareholders in connection with the performance of their
obligations hereunder. Any additional expenses incurred as a result of the sale
of the Shares by the Selling Shareholders will be borne collectively by the
Company and the Selling Shareholders. The provisions of this Section 5(a)(i) are
intended to relieve the Underwriters from the payment of the expenses and costs
which the Selling Shareholders and the Company hereby agree to pay, but shall
not affect any agreement which the Selling Shareholders and the Company may
make, or may have made, for the sharing of any of such expenses and costs. Such
agreements shall not impair the obligations of the Company and the Selling
Shareholders hereunder to the several Underwriters.
(ii) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis for
all reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held
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<PAGE> 23
to have been improper, the Underwriters shall promptly return such payment to
the Company together with interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of the highest
credit standing) listed from time to time in The Wall Street Journal which
represents the base rate on corporate loans posted by a substantial majority of
the nation's thirty (30) largest banks (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the Underwriters within thirty (30)
days of a request for reimbursement shall bear interest at the Prime Rate from
the date of such request.
(b) In addition to their other obligations under Section 8(c) hereof,
the Underwriters severally and not jointly agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(c) hereof, they will reimburse the Company on
a monthly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company shall
promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 5(a)(ii) and 5(b)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 5(a)(ii) and 5(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created by the provisions of
Sections 8(a) and 8(c) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 8(e) hereof.
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<PAGE> 24
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Selling Shareholders
herein, to the performance by the Company and the Selling Shareholders of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company, any Selling Shareholder or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or any Incorporated
Document or otherwise) shall have been complied with to the satisfaction of
Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been reasonably satisfactory to Underwriters' Counsel, and such counsel
shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to in
this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be,
(i) there shall not have been any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise from that set
forth in the Registration Statement or Prospectus, which, in your sole judgment,
is material and adverse and that makes it, in your sole judgment, impracticable
or inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus; and
(ii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any review
for a possible change that does not indicate the direction of the possible
change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Act.
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<PAGE> 25
(d) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of Berlin, Hamilton & Dahmen LLP, general counsel for the Company and
counsel to the Selling Shareholders, dated the Closing Date or such later date
on which Option Shares are to be purchased addressed to the Underwriters and
with reproduced copies or signed counterparts thereof for each of the
Underwriters, to the effect that:
(i) The Company and each subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company and each subsidiary has the corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus;
(iii) The Company and each subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction,
if any, in which the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise. To such counsel's
knowledge, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than [list subsidiaries];
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption "Capitalization" as
of the dates stated therein, the issued and outstanding shares of capital stock
of the Company (including the Selling Shareholder Shares) have been duly and
validly issued and are fully paid and nonassessable, and, to such counsel's
knowledge, will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal or
other similar right;
(v) All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable, and, to such counsel's knowledge, have not been
issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right and are owned
by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest;
(vi) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
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<PAGE> 26
(vii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by you, is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except insofar as indemnification provisions may be
limited by applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles;
(viii) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it constitutes matters of law
or legal conclusions, has been reviewed by such counsel and is a fair summary of
such matters and conclusions; and the forms of certificates evidencing the
Common Stock comply with Massachusetts law;
(ix) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the Act and the
applicable Rules and Regulations;
(x) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations;
(xi) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except such as have been
obtained under the Act, the Exchange Act or such as may be required under state
or other securities or Blue Sky laws in connection with the purchase and the
distribution of the Shares by the Underwriters;
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<PAGE> 27
(xii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus and any Incorporated Document, no holders
of Common Stock or other securities of the Company have registration rights with
respect to securities of the Company and, except as set forth in the
Registration Statement and Prospectus, all holders of securities of the Company
having rights known to such counsel to registration of such shares of Common
Stock or other securities, because of the filing of the Registration Statement
by the Company have, with respect to the offering contemplated thereby, waived
such rights or such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration Statement or have
included securities in the Registration Statement pursuant to the exercise of
and in full satisfaction of such rights;
(xiii) Each Selling Shareholder which is not a natural person has
full right, power and authority to enter into and to perform its obligations
under the Power of Attorney and Custody Agreement to be executed and delivered
by it in connection with the transactions contemplated herein; the Power of
Attorney and Custody Agreement of each Selling Shareholder that is not a natural
person has been duly authorized by such Selling Shareholder; the Power of
Attorney and Custody Agreement of each Selling Shareholder has been duly
executed and delivered by or on behalf of such Selling Shareholder; and the
Power of Attorney and Custody Agreement of each Selling Shareholder constitutes
the valid and binding agreement of such Selling Shareholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles;
(xiv) Each of the Selling Shareholders has full right, power and
authority to enter into and to perform its obligations under this Agreement and
to sell, transfer, assign and deliver the Shares to be sold by such Selling
Shareholder hereunder;
(xv) This Agreement has been duly authorized by each Selling
Shareholder that is not a natural person and has been duly executed and
delivered by or on behalf of each Selling Shareholder; and
(xvi) Upon the delivery of and payment for the Shares as
contemplated in this Agreement, each of the Underwriters will receive valid
marketable title to the Shares purchased by it from such Selling Shareholder,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest. In rendering such opinion, such counsel may assume that the
Underwriters are without notice of any defect in the title of the Shares being
purchased from the Selling Shareholders.
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<PAGE> 28
Counsel rendering the foregoing opinion may rely as to questions
of law not involving the laws of the United States or the Commonwealth of
Massachusetts upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, the Selling
Shareholders or officers of the Selling Shareholders (when the Selling
Shareholder is not a natural person), and of government officials, in which case
their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, an opinion of
Hale and Dorr LLP, in form and substance satisfactory to you, with respect to
the sufficiency of all such corporate proceedings and other legal matters
relating to this Agreement and the transactions contemplated hereby as you may
reasonably require, and the Company shall have furnished to such counsel such
documents as they may have requested for the purpose of enabling them to pass
upon such matters.
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter from
Arthur Andersen LLP and KPMG Peat Marwick LLP addressed to the Underwriters,
dated the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, confirming, in each case, that they are
independent certified public accountants with respect to Zycon and the Company
within the meaning of the Act and the applicable published Rules and Regulations
and based upon the procedures described in each such letter delivered to you
concurrently with the execution of this Agreement (each such letter being herein
called the "Original Letter"), but carried out to a date not more than five (5)
business days prior to the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, (i) confirming, to the extent
true, that the statements and conclusions set forth in the Original Letter are
accurate as of the Closing Date or such later date on which Option Shares are to
be purchased, as the case may be, and (ii) setting forth any revisions and
additions to the statements and conclusions set forth in the Original Letter
which are necessary to reflect any changes in the facts described in the
Original Letter since the date of such letter, or to reflect the availability of
more recent financial statements, data or information. The letter shall not
disclose any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise from that set forth in the Registration Statement
or Prospectus, which, in your sole judgment, is material and adverse and that
makes it, in your sole judgment, impracticable or inadvisable to proceed with
the public offering of the Shares as contemplated by the Prospectus. The
Original Letter from Arthur Andersen LLP shall be addressed to or for the use of
the Underwriters in form and substance
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<PAGE> 29
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to Zycon and
the Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the consolidated balance sheet of the Company as of October 26, 1996 and related
consolidated statements of operations, shareholders' equity, and cash flows for
the twelve (12) months ended October 26, 1996, (iii) set forth in their opinion
with respect to their examination of the consolidated balance sheet of Zycon as
of December 31, 1996 and related consolidated statement of operations of
shareholders's equity and cash flow for the twelve (12) months ended December
31, 1996, (iv) state that Arthur Andersen LLP has performed the procedures set
out in Statement on Auditing Standards No. 71 ("SAS 71") for a review of interim
financial information and providing the report of Arthur Andersen LLP as
described in SAS 71 on the financial statements for the quarter ended January
25, 1997 (the "Quarterly Financial Statements"), (v) state that in the course of
such review, nothing came to their attention that leads them to believe that any
material modifications need to be made to any of the Quarterly Financial
Statements in order for them to be in compliance with generally accepted
accounting principles consistently applied across the periods presented, and
(vi) address other matters agreed upon by Arthur Andersen LLP and you. The
Original Letter from KPMG Peat Marwick LLP shall be addressed to or for the use
of the underwriters in for and substance satisfactory to the underwriters and
shall (i) represent to the extent true, that they are independent certified
public accounts with respect to Zycon and the Company within the meaning of the
Act and applicable published Rules and Regulations and (ii) set forth in their
opinion with respect to their examination of the consolidated balance sheet of
Zycon at December 31, 1995 and related consolidated statements of operations of
shareholders' equity and cash flow for the twelve (12) months ended December 31,
1995. In addition, you shall have received from Arthur Andersen LLP a letter
addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of October 26, 1996, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a certificate of
the Company, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, signed by the Chief Executive Officer
and Chief Financial Officer of the Company, to the effect that, and you shall be
satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or any
later date on which Option Shares are to be purchased, as the case may be, and
the Company has complied with all the agreements and satisfied all the
conditions on its
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<PAGE> 30
part to be performed or satisfied at or prior to the Closing Date or any later
date on which Option Shares are to be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all
times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto and the Incorporated Documents, when such Incorporated Documents became
effective or were filed with the Commission, contained all material information
required to be included therein by the Act and the Rules and Regulations or the
Exchange Act and the applicable rules and regulations of the Commission
thereunder, as the case may be, and in all material respects conformed to the
requirements of the Act and the Rules and Regulations or the Exchange Act and
the applicable rules and regulations of the Commission thereunder, as the case
may be, the Registration Statement, and any amendment or supplement thereto, did
not and does not include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and, since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been (a)
any material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise, (b) any transaction that is material to the
Company and its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (c) any obligation, direct or
contingent, that is material to the Company and its subsidiaries considered as
one enterprise, incurred by the Company or its subsidiaries, except obligations
incurred in the ordinary course of business, (d) any change in the capital stock
or outstanding indebtedness of the Company or any of its subsidiaries that is
material to the Company and its subsidiaries considered as one enterprise, (e)
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company or any of its subsidiaries, or (f) any loss or damage
(whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or otherwise), earnings,
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<PAGE> 31
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise.
(h) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for each Selling
Shareholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have not been
informed that:
(i) The representations and warranties made by such Selling
Shareholder herein are not true or correct in any material respect on the
Closing Date or on any later date on which Option Shares are to be purchased, as
the case may be; or
(ii) Such Selling Shareholder has not complied with any
obligation or satisfied any condition which is required to be performed or
satisfied on the part of such Selling Shareholder at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be.
(i) The Company shall have obtained and delivered to you an agreement
from each officer and director of the Company and each Selling Shareholder in
writing prior to the date hereof that such person will not, during the Lock-up
Period, effect the Disposition of any Securities now owned or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) as a bona fide gift or
gifts, provided the donee or donees thereof agree in writing to be bound by this
restriction, (ii) as a distribution to partners or shareholders of such person,
provided that the distributees thereof agree in writing to be bound by the terms
of this restriction, or (iii) with the prior written consent of Robertson,
Stephens & Company LLC. The foregoing restriction shall have been expressly
agreed to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than the such holder. Such
prohibited hedging or other transactions would including, without limitation,
any short sale (whether or not against the box) or any purchase, sale or grant
of any right (including, without limitation, any put or call option) with
respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities. Furthermore, such person will
have also agreed and consented to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Securities held by such
person except in compliance with this restriction.
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<PAGE> 32
(j) The Company and the Selling Shareholders shall have furnished to
you such further certificates and documents as you shall reasonably request
(including certificates of officers of the Company, the Selling Shareholders or
officers of the Selling Shareholders (when the Selling Shareholder is not a
natural person) as to the accuracy of the representations and warranties of the
Company and the Selling Shareholders herein, as to the performance by the
Company and the Selling Shareholders of its their respective obligations
hereunder and as to the other conditions concurrent and precedent to the
obligations of the Underwriters hereunder.
(k) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of Testa, Hurwitz & Thibeault, LLP, special securities counsel to the
Company, dated the Closing Date or such later date on which Option Shares are to
be purchased addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
(i) The Registration Statement has become effective under the Act
and, to such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Act;
(ii) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the requirements of
the Act and the applicable Rules and Regulations; and each of the Incorporated
Documents (other than the financial statements (including supporting schedules)
and the financial data derived therefrom as to which such counsel need express
no opinion) complied when filed pursuant to the Exchange Act as to form in all
material respects with the requirements of the Act and the Rules and Regulations
and the Exchange Act and the applicable rules and regulations of the Commission
thereunder;
(iii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or any Incorporated Document or to be filed as an exhibit to the
Registration Statement or any Incorporated Document which are not described or
referred to therein or filed as required;
(iv) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or any of its
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<PAGE> 33
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus or any Incorporated Document by the Act or the Rules
and Regulations or by the Exchange Act or the applicable rules and regulations
of the Commission thereunder, other than those described therein;
(v) The Firm Shares or the Option Shares, as the case may be, to
be issued by the Company pursuant to the terms of this Agreement have been duly
authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully paid
and nonassessable, and will not have been issued in violation of or subject to
any preemptive right, co-sale right, registration right, right of first refusal
or other similar right.
(vi) The information in the Prospectus under the caption "Certain
Federal Income Tax Considerations", to the extent that it constitutes matters or
law or legal conclusions, has been reviewed by such counsel and is a fair
summary of such matters and conclusions.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later date on which
Option Shares are to be purchased, the Registration Statement and any amendment
or supplement thereto and any Incorporated Document, when such documents became
effective or were filed with the Commission (other than the financial statements
including supporting schedules and other financial and statistical information
derived therefrom, as to which such counsel need express no comment) contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or at the Closing Date or any later date on which the Option Shares
are to be purchased, as the case may be, the Registration Statement, the
Prospectus and any amendment or supplement thereto and any Incorporated Document
(except as aforesaid) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. Such
counsel shall also state that the conditions for the use of Form S-3 set forth
in the General Instructions thereto have been satisfied.
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<PAGE> 34
Counsel rendering the foregoing opinion may rely as to questions
of law not involving the laws of the United States or the Commonwealth of
Massachusetts upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, the Selling
Shareholders or officers of the Selling Shareholders (when the Selling
Shareholder is not a natural person), and of government officials, in which case
their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company and the Selling Shareholders will furnish
you with such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
7. Option Shares.
-------------
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company and the Selling Shareholders hereby grant to the several Underwriters,
for the purpose of covering over-allotments in connection with the distribution
and sale of the Firm Shares only, a nontransferable option to purchase, the
respective number of Company Option Shares and Selling Shareholder Shares set
forth opposite the names of the Company and the Selling Shareholders in Schedule
B hereto, at the purchase price per share for the Firm Shares set forth in
Section 3 hereof. Such option may be exercised by the Representatives on behalf
of the several Underwriters on one (1) or more occasions in whole or in part
during the period of thirty (30) days after the date on which the Firm Shares
are initially offered to the public, by giving written notice to the Company.
The number of Option Shares to be purchased by each Underwriter upon the
exercise of such option shall be the same proportion of the total number of
Option Shares to be purchased by the several Underwriters pursuant to the
exercise of such option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of Firm
Shares purchased by the several Underwriters (set forth in Schedule A hereto),
adjusted by the Representatives in such manner as to avoid fractional shares.
The Underwriters shall purchase all Selling Shareholder Shares before purchasing
any Company Option Shares.
The certificates in negotiable form for the Selling Shareholder
Shares have been placed in custody (for delivery under this Agreement) under the
Custody Agreement. Each Selling Shareholder agrees that the certificates for the
Selling Shareholder Shares of such Selling Shareholder so held in custody are
subject
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<PAGE> 35
to the interests of the Underwriters hereunder, that the arrangements made by
such Selling Shareholder for such custody, including the Power of Attorney is to
that extent irrevocable and that the obligations of such Selling Shareholder
hereunder shall not be terminated by the act of such Selling Shareholder or by
operation of law, whether by the death or incapacity of such Selling Shareholder
or the occurrence of any other event, except as specifically provided herein or
in the Custody Agreement. If any Selling Shareholder should die or be
incapacitated, or if any other such event should occur, before the delivery of
the certificates for the Selling Shareholder Shares hereunder, the Selling
Shareholder Shares to be sold by such Selling Shareholder shall, except as
specifically provided herein or in the Custody Agreement, be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether
the Custodian shall have received notice of such death or other event.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in next-day funds, payable to the order of the Company with regard
to the Company Option Shares being purchased, and to the order of either
Attorney for the respective accounts of the Selling Shareholders with regard to
the Selling Shareholder Shares (and the Company and the Selling Shareholders
agree not to deposit any such check in the bank on which it is drawn, and not to
take any other action with the purpose or effect of receiving immediately
available funds, until the business day following the date of its delivery to
the Company and the Selling Shareholders). In the event of any breach of the
foregoing, the Company and the Selling Shareholders shall reimburse the
Underwriters for the interest lost and any other expenses borne by them by
reason of such breach. Such delivery and payment shall take place at the offices
of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts 02110
or at such other place as may be agreed upon among the Representatives and the
Company (i) on the Closing Date, if written notice of the exercise of such
option is received by the Company at least two (2) full business days prior to
the Closing Date, or (ii) on a date which shall not be later than the third
(3rd) full business day following the date the Company receives written notice
of the exercise of such option, if such notice is received by the Company less
than two (2) full business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be
made available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit
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<PAGE> 36
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company and the Selling Shareholders herein, to
the accuracy of the statements of the Company, the Selling Shareholders and
officers of the Company made pursuant to the provisions hereof, to the
performance by the Company and the Selling Shareholders of their respective
obligations hereunder, to the conditions set forth in Section 6 hereof, and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may request in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants or agreements of the Company and the Selling Shareholders or the
satisfaction of any of the conditions herein contained.
8. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject (including, without limitation, in its
capacity as an Underwriter or as a "qualified independent underwriter" within
the meaning of Section 2720 of the Conduct Rules of the NASD), under the Act,
the Exchange Act or otherwise, specifically including, but not limited to,
losses, claims, damages or liabilities (or actions in respect thereof) arising
out of or based upon (i) any breach of any representation, warranty, agreement
or covenant of the Company herein contained, (ii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, including any Incorporated
Document, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or the
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<PAGE> 37
Prospectus or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
such Preliminary Prospectus or the Prospectus, or any such amendment or
supplement thereto, in reliance upon, and in conformity with, written
information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, PROVIDED FURTHER, that the indemnity agreement provided in this
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
(b) Each Selling Shareholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject
(including, without limitation, in its capacity as an Underwriter or as a
"qualified independent underwriter" within the meaning of Section 2720 of the
Conduct Rules of the NASD) under the Act, the Exchange Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of such Selling
Shareholder herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, including any Incorporated Document, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any
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<PAGE> 38
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this Section 8(b) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company or such Underwriter by such Selling
Shareholder, directly or through such Selling Shareholder's representatives,
specifically for use in the preparation thereof, and agrees to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the indemnity agreement provided in
this Section 8(b) with respect to any Preliminary Prospectus shall not inure to
the benefit of any Underwriter from whom the person asserting any losses,
claims, damages, liabilities or actions based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which such Selling Shareholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company and each Selling Shareholder against any losses,
claims, damages or liabilities, joint or several, to which the Company or such
Selling Shareholder may become subject under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon (i)
any breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, including any Incorporated Document, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this Section 8(c) to the extent, but only to the
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<PAGE> 39
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof, and agrees to reimburse
the Company and each such Selling Shareholder for any legal or other expenses
reasonably incurred by the Company and each such Selling Shareholder in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(c) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each director
of the Company, each Selling Shareholder and each person, if any, who controls
the Company or any Selling Shareholder within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any liabilities
which each Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 8, notify the indemnifying party in writing of the commencement
thereof but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party otherwise than
under this Section 8. In case any such action is brought against any indemnified
party, and it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it shall elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; PROVIDED, HOWEVER, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under
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<PAGE> 40
Section 8(a), 8(b) or 8(c) hereof who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; PROVIDED that such
consent shall not be unreasonably withheld. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnification could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on all claims that are the subject
matter of such proceeding.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 8
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that, except as set forth
in Section 8(f) hereof, the Underwriters severally and not jointly are
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company and the Selling Shareholders are responsible for the remaining portion,
PROVIDED, HOWEVER, that (i) no Underwriter shall be required to contribute any
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter exceeds the amount of damages which
such Underwriter has otherwise required to pay and (ii) no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this Section 8(e)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter, the Company or
any Selling Shareholder within the meaning of the Act or the Exchange Act and
each officer of the Company who signed the Registration Statement and each
director of the Company.
(f) The liability of each Selling Shareholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 8 shall be
limited to an amount equal to the initial public offering price of the Selling
Shareholder Shares sold by such Selling Shareholder to the Underwriters minus
the amount of the
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<PAGE> 41
underwriting discount paid thereon to the Underwriters by such Selling
Shareholder. The Company and such Selling Shareholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company, the Selling Shareholders and the Underwriters herein or in certificates
delivered pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or any Selling Shareholder, or
any of their officers, directors or controlling persons within the meaning of
the Act or the Exchange Act, and shall survive the delivery of the Shares to the
several Underwriters hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters shall
fail to take up and pay for the number of Firm Shares agreed by such Underwriter
or Underwriters to be purchased hereunder upon tender of such Firm Shares in
accordance with the terms hereof, and if the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the
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<PAGE> 42
several Underwriters the privilege of substituting within twenty-four (24) hours
(including non-business hours) another underwriter or underwriters (which may
include any nondefaulting Underwriter) satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid by such
postponed Closing Date, the Closing Date may, at the option of the Company, be
postponed for a further twenty-four (24) hours, if necessary, to allow the
Company the privilege of finding another underwriter or underwriters,
satisfactory to you, to purchase the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase. If it shall be
arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 10, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement, supplements to the Prospectus or other
such documents which may thereby be made necessary, and (ii) the respective
number of Firm Shares to be purchased by the remaining Underwriters and
substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and pay
for all such Firm Shares so agreed to be purchased by the defaulting Underwriter
or Underwriters or substitute another underwriter or underwriters as aforesaid
and the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company nor any Selling
Shareholder shall be liable to any Underwriter (except as provided in Sections 5
and 8 hereof) nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Firm Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, the Selling
Shareholders and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company or any Selling Shareholder (except to the
extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. Effective Date of this Agreement and Termination.
------------------------------------------------
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., San Francisco time, on the first full business day following the effective
date of the Registration Statement, or (ii) the time of the initial public
offering of any of the
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<PAGE> 43
Shares by the Underwriters after the Registration Statement becomes effective.
The time of the initial public offering shall mean the time of the release by
you, for publication, of the first newspaper advertisement relating to the
Shares, or the time at which the Shares are first generally offered by the
Underwriters to the public by letter, telephone, telegram or telecopy, whichever
shall first occur. By giving notice as set forth in Section 12 before the time
this Agreement becomes effective, you, as Representatives of the several
Underwriters, or the Company, may prevent this Agreement from becoming effective
without liability of any party to any other party, except as provided in
Sections 4(i), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
or any Selling Shareholder shall have failed, refused or been unable to perform
any agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse, or (ii) if additional material governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading in
securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. In the event of termination pursuant to subparagraph (i) above,
the Company shall remain obligated to pay costs and expenses pursuant to
Sections 4(i), 5 and 8 hereof. Any termination pursuant to any of subparagraphs
(ii) through (v) above shall be without liability of any party to any other
party except as provided in Sections 5 and 8 hereof.
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<PAGE> 44
If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o Robertson, Stephens & Company LLC, 555
California Street, Suite 2600, San Francisco, California 94104, telecopier
number (415) 781-0278, Attention: General Counsel; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Hadco Corporation, 12A Manor Parkway,
Salem, New Hampshire 03079, telecopier number (603) 893-0025, Attention: Andrew
E. Lietz, Chief Executive Officer; if sent to one or more of the Selling
Shareholders, such notice shall be sent mailed, delivered, telegraphed (and
confirmed by letter) or telecopied (and confirmed by letter) to Andrew E. Lietz
and Timothy Losik, as Attorneys-in-Fact for the Selling Shareholders, at Hadco
Corporation, 12A Manor Parkway, Salem, New Hampshire 03079, telecopier number
(603) 893-0025.
13. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and the Selling Shareholders and
their respective executors, administrators, successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons
within the meaning of the Act or the Exchange Act, officers and directors
referred to in Section 8 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company and the Selling Shareholders under
this Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and the Selling Shareholders shall be entitled to act and rely upon
any statement, request, notice or agreement made or given by you jointly or by
Robertson, Stephens & Company LLC on behalf of you.
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<PAGE> 45
14. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
15. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
If the foregoing correctly sets forth the understanding among the
Company, the Selling Shareholders and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Selling Shareholders
and the several Underwriters.
Very truly yours,
HADCO CORPORATION
By:
----------------------------------
SELLING SHAREHOLDERS
By:
----------------------------------
Attorney-in-Fact for the Selling
Shareholders named in Schedule B
hereto
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<PAGE> 46
Accepted as of the date first above written:
ROBERTSON, STEPHENS & COMPANY LLC
MERRILL LYNCH & CO.
ADAMS, HARKNESS & HILL, INC.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By ROBERTSON, STEPHENS & COMPANY LLC
By ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By
--------------------------------------
Authorized Signatory
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<PAGE> 47
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm
Underwriters Shares To Be
------------ Purchased
--------------
<S> <C>
Robertson, Stephens & Company LLC.......................
Merrill Lynch, Pierce, Fenner &
Smith Incorporated......................................
Adams, Harkness & Hill, Inc.............................
----------
TOTAL............................................... $2,000,000
</TABLE>
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<PAGE> 48
SCHEDULE B
<TABLE>
<CAPTION>
Number of Selling
Name of Selling Shareholder Shareholder Shares To
--------------------------- Be Sold
---------------------
--------
<S> <C>
Total.................................. 202,600
Company Option Shares...................... 97,400
Total Option Shares ....................... 300,000
</TABLE>
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<PAGE> 1
Exhibit 1.2
$100,000,000(1)
HADCO CORPORATION
__% CONVERTIBLE SUBORDINATED NOTES DUE 2004
UNDERWRITING AGREEMENT
_____________, 1997
ROBERTSON, STEPHENS & COMPANY LLC
MERRILL LYNCH & CO.
As Representatives of the several Underwriters
c/o Robertson, Stephens & Company LLC
555 California Street, Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
Hadco Corporation, a Massachusetts corporation (the "Company"), addresses
you as the Representatives of each of the persons, firms and corporations listed
in Schedule A hereto (herein collectively called the "Underwriters") and hereby
confirms its agreement with the several Underwriters as follows:
1. Description of Notes. The Company proposes to issue and sell to the
several Underwriters an aggregate of 100,000,000 principal amount of __%
Convertible Subordinated Notes due 2004 (the "Firm Notes"). The Company also
proposes to grant to the Underwriters an option to purchase up to an aggregate
of an additional $15,000,000 principal amount of __% Convertible Subordinated
Notes due 2004 (the "Option Notes"), as provided in Section 7 hereof. As used in
this Agreement, the term "Notes" shall include the Firm Notes and the Option
Notes. The Notes are to be issued under an Indenture to be dated as of ________,
1997 (the "Indenture"), by and between the Company and State Street Bank and
Trust Company, as trustee (the "Trustee"), pursuant to which the Notes will be
convertible at the option of the holders into the Company's Common Stock, par
value $0.05 per share (the "Common Stock"). The Notes and the shares of Common
Stock into which the Notes are convertible are herein collectively called the
"Securities."
- --------
(1) Plus an option to purchase up to an aggregate of an additional
$15,000,000 principal amount of ___% Convertible Subordinated Notes due 2004
from the Company to cover over-allotments, if any.
1
<PAGE> 2
2. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to and agrees with each Underwriter that:
(a) A registration statement on Form S-3 (File No. 333-21977) with
respect to the Securities, including a prospectus subject to completion,
has been prepared by the Company in conformity with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the applicable
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Act and has been filed
with the Commission; such amendments to such registration statement, such
amended prospectuses subject to completion and such abbreviated
registration statements pursuant to Rule 462(b) of the Rules and
Regulations as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company will
file such additional amendments to such registration statement, such
amended prospectuses subject to completion and such abbreviated
registration statements as may hereafter be required. Copies of such
registration statement and amendments, of each related prospectus subject
to completion (the "Preliminary Prospectuses"), including all documents
incorporated by reference therein, and of any abbreviated registration
statement pursuant to Rule 462(b) of the Rules and Regulations have been
delivered to you. The Company and the transactions contemplated by this
Agreement meet the requirements for using Form S-3 under the Act.
If the registration statement relating to the Securities has
been declared effective under the Act by the Commission, the Company will
prepare and promptly file with the Commission the information omitted from
the registration statement pursuant to Rule 430A(a) pursuant to
subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations or, if
Robertson, Stephens & Company LLC, on behalf of the several Underwriters,
shall agree to the utilization of Rule 434 of the Rules and Regulations,
the information required to be included in any term sheet filed pursuant
to Rule 434(b) or (c), as applicable, of the Rules and Regulations
pursuant to subparagraph (7) of Rule 424(b) of the Rules and Regulations
or as part of a post-effective amendment to the registration statement
(including a final form of prospectus). If the registration statement
relating to the Securities has not been declared effective under the Act
by the Commission, the Company will prepare and promptly file an amendment
to the registration statement, including a final form of prospectus, or,
if Robertson, Stephens & Company LLC, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the information required to be included in any term sheet
filed pursuant to Rule 434(b) or (c), as applicable, of the Rules and
Regulations. The term "Registration Statement" as used in this Agreement
shall mean such registration statement, including financial statements,
schedules and exhibits (other than in the Statement of Eligibility and
Qualification of the Trustee on Form T-1), in the form in which it became
or becomes, as the case may be, effective (including, if the Company
omitted information from the registration statement pursuant to Rule
430A(a) or files a term sheet pursuant to Rule 434 of the Rules and
Regulations, the information deemed to be a part of the registration
statement at the time it became effective pursuant to Rule 430A(b) or Rule
434(d) of the Rules and Regulations) and, in the event of any amendment
thereto or the filing of any abbreviated registration statement pursuant
to Rule
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462(b) of the Rules and Regulations relating thereto after the effective
date of such registration statement, shall also mean (from and after the
effectiveness of such amendment or the filing of such abbreviated
registration statement) such registration statement as so amended,
together with any such abbreviated registration statement. The term
"Prospectus" as used in this Agreement shall mean the prospectus relating
to the Securities as included in such Registration Statement at the time
it becomes effective (including, if the Company omitted information from
the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the
Rules and Regulations or, if an abbreviated registration statement is
filed pursuant to Rule 462(b) of the Rules and Regulations, at the time
such abbreviated registration statement becomes effective); provided,
however, that if in reliance on Rule 434 of the Rules and Regulations and
with the consent of Robertson, Stephens & Company LLC, on behalf of the
several Underwriters, the Company shall have provided to the Underwriters
a term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the
time that a confirmation is sent or given for purposes of Section 2(10)(a)
of the Act, the term "Prospectus" shall mean the "prospectus subject to
completion" (as defined in Rule 434(g) of the Rules and Regulations) last
provided to the Underwriters by the Company and circulated by the
Underwriters to all prospective purchasers of the Securities (including
the information deemed to be a part of the Registration Statement at the
time it became effective pursuant to Rule 434(d) of the Rules and
Regulations). Notwithstanding the foregoing, if any revised prospectus
shall be provided to the Underwriters by the Company for use in connection
with the offering of the Securities that differs from the prospectus
referred to in the immediately preceding sentence (whether or not such
revised prospectus is required to be filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations), the term "Prospectus" shall
refer to such revised prospectus from and after the time it is first
provided to the Underwriters for such use. If in reliance on Rule 434 of
the Rules and Regulations and with the consent of Robertson, Stephens &
Company LLC, on behalf of the several Underwriters, the Company shall
have provided to the Underwriters a term sheet pursuant to Rule 434(b) or
(c), as applicable, prior to the time that a confirmation is sent or given
for purposes of Section 2(10)(a) of the Act, the Prospectus and the term
sheet, together, will not be materially different from the prospectus in
the Registration Statement. Any reference to the Registration Statement or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Act, as of the date of the Registration Statement or the Prospectus,
as the case may be, and any reference to any amendment or supplement to
the Registration Statement or the Prospectus shall be deemed to refer to
and include any documents filed after such date under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which, upon filing,
are incorporated by reference therein, as required by paragraph (b) of
Item 12 of Form S-3. As used in this Agreement, the term "Incorporated
Documents" means the documents which at the time are incorporated by
reference in the Registration Statement, the Prospectus or any amendment
or supplement thereto.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such
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<PAGE> 4
Preliminary Prospectus has conformed in all material respects to the
requirements of the Act and the Rules and Regulations and, as of its date,
has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
at the time the Registration Statement became or becomes, as the case may
be, effective and at all times subsequent thereto up to and on the Closing
Date (hereinafter defined) and on any later date on which Option Notes are
to be purchased, (i) the Registration Statement and the Prospectus, and
any amendments or supplements thereto, contained and will contain all
material information required to be included therein by the Act and the
Rules and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, (ii) the
Registration Statement, and any amendments or supplements thereto, did not
and will not include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that none of the
representations and warranties contained in this subparagraph (b) shall
apply to information contained in or omitted from the Registration
Statement or Prospectus, or any amendment or supplement thereto, in
reliance upon, and in conformity with, written information relating to any
Underwriter furnished to the Company by such Underwriter specifically for
use in the preparation thereof.
The Incorporated Documents heretofore filed, when they were
filed (or, if any amendment with respect to any such document was filed,
when such amendment was filed), conformed in all material respects with
the requirements of the Exchange Act and the rules and regulations of the
Commission thereunder; any further Incorporated Documents so filed will,
when they are filed, conform in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder; no such document when it was filed (or, if an
amendment with respect to any such document was filed, when such amendment
was filed), contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and no such further amendment
will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Indenture complies as to form in
all material respects with the requirements of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and
regulations thereunder, and, on the effective date of the Registration
Statement, will be duly qualified under the Trust Indenture Act.
(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation with full power
and authority (corporate and other) to own, lease and operate its
properties and conduct its business as described in the Prospectus; the
Company owns all of the outstanding capital stock of its subsidiaries free
and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest (other than any appraisal rights resulting
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<PAGE> 5
from the Company's recent acquisition of Zycon Corporation); each of the
Company and its subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified
or be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise; no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail,
such power and authority or qualification; each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and
effect; neither the Company nor any of its subsidiaries is in violation of
its respective charter or bylaws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which it or any of its subsidiaries or their respective properties may
be bound; and neither the Company nor any of its subsidiaries is in
material violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or over their respective properties of which it has
knowledge. The Company does not own or control, directly or indirectly,
any corporation, association or other entity other than Hadco Foreign
Sales Corporation, Zycon Corporation, Zycon Acquisition Corporation and
Zycon Corporation SDN.BHV.
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company
and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally or by general equitable
principles; the performance of this Agreement, the Indenture and the Notes
and the consummation of the transactions herein or therein contemplated
will not result in a material breach or violation of any of the terms and
provisions of, or constitute a default under, (i) any bond, debenture,
note or other evidence of indebtedness, or under any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of its subsidiaries or their respective
properties may be bound (except for such agreement or instrument for which
a waiver or consent has been obtained), (ii) the charter or bylaws of the
Company or any of its subsidiaries, or (iii) any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government
or governmental agency or body, domestic or foreign, having jurisdiction
over the Company or any of its subsidiaries or over their
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<PAGE> 6
respective properties. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties is required for the
execution and delivery of this Agreement, the Indenture or the Notes, and
the consummation by the Company or any of its subsidiaries of the
transactions herein or therein contemplated, except such as may be
required under the Act, the Exchange Act (if applicable), or under state
or other securities or Blue Sky laws, or under the rules and regulations
of the National Association of Securities Dealers, Inc. ("NASD") with
respect to the clearance of the underwriting arrangements, or under the
Trust Indenture Act, all of which requirements have been satisfied in all
material respects.
(e) Except as set forth in the Registration Statement and
Prospectus and any Incorporated Document, there is not any pending or, to
the best of the Company's knowledge, threatened action, suit, claim or
proceeding against the Company, any of its subsidiaries or any of their
respective officers or any of their respective properties, assets or
rights before any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective officers or properties or otherwise
which (i) might result in any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise
or might materially and adversely affect their properties, assets or
rights, (ii) might prevent consummation of the transactions contemplated
hereby or (iii) is required to be disclosed in the Registration Statement
or Prospectus and is not so disclosed. There are no agreements, contracts,
leases or documents of the Company or any of its subsidiaries of a
character required to be described or referred to in the Registration
Statement or Prospectus or any Incorporated Document or to be filed as an
exhibit to the Registration Statement or any Incorporated Document by the
Act or the Rules and Regulations or by the Exchange Act or the rules and
regulations of the Commission thereunder which have not been accurately
described in all material respects in the Registration Statement or
Prospectus or any Incorporated Document or filed as exhibits to the
Registration Statement or any Incorporated Document.
(f) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities,
and the authorized and outstanding capital stock of the Company is as set
forth in the Prospectus under the caption "Capitalization" and conforms in
all material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus and any Incorporated Document
(and such statements correctly state the substance of the instruments
defining the capitalization of the Company); the shares of Common Stock
issuable upon conversion of the Notes have been duly authorized and
reserved for issuance upon conversion of the Notes and, when issued and
delivered by the Company upon such conversion, will be duly and validly
issued and fully paid and nonassessable; and no preemptive right, co-sale
right, registration right, right of first refusal or other similar right
of shareholders exists with
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<PAGE> 7
respect to any of such shares of Common Stock or the issuance and sale
thereof. No further approval or authorization of any shareholder, the
Board of Directors of the Company or others is required for the issuance
and sale or transfer of the Securities except as may be required under the
Act, the Exchange Act, under state or other securities or Blue Sky laws or
rules and regulations of the NASD. All issued and outstanding shares of
capital stock of each subsidiary of the Company have been duly authorized
and validly issued and are fully paid and nonassessable, and were not
issued in violation of or subject to any preemptive right, or other rights
to subscribe for or purchase shares. Except as disclosed in the Prospectus
and the financial statements of the Company, and the related notes
thereto, included or incorporated by reference in the Prospectus, neither
the Company nor any subsidiary has outstanding any options to purchase, or
any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The description of
the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth or incorporated by reference in the Prospectus
accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
(g) The Company has all legal right, power and authority to enter
into the Indenture and the Notes and to perform its obligations
thereunder. The Indenture has been duly authorized by all necessary
corporate action on the part of the Company and, when executed and
delivered by the Company in accordance with its terms (assuming due
authorization, execution and delivery thereof by the Trustee), will be a
legal, valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except to the extent that a
waiver of rights under any usury laws may be unenforceable and except as
the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws, now or
hereafter in effect, relating to or affecting creditors' rights and
remedies generally, or by general equitable principles. The Notes have
been duly authorized by all necessary corporate action on the part of the
Company and on the Closing Date, the Indenture and the Notes will have
been duly executed by the Company and will conform in all material
respects to the descriptions thereof in the Prospectus. When the Notes
are issued, executed and authenticated in accordance with the Indenture
and paid for in accordance with the terms of this Agreement, the Notes
will be legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture, except to the extent that a waiver of rights
under any usury laws may be unenforceable and except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, relating to or affecting creditors' rights and remedies
generally, or by general equitable principles.
(h) Arthur Andersen LLP, which has examined (i) the consolidated
financial statements of the Company, together with the related schedules
and notes, as of October 26, 1996 and for each of the years in the three
(3) years ended October 26, 1996 and (ii) the consolidated financial
statements of Zycon Corporation ("Zycon"), together with the related
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<PAGE> 8
schedules and notes as of December 31, 1996 and for the year ended
December 31, 1996 filed with the Commission as a part of or incorporated
by reference into the Registration Statement, which are included or
incorporated by reference in the Prospectus, and KPMG Peat Marwick LLP,
which has examined the consolidated financial statements of Zycon
together with the related schedules and notes, as of December 31, 1995 and
for each of the years in the two (2) years ended December 31, 1995 filed
with the Commission as part of or incorporated by reference into the
Registration Statement, which are included or incorporated by reference in
the Report of our independent accountants within the meaning of the Act
and the Rules and Regulations, are independent accountants within the
meaning of the Act and the Rules and Regulations; the audited consolidated
financial statements of the Company and Zycon, together with the related
schedules and notes, and the unaudited consolidated financial information,
forming part of the Registration Statement and Prospectus, fairly present
the financial position and the results of operations of the Company and
its subsidiaries and Zycon and its subsidiaries at the respective dates
and for the respective periods to which they apply; and all audited
consolidated financial statements of the Company and Zycon, together with
the related schedules and notes, and the unaudited consolidated financial
information, filed with the Commission as part of or incorporated by
reference into the Registration Statement, have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved except as may be otherwise stated
therein. The selected and summary financial and statistical data included
or incorporated by reference in the Registration Statement present fairly
the information shown therein and have been compiled on a basis consistent
with the audited financial statements presented therein. No other
financial statements or schedules are required to be included or
incorporated by reference in the Registration Statement.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i)
any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and
its subsidiaries considered as one enterprise, (ii) any transaction that
is material to the Company and its subsidiaries considered as one
enterprise, except transactions entered into in the ordinary course of
business, (iii) any obligation, direct or contingent, that is material to
the Company and its subsidiaries considered as one enterprise, incurred by
the Company or its subsidiaries, except obligations incurred in the
ordinary course of business, (iv) any change in the capital stock or
outstanding indebtedness of the Company or any of its subsidiaries that is
material to the Company and its subsidiaries considered as one enterprise,
(v) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its subsidiaries, or (vi) any loss
or damage (whether or not insured) to the property of the Company or any
of its subsidiaries which has been sustained or will have been sustained
which has a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(j) Except as set forth in the Registration Statement and
Prospectus and any Incorporated Document, (i) each of the Company and its
subsidiaries has good and
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<PAGE> 9
marketable title to all properties and assets described in the
Registration Statement and Prospectus and any Incorporated Document as
owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than such as would not
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and
its subsidiaries considered as one enterprise, (ii) the agreements to
which the Company or any of its subsidiaries is a party described in the
Registration Statement and Prospectus and any Incorporated Document are
valid agreements, enforceable by the Company and its subsidiaries (as
applicable), except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles and, to the best of the Company's knowledge,
the other contracting party or parties thereto are not in material breach
or material default under any of such agreements, and (iii) each of the
Company and its subsidiaries has valid and enforceable leases for all
properties described in the Registration Statement and Prospectus and any
Incorporated Document as leased by it, except as the enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles. Except as set forth
in the Registration Statement and Prospectus and any Incorporated
Document, the Company owns or leases all such properties as are necessary
to its operations as now conducted or as proposed to be conducted.
(k) The Company and its subsidiaries have timely filed all
necessary federal, state and foreign income and franchise tax returns and
have paid all taxes shown thereon as due, and there is no tax deficiency
that has been or, to the best of the Company's knowledge, might be
asserted against the Company or any of its subsidiaries that might have a
material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and
its subsidiaries considered as one enterprise; and all tax liabilities are
adequately provided for on the books of the Company and its subsidiaries.
(l) The Company and its subsidiaries maintain insurance with
insurers of recognized financial responsibility of the types and in the
amounts generally deemed adequate for their respective businesses and
consistent with insurance coverage maintained by similar companies in
similar businesses, including, but not limited to, insurance covering real
and personal property owned or leased by the Company or its subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any
such subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely
affect the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries
considered as one enterprise.
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(m) To the best of Company's knowledge, no labor disturbance by
the employees of the Company or any of its subsidiaries exists or is
imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers,
subassemblers, value added resellers, subcontractors, original equipment
manufacturers, authorized dealers or international distributors that might
be expected to result in a material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one
enterprise. No collective bargaining agreement exists with any of the
Company's employees and, to the best of the Company's knowledge, no such
agreement is imminent.
(n) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names and copyrights
which are necessary to conduct its businesses as described in the
Registration Statement and Prospectus and any Incorporated Document; the
expiration of any patents, patent rights, trade secrets, trademarks,
service marks, trade names or copyrights would not have a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries
considered as one enterprise; the Company has not received any notice of,
and has no knowledge of, any infringement of or conflict with asserted
rights of the Company by others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights; and the Company has not received any notice of, and
has no knowledge of, any infringement of or conflict with asserted rights
of others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise.
(o) The Common Stock is registered pursuant to Section 12(g) of
the Exchange Act and is listed on The Nasdaq National Market, and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from The Nasdaq National Market, nor has the
Company received any notification that the Commission or the NASD is
contemplating terminating such registration or listing.
(p) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to
conduct, its affairs in such a manner as to ensure that it will not become
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the 1940 Act and such rules and
regulations.
(q) The Company has not distributed and will not distribute prior
to the later of (i) the Closing Date, or any date on which Option Notes
are to be purchased, as the case may be, and (ii) completion of the
distribution of the Securities, any offering material in connection
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<PAGE> 11
with the offering and sale of the Securities other than any Preliminary
Prospectuses, the Prospectus, the Registration Statement and other
materials, if any, permitted by the Act.
(r) Neither the Company nor any of its subsidiaries has at any
time during the last five (5) years (i) made any unlawful contribution to
any candidate for foreign office or failed to disclose fully any
contribution in violation of law, or (ii) made any payment to any federal
or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(s) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the
Securities to facilitate the sale or resale of the Notes.
(t) Each officer and director of the Company and each of the
beneficial owners of shares of Common Stock identified on Schedule B (the
"Selling Shareholders") attached to that certain Underwriting Agreement,
dated as of ________, 1997, among the Company, Robertson, Stephens &
Company LLC, Merrill Lynch & Co. and Adams, Harkness & Hill, Inc., has
agreed in writing that such person will not, directly or indirectly,
without prior written consent of Robertson, Stephens & Company LLC,
offer, sell, contract to sell, grant any option to purchase, pledge or
otherwise dispose of or transfer (collectively, a "Disposition") any
shares of Common Stock or any securities convertible into or exchangeable
for, or any rights to purchase or acquire, shares of Common Stock held by
such officer, director or Selling Shareholder, acquired by such officer,
director or Selling Shareholder after the date of the Prospectus or which
may be deemed to be beneficially owned by such officer, director or
Selling Shareholder pursuant to the Rules and Regulations promulgated
under the Act (the "Lock-up Shares") other than pursuant to this
Agreement, for a period ending 90 days after the date that the
Registration Statement is declared effective (the "Lock-up Period"). The
foregoing restriction has been expressly agreed to preclude the holder of
Lockup Shares from engaging in any hedging or other transaction which is
designed to or reasonably expected to lead to or result in a Disposition
of Lock-up Shares during the Lockup Period, even if such Lock-up Shares
would be disposed of by someone other than such holder. Such prohibited
hedging or other transactions would include, without limitation, any short
sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with
respect to any Lock-up Shares or with respect to any security (other than
a broad-based market basket or index) that includes, relates to or derives
any significant part of its value from Lock-up Shares. Notwithstanding the
foregoing, the holder may transfer any or all of the Lock-up Shares (i) as
a bona fide gift or gifts, provided the donee or donees thereof agrees in
writing as a condition precedent to such gift or gifts to be bound by this
restriction, or (ii) as a distribution to partners or shareholders of the
holder, provided that the distributees thereof agree in writing to be
bound by this restriction. The transferor shall notify Robertson, Stephens
& Company LLC in writing prior to the transfer, and there shall be no
further transfer of such Lock-up Shares except in accordance with this
restriction. Furthermore, such person has also agreed and
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<PAGE> 12
consented to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Lock-up Shares held by such
person except in compliance with this restriction. The Company has
provided to counsel for the Underwriters true, accurate and complete
copies of all of the agreements pursuant to which its officers, directors
and shareholders have agreed to such or similar restrictions (the "Lock-up
Agreements") presently in effect or effected hereby. The Company hereby
represents and warrants that it will not release any of its officers,
directors or other shareholders from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of
Robertson, Stephens & Company LLC.
(u) Except as set forth in the Registration Statement and
Prospectus and any Incorporated Document, (i) the Company is in compliance
with all rules, laws and regulations relating to the use, treatment,
storage and disposal of toxic substances and protection of health or the
environment in effect as of the date hereof ("Environmental Laws") which
are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the
Registration Statement and the Prospectus and any Incorporated Document,
(iii) the Company will not be required to make future material capital
expenditures to comply with Environmental Laws and (iv) no property which
is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), or
otherwise designated as a contaminated site under applicable state or
local law.
(v) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(w) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of
the executive officers or directors of the Company or any of the members
of the families of any of them, except as disclosed in the Registration
Statement and the Prospectus and any Incorporated Document.
(x) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the Government
of Cuba or with any person or affiliate located in Cuba.
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3. Purchase, Sale and Delivery of Firm Notes. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue and sell to
the Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of ___% of the principal amount
thereof, Firm Notes in the respective principal amount as hereinafter set forth.
The obligation of each Underwriter to the Company shall be to purchase from the
Company that number of Firm Notes which is set forth opposite the name of such
Underwriter in Schedule A hereto (subject to adjustment as provided in Section
10).
Delivery of the Firm Notes to be purchased by the Underwriters
pursuant to this Section 3 shall be made against receipt of a wire transfer
reference number issued by the Federal Reserve System evidencing payment of the
purchase price therefor by the several Underwriters by wire transfer of
immediately available funds, to an account specified in writing by the Company,
at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, MA
02110 (or at such other place as may be agreed upon among the Representatives
and the Company), at 7:00 A.M., San Francisco time (a) on the third (3rd) full
business day following the first day that Firm Notes are traded, (b) if this
Agreement is executed and delivered after 1:30 P.M., San Francisco time, the
fourth (4th) full business day following the day that this Agreement is executed
and delivered or (c) at such other time and date not later than seven (7) full
business days following the first day that Firm Notes are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 10 hereof),
such time and date of payment and delivery being herein called the "Closing
Date;" provided, however, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representatives. The Firm Notes to be so
delivered will be made available to you at such office or such other location
including, without limitation, in New York City, as you may reasonably request
for checking at least one (1) full business day prior to the Closing Date and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to the Closing Date. If the
Representatives so elect, delivery of the Firm Notes may be made by credit
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Notes to be purchased by such Underwriter or Underwriters. Any
such payment by you shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make a public offering (as such term is described in
Section 11 hereof) of the Firm Notes as set forth in the Prospectus. After the
public offering, the several Underwriters may, in their discretion, vary the
public offering price.
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<PAGE> 14
The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), on the inside
front cover concerning stabilization by the Underwriters, and in the penultimate
paragraph under the caption "Underwriting" in any Preliminary Prospectus and in
the Prospectus constitutes the only information furnished by the Underwriters to
the Company for inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement or any Incorporated Document, and you, on behalf of the
respective Underwriters, represent and warrant to the Company that the
statements made therein do not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
4. Further Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto, to become effective as promptly as possible; the Company will use
its best efforts to cause any abbreviated registration statement pursuant
to Rule 462(b) of the Rules and Regulations as may be required subsequent
to the date the Registration Statement is declared effective to become
effective as promptly as possible; the Company will notify you, promptly
after it shall receive notice thereof, of the time when the Registration
Statement, any subsequent amendment to the Registration Statement or any
abbreviated registration statement has become effective or any supplement
to the Prospectus has been filed; if the Company omitted information from
the Registration Statement at the time it was originally declared
effective in reliance upon Rule 430A(a) of the Rules and Regulations, the
Company will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of
Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to such Registration Statement as originally declared effective
which is declared effective by the Commission or as part of an abbreviated
registration statement filed pursuant to Rule 462(b) which is declared
effective by the Commission; if the Company files a term sheet pursuant to
Rule 434 of the Rules and Regulations, the Company will provide evidence
satisfactory to you that the Prospectus and term sheet meeting the
requirements of Rule 434(b) or (c), as applicable, of the Rules and
Regulations, have been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (7) of Rule 424(b) of the Rules and
Regulations; if for any reason the filing of the final form of Prospectus
is required under Rule 424(b)(3) of the Rules and Regulations, it will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed; it will notify you promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; promptly upon your request, it
will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in the opinion of counsel
for the several Underwriters ("Underwriters' Counsel"), may be necessary
or advisable in connection with the
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<PAGE> 15
distribution of the Notes by the Underwriters; it will promptly prepare
and file with the Commission, and promptly notify you of the filing of,
any amendments or supplements to the Registration Statement or Prospectus
which may be necessary to correct any statements or omissions, if, at any
time when a prospectus relating to the Notes is required to be delivered
under the Act, any event shall have occurred as a result of which the
Prospectus or any other prospectus relating to the Notes as then in effect
would include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; in case any
Underwriter is required to deliver a prospectus nine (9) months or more
after the effective date of the Registration Statement in connection with
the sale of the Notes, it will prepare promptly upon request, but at the
expense of such Underwriter, such amendment or amendments to the
Registration Statement and such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus or the Incorporated Documents, or,
prior to the end of the period of time in which a prospectus relating to
the Notes is required to be delivered under the Act, file any document
which upon filing becomes an Incorporated Document, which shall not
previously have been submitted to you a reasonable time prior to the
proposed filing thereof or to which you shall reasonably object in
writing, subject, however, to compliance with the Act and the Rules and
Regulations, the Exchange Act and the rules and regulations of the
Commission thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or
of the initiation or threat of any proceeding for that purpose; and it
will promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal at the earliest possible moment if such
stop order should be issued.
(c) The Company will use its best efforts to qualify the Notes for
offering and sale under the securities laws of such jurisdictions as you
may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Notes, except that
the Company shall not be required in connection therewith or as a
condition thereof to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction in which it is
not otherwise required to be so qualified or to so execute a general
consent to service of process. In each jurisdiction in which the Notes
shall have been qualified as above provided, the Company will make and
file such statements and reports in each year as are or may be required by
the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, in no event later than the first (1st) full business day
following the first day that Notes are traded, copies of the Registration
Statement (three of which will be signed and which will include all
exhibits), each Preliminary Prospectus, the Prospectus and any amendments
or supplements to such documents, including any prospectus prepared to
permit compliance with Section 10(a)(3) of
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<PAGE> 16
the Act, and the Incorporated Documents (three of which will include all
exhibits,) all in such quantities as you may from time to time reasonably
request. Notwithstanding the foregoing, if Robertson, Stephens & Company
LLC, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall
provide to you copies of a Preliminary Prospectus updated in all respects
through the date specified by you in such quantities as you may from time
to time reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than
the forty-fifth (45th) day following the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement, an earnings statement (which will be in reasonable
detail but need not be audited) complying with the provisions of Section
11(a) of the Act and covering a twelve (12) month period beginning after
the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its shareholders as soon as practicable after the
end of each respective period, annual reports (including financial
statements audited by independent certified public accountants) and
unaudited quarterly reports of operations for each of the first three
quarters of the fiscal year, and will furnish to you and the other several
Underwriters hereunder, upon request (i) concurrently with furnishing such
reports to its shareholders, statements of operations of the Company for
each of the first three (3) quarters in the form furnished to the
Company's shareholders, (ii) concurrently with furnishing to its
shareholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of shareholders' equity, and
of cash flows of the Company for such fiscal year, accompanied by a copy
of the certificate or report thereon of independent certified public
accountants, (iii) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders, (iv) as soon as they are
available, copies of all reports and financial statements furnished to or
filed with the Commission, any securities exchange or the NASD, (v) every
material press release and every material news item or article in respect
of the Company or its affairs which was generally released to shareholders
or prepared by the Company or any of its subsidiaries, and (vi) any
additional information of a public nature concerning the Company or its
subsidiaries, or its business which you may reasonably request. During
such five (5) year period, if the Company shall have active subsidiaries,
the foregoing financial statements shall be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are
consolidated, and shall be accompanied by similar financial statements for
any significant subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Notes being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which
may be the same entity as the transfer agent) for its Common Stock.
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<PAGE> 17
(i) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company to
perform any agreement on its part to be performed hereunder or to fulfill
any condition of the Underwriters' obligations hereunder, or if the
Company shall terminate this Agreement pursuant to Section 11(a) hereof,
or if the Underwriters shall terminate this Agreement pursuant to Section
11(b)(i), the Company will reimburse the several Underwriters for all
reasonable out-of-pocket expenses (including reasonable fees and
disbursements of Underwriters' Counsel) incurred by the Underwriters in
investigating or preparing to market or marketing the Notes.
(j) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in
your opinion the market price of the Common Stock has been or is likely to
be materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising the Company to the
effect set forth above, forthwith prepare, consult with you concerning the
substance of and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
(k) During the Lock-up Period, the Company will not, without the
prior written consent of Robertson Stephens & Company LLC, effect the
Disposition of, directly or indirectly, any Lock-up Shares other than the
issuance of shares of Common Stock upon conversion of the Notes, the sale
of certain shares of Common Stock by the Company contemplated by the
Registration Statement and the Prospectus and the Company's issuance of
options or Common Stock under the Company's presently authorized December
1985 Option Plan, December 1986 Option Plan, December 1987 Option Plan,
September 1990 Plan, December 1991 Director Option Plan and November 1995
Stock Option Plan (collectively, the "Option Plans").
5. Expenses.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules
and exhibits), Preliminary Prospectuses and the Prospectus and the
Incorporated Documents and any amendments or supplements thereto;
the photocopying of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue
Sky Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to
any of the foregoing; the issuance and delivery of the Notes
hereunder to the several Underwriters, including transfer taxes, if
any, the cost of printing and engraving the Notes and Trustees'
fees, note registrar's fees and similar fees; the fees and
disbursements of counsel for the Company; all fees and other
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<PAGE> 18
charges of the Company's independent certified public accountants;
the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary
Prospectus and the Prospectus and the Incorporated Documents, and
any amendments or supplements to any of the foregoing; NASD filing
fees and the cost of qualifying the Notes under the laws of such
jurisdictions as you may designate (including filing fees and fees
and disbursements of Underwriters' Counsel in connection with such
NASD filings and Blue Sky qualifications); and all other expenses
directly incurred by the Company in connection with the performance
of its obligations hereunder.
(ii) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(a) hereof, it will reimburse the
Underwriters on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Company's obligation to
reimburse the Underwriters for such expenses and the possibility
that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the
Underwriters shall promptly return such payment to the Company
together with interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of
the highest credit standing) listed from time to time in The Wall
Street Journal which represents the base rate on corporate loans
posted by a substantial majority of the nation's thirty (30) largest
banks (the "Prime Rate"). Any such interim reimbursement payments
which are not made to the Underwriters within thirty (30) days of a
request for reimbursement shall bear interest at the Prime Rate from
the date of such request.
(b) In addition to their other obligations under Section 8(b)
hereof, the Underwriters severally and not jointly agree that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding described in Section 8(b) hereof, they will
reimburse the Company on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company
for such expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company shall promptly return such payment to the
Underwriters together with interest, compounded daily, determined on the
basis of the Prime Rate. Any such interim reimbursement payments which are
not made to the Company within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
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<PAGE> 19
(c) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in Sections 5(a)(ii)
and 5(b) hereof, including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which
such amounts shall be apportioned among the reimbursing parties, shall be
settled by arbitration conducted under the provisions of the Constitution
and Rules of the Board of Governors of the New York Stock Exchange, Inc.
or pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for
arbitration or a written notice of intention to arbitrate, therein
electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in
such demand or notice, then the party responding to said demand or notice
is authorized to do so. Any such arbitration will be limited to the
operation of the interim reimbursement provisions contained in Sections
5(a)(ii) and 5(b) hereof and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses which is
created by the provisions of Sections 8(a) and 8(b) hereof or the
obligation to contribute to expenses which is created by the provisions of
Section 8(d) hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Notes as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Notes are to be purchased, as the case may be, of the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you;
and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or,
to the knowledge of the Company or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or any
Incorporated Document or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the Indenture, the form of Registration Statement and
the Prospectus, and the registration, authorization, issue, sale and
delivery of the Notes, shall have been reasonably satisfactory to
Underwriters' Counsel, and such counsel shall have been furnished with
such papers and information as they may reasonably have requested to
enable them to pass upon the matters referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Notes are to
be purchased, as the case may be,
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<PAGE> 20
(i) there shall not have been any change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse
and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Notes as
contemplated by the Prospectus; and
(ii) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Act.
(d) You shall have received on the Closing Date and on any later
date on which Option Notes are to be purchased, as the case may be, the
following opinion of Berlin, Hamilton & Damon LLP, general counsel for
the Company, dated the Closing Date or such later date on which Option
Notes are to be purchased addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the
Underwriters, to the effect that:
(i) The Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation;
(ii) The Company and each subsidiary has the corporate power
and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
(iii) The Company and each subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its
properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in
good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business
of the Company and its subsidiaries considered as one enterprise. To
such counsel's knowledge, the Company does not own or control,
directly or indirectly, any corporation, association or other entity
other than Hadco Foreign Sales Corporation, Zycon Corporation, Zycon
Acquisition Corporation and Zycon Corporation SDN.BHV.
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company have been duly
and validly issued and are fully paid and nonassessable, and, to
such counsel's
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knowledge, will not have been issued in violation of or subject to
any preemptive right, co-sale right, registration right, right of
first refusal or other similar right;
(v) All issued and outstanding shares of capital stock of
each subsidiary of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and, to such counsel's
knowledge, have not been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first
refusal or other similar right and are owned by the Company free and
clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest;
(vi) The shares of Common Stock issuable upon conversion of
the Notes have been duly authorized and reserved for issuance upon
conversion of the Notes and will be, when issued and delivered upon
conversion, validly issued and fully paid and nonassessable, and not
subject to any preemptive or other similar right;
(vii) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the
Underwriters the Notes to be issued and sold by it hereunder and to
issue the Common Stock upon conversion of the Notes;
(viii) This Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, is a valid and binding
agreement of the Company.
(ix) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such
counsel and is a fair summary of such matters and conclusions; and
the forms of certificates evidencing the Common Stock comply with
Massachusetts law;
(x) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes
are accurate and fairly present the information required to be
presented by the Act and the applicable Rules and Regulations;
(xi) The performance of this Agreement, the Indenture and
the Notes and the consummation of the transactions herein
contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion
need be expressed) will not (a) result in any violation of the
Company's charter or
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bylaws or (b) to such counsel's knowledge, result in a material
breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument known to such counsel (other than the Bank
Credit Agreement, dated as of January 8, 1997, by and among the
Company, the lenders from time to time that are party thereto and
The First National Bank of Boston, as agent (the "Bank Credit
Agreement"), to which such counsel need not opine) to which the
Company is a party or by which its properties are bound, or any
applicable statute, rule or regulation known to such counsel or, to
such counsel's knowledge, any order, writ or decree of any court,
government or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries, or over any of their
properties or operations;
(xii) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or
body having jurisdiction over the Company or any of its
subsidiaries, or over any of their properties or operations is
necessary in connection with the consummation by the Company of the
transactions herein contemplated, except such as have been obtained
under the Act, the Exchange Act or such as may be required under
state or other securities or Blue Sky laws in connection with the
purchase and the distribution of the Notes by the Underwriters;
(xiii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus and any Incorporated Document,
no holders of Common Stock or other securities of the Company have
registration rights with respect to securities of the Company and,
except as set forth in the Registration Statement and Prospectus,
all holders of securities of the Company having rights known to such
counsel to registration of such shares of Common Stock or other
securities, because of the filing of the Registration Statement by
the Company have, with respect to the offering contemplated thereby,
waived such rights or such rights have expired by reason of lapse of
time following notification of the Company's intent to file the
Registration Statement.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the
Commonwealth of Massachusetts upon opinions of local counsel and with
regard to New York law can assume that the laws of the State of New York
are identical to the laws of the Commonwealth of Massachusetts, and as to
questions of fact upon representations or certificates of officers of the
Company and of government officials, in which case their opinion is to
state that they are so relying and that they have no knowledge of any
material misstatement or inaccuracy in any such opinion, representation or
certificate. Copies of any opinion, representation or certificate so
relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
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(e) You shall have received on the Closing Date and on any later
date on which Option Notes are to be purchased, as the case may be, (i) an
opinion of Hale and Dorr LLP, in form and substance satisfactory to you,
with respect to the sufficiency of all such corporate proceedings and
other legal matters relating to this Agreement and the transactions
contemplated hereby as you may reasonably require, and (ii) an opinion of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, in the form
and substance satisfactory to you, with respect to the validity of the
Notes, and the Company shall have furnished to each such counsel such
documents as they may have requested for the purpose of enabling them to
pass upon such matters.
(f) You shall have received on the Closing Date and on any later
date on which Option Notes are to be purchased, as the case may be, a
letter from Arthur Andersen LLP and KPMG Peat Marwick LLP addressed to
the Underwriters, dated the Closing Date or such later date on which
Option Notes are to be purchased, as the case may be, confirming, in each
case, that they are independent certified public accountants with respect
to Zycon and the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in
each such letter delivered to you concurrently with the execution of this
Agreement (each such letter being herein called the "Original Letter"),
but carried out to a date not more than five (5) business days prior to
the Closing Date or such later date on which Option Notes are to be
purchased, as the case may be, (i) confirming, to the extent true, that
the statements and conclusions set forth in the Original Letter are
accurate as of the Closing Date or such later date on which Option Notes
are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise
from that set forth in the Registration Statement or Prospectus, which, in
your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public
offering of the Notes as contemplated by the Prospectus. The Original
Letter from Arthur Andersen LLP shall be addressed to or for the use of
the Underwriters in form and substance satisfactory to the Underwriters
and shall (i) represent, to the extent true, that they are independent
certified public accountants with respect to Zycon and the Company within
the meaning of the Act and the applicable published Rules and Regulations,
(ii) set forth their opinion with respect to their examination of the
consolidated balance sheet of the Company as of October 26, 1996 and
related consolidated statements of operations, shareholders' equity, and
cash flows for the twelve (12) months ended October 26, 1996, (iii) set
forth in their opinion with respect to their examination of the
consolidated balance sheet of Zycon as of December 31, 1996 and related
consolidated statement of operations of shareholders' equity and cash flow
for the twelve (12) months ended December 31, 1996, (iv) state that Arthur
Andersen LLP has performed the procedures set out in Statement on Auditing
Standards No. 71 ("SAS 71") for a review of interim financial information
and providing the report of Arthur Andersen LLP as described in SAS 71 on
the financial
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<PAGE> 24
statements for the quarter ended January 25, 1997 (the "Quarterly
Financial Statements"), (v) state that in the course of such review,
nothing came to their attention that leads them to believe that any
material modifications need to be made to any of the Quarterly Financial
Statements in order for them to be in compliance with generally accepted
accounting principles consistently applied across the periods
presented, and (vi) address other matters agreed upon by Arthur Andersen
LLP and you. The Original Letter from KPMG Peat Marwick LLP shall be
addressed to or for the use of the underwriters in for and substance
satisfactory to the underwriters and shall (i) represent to the extent
true, that they are independent certified public accounts with respect to
Zycon and the Company within the meaning of the Act and applicable
published Rules and Regulations and (ii) set forth in their opinion with
respect to their examination of the consolidated balance sheet of Zycon
at December 31, 1995 and related consolidated statements of operations of
shareholders' equity and cash flow for the twelve (12) months ended
December 31, 1995. In addition, you shall have received from Arthur
Andersen LLP a letter addressed to the Company and made available to you
for the use of the Underwriters stating that their review of the Company's
system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of their examination of the Company's
consolidated financial statements as of October 26, 1996, did not disclose
any weaknesses in internal controls that they considered to be material
weaknesses.
(g) You shall have received on the Closing Date and on any later
date on which Option Notes are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on
which Option Notes are to be purchased, as the case may be, signed by the
Chief Executive Officer and Chief Financial Officer of the Company, to the
effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the
Closing Date or any later date on which Option Notes are to be
purchased, as the case may be, and the Company has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date or any later
date on which Option Notes are to be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate,
the Registration Statement and the Prospectus, and any amendments or
supplements thereto and the Incorporated Documents, when such
Incorporated Documents became effective or were filed with the
Commission, contained all material information required to be
included therein by the Act and the Rules and Regulations or the
Exchange Act and the applicable rules and regulations of the
Commission thereunder, as the case may be, and in all material
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<PAGE> 25
respects conformed to the requirements of the Act and the Rules and
Regulations or the Exchange Act and the applicable rules and
regulations of the Commission thereunder, as the case may be, the
Registration Statement, and any amendment or supplement thereto, did
not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the
Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in
an amended or supplemented Prospectus which has not been so set
forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
there has not been (a) any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one
enterprise, (b) any transaction that is material to the Company and
its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (c) any obligation,
direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company
or its subsidiaries, except obligations incurred in the ordinary
course of business, (d) any change in the capital stock or
outstanding indebtedness of the Company or any of its subsidiaries
that is material to the Company and its subsidiaries considered as
one enterprise, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of
its subsidiaries, or (f) any loss or damage (whether or not insured)
to the property of the Company or any of its subsidiaries which has
been sustained or will have been sustained which has a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise.
(h) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company and each Selling
Shareholder in writing prior to the date hereof that such person will not,
during the Lock-up Period, effect the Disposition of any Lock-up Shares
now owned or hereafter acquired directly by such person or with respect to
which such person has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or
donees thereof agree in writing to be bound by this restriction, (ii) as a
distribution to partners or shareholders of such person, provided that the
distributees thereof agree in writing to be bound by the terms of this
restriction, or (iii) with the prior written consent of Robertson,
Stephens & Company LLC. The foregoing restriction shall have been
expressly agreed to preclude the holder of the Lock-up Shares from
engaging in any hedging or other transaction which is designed to or
reasonably expected to lead to or result in a Disposition of Lock-up
Shares during the Lock-up Period, even if such Lock-up Shares would be
disposed of by someone other than the such holder. Such
25
<PAGE> 26
prohibited hedging or other transactions would including, without
limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any
put or call option) with respect to any Lock-up Shares or with respect to
any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Lock-up Shares. Furthermore, such person will have also agreed and
consented to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Lock-up Shares held by such
person except in compliance with this restriction.
(i) You shall have received on the Closing Date and on any later
date on which Option Notes are to be purchased, as the case may be, the
following opinion of Testa, Hurwitz & Thibeault, LLP, special securities
counsel to the Company, dated the Closing Date or such later date on which
Option Notes are to be purchased addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the
Underwriters, to the effect that:
(i) The Company has full legal right, power and authority to
enter into the Indenture and the Notes and to perform its
obligations thereunder;
(ii) The Indenture has been duly authorized by all necessary
corporate action on the part of the Company and has been duly
executed and delivered by the Company;
(iii) The Indenture, assuming due authorization, execution and
delivery by the Trustee, is a legal, valid and binding agreement of
the Company, enforceable in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws, now
or hereafter in effect, relating to or affecting creditors' rights
and remedies generally, or by general equitable principles;
(iv) The Notes have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement and, when
issued, executed and authenticated in accordance with the terms of
the Indenture and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will constitute legal,
valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms and entitled to the
benefits of the Indenture, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws, now or hereafter in effect, relating to
or affecting creditors' rights generally or by general equitable
principles (provided that such counsel need not opine as to the
enforceability of the waiver of rights or defenses contained in
Section 5.8 of the Indenture);
(v) The Indenture complies as to form in all material
respects with the Trust Indenture Act and the rules and regulations
thereunder and, on the effective date of the Registration Statement,
will be duly qualified under the Trust Indenture Act;
26
<PAGE> 27
(vi) The terms and provisions of the Notes and the Indenture
conform in all material respects to the descriptions thereof
contained in the Registration Statement and Prospectus;
(vii) The performance of the Indenture and the Notes and the
consummation of the transactions therein contemplated (other than
performance of the Company's indemnification obligations hereunder,
concerning which no opinion need be expressed) will not to such
counsel's knowledge, result in a material breach or violation of any
of the terms and provisions of, or constitute a default under the
Bank Credit Agreement;
(viii) The Registration Statement has become effective under
the Act and, to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending
or threatened under the Act;
(ix) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived
therefrom as to which such counsel need express no opinion), as of
the effective date of the Registration Statement, complied as to
form in all material respects with the requirements of the Act and
the applicable Rules and Regulations; and each of the Incorporated
Documents (other than the financial statements (including supporting
schedules) and the financial data derived therefrom as to which such
counsel need express no opinion) complied when filed pursuant to the
Exchange Act as to form in all material respects with the
requirements of the Act and the Rules and Regulations and the
Exchange Act and the applicable rules and regulations of the
Commission thereunder;
(x) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a
character required to be described or referred to in the
Registration Statement or Prospectus or any Incorporated Document or
to be filed as an exhibit to the Registration Statement or any
Incorporated Document which are not described or referred to therein
or filed as required;
(xi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company
or any of its subsidiaries of a character required to be disclosed
in the Registration Statement or the Prospectus or any Incorporated
Document by the Act or the Rules and Regulations or by the Exchange
Act or the applicable rules and regulations of the Commission
thereunder, other than those described therein;
(xii) The information in the Prospectus under the caption
"Description of Notes" and "Certain Federal Income Tax
Considerations", to the extent that it
27
<PAGE> 28
constitutes matters or law or legal conclusions, has been reviewed
by such counsel and is a fair summary of such matters and
conclusions.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives
of the Company, the Representatives, Underwriters' Counsel and the
independent certified public accountants of the Company, at which
such conferences of the Registration Statement and Prospectus and
related matters were discussed and although they have not been
verified the accuracy or completeness of the statements contained in
the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at
the time the Registration Statement became effective and at all
times subsequent thereto up to and on the Closing Date and on any
later day on which the Option Notes are to be purchased, the
Registration Statement and any amendment or supplement thereto and
any Incorporated Document, when such documents became effective or
were filed with the Commission (other than the financial statements
including supporting schedules and other financial and statistical
information derived therefrom, as to which such counsel need express
no comment) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the
Closing Date or any later date on which the Option Notes are to be
purchased, as the case may be, the Registration Statement, the
Prospectus and any amendment or supplement thereto and any
Incorporated Document (except as aforesaid) contained any untrue
statement of material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Such
counsel shall also state that the conditions for the use of Form S-3
set forth in the General Instructions thereto have been satisfied.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the
Commonwealth of Massachusetts upon opinions of local counsel, and as
to questions of fact upon representations or certificates of
officers of the Company and of government officials, in which case
their opinion is to state that they are so relying and that they
have no knowledge or any material misstatement or inaccuracy in any
such opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to
you, as Representatives of the Underwriters, and to Underwriters'
Counsel.
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriter's Counsel. The Company will furnish you
with such number of conformed copies of such opinions, certificates,
letters and documents as you shall reasonably request.
(j) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company
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<PAGE> 29
as to the accuracy of the representations and warranties of the Company
herein, as to the performance by the Company of its their respective
obligations hereunder and as to the other conditions concurrent and
precedent to the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company and the Selling
Shareholders will furnish you with such number of conformed copies of such
opinions, certificates, letters and documents as you shall reasonably
request.
7. Option Notes.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters, for the
purpose of covering over-allotments in connection with the distribution
and sale of the Firm Notes only, a nontransferable option to purchase, at
the purchase price per Note for the Firm Notes set forth in Section 3
hereof, $15,000,000 aggregate principal amount of Option Notes. Such
option may be exercised by the Representatives on behalf of the several
Underwriters on one (1) or more occasions in whole or in part during the
period of thirty (30) days after the date on which the Firm Notes are
initially offered to the public, by giving written notice to the Company.
The principal amount of Option Notes to be purchased by each Underwriter
upon the exercise of such option shall be the same proportion of the total
principal amount of Option Notes to be purchased by the several
Underwriters pursuant to the exercise of such option as the principal
amount of Firm Notes purchased by such Underwriter (set forth in Schedule
A hereto) bears to the total principal amount of Firm Notes purchased by
the several Underwriters (set forth in Schedule A hereto), adjusted by the
Representatives in such manner as to avoid Notes of less than $1,000 in
principal amount.
Delivery of the Option Notes to be purchased by the several
Underwriters pursuant to the exercise of the option granted by this
Section 7 shall be made against payment of the purchase price therefor by
the several Underwriters by wire transfer of same-day funds paid to an
account designated by the Company. Such delivery and payment shall take
place at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street,
Boston, Massachusetts 02110 or at such other place as may be agreed upon
among the Representatives and the Company (i) on the Closing Date, if
written notice of the exercise of such option is received by the Company
at least two (2) full business days prior to the Closing Date, or (ii) on
a date which shall not be later than the third (3rd) full business day
following the date the Company receives written notice of the exercise of
such option, if such notice is received by the Company less than two (2)
full business days prior to the Closing Date.
The Option Notes to be so delivered will be made available to
you at such office or such other location including, without limitation,
in New York City, as you may reasonably request for checking at least one
(1) full business day prior to the date of payment
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<PAGE> 30
and delivery and will be in such names and denominations as you may
request, such request to be made at least two (2) full business days prior
to such date of payment and delivery. If the Representatives so elect,
delivery of the Option Notes may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be
obligated to) make payment of the purchase price on behalf of any
Underwriter or Underwriters whose check or checks shall not have been
received by you prior to the date of payment and delivery for the Option
Notes to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such
Option Notes will be subject (as of the date hereof and as of the date of
payment and delivery for such Option Notes) to the accuracy of and
compliance with the representations, warranties and agreements of the
Company herein, to the accuracy of the statements of the Company, and
officers of the Company made pursuant to the provisions hereof, to the
performance by the Company obligations hereunder, to the conditions set
forth in Section 6 hereof, and to the condition that all proceedings taken
at or prior to the payment date in connection with the sale and transfer
of such Option Notes shall be satisfactory in form and substance to you
and to Underwriters' Counsel, and you shall have been furnished with all
such documents, certificates and opinions as you may request in order to
evidence the accuracy and completeness of any of the representations,
warranties or statements, the performance of any of the covenants or
agreements of the Company or the satisfaction of any of the conditions
herein contained.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified
independent underwriter" within the meaning of Section 2720 of the Conduct
Rules of the NASD), under the Act, the Exchange Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon
(i) any breach of any representation, warranty, agreement or covenant of
the Company herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or
any amendment or supplement thereto, including any Incorporated Document,
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or (iii) any untrue statement or alleged untrue statement
of any material fact contained in any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each
30
<PAGE> 31
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or
any such amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished
to the Company by such Underwriter, directly or through you, specifically
for use in the preparation thereof and, provided further, that the
indemnity agreement provided in this Section 8(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any losses, claims, damages, liabilities or
actions based upon any untrue statement or alleged untrue statement of
material fact or omission or alleged omission to state therein a material
fact purchased Notes, if a copy of the Prospectus in which such untrue
statement or alleged untrue statement or omission or alleged omission was
corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is
the result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act
or the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims,
damages or liabilities, joint or several, to which the Company may become
subject under the Act, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of
any representation, warranty, agreement or covenant of such Underwriter
herein contained, (ii) any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement or any amendment
or supplement thereto, including any Incorporated Document, or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of
any material fact contained in any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, in the case of subparagraphs (ii) and (iii) of
this Section 8(b) to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
to the Company by such Underwriter, directly or through you, specifically
for use in the preparation thereof, and agrees to reimburse the Company
for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action.
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<PAGE> 32
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each
director of the Company and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act. This indemnity
agreement shall be in addition to any liabilities which each Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this Section 8. In case
any such action is brought against any indemnified party, and it notified
the indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it shall
elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of
such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with
the proviso to the next preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more
than one separate counsel (together with appropriate local counsel)
approved by the indemnifying party representing all the indemnified
parties under Section 8(a) or 8(b) hereof who are parties to such action),
(ii) the indemnifying party shall not have employed counsel satisfactory
to the indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event
shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved
the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnification could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such proceeding.
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<PAGE> 33
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this
Section 8 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact
that this Section 8 provides for indemnification in such case, all the
parties hereto shall contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after contribution from
others) in such proportion so that the Underwriters severally and not
jointly are responsible pro rata for the portion represented by the
percentage that the underwriting discount bears to the initial public
offering price, and the Company is responsible for the remaining portion,
provided, however, that (i) no Underwriter shall be required to contribute
any amount in excess of the amount by which the underwriting discount
applicable to the Notes purchased by such Underwriter exceeds the amount
of damages which such Underwriter has otherwise required to pay and (ii)
no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. The
contribution agreement in this Section 8(d) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person,
if any, who controls any Underwriter, the Company within the meaning of
the Act or the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 8, and are fully informed
regarding said provisions. They further acknowledge that the provisions of
this Section 8 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure
that adequate disclosure is made in the Registration Statement and
Prospectus as required by the Act and the Exchange Act.
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter within the meaning of the Act or the Exchange Act, or by or on
behalf of the Company or any of its officers, directors or controlling persons
within the meaning of the Act or the Exchange Act, and shall survive the
delivery of the Notes to the several Underwriters hereunder or termination of
this Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters
shall fail to take up and pay for the principal amount of Firm Notes agreed by
such Underwriter or Underwriters to be purchased hereunder upon tender of such
Firm Notes in accordance with the terms hereof, and if the aggregate principal
amount of Firm Notes which such defaulting Underwriter or Underwriters so agreed
but failed to purchase does not exceed 10% of the Firm Notes, the remaining
Underwriters
33
<PAGE> 34
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Notes of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
principal amount of Firm Notes which such defaulting Underwriter or Underwriters
agreed but failed to take up and pay for exceeds 10% of the Firm Notes, the
remaining Underwriters shall have the right, but shall not be obligated, to take
up and pay for (in such proportions as may be agreed upon among them) the Firm
Notes which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Notes which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or
underwriters shall have been substituted as aforesaid by such postponed Closing
Date, the Closing Date may, at the option of the Company, be postponed for a
further twenty-four (24) hours, if necessary, to allow the Company the privilege
of finding another underwriter or underwriters, satisfactory to you, to purchase
the Firm Notes which the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Notes of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement, supplements to the Prospectus
or other such documents which may thereby be made necessary, and (ii) the
respective principal amount of Firm Notes to be purchased by the remaining
Underwriters and substituted underwriter or underwriters shall be taken as the
basis of their underwriting obligation. If the remaining Underwriters shall not
take up and pay for all such Firm Notes so agreed to be purchased by the
defaulting Underwriter or Underwriters or substitute another underwriter or
underwriters as aforesaid and the Company shall not find or shall not elect to
seek another underwriter or underwriters for such Firm Notes as aforesaid, then
this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, the Company shall not be liable to any
Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the principal amount of
Firm Notes agreed by such Underwriter to be purchased hereunder, which
Underwriter shall remain liable to the Company and the other Underwriters for
damages, if any, resulting from such default) be liable to the Company (except
to the extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
34
<PAGE> 35
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of (i)
6:30 A.M., San Francisco time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Notes by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Notes, or the time at which the Notes are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(i), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to any
later date on which Option Notes are to be purchased, as the case may be, (i) if
the Company shall have failed, refused or been unable to perform any agreement
on its part to be performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled is not fulfilled, including,
without limitation, any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse, or (ii) if additional material governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading in
securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Notes, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Notes as contemplated by
the Prospectus. In the event of termination pursuant to subparagraph (i) above,
the Company shall remain obligated to pay costs and expenses pursuant to
Sections 4(i), 5 and 8 hereof. Any termination pursuant to any of subparagraphs
(ii) through (v) above shall be without liability of any party to any other
party except as provided in Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone,
35
<PAGE> 36
telecopy or telegram, in each case confirmed by letter. If the Company shall
elect to prevent this Agreement from becoming effective, the Company shall
promptly notify you by telephone, telecopy or telegram, in each case, confirmed
by letter.
12. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o Robertson, Stephens & Company LLC, 555
California Street, Suite 2600, San Francisco, California 94104, telecopier
number (415) 781-0278, Attention: General Counsel; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Hadco Corporation, 12A Manor Parkway,
Salem, New Hampshire 03079, telecopier number (603) 893-0025, Attention: Andrew
E. Lietz, Chief Executive Officer.
13. Parties. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and their respective executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or entity, other
than the parties hereto and their respective executors, administrators,
successors and assigns, and the controlling persons within the meaning of the
Act or the Exchange Act, officers and directors referred to in Section 8 hereof,
any legal or equitable right, remedy or claim in respect of this Agreement or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators,
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or entity. No purchaser of any
of the Notes from any Underwriter shall be construed a successor or assign by
reason merely of such purchase.
In all dealings with the Company under this Agreement, you shall act
on behalf of each of the several Underwriters, and the Company shall be entitled
to act and rely upon any statement, request, notice or agreement made or given
by you jointly or by Robertson, Stephens & Company LLC on behalf of you.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of New York.
15. Counterparts. This Agreement may be signed in several counterparts,
each of which will constitute an original.
36
<PAGE> 37
If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among the Company and the several Underwriters.
Very truly yours,
HADCO CORPORATION
By: _______________________________
Accepted as of the date first above written:
ROBERTSON, STEPHENS & COMPANY LLC
MERRILL LYNCH & CO.
On their behalf and on behalf of each of the several Underwriters named in
Schedule A hereto.
By ROBERTSON, STEPHENS & COMPANY LLC
By ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By: _______________________________
Authorized Signatory
37
<PAGE> 38
SCHEDULE A
PRINCIPAL AMOUNT OF FIRM
NOTES TO BE
UNDERWRITERS PURCHASED
- --------------------------------------------------- --------------------------
Robertson, Stephens & Company LLC.................
Merrill Lynch, Pierce, Fenner & Smith Incorporated
--------------
TOTAL....................................... $100,000,000
<PAGE> 1
EXHIBIT 4
HADCO CORPORATION
AND
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
INDENTURE
DATED AS OF _______________, 1997
__% CONVERTIBLE SUBORDINATED NOTES DUE 2004
<PAGE> 2
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS.......................................................1
Section 1.1 Definitions................................................1
ARTICLE II ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE
OF NOTES...............................................................8
Section 2.1 Designation, Amount and Issue of Notes.....................8
Section 2.2 Form of Notes..............................................8
Section 2.3 Date and Denomination of Notes; Payments of Interest.......8
Section 2.4 Execution of Notes........................................10
Section 2.5 Exchange and Registration of Transfer of Notes............10
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes................11
Section 2.7 Temporary Notes...........................................12
Section 2.8 Cancellation of Notes Paid, Etc...........................13
ARTICLE III REDEMPTION OF NOTES............................................13
Section 3.1 Redemption Prices.........................................13
Section 3.2 Notice of Redemption; Selection of Notes..................13
Section 3.3 Payment of Notes Called for Redemption....................15
Section 3.4 Conversion Arrangement on Call for Redemption.............16
ARTICLE IV SUBORDINATION OF NOTES..........................................16
Section 4.1 Agreement of Subordination................................16
Section 4.2 Payments to Noteholders...................................17
Section 4.3 Subrogation of Notes......................................19
Section 4.4 Authorization by Noteholders..............................20
Section 4.5 Notice to Trustee.........................................21
Section 4.6 Trustee's Relation to Senior Indebtedness.................22
Section 4.7 No Impairment of Subordination............................22
Section 4.8 Certain Conversions Deemed Payment........................22
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY..............................23
Section 5.1 Payment of Principal, Premium and Interest................23
Section 5.2 Maintenance of Office or Agency...........................23
Section 5.3 Appointments to Fill Vacancies in Trustee's Office........24
Section 5.4 Provisions as to Paying Agent.............................24
Section 5.5 Existence.................................................25
Section 5.6 Maintenance of Properties.................................25
Section 5.7 Payment of Taxes and Other Claims.........................25
Section 5.8 Stay, Extension and Usury Laws............................25
Section 5.9 Statement by Officers as to Default.......................26
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
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Section 5.10 Further Instruments and Acts..............................26
ARTICLE VI NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE
TRUSTEE ...............................................................26
Section 6.1 Noteholders' Lists........................................26
Section 6.2 Preservation and Disclosure of Lists......................27
Section 6.3 Reports by Trustee........................................27
Section 6.4 Reports by Company........................................27
ARTICLE VII DEFAULTS AND REMEDIES...........................................28
Section 7.1 Events of Default.........................................28
Section 7.2 Payments of Notes on Default; Suit Therefor...............30
Section 7.3 Application of Monies Collected by Trustee................32
Section 7.4 Proceedings by Noteholder.................................32
Section 7.5 Proceedings by Trustee....................................33
Section 7.6 Remedies Cumulative and Continuing........................33
Section 7.7 Direction of Proceedings and Waiver of Defaults
by Majority of Noteholders................................34
Section 7.8 Notice of Defaults........................................34
Section 7.9 Undertaking to Pay Costs..................................34
Section 7.10 Delay or Omission Not Waiver..............................35
ARTICLE VIII CONCERNING THE TRUSTEE.........................................35
Section 8.1 Duties and Responsibilities of Trustee....................35
Section 8.2 Reliance on Documents, Opinions, Etc......................36
Section 8.3 No Responsibility for Recitals, Etc.......................37
Section 8.4 Trustee, Paying Agents, Conversion Agents
or Registrar May Own Notes............................... 37
Section 8.5 Monies to Be Held in Trust................................38
Section 8.6 Compensation and Expenses of Trustee......................38
Section 8.7 Officers' Certificate as Evidence.........................38
Section 8.8 Conflicting Interests of Trustee..........................38
Section 8.9 Eligibility of Trustee....................................39
Section 8.10 Resignation or Removal of Trustee.........................39
Section 8.11 Acceptance by Successor Trustee...........................40
Section 8.12 Succession by Merger, Etc.................................41
Section 8.13 Limitation on Rights of Trustee as Creditor...............41
ARTICLE IX CONCERNING THE NOTEHOLDERS.......................................41
Section 9.1 Action by Noteholders.....................................41
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 9.2 Proof of Execution by Noteholders.........................42
Section 9.3 Who Are Deemed Absolute Owners............................42
Section 9.4 Company-Owned Notes Disregarded...........................42
Section 9.5 Revocation of Consents; Future Holders Bound..............43
ARTICLE X NOTEHOLDERS' MEETINGS.............................................43
Section 10.1 Purpose of Meetings.......................................43
Section 10.2 Call of Meetings by Trustee...............................43
Section 10.3 Call of Meetings by Company or Noteholders................44
Section 10.4 Qualifications for Voting.................................44
Section 10.5 Regulations...............................................44
Section 10.6 Voting....................................................45
Section 10.7 No Delay of Rights by Meeting.............................45
ARTICLE XI SUPPLEMENTAL INDENTURES..........................................45
Section 11.1 Supplemental Indentures Without Consent of Noteholders....45
Section 11.2 Supplemental Indentures With Consent of Noteholders.......47
Section 11.3 Effect of Supplemental Indentures.........................47
Section 11.4 Notation on Notes.........................................48
Section 11.5 Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee.........................................48
ARTICLE XII MERGER, SALE OR CONSOLIDATION...................................48
Section 12.1 Limitation on Merger, Sale or Consolidation...............48
Section 12.2 Successor Corporation to Be Substituted...................49
ARTICLE XIII SATISFACTION AND DISCHARGE OF INDENTURE........................49
Section 13.1 Discharge of Indenture....................................49
Section 13.2 Deposited Monies to Be Held in Trust by Trustee...........50
Section 13.3 Paying Agent to Repay Monies Held.........................50
Section 13.4 Return of Unclaimed Monies................................50
Section 13.5 Reinstatement.............................................51
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS..............................................................51
Section 14.1 Indenture and Notes Solely Corporate Obligations..........51
ARTICLE XV CONVERSION OF NOTES..............................................51
Section 15.1 Right to Convert..........................................51
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<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
PAGE
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Section 15.2 Exercise of Conversion Privilege;
Issuance of Common Stock on Conversion;
No Adjustment for Interest or Dividends...................52
Section 15.3 Cash Payments in Lieu of Fractional Shares................53
Section 15.4 Conversion Price..........................................53
Section 15.5 Adjustment of Conversion Price............................53
Section 15.6 Effect of Reclassification, Consolidation,
Merger or Sale............................................63
Section 15.7 Taxes on Shares Issued....................................65
Section 15.8 Reservation of Shares; Shares to Be Fully Paid;
Listing of Common Stock...................................65
Section 15.9 Responsibility of Trustee.................................65
Section 15.10 Notice to Holders Prior to Certain Actions................66
ARTICLE XVI REPURCHASE UPON A DESIGNATED EVENT...............................67
Section 16.1 Repurchase Right..........................................67
Section 16.2 Notices; Method of Exercising Repurchase Right, Etc.......67
Section 16.3 Certain Definitions.......................................69
ARTICLE XVII MISCELLANEOUS PROVISIONS........................................71
Section 17.1 Provisions Binding on Company's Successors................71
Section 17.2 Official Acts by Successor Corporation....................71
Section 17.3 Addresses for Notices, Etc................................71
Section 17.4 Governing Law.............................................72
Section 17.5 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee.................................. 72
Section 17.6 Legal Holidays............................................72
Section 17.7 No Security Interest Created..............................72
Section 17.8 Trust Indenture Act.......................................73
Section 17.9 Benefits of Indenture.....................................73
Section 17.10 Table of Contents, Headings, Etc..........................73
Section 17.11 Authenticating Agent......................................73
Section 17.12 Execution in Counterparts.................................74
-iv-
<PAGE> 6
INDENTURE dated as of _______________, 1997 between Hadco Corporation, a
Massachusetts corporation (hereinafter sometimes called the "Company", as more
fully set forth in Section 1.1), and State Street Bank and Trust Company, a
Massachusetts trust company (hereinafter sometimes called the "Trustee", as more
fully set forth in Section 1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its __% Convertible Subordinated Notes due 2004
(hereinafter sometimes called the "Notes"), in an aggregate principal amount not
to exceed $115,000,000 and, to provide the terms and conditions upon which the
Notes are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repayment upon a
Designated Event, a form of conversion notice and a form of assignment to be
borne by the Notes are to be substantially in the forms hereinafter provided
for; and
WHEREAS, all acts and things necessary to make the Notes, when executed by
the Company and authenticated and delivered by the Trustee or a duly authorized
authenticating agent, as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1 (except as
herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture, which are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein," "hereof," "hereunder," and words of similar import refer to this
Indenture as a whole
<PAGE> 7
and not to any particular Article, Section or other Subdivision of this
Indenture. The terms defined in this Indenture include the plural as well as the
singular.
Affiliate: The term "Affiliate" of any specified person means any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any specified person means the
power to direct or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Bank Credit Agreement: The term "Bank Credit Agreement" means that certain
Revolving Credit Agreement, dated as of January 8, 1997, by and among the
Company, the lenders from time to time that are party thereto (the "Banks"), and
The First National Bank of Boston, as agent for the Banks, as in effect on the
date of this Indenture and as such agreement may be modified from time to time,
and any credit agreement, loan agreement, note purchase agreement, indenture or
other agreement, document or instrument refinancing, re-funding or otherwise
replacing such agreement.
Bank Credit Documents: The term "Bank Credit Documents" has the same
meaning herein as the term "Loan Documents" has in the Bank Credit Agreement.
Board of Directors: The term "Board of Directors" means the Board of
Directors of the Company or a committee of such Board duly authorized to act for
it hereunder.
Board Resolution: The term "Board Resolution" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors, or duly authorized committee thereof (to
the extent permitted by applicable law), and to be in full force and effect on
the date of such certification.
Business Day: The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York or the city in which the Corporate Trust
Office is located are authorized or obligated by law or executive order to close
or be closed.
Commission: The term "Commission" means the Securities and Exchange
Commission.
Common Stock: The term "Common Stock" means any stock of any class of the
Company which has no preference in respect of dividends or of amounts payable in
the event of any voluntary or involuntary liquidation, dissolution or winding up
of the Company and which is not subject to redemption by the Company. Subject to
the provisions of Section 15.6, however, shares issuable on conversion of Notes
shall include only shares of the class designated as common stock of the Company
at the date of this Indenture or shares of any class or classes resulting from
any reclassification or reclassifications thereof and which have no preference
in respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and which are
not subject to redemption by the Company; provided that if at any
2
<PAGE> 8
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
Company: The term "Company" means Hadco Corporation, a Massachusetts
corporation, and subject to the provisions of Article XII, shall include its
successors and assigns.
Corporate Trust Office: The term "Corporate Trust Office," or other
similar term, means the office of the Trustee at which at any particular time
its corporate trust business shall be principally administered, which office is,
at the date as of which this Indenture is dated, located at 2 International
Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust
Department (Hadco Corporation __% Convertible Subordinated Notes due 2004).
Default: The term "default" means any event that is, or after notice or
passage of time, or both, would be, an Event of Default.
Designated Senior Indebtedness: The term "Designated Senior Indebtedness"
means all Senior Indebtedness under the Bank Credit Documents and all other
Senior Indebtedness with respect to which the instrument creating or evidencing
the same or the assumption or guarantee thereof (or related agreements or
documents to which the Company is a party) expressly provides that such
indebtedness shall be "Designated Senior Indebtedness" for purposes of this
Indenture (provided that such instrument, agreement or other document may place
limitations and conditions on the right of such Senior Indebtedness to exercise
the rights of Designated Senior Indebtedness).
Exchange Act: The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
Event of Default: The term "Event of Default" means any event specified in
Section 7.1(a), (b), (c), (d), (e), (f), (g), (h) or (i), continued for the
period of time, if any, and after the giving of notice, if any, therein
designated.
Indebtedness: The term "Indebtedness" shall have the meaning specified in
Section 7.1(f).
Indenture: The term "Indenture" means this instrument as originally
executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
Note or Notes: The terms "Note" or "Notes" means any Note or Notes, as the
case may be, authenticated and delivered under this Indenture.
Noteholder or holder: The terms "Noteholder" or "holder" as applied to any
Note, or other similar terms (but excluding the term "beneficial holder"), means
any person in whose name at the time a particular Note is registered on the Note
register.
3
<PAGE> 9
Officers' Certificate: The term "Officers' Certificate", when used with
respect to the Company, means a certificate signed by the Chief Executive
Officer, President, or any Vice President (whether or not designated by a number
or numbers or word added before or after the title "Vice President") and by the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company, which is delivered to the Trustee. Each such certificate shall
include the statements provided for in Section 17.5 if and to the extent
required by the provisions of such Section.
Opinion of Counsel: The term "Opinion of Counsel" means an opinion in
writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee, which is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
17.5 if and to the extent required by the provisions of such Section.
outstanding: The term "outstanding," when used with reference to Notes,
means, subject to the provisions of Section 9.4, as of any particular time, all
Notes authenticated and delivered by the Trustee under this Indenture, except
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for the payment or redemption of
which monies in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by the Company (if the
Company shall act as its own paying agent); provided that if such Notes
are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as provided in Section 3.2 or provision
satisfactory to the Trustee shall have been made for giving such notice;
provided further that if any Notes are not redeemed on a redemption date
then such Notes shall be deemed outstanding until all principal of and
premium, if any, and accrued interest on such Notes has been paid in full
in accordance with the terms of this Indenture;
(c) Notes in lieu of which, or in substitution for which, other
Notes shall have been authenticated and delivered pursuant to the terms of
Section 2.6 unless proof satisfactory to the Trustee is presented that any
such Notes are held by bona fide holders in due course; and
(d) Notes converted into Common Stock pursuant to Article XV,
Notes deemed not outstanding pursuant to Section 3.2 and Notes repurchased
pursuant to Article XVI.
person: The term "person" means a corporation, an association, a
partnership, an individual, a joint venture, a joint stock company, a trust, an
unincorporated organization or a government or an agency or a political
subdivision thereof.
Predecessor Note: The term "Predecessor Note" of any particular Note
means every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for
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the purposes of this definition, any Note authenticated and delivered under
Section 2.6 in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the lost, destroyed or stolen Note that it replaces.
Responsible Officer: The term "Responsible Officer", when used with
respect to the Trustee, means an officer of the Trustee assigned to the
Corporate Trust Office of the Trustee, and any other officer of the Trustee to
whom such matter is referred to because of his knowledge of and familiarity with
the particular subject.
Rights: The term "Rights" shall mean "Rights" as such term is defined in
the Rights Agreement.
Rights Agreement: The term "Rights Agreement" means that certain Rights
Agreement, dated as of August 22, 1995 between the Company and the Rights Agent
(as such term is defined therein), as amended from time to time.
Securities Act: The term "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
Senior Indebtedness: The term "Senior Indebtedness" means the principal
of, premium, if any, interest on (including any interest accruing after the
filing of a petition by or against the Company under any bankruptcy law, whether
or not allowed as a claim after such filing in any proceeding under such
bankruptcy law) and any other payment due pursuant to, any of the following,
whether outstanding on the date of this Indenture or thereafter incurred or
created:
(a) All indebtedness of the Company for money borrowed or
evidenced by notes, debentures, bonds, similar instruments or other debt
securities (including, but not limited to, purchase money mortgages and
any such other indebtedness that is convertible or exchangeable for
securities of the Company);
(b) All indebtedness of the Company due and owing with respect to
letters of credit, banker's acceptances or similar credit transactions
(including, but not limited to, reimbursement obligations with respect
thereto);
(c) All indebtedness or other obligations of the Company due and
owing with respect to interest rate and currency swap agreements, cap,
floor, collar and option agreements, currency spot and forward contracts
and other similar agreements and arrangements;
(d) All indebtedness consisting of commitment or standby fees due
and payable to lending institutions with respect to credit facilities or
letters of credit, banker's acceptances or similar credit transactions;
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(e) All obligations of the Company for payment of money under
leases required or permitted to be capitalized under generally accepted
accounting principles;
(f) All indebtedness or obligations of others of the kinds
described in any of the preceding clauses (a), (b), (c), (d) or (e)
assumed by or guaranteed in any manner by the Company or in effect
guaranteed (directly or indirectly) by the Company through an agreement to
purchase, contingent or otherwise, and all obligations of the Company
under any such guarantee or other arrangements; and
(g) All renewals, extensions, refundings, deferrals, amendments or
modifications of indebtedness of the kinds described in any of the
preceding clauses (a), (b), (c), (d), (e) or (f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, deferral, refunding, amendment, modification or supplement, the
instrument or other document creating or evidencing the same or the assumption
or guarantee of the same expressly provides that such indebtedness, obligation,
renewal, extension, refunding, deferral, amendment or modification or supplement
is subordinate to, or is not superior to, or is pari passu with, the Notes;
provided that Senior Indebtedness shall not include (i) any indebtedness of any
kind of the Company to any Subsidiary of the Company, a majority of the voting
stock of which is owned, directly or indirectly, by the Company, (ii)
indebtedness for trade payables or constituting the deferred purchase price of
inventory, material or services incurred in the ordinary course of business or
(iii) the Notes.
Significant Subsidiary: The term "Significant Subsidiary" means, with
respect to any person, a Subsidiary of such person that would constitute a
significant subsidiary, as such term is defined under Rule 1-02 of Regulation
S-X of the Commission.
Subsidiary: The term "Subsidiary" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
Trust Indenture Act: The term "Trust Indenture Act" means the Trust
Indenture Act of 1939, as amended, as it was in force at the date of execution
of this Indenture, except as provided in Sections 11.3 and 15.6; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after the
date hereof, the term "Trust Indenture Act" shall mean, to the extent required
by such amendment, the Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" means State Street Bank and Trust Company, and
its successors and any corporation resulting from or surviving any consolidation
or merger to which it or its successors may be a party and any successor trustee
at the time serving as successor trustee hereunder.
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In addition to the foregoing defined terms (except as herein otherwise
expressly provided or unless the context otherwise requires), the following
terms shall have the respective meanings specified in the following Sections and
any other terms defined herein shall have the meanings assigned thereto:
Term Section
---- -------
beneficial owner 16.3
Change in Control 16.3
Closing Price 15.5(h)
Company Notice 16.2
Continuing Director 16.3
Conversion Price 15.4
Current Market Price 15.5(h)
Defaulted Interest 2.3
Designated Event 16.3
"ex" date 15.5(h)
Expiration Time 15.5(f)
fair market value 15.5(h)
junior securities 4.8
non-electing share 15.6
Note register 2.5
Note registrar 2.5
Offer Expiration Time 15.5(g)
Payment Blockage Notice 4.2
person or group 16.3
Purchased Common Shares 15.5(g)
Purchased Shares 15.5(f)
record date 2.3
Record Date 15.5(h)
Removal Notice 8.10(b)
repurchase date 16.1
Repurchase Price 16.1
Securities 15.5(d)
Subordinated Indebtedness 4.1
Termination of Trading 16.3
Trading Day 15.5(h)
Trigger Event 15.5(d)
Voting Stock 16.3
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ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes. The Notes shall be
designated as "__% Convertible Subordinated Notes due 2004". Notes not to exceed
the aggregate principal amount of $100,000,000 (or $115,000,000 if the
over-allotment option set forth in Section 7 of the Underwriting Agreement for
the Notes dated _______________, 1997 (as amended from time to time by the
parties thereto) by and between the Company and the several underwriters named
therein is exercised in full) (except as provided in Sections 2.5, 2.6, 3.3,
15.2 and 16.2) upon the execution of this Indenture, or from time to time
thereafter, may be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Notes upon the written order of the Company, signed by its (a) Chief Executive
Officer, President or any Vice President (whether or not designated by a number
or numbers or word or words added before or after the title "Vice President")
and (b) Treasurer or Assistant Treasurer or its Secretary or any Assistant
Secretary, without any further action by the Company hereunder.
Section 2.2 Form of Notes. The Notes and the Trustee's certificate of
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, or to conform to usage.
The terms and provisions contained in the form of Note attached as Exhibit
A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of Interest. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication, shall bear interest from the applicable
date and accrued interest shall be payable semiannually on each ________ and
________, commencing ________, 1997 as specified on the face of the form of
Note, attached as Exhibit A hereto.
The person in whose name any Note (or its Predecessor Note) is registered
at the close of business on any record date with respect to any interest payment
date (including any Note that is
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converted after the record date and on or before the interest payment date)
shall be entitled to receive the interest payable on such interest payment date
notwithstanding the cancellation of such Note upon any transfer, exchange or
conversion subsequent to the record date and prior to such interest payment
date; provided that any Note surrendered for conversion during the period from a
record date to the close of business on the Business Day prior to next
succeeding interest payment date, to the extent provided in Section 15.2, shall
be accompanied by a payment equal to the interest otherwise payable on such next
succeeding interest payment date; provided further that in the event of any
redemption or repurchase of any Note after a record date and prior to the close
of business on the Business Day prior to next succeeding interest payment date,
interest shall not be paid to the person in whose name the Note is registered on
the close of business on such record date, but instead shall be payable to the
holder of such Note surrendering such Note for redemption or repurchase, as the
case may be, as required by Section 3.3 hereof and Article XVI hereof,
respectively. Interest may, at the option of the Company, be paid by check
mailed to the address of such person on the registry kept for such purposes;
provided that, with respect to any holder of Notes with an aggregate principal
amount equal to or in excess of $2,000,000, at the request of such holder in
writing to the Company, interest on such holder's Notes shall be paid by wire
transfer in immediately available funds in accordance with the wire transfer
instruction supplied by such holder to the Trustee and paying agent (if
different from Trustee). The term "record date" with respect to any interest
payment date shall mean the __________ immediately preceding each __________
interest payment date and the __________ immediately preceding each __________
interest payment date.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any said __________ or __________ (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Noteholder on
the relevant record date by virtue of his having been such Noteholder; and such
Defaulted Interest shall be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and
the date of the payment (which shall be not less than twenty-five (25)
days after the receipt by the Trustee of such notice, unless the Trustee
shall consent to an earlier date), and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the persons entitled to such Defaulted Interest
as in this clause provided. Thereupon the Trustee shall fix a special
record date for the payment of such Defaulted Interest which shall be not
more than fifteen (15) days and not less than ten (10) days prior to the
date of the proposed payment and not less than ten (10) days (or such
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shorter period to which the Trustee consents) after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such special record date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed,
first-class postage prepaid, to each Noteholder at his address as it
appears in the Note register, not less than ten (10) days prior to such
special record date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been so mailed, such
Defaulted Interest shall be paid to the persons in whose names the Notes
(or their respective Predecessor Notes) were registered at the close of
business on such special record date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes may
be listed or designated for issuance, and upon such notice as may be
required by such exchange or automated quotation system, if, after notice
given by the Company to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed practicable by the
Trustee.
Section 2.4 Execution of Notes. The Notes shall be signed in the name and
on behalf of the Company by the signature of its Chief Executive Officer, its
President, or any of its Vice Presidents (whether or not designated by a number
or numbers or word or words added before or after the title "Vice President")
and attested by the signature of its Secretary or any of its Assistant
Secretaries. The signature of any of these officers on the Notes may be manual
or facsimile and may be printed, engraved or otherwise reproduced on the Notes.
Only such Notes as shall bear thereon a certificate of authentication
substantially in the form set forth on the form of Note attached as Exhibit A
hereto, manually executed by the Trustee (or an authenticating agent appointed
by the Trustee as provided by Section 17.11), shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee (or such an authenticating agent) upon any Note executed by the
Company shall be conclusive evidence and the only evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the Notes
shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes. The Company
shall cause to be kept at the Corporate Trust Office of the Trustee a register
(the register maintained in such office and in any other office or agency of the
Company designated pursuant to Section 5.2 being herein sometimes collectively
referred to as the "Note register") in which, subject to such reasonable
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regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. Such Note register shall be in written form
or in any form capable of being converted into written form within a reasonable
period of time. The Trustee is hereby appointed "Note registrar" for the purpose
of registering Notes and transfers of Notes as herein provided. The Company may
appoint one or more co-registrars in accordance with Section 5.2.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount.
Notes may be exchanged for other Notes of any authorized denominations and
of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency. Whenever any Notes are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Noteholder making the exchange is entitled to
receive, bearing registration numbers not contemporaneously outstanding.
All Notes presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company, the Trustee, the Note registrar
or any co-registrar) be duly endorsed, or be accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company and the Trustee
and duly executed by the Noteholder thereof or his attorney duly authorized in
writing.
No service charge shall be charged to the Noteholder for any exchange or
registration of transfer of Notes, but the Company may require payment of a sum
sufficient to cover any tax, assessments or other governmental charges that may
be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any co-registrar
shall be required to exchange or register a transfer of (a) any Notes for a
period of fifteen (15) days next preceding any selection of Notes to be redeemed
or (b) any Notes called for redemption or, if a portion of any Note is selected
or called for redemption, such portion thereof selected or called for redemption
or (c) any Notes surrendered for conversion or, if a portion of any Note is
surrendered for conversion, such portion thereof surrendered for conversion or
(d) any Notes surrendered for repurchase pursuant to Article XVI or, if a
portion of any Note is surrendered for repurchase pursuant to Article XVI, such
portion thereof surrendered for repurchase pursuant to Article XVI.
All Notes issued upon any transfer or exchange of Notes in accordance with
this Indenture shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture as the Notes
surrendered upon such registration of transfer or exchange.
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In case any Note
shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and deliver,
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a new Note, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Note, or in lieu of and in substitution for the
Note so destroyed, lost or stolen. In every case the applicant for a substituted
Note shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless for any loss, liability, cost or expense caused by or
connected with such substitution, and such other documents as may reasonably be
required by the Trustee and, in every case of destruction, loss or theft, the
applicant shall also furnish to the Company, to the Trustee and, if applicable,
to such authenticating agent evidence to their satisfaction of the destruction,
loss or theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note which has matured or is about to mature or has been
called for redemption or submitted for repurchase or is about to be converted
into Common Stock shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Note, pay or authorize the payment
of or convert or authorize the conversion of the same (without surrender thereof
except in the case of a mutilated Note), as the case may be, if the applicant
for such payment or conversion shall furnish to the Company, to the Trustee and,
if applicable, to such authenticating agent such security or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or connected with such substitution, and, in case of
destruction, loss or theft, evidence satisfactory to the Company, the Trustee
and, if applicable, any paying agent or conversion agent of the destruction,
loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7 Temporary Notes. Pending the preparation of definitive Notes,
the Company may execute and the Trustee or an authenticating agent appointed by
the Trustee shall, upon written request of the Company, authenticate and deliver
temporary Notes (printed, typewritten or lithographed). Temporary Notes shall be
issuable in any authorized denomination, and substantially in the form of the
definitive Notes but with such omissions, insertions and variations as may be
appropriate for temporary Notes, all as may be determined by the Company. Every
such temporary Note shall be executed by the Company and authenticated by the
Trustee or such authenticating agent
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upon the same conditions and in substantially the same manner, and with the same
effect, as the definitive Notes. Without unreasonable delay the Company will
execute and deliver to the Trustee or such authenticating agent definitive Notes
and thereupon any or all temporary Notes may be surrendered in exchange
therefor, at each office or agency maintained by the Company pursuant to Section
5.2 and the Trustee or such authenticating agent shall authenticate and deliver
in exchange for such temporary Notes an equal aggregate principal amount of
definitive Notes. Such exchange shall be made by the Company at its own expense
and without any charge therefor. Until so exchanged, the temporary Notes shall
in all respects be entitled to the same benefits and subject to the same
limitations under this Indenture as definitive Notes authenticated and delivered
hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. The Trustee
shall destroy canceled Notes in accordance with its existing retention and
destruction policies and practices. If the Company shall acquire any of the
Notes, such acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes unless and until the same are delivered
to the Trustee for cancellation.
ARTICLE III
REDEMPTION OF NOTES
Section 3.1 Redemption Prices. The Notes may not be redeemed at the
option of the Company prior to __________, 2000. At any time on or after that
date, the Company may, at its option, redeem all, or from time to time any part
of, the Notes on any date prior to maturity, upon notice as set forth in Section
3.2, and at the optional redemption prices set forth in the form of Note
attached as Exhibit A hereto, together with accrued interest, if any, to, but
excluding, the date fixed for redemption.
Section 3.2 Notice of Redemption; Selection of Notes. In case the Company
shall desire to exercise the right to redeem all or, as the case may be, any
part of the Notes pursuant to Section 3.1, the Company shall fix a date for
redemption and the Company, or at the request of the Company the Trustee in the
name of the Company (such request to be received by the Trustee at least ten
(10) Business Days prior to the date the Trustee is requested to give notice as
described below unless a shorter period is agreed to by the Trustee), shall mail
or cause to be mailed a notice of such redemption at least twenty (20) and not
more than sixty (60) days prior to the date fixed for redemption in a form to be
prepared by and at the expense of the Company to the holders of Notes so to be
redeemed as a whole or in part at their last addresses as the same appear on the
Note register (provided that if the Company shall give such notice, it shall
also give such notice, and notice of the Notes to be redeemed, to the Trustee).
Such mailing shall be by first-class mail. The notice if mailed in the manner
herein provided shall be conclusively presumed to have been duly given, whether
or
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not the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Note designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note.
Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the date fixed for redemption, the redemption
price at which Notes are to be redeemed, the name and address of the paying
agent and the conversion agent (if different from the Trustee), the place or
places of payment, that payment will be made upon presentation and surrender of
such Notes, that interest accrued to, but excluding, the date fixed for
redemption will be paid as specified in said notice, and that, unless the
Company defaults in making the redemption payment, on and after said date
interest thereon or on the portion thereof to be redeemed will cease to accrue.
Such notice shall also state the then-applicable Conversion Price and that the
right to convert such Notes or portions thereof into Common Stock will expire at
the close of business on the Business Day next preceding the date fixed for
redemption (unless the Company fails to redeem such Notes on such date, in which
case the right to convert shall terminate on the date such default is cured and
such Note is redeemed). If fewer than all the Notes are to be redeemed, the
notice of redemption shall identify the Notes to be redeemed. In case any Note
is to be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section, the Company will deposit with the Trustee or
with one or more paying agents (or, if the Company is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 5.4) an
amount of money sufficient to redeem on the redemption date all the Notes (or
portions thereof) so called for redemption (other than those theretofore
surrendered for conversion into Common Stock) at the appropriate redemption
price, together with accrued interest to, but excluding, the date fixed for
redemption, provided that if such payment is made on the redemption date it must
be received by the Trustee or paying agent, as the case may be, by 10:00 a.m.
New York City time, on such date. If any Note called for redemption is converted
pursuant hereto, any money deposited with the Trustee or any paying agent or so
segregated and held in trust for the redemption of such Note shall be paid to
the Company upon its request, or, if then held by the Company shall be
discharged from such trust. If fewer than all the Notes are to be redeemed, the
Company will give the Trustee written notice in the form of an Officers'
Certificate not fewer than forty-five (45) days (or such shorter period of time
as may be acceptable to the Trustee) prior to the redemption date as to the
aggregate principal amount of Notes to be redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed (in principal amounts of $1,000 or
integral multiples thereof), by lot or, in its sole discretion, on a pro rata
basis, with such adjustments up to $1,000 as are required in order to retain the
minimum denominations of the Notes. If any Note selected for partial redemption
is converted in part after such selection, the converted portion of such Note
shall be deemed (so far as may be) to be the portion to be selected for
redemption. The Notes (or portions thereof) so selected shall be deemed duly
selected for redemption for all purposes hereof, notwithstanding that any such
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Note is converted as a whole or in part before the mailing of the notice of
redemption. Notes may be redeemed in part only in denominations of $1,000 or any
integral multiple thereof. Provisions of this Indenture that apply to Notes
called for redemption also apply to portions of Notes called for redemption.
Upon any redemption of less than all Notes, the Company and the Trustee
shall treat as outstanding any Notes surrendered for conversion during the
period of fifteen (15) days next preceding the mailing of a notice of redemption
and shall treat as not outstanding any Note authenticated and delivered during
such period in exchange for the unconverted portion of any Note converted in
part during such period.
Section 3.3 Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless such Notes or portions
thereof have been delivered to the Trustee for cancellation or converted into
Common Stock pursuant to the terms hereof, become due and payable on the date
and at the place or places stated in such notice at the applicable redemption
price, together with interest accrued to, but excluding, the date fixed for
redemption. On and after said date (unless the Company shall default in the
payment of such Notes at the redemption price, together with interest accrued to
said date) interest on the Notes or portion of Notes so called for redemption
shall cease to accrue and such Notes shall cease, except as provided in Sections
8.5 and 13.4 to be entitled to any benefit or security under this Indenture, and
the holders thereof shall have no right in respect of such Notes except the
right to receive the redemption price thereof and unpaid interest to, but
excluding, the date fixed for redemption. On and after the close of business on
the Trading Day next preceding the date fixed for redemption (unless the Company
shall default in the payment of such Notes at the redemption price, together
with accrued interest to the date fixed for redemption) the Notes or portion of
the Notes called for redemption shall also cease to be convertible into Common
Stock. On presentation and surrender of such Notes at a place of payment in said
notice specified, the said Notes or the specified portions thereof to be
redeemed shall be paid and redeemed by the Company at the applicable redemption
price, together with interest accrued thereon to, but excluding, the date fixed
for redemption; provided that, if the applicable redemption date is an interest
payment date, the semi-annual payment of interest becoming due on such date
shall be payable to the holders of such Notes registered as such on the relevant
record date subject to the terms and provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not pay the redemption
price of any Notes or mail any notice of optional redemption during the
continuance of a default in payment of interest or premium, if any, on the Notes
or of any Event of Default of which, in the case of any Event of Default other
than under Section 7.1(a), (b) or (d), a Responsible Officer of the Trustee has
knowledge. If any Note called for redemption shall not be so paid upon surrender
thereof for
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redemption, the principal and premium, if any, shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate borne
by the Note and such Note shall remain convertible into Common Stock until the
principal and premium, if any, shall have been paid or duly provided for.
Section 3.4 Conversion Arrangement on Call for Redemption. In connection
with any redemption of Notes, the Company may arrange for the purchase and
conversion of any Notes by an agreement with one or more investment bankers or
other purchasers to purchase such Notes by paying to the Trustee in trust for
the Noteholders, on or before the date fixed for redemption, an amount not less
than the applicable redemption price, together with interest accrued to, but
excluding, the date fixed for redemption, of such Notes. Notwithstanding
anything to the contrary contained in this Article III, the obligation of the
Company to pay the redemption price of such Notes, together with interest
accrued to, but excluding, the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, a copy of which will be filed
with the Trustee prior to the date fixed for redemption, any Notes not duly
surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article XV) surrendered by such purchasers for conversion, all as
of immediately prior to the close of business on the date fixed for redemption
(and the right to convert any such Notes shall be deemed to have been extended
through such time), subject to payment of the above amount as aforesaid. At the
direction of the Company, the Trustee shall hold and dispose of any such amount
paid to it in the same manner as it would monies deposited with it by the
Company for the redemption of Notes. Without the Trustee's prior written
consent, no arrangement between the Company and such purchasers for the purchase
and conversion of any Notes shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture, and the Company agrees to indemnify the Trustee from, and hold
it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Notes between the Company and such purchasers to which the Trustee has not
consented in writing, including the costs and expenses incurred by the Trustee
in the defense or investigation of any claim or liability arising out of or in
connection with the exercise or performance of any of its powers, duties,
responsibilities or obligations under this Indenture.
ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1 Agreement of Subordination. The Company covenants and agrees,
and each holder of Notes issued hereunder by its acceptance thereof likewise
covenants and agrees, that all Notes shall be issued subject to the provisions
of this Article IV; and each person holding any Note, whether upon original
issue or upon transfer, assignment or exchange thereof, accepts and agrees to be
bound by such provisions.
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The payment of the principal of, premium, if any, and interest on all
Notes (including, but not limited to, the redemption price or repurchase price
with respect to the Notes to be redeemed or repurchased, as provided in this
Indenture) issued hereunder and all other payments to Noteholders required
hereunder (the "Subordinated Indebtedness") shall, to the extent and in the
manner hereinafter set forth, be subordinated and subject in right of payment to
the prior payment in full in cash or in such other form of payment as may be
acceptable to the holders of all Senior Indebtedness, whether outstanding at the
date of this Indenture or thereafter incurred.
No provision of this Article IV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2 Payments to Noteholders. No payment shall be made with
respect to Subordinated Indebtedness, except payments made pursuant to Article
XIII from monies deposited with the Trustee pursuant thereto prior to the
happening of the events specified in either of the following clauses (i) or
(ii), if:
(i) a default in the payment of principal of or, premium, if any,
interest or other payment due on any Designated Senior Indebtedness occurs
and is continuing (or, in the case of Designated Senior Indebtedness for
which there is a period of grace, in the event of such a default that
continues beyond the period of grace, if any, specified in the instrument
evidencing such Designated Senior Indebtedness), provided that the
foregoing shall apply to the Trustee only if the Trustee has actual
knowledge (as determined in accordance with Section 4.5) of the occurrence
and/or continuation of such default; or
(ii) a default, other than a payment default, on any Designated
Senior Indebtedness occurs and is continuing that then permits holders of
such Designated Senior Indebtedness to accelerate its maturity and the
Trustee and the Company receive a notice of the default (a "Payment
Blockage Notice") from a holder (or a trustee on behalf of such holder) of
Designated Senior Indebtedness or its representative or agent.
If the Trustee and the Company receive any Payment Blockage Notice
pursuant to clause (ii) above, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section unless (A) at least 365 days shall have
elapsed since the first day of effectiveness of the immediately prior Payment
Blockage Notice, and (B) either (x) all scheduled payments of the principal of
and premium, if any, and interest on the Notes that have come due have been paid
in full in cash or (y) the Trustee or the Noteholders shall not have instituted
proceedings to enforce the Noteholders' right to receive such payments. No
default (whether or not such nonpayment default is on the same issue of
Designated Senior Indebtedness) that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee and the Company shall be,
or be made, the basis for a subsequent Payment Blockage Notice. If the Trustee
and the Company receive a Payment Blockage Notice pursuant to clause (ii) above
that is ineffective pursuant to this paragraph, the Trustee shall so notify the
sender of such ineffective Payment Blockage Notice and continue to make payments
pursuant to this Indenture.
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The Company may and shall resume payments on and distributions in
respect of the Notes upon the earlier of:
(1) the date upon which the default referred to in clause (i) or
(ii) above, as applicable, is cured or waived, provided that the foregoing shall
apply to the Trustee only if the Trustee has actual knowledge (as determined in
accordance with Section 4.5) of such cure or waiver, or
(2) in the case of a default referred to in clause (ii) above, 179
days pass after the Payment Blockage Notice is received unless the maturity of
such Designated Senior Indebtedness has been accelerated,
unless this Article IV otherwise prohibits the payment or distribution at the
time of such payment or distribution.
In the event of the acceleration of the Notes because of an Event of
Default, the Company may not make any payment or distribution to the Trustee or
any holder of Notes in respect of the amounts payable with respect to the Notes
and may not acquire or purchase from the Trustee or any holder of Notes any
Notes until all Senior Indebtedness has been paid in full or such acceleration
is rescinded in accordance with the terms of this Indenture.
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full in cash or
such other form of payment acceptable to the holders thereof before any payment
is made on account of Subordinated Indebtedness (except payments made pursuant
to Article XIII from monies deposited with the Trustee pursuant thereto prior to
the happening of such dissolution, winding-up, liquidation or reorganization or
bankruptcy, insolvency, receivership or other such proceedings); and upon any
such dissolution or winding-up or liquidation or reorganization or bankruptcy,
insolvency, receivership or other such proceedings, any payment by the Company,
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to which the holders of the Notes or the Trustee
under this Indenture would be entitled, except for the provisions of this
Article IV, shall (except as aforesaid) be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the holders of the Notes or by the
Trustee under this Indenture if received by them or it, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, or as otherwise required by
law or a court order) or their respective representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full in cash or such other form of payment acceptable to the holders of such
Senior Indebtedness after giving effect to any concurrent payment or
distribution
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to or for the holders of Senior Indebtedness, before any payment or distribution
is made to the holders of the Notes or to the Trustee under this Indenture.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing, shall be received by the Trustee under
this Indenture or by any holders of the Notes before all Senior Indebtedness is
paid in full in cash or such other form of payment acceptable to the holders of
such Senior Indebtedness or provision is made for such payment in accordance
with its terms, such payment or distribution shall be held by the recipient or
recipients for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in cash or such other
form of payment acceptable to the holders of such Senior Indebtedness in
accordance with its terms, after giving effect to any concurrent payment or
distribution (or provision therefor) to or for the holders of such Senior
Indebtedness; provided that the foregoing shall apply to the Trustee only if the
Trustee has actual knowledge (as determined in accordance with Section 4.5) that
such payment or distribution is prohibited by this Indenture.
For purposes of this Article IV, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated (at least to the extent provided in this Article IV with respect to
the Notes) to the payment of all Senior Indebtedness which may at the time be
outstanding; provided that (i) the Senior Indebtedness is assumed by the new
corporation, if any, resulting from such reorganization or adjustment, and (ii)
the rights of the holders of Senior Indebtedness (other than leases which are
not assumed by the Company or by the new corporation, as the case may be) are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XII shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 4.2
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article XII.
Nothing in this Section 4.2 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject to
the further provisions of Section 4.5.
Section 4.3 Subrogation of Notes. Subject to the payment in full of all
Senior Indebtedness, the rights of the holders of the Notes shall be subrogated
to the extent of the payments or distributions made to the holders of such
Senior Indebtedness pursuant to the provisions of this Article IV (equally and
ratably with the holders of all indebtedness of the Company which by its express
terms is subordinated to other indebtedness of the Company to substantially the
same extent
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as the Notes are subordinated and is entitled to like rights of subrogation) to
the rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Indebtedness until the principal of (and premium, if any) and interest on
the Notes shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness of any cash,
property or securities to which the holders of the Notes or the Trustee would be
entitled except for the provisions of this Article IV, and no payment over
pursuant to the provisions of this Article IV, to or for the benefit of the
holders of Senior Indebtedness by holders of the Notes or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness,
and the holders of the Notes, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness; and no payments or distributions of cash,
property or securities to or for the benefit of the holders of the Notes
pursuant to the subrogation provisions of this Article IV, which would otherwise
have been paid to the holders of Senior Indebtedness shall be deemed to be a
payment by the Company to or for the account of the Notes. It is understood that
the provisions of this Article IV are and are intended solely for the purposes
of defining the relative rights of the holders of the Notes, on the one hand,
and the holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of (and premium, if any) and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article IV of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article IV, the Trustee, subject to the provisions of Section 8.1, and the
holders of the Notes shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.
Section 4.4 Authorization by Noteholders. Each holder of a Note by his
acceptance thereof authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article IV and appoints the Trustee his attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.09 hereof at least 30
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days before the expiration of the time to file such claim, the holders of any
Senior Indebtedness or their respective representative or representatives are
hereby authorized to file an appropriate claim for and on behalf of the holders
of the Notes.
Section 4.5 Notice to Trustee. The Company shall give prompt written
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company which would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the provisions of this Article IV.
Notwithstanding the provisions of this Article IV or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any Senior Indebtedness (including Designated Senior Indebtedness) or of any
default or event of default (or cure or waiver of any default or event of
default) with respect to any Senior Indebtedness (including Designated Senior
Indebtedness) or of any other facts which would prohibit the making of any
payment of monies to or by the Trustee in respect of the Notes pursuant to the
provisions of this Article IV, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof at the Corporate Trust Office
of the Trustee from the Company (in the form of an Officers' Certificate) or
from a holder or holders of Senior Indebtedness or Designated Senior
Indebtedness or from any trustee thereof who shall have been certified by the
Company or otherwise established to the reasonable satisfaction of the Trustee
to be such holder or trustee; and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 8.1, shall be entitled in all
respects to assume that no such facts exist; provided that if on a date at least
two (2) Business Days prior to the date upon which by the terms hereof any such
monies may become payable for any purpose (including, without limitation, the
payment of the principal of, or premium, if any, or interest on any Note), the
Trustee shall not have received with respect to such monies the notice provided
for in this Section 4.5, then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
monies and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary which may be received by it
on or after such prior date.
Notwithstanding anything to the contrary hereinbefore set forth, nothing
shall prevent any payment by the Trustee to the Noteholders of monies deposited
with it pursuant to Section 13.1.
The Trustee, subject to the provisions of Section 8.1, shall be entitled
to rely on the delivery to it of a written notice by a person representing
himself to be a holder of Senior Indebtedness or Designated Senior Indebtedness
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Indebtedness or Designated Senior Indebtedness or a
trustee on behalf of any such holder or holders. In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article IV, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such person, the extent to which
such person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such person under this Article IV, and if
such evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment. In the event that the
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Trustee determines in good faith that further evidence is required with respect
to the right of any person as a holder of Designated Senior Indebtedness to
deliver a Payment Blockage Notice pursuant to this Article IV, the Trustee may
request such person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Designated Senior Indebtedness held by such person
and any other facts pertinent to determining the right of such person to deliver
a Payment Blockage Notice, and if such evidence is not furnished the Trustee may
defer taking action with respect to a Payment Blockage Notice pending judicial
determination as to the right of such person to give such notice.
Section 4.6 Trustee's Relation to Senior Indebtedness. The Trustee and
any agent of the Company or the Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article IV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
Nothing in this Article IV shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 8.6.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall
not be personally liable to any holder of Senior Indebtedness if it shall pay
over or deliver to holders of Notes, the Company or any other person money or
assets to which any holder of Senior Indebtedness shall be entitled by virtue of
this Article IV or otherwise.
Section 4.7 No Impairment of Subordination. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8 Certain Conversions Deemed Payment. For the purposes of this
Article only, (1) the issuance and delivery of junior securities upon conversion
of Notes in accordance with Article XV shall not be deemed to constitute a
payment or distribution on account of the principal of (or premium, if any) or
interest on Notes or on account of the purchase or other acquisition of Notes,
and (2) the payment, issuance or delivery of cash, property or securities (other
than junior securities) upon conversion of a Note shall be deemed to constitute
payment on account of the principal of such Note. For the purposes of this
Section, the term "junior securities" means (a) shares of any stock of any class
of the Company and (b) securities of the Company which are subordinated in right
of payment to all Senior Indebtedness which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Notes are so subordinated as provided in this
Article and the weighted average maturity of which is no earlier than the
maturity of the Notes. Nothing contained in this Article or elsewhere in this
Indenture or in the
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Notes is intended to or shall impair, as among the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the Notes, the right,
which is absolute and unconditional, of the Holder of any Note to convert such
Note in accordance with Article XV.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes. Each installment of interest on the Notes due on any semi-annual interest
payment date may be paid by mailing checks for the interest payable to or upon
the written order of the holders of Notes entitled thereto as they shall appear
on the registry books of the Company; provided that, with respect to any holder
of Notes with an aggregate principal amount equal to or in excess of $2,000,000,
at the request of such holder in writing to the Company, interest on such
holder's Notes shall be paid by wire transfer in immediately available funds in
accordance with the wire transfer instruction supplied by such holder to the
Trustee and paying agent (if different from the Trustee). The Company hereby
designates the Trustee as paying agent, Note registrar and conversion agent.
Section 5.2 Maintenance of Office or Agency. The Company will maintain in
the Borough of Manhattan, The City of New York, an office or agency where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion, redemption or repurchase and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency not designated or appointed by the Trustee. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee or at such other office as may be designated by the Trustee in the
Borough of Manhattan, the City of New York.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York, for such purposes. The Company will give prompt written notice to
the Trustee and the holders of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby initially designates the Corporate Trust Office and the
office or agency of the Trustee in the Borough of Manhattan, The City of New
York of State Street Bank and Trust Company, N.A., an Affiliate of the Trustee,
located at 61 Broadway, Concourse Level, Corporate
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Trust Window, New York, NY 10006 as one such office or agency of the Company for
the purpose of payment, conversion and registration.
So long as the Trustee is the Note registrar, the Trustee agrees to mail,
or cause to be mailed, the notice set forth in Section 8.10(a).
Section 5.3 Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee or if the Trustee shall appoint such a paying agent, it will cause
such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions
of this Section 5.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest on
the Notes (whether such sums have been paid to it by the Company or
by any other obligor on the Notes) in trust for the benefit of the
holders of the Notes;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Notes) to make any payment
of the principal of and premium, if any, or interest on the Notes
when the same shall be due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with the paying agent a
sum sufficient to pay such principal, premium, if any, or interest, and
(unless such paying agent is the Trustee) the Company will promptly notify
the Trustee of any failure to take such action, provided that if such
deposit is made on the due date, such deposit must be received by the
paying agent by 10:00 a.m., New York City time, on such date.
(b) If the Company shall act as its own paying agent, it will, on
or before each due date of the principal of, premium, if any, or interest
on the Notes, set aside, segregate and hold in trust for the benefit of
the holders of the Notes a sum sufficient to pay such principal, premium,
if any, or interest so becoming due and will notify the Trustee of any
failure to take such action and of any failure by the Company (or any
other obligor under the Notes) to make any payment of the principal of,
premium, if any, or interest on the Notes when the same shall become due
and payable.
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(c) Anything in this Section 5.4 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction
and discharge of this Indenture, or for any other reason, pay or cause to
be paid to the Trustee all sums held in trust by the Company or any paying
agent hereunder as required by this Section 5.4, such sums to be held by
the Trustee upon the trusts herein contained and upon such payment by the
Company or any paying agent to the Trustee, the Company or such paying
agent shall be released from all further liability with respect to such
sums.
(d) Anything in this Section 5.4 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 5.4 is
subject to Sections 13.3 and 13.4.
Section 5.5 Existence. Subject to Article XII, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and rights (charter and statutory); provided,
however, that the Company shall not be required to preserve any such right if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not adverse in any material respect to the holders.
Section 5.6 Maintenance of Properties. The Company will cause all
material properties owned, leased or licensed in the conduct of its business or
the business of any Significant Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business and not
adverse in any material respect to the holders.
Section 5.7 Payment of Taxes and Other Claims. The Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all material taxes, assessments and governmental charges levied
or imposed upon the Company or upon the income, profits or property of the
Company and (2) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien upon the property of the Company; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 5.8 Stay, Extension and Usury Laws. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on
the Notes as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may
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lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
Section 5.9 Statement by Officers as to Default. The Company shall
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Company ending after the date hereof, an Officers' Certificate, stating whether
or not to the best knowledge of the signers thereof the Company is in default in
the performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming aware of
any default in the performance or observance of any covenant, agreement or
condition contained in this Indenture, or any Event of Default, an Officers'
Certificate specifying with particularity such default or Event of Default and
further stating what action the Company has taken, is taking or proposes to take
with respect thereto. As of the date of this Indenture, the Company's fiscal
year ends on the last Saturday of October.
Any notice required to be given under this Section 5.9 shall be delivered
to the Trustee at its Corporate Trust Office.
Section 5.10 Further Instruments and Acts. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1 Noteholders' Lists. The Company covenants and agrees that it
will furnish or cause to be furnished to the Trustee, semi-annually, not more
than fifteen (15) days after each __________and __________ in each year
beginning with __________ , 1997, and at such other times as the Trustee may
request in writing, within thirty (30) days after receipt by the Company of any
such request (or such lesser time as the Trustee may reasonably request in order
to enable it to timely provide any notice to be provided by it hereunder), a
list in such form as the Trustee may reasonably require of the names and
addresses of the holders of Notes as of a date not more than fifteen (15) days
(or such other date as the Trustee may reasonably request in order to so provide
any such notices) prior to the time such information is furnished, except that
no such list need be furnished so long as the Trustee is acting as Note
registrar.
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Section 6.2 Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Notes contained in the most recent list furnished to it as provided
in Section 6.1 or maintained by the Trustee in its capacity as Note registrar,
if so acting. The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Noteholders to communicate with other holders
of Notes with respect to their rights under this Indenture or under the Notes
and the corresponding rights and duties of the Trustee, shall be as provided by
the Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information regardless of the source which such information was
derived as to names and addresses of holders of Notes made pursuant to the Trust
Indenture Act.
Section 6.3 Reports by Trustee.
(a) Within sixty (60) days after May 15 of each year commencing
with the year 1997, the Trustee shall transmit to holders of Notes such reports
dated as of May 15 of the year in which such reports are made concerning the
Trustee and its actions under this Indenture as may be required pursuant to
Section 313 of the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of such reports shall, at the time of such
transmission to holders of Notes, be filed by the Trustee with each stock
exchange and automated quotation system upon which the Notes are listed and with
the Company, in each case as may be required by the Trust Indenture Act. The
Company will notify the Trustee when the Notes are listed on any stock exchange
or automated quotation system and when any such listing is discontinued.
Section 6.4 Reports by Company. The Company shall file with the Trustee
and the Commission, and transmit to holders of Notes, such information,
documents and other reports and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; provided that any such information, documents or reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within fifteen (15) days after the
same is so required to be filed with the Commission.
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ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 Events of Default. In case one or more of the following
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
(a) default in the payment of the principal of, or premium, if
any, on any of the Notes as and when the same shall become due and payable
either at maturity or in connection with any redemption pursuant to
Article III or repurchase pursuant to Article XVI, by declaration or
otherwise, whether or not such payment is prohibited by the provisions of
Article IV; or
(b) default in the payment of any installment of interest on any
of the Notes as and when the same shall become due and payable, and
continuance of such default for a period of thirty (30) days, whether or
not such payment is prohibited by the provisions of Article IV; or
(c) failure on the part of the Company duly to observe or perform
any other of the covenants or agreements on the part of the Company in the
Notes or in this Indenture (other than a covenant or agreement a default
in whose performance or whose breach is elsewhere in this Section
specifically dealt with) and the default continues for a period of
forty-five (45) days after the date on which written notice of such
failure, requiring the Company to remedy the same, shall have been given
to the Company by the Trustee, or to the Company and a Responsible Officer
of the Trustee by the holders of at least 25% in aggregate principal
amount of the Notes at the time outstanding determined in accordance with
Section 9.4; or
(d) a default in the payment of the Repurchase Price in respect
of any Note on the repurchase date therefor in accordance with the
provisions of Article XVI, whether or not such payment is prohibited by
the provisions of Article IV; or
(e) failure on the part of the Company to provide notice of a
Designated Event in accordance with the provisions of Article XVI; or
(f) failure by the Company or any Significant Subsidiary to make
any payment at maturity, including any applicable grace period, in respect
of indebtedness, which term as used herein means obligations (other than
the Notes or non-recourse obligations) of, or guaranteed or assumed by,
the Company, or any Significant Subsidiary, for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments
("Indebtedness") in an amount in excess of $10,000,000 or the equivalent
thereof in any other currency or composite currency and such failure shall
have continued for thirty (30) days after written notice thereof
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shall have been given to the Company by the Trustee or to the Company and
a Responsible Officer of the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Notes at the time
outstanding determined in accordance with Section 9.4; or
(g) a default by the Company or any Significant Subsidiary with
respect to any Indebtedness, which default results in the acceleration of
Indebtedness in an amount in excess of $10,000,000 or the equivalent
thereof in any other currency or composite currency without such
Indebtedness having been discharged or such acceleration having been
cured, waived, rescinded or annulled for a period of thirty (30) days
after written notice thereof shall have been given to the Company by the
Trustee or to the Company and a Responsible Officer of the Trustee by the
holders of at least 25% in aggregate principal amount of the outstanding
Notes at the time outstanding determined in accordance with Section 9.4;
or
(h) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due; or
(i) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(h) or (i) with respect to the Company), unless the principal of
all of the Notes shall have already become due and payable, either the Trustee
or the holders of not less than 25% in aggregate principal amount of the Notes
then outstanding hereunder determined in accordance with Section 9.4, by notice
in writing to the Company (and to the Trustee if given by Noteholders), may
declare the principal of and premium, if any, on all the Notes and the interest
accrued thereon to be due and payable immediately, and upon any such declaration
the same shall become and shall be immediately due and payable, anything in this
Indenture or in the Notes contained to the contrary notwithstanding. If an Event
of Default specified in Section 7.1(h) or (i) with respect to the Company occurs
and is continuing, the principal of, and premium, if any, on all the Notes and
the interest accrued thereon shall be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Notes. This
provision, however, is subject to the condition that if, at any time after the
principal of the Notes shall have been so declared due and payable, and before
any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided,
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the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all Notes and the principal of and
premium, if any, on any and all Notes which shall have become due otherwise than
by acceleration (with interest on overdue installments of interest (to the
extent that payment of such interest is enforceable under applicable law) and on
such principal and premium, if any, at the rate borne by the Notes, to the date
of such payment or deposit) and amounts due to the Trustee pursuant to Section
8.6, and if any and all defaults under this Indenture, other than the nonpayment
of principal of and premium, if any, and accrued interest on Notes which shall
have become due by acceleration, shall have been cured or waived pursuant to
Section 7.7, then and in every such case the holders of a majority in aggregate
principal amount of the Notes then outstanding, by written notice to the Company
and to the Trustee, may waive all defaults or Events of Default and rescind and
annul such declaration and its consequences; but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent default or Event of
Default, or shall impair any right consequent thereon. The Company shall notify
a Responsible Officer of the Trustee, promptly upon becoming aware thereof, of
any Event of Default.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the holders of Notes, and the Trustee shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Company, the holders of Notes, and the Trustee shall continue as
though no such proceeding had been instituted.
Section 7.2 Payments of Notes on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment by the Company
of any installment of interest upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty (30) days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or in connection
with any redemption or repurchase, by declaration under this Indenture or
otherwise, then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Notes, the whole amount that then
shall have become due and payable on all such Notes for principal and premium,
if any, or interest, or both, as the case may be, with interest upon the overdue
principal and premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law) upon the overdue installments of interest
at the rate borne by the Notes; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and premium, if any, and interest on the Notes to the
registered holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may
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prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on the Notes and collect in the manner provided by law out of the
property of the Company or any other obligor on the Notes wherever situated the
monies adjudged or decreed to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obliger, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
of the Noteholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Notes, its or their creditors, or its or their
property, and to collect and receive any monies or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of any amounts due the Trustee under Section 8.6; and any receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, custodian or similar
official is hereby authorized by each of the Noteholders to make such payments
to the Trustee, and, in the event that the Trustee shall consent to the making
of such payments directly to the Noteholders, to pay to the Trustee any amount
due it for reasonable compensation, expenses, advances and disbursements,
including counsel fees incurred by it up to the date of such distribution. To
the extent that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or adopt on behalf of any Noteholder any plan of
reorganization or arrangement affecting the Notes or the rights of any
Noteholder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding, provided, however, that the Trustee may, on
behalf of the Noteholders, vote for the election of a trustee in bankruptcy or
similar official and may be a member of the creditor's committee established
with respect to such bankruptcy.
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All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
Section 7.3 Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
First: To the payment of all amounts due the Trustee under Section
8.6;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on the Notes in default in the order of
the maturity of the installments of such interest, with interest (to the
extent that such interest has been collected by the Trustee) upon the
overdue installments of interest at the rate borne by the Notes, such
payments to be made ratably to the persons entitled thereto;
Third: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall have become due, by declaration
or otherwise, and be unpaid, to the payment of the whole amount then owing
and unpaid upon the Notes for principal and premium, if any, and interest,
with interest on the overdue principal and premium, if any, and (to the
extent that such interest has been collected by the Trustee) upon overdue
installments of interest at the rate borne by the Notes; and in case such
monies shall be insufficient to pay in full the whole amounts so due and
unpaid upon the Notes, then to the payment of such principal and premium,
if any, and interest without preference or priority of principal and
premium, if any, over interest, or of interest over principal and premium,
if any, or of any installment of interest over any other installment of
interest, or of any Note over any other Note, ratably to the aggregate of
such principal and premium, if any, and accrued and unpaid interest; and
Fourth: Subject to the provisions of Article IV, to the payment of
the remainder, if any, to the Company or any other person lawfully
entitled thereto.
Section 7.4 Proceedings by Noteholder. No holder of any Note shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding
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in equity or at law upon or under or with respect to this Indenture, or for the
appointment of a receiver, trustee, liquidator, custodian or other similar
official, or for any other remedy hereunder, unless such holder previously shall
have given to the Trustee written notice of an Event of Default and of the
continuance thereof, as hereinbefore provided, and unless also the holders of
not less than 25% in aggregate principal amount of the Notes then outstanding
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee for sixty
(60) days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or proceeding
and no direction inconsistent with such written request shall have been given to
the Trustee pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of Notes shall
have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Notes (except as otherwise provided herein).
For the protection and enforcement of this Section 7.4, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of
any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.
Anything in this Indenture or the Notes to the contrary notwithstanding,
the holder of any Note, without the consent of either the Trustee or the holder
of any other Note, on his own behalf and for his own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
Section 7.5 Proceedings by Trustee. In case of an Event of Default the
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either by
suit in equity or by action at law or by proceeding in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 7.6 Remedies Cumulative and Continuing. Except as provided in the
last paragraph of Section 2.6, all powers and remedies given by this Article VII
to the Trustee or to the Noteholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any thereof or of any other powers and
remedies available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and
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agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein; and, subject to the provisions of Section
7.4, every power and remedy given by this Article VII or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by Noteholders.
Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority
of Noteholders. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding determined in accordance with Section 9.4 shall
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, and (b) the
Trustee may, but shall have no obligation to, take any other action deemed
proper by the Trustee which is not inconsistent with such direction. The holders
of a majority in aggregate principal amount of the Notes at the time outstanding
determined in accordance with Section 9.4 may on behalf of the holders of all of
the Notes waive any past default or Event of Default hereunder and its
consequences except (i) a default in the payment of interest or premium, if any,
on, or the principal of, the Notes, (ii) a failure by the Company to convert any
Notes into Common Stock or (iii) a default in respect of a covenant or
provisions hereof which under Article XI cannot be modified or amended without
the consent of the holders of all Notes then outstanding. Upon any such waiver
the Company, the Trustee and the holders of the Notes shall be restored to their
former positions and rights hereunder; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Whenever any default or Event of Default hereunder shall have been
waived as permitted by this Section 7.7, said default or Event of Default shall
for all purposes of the Notes and this Indenture be deemed to have been cured
and to be not continuing; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
Section 7.8 Notice of Defaults. The Trustee shall, within ninety (90)
days after the occurrence of a default, mail to all Noteholders, as the names
and addresses of such holders appear upon the Note register, notice of all
defaults known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; and provided that, except in
the case of default in the payment of the principal of, or premium, if any, or
interest on any of the Notes, or in the payment of any redemption or repurchase
obligation, the Trustee shall be protected in withholding such notice if and so
long as a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
best interest of the Noteholders.
Section 7.9 Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its
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discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; provided that
the provisions of this Section 7.9 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate more than 10% in principal amount of the Notes at the
time outstanding determined in accordance with Section 9.4, or to any suit
instituted by any Noteholder for the enforcement of the payment of the principal
of or premium, if any, or interest on any Note on or after the due date
expressed in such Note or to any suit for the enforcement of the right to
convert any Note in accordance with the provisions of Article XV or to require
the Company to repurchase any Note in accordance with Article XVI.
Section 7.10 Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any holder of any Note to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or any acquiescence therein. Every right and
remedy given by this Article or by law to the Trustee or to the holders of Notes
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the holders of Notes, as the case may be.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 Duties and Responsibilities of Trustee. The Trustee, prior to
the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has occurred (which has not been cured or waived) the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and
the Trust Indenture Act, and the Trustee shall not be liable except
for the performance of such duties and obligations as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture and the Trust
Indenture Act against the Trustee; and
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(2) in the absence of bad faith and willful misconduct on the
part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture;
but, in the case of any such certificates or opinions which by any
provisions hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the Trustee, unless
it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts;
(c) the Trustee shall not be liable to any Noteholder with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of not less than a majority
in principal amount of the Notes at the time outstanding determined as
provided in Section 9.4 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions of
this Section.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2 Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note, coupon or other paper or document
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors may
be evidenced to the Trustee by a copy thereof certified by the Secretary
or an Assistant Secretary of the Company;
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(c) the Trustee may consult with counsel and any advice or Opinion
of Counsel shall be full and complete authorization and protection in
respect of any action taken or omitted by it hereunder in good faith and
in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order
or direction of any of the Noteholders pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney; provided, however, that if the payment within a reasonable time
to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to
it by the terms of this Indenture, the Trustee may require reasonable
indemnity from the Noteholders against such expenses or liability as a
condition to so proceeding; the reasonable expenses of every such
examination shall be paid by the Company or, if paid by the Trustee or any
predecessor Trustee, shall be repaid by the Company upon demand; and
(f) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due
care hereunder.
Section 8.3 No Responsibility for Recitals, Etc. The recitals contained
herein and in the Notes (except in the Trustee's certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May
Own Notes. The Trustee, any paying agent, any conversion agent or Note
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
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Section 8.5 Monies to Be Held in Trust. Subject to the provisions of
Section 13.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder.
Section 8.6 Compensation and Expenses of Trustee. The Company covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation for all services rendered by it hereunder
in any capacity (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in the
administration of this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. The Company also covenants to indemnify the Trustee
in any capacity under this Indenture and its agents and any authenticating agent
for, and to hold them harmless against, any loss, liability or expense incurred
without negligence, willful misconduct, recklessness or bad faith on the part of
the Trustee or such agent or authenticating agent, as the case may be, and
arising out of or in connection with the acceptance or administration of this
trust or in any other capacity hereunder, including the costs and expenses of
defending themselves against any claim of liability in the premises. The
obligations of the Company under this Section 8.6 to compensate or indemnify the
Trustee and to pay or reimburse the Trustee for expenses, disbursements and
advances shall be secured by a lien upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the holders of particular Notes. The obligation of the Company under this
Section shall survive the satisfaction and discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(h) or (i) occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any bankruptcy,
insolvency or similar laws.
Section 8.7 Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence, willful misconduct, recklessness
and bad faith on the part of the Trustee, be deemed to be conclusively proved
and established by an Officers' Certificate delivered to the Trustee, and such
Officers' Certificate, in the absence of negligence, willful misconduct,
recklessness and bad faith on the part of the Trustee, shall be full warrant to
the Trustee for any action taken or omitted by it under the provisions of this
Indenture upon the faith thereof.
Section 8.8 Conflicting Interests of Trustee. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate
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such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Indenture.
Section 8.9 Eligibility of Trustee. There shall at all times be a Trustee
hereunder which shall be a person that is qualified pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000. If such person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 8.10 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written notice
of such resignation to the Company and by mailing notice thereof to the
holders of Notes at their addresses as they shall appear on the Note
register. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee. If no successor trustee shall have been so appointed and have
accepted appointment sixty (60) days after the mailing of such notice of
resignation to the Noteholders, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor
trustee, or any Noteholder who has been a bona fide holder of a Note or
Notes for at least six months may, subject to the provisions of Section
7.9, on behalf of himself and all others similarly situated, petition any
such court for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has
been a bona fide holder of a Note or Notes for at least six months,
or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Noteholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
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then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order
of the Board of Directors, one copy of which instrument shall be delivered
to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 7.9, any Noteholder who has been a
bona fide holder of a Note or Notes for at least six months may, on behalf
of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment
of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.
(c) The holders of a majority in aggregate principal amount of
the Notes at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within ten (10) days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so
removed or any Noteholder, upon the terms and conditions and otherwise as
in Section 8.10(a) provided, may petition any court of competent
jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of
a successor trustee pursuant to any of the provisions of this Section 8.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.11.
Section 8.11 Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of Section
8.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, the Company shall mail or cause to be mailed notice of the
succession of the former trustee hereunder to the holders of Notes at their
addresses as they shall appear on the Note register. If the Company
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fails to mail such notice within ten (10) days after acceptance of appointment
by the successor trustee, the successor trustee shall cause such notice to be
mailed at the expense of the Company.
Section 8.12 Succession by Merger, Etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee, including the trust created
by this Indenture, shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to all
or substantially all of the trust business of the Trustee such corporation shall
be qualified under the provisions of Section 8.8 and eligible under the
provisions of Section 8.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or an authenticating agent appointed by such successor
trustee may authenticate such Notes either in the name of any predecessor
trustee hereunder or in the name of the successor trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
Section 8.13 Limitation on Rights of Trustee as Creditor. If and when the
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X, or (c) by a
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combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
Section 9.2 Proof of Execution by Noteholders. Subject to the provisions
of Sections 8.1, 8.2 and 10.5, proof of the execution of any instrument by a
Noteholder or his agent or proxy shall be sufficient if made in accordance with
such reasonable rules and regulations as may be prescribed by the Trustee or in
such manner as shall be satisfactory to the Trustee. The holding of Notes shall
be proved by the Note register or by a certificate of the Note registrar.
The record of any Noteholders meeting shall be proved in the manner
provided in Section 10.6.
Section 9.3 Who Are Deemed Absolute Owners. The Company, the Trustee, any
authenticating agent, any paying agent, any conversion agent and any Note
registrar may deem the person in whose name such Note shall be registered upon
the Note register to be, and may treat him as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal of, premium, if any, and interest on such Note, for
conversion of such Note and for all other purposes; and neither the Company nor
the Trustee, nor any paying agent, nor any conversion agent nor any Note
registrar shall be affected by any notice to the contrary. All such payments so
made to any holder for the time being, or upon his order, shall be valid, and,
to the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for monies payable upon any such Note.
Section 9.4 Company-Owned Notes Disregarded. In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent, waiver or other
action only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgees' right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described persons;
and, subject to Section 8.1, the
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Trustee shall be entitled to accept such Officers' Certificate as conclusive
evidence of the facts therein set forth and of the fact that all Notes not
listed therein are outstanding for the purpose of any such determination.
Section 9.5 Revocation of Consents; Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as it concerns
such Note. Except as aforesaid, any such action taken by the holder of any Note
shall be conclusive and binding upon such holder and upon all future holders and
owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1 Purpose of Meetings. A meeting of Noteholders may be called
at any time and from time to time pursuant to the provisions of this Article X
for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or to
consent to the waiving of any default or Event of Default hereunder and
its consequences, or to take any other action authorized to be taken by
Noteholders pursuant to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of the
Notes under any other provision of this Indenture or under applicable law;
or
(5) to take any other action authorized by this Indenture or
under applicable law.
Section 10.2 Call of Meetings by Trustee. The Trustee may at any time call
a meeting of Noteholders to take any action specified in Section 10.1, to be
held at such time and at such place in the Borough of Manhattan, The City of New
York or in the City of Boston, Massachusetts or any
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other reasonably convenient city in the continental United States, as the
Trustee shall determine. Notice of every meeting of the Noteholders, setting
forth the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting and the establishment of any record date
pursuant to Section 9.1, shall be mailed to holders of Notes at their addresses
as they shall appear on the Note register. Such notice shall also be mailed to
the Company. Such notices shall be mailed not less than twenty (20) nor more
than ninety (90) days prior to the date fixed for the meeting.
Any meeting of Noteholders shall be valid without notice if the holders of
all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Noteholders. In case at any
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within twenty (20) days after receipt of such request, then the Company
or such Noteholders may determine the time and the place for such meeting and
may call such meeting to take any action authorized in Section 10.1, by mailing
notice thereof as provided in Section 10.2.
Section 10.4 Qualifications for Voting. To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes. The only
persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.5 Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
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Subject to the provisions of Section 9.4, at any meeting each Noteholder
or proxyholder shall be entitled to one vote for each $1,000 principal amount of
Notes held or represented by him; provided, however, that no vote shall be cast
or counted at any meeting in respect of any Note challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Notes held by
him or instruments in writing as aforesaid duly designating him as the proxy to
vote on behalf of other Noteholders. Any meeting of Noteholders duly called
pursuant to the provisions of Section 10.2 or 10.3 may be adjourned from time to
time by the holders of a majority of the aggregate principal amount of Notes
represented at the meeting, whether or not constituting a quorum, and the
meeting may be held as so adjourned without further notice.
Section 10.6 Voting. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 10.2. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 No Delay of Rights by Meeting. Nothing in this Article X
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or implied conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Noteholders under
any of the provisions of this Indenture or of the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Noteholders. The
Company, when authorized by the resolutions of the Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
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(a) to make provisions with respect to the conversion rights of
the holders of Notes pursuant to the requirements of Section 15.6;
(b) subject to Article IV, to convey, transfer, assign, mortgage
or pledge to the Trustee as security for the Notes, any property or
assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article XII;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(e) to provide for the issuance under this Indenture of Notes in
coupon form (including Notes registrants as to principal only) and to
provide for exchangeability of such Notes with the Notes issued hereunder
in fully registered form and to make all appropriate changes for such
purpose;
(f) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may be
defective or inconsistent with any other provision contained herein or in
any supplemental indenture, or to make any other provisions with respect
to matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture; provided such action
shall not materially adversely affect the interests of the holders of the
Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification
of this Indenture under the Trust Indenture Act, or under any similar
federal statute hereafter enacted.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental
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indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
Section 11.2 Supplemental Indentures With Consent of Noteholders. With the
consent (evidenced as provided in Article IX) of the holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding
(determined in accordance with Section 9.4), the Company, when authorized by the
resolutions of the Board of Directors, and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or any supplemental indenture or of
modifying in any manner the rights of the holders of the Notes; provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any Note, or reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof or premium, if any, thereon, or
reduce any amount payable on redemption or repurchase thereof, change or impair
the obligation of the Company to repurchase any Note at the option of the holder
upon the happening of a Designated Event, or impair or affect the right of any
Noteholder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Notes, or change or impair the right to convert
the Notes into Common Stock subject to the terms set forth herein, including
Section 15.6, or modify the provisions of this Indenture with respect to the
subordination of the Notes in a manner adverse to the Noteholders, without the
consent of the holder of each Note so affected, or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding.
Upon the request of the Company, accompanied by a copy of the resolutions
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Noteholders as aforesaid,
the Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 Effect of Supplemental Indentures. Any supplemental indenture
executed pursuant to the provisions of this Article XI shall comply with the
Trust Indenture Act, as then in effect. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article XI, this Indenture shall be
and be deemed to be modified and amended in accordance therewith and
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the respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 11.4 Notation on Notes. Notes authenticated and delivered after
the execution of any supplemental indenture pursuant to the provisions of this
Article XI may (but need not) bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may (but need not), at the
Company's expense, be prepared and executed by the Company, authenticated by the
Trustee (or an authenticating agent duly appointed by the Trustee pursuant to
Section 17.11) and delivered in exchange for the Notes then outstanding, upon
surrender of such Notes then outstanding.
Section 11.5 Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.1 and
8.2, shall be entitled to receive an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any supplemental indenture executed pursuant
hereto complies with the requirements of this Article XI.
ARTICLE XII
MERGER, SALE OR CONSOLIDATION
Section 12.1 Limitation on Merger, Sale or Consolidation.
(a) The Company shall not, directly or indirectly, consolidate
with or merge with or into another person or sell, lease, convey or transfer all
or substantially all of its assets (computed on a consolidated basis), whether
in a single transaction or a series of related transactions, to another person
or group of affiliated persons, unless (i) either (A) in the case of a merger or
consolidation, the Company is the surviving entity or (B) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company in
connection with the Securities and the Indenture; (ii) no Default or Event of
Default shall exist or shall occur immediately before or after giving effect on
a pro forma basis to such transaction; and (iii) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, lease, conveyance or transfer and, if a
supplemental indenture is required, such supplemental indenture comply with the
Indenture and that all conditions precedent relating to such transactions have
been satisfied.
(b) For purposes of clause (a) of this Section 12.1, the sale,
lease, conveyance, assignment, transfer, or other disposition of all or
substantially all of the properties and assets of one
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or more Subsidiaries of the Company, which properties and assets, if held by the
Company instead of such Subsidiaries, would constitute all or substantially all
of the properties and assets of the Company on a consolidated basis, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
Section 12.2 Successor Corporation to Be Substituted. In case of any such
consolidation, merger, sale, conveyance or lease and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest on all of the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as the party of the first part. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of Hadco Corporation any or all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation instead of the
Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause
to be authenticated and delivered, any Notes which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Notes which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the Notes
so issued shall in all respects have the same legal rank and benefit under this
Indenture as the Notes theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Notes had been issued at the date
of the execution hereof. In the event of any such consolidation, merger, sale or
conveyance (but not in the event of such lease), the person named as the
"Company" in the first paragraph of this Indenture, or any successor which shall
thereafter have become such in the manner prescribed in this Article XII and
which shall have transferred its rights and obligations hereunder to another
successor in the manner prescribed in this Article XII, may be dissolved, wound
up and liquidated at any time thereafter and such person shall be released from
its liabilities as obligor and maker of the Notes and from its obligations under
this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture. When (a) the Company shall deliver to
the Trustee for cancellation all Notes theretofore authenticated (other than any
Notes which have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or (b) all the Notes not theretofore canceled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year under arrangements
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satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit with the Trustee, in trust, net funds sufficient to pay at
maturity or if all Notes are scheduled for redemption upon the date fixed for
redemption of all of the Notes (other than any Notes which shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for which
other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, and if in either case the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then this Indenture shall cease to be of further effect (except as to (i)
remaining rights of registration of transfer, substitution and exchange and
conversion of Notes, (ii) rights hereunder of Noteholders to receive payments of
principal of and premium, if any, and interest on the Notes and the other
rights, duties and obligations of Noteholders, as beneficiaries hereof with
respect to the amounts, if any, so deposited with the Trustee and (iii) the
rights, obligations and immunities of the Trustee hereunder), and the Trustee,
on demand of the Company accompanied by an Officers' Certificate and an Opinion
of Counsel as required by Section 17.5 and at the cost and expense of the
Company, shall execute proper instruments furnished to it acknowledging
satisfaction of and discharging this Indenture; the Company, however, hereby
agrees to reimburse the Trustee for any costs or expenses (including reasonable
fees and expenses of counsel to the Trustee) thereafter reasonably and properly
incurred by the Trustee and to compensate the Trustee for any services
thereafter reasonably and properly rendered by the Trustee in connection with
this Indenture or the Notes.
Section 13.2 Deposited Monies to Be Held in Trust by Trustee. Subject to
Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1
shall be held in trust and applied by it to the payment, notwithstanding the
provisions of Article IV, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest and premium, if any. All monies deposited by the Company in accordance
with Section 4.2 and so held in trust shall not be subject to the subordination
provisions of Article IV.
Section 13.3 Paying Agent to Repay Monies Held. Upon the satisfaction and
discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon demand of the Company or the Trustee,
be repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.
Section 13.4 Return of Unclaimed Monies. Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on demand and all liability of the Trustee shall thereupon cease with
respect to such monies; and the holder of any of the Notes shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
unless an applicable abandoned property law designates another person.
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Section 13.5 Reinstatement. If (i) the Trustee or the paying agent is
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application and (ii) the holders of at least a
majority in principal amount of the then outstanding Notes so request by written
notice to the Trustee, the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 13.1 until such time as the Trustee or the paying agent is permitted
to apply all such money in accordance with Section 13.2; provided, however, that
if the Company makes any payment of interest or premium, if any, on or principal
of any Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the holders of such Notes to receive such payment
from the money held by the Trustee or paying agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate Obligations. No recourse
for the payment of the principal of or premium, if any, or interest on any Note,
or for any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in this
Indenture or in any supplemental indenture or in any Note, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer or director or Subsidiary,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1 Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, the holder of any Note shall have the right, at
his option, at any time prior to the close of business on ____________ , 2004
(except that, with respect to any Note or portion of a Note which shall be
called for redemption, such conversion right shall terminate, except as provided
in the fourth paragraph of Section 15.2, at the close of business on the last
Business Day prior to the date fixed for redemption of such Note or portion of a
Note unless the Company shall default in payment due upon redemption thereof (in
which case the conversion right shall terminate at the close of business on the
date such default is cured and such Note is redeemed) to convert the principal
amount of any such Note, or any portion of such principal amount which is $1,000
or an integral multiple thereof,
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into that number of fully paid and non-assessable shares of Common Stock (as
such shares shall then be constituted) obtained by dividing the principal amount
of the Note or portion thereof surrendered for conversion by the Conversion
Price in effect at such time, by surrender of the Note so to be converted in
whole or in part in the manner provided in Section 15.2. Provisions of this
Indenture that apply to conversion of all of a Note also apply to conversion of
a portion of a Note. A Note in respect of which a holder has delivered a notice
of exercise of the right to require the Company to repurchase such Note upon the
occurrence of a Designated Event may be converted only if such notice of
exercise is withdrawn by a written notice of withdrawal delivered by the holder
to the Company prior to the close of business on the Business Day preceding the
date fixed for repurchase in accordance with the terms of Section 16.2(b). A
holder of Notes is not entitled to any rights of a holder of Common Stock until
such holder has converted his Notes to Common Stock, and only to the extent such
Notes are deemed to have been converted to Common Stock under this Article XV.
Section 15.2 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends. In order to exercise the
conversion privilege with respect to any Note, the holder of any such Note to be
converted in whole or in part shall surrender such Note, duly endorsed, at an
office or agency maintained by the Company pursuant to Section 5.2, accompanied
by the funds, if any, required by the last paragraph of this Section 15.2, and
shall give written notice of conversion in the form provided on the Notes (or
such other notice which is acceptable to the Company) to such office or agency
that the holder elects to convert such Note or such portion thereof specified in
said notice. Such notice shall also state the name or names (with address) in
which the certificate or certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued, and shall be accompanied by
transfer taxes, if required pursuant to Section 15.7. Each such Note surrendered
for conversion shall, unless the shares issuable on conversion are to be issued
in the same name as the registration of such Note, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the holder or his duly authorized attorney.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, the Company shall issue and shall deliver to such
holder at the office or agency maintained by the Company for such purpose
pursuant to Section 5.2, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Note or portion
thereof in accordance with the provisions of this Article and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 15.3 (which payment, if any, shall
be paid no later than five Business Days after satisfaction of the requirements
for conversion set forth above). In case any Note of a denomination greater than
$1,000 shall be surrendered for partial conversion, and subject to Section 2.3,
the Company shall execute and the Trustee shall authenticate and deliver to the
holder of the Note so surrendered, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.
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Each conversion shall be deemed to have been effected as to any such Note
(or portion thereof) on the date on which the requirements set forth above in
this Section 15.2 have been satisfied as to such Note (or portion thereof), and
the person in whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; provided,
however, that any such surrender on any date when the stock transfer books of
the Company shall be closed shall constitute the person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date to
the close of business on the Business Day next preceding such interest payment
date shall (unless such Note or portion thereof being converted shall have been
called for redemption during the period from the close of business on the record
date for any interest payment date to the close of business on the Business Day
next preceding such interest payment date) be accompanied by payment, in funds
acceptable to the Company, of an amount equal to the interest otherwise payable
on such interest payment date on the principal amount being converted; provided,
however, that no such payment need be made if there shall exist at the time of
conversion a default in the payment of interest on the Notes; provided further
that no such payment shall be required with respect to interest payable on
_________, 2000. An amount equal to such payment shall be paid by the Company on
such interest payment date to the holder of such Note at the close of business
on such record date; provided, however, that if the Company shall default in the
payment of interest on such interest payment date, such amount shall be paid to
the person who made such required payment. Except as provided above in this
Section 15.2, no adjustment shall be made for interest accrued on any Note
converted or for dividends on any shares issued upon the conversion of such Note
as provided in this Article.
Section 15.3 Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares which shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered for conversion. If any fractional share of
stock otherwise would be issuable upon the conversion of any Note or Notes, the
Company shall make an adjustment therefor in cash at the Current Market Price on
the last Business Day prior to the date of conversion.
Section 15.4 Conversion Price. The conversion price shall be as specified
in the form of Note (herein called the "Conversion Price") attached as Exhibit A
hereto, subject to adjustment as provided in this Article XV.
Section 15.5 Adjustment of Conversion Price. The Conversion Price shall be
adjusted from time to time by the Company as follows:
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(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock, the Conversion Price in effect at the opening of business on
the date following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be reduced
by multiplying such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the Record Date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on the day
following the Record Date. If any dividend or distribution of the type
described in this Section 15.5(a) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which
would then be in effect if such dividend or distribution had not been
declared.
(b) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding shares of Common Stock shall
be combined into a smaller number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may be,
to become effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
(c) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within forty-five (45) days after the date fixed for the
determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined in Section 15.5(h)) on the
Record Date fixed for the determination of stockholders entitled to
receive such rights or warrants, the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the
Conversion Price in effect at the opening of business on the date after
such Record Date by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the
Record Date plus the number of shares which the aggregate offering price
of the total number of shares so offered would purchase at such Current
Market Price, and of which the denominator shall be the number of shares
of Common Stock outstanding on the close of business on the Record Date
plus the total number of additional shares of Common Stock so offered for
subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the Record
Date fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not
issued pursuant to such rights or warrants, upon the expiration or
termination of such rights or warrants the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on
the basis
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of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued,
the Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been
fixed. In determining whether any rights or warrants entitle the holders
to subscribe for or purchase shares of Common Stock at less than such
Current Market Price, and in determining the aggregate offering price of
such shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of
Directors.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions to
which Section 15.5(a) applies) or evidences of its indebtedness, cash or
other assets (including securities, but excluding any rights or warrants
referred to in Section 15.5(b) and dividends and distributions paid
exclusively in cash and excluding any capital stock, evidences of
indebtedness, cash or assets distributed upon a merger or consolidation to
which Section 15.6 applies) (the foregoing hereinafter in this Section
15.5(d) called the "Securities"), then, in each such case, the Conversion
Price shall be reduced so that the same shall be equal to the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the Record Date (as defined in Section
15.5(h)) with respect to such distribution by a fraction of which the
numerator shall be the Current Market Price (as defined in Section
15.5(h)) on such date less the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described
in a Board Resolution) on such date of the portion of the Securities so
distributed applicable to one share of Common Stock and the denominator
shall be such Current Market Price, such reduction to become effective
immediately prior to the opening of business on the day following the
Record Date; provided, however, that in the event the then fair market
value (as so determined) of the portion of the Securities so distributed
applicable to one share of Common Stock is equal to or greater than the
Current Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Noteholder shall
have the right to receive upon conversion of a Note (or any portion
thereof) the amount of Securities such holder would have received had such
holder converted such Note (or portion thereof) immediately prior to such
Record Date. In the event that such dividend or distribution is not so
paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors determines
the fair market value of any distribution for purposes of this Section
15.5(d) by reference to the actual or when issued trading market for any
securities comprising all or part of such distribution, it must in doing
so consider the prices in such market over the same period used in
computing the Current Market Price pursuant to Section 15.5(h) to the
extent possible.
In the event the Company amends the Rights Plan, the Rights Plan
shall provide that upon conversion of the Notes the holders will receive,
in addition to the Common Stock issuable upon such conversion, the Rights
issued under the Rights Plan (notwithstanding the
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occurrence of an event causing such rights to separate from the Common
Stock at or prior to the time of conversion). In the event the Company
implements a replacement or successor stockholder rights plan, such rights
plan shall provide that upon conversion of the Notes the holders will
receive, in addition to the Common Stock issuable upon such conversion,
the rights issued under such rights plan (notwithstanding the occurrence
of an event causing such rights to separate from the Common Stock at or
prior to the time of conversion).
Rights or warrants distributed by the Company to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock; (ii) are not exercisable;
and (iii) are also issued in respect of future issuances of Common Stock,
shall be deemed not to have been distributed for purposes of this Section
15.5(d) (and no adjustment to the Conversion Price under this Section
15.5(d) will be required) until the occurrence of the earliest Trigger
Event. If such right or warrant is subject to subsequent events, upon the
occurrence of which such right or warrant shall become exercisable to
purchase different securities, evidences of indebtedness or other assets
or entitle the holder to purchase a different number or amount of the
foregoing or to purchase any of the foregoing at a different purchase
price, then the occurrence of each such event shall be deemed to be the
date of issuance and Record Date with respect to a new right or warrant
(and a termination or expiration of the existing right or warrant without
exercise by the holder thereof to the extent not exercised). In addition,
in the event of any distribution (or deemed distribution) of rights or
warrants, or any Trigger Event or other event (of the type described in
the preceding sentence) with respect thereto, that resulted in an
adjustment to the Conversion Price under this Section 15.5(d), (1) in the
case of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Price
shall be readjusted upon such final redemption or repurchase to give
effect to such distribution or Trigger Event, as the case may be, as
though it were a cash distribution (but not a distribution paid
exclusively in cash), equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made
to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants all of which
shall have expired or been terminated without exercise, the Conversion
Price shall be readjusted as if such rights and warrants had never been
issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b),
any dividend or distribution to which this Section 15.5(d) is applicable
that also includes shares of Common Stock or also includes rights or
warrants to subscribe for or purchase shares of Common Stock to which
Section 15.5(b) applies (or also includes both), shall be deemed to be (1)
a dividend or distribution of the evidences of indebtedness, assets,
shares of capital stock, rights or warrants other than such shares of
Common Stock or rights or warrants to which Section 15.5(b) applies (and
any Conversion Price reduction required by this Section 15.5(d) with
respect to such dividend or distribution shall then be made) immediately
followed by (2)
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a dividend or distribution of such shares of Common Stock or such rights
or warrants (and any further Conversion Price reduction required by
Sections 15.5(a) and (b) with respect to such dividend or distribution
shall then be made, except (A) the Record Date of such dividend or
distribution shall be substituted as "the date fixed for the determination
of stockholders entitled to receive such dividend or other distribution",
"Record Date fixed for such determination" and "Record Date" within the
meaning of Section 15.5(a) and as "the date fixed for the determination of
stockholders entitled to receive such rights or warrants", "the Record
Date fixed for the determination of the stockholders entitled to receive
such rights or warrants" and "such Record Date" within the meaning of
Section 15.5(b) and (B) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the Record Date fixed for such determination" within the
meaning of Section 15.5(a)).
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash
that is distributed upon a merger or consolidation to which Section 15.6
applies or as part of a distribution referred to in Section 15.5(d)), in
an aggregate amount that, combined together with (1) the aggregate amount
of any other such distributions to all holders of its Common Stock made
exclusively in cash within the twelve (12) months preceding the date of
payment of such distribution, and in respect of which no adjustment
pursuant to this Section 15.5(e) has been made, and (2) the aggregate of
any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a
Board Resolution) of consideration payable in respect of any tender offer
by the Company or any Subsidiary for all or any portion of the Common
Stock concluded within the twelve (12) months preceding the date of
payment of such distribution, and in respect of which no adjustment
pursuant to Section 15.5(f) has been made, exceeds 10% of the product of
the Current Market Price (as defined in Section 15.5(h)) on the Record
Date with respect to such distribution times the number of shares of
Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date, the Conversion Price
shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close
of business on such Record Date by a fraction (i) the numerator of which
shall be equal to the Current Market Price on the Record Date less an
amount equal to the quotient of (x) the excess of such combined amount
over such 10% and (y) the number of shares of Common Stock outstanding on
the Record Date and (ii) the denominator of which shall be equal to the
Current Market Price on such date; provided, however, that in the event
the portion of the cash so distributed applicable to one share of Common
Stock is equal to or greater than the Current Market Price of the Common
Stock on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Noteholder shall have the right to
receive upon conversion of a Note (or any portion thereof) the amount of
cash such holder would have received had such holder converted such Note
(or portion thereof) immediately prior to such Record Date. In the event
that such dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price which would then
be in effect if such dividend or distribution had not been declared. Any
cash distribution to all holders of Common Stock as to which the Company
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makes the election permitted by Section 15.5(n) and as to which the
Company has complied with the requirements of such Section shall be
treated as not having been made for all purposes of this Section 15.5(e).
(f) In case a tender offer made by the Company or any Subsidiary
for all or any portion of the Common Stock shall expire and such tender
offer (as amended upon the expiration thereof) shall require the payment
to stockholders (based on the acceptance (up to any maximum specified in
the terms of the tender offer) of Purchased Shares (as defined below)) of
an aggregate consideration having a fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) that combined together with (1) the
aggregate of the cash plus the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described
in a Board Resolution), as of the expiration of such tender offer, of
consideration payable in respect of any other tender offers, by the
Company or any Subsidiary for all or any portion of the Common Stock
expiring within the twelve (12) months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to this
Section 15.5(f) has been made and (2) the aggregate amount of any
distributions to all holders of the Company's Common Stock made
exclusively in cash within twelve (12) months preceding the expiration of
such tender offer and in respect of which no adjustment pursuant to
Section 15.5(e) has been made, exceeds 10% of the product of the Current
Market Price (as defined in Section 15.5(h)) as of the last time (the
"Expiration Time") tenders could have been made pursuant to such tender
offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time, then,
and in each such case, immediately prior to the opening of business on the
day after the date of the Expiration Time, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the close of business
on the date of the Expiration Time by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time multiplied by the Current Market
Price of the Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of all shares validly tendered
and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and the
Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction (if any) to become
effective immediately prior to the opening of business on the day
following the Expiration Time. In the event that the Company or any
Subsidiary is obligated to purchase shares pursuant to any such tender
offer, but the Company or such Subsidiary is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such tender offer had
not been made. If the application of this Section 15.5(f) to any tender
offer would result in an increase in the Conversion Price, no adjustment
shall be made for such
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tender offer under this Section 15.5(f). Any cash distribution to all
holders of Common Stock as to which the Company has made the election
permitted by Section 15.5(n) and as to which the Company has complied with
the requirements of such Section shall be treated as not having been made
for all purposes of this Section 15.5(f).
(g) In case of a tender or exchange offer made by a person other
than the Company or any Subsidiary for an amount which increases the
offeror's ownership of Common Stock to more than 25% of the Common Stock
outstanding and shall involve the payment by such person of consideration
per share of Common Stock having a fair market value (as determined by the
Board of Directors whose determination shall be conclusive and described
in a Board Resolution at the last time (the "Offer Expiration Time")
tenders or exchanges may be made pursuant to such tender or exchange offer
(as it shall have been amended)) that exceeds the Current Market Price of
the Common Stock on the Trading Day next succeeding the Offer Expiration
Time, and in which, as of the Offer Expiration Time the Board of Directors
is not recommending rejection of the offer, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the Offer Expiration
Time by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered or exchanged shares) at
the Offer Expiration Time multiplied by the Current Market Price of the
Common Stock on the Trading Day next succeeding the Offer Expiration Time
and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Offer Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the
"Purchased Common Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Common Shares) on the Offer
Expiration Time and the Current Market Price of the Common Stock on the
Trading Day next succeeding the Offer Expiration Time, such reduction to
become effective immediately prior to the opening of business on the day
following the Offer Expiration Time. In the event that such person is
obligated to purchase shares pursuant to any such tender or exchange
offer, but such person is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such tender or exchange offer had not been
made. If the application of this Section 15.5(g) to any tender or exchange
offer would result in an increase in the Conversion Price, no adjustment
shall be made for such tender or exchange offer under this Section
15.5(g). Notwithstanding the foregoing, the adjustment described in this
Section 15.5(g) shall not be made if, as of the Expiration Time, the
offering documents with respect to such offer disclose a plan or intention
to cause the Company to engage in any transaction described in Article
XII.
(h) For purposes of this Section 15.5, the following terms shall
have the meaning indicated:
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(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in
case no such sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in each case on
the Nasdaq National Market or New York Stock Exchange, as
applicable, or, if such security is not listed or admitted to
trading on such National Market or Exchange, on the principal
national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the closing bid and
asked prices of such security on the over-the-counter market on the
day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or,
if not so available, in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board
of Directors for that purpose, or a price determined in good faith
by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution.
(2) "Current Market Price" shall mean, except as provided in
the following sentence, the average of the daily Closing Prices per
share of Common Stock for the ten (10) consecutive Trading Days
immediately prior to the date in question; provided, however, that
(1) if the "ex" date (as hereinafter defined) for any event (other
than the issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs during such ten (10)
consecutive Trading Days, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event, (2) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires
an adjustment to the Conversion Price pursuant to Section 15.5(a),
(b), (c), (d), (e), (f) or (g) occurs on or after the "ex" date
for the issuance or distribution requiring such computation and
prior to the day in question, the Closing Price for each Trading Day
on and after the "ex" date for such other event shall be adjusted
by multiplying such Closing Price by the reciprocal of the fraction
by which the Conversion Price is so required to be adjusted as a
result of such other event, and (3) if the "ex" date for the
issuance or distribution requiring such computation is prior to the
day in question, after taking into account any adjustment required
pursuant to clause (1) or (2) of this proviso, the Closing Price for
each Trading Day on or after such "ex" date shall be adjusted by
adding thereto the amount of any cash and the fair market value (as
determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 15.5(d), (f) or
(g), whose determination shall be conclusive and described in a
Board Resolution) of the evidences of indebtedness, shares of
capital stock or assets being distributed applicable to one share of
Common Stock as of the close of business on the day before such
"ex" date. For purposes of any computation under Sections 15.5(f)
or (g), the Current Market Price of the Common Stock on any date
shall mean the
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average of the daily Closing Prices per share of Common Stock for
such day and the next two succeeding Trading Days; provided,
however, that if the "ex" date for any event (other than the
tender or exchange offer requiring such computation) that requires
an adjustment to the Conversion Price pursuant to Section 15.5(a),
(b), (c), (d), (e), (f) and (g) occurs on or after the Expiration
Time or Offer Expiration Time, as applicable, for the tender or
exchange offer requiring such computation and prior to the day in
question, the Closing Price for each Trading Day on and after the
"ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event. For purposes of this paragraph, the term "ex" date,
(1) when used with respect to any issuance or distribution, means
the first date on which the Common Stock trades regular way on the
relevant exchange or in the relevant market from which the Closing
Price was obtained without the right to receive such issuance or
distribution, (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which
the Common Stock trades regular way on such exchange or in such
market after the time at which such subdivision or combination
becomes effective, and (3) when used with respect to any tender or
exchange offer means the first date on which the Common Stock trades
regular way on such exchange or in such market after the Expiration
Time or Offer Expiration Time, as applicable, of such offer.
Notwithstanding the foregoing, whenever successive adjustments to
the Conversion Price are called for pursuant to this Section 15.5,
such adjustments shall be made to the Current Market Price as may be
necessary or appropriate to effectuate the intent of this Section
15.5 and to avoid unjust or inequitable results as determined in
good faith by the Board of Directors.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security)
is exchanged for or converted into any combination of cash,
securities or other property, the date fixed for determination of
stockholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security
is listed or admitted for trading on the New York Stock Exchange or
another national security exchange, a day on which the New York
Stock Exchange or such other national security exchange is open for
business or (y) if the applicable security is quoted on the Nasdaq
National Market, a day on which trades may be made thereon or (z) if
the applicable security is not so listed, admitted for trading or
quoted, any day other than
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a Saturday or Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive
order to close.
(i) The Company may make such reductions in the Conversion Price,
in addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f)
and (g), as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time
if the period is at least twenty (20) days, the reduction is irrevocable
during the period and the Board of Directors shall have made a
determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive and described in a Board
Resolution; provided that in no event may the Conversion Price be less
than the par value of the Common Stock as a result of any such reduction.
Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to the holder of each Note at his last
address appearing on the Note register provided for in Section 2.5 a
notice of the reduction at least fifteen (15) days prior to the date the
reduced Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of
this Section 15.5(j) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations
under this Article XV shall be made by the Company and shall be made to
the nearest cent or to the nearest one hundredth of a share, as the case
may be. No adjustment need be made for a change in the par value or no par
value of the Common Stock.
(k) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Trustee and any conversion agent
other than the Trustee an Officers' Certificate setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date
on which each adjustment becomes effective and shall mail such notice of
such adjustment of the Conversion Price to the holder of each Note at his
last address appearing on the Note register provided for in Section 2.5,
within twenty (20) days of the effective date of such adjustment. Failure
to deliver such notice shall not effect the legality or validity of any
such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a Record Date for an
event, the Company may defer until the occurrence of such event (i)
issuing to the holder of any Note converted after such Record Date and
before the occurrence of such event the additional shares of Common Stock
issuable
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upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such holder any amount
in cash in lieu of any fractional shares pursuant to Section 15.3.
(m) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock.
The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.
(n) In lieu of making any adjustment to the Conversion Price
pursuant to Section 15.5(e), the Company may elect to reserve an amount of
cash for distribution to the holders of the Notes upon the conversion of
the Notes so that any such holder converting Notes will receive upon such
conversion, in addition to the shares of Common Stock and other items to
which such holder is entitled, the full amount of cash which such holder
would have received if such holder had, immediately prior to the Record
Date for such distribution of cash, converted its Notes into Common Stock,
together with any interest accrued with respect to such amount, in
accordance with this Section 15.5(n). The Company may make such election
by providing an Officers' Certificate to the Trustee to such effect on or
prior to the payment date for any such distribution and depositing with
the Trustee on or prior to such date an amount of cash equal to the
aggregate amount the holders of the Notes would have received if such
holders had, immediately prior to the Record Date for such distribution,
converted all of the Notes into Common Stock. Any such funds so deposited
by the Company with the Trustee shall be held in a segregated account and
invested by the Trustee in a money market fund limited to United States
government obligations, or repurchase agreements backed by such
obligations as shall be specifically directed by the Company in writing,
and the Trustee shall not be liable for any losses incurred from any such
investment. Upon conversion of Notes by a holder, the holder will be
entitled to receive, in addition to the Common Stock issuable upon
conversion, an amount of cash from such funds equal to the amount such
holder would have received if such holder had, immediately prior to the
Record Date for such distribution converted its Note into Common Stock,
along with such holder's pro rata share of any accrued interest earned as
a consequence of the investment in such funds and the Trustee may
liquidate any such investment then held by it as it may determine to make
such payments. Promptly after making an election pursuant to this Section
15.5(n), the Company shall give or shall cause to be given notice to all
Noteholders of such election, which notice shall state the amount of cash
per $1,000 principal amount of Notes such holders shall be entitled to
receive (excluding interest) upon conversion of the Notes as a consequence
of the Company having made such election.
Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale. If
any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
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combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company to
any other corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, then the Company or
the successor or purchasing corporation, as the case may be, shall execute with
the Trustee a supplemental indenture (which shall comply with the Trust
Indenture Act as in force at the date of execution of such supplemental
indenture if such supplemental indenture is then required to so comply)
providing that such Note shall be convertible into the kind and amount of shares
of stock and other securities or property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance by a holder of a number of shares of Common Stock issuable upon
conversion of such Notes (assuming, for such purposes, a sufficient number of
authorized shares of Common Stock available to convert all such Notes)
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance assuming such holder of Common Stock did not
exercise his rights of election, if any, as to the kind or amount of securities,
cash or other property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance is not the same for each share of Common
Stock in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 15.6 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance for each non-electing share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. If, in the case of any such
reclassification, change, consolidation, merger, combination, sale or
conveyance, the stock or other securities and assets receivable thereupon by a
holder of shares of Common Stock includes shares of stock or other securities
and assets of a corporation other than the successor or purchasing corporation,
as the case may be, in such reclassification, change, consolidation, merger,
combination, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the holders of the Notes as the Board of Directors
shall reasonably consider necessary by reason of the foregoing, including to the
extent practicable the provisions providing for the repurchase rights set forth
in Article XVI herein.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The Trustee, subject to the provisions of Sections 8.1 and 8.2, shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Section 15.6.
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The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
Section 15.7 Taxes on Shares Issued. The issue of stock certificates on
conversions of Notes shall be made without charge to the converting Noteholder
for any tax in respect of the issue thereof. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of stock in any name other than that of the holder of
any Note converted, and the Company shall not be required to issue or deliver
any such stock certificate unless and until the person or persons requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
Section 15.8 Reservation of Shares; Shares to Be Fully Paid; Listing of
Common Stock. The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock issued upon
conversion of Notes will be fully paid and non-assessable by the Company and
free from all taxes, liens and charges with respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be provided
for the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that if at any time the Common Stock shall
be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Notes.
Section 15.9 Responsibility of Trustee. The Company is solely responsible
for performing the duties and responsibilities contained in this Article XV,
except for the specific obligations assigned to the Trustee in Sections 15.2,
15.5(n) and 15.6, respectively, and except for the specific duties
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assigned to any conversion agent. The Trustee and any other conversion agent
shall not at any time be under any duty or responsibility to any holder of Notes
to determine whether any facts exist which may require any adjustment of the
Conversion Price, or with respect to the nature or extent or calculation of any
such adjustment when made, or with respect to the method employed, or herein or
in any supplemental indenture provided to be employed, in making the same. The
Trustee and any other conversion agent shall not be accountable with respect to
the validity or value (or the kind or amount) of any shares of Common Stock, or
of any securities or property, which may at any time be issued or delivered upon
the conversion of any Note; and the Trustee and any other conversion agent make
no representations with respect thereto. Neither the Trustee nor any conversion
agent shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
Section 15.10 Notice to Holders Prior to Certain Actions. In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (that would require an adjustment in the
Conversion Price pursuant to Section 15.5); or
(b) the Company shall authorize the granting to all or
substantially all of the holders of its Common Stock of rights or warrants
to subscribe for or purchase any share of any class or any other rights or
warrants; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common Stock,
or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the
Company is required, or of the sale or transfer of all or substantially
all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register, provided for in
Section 2.5 of this Indenture, as promptly as
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possible but in any event at least fifteen (15) days prior to the applicable
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, authorization of
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
ARTICLE XVI
REPURCHASE UPON A DESIGNATED EVENT
Section 16.1 Repurchase Right. If, at any time prior to _________, 2004
there shall occur a Designated Event, then each Noteholder shall have the right,
at such holder's option, to require the Company to repurchase all of such
holder's Notes, or any portion thereof (in principal amounts of $1,000 or
integral multiples thereof), on the repurchase date (the "repurchase date") that
is forty (40) calendar days after the date of the Company Notice (as defined in
Section 16.2 below) of such Designated Event (or, if such 40th day is not a
Business Day, the next succeeding Business Day). Such repayment shall be made in
cash at a price equal to 100% of the principal amount of Notes such holder
elects to require the Company to repurchase together with accrued interest
thereon to, but excluding, the repurchase date (the "Repurchase Price");
provided that, if such repurchase date is an interest payment date, the
semi-annual payment of interest becoming due on such date shall be payable to
the holders of such Notes registered as such on the relevant record date subject
to the terms and provisions of Section 2.3 hereof. No Notes may be repurchased
at the option of holders upon a Designated Event if there has occurred and is
continuing an Event of Default, other than a default in the payment of the
Repurchase Price with respect to such Notes on the repurchase date.
Section 16.2 Notices; Method of Exercising Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for redemption all
of the outstanding Notes, on or before the fifteenth (15th) calendar day after
the occurrence of a Designated Event, the Company or, at the request of the
Company, the Trustee, shall mail to all holders a notice (the "Company Notice")
of the occurrence of the Designated Event and of the repurchase right set forth
herein arising as a result thereof. The Company shall also deliver a copy of
such Company Notice of a repurchase right to the Trustee and cause a copy of
such Company Notice of a repurchase right, or a summary of the information
contained therein, to be published in a newspaper of general circulation in The
City of New York. The Company Notice shall contain the following information:
(1) the repurchase date,
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(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a holder must follow to
exercise a repurchase right and the procedure which a holder must follow
to withdraw such repurchase right once exercised (including the last date
for such withdrawal), and
(5) the Conversion Price then in effect, a statement that a Note
for which the holder has delivered a notice of exercise of repurchase
right may be converted only if such notice is withdrawn by a written
notice of withdrawal delivered by such holder to the Company (or agent
designated by the Company for such purpose) prior to the close of business
on the Business Day prior to the repurchase date, and the place or places
where Notes may be surrendered for conversion.
No failure of the Company to give the foregoing notices or defect therein
shall limit any holder's right to exercise a repurchase right or affect the
validity of the proceedings for the repurchase of Notes.
If any of the foregoing provisions are inconsistent with applicable law,
such law shall govern.
(b) To exercise a repurchase right, a holder shall deliver to the Trustee
on or before the thirty-fifth (35th) day after the date the Company Notice is
first mailed to Noteholders (i) written notice to the Company (or agent
designated by the Company for such purpose) of the holder's exercise of such
right, which notice shall set forth the name of the holder, the principal amount
of the Notes to be repurchased and a statement that an election to exercise the
repurchase right is being made thereby, and (ii) the Notes with respect to which
the repurchase right is being exercised, duly endorsed for transfer to the
Company.
A holder's notice of exercise of a repurchase right may be withdrawn by
means of a written notice of withdrawal delivered to the Company at any time
prior to the close of business on the Business Day prior to repurchase date
specifying:
(1) the serial number of the Note in respect of which such notice
of withdrawal is being submitted,
(2) the principal amount of the Note with respect to which such
notice of withdrawal is being submitted, and
(3) the principal amount, if any, of such Note which remains
subject to the original written notice of exercise of the repurchase right
and which has been delivered for repurchase by the Company.
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(c) If the Company fails to repurchase on the repurchase date any Notes
(or portions thereof) as to which the repurchase right has been properly
exercised, then the principal of such Notes shall, until paid, bear interest to
the extent permitted by applicable law from the repurchase date at the rate
borne by the Notes and each such Note shall be convertible into Common Stock in
accordance with this Indenture until the principal of such Note shall have been
paid or duly provided for.
(d) Any Note which is to be repurchased only in part shall be
surrendered to the Trustee (with due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and deliver to the holder of
such Note without service charge, a new Note or Notes, containing identical
terms and conditions, of any authorized denomination as requested by such holder
in aggregate principal amount equal to and in exchange for the unrepurchased
portion of the principal of the Note so surrendered.
(e) On or prior to the repurchase date, the Company shall deposit with
the Trustee or with a paying agent (or, if the Company is acting as its own
paying agent, segregate and hold in trust as provided in Section 5.4) an amount
of money sufficient to pay the Repurchase Price of the Notes that are to be
repaid on the repurchase date, provided that if such payment is made on the
repurchase date it must be received by the Trustee or paying agent, as the case
may be, by 10:00 a.m., New York City time, on such date.
(f) The Company will comply with the provisions of Rule 13e-4, Rule
14e-1 and any other tender offer rules under the Exchange Act to the extent then
applicable, and will otherwise comply with all federal and state securities laws
in connection with any offer by the Company to repurchase Notes pursuant to this
Article XVI.
Section 16.3 Certain Definitions. For purposes of this Article XVI:
(a) the term "beneficial owner" shall be determined in accordance with
Rule 13d-3 and 13d-5, as in effect on the date of the original execution of this
Indenture, promulgated by the Commission pursuant to the Exchange Act;
(b) the term "person" or "group" shall include any syndicate or group
which would be deemed to be a "person" under Section 13(d)(3) and 14(d) of the
Securities Exchange Act of 1934, as amended, as in effect on the date of the
original execution of this Indenture;
(c) the term "Continuing Director" means at any date a member of the
Company's Board of Directors (i) who was a member of such board on ________,
1997 or (ii) who was nominated or elected by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the Company's Board of Directors was recommended
or endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or such lesser number
comprising a majority of a nominating committee if authority for such
nominations or elections has been delegated to a nominating committee whose
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authority and composition has been approved by at least a majority of the
directors who were Continuing Directors at the time such committee was formed.
(Under this definition, if the current Board of Directors of the Company were to
approve a new director or directors and then resign, no Change in Control would
occur even though the current Board of Directors would thereafter cease to be in
office);
(d) the term "Designated Event" means a Change in Control or a
Termination of Trading;
(e) the term "Change in Control" means an event or series of events
after the original issuance of the Notes as a result of which (i) any person or
group is or becomes the beneficial owner of shares representing more than 50% of
the combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company (the "Voting Stock"), (ii)
the stockholders of the Company approve any plan or proposal for the
liquidation, dissolution or winding up of the Company, (iii) the Company
consolidates with or merges into any other corporation, or conveys, transfers or
leases all or substantially all of its assets to any person, or any other
corporation merges into the Company, and in the case of any such transaction,
the outstanding common stock of the Company is changed or exchanged into or for
other assets or securities as a result, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least 51% of the combined voting power of the
outstanding voting securities of the corporation resulting from such transaction
in substantially the same proportion as their ownership of the Voting Stock
immediately before such transaction, or (iv) any time Continuing Directors do
not constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided that a Change in
Control shall not be deemed to have occurred if either (x) the Closing Price of
the Common Stock for any five (5) Trading Days during the ten (10) Trading Days
immediately preceding the Change in Control is at least equal to 105% of the
Conversion Price in effect on the date on which the Change in Control occurs or
(y) in the case of a merger or consolidation, at least 95% of the consideration
(excluding cash payments for fractional shares and for dissenters' rights) in
such merger or consolidation or otherwise constituting the Change in Control
consists of common stock traded on a United States national securities exchange
or quoted on the Nasdaq National Market (or which will be so traded or quoted
when issued or exchanged in connection with such Change in Control) and as a
result of such transaction or transactions such Notes become convertible solely
into such common stock; and
(f) a "Termination of Trading" shall have occurred if the Common Stock
of the Company (or other common stock into which the Notes are then convertible)
is neither listed for trading on a United States national securities exchange
nor approved for trading on an established automated over-the-counter trading
market in the United States.
Section 16.4 Consolidation, Merger, etc. In the case of any
reclassification, change, consolidation, merger, combination, sale or conveyance
to which Section 15.6 applies, in which the Common Stock of the Company is
changed or exchanged as a result into the right to receive shares of stock and
other securities or property or assets (including cash) which includes shares of
Common Stock of the Company or common stock of another person that are, or upon
issuance will be, traded on a United States national securities exchange or
approved for trading on an established automated
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over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such shares of stock and other securities,
property and assets (including cash) (as determined by the Company, which
determination shall be conclusive and binding), then the person formed by such
consolidation or resulting from such merger or combination or which acquires the
properties or assets (including cash) of the Company, as the case may be, shall
execute and deliver to the Trustee a supplemental indenture (which shall comply
with the Trust Indenture Act as in force at the date of execution of such
supplemental indenture) modifying the provisions of this Indenture relating to
the right of holders of the Notes to cause the Company to repurchase the Notes
following a Change in Control, including without limitation the applicable
provisions of this Article XVI and the definitions of the Common Stock,
Designated Event, Continuing Directors, as appropriate, and such other related
definitions set forth herein as determined in good faith by the Company (which
determination shall be conclusive and binding), to make such provisions apply to
the common stock and the issuer thereof if different from the Company and Common
Stock of the Company (in lieu of the Company and the Common Stock of the
Company).
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1 Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements of the Company in this
Indenture contained shall bind its successors and assigns whether so expressed
or not.
Section 17.2 Official Acts by Successor Corporation. Any act or proceeding
by any provision of this Indenture authorized or required to be done or
performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 17.3 Addresses for Notices, Etc. Any notice or demand which by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes if given or served by being
sent by overnight courier, or deposited postage prepaid by registered or
certified mail in a post office letter box addressed (until another address is
filed by the Company with the Trustee) to Hadco Corporation, 12A Manor Parkway,
Salem, New Hampshire 03079, Attention: Chief Financial Officer. Any notice,
direction, request or demand hereunder to or upon the Trustee shall be deemed to
have been sufficiently given or made, for all purposes, if given or served by
being sent by overnight courier, or deposited postage prepaid by registered or
certified mail in a post office letter box addressed to the Corporate Trust
Office of the Trustee, which office is, at the date as of which this Indenture
is dated, located at 2 International Place, 4th Floor, Boston, Massachusetts
02110, Attention: Corporate Trust Department (Hadco Corporation __% Convertible
Subordinated Notes due 2004).
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The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to him
by first class mail, postage prepaid, at his address as it appears on the Note
register and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Noteholder or any defect in
it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 17.4 Governing Law. This Indenture and each Note shall be deemed
to be a contract made under the laws of New York, and for all purposes shall be
construed in accordance with the laws of New York.
Section 17.5 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel, stating
that, in the opinion of such counsel, all such conditions precedent have been
complied with.
Each certificate or opinion provided for in this Indenture and delivered
to the Trustee with respect to compliance with a condition or covenant provided
for in this Indenture shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 17.6 Legal Holidays. In any case where the date of maturity of
interest on or principal of the Notes or the date fixed for redemption or
repurchase of any Note will not be a Business Day, then payment of such interest
on or principal of the Notes need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption or repurchase, and no
interest shall accrue for the period from and after such date.
Section 17.7 No Security Interest Created. Nothing in this Indenture or in
the Notes, expressed or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect, in any jurisdiction.
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Section 17.8 Trust Indenture Act. If and to the extent that any provision
of this Indenture limits, qualifies or conflicts with another provision included
in this Indenture which is required to be included in this Indenture by any of
Section 310 to 317, inclusive, of the Trust Indenture Act, such required
provision shall control. If any provision of this Indenture modifies or excludes
any provision of the Trust Indenture Act that may be so modified or excluded,
the latter provision shall be deemed to apply to this Indenture as so modified
or excluded, as the case may be.
Section 17.9 Benefits of Indenture. Nothing in this Indenture or in the
Notes, expressed or implied, shall give to any person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar, any
conversion agent and their successors hereunder, the holders of Notes and to the
extent expressly provided herein the holders of Senior Indebtedness, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
Section 17.10 Table of Contents, Headings, Etc. The table of contents and
the titles and headings of the articles and sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 17.11 Authenticating Agent. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7, 3.3, 5.2 and 16.2 as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Notes for the Trustee's certificate
of authentication. Such authenticating agent shall at all times be a person
eligible to serve as trustee hereunder pursuant to Section 8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written notice
of resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor authenticating agent (which may be the
Trustee), shall give written notice of such
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appointment to the Company and shall mail notice of such appointment to all
holders of Notes as the names and addresses of such holders appear on the Note
register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11 shall
be applicable to any authenticating agent.
Section 17.12 Execution in Counterparts. This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
State Street Bank and Trust Company hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed all as of the date first written above.
HADCO CORPORATION
By:______________________________________
Title:___________________________________
STATE STREET BANK AND TRUST COMPANY
as Trustee
By:______________________________________
Title:___________________________________
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EXHIBIT A - FORM OF NOTE
[FORM OF FACE OF NOTE]
No.___________ $______________
HADCO CORPORATION
__% Convertible Subordinated Note Due 2004
Hadco Corporation, a corporation duly organized and validly existing
under the laws of the State of Massachusetts (herein called the "Company", which
term includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to
_____________________, or registered assigns, the principal sum of
_____________________ Dollars on _________________, 2004, and to pay interest on
said principal sum semiannually on ___________ and _________ of each year,
commencing _________, 1997, at the rate per annum specified in the title of this
Note, to holders of record at the close of business on the preceding
_______________ and _____________, respectively (whether or not a Business Day),
accrued from the _________ or _________, as the case may be, next preceding the
date of this Note to which interest has been paid or duly provided for, unless
the date of this Note is a date to which interest has been paid or duly provided
for, in which case interest shall accrue from the date of this Note, or unless
no interest has been paid or duly provided for on this Note, in which case
interest shall accrue from __________, 1997, until payment of said principal sum
has been made or duly provided for. Notwithstanding the foregoing, if the date
hereof is after any ________ or ________, as the case may be, and before the
following ________ or ________, this Note shall bear interest from such ________
or ________, respectively; provided, however, that if the Company shall default
in the payment of interest due on such ________ or ________, then this Note
shall bear interest from the next preceding ________ or ________ to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for on this Note, from ________, 1997. Except as provided in the
Indenture with respect to Notes redeemed or repurchased between a ________ and
________ or between a ________ and ________, the interest so payable on any
________ or ________ will be paid to the person in whose name this Note (or one
or more Predecessor Notes) is registered at the close of business on the record
date, which shall be the ________ or ________ (whether or not a Business Day)
next preceding such ________ or ________, respectively; provided that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. Payment of the principal of and interest accrued on this Note
shall be made at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, The City of New York, or, at the option of the
holder of this Note, at the Corporate Trust Office of the Trustee, in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts; provided, however,
that at the option of the Company, payment of interest may be made by check
mailed to the registered address of the person entitled thereto; provided that
the holder of Notes with an aggregate principal amount in excess of
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$2,000,000 shall, at the election of such holder, be paid by wire transfer in
immediately available funds.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of, premium, if any, and interest on this Note to the prior
payment in full of all Senior Indebtedness as defined in the Indenture and
provisions giving the holder of this Note the right to convert this Note into
Common Stock of the Company on the terms and subject to the limitations referred
to on the reverse hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of said state.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
HADCO CORPORATION
Dated: By:
--------------------- ---------------------------------
Title
Attest:
-------------------------------------
Secretary
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[FORM OF CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
----------------------------
Authorized Signatory
By:
----------------------------
As Authentication Agent (if different from Trustee)
[FORM OF REVERSE OF NOTE]
HADCO CORPORATION
% Convertible Subordinated Note Due 2004
This Note is one of a duly authorized issue of Notes of the Company,
designated as its % Convertible Subordinated Notes due 2004 (herein called
the "Notes"), limited to the aggregate principal amount of $115,000,000 all
issued or to be issued under and pursuant to an Indenture dated as of
______________, 1997 (herein called the "Indenture"), between the Company and
State Street Bank and Trust Company (herein called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest on all Notes may be declared, and upon said declaration shall become,
due and payable in the manner, with the effect and subject to the conditions
provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority of the
aggregate principal amount of the Notes at the time outstanding, evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the holders of the Notes;
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provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable on redemption or repurchase thereof,
change or impair the obligation of the Company to repurchase any Note at the
option of the holder upon the happening of a Designated Event, as defined in the
Indenture, or impair or affect the right of any Noteholder to institute suit for
the payment thereof, or make the principal thereof or interest or premium, if
any, thereon payable in any coin or currency other than that provided in the
Notes, or change or impair the right to convert the Notes into Common Stock
subject to the terms set forth in the Indenture, including Section 15.6 thereof,
or modify the provisions of the Indenture with respect to the subordination of
the Notes in a manner adverse to the Noteholders, without the consent of the
holder of each Note so affected or (ii) reduce the aforesaid percentage of
Notes, the holders of which are required to consent to any such supplemental
indenture, without the consent of the holders of all Notes then outstanding. It
is also provided in the Indenture that the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of interest or
any premium on or the principal of any of the Notes, a default in the payment of
redemption price pursuant to Article III or repurchase price pursuant to Article
XVI or a failure by the Company to convert any Notes into Common Stock of the
Company. Any such consent or waiver by the holder of this Note (unless revoked
as provided in the Indenture) shall be conclusive and binding upon such holder
and upon all future holders and owners of this Note and any Notes which may be
issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney in fact for such purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without
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<PAGE> 85
payment of any service charge but with payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
The Notes will not be redeemable at the option of the Company prior to
__________, 2000. On or after such date and prior to maturity the Notes may be
redeemed at the option of the Company as a whole, or from time to time in part,
upon mailing a notice of such redemption not less than 20 nor more than 60 days
before the date fixed for redemption to the holders of Notes at their last
registered addresses, all as provided in and subject to the conditions set forth
in the Indenture, at the following redemption prices (expressed as percentages
of the principal amount), together in each case with accrued interest to, but
excluding, the date fixed for redemption.
If redeemed during the 12-month period beginning ______________, 2000
(beginning __________, 2000 and ending _________, 2001 in the case of the first
such period):
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2000.............................. %
2001..............................
2002..............................
2003..............................
</TABLE>
and 100% at __________ , 2004; provided that, if the date fixed for redemption
is a __________ or __________, then the interest payable on such date shall be
paid to the holder of record on the next preceding __________ or __________,
respectively.
The Notes are not subject to redemption through the operation of any
sinking fund.
Upon the occurrence of a Designated Event, as defined in the Indenture,
prior to __________, 2004, the Noteholder has the right, at such holder's
option, to require the Company to repurchase this Note or any portion of the
principal amount hereof that is an integral multiple of $1,000 on the 40th day
after notice of such Designated Event at a price equal to 100% of the principal
amount of the Notes repurchased, together in each case with accrued interest to,
but excluding, the date fixed for redemption; provided that if such repurchase
date is __________ or __________, then the interest payable on such date shall
be paid to the holder of record of the Note on the next preceding __________ or
__________, respectively. The Company shall mail to all holders of record of the
Notes a notice of the occurrence of a Designated Event and of the repurchase
right arising as a result thereof on or before 15 calendar days after the
occurrence of such Designated Event.
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the latest date of original issuance of
the Notes and prior to the close of business on __________, 2004, or, as to all
or any portion hereof called for redemption, prior to the close of business on
the Business Day next preceding the date fixed for redemption (unless the
Company shall
A-5
<PAGE> 86
default in payment due upon redemption), to convert the principal hereof or any
portion of such principal which is $1,000 or an integral multiple thereof, into
that number of fully paid and non-assessable shares of the Company's Common
Stock, as said shares shall be constituted at the date of conversion, obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the conversion price of $_______ as such conversion price is adjusted from
time to time as provided in the Indenture, upon surrender of this Note, together
with a conversion notice as provided in the Indenture and this Note, to the
Company at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, or at the option of such holder,
the Corporate Trust Office of the Trustee, and, unless the shares issuable on
conversion are to be issued in the same name as this Note, duly endorsed by, or
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the holder or by his duly authorized attorney. No adjustment in
respect of interest or dividends will be made upon any conversion; provided,
however, that if this Note shall be surrendered for conversion during the period
from the close of business on any record date for the payment of interest
through the close of business on the Business Day next preceding the following
interest payment date, this Note (unless it or the portion being converted shall
have been called for redemption on a date in such period) must be accompanied by
an amount, in funds acceptable to the Company, equal to the interest otherwise
payable on such interest payment date on the principal amount being converted;
provided, further, that no such payment will be required with respect to
interest payable on __________, 2000. No fractional shares of Common Stock will
be issued upon any conversion, but an adjustment in cash will be paid to the
holder, as provided in the Indenture, in respect of any fraction of a share
which would otherwise be issuable upon the surrender of any Note or Notes for
conversion.
Any Notes called for redemption, unless surrendered for conversion on
or before the close of business on or before the date fixed for redemption, may
be deemed to be purchased from the holder of such Notes at an amount equal to
the applicable redemption price, together with accrued interest to the date
fixed for redemption, by one or more investment bankers or other purchasers who
may agree with the Company to purchase such Notes from the holders thereof and
convert them into Common Stock of the Company and to make payment for such Notes
as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or at the option of the holder of this Note, at the Corporate Trust Office
of the Trustee, a new Note or Notes of authorized denominations for an equal
aggregate principal amount will be issued to the transferee in exchange thereof,
subject to the limitations provided in the Indenture, without charge except for
any tax or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment hereof, or on account hereof, for
the conversion hereof and for all other purposes, and neither the Company nor
the Trustee nor any other authenticating agent nor any paying agent nor any
other conversion agent nor any Note registrar shall
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<PAGE> 87
be affected by any notice to the contrary. All payments made to or upon the
order of such registered holder shall, to the extent of the sum or sums paid,
satisfy and discharge liability for monies payable on this Note.
No recourse for the payment of the principal of or premium, if any, or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, employee, agent, officer, director
or Subsidiary, as defined in the Indenture, as such, past, present or future, of
the Company or of any successor corporation, either directly or through the
Company or any successor corporation, whether by virtue of any constitution,
statute or rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.
Terms used in this Note and defined in the Indenture are used herein as
therein defined. In the case of any conflict between the provisions of this Note
and the Indenture, the provisions of the Indenture shall control.
A-7
<PAGE> 88
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
________ Custodian _________
TEN ENT - as tenants by the (Cust) (Minor)
entireties
under Uniform Gifts to Minors
Act _________________________________
JT TEN - as joint tenants with (State)
right of survivorship
and not as tenants in
common
Additional abbreviations may also be used
though not in the above list.
A-8
<PAGE> 89
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Hadco Corporation
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. Any amount required to be
paid to the undersigned on account of interest accompanies this Note.
Dated:_________________
--------------------------------
--------------------------------
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and
credit unions) with membership in an
approved signature guarantee medallion
program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Common
Stock are to be issued, or Notes are to be
delivered, other than to and in the name of
the registered holder.
- --------------------------------
Signature Guarantee
A-9
<PAGE> 90
Fill in for registration of shares if to be
issued, and Notes if to be delivered, other
than to and in the name of the registered
holder:
- -----------------------------------
(Name)
- -----------------------------------
(Street Address)
- -----------------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all): $_____,000
---------------------------------
Social Security or Other
Taxpayer Identification Number
A-10
<PAGE> 91
[FORM OF OPTION TO ELECT REPURCHASE
UPON A DESIGNATED EVENT]
To: Hadco Corporation
The undersigned registered owner of this Note hereby acknowledges
receipt of a notice from Hadco Corporation (the "Company") as to the occurrence
of a Designated Event with respect to the Company and requests and instructs the
Company to repay the entire principal amount of this Note, or the portion
thereof (which is $1,000 principal amount or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Note, together with accrued interest to, but excluding, such date, to the
registered holder hereof.
Dated:______________________
-----------------------------------
-----------------------------------
Signature(s)
-----------------------------------
Social Security or Other
Taxpayer Identification Number
Principal amount to be repaid
(if less than all): $_____,000
NOTICE: The above signatures of the
holder(s) hereof must correspond with the
name as written upon the face of the Note in
every particular without alteration or
enlargement or any change whatever.
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<PAGE> 92
[FORM OF ASSIGNMENT]
For value received __________________________ hereby sell(s), assign(s)
and transfer(s) unto ________________________________ (Please insert social
security or other identifying number of assignee) the within Note, and hereby
irrevocably constitutes and appoints
_________________________________________________________ attorney to transfer
the said Note on the books of the Company, with full power of substitution in
the premises.
Dated: __________________
- -------------------------------
- -------------------------------
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and
credit unions) with membership in an
approved signature guarantee medallion
program pursuant to Securities and Exchange
Commission Rule 17Ad-15
- ------------------------------
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect repurchase
upon a Designated Event or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
A-12
<PAGE> 1
EXHIBIT 10.3
HTI ENGINEERING (M) SDN. BHD.
25-3(TINGKAT2), JALAN 14/22, 46100 PETALING JAYA,
SELANGOR DARUL ESHAN, WEST MALAYSIA,
TEL: 03-7573210, 7573212
FAX: 03-7573626
Our Ref: HE/95/1218-shs
August 7, 1995
Zycon Corporation
445 El Camino Real
Santa Clara
California, 95050-4366
U.S.A.
Attention: Mr. Ron Donati
Dear Sir,
RE: AGREEMENT BETWEEN OWNER AND CONSTRUCTION MANAGER
ZYCON CORP. SDN BHD
HITI ENGINEERING (M) SDN BHD
-------------------------------------------------------
Enclosed is a copy of the Agreement which has been signed by the Construction
Manager, Mr. Felix Tee Yee Loh.
Please do not hesitate to contact us if you require further information.
Your Faithfully,
HITI ENGINEERING (M) SDN BHD
/s/
- ----------------------------
MR. NG BOON HOCK
Technical Director
<PAGE> 2
- 2 -
- --------------------------------------------------------------------------------
AGREEMENT
BETWEEN OWNER AND
CONSTRUCTION MANAGER
This Document has important legal and insurance consequences; consultation with
an attorney is encouraged with respect to its completion or modification.
- --------------------------------------------------------------------------------
AGREEMENT
Made this Third day of August in the year Nineteen Hundred and Ninety Five
(1995)
BETWEEN ZYCON CORPORATION SDN. BHD. the Owner, and HITI ENGINEERING (M) SDN.
BHD. the Construction Manager.
For services in connection with the following Project described on Exhibit A
hereto which is incorporated by reference.
The Owner and the Construction Manager agree as set forth below:
<PAGE> 3
- 3 -
TABLE OF CONTENTS
ARTICLE 1 The Construction Team and Extent of
Agreement...............................................4.
ARTICLE 2 Construction Manager's Services.........................4.
ARTICLE 3 Owner's Responsibilities...............................10.
ARTICLE 4 Trade Contracts........................................11.
ARTICLE 5 Schedule...............................................12.
ARTICLE 6 Guaranteed Maximum Price...............................12.
ARTICLE 7 Construction Manager's Fee............................13.
ARTICLE 8 Cost of the Project....................................13.
ARTICLE 9 Changes in the Project.................................15.
ARTICLE 10 Bonuses................................................18.
ARTICLE 11 Payments to the Construction Manager.. ................18.
ARTICLE 12 Insurance, Indemnity and Waiver of
Subrogation............................................20.
ARTICLE 13 Termination of the Agreement and Owner's
Right to Perform Construction Manager's
Obligations............................................23.
ARTICLE 14 Assignment and Governing Law...........................25.
ARTICLE 15 Miscellaneous Provisions...............................26.
ARTICLE 16 Arbitration............................................26.
<PAGE> 4
- 4 -
ARTICLE 1
---------
The Construction Team and Extent of Agreement
The CONSTRUCTION MANAGER accepts the relationship of trust and confidence
established between him and the Owner by this Agreement. He covenants with the
Owner to furnish his best skill and judgment and to cooperate with the Owner in
furthering the interests of the Owner. He agrees to furnish efficient business
administration and superintendence and to use his best efforts to complete the
Project in an expeditious and economical manner consistent with the interest of
the Owner.
1.1. THE CONSTRUCTION TEAM. The Construction Manager and the Owner
(through Owner's representative) called the "Construction Team" shall work from
the beginning of design through construction completion. The Construction
manager shall provide leadership to the Construction Team on all matters
relating to construction.
1.2. EXTENT OF AGREEMENT. This Agreement represents the entire
agreement between the Owner and the Construction Manager and supersedes all
prior negotiations, representations or agreements. When Drawings and
Specifications are completed, they shall be identified by amendment to this
Agreement. This Agreement shall not be superseded by any provisions of the
documents for construction and may be amended only by written instrument signed
by both the Owner and the Construction Manager.
1.3. DEFINITIONS. The Project is the total construction to be performed
under this Agreement, the exhibits hereto, and the Drawings and Specifications
and Time Schedule referenced below. The Work is that part of the construction
that the Construction Manager is to perform with his own forces or the part of
the construction that a particular Trade Contractor is to perform. The term day
shall mean calendar day unless specifically designated. "Hard Construction
Costs" shall mean the cost items specified in Article 8.2 below. "Soft
Construction Costs" shall mean all engineering costs associated with the Project
and the commissions and expenses involved in obtaining the Performance Bonds, as
defined below, and premiums for insurance required of Construction Manager under
Section 12.2 below.
ARTICLE 2
---------
Construction Manager's Services
The Construction Manager will perform the following services under this
Agreement in each of the two phases described below.
2.1. Design Phase.
2.1.1. CONSULTATION DURING PROJECT DEVELOPMENT. Schedule and
attend regular meetings with the Owner during the development of conceptual and
preliminary design to advise on site use and improvements, selection of
materials, building systems
<PAGE> 5
- 5 -
and equipment. Provide recommendations on construction feasibility, availability
of materials and labor, time requirements for installation and construction and
factors related to cost including costs of alternative designs or materials,
preliminary budgets and possible economies.
2.1.2. SCHEDULING. Develop with Owner a project Time Schedule
that coordinates and integrates the design efforts with construction schedule,
including realistic activity sequences and durations, allocation of labor and
materials, processing of shop drawings and samples, and delivery of products
requiring long lead-time procurement.
2.1.3. PROJECT CONSTRUCTION BUDGET. Prepare a Project Budget
within fourteen (14) days of execution of this agreement for Owner's approval,
which shall be consistent with the Construction Manager's May 18, 1995
quotation, as amended on May 30, 1995, on an overall basis, and update such
Budget periodically for the Owner's approval. Advise the Owner if it appears
that the Project Budget will not be met and make recommendations for corrective
action.
2.1.4. COORDINATION OF CONTRACT DOCUMENTS. Prepare with Owner
the Drawings and Specifications, recommending alternative solutions whenever
design details affect construction feasibility or schedules.
2.1.5. CONSTRUCTION PLANNING. Recommend for purchase and
expedite the procurement of long-lead items to ensure their delivery by the
required dates.
2.1.5.1. Make recommendations to the Owner regarding
the division of work in the Drawings and Specifications to facilitate the
bidding and awarding of Trade Contracts, allowing for phase construction taking
into consideration such factors as time performance, availability of labor,
overlapping trade jurisdictions and provisions for temporary facilities.
2.1.5.2. Review the Drawings and Specifications with
the Owner to eliminate areas of conflict and overlapping in the Work to be
performed by the various Trade Contracts and prepare pre-qualification criteria
for bidders.
2.1.5.3. Develop Trade Contractor interest in the
Project and as working Drawings and Specifications are completed, take
competitive bids of the Work from the various Trade Contractors. After analyzing
the bids and aware contract pursuant to Article 4 below.
2.2. Construction Phase
2.2.1. PROJECT CONTROL. Monitor the work of the Trade
Contractors and coordinate the Work with the activities and responsibilities of
the Owner and to complete the Project in accordance with the Owner's objectives
of cost, time and quality.
<PAGE> 6
- 6 -
2.2.1.1. Maintain a competent full-time staff at the
Project site to coordinate and provide general direction of the Work and
progress of the Trade Contractors on the Project.
Without limiting the above, Construction Manager agrees, except in the
event of death or disability:
a. Luke Lai Khin Lee and Chua Shen Huat shall be on the
construction site on all work days during the start up and
through the completion of the major civil and structural
phases;
b. Luke Lai Khin Lee shall be present at the construction site
through the balance of the project including, but not
limited to, the electrical phase;
c. Ng Boon Hock or Change Chin Sia shall be present at the
construction site on all work days during the installation
of the mechanical and electrical equipment;
d. Felix Tee shall supervise the Project as required but at a
minimum shall be on site at least every other week for
sufficient time to assure that prudent decisions have been
made concerning the construction and that materials and
equipment have been ordered in sufficient time to assure
that the Project is completed as contemplated by this
agreement.
In the event of death or disability of any of the aforementioned
individuals, Construction Manager shall replace the individual at Construction
Manager's expense with another qualified individual acceptable to Owner.
2.2.1.2. Establish on-site organization and lines of
authority in order to carry out the overall plans of the Construction Team.
2.2.1.3. Establish procedures for coordination with
the Owner and Trade Contractors with respect to all aspects of the Project and
implement such procedures.
Without limiting the above, Construction Manager shall hold
weekly progress meetings concerning the status of the construction project, a
comparison with the estimated construction Time Schedule and Construction
Budget. Construction Manager shall prepare accurate minutes of such meetings
which shall be promptly forwarded to Ronald Donati, Robert Snyder, Larry Jo and
Richard Goh.
<PAGE> 7
- 7 -
2.2.1.4. Schedule and conduct progress meetings at
which Trade Contractors, owner and Construction Manager can discuss jointly such
matters as procedures, progress, problems and scheduling.
2.2.1.5. Provide regular monitoring of the schedule
as construction progresses. Identify potential variances between scheduled and
probable completion dates. Review schedule for Work not started or incomplete
and recommend to the Owner and Trade Contractors adjustments in the schedule to
meet the probable completion date. Provide summary reports of each monitoring
and document all changes in schedule.
2.2.1.6. Determine the adequacy of the Trade
Contractors' personnel and equipment and the availability of materials and
supplies to meet the schedule.
2.2.1.7. Pay strict attention to safety on the
Project for all workers and others visiting the site and will insure that safety
helmets and apparel are worn by all workers and other persons visiting the site.
Construction Manager shall instruct all employees and hold appropriate classes
on safety.
2.2.2.1. PHYSICAL CONSTRUCTION. Except as provided
in Article 2.2.2.2., provide all supervision, labor, materials, construction
equipment, including, but not limited to, equipment, tools and subcontract items
which are necessary for the completion of the Project which are not provided by
either the Trade Contractors or the Owner. To the extent that the Construction
Manager performs any Work with his own forces, he shall, with respect to such
Work, perform in accordance with the Drawings and Specifications and in
accordance with the procedure applicable to the Project.
2.2.2.2. The Project items which Construction Manager
is not required to provide are:
a. Process vacuum system
b. Epoxy floor coatings
c. Ceco scrubber system
The above items will be obtained and paid for directly by Owner
and will not be considered Costs of the Project. Construction Manager shall,
however, unless directed otherwise by Owner, supervise and direct the
installation of such items. Owner shall pay Construction Manager a separate
supervision fee equal to 2% of the Owner's cost of each system or equipment, the
installation of which Construction Manager supervises.
2.2.3. COST CONTROL. Develop and monitor an effective system of
Project cost control. Revise and refine the initially approved Project
Construction Budget, incorporate approved changes as they occur and develop cash
flow reports and forecasts as needed. Identify variances between actual and
budgeted or estimated costs and advise
<PAGE> 8
- 8 -
Owner whenever projected cost exceeds budgets or estimates. All modifications to
the Project construction Budget must be approved by Owner.
2.2.3.1. Maintain cost accounting records on
authorized Work performed. Afford the Owner access to these records and preserve
them for a period of six (6) years after final payment.
2.2.4. CHANGE ORDERS. Develop and implement a system for
the preparation, review and processing of Change Orders. Recommend necessary or
desirable changes to the Owner, review requests for changes, submit
recommendations to the Owner and assist in negotiating Change Orders. All Change
Orders must be approved by Owner.
2.2.5. PAYMENTS TO TRADE CONTRACTORS. Develop and implement
a procedure for the review, processing and payment of applications by Trade
Contractors for progress and final payments, which procedure shall be
satisfactory to Owner.
2.2.6. PERMITS AND FEES. Obtain all building permits and
special permits for permanent improvements.
Without limiting the above, Construction Manager shall be
responsible for obtaining all necessary permits, licenses and approvals in
connection with the Project other than approval from the Division of Environment
including, but not limited to, the following agencies:
a. Sarawak State Government
b. Local town council
c. Fire department (BOMBA)
d. Jabatan Kerja Raya/water boards
e. State Economic Development Corporation (SEDCO)
Construction Manager shall insure that all work on the Project
is done in conformity with such permits, licenses and approvals (and the
approval of the Department of Environment) and all such work shall be done in
compliance with all applicable laws, including local laws and ordinances of
Kuching. The cost of obtaining all such approvals (other than from the
Department of Environment) shall be considered a Cost of the Project within the
meaning of Article 8, but not a Hard Construction Cost. Fees required by the
licensing authorities shall be paid directly by Owner or Construction Manager,
but if Owner pays the fees (other than for approval from the Department of
Environment), the amount so paid shall be credited against the Cost of the
Project at the time of final payment under Article 11.2. Notwithstanding
anything to the contrary above stated, in the event any contributions, fees or
levies shall be imposed by either SESCO, the Sarawak Water Board or Telekoms,
such contributions, fees or levies shall be paid directly by the Owner and shall
not be considered a Cost of the Project.
<PAGE> 9
- 9 -
2.2.7. OWNER'S CONSULTANTS. If required, assist the Owner in
selecting and retaining professional services of a surveyor, testing
laboratories and special consultants and coordinate these services, without
assuming any responsibility or responsibility or liability of or for these
consultants.
2.2.8. INSPECTION. Inspect the work of Trade Contractors
for defects and deficiencies in the Work.
2.2.8.1. Review the safety programs of each of the
Trade Contractors and make appropriate recommendations. The performance of such
services by the Construction Manager shall not relieve the Trade Contractors of
their responsibilities for the safety of persons and property, and for
compliance with laws, rules, regulations and orders applicable to the conduct of
the Work.
2.2.9. Intentionally omitted.
2.2.10. REPORTS AND PROJECT SITE DOCUMENTS. Record the
progress of the Project. Submit written progress reports to the Owner including
information on the Trade Contractors' Work and the percentage of completion.
Keep a daily log available to the Owner.
2.2.10.1. Maintain at the Project site, on a current
basis: records of all necessary Contracts, Drawings, Permits, Licenses and
Approvals, samples, purchases, materials, equipment, maintenance and operating
manuals and instructions, and other construction related documents, including
all revisions. Obtain data from Trade Contractors and maintain a current set of
record Drawings, Specifications and operating manuals. At the completion of the
Project, deliver all such records to the Owner.
2.2.12. TRADE CONTRACTORS' SUPERVISION. Prepare for Trade
Contractors' readiness and assist in their initial start-up and supervise and
direct Trade Contractors' performance.
2.2.13. START-UP. With the Owner's maintenance personnel,
direct the checkout of utilities, operations, systems and equipment for
readiness and assist in their initial start-up and testing by the Trade
Contractors.
2.2.14. FINAL COMPLETION. Provide written notice to the Owner
that the Work is ready for final inspection. Secure and transmit to the Owner
required guarantees, affidavits, releases, bonds and waivers. Turn over to the
Owner all keys, manuals, record drawings and maintenance stocks.
2.2.15. PIPES: All process pipes shall be labeled every
twenty (20) feet by the Construction Manager to identify the gases or fluids
transported.
2.2.16. AS-BUILT PLANS: Upon completion of the Project, the
Construction Manager shall deliver a complete set of as-built plans for the
Project to the Owner.
<PAGE> 10
- 10 -
2.2.17. WARRANTY. Where any Work is performed by the
Construction Manager's own forces or by Trade Contractors under contract with
the Construction Manager, the Construction Manager shall warrant that all
materials and equipment included in such Work will be new, unless otherwise
specified, and that such Work will be of good quality, free from improper
workmanship and defective materials and in conformance with the Drawings and
Specifications. With respect to the same Work, the Construction Manager further
agrees to correct all work defective in material and workmanship for a period of
one year from the Construction Completion Date, as defined below, or for such
longer periods of time as may be set forth with respect to specific warranties
contained in the trade sections of the Specifications. The Construction Manager
shall collect and deliver to the Owner any specific written warranties given by
others.
2.3. Additional Services.
2.3.1. At the request of the Owner the Construction Manager
will provide the following additional services upon written agreement between
the Owner and Construction Manager defining the extent of such additional
services and the amount and manner in which the Construction Manager will be
compensated for such additional services.
2.3.2. Services related to investigation, appraisals or
valuations of existing conditions, facilities or equipment, or verifying the
accuracy of existing drawings or other Owner-furnished information.
2.3.3. Services related to Owner-furnished equipment,
furniture and furnishings which are not a part of this Agreement.
2.3.4. Obtaining or training maintenance personnel or
negotiating maintenance service contracts.
2.4. As a condition to Construction Manager's rights under this
agreement and Owner's obligation to Construction Manager, Construction Manager
shall obtain and provide to Owner two performance guarantees ("Performance
Bonds") through a bank or insurance company operating in Malaysia which bank or
insurance company is acceptable to Owner each in an amount equal to 5% of the
Guaranteed Maximum Price. The cost of such bonds shall be borne by Construction
Manager and shall not be considered a Hard Construction Cost within the meaning
of Article 10. Owner shall permit the cancellation of one Performance Bond in an
amount of not more than RM1,675,000 when Owner has recouped payment made under
Article 11.6. as provided in Article 11.1. The other Performance Bond shall
remain effective through completion of the Project.
2.5. All plans and equipment to be purchased for the Project must
be approved in writing by Owner. Any changes to the building plans or types and
brands of equipment already selected for the Project must also be approved.
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ARTICLE 3
Owner's Responsibilities
3.1. The Owner shall provide full information regarding his
requirement for the Project.
3.2. The Owner shall designate a representative who shall be fully
acquainted with the Project and has authority to issue and approved Project
Construction Budget, issue Change Orders, Equipment Purchases, render decisions
within three (3) business days (excluding Saturdays and Sundays) of receipt of a
written request by the Construction Manager and furnish information
expeditiously by telephone facsimile.
Owner has designated Larry Jo as its representative. However, all
project construction budgets, change orders, equipment purchases and other
decisions called for under this agreement must be approved by one of the
following persons in addition to Larry Jo:
a. Ronald Donati
b. Robert Snyder
c. Joe Brechel
Owner reserves the right to change its representative for any reason
whatsoever by giving notice to Construction Manager.
3.3. Within three business days (excluding Saturdays and Sundays
and American national holidays) of a party's receipt of any written request for
information or a decision concerning the Project from the other party, the
information or decision will be communicated to the requesting party by personal
delivery or telephone facsimile.
3.4. The Owner shall furnish soil reports for the site of the
Project.
3.5. Intentionally omitted.
3.6. Intentionally omitted.
3.7. Intentionally omitted.
3.8. The Owner shall provide insurance for the Project as provided
in Article 12.4.
3.9. The services, information, and reports required by Owner under
the above paragraphs or otherwise to be furnished by other consultants employed
by the Owner, shall be furnished with reasonable promptness at the Owner's
expense and the
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Construction Manager shall be entitled to rely upon the accuracy
and completeness thereof.
3.10. If the Owner becomes aware of any fault or defect in the
Project or non-conformance with the Drawings and Specifications, he shall give
prompt written notice thereof to the Construction Manager.
3.11. The Owner shall communicate with the Trade Contractors only
through or with the knowledge of the Construction Manager.
ARTICLE 4
Trade Contracts
4.1. All portions of the Project that the Construction Manager does
not perform with his own forces shall be performed under Trade Contracts. The
Construction Manager shall request and receive proposals from Trade Contractors
and award Trade Contracts. Trade Contractor's proposals will be submitted to
Owner for review on Owner's request.
4.2. If the Owner refuses to accept a Trade Contractor recommended
by the Construction Manager, the Construction Manager shall recommend an
acceptable substitute and the Guaranteed Maximum Price if applicable shall be
increased or decreased by the difference in cost occasioned by such substitution
and an appropriate Change Order shall be issued.
4.3. Unless otherwise directed by the Owner, Trade Contracts will
be between the Construction Manager and the Trade Contractors. Whether the Trade
Contracts are with the Construction Manager or the Owner, the form of the Trade
Contracts shall be prepared by Construction Manager, include the General and
Supplementary Conditions, and shall be satisfactory to the Construction Manager.
4.4. The Construction Manager shall be responsible to the Owner for
the acts and omissions of his agents and employees, Trade Contractors performing
Work under a contract with the Construction Manager and such Trade Contractor's
agents and employees.
4.5. No Trade Contract will be awarded and no Trade Contractor will
be used if Owner objects in writing to the Trade Contract or the Trade
Contractor.
ARTICLE 5
Schedule
5.1. The services to provide under this Agreement shall be in
general accordance with the Time Schedule mutually agreed upon by the parties in
writing.
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5.2. Intentionally omitted.
5.3. "Substantial Completion" of the Project occurs when
construction is substantially completed in accordance with the Drawings and
Specifications so the Owner can occupy and utilize the Project for its intended
purpose and a temporary occupancy permit or appropriate letter of approval for
occupancy from appropriate government authorities has been issued. In the Time
Schedule, the date projected for Substantial completion shall be July 1, 1996,
which shall be referred to as the "Construction Completion Date."
5.4. If the Construction Manager is delayed at any time in the
Progress of the Project by any act or neglect of the Owner or by any separate
contractor employed by the Owner, or by changes ordered in the Project, the
Construction Completion Date shall be extended by Change Order for a reasonable
length of time, and the dates set forth in Article 10 (relative to Bonus) shall
be extended accordingly, but no such extensions shall affect the dates set forth
in Article 10 (relative to Bonus) by more than two weeks.
ARTICLE 6
Guaranteed Maximum Price
6.1. The Guaranteed Maximum Price (guaranteeing the maximum price
to the Owner for the Cost of the Project and the Construction Manager's Fee) is
RM33,500,000. Such Guaranteed Maximum Price will be subject to modification for
Changes in the Project as provided in Article 9, and for additional reasonable
costs directly arising from delays caused by the Owner. The Guaranteed Maximum
Price is made up of the following: Hard Construction Cost - RM30,000,000.00,
Soft Construction Cost - RM1,896,000.00, and Construction Manager's Fee -
RM1,610,000.00 for a total of RM33,500,000.00.
6.2. The Owner authorizes the Construction Manager to take all
steps necessary, including arbitration or litigation, to assure that the Trade
Contractors perform their contracts in accordance with their terms.
6.3. Intentionally omitted.
6.4. Intentionally omitted.
ARTICLE 7
Construction Manager's Fee
7.1. In consideration of the performance of this agreement, the
Owner agrees to pay Construction Manager as compensation for services under this
agreement, a Construction Manager's Fee equal to Ringgit Malaysian One Million
Six Hundred and Ten Thousand Only (RM1,610,000.00).
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7.2. The Construction Manager's Fee shall be paid in accordance
with the provisions of Article 11. The Construction Manager's Fee in relation to
change orders approved by Owner and with respect to items of cost that are
incurred if the Construction Manager is placed in charge of the reconstruction
of any insured or uninsured loss (provided such uninsured loss does not arise
from a breach of duty or warranty by Construction Manager) shall be five percent
(5%) of the costs to be incurred resulting from the change orders. In the event
of a change order resulting in savings, the Construction Manager's Fee shall be
similarly reduced. The Construction Manager's Fee shall in the event of change
orders being issued be calculated according to the following formula:
Construction Manager's Fee = RM1,610,000.00 +/- (5% x Value of Change Orders).
ARTICLE 8
Cost of the Project
8.1. The term Cost of the Project shall mean cost necessarily
incurred in the Project during either the Design or Construction Phase, and paid
by the Construction Manager other than as set forth in Article 7. Such costs are
the Soft Construction Costs and the items set forth below in this Article,
including all items of costs set forth under `A' and `B' in Construction
Manager's quotation, dated May 30, 1995.
8.1.1. The Owner agrees to pay the Construction Manager for
the Cost of the Project as defined in Article 8. Such payment shall be in
addition to the Construction Manager's Fee stipulated in Article 7.
8.2. HARD CONSTRUCTION COSTS.
8.2.1. Wages paid for labor in the direct employ of the
Construction Manager in the performance of this Work under applicable collective
bargaining agreements, or under any salary or wage schedule, and including such
welfare or other benefits, if any, as may be payable with respect thereto.
8.2.2. Salaries of the Construction Manager's employees when
stationed at the field office, in whatever capacity employed, employees on the
road in expediting the production or transportation of materials and equipment,
and employees in the main or branch office performing the functions listed
below.
8.2.3. Cost of all employee benefits and taxes for such items
as unemployment compensation and social security, insofar as such cost is based
on wages, salaries, or other remuneration paid to employees of the Construction
Manager and included in the Cost of the Project under Subparagraphs 8.2.1 and
8.2.2.
8.2.4. Reasonable transportation, traveling, moving and hotel
expenses of the Construction Manager or of his officers or employees incurred in
discharge of duties connected with the Project.
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8.2.5. Cost of all materials, supplies and equipment
incorporated in the Project, including costs of transportation and storage
thereof.
8.2.6. Payments made by the Construction Manager or Owner to
Trade Contractors for their Work performed pursuant to contract under this
Agreement. This provision shall not apply to Owners' installation of any of the
items specifically excluded from the agreement under Article 2.2.2.2.
8.2.7. Cost, including transportation and maintenance, of all
materials, supplies, equipment, temporary facilities and hand tools not owned by
the workmen, which are employed or consumed in the performance of the Work, and
cost less salvage value on such items used but not consumed which remain the
property of the Construction Manager.
8.2.8. Rental charges of all necessary machinery and
equipment, exclusive of hand tools, used at the site of the Project, whether
rented from the Construction Manager or other, including installation, repairs
and replacements, dismantling, removal, costs of lubrication, transportation and
delivery costs thereof, at rental charges consistent with those prevailing in
the area.
8.2.9. Intentionally omitted.
8.2.10. Sales, use, gross receipts of similar taxes related to
the Project imposed by any governmental authority, and for which the
Construction Manager is liable. Notwithstanding anything to the contrary in this
Section 8.2.10, in the event any taxes, duties or levies are imposed on
production or support materials and equipment for incorporation into the
Project, Construction Manager shall use its best efforts to eliminate any such
taxes, duties or levies and shall prepare all necessary documents for a protest
of
[PAGE 15 MISSING]
9.1.1. A Change Order is a written order to the Construction
Manager signed by the Owner or his authorized agent issued after the execution
of this Agreement, authorizing a change in the Project or the method or manner
of performance and/or an adjustment in the Guaranteed Maximum Price, the
Construction Manager's Fee or the Construction Completion Date. Each adjustment
in the Guaranteed Maximum Price resulting from a Change Order shall clearly
separate the amount attributable to the Cost of the Project and the Construction
Manager's Fee.
9.1.2. The increase or decrease in the Guaranteed Maximum
Price resulting form a Change in the Project shall be determined in one or more
of the following ways:
a. by mutual acceptance of a lump sum properly
itemized and supported by sufficient
substantiating data to permit evaluation;
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b. by Cost as defined in Article 8 plus a
percentage equal to the Construction Manager's
Fee Percentage specified in Article 7.1; or
c. by the method provided in subparagraph 9.1.3.
9.1.3. If none of the methods set forth in Clauses 9.1.2.a.
through 9.1.2.c is agreed upon, the Construction Manager, provided he receives a
written order signed by the Owner, shall promptly proceed with the Work
involved. The cost of such Work shall then be determined on the basis of the
reasonable expenditures and savings of those performing the Work attributed to
the change, including, in the case of an increase in the Guaranteed Maximum
Price, an increase in the Construction Manager's fee based upon the Construction
Manager's fee Percentage or in the case of a decrease in the Guaranteed Maximum
Price, a decrease in the Construction Manager's Fee based upon the Construction
Manager's Fee Percentage. In such case, and also under Clause 9.1.2.c. and
9.1.2.d. above, the Construction Manager shall keep and present, in such form as
the Owner may prescribe, an itemized accounting together with appropriate
supporting data of the increase in the Cost of the Project as outlined in
Article 8. When both additions and credits are involved in any one change, the
increase or decrease in the Construction Manager's Fee shall be figured on the
basis of net increase or net decrease, if any.
9.1.4. If unit prices are stated in the Agreement or
subsequently agreed upon, and if the quantities originally contemplated are so
changed in a proposed Change Order or as a result of several Change Orders that
application of the agreed unit prices to the quantities of Work proposed will
cause substantial inequity to the Owner or the Construction Manager the
applicable unit prices and Guaranteed Maximum Price shall be equitably adjusted.
9.1.5. Intentionally omitted.
9.2. CLAIMS FOR ADDITIONAL COST OR TIME.
9.2.1. If the Construction Manager wishes to make a claim or
an increase in the Guaranteed Maximum Price, an increase in his fee, or
extension in the Construction Completion Date, he shall give the Owner written
notice thereof within a reasonable time after the occurrence of the event giving
rise to such claim. This notice shall be given by the Construction manager
before proceeding to execute any Work, except in an emergency endangering life
or property in which case the Construction Manager shall act, at his discretion,
to prevent threatened damage, injury or loss. Claims arising from delay shall be
made within a reasonable time after the delay. No such claim shall be valid
unless so made. If the Owner and the Construction Manager cannot agree on the
amount of the adjustment in the Guaranteed Maximum Price, Construction Manager's
Fee or Construction Completion Date it shall be determined pursuant to the
provisions of Article 16. Failure of the Owner and the Construction manager to
agree on any such adjustment shall not entitle the Construction manager to
suspend or stop the performance of Work. Any change in the Guaranteed Maximum
Price, Constructions Manager's Fee
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or Construction Completion Date resulting from such claim shall be authorized by
Change Order.
9.3. MINOR CHANGES IN THE PROJECT.
9.3.1. Owner's representative, as designated under Article
3.2, will have authority to order minor Changes in the Project not involving an
adjustment in the Guaranteed Maximum Price or an extension of the Construction
Completion Date and not inconsistent with the intent of the Drawings and
Specifications. Such Changes may be effected by written order and shall be
binding on the Owner and the Construction Manager.
9.4. EMERGENCIES.
9.4.1. In any emergency affecting the safety of persons or
property, the Construction Manager shall act, at his discretion, to prevent
threatened damage, injury or loss. Any increase in the Guaranteed Maximum Price
or extension of time claimed by the Construction Manager on account of emergency
work shall be determined as provided in this Article.
ARTICLE 10
Bonuses
10.1. COST BONUS. If the final total Hard Construction Costs of the
Project is RM30,000,000 or less, than the difference between the total Hard
Construct Cost of the Project and RM30,000,000 shall be shared and divided
equally between Owner and Construction Manager. For example, if the total Hard
Construction Cost of the Project is RM26,000,000, then Owner shall pay to
Construction Manager a bonus of RM2,000,000. Any payment due under this Article
shall be paid after Owner has been granted a final occupancy permit and all
items contained on the punch list referred to in Article 11.2 have been
completed to Owner's satisfaction. As used herein, Hard Construction Costs are
the cost of labor, equipment, materials, and Trade Contracts, and the
Construction Manager's Fee but are not Construction Manager's fixed costs,
overhead, and the costs of insurance, Performance Bonds, permit approval costs
or similar items, all of which Construction Manager has estimated to be in the
amount of approximately RM1,890,000.
10.2. TIMELINESS BONUS. Owner will pay Construction Manager a bonus
equal to RM250,000 at the date of occupancy if there is no material breach of
this Agreement and all of the following conditions are fully and timely met:
a. The Project is completed so that Owner is able to commence
installation of the automatic plating lines no later than
April 1, 1996;
b. The Project is completed so that Owner is able to commerce
the installation of the waste treatment equipment no later
than April 1, 1996; and
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c. Owner receives a temporary occupancy permit or an
appropriate letter of approval for occupancy from
appropriate governmental authorities no later than
July 1, 1996.
ARTICLE 11
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Payments to the Construction Manager
11.1. Construction Manger shall submit to Owner in California by
telephone facsimile, personal delivery, or Federal Express (or DHL) delivery, on
a monthly basis, a statement showing in detail the amount of all bills for
labor, material, subcontracts and other Costs of the Project for work completed
during the previous calendar month with each item compared to the approved
budget for such item. Owner (or a personal or entity designated by Owner which
may be Owner's bank) shall within ten (10) days after receipt of such a progress
statement certify that the work was actually performed in compliance with the
approved plans and actually performed in compliance with the approved plans and
specifications, the amounts charged were reasonable and the work and amount
shown were within the budget for such items and consistent with the overall
Project budget. If any cost claimed
[PAGE 19 MISSING]
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The Owner may remit payment by wire transfer to an account designated by the
Construction Manager.
11.5. Payments due but unpaid shall bear interest at the rate the
Owner is paying on his construction loan.
11.6. Owner shall pay Construction Manager an amount equal to 10% of
the Guaranteed Maximum Price when this agreement has been signed by both parties
and the conditions in Section 13.3.3 have been met.
11.7. BONUS. A Bonus will be paid in accordance with Article 10.2.
ARTICLE 12
----------
Insurance, Indemnity and Waiver of Subrogation
12.1. INDEMNITY
12.1.1. The Construction Manager agrees to indemnify, hold
harmless and defend Owner, its shareholders, and their respective officers,
employees, directors, agents ("Indemnitees") from and against any and all
liabilities, damages, actions, costs, losses, claims and expenses (including
attorneys' fees) on account of personal injury, or death of any persons
whomsoever or damage to or loss of real or personal property or profits arising
out of or resulting, in whole or in part, from any act, omission, negligence,
violation of law or ordinance by or attributable to the Construction Manager,
any Trade Contractor or any of their employees or agents. Such indemnification
shall apply unless and to the extent such damage or injury results from the sole
negligence or willful misconduct of Owner, its employees or agents.
12.1.2. The Owner shall cause any other contractor who may
have a contract with Owner to perform construction or installation work in the
areas where Work will be performed under this agreement, to agree to indemnify
the Owner and the Construction Manager and hold them harmless from all claims
for bodily injury and property damage (other than property insured under Article
12.3.) that may arise from the contractor's operations. Such provisions shall be
in a form satisfactory to the Owner.
12.2. CONSTRUCTION MANAGER'S LIABILITY INSURANCE
12.2.1. Without prejudice to the Construction Manager's
liability to indemnify the Owner under subparagraph 12.1.1., the Construction
Manager shall purchase a Workmen Compensation Policy and such other liability
insurance as is satisfactory to Owner for the duration of the Project from a
reputable insurance company acceptable to Owner. Construction Manger shall
submit the insurance policies to Owner for Owner's approval.
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12.2.2. The foregoing policies shall contain a provision that
coverages afforded under the policies will not be cancelled or not renewed until
at least sixty (60) days' prior written notice has been given to the Owner.
Certificates of Insurance showing such coverages to be in force shall be filed
with the Owner prior to commencement of the Work. The Owner may require copies
of the insurance policies or inspect the originals thereof at any time during
construction. All insurers for policies under this Article 12.2 shall be
acceptable to the Owner with coverages acceptable to Owner.
12.3. OWNER'S LIABILITY INSURANCE.
12.3.1. The Owner may purchase and maintain his own liability
insurance and, at his option, may purchase and maintain such insurance as will
protect him against claims which may arise from operations under this Agreement.
Such insurance shall be secondary to insurance carried by Construction Manager.
12.4. INSURANCE TO PROTECT PROJECT.
12.4.1. The Owner shall purchase and maintain property
insurance upon the entire Project for the full cost of replacement as of the
time of any loss. This insurance shall include as named insured only the Owner,
and shall include "All risk" insurance for physical loss or damage with coverage
acceptable to Owner. The Owner will increase limits of coverage, if necessary,
to reflect estimated replacement cost. The Owner will be responsible for an
co-insurance penalties or deductibles.
12.4.1.1. If the Owner finds it necessary to occupy or use a
portion of the Project prior to Substantial Completion thereof, such occupancy
shall not commerce prior to a time mutually agreed to by the Owner and
Construction Manager and to which the insurance company or companies providing
the property insurance have consented by endorsement to the policy or policies.
This insurance shall not be cancelled or lapsed on account of such partial
occupancy. Consent of the Construction Manager and of the insurance company or
companies to such occupancy or use shall not be unreasonably withheld. It is
contemplated that prior to Substantial Completion, Owner will be given access to
the building to commerce or cause its contractors to commerce installation of
equipment to be supplied by Owner. All policies provided shall permit such
occupancy.
12.4.2. The Owner shall purchase and maintain such boiler and
machinery insurance as may be required or necessary. This insurance shall
include only the interests of the Owner.
12.4.3. Intentionally omitted.
12.4.4. Intentionally omitted.
12.5. PROPERTY INSURANCE LOSS ADJUSTMENT
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12.5.1. Any insured loss shall be adjusted with the Owner and
made payable to the Owner, subject to any applicable mortgages clause.
12.5.2. Intentionally omitted.
12.6. ADDITIONAL INSURANCE PROVISIONS
12.6.1. Intentionally omitted.
12.6.2. Intentionally omitted.
12.6.3. Intentionally omitted.
12.6.4. If the policies of insurance referred to in this
Article 12, require an endorsement to provide for continued coverage where there
is a waiver of subrogation, the owners of such policies will cause them to be
co-endorsed.
12.7. Notwithstanding the provisions of Articles 12.2 or 12.4, Owner
shall have the right to either require Construction Manager to obtain the
liability insurance required under Section 12 or Owner may obtain such policies
itself. If the Construction Manager fails to pay insurance or fails to renew the
same, the Owner may pay such premiums or renew the insurance on behalf of the
Construction Manager. If Owner obtains or renews such policies, then the cost of
such insurance shall not be considered a Cost of the Project and the Guaranteed
Maximum Price established under Article 6 shall be reduced by the sum of the
cost of said insurance and by Construction Manager's Fee Percentage attributable
thereto.
12.8. Construction Manager will not do any act or permit or suffer
any circumstances whereby the insurance referred to in Articles 12.2 and 12.4
may at any time become void or voidable and the Construction Manager shall at
all times at its own expense comply with conditions of the policies and the
requirements of the insurer so as to prevent the invalidation of those insurance
or otherwise prejudice the rights of any insured. The Construction Manager
hereby indemnifies the Owner against all or any losses, caused, and expenses
arising out of the Construction Manager's default under this clause.
12.9. Upon the happening of any loss, damage, injury, death or
accident likely to give rise to a claim under insurance referred to in Articles
12.2 and 12.4, the Construction Manager shall immediately give notice thereof to
the Owner stating the circumstances of the damages, injury, death or accident.
Such notice shall be confirmed in writing by the Construction Manager as soon as
possible. If any theft, vandalism, or malicious damages is suspected, the
Construction Manager shall forthwith inform the appropriate law enforcement
agencies. The Construction Manager shall comply in all respects with
requirements for notice, reporting, detail, insurance claims, and any other item
in accordance with the policies. In addition, the Construction Manager shall at
all times fully cooperate with the Owner in pursuing recovery of any claims
under the
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insurances referred to in Articles 12.2 and 12.4, including the
provisions of report, information and other matters as may be required by the
Owner from time to time.
12.10. The Owner shall have the power to negotiate settlement and to
effect compromise in respect of any claims against insurers under the insurances
referred to in Article 12.4 and the Owner shall not be liable for any loss to
the Construction Manager or any other insured occasioned thereby.
Notwithstanding the above, the Owner may direct the Construction Manager to
claim, negotiate and settle whether in part or in whole, any claim against
insurers under insurances referred to in Articles 12.2 and 12.4.
ARTICLE 13
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Termination of the Agreement and Owner's Right
to Perform Construction Manager's Obligations
13.1. Termination by the Construction Manager.
13.1.1. If the Project, in whole or substantial part, is
stopped for a period of thirty days under an order of any court or other public
authority having jurisdiction, or as a result of an act of government, such as a
declaration of a national emergency making materials unavailable, through no act
or guilt of the Construction Manager, or if the Project should be stopped for a
period of thirty days by the Construction Manager for the Owner's failure to
make an undisputed payment thereon, then the construction Manager may, upon
seven days' written notice to the Owner terminate this Agreement and recover
from the Owner payment for all completed Work executed, the Construction
Manager's Fee earned to date, any proven loss sustained upon any materials,
equipment, tools, construction equipment and machinery, cancellation charges on
existing obligations of the Construction Manager, and a reasonable profit.
13.2. OWNER'S RIGHT TO PERFORM CONSTRUCTION MANAGER'S OBLIGATION AND
TERMINATION BY THE OWNER FOR CAUSE.
13.2.1. If the Construction Manager fails to perform any of
his obligations under this Agreement including any obligation he assumes to
perform Work with his own forces, the Owner may, after seven days' written
notice during which period the Construction Manager fails to perform such
obligation, make good such deficiencies. The Guaranteed Maximum Price, if any,
shall be reduced by the cost of the Owner of making good such deficiencies plus
the Construction Manager's fee attributable thereto.
13.2.2. If the Construction Manager is adjusted bankrupt, or
if he makes a general assignment for the benefit of his creditors, or if a
receiver is appointed on account of his insolvency, or if he refuses to or
fails, to a material extent, except in cases for which extension of time is
provided, to supply enough properly skilled workmen or proper materials or fails
to timely complete construction in accordance with the Time Schedule agreed upon
by the parties or if he fails to make proper payment to Trade Contractors or for
materials or labor, or materially or intentionally disregards laws,
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ordinances, rules, regulations or orders of any public authority having
jurisdiction, or otherwise is guilty of a substantial violation of a provision
of the Agreement then the Owner may, without prejudice to any right or remedy
and after giving the Construction Manager and his surety, if any, seven days'
written notice, during which period the Construction Manager fails to cure the
violation, terminate the employment of the Construction Manager and take
possession of the site and of all materials, equipment, tools, construction
equipment, plans, records and machinery thereon owned by the Construction
Manager and may finish the Project by whatever reasonable method he may deem
expedient. In such case, the Construction Manager shall not be entitled to
receive any further payment until the Project is finished nor shall he be
relieved from his obligations assumed under this Agreement.
13.3.1. If the Owner terminates this Agreement other than
pursuant to Article 13.2.2. or Article 13.3.2. he shall reimburse the
Construction Manager for any unpaid Cost of the Project due to him under Article
8, plus (1) the unpaid balance of the Fee computed upon the Cost of the Project
to the date of termination at the rate of the percentage named in Article 7.2.1.
The Owner shall also pay to the Construction Manager fair compensation either by
purchase or rental at the election of the Owner, for any equipment retained. In
case of such termination of the Agreement, the Owner shall further assume and
become liable for obligations, commitments and unsettled claims that the
Construction Manager has previously undertaken or incurred in good faith in
connection with said Project which benefit the Project. The Construction Manager
shall, as a condition of receiving the payments referred to in this Article 13,
execute and deliver all such papers and take all such steps, including the legal
assignment of his contractual rights, as the Owner may require for the purpose
of fully vesting in him the rights and benefits of the Construction Manager
under such obligation or commitments.
13.3.2. After the completion of the Design Phase, if the final
cost estimates make the Project no longer feasible from the standpoint of the
Owner, the Owner may terminate this Agreement and pay the Construction Manager
his Fee in accordance with subparagraph 7.1.1. plus any Costs of the Project
incurred pursuant to Article 9 and the Construction Manager's Fee attributable
thereto.
13.3.3. Owner may cancel this agreement and shall have no
liability to Construction Manager if:
a. Owner does not obtain a permit to proceed with the
construction by the Department of Environment; or
b. Owner does not receive financing to construct the
Project satisfactory to Owner; or
c. Construction Manager fails to obtain the performance
bonds or any insurance required by this agreement; or
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d. Construction Manager and Owner fail to agree in
writing on the Time Schedule for construction, Construction Budget and final
Drawings and Specifications by July 31, 1995.
Notwithstanding the foregoing, if the Owner cancels this agreement
under Section 13.3.3.b., the Owner shall reimburse the Construction Manager for
all its expenses incurred to the date of such cancellation.
13.4. OTHER REMEDIES: Nothing in this Article shall be construed as
a limitation on any remedies available at law, including damages, to either
party, for breach of this agreement by the Construction Manager or Owner,
including any failure of the Construction Manager to comply with the Time
Schedule (including the Construction Completion Date), Construction Budget, and
final Drawings and Specifications.
13.5. DELAY DAMAGES: If Substantial Completion of the Project is
delayed beyond the Construction Completion Date, as agreed by the Owner and the
Construction Manager in the Time Schedule, the parties agree that the Owner
would suffer damages and Construction Manager shall therefore pay to the Owner
the sum of RINGGIT MALAYSIA EIGHT THOUSAND (RM8,000.000) per day for each
calendar day during which Substantial Completion Date as agreed by Owner and the
Contractor in the Time Schedule.
ARTICLE 14
----------
Assignment and Governing Law
14.1. Neither the Owner nor the Construction Manager shall assign
his interest in this Agreement without the written consent of the other except
as to the assignment of proceeds.
14.2. This Agreement shall be governed by the laws of the place
where the Project is located.
ARTICLE 15
----------
Miscellaneous Provisions
15.1. Intentionally omitted.
ARTICLE 16
----------
Arbitration
16.1. Any dispute, controversy or claim arising out of or relating
to this contract or the breach, termination or invalidity thereof, shall be
settled by arbitration in accordance with the UNCITRAL Arbitration Rules in
effect on the date of this contract. If the parties are unable to agree upon an
arbitrator or if for any reason an appointing
<PAGE> 25
- 26 -
authority is necessary, the appointing authority shall be the director of the
Regional Center for Arbitration in Kuala Lampur. At the request of either party,
the case shall be administered by the director of the Regional Center for
Arbitration in Kuala Lampur in accordance with its Procedure for cases under the
UNCITRAL Arbitration Rules.
The language to be used in the arbitral proceedings shall be English.
Unless the parties agree otherwise, the place of arbitration shall be
Kuala Lampur and there shall be only one arbitrator and he shall be a citizen of
Singapore.
16.2. Notice of the demand for arbitration shall be filed in writing
with the other party to this Agreement. The demand for arbitration shall be made
within a reasonable time after the claim, dispute or other matter in question
has arisen, and in no event shall it be made after the date when institution of
legal or equitable proceedings based on such claim, dispute or other matter in
question would be barred by the applicable statute of limitations.
16.3. The award rendered by the arbitrators shall be final and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
16.4. Unless otherwise agreed in writing, the Construction Manager
shall carry on the Work and maintain the Contract Completion Date during any
arbitration proceedings, and the Owner shall continue to make payments in
accordance with this Agreement.
16.5. All claims which are related to or dependent upon each other,
shall be heard by the same arbitrator or arbitrators even though the parties are
not the same unless a specific contract prohibits such consolidation.
This Agreement executed the day and year first written above.
OWNER:
ZYCON CORPORATION SDW. BHD
By: /s/ Ronald H. Donati - President
--------------------------------
Name:
Title:
CONSTRUCTION MANAGER:
HITI ENGINEERING (M) SDW.BHD
By: /s/ Felix Tee Yee Loh
--------------------------------
Name:
Title:
<PAGE> 26
- 27 -
<PAGE> 1
Exhibit 10.7
PLAN 001
FIN 04-2393279
HADCO CORPORATION
PROFIT SHARING AND 401K PLAN AND TRUST
AS AMENDED THROUGH DECEMBER 9, 1988
AND RESTATED EFFECTIVE JANUARY 1, 1988
<PAGE> 2
TABLE OF CONTENTS
Page No.
INTRODUCTION................................................
ARTICLE I DEFINITIONS.................................................
ARTICLE II PLAN PARTICIPATION..........................................
2.1 - Initial Participation...............................
2.2 - Cessation of Participation..........................
2.3 - Reinstatement of Active Participation...............
ARTICLE III CONTRIBUTIONS AND ALLOCATIONS...............................
3.1 - Profit Sharing Contributions........................
3.2 - Elective Deferrals..................................
3.3 - Matching Contributions..............................
3.4 - Qualified Nonelective Contributions.................
3.5 - Voluntary Contributions.............................
3.6 - Rollover Contributions..............................
3.7 - Forfeitures.........................................
3.8 - Investment Adjustment...............................
3.9 - Limitations on Allocations..........................
3.10 - Allocation of Excess Allocations and Contributions..
3.11 - Contributions for Top-Heavy Plan Years..............
ARTICLE IV WITHDRAWALS PRIOR TO TERMINATION OF
EMPLOYMENT..................................................
4.1 - Withdrawals from Voluntary Accounts.................
4.2 - Resumption of Voluntary Contributions...............
4.3 - Withdrawals from Employer Contributions Account.....
4.4 - Withdrawals from Rollover Account...................
4.5 - Withdrawals from Salary Savings Account.............
4.6 - Loans to Participants...............................
ARTICLE IV-A VALUATION OF ACCOUNTS.......................................
4A.1 - Accounts............................................
4A.2 - Adjustment of Accounts..............................
4A.3 - Valuation of Trust Fund.............................
4A.4 - Annual Statements...................................
ARTICLE V VESTING.....................................................
5.1 - Full Vesting........................................
5.2 - Partial Vesting.....................................
5.3 - Vesting after Receipt of Distribution...............
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<PAGE> 3
5.4 - Vesting for Top-Heavy Plan..........................
5.5 - Crediting Years of Service..........................
ARTICLE VI DISTRIBUTION AT RETIREMENT, DEATH OR DISABILITY.............
6.1 - Distribution at Retirement..........................
6.2 - Distribution Upon Incurring Disability..............
6.3 - Distributions at Death..............................
6.4 - Notices and Election Procedures.....................
6.5 - Definitions and Application.........................
ARTICLE VII TERMINATION OF EMPLOYMENT...................................
7.1 - Termination Distributions...........................
7.2 - Termination Forfeitures.............................
7.3 - Repayment to Reinstate Forfeited Amounts............
ARTICLE VIII TRUSTEES....................................................
8.1 - Appointment and Tenure of Trustees..................
8.2 - Basic Responsibilities of Trustee...................
8.3 - Powers and Duties of Trustee........................
8.4 - Directed Investments by Participants................
8.5 - Authority...........................................
8.6 - Participation.......................................
8.7 - Discretion..........................................
8.8 - Disputes............................................
8.9 - Records.............................................
8.10 - Accounts............................................
8.11 - Taxes...............................................
8.12 - Expenses............................................
8.13 - Compensation........................................
8.14 - Vacancies...........................................
8.15 - Employer's Records..................................
8.16 - ERISA...............................................
ARTICLE IX ADMINISTRATION..............................................
9.1 - Allocation of Responsibility........................
9.2 - Appointment of Plan Administrator...................
9.3 - Claims Procedure....................................
9.4 - Records and Reports.................................
9.5 - Powers and Duties of the Plan Administrator.........
9.6 - Rules and Decisions.................................
9.7 - Authorization of Benefits Payments..................
9.8 - Application and Forms for Benefits..................
9.9 - Facility of Payment.................................
ARTICLE X MISCELLANEOUS...............................................
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<PAGE> 4
10.1 - Nonguarantee of Employment..........................
10.2 - Rights of Employees and Beneficiaries...............
10.3 - Nonalienation of Benefits...........................
10.4 - Discontinuance of Employer Contributions............
10.5 -No Reversion in Employer............................
10.6 - Jurisdiction........................................
10.7 - Timing of Distributions.............................
10.8 - Beneficiary Designations............................
10.9 - Benefits of Lost Participants.......................
ARTICLE XI AMENDMENTS AND ACTION BY EMPLOYER...........................
11.1 - Amendments..........................................
11.2 - Action by Employer..................................
ARTICLE XII SUCCESSOR EMPLOYER AND MERGER OR
CONSOLIDATION OF PLANS......................................
12.1 - Successor Employer..................................
12.2 - Plan Assets.........................................
ARTICLE XIII PLAN TERMINATION............................................
13.1 - Right to Terminate..................................
13.2 - Partial Termination.................................
13.3 - Liquidation of the Plan.............................
13.4 -Manner of Distribution...............................
ARTICLE XIV DISCHARGE OF DUTIES BY FIDUCIARIES..........................
-iv-
<PAGE> 5
INTRODUCTION
WHEREAS, Hadco Corporation, hereinafter referred to as the "Employer," a
corporation organized and existing under the laws of the Commonwealth of
Massachusetts, established effective October 27, 1973 the Hadco Printed
Circuits, Inc. Profit Sharing Plan and Trust for the purpose of providing
retirement benefits for those employees of the Employer entitled to participate
therein, and
WHEREAS, the Employer has previously amended and restated said Profit
Sharing Plan; and
WHEREAS, the Employer has most recently amended said Profit Sharing Plan on
September 9, 1988 and December 9, 1988;
NOW, THEREFORE, the Employer hereby publishes this Restatement of the Hadco
Corporation Profit Sharing and 401(k) Plan and Trust reflecting amendments
through December 9, 1988 for those of its Employees entitled to participate
herein pursuant to the provisions hereof.
ARTICLE I
DEFINITIONS
1.1 ADJUSTMENT FACTOR shall mean the cost of living adjustment factor
prescribed by the Secretary of the Treasury under Section 415(d) of the
Code for years beginning after December 31, 1987, as applied to such
items and in such manner as the Secretary shall provide. (1/l/88)
1.2 BENEFICIARY shall mean the person(s) or other recipient designated in
accordance with the provisions of Article X hereof to receive any death
benefit which may become payable under this Plan.
1.3 BREAK IN SERVICE shall mean a Computation Period in which an Employee
completes less than five hundred one (501) Hours of Service. (1/l/85)
1.4 CODE shall mean the Internal Revenue Code of 1986 and amendments
thereto. (1/l/87)
1.5 COMPENSATION shall mean the total compensation of a Participant during
the calendar year for which a contribution is being made for which the
Participant received or was entitled to receive a W-2 form from the
Employer. For purposes of this Section 1.5, compensation shall include
those items specified in Treasury Regs. (cent)1.415-2(d)(1) and shall
not include those items specified in Treasury Regs.
(cent)1.415-2(d)(2). (1/l/88)
1.6 DEFINED CONTRIBUTION PLAN shall mean all defined contribution plans
(whether or not terminated) of an employer which shall be treated as
one defined contribution plan for purposes of applying the limitations
of Section 415(b), (c), and (e) of the Code.
<PAGE> 6
-2-
1.7 DETERMINATION DATE shall mean December 31. (1/l/87).
1.8 DISABILITY shall mean a Participant's permanent and total incapacity of
engaging in any employment of the Employer for physical or mental
reasons. Disability shall be deemed to exist only when a written
application has been filed with the Plan Administrator by or on behalf
of such Participant and when Disability is certified to the Plan
Administrator by a licensed physician approved by the Plan
Administrator; provided, however, that in the event any such
Participant meets the requirements for disability benefits under the
Social Security law then in effect, he shall thereafter be deemed to be
disabled within the meaning of this definition.
1.9 EARLY RETIREMENT DATE shall mean the date the Participant attains age
fifty-five (55) and completes fifteen (15) Years of Service.
1.10 EFFECTIVE DATE shall mean the original effective date of the Plan,
October 27, 1973.
1.11 ELECTIVE DEFERRALS shall mean contributions to the Plan made by the
Employer during the Plan Year at the election of the Participant in
lieu of cash compensation and shall include contributions made pursuant
to a salary reduction agreement under Section 3.2 of the Plan. (1/l/88)
1.12 EMPLOYEE shall mean any individual who is employed by the Employer
(other than nonresident aliens employed outside the United States) on
or after the Effective Date, and shall include leased employees within
the meaning of Section 414(n)(2) of the Code except to the extent
excludable under Section 414(n)(5) of the Code. An Employee who is on
an authorized leave of absence shall retain his status as an Employee
for all purposes under the Plan, regardless of whether he is receiving
Compensation during such leave of absence. (1/1/88)
1.13 EMPLOYER shall mean Hadco Corporation, a corporation organized and
existing under the laws of the Commonwealth of Massachusetts, and all
its subsidiaries. (1/l/84)
1.14 EMPLOYER CONTRIBUTIONS shall mean the contributions paid hereunder by
the Employer to the Trustees in accordance with the provisions of
Article III of this document.
1.15 EMPLOYER CONTRIBUTIONS ACCOUNT shall mean the portion of a
Participant's Account which is attributable to Employer Profit Sharing
Contributions made on behalf of such Participant. (1/l/88)
<PAGE> 7
-3-
1.16 EMPLOYER PROFIT SHARING CONTRIBUTIONS shall mean contributions to the
Plan made by the Employer for the Plan Year, other than Elective
Deferrals, Matching Contributions and Qualified Nonelective
Contributions, and allocated to Employer Contributions Accounts under
Section 3.1 of the Plan. (1/1/88)
1.17 ENTRY DATE shall mean any January 1, April 1, July 1 or October 1
following the date a Participant meets the eligibility requirements of
Section 2.1 of the Plan. (1/l/88)
1.18 ERISA shall mean Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, and any amendments thereto.
1.19 FAMILY MEMBER shall mean any individual described in Section 4.14(q)(6)
of the Code. (1/l/87)
1.20 FISCAL YEAR shall mean a twelve (12)- month period ending on the last
Saturday in October.
1.21 FORFEITURES shall mean the portion of a Participant's Employer
Contribution Account and/or Matching Contributions Account which is
forfeited in accordance with Section 7.2 of Article VII hereof.
(1/l/88)
1.22 HIGHLY COMPENSATED EMPLOYEE shall mean any Employee who, during the
Plan Year or the preceding Plan year,
(a) owns (or is considered as owning within the meaning of Section
318 of the Code) more than five percent (5%) of the outstanding
stock of the Employer or stock possessing more than five percent
(5%) of the total combined voting power of all stock of the
Employer, in each case determined without regard to the
aggregation rules of subsections (b), (c) and (m) of Section 414
of the Code; or
(b) received Compensation from the Employer in excess of $75,000.00;
or
(c) received Compensation from the Employer in excess of $50,000.00
and was in the top paid group of employees for such year; or
(d) was at any time an officer and received Compensation greater than
150 percent of the amount in effect under Section 415(c)(1)(A) of
the Code for such year.
For purposes of this Section 1.22, the provisions of subsections
(2), (4), (5), (6), (7), (8), (9) and (10) of Section 414(q) of
the Code are incorporated herein by reference. (1/l/87)
1.23 HOUR OF SERVICE shall mean:
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours shall
be credited to the Employee for the computation period in which
the duties are performed; and
(b) Each hour for which an Employee is paid or entitled to payment by
the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military
duty, or leave
<PAGE> 8
-4-
of absence. No more than 501 Hours of Service. shall be credited
under this paragraph for any single continuous period (whether or
not such period occurs in a single computation period). Hours
under this paragraph shall be calculated and credited pursuant to
Section 2530.200b-2 of the Department of Labor Regulations which
are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
Hours of Service shall not be credited both under paragraphs (a)
or (b), as the case may be, and under this paragraph (c). These
hours shall be credited to the Employee for the computation
period in which the award, agreement, or payment pertains rather
than the period in which such award, agreement or payment is
made. [12/9/88])
1.24 INSURANCE COMPANY shall mean a legal reserve life insurance company
organized and incorporated under the laws of any one of the United
States of America and duly licensed in the Commonwealth of
Massachusetts.
1.25 KEY EMPLOYEE shall mean any Employee, former Employee, or Beneficiary
of any Employee or former Employee who at any time during a Plan Year
or any of the four (4) preceding Plan Years, is:
(a) an officer of the Employer having an annual Compensation greater
than 150% of the amount in effect under Section 415(c)(1)(A) of
the Code for any such Plan Year;
(b) one (1) of the ten (10) Employees having an annual Compensation
from the Employer greater than 150% of the amount in effect under
Section 415(c)(1)(A) of the Code and owning (or considered as
owning) within the meaning of Section 318 of the Code the largest
interests in the Employer;
(c) a five (5%) percent owner of the Employer; or
(d) a one (1%) percent owner of the Employer having an annual
Compensation from the Employer of more than $150,000.
For purposes of clause (a), no more than fifty (50) Employees
(or, if lesser, the greater of three [3] or ten [10%] percent of
all Employees) shall be treated as officers. For purposes of
clause (b), if two Employees own the same percentage interest in
the Employer, the Employee with the highest Compensation from the
Employer will be considered to own a greater percentage. For
purposes of clauses (c) and (d), the definitions of percentage
owners" set forth in Section 416(i)(1)(B) of the Code are
incorporated herein by reference. (1/l/84)
1.26 MATCHING CONTRIBUTIONS shall mean contributions to the Plan made by the
Employer for the Plan Year under Section 3.3 of the Plan and allocated
to a Participant's
<PAGE> 9
-5-
Matching Contributions Account by reason of the Participant's Elective
Deferrals. (1/l/88)
1.27 MATCHING CONTRIBUTIONS ACCOUNT shall mean the portion of a
Participant's Account which is attributable to Matching Contributions
made on behalf of such Participant. (1/l/88)
1.28 NET PROFIT shall mean the net profit of Hadco Corporation and its
subsidiaries on a consolidated basis, determined in accordance with
generally accepted accounting principles. (1/l/84)
1.29 NONHIGHLY COMPENSATED EMPLOYEE shall mean an Employee who is neither a
Highly Compensated Employee nor an individual described in Section
414(q)(6) of the Code. (1/l/87)
1.30 NORMAL RETIREMENT AGE shall mean age sixty-five (65). NORMAL RETIREMENT
DATE shall mean the later of the following:
(a) the Participant's sixty-fifth (65th) birthday, or
(b) the tenth (10th) anniversary of the time the Participant
commenced participation in the Plan.
A Participant may continue participation beyond his Normal
Retirement Date.
1.31 PARTICIPANT shall mean an "Employee who is actively participating in
the Plan in accordance with the provisions of Section 2.1 of Article II
hereof.
1.32 PARTICIPANT'S ACCOUNT shall mean the Participant's Employer
Contributions Account, Matching Contributions Account, Voluntary
Account, Salary Savings Account and Rollover Account referred to
collectively. (1/l/88)
1.33 PARTICIPATION COMPUTATION PERIOD shall mean a twelve (12)
consecutive-month period during which an Employee completes one
thousand (1,000) hours of service with the Employer. An Employee's
initial Participation Computation Period shall be the twelvemonth
period commencing with the Employee's employment commencement date.
Thereafter, the Participation Computation Period shall be the Plan Year
beginning with the Plan Year which includes the first anniversary of
the Employee's employment commencement date, provided that an. Employee
who is credited with one thousand (1,000) hours of service in both the
initial Participation Computation Period and the Plan Year which
includes the first anniversary of the Employee's employment
commencement date shall be credited with two years of service for
purposes of eligibility to participate. (1/l/81)
1.34 PLAN shall mean the Hadco Corporation Profit Sharing and 401(k) Plan
and Trust.
<PAGE> 10
-6-
1.35 PLAN ADMINISTRATOR shall mean Hadco Corporation or such other person or
entity appointed under Article IX hereof, who shall have those
responsibilities of administering the Plan as set forth in Article IX.
1.36 PLAN FIDUCIARY shall be the Trustees, but only with respect to the
specific allocated responsibilities for Plan Administration, as
described in Section 9.1 of Article IX hereof.
1.37 PLAN YEAR shall mean October 28, 1979 to December 31, 1979. Thereafter,
a Plan Year shall mean the twelve (12) month period beginning on each
January 1 and ending on the succeeding December 31.
1.38 QUALIFIED JOINT AND SURVIVOR ANNUITY shall mean an annuity for the life
of the Participant with a survivor annuity for the life of his spouse
which is equal to "two-thirds of the annuity payable during the joint
lives of the Participant and his spouse, and which is the actuarial
equivalent of a single life annuity for the life of the Participant.
[12/9/88]
1.39 QUALIFIED NONELECTIVE CONTRIBUTIONS shall mean contributions to the
Plan made by the Employer for the Plan Year, other than Elective
Deferrals, Employer Profit Sharing Contributions, and Matching
Contributions and allocated to Participants' Salary Savings Accounts
under Section 3.4 of the Plan. (1/l/88)
1.40 ROLLOVER ACCOUNT shall mean the portion of a Participant's interest in
this Plan which is attributable to his Rollover Contributions. (1/l/84)
1.41 ROLLOVER CONTRIBUTION shall mean a contribution made by an Employee
from another qualified plan as provided in Section 3.6 of this Plan.
(1/l/84)
1.42 SALARY SAVINGS ACCOUNT shall mean that portion of a Participant's
Account which is attributable to Elective Deferrals and Qualified
Nonelective Contributions made on behalf of such Participant, and which
is subject to the limitations and provisions of Sections 5.1(a) and 4.5
of the Plan. (1/l/88)
1.43 TOP-HEAVY PLAN shall mean this Plan with respect to any Plan Year if,
as of the last day of the preceding Plan Year, (i) the aggregate of the
accounts of Key Employees under the Plan exceeds sixty (60%) percent of
the aggregate of the accounts of all Employees under the Plan or (ii)
this Plan is part of a Top-Heavy group. For purposes of determining
whether this Plan is a Top Heavy Plan, (A) each plan of the Employer in
which a Key Employee is a Participant and (B) each other plan of the
Employer which enables any plan described in subclause (A) to meet the
requirements of Sections 401(a)(4) or 410 of the Internal Revenue Code
of 1954, as amended, shall be aggregated. This Plan shall be considered
as part of a Top-Heavy group for any Plan Year if it is included in a
group of plans which are aggregated in accordance with the preceding
sentence and the sum of (x) the present value of the cumulative accrued
benefits for Key Employees under all defined benefit plans included in
such aggregation group and (y) the aggregate of the accounts of Key
Employees under all defined contribution plans
<PAGE> 11
-7-
included in such aggregation group, exceeds sixty (60%) percent of a
similar sum determined for all Employees. The following shall apply for
purposes of this Section 1.43:
(a) For purposes of determining the present value of the cumulative
accrued benefit for any Employee or the amount of the account of
any Employee, such present value of amount shall be increased by
the aggregate distributions made with respect to such Employee
during the five (5) year period ending on the Determination Date.
(b) Except to the extent provided in regulations issued by the
Secretary of the Treasury or his designate, any Rollover
Contribution (or similar transfer) initiated by an Employee and
made after December 31, 1983 to a plan shall not be taken account
with respect to the transferee plan for purposes of determining
whether such plan is a Top-Heavy Plan (or whether any aggregation
group which includes such plan is a Top-Heavy group).
(c) If an individual is not a Key Employee with respect to any plan
for any Plan Year, but such individual was a Key Employee with
respect to such plan for any prior Plan Year, any accrued benefit
for such Employee and the account of such Employee shall not be
taken into account.
(d) If an individual has not received any Compensation from the
Employer (other than benefits under the Plan) at any time during
the five (5) year period ending on the determination date, any
accrued benefit for such individual and the account of such
individual shall not be taken into account. (1/l/85)
(e) To the extent provided in regulations issued by the Secretary of
the Treasury or his designate, this section shall be applied on
the basis of any year specified in such regulations in lieu of
plan years. (1/l/84)
1.44 TRUST shall mean the trust agreement entered into by the Employer and
the Trustee(s), embodied herein (inclusive of any subsequent amendments
or supplements hereto), and as duly executed by both parties.
1.45 TRUSTEES shall mean the individual(s) or entity who may at any time be
appointed and acting as Trustees under this Plan and Trust. (1/l/87)
1.46 VALUATION DATE shall mean the last day of each calendar quarter.
1.47 VESTING COMPUTATION PERIOD shall mean the Plan Year. Each Vesting
Computation Period during which the Employee completes one thousand
(1,000) Hours of Service shall be considered a Year of Service for
vesting purposes. An Employee who completes more than 1,000 hours of
service during. both twelve-month periods extending from October 28,
1979 to October 25, 1980 and from January 1, 1980 to December 31,
<PAGE> 12
-8-
1980 shall be credited with two Years of Service for purposes of
determining his vested interest in his Employer Contribution Account.
(10/28/79)
1.48 VOLUNTARY ACCOUNT shall mean the portion of a Participant's interest in
this Plan which is attributable to his Voluntary Contributions.
1.49 VOLUNTARY CONTRIBUTIONS shall mean the voluntary contributions paid by
a Participant hereunder.
1.50 Wherever used herein, a pronoun in the masculine gender shall be
considered as including the feminine gender unless the context clearly
indicates otherwise.
ARTICLE II
PLAN PARTICIPATION
2.1 INITIAL PARTICIPATION
For Plan Years ending on or before December 31, 1987, each Employee,
other than an Employee who is covered by a collective bargaining
agreement under which retirement benefits were the subject of good
faith bargaining, shall commence participation hereunder on the first
day of the month next following his completion of a Participation
Computation Period during which he completed one thousand (1,000)
Hours of Service, but in no event earlier than the Effective Date. For
Plan Years beginning on or after January 1, 1988, each Employee, other
than an Employee who is covered by a collective bargaining agreement
under which retirement benefits were the subject of good faith
bargaining, shall commence participation hereunder on the Entry Date
next following the completion of a six month period of service with
the Employer without regard to the number of Hours of Service
completed. (1/l/88)
For purposes of determining an Employee's initial eligibility to
participate, an Employee shall receive credit for the time period
commencing with the first day he performs an Hour of Service for the
Employer and ending on the date a twelve consecutive month period of
severance begins. A period of severance shall mean a period of time
during which the Employee is no longer employed by the Employer, and
shall begin on the earlier of (i) the date on which the Employee quits,
retires, is discharged or dies or(ii) the first anniversary of the
first day of a period in which the Employee remains absent from service
(with or without pay) with the Employer for any reason other than quit,
retirement, discharge or death, such as on account of vacation,
holiday, sickness, disability, leave of absence or layoff. [12/9/88]
2.2 CESSATION OF PARTICIPATION
A Participant shall become an inactive Participant on the date his
employment with the Employer terminates. He shall remain an inactive
Participant until the date on which the balance of his Participant
Account is distributed to him, or is forfeited, at which time he
<PAGE> 13
-9-
shall cease to be an inactive Participant and become a former
Participant. Active participation in this Plan subsequent to either of
those dates shall be determined in accordance with Section 2.3.
2.3 REINSTATEMENT OF ACTIVE PARTICIPATION
An inactive or former Participant shall recommence active participation
in this Plan on his date of reemployment by the Employer. (1/l/85)
ARTICLE III
CONTRIBUTIONS AND ALLOCATIONS
3.1 PROFIT SHARING CONTRIBUTIONS
The Employer may make annual Profit Sharing Contributions to the Plan
in accordance with this Section 3.1 for the Fiscal Year during which
this Plan is established and for each subsequent Fiscal Year. The
Profit Sharing Contribution for each Fiscal Year shall be an amount
from the Employer's current or accumulated Net Profit as determined
annually by the Board of Directors of the Employer, subject to the
limitations set forth in this Section 3.1 and in Section 3.9, provided
that the Board of Directors may determine that no Profit Sharing
Contribution shall be made for a particular Fiscal Year regardless of
whether the Employer has a Net Profit for such year or an accumulated
Net Profit for prior Fiscal Years.
The Profit Sharing Contribution for each Fiscal Year shall be limited
in amount so that it does not exceed any of the following amounts:
(a) The sum of the Employer's Net Profit for such Fiscal Year plus
its accumulated Net Profit for prior Fiscal Years; or
(b) The maximum amount deductible from the Employer's income for
such Fiscal Year under Section 404 of the Code as a
contribution to a profit sharing plan which meets the
requirements for qualification under Section 401 of the Code,
after taking into consideration all other Employer
contributions under this Plan; or
(c) The aggregate individual Participant limitations in accordance
with Section 415 of the Code, as applied in accordance with
Section 3.9.
The Profit Sharing Contribution for each Fiscal Year shall be
paid to the Trustees as soon as practicable after the end of
the Fiscal Year, but in any event not later than the due date
for the Employer's federal income tax return for such Fiscal
Year, including extensions. If no Profit Sharing Contribution
is to be made for a particular Fiscal Year, the Employer shall
so notify the Trustees within sixty (60) days after the end of
such Fiscal Year. Profit Sharing Contributions shall be
allocated to the Employer Contributions Accounts of those
Participants who shall
<PAGE> 14
-10-
have received any Compensation during the Plan Year within
which such Fiscal Year ends and who are employed on the last
day of the Plan Year. Such contribution shall be allocated
according to the ratio that each such Participant's
Compensation for the Plan Year bears to the total Compensation
of all such Participants for the Plan Year. [12/9/88]
(1/l/88)
3.2 ELECTIVE DEFERRALS
Effective as of April 1, 1988, an Employee who has met the eligibility
and participation requirements of Article II may authorize the Employer
to contribute to the Plan on his behalf as an Elective Deferral an
amount from his Compensation from employment with the Employer, subject
to the limitations set forth in this Section 3.2, and in Section 3.9. A
Participant may authorize Elective Deferrals by filing a salary
reduction agreement with the Employer within thirty (30) days before
the Entry Date he first elects to participate under this Section 3.2.
Each salary reduction agreement shall state the amount to be
contributed to the Plan on behalf of the Participant as a whole
percentage of his Compensation of not less than one percent (1%) or
more than fifteen percent (15%), and shall authorize the Employer to
reduce the Participant's Compensation by such percentage. Such
agreement shall continue until revoked or changed by the Participant by
written notice to the Employer at least thirty (30) days prior to the
effective date of the revocation or change. A Participant who revokes
his salary reduction agreement shall not be eligible to enter into a
new salary reduction agreement before the next Entry Date following the
final payroll period in which such revocation was effective. A
Participant may change his salary reduction agreement quarterly without
restriction.
Contributions may be made under this Section 3.2 without regard to
current or accumulated Net Profits.
No Employee shall be permitted to have Elective Deferrals made under
this Plan during any calendar year in excess of $7,000.00 multiplied by
the Adjustment Factor. In addition, Elective Deferrals on behalf of
Highly Compensated Employees shall be limited as provided in Section
3.9.
Elective Deferrals, reduced by the amount of any taxes required of a
Participant with respect to such Elective Deferrals under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, shall
be paid by the Employer to the Trustees promptly following each pay
period, but in no event later than 30 days after the end of the Plan
Year. The amount of such taxes shall be paid by the Employer to the
appropriate government agency as required by law. Elective Deferrals
shall be allocated to the Salary Savings Accounts of the respective
Participants on whose behalf the contributions are made.
(1/1/88)
<PAGE> 15
-11-
3.3 MATCHING CONTRIBUTIONS
The Employer shall make Matching Contributions to the Plan in
accordance with this Section 3.3 for any calendar quarter during which
one or more Participants authorize Elective Deferrals. The Employer
shall contribute as a Matching Contribution on behalf of each
Participant who has authorized Elective Deferrals an amount equal to
twenty-five percent (25%) of the amount of the Elective Deferrals
(determined without regard to taxes, if any, required to be deducted
therefrom as provided in Section 3.2), up to a maximum of four percent
(4%) of the Participant's Compensation in any Plan Year and subject to
the limitations set forth in Section 3.9. The Board of Directors may
determine that no Matching Contributions shall be made for a particular
calendar quarter, or may increase or decrease the amount of Matching
Contributions for any calendar quarter; provided that such
determination, increase or decrease does not discriminate in favor of
Highly Compensated Employees.
Matching Contributions under this Section 3.3 may be made without
regard to current or accumulated Net Profits.
Matching Contributions shall be paid by the Employer to the Trustees on
a quarterly basis, promptly following the close of each calendar
quarter, but in any event not later than the due date for the
Employer's federal income tax return for the Fiscal Year which ends
within the Plan Year, including extensions. Matching Contributions
shall be allocated to the Matching Contributions Accounts of the
respective Participants on whose behalf the contributions are made and
who are employed on the last day of the quarter.
(1/1/88)
3.4 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer may make Qualified Nonelective Contributions to the Plan
in accordance with this Section 3.4 for any Plan Year. If a Participant
authorizes Elective Deferrals under Section 3.2 when he first becomes
eligible to do so, the Employer shall contribute to the Plan on behalf
of such Participant the sum of $100.00 without regard to the amount of
the Elective Deferral. Any additional Qualified Nonelective
Contribution for any Plan Year shall be an amount as determined
annually by the Board of Directors of the Employer, subject to the
limitations set forth in Section 3.9, provided that the Board of
Directors may determine that no Qualified Nonelective Contribution
shall be made for a particular Plan Year, and provided further that the
Board of Directors may authorize any additional Qualified Nonelective
Contribution to be allocated among all Participants who are Nonhighly
Compensated Employees equally, or according to the ratio that each such
Participant's Elective Deferrals for the Plan Year bears to the total
Elective Deferrals of all Participants who are Nonhighly Compensated
Employees, or according to the ratio that each such Participant's
Compensation bears to the total Compensation of all Participants who
are Nonhighly Compensated Employees for the Plan Year. [9/9/88]
<PAGE> 16
-12-
Qualified Nonelective Contributions under this Section 3.4 may be made
without regard to current or accumulated Net Profits.
Qualified Nonelective Contributions shall be paid to the Trustees as
soon as practicable after the end of the Plan Year, but in any event
not later than the due date for the Employer's federal income tax
return for the Fiscal Year which ends within such Plan Year, including
extensions, and shall be allocated to the Salary Savings Accounts of
Participants on whose behalf the contributions are made.
(1/1/88)
3.5 VOLUNTARY CONTRIBUTIONS
For Plan Years ending on or before December 31, 1987, a Participant may
elect to make Voluntary Contributions to the Plan by executing an
application authorizing the Employer to make regular payroll deductions
of said Voluntary Contributions or by means of a lump sum payment to
the Plan. The amount of such Voluntary Contributions shall be subject
to the limitations of Section 3.9, and the aggregate of all amounts a
Participant contributes shall not exceed ten (10%) percent of the total
Compensation paid to him since he became a Participant in the Plan.
Voluntary Contributions shall be allocated to the Voluntary Account of
the Participant who' has made such contribution.
(1/l/88)
3.6 ROLLOVER CONTRIBUTIONS
An Employee may, with the consent of the Employer and the Trustees,
contribute to the Plan cash as a Rollover Contribution from another
qualified plan or individual retirement trust or annuity or retirement
bond in accordance with Sections 402(a)(5), 403(a)(4), 408(d)(3) or
409(3)(C) of the Code. The Trustees shall maintain a separate Rollover
Account under the Plan for each Rollover Contribution. All such
contributions and the investments thereon shall immediately become and
at all time remain fully vested in the Employee. Rollover Contributions
shall not be taken into consideration in determining the limitations
set forth in Section 3.9.
(1/l/88)
3.7 FORFEITURES
Any Forfeitures from Employer Contributions Accounts which have become
available for distribution during a Plan Year shall be credited. to the
Employer Contributions Accounts of those Participants who are entitled
to share in the Employer's Profit Sharing Contribution for such Plan
Year (regardless of whether a Profit Sharing Contribution has been
made) and such amounts shall be allocated according to the ratio that
each such Participant's Compensation for such Plan Year bears to the
total Compensation of all such Participants for that Plan Year.
<PAGE> 17
-13-
Any Forfeitures from Matching Contributions Accounts which have arisen
during a Plan Year shall be used to reduce the amount of Matching
Contributions required to be made by the Employer under Section 3.3 for
the Plan Year. In the event that the amount of such Forfeitures exceeds
the amount of Matching Contributions so required, the excess shall be
held in a suspense account to be used to reduce the amount of Matching
Contributions required for any subsequent Plan Year. In the event that
upon the termination of the Plan there is any amount then held in such
suspense account, such amount shall be allocated among those
Participants who have a balance in their Matching Contributions
Accounts according to the ratio that the aggregate of each such
Participant's Matching Contributions Account and Salary Savings Account
bears to the aggregate of all Participants' Matching Contributions
Accounts and Salary Savings Accounts, and such amounts shall be
credited to such Matching Contributions Accounts, subject to Sections
3.9 and 3.10. [12/9/88]
(1/l/88)
3.8 INVESTMENT ADJUSTMENT
The net earnings or losses of the trust fund shall be computed on a
quarterly basis. The quarterly periods shall end each March 31, June
30, September 30 and December 31.
The earnings allocated base will be updated to reflect distributions
and contributions before earnings are allocated. At the end of each
quarter, the net earnings and losses of the trust fund for that quarter
shall be allocated to each of the individual accounts of Participants
and Beneficiaries in proportion to their account balances as of the
last day of such quarter except to the extent the provisions of Section
8.4 of the Plan are applicable to any individual account.
(1/l/88)
3.9 LIMITATIONS ON ALLOCATIONS AND CONTRIBUTIONS
(a) Maximum Annual Additions
All annual additions made under the provisions of this Article
III within any Plan Year and with respect to any Participant
shall not exceed the lesser of:
(i) Thirty thousand dollars ($30,000.00) multiplied by
the Adjustment Factor or
(ii) 25% of the Participant's Compensation for such Plan
Year.
For Plan Years ending on or before December 31, 1986, the term
"annual addition" shall mean the sum of (1) Employer
contributions, plus (2) the lesser of one-half (1/2) of the
Participant's Voluntary Contributions or such Participant's
Voluntary Contributions in excess of six percent (6%) of his
annual
<PAGE> 18
-14-
Compensation, plus (3) Forfeitures. For Plan Years beginning
after December 31, 1986, the term "annual addition" shall mean
the amount allocated to a Participant's Account during the
Plan Year that constitutes Profit Sharing Contributions,
Elective Deferrals, Matching Contributions, Qualified
Nonelective Contributions, Voluntary Contributions and
Forfeitures.
In the event the limits of this Section 3.9(a) are exceeded,
the provisions of Section 3.10(a) shall become effective.
(1/l/88)
(b) Maximum Elective Deferrals
The average actual deferral percentage for eligible
Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the greater of (i) or (ii) below:
(ii) the average actual deferral percentage for eligible
Participants who are Nonhighly Compensated Employees
for the Plan Year multiplied by 1.25, or
(ii) the average actual deferral percentage for eligible
Participants who are Nonhighly Compensated Employees
for the Plan Year multiplied by 2, provided that the
average actual deferral percentage for eligible
Participants who are Highly Compensated Employees
does not exceed the average actual deferral
percentage for eligible Participants who are
Nonhighly Compensated Employees by more than two
percentage points or such lesser amount as the
Secretary of the Treasury may prescribe by
regulation.
For purposes of this Section 3.9(b) and Section 3.10(c), the
following definitions shall be used:
(x) "actual deferral percentage" shall mean the ratio
(expressed as a percentage) of Elective Deferrals and
Qualified Nonelective Contributions on behalf of the
eligible Participant for the Plan Year to the
eligible Participant's Compensation for the Plan
Year;
(y) "average actual deferral percentage" shall mean the
average (expressed as a percentage) of the actual
deferral percentages of the eligible Participants in
a group; and
(z) "eligible Participant" shall mean any Participant who
is authorized under the terms of the Plan to have
Elective Deferrals or Qualified Nonelective
Contributions allocated to his Salary Savings Account
for the Plan Year.
<PAGE> 19
-15-
For purposes of determining the actual deferral percentage of
a Participant who is a Highly Compensated Employee, the
Elective Deferrals, Qualified Nonelective Contributions and
Compensation of such Participant shall include the Elective
Deferrals, Qualified Nonelective Contributions and
Compensation of Family Members, and such Family Members shall
be disregarded in determining the actual deferral percentage
for Participants who are Nonhighly Compensated
Employees.
The determination and treatment of the Elective Deferrals,
Qualified Nonelective Contributions and actual deferral
percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
In the event the limits of this Section 3.9(b) are exceeded,
the provisions of Section 3.10(c) shall become effective.
(1/1/88)
(c) Maximum Employee Contributions and Matching Contributions
The average contribution percentage for eligible Participants
who are Highly Compensated Employees for the Plan Year shall
not exceed the greater of (i) or (ii) below:
(i) The average contribution percentage for eligible
Participants who are Nonhighly Compensated Employees
for the Plan Year multiplied by 1.25; or
(ii) The average contribution percentage for eligible
Participants who are Nonhighly Compensated Employees
for the Plan Year multiplied by 2, provided that the
average contribution percentage for eligible
Participants who are Highly Compensated Employees
does not exceed the average contribution percentage
for eligible Participants who are Nonhighly
Compensated by more than two percentage points or
such lesser amount as the Secretary of the Treasury
may prescribe by regulation.
For purposes of this Section 3.9(c) and Section 3.10(d), the
following definitions shall be used:
(x) "average contribution percentage" shall mean the
average (expressed as a percentage) of the
contribution percentages of the eligible Participants
in a group;
(y) "contribution percentage" shall mean the ratio
(expressed as a percentage), of the sum of the
Voluntary Contributions and Matching Contributions
under the plan on behalf of the eligible Participant
for the Plan Year to the eligible Participant's
Compensation for the Plan Year; and
<PAGE> 20
-16-
(z) "eligible Participant" shall mean any Participant who
is authorized under the terms of the Plan to have
Voluntary Contributions or Matching Contributions
allocated to his account for the Plan Year.
For purposes of determining the contribution percentage of an
eligible Participant who is a Highly Compensated Employee, the
Voluntary Contributions, Matching Contributions and
Compensation of such eligible Participant shall include the
Voluntary Contributions, Matching Contributions, and
Compensation of Family Members, and such Family Members shall
be disregarded in determining the contribution percentage for
eligible Participants who are Nonhighly
Compensated Employees.
The determination and treatment of the contribution percentage
of any eligible Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
In the event the limits of this Section 3.9(c) are exceeded,
the provisions of Section 3.10(d) shall become effective.
(1/l/87)
(c) Maximum Employee Contributions and Matching Contributions
The average contribution percentage for eligible Participants
who are Highly Compensated Employees for the Plan Year shall
not exceed the greater of (i) or (ii) below:
(I) The average contribution percentage for eligible
Participants who are Nonhighly Compensated Employees
for the Plan Year multiplied by 1.25; or
(ii) The average contribution percentage for eligible
Participants who are Nonhighly Compensated Employees
for the Plan Year multiplied by 2, provided that the
average contribution percentage for eligible
Participants who are Highly Compensated Employees
does not exceed the average contribution percentage
for eligible Participants who are Nonhighly
Compensated by more than two percentage points or
such lesser amount as the Secretary of the Treasury
may prescribe by regulation.
For purposes of this Section 3.9(c) and Section 3.10(d), the
following definitions shall be used:
(x) "average contribution percentage" shall mean the
average (expressed as a percentage) of the
contribution percentages of the eligible Participants
in a group'
<PAGE> 21
-17-
(y) "contribution percentage" shall mean the ratio
(expressed as a percentage), of the sum of the
Voluntary Contributions and Matching Contributions
under the plan on behalf of the eligible Participant
for the Plan Year to the eligible Participant's
Compensation for the Plan Year; and
(z) "eligible participant" shall mean any Participant who
is authorized under the terms of the Plan to have
Voluntary Contributions or Matching Contributions
allocated to his account for the Plan Year.
For purposes of determining the Contribution percentage of an
eligible Participant who is a Highly Compensated Employee, the
Voluntary Contributions, Matching Contributions and
Compensation of such eligible Participant shall include the
Voluntary Contributions, Matching Contributions, and
Compensation of Family Members, and such Family Members shall
be disregarded in determining the contribution percentage for
eligible Participants ;who are Nonhighly
Compensated Employees.
(d) Limitations on Compensation
For Plan Years beginning after December 31, 1988, the
Compensation of each Employee taken into account under this
Plan shall not exceed $200,000.00 multiplied by the Adjustment
Factor.
(1/l/88)
3.10 ALLOCATION OF EXCESS ALLOCATIONS AND CONTRIBUTIONS
(a) Excess Annual Additions
The following steps shall be taken when a Participant has
received an allocation to his Participant Account in a given
Plan Year which results in an annual addition that would
exceed the limitations in 3.9(a) above:
(i) That portion of a Participant's Voluntary
Contribution for that Plan Year which is a part of
the annual additions shall be refunded to him to the
extent necessary to reduce the annual addition to the
allowable limits as set forth in Section 3.9(a)
above.
(ii) If, after returning a Participant's Voluntary
Contributions for that Plan Year as called for in (i)
above, the limits of Section 3.9(a) are still
exceeded, then the excess portion of the allocation
of Profit Sharing Contributions and Forfeitures shall
be reallocated to eligible Participants
<PAGE> 22
-18-
as a Forfeiture for the Year in the manner described
in Section 3.7 of this Article III.
(iii) In the event that any Profit Sharing Contributions
and/or Forfeitures may still be remaining subsequent
to the procedures set forth in (ii) above, then such
amounts shall be placed in a suspense account to be
reallocated on the next succeeding Allocation Date in
accordance with Section 3.7 of this Article III. In
the event of termination of the Plan, the suspense
account shall revert to the Employer to the extent it
may not then be allocated to any Participant's
account.
(iv) Notwithstanding any other provisions of this Plan,
the Employer shall not contribute any amount that
would cause an allocation to the suspense account as
of the date the contribution is allocated. If the
contribution is made prior to the date as of which it
is to be allocated, then such contribution shall not
exceed an amount that would cause an allocation to
the suspense account if the date of contribution were
on the. allocation date. if an allocation is made to
such suspense account, it shall contain gains or
losses. Any such gains shall be viewed as an annual
addition at the time they are allocated to a
Participant's Account.
(1/l/87)
(b) Excess Deferrals
In the event the aggregate elective deferrals of a Participant
under one or more plans described in Sections 401(k), 408(k)
or 403(b) of the Code exceed $7,000.00 for any taxable year of
such Participant, the excess deferral amount for such year
that the Participant allocates to this Plan and income
allocable thereto shall be distributed no later than April 1
following the close of such taxable year, provided that the
Participant gives written notice on or before March 1
following the close of the taxable year specifying the excess
deferral amount allocated to this Plan and stating that if
such amounts are not distributed, such excess deferral amount,
when added to amounts deferred under other plans or
arrangements described in Sections 401(k), 408(k), or 403(b)
of the Code, will exceed the limit imposed on the Participant
by Section 402(g) of the Code for the year in which the
deferral occurred. Notwithstanding a distribution under this
Section 3.10(b), any excess deferral amount allocated to this
Plan shall be treated as an Elective Deferral for purposes of
applying Section 3.9(b).
(1/l/88)
(c) Excess Contributions
The Plan Administrator may suspend, reduce or prohibit all
Elective Deferrals made on behalf of Participants who are
Highly Compensated Employees for any
<PAGE> 23
-19-
Plan Year or part thereof, if the Plan Administrator in its
discretion determines that such Elective Deferrals may result
in an actual deferral percentage that exceeds the limits of
Section 3.9(b). In the event the limits of Section 3.9(b) are
exceeded for any Plan Year, the excess contributions shall be
treated as provided in (i) or (ii) below:
(i) At the Participant's written election, excess
contributions and income allocable thereto shall be
treated as an amount distributed to the Participant
and than contributed by the Participant to the Plan,
provided that such treatment does not cause the
limitations of Sections 3.9(a) or 3.9(c) to be
exceeded.
(ii) Except as otherwise elected in writing by a
Participant pursuant to (i) above, excess
contributions and income allocable thereto shall be
distributed no later than the last day of the
following Plan Year to Participants on whose behalf
such excess contributions were made. Any distribution
of excess contributions for any Plan Year shall be
made to Highly Compensated Employees on the basis of
the respective portions of the excess contributions
attributable to each of such Employees.
The term "excess contributions" means, with respect to any
Plan Year, the excess of (x) the aggregate amount of Elective
Deferrals, Matching Contributions and Qualified Nonelective
Contributions actually paid over to the Trustees on behalf of
Highly Compensated Employees for such Plan Year, over (y) the
maximum amount of such contributions permitted under the
limitations of Section 3.9(b) (determined by reducing
contributions made on behalf of Highly Compensated Employees
in order of actual deferral percentages beginning with the
highest of such percentages).
(1/l/88)
(d) Excess Aggregate Contributions
In the event the limits of Section 3.9(c) are exceeded for any
Plan Year, excess aggregate contributions and income allocable
thereto shall be forfeited, if otherwise forfeitable under the
terms of this Plan, or if not forfeitable, distributed no
later than the last day of the following Plan Year to
Participants to whose accounts such Voluntary Contributions or
Matching Contributions were allocated. Any distribution of
excess aggregate contributions for any Plan Year shall be made
to Highly Compensated Employees on the basis of the respective
portions of such amounts attributable to each of such
Employees. Forfeitures of excess aggregate contributions may
not be allocated to Participants whose contributions are
reduced under this paragraph.
The term "excess aggregate Contributions means, with respect
to any Plan Year, the excess of (x) the aggregate amount of
contributions taken into account in
<PAGE> 24
-20-
computing the contribution percentage under Section 3.9(c)
actually made on behalf of Highly Compensated Employees for
such Plan Year, over (y) the maximum amount of such
contributions permitted under the limitations of Section
3.9(c) (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of their contribution
percentages beginning with the highest of such percentages).
The determination of the amount of excess aggregate
contributions shall be made after first applying the
provisions of Sections 3.10(b) and 3.10(c).
(1/l/87)
3.11 CONTRIBUTIONS FOR TOP-HEAVY PLAN YEARS
For any Plan Year for which this Plan is deemed to be a Top-Heavy Plan
under the provisions of Section 1.43 of the Plan, the following
provisions shall apply:
(a) The Employer shall contribute for each Participant who is not
a Key Employee not less than three (3%) percent of such
Participant's Compensation for the year, except as provided in
Section 3.11(b) below. For purposes hereof, any Participant
who has not separated from service at the end of the Plan Year
shall receive the minimum contribution provided for herein
without regard to the number of hours worked during the Plan
Year. [12/9/88]
(b) The percentage referred to in Section 3.11(a) above for any
year shall not exceed the percentage at which contributions
are made under the Plan for such year the Key Employee for
whom such percentage is the highest for the year. The
determination of the percentage at which contributions are
made for each Key Employee shall be made by dividing the
contribution for such Employee by so much of his Compensation
for the year as does not exceed $200,000.00 multiplied by the
Adjustment Factor.
(c) The annual Compensation of each
Empl___________________________________ account under this
Plan shal_____________________________________________
$200,000.00 multiplied by the
Adjust______________________________________
(1/l/88)
ARTICLE IV
WITHDRAWALS PRIOR TO TERMINATION OF __________
4.1 WITHDRAWALS FROM VOLUNTARY ACCOUNTS
A Participant may, at any time prior to the distribution of his
Voluntary Account, elect to withdraw a cash amount equal to all or a
specified portion of the value of such Account,
<PAGE> 25
-21-
including interest and earnings thereof. The minimum withdrawal shall
be the total balance of the Voluntary Account or in increments of
$500.00. The Participant's election to withdraw must be made in writing
to the Plan Administrator and such request must specify the amount to
be withdrawn from his Voluntary Account.
Each such withdrawal shall be made as soon as practicable following the
date the Plan Administrator receives from the Participant such written
notice of withdrawal.
(1/l/88)
4.2 RESUMPTION OF VOLUNTARY CONTRIBUTIONS
Any Participant who makes a withdrawal in accordance with this Article
shall be prohibited from making Voluntary Contributions for a period of
twelve (12) months. The Participant may elect to resume Voluntary
Contributions as of the first day of any month which succeeds the date
of withdrawal by at least twelve (12) months. Election to resume
payments must be made in writing to the Plan Administrator at least
thirty-one (31) days prior to the first day of the month in which the
Participant wishes the resumption to be made effective. Amounts
withdrawn by a Participant may not be returned to this Plan.
4.3 WITHDRAWALS FROM EMPLOYER CONTRIBUTIONS ACCOUNT
In no event shall a Participant be eligible to elect withdrawal of any
monies from his Employer Contributions Account except upon his
termination of employment with the Employer, at which time such
withdrawal shall be subject to the terms of Article VII.
4.4 WITHDRAWALS FROM ROLLOVER ACCOUNT
In no event shall a Participant be eligible to elect withdrawal of any
monies from his Rollover Account except upon his termination of
employment with the Employer. At any time, on or after a Participant's
termination of employment, the Participant may elect, by written notice
meeting the requirements set out in Section 7.1 hereof, to receive a
lump sum distribution of his Rollover Account valued as of the
Valuation Date coincident with or next following receipt of such
notice. Such lump sum payment shall be made as soon as practicable
after the date the Plan Administrator receives such written notice from
the Participant. (8/22/86; 1/l/87)
4.5 WITHDRAWALS FROM SALARY SAVINGS ACCOUNT
A Participant shall not be eligible to elect a withdrawal of any monies
from his Salary Savings Account prior to his separation from service,
except upon the earlier to occur of (a) attainment of age 59 1/2 by the
Participant, or (b) termination of the Plan without the establishment
of a successor plan, or (c) upon hardship of the Participant. Upon a
Participant's separation from service with the Employer, whether by
reason of death, disability, retirement or termination of employment,.
distribution of the Participant's
<PAGE> 26
-22-
Salary Savings Account shall be subject to the provisions of Article VI
or VII as the case may be. [9/9/88]
For purposes of this Section 4.5, "hardship" shall be limited to such
extraordinary circumstances as the Plan Administrator in its sole
discretion shall determine, such as: unusual and uninsured medical
expenses.. college educational expense, the construction, renovation or
purchase of a principal residence, but generally excluding hardship
attributable solely to layoff; provided, however, any distribution
under this Section 4.5 shall not exceed the amount required to meet the
immediate financial need created by the hardship and in making such
determination the Plan Administrator shall take into account other
financial resources available to the Participant (provided that
similarly situated Plan Participants shall be treated in a uniform and
nondiscriminatory manner). Hardship withdrawals under this Section 4.5
shall be limited to that portion of the Participant's Salary Savings
Account that is attributable to his Elective Deferrals and shall not
include any portion of such account that is attributable to income
earned on such account after December 31, 1988. In addition, hardship
withdrawals shall not include any portion of the Participant's Salary
Savings Account that is attributable to Qualified Nonelective
Contributions or qualified employer matching contributions (if any) or
any income earned thereon. [12/9/88]
All requests for distributions under this Section 4.5 shall be made in
writing and delivered to the Plan Administrator thirty days prior to
the end of any calendar quarter. Distributions under this Section 4.5
shall be made not later than 60 days following the close of the
calendar quarter coinciding with or next following the delivery of the
written request for withdrawal to the Plan Administrator. if the
Participant is married, the spouse of the Participant must consent to
any lump sum distribution in excess of $3,500.00. The spouse's consent
must be in writing and must acknowledge the effect of the election. The
spouse's signature must be witnessed by a Plan representative or a
notary public. In determining the value of a Participant's Salary
Savings Account for purposes of this Section, the Plan Administrator
shall have the discretion to use either of the following values: (i)
the value as of the most recent valuation, or (ii) the value as of the
next valuation. [9/9/88]
Any Participant who makes a withdrawal in accordance with this Section
4.5 shall be prohibited from making Elective Deferrals for a period of
twelve (12) months. The Participant may elect to resume Elective
Deferrals as of the Entry Date which succeeds the date of withdrawal by
at least twelve (12) months, provided that the Participant's Elective
Deferrals for his taxable year immediately following the taxable year
of the hardship withdrawal shall not exceed the limit set forth in
Section 3.2 of this Plan decreased by the amount of the Participant's
Elective Deferrals for the taxable year of the hardship withdrawal. An
election to resume Elective Deferrals must be made in writing to the
Plan Administrator at least thirty (30) days prior to the Entry Date on
which the Participant wishes the resumption to be made effective.
Amounts withdrawn by a Participant may not be returned to this Plan.
[12/9/88]
<PAGE> 27
-23-
(1/l/88)
4.6 LOANS TO PARTICIPANTS
The Plan Administrator may, subject to rules of uniform application,
authorize the Trustees to make loans to any Participant who has
authorized Elective Deferrals under Section 3.3, subject to the
provisions of this Section 4.6.
(a) The amount of any loan to a Participant, when added to the
outstanding balance of all other loans from this Plan or a
related plan, shall be limited as follows:
(i) If the present value of the Participant's vested
interest in his Salary Savings Account and Matching
Contributions Account is ten thousand ($10,000)
dollars or less, then the limit shall be the amount
of such vested interest;
(ii) If the present value of the Participant's vested
interest in his Salary Savings Account and Matching
Contributions Account exceeds ten thousand ($10,000)
dollars, then the limit shall be the greater of ten
thousand ($10,000) dollars or one-half of such vested
interest, but not more than fifty thousand ($50,000)
dollars. (9/9/88)
(b) The minimum loan amount shall be $1,000 and may be in
additional increments of $500. Written requests for a loan
must be submitted to the Plan Administrator within sixty days
prior to the beginning of any calendar quarter.
(c) Any loan hereunder shall be evidenced by a valid promissory
note, payable on a date or dates certain by payroll deduction,
with interest at a rate to be established by the Plan
Administrator with reference to the then current interest
rates available from lending institutions in the Southern New
Hampshire area. Unless the loan is to be used to acquire any
dwelling unit which, within a reasonable time of the date of
the loan, is to be used as a principal residence of the
Participant, the promissory note shall provide that the loan
is to be repaid within five (5) years. [9/9/88]
(d) The Trustees may require such security for the loan as they
deem reasonable; provided that, if the Participant's Account
is to be used as security, the spouse of the Participant must
consent in writing to the use of the account as security and
such consent must be given at the time the security interest
is entered into.
(e) For purposes of this Section 4.6, the value of a Participant's
Salary Savings Account and Matching Contributions Account
shall be based on the value of such accounts as determined as
of the date of the most recent preceding valuation or, in the
discretion of the Plan Administrator, as of the date on which
the loan is made.
(1/l/88)
<PAGE> 28
-24-
ARTICLE IV-A
VALUATION OF ACCOUNTS
4A.1 ACCOUNTS
The Plan Administrator shall create and maintain adequate records to
disclose the interest in this Plan of each Participant and Beneficiary.
Such records shall be in the form of individual accounts, including
Employer Contributions Accounts, Matching Contributions Account, Salary
Savings Accounts, Voluntary Accounts and Rollover Accounts, and credits
and charges shall be made to such accounts in the manner described in
this Article IV-A.
4A.2 ADJUSTMENT OF ACCOUNTS
All Participant's Accounts shall be adjusted as of the last day of each
calendar quarter to reflect transfer of funds, contributions,
forfeitures and net earnings allocated, and withdrawals, distributions,
forfeitures and losses debited, during or with respect to such quarter
under the provisions of this Plan.
4A.3 VALUATION OF TRUST FUND
As of each Determination Date and at such other times as may be
requested by the Employer or the Plan Administrator, the Trustees shall
determine the fair market value of the trust fund.
4A.4 ANNUAL STATEMENTS
Not less frequently than annually, each Participant or Beneficiary
shall be furnished a statement showing the value of his Participant's
Account, including a breakdown by individual account.
(Article amended effective 1/l/88)
ARTICLE V
VESTING
5.1 FULL VESTING
(a) A Participant shall be one hundred percent (100%) vested in
his Voluntary Account, Rollover Account, and Salary Savings
Account at all times.
(b) A Participant's interest in his Employer Contributions Account
shall become one hundred percent (100%) vested at the earliest
of the following dates:
<PAGE> 29
-25-
(i) For Plan Years ending on or before December 31, 1987,
the date the Participant has completed ten (10) Years
of Service with the Employer, or for Plan Years
beginning after December 31, 1987, the date the
Participant has completed five (5) Years of Service
with the Employer; provided that, if the Participant
has completed five (5) Years of Service on or before
December 31, 1987 and is employed on that date, he
shall become one hundred percent (100%) vested as of
December 31, 1987;
(ii) The date of the Participant's death;
(iii) The date the Participant incurs a Disability;
(iv) The Participant's Normal Retirement Age;
(v) The date of termination of this Plan or partial
termination of this Plan with respect to the
Participant as provided in Article XIII, or the date
of complete discontinuance of Employer contributions
as provided in Section 10.4.
(c) A Participant's interest in his Matching Contributions Account
shall become one hundred percent (100%) vested at the earliest
of the following dates:
(i) The date the Participant has completed three (3)
Years of Service with the Employer;
(ii) The date of the Participant's death;
(iii) The date the Participant incurs a Disability;
(iv) The Participant's Normal Retirement Age;
(v) The date of termination of this Plan or partial
termination of this Plan with respect to the
Participant as provided in Article XIII.
(1/l/88)
5.2 PARTIAL VESTING
Prior to the date that the Participant's interest in his Employer
Contributions Account or Matching Contributions Account becomes fully
vested in accordance with Section 5.1, his current vested interest
shall be determined in accordance with (a), (b) or (c) below:
(a) For Plan Years ending on or before December 31, 1987, the
following schedule shall apply with respect to Employer
Contributions Accounts:
Vested Percentage of
Years of Service Participant's Employer
<PAGE> 30
-26-
With the Employer Contributions Account
----------------- ---------------------
Less than 4 0%
4 40%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
(b) For Plan Years beginning after December 31, 1987, the
following schedule shall apply with respect to Employer
Contributions Accounts:
Vested Percentage of
Years of Service Participant's Employer
With the Employer Contributions Account
----------------- ---------------------
Less than 2 0%
2 25%
3 50%
4 75%
5 or more 100%
(c) For Plan Years beginning after December 31, 1987, the
following schedule shall apply with respect to Matching
Contributions Accounts:
Vested Percentage of
Years of Service Participant's Employer
With the Employer Contributions Account
----------------- ---------------------
Less than 1 0%
1 33-1/3%
2 66-2/3%
3 or more 100%
(1/l/88)
5.3 VESTING AFTER RECEIPT OF DISTRIBUTION
In the event that a Participant receives a distribution from his
Employer Contributions Account in accordance with the provisions of
this Plan governing distributions prior to the date he is one hundred
percent (100%) vested in such Account, then his vested interest in such
Account on any date of determination subsequent to the date of
distribution and prior to the date he ceases participation shall not be
less than an amount ("X") determined by the formula:
<PAGE> 31
-27-
X = P (AB + (R) (D)) - (R) (D), where
AB = The Participant's Account Balance as of the date of
determination
D = Amount of the distribution
P = The Vested percentage applicable to the Participant as of the
date of determination
R = The ratio of the Account Balance as of the date of
determination to the Account Balance after the distribution
5.4 VESTING FOR TOP-HEAVY PLAN
(a) In the event this Plan is deemed to a Top-Heavy Plan, a Participant's
current vested interest in his Employer Contributions Account shall be
determined in accordance with this Section 5.4 notwithstanding the
foregoing provisions of this Article V.
(b) The following vesting schedule shall be applicable in lieu of the
vesting schedule set out in Section 5.2(a), with respect to Plan Years
ending on or before December 31, 1987:
Vested Percentage of
Years of Service Participant's Employer
With the Employer Contributions Account
----------------- ---------------------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(c) The vesting schedule set out in section 5.2(b) shall be
applicable with respect to Plan Years beginning after December
31, 1987.
(d) For purposes of this Section 5.4, Years of Service shall be
determined under the applicable provisions of Sections 1.47,
2.2 and 2.3 of this Plan.
(e) At such time as the Plan ceases to be a Top-Heavy Plan, the
vesting schedule of Section 5.2 shall again become applicable
in determining a Participant's vested interest in his Employer
Contributions Account; provided, however, that no
Participant's vested interest may be reduced hereunder; and
provided further, that any Participant who has completed at
least three (3) years of service at the time the Plan ceases
to be a Top-Heavy Plan may elect to continue to have his
vested percentage determined under the schedule set out in
this Subsection 5.4.
(1/l/88)
<PAGE> 32
-28-
5.5 CREDITING YEARS OF SERVICE
(a) Years of Service for purposes of determining a Participant's
vested interest in this Plan, as defined in Section 1.47,
shall be credited in accordance with the following provisions:
(1) All Years of Service of a Participant who has never
incurred a Break in Service or who has incurred fewer
than five (5) consecutive Breaks in Service shall be
taken into account in determining his vested interest
in his Employer Contribution Account and/or Matching
Contributions Account.
(2) In the case of a Participant who has incurred five
(5) or more consecutive Breaks in Service, and who
has retained a vested interest in this Plan, separate
accounts will be maintained for the Employer
Contributions and Matching Contributions accrued
prior to such Breaks and Employer Contributions and
Matching Contributions accrued after such Breaks.
Years of Service after such Breaks shall be
disregarded for purposes of determining such
Participant's vested interest in his preBreak
Employer `Contributions Account and/or Matching
Contributions Account, and all Years of Service shall
be taken into account in determining his vested
interest in his postBreak Employer Contribution
Account and/or Matching Contributions Account.
(3) All Years of Service of an inactive or former
Participant whose vested percentage in this Plan in
accordance with this Article V is zero (0) shall be
taken into account for purposes of determining such
Participant's vested interest after reemployment with
the Employer unless the number of his consecutive
Breaks in Service equals or exceeds five (5), in
which case prebreak service shall be disregarded.
(1/l/88)
(b) For purposes of determining whether a Participant has incurred
a Break in Service, the following provisions shall apply in
the case of any individual who is absent from work for any
period by reason of the pregnancy of the individual, the birth
of a child of the individual, the placement of a child with
the individual in connection with the adoption of such child
by such individual, or for purposes of caring for such child
for a period beginning immediately following such birth or
placement.
(1) The following hours shall be treated as Hours of
Service under the Plan:
(i) the Hours of Service which otherwise
normally would have been credited to such
individual but for such absence, or
<PAGE> 33
-29-
(ii) eight (8) hours per day of such absence, if
the actual number of hours described in
paragraph (i) cannot be determined;
except that the total number of hours treated as
Hours of Service hereunder shall not exceed 501
hours.
(2) The hours described in subsection
______________________________ shall be treated as
Hours of Service _____________________________ the
Plan Year in which the absence
_____________________________ begins, if a
Participant would __________________________________
from incurring a Break in Service in
_____________________________ solely because the
period of absence _____________________________
treated as Hours of Service as provided in subsection
(1) above, or otherwise in the immediately following
year.
(3) The Plan Administrator may require a Participant to
provide reasonable evidence to establish that the
absence from work is covered by these provisions and
the number of days for which there was such an
absence.
(1/l/85)
ARTICLE VI
DISTRIBUTION AT RETIREMENT, DEATH, OR DISABILITY
6.1 DISTRIBUTION AT RETIREMENT
(a) A Participant shall, upon retirement on or after his Early
Retirement Date (if applicable) or his Normal Retirement Date,
be entitled to a distribution of his Participant Account as
described in this section. The final value of the Participant
Account shall be determined as of the Valuation Date
coincident with or next following the applicable retirement
date. (1/l/88)
(b) Unless otherwise elected as provided in Section 6.4 below, the
Plan benefit to be distributed to a Participant shall be paid
in the form of a qualified joint and survivor annuity.
(c) If a Participant elects to waive a benefit in the form
described in paragraph (b) above, in accordance with the
election procedures described in Section 6.4 below, he shall
be entitled to receive a benefit in any one of the following
forms or in a combination of any of the following forms:
(i) A single sum cash distribution equal to the total
amount contained in his Participant Account;
(ii) An annuity for the life of the Participant;
<PAGE> 34
-30-
(iii) A contingent annuitant annuity;
(iv) A year certain and life annuity; or
(v) A full cash refund annuity.
6.2 DISTRIBUTION UPON INCURRING DISABILITY
If a Participant should become disabled prior to his Retirement Date,
he may elect, in accordance with the procedure described in Section 6.4
below, to receive a distribution of benefits in any of' the forms
described in Section 6.1 above at any time after the date he incurs the
Disability. As of the Participant's Retirement Date, any amount then
remaining in his Participant Account shall commence to be paid as a
retirement benefit in accordance with Section 6.1 above.
6.3 DISTRIBUTIONS AT DEATH
(a) The Beneficiary of a Participant who dies before benefits have
commenced under this Plan shall be entitled to a death benefit
based on the value of the Participant's account as of the
actual date of distribution, to be paid in a single sum cash
distribution.
(b) In the case of a Participant's death after the commencement of
a benefit under this Plan, any death benefit shall be payable
in accordance with the particular form of annuity the
Participant had elected.
6.4 NOTICES AND ELECTION PROCEDURES
(a) At least nine (9) months prior to a Participant's Early or
Normal Retirement Date, the Plan Administrator shall notify
the Participant in writing of:
(i) the terms and conditions of a qualified joint and
survivor annuity;
(ii) the Participant's right to make and the effect of an
election to waive the qualified joint and survivor
annuity form of benefit;
(iii) the rights of a Participant's spouse; and
(iv) the right to make, and the effect of, a revocation of
a previous election to waive the qualified joint and
survivor annuity.
The Plan Administrator will also provide a Participant with a
written explanation, in nontechnical language, of each of the
forms of benefits described in Section 6.1(c) above, and the
financial consequences and legal ramifications, if any,
contained therein, at the same time as the said notice
concerning the qualified joint and survivor annuity is given.
<PAGE> 35
-31-
(b) A Participant may elect to waive a benefit in the form of a
qualified joint and survivor annuity, provided that the waiver
must be in writing and must be consented to by the
Participant's spouse. The spouse's consent must acknowledge
the effect of the election and must be witnessed by a Plan
representative or notary public. Notwithstanding this consent
requirement, if the Participant establishes to the
satisfaction of a Plan representative that such written
consent may not be obtained because there is no spouse or the
spouse cannot be located, a waiver signed only by the
Participant will be deemed a qualified election. Any consent
necessary under this provision will be valid only with respect
to the spouse who signs the consent, or in the event of a
deemed qualified election, the designated spouse.
Additionally, a revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any time
before the commencement of benefits. The number of waivers or
revocations shall not be limited.
(c) The election to waive a qualified joint and survivor annuity
must be made within the ninety (90) day period ending on the
date the Participant's benefits would commence.
6.5 DEFINITIONS AND APPLICATION
(a) As used in this Article VI, the following terms have the
meanings set out below:
(i) Qualified Joint and Survivor Annuity: An annuity for
the life of the Participant with a survivor annuity
for the life of the spouse which meets the
requirements of Section 1.38 above, and which is the
amount of the benefit which can be purchased with the
Participant's vested account balance. A qualified
joint and survivor annuity for an unmarried
Participant is an annuity for the life of the
Participant. [12/9/88]
(ii) Spouse: The spouse or surviving spouse of the
Participant, provided that a former spouse will be
treated as the spouse of a surviving spouse to the
extent provided under a qualified domestic relations
order as described in Section 414(p) of the Code.
(b) The provisions of Section 6.1 relating to qualified joint and
survivor annuities shall apply to any Participant who is
credited with at least one (1) Hour of Service on or after
August 23, 1984.
(c) A Participant who is living, who has been credited with at
least one (1) Hour of Service on or after September 2, 1974,
who separated from service before August 23, 1984 and who has
not commenced receiving benefits, may elect to have the
provisions of Section 6.1 apply to him and his spouse.
(d) A Participant who is living, who has been credited with at
least one (1) Hour of Service in a Plan Year beginning on or
after January 1, 1976, who separated from
<PAGE> 36
-32-
service before August 23, 1984 having at least ten (10) years
of service under the Plan, and who has not commenced receiving
benefits, may elect to have the provisions of Section 6.1
apply to him and his spouse.
(e) An election under either subsection (c) or (d) may be made
within the period beginning on August 13, 1984 and ending on
the earlier of the date benefits would commence or the date of
the Participant's death. Notice of the right to make such
election shall be provided in accordance with applicable rules
and regulations.
(Article amended 1/l/85)
ARTICLE VII
TERMINATION OF EMPLOYMENT
7.1 TERMINATION DISTRIBUTIONS
Upon the termination of the Participant's employment with the Employer
prior to his Retirement Date, other than by reason of his incurring a
Disability or his death, the Participant's vested interest in each of
his Accounts shall be determined, as of his date of termination of
employment, in accordance with Article V hereof. Distribution of the
Participant's vested interest in his Accounts (valued as of the
Valuation Date next prior to the actual distribution commencement date)
shall be made in accordance with (a) , (b) or (c) as follows:
(a) Before Retirement Date: The Participant may elect, by written
notice meeting the requirements set out below to the Plan
Administrator, to receive a lump sum distribution equal to his
vested interest in his Employer Contributions Account at any
time after he has incurred a one year Break in Service during
a Vesting Computation Period (determined without regard to the
provisions of Section 5.5(b)) and prior to his Retirement
Date; provided, however, that such election may be made at any
time on or after a Participant's date of termination of
employment if his interest in such Account is fully vested.
The Participant may make such election with respect to his
Salary Savings Account, Matching Contributions Account,
Voluntary Account and Rollover Account at any time on or after
his date of termination of employment. Such lump sum cash
payment shall be made as soon as practicable after the
Valuation Date following the later of (i) the date the
Participant becomes eligible to receive such payment or (ii)
the date the Plan Administrator receives from the Participant
such written notice. [9/9/88]
(b) At Social Security Retirement: A Participant who otherwise
does not qualify for Early or Normal Retirement under the
Plan, but who has attained age sixty-two (62) and is actually
retiring under the provisions of the Social Security Act, may
elect to receive a lump sum distribution equal to his vested
interest in his Participant Account, by giving written notice
meeting the requirements set out
<PAGE> 37
-33-
below to the Plan Administrator that he meets the conditions
of this section and that he does not intend to seek future
employment with the Employer. Such lump sum payment shall be
made as soon as practicable after the Valuation Date following
the date the Plan Administrator receives such written notice.
(c) At or After Retirement Date: If, as of the Participant's
Retirement Date, any amount shall then be remaining in his
Participant Account, distribution of said amount shall
automatically be made to such Participant (provided he is then
living) as of such Retirement Date. Payment at Retirement Date
shall be in any method described in Section 6.1 hereof as
shall be chosen by the Participant.
Any election to receive a lump sum distribution must be in writing and
signed by the Participant. If the Participant is married, the spouse of
the Participant must consent to any lump sum distribution in excess of
$3,500.00. The spouse's consent must be in writing and must acknowledge
the effect of the election. The spouse's signature must be witnessed by
a Plan representative or a notary public.
Notwithstanding the foregoing, if the value of the vested interest of
the Participant in his Participant's Account upon retirement or
termination of employment is three thousand five hundred ($3,500.00)
dollars or less, the Plan Administrator may direct the distribution of
such amount as a lump sum cash payment to the Participant, whether or
not the Participant has filed a written election under this Section
7.1. [9/9/88]
(1/l/88)
7.2 TERMINATION FORFEITURES
A Participant whose employment with the Employer is terminated as
described in Section 7.1 of this Article, and who has not received a
distribution of the vested portion of his Employer Contributions
Account and/or Matching Contributions Account, shall forfeit the value
of that portion of his Employer Contributions Account and/or Matching
Contributions Account in which he was not vested at the date of his
termination of employment as of the Valuation Date coincident with or
next following the date he incurs five (5) consecutive Breaks in
Service after such termination of employment. A Participant who has
received a distribution of the vested portion of his Employer
Contributions Account and/or Matching Contributions Account under
Section 7.1 shall forfeit the value of the portion of his Employer
Contributions Account and/or Matching Contributions Account in which he
was not vested at the date of his termination of employment as of
December 31 of the Plan Year in which such distribution was made,
provided that such forfeited amounts may be reinstated as provided in
Section 7.3 of this Article. Except as provided in Article XII hereof,
any amounts so forfeited by Participants shall be allocated to
remaining Participants in accordance with Section 3.4 of Article III.
[9/9/88]
If the Participant's employment with the Employer is terminated as
described in Section 7.1 of this Article, and he subsequently resumes
employment with the Employer prior to
<PAGE> 38
-34-
receiving a distribution of his vested interest in his Employer
Contributions Account and/or Matching Contributions Account, the then
current value of the nonvested portion of his Employer Contributions
Account and/or Matching Contributions Account shall not be forfeited on
account of such termination of employment and shall continue to be
maintained in said Employer Contributions Account and/or Matching
Contributions Account.
(1/l/88)
7.3 REPAYMENT TO REINSTATE FORFEITED AMOUNTS
(a) A former Participant who has received a distribution from the
Plan pursuant to Section 7.1(a) or 7.1(b), and who resumes
employment with the Employer prior to incurring five (5)
consecutive Breaks in Service, shall have reinstated that
portion of his Employer Contribution Account and/or Matching
Contributions Account which was forfeited under Section 7.2
upon repayment by the Participant of the full distribution
made to him. Such repayment must be made before the end of a
period of five (5) consecutive Breaks in Service after the
distribution.
(b) The amount to be credited to the Participant's Employer
Contribution Account and/or Matching Contributions Account
upon repayment shall not be less than the balance of the
Participant's Employer Contribution Account and/or Matching
Contributions Account at the time of distribution, including
both the amount distributed and the nonvested amount,
unadjusted by any subsequent gains or losses.
(c) In the event that the Participant elects not to make the
repayment described in subsection (a) above, the forfeited
amounts shall not be taken into account in computing his
accrued benefit under this Plan. [9/9/88]
(1/l/88)
ARTICLE VIII
TRUSTEE RESPONSIBILITY AND INVESTMENT OF TRUST FUNDS
8.1 APPOINTMENT AND TENURE OF TRUSTEES
The Employer may name either individual or corporate Trustees, provided
that there shall be at least two Trustees so long as any individual is
serving as Trustee. Any Trustee may resign by notice in writing mailed
or delivered to the Employer. The Employer shall have the power to
remove a Trustee. A Trustee shall cease to be such upon death or upon
removal by the Employer.
(1/l/87)
8.2 BASIC RESPONSIBILITIES OF TRUSTEE
<PAGE> 39
-35-
The Trustees are hereby empowered, in addition to such other powers as
are set forth herein or conferred by law:
(a) Consistent with the funding policy established by the
Employer, to invest, manage and maintain custody of the trust
assets;
(b) At the direction of the Plan Administrator, to distribute
benefits to the Participants or their Beneficiaries as
required under the terms of the Plan; and
(c) To maintain records of receipts and disbursements on behalf of
the trust fund and to furnish the Employer and/or Plan
Administrator with information required under the provisions
of this Plan.
(1/l/87)
8.3 POWERS AND DUTIES OF TRUSTEE
In carrying out the Plan's funding policy as established by the
Employer, and except as directed by the Participants (as hereinafter
provided), the Trustee is empowered:
(a) To invest and reinvest such part of the Trust Fund as in their
sole judgment is advisable and is not required for current
expenditures.
(b) To sell, exchange, lease, convey, or dispose of any property,
whether real or personal, at any time forming a part of the
Trust Fund upon such terms as they may deem proper' and to
execute and deliver any and all instruments of conveyance and
transfer in connection therewith.
(c) To consent to or participate in dissolutions, reorganizations,
consolidations, mergers, sales, leases, mortgages, transfers,
or other changes, affecting property or money held by them and
to pay assessments, subscriptions, or other charges in
connection therewith.
(d) To enter into any and all contracts, Group Annuity Contracts,
and agreements for carrying out the terms of this Plan and for
the administration of the Trust Fund and to do all acts as
they, in their discretion, may deem necessary or advisable,
and such contracts and agreements and acts shall be binding
and conclusive on the parties hereto and on the Employees
involved.
(e) To keep property and securities registered in the name of the
Trustee or in the name of nominee or nominees or in
unregistered or bearer form.
(f) To keep money, property or securities of the Trust Fund in the
custody of a bank.
(g) To establish and accumulate as part of the Trust Fund a
reserve or reserves, adequate, in the opinion of the Trustees,
to carry out the purpose of the Plan.
<PAGE> 40
-36-
(h) To hold uninvested such part of the Trust Fund as reasonably
needed for current purposes.
(i) To pay out of the Trust Fund all real and personal property
taxes, income taxes and other taxes of any and all kinds
levied or assessed under existing or future laws upon or in
respect to the Trust Fund or any money, property or securities
forming a part thereof.
(j) To do all acts, whether or not expressly authorized herein,
which the Trustees may deem necessary or proper for the
protection of the property held hereunder.
(k) To acquire and hold qualifying employer real property and/or
qualifying employer securities, as defined in Section 407 of
ERISA, whether or not the aggregate fair market value of such
property and/or securities exceeds ten (10%) percent of the
fair market value of the assets of the Plan. (12/31/84)
(1/l/87)
8.4 DIRECTED INVESTMENTS BY PARTICIPANTS
Participants shall be permitted to direct the Trustee in writing as to
the investment of their Salary Savings Accounts and Matching
Contributions Accounts in increments of twenty-five percent (25%) of
such Accounts in accordance with the investment alternatives offered by
the Trustee. Information concerning available investment alternatives
will be provided by the Trustee to all Participants who are eligible to
direct the investment of their accounts under this Section 8.4. A
Participant may change investment directives quarterly, by giving
written notice to the Trustees.
Upon giving such direction to the Trustee, that portion of the
Participant's Salary Savings Account and Matching Contributions Account
to which such direction applies shall be segregated from the remainder
of the trust fund, shall be invested in accordance with such directive,
shall be credited or charged with the gains and losses resulting from
such directed investment, and such gains or losses shall not be
considered in determining gains or losses of the remainder of the trust
fund. No Participant shall be deemed a Plan Fiduciary by reason of
giving investment directives hereunder, and no person who is otherwise
a Plan Fiduciary shall be liable for any loss attributable to such
directed investments, or for any result of a Participant's exercise of
control over the investment of his accounts which would otherwise
constitute a breach of fiduciary responsibility.
(1/l/88)
8.5 AUTHORITY
The Trustees may delegate to any one of their number authority to sign
documents on behalf of the Trustees, or to perform ministerial acts,
but no person to whom such authority is delegated shall perform any act
involving the exercise of any discretion
<PAGE> 41
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without first obtaining the concurrence of the other Trustee or
Trustees, even though he alone may sign any document required by third
parties. If at any time there shall be less than two (2) Trustees, the
remaining Trustee shall have authority to act. In the event the
Trustees are unable to agree on any matter, the decision of a majority
of the Trustees shall control; or if the Trustees are evenly divided
upon such matter, the Board of Directors of the Employer shall decide
the issue; and the Trustees shall take such action as shall be in
accordance therewith.
8.6 PARTICIPATION
No Trustee shall be precluded from becoming a Participant of this Plan
if he would be otherwise eligible, he shall not be entitled to vote or
act upon, or sign any documents relating to, his own participation
under the Plan. In the event that there is only one Trustee hereunder,
the Board of Directors of the Employer shall make all decisions and
take all action with respect to his participation hereunder.
8.7 DISCRETION
Wherever in this Plan discretionary powers are given to the Trustees,
it shall be understood that the Trustees shall have complete
discretion, and their decisions shall be binding upon all parties. The
Trustees shall exercise their discretion in a nondiscriminatory manner.
8.8 DISPUTES
In the event that any dispute shall arise as to any act to be performed
by the Trustees, the Trustees may postpone the performing of such act
until actual adjudication of such dispute shall have been made in a
court of competent jurisdiction.
8.9 RECORDS
The Trustees shall keep records which shall show the operation of the
Trust Fund. Any Participant may demand a copy of the Trustee's records
with respect to his own participation, but shall have no right to
inquire with respect to other persons. The Employer may at any time
inspect the records of the Trustee.
8.10 ACCOUNTS
The Trustees may from time to time file with the Employer a statement
of accounting of their acts hereunder and the Employer may enter into
an agreement approving and allowing the same, and any such agreement
shall be final, binding and conclusive on all persons and parties
hereto or claiming any interest hereunder, and shall be a full
discharge and acquittance of the Trustee with respect to the matters
set forth in such statement or accounting. This shall not, however,
deprive the Trustees of the right to have a judicial settlement of
their accounts if they so desire.
<PAGE> 42
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8.11 TAXES
The Trustees shall deduct from and charge against the Trust Fund any
taxes paid by them, which may be imposed upon the Trust Fund or the
income thereof, or which the Trustees are required to pay, upon or with
respect to the interest of any person therein.
8.12 EXPENSES
The Employer agrees to pay the reasonable expenses of the Trustee in
the administration of the Trust Fund including reasonable legal
expenses.
8.13 COMPENSATION
The Trustees shall receive for their services as Trustees hereunder the
compensation which the Employer may from time to time agree to pay from
its own funds to the Trustees, provided that no full-time Employee who
may be serving as Trustee shall be compensated for such service.
8.14 VACANCIES
Vacancies of the Trustees shall be filled by the Employer. The
appointment of a successor shall become effective upon acceptance in
writing of such appointment by the successor Trustee.
8.15 EMPLOYER'S RECORDS
The Trustees may inspect the records of the Employer whenever such
inspection shall be reasonably necessary in order to determine any fact
pertinent to the performance of their duties under this Plan.
8.16 ERISA
In all matters involving the investment and administration of the Trust
Fund, the Trustees shall be obligated to act in a prudent manner to be
consistent with ERISA.
ARTICLE IX
ADMINISTRATION
9.1 ALLOCATION OF RESPONSIBILITY
The Employer, Trustees, Plan Administrator and Plan Fiduciary shall
have only those specific powers, duties, responsibilities and
obligations as are specifically given them under this Plan. In general,
the Employer shall have the sole responsibility for making the payment
required in accordance with Sections 3.1. The Plan Administrator shall
have the sole responsibility for the administration of this Plan, which
responsibility is specifically described in this Plan. The Plan
Fiduciary shall have responsibility for the
<PAGE> 43
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investment and general disposition of Plan and Trust Fund assets. The
Employer, Plan Administrator and Plan Fiduciary shall each warrant that
any directions given, information furnished or any action taken shall
be in accordance with the provisions of this Plan authorizing or
providing for such direction, information or action.
9.2 APPOINTMENT OF PLAN ADMINISTRATOR
The Plan shall be administered by the Plan Administrator who shall be
appointed by and serve at the discretion of the Employer. The Plan
Administrator may be an Employee who shall not be precluded from
participating in this Plan, but he shall not receive compensation with
respect to his services as Plan Administrator, nor shall he be
permitted to make any decision or take any action with respect to his
own participation in the Plan.
9.3 CLAIMS PROCEDURE
The Plan Administrator shall make all determinations as to the right of
any person to a benefit. Any denial by the Plan Administrator of the
claim for benefits to a Participant, former Participant or Beneficiary
under the Plan shall be stated in writing by him and delivered or
mailed to the Participant, former Participant or Beneficiary; and such
notice shall set forth the specific reasons for the denial, written to
the best of his ability in a manner that may be understood without
legal or actuarial counsel.
Any person whose claim has been denied shall have the opportunity to
appeal such denial by written notification to the Plan Administrator
within sixty (60) days following receipt of such written denial. Within
sixty (60) days following receipt of such written appeal, the Plan
Administrator shall transmit written notification of its decision
regarding the' appeal to said person provided, however, that if the
Plan Administrator determines a hearing shall be necessary, such sixty
(60) day period shall be extended for one hundred twenty (120) days.
9.4 RECORDS AND REPORTS
The Plan Administrator shall exercise such authority and responsibility
as he deems appropriate in order to comply with ERISA, and governmental
regulations issued thereunder relating to records of Participant' s
service, Retirement Benefits and the percentage of such Benefits which
are nonforfeitable under the Plan; notifications to Participants;
periodic registration with the Internal Revenue Service; annual reports
to the Department of Labor; and applicable reports to the Pension
Benefit Guaranty Corporation.
9.5 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
The Plan Administrator shall have such duties and powers as may be
necessary to discharge his duties hereunder, including, but not limited
to the following:
<PAGE> 44
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(a) To construe and interpret the Plan, decide all questions of
eligibility and determine the amount and time of payment of
any benefits hereunder;
(b) To prescribe procedures to be followed by Participants, Former
Participants or Beneficiaries in filing applications for
benefits;
(c) To prepare and distribute, in such manner as he determines to
be appropriate, information explaining the Plan;
(d) To receive from the appropriate sources such information as
shall be necessary for the proper administration of the Plan;
(e) To receive, review and keep on file (as he deems convenient or
proper) reports of the financial condition, and of the
receipts and disbursements, of the assets from the Plan
Fiduciary;
(f) To appoint or employ individuals to assist in the
administration of the Plan and any other agents he deems
advisable, including legal counsel.
The Plan Administrator shall have no power to add to, subtract from or
modify any of the terms of the Plan, or to change or add to any
benefits provided by the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan.
9.6 RULES AND DECISIONS
The Plan Administrator may adopt such rules as he deems necessary,
desirable, or appropriate. All rules and decisions of the Plan
Administrator shall be uniformly and consistently applied to all
Participants in similar circumstances. When making a determination or
calculation. The Plan Administrator shall be entitled to rely upon
information furnished by a Participant or Beneficiary, or the legal
counsel of the Employer, or the Plan Fiduciary.
9.7 AUTHORIZATION OF BENEFITS PAYMENTS
The Plan Administrator shall issue directions to the appropriate party
concerning the payment of all benefits which are to be paid from the
assets of the Plan, and warrants that all such directions are in
accordance with the provisions of this Plan.
9.8 APPLICATION AND FORMS FOR BENEFITS
The Plan Administrator may require a Participant or Beneficiary to
complete and file with him an application for benefits and all other
forms approved by him and furnish all pertinent information requested
by him. The Plan Administrator may rely upon all such information so
furnished him, including the Participant's or Beneficiary's current
mailing address.
<PAGE> 45
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9.9 FACILITY OF PAYMENT
Whenever, in the Plan Administrator's opinion, a person entitled to
receive any benefit hereunder is under a legal disability or is
incapacitated in any way so as to be unable to manage his financial
affairs, the Plan Administrator may cause payments otherwise payable to
such person to be made to such person's legal representative or to a
relative or friend of such person for his benefit. Any payment of
benefit in accordance with the provisions of this Section shall be a
complete discharge of any liability for the making of such payment
under the provisions of this Plan.
ARTICLE X
MISCELLANEOUS
10.1 NONGUARANTEE OF EMPLOYMENT
Nothing contained in this Plan shall be construed as a contract of
employment between the Employer and any Employee, or as a right of any
Employee to be continued in the employment of the Employer, or as a
limitation of the right of the Employer to discharge any of its
Employees, with or without cause.
10.2 RIGHTS OF EMPLOYEES AND BENEFICIARIES
No Employee or Beneficiary shall have any right to interest in any
assets of the Plan upon termination his employment or otherwise, except
as provided from time to time under this Plan, and then only to the
extent of the benefits payable under the Plan to such Employee or
Beneficiary out of such assets. All payments of benefits as provided
for in this Plan shall be made solely out of Trust Fund assets.
10.3 NONALIENATION OF BENEFITS
Benefits payable under this Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind,
either voluntary or involuntary, including any such liability which is
for alimony or other payments for the support of a spouse or former
spouse, or for any other relative of the Employee, prior to actually
being received by the person entitled to the benefit under the terms of
the Plan; and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, charge or otherwise dispose of any right to
benefits payable hereunder, shall be void. The Plan assets shall not in
any manner be liable for, or subject to the debts, contracts
liabilities, engagements or torts of any person entitled to benefits
hereunder. Nothing herein shall be construed as preventing the
assignment of all or part of a Participant's interest in this Plan
pursuant to a qualified domestic relations order which meets the
requirements of Sections 401(a)(13) and 414(p) of the Code. (1/l/85)
<PAGE> 46
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10.4 DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS
In the event of complete discontinuance of contributions to the Plan by
the Employer, within the meaning of Section 411(d) of the Code and the
related regulations, the accounts of all Participants shall, as of the
date of such discontinuance, become fully vested.
10.5 NO REVERSION IN EMPLOYER
The Employer has no beneficial interest in the Plan assets and no part
of the Plan assets shall ever revert or be repaid to the Employer,
directly or indirectly, except that if the Internal Revenue Service
initially determines that the Plan does not meet the requirements of
Section 401(a) of the Internal Revenue Code, any assets attributable to
contributions made by the Employer under the Plan shall be returned to
the Employer within one calendar year of denial of qualification of the
Plan.
10.6 JURISDICTION
This Plan shall be construed in accordance with the laws of the
jurisdiction of the Commonwealth of Massachusetts except to the extent
to which said laws are superseded by Federal Law.
10.7 TIMING OF DISTRIBUTIONS
(a) The distribution of any benefits under this Plan shall begin,
unless otherwise' elected by the Participant, no later than
the sixtieth (60th) day after the latest of the close of the
Plan Year in which (i) the Participant attains age sixty-five
(65), (ii) occurs the tenth (10th) anniversary of the time the
Participant commenced participation in the Plan, or (iii) the
Participant terminates his employment with the Employer.
(b) Any distribution to be made due to a Participant's termination
of employment prior to his Normal Retirement Date shall begin
no later than the sixtieth (60th) day following the date he
has incurred five (5) consecutive Breaks in Service for
vesting computation purposes, unless the Participant otherwise
elects to defer payment to a date specified in the preceding
Subsection (a). (1/l/85)
(c) The entire interest of a Participant either:
(i) will be distributed to him not later than April 1 of
the calendar year following the calendar year in
which he attains age seventy and one-half (70-1/2)
(hereinafter, the "required date"), or
(ii) will be distributed, commencing not later than such
required date, (i) in accordance with regulations
prescribed by the Secretary of the Treasury, over the
life of such Participant or over the lives of such
Participant and a designated beneficiary or (ii) in
accordance with such regulations, over a
<PAGE> 47
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period not extending beyond the life expectancy of
such Participant or the life expectancy of such
Participant and a designated beneficiary.
(1/l/87)
(d) If distribution of a Participant's interest has begun in
accordance with subsection 10.7(c)(ii) above and the
Participant dies before his entire remaining is distributed to
him, the remaining portion of such interest will be
distributed at least as rapidly as under the method of
distribution being used as of the date of his death.
(e) If a participant dies before the distribution of his interest
has begun in accordance with subsection 10.7(c)(ii) above, the
entire interest of the Participant will be distributed in
accordance with the following provisions:
(i) Any portion payable to or for the benefit of a
designated beneficiary will be distributed in
accordance with applicable regulations over the life
of such designated beneficiary, or over a period not
extending beyond the life expectancy of such
beneficiary, beginning not later than one year after
the date of the Participant's death; or
(ii) Any portion payable to or for the benefit of a
designated beneficiary who is the surviving spouse of
the Participant will be distributed as provided in
the preceding clause (i) beginning not later than the
date on which the Participant would have attained age
seventy and one-half (70-1/2); provided that if the
surviving spouse dies before the distributions to
such spouse begin, this subsection 10.7(f) to such
shall be applied as if the surviving spouse were the
Participant; or
(iii) If neither of the preceding clauses (i) and (ii)
apply, the entire interest of the Participant will be
distributed within five (5) years after the death of
such Participant.
10.8 BENEFICIARY DESIGNATIONS
(a) Except as provided in subsection (b) below, the Participant
shall have the unrestricted right to designate, and to rescind
or change any designation of, a primary and contingent
Beneficiary or Beneficiaries to receive any benefit due in the
event of his death. Each such rescission or change of
Beneficiary(ies) must be made in writing to the Plan
Administrator and must be signed by the Participant. If there
is no designated Beneficiary living when the death benefit
becomes payable or if no such designation of Beneficiary is on
file with the Plan Administrator, or if in the sole discretion
of the Plan Administrator such designation is effective, any
death benefit due will be paid to any one or more of the
surviving members of the Participant's relatives in the
following order of preference:
<PAGE> 48
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(i) to his spouse;
(ii) in equal shares to his children;
(iii) to his parents; or
(iv) to his estate.
(b) If a Participant who is married wishes to designate a primary
Beneficiary who is not the spouse of such Participant, such
designation shall not be effective unless the spouse of such
Participant consents in writing to such designation. The
written consent of the spouse must acknowledge the effect of
such consent, and must be witnessed by a plan representative
or a notary public. Any consent by a spouse hereunder shall be
effective only with respect to that spouse.
(1/l/85)
10.9 BENEFITS OF LOST PARTICIPANTS
The provisions of this Section 10.9 shall apply in the event a
Participant or Beneficiary fails to file an application for benefits,
or in the event of the termination of the Plan or other event requiring
distribution of a benefit or other Plan assets to a Participant or
Beneficiary, if the Participant or Beneficiary cannot be located.
(a) The Plan Administrator shall give written notice to each
Participant at his last known address of his right to receive
a distribution under the Plan, within a reasonable time after
the happening of the event giving rise to the right to receive
the distribution.
(b) If the Participant cannot be located in this manner, the
account of such Participant shall continue to be held in a
Participant Account under the Plan until the occurrence of an
event described in any of Sections 10.9(c), (d) or (e)
following.
(c) If proof of death of the Participant satisfactory to the Plan
Administrator is received by the Plan Administrator, the
benefit or other distribution shall be paid to the
Participant's Beneficiary.
(d) If the Plan is terminated prior to distribution of the benefit
or other amount due, the Plan Administrator shall establish an
interest-bearing custodial account for the benefit of the
Participant or his Beneficiary in a federally-insured bank,
savings and loan association, or credit union, into which the
Participant's account balance shall be deposited. Such account
shall be held in trust for the benefit of the Participant or
his Beneficiary.
(e) If no claim is made by a Participant or his Beneficiary within
ten (10) years of the date the Participant became entitled to
receive a benefit or other distribution, the benefit payable
to or account balance of such Participant shall be forfeited;
<PAGE> 49
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provided that such forfeited benefit or amount shall be
reinstated in the event a valid claim for such amount is
subsequently made by the Participant or his Beneficiary. Any
forfeiture hereunder shall be treated as a Forfeiture under
Section 3.1 of the Plan for the year in which it occurs.
(1/1/85)
ARTICLE XI
AMENDMENTS AND ACTION BY EMPLOYER
11.1 AMENDMENTS
The Employer reserves the right to make from time to time any amendment
or amendments to this Plan which do not cause any part of the assets of
the Plan to be used for, or diverted to, any purpose other than the
exclusive benefit of Participants or their Beneficiaries; provided,
however, that the Employer may make any amendment it determines
necessary or desirable, with or without retroactive effect, to comply
with the requirements of the Internal Revenue code or of any other
pertinent provision of Federal or State law, or any regulation or
ruling of any duly constituted authority in connection therewith.
11.2 ACTION BY EMPLOYER
Any action by the Employer under this Plan may be made by resolution of
its Board of Directors, or by any person or persons duly authorized by
resolution of said Board to take such action.
ARTICLE XII
SUCCESSOR EMPLOYER AND MERGER OR CONSOLIDATION OF PLANS
12.1 SUCCESSOR EMPLOYER
In the event of the dissolution, merger, consolidation or
reorganization of the Employer, provision may be made by which the Plan
will be continued by the successor; and, in that event, such successor
shall be substituted for the Employer under the Plan. The substitution
of the successor shall constitute an assumption of Plan liabilities by
the successor and the successor shall have all the powers, duties and
responsibilities of the Employer under the Plan and Trust Agreement.
12.2 PLAN ASSETS
In the event of any merger or consolidation of the Plan with, or
transfer in whole or in part of the Trust Fund assets and liabilities
of the Plan to another plan of deferred compensation maintained or to
be established for the benefit of all or some of the
<PAGE> 50
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Participants of this Plan, the Trust Fund assets applicable to such
Participants shall be transferred to the other plan only if:
(a) each Participant would (if either this Plan or the other plan
then terminated) receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater
than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (if
this Plan had then terminated);
(b) resolutions of the Board of Directors of the Employer under
this Plan, or of any new or successor employer of the affected
Participants, shall authorize such transfer of assets; and, in
the case of the new or successor employer of the affected
Participants its resolutions shall include an assumption of
liabilities with respect to such Participant's inclusion in
the new employer's plan; and,
(c) such other plan is qualified under Section 401(a) and 501(a)
of the Internal Revenue Code.
ARTICLE XIII
PLAN TERMINATION
13.1 RIGHT TO TERMINATE
In accordance with the procedures set forth in this Article, the
Employer may terminate the Plan at any time. In the event of the
dissolution, merger, consolidation or reorganization of the Employer,
the Plan shall terminate and the Plan and Trust Fund assets shall be
liquidated unless the Plan is continued by a successor to the Employer
in accordance with Section 12.1.
13.2 PARTIAL TERMINATION
Upon termination of the Plan with respect to a group of Participants
which constitutes a partial termination of the Plan, the Plan
Administrator shall allocate and segregate for the benefit of the
Employees then or theretofore employed by the Employer with respect to
which the Plan is being terminated the proportionate interest of such
Participants in the Plan and Trust Fund assets. The assets so allocated
and segregated shall be used by the Plan Administrator to pay benefits
to or on behalf of Participants in accordance with Section 13.3.
13.3 LIQUIDATION OF THE PLAN
Upon termination or partial termination of the Plan, the accounts of
all Participants affected thereby shall become fully vested, and the
Plan Administrator shall, subject to the provisions of the immediately
following paragraph, cause the assets remaining in the Trust Fund
(including any Forfeitures which shall not have been allocated) to be
allocated
<PAGE> 51
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and distributed to the remaining Participants and Beneficiaries in
proportion to their respective account balances.
In the event that any service charges assessed under this Plan are due
and unpaid as of such Plan termination date, the payment of such
charges shall be satisfied by deducting a pro rata share of the amount
remaining to be paid from each Participant's Employer Contributions
Account.
13.4 MANNER OF DISTRIBUTION
To the extent that no discrimination in value results, any distribution
after termination of the Plan may be made, in whole or in part, in
cash, in securities or in nontransferable annuity contracts, as the
Plan Administrator (in his discretion) may determine. All noncash
distributions shall be valued at fair market value at date of
distribution.
ARTICLE XIV
DISCHARGE OF DUTIES BY FIDUCIARIES
The Employer, Plan Administrator, Plan fiduciary and any other person
who, by reason of his involvement in and under this Plan and Trust Agreement
shall be deemed to be a fiduciary within the meaning of Title I, Section 3 (21)
of ERISA, shall discharge their Plan and Trust related duties and
responsibilities solely in the interest of the Participants and their
Beneficiaries and with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims. Any provision in any agreement or other plan
document which has the effect of relieving said fiduciaries from responsibility
for acts within the discretionary authority of such persons are hereby deleted
and cancelled.
<PAGE> 52
TRUST AGREEMENT
FORMING A PART OF THE
HADCO CORPORATION PROFIT SHARING PLAN AND TRUST
AS AMENDED AND RESTATED THROUGH
JANUARY 1. 1988
ARTICLE ONE -- PRELIMINARY MATTERS
1.1 NAME. This Trust Agreement is supplemental to and forms a part of the
Trust embodied in the Hadco Corporation Profit Sharing Plan and Trust as amended
and restated through January 1, 1988. The Trust shall be known as the Hadco
Corporation Profit Sharing Trust, and is referred to in this Agreement as the
Trust.
1.2 ACCOUNTING YEAR. The accounting year of the Trust shall be the same as
the Plan Year.
1.3 EFFECTIVE DATE. The Effective Date of this Trust Agreement is January
1, 1988.
l.4 DEFINITIONS. Any term used in this Trust Agreement which is defined in
the Hadco Corporation Profit Sharing Plan and Trust shall have the meaning set
forth in such Plan. unless the context clearly indicates otherwise.
1.5 TRUSTEE. The person or persons appointed to serve hereunder in
accordance with Article VIII of the Plan. For convenience, this document shall
use the masculine singular pronoun to refer to the Trustee or Trustees who are
currently serving in that capacity.
1.6 EMPLOYER. Hadco Corporation (hereinafter referred to as the
"Employer").
<PAGE> 53
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ARTICLE II -- RESPONSIBILITIES AND
STANDARD OF CONDUCT FOR TRUSTEE
2.1 GENERAL DUTIES. It shall be the duty of the Trustee to receive and
hold as the trust fund such funds or other property as comprise the assets of
the Trust and which are transferred to him from predecessor Trustees or which
are paid to him by the Employer as contributions under the Plan; to manage,
invest and reinvest the trust fund held hereunder in accordance with the
provisions of this Trust; to collect the income of such trust fund; and to make
payments and transfers from the trust fund upon the direction of the Plan
Administrator. The Trustee shall not be under any duty to compute the amount of
contributions required to be paid by the Employer or to take any steps to
collect such amounts as may be due to him under the Plan. The Trustee shall be
responsible only for the investment and safekeeping of the trust fund
transferred to and held by him as Trustee under the terms of the Trust, and any
liabilities under the Plan shall be satisfied only out of such trust fund held
by the Trustee hereunder.
2.2 STANDARD OF CONDUCT. The Trustee shall discharge his duties with
respect to the Plan solely in the interest of the Participants and Beneficiaries
(1) for the exclusive purpose of defraying reasonable expenses of administering
the Plan, (2) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims, (3) by diversifying the investments of the Plan so
as to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so, and (4) in accordance with the Plan and Trust
documents in so far as the Plan and Trust are consistent with the provisions of
federal law.
<PAGE> 54
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2.3 MULTIPLE TRUSTEES. In the event that multiple Trustees are appointed
by the Employer for the purpose of dividing the trust fund investments between
Trustees, each Trustee shall be responsible only for that portion of the trust
fund that he holds, and his responsibility, for diversification and investment
of such portion shall be subject to, and may be limited by, written guidelines
or investment directions issued to him by the Employer or by an investment
manager or Named Fiduciary in accordance with Section 2.4 hereof.
2.4 INVESTMENT MANAGER AND NAMED FIDUCIARY. The Employer, by its Board of
Directors. shall possess the authority to appoint an investment manager or
managers or to designate one or more persons (hereinafter referred to as "Named
Fiduciary") to manage (including the power to acquire and dispose of ) all or
any of the assets of the Trust, including but not limited to the selection of
investment alternatives for Salary Savings Accounts and Matching Contributions
Accounts under Section 8.4 of the Plan. In the event of any such appointment,
the Employer shall designate the portion of the assets of the Trust which shall
be subject to the management of the investment manager or the Named Fiduciary
and shall so notify the Trustee in writing. With respect to such assets over
which an investment manager or Named Fiduciary has investment responsibility,
the investment manager or Named Fiduciary shall possess all of the investment
powers and responsibilities granted to the Trustee hereunder, and the Trustee
shall invest and reinvest such assets pursuant to the written directions of the
investment manager or Named Fiduciary. The Trustee shall have no investment
responsibility with respect to the assets subject to the investment
responsibility of an investment manager or Named Fiduciary, and shall have no
duty to inquire into such directions. to solicit such directions, nor to review
and follow the investments made pursuant to any such direction other than to the
extent provided by law (including that any investment direction received from a
Named Fiduciary shall constitute a
<PAGE> 55
-4-
proper direction within the meaning of Section 403(a) (1) of the Employee
Retirement Income Security Act of 1974 and shall not be contrary to the
provisions of Title I of said Act). The Trustee shall be fully protected and
shall be under no liability for any loss of any kind which may result by reason
of any action taken or omitted direction of any investment manager or Named
Fiduciary, except for any such loss which is due to its own negligence, willful
misconduct, lack of good faith or violation of ERISA. The Trustees shall be
indemnified and held harmless by the Employer for any and all liability for loss
and expense of any kind which may result by reason of any action taken or
omitted by it in accordance with any direction of an investment manager or Named
Fiduciary, except for any such loss which is due to its own negligence, willful
misconduct, lack of good faith, or violation of ERISA.
2.5 EMPLOYER'S ESTABLISHMENT OF METHOD OF FUNDING. To the extent that the
Employer. Named Fiduciary or an investment manager issues guidelines or
directions that limit diversification by the Trustee or that limit investments
to a certain type of asset, the Trustee shall not be responsible for
diversification to the extent so limited, and the Employer, Named Fiduciary or
investment manager, as the case may be, shall be responsible for the overall
diversification of the trust fund, including selection of investment
alternatives to be made available for investment of Salary Savings Accounts and
Matching Contributions Accounts.
2.6 TRUSTEE AS PARTICIPANT. Nothing in this Article shall be construed to
prohibit the Trustee from receiving any benefit to which he may be entitled as a
Participant or Beneficiary under the Plan. so long as the benefit is computed
and paid on the basis which is consistent with the terms of the Plan as applied
to all other Participants and Beneficiaries. In
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addition, nothing in this Article shall be construed to prohibit the Trustee
from serving as such in addition to being an officer, employee, agent or other
representative of the Employer.
ARTICLE III -- INVESTMENT AND ADMINISTRATIVE POWERS
3.1 INVESTMENT AND ADMINISTRATIVE POWERS. Subject to the provisions of
Article Two, the Trustee shall have the following powers with respect to the
investment and reinvestment of the trust fund, which shall be in addition to and
not in limitation of the powers and duties enumerated in Section 8.3 of the
Plan:
(1) To purchase, hold, sell, invest and reinvest all or part of the
trust fund, without distinction between principal and income, in
securities and other property (real. personal or mixed) such as, but not
limited to, common and preferred stocks. bonds, options, REIT and separate
investment company shares, partnerships and limited partnership interests,
bills, notes, commercial paper. debentures, mortgages. equipment trust
certificates, investment trust certificates, royalties, interests and
rights and equipment pertaining to the trust of deposit and interest
bearing ______________________________ contracts issued by any life
insurance
(2) To invest and reinvest all or _____________________________ of
the trust fund collectively __________________________________________ and
profit-sharing trusts exempt _________________________________________
501(a) of the Internal Revenue Code of 1954 by reason qualifying under
Section 401(a) of said Code through the medium of any common, collective
or commingled trust fund or funds, provided that the provisions of such
common, collective or commingled trust, as
<PAGE> 57
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amended from time to time, shall be adopted as part of this Trust so long
as any portion of the trust fund shall be invested through the medium
thereof.
(3) To pool all or any of the assets of the trust fund with assets
belonging to any other employee benefit trust created by the Employer, and
to commingle such assets and make joint or common investments, carry joint
accounts on behalf of the Trust and such other trust or trusts, allocating
undivided shares or interests in such investments or accounts or in any.
Pooled assets to the two or more trusts in accordance with their
respective interests.
(4) To hold uninvested from time to time such sums of money as are
necessary for the immediate cash requirements of the Plan or Trust, and to
keep such part of the trust fund in interest bearing accounts, or
equivalent investments.
5) To exchange, mortgage, or lease any such property and to convey,
transfer, or dispose of any such property on such terms and conditions as
the Trustee deems appropriate.
(6) To exercise any subscription rights or conversion privileges
with respect to any securities held in the trust fund.
(7) To grant options for the sale, transfer, exchange, or disposal
of any such property.
(8) To exercise all voting rights pertaining to any securities, and
to consent to or request any action on the part of the issuer of any such
securities, and to give general or special proxies or powers of attorney
with or without power of substitution.
(9) To consent to or participate in amalgamations, reorganizations,
recapitalizations, consolidations. mergers, liquidations, or similar
transactions with
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respect to any securities. and to accept and to hold any other securities
issued in connection therewith.
(10) To collect and receive any and all money and other property of
whatsoever kind or nature due or owing or belonging to the trust fund and
to give full discharge and acquittance therefor, and to extend the time of
payment of any obligation at any time owing to the trust fund, as long as
such extension is for a reasonable period, and provides for reasonable
interest.
(11) To cause any securities or other property to be registered in,
or transferred to, the individual name of the Trustee, or in the name of
one or more of his nominees, or one or more nominees of any system for the
centralized handling of securities, or to retain them unregistered and in
form permitting transferability by delivery, but the books and records of
the Trust shall at all times show that all such investments are a part of
the trust fund.
(12) To settle, compromise, or submit to arbitration any claims or
debts due or owing to or from the Trust, to commence or defend suits or
legal proceedings whenever. in his judgment, any interest of the Trust
requires it, and to represent the Trust in all suits or legal proceedings
in any court of law or equity or before any other body or tribunal.
insofar as such suits or proceedings relate to any property forming part
of the trust fund or to the administration of the trust fund.
(13) To borrow money from others for the purposes of the Trust, but
if the Trustee is a bank the Trustee shall not be authorized to borrow any
money from its own or a related banking department.
<PAGE> 59
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(14) To lend money to unrelated third parties (or to related parties
who have been properly exempted) in such amounts and upon such written
terms and conditions as shall be deemed advisable or proper to carry out
the purposes of the Trust, and to accept and hold adequate security from
the borrower until repayment of the loan, including loans to participants
pursuant to Section 4.6 of the Plan.
(15) To exercise all rights of ownership in any insurance company
contract to which any part of the trust fund may be invested and pay
premiums thereon. The Trustee shall not be responsible for the validity of
any contract nor for any failure on the part of an issuing insurance
company to make payments under the terms of its contract. No issuing
insurance company shall be deemed a party to the Plan or Trust.
(16) To acquire and hold qualifying employer real property and/or
qualifying employer securities. as defined in Section 401 of ERISA,
whether or not the aggregate fair market value of such property and/or
securities exceeds ten (10%) percent of the fair market value of the
assets of the Plan.
(17) Generally to do all acts, whether or not expressly authorized,
which the Trustee deems necessary or desirable, but acting at all times
according to the principles of prudence expressed under Article Two of
this Trust Agreement and under Articles VIII and XIV of the Plan.
3.2 BANK MAY INVEST IN ITS INSTRUMENTS. If a bank or similar institution
is Trustee, it is specifically authorized to deposit and retain any part of the
trust fund in savings accounts, certificates of deposit, money fund-type
instruments, or equivalent investments offered by itself or its affiliates.
<PAGE> 60
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3.3 UNITED STATES LOCATION FOR TRUST ASSETS. Except as authorized by law,
the Trustee shall not maintain the indicia of ownership of any trust fund assets
outside the jurisdiction of the District Courts of the United States.
3.4 PAYMENTS BY TRUSTEE. The Trustee shall pay monies from the Trust for
the use of the Plan, or to Participants or their Beneficiaries. or for the
purpose of purchasing life insurance or annuity contracts if permitted by the
Plan. The Trustee shall be protected in paying out monies from the Trust from
time to time upon written orders, directions or requisitions given or authorized
by the Plan Administrator and shall not be charged with any responsibility
whatsoever respecting the application of monies paid by it upon such orders,
directions or requisitions. if permitted by the Plan and directed by the Plan
Administrator, the Trustee is hereby specifically authorized and empowered to
purchase or cause to be purchased annuity contracts for retired employees by
transferring money, at the direction of the Plan Administrator, to a legal
reserve life insurance company authorized to do business in the state where the
principal office of the Employer or Trustee is located, or in the Commonwealth
of Massachusetts.
3.5 TAXES. Unless paid by the Employer, the Trustee shall pay out of the
trust fund all real and personal property taxes, income taxes. and other taxes
of any and all kinds levied or assessed under existing or future laws upon or
with respect to the trust fund or any money, property or securities forming a
part thereof, but the Employer or Plan Administrator may contest any such tax.
ARTICLE FOUR -- ACCOUNTING AND REPORTS OF TRUSTEES
4.1 ACCOUNTING. The Trustee shall keep and maintain such accounts and
records as he shall deem necessary and proper to record his transactions with
respect to his
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administration of the Trust, or as required by the Plan. The Trustee shall
permit inspection of such accounts, records, and assets of the Trust by any duly
authorized representative of the Employer at any time during the usual business
hours of the Trustee.
4.2 REPORTS. Unless waived by the Plan Administrator. the Trustee shall
file with the Employer and/or Plan Administrator at least annually a written
report containing such information as is required under the provisions of the
Plan or is otherwise agreed upon between the Trustee and the Administrator with
respect to the transactions effected by the Trustee during such accounting year
or other period. In addition, the Trustee shall make such periodic reports to
the Employer and/or Administrator as the Trustee shall deem necessary and proper
and such other reports as the Administrator may reasonably request, including a
valuation of the assets of the Trust at the end of each calendar quarter or upon
no less than 30 days written notice.
ARTICLE FIVE -- COMPENSATION PROCEDURAL RULES
5.1 COMPENSATION AND EXPENSES. The Trustee shall receive each year as
compensation for his services hereunder such amount as he and the Employer agree
to in writing, or in the absence of such agreement, the amount established by
the Trustee's published fee schedule then in effect. In addition, the Trustee
shall be entitled to reimbursement for all reasonable expenses incurred by him
in the performance of his duties hereunder. including reasonable fees for legal
services rendered to the Trustee (whether in connection with any litigation or
otherwise) and all other proper charges and disbursements. such compensation and
expenses shall be paid by the Employer: provided that, in the event of the
bankruptcy of the Employer, the Trustee may recover such compensation and
expenses as a charge against the trust fund. In no event shall any person
serving as Trustee who already receives full-time compensation from the Employer
or from any Employee organization whose members are
<PAGE> 62
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Participants receive compensation as Trustee, except for reimbursement of
expenses properly and actually incurred.
5.2 PROCEDURAL RULES. The following rules shall govern certain procedural
matters in administering the Trust:
(1) A written direction, statement or certificate to the Trustee,
signed by an officer or employee of the Employer designated by its Board
of Directors as authorized to act on behalf of the Employer, or by the
Plan Administrator (or, if a committee is acting as Plan Administrator, by
all the members of the committee then in office, or any member of the
committee authorized by a resolution adopted by the committee to execute
instruments on its behalf), shall be deemed to be the direction,
statement, of certificate of the Employer or of the Plan Administrator, as
the case may be, and the Trustee may rely upon such directions,
statements, or certificates to the extent permitted by law. The Employer
when requested, with instruments signed as aforesaid evidencing the
designation of an officer or employee as authorized to act on behalf of
the Employer, and of the appointment and termination of an individual as
Plan Administrator or the members of a committee . serving as Plan
Administrator, and of successors of such members, and any committee
serving as the Plan Administrator shall furnish the Trustee with a copy,
signed by all of its members, of any resolution adopted by it authorizing
one of its members to execute instructions, notices and directions on its
behalf. The Trustee shall be entitled to rely upon such instruments as
evidence of the identity and authority any such officer, employee, Plan
Administrator, or member of a committee serving as Plan Administrator, as
the case may be, shall be furnished the Trustee with instruments relative
to such change.
<PAGE> 63
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(2) In the event that any dispute shall arise as to the persons to
whom payment of funds or delivery of any assets shall be made by the
Trustee, the Trustee may withhold such payment or delivery until such
dispute shall have been determined by a court of competent jurisdiction or
shall have been settled by the parties concerned.
(3) The Trustee may from time to time consult with counsel, who may
or may not be counsel to the Employer and shall be protected to the extent
the law permits in acting upon such advice of counsel with respect to
legal questions. The Trustee may also from time to time employ agents and
expert assistants and delegate to them such ministerial duties as it sees
f it. In the event that the Trustee does delegate such ministerial duties,
it shall .periodically review the performance of the person(s) to whom
these duties have been delegated.
(4) Whenever more than two persons are serving as Trustee, any
power, discretion or authority may be authorized by a majority.
ARTICLE SIX -- RESIGNATION, REMOVAL
AND APPOINTMENT OF SUCCESSOR TRUSTEE
6.1 RESIGNATION AND REMOVAL. The Trustee may be removed by the Board of
Directors of the Employer at any time by delivery of Written notice of such
action to the Trustee. The Trustee may resign at any time upon 60 days notice in
writing to the Employer, provided that the Employer may waive such notice in
writing. Within 60 days after such removal or resignation of the Trustee, the
Trustee shall file with the Employer a written account, to the date of such
removal or resignation, in the form similar to, and containing information
similar to that required to be set forth in, the reporting provided for under
Section 4.1 of this Agreement.
<PAGE> 64
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6.2 SUCCESSOR TRUSTEE. Upon the death. removal or resignation of any
person or entity acting as Trustee, the Board of Directors of the Employer shall
designate a successor Trustee to act hereunder, who shall have the same powers
and duties as those conferred upon the predecessor Trustee. upon such
designation, and upon the written acceptance of the successor Trustee, the
assets then constituting the trust fund shall be assigned, transferred and paid
over to such successor Trustee, provided, however, that the predecessor Trustee
is authorized to reserve such sum of money (and for that purpose to liquidate
such property as may be necessary to produce such sum), as he may deem advisable
for payment of all proper charges against the trust fund, including expenses in
connection with such resignation or removal, and any balance of such reserve
remaining after the payment of such charges shall be paid over to the successor
Trustee. In the event that more than one party shall be acting as Trustee, the
death, resignation or removal of any party shall not affect the duties of the
remaining party or parties continuing to act as Trustee hereunder, who shall
have full authority to act until such vacancy is filled.
ARTICLE SEVEN -- AMENDMENT AND TERMINATION OF TRUST
7.1 AMENDMENT. The Employer may at any time by resolution of its Board of
Directors amend, in whole or in part, any or all of the provisions of this Trust
Agreement, or of the Plan or Trust, provided that no such amendment may affect
the rights, duties, or responsibilities of the Trustee without his written
consent and, provided further, that no such amendment may permit any part of the
corpus or income of the trust fund to be used for or diverted to purposes other
than for the exclusive benefit of the Participants and their Beneficiaries at
any time prior to the satisfaction of all liabilities under the Plan with
respect to such persons, except as otherwise provided in the Plan or by law. Any
such amendment shall become effective when received by the Trustee.
<PAGE> 65
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7.2 TERMINATION. This Trust shall continue for such time as may be
necessary to accomplish the purposes for which it was created, but may be
terminated at any time by the Employer by action of its Board of Directors. Upon
termination of the Trust, provided that the Trustee has received instructions
from the Plan Administrator. the Trustee shall liquidate the Trust and. after
paying the reasonable expenses of the Trust, including expenses involved in the
termination. distribute the balance thereof according to written directions from
the Plan Administrator.
ARTICLE EIGHT -- MISCELLANEOUS PROVISIONS
8.1 HEADINGS. The headings are for reference only. In the event of a
conflict between a heading and the content of a section, the content of the
section shall control.
8.2 CONSTRUCTION. This Trust shall in all respects be construed and
regulated by the laws of the Commonwealth of Massachusetts, except where such
laws are superseded by the Internal Revenue Code of 1986 or the Employee
Retirement Income Security Act of 1974 (as the same may be amended or
reenacted).
8.3 SUCCESSORS. This Agreement shall be binding upon, and the powers
herein granted to the Employer and the Trustee shall be exercisable by the
respective successors and assigns of the Employer and the Trustee.
8.4 AGENCY. The Employer may engage the Trustee as its agent in the
performance of any duties required of the Employer under the Plan. but such
agency employment shall not be deemed to increase the responsibility or
liability of the Trustee under this Trust Agreement.
8.5 SIGNATURE REQUIREMENT. If. applicable, the Trustee may designate any
one or more of them to execute or sign any instruments, including checks or
policy contracts, on behalf of all the Trustees under the Trust.
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8.6 IRREVOCABILITY OF TRUST. No part of the corpus of the Trust Fund nor
any income therefrom shall revert to the Employer or be used for or diverted to
purposes other than for the exclusive benefit of the Participants or former
Participants and their Beneficiaries. except as the Plan shall otherwise
specifically provide in accordance with the provisions of federal law regulating
tax qualified retirement plans.
8.7 EXEMPT TRUST. It is the intent of the parties hereto that this Trust
be a trust exempt from income taxation under the Federal income tax laws, and
any ambiguities in construction shall be resolved in favor of interpretations
which will effectuate such intention.
IN WITNESS WHEREOF, this Trust Agreement has been executed on the _____
day of December, 1987.
HADCO CORPORATION
By:
-------------------------------------
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK, TRUSTEE
By:
-------------------------------------
<PAGE> 1
FIRST AMENDMENT AND MODIFICATION AGREEMENT
FIRST AMENDMENT AND MODIFICATION AGREEMENT dated as of February 21, 1997
(this "Amendment") by and among HADCO CORPORATION, a Massachusetts corporation
(the "Company"); the direct and indirect subsidiaries of the Company listed on
the signature pages hereto (collectively, the "Hadco Subsidiaries"); THE FIRST
NATIONAL BANK OF BOSTON individually; and THE FIRST NATIONAL BANK OF BOSTON, as
Agent (the "Agent") for the Banks, amending certain provisions of the Revolving
Credit Agreement dated as of January 8, 1997 (as amended and in effect from time
to time, the "Agreement") among the Company, the Banks and the Agent. Terms not
otherwise defined herein which are defined in the Agreement shall have the
respective meanings assigned to such terms in the Agreement.
WHEREAS, the Company has requested that the Agent and the Banks amend
certain provisions of the Agreement; and
WHEREAS, upon the terms and subject to the conditions contained herein, the
Agent and the Banks are willing to amend such provisions of the Credit
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Agreement, the other Loan Documents and this Amendment and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
sec.1. AMENDMENT TO AGREEMENT. With effect from the Effective Date (as
defined in ss.2 below), the Agreement shall be amended as follows'
sec.1.1. Section 1.1 of the Agreement is hereby amended by
changing the section referenced in the definition of "Agent's Side Letter" from
5.2 to 5.1.
sec.1.2. Section 1.1 of the Agreement is hereby further amended
by changing the section referenced in the definition of "Assignment and
Acceptance" from 20.1 to 19.1.
sec.1.3. Section 1.1 of the Agreement is hereby further amended
by changing the sections referenced in the definitions of "CERCLA",
"Environmental Laws", and "Hazardous Substances" from 7.18 to 7.17.
<PAGE> 2
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sec.1.4. Section 1.1 of the Agreement is hereby further amended
by inserting the words "(and including any purchase, redemption, prepayment or
other retirement, in whole or in part, of the Subordinated Notes or any of
them)" between the words "capital stock" and ", of the Borrower" in line 6 of
the definition of "Distribution", and by inserting the following text at the end
of such definition:
"PROVIDED, HOWEVER, that (a) any issuances of common stock or other "junior
securities" (as such term is defined in Section 4.8 of the Indenture) of the
Borrower upon conversion of any of the Subordinated Notes in accordance with
their terms and the terms of the Indenture and (b) any payment by the Borrower
of cash in lieu of the issuance of fractional shares in connection with any such
conversion shall not be deemed to be "Distributions" hereunder."
sec.1.5. Section 1.1 of the Agreement is hereby further amended
by changing the word "account" referenced in line 5 of the definition of
"Earnings Before Interest and Taxes or EBIT" to "accounting".
sec.1.6. Section 1.1 of the Agreement is hereby amended by
deleting the definition of "Guarantors" in its entirety and substituting in lieu
thereof the following new definition:
"GUARANTORS. (i) Hadco Acquisition, which term shall refer immediately
following the consummation of the Merger to Zycon Corporation, a Delaware
corporation, being the survivor of the merger of Hadco Acquisition Corp. with
and into Zycon Corporation; (ii) immediately following the consummation of the
Merger, Zycon Alternate Circuits, Inc.; and (iii) any other direct or indirect
Subsidiary of the Borrower (other than Hadco FSC and Zycon Corp. SDN BHD)."
sec.1.7. Section 1.1 of the Agreement is hereby further amended
by inserting the following new definition in alphabetical order therein:
"INDENTURE. The Indenture between or to be between the Borrower and State
Street Bank and Trust Company, as Trustee, with respect to the Subordinated
Notes, substantially in the form of the draft dated February , 1997 previously
delivered to the Agent and each of the Banks, with such modifications as are
appropriate or necessary to complete such form (including without limitation,
changes to reflect the specific maturity date in 2004 or thereafter, the
interest payment dates, the record dates, the interest rate, the initial
conversion price, the redemption prices and such other terms as are related to
the "pricing" of the securities to be represented by the Subordinated Notes) and
such other changes as are either non-
<PAGE> 3
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substantive or as shall have been approved by the Agent on behalf of the
Banks. The Indenture is to be entered into by the parties thereto as of the
closing of the issuance of the Subordinated Notes."
sec.1.8. Section 1.1 of the Agreement is hereby further amended
by changing the section referenced in the definition of "Permitted Acquisitions"
to from 9.5.1 to 9.5.2(c).
sec.1.9. Section 1.1 of the Agreement is hereby further amended
by inserting the following new definition in alphabetical order therein:
"SUBORDINATED NOTES. The Borrower's Convertible Subordinated Notes due 2004
or thereafter, in an aggregate principal amount of up to $138,000,000, issued or
to be issued under and pursuant to the Indenture."
sec.1.10. Section 2.3 of the Agreement is hereby amended by
inserting the words "or sec.9.1(l)" after the words "permitted by
sec.9.1(k)" in lines 2 and 16 thereof, deleting the words "in sec.9.1(k)(i)"
in line 6 thereof and substituting therefor the words "in sec.9.1(k) or
sec.9.1(l)(i)", inserting the word "cumulative" between the words "a" and
"maximum" in line 6 thereof, changing the section referenced in line 7 thereof
from 9.1(k)(ii) to 9.1(1)(ii), and changing the section referenced in the sixth
line from the end thereof from 2.3.2 to 2.3.
sec.1.11. Section 3.2 of the Agreement is hereby amended by
inserting the words "or sec.9.1(l)" after the words "permitted by
sec.9.1(k)" in line 2 thereof, deleting the words "in sec.9.1(k)(i)" in line
6 thereof and substituting therefor the words "in sec.9.1(k) or
sec.9.1(1)(i)", inserting the word "cumulative" between the words "a" and
"maximum" in line 7 thereof, and changing the section referenced in line 8
thereof from 9.1(k)(ii) to 9.1(l)(ii).
sec.1.12. Section 5.3 of the Agreement is hereby amended by
changing the phrase "records on each Bank" in line 12 thereof to "records of
each Bank".
sec.1.13. Section 8.4(d) of the Agreement is hereby amended by
inserting the word "by" after the word "filed" in line 3 of such subsection.
sec.1.14. Section 9.1 of the Agreement is hereby amended by
deleting subsections 9.1(k) and 9.1(1) in their entirety and inserting the
following new subsections 9.1(k), 9.1(l) and 9.1(m):
"(k) the Subordinated Notes;
<PAGE> 4
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(1) so long as no Default or Event of Default shall have occurred
and be continuing or would occur as a result of the incurrence of any
thereof, unsecured Indebtedness of the Borrower or any of its
Subsidiaries up to an aggregate amount (the "ADDITIONAL AMOUNT") equal
to the sum of $175,000,000 LESS the outstanding aggregate principal
amount of the Subordinated Notes, if any. Such Indebtedness shall
consist of: (i) up to an amount equal to $150,000,000 LESS the
aggregate outstanding principal amount of the Subordinated Notes (but
not to exceed, when combined with amounts of Indebtedness incurred
pursuant to clause (ii) of this sec.9.1(l), the Additional Amount) of
Indebtedness which is expressly subordinated and made junior to the
payment and performance in full of the Obligations on terms and
conditions satisfactory to the Agent and the Majority Banks in their
sole and absolute discretion, and evidenced as subordinate by a
Subordination and Intercreditor Agreement or another written instrument
containing subordination provisions in form and substance satisfactory
to (in their sole and absolute discretion) and approved by the Agent
and the Majority Banks in writing; and (ii) up to $100,000,000 (but not
to exceed, when combined with amounts of Indebtedness incurred pursuant
to clause (i) of this sec.9.1(l), the Additional Amount) of
Indebtedness which may rank PARI PASSU with the Obligations; PROVIDED,
HOWEVER, that the terms of Indebtedness permitted pursuant to this
sec.9.1(l) shall include the following: (A) the maturity date of any
such Indebtedness occurs at least one hundred twenty (120) days
following the Revolving Credit Loan Maturity Date; (B) with respect to
subordinated Indebtedness described in clause (i) of this sec.9.1(l),
no principal, interest, fees or other amounts with respect thereto are
due and payable upon the occurrence and during the continuance of a
Default or Event of Default; (C) with respect to subordinated
Indebtedness described in clause (i) of this sec.9.1(1), no principal
or sinking fund payments are due prior to at least one hundred twenty
(120) days following the Revolving Credit Loan Maturity Date; (D) the
rate of interest and other fees applicable to such Indebtedness are, in
the reasonable judgment of the Agent and the Majority Banks, a market
rate for companies with the same or similar financial profile as the
Borrower; (E) the covenants, including affirmative, negative and
financial covenants, included therein are, in the reasonable judgment
of the Agent and the Majority Banks, less restrictive than the
covenants set forth in secs.8, 9 and 10 hereof and do not contain a
negative pledge on assets of the Borrower and the other Transaction
Parties (but may, with respect to PARI PASSU Indebtedness described in
clause (ii) of this sec.9.1(l), contain an "equal and ratable clause"
with respect to any collateral obtained by the Agent and the Banks);
(F) the terms and conditions of which may not be amended without the
prior written consent of the Agent and the Majority Banks;
<PAGE> 5
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(G) default provisions with respect to which do not cross-default to
the Credit Agreement and the other Loan Documents, except that, with
respect to PARI PASSU Indebtedness described in clause (ii) of this
sec.9.1(l), such default provisions may cross-default to a Default or
Event of Default under sec.13.1(a) or (b), to the extent that any
such Default or Event of Default is not cured or waived within thirty
(30) days after the occurrence thereof; and (H) such other terms and
conditions as the Agent and the Majority Banks may reasonably require;
PROVIDED, FURTHER, that prior to the incurrence of any such
Indebtedness, the Borrower shall provide to the Agent and each of the
Banks PRO FORMA financial statements and compliance certificates in the
form of EXHIBIT C indicating that for the period from the date of the
incurrence of such Indebtedness until the Revolving Credit Loan
Maturity Date, no Default or Event of Default would result from the
incurrence of such Indebtedness; and
(m) Indebtedness not otherwise set forth in clauses (a) - (1) of
this sec.9.1 in an amount not to exceed $2,000,000 in the aggregate."
sec.1.15. Section 9.5.2 of the Agreement is hereby amended by
changing the word "writtent" in line 12 thereof to "written", deleting the
second "shall" in line 13 thereof, and changing the reference "Exhibit E-1" in
line 31 thereof to "Exhibit C".
sec.1.16. Section 9.9 of the Agreement is hereby amended by
adding the following at the end thereof:
"The Borrower will not, and will not permit the other parties thereto to, (i)
amend, modify or supplement the Subordinated Notes or the Indenture in any way
which would materially adversely affect the rights or interests of the Agent or
any of the Banks as holders of "Senior Indebtedness" or "Designated Senior
Indebtedness" thereunder, or (ii) enter into a supplemental indenture pursuant
to Sections 11.1(b) and 11.1(d) of the Indenture, unless in each case the form
of such proposed amendment, modification, supplement or supplemental indenture
shall have first been approved in writing by the Agent and the Majority Banks,
and, in the absence of such approval, in addition to and without limitation of
such other rights as the Agent and the Banks may have hereunder, no such
amendment, modification, supplement or supplemental indenture shall be effective
to modify the rights or interests of the Agent or any of the Banks as holders of
"Senior Indebtedness" or "Designated Senior Indebtedness" under the Indenture."
sec.1.17. The Agreement is hereby amended by inserting the
following new Section 9.12 therein:
<PAGE> 6
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"9.12. DESIGNATION OF INDEBTEDNESS UNDER INDENTURE. The Borrower will not
designate, declare or identify any Indebtedness as "Designated Senior
Indebtedness" under and pursuant to the Indenture, unless the amount and terms
of such Designated Senior Indebtedness shall first have been approved by the
Agent and the Majority Banks in writing."
sec.1.18. Section 11.4 of the Agreement is hereby amended by
inserting the phrase "each Transaction Party" after the word "from" in line 2
thereof.
sec.1.19. Section 14 of the Agreement is hereby amended by
inserting the phrase "notify the Agent thereof and" prior to the phrase "make
such disposition" in line 23 thereof.
sec.1.20. Section 15.1(a) of the Agreement is hereby amended by
inserting the phrase "(including the approval by the Agent of the final form of
the Indenture as contemplated by the definition of the term "Indenture")
following the words "reasonably incident thereto" in line 4 thereof.
sec.1.21. The Agreement is hereby amended by deleting the portion
of Section 26 selected below, and substituting for the deleted text the
replacement text set forth below:
Delete the following: "Notwithstanding the foregoing, the rate of interest on
the Notes (other than interest accruing pursuant to sec.5.10.2 following the
effective date of any waiver by the Majority Banks of the Default or Event of
Default relating thereto), the term of the Notes, the amount of the Commitments
of the Banks, and the amount of commitment fee or Letter of Credit Fees
hereunder may not be changed without the written consent of the Borrower and the
written consent of each Bank affected thereby; the definition of Majority Banks
may not be amended without the written consent of all of the Banks;"
Replace with the following: "Notwithstanding the foregoing, the rate of interest
on the Notes (other than interest accruing pursuant to sec.5.10.2 following the
effective date of any waiver by the Majority Banks of the Default or Event of
Default relating thereto), the term of the Notes, the amount of the Commitments
of the Banks, and the amount of commitment fee or Letter of Credit Fees
hereunder may not be changed, and no scheduled date for the payment of
principal, interest or fees may be postponed or extended without the written
consent of the Borrower and the written consent of each Bank affected thereby;
the definition of Majority Banks and the terms of this Section 26 may not be
amended and no collateral or guaranty may be released without the written
consent of all of the Banks;"
<PAGE> 7
-7-
sec.1.22. Exhibit A (Form of Revolving Credit Note) of the
Agreement is hereby amended as follows:
(a) The second paragraph (section (a)) is amended by changing the words "the
date hereof" in lines 4 and 5 thereof to "January 8, 1997"; and
(b) The fourth paragraph (section (c)) is amended by changing the words
"Closing Date under the Credit Agreement" in line 2 thereof to "date hereof."
sec.1.23. Exhibit D (Form of Assignment and Acceptance) of the
Agreement is hereby amended as follows:
(a) Section 1 of the Assignment and Acceptance is amended by inserting the
text "(except for the specific representations in Section 2 hereof)" after the
words "without recourse to the Assignor" in line 4 thereof: and
(b) Section 2 of the Assignment and Acceptance is amended by adding the word
"and" prior to the phrase "the aggregate amount" in line 5 thereof, and by
adding the text "and that it has no knowledge that a Default or Event of Default
has occurred and is continuing" after the words "free and clear of any claim or
encumbrance" in lines 20-21 thereof.
sec.2. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to be
effective as of February 21, 1997 (the "Effective Date"), upon the Agent's
receipt of facsimile copies of original counterparts (to be followed promptly by
original counterparts) or original counterparts of this Amendment, duly executed
by each of the Company, the Hadco Subsidiaries, the Agent and The First National
Bank of Boston.
sec.3. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION. Each of
the Company and the Hadco Subsidiaries hereby represents and warrants to each of
the Agent and the Banks as follows:
(a) Each of the representations and warranties of the Company and
the Hadco Subsidiaries contained in the Agreement, the other Loan
Documents or in any document or instrument delivered pursuant to or in
connection with the Agreement, the other Loan Documents or this
Amendment was true as of the date as of which it was made, and no
Default or Event of Default has occurred and is continuing as of the
date of this Amendment; and
<PAGE> 8
-8-
(b) This Amendment has been duly authorized, executed and delivered
by the Company and each of the Hadco Subsidiaries, and shall be in full
force and effect upon the satisfaction of the conditions set forth in
sec.2 hereof, and the agreements of the Company and each of the Hadco
Subsidiaries contained herein, in the Agreement as herein amended, or
in the other Loan Documents respectively, constitute the legal, valid
and binding obligations of the Company and each of the Hadco
Subsidiaries party hereto or thereto, enforceable against the Company
or such Hadco Subsidiary, in accordance with their respective terms,
except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent
that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
sec.4. RATIFICATION, ETC. Except as expressly amended hereby, the
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. All references in the Agreement or such
other Loan Documents or in any related agreement or instrument to the Agreement
or such other Loan Documents shall hereafter refer to such agreements as amended
hereby, pursuant to the provisions of the Agreement.
sec.5. NO IMPLIED WAIVER, ETC. Except as expressly provided herein,
nothing contained herein shall constitute a waiver of, impair or otherwise
affect any of the Obligations, any other obligations of the Company or any of
the Hadco Subsidiaries or any right of the Agent or the Banks consequent
thereon. The waivers and consents provided herein are limited strictly to their
terms. Neither the Agent nor any of the Banks shall have any obligation to issue
any further waiver or consent with respect to the subject matter hereof or any
other matter.
sec.6. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
sec.7. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO CHOICE OR CONFLICTS OF LAWS).
<PAGE> 9
-9-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
a document under seal as of the date first above written.
THE FIRST NATIONAL BANK
OF BOSTON, individually
and as Agent
By:
------------------------------------
Title:
HADCO CORPORATION
By:
------------------------------------
Title:
<PAGE> 10
-10-
Each of the undersigned hereby acknowledges the foregoing Amendment as of the
Effective Date and agrees that its obligations under the Guaranty will extend to
the Agreement, as so amended, and the other Loan Documents, as so amended.
ZYCON CORPORATION
By:
------------------------------------
Title:
ZYCON ALTERNATE CIRCUITS, INC.
By:
------------------------------------
Title:
<PAGE> 1
ASSIGNMENT AND ACCEPTANCE
-------------------------
Dated as of February 27, 1997
Reference is made to the Revolving Credit Agreement, dated as of January 8,
1997 (as from time to time amended and in effect, the "Credit Agreement"), by
and among HADCO CORPORATION, (the "Borrower"), the banking institutions referred
to therein as Banks (collectively, the "Banks"), and THE FIRST NATIONAL BANK OF
BOSTON, as agent (in such capacity, the "Agent") for the Banks. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
such terms in the Credit Agreement.
THE FIRST NATIONAL BANK OF BOSTON (the "Assignor") and each of ABN AMRO Bank
N.V., individually and as Documentation Agent, The Bank of Nova Scotia, Bank of
Tokyo-Mitsubishi Trust Company, CIBC, Inc., The Chase Manhattan Bank, CoreStates
Bank, N.A., The First National Bank of Chicago, The Fuji Bank, Limited, The
Industrial Bank of Japan, Limited, KeyBank National Association, State Street
Bank and Trust Company, The Sumitomo Bank, Limited, and SunTrust Bank, Atlanta
(each, an "Assignee" and collectively, the "Assignees") hereby agree as
follows:
<TABLE>
1. ASSIGNMENT. Subject to the terms and conditions of this Assignment and
Acceptance, the Assignor hereby sells and assigns to the Assignees, and each of
the Assignees hereby purchases and assumes without recourse to the Assignor
(except for the specific representations in Section 2 hereof), an interest in
and to the rights, benefits, indemnities and obligations of the Assignor under
the Credit Agreement in the dollar amount set forth opposite such Assignee's
name in the table below and equal to the percentage in respect of the Total
Commitment immediately prior to the Effective Date (as hereinafter defined) set
forth opposite such Assignee's name in the table below:
<CAPTION>
Commitment Commitment
Assignee Amount Percentage
- -------- ----------- ----------
<S> <C> <C>
ABN AMRO Bank, N.V $25,000,000 10.0%
The Bank of Nova Scotia $12,000,000 4.8%
Bank of Tokyo-Mitsubishi
Trust Company $20,000,000 8.0%
CIBC, Inc. $12,000,000 4.8%
The Chase Manhattan Bank $20,000,000 8.0%
CoreStates Bank, N.A $12,000,000 4.8%
The First National Bank
of Chicago $20,000,000 8.0%
The Fuji Bank, Limited $12,000,000 4.8%
The Industrial Bank of
Japan, Limited $20,000,000 8.0%
KeyBank National Association $20,000,000 8.0%
</TABLE>
<PAGE> 2
-2-
<TABLE>
<CAPTION>
Commitment Commitment
Assignee Amount Percentage
- -------- ----------- ----------
<S> <C> <C>
State Street Bank and Trust
Company $12,000,000 4.8%
The Sumitomo Bank, Limited $12,000,000 4.8%
SunTrust Bank, Atlanta $12,000,000 4.8%
</TABLE>
2. ASSIGNOR'S REPRESENTATIONS. The Assignor (i) represents and warrants that
(A) it is legally authorized to enter into this Assignment and Acceptance, and
(B) as of the date hereof, after giving effect to the assignments contemplated
hereby, its Commitment is $41,000,000, its Commitment Percentage is 16.4%, the
aggregate outstanding principal balance of its Loans equals $35,260,000, AND the
aggregate amount of its Letter of Credit Participations equals $0, (ii) makes no
representation or warranty, express or implied, and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or any of the other Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant thereto or the attachment, perfection or priority of
any security interest or mortgage, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder free and clear
of any claim or encumbrance and that it has no knowledge that a Default or Event
of Default has occurred and is continuing; (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or any of the other Transaction Parties or any other Person
primarily or secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower or any of the other Transaction
Parties or any other Person primarily or secondarily liable in respect of any of
the Obligations or any of its obligations under the Credit Agreement or any of
the other Loan Documents or any other instrument or document delivered or
executed pursuant thereto; and (iv) attaches hereto the Note delivered to it
under the Credit Agreement.
<TABLE>
The Assignor requests that the Borrower exchange the Assignor's Note for new
Notes payable to the Assignor and the Assignees as follows:
<CAPTION>
Notes Payable to Amount of Revolving
the Order of: Credit Note
------------- -------------------
<S> <C>
Assignor $41,000,000
</TABLE>
<PAGE> 3
-3-
<TABLE>
<CAPTION>
Notes Payable to Amount of Revolving
the Order of: Credit Note
------------- -------------------
<S> <C>
Assignees:
ABN AMRO Bank, N.V. $25,000,000
The Bank of Nova Scotia $12,000,000
Bank of Tokyo-Mitsubishi Trust Company $20,000,000
CIBC, Inc. $12,000,000
The Chase Manhattan Bank $20,000,000
CoreStates Bank, N.A. $12,000,000
The First National Bank of Chicago $20,0O0,000
The Fuji Bank, Limited $12,000,000
The Industrial Bank of Japan, Limited $20,000,000
KeyBank National Association $20,000,000
State Street Bank and Trust Company $12,000,000
The Sumitomo Bank, Limited $12,000,000
SunTrust Bank, Atlanta $12,000,000
</TABLE>
3. ASSIGNEES' REPRESENTATIONS. Each of the Assignees (i) represents and
warrants that (A) it is duly and legally authorized to enter into this
Assignment and Acceptance, (B) the execution, delivery and performance of this
Assignment and Acceptance do not conflict with any provision of law or of the
charter or by-laws of the Assignee, or of any agreement binding on the Assignee,
(C) all acts, conditions and things required to be done and performed and to
have occurred prior to the execution, delivery and performance of this
Assignment and Acceptance, and to render the same the legal, valid and binding
obligation of the Assignee, enforceable against it in accordance with its terms,
have been done and performed and have occurred in due and strict compliance with
all applicable laws; (ii) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to sec.8.4 thereof and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Bank and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iv) represents and warrants that it is an
Eligible Assignee; (v) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement and
the other Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (vi) agrees
that it will perform in accordance with their terms all the obligations which
by the terms of the Credit Agreement are required to be performed by it as a
Bank; and (vii) acknowledges that it has made arrangements with the Assignor
satisfactory to
<PAGE> 4
-4-
the Assignee with respect to its PRO RATA share of Letter of Credit Fees in
respect of outstanding Letters of Credit.
4. EFFECTIVE DATE. The effective date for this Assignment and Acceptance
shall be February 27, 1997 (the "Effective Date"). Following the execution of
this Assignment and Acceptance and, so long as no Default or Event of Default
has occurred and is continuing, the consent of the Borrower hereto having been
obtained, each party hereto shall deliver its duly executed counterpart hereof
to the Agent for acceptance by the Agent and recording in the Register by the
Agent. SCHEDULE 1 to the Credit Agreement shall thereupon be replaced as of the
Effective Date by the SCHEDULE 1 annexed hereto.
5. RIGHTS UNDER CREDIT AGREEMENT. Upon such acceptance and recording, from
and after the Effective Date, (i) each of the Assignees shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Bank thereunder, and (ii) the Assignor
shall, with respect to that portion of its interest under the Credit Agreement
assigned hereunder, relinquish its rights and be released from its obligations
under the Credit Agreement; PROVIDED, HOWEVER, that the Assignor shall retain
its rights to be indemnified pursuant to sec.17 of the Credit Agreement with
respect to any claims or actions arising prior to the Effective Date.
6. PAYMENTS. Upon such acceptance of this Assignment and Acceptance by the
Agent and such recording, from and after the Effective Date, the Agent shall
make all payments in respect of the rights and interests assigned hereby
(including payments of principal, interest, fees and other amounts) to the
Assignees, as applicable. The Assignor and each Assignee shall make any
appropriate adjustments in payments for periods prior to the Effective Date by
the Agent or with respect to the making of this assignment directly between
themselves.
7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE EFFECT
AS A SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICT OF
LAWS).
8. COUNTERPARTS. This Assignment and Acceptance may be executed in
any number of counterparts which shall together constitute but one and the
same agreement.
<PAGE> 5
-5-
IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned
has caused this Assignment and Acceptance to be executed on its behalf by its
officer thereunto duly authorized, as of the date first above written.
ASSIGNOR:
THE FIRST NATIONAL BANK OF
BOSTON
By:
------------------------------------
Title:
ASSIGNEES:
ABN AMRO Bank, N.V.,
individually and as
Documentation Agent
By:
------------------------------------
Title:
THE BANK OF NOVA SCOTIA
By:
------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By:
------------------------------------
Title:
<PAGE> 6
-6-
CIBC, INC.
By:
------------------------------------
Title:
THE CHASE MANHATTAN BANK
By:
------------------------------------
Title:
CORESTATES BANK, N.A.
By:
------------------------------------
Title:
THE FIRST NATIONAL BANK
OF CHICAGO
By:
------------------------------------
Title:
THE FUJI BANK, LIMITED
By:
------------------------------------
Title:
<PAGE> 7
-7-
THE INDUSTRIAL BANK
OF JAPAN, LIMITED
By:
------------------------------------
Title:
KEYBANK NATIONAL
ASSOCIATION
By:
------------------------------------
Title:
STATE STREET BANK AND
TRUST COMPANY
By:
------------------------------------
Title:
THE SUMITOMO BANK, LIMITED
By:
------------------------------------
Title:
By:
------------------------------------
Title:
<PAGE> 8
-8-
SUNTRUST BANK, ATLANTA
By:
------------------------------------
Title:
By:
------------------------------------
Title:
CONSENTED TO:
- -------------
HADCO CORPORATION
By:
---------------------------------
Title:
THE FIRST NATIONAL BANK
OF BOSTON, as Agent
By:
---------------------------------
Title:
<PAGE> 9
<TABLE>
SCHEDULE 1
----------
<CAPTION>
Bank Commitment Commitment
---- ----------- ----------
Amount Percentage
----------- ----------
<S> <C> <C>
DOMESTIC AND EURODOLLAR LENDING OFFICE:
THE FIRST NATIONAL BANK OF BOSTON $41,000,000 16.4%
100 Federal Street
New England Corporate Banking, 01-07-05
Boston, MA 02110
Attn: Jeffrey G. Millman
Tel: 617-434-7944
Fax: 617-434-8102
DOMESTIC AND EURODOLLAR LENDING OFFICE:
ABN AMRO BANK, N.V. $25,000,000 10.0%
One Post Office Square, 39th Floor
Boston, MA 02109
Attn: Chip Wahle
Tel: 617-988-7935
Fax: 617-988-7910
with copies of correspondence to:
ABN AMRO Bank, N.V.
135 S. LaSalle Street, Legal Dept.
Chicago, IL 60603
Attn: Janet Knutel
Tel: 312-904-2225
Fax: 312-904-2340
DOMESTIC AND EURODOLLAR LENDING OFFICE:
THE BANK OF NOVA SCOTIA $12,000,000 4.8%
101 Federal Street, 16th Floor
Boston, MA 02110
Attn: Michael Bradley
Tel: 617-737-6312
Fax: 617-951-2177
</TABLE>
<PAGE> 10
-2-
<TABLE>
<CAPTION>
Bank Commitment Commitment
---- ----------- ----------
Amount Percentage
----------- ----------
<S> <C> <C>
DOMESTIC AND EURODOLLAR LENDING OFFICE:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY $20,000,000 8.0%
1251 Avenue of the Americas
New York, NY 10020-1104
Contacts:
Robert J. Diloff (Credit Matters)
Tel: 617-330-7419
Fax: 617-330-7422
Rolando Uy (Operations)
Tel: 201-413-8576
Fax: 201-413-8225
with all correspondence sent to:
Bank of Tokyo-Mitsubishi Trust Company
125 Summer Street, Suite 1170
Boston, MA 02110
Attn: Robert J. Diloff
Tel: 617-330-7419
Fax: 617-330-7422
and to:
Bank of Tokyo-Mitsubishi Trust Company
Legal Department
1251 Avenue of the Americas
New York, NY 10020-1104
Attn: Frederick Leone
Tel: 212-782-4637
Fax: 212-782-6420
DOMESTIC AND EURODOLLAR LENDING OFFICE:
CIBC, INC. $12,000,000 4.8%
425 Lexington Avenue
New York, NY 10017
Attn: Cyd Petre
Tel: 212-856-4165
Fax: 212-856-3991
</TABLE>
<PAGE> 11
-3-
<TABLE>
<CAPTION>
Bank Commitment Commitment
---- ----------- ----------
Amount Percentage
----------- ----------
<S> <C> <C>
DOMESTIC AND EURODOLLAR LENDING OFFICE:
THE CHASE MANHATTAN BANK $20,000,000 8.0%
999 Broad Street
Bridgeport, CT 06604
Attn: Fred Loder
Tel: 203-382-6493
Fax: 203-382-6573
with copies of correspondence to:
The Chase Manhattan Bank
Legal Department
270 Park Avenue, 40th Floor
New York, NY 10017
Attn: David Struss
Tel: 212-270-5038
Fax: 212-270-7429
DOMESTIC AND EURODOLLAR LENDING OFFICE:
CORESTATES BANK, N.A. $12,000,000 4.8%
1345 Chestnut Street
FC 1-8-3-16
Philadelphia, PA 19102
Attn: John Fessick
Tel: 215-786-2162
Fax: 215-973-6745
DOMESTIC AND EURODOLLAR LENDING OFFICE:
THE FIRST NATIONAL BANK OF CHICAGO $20,000,000 8.0%
153 W. 51st Street, 8th Floor
New York, NY 10019
Attn: Thomas Knoff
Tel: 212-373-1181
Fax: 212-373-1388
with copies of correspondence to:
The First National Bank of Chicago
1 First National Plaza
Chicago, IL 60670
Attn: Leane Cerven
Tel: 312-732-8191
Fax: 312-732-6037
</TABLE>
<PAGE> 12
-4-
<TABLE>
<CAPTION>
Bank Commitment Commitment
---- ----------- ----------
Amount Percentage
----------- ----------
<S> <C> <C>
DOMESTIC AND EURODOLLAR LENDING OFFICE:
THE FUJI BANK, LIMITED $12,000,000 4.8%
2 World Trade Center, 79th Floor
New York, NY 10022
Attn: Mark Hanslin
Tel: 212-898-2073
Fax: 212-912-0516
DOMESTIC AND EURODOLLAR LENDING OFFICE:
THE INDUSTRIAL BANK OF JAPAN, LIMITED $20,000,000 8.0%
1251 Avenue of the Americas
New York, NY 10020-1104
Attn: Wayne Right
Tel: 212-282-3462
Fax: 212-282-4488
DOMESTIC AND EURODOLLAR LENDING OFFICE:
KEYBANK NATIONAL ASSOCIATION $20,000,000 8.0%
127 Public Square
Mail Code: 01-27-0606
Cleveland, Ohio 44114
Attn: Michael Landini
Tel: 216-689-5562
Fax: 216-689-4981
DOMESTIC AND EURODOLLAR LENDING OFFICE:
STATE STREET BANK AND TRUST COMPANY $12,000,000 4.8%
225 Franklin Street
Boston, MA 02110-2804
Attn: Bruce Daniels
Tel: 617- 654-3611
Fax: 617- 654-4176
</TABLE>
<PAGE> 13
-5-
<TABLE>
<CAPTION>
Bank Commitment Commitment
---- ----------- ----------
Amount Percentage
----------- ----------
<S> <C> <C>
DOMESTIC AND EURODOLLAR LENDING OFFICE:
THE SUMITOMO BANK, LIMITED $12,000,000 4.8%
233 S. Wacker Drive, Suite 5400
Chicago, IL 60606
Attn: Richard Bailey, Vice President Operations
Tel: 312-993-6214
Fax: 312-876-1995
with copies of correspondence to:
The Sumitomo Bank Limited
One Post Office Square, Suite 820
Boston, MA 02109
Attn: A1 DeGemmis
Tel: 617-451-3200
Fax: 617-423-4884
DOMESTIC AND EURODOLLAR LENDING OFFICE:
SUNTRUST BANK, ATLANTA $12,000,000 4.8%
711 Fifth Avenue, 5th Floor
Mail Code 0122
New York, NY 10022
Attn: Susan Boyd
Tel: 212-583-2612
Fax: 212-371-9386
with copies of correspondence to:
SunTrust Bank, Atlanta
25 Park Place, 18th Floor
Atlanta, GA 30303
Attn: John Bettex
Tel: 404-588-7084
Fax: 404-230-5387
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 15, 1997
<PAGE> 1
EXHIBIT 23.3
The Board of Directors
Hadco Corporation
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
San Jose, California
April 15, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
San Jose, California
April 15, 1997
