<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) of
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MAY 2, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 0-12102
HADCO CORPORATION
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2393279
- ------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
12A MANOR PARKWAY, SALEM, NEW HAMPSHIRE 03079
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 898-8000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Registrant has 13,242,127 shares of Common Stock, $0.05 Par Value, outstanding
at June 8, 1998.
<PAGE> 2
HADCO CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of
May 2, 1998 and October 25, 1997, respectively...................... 3
Consolidated Condensed Statements of Operations for the
Three Months ended May 2, 1998 and April 26, 1997 and
six months ended May 2, 1998 and April 26, 1997,
respectively........................................................ 4
Consolidated Condensed Statements of Cash Flows
for the six months ended May 2, 1998
and April 26, 1997, respectively.................................... 5
Notes to Consolidated Condensed Financial
Statements.......................................................... 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition.............................. 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 26
Item 2. Changes in Securities ............................................. 26
Item 4. Submission of Matters to a Vote of Security Holders .............. 26
Item 6. Exhibits and Reports on Form 8-K .................................. 27
SIGNATURE..................................................................... 30
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
(In thousands)
ASSETS May 2, October 25,
1998 1997
-------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents ............................. $ 4,997 $ 12,171
Short-term investments ................................ - 1,562
Accounts receivable, net of allowance for
doubtful accounts of $2,589 in 1998 and
$1,700 in 1997, respectively ......................... 114,352 92,222
Inventories ........................................... 75,095 46,000
Deferred tax asset .................................... 20,106 10,483
Prepaid and other current expenses .................... 8,058 4,245
-------- --------
Total Current Assets ............................. 222,608 166,683
Property, Plant and Equipment, net .................... 318,335 231,490
Acquired Intangible Assets, net ....................... 195,026 101,131
Other Assets .......................................... 3,472 3,213
-------- --------
$739,441 $502,517
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-term debt and current portion of long-term debt.. $ 4,837 $ 5,064
Accounts payable ...................................... 74,169 68,594
Accrued Payroll and other employee benefits ........... 29,246 28,279
Accrued Taxes ......................................... 494 1,775
Other accrued expenses ................................ 15,229 9,278
-------- --------
Total Current Liabilities ........................ 123,975 112,990
-------- --------
Long Term Debt, net of current portion .................... 359,037 109,716
-------- --------
Deferred Tax Liability .................................... 51,668 30,685
-------- --------
Other Long-Term Liabilities ............................... 9,192 9,214
-------- --------
Commitments and Contingencies
Stockholders' investment:
Common stock, $.05 par value -
Authorized 50,000 shares in 1998 and 25,000 in 1997
Issued and outstanding 13,212 in
1998 and 13,086 in 1997 ............................... 662 655
Paid-in capital ........................................... 171,466 168,246
Deferred compensation ..................................... (75) (117)
Retained earnings ......................................... 23,516 71,128
-------- --------
Total Stockholders' Investment ................... 195,569 239,912
-------- --------
$739,441 $502,517
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
3
<PAGE> 4
<TABLE>
<CAPTION>
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited )
(In thousands, except share data)
Three Months Ended Six Months Ended
------------------ ----------------
May 2, April 26, May 2, April 26,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales .................................................. $ 209,587 $ 180,662 $ 407,863 $ 292,198
Cost of Sales .............................................. 172,857 142,199 332,065 227,358
----------- ----------- ----------- -----------
Gross Profit .......................................... 36,730 38,463 75,798 64,840
Operating Expenses ......................................... 21,526 17,999 39,310 28,819
Restructuring and other non-recurring charges (Note 7) ..... 5,947 - 5,947 -
Write-off of acquired in-process
research and development ................................. 63,050 - 63,050 78,000
----------- ----------- ----------- -----------
Income (Loss) From Operations .............................. (53,793) 20,464 (32,509) (41,979)
Interest and Other Income (Expense), net ................... 844 (70) 1,377 806
Interest Expense ........................................... (4,195) (4,318) (6,294) (5,251)
----------- ----------- ----------- -----------
Income (Loss) Before
Provision for Income Taxes ................................. (57,144) 16,076 (37,426) (46,424)
Provision for Income Taxes ................................. 2,595 6,123 10,186 12,788
Net Income (Loss) .......................................... $ (59,739) $ 9,953 $ (47,612) $ (59,212)
----------- ----------- ----------- -----------
Income (loss) per common and common equivalent Shares (Note 1)
Basic Net Income (Loss) Per Share.......................... $(4.54) $.95 $(3.63) $(5.67)
====== ==== ====== ======
Diluted Net Income (Loss) Per Share........................ $(4.54) $.91 $(3.63) $(5.67)
====== ==== ====== ======
Weighted average common and common equivalent Shares
outstandingc (Note 1)
Basic .................................................... 13,161,078 10,458,213 13,130,418 10,434,555
=========== =========== =========== ===========
Diluted .................................................. 13,161,078 10,956,458 13,130,418 10,434,555
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
4
<PAGE> 5
<TABLE>
<CAPTION>
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
Six Months Ended
----------------
May 2, April 26,
1998 1997
----- ---------
<S> <C> <C>
Total Cash Provided From Operating Activities .................................... $ 12,595 $ 13,990
--------- ---------
Cash Flows From Investing Activities:
Purchases of short-term investments ......................................... (2,020) -
Maturities of short-term investments ........................................ 3,582 9,401
Purchases of property, plant and equipment .................................. (48,186) (29,611)
Acquisitions of Continental in 1998 and Zycon in 1997 ....................... (190,032) (209,661)
--------- ---------
Net Cash Used In Investing Activities ............................................ (236,656) (229,871)
Cash Flows From Financing Activities:
Principal payments of long-term debt ........................................ (43,218) (36,621)
Proceeds from issuance of long-term debt .................................... 256,878 225,000
Proceeds from exercise of stock options ..................................... 477 435
Tax benefit from exercise of stock options .................................. 1,270 1,387
Proceeds from the sale of Common Stock ...................................... 1,480 -
--------- ---------
Net Cash Provided by Financing Activities ........................................ 216,887 190,201
--------- ---------
Net decrease in Cash and Cash Equivalents ........................................ (7,174) (25,680)
Cash and Cash Equivalents Beginning of Period .................................... 12,171 32,786
--------- ---------
Cash and Cash Equivalents End of Period .......................................... $ 4,997 $ 7,106
========= =========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest ................................................................... $ 4,689 $ 4,282
========= =========
Income taxes (net of refunds) ............................................. $ 10,906 $ 9,070
========= =========
Acquisitions of Continental in 1998 and Zycon in 1997:
Fair value of assets acquired ............................................... $ 140,123 $ 212,509
Liabilities assumed ......................................................... (47,905) (114,993)
Cash paid ................................................................... (186,083) (204,885)
Acquisition costs incurred .................................................. (3,949) (7,600)
Write-off of acquired in-process
research and development ................................................... 63,050 78,000
--------- ---------
Goodwill .................................................................... $ (34,764) $ (36,969)
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
5
<PAGE> 6
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Hadco Corporation's (the "Company" or "Hadco") principal products are
multilayer rigid printed circuits and backplane assemblies. The
consolidated condensed financial statements reflect the application of
certain accounting policies. For information as to the significant
accounting policies followed by the Company and other financial and
operating information, see this note and elsewhere in the accompanying
notes to consolidated condensed financial statements, as well as the
Company's Annual Report on Form 10-K for the fiscal year ended October 25,
1997, Quarterly Report on Form 10-Q for the fiscal quarter ended January
31, 1998, Current Reports on From 8-K dated February 18, 1998. February
20, 1998, and May 1, 1998 and current report on From 8-K dated March 26,
1998 as amended by Current Report on Form 8-K/A dated May 1, 1998. These
financial statements should be read in conjunction with the financial
statements included in those above-referenced SEC filings.
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 condensed 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 condensed balance sheet as of May 2, 1998,
and the consolidated statements of operations and cash flows for the six
month periods ended May 2, 1998 and April 26, 1997 are unaudited but, in
the opinion of management, include all adjustments (consisting only of
normal, recurring adjustments) necessary for a fair presentation of
results for these interim periods. Results of operations for the interim
period are not necessarily indicative of results to be expected for the
entire year or any future period.
NET INCOME (LOSS) PER SHARE
The Company adopted SFAS No. 128, "Earnings per share", effective for the
quarter ended January 31, 1998 which replaces the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. Prior period amounts have been restated to conform to the current
period presentation. Under SFAS No. 128, basic net income (loss) per
common share is computed based on income (loss) available to common
stockholders and the weighted average number of common shares outstanding
during the period. The dilutive net income (loss) per share is computed
based on including the number of additional common shares that would have
been outstanding if the dilutive potential of common shares had been
issued.
6
<PAGE> 7
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
Basic and diluted shares outstanding, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(in thousands, except per share data)
May 2, April 26, May 2, April 26,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic weighted average shares outstanding 13,161 10,458 13,130 10,435
Weighted average common equivalent shares - 498 - -
------ ------ ------ ------
Diluted weighted average shares outstanding 13,161 10,956 13,130 10,435
====== ====== ====== ======
</TABLE>
Diluted weighted average shares outstanding for the three month periods
ended May 2, 1998 and April 26, 1997, do not include 383,997 and 575,366
common equivalent shares, respectively, as their effect would be
anti-dilutive. Diluted weighted averages shares outstanding for the six
month periods ended May 2, 1998 and April 26, 1997, respectively, do not
include 401,798 and 571,815 common equivalent shares as their effect would
be anti- dilutive.
2. AQUISITIONS
On January 10, 1997, the Company acquired (the "Zycon Acquisition") all of
the outstanding common stock of Zycon Corporation ("Zycon"), and on March
20, 1998, the Company acquired (the "Continental Acquisition", and
together with the Zycon Acquistion, the "Acquisitions") all of the
outstanding common stock of Continental Circuits Corp. ("Continental").
These acquisitions were financed by the $400 million unsecured senior
revolving credit facility with a group of banks, which amended and
restated an existing credit facility (the "Amended Credit Facility"),
under which the Company borrowed approximately $215,000,000 upon
consummation of the Zycon Acquisition and approximately $220,000,000 upon
consummation of the Continental Acquisition. These acquisitions were
accounted for as purchases in accordance with Accounting Principles Board
Opinion No. 16, and accordingly, Zycon's and Continental's operating
results since the respective dates of acquisition are included in the
accompanying consolidated condensed financial statements. In accordance
with ABP Opinion No. 16, the Company allocated the purchase price of the
Acquisitions based on the fair value of assets acquired and liabilities
assumed. Significant portions of the purchase price of both Acquisitions
were identified in independent appraisals as intangible assets using
proven valuation procedures and techniques. These intangible assets
include approximately $78,000,000 and $63,050,000 for Zycon and
Continental, respectively, for acquired in-process research and
development ("in-process R&D") for projects that did not have a future
alternative use. Acquired intangibles include developed technology,
customer relationships, assembled workforce, trade names and trademarks.
These intangibles are being amortized over their estimated useful lives of
12 to 30 years.
Unaudited pro forma operating results for the Company, assuming the
acquisitions of Zycon and Continental occurred on October 27, 1996, are as
follows:
7
<PAGE> 8
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
ACQUISITIONS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(in thousands, except per share data)
May 2, April 26, May 2, April 26,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales ............................ $226,196 $212,524 $459,814 $414,633
Net Income ........................... $ (473) $ 9,010 $ 8,880 $ 16,275
Basic Net Income (Loss) Per Share .... $(.04) $.86 $.68 $1.56
Diluted Net Income (Loss) Per Share .. $(.04) $.82 $.66 $1.49
</TABLE>
For purposes of these pro forma operating results, the acquired in-process
R&D was assumed to have been written off prior to October 27, 1996, 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 (in thousands):
<TABLE>
<CAPTION>
May 2, October 25,
1998 1997
---- ----
<S> <C> <C>
Raw Materials....................... $33,656 $14,167
Work-in-process..................... 41,439 31,833
------- -------
$75,095 $46,000
======= =======
</TABLE>
4. INTANGIBLE ASSETS
The Company has assessed the realizability of its acquired 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. See Note 7.
5. LINES OF CREDIT
The Company's $400 million Amended Credit Facility is pursuant to an
Amended and Restated Revolving Credit Agreement, as amended (the
"Agreement). The Agreement provides for direct borrowings or letters of
credit for up to $400 million and expires January 8, 2002. Borrowings
under the Agreement bear interest, at the Company's option, at either: (i)
the Eurodollar Rate plus the Applicable Eurodollar Rate Margin (both as
defined in the Agreement) ranging between .5% and 1.1375%, based on
certain financial
8
<PAGE> 9
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
LINES OF CREDIT (CONTINUED)
ratios of the Company, or (ii) the Base Rate (as defined in the
Agreement). The Company is required to pay a quarterly commitment fee
ranging from .2% to .375% per annum, based on certain financial ratios of
the Company, of the unused commitment under the Agreement. If the Company
obtains certain debt financing, as defined, the banks may require the
Company to repay up to $150,000,000 of amounts outstanding under the
Agreement. At May 2, 1998, borrowings of $345,000,000 were outstanding
under the agreement at a weighted average interest rate of 6.56%.
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, among other things,
minimum levels of consolidated net worth, a maximum ratio of consolidated
funded debt to EBITDA, maximum capital expenditures and minimum interest
coverage, as defined, during the term of the Agreement. At May 2, 1998,
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 $3.4 million for the purpose of acquiring land, facilities
and equipment for the Company's Malaysian subsidiary. The arrangement is
renewable annually. At May 2, 1998, there were no amounts outstanding
under this arrangement.
6. LONG TERM DEBT
<TABLE>
<CAPTION>
May 2, October 25,
1998 1997
------- -----------
(In thousands)
<S> <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 quarterly............................. $ 778 $ 820
Revolving credit agreement (Note 5)................ 345,000 100,000
Obligations under capital leases................... 18,096 13,960
-------- --------
363,874 114,780
Less - Current portion............................. 4,837 5,064
-------- --------
$359,037 $109,716
======== ========
</TABLE>
9
<PAGE> 10
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
7. RESTRUCTURING AND OTHER NON-RECURRING CHARGES
On April 6, 1998, the Company announced the planned consolidation of its
two East Coast quick-turn prototype facilities into the larger of the two
facilities located at Haverhill, MA. The Company incurred and recorded in
the fiscal quarter ended May 2, 1998 non-recurring charges in connection
with the consolidation totaling $5.9 million. The component of this charge
classified as restructuring-related met the criteria set forth in Emerging
Issues and Task Force Issue ("EITF") 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The amount
recorded as a liability, which totaled $1.5 million, relates to severance
and other payroll-related costs, as well as lease termination costs.
Non-recurring costs include costs associated with the abandonment of
assets at one of the facilities. The components of the restructuring and
other non-recurring costs during the three months ended May 2, 1998 are as
follows:
<TABLE>
<CAPTION>
Amount
(in thousands)
<S> <C>
Loss on abandonment of assets ................................ $1,965
Severance benefits and associated legal costs ................ 129
Lease termination loss ....................................... 1,336
------
Total Restructuring Charges .................................. 3,430
Other Non-recurring Charges .................................. 2,517
------
Total Restructuring and Other Charges ........................ $5,947
======
</TABLE>
Included in the restructuring and other charges is $2.5 million, which
represents the write-down of existing assets to their net realizable
value, in accordance with SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of."
8. 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),
10
<PAGE> 11
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ENVIRONMENTAL MATTERS (CONTINUED)
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 has
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 notified the Company that it
will take 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). Hadco and others are
participating in alternative dispute resolution regarding the site with an
independent mediator. In connection with 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 were then suspended during ongoing assessment
and feasibility activities. On June 9, 1992, the Company entered into a
Cooperating Parties Agreement in which it and Gould, Inc., another prior
lessee of the site, agreed to fund certain assessment and feasibility
study activities at the site. The cost of such activities is not expected
to be material to the Company. 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 Note 9 below.
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. Further
investigation is underway to determine the areal extent of the groundwater
contaminant plume. 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.
11
<PAGE> 12
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ENVIRONMENTAL MATTERS (CONTINUED)
The City of Santa Clara adopted an ordinance that, as of April 1, 1997,
reduced the amount of waste, including copper and nickel, that companies
such as the Company may discharge into the city sanitary sewer. The
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 ordinance, the Company is subject to stringent
requirements on the amount of water it can discharge. The concentration
limit for Hadco's copper discharge was reduced from 2.70 milligrams per
liter to 1.02 milligrams per liter, and the concentration limit for
Hadco's nickel discharge was reduced from 2.60 milligrams per liter to
0.15 milligrams per liter. The Company believes it is currently in
compliance with new discharge limits.
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" note 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.
9. LEGAL PROCEEDINGS AND CLAIMS
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 (described in Note 8 above), each of Hadco and
Gould, Inc., another prior lessee of the site of the printed circuit
manufacturing facility in Florida, was 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.
12
<PAGE> 13
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
LEGAL PROCEEDINGS AND CLAIMS (CONTINUED)
In March 1993, the EPA notified Hadco Santa Clara (formerly 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 Hadco Santa Clara 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, Hadco Santa Clara'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 Hadco Santa Clara
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
Hadco Santa Clara's status as a generator of hazardous waste.
In June 1997, the United States District Court in Los Angeles, California
approved and entered a Consent Decree among the EPA and 49 entities
(including Hadco Santa Clara) acting through the Casmalia Steering
Committee (CSC). 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.
On March 27, 1998, the Company received a written notice from legal
counsel for the Lemelson Medical, Education & Research Foundation Limited
Partnership (the "Lemelson Partnership"), alleging that the Company is
infringing certain patents held by the Lemelson Partnership and offering
to license such patents to the Company. The ultimate outcome of this
matter is not currently determinable, and there can be no assurance that
the outcome of this matter will not have a material adverse effect upon
the Company's business, financial condition and results of operations.
13
<PAGE> 14
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
LEGAL PROCEEDINGS AND CLAIMS (CONTINUED)
Litigation with respect to patents and other intellectual property matters
can result in substantial damages, require the cessation of the
manufacture, use and sale of infringing products and the use of certain
processes, or require the infringing party to obtain a license to the
relevant intellectual property.
On January 12, 1998, Hadco Santa Clara (formerly Zycon) received notice of
the filing of a lawsuit, before the Superior Court (County of Santa Clara,
California), against it by Jackie Riley, Keith Riley and Richard Riley for
damages (including punitive damages) for alleged injuries suffered,
including Richard Riley's cancer, as a result of the alleged emission at a
Zycon facility of effluent from allegedly toxic and hazardous chemical
substances. Because this matter is at an early stage, the Company believes
it cannot assess the potential range of damages that might be awarded
should the plaintiffs prevail.
10. SUBSEQUENT EVENT - DEBT OFFERING
On May 18, 1998, the Company sold $200.0 million aggregate principal
amount of its 9-1/2% Senior Subordinated Notes due 2008 (the "Notes") to
certain purchasers. The purchasers subsequently resold the Notes to
"qualified institutional buyers" in reliance upon Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"), and offshore
purchasers pursuant to Rule 904 of Regulation S under the Securities Act.
The Notes were so resold at a price equal to 99.66% of their principal
amount.
Interest on the Notes is payable semiannually on each June 15 and December
15, commencing December 15, 1998. The Notes are redeemable at the option
of the Company, in whole or in part, at any time on or after June 15,
2003, at 104.75% of their principal amount, plus accrued interest, with
such percentages declining ratably to 100% of their principal amount, plus
accrued interest. At any time on or prior to June 15, 2001 and subject to
certain conditions, up to 35% of the aggregate principal amount of the
Notes may be redeemed, at the option of the Company, with the proceeds of
certain equity offerings of the Company at 109.50% of the principal amount
thereof, plus accrued interest. In addition, at any time prior to June 15,
2003, the Company may redeem the Notes, at its option, in whole or in
part, at a price equal to the principal amount thereof, together with
accrued interest, plus the Applicable Premium (as defined in the Indenture
governing the Notes).
The Notes are guaranteed, on a senior subordinated basis, by each of the
Company's U.S. Restricted Subsidiaries (as defined in the Indenture) (the
"Guarantors"). The net proceeds received by the Company from the issuance
and sale of the Notes, approximately $193,820 million, was used to repay
outstanding indebtedness under the Amended Credit Facility previously
incurred to, among other things, finance the Acquisitions.
The Indenture under that which the Notes were issued (the "Indenture")
imposes certain limitations on the ability of the Company, its
subsidiaries and, in certain circumstances, the Guarantors, to, among
other things, incur indebtedness, pay dividends, prepay subordinated
indebtedness, repurchase capital stock, make investments, create liens,
engage in transactions with stockholders and affiliates, sell assets and
engage in mergers and consolidations.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters
discussed below or elsewhere in this quarterly report including, without
limitation, "Environmental Matters," are forward-looking statements that
involve risks and uncertainties. The Company makes such forward-looking
statements under the provisions of the "Safe Harbor" section of the
Private Securities Litigation Reform Act of 1995. Any forward-looking
statements should be considered in light of the factors described below
under "Factors That May Affect Future Results." Actual results may vary
materially from those projected, anticipated or indicated in any
forward-looking statements. In this quarterly report, the words
"anticipates," "believes," "expects," "estimates," "intends," "may,"
"future," "could," "will," and similar words or expressions (as well as
other words or expressions referencing future events, conditions or
circumstances) identify forward-looking statements.
RESULTS OF OPERATIONS
SECOND QUARTER
Net sales for the second quarter of 1998 increased 16.0% over the same
period in 1997. The increase resulted from several factors including the
acquisition of Continental on March 20, 1998, which added $16.8 million to
printed circuit net sales in the quarter, and an increase in backplane
assembly net sales. Backplane assembly net sales increased 104.4 % due to
higher product volume and shipments. Printed circuit net sales decreased
0.5% due to lower production volume and shipments, and a 4.4% decrease in
average pricing. The shift towards printed circuits with more layers and
greater densities partially offset the decrease in the volume of shipments
and decrease in price. Net sales from backplane assemblies increased to
15.6% of net sales from 8.8% in the second quarter of 1997.
The gross profit margin decreased to 17.5% in the second quarter of 1998
from 21.3% in the comparable period in fiscal 1997. The decrease resulted
from lower capacity utilization from printed circuit operations, and lower
overall gross margins from the Hadco Santa Clara (formerly Zycon) and
Hadco Phoenix (formerly Continental) operations.
Operating expenses, as a percent of net sales, increased to 10.3% in the
second quarter of 1998 from 10.0% in the comparable period in fiscal 1997
due to increased goodwill and purchased intangibles amortization expenses
from the acquisition of Continental.
Income from operations for the second quarter of 1998 was reduced by
approximately $63 million due to a non-recurring write-off relating to
acquired in-process research and development recorded in connection with
the Continental Acquisition, and by approximately $5.9 million in
restructuring and other non-recurring charges related to the consolidation
of the Company's East Coast Tech Center operations. The remaining goodwill
and purchased intangibles from the Continental Acquisition will be
amortized over 12 to 20 years, with an average amortization period of 16
years, which will reduce income from operation by approximately $1.5
million per fiscal quarter.
Income from operations, as a percent of net sales, decreased prior to the
write-off of acquired in-process research and development and the
restructuring and other non-recurring charges to 7.3% in the second
quarter of 1998 from 11.3% in the comparable period in fiscal 1997,
primarily as a result of the decrease in gross profits.
15
<PAGE> 16
SECOND QUARTER (CONTINUED)
Interest income decreased in the second quarter of 1998 as compared to the
second quarter of 1997 due to lower average cash balances available for
investing. Interest expense decreased slightly in the second quarter of
1998 as compared to the second quarter of 1997, due to lower average
outstanding debt balances for the second quarter of 1998 compared to the
second quarter of 1997.
The Company includes in operating 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 operating 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.
The Company believes that excess capacity may exist in the printed circuit
and electronic assembly industries. In addition, growth rates in the
electronics industry as a whole have fluctuated historically. These
factors could have a material adverse effect on future orders and pricing.
However, the Company has historically needed to increase its manufacturing
capacity to maintain and expand its market position, although the
Company's manufacturing capacity needs could change at any time or times
in the future. The Company also believes that the potential exists for a
shortage of materials in the printed circuit and electronic assembly
industries, which could have a material adverse effect on future unit
costs. In response to such concerns, the Company engages in the normal
industry practices of maintaining primary and secondary vendors and
diversifying its customer base. There can be no assurances, however, that
such measures will be sufficient to protect the Company against any
shortages of materials.
YEAR TO DATE
Net sales for the six months ended May 2, 1998 increased 39.6% over net
sales for the six months ended April 26, 1997. The increase resulted from
several factors including the acquisitions of Zycon and Continental, which
added $80.2 million to printed circuit net sales in the six month period,
and an increase in both backplane assembly and printed circuit net sales
(excluding these Acquisitions). Backplane assembly net sales increased due
to higher production 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. In addition,
average pricing for printed circuits decreased 3.4% for the first six
months of fiscal 1998 over the same period in fiscal 1997. Net sales from
backplane assemblies increased to 14.2% of net sales from 11.7% in the
first six months of fiscal 1997.
The gross profit margin decreased to 18.6% in the six months ended May 2,
1998 from 22.2% in the comparable period in fiscal 1997. The decrease
resulted from lower capacity utilization from printed circuit facilities,
and lower overall gross margins from the Hadco Santa Clara and Hadco
Phoenix operations.
Operating expenses, as a percent of net sales, decreased to 9.6% in the
six months ended May 2, 1998 from 9.9% in the comparable period in fiscal
1997, due to increased net sales and the fixed nature of the Company's
operating expenses. The decrease was partially offset by goodwill and
purchased intangibles amortization.
16
<PAGE> 17
YEAR TO DATE (CONTINUED)
Income from operations for the six months ended May 2, 1998 and April 26,
1997, was reduced by $63 million and $78 million, respectively, over the
comparable respective preceding periods, due to non-recurring write-offs
of acquired in-process research and development recorded in connection
with the Continental and Zycon acquisitions. 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 $3.1 million per fiscal quarter. In addition,
income from operations for the six months ended May 2, 1998, was reduced
by approximately $5.9 million for restructuring and other non-recurring
charges related to the consolidation of the Company's East Coast Tech
Center operations.
Excluding the non-recurring write-off and restructuring charges, income
from operations as a percent of net sales, decreased to 8.9% for the six
months ended May 2, 1998 from 12.3% in the comparable period in fiscal
1997, primarily as a result of the same factors affecting gross profit
margins, and of goodwill and purchased intangibles amortization from the
acquisitions.
Interest income increased in the six months ended May 2, 1998 as compared
to the six months ended April 26, 1997, due to higher daily average cash
balances available for investing. Interest expense increased in the six
months ended May 2, 1998 as compared to the six months ended April 26,
1997, due to an increase in outstanding debt as a result of the
acquisitions.
INCOME TAXES
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 recorded a loss before income
taxes in 1998 and 1997, the Company anticipates an effective annual income
tax rate for fiscal 1998 of 39.75%, which is slightly less than the
combined federal and state statutory rates. The effective rate was
increased by amortization of goodwill which is not tax deductible, and was
offset by the tax benefit of the Company's foreign sales corporation and
various state investment tax credits. The effective tax rate for fiscal
1998 is based on current tax laws.
LIQUIDITY AND CAPITAL RESOURCES
At May 2, 1998, the Company had working capital of approximately $98.6
million and a current ratio of 1.80, compared to working capital of
approximately $53.7 million and a current ratio of 1.48 at October 25,
1997. Cash, cash equivalents and short-term investments at May 2, 1998
were approximately $5.0 million, a decrease of $8.7 million from
approximately $13.7 million at October 25, 1997.
In December 1997, the Company negotiated a $400 million unsecured senior
revolving credit loan facility with a group of banks, which amended and
restated an existing credit facility (the "Amended Credit Facility").
Interest on loans outstanding under the Amended Credit Facility is, at the
Company's option, payable at either (1) the Eurodollar Rate plus the
Applicable Eurodollar Rate Margin (both as defined in the Amended Credit
Facility), or (2) the Base Rate as defined in the Amended Credit Facility.
At May 2, 1998, $345 million was outstanding under the Amended Credit
Facility. The Amended Credit Facility matures in January 2002. See Notes 5
and 10 of Notes to Consolidated Condensed Financial Statements above.
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company believes its existing working capital and borrowing capacity,
coupled with the funds generated from the Company's operations will be
sufficient to fund its anticipated working capital, capital expenditure
and debt payment requirements through fiscal 1998. 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 security holders.
DEBT OFFERING
On May 18, 1998, the Company sold $200.0 million aggregate principal
amount of its 9-1/2% Senior Subordinated Notes due 2008 (the "Notes") to
certain purchasers. The purchasers subsequently resold the Notes to
"qualified institutional buyers" in reliance upon Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"), and offshore
purchasers pursuant to Rule 904 of Regulation S under the Securities Act.
The Notes were so resold at a price equal to 99.66% of their principal
amount. The Notes are guaranteed, on a senior subordinated basis, by each
of the Company's U.S. Restricted Subsidiaries (as defined in the
Indenture) (the "Guarantors"). The net proceeds received by the Company
from the issuance and sale of the Notes, approximately $193,820 million,
was used to repay outstanding indebtedness under the Amended Credit
Facility previously incurred to, among other things, finance the
Acquisitions. The Indenture under that which the Notes were issued (the
"Indenture") imposes certain limitations on the ability of the Company,
its subsidiaries and, in certain circumstances, the Guarantors, to, among
other things, incur indebtedness, pay dividends, prepay subordinated
indebtedness, repurchase capital stock, make investments, create liens,
engage in transactions with stockholders and affiliates, sell assets and
engage in mergers and consolidations. See Note 10 of Notes to Consolidated
Condensed Financial Statements above.
YEAR 2000 COMPLIANCE
The Company is reviewing the areas within its business and operations
which could be adversely affected by Year 2000 issues and evaluating the
costs associated with modifying and testing its systems for the Year 2000.
Although the company is not yet able to estimate its incremental cost for
Year 2000 issues, based on its preliminary review to date, the Company
does not believe Year 2000 issues will have a material adverse effect on
the Company's business, financial condition or results of operations. The
Company is also working with suppliers to ensure their systems are Year
2000 compliant as well. All costs associated with supplier compliance will
be borne by the suppliers.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company operates in a changing environment that involves a number of
risks, some of which are beyond the Company's control. The following
discussion highlights some of these risks.
DEPENDENCE ON ELECTRONICS INDUSTRY
The Company's principal customers are 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. 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
18
<PAGE> 19
DEPENDENCE ON ELECTRONICS INDUSTRY (CONTINUED)
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.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have varied and may continue to
fluctuate significantly from period to period, including on a quarterly
basis. 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,
product and price competition, product mix, number of working days in a
particular quarter, manufacturing process yields, the timing of
expenditures in anticipation of future sales, raw material and component
availability, the length of sales cycles, 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 will
maintain or improve gross margins. 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. 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.
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 changes,
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.
19
<PAGE> 20
ACQUISITIONS
On March 20, 1998, the Company acquired (the "Continental Acquisition")
all of the outstanding capital stock of Continental Circuits Corp.
("Continental"), for approximately $188 million (including acquisition
costs). On January 10, 1997, the Company acquired (the "Zycon
Acquisition", and together with the Continental Acquisition, the
"Acquisitions") all of the outstanding capital stock of Zycon Corporation
("Zycon"), for approximately $212 million (including acquisition costs).
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 businesses profitably in the
future. The gross profit margins for Continental and Zycon for their
respective fiscal years ended July 31, 1997 and December 31, 1996 were
18.2% and 15.7%, respectively. The gross profit margins for Hadco (not
including Continental or Zycon) for its fiscal years ended October 26,
1996 and October 25, 1997 were 25.8% and 21.8%, respectively. As a result
of the Acquisitions, the Company expects its gross profit margin will be
lower in future fiscal quarters than has historically been the case.
Operating expenses associated with the acquired businesses may have a
material adverse effect on the Company's business, financial condition and
results of operations in the future. In addition, shortly after the
Continental Acquisition, one senior member of Continental's management
left the Company. There can be no assurance that the Company will be able
to retain key personnel at Continental.
The Company may from time to time pursue the acquisition of other
companies, assets, products or technologies. The Company may incur
additional indebtedness and additional charges against earnings in
connection with future acquisitions, and such incurrences could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Leverage" below. The 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 material adverse effect on the Company's
business, financial condition and results of operations.
MANAGEMENT OF GROWTH
In fiscal 1997 and 1998, the Company has significantly expanded its
operations, including geographically, which has placed, and will continue
to place, significant demands on the Company's management, operational,
technical and financial resources. The Acquisitions have intensified these
demands. 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 could have a materiel 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.
20
<PAGE> 21
COMPETITION
The electronic interconnect industry is highly fragmented and
characterized by intense competition. The Company believes 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. This price competition from
Asian printed circuit manufacturers may intensify as a result of economic
turmoil, currency devaluations or financial market instability that many
Asian countries are currently experiencing. Moreover, 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.
MALAYSIA FACILITY AND ASIAN ECONOMIC TURMOIL
Hadco Santa Clara (formerly Zycon) completed construction of a volume
manufacturing facility for printed circuits in Malaysia in fiscal 1997.
Hadco's management has no experience in operating foreign manufacturing
facilities, and there can be no assurance that the Company will operate
the new facility on a profitable basis. The Company believes that the
Malaysian facility could incur operating losses in the future as a result
of various factors, including, without limitation, operating
inefficiencies and price competition for the products which the Company
intends to produce at the facility. 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. Malaysia and other Asian countries
have recently experienced economic turmoil and a significant devaluation
of their local currencies. There can be no assurance that this period of
Asian economic turmoil will not result in increased price competition,
reduced sales by the Company's customers in Asia with a concomitant
reduction in such customers' orders for the Company's products,
restrictions on the transfer of funds overseas, employee turnover, labor
unrest, the reversal of current policies encouraging foreign investment
and trade, or other domestic Asian economic problems that could materially
adversely affect the Company's business, financial condition or results of
operations.
21
<PAGE> 22
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 in the future could 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, and there can be no assurance that failures or disruptions will
not occur in the future. In addition, the Company has a large
manufacturing facility in Santa Clara, California, an area of the United
States that is subject to significant natural disasters, including
earthquakes, fires and flooding. 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, flood or
drought in California or other locations where the Company has facilities,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
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 1995, 1996 and 1997, the Company's ten
largest customers accounted for approximately 46%, 48% and 47% of net
sales, respectively. In fiscal 1997, Solectron accounted for approximately
15% of the net sales of the Company. 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.
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.
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
22
<PAGE> 23
MANUFACTURING CAPACITY (CONTINUED)
manage such additional facilities. Although the Company has historically
needed to increase its manufacturing capacity, the Company believes that
excess capacity may exist in the printed circuit and electronic assembly
industries. In addition, growth rates in the electronics industry as a
whole have fluctuated historically. These factors could have a material
adverse effect on future orders and pricing. 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
when needed 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.
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.
AVAILABILITY OF RAW MATERIALS AND COMPONENTS
Although 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. Hadco Santa Clara has
experienced shortages of certain types of raw materials in the past. The
Company believes that the potential exists for shortages of materials in
the printed circuit and electronic assembly industries, which could have a
material adverse effect on the Company's manufacturing operations and
future unit costs. 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 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
23
<PAGE> 24
AVAILABILITY OF RAW MATERIALS AND COMPONENTS (CONTINUED)
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.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a large extent upon the continued
services of key managerial and technical employees. The only executive
officers of the Company bound by employment or non-compete agreements are
the President and Chief Executive Officer and a Senior Vice President
(formerly President and Chief Executive Officer of Continental). Hadco's
President and Chief Executive Officer's non-compete agreement expires one
year after the termination of his employment with the Company. Most other
key employees of the Company do not have employment or non-compete
agreements. 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.
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.
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
24
<PAGE> 25
VOLATILITY OF STOCK PRICE (CONTINUED)
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.
LEVERAGE
The Acquisitions and related debt financings have significantly increased
the Company's debt service obligations. Although the Company's cash flow
from operations has been sufficient to meet its debt service obligations
in the past, there can be no assurance that the Company's operating
results will continue to be sufficient for the Company to meet such
obligations in the future.
FORWARD-LOOKING STATEMENTS
A number of the matters and subject areas discussed in this Form 10-Q that
are not historical or current facts deal with potential future
circumstances and developments. The discussion of such matters and subject
areas is qualified by the inherent risks and uncertainties surrounding
future expectations generally, and also may differ materially from the
Company's actual future experience involving any one or more of such
matters and subject areas. The Company has attempted to identify, in
context, certain of the factors that it currently believes may cause
actual future experience and results to differ from the Company's current
expectations regarding the relevant matter or subject area. The operations
and results of the Company's business also may be subject to the effect of
other risks and uncertainties in addition to the relevant qualifying
factors identified elsewhere in the foregoing "Factors That May Affect
Future Results" section, including, but not limited to other risks and
uncertainties described from time to time in the Company's reports filed
with the Securities and Exchange Commission.
25
<PAGE> 26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 9 of Notes to Consolidated Condensed Financial Statements above
for a description of certain litigation in which the Company is currently
involved.
Item 2. Changes in Securities
(a) An amendment to the Company's Restated Articles of Organization to
increase the number of authorized shares of Common Stock from 25,000,000 shares
to 50,000,000 shares was approved at the Annual Meeting of Stockholders on March
4, 1998. Articles of Amendment were filed with the Commonwealth of Massachusetts
on March 4, 1998.
(b) On May 18, 1998, the Company sold $200.0 million aggregate principal
amount of its 9-1/2% Senior Subordinated Notes due 2008 (the "Notes") to certain
purchasers. The purchasers subsequently resold the Notes to "qualified
institutional buyers" in reliance upon Rule 144A under the Securities Act of
1933, as amended (the "Securities Act"), and offshore purchasers pursuant to
Rule 904 of Regulation S under the Securities Act. The Notes were so resold at a
price equal to 99.66% of their principal amount. The Indenture under the which
the Notes were issued imposes certain limitations on the ability of the Company,
its subsidiaries and, in certain circumstances, the Guarantors, to, among other
things, incur indebtedness, pay dividends, prepay subordinated indebtedness,
repurchase capital stock, make investments, create liens, engage in transactions
with stockholders and affiliates, sell assets and engage in mergers and
consolidations.
(c)(i) Under the Company's Outside Directors' Compensation Plan of 1998
(the "Outside Directors' Plan"), non-employee directors
("Non-Employee Directors") of the Company receive payment of an
annual fee in the form of restricted Common Stock of the Company.
Non-Employee Directors may elect to defer receipt of any such
payment. On March 4, 1998, the Non-Employee Directors received an
aggregate of 1,290 shares of Common Stock pursuant to the Outside
Directors' Plan. Of such shares, receipt of 215 shares was deferred
in accordance with the Outside Directors' Plan. The aggregate value
of all such shares issued on March 4, 1998 to Non-Employee Directors
was $59,985 (based on a fair market value on that date of $46.50 per
share).
(ii) On March 20, 1998, and as a condition to his employment as a Senior
Vice President of the Company, Frederick G. McNamee, III, agreed to
purchase 40,000 shares of Common Stock of the Company pursuant to a
Stock Purchase Agreement dated as of March 20, 1998. The purchase
price of $37.00 per share was based on the fair market value of such
shares on March 20, 1998, the date of purchase.
(iii) Each of the shares of Common Stock of the Company referenced in this
Item 2, Subsection (c) was issued by the Company in reliance on the
exemption from registration provided by Section 4(2) of the
Securities Act for an offering to a small number of knowledgeable
investors.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of Hadco Corporation was held on
March 4, 1998.
(b) No information provided due to inapplicability of item.
26
<PAGE> 27
(c) A vote was proposed to (1) fix the number of directors at eight (8)
and to elect a Board of Directors to serve for the ensuing year or
until their respective successors are duly elected and qualified;
(2) approve Hadco Corporation Employee Stock Purchase Plan of
November 17, 1997; (3) approve the amendment of the Corporation's
Restated Articles of Organization to increase the authorized shares
of Common Stock from 25,000,000 to 50,000,000; (4) ratify the
selection of Arthur Andersen LLP as auditors for the fiscal year
ending October 31, 1998.
The voting results are as follows:
<TABLE>
<CAPTION>
Votes Votes Votes Votes Broker
For Against Withheld Abstained Non-Votes
<S> <C> <C> <C> <C> <C>
(1)Horace H. Irvine II 11,807,602 N/A 39,923 N/A N/A
Andrew E. Lietz 11,807,907 N/A 39,618 N/A N/A
Patrick Sweeney 11,807,907 N/A 39,168 N/A N/A
Oliver O. Ward 11,806,602 N/A 41,463 N/A N/A
Lawrence Coolidge 11,806,862 N/A 40,663 N/A N/A
John F. Smith 11,804,703 N/A 42,822 N/A N/A
John E. Pomeroy 11,808,162 N/A 39,363 N/A N/A
James C. Taylor 11,807,162 N/A 40,363 N/A N/A
(2)Hadco Corporation 11,399,844 419,016 N/A 28,665 N/A
Employee Stock
Purchase Plan of
November 17, 1997
(3)Amendment to
Restated Articles of 10,377,873 1,454,606 N/A 15,046 N/A
Organization
(4)Arthur Andersen LLP 11,809,925 26,761 N/A 10,839 N/A
Ratification
</TABLE>
(d) No information provided due to inapplicability of item.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
*10.1 Non-Qualified Stock Option Plan dated November 29, 1995,
as amended and restated April 7, 1998.
*10.2 Form of Option Agreement to Non-Qualified Stock Option
Plan dated November 29, 1995, as amended and restated
April 7, 1998.
*10.3 Stock Purchase Agreement dated as of March 20, 1998
between Registrant and Frederick G. McNamee, III.
*10.4 Employment Agreement dated as of February 17, 1998
between Registrant and Frederick G. McNamee, III.
27
<PAGE> 28
10.5 Second Amendment and Modification Agreement among
Registrant and a group of Banks dated as of May 11,
1998.
27.1 Financial Data Schedule for the Period Ended May 2, 1998
(*) Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an exhibit.
(b) Reports on Form 8-K
A Current Report on Form 8-K dated February 17, 1998, filed by the Company
on February 18, 1998, reported on (i) an announcement by the Company that
it had agreed to acquire Continental Circuits Corp. for $23.90 per share
and (ii) an announcement by the Company of its financial results for the
first quarter ended January 31, 1998.
A Current Report on Form 8-K dated February 20, 1998, filed by the Company
on February 20, 1998, reported on an announcement by the Company that it
had commenced a tender offer for all outstanding shares of Continental
Circuits Corp.
A Current Report on Form 8-K dated May 1, 1998, filed by the Company on
May 1, 1998, reported on an announcement by the Company that on (i) March
27, 1998 it had received a notice from legal counsel to the Lemelson
Medical, Education & Research Foundation Limited Partnership alleging that
the Company is infringing certain patents held by said Foundation and
offering to license said patents to the Company and (ii) January 12, 1998,
Hadco Santa Clara, Inc. received a notice of a lawsuit against it relating
to alleged injuries suffered as a result of alleged emissions of effluent
from allegedly toxic and hazardous substances.
A Current Report on Form 8-K dated March 20, 1998, filed by the Company on
March 26, 1998, and amended by a Current Report on Form 8-K/A, filed by
the Company on May 1, 1998, reported on an announcement by the Company
that on March 20, 1998 it had, through an acquisition subsidiary,
consummated the acquisition of all of the outstanding common stock of
Continental Circuits Corp.
The above Current Report on Form 8-K/A included the following financial
statements of an acquired business, Continental Circuits Corp.:
(i) Financial Statements of Business Acquired
Report of Independent Auditors (Ernst & Young LLP)
Consolidated Balance Sheets at July 31, 1996 and 1997 and
January 31, 1998 (unaudited)
Consolidated Statements of Income for the Years Ended July 31,
1995, 1996 and 1997 and for the Six Months Ended February 2,
1997 (unaudited) and January 31, 1998 (unaudited)
Consolidated Statements of Cash Flow for the Years Ended
July 31, 1995, 1996 and 1997 and for the Six Months Ended
February 2, 1997 (unaudited) and January 31, 1998 (unaudited)
Consolidated Statements of Shareholders' Equity for the Years Ended
July 31, 1995, 1996 and 1997 and for the Six Months Ended
January 31, 1998 (unaudited)
Notes to Consolidated Financial Statements
28
<PAGE> 29
(ii) Pro Forma Condensed Consolidated Financial Statements (unaudited)
Pro Forma Condensed Consolidated Balance Sheet as of
January 31, 1998
Pro Forma Condensed Consolidated Statement of Operations for the
Year Ended October 25, 1997
Pro Forma Consolidated Statement of Operations for the Three Months
Ended January 31, 1998
Note to Pro Forma Condensed Consolidated Financial Statements
29
<PAGE> 30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hadco Corporation
Date: June 11, 1998 By: /s/
-----------------------------------
Timothy P. Losik
Senior Vice President and Chief
Financial Officer (principal financial
officer and principal accounting officer)
30
<PAGE> 31
Exhibit Index
Exhibits
*10.1 Non-Qualified Stock Option Plan dated November 29, 1995,
as amended and restated April 7, 1998.
*10.2 Form of Option Agreement to Non-Qualified Stock Option
Plan dated November 29, 1995, as amended and restated
April 7, 1998.
*10.3 Stock Purchase Agreement dated as of March 20, 1998
between Registrant and Frederick G. McNamee, III.
*10.4 Employment Agreement dated as of February 17, 1998
between Registrant and Frederick G. McNamee, III.
10.5 Second Amendment and Modification Agreement among
Registrant and a group of Banks dated as of May 11,
1998.
27.1 Financial Data Schedule for the Period Ended May 2, 1998
31
<PAGE> 1
Exhibit 10.1
HADCO CORPORATION
NON-QUALIFIED STOCK OPTION PLAN
NOVEMBER 29, 1995
AS AMENDED AND RESTATED APRIL 7, 1998
1. Purpose. This Non-Qualified Stock Option Plan (hereinafter, the
"Plan") is intended to promote the interests of Hadco Corporation (hereinafter,
the "Company") by providing an inducement for highly qualified personnel to
enter the employ of the Company and an incentive for valued employees to remain
with the Company and to use their best efforts to promote the Company's
continued success, by means of the offer of an opportunity to acquire or
increase their proprietary interest in the Company through the granting of
options to purchase the Company's stock pursuant to the terms of this Plan. As
used herein, the term "Company" includes any present or future subsidiary and
any successor corporation.
2. Rights to be Granted. Under this Plan, options may be granted
that give an optionee the right for a specified time period to purchase a
specified number of shares of common stock, par value $0.05, of the Company. The
option price shall be determined in each instance by the Stock Option Committee,
in accordance with the terms of this Plan, including, without limitation, under
Section 7 hereof.
3. Available Shares. The total number of shares of common stock,
par value $0.05, of the Company, for which
- 1 -
<PAGE> 2
options may be granted shall be One Million (1,000,000) shares, subject to
adjustment in accordance with Paragraph 11 of this Plan. Shares subject to the
Plan may be either authorized but unissued shares or shares that were once
issued and subsequently reacquired by the Company. If any options granted under
this Plan are surrendered before exercise or lapse without exercise, in whole or
in part, the shares reserved therefor shall revert to the option pool and shall
continue to be available under the Plan. No one employee of the Company may be
granted options to acquire, in the aggregate, more than 300,000 shares of Common
Stock under this Plan. If any option granted under this Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part or shall be repurchased by
the Company, the shares subject to such option shall be included in the
determination of the aggregate number of shares of common stock deemed to have
been granted to such employee under this Plan.
4. Administration. The Plan shall be administered by the Stock
Option Committee (hereinafter, the "Committee"), which shall consist of two or
more members appointed by the Board of Directors of the Company; provided,
however that the Plan shall be administered: (I) to the extent required by
applicable regulations under Section 162(m) of the Internal Revenue Code of
1986, by two or more "outside directors" (as defined in applicable regulations
thereunder) and (ii) to the extent required by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 or any successor provision ("Rule 16b-3"), by a
- 2 -
<PAGE> 3
disinterested administrator or administrators within the meaning of Rule 16b-3.
The Board may at any time and from time to time thereafter appoint additional or
substitute members of the Committee and may fill vacancies on the Committee,
however caused. No person shall be a member of the Committee who is not a
Director of the Company.
In the event no Committee is appointed, the Board shall act as the
Committee and all references in this Plan to the Committee shall mean the Board.
If a Committee is appointed but under applicable law does not have authority to
undertake any duty stated herein, the Board shall act as and for the Committee
for the purpose of undertaking that particular duty.
The Committee shall choose one of its members as Chair and shall
hold meetings at such times and places as it deems advisable. A majority of the
members of the Committee shall constitute a quorum, and any action may be taken
by a majority of those present and voting at any meeting.
Subject to the provisions of this Plan, the Committee shall have
authority in its discretion to determine the employees of the Company to whom
options shall be granted, the number of shares to be covered by each option, the
time or times at which options shall be granted, the purchase price of the stock
covered by each option, the time or times during the term of option (defined in
Section 9) at which each such option shall become exercisable, the form of
agreement to be used in granting the options, and shall further have the
authority to interpret this Plan, and to prescribe, amend and rescind rules and
- 3 -
<PAGE> 4
regulations relating to it. All questions of interpretation and application of
this Plan and of any options issued under it shall be determined by the
Committee, and such determination shall be final and binding upon all persons.
No member of the Board or of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under it.
5. Grant of Options. The Committee may from time to time grant
options to eligible persons pursuant to the provisions of this Plan. Each
option so granted shall be evidenced by an Option Agreement, in such form as may
be approved by the Committee, which Agreement shall be duly executed and
delivered on behalf of the Company and by the optionee to whom such option is
granted. The Agreement may contain such terms, provisions, and conditions not
inconsistent with the Plan as may be determined by the Committee, including
restrictions to be imposed on the shares acquired by a participant upon the
exercise of an option granted to him.
The grant of an option under this Plan shall be effective as of the
date of the vote of the Stock Option Committee of the Board of Directors of
the Company to issue such an option. The granting of options under this Plan
shall be entirely discretionary and nothing in this Plan shall be deemed to give
any employee any right to participate in this Plan or to receive options.
The grant of an option under this Plan confers no right upon the
optionee with respect to the continuation of his
- 4 -
<PAGE> 5
employment with the Company or a subsidiary of the Company. Nothing contained in
this Plan or any option agreement issued hereunder shall be construed as
interfering with or restricting the right of the Company or its subsidiary or
the optionee to terminate his employment at any time.
6. Eligibility and Limitations. Options may be granted pursuant to
this Plan only to employees of the Company or of any present or future
subsidiary corporation; provided, however, that a person shall be considered to
be an employee within the meaning of this Plan if the person has executed a
written employment agreement with the Company which provides for the start of
active employment within one (1) month of the date of grant of an option. In
determining the eligibility of an individual to be granted an option, as well as
in determining- the number of shares to be optioned to any individual, the
Committee shall consider the responsibilities of the person being considered,
the nature and value to the Company or its subsidiaries of his service and
accomplishments, his present and potential contribution to the success of the
Company or its subsidiaries, and such other factors as the Committee may deem
relevant.
No option may be granted under this Plan after December 31, 2005.
7. Option Price. The purchase price of the stock covered by an
option granted pursuant to this Plan shall be the fair market value of the
underlying shares of Common Stock on the date the option is granted.
If the Company's common stock is actively traded in
- 5 -
<PAGE> 6
the established over-the-counter market, the fair market value of such common
stock shall be the mean between the bid and asked prices quoted in such
over-the-counter market at the close on the date nearest preceding the date of
grant. If such common stock is listed on any national exchange, or traded in the
Nasdaq National Market, the mean between the high and low sale prices quoted on
such exchange or market on the trading day nearest preceding the date of the
granting of the option may be taken as such fair market value. If the stock is
not publicly traded, the fair market value shall be determined from time to time
by the Board of Directors.
The full purchase price per share (determined after any appropriate
adjustment has been made under the terms of Section 11 of this Plan) shall be
paid as provided in Section 8 below.
8. Exercise of Option. Subject to the terms and conditions of this
Plan and the Option Agreement, an option granted hereunder shall be exercisable
in whole or in part by giving written notice to the Company by mail or in person
addressed to Treasurer, Hadco Corporation, 12A Manor Parkway, Salem, New
Hampshire 03079, stating the number of shares with respect to which the option
is being exercised, accompanied by payment in full for such shares, which
payment may be made (a) in United States dollars in cash or by check, or (b) at
the discretion of the Committee, through delivery of shares of Common Stock
having a fair market value equal as of the date of the exercise to the cash
exercise price of the option, or (c) at the
- 6 -
<PAGE> 7
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the option and an
authorization to the broker or selling agent to pay that amount to the Company,
which sale shall be at the participant's direction at the time of exercise, or
(d) at the discretion of the Committee, by any combination of (a), (b) and (c)
above. There shall be no such exercise at any one time as to fewer than one
hundred (100) shares or all of the shares then purchasable by the person or
persons exercising the option, if fewer than one hundred (100) shares. A copy of
such notice shall be provided to Berlin, Hamilton & Dahmen, 73 Tremont Street,
Boston, Massachusetts 02108, or to such other counsel as the Company may
hereafter designate, and to the Bank of Boston, Shareholder Services Division,
Post Office Box 644, Boston, Massachusetts 02102, or to such other Stock
Transfer Agent as the Company may hereafter designate. The Transfer Agent shall,
on behalf of the Company, prepare a certificate or certificates representing
such shares acquired pursuant to exercise of the option, shall register the
optionee as the owner of such shares on the books of the Company and shall cause
the fully executed certificate(s) representing such shares to be delivered to
the optionee as soon as practicable after payment of the option price in full.
The holder of an option shall not have any rights of a shareholder with respect
to the shares covered by the option, except to the extent that one or more
certificates for such shares shall be
- 7 -
<PAGE> 8
delivered to him upon the due exercise of the option.
9. Term and Transferability of Options.
(a) Each option shall become exercisable as provided in each option
granted by the Company to the participant and as provided in each respective
Option Agreement, but in no event shall the option be exercisable during a
period longer than the period beginning with the date of grant and ending not
later than ten (10) years from such date of grant.
(b) Any option granted pursuant to this Plan shall not be
assignable or transferable except by will or by the laws of descent and
distribution. During the lifetime of the optionee, any option shall be
exercisable only by the optionee to whom the option is granted. Any option
granted hereunder shall be null and void and without effect upon the bankruptcy
of the optionee to whom the option is granted, or upon any attempted assignment
or transfer, including without limitation, any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, trustee process or similar process, whether legal or equitable, upon
such option.
10. Termination of Option Rights.
(a) In the event an optionee ceases to be an employee of the
Company for any reason other than death, retirement with the consent of the
Company or disability, any unvested or unexercised options granted to such
optionee shall terminate and become void at midnight on the thirtieth day after
the date of termination, but in no event later than the specified expiration
date of the option.
- 8 -
<PAGE> 9
(b) In the event that an optionee ceases to be an employee of the
Company by reason of his or her disability or death, any option granted to such
optionee shall be immediately and automatically accelerated and all previously
unexercised options (to the extent that they have not previously been forfeited
in accordance with the terms of the individual option agreement) shall vest and
be exercisable (by the optionee's personal representative, heir or legatee, in
the event of death) during the period ending one hundred eighty (180) days after
the date of termination of employment, but in no event later than the specified
expiration date of the option.
(c) In the event an optionee ceases to be an employee of the
Company by reason of his or her retirement with the consent of the Company, any
option granted to such employee which had vested as of the date of retirement
may be exercised during the period ending ninety (90) days after the date or
retirement, but in no event later than the specified expiration date of the
option.
(d) For purposes of the Plan, a transfer of an employee between the
parent Company and a subsidiary company, or between subsidiary companies, shall
not be deemed a termination of employment.
11. Adjustments Upon Changes in Capitalization.
(a) In the event that the outstanding shares of the Common Stock of
the Company are changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of any reorganization,
recapitalization,
- 9 -
<PAGE> 10
reclassification, stock split-up, combination of shares or dividends payable in
capital stock, appropriate adjustments shall be made in the number and kind of
shares as to which options may be granted under the Plan and as to which
outstanding options or portions thereof then unexercised shall be exercisable,
to the end that the proportionate interest of the option holder shall be
maintained as before the occurrence of such event. Such adjustment in
outstanding options shall be made without change in the total price applicable
to the unexercised portion of such options and with a corresponding adjustment
in the option price per share.
(b) Upon any sale of all or substantially all of the assets of the
Company, or upon any merger, consolidation or tender offer in respect of which
the stockholders holding all of the Company's outstanding voting securities
immediately prior to the consummation thereof hold less then 50% of all of the
Company's outstanding voting securities immediately after such consummation
(each of the foregoing sale, merger, consolidation or tender offer hereinafter
called an "Acquisition"), then the date upon which all then outstanding options
granted under this Plan become fully vested and exercisable shall be
automatically accelerated to occur immediately prior to the consummation of such
Acquisition; provided, however, that any such then outstanding options which are
not thereupon exercised in full immediately prior to the consummation of such
Acquisition shall thereupon terminate.
(c) In the event of a recapitalization or reorganization
- 10 -
<PAGE> 11
of the Company (other than a transaction described in subsections 11(a) and (b)
above) pursuant to which securities of the Company or of another corporation are
issued with respect to the outstanding shares of Common Stock, an optionee upon
exercising an option shall be entitled to receive for the purchase price paid
upon such exercise securities he or she would have received if he or she had
exercised such option prior to such recapitalization or reorganization. In the
event of the proposed dissolution or liquidation of the Company, each option
will terminate immediately prior to the consummation of such proposed action or
at such other time and subject to such other conditions as shall be determined
by the Committee. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares subject to options. No
adjustments shall be made for dividends paid in cash or in property other than
securities of the Company. No fractional shares shall be issued under the Plan
and the optionee shall receive from the Company cash in lieu of such fractional
shares. Upon the happening of any of the events described in this Section 11,
the class and aggregate numbers of shares set forth in Section 3 hereof that are
subject to options which previously have been or subsequently may be granted
under this Plan, as well as the 300,000 figure in Section 3, shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall
- 11 -
<PAGE> 12
determine the specific adjustments to be made under this Section 11 and, subject
to Section 2, its determination shall be conclusive.
12. Restrictions on Issuance of Shares.
Notwithstanding the provisions of Section 8 of the Plan, the Company shall have
no obligation to deliver any certificate or certificates upon exercise of an
option until one of the following conditions shall be satisfied:
(i) The shares with respect to which the option has been
exercised are at the time of the issue of such shares effectively
registered under applicable Federal and State securities acts as
now in force or hereafter amended; or
(ii) Counsel for the Company shall have given an opinion
that such shares are exempt from registration under Federal and
State securities acts as now in force or hereafter amended; and
until the Company has complied with all applicable laws and
regulations, including without limitation all regulations required
by any stock exchange upon which the Company's outstanding common
stock is then listed.
The Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the Company
shall be under no obligation to cause a registration statement or a
post-effective amendment to any registration statement to be prepared at its
expense solely for the purpose of covering the issue of shares in respect of
- 12 -
<PAGE> 13
which any option may be exercised.
Any stock purchased under the Plan prior to shareholder approval of
the Plan may not be sold, assigned, transferred, pledged or encumbered in any
way and will be held in escrow by the Company until shareholder approval for the
Plan is obtained, and if such approval is not obtained by the earlier of (i) the
next annual meeting of stockholders of the Company, or (ii) June 30, 1996, the
purchase of such stock and any option granted hereunder and this Plan will be
automatically rescinded and the purchase price returned to purchasing optionees
without interest.
13. Representations of Optionee. The Company may require the
optionee to deliver such written warranties and representations upon exercise of
the option that the Company deems reasonable or necessary, including without
limitation a representation that a purchase of shares under the option is made
for investment and not with a view to their distribution (as that term is used
in the Securities Act of 1933).
14. Modification of Outstanding Options. The Committee or the
Board of Directors may accelerate the exercisability of any outstanding option
and may authorize changes to any outstanding option with the consent of the
participant (including, without limitation, to extend the term of an option upon
termination of employment to a date not later than ten (10) years from the
original grant date) when and subject to such conditions as are deemed to be in
the best interests of the Company and in accordance with the purposes of the
Plan.
- 13 -
<PAGE> 14
15. Approval of Stockholders. The Plan shall be subject to approval
by the affirmative vote of stockholders holding at least a majority of the
voting stock of the Company voting in person or by proxy at or by the earlier of
(i) the next annual meeting of stockholders of the Company, or (ii) June 30,
1996, and the Plan shall take effect as of the date of adoption immediately upon
such approval.
16. Termination and Amendment of Plan. The Plan shall expire at the
end of the business day on December 31, 2005 (except as to options outstanding
on that date). The Board may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable; provided, however, that
except as provided in Section 11 the Board may not, without approval of the
stockholders of the Company obtained in the manner stated in Section 15 (without
regard to clauses (i) and (ii) therein), increase the maximum number of shares
for which options may be granted under the Plan. To the extent required by Rule
16b-3, any other amendments to this Plan shall be approved by the stockholders
of the Company in the manner stated in Section 15 (without regard to clauses (i)
and (ii) therein). Termination or any modification or amendment of the Plan
shall not, without consent of a participant, affect his rights under an option
previously granted to him.
17. Withholding of Additional Income Taxes. Upon any exercise of
any option or the vesting or transfer of restricted stock or securities acquired
on the exercise of an option hereunder, or the making of a distribution or other
payment with
- 14 -
<PAGE> 15
respect to such stock or securities, the Company may withhold taxes in respect
of amounts that constitute compensation includable in gross income. The
Committee in its discretion may condition (i) the exercise of an option, or (ii)
the vesting or transferability of restricted stock or securities acquired by
exercising an option, on the optionee's making satisfactory arrangement for such
withholding. Such arrangement may include payment by the optionee in cash or by
check of the amount of the withholding taxes or, at the discretion of the
Committee, by the optionee's delivery of previously held shares of Common Stock
or the withholding of shares from the shares of Common Stock otherwise
deliverable upon exercise of an option, with such shares in each case having an
aggregate fair market value equal to the amount of such withholding taxes.
-15-
<PAGE> 1
Exhibit 10.2
FORM OF
OPTION AGREEMENT
AGREEMENT made this day of , 19 , by and between Hadco
Corporation, a Massachusetts corporation with a usual place of business in
Salem, New Hampshire (hereinafter the "Company"), and
, of
(hereinafter the "Optionee"). This Agreement
and the option granted hereunder are pursuant to and subject to the terms and
conditions of the Company's November 29, 1995 Non-Qualified Stock Option Plan
(the "Plan") as Amended and Restated on April 7, 1998 and as it may be amended
from time to time, a copy of which has been made available to the Optionee.
Unless the context otherwise requires, terms used herein shall have the same
meaning as in the Plan.
Section 1. Grant of Option. The Company grants to the Optionee an
option to purchase, on the terms and conditions hereinafter set forth,
( ) shares (the "Option Shares") of the Company's Common Stock, $0.05 par
value, at the option price of and /100 ($ ) Dollars
per share. This option is not intended to qualify as an incentive stock option
under Section 422 of the Internal Revenue Code.
Section 2. Period of Option. (a) Vesting. The
<PAGE> 2
right to exercise this option and purchase the Option Shares shall vest in
installments as set forth below, unless earlier terminated in accordance with
the provisions of Section 2(c) hereof.
<TABLE>
<CAPTION>
Cumulative Percent of
Option Shares That May
Be Purchased Date of Vesting
<S> <C>
50 Two Year Anniversary of Date of Grant
75 Three Year Anniversary of Date of Grant
100 Four Year Anniversary of Date of Grant
</TABLE>
(b) Expiration. The option granted hereunder shall expire on the ten
year anniversary of the date of grant of the option.
(c) Termination. (1) Any unvested or unexercised option granted
hereunder shall terminate and become void at midnight on the thirtieth (30th)
day after the Optionee's employment with the Company is terminated for any
reason other than disability, death, or retirement with the consent of the
Company, but in no event may the option be exercised later than the specified
expiration date of the option.
(2) In the event the employment of the Optionee terminates by
reason of his disability or death, the option granted hereunder to such Optionee
shall be immediately and automatically accelerated and to the extent such option
is unexercised, it shall vest and be exercisable (by the
<PAGE> 3
Optionee's personal representative, heir, or legatee, in the event of death)
during the period ending one hundred eighty (180) days after the date of
termination of employment, but in no event later than the specified expiration
date of the option.
For purposes of this Agreement, the Optionee's employment
shall always be deemed to have been terminated due to disability if (a) the
Optionee's employment is terminated by either the Company or the Optionee; (b)
at the time of such termination, the Optionee is unable to work due to sickness
or injury and is totally disabled, either physically or mentally; (c) the
Optionee is unable to substantially perform any gainful employment for a period
of five (5) consecutive months, including the time of termination; and (d) the
Optionee applies for and is approved for disability payments by the Social
Security Administration of the United States government. The date of any such
disability shall be the first day of such consecutive period during which the
Optionee was unable, due to his physical or mental condition, to substantially
perform any gainful employment.
(3) In the event the employment of the Optionee terminates by
reason of his retirement with the consent of the Company, any option granted
hereunder which had vested as of the date of retirement may be exercised during
the period ending ninety (90) days after the date of retirement, but in no event
later than the specified expiration date of
<PAGE> 4
the option.
(4) For purposes of this Agreement, a transfer of the Employee
between the parent Company and a subsidiary company, or between subsidiary
companies, shall not be deemed a termination of employment.
Section 3. Limitations on Right to Exercise Option. Notwithstanding
anything elsewhere in this Option Agreement to the contrary, except the
provisions of Section 2(c), the right to exercise this option shall be subject
to the following limitations:
(a) This option may not be exercised unless the Optionee, at the time
he exercises this option, is an employee of one or more of the Company, a parent
corporation or a subsidiary of the Company and has been such an employee at all
times since the date of this Agreement. If this option shall be assumed or a new
option substituted therefor as a result of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization, or liquidation,
then employment by such assuming or substituting corporation (hereinafter called
the "Successor Corporation") or by a parent corporation or a subsidiary thereof
shall be considered for purposes of this option to be employment by the Company.
(b) This option must be exercised for a minimum of one hundred (100)
shares, or for all of the shares then purchasable hereunder if less than one
hundred (100) shares, and no fractional shares may be purchased under this
option.
<PAGE> 5
Section 4. Exercise of Option.
(a) Method of Exercise of Option. This option may be exercised by
giving written notice to the Company by mail or in person addressed to
Treasurer, Hadco Corporation, 12A Manor Parkway, Salem, New Hampshire 03079,
specifying the number of Option Shares being purchased, accompanied by payment
of the full option price of the shares being purchased. A copy of such notice
shall be provided to Berlin, Hamilton & Dahmen, 73 Tremont Street, Boston,
Massachusetts 02108, or to such other counsel as the Company may hereafter
designate, and to the Bank of Boston, Shareholder Services Division, Post Office
Box 644, Boston, Massachusetts 02102, or to such other Stock Transfer Agent as
the Company may hereafter designate. The price for the Option Shares shall be
payable (a) in U.S. Dollars in cash, or (b) through delivery of shares of Common
Stock having a fair market value equal as of the date of the exercise to the
cash exercise price of the option, or (c) consistent with applicable law,
through the delivery of an assignment to the Company of a sufficient amount of
the proceeds from the sale of the Common Stock acquired upon exercise of the
option and an authorization to the broker or selling agent to pay that amount to
the Company, which sale shall be at the participant's direction at the time of
exercise, or (d) by any combination of (a), (b) and (c) above. The holder of an
option shall not have any rights of a shareholder with respect to the shares
covered by the option, except to the
<PAGE> 6
extent that one or more certificates for such shares shall be delivered to him
upon the due exercise of the option.
(b) Delivery of Stock Certificates Upon Exercise. Upon each exercise of
this option and the satisfaction of all conditions set forth in the option, the
Transfer Agent shall, on behalf of the Company, mail or deliver to the Optionee,
as promptly as practicable, a stock certificate or certificates representing the
Option Shares then being purchased. The Company will pay all stamp taxes due or
payable in connection with the issuance of the certificates. Such certificates
may bear statements relating to the non-registration of such shares under the
Securities Act of 1933, and the rights, privileges and limitations of Common
Stock, par value $0.05, of the Company, as set forth in the Restated Articles of
Organization, as amended.
(c) Restrictions on Issuance of Shares. Notwithstanding the foregoing,
the Company shall not be obligated to deliver any such certificate or
certificates upon exercise of this option until one of the following conditions
shall be satisfied: (i) The shares with respect to which the option has been
exercised are at the time of the issue of such shares effectively registered
under applicable Federal and State securities acts as now in force or hereafter
amended; or (ii) Counsel for the Company shall have given an opinion that such
shares are exempt from registration under applicable Federal and State
securities acts as now in force or hereafter amended; and until the
<PAGE> 7
Company is in compliance with all applicable laws and regulations, including
without limitation all regulations required by any stock exchange upon which the
Company's outstanding Common Stock is then listed.
The Company shall use its best efforts to bring about compliance with
the above conditions within a reasonable time, except that the Company shall be
under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely for
the purpose of covering the issue of shares in respect of which any option may
be exercised.
(d) Agreement to Purchase for Investment. By acceptance of this option,
the Optionee agrees that a purchase of shares under this option will be made for
investment and will not be made with a view to their distribution, as that term
issued in the Securities Act of 1933, as amended, unless in the opinion of
counsel for the Company such distribution is in compliance with or exempt from
registration and prospectus requirements of the Act. The Optionee agrees, if
necessary, to sign a certification to such effect at the time of exercising the
option and agrees that the certificate for the shares so purchased may be
inscribed with a legend to ensure compliance with the Securities Act of 1933 and
with any other applicable securities laws.
Section 5. Adjustments Upon Changes in Capitalization.
(a) In the event that the outstanding shares of the
<PAGE> 8
Common Stock of the Company are changed into or exchanged for a different number
or kind of shares or other securities of the Company by reason of any
reorganization, recapitalization, reclassification, stock split-up, combination
of shares or dividends payable in capital stock, appropriate adjustments shall
be made in the number and kind of shares as to which outstanding options or
portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the Optionee shall be maintained as before the
occurrence of such event. Such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per share.
(b) Upon any sale of all or substantially all of the assets of the
Company, or upon any merger, consolidation or tender offer in respect of which
the stockholders holding all of the Company's outstanding voting securities
immediately prior to the consummation thereof hold less than 50% of all of the
Company's outstanding voting securities immediately after such consummation
(each of the foregoing sale, merger, consolidation or tender offer hereinafter
called an "Acquisition"), then the date upon which all then outstanding options
granted under the Plan become fully vested and exercisable shall be
automatically accelerated to occur immediately prior to the consummation of such
Acquisition; provided, however, that any such then
<PAGE> 9
outstanding options which are not thereupon exercised in full immediately prior
to the consummation of such Acquisition shall thereupon terminate.
(c) In the event of a recapitalization or reorganization of the Company
(other than a transaction described in subsections 5(a) and (b) above) pursuant
to which securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, the Optionee upon exercising
this option shall be entitled to receive for the purchase price paid upon such
exercise the securities he or she would have received if he or she had exercised
such option prior to such recapitalization or reorganization. In the event of
the proposed dissolution or liquidation of the Company, the option will
terminate immediately prior to the consummation of such proposed action or at
such other time and subject to such other conditions as shall be determined by
the Committee. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares subject to the option. No
adjustments shall be made for dividends paid in cash or in property other than
securities of the Company. No fractional shares shall be issued and the Optionee
shall receive from the Company cash in lieu of such fractional shares. The
Committee or the Successor Board
<PAGE> 10
shall determine the specific adjustments to be made under this Section 5 and,
subject to the Plan, its determination shall be conclusive.
Section 6. Effect Upon Employment. The grant of this option confers no
right upon the Optionee with respect to the continuation of his employment with
the Company or a subsidiary of the Company. Nothing contained herein shall be
construed as interfering with or restricting the right of the Company or its
subsidiary or of the Optionee to terminate his employment at any time.
Section 7. Non-Transferability. This option shall not be assignable or
transferable except by will or by the laws of descent and distribution. During
the lifetime of the Optionee, this option shall be exercisable only by the
Optionee. This option shall be null and void and without effect upon the
bankruptcy of the Optionee, or upon any attempted assignment or transfer,
including without limitation, any purported assignment, whether voluntary or by
operation of law, pledge, hypothecation or other disposition, attachment,
trustee process or similar process, whether legal or equitable, upon such
option.
Section 8. Notices. Any notice permitted or required under this Option
Agreement shall be sufficient if made in writing and mailed, postage prepaid, or
delivered in hand to the parties as follows: (a) as to the Company, to its
Treasurer at the principal office of the Company; and (b) as to the Optionee, at
the address listed for the Optionee on
<PAGE> 11
the books of the Company or the books of the Stock Transfer Agent, or (c) as to
either party, at such other address as shall be designated by the addressee in a
written notice to the other complying as to delivery with the terms of this
Section 8.
Section 9. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of the
Commonwealth of Massachusetts.
Section 10. Modification of Outstanding Options. The Stock Option
Committee of the Company's Board of Directors or the Company's Board of
Directors may accelerate the exercisability of any outstanding option and may
authorize changes to any outstanding option with the consent of the Optionee
when and subject to such conditions as are deemed to be in the best interests of
the Company and in accordance with the purposes of the Company's November 29,
1995 Non-Qualified Stock Option Plan.
Section 11. Entire Agreement. This Agreement contains the full and
complete understanding and agreement of the parties hereto as to the subject
matter hereof and may not be modified or amended, nor may any provisions hereof
be waived, except by a further written agreement duly signed by each of the
parties.
Section 12. Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns; provided, however,
<PAGE> 12
that as respects the Optionee, this Agreement is deemed to be personal in nature
and may not be assigned or transferred.
Section 13. Interpretation and Construction. Any interpretation or
construction of this Option Agreement by the Company's Board of Directors, or a
duly authorized committee appointed by the Board, shall be final and conclusive.
The section headings are for convenience of reference only and shall not be
deemed germane to the interpretation or construction of this Option Agreement.
Section 14. Survival. All representations, warranties and
acknowledgments made in this Agreement shall survive the delivery of the
certificate or certificates representing the shares purchased pursuant to the
exercise of the option granted herein.
Section 15. Withholding Taxes. If the Company in its discretion
determines that it is obligated to withhold any tax in connection with the
exercise of this option, or in connection with the transfer of, or the lapse of
restrictions on, any Common Stock or other property acquired pursuant to this
option, the Optionee hereby agrees that the Company may withhold from the
Optionee's wages or other remuneration the appropriate amount of tax. At the
discretion of the Company, the amount required to be withheld may be withheld in
cash from such wages or other remuneration or in kind from the Common Stock or
other property otherwise deliverable to the Optionee on exercise
<PAGE> 13
of this option. The Optionee further agrees that, if the Company does not
withhold any amount from the Optionee's wages or other remuneration sufficient
to satisfy the withholding obligation of the Company, the Optionee will make
reimbursement on demand, in cash, for the amount withheld.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
Witnesses: Hadco Corporation
- -------------------------- -----------------------------
- -------------------------- ------------------------------
Optionee
Stock.OptionAgr.6.98 (B)
<PAGE> 1
Exhibit 10.3
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), to be effective as of
March 20, 1998, by and between Hadco Corporation ("Hadco") and Frederick G.
McNamee, III, an individual ("Purchaser") .
1. Terms of Purchase. Subject to the other terms and conditions of this
Agreement, the Purchaser hereby agrees to purchase from Hadco, and Hadco hereby
agrees to sell to the Purchaser, forty thousand (40,000) shares of the common
stock of Hadco, $0.05 par value (the "Shares"), for the sum of One Million Four
Hundred Eighty Thousand Dollars ($1,480,000.00), or $37.00 per share, based on
the fair market value of the Shares (measured as the average between the high
and low trading prices of Hadco's common stock on the last business day
immediately preceding the effective date set forth above). Payment for the
Shares shall be in lawful money of the United States of America in the form of
cash, check or similar negotiable instrument. Upon such payment and satisfaction
of all conditions set forth in this Agreement, Hadco's transfer agent,
BankBoston/Boston EquiServe Services, shall on behalf of Hadco, mail or deliver
to the Purchaser, as promptly as practicable, a stock certificate or
certificates representing the Shares being purchased.
2. Representations and Warranties of Purchaser. As an inducement to Hadco
to sell the Shares to the Purchaser, the Purchaser represents and warrants to
Hadco as follows, intending that such representations and warranties will
survive the admission of the Purchaser as a stockholder of Hadco:
(a) The Purchaser is over 21 years of age and is legally competent to
execute this Agreement.
(b) The Purchaser has carefully reviewed and understands the risks of
an investment in Hadco, is able to bear the economic risks of an investment
in Hadco, can withstand a complete loss of his investment in the Shares,
can hold the Shares for an indefinite period of time and has the net worth
to undertake these risks.
(c) The Purchaser, either alone or together with the assistance of the
Purchaser's own professional advisor or advisors, has the knowledge and
experience in business and financial matters that make the Purchaser
capable of reading and interpreting financial statements of and concerning
Hadco and of evaluating the merits and risks of an investment in the
Shares. The Purchaser is an "Accredited Investor" as such term is defined
in Regulation D of the Securities Act of 1933, as amended (the "Securities
Act").
(d) The Purchaser understands that an investment in the Shares is
highly speculative, but believes that an investment in the Shares is
suitable for the Purchaser based upon his investment objectives and
financial needs, and the Purchaser has adequate
<PAGE> 2
-2-
means for providing for his current financial needs and personal
contingencies and has no need for liquidity of investment with respect to
the Shares.
(e) The Purchaser is acquiring the Shares for purposes of long-term
investment, for the personal account of the Purchaser, and with no present
intention of reselling, distributing or otherwise transferring the Shares
or any portion of the Shares, and the Purchaser has no contract,
undertaking or arrangement with any person or entity to sell or transfer
all or any portion of the Shares to that person or entity, or to have that
person or entity sell for him all or any portion of the Shares, or to
afford or allow any participation in the Shares by any other person or
entity.
(f) The Purchaser understands and acknowledges that the Shares will be
lettered or restricted stock, that the Shares are being offered and sold
under the exemption to registration provided in Section 3(b) of the
Securities Act and Regulation D promulgated thereunder and/or Section 4(2)
of the Securities Act, and that this transaction has not been reviewed or
passed upon by any federal or state agency. The Purchaser further
understands and acknowledges that each certificate of Shares issued in
connection with this Agreement shall contain the following restrictive
legends:
1. "The Shares represented by this certificate are subject to
restrictions on transfer contained in the terms and conditions of the
Stock Purchase Agreement by and between Hadco Corporation and
Frederick G. McNamee, III, dated March __, 1998."
2. "The Shares represented by this certificate have not been
registered under the Securities Act of 1933. These Shares have been
acquired for investment and not with a view to distribution or resale,
and may not be sold, mortgaged, pledged, hypothecated or otherwise
transferred without an effective registration statement of such Shares
under the Securities Act of 1933, or an opinion of counsel for Hadco
Corporation that registration is not required under such Act."
(g) The Purchaser realizes that (i) the purchase of the Shares is a
long-term investment; (ii) the Purchaser must bear the economic risk of
investment for an indefinite period of time because the Shares have not
been registered and, therefore, cannot be sold unless they are subsequently
registered or exemptions from registration are available; (iii) there
presently is no public market for the Shares, and the Purchaser may not be
able to liquidate his investment in the Shares in the event of an emergency
or to pledge the Shares as collateral for loans; and (iv) the
transferability of the Shares is restricted, and (A) requires the written
consent of Hadco, (B) requires conformity with the restrictions contained
in paragraph (f) above, (C) will be further restricted by legends placed on
the certificate representing the Shares referring to the applicable
restrictions on transferability, and (D) may be subject to a stop transfer
order until such time as transfer
<PAGE> 3
-3-
of the Shares may be effected without violation of all applicable state and
federal securities laws.
(h) The Purchaser has been furnished materials relating to Hadco (or
these materials have been made available to the Purchaser), including the
annual report of Hadco for its most recent fiscal year, the proxy statement
used in connection with the annual meeting of Hadco following its most
recent fiscal year, the reports filed with the Securities and Exchange
Commission for the periods covering the most recent completed fiscal year
of Hadco, all reports filed since the end of that year and any other
materials that the Purchaser has requested.
(i) The Purchaser has been given access to full and complete
information regarding Hadco and has utilized that access to his
satisfaction for the purpose of obtaining information concerning Hadco, an
investment in the Shares and the terms and conditions of the offering of
the Shares for the purpose of asking questions of, and receiving answers
from, Hadco representatives concerning Hadco, an investment in the Shares
and the terms and conditions of the offering, and for the purpose of
obtaining any additional information (to the extent reasonably available)
that is necessary to verify the information provided.
(j) The Purchaser has obtained, in his judgment, sufficient
information to understand the business in which Hadco is engaged and to
evaluate the merits and risks of an investment in Hadco.
(k) The Purchaser confirms that he has been advised that he should
rely on his own professional accounting, tax, legal and financial advisors
with respect to an investment in Hadco and a purchase of the Shares, and
obtained, to the extent he deems necessary, the Purchaser's own personal
professional advice with respect to both the risks inherent in an
investment in the Shares and the suitability of an investment in the Shares
in light of the Purchaser's financial condition and investment needs.
(l) The Purchaser certifies, under the penalties of perjury, that he
is NOT subject to the backup withholdings provisions of Section 3406 (a)
(1) (c) of the Internal Revenue Code of 1986. The Purchaser understands
that he would be subject to backup withholding if (i) he failed to furnish
his Social Security number or taxpayer identification number in this
Agreement; (ii) the Internal Revenue Service notified Hadco that the
Purchaser furnished an incorrect Social Security number or taxpayer
identification number; (iii) the Purchaser was notified that he is subject
to backup withholding; or (iv) the Purchaser failed to certify that he is
not subject to backup withholding or failed to certify his Social Security
number or taxpayer identification number.
<PAGE> 4
-4-
(m) The address set forth below is the Purchaser's true and correct
residence, and he has no present intention of becoming a resident of any
other state or jurisdiction.
(n) All of the information that the Purchaser has furnished to Hadco,
or that is set forth herein, or that is contained in any purchaser
questionnaire that has been provided to Hadco in connection with this
Agreement, is correct and complete as of the date hereof, and, if there
should be any material change in the information prior to the admission of
the Purchaser as a stockholder of Hadco, the Purchaser will immediately
furnish the revised or corrected information to Hadco.
3. Indemnification. The Purchaser acknowledges that he understands the
meaning and legal consequences of the representations and warranties contained
herein and agrees to indemnify Hadco and hold it harmless from and against any
and all loss, damage, expense, or liability due to, or arising out of, any
breach of any representation or warranty of the Purchaser contained herein.
4. Assignment. The Purchaser acknowledges and agrees that he may not
transfer or assign this Agreement, or any interest in this Agreement, and that
any such purported assignment shall be null and void.
5. Survival of Agreement. The Purchaser understands and agrees that this
Agreement will survive the death or disability of the Purchaser, except as
provided in the following paragraph.
6. Termination of Agreement. If any one or more of the representations and
warranties of the Purchaser contained herein are not true prior to the purchase
of the Shares by the Purchaser, and written notice of that fact has been given
to Hadco, then and in any of such events this Agreement shall be null and void
and of no further force or effect, and neither party shall have any rights
against the other party hereunder, this Agreement will be canceled, and the
payment for the Shares will be returned to the Purchaser.
7. Notice. All notices or other communications given or made hereunder
shall be in writing and delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the Purchaser at the address set
forth below, and to Hadco at 12A Manor Parkway, Salem, NH 03079, with copies to
James C. Hamilton, Clerk, Berlin, Hamilton & Dahmen, LLP, 73 Tremont Street,
Boston, MA 02108.
8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof, and may be
amended only by a writing executed by all of the parties hereto.
<PAGE> 5
-5-
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
Dated this 20th day of March, 1998.
/s/ Rick McNamee
------------------------------------
Frederick G. McNamee, III
SS#
--------------------------------
Address:
----------------------------
------------------------------------
HADCO CORPORATION
By: /s/ Andrew E. Lietz
---------------------------------
Andrew E. Lietz
President, CEO
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), to be effective as of the
Effective Time (as defined in an Agreement and Plan of Merger (the "Acquisition
Agreement") dated as of the date hereof (as it may be amended) among Hadco
Corporation, a Massachusetts corporation ("Hadco"), Hadco Acquisition Corp. II,
a Delaware corporation ("Sub"), and Continental Circuits Corp., a Delaware
corporation ("Continental")), by and between Hadco and Frederick G. McNamee,
III, an individual ("Employee").
Whereas, Employee is currently the chief executive officer and
president of Continental; and
Whereas, the Acquisition Agreement contemplates the acquisition by Sub
of all of the outstanding capital stock of Continental, with a subsequent merger
of Sub into Continental, and the renaming of the Surviving Corporation (as
defined in the Acquisition Agreement) to be Hadco Phoenix, Inc. ("Hadco
Phoenix"); and
Whereas, in connection with the acquisition, Employee has agreed to
serve as an employee of Hadco upon the terms and conditions set forth herein.
Now, therefore, in consideration of the premises and for good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES. Hadco agrees to employ Employee on a
full-time basis, subject to the terms and conditions provided herein, and
Employee agrees to accept such full-time employment upon said terms and
conditions. Employee's initial title shall be Senior Vice President, Hadco
Phoenix, in which capacity Employee shall have general responsibility for the
activities and operations of Hadco Phoenix and all of its direct wholly-owned
subsidiaries, subject to the direction and control of Hadco's chief executive
officer. Although Employee understands that his duties will include a
substantial amount of business travel, during the entire term of employment, he
shall be based in the Phoenix, Arizona, area, unless otherwise agreed between
the parties in the future. Employee's employment shall be subject to the
standard terms, conditions, and policies applicable to all Hadco employees, as
such terms, conditions and policies may exist from time to time.
2. TERM. The term of employment under this Agreement (the "Term") shall
commence on the Effective Time and shall continue for a period of two years,
unless earlier terminated as set forth in Section 5 below.
3. COMPENSATION.
a. BASE SALARY. Hadco agrees to pay Employee a base salary, before
deducting all applicable withholdings, at the annual rate of $235,000
(the "Base Salary"), which shall be payable in accordance with Hadco's
standard executive payroll policies as they may be revised from time to
time. The Base Salary may be increased during the Term hereof at the
discretion of the chief executive officer of Hadco.
b. BONUS. Employee shall be eligible to participate in the bonus
programs of Hadco applicable to senior executives, as such programs may
exist from time to time.
c. STOCK OPTIONS. Employee shall be granted non-qualified stock
options to purchase 40,000 shares of Hadco common stock, pursuant to
and subject to the terms and provisions of Hadco's Non-Qualified Stock
Option Plan of November 29, 1995, at the fair market value of such
stock as of the last business day immediately preceding the Effective
Time. Such option shall be evidenced by a Stock Option Agreement in the
form customarily utilized by Hadco for such grants.
<PAGE> 2
-2-
d. BENEFITS. Employee shall be accorded such benefits as are
customarily enjoyed by senior executives of Hadco.
4. INVESTMENT. Employee agrees to purchase from Hadco, on the Effective
Time, 40,000 shares of Hadco common stock at the fair market value of such stock
(measured as the average between the high and low trading prices of Hadco's
common stock on the last business day immediately preceding the Effective Time),
which shares will not have been registered under the Securities Act of 1933, as
amended. Employee understands and agrees that such shares will not be salable on
the open market, and Employee represents and warrants that he is purchasing such
shares for investment purposes and not with a view to distribution, and that he
is an "Accredited Investor" (as such term is defined in Regulation D of the
Securities Act of 1933, as amended). Employee agrees that certificates
representing such shares shall bear appropriate restrictive legends, and further
agrees that the shares may be subject to a stop transfer order until such time
as transfer of the shares may be effected without violation of state or federal
securities laws.
5. SEVERANCE. If, during the Term hereof, Employee's employment is
terminated by Hadco without cause, or is terminated by Employee for Good Reason
(as defined herein), Employee shall be paid his full Base Salary for the
remainder of the Term. For purposes of this Agreement, the following definitions
shall apply:
(a) CAUSE. Hadco shall have "cause" to terminate
Employee's employment in the event of (i) Employee's willful
and continued failure to substantially perform his duties
(other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered by Hadco which demand
specifically identifies the manner in which Employee has not
substantially performed his duties, or (ii)(x) Employee shall
have been guilty of any act or acts of dishonesty constituting
a felony, or (y) Employee shall have violated any provision of
any confidentiality, nondisclosure, assignment of invention,
noncompetition or similar agreement entered into by him in
connection with his employment by Hadco. For purposes of this
subsection, no act or failure to act on the part of Employee
shall be deemed "willful" unless done or omitted to be done by
Employee not in good faith and without reasonable belief that
his action or omission was in the best interest of Hadco.
(b) GOOD REASON. "Good Reason" shall mean, without
Employee's consent, the occurrence of the following:
(i) any significant diminution in Employee's
position, duties, responsibilities, power,
title or office;
(ii) any reduction in Employee's annual base
salary; or
(iii) any requirement by Hadco that the
location at which Employee performs his
principal duties be outside a radius of 30
miles from Phoenix.
6. NON-COMPETITION; NON-SOLICITATION.
a. NON-COMPETE. Employee agrees that he will not,
during the Term, directly or indirectly, engage in (whether as an
officer, employee, consultant, director, proprietor, agent, partner or
otherwise) or have any ownership interest in, or participate in the
financing, operation, management or control of, any person, firm,
corporation or business that engages in competition with Hadco or any
of its subsidiaries or affiliates in the business of manufacture or
sale of printed circuit boards or of other electronic interconnect
products, or in the development of technologies for such businesses.
The territory to which this restriction shall apply shall be worldwide.
It is agreed that ownership of no more than 1% of the outstanding
voting stock of a publicly traded corporation shall not constitute a
violation of this provision.
b. CONFIDENTIAL INFORMATION. Employee acknowledges that
Employee may receive, or contribute to the production of, Confidential
Information. For purposes of this Agreement, Employee
<PAGE> 3
-3-
agrees that "Confidential Information" shall mean information or
material proprietary to Hadco or any of its direct or indirect
subsidiaries or designated as Confidential Information by Hadco and not
generally known by non-Hadco personnel, which Employee develops or of
or to which Employee may obtain knowledge or access through or as a
result of Employee's relationship with Hadco or any of its direct or
indirect subsidiaries (including information conceived, originated,
discovered or developed in whole or in part by Employee). Confidential
Information includes, but is not limited to, the following types of
information and other information of a similar nature (whether or not
reduced to writing) related to Hadco's business: discoveries,
inventions, ideas, concepts, research, development, processes,
procedures, "know-how", formulae, marketing techniques and materials,
marketing and development plans, business plans, customer names and
other information related to customers, price lists, pricing policies,
methods of operation, financial information, employee compensation, and
computer programs and systems. Confidential Information also includes
any information described above which Hadco or any of its direct or
indirect subsidiaries obtains from another party and which Hadco treats
as proprietary or confidential, or designates as Confidential
Information, whether or not owned by or developed by Hadco. Employee
acknowledges that the Confidential Information derives independent
economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use. Information
publicly known without breach of this Agreement that is generally
employed by the trade at or after the time Employee first learns of
such information, or generic information or knowledge which Employee
would have learned in the course of similar employment or work
elsewhere in the trade, shall not be deemed part of the Confidential
Information. Employee further agrees:
(1) To furnish Hadco on demand, at any time during or
after employment, a complete list of the names and addresses of all
present, former and potential suppliers, customers and other contacts
gained while an employee of Hadco in Employee's possession, whether or
not in the possession or within the knowledge of Hadco.
(2) That all notes, memoranda, electronic storage,
documentation and records in any way incorporating or reflecting any
Confidential Information shall belong exclusively to Hadco, and
Employee agrees to turn over all copies of such materials in Employee's
control to Hadco upon request or upon termination of Employee's
employment with Hadco.
(3) That while employed by Hadco and thereafter
Employee will hold in confidence and not directly or indirectly reveal,
report, publish, disclose or transfer any of the Confidential
Information to any person or entity, or utilize any of the Confidential
Information for any purpose, except in the course of Employee's work
for Hadco.
(4) That any idea in whole or in part conceived of or
made by Employee during the term of his employment, consulting, or
similar relationship with Hadco which relates directly or indirectly to
Hadco's current or planned lines of business and is made through the
use of any of the Confidential Information or any of Hadco equipment,
facilities, trade secrets or time, or which results from any work
performed by Employee for Hadco, shall belong exclusively to Hadco and
shall be deemed a part of the Confidential Information for purposes of
this Agreement. Employee hereby assigns and agrees to assign to Hadco
all rights in and to such Confidential Information whether for purposes
of obtaining patent or copyright protection or otherwise. Employee
shall acknowledge and deliver to Hadco, without charge to Hadco (but at
its expense) such written instruments and do such other acts, including
giving testimony in support of Employee's authorship or inventorship,
as the case may be, necessary in the opinion of Hadco to obtain patents
or copyrights or to otherwise protect or vest in Hadco the entire right
and title in and to the Confidential Information.
c. NON-SOLICITATION. During the Term and for a period of one
year thereafter, Employee agrees that he shall not (for the purpose of
or which results in competition with Hadco or any of its affiliates or
subsidiaries) either solicit any persons or companies who were
customers, clients, suppliers or business patronage of Hadco during the
Term or prior thereto or of any of its predecessors, affiliates or
<PAGE> 4
-4-
subsidiaries or use any Confidential Information; nor will he solicit
for any purpose the employment of any employees of Hadco or any of its
affiliates or subsidiaries during the Term or for a period of one year
thereafter.
d. INJUNCTIONS. It is agreed that the restrictions contained
in this Section 6 are reasonable, but it is recognized that damages in
the event of the breach of any of the restrictions will be difficult or
impossible to ascertain; and, therefore, Employee agrees that, in
addition to and without limiting any other right or remedy Hadco may
have, Hadco shall have the right to an injunction against Employee
issued by a court of competent jurisdiction enjoining any such breach
without showing or proving any actual damage to Hadco.
e. PART OF CONSIDERATION. Employee also agrees, acknowledges,
covenants, represents and warrants that he is fully and completely
aware that, and further understands that, the foregoing restrictive
covenants are an essential part of the consideration for Hadco entering
into this Agreement and that Hadco is entering into this Agreement in
full reliance on these acknowledgments, covenants, representations and
warranties.
f. TIME AND TERRITORY REDUCTION. If the period of time and/or
territory described above are held to be in any respect an unreasonable
restriction, it is agreed that the court so holding may reduce the
territory to which the restriction pertains or the period of time in
which it operates or may reduce both such territory and such period, to
the minimum extent necessary to render such provision enforceable.
g. APPLICABILITY TO SUBSIDIARIES. As used in this Section,
Hadco shall mean and include Hadco Corporation and all or its direct or
indirect subsidiaries.
h. SURVIVAL. The obligations described in this Section 6 shall
survive any termination of this Agreement, except for a termination
under Section 14 hereof, or any termination of the employment
relationship created hereunder.
7. GOVERNING LAW AND VENUE. Arizona law shall govern the construction
and enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be in courts located in Maricopa County,
Arizona.
8. CONSTRUCTION. The language in all parts of this Agreement shall in
all cases be construed as a whole according to its fair meaning and not strictly
for nor against any party. The Section headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. All terms used in one number or gender shall
be construed to include any other number or gender as the context may require.
The parties agree that each party has reviewed this Agreement and has had the
opportunity to have counsel review the same and that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not apply in the interpretation of this Agreement or any amendment or any
exhibits thereof.
9. NONDELEGABILITY OF EMPLOYEE'S RIGHTS AND HADCO ASSIGNMENT RIGHTS.
The obligations, rights and benefits of Employee hereunder are personal and may
not be delegated, assigned or transferred in any manner whatsoever, nor are such
obligations, rights or benefits subject to involuntary alienation, assignment or
transfer. This Agreement shall be assigned automatically to any entity merging
with or acquiring Hadco or its business.
10. SEVERABILITY. If any term or provision of this Agreement is
declared by a court of competent jurisdiction to be invalid or unenforceable for
any reason, this Agreement shall remain in full force and effect, and either (a)
the invalid or unenforceable provision shall be modified to the minimum extent
necessary to make it valid and enforceable or (b) if such a modification is not
possible, this Agreement shall be interpreted as if such invalid or
unenforceable provision were not a part hereof.
11. ATTORNEYS' FEES. Except as otherwise provided herein, if any party
hereto institutes an action or other
<PAGE> 5
-5-
proceeding to enforce any rights arising out of this Agreement, the party
prevailing in such action or other proceeding shall be paid all reasonable costs
and attorneys' fees by the non-prevailing party, such fees to be set by the
court and not by a jury and to be included in any judgment entered in such
proceeding.
12. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed duly given, upon receipt, if either personally
delivered, sent by certified mail, return receipt requested, or sent by a
nationally-recognized overnight courier service, addressed to the parties as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
IF TO HADCO: Hadco Corporation
12A Manor Parkway
Salem, NH
Attention: Chief Executive Officer
With a copy to: Testa, Hurwitz &Thibeault, LLP
Attention: Stephen A. Hurwitz
125 High Street
Boston, MA 02110
IF TO EMPLOYEE: Frederick G. McNamee, III
Hadco Phoenix Inc.
3502 East Roeser Road
Phoenix, AZ 85040
</TABLE>
or to such other address as either party may provide to the other in accordance
with this Section.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof (i.e., Employee's
employment by Hadco) and supersedes all prior or contemporaneous employment
agreements and understandings or agreements in regard to Employee's employment.
Employee hereby acknowledges and agrees that as of the Effective Time the
Employment Agreement dated as of August 1, 1997 by and between Continental and
Employee and the letter agreement dated May 8, 1997 by and between Continental
and Employee and any all other agreements between Continental and Employee are
hereby terminated and shall be of no further force or effect, except that all
confidentiality obligations and non-disclosure obligations of Employee to
Continental shall nonetheless survive. No modification or addition to this
Agreement shall be valid unless in writing, specifically referring to this
Agreement and signed by all parties hereto. No waiver of any rights under this
Agreement shall be valid unless in writing and signed by the party to be charged
with such waiver. No waiver of any term or condition contained in this Agreement
shall be deemed or construed as a further or continuing waiver of such term or
condition, unless the waiver specifically provides otherwise.
14. OTHER PROVISIONS. The parties agree that if the Acquisition
Agreement terminated under Section 8.1 thereof, this Agreement shall be null and
void with no liability by any party to any other party by reason of this
Agreement becoming so null and void.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
February 15, 1998.
HADCO: EMPLOYEE:
Hadco Corporation.
a Massachusetts corporation
By: ______________________________ _________________________________
Frederick G. McNamee, III
Title: ____________________________
<PAGE> 1
Exhibit 10.5
SECOND AMENDMENT AND MODIFICATION AGREEMENT
SECOND AMENDMENT AND MODIFICATION AGREEMENT dated as of May 11, 1998
(this "Amendment") by and among HADCO CORPORATION, a Massachusetts corporation
(the "Borrower"); the direct and indirect subsidiaries of the Borrower listed on
the signature pages hereto (collectively, the "Hadco Subsidiaries"); BANKBOSTON,
N.A., AS AGENT (the "Agent") and BANKBOSTON, N.A., individually and the other
lending institutions (collectively, the "Banks") listed on Schedule 1 to the
Amended and Restated Revolving Credit Agreement dated as of December 8, 1997 (as
amended and in effect from time to time, the "Agreement") among the Borrower,
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 Borrower wishes to issue up to $200,000,000 of its ___%
Senior Subordinated Notes due 2008 (the "Subordinated Notes");
WHEREAS, Section 9.1(k) of the Agreement sets forth certain
requirements for any issuance by the Borrower of subordinated Indebtedness;
WHEREAS, the Borrower has requested that the Agent and the Banks amend
Section 9.1(k) of the Agreement in order to permit the issuance of the
Subordinated Notes;
WHEREAS, the Borrower has also requested that BankBoston, N.A.
establish a $10,000,000 swing line facility;
WHEREAS, in connection with the establishment of such $10,000,000 swing
line facility, the Borrower 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:
<PAGE> 2
-2-
Section 1. AMENDMENT OF Section 1.1 OF THE AGREEMENT. Section 1.1 of
the Agreement is hereby amended by:
(a) inserting the following new definition in the order
required by alphabetical order:
"Applicable Swing Line Margin. For any portion of any fiscal
quarter or portion thereof with respect to any Swing Line Loan, a
percentage equal to the sum of (a) the Applicable Eurodollar Rate
Margin which would then be applicable to Eurodollar Rate Loans plus (b)
one-quarter of one percent (0.25%)."
(b) amending the definition of "Distribution" by
deleting the text "of any subordinated indebtedness permitted by
Section 9.1(k)," and substituting in lieu thereof the text "of the
Subordinated Notes or any of them,".
(c) inserting the following new definitions in the
order required by alphabetical order:
"Fixed Rate Loan. A Swing Line Loan bearing interest at the
Money Market Rate for a period of time agreed to by the Borrower and
the Swing Line Lender pursuant to Section 2.5(c)."
"Indenture. The Indenture to be entered into by the Borrower,
Hadco Santa Clara, Hadco Phoenix, CCIR of Texas, CCIR of California,
and State Street Bank and Trust Company, as Trustee, with respect to
the Subordinated Notes, substantially in the form of the draft dated
May 8, 1998 previously delivered to the Agent and each of the Banks,
including such modifications thereto as have been delivered to the
Agent and the Banks and as are appropriate or necessary to complete
such form (including without limitation, changes to insert the specific
maturity date in 2008 or thereafter and the interest rate (which rate
shall not exceed 10.0% per annum)), and such other changes as are
either non-substantive or as shall have been approved by the Agent on
behalf of the Banks and with the consent of the Majority Banks, but
otherwise excluding any amendments or modifications thereto. The
Indenture is to be entered into by the parties thereto as of the
closing of the issuance of the Subordinated Notes and the term
"Indenture" shall refer to the Indenture as in effect on the date of
such closing (assuming compliance with the requirements of the first
sentence of this definition)."
(d) amending the definition of "Interest Payment Date"
by (i) deleting the word "and" at the end of clause (i) thereof and
(ii) deleting the period at the end thereof and substituting in lieu
thereof the text "; and (iii) as to any Swing Line Loan, on the first
day of the calendar month immediately following the last day of the
Interest Period applicable thereto."
<PAGE> 3
-3-
(e) amending the definition of "Interest Period" by (i)
deleting the first paragraph thereof in its entirety and substituting
in lieu thereof the following new paragraph:
"Interest Period. With respect to each Loan, (i) initially the
period commencing on the Drawdown Date of such Loan and ending on the
last day of one of the periods set forth below, as selected by the
Borrower in a Loan Request or a Swing Line Loan Request, (A) for any
Base Rate Loan, the last day of the calendar quarter; (B) for any Fixed
Rate Loan, the period (not to exceed 14 days) requested by the Borrower
and agreed to by the Swing Line Lender pursuant to Section 2.5(c); and
(C) for any Eurodollar Rate Loan, 1, 2, 3 or 6 months and (ii)
thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Loan and ending on the
last day of one of the periods set forth above, as selected by the
Borrower in a Conversion Request; provided that all of the foregoing
provisions relating to Interest Periods are subject to the following:".
(ii) deleting the word "and" at the end of subSection
(d) thereof.
(iii) deleting the period at the end of subsection (e)
thereof and substituting in lieu thereof the text "; and".
(iv) inserting at the end thereof a new subsection (f)
with the following text:
"(f) if the Borrower fails to repay a Fixed
Rate Loan as provided in Section 2.9, the Borrower shall be deemed to
have requested a conversion of the affected Fixed Rate Loan to a Base
Rate Loan on the last day of the then current Interest Period with
respect thereto."
(f) deleting the definition of "Loans" in its entirety
and substituting in lieu thereof the following new definition:
"Loans. Revolving credit loans (including the Swing Line
Loans) made or to be made to the Borrower by the Banks or the Agent
pursuant to Section 2."
(g) deleting the definition of "Majority Banks" in its
entirety and substituting in lieu thereof the following new
definition:
"Majority Banks. As of any date, the Banks holding at least
fifty-one percent (51%) of the outstanding principal amount of the
Loans on such date (provided that in the event that any Swing Line Loan
is outstanding and has not been participated to the other Banks, for
purposes of this definition, each Bank, including BKB, will be assumed
to have fully funded its participation in such Swing Line Loan); and if
no such principal is outstanding, the Banks
<PAGE> 4
-4-
whose aggregate Commitments (which shall include participating
interests in the risk relating to Swing Line Loans) constitutes at
least fifty-one percent (51%) of the Total Commitment."
(h) inserting the following new definitions in the
places required by alphabetical order:
"Money Market Loans. Swing Line Loans bearing interest
calculated by reference to the Money Market Rate."
"Money Market Rate. With respect to any Swing Line Loan, the
fixed rate of interest quoted by the Swing Line Lender on any date on
which the Borrower requests a Swing Line Loan, which rate the Swing
Line Lender is willing to charge with respect to a Swing Line Loan to
be made by it."
(i) deleting the definition of "Notes" in its entirety
and inserting in lieu thereof the following new definition:
"Notes. The Revolving Credit Notes and the Swing Line Note".
(j) inserting the following new definitions in the
places required by alphabetical order:
"Revolving Credit Notes. See Section 2.4."
"Subordinated Notes. The Borrower's ____% Senior Subordinated
Notes due 2008 , in an aggregate principal amount of up to
$200,000,000, issued or to be issued under and pursuant to the
Indenture, including any Exchange Notes (as defined in the Indenture)
issued pursuant to the Indenture."
"Swing Line Lender. BKB."
"Swing Line Loan Request. See Section 2.9.1."
"Swing Line Loans. See Section 2.9.1."
"Swing Line Note. See Section 2.9.1."
"Swing Line Settlement Amount. See Section 2.9.2."
"Swing Line Settling Bank. See Section 2.9.2."
"Swing Line Settlement Date. (a) The Drawdown Date relating to
any Loan Request, (b) Friday of every other week commencing May 22,
1998, or if such Friday is not a Business Day, the Business Day
immediately following such Friday, (c) at the option of the Swing Line
Lender, on any Business Day
<PAGE> 5
-5-
following a day on which the account officers of the Agent or the Swing
Line Lender active upon the Borrower's account become aware of the
existence of an Event of Default, (d) any Business Day on which the
amount of Loans (including Swing Line Loans) outstanding from the Swing
Line Lender plus the Swing Line Lender's Commitment Percentage of the
sum of the Maximum Drawing Amount and any Unpaid Reimbursement
Obligations is equal to or greater than the Swing Line Lender's
Commitment Percentage of the Total Commitment, (e) the Business Day
immediately following any Business Day on which the amount of Swing
Line Loans exceeds $10,000,000, or (f) the Business Day immediately
following any day on which the Swing Line Lender gives written notice
to the Agent to effect a Swing Line Settlement."
"Swing Line Settlement. The making or receiving of, payments
in immediately available funds, by the Banks to or from the Agent for
the account of the Swing Line Lender in accordance with Section 2.9
hereof to the extent necessary to cause each Bank's actual share of the
outstanding amount of the Loans to be equal to such Bank's Commitment
Percentage of the outstanding amount of such Loans, in any case when,
prior to such action, the actual share is not so equal."
(j) deleting the definition of "Type" in its entirety
and substituting in lieu thereof the following text:
"Type. As to any Loan which is not a Swing Line Loan, its
nature as a Base Rate Loan or a Eurodollar Rate Loan."
Section 2. AMENDMENT OF Section 2.1 OF THE AGREEMENT. Section 2.1 of
the Agreement is hereby amended by:
(a) deleting the following text "(after giving effect
to all amounts requested)" from the first parenthetical thereof (set
forth in the seventh line thereof) and substituting in lieu thereof
the following text: "(after giving effect to all amounts requested,
and including any Bank's participating interest in any Swing Line
Loans outstanding)"; and
(b) deleting the period (".") at the end of the first
sentence thereof and inserting in lieu thereof the following text: ";
provided further that at no time shall the sum of BKB's Commitment
Percentage of the Loans outstanding (including Swing Line Loans made
in its capacity as Swing Line Lender) plus BKB's Commitment Percentage
of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations
exceed BKB's Commitment."
Section 3. AMENDMENT OF Section 2.2 OF THE AGREEMENT. Section 2.2 of
the Agreement is hereby amended by inserting, immediately before the period
(".") at the end of the
<PAGE> 6
-6-
first sentence thereof the text ", with the outstanding amount of any Swing Line
Loans being excluded from such calculation".
Section 4. AMENDMENT OF Section 2.3 OF THE AGREEMENT. Section 2.3 of
the Agreement is hereby amended by deleting the first sentence thereof in its
entirety.
Section 5. AMENDMENT OF Section 2.4 OF THE AGREEMENT. Section 2.4 of
the Agreement is hereby deleted in its entirety, and the following new
Section 2.4 is hereby substituted in lieu theREof:
"SECTION 2.4. THE REVOLVING CREDIT NOTES. The Loans (other
than the Swing Line Loans) shall be evidenced by separate promissory
notes of the Borrower in substantially the form of Exhibit A hereto
(each a "Revolving Credit Note"), dated as of the Closing Date and
completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to
such Bank's Commitment or, if less, the outstanding amount of all Loans
(other than Swing Line Loans) made by such Bank, plus interest accrued
thereon, as set forth below. The Borrower irrevocably authorizes each
Bank to make or cause to be made, at or about the time of the Drawdown
Date of any Loan (other than a Swing Line Loan) or at the time of
receipt of any payment of principal on such Bank's Revolving Credit
Note, an appropriate computer entry or other record reflecting the
making of such Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Loans set forth in such computer
entries or other records shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Bank, but the failure to
record, or any error in so recording, any such amount in such computer
entries or other records shall not limit or otherwise affect the
obligations of the Borrower hereunder or under any Revolving Credit
Note to make payments of principal of or interest on any Revolving
Credit Note when due."
Section 6. AMENDMENT OF SECTION 2.5 OF THE AGREEMENT. Section 2.5 of
the Agreement is hereby amended by:
(a) changing the reference to subsection "(c)" to
subsection "(d)"; and
(b) inserting, between subsection (b) and subsection
(d) (formerly subsection (c)) the following new subsection "(c)":
"(c) Each Swing Line Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the
last day of the Interest Period with respect thereto at a rate per
annum equal to, at the Borrower's option (i) the Base Rate and (ii)
the Money Market Rate plus the Applicable Swing Line Margin, which
interest shall be paid on each Interest
<PAGE> 7
-7-
Payment Date for Swing Line Loans for the account of the Swing Line
Lender. Interest Periods for Swing Line Loans which are also Fixed Rate
Loans shall be for a period of 14 days or less. The Borrower shall give
the Swing Line Lender notice no later than 12:00 p.m. on the last day
of the Interest Period that is a Fixed Rate Loan of its intention to
repay such Swing Line Loan or to refund such Swing Line Loan with a
Loan which is not a Swing Line Loan in accordance with the requirements
of Section 2.9.2. In the event that the Borrower fails to give such
notice, such Swing Line Loan shall, on the last day of such Interest
Period, cease to be a Fixed Rate Loan."
Section 7. AMENDMENT OF SECTION 2.7 OF THE AGREEMENT. Section 2.7 of
the Agreement is hereby amended by inserting at the end thereof the following
new Section 2.7.4:
"2.7.4. APPLICABILITY OF CONVERSION AND CONTINUATION
PROVISIONS. Notwithstanding anything to the contrary herein contained,
the provisions of this Section 2.7 shall not apply to Swing Line
Loans."
Section 8. ADDITION OF Section 2.9 TO THE AGREEMENT. The Agreement is
hereby amended by inserting the following new Section 2.9, immediately after
Section 2.8 of the Agreement and immediately before Section 3 of the Agreement:
2.9. SWING LINE LOANS; SETTLEMENTS.
2.9.1. SWING LINE LOANS. (a) In accordance with the
terms and conditions contained in this Credit Agreement (including but
not limited to Section 12 hereof), the Swing Line Lender may, in its
sole discretion and without conferring with the Banks, fund Loans made
in accordance with the provisions of this Credit Agreement ("Swing Line
Loans"); provided, however, that (i) at no time shall the sum of (A)
the aggregate principal amount of all Swing Line Loans (after giving
effect to all amounts requested and the application of the proceeds
thereof) plus (B) the aggregate principal amount of all outstanding
Loans which are not Swing Line Loans plus (C) the Maximum Drawing
Amount plus all Unpaid Reimbursement Obligations exceed the Total
Commitment, and (ii) at no time shall the sum of the Loans outstanding
(other than Swing Line Loans) made by the Swing Line Lender in its
capacity as a Bank plus the sum of the Swing Line Loans outstanding
plus the Commitment Percentage of the Swing Line Lender (in its
capacity as a Bank) of the Maximum Drawing Amount and the Unpaid
Reimbursement Obligations exceed the Swing Line Lender's Commitment (as
a Bank), and provided further that, notwithstanding anything to the
contrary contained in Section 2.6 hereof, (x) the Borrower shall have
until 12:00 p.m. (Boston time) on the proposed Drawdown Date of any
Swing Line Loan to request such Swing Line Loan (a "Swing Line Loan
Request") in writing, via facsimile or by telephonic notice, if
thereafter promptly confirmed in writing, setting forth (A) the
principal amount of the proposed Swing Line Loan and (B) the proposed
Drawdown
<PAGE> 8
-8-
Date of such Swing Line Loan, and (y) each Swing Line Loan so requested
shall be in a minimum amount of $100,000.
(b) The Swing Line Loans shall be evidenced by a promissory
note of the Borrower payable to the Swing Line Lender in substantially
the form of Exhibit A-1 hereto (the "Swing Line Note"). The Borrower
acknowledges and agrees that the making of such Swing Line Loans shall,
in each case and except as otherwise expressly provided herein, be
subject in all respects to the provisions of this Credit Agreement as
if they were Loans covered by a Loan Request, including without
limitation, the limitations set forth in Section 2.1 and the
requirements that the applicable provisions of Section 12 be satisfied.
All actions taken by the Swing Line Lender or the Agent pursuant to the
provisions of this Section 2.9 shall be conclusive and binding on the
Borrower and the Banks absent the Swing Line Lender's or the Agent's
gross negligence or willful misconduct. Each Bank shall remain
severally and unconditionally liable to fund its pro rata share (based
upon each Bank's Commitment Percentage) of such Swing Line Loans on
each Swing Line Settlement Date. Prior to each Swing Line Settlement,
all payments or repayments of the principal and interest on Swing Line
Loans shall be credited to the account of the Swing Line Lender. The
Borrower shall have the right at its election, to repay the outstanding
amount of the Swing Line Loans, as a whole or in part, at any time
without penalty or premium, provided that any full or partial repayment
of the outstanding amount of any Swing Line Loan that is a Fixed Rate
Loan may be made only on the last day of the Interest Period relating
thereto. The aggregate outstanding amount of Swing Line Loans advanced
by the Swing Line Lender hereunder shall not exceed $10,000,000, and
there shall not be more than four (4) Swing Line Loans outstanding at
any one time.
2.9.2. SETTLEMENTS. (a) The Banks shall effect Swing
Line Settlements on each Swing Line Settlement Date. One (1) Business
Day prior to each such Swing Line Settlement Date, the Agent or the
Swing Line Lender shall give telephonic or facsimile notice to the
Banks of (i) the respective outstanding amount of Loans made by each
Bank as at the close of business on the prior day, (ii) the amount
that any Bank, as applicable (the "Swing Line Settling Bank"), shall
pay to effect a Swing Line Settlement (the "Swing Line Settlement
Amount") and (iii) the portion (if any) of the aggregate Swing Line
Settlement Amount to be paid to each Bank. A statement of the Agent or
the Swing Line Lender submitted to the Banks with respect to any
amounts owing hereunder shall be prima facie evidence of the amount
due and owing. Each Swing Line Settling Bank shall, not later than
1:00 p.m. (Boston time) on each Swing Line Settlement Date, effect a
wire transfer of immediately available funds to the Agent at the
Agent's Head Office in the amount of such Bank's Swing Line Settlement
Amount. The Agent shall, as promptly as practicable during normal
business hours on each Swing Line Settlement Date, effect a
<PAGE> 9
-9-
wire transfer of immediately available funds to the Swing Line Lender
of the Swing Line Settlement Amount to be paid to the Swing Line
Lender.
(b) All funds advanced by any Bank as a Swing Line Settling
Bank pursuant to this Section 2.9.2 shall for all purposes be treated
as a Loan made by such Swing Line Settling Bank to the Borrower, and
all funds received by any Bank pursuant to this Section 2.9.2 shall for
all purposes be treated as repayment of amounts owed by the Borrower
with respect to Loans made by such Bank. In the event that any
bankruptcy, reorganization, liquidation, receivership or similar cases
or proceedings, in which the Borrower is a debtor prevent a Settling
Bank from making a Loan to effect a Settlement as contemplated hereby,
such Settling Bank will make such dispositions and arrangements with
the other Banks with respect to such Loans, either by way of purchase
of participations, distributions, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Bank's share of the
outstanding Loans (including the Swing Line Loans) being equal, as
nearly as may be, to such Bank's Commitment Percentage of the
outstanding amount of the Loans. Whenever, at any time after the Swing
Line Lender has received from any Bank such Bank's participating
interest in a Swing Line Loan pursuant to the terms hereof, the Swing
Line Lender receives any payment on account thereof, the Swing Line
Lender will distribute to such Bank its participating interest in such
amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Bank's participating
interest was outstanding and funded) in like funds as received;
provided, however, that in the event that such payment received by the
Swing Line Lender is required to be returned, such Bank will return to
the Swing Line Lender any portion thereof previously distributed by the
Swing Line Lender to it in like funds as such payment is required to be
returned by the Swing Line Lender.
2.9.3. FUNDING PROCEDURES. (a) The Agent may (unless
notified to the contrary by any Swing Line Settling Bank by 12:00 noon
(Boston time) one (1) Business Day prior to the Settlement Date)
assume that each Swing Line Settling Bank has made available (or will
make available by the time specified in Section 2.9.2 to the Agent its
Swing Line Settlement Amount, and the Agent may (but shall not be
required to), in reliance upon such assumption, make available to the
Swing Line Lender the aggregate Swing Line Settlement Amount. If the
Swing Line Settlement Amount of such Swing Line Settling Bank is made
available to the Agent by such Swing Line Settling Bank on a date
after such Swing Line Settlement Date, such Swing Line Settling Bank
shall pay the Agent on demand an amount equal to the product of (i)
the average, computed for the period referred to in clause (iii)
below, of the weighted average annual interest rate paid by the Agent
for federal funds acquired by the Agent during each day included in
such period times (ii) the Swing Line Settlement Amount times (iii) a
fraction, the numerator of which is the number of days that elapse
from and including such
<PAGE> 10
-10-
Swing Line Settlement Date to but not including the date on which the
Swing Line Settlement Amount shall become immediately available to the
Agent, and the denominator of which is 360, as the case may be. Upon
payment of such amount, the Swing Line Settling Bank shall be deemed to
have delivered its Swing Line Settlement Amount on the Swing Line
Settlement Date and shall become entitled to interest payable by the
Borrower with respect to such Bank's Swing Line Settlement Amount as if
such share were delivered on the Swing Line Settlement Date. If the
Swing Line Settlement Amount is not in fact made available to the Agent
by the Swing Line Settling Bank within three (3) Business Days of such
Swing Line Settlement Date, the Agent shall be entitled to recover such
amount from the Borrower, with interest thereon at the Base Rate,
provided that any such payment by the Borrower hereunder shall be
without prejudice to any rights that the Borrower may have against the
Swing Line Settling Bank which did not fund its required portion of the
applicable Swing Line Loan. In the event that any Swing Line Settling
Bank fails to make such Swing Line Settlement available to the Agent
within one (1) Business Day following the Swing Line Settlement Date,
the Agent will endeavor to provide to the Borrower notice of such
failure, provided, a failure by the Agent to so provide such notice
shall not affect the Agent's rights under this Section 2.9.3.
(b) After any Swing Line Settlement Date, any payment by the
Borrower of Swing Line Loans hereunder shall be allocated among the
Banks, in amounts determined so as to provide that after such
application and the related Swing Line Settlement, the outstanding
amount of Loans of each Bank equals, as nearly as practicable, such
Bank's Commitment Percentage of the aggregate amount of Loans. The
Swing Line Lender will notify the Agent promptly following each advance
of a Swing Line Loan or any repayment with respect thereto. The failure
or refusal of any Settling Bank to make available to the Agent at the
aforesaid time and place on any Settlement Date the amount of such
Settling Bank's Settlement Amount shall not (i) relieve any other
Settling Bank from its several obligations hereunder to make available
to the Agent the amount of such other Settling Bank's Settlement Amount
or (ii) impose upon any Bank, other than the Settling Bank so failing
or refusing, any liability with respect to such failure or refusal or
otherwise increase the Commitment of such other Bank. Each Bank
severally agrees that its obligation to make available to the Swing
Line Lender its refunding or participation amounts as described above
shall (except to the extent expressly set forth in this Section 2.9) be
absolute and unconditional and shall not be affected by any
circumstance, including (v) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Swing Line
Lender, the Borrower or any other Person for any reason whatsoever, (w)
the occurrence or continuance of any Default or Event of Default, the
termination of the Commitments or any other condition precedent
whatsoever, (x) any adverse change in the condition (financial or
otherwise) of the Borrower or
<PAGE> 11
-11-
any of its Subsidiaries or any other Person, (y) any breach of any of
the Loan Documents by the Borrower or any of its Subsidiaries or any
other Bank, or (z) any other circumstance, happening or event, whether
or not similar to any of the foregoing."
Section 9. AMENDMENT OF Section 3.1 OF THE AGREEMENT. Section 3.1 of
the Agreement is hereby amended by adding a new sentence at the end thereof with
the following text: "Without limiting the foregoing, the Borrower promises to
pay to the Agent for the account of the Swing Line Lender, and there shall
become absolutely due and payable, the outstanding principal amount of each
Swing Line Loan made to the Borrower on the earlier of the Swing Line Settlement
Date with respect thereto and the Revolving Credit Loan Maturity Date."
Section 10. AMENDMENT OF Section 3.2 OF THE AGREEMENT. Section 3.2 of
the Agreement is hereby deleted in its entirety, and the following new Section
3.2 is hereby inserted in lieu theREOF:
"3.2. MANDATORY REPAYMENTS OF LOANS. If at any time the sum of the
outstanding amount of the Loans (including Swing Line Loans), the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations exceeds the
Total Commitment, then the Borrower shall immediately pay the amount of such
excess to the Agent for the respective accounts of the Banks and, if
applicable, the Swing Line Lender. Any amounts repaid in accordance with the
immediately preceding sentence shall be applied: first, to the Swing Line
Loans; second, to any Unpaid Reimbursement Obligations; third, to the Loans
which are not Swing Line Loans; and fourth, to provide to the Agent cash
collateral for Reimbursement Obligations as contemplated by Section 4.2(b) and
(c). Each payment of any Unpaid Reimbursement Obligations or prepayment of
Loans shall be allocated among the Banks, or, as the case may be, the Swing
Line Lender, in proportion, as nearly as practicable, to each Reimbursement
Obligation or, as the case may be, the respective unpaid principal amount of
each Bank's Revolving Credit Note or, as the case may be, the Swing Line
Lender's Swing Line Note, with adjustments to the extent practicable to
equalize any prior payments or repayments not exactly in proportion."
Section 11. AMENDMENT OF Section 3.3 OF THE AGREEMENT. Section 3.3 of
the Agreement is hereby deleted in its entirety, and the following new Section
3.3 is hereby substituted in lieu theREof:
"3.3. OPTIONAL REPAYMENT OF LOANS. The Borrower shall have the
right, at its election, to repay the outstanding amount of the Loans which are
not Swing Line Loans and Swing Line Loans which are not Fixed Rate Loans as a
whole or in part, at any time without penalty or premium, provided that any full
or partial prepayment of the outstanding amount of any Eurodollar Rate Loans
pursuant to this Section 3.3 may be made only on the last day of the Interest
Period relating thereto. The Borrower shall give the Agent, no later than 10:00
a.m., Boston time, at least one (1)
<PAGE> 12
-12-
Business Day prior written notice of any proposed prepayment pursuant to this
Section 3.3 of Base Rate Loans and of Swing Line Loans which are not Fixed Rate
Loans, and three (3) Eurodollar Business Days notice of any proposed prepayment
pursuant to this Section 3.3 of Eurodollar Rate Loans, in each case specifying
the proposed date of prepayment of Loans and the principal amount to be prepaid.
Each such partial prepayment of the Loans (other than Swing Line Loans) shall be
in an integral multiple of $5,000,000 and of Swing Line Loans which are not
Fixed Rate Loans shall be in an integral multiple of $100,000 and shall be
applied, in the absence of instruction by the Borrower and in the case of Loans
which are not Swing Line Loans, first to the principal of Base Rate Loans and
then to the principal of Eurodollar Rate Loans. Accrued interest on the
principal prepaid in connection with each such partial prepayment shall be due
and payable on the next Interest Payment Date, but accrued interest on the
principal paid in connection with any full prepayment at a time when the Total
Commitment is terminated shall be paid on the date of prepayment. Each
prepayment shall be allocated among the Banks, in proportion, as nearly as
practicable, to the respective unpaid principal amount of each Bank's Note, with
adjustments to the extent practicable to equalize any prior repayments not
exactly in proportion."
Section 12. AMENDMENT OF Section 5.9 OF THE AGREEMENT. Section 5.9 of
the Agreement is hereby deleted in its entirety and the following new Section
5.9 is hereby substituted in lieu theREof:
"5.9. Indemnity. The Borrower agrees to indemnify each Bank
and to hold each Bank harmless from and against any loss, cost or expense
(including loss of anticipated profits) that such Bank may sustain or incur as a
consequence of (i) default by the Borrower in payment of the principal amount of
or any interest on any Eurodollar Rate Loans or Fixed Rate Loans as and when due
and payable, including any such loss or expense arising from interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain its
Eurodollar Rate Loans or Fixed Rate Loans, (ii) default by the Borrower in
making a borrowing or conversion after the Borrower has given (or is deemed to
have given) a Loan Request, Swing Line Loan Request or a Conversion Request
relating thereto in accordance with Section 2.6, Section 2.7 or Section 2.9.1 or
(iii) the making of any payment of a Eurodollar Rate Loan or a Fixed Rate Loan
or the making of any conversion of any such Loan which is not a Swing Line Loan
or any such Fixed Rate Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with respect thereto, including interest
or fees payable by such Bank to lenders of funds obtained by it in order to
maintain any such Loans."
Section 13. AMENDMENT OF Section 7.20 OF THE AGREEMENT. The Agreement
is hereby amended by inserting, immediately after Section 7.19 thereof and
immediately before Section 8 thereof, the following new Section 7.20, with the
following text:
<PAGE> 13
-13-
"7.20. YEAR 2000 PROBLEM. The Borrower and its Subsidiaries have
reviewed or are reviewing the areas within their businesses and operations which
could be adversely affected by, and have developed or are developing, a program
to address on a timely basis the "Year 2000 Problem" (i.e., the risk that
computer applications used by the Borrower or any of its Subsidiaries may be
unable to recognize and perform properly data-sensitive functions involving
certain dates prior to and any date after December 31, 1999). Based upon such
review, the Borrower reasonably believes that the "Year 2000 Problem" will not
have any materially adverse effect on the business or financial condition of the
Borrower or any of its Subsidiaries."
Section 14. AMENDMENT OF Section 9.1 OF THE AGREEMENT. Section 9.1 of
the Agreement is hereby amended by deleting subsection (k) thereof in its
entirety and substituting in lieu thereof the following new subsection (k):
"(k) the Subordinated Notes and guaranties issued by the Guarantors of
the Borrower's obligations thereunder;".
Section 15. AMENDMENT OF Section 9.3 OF THE AGREEMENT. Section 9.3 of
the Agreement is hereby amended by deleting subsection (f) thereof in its
entirety and substituting in lieu thereof the following new subsection (f):
"(f) Investments consisting of (i)(A) the Guaranties or (B) guaranties
issued by the Guarantors of the Borrower's obligations under the Subordinated
Notes and (ii) Investments by the Borrower in (A) any of the Guarantors, (B)
Hadco FSC in an aggregate amount not to exceed $2,000,000 or (C) New Zycon or
New Continental in an aggregate amount not to exceed $50,000;".
Section 16. AMENDMENT OF Section 9.9 OF THE AGREEMENT. Section 9.9 of
the Agreement is hereby amended by adding the following text at the end thereof:
"The Borrower will not, and will not permit the other
parties thereto to, amend, modify or supplement the Subordinated Notes or the
Indenture in any way, unless in each case the form of any 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. Without limiting the
foregoing, the Borrower will not, and will not permit the other parties thereto,
to amend in any respect Section 10 of the Indenture."
<PAGE> 14
-14-
Section 17. ADDITION OF Section 9.11 TO THE AGREEMENT. The Agreement is
hereby amended by inserting the following new Section 9.11, immediately after
Section 9.10 and immediately before Section 10 of the Agreement:
"9.11. SUBORDINATED NOTES; DESIGNATION OF INDEBTEDNESS UNDER
INDENTURE. The Borrower will not, and will not permit any of its Subsidiaries
to, prepay, redeem, defease or repurchase any of the Subordinated Notes, whether
following the occurrence of a Change of Control (as defined in the Indenture) or
otherwise. The Borrower will not permit any of its Subsidiaries other than
Subsidiaries which are also Guarantors (and have duly executed and delivered to
the Agent a Guaranty in the form of Exhibit E, together with such evidence of
corporate or organizational authority and legal opinions as the Agent shall have
requested) to guaranty or otherwise become liable for any of the Borrower's
obligations under or in respect of the Subordinated Notes. The Borrower will not
designate, declare or identify any Indebtedness (other than the Obligations) as
"Senior Indebtedness" or "Designated Senior Indebtedness" under the Indenture,
unless the amount, terms and designation of such Senior Indebtedness or, as the
case may be, Designated Senior Indebtedness, shall first have been approved by
the Agent and the Majority Banks in writing. Without limiting the foregoing, the
Borrower, the Agent and the Banks hereby designate the Obligations as
"Designated Senior Indebtedness" under and pursuant to the Indenture."
Section 18. AMENDMENT OF Section 10.1 OF THE AGREEMENT. Section 10.1 of
the Agreement is hereby amended by inserting the following text at the end
thereof: "The calculation of such ratio shall include, on a pro forma basis and
if and to the extent approved by the Majority Banks (which approval shall
require, inter alia, the Agent's and the Banks' receipt of audited financial
statements for any Target acquired in accordance with Section 9.5.2(b), together
with an unqualified audited opinion letter from Arthur Andersen LLP or another
nationally recognized accounting firm satisfactory to the Agent and the Majority
Banks, or which financial statements or opinion letter shall otherwise be
satisfactory to the Agent and the Majority Banks), EBITDA for such period of any
Target acquired in compliance with Section 9.5.2(b), regardless of whether such
acquisition is by way of stock purchase, asset purchase or pooling of
interests."
Section 19. AMENDMENT OF Section 10.4 OF THE AGREEMENT. Section 10.4 of
the Agreement is hereby amended by deleting the period (".") at the end thereof
and substituting in lieu thereof the following text: ", regardless of whether
such acquisition is by way of stock purchase, asset purchase or pooling of
interests."
Section 20. AMENDMENT OF Section 13.1 OF THE AGREEMENT. Section 13.1 is
hereby amended by:
(a) deleting the word "or" at the end of subsection (o)
thereof.
<PAGE> 15
-15-
(b) inserting, at the end of subsection (p) thereof the
text "or any "Change of Control", as defined in the Indenture, shall
occur".
(c) inserting a new subsection (q), immediately after
subsection (p) thereof and immediately before the final unindented
paragraph thereof, with the following text:
(q) the holders of all or any part of the Subordinated
Notes shall accelerate the maturity of all or any part of the
Subordinated Notes, or any or all of the Subordinated Notes shall be
prepaid, redeemed, defeased or repurchased in whole or in part;"
(d) deleting the references to "Sections 13.1(g) or
13.1(h)" in the final sentence of Section 13.1 and substituting in
lieu thereof the text "Sections 13.1(g), 13.1(h) or 13.1(q)".
Section 21. AMENDMENT OF Section 13.2 OF THE AGREEMENT. Section 13.2 of
the Agreement is hereby amended by deleting the text "Sections 13.1(g) or
13.1(h)" in the second line thereof and substituting in lieu thereof the text
"Sections 13.1(g), 13.1(h) or 13.1(q)".
Section 22. AMENDMENT OF Section 15.1(A) OF THE AGREEMENT. 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.
Section 23. AMENDMENT OF SECTION 19.1 OF THE AGREEMENT. Section 19.1 of
the Agreement is hereby amended by inserting in clause (i) thereof, immediately
after the text "(i) each of the Agent" and immediately before the text "and,
unless a Default or Event of Default shall have occurred and be continuing, the
Borrower ...", the text ", the Swing Line Lender,".
Section 24. AMENDMENT OF AMENDMENT OF Section 26 OF THE AGREEMENT.
Section 26 of the Agreement is hereby amended by inserting, immediately after
the text "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;", and immediately before the text "and the amount
of the Agent's Fee or any Letter of Credit Fees payable for the Agent's account
and Section 15 may not be amended without the written consent of the Agent.",
the following text: "the definitions of Applicable Swing Line Margin, Swing Line
Loans, Swing Line Note, Swing Line Settlement Amount, Swing Line Settling Bank,
Swing Line Settlement Date and Swing Line Settlement and the terms of Section
2.5(c) and Section 2.9 may not be amended without the written consent of the
Swing Line Lender;".
<PAGE> 16
-16-
Section 25. ADDITION OF EXHIBIT A-1. The Agreement is hereby amended by
including as an additional Exhibit thereto, a new Exhibit A-1 in the form
attached hereto.
Section 26. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed
to be effective as of May 11, 1998 (the "Effective Date"), upon the Agent's
receipt of the following, each in form and substance satisfactory to the Agent:
(a) facsimile copies of original counterparts (to be
followed promptly by original counterparts) or original counterparts
of (i) this Amendment, duly executed by each of the Company, the Hadco
Subsidiaries, the Agent and the Banks, and (ii) a Swing Line Note in
the form of Exhibit A-1 hereto, duly executed by the Company;
(b) payment to the Agent in cash, for the account of each
Bank, a work fee of $5,000 ($75,000 in aggregate);
(c) a duly executed Secretary's certificate of the
Secretary or Assistant Secretary of the Borrower certifying (and where
applicable, attaching copies of) the Borrower's (i) Articles of
Organization; (ii) By-laws; (iii) resolutions of its Board of
Directors authorizing the transactions contemplated hereby;
(d) copies, duly certified by the Secretary of the
Borrower, as to the final form of the Indenture and the Subordinated
Notes, each of which final forms shall respectively comply with the
definitions of Indenture and Subordinated Notes contained in the
Agreement, as amended by this Amendment; and
(e) such other documents, agreements and items as the
Agent may require, including, without limitation, execution and
delivery, together with performance of the agreements and delivery of
the items specified therein, of a fee letter satisfactory in form and
substance to the Agent, duly executed by the Agent and the Borrower.
Section 27. 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
<PAGE> 17
-17-
Amendment or would occur after giving effect to the transactions
contemplated by this Amendment; and
(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 Section 26 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.
Section 28. 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.
Section 29. 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.
Section 30. 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.
Section 31. 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> 18
-18-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
a document under seal as of the date first above written.
HADCO CORPORATION
By:
----------------------------------------
Name:
Title:
BANKBOSTON, N.A., individually and as Agent
By:
-----------------------------------------
Name:
Title: Vice President
ABN AMRO BANK N.V.
By:
----------------------------------------
Name:
Title:
THE BANK OF TOKYO - MITSUBISHI
TRUST COMPANY
By:
----------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By:
----------------------------------------
Name:
Title:
<PAGE> 19
-19-
KEYBANK NATIONAL ASSOCIATION.
By:
----------------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:
----------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
----------------------------------------
Name:
Title:
THE FUJI BANK, LIMITED
By:
----------------------------------------
Name:
Title:
SUNTRUST BANK, ATLANTA
By:
----------------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By:
----------------------------------------
Name:
Title:
<PAGE> 20
-20-
CORESTATES BANK, N.A.
By:
----------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY
By:
----------------------------------------
Name:
Title:
MELLON BANK, N.A.
By:
----------------------------------------
Name:
Title:
THE SANWA BANK, LIMITED
By:
----------------------------------------
Name:
Title:
<PAGE> 21
-21-
USTRUST
By:
----------------------------------------
Name:
Title:
<PAGE> 22
-22-
The undersigned hereby acknowledges the foregoing Amendment as of the Effective
Date and agrees that its obligations under the Guaranty to which it is a party
will extend to the Agreement, as so amended, and the other Loan Documents, as so
amended.
HADCO SANTA CLARA, INC.
By:
----------------------------------------
Title:
HADCO PHOENIX, INC.
By:
----------------------------------------
Title:
CCIR OF CALIFORNIA, CORP.
By:
----------------------------------------
Title:
CCIR OF TEXAS, CORP.
By:
----------------------------------------
Title:
<PAGE> 23
EXHIBIT A-1
SWING LINE NOTE
$10,000,000 as of May 11, 1998
FOR VALUE RECEIVED, the undersigned HADCO CORPORATION, a Massachusetts
corporation (the "Borrower"), hereby promises to pay to the order of BANKBOSTON,
N.A., a national banking association (the "Bank") at the Agent's Head Office (as
defined in the Credit Agreement referred to below):
(a) on the Revolving Credit Loan Maturity Date, the principal
amount of TEN MILLION DOLLARS ($10,000,000) or, if less, the aggregate
unpaid principal amount of Swing Line Loans advanced by the Bank to the
Borrower pursuant to the Amended and Restated Revolving Credit
Agreement dated as of December 8, 1997 (as amended and in effect from
time to time, the "Credit Agreement"), among the Borrower, the Bank,
BankBoston, N.A., as Agent, and other parties thereto;
(b) the principal outstanding hereunder from time to time at
the times provided in the Credit Agreement; and
(c) interest on the principal balance hereof from time to time
outstanding from the date hereof through and including the Revolving
Credit Maturity Date hereof at the times and at the rate provided in
the Credit Agreement.
This Note evidences borrowings under and has been issued by the
Borrower in accordance with the terms of the Credit Agreement. The Bank and any
holder hereof is entitled to the benefits of the Credit Agreement and the other
Loan Documents, and may enforce the agreements of the Borrower contained
therein, and any holder hereof may exercise the respective remedies provided for
thereby or otherwise available in respect thereof, all in accordance with the
respective terms thereof. All capitalized terms used in this Note and not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement.
The Borrower irrevocably authorizes the Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Swing Line Loan or at the
time of receipt of any payment of principal of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, reflecting the making of
such Swing Line Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Swing Line Loans set forth on the grid attached to
this Note, or the continuation of such grid, or any other similar record,
including computer records, maintained by the Bank with respect to any Swing
Line Loans shall be prima facie evidence of the principal amount thereof owing
and unpaid to the Bank, but the failure to record, or any error in so recording,
any such amount on any such grid,
<PAGE> 24
-2-
continuation or other record shall not limit or otherwise affect the obligation
of the Borrower hereunder or under the Credit Agreement to make payments of
principal of and interest on this Note when due.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY
FEDERAL COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 21 OF THE CREDIT AGREEMENT.
THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has caused this Amended and
Restated Swing Line Note to be signed in its corporate name and its corporate
seal to be impressed thereon by its duly authorized officer as of the day and
year first above written.
<PAGE> 25
-3-
[Corporate Seal]
HADCO CORPORATION
By:
----------------------------------
Name:
Title:
<PAGE> 26
-4-
<TABLE>
<CAPTION>
AMOUNT OF BALANCE OF
AMOUNT PRINCIPAL PAID PRINCIPAL NOTATION
DATE OF LOAN OR PREPAID UNPAID MADE BY:
- ------------------ ----------------- ------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> MAY-02-1998
<EXCHANGE-RATE> 1
<CASH> 4,997
<SECURITIES> 0
<RECEIVABLES> 114,352
<ALLOWANCES> 2,589
<INVENTORY> 75,095
<CURRENT-ASSETS> 222,608
<PP&E> 599,656
<DEPRECIATION> 281,321
<TOTAL-ASSETS> 739,441
<CURRENT-LIABILITIES> 123,975
<BONDS> 359,037
0
0
<COMMON> 662
<OTHER-SE> 194,907
<TOTAL-LIABILITY-AND-EQUITY> 739,441
<SALES> 209,587
<TOTAL-REVENUES> 209,587
<CGS> 172,857
<TOTAL-COSTS> 194,387
<OTHER-EXPENSES> 68,997
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,195
<INCOME-PRETAX> (57,144)
<INCOME-TAX> 2,595
<INCOME-CONTINUING> (59,739)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,739
<EPS-PRIMARY> (4.54)
<EPS-DILUTED> (4.54)
</TABLE>
