<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AVX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3670 33-0379007
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
801 17TH AVENUE SOUTH
MYRTLE BEACH, SOUTH CAROLINA 29577
(843) 448-9411
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
DONALD B. CHRISTIANSEN
SENIOR VICE PRESIDENT OF FINANCE AND CHIEF FINANCIAL OFFICER
801 17TH AVENUE SOUTH
MYRTLE BEACH, SOUTH CAROLINA 29577
(843) 448-9411
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
<TABLE>
<S> <C>
GARY C. IVEY, ESQ. ALAN L. JAKIMO, ESQ.
PARKER, POE, ADAMS & BERNSTEIN L.L.P BROWN & WOOD LLP
2500 CHARLOTTE PLAZA ONE WORLD TRADE CENTER
CHARLOTTE, NORTH CAROLINA 28244 NEW YORK, NEW YORK 10048-0557
(704) 372-9000 (212) 839-5300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value...... 6,000,000 shares $51.375 $308,250,000 $81,378
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 750,000 shares that the underwriters have the option to purchase
from Kyocera Corporation to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 based on the
average of the high and low sale prices of the common stock reported on the
New York Stock Exchange on January 13, 2000.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE AN OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY , 2000
PROSPECTUS
5,250,000 SHARES
(AVX LOGO) CORPORATION
COMMON STOCK
------------------------
Kyocera Corporation, our majority stockholder, is selling 5,250,000 shares
of our common stock. AVX Corporation will not receive any proceeds from the sale
of the shares by Kyocera.
The common stock trades on the New York Stock Exchange under the symbol
"AVX." On January 19, 2000, the last sale price of the common stock as reported
on the New York Stock Exchange was $61 1/8 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds, before expenses, to Kyocera....................... $ $
</TABLE>
The underwriters may also purchase up to an additional 750,000 shares from
Kyocera at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will be ready for delivery in New York, New York
on or about , 2000.
------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
------------------------
The date of this prospectus is , 2000.
<PAGE> 3
AVX A Worldwide Manufacturer of
Passive Electronic Components
[Photo of
Ceramic
Capacitors] [Photo of Ceramic Surface Mount
Capacitor Production Equipment]
[Photo of
Tantalum
Capacitors]
AVX's passive electronic components are
used by leading OEMs in such industries as
telecommunications, information technology
hardware, automotive and medical.
[Photo of
Integrated
Passive
Component]
[Photo of
Connectors]
[Photos of end user products]
[Photo of
Leaded
Capacitors]
AVX manufactures and supplies a broad line
of passive electronic components and
related products, some of which are pictured
on the left.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Enforceability of Civil Liabilities......................... 6
Use of Proceeds............................................. 6
Price Range of Common Stock................................. 6
Dividend Policy............................................. 6
Selected Financial Data..................................... 7
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 8
Business.................................................... 14
Management.................................................. 20
Selling Stockholder......................................... 21
Relationship with Kyocera and Related Transactions.......... 21
Description of Capital Stock................................ 23
Shares Eligible for Future Sale............................. 25
Underwriting................................................ 26
Legal Matters............................................... 28
Experts..................................................... 28
Incorporation of Certain Documents by Reference............. 28
Where You Can Find More Information......................... 28
Index to Financial Statements............................... F-1
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus includes or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Words such as "expects,"
"anticipates," "approximates," "believes," "estimates," "intends," and "hopes"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. We intend such forward-looking statements, all
of which are qualified by this statement, to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Litigation
Securities Reform Act of 1995 and are including this statement for purposes of
complying with these safe harbor provisions. We have based these statements on
our current expectations and projections about future events. These
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected in these statements. These risks and
uncertainties include those set forth under "Risk Factors" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition." The
forward-looking statements contained in this prospectus include, among other
issues, statements about the following:
- general economic conditions in our markets, including inflation,
recession, interest rates and other economic factors;
- damage to or other disruption of our facilities and equipment; and
- other factors that generally affect the business of manufacturing and
supplying electronic components and related products.
We are not obligated to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
---------------------
You should rely only on the information contained in this prospectus. We
have not, and Kyocera and the underwriters have not, authorized any other person
to provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and Kyocera
and the underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospectus may have changed since that date.
ii
<PAGE> 5
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be important
to you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision.
THE COMPANY
AVX is a leading worldwide manufacturer and supplier of a broad line of
passive electronic components and related products. Virtually all types of
electronic devices use our passive component products to store, filter or
regulate electric energy.
Our passive electronic component products include ceramic and tantalum
capacitors, film capacitors, ferrites, varistors and non-linear resistors
manufactured in our facilities throughout the world and passive components
manufactured by Kyocera. We also manufacture and sell electronic connectors and
distribute and sell certain electronic connectors manufactured by Kyocera. In
fiscal 1999, our net sales totaled $1.25 billion with passive components
accounting for approximately 91% and electronic connectors accounting for
approximately 9% of this total. For the nine months ended December 31, 1999 we
generated $1.13 billion in net sales and $86.1 million of net income. Sales for
the quarter ended December 31, 1999 were $416.4 million and net income was $42.5
million.
Our customers are multi-national original equipment manufacturers, or OEMs,
and contract equipment manufacturers, or CEMs (also referred to as electronic
manufacturing service providers (EMSs)). In order to meet the needs of our
global customer base, we have developed a comprehensive product line, a global
manufacturing presence and a worldwide marketing organization that we believe
positions us to react to both global and local market trends. We produce our
passive electronic components in 28 manufacturing facilities located in 13
countries around the world. We have invested $292 million over the past three
fiscal years and an additional $109 million in the first nine months of the
current fiscal year to increase and upgrade our production capacity. We market
our products through our own direct sales force, independent manufacturers'
representatives or electronic component distributors depending on market
characteristics and demands. We coordinate our sales, marketing and
manufacturing organization by strategic customer account and globally by region.
Approximately 58% of our net sales in fiscal 1999 were outside North America,
with Europe accounting for 28% and Asia for 30%, respectively.
We sell our products to customers in a broad array of industries, such as
telecommunications, information technology hardware, automotive electronics,
medical devices and consumer electronics. Our major customers include Motorola,
Lucent, Ericsson, Nokia, Northern Telecom, Sagem, Samsung and Siemens in the
telecommunications industry; IBM, Compaq, Seagate Technology, Apple, 3Com, Acer
and Sony in the information technology hardware industry; Robert Bosch, Siemens,
General Motors, VDO, Valeo and Magneti Marelli in the automotive industry; and
Medtronics, St. Jude Medical and Guidant in the medical industry. Major CEM
customers include Solectron, Celestica, Jabil and SCI. We believe that growth
and innovation in the telecommunications and information technology hardware
industries have been and will continue to be driving forces behind growth and
technological advances in the passive component industry. We estimate that, in
fiscal 1999, approximately 65% of our net sales were to the telecommunications
and information technology hardware industries.
We believe that our research and development capabilities are an important
strategic advantage. During the past twelve months, we introduced approximately
40 new products from our global research and development facilities in Myrtle
Beach, South Carolina, Northern Ireland, Israel and England. We have invested
$111 million in research, development and engineering over the past three fiscal
years, which we believe has enhanced our leading position in the industry.
Our executive offices are located in Myrtle Beach, South Carolina. Our
principal address and telephone number are 801 17th Avenue South, Myrtle Beach,
SC 29577 (843) 448-9411. Our manufacturing facilities are located in North
America, Latin America, Europe and Asia.
1
<PAGE> 6
THE SELLING STOCKHOLDER
Kyocera is a global producer of high technology solutions in such fields as
electronics, telecommunications, metal processing, automotive components,
optics, medical and dental implants and solar energy. Since 1990, we have
entered into several agreements with Kyocera under which we can sell certain
Kyocera manufactured electronic components everywhere in the world except Japan,
purchase raw materials from Kyocera used in the manufacture of ceramic
capacitors and share ceramic technology and manufacturing resources. These
arrangements should continue to provide us with important competitive
advantages.
As of December 31, 1999, Kyocera owned approximately 76% of our common
stock. When this offering is complete, Kyocera will own approximately 70% of our
common stock (approximately 69% if the underwriters' over-allotment option is
exercised in full) and will continue to have the ability to elect AVX's entire
board of directors and exercise a controlling influence over our business and
affairs.
THE OFFERING
<TABLE>
<S> <C>
Common stock being offered
by Kyocera.......................................... 5,250,000 shares
Shares outstanding before and after the
offering.......................................... 87,127,250 shares(1)
Use of proceeds..................................... We will not receive any proceeds from the
sale of shares by Kyocera.
Risk factors........................................ See "Risk Factors" and other information
included in this prospectus for a discussion
of factors you should carefully consider
before deciding to invest in shares of our
common stock.
Dividend policy..................................... Our board of directors expects to continue to
pay regular quarterly cash dividends on
shares of our common stock.
New York Stock Exchange Symbol...................... AVX
</TABLE>
- ---------------
(1) The number of shares outstanding both before and after the offering excludes
746,075 shares of common stock issuable upon exercise of options outstanding
and 449,650 shares available for grant as of December 31, 1999 under AVX's
stock option plans.
2
<PAGE> 7
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
This table includes certain summary financial information. You should read
this table together with the discussion under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
our Consolidated Financial Statements and related notes that we include in this
prospectus and similar sections in the documents that we incorporate by
reference in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED MARCH 31, ENDED DECEMBER 31,
--------------------------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................... $ 988,893 $1,207,761 $1,126,178 $1,267,653 $1,245,473 $ 926,862 $1,131,135
Gross profit.................. 211,206 321,267 274,315 297,437 167,409 130,978 209,072
Profit from operations........ 110,193 204,681 171,946 186,700 53,305 44,973 121,590
Net income.................... 74,871 137,736 121,341 134,651 41,516 33,968 86,060
Basic and diluted income per
share....................... $ 0.87 $ 1.58 $ 1.38 $ 1.53 $ 0.48 $ 0.39 $ 0.99
Weighted average common shares
outstanding................. 85,800 87,175 88,000 88,110 87,066 87,281 86,555
Cash dividends declared per
common share................ $ 0.305 $ 0.229 $ 0.225 $ 0.245 $ 0.260 $ 0.195 $ 0.195
OTHER DATA:
EBITDA(1)..................... $ 172,019 $ 276,246 $ 255,198 $ 275,745 $ 149,752 $ 114,645 $ 193,582
Net cash from operating
activities.................. 126,158 155,687 167,926 136,761 184,403 136,258 168,018
Capital expenditures.......... 77,308 110,487 93,954 100,374 97,715 72,839 109,279
Research, development and
engineering expenses........ 25,000 30,000 33,000 36,000 42,000 29,000 33,000
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1999
-----------------
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 523,086
Total assets................................................ 1,230,435
Long-term debt.............................................. 17,229
Stockholders' equity........................................ 917,940
</TABLE>
- ---------------
(1) EBITDA is earnings before interest, taxes, depreciation and amortization.
3
<PAGE> 8
RISK FACTORS
You should consider carefully, in addition to the other information
contained in this prospectus, the following factors before purchasing shares of
our common stock.
THE CYCLICAL DEMAND FOR ELECTRONIC PRODUCTS AND COMPONENTS COULD RESULT IN
FLUCTUATIONS IN OUR SALES RESULTS
Virtually all electronics products and applications use passive electronic
components and electronic connectors sold by AVX. As a result, the demand for
our products and our operating results may be negatively affected by a downturn
in the electronics sector. In addition, a variety of factors affecting
customers, many of which are beyond our control, may influence the level of our
net sales in a particular period, including, without limitation, the timing of
significant orders and shipments and new product introductions, production and
quality problems, changes in the cost of materials, disruption in sources of
supply and seasonal patterns of spending. In addition, our sales and operating
results may fluctuate on a quarter to quarter basis.
CHANGES IN TECHNOLOGY MAY DISRUPT OUR SALES RESULTS AND PRODUCTION CAPABILITIES
Rapid technological evolution in the electronics industry requires us to
anticipate and respond rapidly to changes in industry standards and customer
needs and to develop and introduce new and enhanced products on a timely and
cost-effective basis. We must manage transitions from products using older
technology to those that utilize up-to-date technology in order to maintain and
increase sales and profitability, minimize disruptions in customer orders and
avoid excess inventory of products that are less responsive to our customers'
demands. New product introductions could contribute to fluctuations in operating
results as orders for new products commence and orders for existing products
decline. In response to these challenges, our research and development efforts
place a priority on the design and development of innovative products and
manufacturing processes and engineering advances in existing product lines and
manufacturing operations.
WE FACE SIGNIFICANT COMPETITION IN THE PASSIVE ELECTRONIC COMPONENTS INDUSTRY
AND THE CAPACITOR BUSINESS
Our business is highly competitive worldwide, with low transportation costs
and few import barriers. We compete principally on the basis of product quality
and reliability, availability, customer service, technological innovation,
timely delivery and price. The industry has become increasingly concentrated and
globalized in recent years. Our major competitors, some of which are larger than
AVX, have significant financial resources and technological capabilities.
AN INABILITY TO REDUCE COSTS COULD ADVERSELY AFFECT OUR PROFIT MARGINS AND SALES
GROWTH
We are under continuous pressure from our customers to reduce the prices
for our products. The intense competition in our industry motivates us to
continually decrease prices over a product's life cycle. Our profit margins and
sales growth may suffer if we are unable to reduce the cost of production when
sales prices decline.
A DECREASE IN AVAILABILITY AND INCREASE IN COST OF OUR KEY RAW MATERIALS COULD
ADVERSELY AFFECT OUR PROFIT MARGINS
We currently use palladium, a precious metal, and tantalum powder, among
other raw materials, for the production of capacitors. Palladium is mined
primarily in Russia and South Africa and is currently used as one of the raw
materials in a portion of our multi-layered ceramic capacitor production.
Historically, the market for palladium has experienced a substantial amount of
price volatility. The lack of availability of, or significant price increases
for, palladium or tantalum could have a material adverse effect on our results
of operations. Although palladium and tantalum powder have generally been
available in sufficient quantities to meet our manufacturing requirements, there
can be no assurance that this situation
4
<PAGE> 9
will prevail in the future. We have expanded, and will continue to expand, the
use of base metals, such as nickel, in the production of multi-layered ceramic
capacitors in order to reduce our use of palladium.
FUTURE FOREIGN ECONOMIC AND POLITICAL CONDITIONS COULD ADVERSELY AFFECT OUR
PRODUCTION CAPABILITY
We manufacture and assemble some of our products in foreign locations, such
as the Czech Republic, El Salvador, Israel, Mexico, Taiwan, Malaysia, Brazil and
Northern Ireland. Although we have not experienced significant problems
conducting operations in these areas to date, changes in local economic or
political conditions could impact our production capability and adversely affect
our business and operating results.
FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES MAY ADVERSELY AFFECT OUR
PROFITABILITY
We manufacture and sell electronic components in various regions of the
world and export and import these products to and from a large number of
countries. Sales and manufacturing costs are frequently denominated in local
currencies. Fluctuations in exchange rates could negatively impact our cost of
production and sales which, in turn, could decrease our profitability. Although
we engage in limited hedging operations, such as foreign currency contracts, to
reduce our exposure to foreign currency fluctuations and although currency gains
and losses have not been material during recent periods, there can be no
assurance that such measures will eliminate or substantially reduce our risk in
the future.
FUTURE CHANGES IN OUR ENVIRONMENTAL LIABILITY AND COMPLIANCE OBLIGATIONS MAY
HARM OUR ABILITY TO OPERATE OR INCREASE OUR COSTS
Our manufacturing operations are subject to environmental laws and
regulations governing air emissions, wastewater discharges, the handling,
disposal and remediation of hazardous substances and certain chemicals used and
generated in our manufacturing processes, and employee health and safety. More
stringent environmental regulations may be enacted in the future, and we cannot
presently determine the modifications, if any, in our operations that any such
future regulations might require, or the cost of compliance with these
regulations. In order to resolve liabilities at various sites, we have entered
into various administrative orders and consent decrees, some of which may, under
certain conditions, be reopened or subject to renegotiation.
KYOCERA OWNS A MAJORITY OF OUR STOCK AND CONTROLS OUR BOARD OF DIRECTORS; FUTURE
STOCK SALES BY KYOCERA COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK
After the completion of the offering, Kyocera will retain approximately 70%
of the common stock (approximately 69% if the over-allotment option is exercised
in full) and will continue to retain control over all matters requiring approval
by the stockholders, including the election of directors. Future sales of common
stock in the public market by Kyocera could adversely affect the market price of
our common stock. AVX currently has, and will continue to have, a variety of
contractual relationships with Kyocera.
LOSING THE SERVICES OF KEY PERSONNEL COULD HARM OUR BUSINESS
Our continued success depends on the efforts and abilities of our executive
officers and other key employees. If any of our executive officers or other key
employees leave AVX, our operations could be adversely affected. Except for an
employment agreement with Benedict P. Rosen, our Chief Executive Officer, we do
not have any employment contracts with any of our executive officers or other
key employees. Our ability to attract and retain quality employees in all
disciplines is important to our future success.
OUR CHARTER AND BY-LAWS AND PROVISIONS OF THE DELAWARE LAW COULD HAVE
ANTI-TAKEOVER EFFECTS ON AVX
Our charter and by-laws provide for advance notification of stockholders'
proposals and the removal of directors only by a supermajority vote of
stockholders and for cause. These provisions and other anti-takeover provisions
in our charter and by-laws and Delaware law could deter hostile takeovers or
delay or prevent changes in control or management of AVX.
5
<PAGE> 10
ENFORCEABILITY OF CIVIL LIABILITIES
Kyocera is a Japanese corporation with the majority of its assets and
operations located, and the majority of its revenues derived, outside the United
States. Kyocera has appointed CT Corporation System, New York, New York, as its
agent to receive service of process with respect to any action brought against
it in any federal or state court in the State of New York arising from this
offering. However, it may not be possible for investors to enforce outside the
United States judgments against Kyocera obtained in the United States in any
such actions, including actions predicated upon the civil liability provisions
of the United States federal and state securities laws. In addition, certain
directors and officers of Kyocera and certain directors of AVX are residents of
Japan, and all or substantially all of the assets of such persons are or may be
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon such
persons, or to enforce against them judgments obtained in United States courts,
including judgments predicated upon the civil liability provisions of the United
States federal and state securities laws. Kyocera, the directors and officers of
Kyocera and such directors of AVX have been advised by their Japanese counsel,
Tomotsune Kimura & Mitomi, that there is uncertainty as to whether the courts of
Japan would (i) recognize judgments of United States courts obtained against
Kyocera or such persons predicated upon the civil liability provisions of the
United States federal and state securities laws or (ii) enforce in original
actions brought in Japan liabilities against Kyocera or such persons predicated
upon the United States federal and state securities laws.
USE OF PROCEEDS
AVX will not receive any of the proceeds from the sale of common stock by
Kyocera.
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the New York Stock Exchange and trades under
the symbol "AVX." The following presents the high and low sale prices for our
common stock for each quarter since the quarter ended June 30, 1997, as reported
on the New York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
2000 1999 1998
------------------ ------------------ ------------------
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First quarter..................................... $29 $15 1/8 $21 5/16 $15 5/8 $29 1/8 $19 3/4
Second Quarter.................................... 40 24 1/2 17 15/16 13 5/8 39 5/8 26 5/8
Third Quarter..................................... 50 7/16 32 9/16 20 3/4 13 1/2 34 1/2 17 11/16
Fourth Quarter (through January 19, 2000)......... 61 15/16 42 7/16 17 15/16 12 9/16 23 3/8 18 1/4
</TABLE>
See the cover page of this prospectus for a recent closing price of our
common stock on the New York Stock Exchange.
DIVIDEND POLICY
AVX has paid regular quarterly cash dividends since 1995. Dividends on the
common stock are subject to the discretion of our board of directors and will
depend on our earnings, capital requirements, financial condition, statutory
restrictions and other relevant factors. There can be no assurance that we will
declare and pay dividends in the future.
6
<PAGE> 11
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for AVX for the five
fiscal years ended March 31, 1999. The selected financial data for the five
fiscal years ended March 31, 1999, are derived from AVX's financial statements,
which have been audited by PricewaterhouseCoopers LLP, independent accountants.
The selected financial data for the nine month periods ended December 31, 1998
and 1999 are derived from unaudited financial statements. The financial data for
the nine month periods ended December 31, 1998 and 1999 include all adjustments,
consisting of normal recurring accruals, which we consider necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the nine months ended December 31, 1999 are not
necessarily indicative of the results that may be expected for the entire year
ending March 31, 2000. The financial data set forth below should be read in
conjunction with the company's financial statements and the notes thereto and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------------------------------ ---------------------
1995 1996 1997 1998 1999 1998 1999
-------- ---------- ---------- ---------- ---------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $988,893 $1,207,761 $1,126,178 $1,267,653 $1,245,473 $926,862 $1,131,135
Cost of sales......................... 777,687 886,494 851,863 970,216 1,078,064 795,884 922,063
-------- ---------- ---------- ---------- ---------- -------- ----------
Gross profit.......................... 211,206 321,267 274,315 297,437 167,409 130,978 209,072
Selling, general and administrative
expenses............................ 101,013 116,586 102,369 110,737 114,104 86,005 87,482
-------- ---------- ---------- ---------- ---------- -------- ----------
Profit from operations................ 110,193 204,681 171,946 186,700 53,305 44,973 121,590
Interest income....................... 2,018 5,096 7,536 11,268 7,946 6,204 6,450
Interest expense...................... (2,229) (2,352) (2,049) (1,921) (2,228) (1,710) (1,453)
Other, net............................ 1,218 1,655 1,010 1,377 1,719 13 1,227
-------- ---------- ---------- ---------- ---------- -------- ----------
Income before income taxes............ 111,200 209,080 178,443 197,424 60,742 49,480 127,814
Provision for income taxes............ 36,329 71,344 57,102 62,773 19,226 15,512 41,754
-------- ---------- ---------- ---------- ---------- -------- ----------
Net income............................ $ 74,871 $ 137,736 $ 121,341 $ 134,651 $ 41,516 $ 33,968 $ 86,060
======== ========== ========== ========== ========== ======== ==========
Basic and diluted income per share.... $ 0.87 $ 1.58 $ 1.38 $ 1.53 $ 0.48 $ 0.39 $ 0.99
Weighted average common shares
outstanding......................... 85,800 87,175 88,000 88,110 87,066 87,281 86,555
Cash dividends declared per common
share............................... $ 0.305 $ 0.229 $ 0.225 $ 0.245 $ 0.260 $ 0.195 $ 0.195
OTHER DATA:
EBITDA(1)............................. $172,019 $ 276,246 $ 255,198 $ 275,745 $ 149,752 $114,645 $ 193,582
Net cash from operating activities.... 126,158 155,687 167,926 136,761 184,403 136,258 168,012
Capital expenditures.................. 77,308 110,487 93,954 100,374 97,715 72,839 109,279
Research, development and engineering
expenses............................ 25,000 30,000 33,000 36,000 42,000 29,000 33,000
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF
-------------------------------------------------------------- DECEMBER 31,
1995 1996 1997 1998 1999 1999
---------- ---------- ---------- ---------- ---------- ------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 224,999 $ 357,930 $ 456,672 $ 552,787 $ 471,253 $ 523,086
Total assets................................ 670,697 867,516 949,307 1,048,653 1,058,040 1,230,435
Long-term debt.............................. 9,544 8,507 12,170 8,376 12,714 17,229
Stockholder's equity........................ 456,266 624,000 731,969 850,884 830,641 917,940
</TABLE>
- ---------------
(1) EBITDA is earnings before interest, taxes, depreciation and amortization.
7
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The growth in sales during this fiscal year is due to the expansion of the
worldwide demand for electronic components and to AVX's commitment over the past
several years to (i) put plant and equipment in place around the world to
increase production capacity in advance of our customers' requirements, and (ii)
continue to invest in research, development and engineering in order to provide
our customers with new generations of passive component and connector product
solutions.
The expansion of the worldwide demand for electronic components has been
led primarily by strong growth in the telecommunications and information
technology hardware industries, as the use of electronics in all walks of life
has become more widespread and sophisticated.
The following table sets forth the percentage relationships to net sales of
certain income statement items for the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------- ------------
1997 1998 1999 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.............................. 75.6 76.5 86.6 85.9 81.5
Gross profit............................... 24.4 23.5 13.4 14.1 18.5
Selling, general and administrative
expenses................................. 9.1 8.7 9.2 9.3 7.7
Profit from operations..................... 15.3 14.8 4.2 4.8 10.8
Income before income taxes................. 15.8 15.6 4.8 5.3 11.3
Provision for income taxes................. 5.0 5.0 1.5 1.6 3.7
Net income................................. 10.8 10.6 3.3 3.7 7.6
</TABLE>
OUTLOOK
Our customers are forecasting an increase in demand for electronic
components in order to meet expected demand for their end use products. The
increase in worldwide demand for passive components has led to stabilized and,
in some cases, increased prices. As reflected in this year's quarterly sales
results, we have significantly increased our production capacity in recent years
through continued investment in plant and equipment. We believe that in addition
to increased worldwide demand for electronic components, there are several other
factors that provide opportunities for continued improvements in profitability,
including (a) the continued decrease in the amount of precious metal used and
the substitution of base metals for precious metals in our manufacture of
multi-layer ceramic capacitors, (b) capacity expansion programs and continuous
improvements in our production processes, (c) cost control measures and (d) the
growth of advanced products and connector products through innovation and
component design in conjunction with our customers.
RESULTS OF OPERATIONS
Nine Months Ended December 31, 1999 Compared to Nine Months Ended December 31,
1998
Net sales in the nine months ended December 31, 1999 increased 22.0% to
$1,131.1 million from $926.9 million in the nine months ended December 31, 1998.
The increase was attributable to growth in both passive components and
connectors. The growth in sales is a result of the expansion of the worldwide
demand for electronic components and our continued investment in plant and
equipment in order to increase production capacity.
Gross profit in the nine months ended December 31, 1999 increased 59.6% to
$209.1 million (18.5% of net sales) from $131.0 million (14.1% of net sales) in
the nine months ended December 31, 1998. The increase in gross profit can be
attributed both to additional sales and improved operating efficiencies. As a
8
<PAGE> 13
result of increased worldwide demand for passive components, sales prices have
stabilized and, in some cases, have increased. The improvement in gross profit
as a percentage of sales can be attributed to the favorable pricing environment
and the impact of improvements in our manufacturing processes and higher
throughput in our factories. Gross profit continues to be negatively impacted by
the rise in the cost of palladium, currently a raw material used in a portion of
the multi-layer ceramic capacitors that we produce. The price we paid for
palladium purchased during the nine months ended December 31, 1999 exceeded the
price we paid for an equivalent amount of palladium purchased during the nine
months ended December 31, 1998 by approximately $18.0 million. The TPC passive
component businesses acquired in June 1998 are not yet profitable, but efforts
to stimulate sales growth and reduce costs are ongoing.
Selling, general and administrative expenses in the nine months ended
December 31, 1999 were $87.5 million (7.7% of net sales) compared with $86.0
million (9.3% of net sales) in the nine months ended December 31, 1998. The
decline in selling, general and administrative expenses, as a percentage of
sales, is a result of higher sales, offset in part by higher research and
development costs.
As a result of the above factors, profit from operations in the nine months
ended December 31, 1999 increased 170.4% to $121.6 million from $44.9 million in
the nine months ended December 31, 1998.
The results for the nine months ended December 31, 1999 include the benefit
of $3.0 million of other income as a result of a settlement for defective
materials from a supplier. The expense related to the use of these materials was
recorded in prior years.
For the reasons set forth above, together with the benefit of higher net
interest income offset in part by foreign currency exchange losses, net income
in the nine months ended December 31, 1999 was $86.1 million (7.6% of net sales)
compared to $34.0 million (3.7% of net sales) in the nine months ended December
31, 1998.
Year Ended March 31, 1999 Compared to Year Ended March 31, 1998
Net sales for the year ended March 31, 1999 decreased 1.7% to $1,245.5
million from $1,267.7 million for the year ended March 31, 1998. Sales for the
year ended March 31, 1999 include approximately $85 million of sales from TPC, a
passive component manufacturing business acquired on June 2, 1998. Exclusive of
the acquisition of TPC, sales declined 8.5%, although global unit sales
increased year over year. The decrease in revenue was attributable to a
combination of factors, including, the negative impact of the Asian economic
crisis on worldwide demand and prices, a softening of demand in the electronic
components industry as customers reduced their level of inventory and suppliers
reduced their lead times and the continued trend toward smaller part sizes, all
of which contributed to lower average selling prices. Partially offsetting these
overall effects was a 6.8% increase in sales of advanced products within the
passive components group and an 8% increase in sales of connector products.
Gross profit as a percentage of net sales for the year ended March 31, 1999
decreased 10.1% to $167.4 million (13.4% of net sales) from $297.4 million
(23.5% of net sales) for the year ended March 31, 1998. As indicated above,
overall sales prices in fiscal 1999 were lower compared to fiscal 1998. Gross
profit was also negatively impacted by the rising cost of palladium, a precious
metal used in the manufacture of ceramic capacitors. Compared to fiscal 1998,
the average market price for palladium during fiscal 1999 increased 152% to $315
per troy ounce. The overall impact of rising palladium prices is estimated to
have reduced gross profit for fiscal 1999 by $16.7 million. Slightly lower
throughput, which negatively impacts cost absorption, reflects soft demand and
the intentional reduction in our inventory levels, also contributed to the
decline in gross profit. Partially offsetting these factors were continued
production efficiencies and improvements in production processes, as well as the
impact of relatively higher sales of better margin advanced and connector
products. Gross profit was also negatively impacted by costs associated with the
integration of the TPC operation into our organization. Cost cutting measures
and organizational changes initiated since the TPC acquisition are ongoing.
9
<PAGE> 14
Selling, general and administrative expenses for the year ended March 31,
1999 were $114.1 million (9.2% of net sales), compared with $110.7 million (8.7%
of net sales) in the year ended March 31, 1998. The increase is primarily
attributable to the integration of the TPC operations and the amortization of
goodwill related to the acquisition.
Research, development and engineering expenditures, which encompass the
personnel and related expenses devoted to developing new products, processes and
technical innovations, were $42 million and $36 million in fiscal 1999 and 1998,
respectively. These costs were incurred as we continued to enhance existing
product lines and develop new products.
As a result of the above factors, profit from operations for the year ended
March 31, 1999, decreased to $53.3 million from $186.7 million for the year
ended March 31, 1998.
For the reasons set forth above and lower interest income on invested cash,
net income in the year ended March 31, 1999 decreased to $41.5 million (3.3% of
net sales) from $134.6 million (10.6% of net sales) for the year ended March 31,
1998.
Year Ended March 31, 1998 Compared to Year Ended March 31, 1997
Net sales for the year ended March 31, 1998 increased 12.6% to $1,267.7
million from $1,126.2 million for the year ended March 31, 1997. The increase
was primarily attributable to the growth in the ceramic and tantalum products,
particularly surface-mount and advanced products. Despite the overall increase
in sales, our results continued to be impacted by several factors including: (a)
the shortening of lead times as customers reduced their level of inventory and
suppliers reduced lead times, (b) a continuation of the trend toward
surface-mount products and smaller part sizes, which traditionally have lower
average selling prices, (c) an overall reduction in selling prices, (d) the
uncertainties surrounding the Asian economic crisis and (e) the strengthening of
the U.S. dollar and certain European currencies, which had a modest dampening
effect on reported U.S. dollar sales.
Gross profit as a percentage of net sales for the year ended March 31, 1998
decreased 0.9% to $297.4 million (23.5% of net sales) from $274.3 million (24.4%
of net sales) for the year ended March 31, 1997. Overall sales prices in the
1998 year were lower compared to the 1997 year. Gross profit was also negatively
impacted by the rising cost of palladium. Continued automation of the
manufacturing processes and higher volumes of throughput in our factories have
helped to reduce manufacturing costs for products sold and enabled us to
maintain strong gross profit levels. As a result of our strategy to manufacture
in the various regions in which we sell products, the strengthening of the U.S.
dollar and certain European currencies reduced the overall cost of manufacturing
when reported in U.S. dollars.
Selling, general and administrative expenses for the year ended March 31,
1998 were $110.7 million (8.7% of net sales), compared with $102.4 million (9.1%
of net sales) in the year ended March 31, 1997. The increase in selling, general
and administrative expenses was due to higher research and development spending,
higher sales commissions and the benefit of adjustments to environmental
remediation accruals in 1997. As a percentage of sales, these expenses declined
due to our stringent cost control measures.
Research, development and engineering expenditures, which encompass the
personnel and related expenses devoted to developing new products, processes and
technical innovations, were $36 million and $33 million in fiscal 1998 and 1997,
respectively.
As a result of the above factors, profit from operations for the year ended
March 31, 1998 increased 8.6% to $186.7 million from $171.9 million for the year
ended March 31, 1997.
For the reasons set forth above, higher interest income on invested cash
and a $3.1 million dividend from a nonmarketable equity investment, net income
in the year ended March 31, 1998 increased 11.0% to $134.6 million (10.6% of net
sales) from $121.3 million (10.8% of net sales) for the year ended March 31,
1997.
10
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity needs arise primarily from working capital requirements,
dividends, capital expenditures and acquisitions. Historically, we have
satisfied our liquidity requirements through internally generated funds. As of
December 31, 1999, we had a current ratio of 2.92 to 1, $234.4 million of cash
and cash equivalents, $917.9 million of stockholders' equity and an
insignificant amount of long-term debt.
Net cash from operating activities was $167.9 million for the year ended
March 31, 1997, $136.8 million for the year ended March 31, 1998, $184.4 million
for the year ended March 31, 1999 and $168.0 million for the nine months ended
December 31, 1999.
Purchases of property and equipment were $93.9 million in fiscal 1997,
$100.4 million in fiscal 1998, $97.7 million in fiscal 1999 and $109.3 million
for the nine months ended December 31, 1999. These expenditures related to
expanding the production capabilities of the passive components and connector
product lines. The carrying value for our equipment reflects the fact that
depreciation expense for machinery and equipment is generally computed using the
accelerated double-declining balance method. We continue to add additional
capacity. We expect to purchase equipment totalling from $130 million to $170
million during each of fiscal 2000 and fiscal 2001.
On June 2, 1998, we purchased the passive component business of TPC for
$74.0 million, including the assumption of debt. Our net cash outlay was $58.0
million.
During fiscal 1998, we invested $5.3 million for a 41% interest in the
research and development company, Electro-Chemical Research Ltd. (ECR). ECR has
developed and patented a technology for high capacity electrical storage
devices. We have committed to make an additional investment of $2.7 million in
May 2000 for an additional 10% interest in ECR.
Although the majority of our funding is internally generated, certain of
our European subsidiaries have from time to time borrowed German deutsche marks,
French francs and euros under various bank agreements. At December 31, 1999,
outstanding balances under such agreements totalled $33.7 million. These
borrowings have been used for working capital requirements and to repay other
outstanding obligations.
In fiscal 1997, 1998 and 1999, dividends of $19.4 million, $21.1 million
and $22.7 million, respectively, were paid to stockholders. To date in fiscal
2000, we have paid dividends of $16.9 million.
In accordance with our stock repurchase program, we are authorized to
purchase 2.2 million shares. We purchased 1,929,100 shares at a cost of $31.7
million during fiscal 1999. The repurchased shares are held as treasury stock
and are used to satisfy stock option exercises.
We have established reserves for our projected share of costs associated
with the remediation of, and compliance with, environmental matters at various
sites. Adjustments to such provisions and related expenditures have not been
material in any of these periods.
Based on our financial condition as of December 31, 1999, we believe that
cash on hand and expected to be generated from operating activities will be
sufficient to satisfy our anticipated financing needs for working capital,
capital expenditures, environmental clean-up costs, research, development and
engineering expenses and any dividends to be paid for the foreseeable future.
YEAR 2000
The Year 2000 issue concerns the inability of information systems to
properly recognize and process date-sensitive information beyond January 1,
2000. AVX determined that it was required to modify or replace some of its
hardware and software so that those systems would properly utilize dates beyond
December 31, 1999.
During the past year, we implemented internal procedures to resolve the
Year 2000 issue that involved four phases: assessment, remediation, testing and
implementation. We completed our assessment of all major systems that could be
affected by the Year 2000 issue. The assessment indicated that most of
11
<PAGE> 16
our significant systems, such as customer order, manufacturing and accounting
systems, could be affected. In response to the assessment, we completed the
remediation phase for all major information technology systems, which included
software reprogramming and replacement. We completed system testing and
implementation of our Year 2000 program before the end of 1999.
Additionally, we canvassed our important raw material and service suppliers
for Year 2000 compliance. Our search did not reveal any supplier problems that
would materially impact our results of operations, liquidity or capital
resources.
The total cost of our Year 2000 project was approximately $5.3 million,
which was funded through operating cash flows.
We have not experienced any significant Year 2000 related system failures
nor, to our knowledge, have any of our suppliers. We intend to monitor and test
our own systems for ongoing Year 2000 compliance; however, we cannot guarantee
that our computer systems or the systems of other companies upon which our
operations rely will not be adversely affected by problems associated with the
Year 2000 issue.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued and amended Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). This statement establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. We will be
required to adopt SFAS No. 133 for the quarter ended June 30, 2001. Currently,
we are evaluating this standard and the impact it will have on our consolidated
financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign Currency
Our European sales, which accounted for approximately 28% of fiscal 1999
revenues, generally are denominated in local currencies while those in North
America and Asia generally are denominated in U.S. dollars. Also, certain
manufacturing and operating costs denominated in local currencies are incurred
in Europe, Asia, Mexico and Latin America. As a result, fluctuations in currency
exchange rates affect our operating results and cash flow. In order to minimize
the effect of movements in currency exchange rates, we periodically enter into
forward exchange contracts to hedge external and intercompany foreign currency
transactions. We do not hold or issue derivative financial instruments for
speculative purposes. Currency exchange gains and losses have been immaterial
during the periods presented.
Assuming a 10% hypothetical adverse change in all foreign currencies, with
the resulting functional currency gains and losses translated into U.S. dollars
at the spot rate, the resulting net loss in fair value of exchange contracts
held would not be material to our results, financial position or cash flows.
Euro
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency, the Euro. We have successfully completed all
the necessary enhancements to our sales order, banking arrangements and
operational procedures to ensure Euro compliance. We are able to process orders,
invoice customers and accept payment in Euros throughout Europe. The
introduction of the Euro has not had any material adverse impact upon us. We
continue to monitor the risk of price erosion that could result from increased
price transparency among countries using the Euro.
12
<PAGE> 17
Precious Metals
We are at risk to fluctuations in prices for commodities used to
manufacture our products, primarily palladium and tantalum.
Palladium, a precious metal used in the manufacture of a portion of our
multi-layer ceramic capacitors, is primarily purchased from various companies in
the form of palladium sponge and ingot. The main areas of mining of palladium
are in Russia and South Africa. Palladium is considered a commodity and is
subject to price volatility and has fluctuated in a range of approximately $120
to $450 per troy ounce during the past three years. We have managed, through the
use of forward purchase agreements and strategic spot buying, to purchase
palladium at a cost below the average market cost for each of the past three
years. We are addressing the volatility in the price of palladium by (i)
adjusting the manufacturing process for the parts made with palladium to reduce
the amount of the precious metal used in each part, and (ii) substituting base
metals, such as nickel, in the production of multi-layer ceramic capacitors. We
have constructed a new 100,000 square foot production facility in Myrtle Beach,
which began production during the first quarter of this fiscal year and is
focusing on nickel based products. Because of robust demand for ceramic parts,
both palladium and nickel based production capacity is currently needed to
satisfy our customers' needs.
Assuming a 10% hypothetical increase in the average cost of palladium
purchased by AVX, gross profit for the year ended March 31, 1999 would have been
negatively impacted by approximately $9.6 million.
Tantalum powder is a principal material used in the manufacture of solid
tantalum capacitors. This product is purchased under annual contracts through
suppliers from various parts of the world at prices that are subject to periodic
adjustment. We are a major consumer of the world's annual tantalum production.
Although we believe that there is currently no problem with the procurement of
tantalum powder and that the tantalum required by us has generally been
available in sufficient quantity to meet requirements, the limited number of
tantalum powder suppliers could lead to higher prices.
Assuming a 10% hypothetical increase in the average cost of tantalum
purchased by AVX, gross profit for the year ended March 31, 1999 would have been
negatively impacted by approximately $6.6 million.
Interest Rate Exposure
Interest rate exposure is centrally managed by offsetting surplus cash and
deposits against borrowings on a currency-by-currency basis. We maintain an
insignificant amount of foreign currency denominated long-term and short-term
debt. The term of these borrowings range from 3 months to 36 months, with both
fixed and variable interest rates. A 10% adverse movement in interest rates
would not have a material impact on our operating results, financial position or
cash flows.
13
<PAGE> 18
BUSINESS
AVX is a leading worldwide manufacturer and supplier of a broad line of
passive electronic components and related products. Virtually all types of
electronic devices use our passive component products to store, filter or
regulate electric energy.
Our passive electronic component products include ceramic and tantalum
capacitors, film capacitors, ferrites, varistors and non-linear resistors
manufactured in our facilities throughout the world and passive components
manufactured by Kyocera. We also manufacture and sell electronic connectors and
distribute and sell certain electronic connectors manufactured by Kyocera.
Our customers are multi-national original equipment manufacturers, or OEMs,
and contract equipment manufacturers, or CEMs (also referred to as electronic
manufacturing service providers (EMSs)). We market our products through our own
direct sales force, independent manufacturers' representatives or electronic
component distributors, based upon market characteristics and demands. We
coordinate our sales, marketing and manufacturing organization by strategic
customer account and globally by region.
We sell our products to customers in a broad array of industries, such as
telecommunications, information technology hardware, automotive electronics,
medical devices and instrumentation, industrial instrumentation, military and
aerospace electronic systems and consumer electronics. We estimate that, in
fiscal 1999, approximately 65% of our net sales were to the telecommunications
and information technology hardware industries.
Our principal strategic advantages include:
Providing Superior Customer Service. We believe that the breadth and
quality of our product line and our ability to respond to our customers'
design and delivery requirements in a rapid fashion make us the provider of
choice for our multi-national customer base. We differentiate ourselves by
providing our customers with a substantially complete passive component
solution. We market six families of products: ceramic products, tantalum
products, advanced products, other passive products, connector devices and
Kyocera resale products. This broad array allows our OEM and CEM (EMS)
customers to streamline their purchasing and supply organization.
Maintaining the Lowest Cost, Highest Quality Manufacturing
Organization. We are the only U.S. passive component manufacturer to
manufacture its own ceramic raw materials, which we believe provides a
significant cost and flexibility advantage over our competitors. We are
also investing heavily in the production of base metal ceramic capacitors
in order to reduce our dependence on palladium. We have invested $292
million over the past three fiscal years and an additional $109 million in
the first nine months of the current fiscal year to upgrade and enhance our
manufacturing capabilities. In order to continually reduce the cost of
production, since 1976, our strategy has included the transfer of more
labor intensive manufacturing processes to such areas as El Salvador,
Northern Ireland, Mexico and the Czech Republic.
Globally Coordinating our Marketing and Manufacturing Facilities. Our
28 manufacturing facilities are located in 13 different countries around
the world. As our customers continue to grow and increase their global
production locations, we are ideally situated to meet their supply
requirements. We are also committed to the continuous evaluation of the
potential in new manufacturing locations based on customers' demands and
business opportunities. We assign a global customer account executive to
cover each of our major multi-national customers.
Creating Innovative and Unique Products and Manufacturing
Processes. Our four principal research locations, in Myrtle Beach, South
Carolina, Northern Ireland, England and Israel, participated in the
introduction of approximately 40 new products in the past 12 months. In the
1999 EBN EE Passives Survey, AVX was named as the technology leader by 21%
of the respondents, with our nearest competitor named by only 13% of the
respondents. Our scientists are working continually with our customers to
develop products that will assist them in achieving their design and
production
14
<PAGE> 19
goals. Also, our engineers continue to improve the manufacturing processes
for our existing products in order to improve reliability and decrease the
cost of production.
PRODUCTS
We offer an extensive line of passive components designed to provide our
customers with "one-stop shopping" for substantially all of their passive
component needs. Passive components represented approximately 91% of our net
sales and connectors accounted for approximately 9% of our net sales in fiscal
1999.
Passive Components
We manufacture a full line of multi-layered ceramic and solid tantalum
capacitors in many different sizes and configurations. Our strategic focus on
the growing use of ceramic and tantalum capacitors is reflected in our
investment during the past three fiscal years of approximately $264.4 million
and an additional $96.7 million during the nine months ended December 31, 1999
primarily to increase our capacitor manufacturing capacity. We believe that
sales of ceramic and tantalum capacitors will continue to be among the most
rapidly growing in the worldwide capacitor market because technological advances
have been constantly expanding the number and type of applications for these
products.
Tantalum and ceramic capacitors are commonly used in conjunction with
integrated circuits and are best suited for applications requiring low to medium
capacitance values. Capacitance is the measure of the capacitor's ability to
store electric energy. Generally, ceramic capacitors are more cost-effective at
lower capacitance values, and tantalum capacitors are more cost-effective at
medium capacitance values.
We produce two basic versions of ceramic and tantalum capacitors:
surface-mount and leaded. Surface-mount capacitors are attached directly to a
circuit board. Leaded capacitors are attached to a circuit board using lead
wires. In recent years there has been significant industry-wide growth in the
use of surface-mount capacitors, and industry analysts have predicted that this
will cause the market for leaded capacitors to decline. In certain applications,
however, leaded capacitors continue to be the component of choice. The net sales
of surface-mount and leaded ceramic and tantalum capacitors accounted for
approximately 53% of our passive component net sales in fiscal 1999.
We also offer a line of advanced passive component products to fill the
special needs of our customers. Our advanced products engineers work with some
customers' in-house technical staffs to design, produce and manufacture special
products to meet the specifications of particular applications. The manufacture
of special products permits us, through our research and development activities,
to make technological advances, provide customers with design solutions to fit
their needs, gain a marketing inroad with the customer with respect to our
complete product line and, in some cases, develop products that can be sold to
additional customers in the future. Our advanced products division presently has
significant ongoing projects with a variety of key customers. Sales of advanced
products accounted for approximately 19% of passive component net sales in
fiscal 1999.
With the acquisition of TPC, we expanded our family of passive components
to include film capacitors, ferrites, high-energy/voltage power capacitors,
varistors and non-linear resistors. These products share the same distribution
and market channels as our historical product base and further enhance our
product offerings. The sale of TPC products accounted for approximately 8% of
passive component net sales in fiscal 1999.
We have a non-exclusive license to distribute and sell Kyocera electronic
component products everywhere in the world except Japan. Our distribution and
sale of certain Kyocera products broaden our range of products and further
facilitate our ability to offer "one-stop shopping" for our customers'
electronic components needs. The Kyocera electronic components we sell include
ceramic capacitors, hybrids, oscillators, saw devices, resistor networks,
trimmers, chip resistors, ceramic filters, resonators and piezo acoustic
devices. Sales of these Kyocera products accounted for approximately 20% of
passive component net sales in fiscal 1999.
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<PAGE> 20
Connectors
We also manufacture high-quality electronic connectors and inter-connect
systems for use in the telecommunications, information technology hardware,
automotive electronics, medical device, military and aerospace industries. Our
product lines include a variety of industry-standard connectors as well as
products designed specifically for our customers' unique applications. We
produce fine pitch, or small centerline, connectors, many of which have been
selected by leading OEMs for applications in cellular phones, pagers, printers
and notebook computers. We have also developed a value-added business in flat
ribbon cable assembly and in backpanel and card edge assemblies. We also sell
certain connectors manufactured by Kyocera.
MARKETING, SALES AND DISTRIBUTION
We place a high priority on solving customers' electronic component
problems and responding to their needs. We frequently form teams consisting of
marketing, research and development and manufacturing personnel to work with
customers to design and manufacture products to suit their specific
requirements.
Our products are sold primarily to manufacturers and, to a much lesser
extent, to United States and foreign government agencies. We also have qualified
products under various military specifications, approved and monitored by the
United States Defense Electronic Supply Center, and under certain foreign
military specifications.
Approximately 42%, 28% and 30% of our net sales for fiscal 1999 were to
customers in North America, Europe, and Asia, respectively. Financial
information relating to geographic operations is set forth in our consolidated
financial statements in this prospectus. Our products are marketed worldwide by
our own sales personnel, as well as through independent manufacturers'
representatives who are compensated solely on a commission basis and independent
electronic component distributors. We have regional sales personnel in strategic
locations to provide technical and sales support for independent manufacturers'
representatives and independent electronic component distributors. We believe
that this combination of distribution channels provides a high level of market
penetration and efficient coverage of our customers on a cost-effective basis.
Our OEM customers include Motorola Inc., Lucent Technologies, L.M. Ericsson
Telefonaktiebolaget, OY Nokia AB., Northern Telecom, Sagen SA, Samsung Co.
Limited and Siemens AG in the telecommunications industry; International
Business Machines Corporation, Compaq Computer Corp., Seagate Technology
International, Apple Computer, Inc., 3Com Corporation, Acer Incorporated and
Sony Corporation in the information technology hardware industry; Robert Bosch
GmbH, Siemens AG, General Motors Corp., Mannesmann VDO AG, Valco SA and Magneti
Marelli S.p.A. in the automotive industry; and Medtronics, Inc., St. Jude
Medical and Guidant Corporation in the medical industry. Sales are also made to
large CEM customers, such as Solectron Corporation, Celestica, Inc., Jabil
Circuit, Inc. and SCI Systems, and independent electronic component
distributors, such as Arrow, Avnet, Future Electronics and Kent Electronics. Our
largest customers vary from year to year, and no customer has a long-term
commitment to purchase our products. No one customer has accounted for more than
10% of net sales for the past three fiscal years.
We had a backlog of orders of approximately $456 million at December 31,
1999, $228 million at March 31, 1999, $196 million at March 31, 1998 and $240
million at March 31, 1997. Orders may be canceled by a customer at any time,
subject to cancellation charges under certain circumstances. Backlog fluctuates
year to year due in part to the changes in customer order patterns and the
utilization of capacity in the industry. The backlog outstanding at any time is
not necessarily indicative of the level of business to be expected in any
ensuing period since certain orders are placed and delivered within the same
period.
RESEARCH, DEVELOPMENT AND ENGINEERING
Our emphasis on research and development is reflected by the fact that most
of our manufactured products and manufacturing processes have been designed and
developed by our own engineers and
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<PAGE> 21
scientists. Our 60,000 square-foot facility in Myrtle Beach, South Carolina is
dedicated entirely to pure research and development, and provides centralized
coordination of our global research and development efforts. We also maintain
significant research and development staffs at our facilities in Northern
Ireland, Israel and England.
Our research, development and engineering effort places a priority on the
design and development of innovative products and manufacturing processes and
engineering advances in existing product lines and manufacturing operations.
Other areas of emphasis include material synthesis and the integration of
passive components for applications requiring reduced size and lower
manufacturing costs associated with board assembly. Research, development and
engineering expenditures were approximately $33 million, $36 million and $42
million during fiscal 1997, 1998 and 1999, respectively.
We own United States patents as well as corresponding patents in various
other countries, and also have patent applications pending, although patents are
not in the aggregate material to the successful operation of our business.
RAW MATERIALS
Although most materials incorporated in our products are available from a
number of sources, certain materials (particularly palladium and tantalum) are
available only from a relatively limited number of suppliers.
Palladium, a principal raw material used in the manufacture of ceramic
capacitors, is primarily purchased from various companies in the form of
palladium sponge and ingot. The main areas of mining of palladium are in Russia
and South Africa. Palladium is considered a commodity and is subject to price
volatility that has fluctuated in a range of approximately $120 to $450 per troy
ounce during the last three years. We are addressing the volatility in the price
of palladium by (i) adjusting the manufacturing process for the parts made with
palladium to reduce the amount of the precious metal used in each part, and (ii)
substituting base metals, such as nickel, in the production of multi-layer
ceramic capacitors. We have constructed a new 100,000 square foot production
facility in Myrtle Beach, which began production during the first quarter of
this fiscal year and is focusing on nickel based products. Because of robust
demand for ceramic parts, both palladium and nickel based production capacity is
currently needed to satisfy our customers' needs.
Tantalum powder is a principal material used in the manufacture of tantalum
capacitor products. This product is purchased under annual contracts with
suppliers from various parts of the world at prices that are subject to periodic
adjustment. We are a major consumer of the world's annual tantalum production.
We believe that there is currently no problem with the procurement of tantalum
powder because the tantalum required to produce our products has generally been
available in sufficient quantity. The limited number of tantalum powder
suppliers could, however, lead to higher prices.
AVX internally develops and produces a majority of the ceramic raw
materials used in its production processes and is expanding its ceramic
production operations in order to meet increased demand. We are the only United
States capacitor manufacturer that manufactures its own ceramic raw materials.
COMPETITION
We have encountered strong competition in our various product lines from
both domestic and foreign manufacturers. Competitive factors in the markets
include product quality and reliability, breadth of product line, customer
service, technological innovation, timely delivery and price. We believe we
compete favorably on the basis of each of these factors. The breadth of our
product offering enables us to strengthen our market position by providing
customers with one of the broadest selections of passive electronic components
and connector products available from any one source. Our major competitors are
Murata Manufacturing Company Ltd, TDK Corporation, KEMET Corporation, NEC
Corporation and Vishay Intertechnology, Inc. Our major competitors for certain
electronic connector products are AMP Incorporated, Molex Incorporated and
Amphenol Corporation.
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<PAGE> 22
EMPLOYEES
As of December 31, 1999, we employed approximately 17,000 full time
employees. Approximately 3,800 of these employees are employed in the United
States. Of the employees located in the United States, approximately 1,700 are
covered by collective-bargaining arrangements. In addition, some foreign
employees are members of trade and government-affiliated unions.
LEGAL PROCEEDINGS
We are a party to various legal proceedings and administrative actions, all
of which are of an ordinary or routine nature incidental to our operations.
Although it is difficult to predict the outcome of any legal proceeding, in the
opinion of management, these proceedings and actions should not, individually or
in the aggregate, have a material adverse effect on our financial condition,
results of operations or cash flows.
ENVIRONMENTAL MATTERS
We are subject to federal, state and local laws and regulations concerning
the environment in the United States and to the environmental laws and
regulations of the other countries in which we have manufacturing facilities.
Based on our periodic review of the operating policies and practices at all of
our facilities, we believe that our operations currently comply, in all material
respects, with all of these laws and regulations.
We have been identified by the United States Environmental Protection
Agency ("EPA"), state governmental agencies or other private parties as a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or equivalent state or local
laws for clean-up and response costs associated with thirteen sites at which
remediation is required. Because CERCLA has been construed to authorize joint
and several liability, the EPA could seek to recover all clean-up costs from any
one of the PRPs at a site despite the involvement of other PRPs. At all but one
site, financially responsible PRPs other than AVX also are, or have been,
involved in site investigation and clean-up activities. We therefore believe
that any liability resulting from these sites will be apportioned between AVX
and other PRPs.
To resolve our liability at each of the sites at which we have been named a
PRP, we have entered into various administrative orders and consent decrees with
federal and state regulatory agencies governing the timing and nature of
investigation and remediation. We have paid, or reserved for, all amounts
required under the terms of these orders and decrees corresponding to our
apportioned share of the liabilities. As is customary, the orders and decrees at
sites where the PRPs are not themselves implementing the chosen remedy contain
provisions allowing the EPA to reopen the agreement and seek additional amounts
from settling PRPs in the event that certain contingencies occur, such as the
discovery of significant new information about site conditions during clean-up
or substantial cost overruns for the chosen remedy. The existence of these
reopener provisions, combined with the difficulties of reliably estimating
clean-up costs and the joint and several nature of CERCLA liability, makes it
difficult to predict the ultimate liability at any site with certainty. While no
assurance can be given, we do not believe that any additional costs to be
incurred by AVX at any of the sites will have a material adverse effect on our
financial condition, results of operations or cash flows.
In addition, we do not believe that any investigation or clean-up that may
be required at any other locations will have a material adverse effect on our
financial condition, results of operations or cash flows.
MANUFACTURING OPERATIONS
We conduct manufacturing operations throughout the world. All of our
operations around the world are certified to the ISO 9000 international quality
control standards. ISO 9000 is a comprehensive set of quality program standards
developed by the International Organization for Standardization. The majority of
our facilities have also been qualified under a new set of stringent QS 9000
quality standards developed by the U.S. automotive industry.
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<PAGE> 23
Virtually all manufacturing, research and development and warehousing
facilities could at any time be involved in the manufacturing, sale or
distribution of passive components (PC) and connector products (CP). The
following is a list of our facilities, their square footage, whether they are
leased or owned and a description of their use.
<TABLE>
<CAPTION>
SQUARE
LOCATION FOOTAGE TYPE OF INTEREST DESCRIPTION OF USE
- -------- ------- ---------------- ------------------
<S> <C> <C> <C>
UNITED STATES
Myrtle Beach, SC.................. 546,098 Owned Manufacturing/Research/
Headquarters -- PC -- CP
Myrtle Beach, SC.................. 69,000 Owned Office/Warehouse -- PC, CP
Conway, SC........................ 70,408 Owned Manufacturing -- PC
Biddeford, ME..................... 72,000 Owned Manufacturing -- PC
Colorado Springs, CO.............. 15,000 Owned Manufacturing -- PC
El Paso, TX....................... 24,460 Leased Warehouse -- PC -- CP
New Orleans, LA................... 18,840 Leased Warehouse -- PC
Olean, NY......................... 107,400 Owned Manufacturing -- PC
Raleigh, NC....................... 206,000 Owned Manufacturing/Warehouse -- PC -- CP
Sun Valley, CA.................... 25,000 Leased Manufacturing -- PC
Vancouver, WA..................... 87,048 Leased Manufacturing -- PC
Vancouver, WA..................... 10,800 Leased Warehouse/Office -- PC
OUTSIDE THE UNITED STATES
Beaune, France.................... 235,210 Leased Manufacturing -- PC
Betzdorf, Germany................. 101,671 Owned Manufacturing -- CP
Biggleswade, England.............. 10,000 Leased Manufacturing -- CP
Chihuahua, Mexico................. 393,952 Owned Manufacturing -- PC
Coleraine, N. Ireland............. 167,000 Owned Manufacturing/Research -- PC
Guadalajara, Mexico............... 20,000 Owned Warehouse -- PC -- CP
Hong Kong......................... 30,257 Owned Warehouse -- PC -- CP
Jerusalem, Israel................. 98,200 Leased Manufacturing/Research -- PC
Juarez, Mexico.................... 84,000 Owned Manufacturing -- PC -- CP
Lanskroun, Czech Republic......... 197,593 Leased Manufacturing -- PC
Lanskroun, Czech Republic......... 201,586 Owned Manufacturing -- PC
Manaus, Brazil.................... 78,500 Owned Manufacturing -- PC -- CP
Uherske Hradiste, Czech 148,910 Leased Manufacturing -- PC -- CP
Republic........................
Larne, N. Ireland................. 120,000 Owned Manufacturing/Warehouse PC -- CP
Newmarket, England................ 52,000 Leased Manufacturing -- CP
Penang, Malaysia.................. 140,825 Owned Manufacturing -- PC
Paignton, England................. 154,909 Owned Manufacturing/Research -- PC
Saint-Apollinaire, France......... 321,535 Leased Manufacturing -- PC
Seurre, France.................... 134,333 Leased Manufacturing -- PC
San Salvador, El Salvador......... 232,981 Owned Manufacturing -- PC
Singapore......................... 49,500 Leased Manufacturing/Warehouse -- PC -- CP
Taipei, Taiwan.................... 52,500 Owned Manufacturing -- PC
</TABLE>
In addition to the foregoing, we own and lease a number of sales offices
throughout the world.
Management believes that all of our property, plant and equipment is in
good operating condition. We are constantly upgrading our equipment and adding
capacity through greater use of automation. Our capital expenditures for plant
and equipment were $100.4 million in fiscal 1998, $97.7 million for fiscal 1999
and $109.3 million during the nine months ended December 31, 1999.
In order to meet the expectations of our customers during this current
period of robust demand, we plan to continue to add capacity during the balance
of fiscal year 2000 and in fiscal year 2001.
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<PAGE> 24
MANAGEMENT
The following table provides certain information regarding our executive
officers as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Benedict P. Rosen.......................... 64 Chief Executive Officer
John S. Gilbertson......................... 57 President and Chief Operating Officer
Donald B. Christiansen..................... 60 Senior Vice President of Finance, Chief
Financial Officer and Treasurer
C. Marshall Jackson........................ 51 Senior Vice President of Sales and
Marketing
Ernie Chilton.............................. 55 Senior Vice President of Tantalum
S. M. Chan................................. 43 Vice President of Sales and Marketing -Asia
Allan Cole................................. 57 Vice President of Sales
Alan Gordon................................ 50 Vice President of Sales and
Marketing -- Europe
John L. Mann............................... 57 Vice President of Quality
Roberto E. Salazar......................... 45 Vice President of Latin America Operations
Carl L. Eggerding.......................... 50 Vice President of Advanced Products and
Technology Center
Kurt P. Cummings........................... 44 Corporate Controller and Secretary
</TABLE>
BENEDICT P. ROSEN. Chairman of the Board and Chief Executive Officer since
July 1997. Chief Executive Officer and President of AVX from April 1993 until
July 1997 and a member of the Board since January 1990. Executive Vice President
from February 1985 to March 1993 and employed by AVX since 1972. Senior Managing
and Representative Director of Kyocera since June 1995 and previously served as
a Managing Director of Kyocera from 1992 to June 1995. Director of
Nitzanim-AVX/Kyocera-Venture Capital Fund Ltd., Aerovox Corporation and the
Nordson Corporation.
JOHN S. GILBERTSON. President since July 1997. Chief Operating Officer of
AVX since April 1994, and a member of the Board since January 1990. Executive
Vice President from April 1992 to July 1997, Senior Vice President from
September 1990 to March 1992 and employed by AVX since 1981. Director of Kyocera
since June 1995.
DONALD B. CHRISTIANSEN. Senior Vice President of Finance, Chief Financial
Officer and Treasurer of AVX since July 1997 and a member of the Board since
April 1992. Vice President of Finance, Chief Financial Officer and Treasurer
from April 1994 to July 1997 and Chief Financial Officer from March 1992 to
April 1994.
C. MARSHALL JACKSON. Senior Vice President of Sales and Marketing since
April 1994. From January 1990 until March 1994, Mr. Jackson was Vice President
of AVX and has been employed by AVX since 1969.
ERNIE CHILTON. Senior Vice President-Tantalum since April 1994. From
January 1990 until February 1993, Mr. Chilton served as Vice President of AVX.
Mr. Chilton has been employed by AVX since 1979.
S. M. CHAN. Vice President of Sales and Marketing Asia since April 1994.
From April 1992 until March 1994, Mr. Chan served as the Director of Marketing
of AVX. Mr. Chan has been employed by AVX since October 1990.
ALLAN COLE. Vice President of Sales of the Company since May 1987. Mr.
Cole has been employed by AVX since 1977 serving in several sales management
positions, both domestic and international.
ALAN GORDON. Vice President of European Sales and Marketing of Europe
since February 1993. From January 1991 until February 1993, Mr. Gordon served as
the Director of Marketing of AVX. Mr. Gordon has been employed by AVX since
1991.
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<PAGE> 25
JOHN L. MANN. Vice President of Quality of AVX since May 1986. From March
1984 until May 1986, Mr. Mann served as the Corporate Director of Quality.
CARL L. EGGERDING. Vice President of Advanced Products and Technology
Center since July 1997. Employed by AVX since April 1996. Prior to April 1996,
employed by IBM as Director of Development for Organic Packaging Technology.
ROBERTO E. SALAZAR. Vice President of Latin America Operations since July
1997. Served as General Manager of El Salvador Operations from 1980 until 1993.
Division President for El Salvador and later Chihuahua Mexico operations.
Business manager for the radial conformed coated devices with worldwide
responsibility since 1986.
KURT P. CUMMINGS. Secretary of the Company since July 1997. Corporate
Controller of the Company since June 1992. Prior to June 1992, Partner with
Deloitte & Touche LLP.
SELLING STOCKHOLDER
Kyocera is the majority stockholder of AVX. The address of Kyocera is 6
Takeda Tobadono-cho, Fushimi-ku, Kyoto 612-8501, Japan. As of the date of this
prospectus, Kyocera owns beneficially and of record 66,150,000 shares of common
stock, representing approximately 76% of our outstanding shares. After the
offering, Kyocera will own beneficially and of record 60,900,000 shares of
common stock, representing approximately 70% of AVX's outstanding shares (or
60,150,000 shares, representing approximately 69% of our outstanding stock, if
the underwriters' over-allotment option is exercised in full). Kyocera will,
therefore, be able, acting alone, to elect AVX's entire board of directors and
to control the vote on matters submitted to a vote of our stockholders,
including extraordinary corporate transactions.
RELATIONSHIP WITH KYOCERA AND RELATED TRANSACTIONS
From January 1990 through August 15, 1995, AVX was wholly-owned by Kyocera.
On August 15, 1995, Kyocera sold 22.9%, or 19,650,000 shares of AVX's common
stock, and AVX sold an additional 2,200,000 common shares, in a public offering.
Since January 1990, Kyocera and AVX have engaged in a significant number
and variety of related party transactions, including, without limitation, the
transactions referred to in the Consolidated Financial Statements of AVX set
forth elsewhere in this prospectus. AVX also has established several ongoing
arrangements with Kyocera and has executed several agreements, the more
significant of which are described below. Except for the Buzzer Assembly
Agreement, each of the agreements described below contains provisions requiring
that the terms of any transaction under such agreement be equivalent to that
which an independent unrelated party would agree at arm's-length and is subject
to the approval of the Special Advisory Committee of the AVX Board of Directors.
The Special Advisory Committee is comprised of the independent directors of AVX
and is required to review and approve such agreements and any other significant
transactions between AVX and Kyocera not covered by such agreements.
Products Supply and Distribution Agreement. Pursuant to the Products Supply
and Distribution Agreement (the "Distribution Agreement") (i) AVX will act as
the non-exclusive distributor of certain Kyocera-manufactured products in
territories outside of Japan, and (ii) Kyocera will act as the non-exclusive
distributor of certain AVX-manufactured products within Japan. The Distribution
Agreement has a term of one year, with automatic one-year renewals, subject to
the right of termination by either party at the end of the then current term
upon at least three months prior written notice.
Disclosure and Option to License Agreement. Pursuant to the Disclosure and
Option to License Agreement (the "License Agreement"), AVX and Kyocera agree to
exchange confidential information relating to the development and manufacture of
multi-layered ceramic capacitors and various other ceramic products. The
expiration date of the License Agreement is March 31, 2005.
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<PAGE> 26
Materials Supply Agreement. Pursuant to the Materials Supply Agreement (the
"Supply Agreement"), AVX and Kyocera will from time to time supply the other
party with certain raw and semi-processed materials used in the manufacture of
ceramic capacitors and other ceramic products. The Supply Agreement will expire
on March 31, 2000.
Buzzer Assembly Agreement. Pursuant to the Buzzer Assembly Agreement (the
"Buzzer Agreement"), AVX assembles certain electronic components for Kyocera in
AVX's Juarez, Mexico facility. Kyocera pays AVX a fixed cost mutually agreed
upon by the parties for each component assembled plus a profit margin. The
Buzzer Agreement will terminate on March 31, 2000, with automatic one-year
renewals, subject to the right of either party to terminate upon six months
written notice.
Machinery and Equipment Purchase Agreement. Pursuant to the Machinery and
Equipment Purchase Agreement (the "Machinery Purchase Agreement"), AVX and
Kyocera will from time to time design and manufacture for the other party
certain equipment and machinery of a proprietary and confidential nature used in
the manufacture of capacitors and other electrical components. The agreement
will terminate on March 31, 2000.
AVX and Kyocera are currently negotiating extensions of the Supply
Agreement, Buzzer Agreement and Machinery Purchase Agreement, each of which is
expected to be finalized and executed prior to March 31, 2000. We do not expect
these extensions to materially modify prior arrangements between the two
companies.
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<PAGE> 27
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of AVX consists of 300,000,000 shares of
common stock and 20,000,000 shares of preferred stock. Both before and after
giving effect to the sale of the 5,250,000 shares of common stock offered by
Kyocera in this offering, there are 87,127,250 shares of common stock
outstanding (excluding 746,075 shares of common stock issuable upon exercise of
options outstanding and 449,650 shares available for grant as of December 31,
1999 under AVX's stock option plans). No shares of preferred stock are
outstanding.
COMMON STOCK
The holders of shares of common stock are entitled to vote at all meetings
of stockholders on the basis of one vote per share and receive dividends if, as
and when declared by the board of directors, and participate ratably in any
distribution of property or assets on the liquidation, winding up or other
dissolution of AVX.
The holders of our common stock are not entitled to preemptive,
subscription or conversion rights, and there are no redemption or sinking fund
provisions applicable to the common stock. The common stock does not have
cumulative voting rights. The common stock currently outstanding is validly
issued, fully paid and non-assessable.
PREFERRED STOCK
Our board of directors, without further approval of the stockholders, is
vested with broad authority with respect to the preferred stock to establish and
designate series, fix the number of shares to be included in each series,
provide for a sinking fund for the purchase or redemption of shares or a
purchase fund for the purchase of shares of such series, and determine the
relative rights, preferences and limitations of each series, including but not
limited to the dividend and voting rights of the preferred stock and the
preferential amounts payable to the holders of preferred stock on liquidation.
The board of directors will also determine whether the preferred stock will be
convertible into other securities of the company, including common stock.
Accordingly, the issuance of preferred stock, while promoting flexibility in
connection with possible acquisitions and other corporate purposes, could
adversely affect the voting rights of the holders of, or the market price of,
common stock and, under certain circumstances, make it more difficult for a
third party to gain control of AVX. The holders of preferred stock also have the
right to vote separately as a class on any proposal involving fundamental
changes in the rights of holders of our preferred stock pursuant to Delaware
law.
ANTI-TAKEOVER PROVISIONS
Certain Provisions of the Certificate and By-laws
AVX's certificate and by-laws contain certain provisions that may delay,
defer or prevent a change in control and make removal of management more
difficult. These provisions are intended to enhance the likelihood of continuity
and stability in the composition of the board of directors and in the policies
formulated by the board of directors and to discourage certain types of
transactions that may involve an actual or threatened change of control. The
provisions also are intended to discourage certain tactics that may be used in
proxy fights.
The certificate provides that members of the board of directors may be
removed only for cause and only by the affirmative vote of the holders of 80% or
more of the voting power of the then outstanding stock of AVX.
The by-laws establish advance notice procedures with regard to stockholder
proposals. These procedures provide that notice of stockholder proposals at any
annual meeting of stockholders must generally be received in writing by the
Corporate Secretary not less than 60 days nor more than 90 days prior to the
meeting provided, that, in the event that less than 70 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholders must be received
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<PAGE> 28
within 10 days after notice of the meeting was mailed or publicized in order to
be timely. We may reject a stockholder proposal that is not made in accordance
with these procedures. We may also reject a stockholder proposal that does not,
as required by the by-laws, contain certain information concerning the matters
to be brought before the meeting or the stockholder submitting the proposal.
Business transacted at any special meeting of stockholders is limited to the
purposes stated in the notice of such special meeting.
The foregoing provisions, together with the ability of the board of
directors to issue preferred stock without further stockholder action, could
delay or frustrate the removal of incumbent directors or a change in control of
AVX even if such removal or change would be beneficial, in the short term, to
our stockholders. The provisions could also discourage or make more difficult a
merger, tender offer or proxy contest even if such event would be favorable to
the interests of stockholders.
Delaware Anti-takeover Provisions
Under Section 203 of the Delaware law, certain "business combinations"
between a Delaware corporation, the stock of which generally is publicly traded
or held of record by more than 2,000 stockholders, and an "interested
stockholder" are prohibited for a three-year period following the date that such
stockholder became an interested stockholder, unless (i) the corporation has
elected in its certificate of incorporation not to be governed by Section 203 of
the Delaware law (AVX has not made such an election), (ii) the business
combination was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan), or (iv) the business combination was approved by the board of
directors of the corporation and ratified and authorized at an annual or special
meeting of stockholders (not by written consent) by 66 2/3% of the outstanding
voting stock which the interested stockholder did not own. The three-year
prohibition also does not apply to business combinations proposed by an
interested stockholder following the announcement or notification of
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the assets
or stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder or group who
becomes the beneficial owner of 15% or more of a Delaware corporation's voting
stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation provides that no director of AVX will be
personally liable to the company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware law as
currently in effect or as the same may hereafter be amended. Section 102(b)(7)
of the Delaware law currently does not permit provisions that eliminate or limit
the liability of a director (i) for breach of the director's duty of loyalty to
the company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or purchases
or (iv) for any transaction from which the director derived an improper personal
benefit. The effect of these provisions will be to eliminate the rights of AVX
and its stockholders (through stockholders' derivative suits on behalf of AVX)
to recover monetary damages against any director for breach of fiduciary duty as
a director (including breaches resulting from negligent or grossly negligent
behavior) except for the situations described in clauses (i)-(iv) of the
preceding sentence. These provisions will not affect the availability of
injunctive relief for breach of fiduciary duty or alter the liability of
directors under federal securities laws.
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<PAGE> 29
Our by-laws provide that AVX will indemnify its directors, officers and
certain employees and agents to the maximum extent authorized by the Delaware
law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Both before and after giving effect to the offering, AVX will have
outstanding 87,127,250 shares of common stock (excluding 746,075 shares of
common stock issuable upon exercise of options outstanding and 449,650 shares
available for grant as of December 31, 1999 under AVX's stock option plans). The
shares being sold by Kyocera pursuant to this prospectus will be freely
tradeable without restriction under the Securities Act unless purchased by
"affiliates" of AVX.
Immediately following completion of the offering, the shares of common
stock owned by Kyocera cannot be sold except pursuant to an exemption under the
Securities Act. These shares may not be sold unless they are registered under
the Securities Act or unless an exemption from registration, such as the
exemptions provided by Rule 144 under the Securities Act, is available.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of AVX, who has
beneficially owned restricted shares for at least one year, will be entitled to
sell in any three-month period a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of common stock and (ii) the
average weekly trading volume of the common stock on the New York Stock Exchange
during the four calendar weeks immediately preceding the date on which notice of
the sale is filed with the SEC. Sales pursuant to Rule 144 are also subject to
certain other requirements relating to manner of sale, notice and availability
of current public information about AVX. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of AVX at any time
during the three months immediately preceding the sale is entitled to sell
restricted shares pursuant to Rule 144(k) without regard to the limitations
described above, provided that two years have expired since the later of the
date on which such restricted shares were acquired from AVX or the date they
were acquired from an affiliate of AVX.
25
<PAGE> 30
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated and Salomon
Smith Barney Inc. are acting as representatives of each of the underwriters
named below. Subject to the terms and conditions set forth in a purchase
agreement among us, Kyocera and the underwriters, Kyocera has agreed to sell to
the underwriters, and each of the underwriters has agreed to purchase from
Kyocera, the number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Morgan Stanley & Co. Incorporated...........................
Salomon Smith Barney Inc....................................
------
Total..........................................
======
</TABLE>
The several underwriters have agreed to purchase all of the shares of
common stock being sold under the purchase agreement if any of these shares are
purchased. If an underwriter defaults, the purchase agreement provides that the
purchase commitments of the non-defaulting underwriters may be increased or the
purchase agreement may be terminated.
We and Kyocera have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the underwriters may be required to make in respect of those
liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares and other conditions
contained in the purchase agreement, such as the receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify this offer and to reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The representatives have advised us that the underwriters propose initially
to offer the shares of common stock to the public at the public offering price
set forth on the cover page of this prospectus and to dealers at that price less
a concession not in excess of $ per share. The underwriters may allow, and
the dealers may reallow, a discount not in excess of $ per share to other
dealers. After the offering, the public offering price, concession and discount
may be changed.
The following table shows the per share and total public offering price,
underwriting discount and the proceeds before expenses to Kyocera. This
information is presented assuming either no exercise or full exercise by the
underwriters of their over-allotment option.
<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
--------- ------- ------
<S> <C> <C> <C>
Public offering price....................................... $ $ $
Underwriting discount....................................... $ $ $
Proceeds, before expenses, to Kyocera....................... $ $ $
</TABLE>
The expenses of this offering, not including the underwriting discount, are
estimated at $ and are initially payable by AVX. Kyocera will reimburse
AVX for such expenses.
26
<PAGE> 31
OVER-ALLOTMENT OPTION
Kyocera has granted an option to the underwriters to purchase up to 750,000
additional shares at the public offering price, less the underwriting discount.
The underwriters may exercise this option for 30 days from the date of this
prospectus solely to cover any over-allotments. If the underwriters exercise
this option, each will be obligated, subject to conditions contained in the
purchase agreement, to purchase a number of additional shares proportionate to
that underwriter's initial amount reflected in the table above.
NO SALES OF SIMILAR SECURITIES
We and Kyocera and our executive officers and directors have agreed, with
exceptions, not to sell or transfer any common stock of AVX for a period of 90
days after the date of this prospectus without first obtaining the written
consent of Merrill Lynch & Co. Specifically, we and Kyocera and our executive
officers and directors have agreed not to directly or indirectly
- offer, pledge, sell or contract to sell any common stock of AVX,
- sell any option or contract to purchase any common stock of AVX,
- purchase any option or contract to sell any common stock of AVX,
- grant any option, right or warrant for the sale of any common stock of
AVX,
- otherwise dispose of or transfer any common stock of AVX,
- request or demand that we file any registration statement related to the
common stock of AVX,
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock of AVX
whether any swap or transaction is to be settled by delivery of common
stock or other securities, in cash or otherwise.
This lockup provision applies to common stock of AVX and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock of AVX. It also applies to common stock owned now or acquired later by the
person executing the agreement or for which the person executing the agreement
later acquires the power of disposition.
NEW YORK STOCK EXCHANGE LISTING
The shares are listed on the New York Stock Exchange under the symbol
"AVX".
PRICE STABILIZATION AND SHORT POSITIONS
Until the distribution of the shares is completed, SEC rules may limit
underwriters and selling group members from bidding for and purchasing our
common stock. However, the representatives are permitted to engage in
transactions that stabilize the price of the common stock, such as bids or
purchases to peg, fix or maintain that price.
If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the representatives may reduce that short position
by purchasing shares in the open market. The representatives may also elect to
reduce any short position by exercising all or part of the over-allotment option
described above. Purchases of the common stock to stabilize its price or to
reduce a short position may cause the price of the common stock to be higher
than it might be in the absence of such purchases.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.
27
<PAGE> 32
LEGAL MATTERS
Certain legal matters relating to this offering will be passed upon for AVX
by Parker, Poe, Adams & Bernstein L.L.P., Charlotte, North Carolina. Brown &
Wood LLP, New York, New York is acting as counsel for the underwriters.
EXPERTS
The financial statements incorporated in this prospectus and registration
statement by reference to the annual report on Form 10-K for the year ended
March 31, 1999 and included in this prospectus and registration statement as of
March 31, 1998 and 1999 and for each of the three years in the period
ended March 31, 1999 have been so incorporated and included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to incorporate by reference the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we later file
with the Commission will automatically update and supersede the information
contained or incorporated by reference in this prospectus. Accordingly, we
incorporate by reference the documents listed below and any future filings we
make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act:
- The description of our common stock which is contained in our
registration statement on Form 8-A filed with the Commission on July 12,
1995 and any amendments or reports filed for the purpose of updating such
description.
- Our annual report on Form 10-K for the year ended March 31, 1999.
- Our quarterly reports on Form 10-Q for the quarters ended June 30, 1999,
September 30, 1999 and December 31, 1999, in each case, if applicable, as
amended.
- Our proxy statement dated July 15, 1999 (to the extent incorporated by
reference in our annual report on Form 10-K for the year ended March 31,
1999).
All documents which we subsequently file pursuant to Section 13(a), 13(c),
14, or 15(d) of the Exchange Act prior to the termination of the offering shall
be deemed to be a part of this prospectus from the date of filing of such
documents. These documents are or will be available for inspection or copying at
the locations identified below under the caption "Where You Can Find More
Information."
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, upon written or oral request, a
copy of any and all of the documents that have been incorporated by reference in
this prospectus (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference). You should direct requests for
documents to Donald B. Christiansen, Senior Vice President of Finance and Chief
Financial Officer, 801 17th Avenue South, Myrtle Beach, SC 29577. The telephone
number is (843) 946-0355. We also maintain a website at http://www.avxcorp.com.
The information contained in our website is not incorporated by reference into,
nor is it otherwise to be deemed a part of, this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and, therefore, we file reports, proxy statements,
information statements and other information with the Securities and Exchange
Commission. You may inspect and copy this information (at prescribed
28
<PAGE> 33
rates) at the Commission's public reference facilities at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New
York 10048. Please call the Commission at 1-800-SEC-0330 for more information on
its public reference rooms. The Commission also maintains an Internet Website at
http://www.sec.gov that contains reports, proxy statements and information
statements and other information regarding issuers that file electronically with
the Commission. In addition, this information may also be inspected at the
offices of the National Association of Securities Dealers, Inc. located at 1735
K Street, N.W., Washington, D.C. 20006.
We have filed with the Commission a registration statement (which contains
this prospectus) on Form S-3 under the Securities Act of 1933, as amended. The
registration statement relates to the common stock offered by Kyocera. This
prospectus does not contain all of the information set forth in the registration
statement and its exhibits and schedules. Statements contained in this
prospectus as to the contents of any document referred to are not necessarily
complete, and in each instance we refer you to the copy of such document filed
as an exhibit to the registration statement. For further information with
respect to us and the securities offered hereby, we refer you to the
registration statement and its exhibits and schedules, which may be obtained at
the locations described in the preceding paragraph.
29
<PAGE> 34
INDEX TO FINANCIAL STATEMENTS
AVX CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of March 31, 1998 and 1999
and (unaudited) December 31, 1999...................... F-3
Consolidated Statements of Income for the years ended
March 31, 1997, 1998 and 1999 and (unaudited) for the
nine months ended December 31, 1998 and 1999........... F-4
Consolidated Statements of Stockholders' Equity for the
years ended March 31, 1997, 1998 and 1999 and
(unaudited) for the nine months ended December 31,
1999................................................... F-5
Consolidated Statements of Cash Flows for the years ended
March 31, 1997, 1998, and 1999 and (unaudited) nine
months ended December 31, 1998 and 1999................ F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 35
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
AVX Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of AVX
Corporation and Subsidiaries at March 31, 1998 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended March 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
May 14, 1999
F-2
<PAGE> 36
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
----------------------- DECEMBER 31,
1998 1999 1999
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 201,887 $ 173,106 $ 234,391
Accounts receivable, net.................................. 139,812 157,331 190,735
Inventories............................................... 326,787 277,393 305,170
Deferred income taxes..................................... 20,039 21,895 22,175
Other receivables......................................... 3,707 2,738 3,442
Prepaid and other......................................... 29,980 31,072 40,224
---------- ---------- ----------
Total current assets............................... 722,212 663,535 796,137
Property and equipment:
Land...................................................... 10,110 12,287 12,639
Buildings and improvements................................ 123,668 142,661 177,552
Machinery and equipment................................... 663,594 730,574 781,335
Construction in progress.................................. 44,313 58,692 63,417
---------- ---------- ----------
841,685 944,214 1,034,943
Accumulated depreciation.................................... (559,431) (639,966) (691,475)
---------- ---------- ----------
282,254 304,248 343,468
Goodwill, net............................................... 33,479 78,790 75,441
Other assets................................................ 10,708 11,467 15,389
---------- ---------- ----------
Total assets....................................... $1,048,653 $1,058,040 $1,230,435
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank debt...................................... $ 9,887 $ 20,944 $ 16,663
Current maturities of long-term debt...................... 2,911 148 13
Accounts payable:
Trade................................................... 39,507 46,737 73,939
Affiliates.............................................. 37,800 32,311 55,054
Income taxes payable...................................... 15,650 11,995 34,909
Accrued payroll and benefits.............................. 36,361 41,055 45,574
Accrued expenses.......................................... 27,309 39,092 46,899
---------- ---------- ----------
Total current liabilities............................... 169,425 192,282 273,051
Long-term debt............................................ 8,376 12,714 17,229
Deferred income taxes..................................... 8,563 6,115 7,651
Other liabilities......................................... 11,405 16,288 14,564
---------- ---------- ----------
Total liabilities.................................. 197,769 227,399 312,495
---------- ---------- ----------
Commitments and contingencies (Notes 10 and 13)
Stockholders' equity:
Preferred stock, par value $.01 per share:................ -- --
Authorized, 20,000,000 shares; None issued and outstanding
Common stock, par value $.01 per share:................... 882 882 882
Authorized, 300,000,000 shares; issued and outstanding,
88,183,500 and 88,184,125 shares for 1998 and 1999,
respectively
Additional paid-in capital................................ 325,017 325,028 333,353
Retained earnings......................................... 522,410 541,267 610,466
Accumulated other comprehensive income (loss)............. 2,575 (4,789) (9,371)
Common stock in treasury, at cost, 1,929,100 (March 31,
1999) and 1,056,875 (December 31, 1999) shares.......... -- (31,747) (17,390)
---------- ---------- ----------
Total stockholders' equity......................... 850,884 830,641 917,940
---------- ---------- ----------
Total liabilities and stockholders' equity......... $1,048,653 $1,058,040 $1,230,435
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 37
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
--------------------------------------- -------------------------
1997 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales....................... $ 1,126,178 $ 1,267,653 $ 1,245,473 $ 926,862 $ 1,131,135
Cost of sales................... 851,863 970,216 1,078,064 795,884 922,063
----------- ----------- ----------- ----------- -----------
Gross profit.......... 274,315 297,437 167,409 130,978 209,072
Selling, general and
administrative expenses....... 102,369 110,737 114,104 86,005 87,482
----------- ----------- ----------- ----------- -----------
Profit from
operations.......... 171,946 186,700 53,305 44,973 121,590
Other income (expense):
Interest income............... 7,536 11,268 7,946 6,204 6,450
Interest expense.............. (2,049) (1,921) (2,228) (1,710) (1,453)
Other, net.................... 1,010 1,377 1,719 13 1,227
----------- ----------- ----------- ----------- -----------
Income before income taxes...... 178,443 197,424 60,742 49,480 127,814
Provision for income taxes...... 57,102 62,773 19,226 15,512 41,754
----------- ----------- ----------- ----------- -----------
Net income............ $ 121,341 $ 134,651 $ 41,516 $ 33,968 $ 86,060
=========== =========== =========== =========== ===========
Basic and diluted income per
share......................... $ 1.38 $ 1.53 $ 0.48 $ 0.39 $ 0.99
=========== =========== =========== =========== ===========
Weighted average common shares
outstanding................... 88,000,000 88,109,643 87,066,028 87,280,959 86,555,383
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 38
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER
------------------------------- ADDITIONAL COMPREHENSIVE CURRENT PERIOD'S
NUMBER TREASURY PAID-IN RETAINED INCOME COMPREHENSIVE
OF SHARES AMOUNT STOCK CAPITAL EARNINGS (LOSS) TOTAL INCOME
----------- ------ -------- ---------- -------- ------------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1996... 88,000,000 $880 $ -- $319,909 $306,923 $(3,712) $624,000
Net income................ 121,341 121,341 $121,341
Other comprehensive
income.................. 5,988 5,988 5,988
Dividends................. (19,360) (19,360)
----------- ---- -------- -------- -------- ------- -------- --------
Balance, March 31, 1997... 88,000,000 880 -- 319,909 408,904 2,276 731,969 $127,329
========
Net income................ 134,651 134,651 $134,651
Other comprehensive
income.................. 299 299 299
Dividends................. (21,145) (21,145)
Exercise of stock
options................. 183,500 2 4,482 4,484
Tax benefit of stock
option exercises........ 626 626
----------- ---- -------- -------- -------- ------- -------- --------
Balance, March 31, 1998... 88,183,500 882 -- 325,017 522,410 2,575 850,884 $134,950
========
Net income................ 41,516 41,516 $ 41,516
Other comprehensive income
(loss).................. (7,364) (7,364) (7,364)
Dividends................. (22,659) (22,659)
Exercise of stock
options................. 625 11 11
Treasury stock
purchased............... (1,929,100) (31,747) (31,747)
----------- ---- -------- -------- -------- ------- -------- --------
Balance, March 31, 1999... 86,255,025 882 (31,747) 325,028 541,267 (4,789) 830,641 $ 34,152
========
(UNAUDITED)
Net income................ 86,060 86,060 $ 86,060
Other comprehensive income
(loss).................. (4,582) (4,582) (4,582)
Dividends................. (16,861) (16,861)
Exercise of stock
options................. 872,225 14,357 5,581 19,938
Tax benefit of stock
option exercises........ 2,744 2,744
----------- ---- -------- -------- -------- ------- -------- --------
Balance, December 31,
1999.................... 87,127,250 $882 $(17,390) $333,353 $610,466 $(9,371) $917,940 $ 81,478
=========== ==== ======== ======== ======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 39
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income................................ $121,341 $134,651 $ 41,516 $ 33,968 $ 86,060
Adjustment to reconcile net income to net
cash from operating activities:
Depreciation and amortization.......... 82,242 87,668 94,728 69,659 70,765
Deferred income taxes.................. (911) (2,520) (4,305)
Changes in operating assets and
liabilities, net of effects of
business acquired:
Accounts receivable.................. (9,745) 11,621 2,269 7,668 (41,374)
Inventories.......................... (2,912) (77,053) 70,256 45,472 (30,331)
Accounts payable and accrued
expenses.......................... (5,730) (3,772) (20,804) (24,220) 65,435
Income taxes payable................. (11,093) (9,507) (3,318) (5,781) 25,811
Other assets and liabilities......... (5,266) (4,327) 4,061 9,492 (8,348)
-------- -------- -------- -------- --------
Net cash from operating
activities...................... 167,926 136,761 184,403 136,258 168,018
-------- -------- -------- -------- --------
Investing activities:
Purchases of property and equipment....... (93,954) (100,374) (97,715) (72,839) (109,279)
Equity investments........................ (5,300)
Loans to investee......................... (1,805)
Business acquired, net of cash............ (58,027) (58,027)
Other..................................... 2,347 142 65 17 (863)
-------- -------- -------- -------- --------
Net cash used in investing
activities...................... (91,607) (105,532) (155,677) (130,849) (111,947)
-------- -------- -------- -------- --------
Financing activities:
Proceeds from issuance of debt............ 9,738 2,197 19,596 17,764 11,861
Repayment of debt......................... (10,043) (3,464) (22,675) (17,486) (9,349)
Dividends paid............................ (19,360) (21,145) (22,659) (17,043) (16,861)
Purchase of treasury stock................ (31,747) (27,513)
Exercise of stock options................. 4,482 11 11 19,920
-------- -------- -------- -------- --------
Net cash from (used in) financing
activities...................... (19,665) (17,930) (57,474) (44,267) 5,571
-------- -------- -------- -------- --------
Effect of exchange rate on cash............. 319 14 (33) 69 (357)
-------- -------- -------- -------- --------
Increase (decrease) in cash and cash
equivalents............................... 56,973 13,313 (28,781) (38,789) 61,285
Cash and cash equivalents at beginning of
period.................................... 131,601 188,574 201,887 201,887 173,106
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period.................................... $188,574 $201,887 $173,106 $163,098 $234,391
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 40
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
AVX Corporation is a leading worldwide manufacturer and supplier of a broad
line of passive electronic components and interconnect products. Components sold
by the Company are used in virtually all types of electronic products for
industries such as telecommunications, computers, automotive, medical and
consumer electronics. The consolidated financial statements of AVX Corporation
and its subsidiaries (the "Company" or "AVX") include the accounts of the
Company and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated.
Other investments for which the Company does not control the financial and
operational direction, are either accounted for using the equity method or are
recorded at cost.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
Public Offering
From January 1990 through August 15, 1995, the Company was wholly-owned by
Kyocera Corporation ("Kyocera"). On August 15, 1995, Kyocera sold 22.9%, or
19,650,000 of the Company's common shares, and the Company sold an additional
2,200,000 common shares, in a public offering. As of March 31, 1999, Kyocera
owned approximately 77% of the Company's outstanding common shares.
Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or
market. Inventory costs include material, labor and manufacturing overhead.
Property and Equipment
Property and equipment are recorded at cost. Machinery and equipment are
generally depreciated on the double-declining balance method. Buildings are
depreciated on the straight-line method. The estimated useful lives used for
computing depreciation are as follows: buildings and improvements -- 10 to 31.5
years, and machinery and equipment -- 3 to 10 years. Depreciation expense was
$80,120, $85,858 and $90,858 for the years ended March 31, 1997, 1998 and 1999,
respectively.
The cost of maintenance and repairs is charged to expense as incurred. Upon
disposal or retirement, the cost and accumulated depreciation of assets are
eliminated from the respective accounts. Any gain or loss is reflected in
income.
Goodwill
Assets and liabilities related to business combinations accounted for as
purchase transactions were recorded at their respective fair values on the dates
of acquisition. Any excess of purchase price over such fair value ("Goodwill")
is amortized on a straight-line basis over periods ranging from 20 to 40 years.
The accumulated amortization as of March 31, 1998 and 1999 was $19,099 and
$22,972, respectively. The carrying value of Goodwill is evaluated quarterly in
relation to the operating performance and estimated
F-7
<PAGE> 41
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
future undiscounted cash flows of the related operating unit. Adjustments are
made if the sum of expected future net cash flows is less than carrying value.
Income Taxes
Deferred tax liabilities and assets are determined based on temporary
differences between the bases of certain assets and liabilities for income tax
and financial reporting purposes. The deferred tax assets and liabilities are
classified according to the financial statement classification of the assets and
liabilities generating the differences. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized. The Company does not provide for U.S. taxes on the undistributed
earnings of foreign subsidiaries which are considered to be reinvested
indefinitely. As of March 31, 1999, the amount of U.S. taxes on such
undistributed earnings would have been approximately $39,178.
Foreign Currency Activity
Assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at the exchange rate in effect at the balance sheet date. Operating
accounts are translated at an average rate of exchange for the respective
accounting periods. Translation adjustments result from the process of
translating foreign currency financial statements into U.S. dollars and are
reported separately as a component of accumulated comprehensive income.
The Company enters into foreign currency exchange contracts and swaps to
manage exposure to currency rate fluctuations on anticipated sales, purchases
and intercompany transactions. These exchange agreements generally qualify for
accounting as designated hedges. The realized and unrealized gains and losses on
these contracts are deferred and included as a component of the related
transaction. Any contracts that do not qualify as hedges for accounting purposes
are marked to market with the resulting gains and losses recognized in other
income or expense.
Revenue Recognition
Sales are recorded upon shipment of related goods to customers. Certain
sales to distributors are under terms which allow for the affected distributors
to receive price protection from the Company for actual sales at prices below
anticipated sales prices. A portion of sales is made to distributors under
agreements allowing limited rights of return. The Company provides an allowance
for distributor adjustments based on historical experience.
Grants
The Company receives employment and research grants from various non-US
governmental agencies which are recognized in earnings in the period in which
the related expenditures are incurred. Capital grants for the acquisition of
equipment are recorded as reductions of the related equipment cost and reduce
future depreciation expense.
Use of Estimates
The consolidated financial statements are prepared on the basis of
generally accepted accounting principles. The preparation of financial
statements in conformity with general accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at March 31, 1998 and 1999 and reported amounts of
revenues and expenses for each of the three years in the period ended March 31,
1999. Actual results could differ from those estimates and assumptions.
F-8
<PAGE> 42
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Research, Development and Engineering
Research, development and engineering expenses totaled approximately
$33,000, $36,000 and $42,000 for the years ended March 31, 1997, 1998 and 1999,
respectively, while research and development expenses included in these amounts
totaled $18,558, $21,001 and $20,622 for the years ended March 31, 1997, 1998
and 1999, respectively. Research and development expenditures are expensed when
incurred.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, allows companies to record compensation cost for
stock-based compensation plans at fair value or provide pro forma disclosures.
The Company has chosen to continue to account for stock-based compensation using
the method whereby compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
grant over the amount an employee must pay to acquire the stock.
Treasury Stock
In January 1998, the Company's Board of Directors approved a stock
repurchase program whereby up to 2.2 million shares of common stock may be
purchased from time to time at the discretion of management. As of March 31,
1999 the Company had purchased 1,929,100 shares at a cost of $31,747. The
repurchased shares are held as treasury stock and are available for general
corporate purposes.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). This statement establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
will be required to adopt SFAS No. 133 for the quarter ended June 30, 2000.
Currently, the Company is evaluating this standard and the impact it will have
on the Company's consolidated financial statements.
2. EARNINGS PER SHARE
Basic earnings per share are computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share are computed by dividing net earnings by the sum of
(a) the weighted average number of shares of common stock outstanding during the
period and (b) the dilutive effect of potential common stock equivalents during
the period.
The basic weighted average number of shares of common stock outstanding for
the period were 88,000,000, 88,109,643 and 87,066,028 for the years ended March
31, 1997, 1998 and 1999, respectively.
The diluted weighted average number of shares of common stock and potential
common stock equivalents outstanding for the period were 88,038,950, 88,279,846
and 87,083,500 for the years ended March 31, 1997, 1998 and 1999, respectively.
Stock options are the only common stock equivalents and are therefore considered
in the diluted earnings per share calculations. Common stock equivalents are
computed using the treasury stock method.
F-9
<PAGE> 43
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income ("SFAS No. 130"). The statement requires
disclosure of total non-shareowner changes in equity. Total non-shareowner
changes in equity include all changes in equity during a period except those
resulting from investments by and distributions to shareowners.
The Company's total comprehensive income was $127,329, $134,950 and $34,152
for the years ended March 31, 1997, 1998 and 1999, respectively. The only
adjustment to net income in the periods was for foreign currency translation
adjustments.
4. ACCOUNTS RECEIVABLE
Accounts receivable at March 31 consisted of:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Trade....................................................... $163,348 $183,033
Less: allowances for doubtful accounts, sales returns,
distributor adjustments and discounts..................... (23,536) (25,702)
-------- --------
$139,812 $157,331
======== ========
</TABLE>
Charges to expense related to such allowances were approximately $58,543,
$93,059 and $111,813, and applications to such allowances were approximately
$60,991, $87,746 and $109,558 for the years ended March 31, 1997, 1998 and 1999,
respectively.
5. INVENTORIES
Inventories at March 31 consisted of:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Finished goods.............................................. $116,811 $ 91,551
Work in process............................................. 114,827 96,604
Raw materials and supplies.................................. 95,149 89,238
-------- --------
$326,787 $277,393
======== ========
</TABLE>
6. DEBT
Long-term debt at March 31 consisted of:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Deutsche mark loans at 3.29-6.25% due through 2001 $11,287 $12,862
Less -- current maturities.................................. (2,911) (148)
------- -------
$ 8,376 $12,714
======= =======
</TABLE>
As of March 31, 1999, $8.3 million of long-term deutsche mark debt
originally scheduled to mature on January 1, 2000 has been excluded from current
maturities of long-term debt based on the Company's intent and ability to extend
the facilities.
F-10
<PAGE> 44
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate annual maturities of long-term debt are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 148
2001........................................................ 11,080
2002........................................................ 1,634
-------
$12,862
=======
</TABLE>
Long-term debt includes 15.0 million and 5.0 million of deutsche mark loans
which have variable rates of interest based on a market rate plus .25%. At March
31, 1999, these loans had a rate of 3.29%. The remaining loans of 3.0 million
and .25 million deutsche marks carry fixed rates of 4.5% and 6.25%,
respectively.
Short-term bank debt at March 31, 1999, consists primarily of borrowings
incurred by the Company's European subsidiaries under 15.0 million and 10.0
million deutsche mark short-term working capital bank facilities bearing
interest at market rates (between 3.09% and 4.4% at March 31, 1999) which extend
through April 1999 and June 1999, respectively. In addition, the Company has two
50.0 million French franc working capital bank facilities bearing interest at
market rates (3.42% as of March 31, 1999) which extended through June 1999.
Interest paid totaled $1,639, $1,426 and $1,575 during the years ended
March 31, 1997, 1998 and 1999, respectively.
7. INCOME TAXES
For financial reporting purposes, after adjustments for certain corporate
items, income before income taxes includes the following components:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
Domestic................................................ $102,717 $126,236 $24,089
Foreign................................................. 75,726 71,188 36,653
-------- -------- -------
$178,443 $197,424 $60,742
======== ======== =======
</TABLE>
The provision (benefit) for income taxes consisted of:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Current:
Federal/State........................................... $38,186 $49,075 $13,573
Foreign................................................. 20,084 17,487 13,096
------- ------- -------
58,270 66,562 26,669
------- ------- -------
Deferred:
Federal/State........................................... 4,031 (4,362) (7,709)
Foreign................................................. (5,199) 573 266
------- ------- -------
(1,168) (3,789) (7,443)
------- ------- -------
$57,102 $62,773 $19,226
======= ======= =======
</TABLE>
F-11
<PAGE> 45
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------
1998 1999
--------------------- ---------------------
CURRENT: ASSETS LIABILITIES ASSETS LIABILITIES
-------- ------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Sales and receivable reserves.................. $ 7,626 $ -- $ 9,489 $ --
Inventory reserves............................. 2,990 -- 3,441 --
Accrued expenses............................... 9,423 -- 8,965 --
------- ------- ------- -------
$20,039 $ -- $21,895 $ --
======= ======= ======= =======
Non-current:
Property and equipment depreciation............ $ 1,123 $ 2,707 $ 690 $ 2,002
Accrued expenses............................... 1,330 1,260 2,422 1,252
Other.......................................... -- 11,638 -- 7,934
Foreign income tax loss carryforwards.......... 4,964 -- 18,412 --
------- ------- ------- -------
7,417 15,605 21,524 11,188
Valuation allowance............................ (375) -- (16,451) --
------- ------- ------- -------
$ 7,042 $15,605 $ 5,073 $11,188
======= ======= ======= =======
</TABLE>
A reconciliation between the U.S. Federal statutory income tax rate and the
Company's effective rate for income tax is as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory rate................................. 35.0% 35.0% 35.0%
Increase (decrease) in tax rate resulting from:
State income taxes, net of federal benefit.................. 2.4 1.7 1.0
Taxes at different tax rates on foreign earnings............ (2.9) (3.6) (9.5)
Change in valuation allowance............................... (.8) 10.4
Other, net.................................................. (1.7) (1.3) (5.2)
---- ---- ----
Effective tax rate.......................................... 32.0% 31.8% 31.7%
==== ==== ====
</TABLE>
At March 31, 1999, certain of the Company's foreign subsidiaries in Europe
had tax net operating loss carryforwards totaling approximately $53,428, most
with no expiration date. Accordingly, the Company's valuation allowances relate
to deferred tax assets which are the result of the loss carryforwards in these
jurisdictions. The valuation allowance increased $16,076 during the year ended
March 31, 1999, $8,500 of which was due to the pre-acquisition operating loss
carryforwards of TPC, and decreased $2,560 during the year ended March 31, 1998.
Income taxes paid totaled $72,096, $76,013 and $26,084 during the years
ended March 31, 1997, 1998 and 1999, respectively.
8. EMPLOYEE RETIREMENT PLANS
Pension Plans
The Company sponsors various defined benefit pension plans covering certain
employees. Pension benefits provided to certain U.S. employees covered under
collective bargaining agreements are based on a flat benefit formula. Effective
December 31, 1995, the Company froze benefit accruals under its domestic
non-contributory defined benefit pension plan for a significant portion of the
employees covered under collective bargaining agreements. The Company's pension
plans for certain European employees provide
F-12
<PAGE> 46
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for benefits based on a percentage of final pay. The Company's funding policy is
to contribute the statutory required amount to the appropriate trust or
government funds.
The change in the benefit obligation and plan assets of the U.S. and
non-U.S. defined benefit plans for 1998 and 1999 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------
U.S. PLANS INTERNATIONAL PLANS
----------------- -------------------
1998 1999 1998 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year......... $21,442 $23,187 $43,483 $50,471
Service cost.................................... 181 306 2,358 2,438
Interest cost................................... 1,511 1,538 3,102 3,517
Plan participants' contributions................ 0 0 926 942
Actuarial loss (gain)........................... 1,055 (854) 1,971 2,303
Benefits paid................................... (1,002) (1,074) (1,369) (1,904)
------- ------- ------- -------
Benefit obligation at end of year............... 23,187 23,103 50,471 57,767
------- ------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of
year......................................... 19,702 23,813 46,306 53,330
Actual return on assets......................... 4,903 2,652 7,124 4,331
Employer contributions.......................... 252 0 561 1,485
Plan participants' contributions................ 0 0 926 942
Benefits paid................................... (1,002) (1,074) (1,369) (1,904)
Other expenses.................................. (42) 0 (218) (370)
------- ------- ------- -------
Fair value of plan assets at end of year........ 23,813 25,391 53,330 57,814
------- ------- ------- -------
Funded status................................... 626 2,288 2,859 47
Unrecognized actuary loss (gain)................ (2,249) (3,613) (5,314) (2,093)
Unrecognized prior service cost................. 196 174 477 426
Unrecognized transition obligation.............. 87 65 (49) 54
------- ------- ------- -------
Prepaid (accrued) benefit cost.................. $(1,340) $(1,086) $(2,027) $(1,566)
======= ======= ======= =======
</TABLE>
The Company's assumptions used in determining the pension assets
(liabilities) shown were as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Assumptions:
Discount rates................................ 6.75-7.75% 6.75-7.0% 6.0-7.0%
Increase in compensation...................... 3.0-4.0% 3.0-4.0% 2.50-3.50%
Expected long-term rate of return on plan
assets..................................... 8.0-9.0% 8.0-9.0% 7.50-9.0%
</TABLE>
F-13
<PAGE> 47
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net pension cost related to these pension plans include the following
components:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Service cost......................................... $ 2,745 $ 2,539 $ 2,744
Plan participants' contributions..................... (872) (926) (942)
Interest cost........................................ 4,384 4,613 5,055
Expected return on plan assets....................... (4,837) (7,816) (6,748)
Amortization of prior service cost................... 10 73 51
Amortization of transition obligation................ 22 43 43
Recognized actuarial loss (gain)..................... (43) 2,342 364
------- ------- -------
Net periodic pension cost............................ $ 1,409 $ 868 $ 567
======= ======= =======
</TABLE>
Savings Plans
The Company sponsors retirement savings plans which allow eligible
employees to defer part of their annual compensation. Certain contributions by
the Company are discretionary and are determined by the Company's Board of
Directors each year. The Company's contributions to the savings plans in the
United States and Europe for the years ended March 31, 1997, 1998 and 1999, were
approximately $5,800, $6,302 and $6,272, respectively.
The Company sponsors nonqualified deferred compensation programs which
permit key employees to annually elect to defer a portion of their compensation
until retirement. A portion of the deferral is subject to a matching
contribution by the Company. The employees select among various investment
alternatives, with the investments held in a separate trust. The value of the
participant's balance fluctuates based on the performance of the investments. At
March 31, 1999, the market value of the trust, $2,503, is included as an asset
and a liability of the Company in the accompanying balance sheet because the
trust assets are available to AVX's general creditors in the event of the
Company's insolvency.
9. STOCK BASED COMPENSATION
The Company has two fixed option plans. Under the 1995 Stock Option Plan,
as amended, the Company may grant options to employees for the purchase of up to
an aggregate of 2,650,000 shares of common stock. Under the Non-Employee
Directors' Stock Option Plan, as amended, the Company may grant options for the
purchase of up to an aggregate of 250,000 shares of common stock. Under both
plans, the exercise price of each option equals the market price of the
Company's stock on the date of grant and an option's maximum term is 10 years.
Options granted under the 1995 Stock Option Plan vest as to 25% annually and
options granted under the Non-Employee Directors' Stock Option Plan vest as to
one third annually.
F-14
<PAGE> 48
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the transactions of the Company's stock
option plans for the three year period ended March 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Unexercised options outstanding -- March 31, 1996......... 1,126,000 $25.50
Options granted......................................... 534,000 $18.13
Options exercised....................................... -- --
Options forfeited....................................... (21,500) $23.61
----------
Unexercised options outstanding -- March 31, 1997......... 1,638,500 $23.12
Options granted......................................... 633,000 $22.09
Options exercised....................................... (183,500) $24.42
Options forfeited....................................... (14,325) $22.54
----------
Unexercised options outstanding -- March 31, 1998......... 2,073,675 $22.69
Options granted......................................... 458,300 $16.09
Options exercised....................................... (625) $18.13
Options forfeited....................................... (203,275) $20.26
----------
Unexercised options outstanding -- March 31, 1999......... 2,328,075 $21.20
==========
Price Range $25.50-$31.813 (weighted average contractual
life 6.5 years)...................................... 951,250 $25.80
Price Range $15.0-$19.94 (weighted average contractual
life 8.5 years)...................................... 1,376,825 $18.02
Exercisable options:
March 31, 1997.......................................... 277,500 $25.50
March 31, 1998.......................................... 534,250 $24.07
March 31, 1999.......................................... 1,051,881 $23.20
</TABLE>
The calculated fair value at date of grant for each option granted during
the years ended March 31, 1997, 1998 and 1999 was $6.82, $8.59 to $14.48 and
$6.35 to $8.59, respectively. The fair value of options at date of grant was
estimated using the Black-Scholes model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
--------------------------------
1997 1998 1999
----- ---------- ---------
<S> <C> <C> <C>
Expected life (years)............................. 5 5 5
Interest rate..................................... 6.7% 6.6% 6.6%
Volatility........................................ 35% 45% 45%
Dividend yield.................................... 1.21% 0.75-1.23% 1.23-1.63%
</TABLE>
If the estimated fair value of the options had been recognized as
compensation expense over the vesting periods, income before income taxes would
have been reduced by $3,099 ($2,523 after income taxes or $.03 per share),
$4,127 ($3,408 after income taxes, or $.04 per share) and $4,839 ($3,980 after
income taxes, or $.05 per share) for the years ended March 31, 1997, 1998 and
1999, respectively.
10. COMMITMENTS AND FINANCIAL INSTRUMENTS
Commitments
At March 31, 1999, the Company had contractual obligations for the
acquisition or construction of plant and equipment aggregating approximately
$21,840. In connection with an expansion at the Company's manufacturing facility
in the Northern Ireland, capital grants totaling $11,500 have been
F-15
<PAGE> 49
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approved, $1,700 of which had not been received as of March 31, 1999 and are
contingent upon the Company spending approximately $5,700 for plant and
equipment.
The Company is a lessee under long-term operating leases primarily for
office space, plant and equipment. Future minimum lease commitments under
non-cancelable operating leases as of March 31, 1999, were as follows:
<TABLE>
<CAPTION>
YEARS
ENDING
MARCH 31,
---------
<S> <C>
2000................................................... $ 8,532
2001................................................... 6,848
2002................................................... 6,228
2003................................................... 6,214
2004................................................... 6,724
Thereafter............................................. 13,825
</TABLE>
Rental expense for operating leases was $6,390, $6,440 and $9,634 for the
years ended March 31, 1997, 1998 and 1999, respectively.
Financial Instruments
At March 31, 1999, $11,000 of the Company's intercompany borrowings by a
European subsidiary were denominated in U.S. dollars. To reduce the exposure to
foreign currency fluctuations, the subsidiary entered into foreign currency
swaps which at March 31, 1999 fixed principal balance of the intercompany
borrowings in U.K. sterling. In addition to the U.S. dollar, the Company
conducts business in most European currencies and the Japanese yen. The
Company's foreign currency contracts related to anticipated sales and purchases
generally have maturities that do not exceed six months.
The Company enters into forward delivery contracts with certain suppliers
for certain precious metals used in its production processes.
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company places its cash and cash equivalents with high credit
quality institutions. At times, such investments may be in excess of the Federal
Deposit Insurance Corporation insurance limit. Concentrations of credit risk
with respect to trade accounts receivable are limited due to the large number of
entities comprising the Company's customer base and their dispersion across many
different industries and countries. As of March 31, 1999, the Company believes
that its credit risk exposure is not significant.
F-16
<PAGE> 50
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following disclosure of the estimated fair value of financial
instruments has been determined by the Company, using available market
information and appropriate valuation methodologies. The fair value of financial
instruments classified as current assets or liabilities including cash and cash
equivalents, receivables and accounts payable approximate carrying value due to
the short-term maturity of the instruments. The fair value of short-term and
long-term debt approximate carrying value based on their effective interest
rates compared to current market rates.
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1999
--------------------------------- ---------------------------------
CONTRACT CARRYING UNREALIZED CONTRACT CARRYING UNREALIZED
AMOUNT AMOUNT GAIN (LOSS) AMOUNT AMOUNT GAIN (LOSS)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Off-Balance Sheet Financial
Instruments:
Foreign currency contracts......... $26,541 $ -- $ 259 $46,968 $ -- $(266)
Foreign currency swaps............. 16,000 (1,474) (1,474) 11,000 (570) (570)
Metal delivery contracts........... 25,014 -- 8,016 -- -- --
</TABLE>
11. TRANSACTIONS WITH AFFILIATE
The Company's businesses include the sale and distribution of electronic
products manufactured by Kyocera.
The Company entered into transactions with Kyocera as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Sales:
Product and equipment sales to affiliates................. $ 23,120 $ 25,725 $ 14,247
Subcontracting activities................................. 2,111 1,679 2,103
Commissions received...................................... 236 438 78
Purchases:
Purchases of resale inventories, raw materials supplies,
equipment and services................................. 234,434 266,568 245,504
Commissions paid.......................................... 202 87 72
Rent paid................................................. 959 1,137 1,141
Other:
Dividends paid............................................ 14,553 15,883 17,200
</TABLE>
12. SEGMENT AND GEOGRAPHIC INFORMATION
The Company has three reportable operating segments: Passive Components,
Connectors and Research and Development. The Company is organized, exclusive of
research and development, on the basis of products being separated into six
units. Five of the units which manufacture or distribute ceramic, tantalum, film
and power capacitors, ferrites and other passive devices have been aggregated
into the segment "Passive Components".
The Company evaluates performance of its segments based upon sales and
operating profit. There are no intersegment revenues. For determining segment
assets, cash and accounts receivable, which are centrally managed, are not
readily allocable to operating segments.
F-17
<PAGE> 51
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tables below present information about reported segments for the years
ended March 31,
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
Passive components....................................... $1,036,096 $1,160,428 $1,129,714
Connectors............................................... 90,082 107,225 115,759
Research and development................................. -- -- --
---------- ---------- ----------
Total............................................ $1,126,178 $1,267,653 $1,245,473
========== ========== ==========
Operating profit:
Passive components....................................... $ 196,104 $ 211,416 $ 67,257
Connectors............................................... 3,745 10,950 18,806
Research and development................................. (18,558) (21,001) (20,622)
Corporate administration................................. (9,345) (14,665) (12,136)
---------- ---------- ----------
Total............................................ $ 171,946 $ 186,700 $ 53,305
========== ========== ==========
Depreciation:
Passive components....................................... $ 70,112 $ 74,938 $ 79,493
Connectors............................................... 6,250 7,329 7,545
Research and development................................. 2,173 2,401 2,435
Corporate administration................................. 1,585 1,190 1,385
---------- ---------- ----------
Total............................................ $ 80,120 $ 85,858 $ 90,858
========== ========== ==========
Assets:
Passive components....................................... $ 492,234 $ 570,335 $ 560,982
Connectors............................................... 47,408 45,799 33,809
Research and development................................. 15,480 17,252 19,475
Cash and accounts receivable............................. 343,932 341,699 330,438
Goodwill................................................. 34,913 33,479 78,790
Corporate administration................................. 15,340 40,089 34,546
---------- ---------- ----------
Total............................................ $ 949,307 $1,048,653 $1,058,040
========== ========== ==========
Capital expenditures:
Passive components....................................... $ 83,686 $ 89,790 $ 90,952
Connectors............................................... 6,908 5,971 3,244
Research and development................................. 3,360 4,613 3,519
---------- ---------- ----------
Total............................................ $ 93,954 $ 100,374 $ 97,715
========== ========== ==========
</TABLE>
F-18
<PAGE> 52
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following geographic data is based upon net sales generated by
operations located within that geographic area and long lived assets based upon
physical location. The Other category consists of Latin America and Israel.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
United States............................................ $ 522,879 $ 607,064 $ 520,195
Europe................................................... 253,493 291,709 345,055
Asia..................................................... 345,262 364,300 369,974
Other.................................................... 4,544 4,580 10,249
---------- ---------- ----------
Total............................................ $1,126,178 $1,267,653 $1,245,473
========== ========== ==========
Property, plant and equipment, net:
United States............................................ $ 122,390 $ 127,360 $ 129,937
Europe................................................... 116,571 119,869 129,016
Asia..................................................... 3,226 2,818 10,384
Other.................................................... 29,405 32,207 34,911
---------- ---------- ----------
Total............................................ $ 271,592 $ 282,254 $ 304,248
========== ========== ==========
</TABLE>
No one customer has accounted for more than 10% of net sales in the past
three years.
13. ENVIRONMENTAL MATTERS AND CONTINGENCIES
The Company has been named as a potentially responsible party in state and
federal administrative proceedings seeking contribution for costs associated
with the correction and remediation of environmental conditions at various
hazardous waste disposal sites. The Company continues to monitor these actions
and proceedings and to vigorously defend its interests. The Company's ultimate
liability in connection with environmental claims will depend on many factors,
including its volumetric share of waste, the total cost of remediation and the
financial viability of other companies that also sent waste to a given site.
Once it becomes probable that the Company will incur costs in connection with
remediation of a site and such costs can be reasonably estimated, the Company
establishes or adjusts its reserves for its projected share of these costs.
These reserves do not reflect any possible future insurance recoveries, which
are not expected to be significant, but do reflect a reasonable estimate of cost
sharing at multiple party sites. Based upon information known to the Company
concerning the size of these sites, their years of operations and the number of
past users, management believes that it has adequate reserves with respect to
these matters. Such reserves for remediation, compliance and legal costs totaled
$2,600 at March 31, 1999. Actual costs may vary from these estimated reserves,
but such costs are not expected to have a material adverse effect on the
Company's financial condition or results of operations.
14. ACQUISITION
On June 2, 1998, the Company purchased the passive component business of
Thomson-CSF ("TPC") for $74,000 ($58,000 in cash and $16,000 of assumed debt).
The acquisition was accounted for as a purchase and funded through the use of
working capital. Based upon market valuations of the fair values of the assets
acquired and liabilities assumed the purchase price exceeded the fair value of
net assets acquired by approximately $49,600, which is being amortized on a
straight-line basis over 20 years. The results of operations of TPC are included
in the accompanying financial statements from the date of acquisition.
F-19
<PAGE> 53
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended March 31, 1998 and 1999
is as follows:
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales..................................... $313,807 $292,000 $329,224 $324,144
Gross profit.................................. 78,080 51,460 79,318 42,604
Net income.................................... 34,935 17,402 36,730 10,514
Basic and diluted earnings per share.......... .40 .20 .41 .12
</TABLE>
<TABLE>
<CAPTION>
THIRD QUARTER FOURTH QUARTER
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales..................................... $319,651 $310,718 $304,971 $318,611
Gross profit.................................. 74,173 36,914 65,866 36,431
Net income.................................... 33,329 6,052 29,657 7,548
Basic and diluted earnings per share.......... .38 .07 .34 .09
</TABLE>
F-20
<PAGE> 54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,250,000 SHARES
(AVX LOGO) CORPORATION
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses payable by the
registrant and Kyocera in connection with the sale and distribution of the
securities being registered, other than underwriting discounts and commissions.
All of the amounts shown are estimates, except the Securities and Exchange
Commission ("SEC") registration fee and the filing fee with the National
Association of Securities Dealers, Inc. ("NASD").
<TABLE>
<S> <C>
SEC registration fee........................................ $ 81,378
NASD filing fee.............................................
Printing and engraving expenses.............................
Accountants' fees and expenses..............................
Legal fees and expenses.....................................
Blue Sky qualification fees and expenses....................
Transfer Agent and Registrar fees...........................
Miscellaneous...............................................
----------
Total............................................. *
==========
</TABLE>
- ---------------
* To be completed by amendment. Payable initially by the registrant. Kyocera
will reimburse the registrant for such expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person, including an officer or director, who was
or is, or is threatened to be made, a party to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
officer, director, employee or agent acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests and, for
criminal actions and proceedings, had no reasonable cause to believe that his
conduct was unlawful. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director actually or reasonably
incurred.
Our Restated Certificate of Incorporation provides that no director of AVX
will be personally liable to AVX or its stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Law as currently in effect or as the same may hereafter be amended.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law, our
Restated Certificate of Incorporation eliminates the liability of our directors
to AVX or its stockholders, except for liabilities related to breach of duty of
loyalty, actions not in good faith and certain other liabilities.
AVX maintains directors' and officers' liability insurance policies. Our
by-laws provide for indemnification of the officers and directors of AVX to the
fullest extent permitted by applicable law.
The purchase agreement to be entered into by AVX, Kyocera and the
underwriters who are parties thereto will contain certain provisions for the
indemnification of, among others, controlling persons, directors and officers of
AVX for certain liabilities.
II-1
<PAGE> 56
ITEM 16. EXHIBIT.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>
1.1 Form of Purchase Agreement.
5.1 Form of Opinion of Parker, Poe, Adams & Bernstein L.L.P.
23.1 Form of Consent of Parker, Poe, Adams & Bernstein L.L.P.
(included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP
**23.3 Consent of Tomotsune Kimura & Mitomi
24.1 Powers of Attorney (included on Signature Page of
Registration Statement).
</TABLE>
- ---------------
** To be filed by amendment.
II-2
<PAGE> 57
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c)(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Myrtle Beach, South Carolina, on the 20th day of
January, 2000.
AVX CORPORATION
By /s/ BENEDICT P. ROSEN
------------------------------------
Benedict P. Rosen
Chairman and Chief
Executive Officer
We the undersigned directors and officers of AVX Corporation do hereby
constitute and appoint each of Mr. Benedict P. Rosen and Mr. Donald B.
Christiansen, each will full power of substitution, our true and lawful
attorney-in-fact and agent to do any and all acts and things in our names and in
our behalf in our capacities stated below, which acts and things either of them
may deem necessary or advisable to enable AVX Corporation to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but not limited to, power and authority to
sign for any or all of us in our names, in the capacities stated below, any and
all amendments (including post-effective amendments) hereto and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
and we do hereby ratify and confirm all that they shall do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ KAZUO INAMORI Chairman Emeritus of the January 20, 2000
- ----------------------------------------------------- Board
Kazuo Inamori
/s/ BENEDICT P. ROSEN Chairman of the Board and January 20, 2000
- ----------------------------------------------------- Chief Executive Officer
Benedict P. Rosen
/s/ JOHN S. GILBERTSON President and Chief Operating January 20, 2000
- ----------------------------------------------------- Officer and Director
John S. Gilbertson
/s/ DONALD B. CHRISTIANSEN Senior Vice President of January 20, 2000
- ----------------------------------------------------- Finance, Chief Financial
Donald B. Christiansen Officer and Treasurer and
Director
Director January , 2000
- -----------------------------------------------------
Carroll A. Campbell
/s/ RICHARD TRESSLER Director January 20, 2000
- -----------------------------------------------------
Richard Tressler
</TABLE>
II-4
<PAGE> 59
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ KENSUKE ITOH Director January 20, 2000
- -----------------------------------------------------
Kensuke Itoh
/s/ RODNEY N. LANTHORNE Director January 20, 2000
- -----------------------------------------------------
Rodney N. Lanthorne
/s/ MICHIHISA YAMAMOTO Director January 20, 2000
- -----------------------------------------------------
Michihisa Yamamoto
/s/ MASAHIRO UMEMURA Director January 20, 2000
- -----------------------------------------------------
Masahiro Umemura
/s/ MASAHIRO YAMAMOTO Director January 20, 2000
- -----------------------------------------------------
Masahiro Yamamoto
/s/ YUZO YAMAMURA Director January 20, 2000
- -----------------------------------------------------
Yuzo Yamamura
/s/ YASUO NISHIGUCHI Director January 20, 2000
- -----------------------------------------------------
Yasuo Nishiguchi
/s/ HENRY C. LUCAS Director January 20, 2000
- -----------------------------------------------------
Henry C. Lucas
</TABLE>
II-5
<PAGE> 60
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>
1.1 Form of Purchase Agreement.
5.1 Form of Opinion of Parker, Poe, Adams & Bernstein L.L.P.
23.1 Form of Consent of Parker, Poe, Adams & Bernstein L.L.P.
(included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP
**23.3 Consent of Tomotsune Kimura & Mitomi
24.1 Powers of Attorney (included on Signature Page of
Registration Statement).
</TABLE>
- ---------------
** To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
AVX CORPORATION
(a Delaware corporation)
5,250,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: , 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PURCHASE AGREEMENT................................................................................................1
SECTION 1. Representations and Warranties.....................................................3
(a) Representations and Warranties by the Company......................................3
(i) Compliance with Registration Requirements.................................3
(ii) Incorporated Documents....................................................4
(iii) Independent Accountants...................................................4
(iv) Financial Statements......................................................4
(v) No Material Adverse Change in Business....................................4
(vi) Good Standing of the Company..............................................5
(vii) Good Standing of Subsidiaries.............................................5
(viii) Capitalization............................................................5
(ix) Authorization of Agreement................................................6
(x) Authorization and Description of Securities...............................6
(xi) Absence of Defaults and Conflicts.........................................6
(xii) Absence of Labor Dispute..................................................6
(xiii) Absence of Proceedings....................................................6
(xiv) Accuracy of Exhibits......................................................7
(xv) Possession of Intellectual Property.......................................7
(xvi) Absence of Further Requirements...........................................7
(xvii) Possession of Licenses and Permits........................................7
(xviii) Title to Property.........................................................8
(xix) Environmental Laws........................................................8
(xx) Registration Rights.......................................................9
(xxi) Listing...................................................................9
(b) Representations and Warranties by the Selling Stockholder..........................9
(i) Accurate Disclosure.......................................................9
(ii) Authorization of Agreements...............................................9
(iii) Good and Marketable Title................................................10
(iv) Due Execution of Power of Attorney and Custody
Agreement................................................................10
(v) Absence of Manipulation..................................................10
(vi) Absence of Further Requirements..........................................10
(vii) Restriction on Sale of Securities........................................11
(viii) Certificates Suitable for Transfer.......................................11
(ix) No Association with NASD.................................................11
(c) Officer's Certificates............................................................11
SECTION 2. Sale and Delivery to Underwriters; Closing........................................12
(a) Initial Securities................................................................12
(b) Option Securities.................................................................12
(c) Payment...........................................................................12
(d) Denominations; Registration.......................................................13
</TABLE>
1
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3. Covenants of the Company..........................................................13
(a) Compliance with Securities Regulations and Commission Requests....................13
(b) Filing of Amendments..............................................................14
(c) Delivery of Registration Statements...............................................14
(d) Delivery of Prospectuses..........................................................14
(e) Continued Compliance with Securities Laws.........................................14
(f) Blue Sky Qualifications...........................................................15
(g) Rule 158..........................................................................15
(h) Listing...........................................................................15
(i) Restriction on Sale of Securities.................................................15
(j) Reporting Requirements............................................................16
SECTION 4. Payment of Expenses...............................................................16
(a) Expenses..........................................................................16
(b) Expenses of the Selling Stockholder...............................................16
(c) Termination of Agreement..........................................................17
(d) Allocation of Expenses............................................................17
SECTION 5. Conditions of Underwriters' Obligations...........................................17
(a) Effectiveness of Registration Statement...........................................17
(b) Opinion of Counsel for Company....................................................17
(c) Opinion of Counsel for the Selling Stockholder....................................17
(d) Opinion of Counsel for Underwriters...............................................18
(e) Officers' Certificate.............................................................18
(f) Certificate of Selling Stockholder................................................18
(g) Accountant's Comfort Letter.......................................................18
(h) Bring-down Comfort Letter.........................................................19
[(i) Approval of Listing..............................................................19]
(j) No Objection......................................................................19
(k) Lock-up Agreements................................................................19
(l) Conditions to Purchase of Option Securities.......................................19
(m) Additional Documents..............................................................20
(n) Termination of Agreement..........................................................20
SECTION 6. Indemnification...................................................................20
(a) Indemnification of Underwriters...................................................20
(b) Indemnification of Company, Directors and Officers and Selling Stockholder........21
(c) Actions against Parties; Notification.............................................22
(d) Settlement without Consent if Failure to Reimburse................................22
(e) Other Agreements with Respect to Indemnification..................................22
SECTION 7. Contribution......................................................................23
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
SECTION 8. Representations, Warranties and Agreements to Survive Delivery....................24
SECTION 9. Termination of Agreement..........................................................24
(a) Termination; General..............................................................24
(b) Liabilities.......................................................................25
SECTION 10. Default by One or More of the Underwriters........................................25
SECTION 11. Default by the Selling Stockholder................................................26
SECTION 12. Notices...........................................................................26
SECTION 13. Parties...........................................................................26
SECTION 14. GOVERNING LAW AND TIME............................................................26
SECTION 15. Effect of Headings................................................................26
</TABLE>
3
<PAGE> 5
AVX CORPORATION
(a Delaware corporation)
5,250,000 Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
, 2000
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
as Representative(s) of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
AVX Corporation, a Delaware corporation (the "Company"), and Kyocera
Corporation, a Japanese corporation (the "Selling Stockholder"), confirm their
respective agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated, and Salomon Smith Barney Inc.
are acting as representatives (in such capacity, the "Representatives"), with
respect to (i) the sale by the Selling Stockholder and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") set forth in Schedules A and B hereto and (ii) the grant by the Selling
Stockholder to the Underwriters, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase all or any part of [750,000]
additional shares of Common Stock to cover over-allotments, if any. The
aforesaid [5,250,000] shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any
1
<PAGE> 6
part of the [750,000] shares of Common Stock subject to the option described in
Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities".
The Company and the Selling Stockholder understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333- ) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, in the form first furnished to the Underwriters for
use in connection with the offering of the Securities is herein called the
"Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to the
preliminary prospectus dated _____, 2000 together with the Term Sheet and all
references in this Agreement to the date of the Prospectus shall mean the date
of the Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any Term
Sheet or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to
2
<PAGE> 7
mean and include all such financial statements and schedules and other
information which is incorporated by reference in the Registration Statement,
any preliminary prospectus or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to mean
and include the filing of any document under the Securities Exchange Act of 1934
(the "1934 Act") which is incorporated by reference in the Registration
Statement, such preliminary prospectus or the Prospectuses, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:
(i) Compliance with Registration Requirements. . The Company meets
the requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement,
the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any such amendment or supplement was issued and at the
Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434 and
the Prospectus shall not be "materially different", as such term is
used in Rule 434, from the prospectus included in the Registration
Statement at the time it became effective. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any Underwriter through Merrill Lynch expressly
for use in the Registration Statement or Prospectus.
3
<PAGE> 8
Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, when they became effective or at the time they were
or hereafter are filed with the Commission, complied and will comply in
all material respects with the requirements of the 1933 Act and the
1933 Act Regulations or the 1934 Act and the rules and regulations of
the Commission thereunder (the "1934 Act Regulations"), as applicable,
and, when read together with the other information in the Prospectus,
at the time the Registration Statement became effective, at the time
the Prospectus was issued and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), did not and will
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of
the Company and its consolidated subsidiaries at the dates indicated
and the statement of operations, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved. The supporting
schedules included in the Registration Statement present fairly in
accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included
in the Prospectus present fairly the information shown therein and have
been compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its
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subsidiaries considered as one enterprise, and (C) except for regular
quarterly dividends on the Common Stock in amounts per share that are
consistent with past practice, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) and [________, ________] (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly organized and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued
and outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the preemptive or similar rights
of any securityholder of such Subsidiary. The only subsidiaries of the
Company are (a) the subsidiaries listed on Schedule E hereto and (b)
certain other subsidiaries which, considered in the aggregate as a
single Subsidiary, do not constitute a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus (except
for subsequent issuances, if any, pursuant to this Agreement, pursuant
to reservations, agreements or employee benefit plans referred to in
the Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock, including the Securities to be purchased by
the Underwriters from the Selling Stockholder, have been duly
authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock, including the
Securities to be purchased by the Underwriters from the Selling
Stockholder, was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
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<PAGE> 10
(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) Authorization and Description of Securities. The Common
Stock conforms to all statements relating thereto contained in the
Prospectus and such description conforms to the rights set forth in the
instruments defining the same; no holder of the Securities will be
subject to personal liability by reason of being such a holder; and the
sale of the Securities is not subject to the preemptive or other
similar rights of any securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its subsidiaries is in violation of its charter or by-laws
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which it or any of them may be bound, or to which any
of the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the sale of the Securities) and compliance by the Company
with its obligations hereunder have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any subsidiary.
(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or
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<PAGE> 11
investigation before or brought by any court or governmental agency or
body, domestic or foreign, now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might reasonably
be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a
party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.
(xv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as have been already
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws.
(xvii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms and
conditions of all
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<PAGE> 12
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect; all of
the Governmental Licenses are valid and in full force and effect,
except when the invalidity of such Governmental Licenses or the failure
of such Governmental Licenses to be in full force and effect would not
have a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xviii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Prospectus or (b) do not,
singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company or any of its subsidiaries; and all of
the leases and subleases material to the business of the Company and
its subsidiaries, considered as one enterprise, and under which the
Company or any of its subsidiaries holds properties described in the
Prospectus, are in full force and effect, and neither the Company nor
any subsidiary has any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or any
subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary
to the continued possession of the leased or subleased premises under
any such lease or sublease.
(xix) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party
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<PAGE> 13
or governmental body or agency, against or affecting the Company or any
of its subsidiaries relating to Hazardous Materials or any
Environmental Laws.
(xx) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act.
(xxi) [Listing. The Securities have been approved for listing
on the New York Stock Exchange.]
(b) Representations and Warranties by the Selling Stockholder. The
Selling Stockholder represents and warrants to each Underwriter as of the date
hereof, as of the Closing Time, and, if the Selling Stockholder is selling
Option Securities on a Date of Delivery, as of each such Date of Delivery, and
agrees with each Underwriter, as follows:
(i) Accurate Disclosure. The Selling Stockholder has reviewed
and is familiar with the Registration Statement and the Prospectus and,
with respect to information contained therein regarding the Selling
Stockholder, neither the Prospectus nor any amendments or supplements
thereto or, when read together with the other information in the
Prospectus, documents incorporated or deemed to be incorporated by
reference therein, includes any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; the Selling Stockholder is not prompted to
sell the Securities to be sold by the Selling Stockholder hereunder by
any information concerning the Company or any subsidiary of the Company
which is not set forth in the Prospectus. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, when they became effective or at the time they were
or hereafter are filed with the Commission, when read together with the
other information in the Prospectus, at the time the Registration
Statement became effective, at the time the Prospectus was issued and
at the Closing Time (and, if any Option Securities are purchased, at
the Date of Delivery), with respect to the Selling Stockholder, did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(ii) Authorization of Agreements. The Selling Stockholder has
the full right, power and authority to enter into this Agreement and a
Power of Attorney and Custody Agreement (the "Power of Attorney and
Custody Agreement") and to sell, transfer and deliver the Securities to
be sold by the Selling Stockholder hereunder. The execution and
delivery of this Agreement and the Power of Attorney and Custody
Agreement and the sale and delivery of the Securities to be sold by the
Selling Stockholder and the consummation of the transactions
contemplated herein and compliance by the Selling Stockholder with its
obligations hereunder have been duly authorized by the Selling
Stockholder and do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with or constitute a
breach of, or default under, or result in the creation or imposition of
any tax, lien, charge or encumbrance upon the Securities
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<PAGE> 14
to be sold by the Selling Stockholder or any property or assets of the
Selling Stockholder pursuant to any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which the Selling Stockholder is a party or
by which the Selling Stockholder may be bound, or to which any of the
property or assets of the Selling Stockholder is subject, nor will such
action result in any violation of the provisions of the articles of
incorporation, the regulations of the board of directors or other
organizational instrument of the Selling Stockholder, if applicable, or
any applicable treaty, law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Selling Stockholder
or any of its properties.
(iii) Good and Marketable Title. The Selling Stockholder has
and will at the Closing Time and, if any Option Securities are
purchased, on the Date of Delivery have good and marketable title to
the Securities to be sold by the Selling Stockholder hereunder, free
and clear of any security interest, mortgage, pledge, lien, charge,
claim, equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery of such Securities and payment of the
purchase price therefor as herein contemplated, assuming each such
Underwriter has no notice of any adverse claim, each of the
Underwriters will receive good and marketable title to the Securities
purchased by it from the Selling Stockholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.
(iv) Due Execution of Power of Attorney and Custody Agreement.
The Selling Stockholder has duly executed and delivered, in the form
heretofore furnished to the Representatives, the Power of Attorney and
Custody Agreement with Benedict P. Rosen, John S. Gilbertson and Donald
B. Christiansen, or any of them, as attorneys-in-fact (the
"Attorneys-in-Fact") and Benedict P. Rosen, John S. Gilbertson and
Donald B. Christiansen, or any of them, as custodian (the "Custodian");
the Custodian is authorized to deliver the Securities to be sold by the
Selling Stockholder hereunder and to accept payment therefor; and each
Attorney-in-Fact is authorized to execute and deliver this Agreement
and the certificate referred to in Section 5(f) or that may be required
pursuant to Sections 5(l) and 5(m) on behalf of the Selling
Stockholder, to sell, assign and transfer to the Underwriters the
Securities to be sold by the Selling Stockholder hereunder, to
determine the purchase price to be paid by the Underwriters to the
Selling Stockholder, as provided in Section 2(a) hereof, to authorize
the delivery of the Securities to be sold by the Selling Stockholder
hereunder, to accept payment therefor, and otherwise to act on behalf
of the Selling Stockholder in connection with this Agreement.
(v) Absence of Manipulation. The Selling Stockholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(vi) Absence of Further Requirements. No filing with, or
consent, approval,
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<PAGE> 15
authorization, order, registration, qualification or decree of, any
court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by the Selling Stockholder of
its obligations hereunder or in the Power of Attorney and Custody
Agreement, or in connection with the sale and delivery of the
Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as may have previously been
made or obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws, and except that certain
reports shall be filed by the Selling Stockholder with the Minister of
Finance of Japan under the Securities and Exchange Law and the Foreign
Exchange and Foreign Trade Law of Japan.
(vii) Restriction on Sale of Securities. During a period of
[__] days from the date of the Prospectus, the Selling Stockholder will
not, without the prior written consent of Merrill Lynch, (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not
apply to the Securities to be sold hereunder.
(viii) Certificates Suitable for Transfer. Certificates for
all of the Securities to be sold by the Selling Stockholder pursuant to
this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.
(ix) No Association with NASD. Neither the Selling Stockholder
nor any of its affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, or has any other association with (within the meaning of
Article I, Section 1(m) of the By-laws of the National Association of
Securities Dealers, Inc.), any member firm of the National Association
of Securities Dealers, Inc.
(c) Officer's Certificates. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Stockholder as such and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by the
Selling Stockholder to the Underwriters as to the matters covered thereby.
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SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Selling Stockholder agrees to sell to each Underwriter, severally and
not jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Selling Stockholder, at the price per share set forth in Schedule C,
that proportion of the number of Initial Securities set forth in Schedule B
opposite the name of the Selling Stockholder, which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter, plus
any additional number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof, bears to
the total number of Initial Securities, subject, in each case, to such
adjustments among the Underwriters as the Representatives in their sole
discretion shall make to eliminate any sales or purchases of fractional
securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Selling Stockholder hereby grant(s) an option to the
Underwriters, severally and not jointly, to purchase up to an additional
[750,000] shares of Common Stock, as set forth in Schedule B, at the price per
share set forth in Schedule C, less an amount per share equal to any dividends
or distributions declared by the Company and payable on the Initial Securities
but not payable on the Option Securities. The option hereby granted will expire
30 days after the date hereof and may be exercised in whole or in part from time
to time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial Securities upon
notice by the Representatives to the Selling Stockholder setting forth the
number of Option Securities as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for such
Option Securities. Any such time and date of delivery (a "Date of Delivery")
shall be determined by the Representatives, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to all
or any portion of the Option Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
Option Securities then being purchased which the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter bears to the total
number of Initial Securities, subject in each case to such adjustments as the
Representatives in their discretion shall make to eliminate any sales or
purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Brown &
Wood LLP, One World Trade Center, New York, New York 10048, or at such other
place as shall be agreed upon by the Representatives and the Company and the
Selling Stockholder, at 9:00 A.M. (Eastern time) on the third (fourth, if the
pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Representatives and the Company and the Selling
Stockholder (such time and date of payment and delivery being herein called
"Closing Time").
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In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company and the Selling Stockholder, on each Date of Delivery as
specified in the notice from the Representatives to the Company and the Selling
Stockholder.
Payment shall be made to the Selling Stockholder by wire transfer of
immediately available funds to a bank account designated by the Custodian
pursuant to the Selling Stockholder's Power of Attorney and Custody Agreement
against delivery to the Representatives for the respective accounts of the
Underwriters of certificates for the Securities to be purchased by them. It is
understood that each Underwriter has authorized the Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial Securities and the Option Securities, if any, which it
has agreed to purchase. Merrill Lynch, individually and not as representative of
the Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial Securities or the Option Securities, if any, to
be purchased by any Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify
the Representatives immediately, and confirm the notice in writing, (i)
when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale
in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect
the filings necessary pursuant to Rule 424(b) and will take such steps
as it deems necessary to ascertain
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promptly whether the form of prospectus transmitted for filing under
Rule 424(b) was received for filing by the Commission and, in the event
that it was not, it will promptly file such prospectus. The Company
will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof
at the earliest possible moment.
(b) Filing of Amendments. The Company will give the
Representatives notice of its intention to file or prepare any
amendment to the Registration Statement (including any filing under
Rule 462(b)), any Term Sheet or any amendment, supplement or revision
to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, will furnish the
Representatives with copies of any such documents a reasonable amount
of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representatives or
counsel for the Underwriters shall object.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein and
documents incorporated or deemed to be incorporated by reference
therein) and signed copies of all consents and certificates of experts,
and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of
each amendment thereto (without exhibits) for each of the Underwriters.
The copies of the Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to
each Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"),
such number of copies of the Prospectus (as amended or supplemented) as
such Underwriter may reasonably request. The Prospectus and any
amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company
will comply with the 1933 Act and the 1933 Act Regulations so as to
permit the completion of the distribution of the Securities as
contemplated in this Agreement and in the Prospectus. If at any time
when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the
opinion of counsel for the Underwriters or for the
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<PAGE> 19
Company, to amend the Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include any untrue
statements of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel,
at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly
prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectus
comply with such requirements, and the Company will furnish to the
Underwriters such number of copies of such amendment or supplement as
the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws
of such states and other jurisdictions (domestic or foreign) as the
Representatives may designate and to maintain such qualifications in
effect for a period of not less than one year from the later of the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such
statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of
not less than one year from the effective date of the Registration
Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated
by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Listing. The Company will use its best efforts to [effect
and] maintain the listing of the Securities on the New York Stock
Exchange.
(i) Restriction on Sale of Securities. During a period of [__]
days from the date of the Prospectus, the Company will not, without the
prior written consent of Merrill Lynch, (i) directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any
share of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence
of ownership of the Common
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<PAGE> 20
Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not
apply to (A) the Securities to be sold hereunder, (B) any shares of
Common Stock issued by the Company upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof
and referred to in the Prospectus, (C) any shares of Common Stock
issued or options to purchase Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Prospectus or
(D) any shares of Common Stock issued pursuant to any non-employee
director stock plan or dividend reinvestment plan.
(j) Reporting Requirements. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by
the 1934 Act and the rules and regulations of the Commission
thereunder.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company and the Selling Stockholder will pay or cause
to be paid all expenses incident to the performance of their obligations under
this Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with the
offering, purchase, sale or delivery of the Securities, (iii) the preparation
and delivery of the certificates for the Securities to the Underwriters,
including any stock or other transfer taxes and any stamp or other duties
payable upon the sale or delivery of the Securities to the Underwriters, (iv)
the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities and (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Securities and (x) the fees and expenses
incurred in connection with the listing of the Securities on the New York Stock
Exchange.
(b) Expenses of the Selling Stockholder. The Selling Stockholder will
pay all expenses incident to the performance of its obligations under, and the
consummation of the transactions contemplated by this Agreement, including (i)
any stamp duties, capital duties and stock transfer taxes, if any, payable upon
the sale of the Securities to the Underwriters, and their transfer
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<PAGE> 21
between the Underwriters pursuant to an agreement between such Underwriters, and
(ii) the fees and disbursements of its counsel and accountants.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company and the Selling Stockholder shall reimburse
the Underwriters for all of their out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Stockholder may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholder
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary of the Company or on behalf of the Selling Stockholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or proceedings therefor initiated or threatened by
the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of counsel to the Underwriters. A prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing
such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has
elected to rely upon Rule 434, a Term Sheet shall have been filed with
the Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Parker, Poe, Adams & Bernstein, LLP, counsel for the
Company, in form and substance satisfactory to counsel for the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters to the effect set forth in Exhibit A
hereto and to such further effect as counsel to the Underwriters may
reasonably request.
(c) Opinion of Counsel for the Selling Stockholder. At Closing
Time, the Representatives shall have received the favorable opinion,
dated as of Closing Time, of Tomotsune Kimura & Mitomi, counsel for the
Selling Stockholder, in form and substance satisfactory to counsel for
the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters to the effect set forth in
Exhibit B hereto and to such further effect as counsel to the
Underwriters may reasonably request.
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<PAGE> 22
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Brown & Wood LLP, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of
the other Underwriters with respect to the matters set forth in clauses
[(i), (ii), (v), (vi) (solely as to preemptive or other similar rights
arising by operation of law or under the charter or by-laws of the
Company), (viii) through (x), inclusive, (xii), (xiv) (solely as to the
information in the Prospectus under "Description of Capital
Stock--Common Stock") and the penultimate paragraph] of Exhibit A
hereto. In giving such opinion such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State
of New York, the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Representatives. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to
the extent they deem proper, upon certificates of officers of the
Company and its subsidiaries and certificates of public officials.
(e) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the Representatives shall have
received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the
Company, dated as of Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same
force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(f) Certificate of Selling Stockholder. At Closing Time, the
Representatives shall have received a certificate of an
Attorney-in-Fact on behalf of the Selling Stockholder, dated as of
Closing Time, to the effect that (i) the representations and warranties
of the Selling Stockholder contained in Section 1(b) hereof are true
and correct in all respects with the same force and effect as though
expressly made at and as of Closing Time and (ii) the Selling
Stockholder has complied in all material respects with all agreements
and all conditions on its part to be performed under this Agreement at
or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution
of this Agreement, the Representatives shall have received from
PriceWaterhouse Coopers a letter dated such date, in form and substance
satisfactory to the Representatives, together with signed or reproduced
copies of such letter for each of the other Underwriters containing
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<PAGE> 23
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(h) Bring-down Comfort Letter. At Closing Time, the
Representatives shall have received from PriceWaterhouse Coopers a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (g) of
this Section, except that the specified date referred to shall be a
date not more than three business days prior to Closing Time.
(i) [Approval of Listing. At Closing Time, the Securities
shall have been approved for listing on the New York Stock Exchange,
subject only to official notice of issuance.]
(j) No Objection. The NASD has confirmed that it has not
raised any objection with respect to the fairness and reasonableness of
the underwriting terms and arrangements.
(k) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the
form of Exhibit C hereto signed by the persons listed on Schedule D
hereto.
(l) Conditions to Purchase of Option Securities. In the event
that the Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the Option Securities, the
representations and warranties of the Company and the Selling
Stockholder contained herein and the statements in any certificates
furnished by the Company, any subsidiary of the Company and the Selling
Stockholder hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representatives
shall have received:
(i) Officers' Certificate. A certificate, dated such
Date of Delivery, of the President or a Vice President of the
Company and of the chief financial or chief accounting officer
of the Company confirming that the certificate delivered at
the Closing Time pursuant to Section 5(e) hereof remains true
and correct as of such Date of Delivery.
(ii) Certificate of Selling Stockholder. A
certificate, dated such Date of Delivery, of an
Attorney-in-Fact on behalf of the Selling Stockholder
confirming that the certificate delivered at Closing Time
pursuant to Section 5(f) remains true and correct as of such
Date of Delivery.
(iii) Opinion of Counsel for Company. The favorable
opinion of Parker, Poe, Adams & Bernstein, LLP, counsel for
the Company, in form and substance satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(b) hereof.
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<PAGE> 24
(iv) Opinion of Counsel for the Selling Stockholder.
The favorable opinion of Tomotsune Kimura & Mitomi, counsel
for the Selling Stockholder, in form and substance
satisfactory to counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(c) hereof.
(v) Opinion of Counsel for Underwriters. The
favorable opinion of Brown & Wood LLP, counsel for the
Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(d) hereof.
(vi) Bring-down Comfort Letter. A letter from
PriceWaterhouse Coopers, in form and substance satisfactory to
the Representative(s) and dated such Date of Delivery,
substantially in the same form and substance as the letter
furnished to the Representatives pursuant to Section 5(g)
hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more
than five days prior to such Date of Delivery.
(m) Additional Documents. At Closing Time and at each Date of
Delivery counsel for the Underwriters shall have been furnished with
such documents and opinions as they may require for the purpose of
enabling them to pass upon the sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and the Selling Stockholder in connection with the sale of the
Securities as herein contemplated shall be satisfactory in form and
substance to the Representatives and counsel for the Underwriters.
(n) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the
Representatives by notice to the Company and the Selling Stockholder at
any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination shall be without liability of any
party to any other party except as provided in Section 4 and except
that Sections 1, 6, 7 and 8 shall survive any such termination and
remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company and the Selling
Stockholder, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever,
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<PAGE> 25
as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Company and the Selling Stockholder;
and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(b) Indemnification of Company, Directors and Officers and Selling
Stockholder. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and the Selling
Stockholder and each person, if any, who controls the Selling Stockholder within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Underwriter
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<PAGE> 26
through Merrill Lynch expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company and/or the Selling
Stockholder. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from al
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Stockholder with respect to indemnification.
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<PAGE> 27
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Stockholder on the one hand and of the Underwriters on the other hand in
connection with the statements or which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations.
The relative benefits received by the Company and the Selling
Stockholder on the one hand and the Underwriters on the other hand in connection
with the offering of the Securities pursuant to this Agreement shall be deemed
to be in the same respective proportions as the total net proceeds from the
offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholder and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, or, if Rule 434 is used, the corresponding location
on the Term Sheet bear to the aggregate initial public offering price of the
Securities as set forth on such cover.
The relative fault of the Company and the Selling Stockholder on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Stockholder or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholder and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of
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<PAGE> 28
any damages which such Underwriter has otherwise been required to pay by reason
of any such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or the
Selling Stockholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company or
the Selling Stockholder, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial Securities set forth opposite their respective names in
Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Stockholder with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Stockholder submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or on behalf of the
Company or the Selling Stockholder, and shall survive delivery of the Securities
to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Stockholder, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representatives, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have
24
<PAGE> 29
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority, or (iv) if a banking moratorium has been declared by
either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the Underwriters to purchase and of the Company
to sell the Option Securities to be purchased and sold on such Date of
Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the (i) Representatives or (ii) the Company and the
Selling Stockholder shall have the right to postpone Closing Time or the
relevant Date of Delivery, as the case may be, for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
25
<PAGE> 30
SECTION 11. Default by the Selling Stockholder. If the Selling
Stockholder shall fail at Closing Time or at a Date of Delivery to sell and
deliver the number of Securities which the Selling Stockholder is obligated to
sell hereunder, then the Underwriters may, at option of the Representatives,
either (a) terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8
shall remain in full force and effect or (b) elect to purchase the Securities
which the Selling Stockholder have agreed to sell. No action taken pursuant to
this Section 11 shall relieve the Selling Stockholder so defaulting from
liability, if any, in respect of such default.
In the event of a default by the Selling Stockholder as referred to in
this Section 11, each of the Representatives shall have the right to postpone
Closing Time or Date of Delivery for a period not exceeding seven days in order
to effect any required change in the Registration Statement or Prospectus or in
any other documents or arrangements.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of ; notices to
the Company shall be directed to it at , attention of ; and
notices to the Selling Stockholder shall be directed to Kyocera Corporation,
Accounting Department, 6 Takeda Tobadono-cho, Fushimi-ku, Kyota 612-8501, Japan,
attention of Hideki Ishida.
SECTION 13. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters, the Company and the Selling Stockholder
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Stockholder and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Stockholder
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
26
<PAGE> 31
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholder a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Underwriters,
the Company and the Selling Stockholder in accordance with its terms.
Very truly yours,
AVX CORPORATION
By
------------------------------------
Title:
[__________________]
By
------------------------------------
As Attorney-in-Fact acting on behalf
of the Selling Stockholder named in
Schedule B hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
27
<PAGE> 32
SCHEDULE A
Number of
Name of Underwriter Initial Securities
------------------- ------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
Total...................................... [5,250,000]
===========
Sch A - 1
<PAGE> 33
SCHEDULE B
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- ------------------------
Kyocera Corporation....... 5,250,000 750,000
Total..................... 5,250,000 750,000
Sch B - 1
<PAGE> 34
SCHEDULE C
AVX CORPORATION
5,250,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The public offering price per share for the Securities, determined
as provided in said Section 2, shall be $ .
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $ , being an amount equal to the public
offering price set forth above less $ per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.
Sch C - 1
<PAGE> 35
[SCHEDULE D]
[List of persons and entities
subject to lock-up]
Sch C - 1
<PAGE> 36
[SCHEDULE E]
[List of subsidiaries]
Sch E - 1
<PAGE> 37
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(b)
A-1
<PAGE> 38
Exhibit B
FORM OF OPINION OF COUNSEL FOR THE SELLING STOCKHOLDER
TO BE DELIVERED PURSUANT TO SECTION 5(c)
B-1
<PAGE> 39
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(K)]
Exhibit C
, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
as Representative(s) of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by AVX Corporation
Dear Sirs:
The undersigned, a stockholder and an officer and/or director of AVX
Corporation, a Delaware corporation (the "Company"), understands that Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley &
Co. Incorporated, Salomon Smith Barney Inc., propose to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company and the Selling
Stockholder providing for the public offering of shares (the "Securities") of
the Company's common stock, par value $.01 per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder and an officer and/or director of the Company, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned agrees with each underwriter to be
named in the Purchase Agreement that, during a period of days from the date
of the Purchase Agreement, the undersigned will not, without the prior written
consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of the Company's Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership
M-1
<PAGE> 40
of the Common Stock, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise.
Very truly yours,
Signature: _______________________
Print Name: ______________________
M-2
<PAGE> 1
Exhibit 5.1
_________, 2000
Board of Directors
AVX Corporation
801 17th Avenue South
Myrtle Beach, South Carolina 29577
Re: AVX Corporation/6,000,000 Shares of Common Stock
Dear Sirs:
We are acting as counsel to AVX Corporation, a Delaware corporation
(the "Company"), in connection with the preparation, execution, filing and
processing with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933, as amended (the "Act"), of a
Registration Statement (No. 333- ) on Form S-3 (as amended through the date
hereof, the "Registration Statement"). This opinion is furnished to you for
filing with the Commission pursuant to Item 601(b)(5) of Regulation S-K
promulgated under the Act.
The Registration Statement covers resales by a selling stockholder
listed in the Registration Statement (the "Selling Stockholder") of certain
shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), to the public pursuant to a Purchase Agreement by and between the
Company, the Selling Stockholder, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, Morgan
Stanley Dean Witter & Co. and Salomon Smith Barney Inc. as representatives of
the underwriters (the "Purchase Agreement").
In our representation of the Company, we have examined (1) the
Registration Statement, (2) the Company's Certificate of Incorporation and
Bylaws, as amended to date, (3) all actions of the Company's Board of Directors
recorded in the Company's minute book, (4) the form of certificate for the
Company's Common Stock, (5) the form of Purchase Agreement filed as Exhibit 1.1
to the Registration Statement and such other documents as we have considered
necessary for purposes of rendering the opinions expressed below.
Based upon the foregoing, we are of the opinion that the 6,000,000
shares of Common Stock issued by the Company to the Selling Stockholder and
included in the Registration Statement have been duly authorized and validly
issued and are fully paid and non-assessable.
The opinions expressed herein are limited to the laws of the General
Corporation Law of the State of Delaware and the Act.
<PAGE> 2
Board of Directors
AVX Corporation
____________, 2000
Page 2
We hereby consent to the use of this opinion letter as Exhibit 5.1 to
the Registration Statement and to the use of our name under the heading "Legal
Matters" in related prospectuses. In giving this consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report, dated May 14, 1999, relating to the
financial statements, which appear in AVX Corporation's Annual Report on Form
10-K for the year ended March 31, 1999 and the use in this Registration
Statement on Form S-3 of our report dated May 14, 1999 relating to the financial
statements which appear in such Registration Statement. We also consent to the
references to us under the headings "Experts" and "Selected Financial Data" in
such Registration Statement.
PricewaterhouseCoopers LLP
Atlanta, Georgia
January 20, 2000
