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JOINT PROXY STATEMENT/PROSPECTUS SEPTEMBER 21, 1998
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[LOGO]
THE PROPOSED ZEBRA/ELTRON MERGER
The Boards of Directors of Zebra Technologies Corporation and Eltron
International, Inc. have agreed on a merger designed to create a leading
supplier of bar code products, offering the broadest line of bar code products
in the world. The combined company will be named Zebra Technologies Corporation
and will be headquartered in Vernon Hills, Illinois.
The merger is structured so that Zebra will be the surviving publicly-traded
company and Eltron will become a wholly-owned subsidiary of Zebra. Eltron
shareholders will receive nine tenths (0.90) of a share of Zebra Class B common
stock for each share of Eltron common stock that they own, and Zebra
stockholders will continue to own their existing shares. We estimate that the
shares of Zebra common stock to be issued to Eltron shareholders will represent
approximately 22.1% of the outstanding common stock of Zebra after the merger.
Likewise, the shares of Zebra common stock held by Zebra stockholders prior to
the merger will represent approximately 77.9% of the outstanding common stock of
Zebra after the merger. Because Eltron shareholders will be issued Class B
common stock of Zebra that is entitled to 10 votes per share, the common stock
issued to Eltron shareholders will represent approximately 50.3% of the total
voting power of Zebra common stock (both Class A and Class B).
The merger cannot be completed unless the Zebra stockholders and the Eltron
shareholders both approve it. We have scheduled special meetings for our
stockholders and shareholders to vote on the merger. YOUR VOTE IS VERY
IMPORTANT.
Whether or not you plan to attend a meeting, please take the time to vote by
completing and mailing the enclosed proxy card to us. If you sign, date and mail
your proxy card without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger and any other proposal submitted to
stockholders or shareholders at your meeting. If you fail to return your proxy
card, the effect in most cases will be a vote against the merger. Returning your
proxy card will not affect your right to vote in person, should you choose to
attend a meeting.
Only Zebra stockholders and Eltron shareholders of record as of September 4,
1998, are entitled to attend and vote at the meetings. The dates, times and
places of the meetings are as follows:
FOR ZEBRA STOCKHOLDERS:
MONDAY, OCTOBER 26, 1998
10:00 A.M., LOCAL TIME
ZEBRA TECHNOLOGIES CORPORATION
333 CORPORATE WOODS PARKWAY
VERNON HILLS, ILLINOIS 60061
FOR ELTRON SHAREHOLDERS:
MONDAY, OCTOBER 26, 1998
9:00 A.M., LOCAL TIME
RADISSON HOTEL
999 ENCHANTED WAY
SIMI VALLEY, CALIFORNIA 93065
This Joint Proxy Statement/Prospectus provides you with detailed information
about the proposed merger. We encourage you to read this entire document
carefully including the "RISK FACTORS" section beginning on page 15. In
addition, you may obtain information about our companies from documents that we
have filed with the Securities and Exchange Commission.
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[SIG] [SIG]
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Edward L. Kaplan Donald K. Skinner
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Zebra Technologies Corporation Eltron International, Inc.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE ZEBRA COMMON STOCK TO BE ISSUED UNDER THIS JOINT
PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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ELTRON INTERNATIONAL, INC.
41 MORELAND ROAD
SIMI VALLEY, CALIFORNIA 93065-1692
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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To Our Shareholders:
We will hold a special meeting of shareholders of Eltron International, Inc.
at 9:00 a.m., local time, on October 26, 1998 at the Radisson Hotel, 999
Enchanted Way, Simi Valley, California 93065. At the Eltron special meeting we
will ask you to vote on:
- A proposal to merge with Zebra Technologies Corporation, after which
Eltron will become a wholly-owned subsidiary of Zebra; and
- Such other business as may properly come before the special meeting.
We have fixed the close of business on September 4, 1998, as the record date
for the determination of our shareholders entitled to vote at this special
meeting (including any adjournment). A list of such shareholders will be
available at the special meeting and will also be available for inspection by
shareholders of record during normal business hours at our corporate
headquarters located at 41 Moreland Road, Simi Valley, California 93065-1692 for
10 days prior to the date of the special meeting.
After careful consideration, your board of directors is excited to present
this opportunity to you. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THIS PROPOSAL SO THAT WE MAY COMPLETE THE MERGER. A majority of
Zebra stockholders must also vote in favor of the merger before we can complete
it.
Approval of the proposal to merge with Zebra requires the affirmative vote
of a majority of the outstanding shares of Eltron common stock entitled to vote
at this special meeting. Please sign and promptly return the proxy card in the
enclosed prepaid envelope marked "Proxy," WHETHER OR NOT YOU EXPECT TO ATTEND
THE SPECIAL MEETING. You can revoke your proxy at any time before its exercise.
Returning your proxy card will not affect your right to vote in person, if you
choose to attend the special meeting. Failure to return a properly executed
proxy card or to vote at the special meeting will have the same effect as a vote
against the merger proposal.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG]
KRISTON D. QUALLS,
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
Simi Valley, California
September 21, 1998
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[LOGO]
ZEBRA TECHNOLOGIES CORPORATION
333 CORPORATE WOODS PARKWAY
VERNON HILLS, ILLINOIS 60061-3109
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------------
To Our Stockholders:
We will hold a special meeting of stockholders of Zebra Technologies
Corporation at 10:00 a.m., local time, on October 26, 1998 at our offices
located at 333 Corporate Woods Parkway, Vernon Hills, Illinois 60061. At the
Zebra special meeting we will ask you to vote on:
- A proposal to issue Class B common stock that will enable Zebra to merge
with Eltron International, Inc., after which Eltron will become a
wholly-owned subsidiary of Zebra;
- A proposal to increase the amount of authorized shares of Class A common
stock available for issuance under Zebra's 1997 Stock Option Plan from
531,500 shares to 2.0 million shares, to accommodate options we will issue
in connection with the merger; and
- Such other business as may properly come before the special meeting.
We have fixed the close of business on September 4, 1998, as the record date
for the determination of our stockholders entitled to vote at this special
meeting (including any adjournment). A list of such stockholders will be
available at the special meeting and will also be available for inspection by
stockholders of record during normal business hours at our corporate
headquarters located at 333 Corporate Woods Parkway, Vernon Hills, Illinois
60061-3109, for 10 days prior to the special meeting.
After careful consideration, your board of directors is excited to present
this opportunity to you. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THESE PROPOSALS SO THAT WE MAY COMPLETE THE MERGER. A majority
of Eltron shareholders must also vote in favor of the merger before we can
complete it.
Approval of these proposals requires the affirmative vote of a majority of
the voting power of Zebra common stock entitled to vote at this special meeting,
where there will be a single vote of all holders of Zebra common stock (both
Class A and Class B voting as one class) on each proposal. Please sign and
promptly return the proxy card in the enclosed prepaid envelope marked "Proxy,"
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING. You can revoke your
proxy at any time before its exercise. Returning your proxy card will not affect
your right to vote in person, if you choose to attend the special meeting.
Failure to return a properly executed proxy card or to vote at the special
meeting will have the same effect as a vote against these proposals.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG]
GERHARD CLESS,
SECRETARY
Vernon Hills, Illinois
September 21, 1998
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE ZEBRA/ELTRON
MERGER....................................... 1
SUMMARY........................................ 2
The Companies................................ 2
Our Reasons for the Merger................... 2
Our Recommendations to Stockholders.......... 2
The Merger................................... 2
The Eltron Special Meeting................... 5
The Zebra Special Meeting.................... 5
Risk Factors................................. 6
Market and Market Prices..................... 7
Eltron Summary Historical Consolidated
Financial Information...................... 8
Zebra Summary Historical Consolidated
Financial Information...................... 10
Summary Unaudited Pro Forma Condensed
Combined Financial Information............. 12
Comparative Per Share Data................... 14
RISK FACTORS................................... 15
Uncertainties Relating to Integration........ 15
Certain Characteristics of the Zebra Class B
Shares..................................... 15
Dependence on Significant Customers.......... 16
Risks Associated with Fixed Exchange Ratio... 16
Risk of Product Introductions and New
Technology................................. 16
Dependence on Key Personnel.................. 17
Risks Associated with International
Operations................................. 17
Risks Associated with Limited Supply
Sources.................................... 17
Management of Inventory...................... 18
Management of Rapidly Changing Business...... 18
Competition.................................. 18
Effect of the Merger on Customers............ 19
Risks Associated with Acquisitions........... 19
Fluctuations in Quarterly Results; Possible
Volatility of Stock Price.................. 19
Patents, Intellectual Property and
Proprietary Rights......................... 20
Risks Associated With New Millennium......... 20
UNCERTAINTIES RELATING TO FORWARD-LOOKING
STATEMENTS................................... 21
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THE ELTRON SPECIAL MEETING..................... 21
Purpose of the Eltron Special Meeting........ 21
Proxies...................................... 21
Date, Time and Place of Meeting.............. 21
Record Date and Outstanding Shares........... 21
Solicitation................................. 21
Vote Required................................ 22
Revocability of Proxies...................... 22
THE ZEBRA SPECIAL MEETING...................... 22
Purpose of the Zebra Special Meeting......... 22
Proxies...................................... 22
Date, Time and Place of Meeting.............. 23
Record Date and Outstanding Shares........... 23
Solicitation................................. 23
Vote Required................................ 23
Revocability of Proxies...................... 24
APPROVAL OF THE MERGER......................... 24
Background of the Merger..................... 24
Reasons for the Merger....................... 26
Board Recommendations........................ 30
Opinion of BancAmerica Robertson Stephens,
Financial Advisor to Eltron................ 30
Opinion of William Blair & Company, L.L.C.,
Financial Advisor to Zebra................. 34
Accounting Treatment......................... 37
Regulatory Matters........................... 37
Rights of Dissenting Eltron Shareholders..... 38
Rights of Dissenting Zebra Stockholders...... 40
Interests of Certain Persons in the Merger... 40
Certain Federal Income Tax Consequences...... 42
Resale of Class B Shares..................... 44
Eltron Voting Agreement...................... 44
Zebra Voting Agreement....................... 44
Zebra and Eltron Affiliate Agreements........ 45
Conversion of Outstanding Warrants........... 45
THE MERGER AGREEMENT........................... 46
General...................................... 46
Consideration to be Received in the Merger;
Conversion of Eltron Options............... 46
No Fractional Shares......................... 46
Stock Ownership Following the Merger......... 47
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Conversion of Eltron Common Stock; Procedures
for Exchange of Certificates............... 47
Certain Conditions........................... 47
Certain Representations and Warranties....... 48
Certain Covenants............................ 49
No Solicitation of Transactions.............. 49
Indemnification and Insurance................ 50
Termination.................................. 50
Termination Fee.............................. 50
Expenses..................................... 50
INFORMATION REGARDING ELTRON................... 51
INFORMATION REGARDING ZEBRA.................... 51
POST-MERGER DIRECTORS AND OFFICERS OF ZEBRA.... 51
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS OF ELTRON.................. 56
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS OF ZEBRA................... 57
ELTRON EXECUTIVE COMPENSATION.................. 59
Option Exercises in Last Fiscal Year......... 60
Option Grants in Last Fiscal Year............ 60
ZEBRA EXECUTIVE COMPENSATION................... 61
Option Exercises in Last Fiscal Year......... 62
Option Grants in Last Fiscal Year............ 63
PROPOSAL TO INCREASE THE NUMBER OF SHARES
AVAILABLE FOR OPTIONS UNDER THE ZEBRA 1997
STOCK OPTION PLAN............................ 64
General...................................... 64
Awards Under the 1997 Stock Option Plan...... 65
Changes in Control........................... 66
Discussion of Federal Income Tax
Consequences............................... 66
Non-Qualified Stock Options.................. 67
Incentive Stock Options...................... 67
Parachute Payments........................... 68
DESCRIPTION OF ZEBRA CAPITAL STOCK............. 69
Class A and Class B Common Stock............. 69
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Preferred Stock.............................. 70
Delaware Law and Certain Corporate
Provisions................................. 70
COMPARISON OF SHAREHOLDERS' RIGHTS............. 71
Size of the Board of Directors............... 71
Classified Board of Directors................ 71
Cumulative Voting............................ 72
Removal of Directors......................... 72
Filling Vacancies on the Board of
Directors.................................. 72
Interested Director Transactions............. 72
Indemnification of Directors and Officers.... 73
Amendments to the Certificate of
Incorporation and Articles of
Incorporation.............................. 73
Amendment of Bylaws.......................... 74
Power to Call Special Shareholders' or
Stockholders' Meeting; Action by Consent... 74
Inspection of Shareholders' List............. 74
Dividends and Repurchases of Shares.......... 74
Approval of Certain Corporate Transactions... 75
Business Combination Following a Change of
Control.................................... 75
Shareholder Derivative Suits................. 75
Appraisal Rights............................. 76
Dissolution.................................. 76
EXPERTS........................................ 77
LEGAL MATTERS.................................. 77
WHERE YOU CAN FIND MORE INFORMATION............ 78
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA............ 80
Selected Historical Financial Data........... 80
Zebra Selected Historical Consolidated
Financial Information...................... 81
Eltron Selected Historical Consolidated
Financial Information...................... 82
Unaudited Pro Forma Condensed Combined
Financial Data............................. 83
Unaudited Selected Pro Forma Condensed
Combined Financial Information............. 83
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Unaudited Pro Forma Condensed Combined
Financial Data............................. 84
Unaudited Pro Forma Condensed Combined
Balance Sheet as of July 4, 1998........... 84
Unaudited Pro Forma Condensed Combined
Statement of Income For the Six Months
Ended July 4, 1998......................... 85
Unaudited Pro Forma Condensed Combined
Statement of Income For the Six Months
Ended June 28, 1997........................ 86
Unaudited Pro Forma Condensed Combined
Statement of Income For the Year Ended
December 31, 1997.......................... 87
Unaudited Pro Forma Condensed Combined
Statement of Income For the Year Ended
December 31, 1996.......................... 88
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Unaudited Pro Forma Condensed Combined
Statement of Income For the Year Ended
December 31, 1995.......................... 89
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements.............. 90
Unaudited Quarterly Results.................. 91
APPENDICES
A--Agreement and Plan of Merger.............. A-1
B--Opinion of William Blair & Company,
L.L.C...................................... B-1
C--Opinion of BancAmerica Robertson
Stephens................................... C-1
D-- California General Corporation Law,
Sections 1300 through 1312................ D-1
E--Eltron Stockholders' Agreement............ E-1
F--Zebra Stockholders' Agreement............. F-1
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QUESTIONS AND ANSWERS
ABOUT THE ZEBRA/ELTRON MERGER
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Q: WHY ARE THE TWO COMPANIES PROPOSING TO
MERGE?
A: Both Zebra and Eltron manufacture and
distribute bar code products. Our
products generally are complementary,
and the merger will enable our combined
enterprise to offer the broadest line of
bar code products in the world. This
merger will afford each of us the
complementary strengths of the other,
providing our combined enterprise
significant potential advantages and
resources. We believe that this merger
will allow us to accelerate long-term
growth and provide added stockholder
value. We note that achieving these
anticipated benefits is subject to
certain risks discussed on pages 15 to
20. To review the reasons for the merger
in greater detail, and related
uncertainties, see pages 26 to 30.
Q: HOW WILL I BENEFIT?
A: We believe that stockholders of Zebra
and Eltron will benefit by being owners
of a company that is better able to
compete effectively in its industry than
either Zebra or Eltron individually.
Q: WHAT DO I NEED TO DO NOW?
A: Just sign your proxy card and mail it to
us in the enclosed return envelope as
soon as possible, so that your shares
may be represented at the special
meetings. Both the Zebra and Eltron
special meetings will take place on
Monday, October 26, 1998. The Boards of
Directors of both Zebra and Eltron
unanimously recommend voting in favor of
the proposed merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATE
NOW?
A: No. Zebra stockholders will keep their
current certificates. After the merger
is completed, we will send Eltron
shareholders written instructions for
exchanging their stock certificates.
Q: PLEASE EXPLAIN THE EXCHANGE RATIO.
A: Eltron shareholders will receive
nine-tenths (0.90) of a share of Zebra
common stock in exchange for each share
of Eltron common stock. We will not
issue fractional shares. Eltron
shareholders who would otherwise be
entitled to receive a fractional share
will instead receive cash based on the
market value of the fractional share of
Zebra Class A common stock.
EXAMPLE: IF YOU CURRENTLY OWN 101 SHARES
OF ELTRON STOCK, THEN AFTER THE MERGER
YOU WILL BE ENTITLED TO RECEIVE 90
SHARES OF ZEBRA CLASS B COMMON STOCK AND
A CHECK FOR THE MARKET VALUE OF THE 0.9
FRACTIONAL SHARE. IF YOU CURRENTLY OWN
101 SHARES OF ZEBRA STOCK YOU WILL
CONTINUE TO HOLD THOSE 101 SHARES AFTER
THE MERGER.
Q: WHAT ABOUT FUTURE DIVIDENDS?
A: Historically, neither Zebra nor Eltron
has paid dividends. We do not expect
that our combined enterprise will pay
any dividends in the future.
Q: WHEN DO YOU EXPECT THE MERGER TO BE
COMPLETED?
A: We are working towards completing the
merger as quickly as possible, hopefully
during the week of the stockholder and
shareholder meetings.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE
MERGER?
A: The exchange of shares by Eltron
shareholders generally will be tax-free
to Eltron shareholders for federal
income tax purposes, except for taxes on
cash received for a fractional share.
The merger will be tax-free to Zebra
stockholders for federal income tax
purposes. To review the tax consequences
to stockholders in greater detail, see
pages 42 through 44.
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SUMMARY
FOR YOUR CONVENIENCE, WE HAVE PROVIDED A BRIEF SUMMARY OF CERTAIN
INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS SUMMARY
HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT CONTAIN ALL OF
THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR
A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ
CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS WE HAVE REFERRED YOU TO. SEE
"WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 78.
THE COMPANIES
ELTRON INTERNATIONAL, INC.
41 Moreland Road
Simi Valley, California 93065-1692
(805) 579-1800
Eltron designs, manufactures and distributes thermal label and tag printers,
bar code verifying printers, plastic card printers, secure identification
printing systems, related accessories and software. Eltron also offers a full
range of consumables for its line of printers, including labels, tags, ribbons
and cards. Major markets include package delivery, healthcare, retail,
industrial, access control, loyalty and educational cards. Eltron was founded in
1991.
ZEBRA TECHNOLOGIES CORPORATION
333 Corporate Woods Parkway
Vernon Hills, Illinois 60061
(847) 634-6700
Zebra designs, manufactures and distributes direct thermal and thermal
transfer bar code label printers, related specialty labels and ribbons, and
label design software principally to industrial and service organizations
throughout the world for use in automatic identification and data collection
systems. Zebra was founded in 1969.
OUR REASONS FOR THE MERGER
The Eltron Board believes that the terms of the merger are fair to, and in
the best interest of, Eltron and its shareholders (other than Zebra and its
affiliates). The Eltron Board considered a wide variety of information and a
number of factors in connection with its evaluation of the proposed merger. The
Eltron Board determined that the merger provided an opportunity that serves the
best interests of Eltron and its shareholders and an opportunity for Eltron
shareholders, if they so choose, to share in a potential for long-term growth of
the combined company.
The Zebra Board considered a wide variety of information and a number of
factors in connection with its evaluation of the proposed merger, and determined
that the merger provides an opportunity that serves the best interests of Zebra
and its stockholders.
To review the reasons for the merger in greater detail, as well as related
uncertainties, see pages 26 through 30.
OUR RECOMMENDATIONS TO STOCKHOLDERS
TO ELTRON SHAREHOLDERS:
The Eltron Board believes that the merger is in your best interests and
unanimously recommends that you vote FOR the proposal to approve and adopt the
merger agreement and the merger.
TO ZEBRA STOCKHOLDERS:
The Zebra Board believes that the merger is in your best interests and
unanimously recommends that you vote FOR the proposals to:
- Approve the issuance of the Class B common stock to Eltron shareholders in
the merger; and
- Approve an increase in the number of shares of Class A common stock
available for issuance under the Zebra 1997 Stock Option Plan (a general
description of the plan starts on page 64).
THE MERGER
The merger agreement is attached as Appendix A to this Joint Proxy
Statement/Prospectus. We encourage you to read the merger agreement, as it is
the legal document that governs the merger.
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CONVERSION OF ELTRON COMMON STOCK (see page 46)--Subject to the terms and
conditions of the merger agreement, each share of Eltron common stock then
outstanding (other than shares owned by Zebra and its affiliates) will be
automatically converted into the right to receive 0.90 of a share of Zebra Class
B common stock, subject to the payment of cash for fractional shares and
dissenter's rights.
ZEBRA CLASS B COMMON STOCK (see page 69)--The Zebra Class B common stock
that the Eltron shareholders will receive as a result of the merger is neither
traded on nor quoted by any securities exchange. Zebra Class A common stock is
traded and quoted on the Nasdaq National Market. Generally, the rights of the
holders of Zebra's Class A and Class B common stock are identical, except that
each Class B share is entitled to ten votes per share and each Class A share is
entitled to one vote per share. All or any part of the Class B common stock
which will be issued to the Eltron shareholders as a result of the merger may be
converted at any time, at the holder's option, into shares of Zebra Class A
common stock on a share-for-share basis. After issuance to the Eltron
shareholders, in the event that the Eltron shareholders sell or transfer the
Class B common stock, the Class B common stock will automatically convert into
Class A common stock, subject to certain limited exceptions. In the event the
Eltron shareholders desire to convert or sell the Class B common stock they
receive in the merger, Zebra has made arrangements with its transfer agent to
facilitate such conversion or transfer.
ELTRON STOCK OPTIONS (see page 46)--The merger agreement provides that all
outstanding options to purchase Eltron common stock under the Eltron stock
option plans shall convert into outstanding options to purchase Zebra Class B
common stock based on the exchange ratio of 0.90 of a share of Zebra Class B
common stock for each share of Eltron common stock.
STOCK OWNERSHIP FOLLOWING THE MERGER (see page 47)--Based upon 7,684,210
shares of Eltron common stock issued and outstanding as of September 4, 1998, an
aggregate of approximately 6,915,789 shares of Zebra Class B common stock will
be issued to holders of Eltron's common stock.
The existing holders of Eltron common stock will hold approximately 58.5% of
Zebra's Class B common stock issued and outstanding after the merger.
Furthermore, the existing holders of Eltron common stock will hold
approximately 22.1% of Zebra's total issued and outstanding Class A and Class B
common stock. Because Eltron shareholders will be issued Class B common stock
that is entitled to 10 votes per share, the common stock issued to Eltron
shareholders will represent approximately 50.3% of the total voting power of
both classes of Zebra common stock.
OPINION OF FINANCIAL ADVISOR TO ELTRON (see page 30)--BancAmerica Robertson
Stephens delivered its opinion to the Eltron Board on July 8, 1998, to the
effect that the exchange ratio was fair from a financial point of view to the
Eltron shareholders (other than Zebra and its affiliates). The full text of the
opinion is attached as Appendix C. We urge Eltron shareholders to read this
opinion in its entirety.
OPINION OF FINANCIAL ADVISOR TO ZEBRA (see page 34)--William Blair &
Company, L.L.C. delivered its opinion dated July 7, 1998 to the Zebra Board on
July 8, 1998, that the consideration to be paid by Zebra under the merger
agreement was fair to Zebra from a financial point of view. The full text of the
opinion is attached as Appendix B. We urge Zebra stockholders to read this
opinion in its entirety.
CONDITIONS TO THE MERGER--The completion of the merger depends upon meeting
a number of conditions including:
- The SEC must declare the registration statement of which this Joint Proxy
Statement/Prospectus is a part, effective (which occurred on September 18,
1998);
- the Eltron shareholders must approve the merger agreement and merger;
- the Zebra stockholders must approve the issuance of the Class B common
stock and
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an increase in the number of shares of Class A common stock for the 1997
Zebra Stock Option Plan; and
- each of our independent auditors must deliver letters relating to our
ability to account for the merger as a pooling-of-interests.
TERMINATION (see page 50)--Either of us can terminate the merger agreement
if the merger is not complete by December 31, 1998, and in certain other
circumstances.
EXPENSES AND TERMINATION FEE (see page 50)--In general, all fees and
expenses incurred in connection with the merger agreement and the transactions
it contemplates shall be paid by the party incurring such expenses, whether or
not the merger is completed.
Eltron has agreed that if the merger agreement is terminated under certain
circumstances, it will pay to Zebra a $12.0 million non-refundable fee.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (see page 40)--Certain members of
Eltron's management and the Eltron Board have interests in the merger that are
in addition to their interests as shareholders of Eltron generally.
The merger agreement provides that all rights to indemnification benefiting
Eltron's directors and officers as of the date of the merger agreement, will
survive the merger. Zebra has also agreed to maintain, for five years, a policy
of directors' and officers' liability insurance, as it existed at the date of
the merger agreement, for the benefit of Eltron's directors and officers. There
are certain limitations on the amount Zebra is required to spend to maintain
such insurance.
Donald K. Skinner, the Chairman and Chief Executive Officer of Eltron, Hugh
K. Gagnier, a director, the President and Chief Operating Officer of Eltron, and
Patrice J. Foliard, the Senior Vice President of Sales and Marketing of Eltron,
have each signed new employment agreements with Eltron that will replace their
existing employment agreements if the merger is completed. These new employment
agreements, which were required as a condition of the merger by Zebra, provide
them with different interests than Eltron shareholders generally, including:
- Accelerating their existing Eltron options, although similar acceleration
provisions are in their existing employment agreements;
- Granting them additional options to purchase 36,000, 26,000 and 16,000
shares, respectively, of Zebra Class A common stock that vest only if they
continue as employees of Zebra; and
- Appointing, at the closing of the merger, Mr. Skinner as a member and
Vice-Chairman of the Zebra Board.
The existing provisions of the Eltron employment agreements with Roger Hay,
Eltron's Chief Financial Officer, and Kriston D. Qualls, Eltron's Vice
President, General Counsel and Secretary, provide they will receive lump sum
payments of $180,000 and $159,180, respectively, at the closing of the merger.
Each such executive individually negotiated amendments to their existing Eltron
employment agreement to provide for salary and stay bonuses for a 90-day period
following completion of the merger to assist in integration of our companies.
Mr. Hay will receive his salary and a lump sum stay bonus of $150,000 upon
expiration of the 90-day integration period included in the amendment to his
existing employment agreement. Mr. Qualls will receive a base salary and stay
bonus of $94,000 during the 90-day integration period included in the amendment
to his existing employment agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (see page 42)--We have structured
the merger to be a tax-free reorganization for federal income tax purposes, so
that no gain or loss will be recognized by the Eltron shareholders on the
exchange of Eltron common stock for the Zebra Class B common stock, except to
the extent that Eltron shareholders receive cash in lieu of fractional shares.
We have conditioned the merger on receiving legal opinions that such is the
case. The merger agreement does not require that we
4
<PAGE>
obtain a ruling from the IRS as to the tax consequences of the merger and we
will not request such a ruling.
ACCOUNTING TREATMENT (see page 37)--The merger is intended to be accounted
for as a pooling-of-interests for financial reporting purposes in accordance
with U.S. generally accepted accounting principles. We have conditioned the
merger on receiving opinions from our respective independent accounting firms
that such is the case.
RIGHTS OF DISSENTING SHAREHOLDERS (see pages 38 through 40)--Eltron
shareholders are entitled, in certain circumstances, to dissenters' rights with
respect to the merger under the California General Corporation Law.
Zebra stockholders are not entitled to appraisal rights under Delaware law
because Zebra is not a constituent corporation to the merger under the Delaware
General Corporation Law.
THE ELTRON SPECIAL MEETING
PURPOSE--The purpose of the Eltron special meeting is to vote upon a
proposal to approve the merger. Eltron shareholders may also vote upon such
other matters as may be properly brought before the Eltron special meeting.
RECORD DATE AND VOTE REQUIRED--Only Eltron shareholders of record at the
close of business on September 4, 1998 are entitled to vote at the Eltron
special meeting. The affirmative vote of the holders of a majority of the
outstanding shares of Eltron common stock is required to approve the proposal.
At the close of business on the Eltron record date, there were 7,684,210 shares
of Eltron's common stock outstanding and entitled to vote at the Eltron special
meeting.
ELTRON VOTING AGREEMENT (see page 44)-- Zebra has entered into an agreement
with all of the directors and certain of the executive officers of Eltron and
the trustee of a trust for the benefit of the Chief Executive Officer of Eltron
requiring these shareholders to vote all shares of Eltron common stock
beneficially owned by them in favor of the merger. The directors and officers
are Donald K. Skinner, Hugh K. Gagnier, Patrice J. Foliard, Robert G. Bartizal,
George L. Bragg, William R. Hoover, Kriston D. Qualls and Roger Hay. In total,
these shares represent approximately 7.2% of the Eltron common stock entitled to
vote at the Eltron special meeting.
This Joint Proxy Statement/Prospectus and the accompanying Notice of Special
Meeting of Shareholders were mailed to all Eltron shareholders of record as of
the Eltron record date and constitute notice of the Eltron special meeting in
conformity with the requirements of the California General Corporation Law.
THE ZEBRA SPECIAL MEETING
PURPOSE--The purpose of the Zebra special meeting is to vote upon proposals
to:
- approve the issuance of the Class B common stock in connection with the
merger; and
- authorize an increase in the number of shares of Class A common stock
issuable under the Zebra 1997 Stock Option Plan from 531,500 shares to 2.0
million shares.
Holders of Zebra common stock may also vote upon such other matters as may
be properly brought before the Zebra special meeting.
RECORD DATE AND VOTE REQUIRED--Only Zebra stockholders of record at the
close of business on September 4, 1998 are entitled to vote at the Zebra special
meeting. Approval of these proposals requires approval by the affirmative vote
of the holders of a majority of the voting power of Zebra common stock entitled
to vote at the special meeting. There will be a single vote of all holders of
Zebra Class A and Class B common stock voting as one class on each proposal. At
the close of business on the Zebra record date, there were 4,890,609 shares of
Class B common stock outstanding and entitled to vote at the Zebra special
meeting and there were 19,429,874 shares of Class A common stock outstanding and
entitled to vote at the Zebra special meeting.
A holder of Class A common stock is entitled to one vote per share. A holder
of Class B common stock is entitled to ten votes per share.
5
<PAGE>
ZEBRA VOTING AGREEMENT (see page 44)-- Eltron has entered into an agreement
with all of the directors of Zebra and two of such directors' wives requiring
these stockholders to vote all shares of Zebra common stock beneficially owned
by them in favor of the issuance of the Zebra Class B common stock required to
complete the merger. The directors and the two directors' wives are Edward L.
Kaplan, Gerhard Cless, Carol K. Kaplan, Ruth I. Cless, Christopher Knowles,
Michael Smith and David Riley. In total, these shares represent approximately
71.0% of the Zebra common stock entitled to vote at the Zebra special meeting.
Accordingly, approval of the proposal to issue the Zebra Class B common stock is
assured.
This Joint Proxy Statement/Prospectus and the accompanying Notice of Special
Meeting of Stockholders were mailed to all Zebra stockholders of record as of
the Zebra record date and constitute notice of the Zebra special meeting in
conformity with the requirements of the Delaware General Corporation Law.
RISK FACTORS
This merger and an investment in securities of Zebra by the Eltron
shareholders involve certain risks and uncertainties, including risks related to
the differences between Zebra's Class A and Class B common stock, risks related
to the integration of our companies, risks associated with a fixed exchange
ratio and risks relating to our respective businesses. To review these and other
risks and uncertainties in greater detail, see pages 15 through 20 and our
filings with the Securities and Exchange Commission which you may obtain by
following the directions we have included under "Where You Can Find More
Information" on page 78.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS FIRST BEING MAILED TO ZEBRA
STOCKHOLDERS AND ELTRON SHAREHOLDERS ON OR ABOUT SEPTEMBER 21, 1998.
6
<PAGE>
MARKET AND MARKET PRICES
ELTRON AND ZEBRA COMMON STOCK--To help you in your analysis of the proposed
merger, we have included the following table which sets forth: (1) the average
closing prices per share of Eltron common stock and Zebra Class A common stock
on the Nasdaq National Market during the ten trading day period immediately
preceding the last trading day before announcement of the proposed merger (June
25, 1998 to July 9, 1998) and (2) the closing prices per share of Eltron common
stock and Zebra Class A common stock on the Nasdaq National Market (a) on July
9, 1998 (the last trading day before announcement of the proposed merger) and
(b) on September 18, 1998 (the last trading day before the printing of this
Joint Proxy Statement/Prospectus):
<TABLE>
<CAPTION>
ELTRON ZEBRA CLASS A
COMMON STOCK COMMON STOCK(A)
----------------- -----------------
<S> <C> <C>
10 trading day average (June 25 to July 9, 1998)......... $ 27.41 $ 40.30
July 9, 1998............................................. $ 30.50 $ 39.25
September 18, 1998....................................... $ 24.69 $ 27.81
</TABLE>
- ------------------------
(a) As described above, the Zebra Class B common stock is not traded or quoted
on any securities exchange. Each share of Zebra Class B common stock is
convertible into one share of Zebra Class A common stock at the election of
the holder or, in most cases, automatically upon transfer.
We urge you to obtain current market quotations before making any decision
with respect to the merger.
We have also included the following table which sets forth the range of high
and low closing sales prices reported on the Nasdaq National Market for Eltron
common stock and Zebra Class A common stock for the periods indicated:
<TABLE>
<CAPTION>
ELTRON COMMON STOCK ZEBRA CLASS A COMMON
STOCK
-------------------- ----------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
--------- --------- ----- ---------
Fiscal Year Ended December 31, 1996:
First Quarter............................................... 37 3/4 29 1/4 35 1/4 25 1/4
Second Quarter.............................................. 33 3/4 23 3/4 27 7/8 17 3/4
Third Quarter............................................... 33 3/8 21 3/4 26 1/4 15 1/2
Fourth Quarter.............................................. 38 1/2 18 1/4 31 1/2 23 1/8
Fiscal Year Ended December 31, 1997:
First Quarter............................................... 26 19 1/4 27 1/4 21 3/8
Second Quarter.............................................. 31 18 1/2 32 21 1/2
Third Quarter............................................... 36 1/8 26 1/4 35 27 3/16
Fourth Quarter.............................................. 35 25 3/4 37 7/8 29 3/4
Fiscal Year Ending December 31, 1998:
First Quarter............................................... 31 3/4 19 38 1/2 26
Second Quarter.............................................. 27 7/8 21 5/8 42 3/4 35 1/4
Third Quarter (through September 2, 1998)................... 33 5/16 26 3/4 42 30 7/16
</TABLE>
As of September 4, 1998, there were 54 shareholders of record who held
shares of Eltron common stock (although Eltron has been informed that there were
in excess of 3,400 beneficial owners), as shown on the records of Eltron's
transfer agent for such shares. As of that date, there were 533 stockholders of
record who held shares of Class A common stock and 12 stockholders of record who
held shares of Class B common stock (although Zebra has been informed that there
are in excess of 18,000 beneficial owners of Class A common stock), as shown on
the records of Zebra's transfer agent for such shares.
Following completion of the merger, Eltron common stock will cease to be
quoted on Nasdaq. See "Risk Factors--Risks Associated with Fixed Exchange Ratio"
on page 16 and "--Comparative Per Share Data" on page 14.
Neither of us have ever paid any cash dividends on our stock. We both
anticipate that our combined enterprise, for the foreseeable future, will retain
any earnings for use in the operation of our business.
7
<PAGE>
ELTRON SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
We are providing the following financial information to aid you in your
analysis of the financial aspects of the merger. We derived this summary
historical consolidated financial information of Eltron for its five fiscal
years ended December 31, 1997 from Eltron's audited consolidated financial
statements. The financial data as of June 30, 1998 (for basis of presentation)
and for the six month periods ended June 30, 1997 and 1998 are derived from
unaudited consolidated financial statements and include, in the opinion of
Eltron management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the data for the periods presented. The
following information is only a summary and you should read it in conjunction
with Eltron's consolidated financial statements (and related notes), included in
Eltron's annual reports and other financial information included in Eltron's
filings with the Commission. See "Where You Can Find More Information" on page
78.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------ --------------------
1993(1) 1994(1) 1995(1) 1996 1997 1997 1998
--------- --------- --------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF INCOME
DATA(1):
Sales........................... $ 17,989 $ 29,276 $ 54,971 $ 88,510 $ 105,029 $ 50,683 $ 62,303
Cost of goods sold.............. 10,961 16,253 30,124 50,171 59,521 28,295 36,651
--------- --------- --------- --------- ---------- --------- ---------
Gross profit.................... 7,028 13,023 24,848 38,339 45,508 22,388 25,652
Operating expenses:
Selling, general and
administrative.............. 3,984 5,803 11,270 16,399 19,894 9,632 11,329
Research and product
development................. 1,592 1,885 2,932 5,309 7,127 3,431 4,193
Gain on sale of subsidiary's
assets...................... -- -- -- -- -- -- (404)
Write-off of acquired
in-process technology
and other costs associated
with acquisition............ -- -- -- 3,528 -- -- --
--------- --------- --------- --------- ---------- --------- ---------
Total operating expenses........ 5,576 7,688 14,202 25,236 27,021 13,063 15,118
--------- --------- --------- --------- ---------- --------- ---------
Income from operations.......... 1,452 5,335 10,646 13,103 18,487 9,325 10,534
Other income (expense), net..... (379) (116) 115 211 132 136 191
--------- --------- --------- --------- ---------- --------- ---------
Income before income tax
expense....................... 1,073 5,219 10,761 13,314 18,619 9,461 10,725
Provision for income taxes...... 73 1,596 3,641 6,215 6,982 3,499 4,076
--------- --------- --------- --------- ---------- --------- ---------
Net income...................... $ 1,000 $ 3,623 $ 7,120 $ 7,099 $ 11,637 $ 5,962 $ 6,649
--------- --------- --------- --------- ---------- --------- ---------
--------- --------- --------- --------- ---------- --------- ---------
Net income per basic share...... $ 0.33 $ 0.64 $ 1.07 $ 0.98 $ 1.57 $ 0.81 $ 0.88
Net income per diluted share.... $ 0.28 $ 0.58 $ 0.97 $ 0.91 $ 1.49 $ 0.76 $ 0.85
Basic weighted shares
outstanding................... 3,000 5,627 6,683 7,226 7,395 7,351 7,597
Diluted weighted shares
outstanding................... 3,542 6,212 7,349 7,821 7,802 7,884 7,800
</TABLE>
- ------------------------
(1) Effective March 1, 1996, Eltron acquired RJS, Incorporated in a business
combination accounted for as a pooling-of-interests. Financial information
prior to March 1, 1996 has been restated to give effect to the combination.
8
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------------- JUNE 30,
1993(1) 1994(1) 1995(1) 1996 1997 1998
--------- --------- --------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA:
Cash and cash equivalents and
short-term investments............ $ 432 $ 5,850 $ 16,281 $ 9,237 $ 10,466 $ 10,641
Working capital..................... 2,553 10,463 31,536 34,625 44,956 43,335
Total assets........................ 7,655 19,494 45,624 54,245 66,862 78,194
Long-term debt, less current
portion........................... 504 -- 751 811 50 33
Total shareholders' equity.......... 1,969 11,780 36,185 43,551 56,669 63,417
</TABLE>
- ------------------------
(1) Effective March 1, 1996, Eltron acquired RJS, Incorporated in a business
combination accounted for as a pooling-of-interests. Financial information
prior to March 1, 1996 has been restated to give effect to the combination.
9
<PAGE>
ZEBRA SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
We are providing the following finanical information to aid you in your
analysis of the financial aspects of the merger. We derived this summary
historical consolidated financial information of Zebra for its five fiscal years
ended December 31, 1997 from Zebra's audited consolidated financial statements.
The financial data as of July 4, 1998 and for the six month periods ended June
28, 1997 and July 4, 1998 are derived from unaudited consolidated financial
statements and include, in the opinion of Zebra management, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the data for the periods presented. The following information is only a summary
and you should read it in conjunction with Zebra's consolidated financial
statements (and related notes), included in Zebra's annual reports and other
financial information included in Zebra's filings with the Commission. See
"Where You Can Find More Information" on page 78.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, ----------------------
----------------------------------------------------- JUNE 28, JULY 4,
1993 1994 1995(1) 1996(1) 1997(1) 1997(1) 1998
--------- --------- --------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF INCOME DATA:
Net sales.................................. $ 87,456 $ 107,103 $ 145,348 $ 163,980 $ 192,071 $ 88,853 $ 105,567
Cost of sales.............................. 43,889 55,080 76,241 85,302 93,871 44,124 50,637
--------- --------- --------- --------- --------- ----------- ---------
Gross profit............................... 43,567 52,023 69,107 78,678 98,200 44,729 54,930
Operating expenses:
Sales and marketing...................... 9,204 9,011 12,421 15,445 19,951 8,945 10,937
Research and development................. 4,619 5,835 7,771 9,615 10,784 5,167 6,360
General administrative................... 4,847 6,834 8,934 11,155 14,690 6,917 8,532
Merger costs............................. -- -- -- 315 -- -- --
Acquired in-process technology(2)........ -- -- -- 1,117 -- -- --
--------- --------- --------- --------- --------- ----------- ---------
Total operating expenses................... 18,670 21,680 29,126 37,647 45,425 21,029 25,829
--------- --------- --------- --------- --------- ----------- ---------
Operating income........................... 24,897 30,343 39,981 41,031 52,775 23,700 29,101
Other income, net(3)....................... 3,571 2,533 5,444 6,358 13,959 9,358 4,863
--------- --------- --------- --------- --------- ----------- ---------
Income from continuing operations before
income taxes............................. 28,468 32,876 45,425 47,389 66,734 33,058 33,964
Income taxes............................... 10,213 11,803 15,851 16,536 23,924 11,887 12,243
--------- --------- --------- --------- --------- ----------- ---------
Net income from continuing operations...... 18,255 21,073 29,574 30,853 42,810 21,171 21,721
Loss from discontinued operations (less
applicable income tax benefit)(4)........ -- -- 7,010 1,938 1,692 2,655 --
Loss on disposal of discontinued
operations............................... -- -- -- -- 963 -- --
--------- --------- --------- --------- --------- ----------- ---------
Net income................................. $ 18,255 $ 21,073 $ 22,564 $ 28,915 $ 40,155 $ 18,516 $ 21,721
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
Basic earnings per share from continuing
operations............................... $ 0.76 $ 0.88 $ 1.23 $ 1.27 $ 1.77 $ 0.87 $ 0.89
Diluted earnings per share from continuing
operations............................... $ 0.76 $ 0.87 $ 1.22 $ 1.27 $ 1.76 $ 0.87 $ 0.89
Basic earnings per share................... $ 0.76 $ 0.88 $ 0.94 $ 1.19 $ 1.66 $ 0.76 $ 0.89
Diluted earnings per share................. $ 0.76 $ 0.87 $ 0.93 $ 1.19 $ 1.65 $ 0.76 $ 0.89
Weighted average shares outstanding........ 24,020 23,947 24,113 24,203 24,255 24,242 24,298
Weighted average and equivalent shares
outstanding.............................. 24,020 24,222 24,166 24,241 24,318 24,281 24,412
</TABLE>
- --------------------------
(1) As of June 28, 1997, Zebra made the decision to discontinue the operations
of its VTI subsidiary. VTI was acquired in July 1995.
(2) In conjunction with the purchase of Fenestra Computer Services in February
1996, acquired in-process technology valued at $1,117 was expensed
immediately.
(3) Other income includes a one-time pretax gain of $5,458 during the first
quarter of 1997 from the sale of Zebra's investment in Norand Corporation
common stock.
(4) In conjunction with the acquisition of VTI in July 1995, acquired in-process
technology valued at $6,028 was expensed immediately.
10
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JULY
----------------------------------------------------- 4,
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA:
Cash and cash equivalents and investments
and marketable securities................. $ 41,498 $ 54,203 $ 71,858 $ 94,540 $ 128,853 $ 144,542
Working capital............................. 55,972 76,241 99,833 130,053 164,906 181,960
Total assets................................ 76,697 95,043 131,071 164,386 203,584 226,344
Long-term debt, less current portion........ 293 236 2,177 2,326 263 17
Total shareholders' equity.................. 60,635 82,032 108,206 140,456 179,551 201,723
</TABLE>
11
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following summary unaudited pro forma condensed combined financial
information reflects the pooling-of-interests method of accounting and is
intended to give you a better picture of what our businesses might have looked
like if the merger had been completed, with respect to the statement of income
data, at the beginning of the periods presented or, with respect to the balance
sheet data, as of the date presented. The summary unaudited pro forma condensed
combined financial information combines the selected financial information of
Zebra for each of the years in the five year period ended December 31, 1997 with
the selected financial information of Eltron for each of the years in the five
year period ended December 31, 1997, adjusted for Zebra's 4.9% ownership in
Eltron. The unaudited pro forma combined statement of income data for the six
month periods ended June 28, 1997 and July 4, 1998 combine our historical
results for those six month periods. We derived this information from the
unaudited pro forma combined financial statements, our separate historical
consolidated financial statements and other financial information. We have
included this unaudited pro forma condensed combined financial information for
comparative purposes only and it does not necessarily indicate the results of
operations or financial position which actually would have been obtained if the
merger had been completed at the beginning of the periods or as of the date
presented, or of the results of operations or financial position that we will
experience in the future.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, ------------------
------------------------------------------------ JUNE 28, JULY 4,
1993 1994 1995 1996 1997 1997 1998(1)
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA STATEMENT OF INCOME DATA:
Net sales................................................... $105,445 $136,379 $200,319 $252,490 $297,100 $139,536 $167,870
Cost of sales............................................... 54,850 71,333 106,365 135,473 153,392 72,419 87,288
-------- -------- -------- -------- -------- -------- --------
Gross profit................................................ 50,595 65,046 93,954 117,017 143,708 67,117 80,582
Operating expenses:
Selling, general and administrative....................... 18,035 21,648 32,625 42,999 54,535 25,494 30,798
Research and development.................................. 6,211 7,720 10,703 14,924 17,911 8,598 10,553
Merger costs.............................................. -- -- -- 315 -- -- --
Gain on sale of subsidiary's assets....................... -- -- -- -- -- -- (404)
Acquired in-process technology............................ -- -- -- 4,645 -- -- --
-------- -------- -------- -------- -------- -------- --------
Total operating expenses.................................... 24,246 29,368 43,328 62,883 72,446 34,092 40,947
-------- -------- -------- -------- -------- -------- --------
Operating income............................................ 26,349 35,678 50,626 54,134 71,262 33,025 39,635
Other income, net(2)........................................ 3,192 2,417 5,559 6,569 14,091 9,494 3,384
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations before income taxes....... 29,541 38,095 56,185 60,703 85,353 42,519 43,019
Income taxes................................................ 10,286 13,399 19,492 22,751 30,906 15,386 15,717
-------- -------- -------- -------- -------- -------- --------
Net income from continuing operations....................... $ 19,255 $ 24,696 $ 36,693 $ 37,952 $ 54,447 $ 27,133 $ 27,302
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Basic earnings per share from continuing operations......... $ 0.72 $ 0.85 $ 1.22 $ 1.24 $ 1.76 $ 0.88 $ 0.88
Diluted earnings per share from continuing operations....... $ 0.71 $ 0.83 $ 1.19 $ 1.21 $ 1.74 $ 0.86 $ 0.87
Weighted average shares outstanding......................... 26,720 29,011 30,128 30,706 30,910 30,858 30,912
Weighted average and equivalent shares outstanding.......... 27,208 29,813 30,780 31,280 31,340 31,377 31,209
</TABLE>
- --------------------------
(1) Adjusted to reflect the elimination of Zebra's intercorporate investment in
Eltron common stock as of July 4, 1998 and related gains on such investment
for the six months then ended.
(2) Other income includes a one-time gain of $5,458 during the first quarter of
1997 from the sale of Zebra's investment in Norand Corporation common stock.
12
<PAGE>
<TABLE>
<CAPTION>
AS OF
JULY 4,
1998(1)(2)
-----------
<S> <C>
PRO FORMA BALANCE SHEET DATA:
Cash and cash equivalents and investments and marketable securities................................. $ 145,232
Working capital..................................................................................... 209,930
Total assets........................................................................................ 294,587
Long-term debt, less current portion................................................................ 50
Total shareholders' equity.......................................................................... 250,377
</TABLE>
- --------------------------
(1) Adjusted to reflect estimated nonrecurring transaction costs of $5,414,
consisting of investment banking and professional fees, which will be
expensed at the time the merger is consummated. This estimate does not
include costs to integrate the combining companies.
(2) Adjusted to reflect the elimination of Zebra's intercorporate investment in
Eltron common stock as of July 4, 1998 and related gains on such investment
for the six months then ended.
13
<PAGE>
COMPARATIVE PER SHARE DATA
We have summarized below certain historical per share data of Zebra and
Eltron and combined per share data on an unaudited pro forma basis after giving
effect to the merger accounted for under the pooling-of-interests method of
accounting and assuming that 0.9 of a share of Zebra Class B common stock was
issued in exchange for each share of Eltron common stock (other than shares
owned by Zebra and its affiliates).
You should read this data in conjunction with each of our Selected
Historical and Pro Forma Condensed Combined Financial Information (and the
related notes) that are included elsewhere in this Joint Proxy
Statement/Prospectus.
This unaudited pro forma combined financial data does not necessarily
indicate the operating results that would have been achieved had the merger been
in effect as of the beginning of the periods presented, or the results of
operations or financial position that we will experience in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
------------------------------- ENDED
1995 1996 1997 JULY 4, 1998
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
ZEBRA
Historical Per Common Share:
Basic earnings per share from continuing operations...................... $ 1.23 $ 1.27 $ 1.77 $ 0.89
Diluted earnings per share from continuing operations.................... $ 1.22 $ 1.27 $ 1.76 $ 0.89
Book value as of period end.............................................. $ 8.29
Pro Forma Combined Per Common Share:
Basic earnings per share from continuing operations...................... $ 1.22 $ 1.24 $ 1.76 $ 0.88
Diluted earnings per share from continuing operations.................... $ 1.19 $ 1.21 $ 1.74 $ 0.87
Book value as of period end.............................................. $ 8.12
ELTRON
Historical Per Common Share:
Basic earnings per share................................................. $ 1.07 $ 0.98 $ 1.57 $ 0.88
Diluted earnings per share............................................... $ 0.97 $ 0.91 $ 1.49 $ 0.85
Book value as of period end.............................................. $ 8.35
Equivalent Eltron Pro Forma Combined(1):
Basic earnings per share from continuing operations...................... $ 1.10 $ 1.11 $ 1.59 $ 0.79
Diluted earnings per share from continuing operations.................... $ 1.07 $ 1.09 $ 1.56 $ 0.79
Book value as of period end.............................................. $ 7.31
</TABLE>
- ------------------------
(1) The equivalent Eltron pro forma combined per share amounts are calculated by
multiplying the pro forma combined per common share amounts by the exchange
ratio of 0.9 of a share of Zebra Class B common stock for each share of
Eltron common stock (other than shares owned by Zebra and its affiliates).
14
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN
EVALUATING THE PROPOSALS TO BE VOTED ON AT YOUR SPECIAL MEETING, AND THE
ACQUISITION BY THE ELTRON SHAREHOLDERS (OTHER THAN ZEBRA AND ITS AFFILIATES)
(THE "ELTRON PUBLIC SHAREHOLDERS") OF THE ZEBRA CLASS B SHARES. YOU SHOULD
UNDERSTAND THAT FOR PERIODS FOLLOWING THE MERGER, REFERENCES TO THE PRODUCTS,
BUSINESSES, FINANCIAL RESULTS OR FINANCIAL CONDITION OF ZEBRA AND ELTRON MEAN
OUR COMBINED ENTERPRISE AND ITS SUBSIDIARIES.
UNCERTAINTIES RELATING TO INTEGRATION
This merger involves the integration of our companies, which have previously
operated independently. Our successful combination of these companies will
require significant effort from each of us, including the coordination of
research and development, integration of product offerings and coordination of
sales, marketing and business development efforts. Following the merger, in
order to maintain and increase profitability, we will need to integrate and
streamline overlapping functions successfully. We each have different systems
and procedures in many operational areas that must be rationalized and
integrated. For example, we currently use different printer control languages in
our respective product offerings. We may choose to provide Zebra's current
printer control language on printers currently produced by Eltron or to provide
Eltron's current printer control language on printers currently produced by
Zebra. We cannot assure you that such integration will be accomplished smoothly,
expeditiously or successfully. This integration of certain operations following
the merger will require the dedication of management resources that may
temporarily distract attention from our normal operations. Our business may also
be disrupted by employee uncertainty and lack of focus during this integration.
The difficulties of this integration may initially be increased by the necessity
of coordinating our geographically separated organizations. Zebra is based in
suburban Chicago, Illinois and Eltron is presently based in Simi Valley,
California, although it is relocating to nearby Camarillo, California during the
Fall of 1998. Failure to quickly and effectively accomplish the integration of
our operations, including the relocation of Eltron's manufacturing facilities
and corporate offices to Camarillo, California, uncertainty in the marketplace
or customer concern regarding the impact of the merger and related transactions
could have a material adverse effect on our combined business, financial
condition and results of operations.
CERTAIN CHARACTERISTICS OF THE ZEBRA CLASS B SHARES
Eltron Public Shareholders will receive Zebra Class B shares when the merger
is complete. Currently, the Class B shares are held by the founders of Zebra,
their spouses, other family members, family trusts and certain of their
associates. Generally, the rights of the holders of Zebra Class A shares and
your rights as holders of Class B shares are identical, except that each Class A
share is entitled to one vote per share and each Class B share is entitled to
ten votes per share. Another difference is that upon an open market sale, the
Class B shares automatically convert to Class A shares on a share-for-share
basis. The current holders of Class B Shares are considered "permitted
transferees." If you transfer any Class B shares to anyone other than a
permitted transferee, each such Class B share automatically converts to one
Class A share. Your Class B shares will also be convertible at any time to Class
A shares, on a share-for-share basis, at your option, as a holder of Class B
shares. The Class A shares are traded and quoted on the Nasdaq National Market.
It is our belief that, because: (1) the Class A shares and Class B shares
generally have the same economic rights, (2) the Class B shares cannot as a
practical matter be sold publicly, and (3) the Class B shares are convertible on
a share-for-share basis into the Class A shares, the market price of a Class A
share approximates the fair market value of a Class B share. The Class B shares
are not traded on or quoted by the Nasdaq National Market or any other
securities exchange. We have made arrangements with The Harris Trust and Savings
Bank, Chicago, Illinois, Zebra's designated transfer agent, to facilitate the
conversion of Class B shares to Class A shares when you, as a holder of Class B
shares, desire to convert such shares or to transfer such shares to anyone other
than a permitted transferee. We will include instructions relating to the
process of transferring Class B shares or converting Class B shares
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to Class A shares in the letter of transmittal that will be delivered to Eltron
shareholders should you decide to approve the merger. Additional copies of these
instructions may be obtained from Zebra or its transfer agent after completion
of the merger, upon request.
For more information about conversion of Class B shares and the
characteristics of each class of Zebra common stock, see "Description of Zebra
Capital Stock."
DEPENDENCE ON SIGNIFICANT CUSTOMERS
ELTRON--For the years ended December 31, 1995, 1996 and 1997 Eltron's
largest customer, United Parcel Service, accounted for approximately $20.8
million, $27.3 million and $25.7 million, respectively, of Eltron's sales.
Eltron has entered into a long-term contract for the sale of its products to
UPS, but there is no obligation on the part of UPS to place any further orders
with Eltron. Eltron's financial position, results of operations and cash flows
are substantially dependent on sales to UPS, and the loss of UPS as a customer
or a significant reduction in sales to UPS could have a material adverse effect
on our combined business, results of operations and financial condition.
ZEBRA--For the years ended December 31, 1996 and 1997, Peak Technologies
accounted for approximately 20% and 16%, respectively, of Zebra's total net
sales. Peak Technologies was acquired by Moore Corporation in June, 1997. Moore
Corporation is a major provider of labels, which could have an adverse effect on
our combined sales of labels to Peak Technologies. For example, label sales to
Peak Technologies declined in the quarter immediately following its acquisition
by Moore Corporation. Since that time, however, total sales to Peak Technologies
have continued to increase, with sales in the quarter ended July 4, 1998 up
18.4% from the same period one year ago. Sales to Peak Technologies of labels
accounted for 3% and 2%, respectively, of Zebra's total net sales in the years
ended December 31, 1996 and 1997.
RISKS ASSOCIATED WITH FIXED EXCHANGE RATIO
As a result of the merger, each outstanding share of Eltron's common stock
held by the Eltron Public Shareholders will be converted into the right to
receive that number of Class B shares equal to the number of shares of such
Eltron common stock multiplied by the exchange ratio of 0.9. Because the
exchange ratio is fixed and will not increase or decrease due to fluctuations in
the market price of either the Class A shares or Eltron's common stock, the
specific value of the consideration to be received by Eltron shareholders in the
merger will depend on the market price of Class A shares at the completion of
the merger. In the event that the market price of Class A shares decreases or
increases prior to completion of the merger, the fair market value of Class A
shares to be received by Eltron shareholders (other than Zebra and its
affiliates) in the merger would correspondingly decrease or increase. We advise
Eltron shareholders to obtain recent market quotations for Class A shares and
Eltron common stock. You should note that the Class A shares and Eltron common
stock historically have been subject to price volatility. We have included the
market prices of Class A shares and Eltron common stock as of a recent date at
"Summary--Market and Market Prices." However, we cannot assure you what the
market prices of the Class A shares or Eltron common stock will be at any time.
RISK OF PRODUCT INTRODUCTIONS AND NEW TECHNOLOGY
While we believe that thermal transfer and direct thermal printing will be
two of the primary printing technologies used in our target markets for the
foreseeable future, there are existing competitive printing processes and
development of a new technology which better serves customers in these target
markets, and other markets in which we do not participate, that could have a
material adverse effect on our combined operations and growth. For example, we
are aware of large investments being made by other companies to develop laser
and other printing technologies. Furthermore, our markets each have frequent new
product introductions and increasing customer expectations concerning product
performance and price. As a result of these factors, we believe that the future
growth and financial performance of our combined enterprise will depend upon our
ability to develop and market new products that achieve market acceptance, while
enhancing our existing products to accommodate
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the latest technological advances and customer preferences. Failure by our
combined enterprise to anticipate or respond adequately to changes in technology
or customer preferences or any significant delays in product development or
introduction could adversely affect our combined business, financial condition
or results of operations. In addition, we cannot assure you that new product
introductions will not result in a decrease in revenues from our existing
products or otherwise adversely affect our combined business, financial
condition or results of operations.
DEPENDENCE ON KEY PERSONNEL
Our success is largely dependent on the skills, experience and efforts of
our respective senior management and certain other key personnel. Our combined
future performance will depend in significant part upon the continued service of
Donald K. Skinner, Patrice J. Foliard and Hugh G. Gagnier, who have each entered
into a new employment agreement with us that will take effect upon consummation
of the merger. The initial employment term under these new agreements expires
December 31, 2001. Our combined future performance will also depend in
significant part upon the continued service of Edward L. Kaplan, the Chairman
and Chief Executive Officer (and until April of 1998, the interim president) of
Zebra. In April, 1998, Zebra hired Charles E. Turnbull as President. If, for any
reason, one or more of our respective key personnel do not remain employed with
us in connection with, or following completion of, the merger, our combined
business, financial condition or results of operations could be adversely
affected.
Our combined future success will also depend upon our ability to attract and
retain additional qualified management, technical and marketing personnel. There
is competition in the market for the services of such qualified personnel and we
cannot assure you that we will be able to attract and retain such personnel.
Failure to attract and retain such personnel could adversely affect our combined
business, financial condition or results of operations. We cannot assure you
that we will be able to attract, hire and retain replacements for employees that
leave in connection with, or following completion of, the merger.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
Based on the pro forma financial information we have provided in this Joint
Proxy Statement/ Prospectus, sales to international customers would have
generated approximately 41.8% of our combined net sales from continuing
operations in 1997 and approximately 41.3% of our combined net sales from
continuing operations in 1996. We expect this percentage to continue to increase
in the future. In connection with international sales, fluctuations in currency
conversion rates may expose our products to price competition from products
produced at lower costs in foreign countries and may otherwise affect our
combined results of operations and financial position. In addition, some of our
vendors are located in foreign countries and therefore base their pricing, in
part, on currency exchange rates. Zebra has engaged, and we may engage in the
future, in currency-hedging transactions intended to reduce the effect of
fluctuations in foreign currency exchange rates on our combined results of
operations and financial position. However, there can be no assurance that any
such hedging transactions will materially reduce the effect of foreign currency
exchange rates on such results. We are also subject to certain other risks
inherent in international business generally, including risks of trade
embargoes, political instability and the possibility of war or other hostility.
In 1997, 9.6% and approximately 3.0% of Zebra's and Eltron's total sales,
respectively, were made in Asia. The recent economic turmoil in that area
resulted in year over year revenue declines for each of us in the first half of
1998. We believe that a continuation or further deterioration of economic
conditions in Asia could have a significant adverse effect on our combined sales
to that region.
RISKS ASSOCIATED WITH LIMITED SUPPLY SOURCES
Each of us purchases certain parts and supplies from a limited number of
vendors and, in some instances, from a single vendor. Zebra currently relies on
a primary source of supply, Kyocera Corporation, a publicly held Japanese
corporation, for the majority of its thermal and thermal transfer
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printheads. Eltron currently relies on a single source of supply, Mitsubishi
Electronics, for the main microprocessor used to control its printers, and is
heavily dependent on Rohm Co., Ltd. and Kyocera Corporation, its primary supply
sources for printheads, and NMB Technologies, Inc., its primary supply source
for motors. No back-up tooling exists for many of Eltron's molded plastic
components. Should a mold break or become unusable, repair or replacement could
take several months. Eltron does not always maintain sufficient inventory to
allow it to fill customer orders without interruption during the time that would
be required to obtain an adequate supply of molded plastic products. Although
Eltron management has taken what it believes are adequate precautions to limit
the risk of short supplies, including maintaining adequate inventory, we could
be vulnerable to limits in availability and changes in pricing and could
experience delays or shut downs in manufacturing and shipping in the event we
are required to find new suppliers for any of these parts.
Any future disruptions in supply of suitable parts and components or changes
in pricing from our principal suppliers could have a material adverse effect on
our combined financial position, results of operations and cash flows.
MANAGEMENT OF INVENTORY
Our markets require that our products be shipped very quickly after an order
is received. Since purchased component and manufacturing lead times are
typically much longer than the short order fulfillment time for our products, we
will be required to keep adequate inventories of both components and finished
goods, and must accurately forecast demand for our many products. Inaccurate
forecasts of customer demand, restricted availability of purchased components,
supplier quality control problems, production equipment problems, carrier
strikes or damage to products during manufacture could result in a buildup of
excess components or finished goods on the one hand and an inability to deliver
product on a timely basis on the other, either of which could have a material
adverse effect on our combined financial position, results of operations and
cash flows.
MANAGEMENT OF RAPIDLY CHANGING BUSINESS
Each of us has experienced recent rapid growth and is subject to the risks
inherent in the expansion and growth of a business enterprise. This significant
growth, if sustained, will continue to place a substantial strain on our
operational and administrative resources and to increase the level of
responsibility for our existing and new management personnel. To manage our
growth effectively, we may be required to further develop our operating, MIS,
accounting and financial systems and to expand, train and manage our employee
base. We cannot assure you that the management skills and systems currently in
place will be adequate if our combined enterprise continues to grow.
COMPETITION
Many companies are engaged in the design, manufacture and marketing of
automatic identification equipment. Zebra manufactures and markets direct
thermal and thermal transfer bar code label printers and related supplies to the
demand printing market. Competition in our markets will depend on a number of
factors, including reliability, quality and reputation of the manufacturer and
its products, hardware innovations and specifications, price, level of technical
support, supplies and applications support offered by the manufacturer and
available distribution channels. In addition, various other competitive methods
of bar code printing exist, including ink jet, laser and impact dot matrix, all
of which are used for bar code label printing in some applications.
Competition in the bar code printer market is intense and we expect it to
increase. We expect to compete with a number of companies, some of which have
greater financial, technical and marketing resources than our combined
enterprise. Our ability to compete successfully depends on a number of factors
both within and outside our control, including product pricing, manufacturing
costs, quality and performance; success in developing new products; adequate
manufacturing capacity and supply of components and materials; efficiency of
manufacturing operations; effectiveness of sales and marketing resources and
strategies; strategic relationships with other suppliers; timing of new product
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introductions by our combined enterprise and our competitors; general market and
economic conditions; and government actions throughout the world. We cannot
assure you that our combined enterprise will be able to compete successfully in
the future.
Our combined enterprise's principal competitors in the plastic card market
include Datacard, Inc., a privately-held manufacturer of card personalization
systems and transaction terminals, and Fargo, Inc., a privately-held
manufacturer of wax thermal transfer and dye sublimation color page printers and
ID card printers. We expect competition from these privately-held companies and
other new or existing competitors to intensify as more markets open and mature
to the use of plastic card printing systems.
EFFECT OF THE MERGER ON CUSTOMERS
Certain of our existing reseller partners may view the merger as
disadvantageous to them because of increased channel conflict. Some Eltron
resellers will gain access to portions of the Zebra product line and will begin
competing directly with existing Zebra resellers in some markets. Conversely,
some Zebra resellers will gain access to the Eltron product line and begin
competing directly with Eltron resellers. As a consequence, our relationship
with these resellers could be adversely affected.
RISKS ASSOCIATED WITH ACQUISITIONS
Zebra regularly reviews acquisition opportunities, some of which, if
pursued, would be material to our combined enterprise. To date, Zebra's
management has had limited experience in making acquisitions. Acquisitions
involve a number of special risks and challenges, including the diversion of
management's attention, assimilation of the operations and personnel of acquired
companies, incorporation of acquired products into existing product lines,
adverse short-term effects on reported operating results, amortization of
acquired intangible assets, assumption of the liabilities of acquired companies,
possible loss of key employees and difficulty of presenting a unified corporate
image. We cannot assure you that any potential acquisition by our combined
enterprise will or will not occur, or that, if an acquisition does occur, it
will not ultimately have a material adverse effect on our combined enterprise,
or that any such acquisition will succeed in enhancing our combined business.
For example, Zebra discontinued the operations of its subsidiary, Zebra
Technologies VTI, which was acquired in 1995 and which did not achieve Zebra
management's expectations.
FLUCTUATIONS IN QUARTERLY RESULTS; POSSIBLE VOLATILITY OF STOCK PRICE
Factors such as our announcements of quarterly variations in financial
results could cause the market price of the Class A shares to fluctuate
significantly. Our combined enterprise's quarterly operating results may
fluctuate significantly in the future due to a number of factors, including
timing of new product introductions by our combined enterprise and its
competitors; changes in the mix of products sold; availability and pricing of
components from third parties; timing of orders; level and pricing of
international sales; foreign currency exchange rates; difficulty in maintaining
margins; changes in pricing policies by our combined enterprise, its competitors
or suppliers; technological change; and economic conditions generally.
Accordingly, our combined enterprise could experience an inability to ship
products as rapidly following receipt of an order as we have each been able to
do in the past, which could have a material adverse effect on our combined
operating results for a particular quarter.
In recent years, the stock markets in general, and the share prices of
technology companies in particular, have experienced extreme fluctuations. These
broad market and industry fluctuations may adversely affect the market price of
the Class A shares. In addition, failure to meet or exceed analysts'
expectations for financial results may result in significant price and volume
fluctuations in the Class A shares.
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PATENTS, INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard portions of the hardware designs and operating software
incorporated into our respective products as proprietary and we each attempt to
protect them with a combination of patents, copyright, trademark and trade
secret laws, employee and third-party nondisclosure agreements and similar
means. Certain of our combined enterprise's products will not be protected by
patents, and it may be possible for unauthorized third parties to copy certain
portions of such products or to reverse engineer or otherwise obtain and use, to
our combined enterprise's detriment, information that we each currently regard
as proprietary. While Eltron does own certain patents, there can be no assurance
that such patents are broad enough to protect against the use of similar
technologies by our combined enterprise's competitors. We cannot assure you,
therefore, that any of the combined enterprise's competitors, some of whom have
greater resources than our combined enterprise, will not independently develop
technologies that are substantially equivalent or superior to our combined
enterprise's technology. Moreover, the laws of some foreign countries, such as
China and Taiwan, do not afford the same protection to our combined enterprise's
proprietary rights as do United States laws. We cannot assure you that legal
protections relied upon by our combined enterprise to protect our proprietary
rights will be adequate.
RISKS ASSOCIATED WITH NEW MILLENNIUM
To meet changing business needs, Zebra initiated a conversion in 1995 to the
Baan system, an enterprise-wide business management and resource planning
system. This system is year 2000 compliant and its implementation was completed
in April 1998 for Vernon Hills and will be completed by year-end 1998 for the
United Kingdom location. Zebra's payroll system, not covered by the Baan system,
will also be replaced by the end of 1998. The payroll system will integrate
payroll with Zebra's human resources software and will be year 2000 compliant.
To date, expenditures on the Baan project have aggregated $8,164,000, of which
$6,340,000 have been capitalized. At completion, total expenditures are
estimated to be $8,800,000, of which $7,100,000 is estimated to be capitalized.
Zebra does not believe that its non-information technology systems will be
materially affected by year 2000 issues.
Zebra is in the process of analyzing its significant suppliers to determine
if they are year 2000 compliant. We cannot guarantee that such customers or
suppliers will achieve compliance on a timely basis. The failure by one or more
significant suppliers to achieve compliance could have a material adverse effect
on Zebra. Zebra has not yet undertaken to quantify the effects of such possible
non-compliance, to determine the likely worst-case scenario or to develop
contingency plans to deal with such scenario.
Zebra's printers have no internal clock or dating mechanism and will not be
affected by the change in dates. Zebra's PC-470 printer controller has a
self-contained real-time clock and currently is not year 2000 compliant. Zebra
intends to post instructions on its Web site (www.zebra.com) on how to reset the
PC-470's clock so that it will function properly after January 1, 2000. Current
versions of Zebra's labeling and other software are either year 2000 compliant
or depend on the internal clock of the computer on which it is running for
proper dating. Zebra's LABEL software depends on the BIOS of the system on which
it is running or on the external data source being year 2000 compliant.
During 1997, Eltron began the implementation of a year 2000 compliant
enterprise-wide information system. Eltron has also initiated an assessment
project, both within Eltron and with its business partners, which addresses
those other significant systems that may have year 2000 compliance issues.
Eltron presently believes that with the implementation of the new system and
modification to existing software, year 2000 compliance will not pose a
significant operational challenge for Eltron. However, if these modifications
are not completed on a timely basis, including implementation by its business
partners, our combined enterprise's financial position, results of operations,
and cash flows could be materially and adversely affected.
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UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. All
forward-looking statements involve risk and uncertainty and actual results could
differ materially from those set forth in the forward-looking statements
contained herein for a variety of reasons, including without limitation, the
risks outlined under the caption "Risk Factors", as well as those discussed
elsewhere in this Joint Proxy Statement/Prospectus and in the documents
incorporated herein by reference.
THE ELTRON SPECIAL MEETING
PURPOSE OF THE ELTRON SPECIAL MEETING
The purpose of the special meeting of Eltron's shareholders (the "Eltron
Special Meeting") is to consider and vote upon the approval and adoption of the
Agreement and Plan of Merger, dated July 9, 1998, by and among Zebra, Eltron and
Spruce Acquisition Corp. ("Merger Sub"), a California corporation and
wholly-owned subsidiary of Zebra (the "Merger Agreement") and approval of the
merger contemplated therein (the "Merger"). Holders of the common stock, par
value $0.01 per share, of Eltron (the "Eltron Common Stock") may also consider
and vote upon such other matters as may be properly brought before the Eltron
Special Meeting. The Merger will occur only if the proposal is approved.
THE ELTRON BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER, AND RECOMMENDS A VOTE FOR ADOPTION AND APPROVAL OF THE MERGER
AGREEMENT AND FOR APPROVAL OF THE MERGER.
PROXIES
The Eltron proxy accompanying this Joint Proxy Statement/Prospectus is being
solicited on behalf of the Eltron Board of Directors for use at the Eltron
Special Meeting.
DATE, TIME AND PLACE OF MEETING
The Eltron Special Meeting will be held on October 26, 1998 at 9:00 a.m.,
local time, at the Radisson Hotel, 999 Enchanted Way, Simi Valley, California
93065.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Eltron Common Stock at the close of business on
September 4, 1998 (the "Eltron Record Date") are entitled to notice of and to
vote at the Eltron Special Meeting. At the close of business on the Eltron
Record Date, there were 7,684,210 shares of Eltron Common Stock outstanding and
entitled to vote. Except for the shareholders identified as principal
shareholders in the information provided herein, as of the Eltron Record Date,
no other person beneficially owned more than 5% of the outstanding Eltron Common
Stock. Each holder of record of Eltron Common Stock on the Eltron Record Date
will be entitled to one vote for each share held on all matters to be voted upon
at the Eltron Special Meeting.
SOLICITATION
This Joint Proxy Statement/Prospectus was mailed to all Eltron shareholders
of record on the Eltron Record Date and constitutes notice of the Eltron Special
Meeting in conformity with the requirements of the General Corporation Law of
the State of California (the "CGCL").
The cost of the solicitation of proxies from holders of Eltron Common Stock
and all related costs will be borne by Eltron. In addition, Eltron may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation materials to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
telegram or personal
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solicitation by directors, officers or other regular employees of Eltron. No
additional compensation will be paid to directors, officers or other regular
employees for such services. Eltron may elect to employ a proxy solicitation
firm to assist in the solicitation process.
VOTE REQUIRED
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Eltron Common Stock entitled to vote at
the Eltron Special Meeting is necessary to constitute a quorum. Approval of the
Merger requires the approval of a majority of the outstanding shares of Eltron
Common Stock.
Certain shareholders of Eltron have signed a stockholder agreement with
Zebra, pursuant to which they have agreed, among other things, to vote shares of
Eltron Common Stock beneficially owned by each of them, representing
approximately 7.2% of the total shares of Eltron Common Stock entitled to vote
at the Eltron Special Meeting, in favor of the Merger. See "Approval of the
Merger--Eltron Stockholder Agreement."
As of the date of this Joint Proxy Statement/Prospectus, Zebra owned
approximately 4.9% of the issued and outstanding Eltron Common Stock.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
corporate secretary of Eltron at Eltron's principal offices, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the Eltron Special Meeting and voting in person. Attendance at the
Eltron Special Meeting will not, by itself, revoke a proxy.
THE ZEBRA SPECIAL MEETING
PURPOSE OF THE ZEBRA SPECIAL MEETING
The purpose of the special meeting of Zebra's stockholders (the "Zebra
Special Meeting") is to consider and vote upon proposals to (1) approve the
issuance of the Class B common stock, par value $0.01 per share, of Zebra (the
"Class B Shares") in connection with the Merger and (2) increase the number of
authorized shares of Class A common stock, par value $0.01 per share, of Zebra
(the "Class A Shares") available for issuance under Zebra's 1997 Stock Option
Plan from 531,500 shares to 2.0 million shares. Holders of the Class A Shares
and the Class B Shares (collectively, the "Zebra Common Stock") may also
consider and vote upon such other matters as may be properly brought before the
Zebra Special Meeting or any postponements or adjournments thereof. The issuance
of Class B Shares in connection with the Merger and the increase in the number
of authorized Class A Shares for the Zebra 1997 Stock Option Plan will occur
only if the proposals are approved.
THE ZEBRA BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER, AND RECOMMENDS A VOTE FOR APPROVAL OF THE ISSUANCE OF CLASS B SHARES
IN CONNECTION WITH THE MERGER AND THE INCREASE IN THE NUMBER OF AUTHORIZED CLASS
A SHARES AVAILABLE FOR ISSUANCE UNDER THE ZEBRA 1997 STOCK OPTION PLAN.
PROXIES
The Zebra proxy accompanying this Joint Proxy Statement/Prospectus is being
solicited on behalf of the Zebra Board of Directors for use at the Zebra Special
Meeting.
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DATE, TIME AND PLACE OF MEETING
The Zebra Special Meeting will be held on October 26, 1998 at 10:00 a.m.,
local time, at Zebra's offices located at 333 Corporate Woods Parkway, Vernon
Hills, Illinois 60061.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Zebra Common Stock at the close of business on
September 4, 1998 (the "Zebra Record Date") are entitled to notice of and to
vote at the Zebra Special Meeting. At the close of business on the Zebra Record
Date, there were 24,320,483 shares of Zebra Common Stock outstanding and
entitled to vote, of which 19,429,874 shares were Class A Shares and 4,890,609
were Class B Shares. Except for the stockholders identified as principal
stockholders in the information provided or incorporated by reference herein, as
of the Zebra Record Date, no other person beneficially owned more than 5% of the
outstanding Zebra Common Stock. Each holder of record of Class A Common Stock on
the Zebra Record Date will be entitled to one vote for each Class A Share held
on all matters to be voted upon at the Zebra Special Meeting. Each holder of
record of Class B Common Stock on the Zebra Record Date will be entitled to ten
votes for each Class B Share held on all matters to be voted upon at the Zebra
Special Meeting.
SOLICITATION
This Joint Proxy Statement/Prospectus was mailed to all Zebra stockholders
of record on the Zebra Record Date and constitutes notice of the Zebra Special
Meeting in conformity with the requirements of the Delaware General Corporate
Law (the "DGCL").
The cost of the solicitation of proxies from holders of Zebra Common Stock
and all related costs will be borne by Zebra. In addition, Zebra may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation materials to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
telegram or personal solicitation by directors, officers or other regular
employees of Zebra. No additional compensation will be paid to directors,
officers or other regular employees for such services.
VOTE REQUIRED
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Zebra Common Stock entitled to vote at the
Zebra Special Meeting is necessary to constitute a quorum.
Approval of the proposal requires the approval of a majority of the voting
power present in person or represented by proxy and entitled to vote at the
Zebra Special Meeting. Holders of the Class A Shares and Class B Shares vote
together as a single class on each proposal. All votes will be tabulated by the
inspector of election appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker non-votes. Abstentions
will be counted towards the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as negative votes on each
proposal. Broker non-votes are counted towards a quorum, but are not counted for
any purpose in determining whether a matter has been approved.
Pursuant to the Stockholders Agreement, dated July 9, 1998 (the "Zebra
Voting Agreement"), Edward L. Kaplan, Gerhard Cless, Carol K. Kaplan, Ruth I.
Cless, Christopher Knowles, Michael Smith and David Riley (collectively, the
"Zebra Voting Agreement Stockholders") who, as of the Zebra Record Date
beneficially owned in the aggregate 1.09% of the outstanding shares of Class A
Common Stock and 99.2% of the outstanding shares of Class B Common Stock, which
represented 71.0% of the total voting power of Zebra Common Stock, have agreed
that, prior to the earlier of the (i) Effective Time or (ii) the termination of
the Merger Agreement, they will vote their shares of Zebra Common Stock: (a) for
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approval of the Merger Agreement and any actions necessary for its furtherance;
(b) against any action or agreement that would hinder or violate the Merger
Agreement; and (c) against extraordinary corporate transactions such as business
combinations, asset sales or transfers, and changes to Zebra's corporate
structure except for the Merger Agreement.
The Zebra Voting Agreement Stockholders have executed a written consent
authorizing issuance of the Class B Shares to the Eltron shareholders in
connection with the Merger.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
corporate secretary of Zebra at Zebra's principal offices, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the Zebra Special Meeting and voting in person. Attendance at the
Zebra Special Meeting will not, by itself, revoke a proxy.
APPROVAL OF THE MERGER
BACKGROUND OF THE MERGER
1996 LETTER OF INTENT--On October 16, 1996 Zebra and Eltron announced that
they had signed a non-binding letter of intent providing for a proposed merger
of the two companies. The combination was to be structured as a
pooling-of-interests, tax-free merger in which each share of Zebra Common Stock
was to be exchanged for 0.84 of a share of Eltron Common Stock. The letter of
intent was subject to completion of due diligence, the negotiation and execution
of a definitive merger agreement, stockholder approval and customary closing
conditions, including approval under the HSR Act. On the day prior to the
October 16, 1996 announcement, the Class A Shares closed at $28.75 and Eltron
Common Stock closed at $33.50.
Following the signing of the letter of intent the parties were unable to
negotiate a definitive agreement and on November 19, 1996 announced that they
had terminated merger discussions. The termination was principally caused by
corporate government differences, namely, the composition and tenure of the
Board of Directors of the combined company and the respective responsibilities
of the Chairman of the Board and the Chief Executive Officer of the combined
company.
THE 1998 MERGER AGREEMENT--After November 1996, Donald K. Skinner, the
Chairman and Chief Executive Officer of Eltron had informal conversations with
Edward L. Kaplan, the Chairman and Chief Executive Officer of Zebra to the
effect that a business combination between Zebra and Eltron still made strategic
sense.
In February 1998, Zebra management began considering a possible acquisition
of Eltron because of the strategic benefits management believed such a merger
would provide and because of the decline in the price of Eltron Common Stock.
Shortly thereafter, William Blair & Company, L.L.C. ("William Blair") contacted
Mr. Skinner to determine whether there was an interest in exploring discussions
of a potential merger of Zebra and Eltron. A few days later, Mr. Skinner and Mr.
Kaplan discussed the concept of a merger by telephone and a day later their
respective financial advisors began discussing the process by which a merger
could be considered. Zebra requested a 30 day period during which it would have
the exclusive right to negotiate with Eltron regarding a possible merger which
the Eltron Board of Directors declined because it was evaluating all of its
options (including a merger with a company other than Zebra (although no
negotiations with respect to the foregoing took place) and remaining an
independent public company). Between February and March 1998, Zebra had
independently purchased 372,000 shares of Eltron Common Stock on the open-market
at an average price per share of $21.75.
At a March 13, 1998 Eltron Board of Directors meeting, Eltron retained
BancAmerica Robertson Stephens ("Robertson Stephens") as its investment banker
to advise it concerning Zebra's discussions of a potential merger and to
determine the scope of interest, if any, of other companies in entering into
merger
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discussions, which subsequently did not rise to any meaningful level of interest
from various companies approached by Robertson Stephens. On April 15, 1998, the
Eltron Board of Directors met with Robertson Stephens and discussed its
preliminary results of contacting potential acquisition candidates. Following
this meeting, Robertson Stephens informed William Blair that Eltron was willing
to open discussions concerning a merger of the two companies on a non-exclusive
basis. On April 21, 1998, the Zebra Board of Directors discussed and reviewed in
further detail a possible merger with Eltron.
In late April of 1998, Zebra sent a proposed confidentiality letter to
Eltron, an information request and a discussion outline for a proposal meeting
to be held with Mr. Skinner, Mr. Kaplan and their respective financial advisors.
On May 3 and 4 Mr. Kaplan visited with Eltron management and a member of its
Board of Directors.
On May 7, 1998, Eltron provided partial written responses to Zebra's
information request and on May 12, 1998 a Confidentiality Agreement was signed
by each company. Between May 14 and May 26, Eltron provided Zebra with
additional written information.
On May 26, 1998, Zebra submitted a proposal to Eltron providing for a merger
between Eltron and Zebra with an exchange ratio of 0.85 of a Class B Share for
each share of Eltron Common Stock. Following an Eltron Board of Directors
telephonic meeting with Robertson Stephens on June 1, 1998, Eltron responded to
the Zebra proposal on June 2, 1998 by countering with an exchange ratio of 1:1,
which Zebra declined to accept. Thereafter, on June 9, 1998 Eltron submitted to
Zebra a written counter proposal with a 0.95 exchange ratio and a request for a
meeting on June 15, 1998. On that date, Mr. Skinner and Mr. Kaplan and their
respective financial advisors met to discuss the potential merger and Zebra
increased its original offer to 0.87 of a Class B Share for each share of Eltron
Common Stock. Shortly thereafter, on June 22, 1998, Zebra increased its offer to
0.90 of a Class B Share for each share of Eltron Common Stock. On that date,
following an Eltron Board of Directors meeting, Eltron authorized Robertson
Stephens to inform William Blair that the 0.90 exchange ratio (the "Exchange
Ratio") was acceptable.
During this period of negotiation (commencing May 26, 1998 and ending June
22, 1998) the closing price of a Class A Share ranged from $35.25 to $39.00,
settling at $35.38 on June 22, 1998. Similarly, the closing price of a share of
Eltron Common Stock ranged from $21.69 to $25.63, settling at $25.63 on June 22,
1998. At the outset of the negotiating period, the implied daily premium was
32%. During this period and based upon an assumed exchange ratio of 0.87 the
implied premium to Eltron shareholders gradually declined over most of this
negotiating period. The closing prices of Class A Shares and Eltron Common Stock
on June 22, 1998 resulted in a 20.1% implied premium to Eltron shareholders. The
20.1% implied premium on June 22, 1998 was the lowest implied premium at any
point during this negotiating period, and prompted Zebra to improve its offer as
an inducement to Eltron.
Beginning on June 25 through July 7, 1998, each party and their financial
advisors conducted due diligence inquiries of the other, while legal counsel for
the parties negotiated the Merger Agreement.
On July 2, 1998, the Eltron Board of Directors held a telephonic meeting at
which detailed presentations were made regarding the proposed transaction. On
July 7, 1998 the Zebra Board of Directors met and approved the Merger Agreement,
subject to the Eltron Board of Directors' approval of the Merger Agreement. On
July 8, 1998, the Eltron Board of Directors met with their advisors and
discussed the terms and conditions of the Merger as set forth in the drafts of
the Merger Agreement previously provided to the Eltron Board of Directors. The
Merger Agreement was approved by the Eltron Board of Directors on that date.
Negotiations continued throughout the day and evening regarding the final
details of the Merger Agreement, and the Merger Agreement and related documents
were executed late the following morning. A public announcement of the Merger
was made that day.
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REASONS FOR THE MERGER
JOINT REASONS FOR THE MERGER--The Boards of Directors of Zebra and Eltron
independently concluded that the proposed Merger will afford to each company the
complementary strengths of the two individual companies, will provide the
combined company significant potential advantages and resources and potentially
will enable the combined company to address emerging strategic opportunities
more quickly and effectively.
Zebra and Eltron have each identified additional reasons for the Merger, as
discussed below. It should be noted, however, that the potential benefits of the
Merger may not be realized. See "Risk Factors."
ELTRON'S REASONS FOR THE MERGER--In addition to the anticipated joint
benefits described above, the Eltron Board of Directors believes that the
following are additional reasons the Merger will be beneficial to Eltron and
recommends the shareholders of Eltron vote FOR approval and adoption of the
Merger Agreement and approval of the Merger:
(i) The combined company will have enhanced resources including a market
capitalization of over $1.2 billion, annual sales of over $310 million
and operating profits in excess of $74 million (for the 12 months ended
April 4, 1998), and significant financial resources with cash and
investments of over $138 million, in each case on a pro forma basis;
(ii) The combined company will offer the broadest line of bar code products
in the world. Zebra provides mid-range and high-performance printer
products whereas Eltron provides a wide line of sub-$1000 desk top and
portable printers;
(iii) The combined company's broad product offerings will provide resellers
and end-users with the opportunity for one-stop shopping for the vast
majority of their thermal and thermal transfer bar code printing needs;
(iv) The combined company will be able to deploy its product development
resources more productively by eliminating the development of
duplicative products and focusing its resources on developing
alternative, new products and product improvements;
(v) By combining the resources of Zebra and Eltron, it is expected that
costs will be reduced through higher volume purchasing;
(vi) The combined company will have broader channels of distribution, and
Eltron will have access to Zebra's reseller network and Zebra will gain
access to Eltron's strong channel/key account relationships (although
no decision has been made about which products will be offered through
which channel, because the products of Zebra and Eltron are highly
complementary, the potential exists for cross-selling opportunities to
be exploited);
(vii) The increased size of the combined company will allow segmentation and
focus of the combined company's resources on the card printer business,
and the card printer products will also benefit by having access to the
Zebra reseller channel (sales growth is expected to increase as a
result of these changes);
(viii) The Merger should produce both production and operating cost savings,
including the elimination of duplicative public company costs and the
consolidation of operations on a single ERP software system;
(ix) The Merger will reduce the combined company's reliance on certain
significant customers of either Eltron or Zebra;
(x) Zebra and Eltron have amassed considerable human resources that should
enable the combined company to compete more effectively in the auto
identification market; and
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(xi) Zebra has shown strong price appreciation with a two-year compounded
annual growth rate of 54% and strong liquidity with an average daily
trading volume over the past two years of 125,000 shares, which, in
each case, is higher than that of Eltron over the comparable period.
In considering the proposed Merger, the Eltron Board of Directors has
acknowledged that there are certain risks associated with the Merger, including
(i) the possibility that the potential benefits set forth above may not be
realized or that there might be high costs associated with realizing such
benefits; (ii) the factors set forth under "Risk Factors"; (iii) the possibility
that pooling-of-interests accounting treatment might not be available due to
Zebra's existing ownership of Eltron Common Stock and the potential of Eltron
shareholders exercising any potential dissenters' rights; and (iv) the
possibility that the Merger might not be consummated, resulting in a potential
adverse effect on the market price of the Eltron Common Stock and on Eltron's
relationships with certain of its employees. Notwithstanding the risks, the
Eltron Board of Directors concluded that the positive factors outlined above
outweighed the negative considerations.
In addition to the factors set forth above, in the course of its
deliberations during the Eltron Board meetings held on June 22, July 2 and July
8, 1998, the Eltron Board of Directors reviewed with Eltron management a number
of additional factors relevant to the Merger, including:
(i) Information concerning Eltron and Zebra's respective businesses,
historical financial performance and condition, operations, technology,
products, customers, competitive positions, prospects and management;
(ii) Eltron management's view as to the financial condition, results of
operations and business and financial potential of Eltron and Zebra
before and after giving effect to the Merger, based on management's due
diligence;
(iii) Current financial market conditions and historical market prices,
volatility and trading information with respect to the Eltron Common
Stock and Class A Common Stock;
(iv) The consideration to be received by the Eltron Public Shareholders in
the Merger and the relationship between the market value of the Class A
Common Stock issuable upon conversion of the Class B Common Stock to be
issued in exchange for each share of Eltron Common Stock and a
comparison of comparable merger transactions;
(v) The belief that the terms of the Merger Agreement, including the
parties' representations, warranties and covenants, and the conditions
to their respective obligations, are reasonable;
(vi) Reports from management and legal and financial advisors as to the
results of their due diligence investigation of Zebra;
(vii) The potential impact of the Merger on customers and employees of Eltron
and Zebra;
(viii) The likely reaction to the Merger in the financial markets; and
(ix) Detailed financial analysis and pro forma and other information with
respect to the companies presented by Eltron management and Robertson
Stephens in Eltron Board of Directors presentations, as well as
Robertson Stephens' opinion that, as of July 8, 1998, the Exchange
Ratio was fair to the Eltron Public Shareholders from a financial point
of view (see "--Opinion of BancAmerica Robertson Stephens, Financial
Advisor to Eltron"). A copy of Robertson Stephens' written opinion
dated July 8, 1998, setting forth the assumptions made, matters
considered and review undertaken, is attached to this Joint Proxy
Statement/Prospectus as Appendix C. The full text of such opinion is
incorporated herein by reference and the foregoing description thereof
is qualified in its entirety by such reference. Eltron Public
Shareholders are urged to read such opinion in its entirety.
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The Eltron Board of Directors also considered that the Merger Agreement
provides that Eltron may not solicit any Acquisition Proposal (as defined in the
Merger Agreement). To the extent that Eltron receives an unsolicited Acquisition
Proposal, Eltron may, before the Merger is consummated, provide information to,
engage in discussions with, and enter into an agreement with a third party
related to an unsolicited Acquisition Proposal that the Eltron Board of
Directors reasonably believes is superior to the Eltron Public Shareholders from
a financial point of view to the terms of the Merger, if the Eltron Board of
Directors, upon advice of its counsel and financial advisor, determines that the
failure to do so would result in a breach of fiduciary duty under applicable
law. The Eltron Board of Directors noted that the Merger Agreement provides for
the payment to Zebra of a termination fee of $12 million in certain
circumstances as described under "The Merger Agreement--Termination Fee" and was
aware that Zebra probably would not have agreed to enter into the Merger
Agreement without such provision. The Eltron Board of Directors concluded that,
while the existence of the termination fee provision might reduce the likelihood
that a third party would propose an alternative merger with Eltron pending
completion of the Merger, the increased costs to a third party would not be
material and that benefits of the Merger to Eltron outweighed the risks.
The Eltron Board of Directors also considered the terms of the proposed
Merger Agreement regarding Eltron's right to consider, negotiate and undertake
other acquisition proposals that might arise following announcement of the
Merger. In the course of these deliberations, legal counsel to Eltron advised
the Eltron Board of Directors as to its fiduciary obligations in the context of
considering the proposed transaction.
The Eltron Board of Directors was made aware of the negotiations between
Zebra and each of Messrs. Skinner, Gagnier and Foliard concerning their new
employment agreements to be effective upon completion of the Merger. However,
the Eltron Board members did not participate in these negotiations. The Eltron
Board approved the final forms of these employment agreements. See "Approval of
the Merger--Interests of Certain Persons in the Merger."
The foregoing discussion of the factors considered by the Eltron Board of
Directors is not intended to be exhaustive but is intended to include many of
the material factors considered by the Eltron Board of Directors. In view of the
complexity and variety of factors considered by the Eltron Board of Directors,
the Eltron Board of Directors did not consider it practical to quantify or
otherwise attempt to assign any relative or specific weights to the specific
factors considered, and individual directors may have given differing weights to
different factors.
ZEBRA'S REASONS FOR THE MERGER--In addition to the anticipated joint
benefits described above, the Zebra Board of Directors believes that the
following are additional specific reasons the Merger will be beneficial to Zebra
and recommends the stockholders of Zebra vote FOR approval of issuance of the
Class B Shares in connection with the Merger Agreement and authorization of an
increase in the number of Class A Shares issuable under the Zebra 1997 Stock
Option Plan from 531,500 shares to 2.0 million shares:
(i) The combined company will have enhanced resources including a market
capitalization of over $1.2 billion, annual sales of over $310 million
and operating profits in excess of $74 million (for the 12 months ended
April 4, 1998), and significant financial resources with cash and
investments of over $138 million, in each case on a pro forma basis;
(ii) The combined company will offer the broadest line of bar code products
in the world. Eltron provides a wide line of sub-$1,000 desk top and
portable printers whereas Zebra provides mid-range and high-performance
printer products;
(iii) The combined company's broad product offerings will provide resellers
and end-users with the opportunity for one-stop shopping for the vast
majority of their thermal and thermal transfer bar code printing needs;
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(iv) Eltron's product offerings are targeted principally at applications
where any of the following may be an important consideration: low
price, small size and/or low quantity label production; which market
Zebra believes offers attractive growth potential;
(v) The combined company will be able to deploy its product development
resources more productively by eliminating the development of duplicate
products and focusing its resources on developing alternative, new
products and product improvements;
(vi) By combining the resources of Zebra and Eltron, it is expected that
costs will be reduced through higher volume purchasing;
(vii) The combined company will have broader channels of distribution, and
Eltron will have access to Zebra's reseller network and Zebra will gain
access to Eltron's strong channel/key account relationships (although
no decision has been made about which products will be offered through
which channel, because the products of Zebra and Eltron are highly
complementary, the potential exists for cross-selling opportunities to
be exploited);
(viii) The increased size of the combined company will allow segmentation and
focus of the combined company's resources on the card printer business,
and the card printer products will also benefit by having access to the
Zebra reseller channel (sales growth is expected to increase as a
result of these changes);
(ix) The Merger should produce both production and operating cost savings,
including the elimination of duplicative public company costs and the
consolidation of operations on a single ERP software system;
(x) The Merger will reduce the combined company's reliance on certain
significant customers of either Eltron or Zebra;
(xi) Without the benefit of any revenue or cost synergies, which are
expected to be material, the Merger should be accretive (meaning that
assuming no revenue enhancements or cost savings result from the
Merger, William Blair's analysis indicated that the combined
enterprise's earnings per share in 1999 would be $2.28 compared to
$2.27 for Zebra on a stand-alone basis and that the combined entity's
earnings per share in 2000 would be $2.64 compared to $2.61 for Zebra
on a stand-alone basis) to Zebra's current stockholders on a
prospective pro forma basis; and
(xii) Zebra and Eltron have amassed considerable human resources that should
enable the combined company to compete more effectively in the auto
identification market.
In addition to the factors set forth above, in the course of its meetings on
March 3, 1998, April 21, 1998 and July 7, 1998, the Zebra Board of Directors
reviewed and considered a wide variety of information relevant to the Merger
including:
(i) Information concerning Zebra's and Eltron's respective businesses,
historical financial performance and condition, operations, technology,
products, customers, competitive positions, prospects and management;
(ii) Zebra's management's view as to the financial condition, results of
operations and business and financial potential of Zebra and Eltron
before and after giving effect to the Merger, based on management's due
diligence;
(iii) Current financial market conditions and historical market prices,
volatility and trading information with respect to the Zebra Common
Stock and Eltron Common Stock;
(iv) The consideration to be paid to the Eltron Public Shareholders in the
Merger, the fixed Exchange Ratio and the relationship between the
market value of the Class A Common Stock issuable upon
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conversion of the Class B Common Stock to be issued in exchange for
each share of Eltron Common Stock and a comparison of comparable merger
transactions;
(v) The belief that the terms of the Merger Agreement, including the
parties' representations, warranties and covenants, and the conditions
to their respective obligations, are reasonable;
(vi) Reports from management and legal and financial advisors as to the
results of their due diligence investigation of Eltron;
(vii) The potential impact of the Merger on customers and employees of Zebra
and Eltron;
(viii) The likely reaction to the Merger from the financial markets; and
(ix) Detailed financial analysis and pro forma and other information with
respect to the companies presented by Zebra management and William
Blair in presentations to the Zebra Board of Directors, as well as
William Blair's opinion that the consideration to be paid pursuant to
the Merger Agreement was fair from a financial point of view to Zebra
(a copy of which opinion is attached hereto as Appendix B and which
opinion stockholders are urged to review carefully).
The foregoing discussion of the factors considered by the Zebra Board of
Directors is not intended to be exhaustive but is intended to include many of
the material factors considered by the Zebra Board of Directors. In view of the
complexity and variety of factors considered by the Zebra Board of Directors,
the Zebra Board of Directors did not consider it practical to quantify or
otherwise attempt to assign any relative or specific weights to the specific
factors considered, and individual directors may have given differing weights to
different factors.
BOARD RECOMMENDATIONS
THE ZEBRA BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO AND IN THE
BEST INTERESTS OF ZEBRA AND ITS STOCKHOLDERS AND THEREFORE UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE ISSUANCE OF THE CLASS B SHARES IN
CONNECTION WITH THE MERGER AND THE AUTHORIZATION OF AN INCREASE IN THE NUMBER OF
CLASS A SHARES ISSUABLE UNDER THE ZEBRA 1997 STOCK OPTION PLAN.
THE ELTRON BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO AND IN THE
BEST INTERESTS OF ELTRON AND THE ELTRON PUBLIC SHAREHOLDERS AND THEREFORE
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT, THE MERGER
AND THE RELATED TRANSACTIONS.
OPINION OF BANCAMERICA ROBERTSON STEPHENS, FINANCIAL ADVISOR TO ELTRON
Eltron retained Robertson Stephens to act as its financial advisor in
connection with the Merger and to render an opinion as to the fairness of the
Exchange Ratio, from a financial point of view, to the Eltron Public
Shareholders. The full text of Robertson Stephens' opinion dated July 8, 1998 is
attached to this Joint Proxy Statement/Prospectus as Appendix C and is
incorporated herein by reference, and the summary of the opinion set forth below
is qualified in its entirety by reference to the full text of such opinion. The
Eltron Public Shareholders are urged to read such opinion carefully and in its
entirety for a description of the procedures followed, the factors considered,
the assumptions made and the scope of review undertaken, as well as limitations
on the review undertaken, by Robertson Stephens in rendering its opinion.
At the July 8, 1998 special meeting of the Eltron Board of Directors,
Robertson Stephens delivered its oral opinion, which was subsequently confirmed
in writing (the "Robertson Stephens Opinion"), that, as of such date and based
on the matters described therein, the Exchange Ratio was fair, from a financial
point of view, to the Eltron Public Shareholders. Robertson Stephens' opinion to
the Eltron Board of Directors
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addresses only the fairness of the Exchange Ratio to the Eltron Public
Shareholders, from a financial point of view, and does not constitute a
recommendation to any such shareholder as to how such shareholder should vote at
the Eltron Special Meeting. Robertson Stephens expresses no opinion as to the
tax consequences of the Merger. Robertson Stephens' opinion as to the fairness
of the Exchange Ratio from a financial point of view is based on the assumption
that the Merger will be a tax-free reorganization for federal income tax
purposes and such opinion does not take into account the particular tax status
or position of any shareholder of Eltron. In furnishing its opinion, Robertson
Stephens was not engaged as an agent or fiduciary of Eltron's shareholders or
any other third party. Robertson Stephens did not recommend to the Eltron Board
of Directors that any specific purchase price should constitute the Exchange
Ratio. No limitations were imposed by the Eltron Board of Directors on Robertson
Stephens with respect to the investigations made or procedures followed by it in
furnishing its opinion.
In connection with the preparation of its opinion dated July 8, 1998,
Robertson Stephens, among other things: (i) reviewed certain financial
information relating to Eltron furnished to Robertson Stephens by the management
of Eltron, including certain internal financial analyses and forecasts prepared
by the management of Eltron; (ii) reviewed certain publicly available
information relating to each of Eltron and Zebra, including their respective
stock price and trading histories; (iii) held discussions with the respective
management of each of Zebra and Eltron concerning the businesses, past and
current business operations, financial condition and results of operations and
future prospects of Zebra and Eltron, respectively; (iv) reviewed the Merger
Agreement and certain related documents; (v) reviewed the valuations of publicly
traded companies that Robertson Stephens deemed comparable to Eltron; (vi)
prepared discounted cash flow analyses of Eltron; (vii) compared the financial
terms of the Merger with the financial terms, to the extent publicly available,
of other transactions that Robertson Stephens deemed relevant; (viii) prepared
pro forma merger analyses of the Merger; (ix) prepared a relative contribution
analysis for Eltron and Zebra; and (x) made such other studies and inquiries,
and reviewed other such data, as Robertson Stephens deemed relevant.
Robertson Stephens noted that based on the $42.75 closing stock price of the
Class A Shares on June 30, 1998, the Exchange Ratio of 0.9 of a Class B Share
for each share of Eltron Common Stock implied a value of approximately $38.48
per share of Eltron Common Stock and an aggregate Eltron equity value of
approximately $302.1 million, assuming 7.85 million shares of Eltron Common
Stock on a fully diluted basis.
The following paragraphs summarize the material analyses performed by
Robertson Stephens in arriving at its opinion and reviewed with the Eltron Board
of Directors, but do not purport to be a complete description of the analyses
performed by Robertson Stephens.
COMPARABLE COMPANY ANALYSIS--Using publicly available information with
respect to Eltron and the Comparable Companies (defined below), including
research analyst estimates, Robertson Stephens analyzed, among other things, the
market values and aggregate values (market values plus net debt) and trading
multiples of Eltron and the following selected publicly traded companies in the
bar code printing industry: Unova Inc., TransAct Technologies, Incorporated,
Trident International and Zebra (collectively, the "Comparable Companies").
Multiples compared by Robertson Stephens included aggregate values to each
latest twelve month revenue, latest twelve month EBIT (earnings before net
interest and taxes), estimated 1998 EBIT, latest twelve month EBITDA (EBIT plus
depreciation and amortization) and estimated 1998 EBITDA, and market values to
estimated 1998 net income and estimated 1999 net income. All multiples were
based on closing stock prices as of June 30, 1998. Applying a range of multiples
of aggregate values for the Comparable Companies for latest twelve month
revenue, latest twelve month EBIT, estimated 1998 EBIT, latest twelve month
EBITDA and estimated 1998 EBITDA of 1.5x to 2.5x, 10.0x to 16.0x, 8.0x to 12.0x,
8.0x to 13.0x and 6.0x to 9.0x, respectively, to corresponding financial data
for Eltron resulted in implied equity value reference ranges for Eltron of
approximately $141.9 million to $289.2 million, $200.9 million to $316.6
million, $182.5 million to $269.7 million, $185.4 million to $296.3 million and
$160.7 million to $237.1 million, respectively. Applying a range of multiples of
market values for the Comparable Companies for estimated 1998 net income and
estimated 1999 net income of 12.0x to 20.0x and 10.0x to 16.0x, respectively, to
corresponding financial data for Eltron resulted in
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implied equity value reference ranges for Eltron of approximately $166.9 million
to $278.2 million and $167.4 million to $267.8 million, respectively.
PRECEDENT ACQUISITION ANALYSIS--Using publicly available information,
Robertson Stephens analyzed the aggregate value and implied transaction value
multiples paid or proposed to be paid in selected merger or acquisition
transactions in the bar code manufacturing and printing industries (the
"Comparable Transactions"). Robertson Stephens compared, among other things, the
aggregate value in such transactions as a multiple of the latest twelve month
revenues, EBIT and EBITDA. Applying a range of multiples for the Comparable
Transactions of the latest twelve month revenues of 1.0x to 2.0x, of the latest
twelve month EBIT of 11.0x to 16.0x and of the latest twelve month EBITDA of
7.0x to 15.0x, to corresponding financial data for Eltron resulted in impled
equity value reference ranges for Eltron of approximately $120.4 million to
$232.9 million, $220.1 million to $316.6 million and $163.2 million to $340.7
million, respectively. Robertson Stephens also analyzed the premiums paid in the
Comparable Transactions relative to the closing trading price of the acquired
companies' common stock one day and 30 days prior to the public announcement of
such transactions. The mean and medium premiums based on the one day prior price
were 33.6% and 45.5%, respectively, and the mean and medium premiums based on
the 30 day prior price were 48.0% and 46.0%, respectively.
All multiples for the Comparable Transactions were based on public
information available at the time of the announcement of such transactions,
without taking into account differing market and other conditions during the
period in which the Comparable Transactions occurred. No company, transaction or
business used in the Comparable Company Analysis or the Precedent Transaction
Analysis as a comparison is identical to Eltron, Zebra or the Merger.
Accordingly, an analysis of the results of the foregoing is not entirely
mathematical; rather it involves complex considerations and judgements
concerning differences in financial and operating characteristics and other
factors that could affect the acquisition, public trading and other values of
the Comparable Companies, the Comparable Transactions or the business segment,
company or transactions to which they are being compared.
DISCOUNTED CASH FLOW ANALYSIS--Robertson Stephens performed certain
discounted cash flow analyses to estimate the present value of the cash flows of
Eltron projected in publicly available forecasts published by research analysts.
Robertson Stephens first discounted the projected net cash flows through
December 31, 2003, using discount rates ranging from 22% to 26%. Robertson
Stephens then added to the present value of the cash flows an estimated terminal
value of Eltron at December 31, 2003, discounted back at the same range of
discount rates. The terminal value was computed by multiplying Eltron's
projected EBIT in the fiscal year ending December 31, 2003 by terminal multiples
ranging from 10.0x to 12.0x. The discounted cash flow analyses indicated implied
equity valuations ranging from $209.6 million to $280.3 million.
RELATIVE EXCHANGE RATIO ANALYSIS--Robertson Stephens reviewed the trading
activity of common stock of Eltron and Zebra for the purpose of determining
implied relative exchange ratios. Robertson Stephens examined the exchange ratio
based on trading prices at June 30, 1998 and at a date four weeks prior to June
30, 1998. The resulting implied exchange ratios were 0.64 and 0.59,
respectively. Comparing the Exchange Ratio to such implied exchange ratio,
indicated a premium to Eltron shareholders of 39.9% and 52.6%, respectively.
Additionally, Robertson Stephens reviewed the average trading activity of
common stock of Eltron and Zebra for the purposes of determining implied
relative exchange ratios. Robertson Stephens examined the exchange ratio based
on average trading prices over several periods, including the 30-day average
trading price, 45-day average trading price and 90-day average trading price.
The resulting implied exchange ratios were 0.62, 0.64 and 0.64, respectively.
Comparing the exchange ratio to such implied 30-day exchange ratio, implied
45-day exchange ratio and implied 90-day exchange ratio showed a premium to
Eltron shareholders of 44.5%, 40.9% and 40.5%, respectively.
RELATIVE CONTRIBUTION ANALYSIS--Using publicly available information,
Robertson Stephens compared the relative contributions of Eltron and Zebra to
the pro forma combined revenues, gross profit, EBITDA,
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EBIT and net income, based on actual 1997 results and estimated 1998 results.
Robertson Stephens noted that Eltron's relative contribution to the pro forma
combined revenues, gross profit, EBITDA, EBIT and net income ranged from 21.4%
to 36.3%, implying an exchange ratio ranging from 0.85x to 1.57x and an equity
valuation ranging from $285.2 million to $526.5 million. Robertson Stephens
noted the limited usefulness of the relative contribution analysis given the
fact that Eltron shareholders will have less than a 25% pro forma equity
interest in the combined company after the Merger. This share ownership level,
coupled with the fact that only one existing member of the Eltron Board would
continue as a director of Zebra pursuant to the Merger Agreement, led Robertson
Stephens to conclude that the Merger did not constitute a "merger-of-equals."
Robertson Stephens did take into consideration the fact that Zebra Class B
Shares are entitled to supervoting rights. See "Certain Characteristics of the
Zebra Class B Shares," for a further explication of the relevant rights and
distinctions between the Zebra Class A Shares and the Zebra Class B Shares.
However, even though such supermajority voting rights typically tend to command
a small premium vis-a-vis comparable (one vote) voting securities in dual-class
listed public companies, the illiquidity of the Zebra Class B Shares would
necessitate an equal or greater corresponding discount. Robertson Stephens
considered these valuation tradeoffs in its analysis, but found the option, in
the sole discretion of the Eltron shareholders, to automatically convert Zebra
Class B Shares into Zebra Class A Shares to be beneficial. Robertson Stephens
has assumed that a significant number of Eltron shareholders will in fact opt to
convert to the Zebra Class A Shares for liquidity reasons immediately upon
closing.
PRO FORMA MERGER ANALYSIS--Robertson Stephens analyzed the pro forma
earnings per share of the combined company based on the Exchange Ratio and
financial projections for Eltron and Zebra based on publicly available research
analyst estimates. Such analysis indicated that, in the absence of synergies,
the Merger would be slightly accretive for Zebra for the calendar years 1998 and
1999.
STOCK PRICE AND TRADING ANALYSIS--Robertson Stephens reviewed the trading
activity, including price and volume, of Eltron common stock and Zebra common
stock over the two years prior to June 30, 1998. Robertson Stephens noted that
during such period the daily closing sales price of Eltron common stock ranged
from $19.00 to $38.25, with an average of $27.43 and that the daily closing
sales price of Zebra common stock ranged from $15.50 to $42.75, with an average
of $28.81.
The preparation of fairness opinions involves various determinations as to
the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances; therefore, such opinions are not readily susceptible to summary
description. In arriving at its opinion, Robertson Stephens did not attribute
any particular weight to any analysis or factor considered by it, but rather
made qualitative judgments as to the significance and relevance of each analysis
and factor. Accordingly, Robertson Stephens believes that its analyses must be
considered as a whole and that considering any portion of such analyses and
certain factors could create a misleading or incomplete view of the process
underlying its opinion. In its analyses, Robertson Stephens made numerous
assumptions with respect to industry performance, general business and other
conditions and matters, many of which are beyond the control of Eltron or Zebra.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictive future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
In connection with its opinion, Robertson Stephens did not independently
verify any of the foregoing information and has relied on all such information
being complete and accurate in all material respects, whether such information
was furnished to Robertson Stephens orally or otherwise discussed with Robertson
Stephens by the management of Eltron. Robertson Stephens has relied upon the
assurances of management of Eltron that it is not aware of any facts that would
make such information inaccurate or misleading. Furthermore, Robertson Stephens
did not obtain or make, or assume responsibility for obtaining or making, any
independent appraisal of the properties, assets or liabilities (contingent or
otherwise) of Eltron or Zebra, nor was Robertson Stephens furnished with any
such evaluations or appraisals. With respect to the financial and operating
forecasts (and the assumptions and bases therefor)
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of Eltron that Robertson Stephens reviewed, Robertson Stephens assumed that such
forecasts had been reasonably prepared in good faith by the management of Eltron
on the basis of reasonable assumptions, and reflect the best currently available
estimates and judgments of the management of Eltron of the future financial
condition and performance of Eltron, and Robertson Stephens further assumed that
such projections and forecasts will be realized in the amounts and in the time
periods currently estimated by the management of Eltron. Robertson Stephens
assumed that the Merger will be consummated upon the terms set forth in the
Merger Agreement without material alteration thereof.
Robertson Stephens was retained based on Robertson Stephens' experience as a
financial advisor in connection with mergers and acquisitions and in securities
valuations generally, as well as Robertson Stephens' investment banking
relationship and familiarity with Eltron. Robertson Stephens has provided
certain investment banking services to Eltron from time to time, and may
continue to do so. In the ordinary course of business, Robertson Stephens may
actively trade securities of Eltron and Zebra for its own account or for the
accounts of its clients and, accordingly, may at any time hold a long or short
position in such securities. Michael A. Smith, a member of the Zebra Board of
Directors, is a managing director of BancAmerica Robertson Stephens and was a
managing director of BA Partners, the investment banking division of the Bank of
America prior to its acquisition of Robertson Stephens. BA Partners has in the
past provided investment banking services to Zebra, including acting as
financial advisor to Zebra in connection with a prior proposed transaction
between Eltron and Zebra.
Eltron engaged Robertson Stephens pursuant to a letter agreement dated March
13, 1998. The agreement provides that, for its services, Robertson Stephens was
entitled to receive a fee equal to $50,000 upon execution of such agreement (the
"Retainer Fee") and a fee equal to $150,000 upon delivery of its fairness
opinion (the "Opinion Fee") and will become entitled to a transaction fee (the
"Transaction Fee") upon consummation of the Merger equal to 0.5% of the total
aggregate transaction value plus an incremental 2.0% of the aggregate
transaction value in excess of $207 million. The Retainer Fee and the Opinion
Fee will be credited against the Transaction Fee. Eltron has also agreed to
reimburse Robertson Stephens for certain expenses and to indemnify Robertson
Stephens for certain liabilities relating to or arising out of services provided
by Robertson Stephens as financial advisor to Eltron, including certain
liabilities under the federal securities laws.
OPINION OF WILLIAM BLAIR & COMPANY, L.L.C., FINANCIAL ADVISOR TO ZEBRA
Pursuant to an engagement letter dated October 8, 1996 (the "William Blair
Engagement Letter"), Zebra retained William Blair to render certain financial
advisory and investment banking services to Zebra in connection with a possible
business combination with Eltron. William Blair is a nationally recognized firm
and, as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with merger
transactions and other types of strategic combinations and acquisitions. William
Blair has acted as the lead manager for Zebra's public offerings and has
received underwriting fees for those services. In the ordinary course of its
business, William Blair and its affiliates actively trade Class A Shares and
Eltron Common Stock for their own accounts and for the accounts of their
customers, and accordingly, may hold a long or short position in these
securities.
As consideration for William Blair's services, Zebra agreed to pay William
Blair a fee of $1,000,000 contingent upon the consummation of the Merger. In
addition, Zebra has agreed to indemnify William Blair and its affiliates against
certain liabilities, including liabilities arising under applicable securities
laws.
As part of its engagement Zebra asked William Blair to render an opinion, if
it was able, as to the fairness to Zebra, from a financial point of view, of the
consideration to be paid by Zebra pursuant to the Merger Agreement. On July 7,
1998 William Blair delivered an oral opinion to the Zebra Board of Directors to
the effect that, as of such date and based upon and subject to the assumptions
and qualifications stated in its opinion, the consideration to be paid by Zebra
pursuant to the Merger Agreement was fair to Zebra from a financial point of
view. William Blair subsequently delivered a written opinion to that effect on
July 8, 1998. A copy of William Blair's opinion dated July 8, 1998 (the "William
Blair Opinion") is attached as Appendix B. Zebra stockholders are urged to read
the William Blair
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Opinion in its entirety for assumptions made, procedures followed, other matters
considered and limits of review by William Blair.
William Blair prepared its opinion for the Zebra Board of Directors and is
directed only to the fairness of the per share consideration to be paid in the
Merger (the "Merger Consideration") from a financial point of view and does not
constitute a recommendation to any Zebra stockholder as to how such stockholder
should vote at the Zebra Special Meeting. William Blair was not retained as an
advisor or agent to Zebra stockholders or any other person, other than as an
advisor to the Zebra Board of Directors. The William Blair Opinion does not
constitute an opinion as to the price at which Class A Shares would trade at any
time. Zebra and Eltron determined the Merger Consideration in arm's-length
negotiations where William Blair advised Zebra. Zebra did not impose any
restrictions or limitations upon William Blair with respect to the
investigations made or the procedures which William Blair followed in rendering
its opinion.
In connection with its opinion, William Blair reviewed, among other things:
(a) the Merger Agreement; (b) certain audited financial statements of Zebra for
the five fiscal years ended December 31, 1997 and certain audited financial
statements of Eltron for the three years ended December 31, 1997; (c) the
unaudited quarterly financial statements of Zebra for the quarter ended April 4,
1998 and the unaudited quarterly financial statements of Eltron for the quarter
ended March 31, 1998; (d) certain internal business, operating and financial
information and forecasts of Zebra and Eltron ("Forecasts"), prepared by the
senior management of Zebra and Eltron, respectively; (e) the pro forma impact of
the Merger on the earnings per share of Zebra based on certain pro forma
financial information prepared by the senior management of Zebra and Eltron,
respectively; (f) historical revenues, operating earnings, operating cash flows,
net income and capitalization, as to Zebra, Eltron and certain publicly held
companies in businesses William Blair believes to be comparable to Zebra and
Eltron, respectively; (g) information regarding publicly available financial
terms of certain recently-completed transactions which William Blair believed to
be relevant; (h) current and historical market prices and trading volumes of the
common stock of Zebra and Eltron; and (i) certain other publicly available
information on Zebra and Eltron. William Blair also held discussions with
members of the senior management of Zebra and Eltron to discuss the foregoing,
considered other matters which William Blair deemed relevant to its inquiry and
has taken into account such accepted financial and investment procedures and
considerations as it has deemed relevant.
In rendering its opinion, William Blair assumed and relied, without
independent verification, upon the accuracy and completeness of all the
information examined by or otherwise reviewed or discussed with it for purposes
of its opinion. William Blair has not attempted to verify independently any of
such information, nor has it made or obtained an independent valuation or
appraisal of the assets, liabilities or solvency of Zebra or Eltron. William
Blair has been advised by the managements of Zebra and Eltron that the forecasts
examined by it have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of Zebra and
Eltron, as the case may be. William Blair expresses no opinion with respect to
the forecasts or the estimates and judgments on which they are based. The
William Blair Opinion was based upon economic, market, financial and other
conditions existing on, and other information disclosed to William Blair as of,
the date of its opinion. It should be understood that, although subsequent
developments may affect the William Blair Opinion, William Blair does not have
any obligation to update, revise or reaffirm its opinion. William Blair has
further assumed that the Merger will be accounted for as a pooling-of-interests
under generally accepted accounting principles ("GAAP") and that it will qualify
as a tax-free reorganization for U.S. federal income tax purposes. William Blair
relied as to all legal matters on advice of counsel to Zebra, and has assumed
that the Merger will be consummated on the terms described in the Merger
Agreement, without any waiver of any material terms or conditions by Zebra.
The following presentation provided by William Blair is a summary of certain
of the financial analyses performed by William Blair in arriving at its opinion
dated July 8, 1998, which analyses William Blair discussed with the Zebra Board
of Directors.
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STOCK PRICE ANALYSIS--William Blair examined the history of the trading
prices and volume for the Eltron Common Stock and Class A Shares and the
relationships between movements of such common stock and movements in certain
publicly held companies in businesses William Blair believed to be comparable to
Zebra and Eltron. The analysis revealed that a holder of Eltron Common Stock
would have to sell 1.5 shares of Eltron Common Stock to buy 1.0 Class A Share,
as compared to a low and a high over the last three years of 0.62 of a share,
and 1.74 shares, respectively, of Eltron Common Stock to buy 1.0 Class A Share.
The Exchange Ratio of 0.90 of a Class A Share to each share of Eltron Common
Stock implies an exchange ratio of 1.11 shares of Eltron Common Stock to 1.0
Class A Share. The actual trading relationship between Eltron Common Stock and
Class A Shares ranged from 0.91 to 1.74 over the last twelve months and 0.62 to
1.74 over the last 3 years. Therefore, the price Zebra's stockholders are paying
for Eltron (including an acquisition control premium) is within the market
trading range over the last 12 months and 3 years, respectively.
COMPARABLE COMPANY ANALYSIS--William Blair reviewed and compared selected
historical and projected operating information, stock market data and financial
ratios for Eltron to selected historical and projected operating information,
stock market data and financial ratios of certain other publicly traded
companies including Kronos, Inc., Paxar Corp., Scansource, Inc. and Trident
International, Inc. ("Comparable Companies") that William Blair deemed to be
similar in certain respects to Eltron. For companies used as comparables to
Eltron: (i) an analysis of current stock prices to most recent twelve months
earnings per share yielded a range of 8.6 to 31.1 times earnings, compared with
a multiple of 23.9 times earnings to be received in the Merger by holders of
Eltron Common Stock; (ii) an analysis of current stock price to projected
calendar 1998 earnings per share yielded a range for Comparable Companies of 9.3
to 36.1 times earnings, compared to a multiple of 20.8 times earnings to be
received in the Merger by the Eltron Public Shareholders; and (iii) an analysis
of current stock price to projected calendar 1999 earnings per share yielded a
range for comparable companies of 8.6 to 26.8 times earnings, compared with a
multiple of 17.4 times earnings to be received in the Merger by the Eltron
Public Shareholders. William Blair also examined multiples of total transaction
value (defined as transaction equity value adjusted by adding debt and
subtracting cash and short-term investments) ("Total Transaction Value") to
latest twelve month's revenue, Total Transaction Value to latest twelve month's
earnings before interest and taxes ("EBIT") and Total Transaction Value to
latest twelve month's earnings before interest, taxes, depreciation and
amortization ("EBITDA"). William Blair's analysis of the Comparable Companies
indicated Total Transaction Value to latest twelve month's sales ranged from 0.6
to 4.2, Total Transaction Value to latest twelve month's EBIT ranged from 7.3 to
26.6 and Total Transaction Value to latest twelve month's EBITDA ranged from 4.8
to 14.0 compared to multiples of 2.5x, 14.6x and 12.9x, respectively, to be
received in the Merger by holders of Eltron Common Stock.
COMPARABLE ACQUISITIONS ANALYSIS--William Blair reviewed numerous mergers
and acquisitions which it believed to be relevant since January 1, 1995
including the acquisition of ComputerVision Corp. by Parametric Technology
Corp., the acquisition of International Imaging Materials by Paxar Corp. and the
acquisition of DH Technology Inc. by Axiohm, S.A. (the "Selected Transactions").
Such analysis indicated that for the Selected Transactions (i) Total Transaction
Value as a multiple of latest twelve month's sales ranged from 0.4x to 6.7x, as
compared to 2.5x for the Total Transaction Value to be received in the Merger,
(ii) Total Transaction Value as a multiple of latest twelve month's EBIT ranged
from 5.5x to 33.2x, as compared to 14.6x for the Total Transaction Value to be
received in the Merger and (iii) Total Transaction Value as a multiple of latest
twelve month's EBIT ranged from 5.3x to 24.2x, as compared to 12.9x for the
Total Transaction Value to be received in the Merger.
DISCOUNTED CASH FLOW ANALYSIS--William Blair performed a discounted cash
flow analysis of Eltron. The analysis was performed on a set of projections
using research analyst consensus estimates and the consensus long-term growth
rate for Zebra. Using a weighted average cost of capital between 11% and 13%,
the implied share values of Eltron's Common Stock were estimated to range from
$38.35 to $47.71, as compared to the Merger Consideration of $36.23.
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PRO FORMA MERGER ANALYSIS--William Blair also performed pro forma analyses
of the financial impact of the Merger. Using a range of earning estimates for
Eltron and Zebra based on consensus of earnings estimates, William Blair
compared the earnings per share ("EPS") of the Zebra Common Stock on a
stand-alone basis, to the EPS of the common stock of the combined company on a
pro forma basis before taking into account any potential cost savings and/or
operating synergies. William Blair assumed the Merger would be accounted for
using pooling-of-interests accounting. Based on an analysis of the combination
using the consensus estimates, and excluding nonrecurring charges attributable
to the Merger, the proposed transaction would result in an impact on fiscal 1999
EPS of accretion of approximately 1% and fiscal 2000 accretion of approximately
2%. Based on an analysis of the combination using estimates prepared by the
respective managements, and excluding nonrecurring charges attributable to the
Merger, the proposed transaction would result in an accretive impact on fiscal
1999 and fiscal 2000 EPS.
The foregoing summary set forth above does not purport to be a complete
description of the analysis performed by William Blair. The preparation of a
fairness opinion involves determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances. Therefore, such an opinion is not readily susceptible
to summary description. The preparation of a fairness opinion does not involve a
mathematical evaluation or weighing of the results of the individual analyses
performed, but requires William Blair to exercise its professional judgment,
based on its experience and expertise in considering a wide variety of analyses
taken as a whole. Each of the analyses conducted by William Blair was carried
out in order to provide a different perspective on the Merger and add to the
total mix of information available. William Blair did not form a conclusion as
to whether any individual analysis, considered in isolation, supported or failed
to support an opinion as to fairness. Rather, in reaching its conclusion,
William Blair considered the results of the analyses in light of each other and
ultimately reached its opinion based on the results of all analyses taken as a
whole. William Blair did not place particular reliance or weight on any
particular analysis, but instead concluded its analyses, taken as a whole,
supported its determination. Accordingly, notwithstanding the separate factors
summarized above, William Blair believes that its analyses must be considered as
a whole and that selecting portions of its analyses and the factors considered
by it, without considering all analyses and factors, may create an incomplete
view of the evaluation process underlying its opinion. No company or transaction
used in the above analyses as a comparison is directly comparable to Eltron or
Zebra or the contemplated transaction. In performing its analyses, William Blair
made numerous assumptions with respect to industry performance, business and
economic conditions and other matters. The analyses performed by William Blair
are not necessarily indicative of future actual values and future results, which
may be significantly more or less favorable than suggested by such analyses.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling-of-interests for financial
reporting purposes in accordance with GAAP. Under this accounting treatment, the
recorded assets and liabilities and the operating results of both Eltron and
Zebra will be carried forward to the combined operations of the combined company
at their recorded historical amounts, adjusted for Zebra's 4.9% ownership in
Eltron. Consummation of the Merger is conditioned upon (i) the receipt by Zebra
of a letter from its independent accountants prior to the Effective Time (as
defined in the Merger Agreement) to the effect that pooling-of-interests
accounting for the Merger is appropriate if it is closed and consummated in
accordance with the terms of the Merger Agreement and (ii) receipt by Eltron of
a letter from its independent accountants prior to the Closing to the effect
that pooling-of-interests accounting for the Merger is appropriate.
REGULATORY MATTERS
ANTITRUST--Zebra and Eltron have each filed the required pre-merger
Notification and Report Forms pursuant to the HSR Act. A shareholder of Eltron
has also filed a pre-merger notification concerning his anticipated receipt of
Zebra Common Stock in connection with the Merger. In connection with the Merger,
the Federal Trade Commission or the Antitrust Division of the U.S. Department of
Justice could take such action under the antitrust laws as either deems
necessary or desirable in the public
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interest, including seeking to enjoin consummation of the Merger or seeking to
cause divestiture of significant assets of Zebra or Eltron or their
subsidiaries. There can be no assurance that a challenge to the Merger on
antitrust grounds will not be made, or, if such challenge is made, of what the
result would be. Consummation of the Merger is conditioned upon, among other
things, the expiration or termination of the waiting period applicable to the
consummation of the Merger under the HSR Act and the absence of any temporary
restraining order, preliminary or permanent injunction, or other order issued by
any federal or state court in the United States which prevents the consummation
of the Merger. The waiting period under the HSR Act was terminated on August 18,
1998.
SECURITIES LAWS--Zebra and Eltron must comply with the federal securities
laws and applicable securities laws of various states.
RIGHTS OF DISSENTING ELTRON SHAREHOLDERS
Holders of Eltron Common Stock are, in certain circumstances, entitled to
dissenters' rights with respect to the Merger under the CGCL if, and only if,
the holders of 5% or more of the outstanding Eltron Common Stock elect to
exercise dissenters' rights in respect of their shares. A person having a
beneficial interest in shares of Eltron Common Stock held of record in the name
of another person, such as a broker or nominee, must act promptly to cause the
record holder to follow the steps summarized below properly and in a timely
manner to perfect whatever dissenters' rights the beneficial owner may have.
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the CGCL and is qualified in its entirety by
reference to the full text of Chapter 13 of the CGCL, sections of which are
reprinted in their entirety as Appendix D to this Joint Proxy
Statement/Prospectus and should be read carefully and in their entirety.
If the Merger is approved by the affirmative vote of the holders of a
majority of the outstanding shares of Eltron Common Stock and is not terminated
in accordance with the Merger Agreement, Eltron's shareholders who vote against
the Merger and who have fully complied with all applicable provisions of Chapter
13 of the CGCL and whose shares constitute Dissenting Shares (as defined below)
will, to the extent that their shares collectively aggregate 5% or more of the
outstanding shares of Eltron Common Stock, have the right to require Eltron to
purchase the shares of Eltron Common Stock held by them for cash at fair market
value determined as of the day before the terms of the Merger were first
announced, excluding any appreciation or depreciation because of the Merger but
adjusted for any stock split, reverse stock split or share dividend which
becomes effective thereafter. Under the CGCL, no shareholder of Eltron who is
entitled to exercise dissenters' rights has any right at law or in equity to
contest the validity of the Merger or to have the Merger set aside or rescinded,
except in an action to test whether the number of shares required to authorize
or approve the Merger had legally been voted in favor of the Merger. "Dissenting
Shares" means those shares of Eltron Common Stock with respect to which the
holders have voted against the Merger and have perfected their purchase demand
in accordance with the CGCL, except that no such shares will constitute
Dissenting Shares unless either (i) holders of 5% or more of the outstanding
shares of Eltron Common Stock file demands for payment as dissenting shares
under the CGCL or (ii) the shares in question are subject to a restriction or
transfer imposed by Eltron or by any law or regulation.
Eltron is not aware of any restriction on transfer of any shares of Eltron
Common Stock except restrictions that may be imposed upon shareholders who
received shares in private transactions exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
restrictions on transfer imposed on certain affiliates of Eltron in connection
with the Merger and restrictions on transfer imposed on the Eltron Voting
Agreement Shareholders pursuant to the Eltron Voting Agreement. Those
shareholders who believe there is some such restriction affecting their shares
should consult with their own legal counsel as to the nature and extent of any
dissenters' rights they may have.
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For a holder of Eltron Common Stock to exercise dissenters' rights, the
procedures to be followed under Chapter 13 of the CGCL include the following
requirements:
(1) The shareholder of record must have voted the shares against the
Merger. It is not sufficient to abstain from voting. However, the
shareholder may abstain as to part of his or her shares or vote part of
those shares for the Merger without losing the right to exercise dissenters'
rights as to other shares which were voted against the Merger.
(2) Any such shareholder who votes against the Merger, and who wishes to
have the shares that are being voted against the Merger purchased, must make
a written demand to have Eltron purchase those shares for cash at their fair
market value. The demand must include the information specified below and
must be received by Eltron not later than the date of the Eltron Special
Meeting. Merely voting or delivering a proxy directing a vote against the
approval of the Merger does not constitute a demand for purchase. A written
demand is essential.
The written demand that the dissenting shareholder must deliver to Eltron
must:
(1) Be made by the person who was the shareholder of record on the
Eltron Record Date (or such shareholder's duly authorized representative)
and not by someone who is merely a beneficial owner of the shares and not by
a shareholder who acquired the shares subsequent to the Eltron Record Date;
(2) State the number and class of Dissenting Shares held of record by
the dissenting shareholder; and
(3) Include a demand that Eltron purchase the shares at the dollar
amount that the shareholder claims to be the fair market value of such
shares as of the day before the terms of the Merger were first announced,
excluding any appreciation or depreciation because of the proposed Merger
but adjusted for any stock split, reverse stock split or share dividend
which becomes effective thereafter. Eltron believes that this day is July 9,
1998. A shareholder may take the position in the written demand that a
different date is applicable. The shareholder's statement of fair market
value constitutes an offer by such dissenting shareholder to sell the shares
to Eltron at such price.
The written demand should be delivered to Eltron at Eltron's principal
offices, Attention: Kriston D. Qualls, General Counsel.
A shareholder may not withdraw a demand for payment without the consent of
Eltron. Under the terms of the CGCL, a demand by a shareholder is not effective
for any purpose unless it is received by Eltron (or any transfer agent thereof)
not later than the date of the Eltron Special Meeting.
Within ten days after the approval of the Merger by Eltron's shareholders,
Eltron must notify all holders of Dissenting Shares of the approval and must
offer all of such shareholders a cash price for their shares which Eltron
considers to be the fair market value of the shares as of the day before the
terms of the Merger were first announced. The notice also must contain a brief
description of the procedures to be followed under Chapter 13 of the CGCL to
dispute the price offered and attach a copy of the relevant provisions of the
CGCL in order for a shareholder to exercise the right to have Eltron purchase
his or her shares.
Within 30 days after the date on which the notice of the approval of the
Merger is mailed by Eltron to holders of Dissenting Shares, the shareholder's
certificates, representing any shares which the shareholder demands be
purchased, must be submitted to Eltron, at its principal office, or at the
office of any transfer agent, to be stamped or endorsed with a statement that
the shares are Dissenting Shares or to be exchanged for certificates of
appropriate denomination so stamped or endorsed. Upon subsequent transfer of
those shares, the new certificates will be similarly stamped, together with the
name of the original dissenting shareholder.
If Eltron and a holder of Dissenting Shares agree that the shares held by
such shareholder are eligible for dissenters' rights and agree upon the price of
such shares, such holder of Dissenting Shares is entitled to receive from Eltron
the agreed price with interest thereon at the legal rate on judgments from the
date
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of such agreement. Any agreement fixing the fair market value of Dissenting
Shares as between Eltron and the holders thereof must be filed with Kriston D.
Qualls, the General Counsel of Eltron, at the address set forth herein. Subject
to certain provisions of Section 1306 and Chapter 5 of the CGCL, payment of the
fair market value of the Dissenting Shares shall be made within 30 days after
the amount has been agreed upon or within 30 days after any statutory or
contractual conditions to the Mergers are satisfied, whichever is later, subject
to the surrender of the certificate therefor, unless provided otherwise by
agreement.
If Eltron and a holder of Dissenting Shares fail to agree on either the fair
market value of the shares or on the eligibility of the shares to be purchased,
then either such holder of Dissenting Shares or Eltron may file a complaint for
judicial resolution of the dispute in the superior court of the proper county.
The complaint must be filed within six months after the date on which the
respective notice of approval is mailed to Eltron shareholders. If a complaint
is not filed within six months, the shares will lose their status as Dissenting
Shares. Two or more holders of Dissenting Shares may join as plaintiffs or be
joined as defendants in such an action. If the eligibility of the shares is at
issue, the court must first have decided that issue. If the fair market value of
the shares is in dispute, the court must determine, or shall appoint one or more
impartial appraisers to assist in its determination of, the fair market value.
The cost of the action will be assessed or apportioned as the court considers
equitable. If, however, the appraised value of the Dissenting Shares exceeds the
price offered by Eltron, Eltron must pay the costs.
Any demands, notices, certificates or other documents required to be
delivered to Eltron may be sent to the Eltron Principal Offices, Attention:
Kriston D. Qualls, General Counsel.
RIGHTS OF DISSENTING ZEBRA STOCKHOLDERS
Holders of Zebra Common Stock are not entitled to appraisal rights under the
DGCL because Zebra is not a constituent corporation to the Merger under the
DGCL.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Eltron's management and the Eltron Board of Directors may
be deemed to have certain interests in the Merger that are in addition to their
interests as shareholders of Eltron generally. The Eltron Board of Directors was
aware of these interests and considered them, among other matters, in approving
the Merger Agreement and the transactions contemplated thereby.
EMPLOYMENT AGREEMENTS--In connection with the Merger Agreement, Mr. Donald
K. Skinner, the Chairman and Chief Executive Officer of Eltron, has entered into
an employment agreement with Eltron pursuant to which he will act as President
of Eltron's Card Printer Unit. Effectiveness of this new employment agreement is
conditioned upon consummation of the Merger. Mr. Skinner's employment term under
this new agreement expires December 31, 2000, but may be extended by mutual
consent of the parties. Eltron has agreed to pay Mr. Skinner $240,000 annually,
and to make Mr. Skinner eligible to receive incentive bonuses (which may not
exceed more than 75% of his annual salary) and options under Zebra's stock
option plans. These salary and bonus terms are the same as exist in his current
employment agreement with Eltron. Also, Mr. Skinner will receive options to
purchase 36,000 Class A Shares of which 50% will vest and become exercisable on
the first and second anniversary of the effective date of the new agreement at
an exercise price equal to the fair market value of the Class A Shares, as
quoted by Nasdaq as of the effective date of the new agreement. In the event of
Eltron's termination of Mr. Skinner without cause, Mr. Skinner will continue to
receive, for three years, his annual salary and benefits, which benefit is also
currently provided under his existing employment agreement with Eltron. In
addition, Mr. Skinner will be nominated and elected to the Zebra Board of
Directors and will be appointed Vice Chairman of Zebra as of the Effective Time.
Mr. Hugh K. Gagnier has entered into an employment agreement with Eltron
pursuant to which he will act as the Vice President and General Manager of the
combined company's Simi Valley Operations. Effectiveness of this new employment
agreement is conditioned upon consummation of the Merger. Mr. Gagnier's
employment term under this new agreement expires December 31, 2000, but will
automatically renew for additional one year periods. This new employment
agreement extends the term under his
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previous agreement by two years. Eltron will pay Mr. Gagnier $180,000 annually
and make Mr. Gagnier eligible for incentive bonuses (which may not exceed more
than 75% of his annual salary) and Zebra's stock option plans. These salary and
bonus terms are the same as exist in his current employment agreement with
Eltron. Also, Mr. Gagnier will receive options to purchase 22,000 Class A Shares
in accordance with the Zebra 1997 Stock Option Plan at an exercise price equal
to the fair market value of the Class A Shares, as quoted by the Nasdaq National
Market as of the effective date of the new agreement. In the event of Eltron's
termination of Mr. Gagnier without cause, Mr. Gagnier will continue to receive,
for one year, his annual base salary and benefits, which benefit is also
currently provided under his existing employment agreement with Eltron.
Mr. Patrice J. Foliard has entered into an employment agreement with Eltron
pursuant to which he will act as Vice President of Eltron's Card Printer Unit.
Effectiveness of this new employment agreement is also conditioned upon
consummation of the Merger. Mr. Foliard's employment term under this new
agreement expires December 31, 2000, but will automatically renew for additional
one year periods. This new employment agreement extends the term under his
existing agreement by two years. Eltron will pay Mr. Foliard $130,000 annually
and make Mr. Foliard eligible for both incentive bonuses (which may not exceed
more than 75% of his annual salary) and Zebra's stock option plans. These salary
and bonus terms are the same as exist in his current employment agreement with
Eltron. Also, Mr. Foliard will receive options to purchase 16,000 Class A Shares
in accordance with the Zebra 1997 Stock Option Plan at an exercise price equal
to the fair market value of the Class A Shares, as quoted by the Nasdaq National
Market as of the effective date of the new agreement. In the event of Eltron's
termination of Mr. Foliard without cause, Mr. Foliard will continue to receive,
for one year, his annual base salary and benefits, which benefit is also
currently provided under his existing employment agreement with Eltron.
Each of these new employment agreements contain provisions relating to
non-competition and non-solicitation. The non-competition provisions generally
provide that Messrs. Skinner, Gagnier and Foliard, during their employment and
for a period of one year following termination of employment (or, in the case of
Mr. Skinner, two years following termination of employment, or one year if Zebra
terminates his employment without cause), shall not directly or indirectly
compete with Zebra, its subsidiaries or its affiliates in any jurisdiction where
Zebra conducts any part of its business. The non-solicitation provisions provide
that during their employment and for a period of three years thereafter, they
will not directly or indirectly solicit employees or customers to leave, or
otherwise alter a relationship with, Zebra.
For additional information about terms relating to options to purchase Class
A Shares contained in each of these new employment agreements see "--Granting of
Zebra Options."
Mr. Roger Hay has an employment agreement with Eltron pursuant to which he
is acting as Eltron's Vice President, Finance and Chief Financial Officer. Mr.
Hay's agreement provides that upon a "change in control," he shall have the
option for a period of up to one year following such change in control to
terminate his employment with Eltron and shall be entitled to receive a lump sum
severance payment equal to his annual base salary in effect at that time
(currently $180,000). The Merger constitutes a change in control for purposes of
this employment agreement. Mr. Hay and Eltron have entered into an amendment to
this employment agreement, the effectiveness of which is conditioned upon
consummation of the Merger. Pursuant to the amendment, upon closing of the
Merger, Mr. Hay's existing employment agreement with Eltron will terminate, and
his employment with Eltron will continue for a period of 90 days following the
closing of the Merger to assist in the integration of the companies. Mr. Hay
shall continue to receive his base salary during this 90 day integration period.
Upon the closing of the Merger, Mr. Hay shall be entitled to receive a lump sum
payment of $180,000 as provided for in his existing agreement. At the expiration
of the 90 day stay bonus period covered by the amendment, Mr. Hay will be
entitled to an additional stay bonus of $150,000. The amendment also provides
for the automatic vesting of all options granted to Mr. Hay upon the closing of
the Merger (which provisions are in Mr. Hay's existing employment agreement).
Mr. Kriston D. Qualls has an employment agreement with Eltron pursuant to
which he is acting as Eltron's Vice President, General Counsel and Secretary.
Mr. Qualls' agreement provides that upon a "change in control," he shall have
the option for a period of up to one year following such change in
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control to terminate his employment with Eltron and shall be entitled to receive
a lump sum severance payment equal to his annual base salary in effect at that
time (currently $159,180). The Merger constitutes a change in control for
purposes of this employment agreement. Mr. Qualls and Eltron have entered into
an amendment to this employment agreement, the effectiveness of which is
conditioned upon consummation of the Merger. Pursuant to the amendment, upon
closing of the Merger, Mr. Qualls' existing employment agreement with Eltron
will terminate, and his employment with Eltron will continue for a period of 90
days following the closing of the Merger to assist in the integration of the
companies. Mr. Qualls shall receive a base salary and stay bonus of $94,000
during this 90 day period. Upon the closing of the Merger, Mr. Qualls shall be
entitled to receive a lump sum payment of $159,180 as provided for in his
existing agreement. The amendment also provides for the automatic vesting of all
options granted to Mr. Qualls upon the closing of the Merger (which provisions
are in Mr. Qualls's existing employment agreement).
INDEMNIFICATION AND INSURANCE--The Merger Agreement provides that all rights
to indemnification existing in favor of the persons serving as directors and
officers of Eltron as of the date of the Merger Agreement for acts or omissions
occurring prior to the Effective Time, as provided in the Eltron Articles of
Incorporation or Eltron Bylaws and in certain indemnification agreements between
Eltron and such directors and officers, will survive the Merger. Subject to
certain limitations, Zebra has also agreed to maintain in effect for five years
after the Effective Time a policy of directors' and officers' liability
insurance for the benefit of persons serving as directors and officers of Eltron
as of date of the Merger Agreement. See "The Merger Agreement--Indemnification
and Insurance."
GRANTING OF ZEBRA OPTIONS--In accordance with their new employment
agreements, and in addition to the vesting and conversion of their existing
Eltron options, Messrs. Skinner, Gagnier and Foliard will also be granted
options to purchase 36,000, 22,000 and 16,000 Class A Shares, respectively, upon
consummation of the Merger. The exercise price of these options will be the fair
market value of the Class A Shares, as quoted by the Nasdaq National Market, as
of the Effective Time. Fifty percent of Mr. Skinner's options will be
exercisable on the first and second anniversary, respectively, of the Merger.
Messrs. Gagnier's and Foliard's options will have a life of ten years from the
date of grant and 15%, 17.5%, 20%, 22.5% and 25%, respectively, of the options
granted will become exercisable on the first, second, third, fourth, and fifth
anniversaries of the date of granting.
RELATIONSHIP WITH FINANCIAL ADVISOR--Michael A. Smith, a director of Zebra,
is also a Managing Director of BancAmerica Robertson Stephens, the financial
advisor to Eltron. Mr. Smith did not participate in any of the services provided
by BancAmerica Robertson Stephens to Eltron and, as a result of an informational
barrier, was not privy to information passing between BancAmerica Robertson
Stephens and Eltron. The Robertson Stephens division of BancAmerica Robertson
Stephens is under contract to be sold to the Bank of Boston. Mr. Smith will not
be part of that transaction and he and certain of his colleagues will remain
with BancAmerica.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the Merger that are generally applicable to holders of Eltron
Common Stock. This discussion is based on current existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
U.S. Treasury Regulations ("Treasury Regulations") thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to Zebra, Eltron or the Eltron shareholders as described herein.
Eltron shareholders should be aware that this discussion does not deal with
all U.S. federal income tax considerations that may be relevant to particular
Eltron shareholders in light of their particular circumstances, such as
shareholders who are dealers in securities, banks, insurance companies or
tax-exempt organizations, who are subject to the alternative minimum tax
provisions of the Code, who are non-United States persons, who acquired their
shares in connection with stock option or stock purchase plans or in other
compensatory transactions or who hold their shares as a hedge or as a part of a
hedging, straddle,
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conversion or other risk reduction transaction. In addition, the following
discussion does not address the tax consequences of the Merger under foreign,
state or local tax laws or the tax consequences of transactions effectuated
prior to or after the Merger (whether or not such transactions are in connection
with the Merger).
ELTRON SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM IN THEIR PARTICULAR
CIRCUMSTANCES, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES.
Neither Zebra nor Eltron has requested or will request a ruling from the
Internal Revenue Service (the "IRS") regarding any of the U.S. federal income
tax consequences of the Merger. As a condition to consummation of the Merger,
Troy & Gould, counsel to Eltron, and Katten Muchin & Zavis, counsel to Zebra,
will each render an opinion (collectively, the "Tax Opinions") to Eltron and
Zebra, respectively, that the Merger will constitute a reorganization under
Section 368(a) of the Code (a "Reorganization"). If either Eltron or Zebra
waives receipt of the Tax Opinions, the Eltron shareholders and the Zebra
stockholders will be notified and resolicited. Such Tax Opinions are, and will
be, based on certain assumptions and representations, and will be subject to
certain limitations. Moreover, such opinions will not be binding on the IRS nor
preclude the IRS from adopting a contrary position. The discussion below assumes
that the Merger will qualify as a Reorganization.
Subject to the limitations and qualifications referred to herein, and as a
result of the Merger qualifying as a Reorganization, the following U.S. federal
income tax consequences will result:
(i) No gain or loss will be recognized by the holders of Eltron Common Stock
upon the receipt of only Zebra Common Stock in exchange for Eltron
Common Stock in the Merger (except to the extent, if any, of cash
received in lieu of fractional shares);
(ii) The aggregate tax basis of the Zebra Common Stock received by the
Eltron Public Shareholders in the Merger (including any fractional
share of Zebra Common Stock not actually received) will be the same as
the aggregate tax basis of Eltron Common Stock surrendered in exchange
therefor;
(iii) The holding period of Zebra Common Stock received by each Eltron Public
Shareholder in the Merger will include the period for which the Eltron
Common Stock exchanged therefor was considered to be held, provided
that the Eltron Common Stock surrendered was held as a capital asset at
the Effective Time;
(iv) Cash payments received by the Eltron Public Shareholders in lieu of a
fractional share will be treated as if a fractional share of Zebra
Common Stock was issued in the Merger and then redeemed by Zebra. An
Eltron Public Shareholder receiving such cash will recognize gain or
loss upon such payment, measured by the difference (if any) between the
amount of cash received and the basis of such fractional share. The
gain or loss should be capital gain or loss provided that the Eltron
Common Stock was held as a capital asset at the Effective Time; and
(v) A shareholder of Eltron who exercises dissenters' rights under any
applicable law with respect to a share of Eltron Common Stock and
receives payments for such stock in cash should recognize capital gain
or loss (if such stock was held as a capital asset at the Effective
Time) measured by the difference between the amount of cash received and
the basis of such share, provided such payment is neither essentially
equivalent to a dividend within the meaning of Section 302 of the Code
nor has the effect of a distribution of a dividend within the meaning of
Section 356(a)(2) of the Code (collectively, a "Dividend Equivalent
Transaction"). A sale of Eltron shares incident to an exercise of
dissenters' rights will generally not be a Dividend Equivalent
Transaction if, as a result of such exercise, the dissenting shareholder
owns no shares of Zebra Common Stock (either actually or constructively
within the meaning of Section 318 of the Code) immediately after the
Merger.
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The Tax Opinions will be subject to certain assumptions and qualifications
and will be based on the accuracy of certain representations of Zebra, Merger
Sub and Eltron including representations in certain certificates delivered to
counsel by the respective managements of Zebra, Merger Sub and Eltron.
A successful IRS challenge to the Reorganization status of the Merger could
result in significant adverse tax consequences to the Eltron shareholders. An
Eltron shareholder would recognize gain or loss on each share of Eltron Common
Stock surrendered equal to the difference between the basis of such share and
the fair market value, as of the Effective Time, of the Zebra Common Stock
received in exchange therefor. In such event, a shareholder's aggregate basis in
the Zebra Common Stock received would equal its fair market value, and the
stockholder's holding period for such stock would begin the day after the
Effective Time.
Certain noncorporate Eltron shareholders may be subject to backup
withholding at a rate of 31% on cash payments received in lieu of a fractional
share of Zebra Common Stock. Backup withholding will not apply, however, to a
stockholder who furnishes a correct taxpayer identification number ("TIN") and
certifies that he, she or it is not subject to backup withholding on the
substitute Form W-9 included in the Transmittal Letter, who provides a
certificate of foreign status on Form W-8, or who is otherwise exempt from
backup withholding. A stockholder who fails to provide the correct TIN on Form
W-9 may be subject to a $50 penalty imposed by the IRS.
Each Eltron shareholder will be required to retain records and file with
such shareholder's U.S. federal income tax return a statement setting forth
certain facts relating to the Merger.
RESALE OF CLASS B SHARES
The Class B Shares issued in connection with the Merger will be freely
transferable, except that shares issued to any Eltron shareholder who is an
Eltron Affiliate (as defined) or who becomes an affiliate of Zebra are subject
to certain restrictions on resale. See "--Zebra and Eltron Affiliate
Agreements." Upon resale, the Class B Shares shall automatically convert into
Class A Shares on a share-for-share basis.
ELTRON VOTING AGREEMENT
Pursuant to the Eltron Voting Agreement, the Eltron Voting Agreement
Shareholders who beneficially own an aggregate of 548,848 outstanding shares of
Eltron Common Stock (representing approximately 7.2% of the shares of Eltron
Common Stock based upon 7,684,210 shares outstanding as of August 21, 1998) have
agreed that, prior to the Expiration Date (as defined in the Eltron Voting
Agreement), they will vote their shares of Eltron Common Stock: (i) for approval
of the Merger Agreement and any actions required in furtherance of it; (ii)
against any action or agreement that would in any way hinder or violate the
Merger Agreement; and (iii) against extraordinary corporate transactions such as
business combinations, asset sales or transfers, and changes to Eltron's
corporate structure except as contemplated by the Merger Agreement. In addition,
the Eltron Voting Agreement Shareholders have agreed, prior to the Expiration
Date (as defined in the Eltron Voting Agreement), not to transfer any securities
of Eltron owned by them except as contemplated by the Merger Agreement. The
Eltron Voting Agreement Shareholders include all of the following directors and
executive officers of Eltron: Donald K. Skinner, Hugh K. Gagnier, Patrice J.
Foliard, Robert G. Bartizal, George L. Bragg, William R. Hoover, Kriston D.
Qualls, Roger Hay, and the trustee of a trust for the benefit of Donald K.
Skinner. The form of the Eltron Voting Agreement is attached to this Joint Proxy
Statement/Prospectus as Appendix E.
ZEBRA VOTING AGREEMENT
Pursuant to the Zebra Voting Agreement, the Zebra Voting Agreement
Stockholders, who beneficially own an aggregate of 212,000 outstanding Class A
Shares (representing approximately 1.09% of the Class A Shares) and 4,852,301
outstanding Class B Shares (representing approximately 99.2% of the Class B
Shares) (representing 71.0% of the combined voting power of Zebra Common Stock)
as of the Zebra Record Date have agreed that, prior to the Expiration Date, they
will vote their shares of Zebra Common Stock: (i) for approval of the Merger
Agreement and any actions required in furtherance of it;
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(ii) against any action or agreement that would in any way hinder or violate the
Merger Agreement; and (iii) against extraordinary corporate transactions such as
business combinations, asset sales or transfers, and changes to Zebra's
corporate structure except for the Merger Agreement. Accordingly, approval of
the issuance of the Class B Shares by the Zebra stockholders is assured. In
addition, the Zebra Voting Agreement Stockholders have agreed, prior to the
Expiration Date (as defined in the Zebra Voting Agreement), not to transfer any
securities of Zebra owned by them except as contemplated by the Merger
Agreement. The Zebra Voting Agreement Stockholders include the following
directors and two directors' wives: Edward L. Kaplan, Gerhard Cless, Carol K.
Kaplan, Ruth I. Cless, Christopher Knowles, Michael Smith and David Riley. The
form of the Zebra Voting Agreement is attached to this Joint Proxy
Statement/Prospectus as Appendix F.
ZEBRA AND ELTRON AFFILIATE AGREEMENTS
Each of Zebra and Eltron has delivered to the other an Affiliate Agreement
executed by each person who may be considered an "affiliate," as such term is
defined in Rule 145 promulgated under the Securities Act, of Zebra or Eltron,
respectively (each an "Affiliate"), whereby each Affiliate has agreed not to
effect any sale, transfer or other disposition, in the case of Zebra Affiliates,
any Zebra Common Stock and, in the case of Eltron Affiliates, of any Zebra
Common Stock received by such Eltron Affiliate in the Merger unless: (i) made
following registration pursuant to the Securities Act of 1933; (ii) as permitted
by, and in accordance with, Rule 145 or another applicable exemption under the
Securities Act; or (iii) pursuant to an opinion of counsel furnished to and
satisfactory to Eltron or Zebra, respectively, to the effect that no
registration under the Securities Act would be required.
In addition, so as to help ensure that the Merger will be treated as a
pooling-of-interests for accounting and financial reporting purposes, each
Affiliate Agreement provides that during the period contemplated by the
Commission's Staff Accounting Bulletin No. 65 until the earlier of: (i) Zebra's
public announcement of financial results covering at least 30 days of
post-combination operations of Zebra and Eltron or (ii) the date on which the
Merger Agreement is terminated in accordance with its terms, no Affiliate shall
sell, exchange, transfer, pledge, distribute or through any similar transaction
intended or having the effect, directly or indirectly, to reduce such
Affiliate's risk relative to: (a) in the case of Zebra Affiliates, any Zebra
Common Stock (except pursuant to and upon consummation of the Merger) and, in
the case of Eltron Affiliates, any Eltron Common Stock (except pursuant to and
upon consummation of the Merger); or (b) in the case of Zebra Affiliates, any
Zebra Common Stock received by such Zebra Affiliate in the Merger or upon
exercise of options assumed by Zebra in the Merger, and in the case of any
Eltron Affiliate, any Zebra Common Stock received by such Eltron Affiliate in
the Merger or upon exercise of options assumed by Zebra in the Merger.
CONVERSION OF OUTSTANDING WARRANTS
In connection with Eltron's initial public offering ("IPO") in February
1994, Eltron sold to the representative of the IPO (the "Representative")
warrants to purchase up to 110,000 shares of Eltron Common Stock at an exercise
price of $7.20 per share. As of the date of this Joint Proxy Statement/
Prospectus, warrants to purchase 10,000 shares remain unexercised and because of
a prior two-for-one split in Eltron Common Stock, the current exercise price is
$3.60 per share. These warrants expire February 8, 1999. The holder of these
warrants has certain registration rights with respect to the shares of Eltron
Common Stock underlying the warrants. Upon consummation of the Merger, Zebra
will assume all of the obligations under these warrants, and such warrants will
automatically convert into the right to receive shares of Class B Common Stock
based on the Exchange Ratio. The holder of these warrants received such warrants
when he was an employee of the Representative; he is no longer an employee of
the Representative, but he is currently an employee of Robertson Stephens,
Eltron's financial advisor.
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THE MERGER AGREEMENT
GENERAL
The following is a summary of the material provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. The following is
not a complete statement of all provisions of the Merger Agreement and related
agreements. Statements made in this Joint Proxy Statement/Prospectus with
respect to the terms of the Merger Agreement and such related agreements are
qualified in their respective entireties by reference to the more detailed
information set forth in the Merger Agreement and such related agreements.
Capitalized terms used in this summary but not defined in this Joint Proxy
Statement/Prospectus shall have the meaning ascribed to them in the Merger
Agreement.
The Merger Agreement provides for the merger of Merger Sub with and into
Eltron. As a result of the Merger, Merger Sub will cease to exist, Eltron will
become a wholly owned subsidiary of Zebra and the existing shareholders of
Eltron will become stockholders of Zebra. Eltron, as the Surviving Corporation,
will retain all of its separate corporate existence, with all its corporate
rights unaffected by the Merger. Merger Sub has been formed solely for the
purpose of effecting the Merger, and there will be no other activity in Merger
Sub. The Merger will become effective at the Effective Time, which shall be upon
the filing of an Agreement of Merger with the California Secretary of State or
such later time as may be specified in the Agreement of Merger. The Effective
Time shall occur on the second day after the satisfaction or waiver of all the
conditions to closing set forth in the Merger Agreement. There can be no
assurance, however, that the required regulatory approvals will be obtained,
that the other conditions to the Merger will ever be satisfied, or that the
Merger Agreement will not be terminated. See "--Certain Conditions."
CONSIDERATION TO BE RECEIVED IN THE MERGER; CONVERSION OF ELTRON OPTIONS
At the Effective Time, (a) each issued and outstanding share of Eltron
Common Stock other than shares held by Zebra and its affiliates and all rights
in respect thereof will be converted into the right to receive nine-tenths
(0.90) of a share of Class B Common Stock, (b) each issued and outstanding share
of Merger Sub Common Stock and all rights in respect thereof will be converted
automatically into and exchanged for one share of Common Stock of the Surviving
Corporation, and (c) each outstanding and unexercised option and warrant to
purchase shares of Eltron Common Stock will be assumed by Zebra and converted
into an option or warrant to purchase shares of Class B Common Stock. The number
of shares of Zebra Common Stock to be subject to such new options and warrants
will be determined by multiplying the number of shares of Eltron Common Stock
subject to the original option or warrant by the Exchange Ratio, and the
exercise price with respect thereto will equal the exercise price under the
original option or warrant divided by the Exchange Ratio. The new options will
otherwise have substantially the same terms and conditions in effect immediately
prior to the Effective Time except to the extent that such terms or conditions
change in accordance with their terms as a result of the transactions relating
to the Merger.
NO FRACTIONAL SHARES
No fractional shares of Class B Common Stock will be issued in connection
with the Merger, and no certificates for any such fractional shares will be
issued. In lieu of such fractional shares, any holder of Eltron Common Stock
(after aggregating all fractional shares of Zebra Common Stock otherwise
issuable to such holder) will, upon surrender of such holder's stock
certificate(s) representing Eltron Common Stock to the Exchange Agent, be paid
in cash the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of a share of Class
A Common Stock on the Nasdaq National Market on the trading day immediately
prior to the Effective Time.
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STOCK OWNERSHIP FOLLOWING THE MERGER
Based upon the number of shares of Eltron Common Stock issued and
outstanding as of the Zebra Record Date, an aggregate of approximately 6,915,789
shares of Class B Common Stock will be issued to the Eltron Public Shareholders.
Based upon the number of shares of Zebra Common Stock issued and outstanding as
of the Eltron Record Date (assuming no exercise of outstanding options or other
rights to purchase Zebra Common Stock), the former holders of Eltron Common
Stock would hold and have voting power with respect to approximately 22.1% of
Zebra's total issued and outstanding shares after consummation of the Merger,
which represents approximately 50.3% of the combined voting power of Zebra
Common Stock.
CONVERSION OF ELTRON COMMON STOCK; PROCEDURES FOR EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Time, the Exchange Agent will
mail to the registered holders of Eltron Common Stock (i) a letter of
transmittal and (ii) instructions for the use in effecting the surrender of the
Eltron Stock Certificates in exchange for certificates representing Class B
Shares. Upon surrender of an Eltron Stock Certificate to the Exchange Agent for
exchange, together with a duly executed letter of transmittal and such other
documents as may reasonably be required by the Exchange Agent or Zebra, the
holder of such Eltron Stock Certificate shall be entitled to receive in exchange
therefor a certificate representing the whole number of shares of Class B Shares
that such holder has the right to receive. No fractional shares of Class B
Shares will be issued in connection with the Merger, and no certificates for any
such fractional shares will be issued. See "Risk Factors--Certain
Characteristics of the Zebra Class B Shares" and "--No Fractional Shares."
If any Eltron Stock Certificate has been lost, stolen or destroyed, Zebra
may require the owner of such lost, stolen or destroyed Eltron Stock Certificate
to provide an appropriate affidavit and to deliver a bond as indemnity against
any claim that may be made against the Exchange Agent, Zebra or Eltron with
respect to such Eltron Stock Certificate.
ELTRON SHAREHOLDERS SHOULD NOT SURRENDER THEIR ELTRON STOCK CERTIFICATES FOR
EXCHANGE UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
CERTAIN CONDITIONS
CONDITIONS OF EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER--The obligation
of each party to the Merger Agreement to consummate the Merger is subject to the
following: (a) the Merger Agreement and the Merger shall have received the
approval of the stockholders of Zebra and shareholders of Eltron (the "Requisite
Stockholder Approval"), (b) the Registration Statement that includes this Joint
Proxy Statement/Prospectus shall not be the subject of any stop order suspending
its effectiveness or proceedings therefor, (c) no temporary restraining order,
preliminary or permanent injunction, or other order issued by any court or other
legal restraint or prohibition preventing consummation of the Merger, (d) any
waiting period applicable to the Merger under the HSR Act shall have expired or
been terminated (such waiting period having been terminated on August 18, 1998),
(e) Zebra and Eltron shall have received opinions from Katten Muchin & Zavis and
Troy & Gould Professional Corporation, respectively, as to certain tax matters
related to the Merger, and (f) Eltron and Zebra shall have received letters from
their independent auditors, respectively, to the effect that the transactions
contemplated by the Merger Agreement qualify for pooling-of-interests accounting
treatment. The conditions to a party's obligations to effect the Merger may be
waived by the party entitled to assert the condition.
CONDITIONS TO THE OBLIGATIONS OF ELTRON--The obligation of Eltron to effect
the Merger is also subject to the following: (a) Zebra and its subsidiaries
shall have obtained all of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices,
reasonably deemed necessary by Eltron, upon advice of counsel, to provide for
the continuation of all material
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<PAGE>
agreements and to consummate the Merger, (b) the representations and warranties
of Zebra contained in the Merger Agreement shall be true and correct in all
material respects as of the closing of the Merger except that, for purposes of
determining whether such condition is met, if a representation and warranty is
qualified by materiality it must be true as described in the Merger Agreement,
giving effect to only the materiality qualification contained in the particular
representation, (c) Zebra shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
before the closing of the Merger, (d) Zebra shall have delivered to Eltron an
officers' certificate as to the matters set forth in certain subsections of the
Merger Agreement, (e) no action, suit or proceeding shall be pending or
threatened before any governmental entity or authority wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by the Merger Agreement,
(ii) cause any of the transactions contemplated by the Merger Agreement to be
rescinded following consummation or (iii) affect adversely the right of Zebra to
own, operate or control any of the assets and operations of the Surviving
Corporation and its subsidiaries following the Merger, and no such judgment,
order, decree, stipulation or injunction shall be in effect, (f) there shall not
have been any event or development which results in a Material Adverse Effect
upon the business of Zebra, nor shall there have occurred any event or
development which could reasonably be likely to result in a Material Adverse
Effect upon the business of Zebra in the future, (g) all actions to be taken by
Zebra and Merger Sub in connection with the consummation of the transactions
contemplated by the Merger Agreement and all certificates, opinions, instruments
and other documents required to effect the transactions contemplated by the
Merger Agreement shall be reasonably satisfactory in form and substance to
Eltron and its counsel, and (h) the Class A Shares into which the Class B Shares
to be issued to the stockholders of Eltron are convertible shall have been
approved for listing on Nasdaq.
CONDITIONS TO THE OBLIGATIONS OF ZEBRA--The obligation of Zebra to effect
the Merger is also subject to the following: (a) Eltron and its subsidiaries
shall have obtained all of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices
reasonably deemed necessary by Zebra, upon advice of counsel, to provide for the
continuation of all material agreements and to consummate the Merger, (b) the
representations and warranties of Eltron contained in the Merger Agreement shall
be true and correct in all material respects as of the closing of the Merger
except that, if a representation and warranty is qualified by materiality it
must be true as described in the Merger Agreement, giving effect to only the
materiality qualification contained in the particular representation, (c) Eltron
shall have performed in all material respects all obligations required to be
performed by it under the Merger Agreement at or before the closing of the
Merger, (d) Eltron shall have delivered to Zebra an officers' certificate as to
the matters set forth in certain subsections of the Merger Agreement, (e) no
action, suit or proceeding shall be pending or threatened before any
governmental entity or authority wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by the Merger Agreement, (ii) cause any of the
transactions contemplated by the Merger Agreement to be rescinded following
consummation or (iii) affect adversely the right of Zebra to own, operate or
control any of the assets and operations of the Surviving Corporation and its
subsidiaries following the Merger, and no such judgment, order, decree,
stipulation or injunction shall be in effect, (f) there shall not have been any
event or development which results in a Material Adverse Effect upon the
business of Eltron, nor shall there have occurred any event or development which
could reasonably be likely to result in a Material Adverse Effect upon the
business of Eltron in the future, and (g) all actions to be taken by Eltron in
connection with the consummation of the transactions contemplated by the Merger
Agreement and all certificates, opinions, instruments and other documents
required to effect the transactions contemplated by the Merger Agreement shall
be reasonably satisfactory in form and substance to Zebra and its counsel.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties of
Zebra and Eltron concerning, among other things, due organization and good
standing, capitalization, fairness opinions, ownership
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<PAGE>
of subsidiaries and other investments, corporate authority to enter into the
contemplated transactions, recent reports filed with the Commission, financial
statements, tax matters, employee matters, regulatory matters, information
supplied for use in this Joint Proxy Statement/Prospectus, contractual defaults,
material changes or events, litigation, violations of law, employee benefit
plans, labor relations, environmental matters, required Board and shareholder
approvals, insurance, intellectual property, material contracts, accounting
matters, and conflicts with organizational documents or certain material
agreements.
CERTAIN COVENANTS
The Merger Agreement provides that, until the Effective Time, Eltron, Zebra,
and their respective subsidiaries will each conduct its business in the ordinary
course consistent with past practices and will try to preserve substantially
intact its business organization, to keep available the services of officers and
employees, and to preserve its present relationships with significant customers
and with other persons and entities with whom it has significant business
relationships to the end that its goodwill and ongoing business will be
unimpaired at the Effective Time. The Merger Agreement places restrictions on
the ability of each of Eltron and Zebra to (a) issue or sell capital stock and
related securities or grant options therefor, (b) amend its charter or bylaws,
(c) effect a stock split, combination, or reclassification, (d) pay dividends,
(e) repurchase or redeem its stock, (f) make material acquisitions of, or
investments in, other entities, (g) make material dispositions of assets, (h)
incur indebtedness, (i) increase employee compensation or severance benefits,
(j) make material changes in its accounting policies, (k) make material capital
expenditures, (l) adopt or amend employment or consulting agreements or benefit
plans, (m) enter into certain material contracts, and (n) take any action that
would affect the accounting treatment of the Merger.
The Merger Agreement contains certain other covenants and agreements,
including agreements relating to obtaining pooling-of-interests accounting
treatment for the Merger, preparation and distribution of this Joint Proxy
Statement/Prospectus, public announcements, mutual notification of certain
matters, access to information, and cooperation regarding certain filings with
governmental and other agencies and organizations. In addition, the Merger
Agreement contains a general covenant requiring each of the parties to use its
best efforts to effectuate the Merger.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that neither Eltron nor any of its officers,
directors, employees, financial advisors, or agents will, directly or
indirectly, solicit, initiate, encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to any Acquisition Proposal
(as defined below), engage in any discussions or negotiations relating thereto,
or accept any Acquisition Proposal. The prohibition does not apply, subject to
the observance of certain notice, confidentiality, and other requirements, to
certain discussions and negotiations relating to any Acquisition Proposal that
the Eltron Board of Directors determines in good faith would, if consummated,
result in a transaction more favorable to Eltron's shareholders (a "Superior
Proposal") and which it is required to consider in order to fulfill its
fiduciary duties to the shareholders of Eltron.
"Acquisition Proposal" means any of the following involving Eltron or any of
its subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer, or other disposition of 20% or more of the assets of
Eltron on a consolidated basis, (iii) any issue, sale or other disposition of
securities representing 20% or more of the votes attached to outstanding Eltron
securities, (iv) any person having acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such term is defined under
Section 13(d) of the Exchange Act and applicable rules) having been formed that
beneficially owns or has the right to acquire beneficial ownership of, 20% or
more of Eltron Common Stock, (v) any liquidation, dissolution or other similar
transaction, and (vi) any transaction similar to any of the foregoing.
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INDEMNIFICATION AND INSURANCE
Zebra will become obligated under Eltron's current provisions regarding
indemnification of officers and directors contained in its charter and bylaws
(and in those of its subsidiaries) and any director, officer or employee
indemnification agreement with it or any of its subsidiaries. In addition, for
five years after the Effective Time, Zebra will maintain in effect the current
Eltron policies (or policies of at least equal coverages and amounts) of
directors' and officers' liability insurance with respect to claims arising from
facts or events that occur on or before the Effective Time; Zebra is not,
however, required to expend more than 200% of the current Eltron annual premium
for such insurance.
TERMINATION
Until the Effective Time, the Merger Agreement may be terminated by Eltron
and Zebra by mutual consent, or by either Eltron or Zebra if (a) the Merger has
not been consummated on or before December 31, 1998 (the "Termination Date"),
(b) any court of competent jurisdiction or regulatory authority has issued an
order, decree or ruling, or taken any other action permanently to restrain,
enjoin, or otherwise prohibit the Merger and such order, decree, ruling on other
action shall have become final and non-appealable, (c) the other party has
breached or failed to comply in any material respect with any of its obligations
under the Merger Agreement or any representation or warranty made by the other
party in the Merger Agreement is incorrect in any material respect, and such
breaches, failures, or misrepresentations are not cured within five days of
notice, or (d) the Requisite Shareholder Approval shall not have been obtained.
The Merger Agreement may also be terminated by Zebra if the Eltron Board of
Directors resolves to or does withdraw or adversely modify its approval or
recommendation of the Merger Agreement or the Merger, fails to reaffirm such
approval or recommendation upon request, or approves or recommends any
Acquisition Proposal, or a tender offer or exchange offer for 20% or more of the
outstanding Eltron Common Stock is commenced and the Eltron Board of Directors
recommends acceptance of such offer or takes no action with respect to such
offer. The Merger Agreement may be terminated by Eltron, if the Eltron Board of
Directors enters into a definitive agreement relating to a transaction that
constitutes a Superior Proposal, provided Eltron shall have complied with all of
the provisions of the Merger Agreement and has made payment of the Termination
Fee required by the Merger Agreement.
TERMINATION FEE
The Merger Agreement obligates Eltron to pay to Zebra $12 million in cash (a
"Termination Fee") if Zebra terminates the Merger Agreement because (i) the
Eltron Board of Directors amends, withholds or withdraws its recommendations in
favor of the Merger Agreement or the Merger, (ii) a tender offer or exchange
offer for 20% of the outstanding Eltron Common Stock is commenced and the Eltron
Board of Directors recommends acceptance of the tender offer or takes no
position, (iii) Eltron terminates the Merger Agreement to enter into a
definitive agreement relating to a Superior Proposal, (iv) the Eltron
shareholders fail to approve the Merger and an Acquisition Proposal is publicly
proposed before termination of the Merger Agreement and the Acquisition Proposal
is consummated within twelve months of such termination, or (v) the Eltron
shareholders fail to approve the Merger and an Acquisition Proposal is
consummated within six months of termination of the Merger Agreement.
EXPENSES
Each of Zebra and Eltron will bear its own costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby,
except that (a) the expenses incurred for printing and mailing of this Joint
Proxy Statement/Prospectus will be shared equally and (b) Zebra will bear the
costs and expenses incurred in connection with the filing of the pre-merger
notification and report forms relating to the Merger under the HSR Act.
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INFORMATION REGARDING ELTRON
Eltron is a designer and manufacturer of high quality, low cost thermal
printers, that offers direct thermal and thermal transfer bar code label and
receipt printers, integrated verified printing systems, plastic card printing
systems, secure ID printing systems, and related accessories. A one source
provider, Eltron also manufactures and markets an extensive range of pressure
sensitive labels, tags, printer ribbons and plastic cards.
Founded in 1991, Eltron has sold more than 575,000 printers worldwide.
Eltron makes its products available to the market through value added resellers,
distributors, systems integrators and OEM agreements. Major users include the
healthcare, retail, manufacturing, automotive, package delivery, financial
services, and security industries.
Eltron corporate headquarters are in Simi Valley, California, European
Headquarters are in Workingmam, Berkshire, UK; and Asia Pacific Headquarters are
in Singapore. Eltron has additional facilities throughout the United States,
Europe and the Far East. Eltron recorded revenues of $105 million for its fiscal
year ended December 31, 1997.
INFORMATION REGARDING ZEBRA
Zebra designs, manufactures and distributes thermal and thermal transfer bar
code label printers, related specialty labels and ribbons and label design
software principally to industrial and service organizations throughout the
world for use in automatic identification and data collection systems. Zebra's
products are designed to operate at the user's location to produce and dispense
high quality bar coded labels in extremely time-sensitive and physically
demanding environments. Applications for Zebra's products include inventory
control, automated warehousing, JIT (Just-In-Time) manufacturing, CIM (Computer
Integrated Manufacturing), employee time and attendance records, weighing
systems, tool room control, shop floor control, library systems, prescription
labeling and scientific experimentation.
Zebra's net sales from continuing operations have grown from $58.7 million
in 1992 to $192.1 million in 1997, a compound annual growth rate of 26.8%, while
net income from continuing operations in the same period has grown from $11.8
million to $42.8 million, a compound annual growth rate of 29.3%. Zebra
management believes that Zebra's success results from its reputation for
reliable and durable products and its focus on providing bar code labeling
solutions for its customers. Zebra estimates that over 340,000 Zebra bar code
printing systems are presently installed at approximately 35,000 user sites
around the world.
POST-MERGER DIRECTORS AND OFFICERS OF ZEBRA
Upon consummation of the Merger, all of the current directors and officers
of Zebra will continue to serve in their present capacity until their respective
successors are duly nominated and elected.
In addition, Mr. Skinner will join Zebra as the President of the Card
Printer Unit of Eltron, reporting to the Chief Executive Officer of Zebra. Zebra
has also agreed in the Merger Agreement to take all actions necessary to cause
Mr. Skinner to be nominated and elected to the Zebra Board of Directors and to
be appointed Vice Chairman of Zebra as of the Effective Time. Messrs. Foliard
and Gagnier will join Zebra as senior executive officers of Eltron, reporting to
the President of the Card Printer Unit of Zebra and the Chief Executive Officer
of Zebra, respectively. Information concerning their respective background and
experience is as follows:
DONALD K. SKINNER co-founded Eltron in 1991 and has served as its Chief
Executive Officer since December 1992, and as its Chairman of the Board from
July 1995. From January 1991 (inception) to December 1992, Mr. Skinner served as
the Eltron's Executive Vice President and Chief Operating Officer and as
President from December 1992 until Mr. Gagnier assumed the position of President
in September 1995. From September 1989 to January 1991, Mr. Skinner founded and
served as President of Eltron,
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Incorporated, a manufacturer of custom thermal printers. From January 1989 to
August 1989, Mr. Skinner served as General Manager of Axiom-Edwards-CPE
Incorporated, a manufacturer of thermal printers. In 1985, Mr. Skinner
co-founded and served as Executive Vice President and Chief Operating Officer of
Peripheral Technology Corporation, a manufacturer of computer disk drives, and
was responsible for new product development, engineering, sales and marketing,
and operations. Prior to his tenure at Peripheral Technology Corporation, Mr.
Skinner spent 15 years at Dataproducts Corporation, a manufacturer of computer
printers. While at Dataproducts Corporation, Mr. Skinner was responsible for the
development, manufacturing and marketing of that company's new product lines.
Mr. Skinner is a director of Percon, Inc. (Eugene, Oregon), a manufacturer of
bar code reading products.
HUGH K. GAGNIER has been a director of Eltron since February 1994. Mr.
Gagnier became Executive Vice President and Chief Operating Officer in June
1994, and became President in September 1995. From October 1991 to November
1993, Mr. Gagnier was the Group President of Wangtek and WangDAT, Inc.,
manufacturers of tape drives for automated data back-up and subsidiaries of
Rexon Incorporated, formerly a publicly held company. Prior to his position as
Group President, Mr. Gagnier served as President of Wangtek from May 1991 to
October 1991, and as Vice President of Engineering from October 1988 to May
1991. Prior to his tenure at Rexon Incorporated, Mr. Gagnier spent three and
one-half years at Peripheral Technology Corporation, a disk drive manufacturer,
in various engineering management positions.
PATRICE J. FOLIARD, founder and former president of Privilege S.A. in
France, joined Eltron in January 1996, through Eltron's acquisition of
Privilege, S.A., initially serving as President of Eltron's newly formed Card
Division and in January 1997 became Senior Vice President, Sales and Marketing.
Prior to founding Privilege during 1994, Mr. Foliard founded in 1990 AP-Print
and Newcode, a French company specializing in the design and production of
thermal label printers and card printers. From 1988 to 1989, Mr. Foliard was
General Manager of Cominor, a French company which designs accounting software.
From 1982 to 1988 he served in Paris with the United Kingdom-based International
Computers Limited, and was responsible for sales of minicomputers to end users
for two years and then in charge of the sales force for the personal computer
line.
The current directors of Zebra include:
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME AGE POSITION WITH ZEBRA SINCE
- ------------------------------------ --- -------------------------------------- -----------
<S> <C> <C> <C>
Gerhard Cless....................... 58 Secretary and Director 1969
Edward L. Kaplan.................... 55 Chief Executive Officer, Chairman 1969
and Director
Christopher G. Knowles (1).......... 55 Director 1991
David P. Riley...................... 51 Director 1991
Michael A. Smith (1)................ 43 Director 1991
</TABLE>
- ------------------------
(1) Member of Audit Committee.
GERHARD CLESS served as Executive Vice President for Engineering and
Technology from February 1995 to June of 1998, after having served as Senior
Vice President Since 1969. He is the Secretary, as well as a co-founder of
Zebra, and has served as a director since 1969. Mr. Cless served as Treasurer of
Zebra until October 1991. Since 1969, he has been active with Zebra where he has
directed the development of numerous label printers and maintained worldwide
technology/vendor relationships. Prior to founding Zebra, Mr. Cless was a
research and development engineer at Teletype Corporation's printer division.
Mr. Cless received an MSME degree from Esslingen, Germany and has done graduate
work at the Illinois Institute of Technology.
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EDWARD L. KAPLAN is Chief Executive Officer and Chairman, as well as a
co-founder of Zebra, and has served as a director since 1969. He also served as
President of Zebra from its formation until February 1995 and again from April
1997 to April 1998 (on an interim basis) and Chief Financial Officer of Zebra
from its formation until October 1991. Mr. Kaplan began his career as a project
engineer for Seeburg Corporation, later joining Teletype Corporation as a
mechanical engineer performing research and development in the Printer Division.
In 1969, he and Gerhard Cless founded Zebra, then known as Data Specialties,
Inc. Mr. Kaplan received a BS in Mechanical Engineering from the Illinois
Institute of Technology (graduating Tau Beta Pi) and a MBA from the University
of Chicago and is an NDEA Fellow of Northwestern University.
CHRISTOPHER G. KNOWLES has served as a director of Zebra since July 1991. He
is a member of the Board of Directors of Insurance Auto Auctions, Inc. (since
June 1994) and of Metal Management, Inc. (since November 1997). In 1966, Mr.
Knowles joined North American Van Lines, which was acquired by PepsiCo, Inc. two
years later. He continued his career with PepsiCo, Inc., working in human
relations and distribution with several of its subsidiary companies, including
North American Van Lines, PepsiCo Service Industries and Wilson Sporting Goods,
as well as holding positions on the corporate staff of PepsiCo. In 1976, he
became a Vice President of Allied Van Lines and later became Division Vice
President in charge of Allied's Household Goods Division, the largest division
of that company. Mr. Knowles joined Underwriters Salvage Company in 1980 as its
Chairman of the Board and Chief Executive Officer and subsequently acquired that
company with other members of its management staff. Underwriters Salvage Company
was acquired by Insurance Auto Auctions, Inc. in January 1994. Mr. Knowles
became President and Chief Operating Officer of Insurance Auto Auctions, Inc. in
April 1994 and held such positions until March 1996. Mr. Knowles received his BA
from Indiana University in 1966.
DAVID P. RILEY has served as a director of Zebra since July 1991. Since
1984, he has been President and Chief Executive Officer of The Middleby
Corporation, a public company which manufactures commercial food equipment and
provides complete kitchens to various institutional customers, as well as to
restaurants such as Pizza Hut and Domino's Pizza. He also serves as a director
of The Middleby Corporation. Mr. Riley was previously employed in various
management positions with a subsidiary of The Middleby Corporation and, before
that, with Hobart Corporation, a food equipment manufacturer. Mr. Riley holds a
BS in Engineering from Ohio State University.
MICHAEL A. SMITH has served as a director of Zebra since July 1991. He is
Managing Director and co-head of the Mergers & Acquisitions Department of
BancAmerica Robertson Stephens and previously was co-founder head of the
investment banking group BA Partners and its predecessor entities since 1989.
Previous positions include Managing Director, Corporate Finance Department, for
Bear, Stearns and Company, Inc. (1982 to 1989) and Vice President and Manager of
the Eastern States and Chicago Group Investment Banking Division of Continental
Bank (1977 to 1982). He was a director of Graphic Technology from 1983 to 1989.
Mr. Smith graduated Phi Beta Kappa from the University of Wisconsin and received
a MBA from the University of Chicago.
The current officers of Zebra include:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- --------------------------------------------------
<S> <C> <C>
Charles E. Turnbull................. 46 President
Jack A. LeVan....................... 43 Senior Vice President, Business Development
Thomas C. Beusch.................... 45 Vice President, Sales and International
John H. Kindsvater, Jr.............. 56 Vice President, Marketing
Clive P. Hohberger.................. 55 Vice President, Technology Development
James A. Goffee, Jr................. 47 Vice President, Manufacturing
Phillip G. Arnold................... 56 Vice President, Engineering
Charles R. Whitchurch............... 51 Chief Financial Officer and Treasurer
</TABLE>
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<PAGE>
CHARLES E. TURNBULL joined Zebra as President on April 20, 1998. Mr.
Turnbull came to Zebra from Nashua Corporation, where he was President of the
Commercial Products Group from August 1995 to October 1997. From January 1994
until November 1994, Mr. Turnbull was President of the Polyken Technologies
Division of Kendall International. From 1978 to 1994, Mr. Turnbull held various
management positions of increasing responsibility with the Avery Dennison
Corporation, including Vice President and General Manager of the Marking Films
Division. Mr. Turnbull received a BS in industrial engineering from the
University of Oklahoma and a MBA from the Harvard Graduate School of Business.
JACK A. LEVAN is Senior Vice President of Business Development. He joined
Zebra in January 1995 as Senior Vice President of Marketing. From 1993 until
joining Zebra, Mr. LeVan was President of the Carolina Enterprise Association.
From 1989 to 1993, he served in various senior management positions with Groupe
Legris Industries, progressing to President and CEO of PPM Cranes, Inc., a
company acquired by Groupe Legris Industries in 1992. Mr. LeVan held various
management positions with Miller Fluid Power from 1981 to 1989. In addition, Mr.
LeVan spent three years in consulting with a specialization in industrial
marketing strategy. Mr. LeVan received a BA and a MBA from the University of
Chicago.
THOMAS C. BEUSCH is Vice President of Sales and International. He joined
Zebra in April 1991 as Director of Sales, was promoted to Director of Sales
Worldwide in December 1991, and became Vice President of Sales and International
in January 1995. Prior to joining Zebra, Mr. Beusch spent five years with
American Telephone and Telegraph, where he held various management positions.
Previously, he spent twelve years with International Business Machines in
various sales and regional marketing positions. Mr. Beusch received a BS with a
double major in marketing and management from Eastern Illinois University.
JOHN H. KINDSVATER, JR. joined Zebra in 1980 as Director of Sales.
Subsequently he was elected Vice President and in April 1991 became Vice
President of Marketing and Sales. In May 1995 he became Vice President of
Corporate Development and during the next year closed two acquisitions of
software companies. In May 1996 he was appointed President of Zebra Technologies
VTI, Inc. In August 1997 he resumed marketing responsibilities and became Vice
President of Marketing. Prior to joining Zebra, Mr. Kindsvater held management
posts in corporate development, international operations, marketing and sales
with various technology-based companies, including Quixote Corporation, A.B.
Dick Company, Marsh Instrument Company and Jeppesen & Co. Mr. Kindsvater
attended Purdue University and received his BS and MBA from the University of
Denver. He served two terms on the Board of Directors of Automatic
Identification Manufacturers (AIM), the industry's trade association as well as
one term on the Board of Automatic Identification Manufacturers International
(AIMI).
CLIVE P. HOHBERGER became Vice President of Technology Development in 1994.
He joined Zebra in 1984 as a consultant and became Vice President of Corporate
Development in 1986. He served as Vice President of Marketing from 1988 to 1991
and became Vice President of Market Development in 1991. He became Vice
President of Technology Development in 1994 and is presently responsible for the
development of new market opportunities and liaisons with key customers,
vendors, government standards and regulatory agencies, competitors and
technology developers. Dr. Hohberger has held positions with several firms
including Weber Marking Systems, Abbott Laboratories, The Brookhaven National
Laboratory, the Montreal Neurological Institute and Bunker-Ramo Corporation. Dr.
Hohberger received his BS and MS from Case Institute of Technology in Physics
and Engineering, respectively, a PhD from Case Western Reserve University in
Computer Engineering and a MBA from the Lake Forest Graduate School of
Management.
JAMES A GOFFEE, JR. joined Zebra in August, 1985 as Manager of Quality
Assurance/Standard Products Engineering. He has held various management
positions in Manufacturing since 1987, serving as Director of Manufacturing from
1991 until his promotion to Vice President in 1996. Mr. Goffee previously held
positions in quality management and project management at Corcom Inc., Firex,
Victor Business Products, and N.C.R. Mr. Goffee holds a degree in B.A.A.B.S.
from National Louis University and
54
<PAGE>
completed the AEA/Stanford Executive Institute Program for Management of
Technology Based Companies in 1996.
PHILIP G. ARNOLD joined Zebra in June 1998 as Vice President of Engineering.
From May 1994 until January, 1997, Mr. Arnold served as Vice President of
Engineering for Spectra-Physics Laserplane, a technology company specializing in
laser-based instruments and control systems. From 1992 until May 1994, Mr.
Arnold was an independent consultant in the disk drive business. From 1972 until
1992, he was employed by Digital Equipment Corporation in managerial positions
where he was responsible for the development of products and technologies for
data storage systems. Mr. Arnold holds MS and BS degrees in Electrical
Engineering from Rensselaer Polytechnic Institute and Massachusetts Institute of
Technology, respectively.
CHARLES R. WHITCHURCH joined Zebra as Chief Financial Officer and Treasurer
in September 1991. From 1981 until he joined Zebra, he served as Vice President,
Finance of Corcom, Inc., a technology company specializing in the control of
radio frequency interference. Mr. Whitchurch previously held positions as Chief
Financial Officer of Resinoid Engineering Corporation and as Corporate Services
Officer with the Harris Bank in Chicago. Mr. Whitchurch earned a BA in Economics
(Phi Beta Kappa) from Beloit College in 1968 and a MBA from Stanford University
in 1973.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS OF ELTRON
The following table sets forth, as of September 4, 1998, certain information
with respect to the beneficial ownership of Eltron Common Stock by (i) each
person known by Eltron to own beneficially more than 5% of the outstanding
shares of Eltron Common Stock; (ii) each director of Eltron, (iii) each of the
Eltron Named Officers (as defined herein) and (iv) all directors and executive
officers of Eltron as a group. Except as noted below, Eltron believes that the
persons listed below have sole investment and voting owner with respect to the
Eltron Common Stock owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
----------------------------
<S> <C> <C>
NAME AND ADDRESS NUMBER PERCENT
- ------------------------------------------------------------------------------------------ ----------- ---------------
FMR Corp.(2).............................................................................. 702,900 9.2%
Donald K. Skinner(3)(10).................................................................. 536,848 7.0%
Hugh K. Gagnier(4)(10).................................................................... 48,500 *
Patrice J. Foliard(5)(10)................................................................. 26,750 *
Robert G. Bartizal(6)..................................................................... 56,000 *
George L. Bragg(7)(10).................................................................... 45,000 *
William R. Hoover(8)(10).................................................................. 40,000 *
All directors and current executive officers as a group (9 persons) (9)................... 756,098 9.6%
</TABLE>
- ------------------------
* Less than 1%.
(1) Based upon 7,684,210 shares of Eltron Common Stock outstanding as of
September 4, 1998 and information filed with the Commission.
(2) Fidelity Management & Research Company and Fidelity Management Trust
Company, each subsidiaries of FMR Corp., are the beneficial owners of the
shares of Eltron Common Stock (based upon its Schedule 13G/A filed by FMR
Corp. on February 10, 1998).
(3) Includes 266,848 shares held by the Skinner Revocable Trust, 240,000 shares
held by Skinner Irrevocable Blind Trust and 30,000 shares subject to
options exercisable presently or within 60 days hereof.
(4) Includes 1,000 shares held directly and 47,500 shares subject to options
exercisable presently or within 60 days hereof.
(5) All 26,750 shares are subject to options exercisable presently or within 60
days hereof.
(6) Includes 26,000 shares held directly and 30,000 shares subject to options
exercisable presently or within 60 days hereof.
(7) All 45,000 shares are subject to options exercisable presently or within 60
days hereof.
(8) Includes 15,000 shares held in a revocable trust for the benefit of Mr.
Hoover's children and 25,000 shares subject to options exercisable
presently or within 60 days hereof.
(9) Includes 207,250 shares subject to options exercisable presently or within
60 days hereof.
(10) The address of this shareholder is c/o Eltron International, Inc., 41
Moreland Road, Simi Valley, California 93065.
56
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS OF ZEBRA
The following table sets forth, as of September 4, 1998, certain information
with respect to the beneficial ownership of Zebra's Common Stock by (i) each
person known by Zebra to own beneficially more than 5% of the outstanding shares
of any class of Zebra Common Stock, (ii) each director of Zebra, (iii) each of
the Zebra Named Officers (as defined herein) and (iv) all directors and
executive officers of Zebra as a group.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
% OF TOTAL
-------------------------- ------------------------- VOTING
NAME AND ADDRESS NUMBER % OF CLASS NUMBER % OF CLASS POWER(1)
- ---------------------------------------- ------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Edward L. Kaplan(2)..................... -- -- 1,409,737(3) 28.8% 20.6%
Carol K. Kaplan(2)...................... -- -- 290,448(4) 5.9% 4.2%
Gerhard Cless(2)........................ 140,000(5) * 2,368,312(6) 48.4% 34.8%
Ruth I. Cless(2)........................ -- (7) * 783,804(8) 16.0% 11.5%
Christopher G. Knowles.................. 28,000(9) * -- -- *
David Riley............................. 18,000(10) * -- -- *
Michael A. Smith........................ 26,000(9) * -- -- *
Thomas C. Beusch........................ 15,614(11) * -- -- *
Jeffrey K. Clements..................... 6,206(12) * -- -- *
Jack A. LeVan........................... 6,152(13) * -- -- *
Charles R. Whitchurch................... 20,413(14) * -- -- *
William Blair & Co., L.L.C.............. 1,935,664(15) 9.9% -- -- 2.8%
Jurika & Voyles, L.P.................... 1,688,287(16) 8.6% -- -- 2.5%
Fifth Third Bancorp..................... 1,167,885(17) 6.0% -- -- 1.7%
All executive officers and directors as
a group (14 persons).................. 291,415(18) 1.5% 4,852,301 99.2% 71.3%
</TABLE>
- ------------------------
* Less than one percent.
(1) Each share of the Class A Common Stock has one vote and each share of the
Class B Common Stock has ten votes. This column shows the combined voting
power of all Class A Common Stock and Class B Common Stock beneficially
owned by each of the listed persons. The percentages are based on the
outstanding number of shares of Class A Common Stock and Class B Common
Stock as of September 4, 1998.
(2) The address of this stockholder is c/o Zebra Technologies Corporation, 333
Corporate Woods Parkway, Vernon Hills, Illinois 60061.
(3) Excludes 290,448 shares which may be deemed held of record or beneficially
by Mr. Kaplan's wife, Carol, which may be deemed to be beneficially owned
by Mr. Kaplan.
(4) Excludes 1,409,737 shares held of record or beneficially by Mr. Kaplan,
which may be deemed to be beneficially owned by Mrs. Kaplan.
(5) Includes 140,000 shares held by a foundation of which Mr. Cless is
director.
(6) Excludes 783,804 shares held of record or beneficially by Mr. Cless' wife,
Ruth, which may be deemed to be beneficially owned by Mr. Cless.
(7) Excludes 140,000 shares held of record or beneficially by Mr. Cless, which
may be deemed to be beneficially owned by Mrs. Cless.
57
<PAGE>
(8) Excludes 2,368,312 shares held of record or beneficially by Mr. Cless,
which may be deemed to be beneficially owned by Mrs. Cless.
(9) Includes 20,000 shares of Class A Common Stock currently issuable within 60
days upon exercise of options granted pursuant to Zebra's Outside Directors
Plan and 6,000 of Class A Common Stock currently issuable within 60 days
upon exercise of options granted pursuant to Zebra's 1997 Directors Plan.
(10) Includes 12,000 shares of Class A Common Stock currently issuable within
60 days upon exercise of options granted pursuant to Zebra's Outside
Directors Plan and 6,000 of Class A Common Stock currently issuable within
60 days upon exercise of options granted pursuant to the Zebra 1997
Directors Plan.
(11) Includes 9,750 shares of Class A Common Stock currently issuable within 60
days upon exercise of outstanding options.
(12) Mr. Clements' employment with Zebra ended on January 8, 1998. His share
ownership is reported as of December 31, 1997. Includes 5,500 shares of
Class A Common Stock currently issuable within 60 days as of such date
upon exercise of options.
(13) Includes 5,250 shares of Class A Common Stock currently issuable within 60
days upon exercise of options.
(14) Includes 13,250 shares of Class A Common Stock issuable within 60 days
upon exercise of options.
(15) As reported on a Schedule 13G filed by William Blair & Co., L.L.C. on
February 17, 1998. According to such 13G, William Blair & Co., L.L.C. has
sole voting power with respect to 721,922 of these shares, and sole
dispositive power with respect to all 1,935,554 of these shares. The
address of this stockholder is 222 West Adams Street, Chicago, IL 60606.
(16) As reported on a Schedule 13G filed by Jurika & Voyles, L.P. on February
10, 1998. According to such 13G, Jurika & Voyles, L.P. has shared voting
power with respect to 1,532,297 of these shares, and shared dispositive
power with respect to 1,688,297 of these shares. Jurika & Voyles, L.P.
does not have sole voting of dispositive power with respect to any share.
The address of this stockholder is 1999 Harrison Street, Suite 700,
Oakland, CA 94612.
(17) As reported on a Schedule 13G filed by Fifth Third Bancorp on February 17,
1998. According to such 13G, banking subsidiaries of Fifth Third Bancorp
have sole voting power with respect to 1,139,685 of these shares, shared
voting power with respect to 24,400 of these shares, sole dispositive
power with respect to 1,139,685 of these shares and shared dispositive
power with respect to 28,200 of these shares. The address of this
stockholder is 38 Fountain Square Plaza, Cincinnati, Ohio 45263.
(18) Includes 115,100 shares of Class A Common Stock issuable within 60 days
upon exercise of options.
58
<PAGE>
ELTRON EXECUTIVE COMPENSATION
The following table provides information concerning the annual and long-term
compensation paid or accrued by Eltron for the year ended December 31, 1997
("fiscal 1997") and the two prior fiscal years to its Chief Executive Officer
and to the other three most highly compensated executive officers who received
total salary and bonuses from Eltron of over $100,000 (collectively, the "Eltron
Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
AWARDS PAYOUTS
----------- -----------
ANNUAL COMPENSATION
------------------------------------------------
SALARY OTHER ANNUAL SECURITIES LTIP
NAME AND PRINCIPAL POSITION YEAR ($) BONUS(1) COMPENSATION(2) OPTIONS (#) PAYOUTS ($)
- ------------------------------- --------- --------- --------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Donald K. Skinner.............. 1997 $ 210,000 $ 94,815 -- -- --
Chief Executive Officer 1996 195,000 85,678 -- 60,000 --
1995 156,850 98,020 -- -- --
Hugh K. Gagnier,............... 1997 $ 170,000 $ 75,544 -- -- --
President and Chief 1996 155,000 68,588 -- 40,000 --
Operating Officer 1995 149,520 84,500 -- -- --
Patrice J. Foliard,............ 1997 $ 115,000 $ 54,767 -- 20,000 --
Senior Vice President 1996 67,286 46,000 -- 43,500 --
Sales and Marketing(3)
Daniel C. Toomey, Jr.,......... 1997 $ 115,000 $ 36,633 -- -- --
Chief Financial Officer, 1996 105,000 62,736 -- 25,000 --
Vice President Finance 1995 80,621 52,390 -- -- --
and Secretary(4)
</TABLE>
- ------------------------
(1) Represents performance-based bonuses earned during such fiscal year,
regardless of when such bonuses were paid to the officer.
(2) The value of personal benefits furnished to the Eltron Named Officers did
not exceed the lesser of either $50,000 or 10% of their respective salary
and bonus compensation.
(3) Mr. Foliard was President of the Card Division from January 1996 until
January 1997, when he became Senior Vice President Sales and Marketing.
(4) Mr. Toomey ceased being an executive officer on December 1, 1997 and an
employee on December 31, 1997.
59
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information concerning option exercises by the
Eltron Named Officers in fiscal 1997 and the Eltron Named Officers' unexercised
options at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald K. Skinner................... -- -- 15,000 45,000 $ 58,125 $ 174,375
Hugh K. Gagnier..................... 65,000 $ 1,378,094 7,500 55,000 29,063 950,938
Patrice J. Foliard.................. -- -- 10,875 52,625 92,438 484,813
Daniel C. Toomey, Jr.(2)............ 33,442 659,231 -- 28,252 -- 60,390
</TABLE>
- ------------------------
(1) Amounts are shown as the difference between exercise price and fair market
value based on the closing price of $30.25 per share at fiscal year ended
December 31, 1997.
(2) Mr. Toomey ceased being an executive officer on December 1, 1997 and an
employee on December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on grants of stock options to the
Eltron Named Officers in fiscal 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------ ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF TOTAL PRICE APPRECIATION FOR
SECURITIES OPTIONS/SARS EXERCISE OR OPTION TERM (1)
UNDERLYING OPTIONS GRANTED TO BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) EMPLOYEES ($/SH) DATE 5% 10%
- ------------------------------------- ------------------- ------------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Donald K. Skinner.................... -- -- -- -- -- --
Hugh K. Gagnier...................... -- -- -- -- -- --
Patrice J. Foliard................... 20,000 8.4% $ 19.875 04/30/07 $ 249,985 $ 633,512
Daniel C. Toomey, Jr.(2)............. -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The 5% and 10% assumed rates of appreciation are prescribed by the rules and
regulations of the Commission and do not represent Eltron's estimate or
projection of future trading prices of the Eltron Common Stock.
(2) Mr. Toomey ceased being an executive officer on December 1, 1997 and an
employee on December 31, 1997.
60
<PAGE>
ZEBRA EXECUTIVE COMPENSATION
The following table provides information concerning the annual and long-term
compensation for services in all capacities to Zebra for the fiscal year ended
December 31, 1997, and the two prior fiscal years, for (i) the chief executive
officer and (ii) the four other executive officers of Zebra who received the
highest compensation (combined salary and bonus) for fiscal 1997 (collectively,
the "Zebra Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
-------------------- -----------------
AWARDS
-----------------
SECURITIES ALL OTHER
SALARY UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) OPTIONS (#) ($)
- --------------------------------- --------- --------- --------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Edward Kaplan ................... 1997 $ 309,355 $ 139,210 -- $ 10,555(1)
Chief Executive Officer and 1996 281,731 64,347 -- 17,972
Chairman 1995 256,289 159,893 -- 15,992
Thomas C. Beusch ................ 1997 $ 156,970 $ 43,781 -- $ 35,700(2)
Vice President, Sales and 1996 148,246 10,507 -- 30,262
International 1995 140,000 48,500 -- 31,564
1997 $ 194,376 $ 51,833 --
Jeffrey K. Clements(3) .......... 1996 194,376 35,668 -- $ 10,055(4)
Executive Vice President 1995 175,503 87,497 -- 12,164
Jack A. LeVan ................... 1997 $ 168,940 $ 45,614 -- $ 10,055(5)
Senior Vice President, Business 1996 141,617 33,361 -- 9,875
Development 1995 121,735 -- -- 10,841
Charles R. Whitchurch ........... 1997 $ 169,028 $ 46,637 -- $ 10,055(6)
Chief Financial Officer and 1996 144,463 23,462 -- 10,628
Treasurer 1995 131,405 53,940 -- 9,249
</TABLE>
- ------------------------
(1) Includes 401(k) contributions of $4,750, and profit sharing plan payments of
$5,305.
(2) Includes commissions of $25,645, 401(k) contributions of $4,750, and profit
sharing plan payments of $5,305
(3) Jeffrey K. Clements resigned from Zebra on January 8, 1998.
(4) Includes 401(k) contributions of $4,750, and profit sharing plan payments of
$5,305.
(5) Includes 401(k) contributions of $4,750, and profit sharing plan payments of
$5,305.
(6) Includes 401(k) contributions of $4,750, and profit sharing plan payments of
$5,305.
61
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises by the Zebra
Named Officers in fiscal 1997 and on the Zebra Named Officers' unexercised
options at December 31, 1997:
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT
UNEXERCISED OPTIONS AT FISCAL YEAR-END
FISCAL YEAR-END (#) ($)(1)
------------------------ ---------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------- --------------- --------------- ------------------------ ---------------
<S> <C> <C> <C> <C>
Edward Kaplan......... -- -- -- --
Thomas C. Beusch...... 3,000 $ 42,375 7,500/24,500 9$4,688/198,688
Jeffrey K.
Clements(2)......... 6,500 71,500 5,500/18,000 55,750/134,875
Jack A. LeVan......... -- -- 2,250/17,750 21,797/127,578
Charles R.
Whitchurch.......... -- -- 4,500/30,000 78,188/218,125
</TABLE>
- ------------------------
(1) The value per option is calculated by subtracting the exercise price from
the closing price of the Class A Common Stock on the Nasdaq National Market
on December 31, 1997 of $29.75.
(2) Jeffrey K. Clements resigned from Zebra on January 8, 1998.
62
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on grants of stock options to the
Zebra Named Officers in fiscal 1997. No stock appreciation rights were granted
to the Zebra Named Officers during 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATE OF
NUMBER OF PERCENT OF STOCK
SECURITIES TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS OPTION
OPTIONS GRANTED TO EXERCISE OR TERM ($)(3)
GRANTED (#) EMPLOYEES BASE PRICE EXPIRATION ----------------------
NAME (1) (%)(2) ($/SH) DATE 5% 10%
- ----------------------------------------------- ------------- ------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward Kaplan.................................. -- -- -- -- -- --
Thomas C. Beusch............................... 15,000 5.15% $ 24.50 2/11/07 $ 231,119 $ 585,700
Jeffrey K. Clements(4)......................... -- -- -- -- -- --
Jack A. LeVan.................................. 10,000 3.44% 24.50 2/11/07 154,679 390,467
Charles R. Whitchurch.......................... 25,000 8.58% 24.50 2/11/07 385,198 976,167
</TABLE>
- ------------------------
(1) Each of these options was granted pursuant to either the Zebra 1997 Stock
Option Plan or the Zebra 1991 Stock Option Plan and is subject to the terms
of such plan. All options were granted at an exercise price equal to the
fair market value of Class A Shares on the date of grant.
(2) Does not include the grant of options to purchase 45,000 shares of common
stock to non-employee directors under the Zebra 1997 Director Plan.
(3) In accordance with the rules of the Commission, shown are hypothetical gains
or "option spreads" that would exist for the respective options. These gains
are based on assumed rates of annual compounded stock price appreciation of
5% and 10% from the date the option was granted over the full option term.
The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Commission and do not represent Zebra's estimate or projection for
future increases in the price of its common stock.
(4) Jeffrey K. Clements resigned from Zebra on January 8, 1998.
63
<PAGE>
PROPOSAL TO INCREASE THE NUMBER OF SHARES AVAILABLE
FOR OPTIONS UNDER THE ZEBRA 1997 STOCK OPTION PLAN
The Zebra 1997 Stock Option Plan (the "1997 Stock Option Plan") currently
provides that 531,500 Class A Shares are authorized for issuance pursuant to
options granted thereunder. To date, Zebra has granted options to purchase
507,000 Class A Shares under the 1997 Stock Option Plan. After taking
cancellations and forfeitures into account, 43,625 Class A Shares currently
remain available for future option grants. In order to consummate the Merger and
the other transactions contemplated by the Merger Agreement, it is necessary to
increase the number of Class A Shares authorized for issuance under the Zebra
1997 Stock Option Plan from 531,500 Class A Shares to 2.0 million Class A
Shares. These additional shares will be used, among other things, to accomplish
the conversion of options to purchase Eltron Common Stock into options to
purchase Zebra Class A Shares based on the Exchange Ratio in accordance with the
Merger Agreement.
The Zebra Board of Directors adopted the 1997 Stock Option Plan, effective
February 11, 1997.
Stockholder approval of the 1997 Stock Option Plan was granted in 1997 to
(i) meet the requirements of the Nasdaq National Market, (ii) qualify certain
compensation under the 1997 Stock Option Plan as performance based compensation
that is tax deductible under Section 162(m) of the Code, and (iii) qualify
certain stock options granted under the 1997 Stock Option Plan as incentive
stock options.
The following is a brief summary of certain provisions of the 1997 Stock
Option Plan.
GENERAL
The 1997 Stock Option Plan is a flexible plan that provides the Zebra Option
Committee broad discretion to fashion the terms of the awards to provide
eligible participants with stock-based incentives, including: (i) non-qualified
and incentive stock options for the purchase of Class A Shares and (ii) dividend
equivalents. The 1997 Stock Option Plan is administered by the Zebra Option
Committee, which is currently comprised of Mr. Kaplan and Mr. Cless. The persons
eligible to participate in the 1997 Stock Option Plan are directors, officers,
and employees of Zebra or any subsidiary of Zebra who, in the opinion of the
Zebra Option Committee, are in a position to make contributions to the growth,
management, protection and success of Zebra or its subsidiaries. To the extent
required by Section 162(m) of the Code, grants under the 1997 Stock Option Plan
will be approved by at least two nonemployee directors of Zebra.
The purpose of the 1997 Stock Option Plan is to promote the overall
financial objectives of Zebra and its stockholders by motivating eligible
participants to achieve long-term growth in stockholder equity in Zebra and by
retaining the association of these individuals.
The 1997 Stock Option Plan provides for the grant of options and other
awards of up to 531,500 shares of Class A Shares. In the discretion of the Zebra
Option Committee, Class A Shares subject to an award under the 1997 Stock Option
Plan that remain unissued upon termination of such award, are forfeited, or are
received by Zebra as consideration for the exercise or payment of an award,
shall become available for additional awards under the 1997 Stock Option Plan.
In the event of a stock dividend, stock split, recapitalization, sale of
substantially all of the assets of Zebra, reorganization or similar event, the
Zebra Option Committee will adjust the aggregate number of Class A Shares
subject to the 1997 Stock Option Plan, the number of shares available for awards
and subject to outstanding awards and the exercise price per share, and other
terms of outstanding awards.
The Zebra Board of Directors or Zebra Option Committee may amend, modify or
discontinue the 1997 Stock Option Plan at any time, except if such amendment (i)
impairs the rights of a Participant (as defined in the 1997 Stock Option Plan)
without the Participant's consent, or (ii) would disqualify the 1997 Stock
Option Plan from the exemption provided by Rule 16b-3 under the Exchange Act.
Amendments may be subject to stockholder approval under applicable law. Any
amendment by the Zebra Option Committee
64
<PAGE>
is subject to approval of the Zebra Board of Directors. The Zebra Option
Committee may amend the terms of any award granted under the 1997 Stock Option
Plan (other than to decrease the option price), subject to the consent of a
Participant if such amendment impairs the rights of such Participant unless such
amendment is necessary for the option or the 1997 Stock Option Plan to qualify
for the exemption provided by Rule 16b-3 under the Exchange Act.
AWARDS UNDER THE 1997 STOCK OPTION PLAN
STOCK OPTIONS--Options to purchase no more than 100,000 shares of Class A
Shares may be granted to any one Participant in any fiscal year. Subject to such
limitation, the Zebra Option Committee shall determine the number of shares of
Class A Shares subject to the options to be granted to each Participant. The
Zebra Option Committee may grant non-qualified stock options, incentive stock
options or a combination thereof to a Participant. Only persons who on the date
of the grant are employees of Zebra or any parent or a subsidiary of Zebra may
be granted options which qualify as incentive stock options. Options granted
under the 1997 Stock Option Plan will provide for the purchase of Class A Shares
at prices determined by the Zebra Option Committee, but in no event will an
option intended as an incentive stock option be granted at less than fair market
value on the date of grant. When incentive stock options are granted to an
individual who owns stock possessing more than 10% of the combined voting power
of all Zebra Common Stock (both Class A Shares and Class B Shares), the option
price shall not be less than 110% of fair market value. No non-qualified stock
option or incentive stock option shall be exercisable later than the tenth
anniversary date of its grant. In the case of an incentive stock option granted
to a Participant who owns more than 10% of the combined voting power of all
classes of stock of Zebra or any parent or subsidiary of Zebra, such option
shall not be exercisable later than the fifth anniversary date of its grant. No
incentive stock option shall be granted later than the tenth anniversary date of
the adoption of the 1997 Stock Option Plan or its approval by the stockholders
of Zebra, whichever is earlier.
Options granted under the 1997 Stock Option Plan shall be exercisable at
such times and subject to such terms and conditions set forth in the 1997 Stock
Option Plan and as the Zebra Option Committee shall determine or provide in an
option agreement. Except as provided in any option agreement, options may only
be transferred under the laws of descent and distribution or if such transfer is
permitted by Rule 16b-3 without liability under applicable law and is consistent
with the use of Commission's Form S-8. Otherwise, options shall be exercisable
only by the Participant during such Participant's lifetime. The option exercise
price shall be payable by the Participant (i) in cash, (ii) in Class A Shares
having a fair market value equal to the exercise price, (iii) by delivery of a
note or other evidence of indebtedness, (iv) by authorizing Zebra to retain
Class A Shares having a fair market value equal to the exercise price, (v) by
"cashless exercise" as permitted under the Federal Reserve Board's Regulation T,
or (vi) by any combination of the foregoing. Upon termination of a Participant's
employment with Zebra due to death or Disability (as defined in the 1997 Stock
Option Plan), all of such Participant's unexpired and unexercised options shall
be exercisable for the shorter of (a) their remaining term or (b) 90 days after
either (i) in the case of a Participant's Disability, termination of employment
or (ii) in the case of a Participant's death, the date of the appointment of a
Representative (as defined in the 1997 Stock Option Plan) or such other period
as the Zebra Option Committee may determine. If a Participant retires or if a
Participant involuntarily ceases to be an employee of Zebra (other than due to
death, Disability or as a result of termination for Cause (as defined in the
1997 Stock Option Plan)), all of such Participant's options shall terminate,
except that, to the extent such options are then exercisable, such options may
be exercised for the shorter of their remaining terms or 90 days (or such
shorter period as the Zebra Option Committee may specify) after termination of
employment. If a Participant voluntarily ceases to be an employee of Zebra
(other than due to retirement) or is terminated as a result of Cause, all of
such Participant's outstanding options shall terminate 30 days (or such shorter
period as the Zebra Option Committee may specify) after termination of
employment.
65
<PAGE>
Upon receipt of a notice from a Participant to exercise an option, the Zebra
Option Committee may elect to cash out all or part of any such option by paying
the Participant, in cash or Class A Shares, the following amount: (i) the excess
of the fair market value of the Class A Shares subject to the unexercised option
over the option price, multiplied by (ii) the number of Class A Shares for which
the option is to be exercised.
DIVIDEND EQUIVALENTS--The Zebra Option Committee is authorized to grant
dividend equivalents conferring on Participants the right to receive cash, Class
A Shares, or other property equal in value to dividends paid on a specified
number of Class A Shares under an option. Dividend equivalents may be paid
currently or on a deferred basis and, if deferred, may be deemed to have been
reinvested in additional Class A Shares or other investment vehicles as
specified by the Zebra Option Committee.
CHANGES IN CONTROL
Upon the occurrence of a Change in Control (as defined below), all
unexercised stock options shall become immediately exercisable, to the extent
provided by the Zebra Option Committee in an award agreement or otherwise. In
addition, unless the Zebra Option Committee provides otherwise in an option
agreement, after the Change in Control a Participant shall have the right, by
giving notice during the 60-day period from and after a Change in Control to
Zebra, to surrender all or part of the outstanding awards and receive in cash
from Zebra the following amount for each award: (i) the excess of the Change in
Control Price (as defined below) over the exercise price of the award,
multiplied by (ii) the number of Class A Shares subject to the award. The
"Change in Control Price" is the higher of (i) the highest reported sales price
of a share of Class A Common Stock in any transaction reported on the principal
exchange on which such shares are listed or on the Nasdaq National Market during
the 60-day period prior to the Change of Control, or (i) if the Change in
Control event is a tender offer, merger or other reorganization, the highest
price to be paid per share of Class A Common Stock in such transaction.
For purposes of the 1997 Stock Option Plan, a "Change in Control" shall be
deemed to have occurred if (i) any corporation, person or other entity (other
than Zebra, a permitted transferee, a majority-owned subsidiary of Zebra or any
of its subsidiaries, or an employee benefit plan (or related trust) sponsored or
maintained by Zebra), including a "group" as defined in Section 13(d)(3) of the
Exchange Act, becomes the beneficial owner of stock representing more than the
greater of (a) 25% of the combined voting power of Zebra's then outstanding
securities or (b) the percentage of the combined voting power of Zebra's then
outstanding securities which equals (1) 10% plus (2) the percentage of the
combined voting power of Zebra's outstanding securities held by such
corporation, person or entity on the effective date of the 1997 Stock Option
Plan; (ii)(a) the stockholders of Zebra approve a definitive agreement to merge
or consolidate Zebra with or into another corporation other than a
majority-owned subsidiary of Zebra, or to sell or otherwise dispose of all or
substantially all of Zebra's assets, and (b) the persons who were the members of
the Zebra Board of Directors prior to such approval do not represent a majority
of the directors of the surviving, resulting or acquiring entity or the parent
thereof, (iii) the stockholders of Zebra approve a plan of liquidation of Zebra;
or (iv) within any period of 24 consecutive months, persons who were members of
the Zebra Board of Directors immediately prior to such 24-month period, together
with any persons who were first elected as directors (other than as a result of
any settlement of a proxy or consent solicitation contest or any action taken to
avoid such a contest) during such 24-month period by or upon the recommendation
of persons who were members of the Zebra Board of Directors immediately prior to
such 24-month period and who constituted a majority of the Zebra Board of
Directors at the time of such election, cease to constitute a majority of the
Zebra Board of Directors.
DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
The following summary of tax consequences with respect to the awards granted
under the 1997 Stock Option Plan is not comprehensive and is based upon laws and
regulations currently in effect. Such laws and regulations are subject to
change.
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NON-QUALIFIED STOCK OPTIONS
PARTICIPANT--Generally, a Participant receiving a non-qualified stock option
does not realize any taxable income for federal income tax purposes at the time
of grant. Upon exercise of such Option, the excess of the fair market value of
the Class A Shares subject to the non-qualified stock option on the date of
exercise over the exercise price will be taxable to the Participant as ordinary
income. The Participant will have a capital gain (or loss) upon the subsequent
sale of the Class A Shares received upon exercise of the option in an amount
equal to the sale price reduced by the fair market value of the Class A Shares
on the date the option was exercised. The holding period for purposes of
determining whether the capital gain (or loss) is a long-term or short-term
capital gain (or loss) will commence on the date the non-qualified stock option
is exercised.
TAX WITHHOLDING--The amount of income that is taxable to a Participant upon
the exercise of a non-qualified stock option will be treated as compensation
income. Accordingly, such amount will be subject to applicable withholding of
federal, state and local income taxes and social security taxes.
IF THE PARTICIPANT USES COMPANY STOCK TO PAY THE OPTION EXERCISE PRICE--If
the Participant who exercises a non-qualified stock option pays the exercise
price by tendering Class A Shares and receives back a larger number of Class A
Shares, the Participant will realize taxable income in an amount equal to the
fair market value of the additional Class A Shares received on the date of
exercise, less any cash paid in addition to the Class A Shares tendered. Upon a
subsequent sale of the Class A Shares received, the number of Class A Shares
equal to the number delivered as payment of the exercise price will have a tax
basis equal to that of the Class A Shares originally tendered. The additional
newly-acquired Class A Shares obtained upon exercise of the non-qualified stock
option will have a tax basis equal to the fair market value of such shares on
the date of exercise.
ZEBRA--Zebra generally will be entitled to a tax deduction in the same
amount and in the same year in which the Participant recognizes ordinary income
resulting from the exercise of a non-qualified stock option.
INCENTIVE STOCK OPTIONS
PARTICIPANT--Generally, a Participant will not realize any taxable income
for federal income tax purposes at the time an incentive stock option is
granted. Upon exercise of the incentive stock option, the Participant will incur
no income tax liability (other than pursuant to the alternative minimum tax, if
applicable). If the Participant transfers Class A Shares received upon the
exercise of an incentive stock option within a period of two years from the date
of grant of such incentive stock option or one year from the date of receipt of
the Class A Shares (the "Holding Period"), then, in general, the Participant
will have taxable ordinary income in the year in which the transfer occurs in an
amount equal to the excess of the fair market value on the date of exercise over
the exercise price, and will have long-term or short-term capital gain (or loss)
in an amount equal to the difference between the sale price of the Class A
Shares and the fair market value of such shares on the date of exercise.
However, if the sale price is less than the fair market value of such shares on
the date of exercise, the ordinary income will be not more than the difference
between the sale price and the exercise price. If the Participant transfers the
Class A Shares after the expiration of the Holding Period, the Participant will
recognize income taxable at the capital gains tax rate on the difference between
the sale price and the exercise price.
TAX WITHHOLDING--If the Participant makes any disqualifying disposition
prior to the completion of the Holding Period with respect to Class A Shares
acquired upon the exercise of an incentive stock option granted under the 1997
Stock Option Plan, then such Participant must remit to Zebra an amount
sufficient to satisfy all federal, state, and local withholding taxes thereby
incurred.
IF THE PARTICIPANT USES CLASS A COMMON STOCK TO PAY THE OPTION EXERCISE
PRICE--If a Participant who exercises an incentive stock option pays the option
exercise price by tendering Class A Shares, such
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Participant will generally incur no income tax liability (other than pursuant to
the alternative minimum tax, if applicable), provided any Holding Period
requirement for the tendered shares is met. If the tendered stock was subject to
the Holding Period requirement when tendered, payment of the exercise price with
such stock constitutes a disqualifying disposition. If the Participant pays the
exercise price by tendering Class A Shares and the Participant receives back a
larger number of shares, under proposed Treasury Regulations, the Participant's
basis in the number of shares of newly acquired stock equal to the number of the
shares delivered as payment of the exercise price will have a tax basis equal to
that of the shares originally tendered, increased, if applicable, by any amount
included in the Participant's gross income as compensation. The additional newly
acquired shares obtained upon exercise of the option will have a tax basis of
zero. All Class A Shares acquired upon exercise will be subject to the Holding
Period requirement, including the number of shares equal to the number tendered
to pay the exercise price. Any disqualifying disposition will be deemed to be a
disposition of Class A Shares with the lowest basis.
ZEBRA--Zebra is not entitled to a tax deduction upon grant, exercise or
subsequent transfer of Class A Shares acquired upon exercise of an incentive
stock option, provided that the Participant holds the shares received upon the
exercise of such option for the Holding Period. If the Participant transfers the
Class A Shares acquired upon the exercise of an incentive stock option prior to
the end of the Holding Period, Zebra generally is entitled to a deduction at the
time the Participant recognizes ordinary income in an amount equal to the amount
of ordinary income recognized by such Participant as a result of such transfer.
PARACHUTE PAYMENTS
In the event any payments or rights accruing to a Participant upon a Change
in Control, or any other payments awarded under the 1997 Stock Option Plan,
constitute "parachute payments" under Section 28OG of the Code, depending upon
the amount of such payments accruing and the other income of the Participant
from Zebra, the Participant may be subject to an excise tax (in addition to
ordinary income tax) and Zebra may be disallowed a deduction for the amount of
the actual payment.
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DESCRIPTION OF ZEBRA CAPITAL STOCK
The authorized capital stock of Zebra consists of 88,358,189 shares of
capital stock of all classes, including common stock, $.01 par value per share,
divided into Class A Common Stock and Class B Common Stock and 10,000,000 shares
of Preferred Stock, $.01 par value per share ("Preferred Stock").
CLASS A AND CLASS B COMMON STOCK
The authorized Zebra Common Stock consists of (i) 50,000,000 shares of Class
A Common Stock, of which 19,429,874 were outstanding as of the Zebra Record Date
and (ii) 28,358,189 shares of Class B Common Stock, of which 4,890,609 were
outstanding as of the Zebra Record Date. All shares of Zebra Common Stock
currently outstanding are fully paid and nonassessable, not subject to
redemption and without preemptive or other rights to subscribe for or purchase
any proportionate part of any new or additional issues of any class of
securities convertible into stock of any class.
VOTING--Holders of Class A Common Stock are entitled to one vote per share.
Holders of Class B Common Stock are entitled to 10 votes per share. All actions
submitted to a vote of stockholders are voted on by holders of Class A Common
Stock and Class B Common Stock voting together as a single class, except as
otherwise set forth below or provided by law. Holders of the Class B Common
Stock must vote separately as a class to approve the issuance of additional
shares of Class B Common Stock to persons who are not "permitted transferees" as
defined below. If at any time the number of outstanding shares of Class B Common
Stock represents less than 10% of the total number of outstanding shares of both
classes of Zebra Common Stock, then at such time such outstanding shares of
Class B Common Stock will automatically convert into an equal number of shares
of Class A Common Stock.
CONVERSION--Class A Common Stock has no conversion rights. A holder of Class
B Common Stock may convert its Class B Common Stock into Class A Common Stock,
in whole or in part, at any time and from time to time on a share-for-share
basis. If, without consent of the following individuals, any shares of Class B
Common Stock are beneficially owned by any person other than Edward Kaplan,
Carol Kaplan, Gerhard Cless, Ruth Cless, Meyer Kaplan, Bee Kaplan, Stewart
Shiman, Lenin Pellegrino, M.D. or John H. Kindsvater, Jr. (or their respective
family members, descendants or trusts for their benefit, entities or
organizations controlled by such persons or foundations or charitable
organizations established by such persons) (collectively, the "permitted
transferees"), such shares automatically convert into an equal number of shares
of Class A Common Stock. The permitted transferees have consented, in writing,
to the issuance of Class B Common Stock to the holders of Eltron Common Stock
pursuant to the Merger Agreement. Therefore, as stated earlier, holders of
Eltron Common Stock will be entitled to hold the Class B Common Stock they will
receive upon consummation of the Merger, until they opt to convert such shares
or sell such shares to anyone other than a permitted transferee.
Zebra has made arrangements with the Transfer Agent to facilitate
conversion, at any time, of Class B Common Stock to Class A Common Stock at the
option of a holder of Class B Common Stock or upon sale or transfer of Class B
Common Stock to anyone other than the permitted transferees. Instructions for
selling Class B Common Stock will be included with the letter of transmittal.
DIVIDENDS--Holders of Class A Common Stock and Class B Common Stock are
entitled to receive cash dividends equally on a per share basis if and when such
dividends are declared by the Zebra Board of Directors from funds legally
available therefor. In the case of any dividend paid in stock, holders of Class
A Common are entitled to receive the same percentage dividend (payable in shares
of Class A Common Stock) that the holders of Class B Common Stock receive
(payable in shares of Class B Common Stock).
LIQUIDATION--Holders of Class A Common Stock and Class B Common Stock share
with each other on a ratable basis as a single class in the net assets of Zebra
available for distribution in respect of Class A Common Stock and Class B Common
Stock in the event of liquidation.
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OTHER TERMS--Neither the Class A Common Stock nor the Class B Common Stock
may be subdivided, consolidated, reclassified or otherwise changed unless
contemporaneously therewith the other class of shares is subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner.
In any merger, consolidation or business combination, the consideration to
be received per share by holders of either Class A Common Stock or Class B
Common Stock must be identical to that received by holders of the other class of
Zebra Common Stock, except that in any such transaction in which shares of
capital stock are distributed, such shares may differ as to voting rights only
to the extent that voting rights now differ between Class A Common Stock and
Class B Common Stock.
The rights, preferences and privileges of holders of Zebra Common Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which Zebra may designate and issue in
the future.
PREFERRED STOCK
Zebra has an authorized class of undesignated Preferred Stock consisting of
10 million shares. The Zebra Board of Directors has authority, without any
further vote or action by the Zebra stockholders, to provide for the issuance of
the shares of Preferred Stock in series, to establish from time to time the
number of shares to be included in each such series and to fix the designations,
preferences and relative, participating, optional or other special rights,
qualifications or restrictions of the shares of each such series and to
determine the voting powers, if any, of such shares. The issuance of Preferred
Stock could adversely affect, among other things, the rights of existing
stockholders. The issuance of Preferred Stock could decrease the amount of
earnings and assets available for distribution to holders of Zebra Common Stock.
In addition, any such issuance could have the effect of delaying, deferring or
preventing a change in control of Zebra and could make the removal of the
present management of Zebra more difficult. Zebra has no present plans to issue
any of the Preferred Stock.
DELAWARE LAW AND CERTAIN CORPORATE PROVISIONS
Zebra is subject to the provisions of Section 203 of the DGCL. In general,
this statute prohibits a publicly held Delaware corporation from engaging, under
certain circumstances, in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless either (i) prior to
the date at which the stockholder became an interested stockholder the Board of
Directors approved either the business combination or the transaction in which
the person becomes an interested stockholder, (ii) the stockholder acquires more
than 85% of the outstanding voting stock of the corporation (excluding shares
held by directors who are officers or held in certain employee stock plans) upon
consummation of the transaction in which the stockholder becomes an interested
stockholder or (iii) the business combination is approved by the Board of
Directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder) at a meeting of
stockholders (and not by written consent) held on or subsequent to the date of
the business combination. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or at any times within the prior three
years did own) 15% or more of the corporation's voting stock. Section 203
defines a "business combination" to include, without limitation, mergers,
consolidations, stock sales and asset based transactions and other transactions
resulting in a financial benefit to the interested stockholder.
Zebra's Certificate of Incorporation (the "Certificate") and Bylaws contain
a number of provisions relating to corporate governance and to the rights of
stockholders. Certain of these provisions may be deemed to have a potential
"anti-takeover" effect in that such provisions may delay, defer or prevent a
change of control of Zebra. These provisions include (a) the disproportionate
voting rights of the Class A Common Stock and Class B Common Stock; (b) a
requirement that special meetings of stockholders may
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be called only by the Zebra Board of Directors or by holders of Zebra Common
Stock representing at least 66 2/3% of the votes entitled to be cast by the
outstanding Zebra Common Stock; (c) a requirement that stockholder action may be
taken only at stockholder meetings or by written consent of the holders of Zebra
Common Stock representing at least 66 2/3% of the votes entitled to be cast by
the outstanding Zebra Common Stock; (d) the authority of the Zebra Board of
Directors to issue series of Preferred Stock with such voting rights and other
powers as the Zebra Board of Directors may determine; (e) the requirement that
the By-laws may only be amended (other than by the Zebra Board of Directors) by
the vote of in excess of 66 2/3% of the votes entitled to be cast by the
outstanding Zebra Common Stock; and (f) notice requirements in the By-laws
relating to nominations to the Zebra Board of Directors and to the raising of
business matters at stockholder meetings.
COMPARISON OF SHAREHOLDERS' RIGHTS
In connection with the Merger, the Eltron Public Shareholders will be
converting their shares of Eltron Common Stock into shares of Class B Common
Stock. Zebra is a Delaware corporation and Eltron is a California corporation,
and the Zebra Certificate of Incorporation and the Zebra Bylaws differ from the
Eltron Articles of Incorporation and the Eltron Bylaws in several significant
respects. Because of the differences between the DGCL and the CGCL, and the
differences in the charter documents of Zebra and Eltron, the rights of a holder
of Zebra Common Stock differ from the rights of a holder of Eltron Common Stock.
Below is a summary of some of the important differences between the DGCL and
the CGCL and the charter documents of Zebra and Eltron. It is not practical to
summarize all of such differences in this Joint Proxy Statement/Prospectus, but
some of the principal differences which could materially affect the rights of
shareholders include the following:
SIZE OF THE BOARD OF DIRECTORS
As permitted under the DCGL, the Zebra Bylaws state that the number of
directors will be set exclusively by the Zebra Board of Directors and authorizes
the Zebra Board of Directors to change the number by resolution. The number of
directors of Zebra is currently fixed at five. The Zebra Board of Directors
acting without stockholder approval may change such number.
Under the CGCL, although changes in the number of directors must in general
be approved by the shareholders, the board of directors may fix the exact number
of directors within a stated range set forth in the articles of incorporation or
bylaws, if the stated range has been approved by the shareholders. The Eltron
Bylaws permit the Eltron Board of Directors to adjust the size of the Board from
a minimum of three directors to a maximum of five. The current number of Eltron
directors is five.
CLASSIFIED BOARD OF DIRECTORS
A classified board is one in which a certain number, but not all, of the
directors are elected on a rotating basis each year. The DGCL permits, but does
not require, a classified board of directors, pursuant to which the directors
can be divided into as many as three classes with staggered terms of office,
with only one class of directors standing for election each year. The Zebra
Certificate of Incorporation does not currently provide for a classified board.
Under the CGCL, directors generally must be elected annually; however, as a
"listed corporation" (shares of Eltron Common Stock are traded on Nasdaq) Eltron
is permitted to adopt a classified board. The Eltron Articles of Incorporation
do not currently provide for a classified board.
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CUMULATIVE VOTING
In an election of directors under cumulative voting, each share of stock
normally having one vote is entitled to a number of votes equal to the number of
directors to be elected. A shareholder may then cast all such votes for a single
candidate or may allocate them among as many candidates as the shareholder may
choose. Under the DGCL, cumulative voting in the election of directors is not
available unless specifically provided in the certificate of incorporation. The
Zebra Certificate of Incorporation does not provide for cumulative voting.
The CGCL and the Eltron Articles of Incorporation do not provide for
cumulative voting unless the name of each candidate has been placed in
nomination and notice of cumulative voting is received, in each case, prior to
the voting.
REMOVAL OF DIRECTORS
Under the DGCL, any director or the entire Board of Directors may be removed
with or without cause by the holders of a majority of the voting shares except
that (i) if a corporation has a classified board, the stockholders may remove a
director only for cause, unless the certificate of incorporation provides
otherwise, and (ii) if a corporation has cumulative voting, less than the entire
board can not be removed without cause if the votes cast against removal would
be sufficient to elect such director if then cumulatively voted at an election
of the entire board, or if there are classes of directors, at an election of
such class of directors.
Under the CGCL, any director or the entire board of directors may be
removed, with or without cause, if the removal is approved by the affirmative
vote of a majority of the outstanding shares entitled to vote, subject to
limitations, if applicable, of cumulative voting, class or series voting and
classified board requirements.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under the DCGL, vacancies and newly created directorships may be filled by a
majority of the directors then in office (even though less than a quorum) unless
otherwise provided in the certificate of incorporation or bylaws (and unless the
certificate of incorporation directs that a particular class of stock is to
elect such director, in which case any other directors elected by such class, or
a sole remaining director so elected, may fill such vacancy). The Zebra
Certificate of Incorporation provides for vacancies to be filled by a majority
of the directors then in office.
Under the CGCL, any vacancy on the board of directors (other than one
created by removal of a director) may be filled by the unanimous written consent
of the directors then in office, by the affirmative vote of a majority of the
directors at a meeting held pursuant to notice or waivers of notice, or by a
sole remaining director. A vacancy created by removal of a director may be
filled by the board only if the board is so authorized. The Eltron Bylaws
provide for vacancies to be filled by a majority of the directors, except that a
vacancy created by removal may be filled only by shareholder vote.
INTERESTED DIRECTOR TRANSACTIONS
Under both the DGCL and CGCL, certain contracts or transactions in which one
or more of a corporation's directors has an interest are not void or voidable
because of such interest, provided that certain conditions, such as obtaining
the required approval and fulfilling the requirements of good faith and full
disclosure are met. Under the DGCL and CGCL the conditions are similar in that
either (i) the shareholders or the disinterested directors must approve any such
contract or transaction after the full disclosure of material facts, and in
California in the case of board approval, the contract or transaction must have
been "just and reasonable" to the corporation, or (ii) the contract or
transaction must have been just and reasonable (in California) or fair (in
Delaware) as to the corporation at the time it was approved.
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Under the CGCL, if shareholder approval is sought, the interested director
is not entitled to vote his shares with respect to any action regarding such
contract or transaction. If board approval is sought, the contract or
transaction must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that uninterested
directors may be counted for purposes of establishing quorum).
Under the DGCL, if board approval is sought, the contract or transactions
must be approved by a majority of the disinterested directors (even though less
than a quorum).
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Zebra and Eltron provide for similar indemnification of directors, officers
and employees. Zebra's Certificate of Incorporation, the Eltron Articles of
Incorporation and both companies' Bylaws provide that such corporation shall, to
the maximum extent and in the manner permitted by the law, indemnify each of its
directors, officers and employees against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact that such person is or was an
agent of the corporation; except that Zebra's Certificate of Incorporation does
not require indemnification for actions initiated by the person seeking
indemnification or for settlements not consented to by Zebra.
Under both the DGCL and the CGCL, other than an action brought by or in the
right of the corporation, such indemnification is available if it is determined
that the proposed indemnitee acted in good faith and in a manner he or she
reasonably believed to be in, or under the DGCL not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his or her conduct was unlawful.
In actions brought by or in the right of the corporation, such indemnification
is limited to expenses actually and reasonably incurred and permitted only if
the indemnitee acted in good faith and in a manner he or she reasonably believed
to be in, or under the DGCL not opposed to, the best interests of the company,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such person is adjudged to be liable to the corporation,
unless and only to the extent that the court in which the action was brought
determines that, despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such expenses which the court deems proper. To the extent that the
proposed indemnitee (only officers or directors under the DGCL) has been
successful in defense of any action, suit or proceeding, he must be indemnified
against expenses actually and reasonably incurred by him in connection with the
action.
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION AND ARTICLES OF INCORPORATION
Under the DGCL, a corporation's certificate of incorporation can be amended
by the affirmative vote of the board of directors and approved by the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote thereon, unless the certificate of incorporation requires the vote of a
larger portion of the shares. The Zebra Certificate of Incorporation requires
approval by 66 2/3% of the outstanding shares entitled to vote in order to amend
certain provisions of the Zebra Certificate of Incorporation relating to
amendment of the Zebra Bylaws, actions by stockholders and the calling of
special meetings.
Under the CGCL, a corporation's articles of incorporation can be amended by
the affirmative vote of the majority of the board of directors of the
corporation and of the holders of a majority of the outstanding shares entitled
to vote, unless the corporation's articles of incorporation require the vote of
a larger portion of the shares. The Eltron Articles of Incorporation do not
require a larger percentage affirmative vote than a majority of the shares
entitled to vote thereon.
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AMENDMENT OF BYLAWS
Under the Zebra Certificate of Incorporation and Zebra Bylaws, the
stockholders of Zebra may alter, amend or repeal the Zebra Bylaws by a vote of
at least 66 2/3% of the outstanding shares entitled to vote thereon. Under the
Zebra Certificate of Incorporation and Zebra Bylaws, the Zebra Board of
Directors may amend the Zebra Bylaws or enact other bylaws by a majority vote.
Under the Eltron Bylaws, the shareholders of Eltron may alter, amend or
repeal the Eltron Bylaws by a majority vote of the outstanding shares entitled
to vote. The Eltron Bylaws also authorize the Eltron Board of Directors to
alter, amend or repeal the Eltron Bylaws (other than to change the authorized
number of directors). Under the CGCL, an amendment to the bylaws reducing the
minimum number of directors below five cannot be adopted if the votes against
the amendment exceed 16 2/3% of the outstanding shares entitled to vote thereon.
POWER TO CALL SPECIAL SHAREHOLDERS' OR STOCKHOLDERS' MEETING; ACTION BY CONSENT
Under the DGCL, a special meeting of stockholders may be called by the board
of directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. The Zebra Certificate of Incorporation and the
Zebra Bylaws provide that special meetings of stockholders may be called by a
majority of the Zebra Board of Directors or by the holders of shares of common
stock representing at least 66 2/3% of the votes entitled to be cast in the
election of directors. The Zebra Certificate of Incorporation provides that any
action taken by stockholders may be effected at an annual or special meeting or
may be effected by written consent without a meeting if such consent is signed
by holders of outstanding shares of common stock representing at least 66 2/3%
of the votes entitled to be cast by the outstanding common stock.
Under the CGCL, a special meeting of shareholders may be called by the board
of directors, the Chairman of the board of directors, the President, or by one
or more shareholders holding ten percent or more of the votes entitled to vote
thereon. In addition, the Eltron Bylaws provide that any action which may be
taken at any annual or special meeting of shareholders may be taken without a
meeting if a consent in writing is signed by the holders of the requisite number
of outstanding shares entitled to vote thereon. In the case of the election of
Eltron directors (other than an election to fill a vacancy that has not been
filled by the directors), however, such consent shall be effective only if
signed by the holders of all outstanding shares entitled to vote for the
election of directors.
INSPECTION OF SHAREHOLDERS' LIST
Both the DGCL and the CGCL allow any stockholder or shareholder,
respectively, to inspect the stockholders' or shareholders' list for a purpose
reasonably related to such person's interest as a stockholder or shareholder.
The CGCL provides, in addition, an absolute right to inspect and copy the
corporation's shareholders' list by a person or persons holding 5% or more of a
corporation's outstanding voting shares, or any shareholder or shareholders
holding one percent 1% or more of such shares who has filed certain documents
with the Commission relating to the election of directors. The DGCL does not
provide for any such absolute right of inspection.
DIVIDENDS AND REPURCHASES OF SHARES
The DGCL permits a corporation, unless otherwise restricted by its
certificate of incorporation, to declare and pay dividends out of its surplus
or, if there is no surplus, out of net profits for the fiscal year in which the
dividend is declared or for the preceding fiscal year as long as the amount of
capital of the corporation is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. The Zebra Certificate of
Incorporation does not contain any such restrictions on Zebra's ability to
declare and pay dividends. In addition, the DGCL generally provides that a
corporation may redeem or repurchase its shares only if such
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redemption or repurchase would not impair the capital of the corporation. The
ability of a Delaware corporation to pay dividends on, or to make repurchases or
redemptions of, its shares is dependent on the financial status of the
corporation standing alone and not on a consolidated basis. In determining the
amount of surplus of a Delaware corporation, the assets of the corporation,
including stock of subsidiaries owned by the corporation, must be valued at
their fair market value as determined by the board of directors, regardless of
their historical book value.
Under the CGCL, a corporation may not make any distribution (including
dividends, whether in cash or other property, and repurchases of its shares)
unless either the corporation's retained earnings immediately prior to the
proposed distribution equal or exceed the amount of the proposed distribution
or, immediately after giving effect to such distribution, the corporation's
assets (exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1 1/4 times its liabilities (not
including deferred taxes, deferred income and other deferred credits), and the
corporation's current assets, as defined, would be at least equal to its current
liabilities (or 1 1/4 times its current liabilities if the average pre-tax and
pre-interest earnings for the preceding two fiscal years were less than the
average interest expenses for such years). Such tests are applied to California
corporations on a consolidated basis. Under the CGCL, there are certain
exceptions to the foregoing rules for repurchases of shares including in
connection with certain rescission actions or pursuant to certain employee stock
plans.
APPROVAL OF CERTAIN CORPORATE TRANSACTIONS
Under both the DGCL and the CGCL, with certain exceptions, any merger,
consolidation or sale, lease or exchange of all or substantially all of the
assets must be approved by the board of directors and by the affirmative vote of
a majority of the outstanding shares entitled to vote. Under the CGCL, similar
board and shareholder approval is also required in connection with certain
additional acquisition transactions.
BUSINESS COMBINATION FOLLOWING A CHANGE OF CONTROL
The DGCL prohibits certain business combinations between a Delaware
corporation, the shares of which are listed on a national securities exchange,
and an "interested shareholder" for a period of three years following the time
that such person became an "interested shareholder," unless certain conditions
are met or unless the certificate of incorporation of the corporation contains a
provision expressly electing not to be governed by such provisions. The Zebra
Certificate of Incorporation does not contain such an election.
The CGCL does not contain an analogous law. However, the CGCL does provide
that (i) in connection with a sale of all or substantially all of the assets of
a corporation where the buyer is in control of or under common control with the
seller (control being ownership of shares possessing more than fifty percent of
the voting powers), the principal terms of the sale must be approved by at least
90% of the voting power unless the sale is in consideration of nonredeemable
common shares of the purchasing corporation or its parent and (ii) in connection
with a merger where one constituent corporation or its parent owns more than 50%
of the voting power of another constituent corporation (but less than 90% of the
voting power of each class) the nonredeemable common stock of a disappearing
corporation may be converted only into nonredeemable common shares of the
surviving corporation or parent unless all of the shareholders of the class
consent or the transaction is determined to be fair by the California
Commissioner of Corporations.
SHAREHOLDER DERIVATIVE SUITS
Under the DGCL, a stockholder may only bring a derivative action on behalf
of the corporation if the stockholder was a stockholder of the corporation at
the time of the transaction in question or his or her stock thereafter devolved
upon him or her by operation of law. The CGCL provides that a shareholder
75
<PAGE>
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the transaction in question provided that certain
tests are met. The CGCL also provides that the corporation or the defendant in a
derivative suit may make a motion to the court for an order requiring the
plaintiff shareholder to furnish a security bond. Delaware does not have a
similar bonding requirement.
APPRAISAL RIGHTS
Under the DGCL and the CGCL, a stockholder and a shareholder, respectively,
of a corporation participating in certain major corporate transactions may,
under varying circumstances, be entitled to appraisal rights pursuant to which
such shareholder may receive cash in the amount of the fair market value of the
shares held by such shareholder (as determined by a court or by agreement of the
corporation and the shareholder) in lieu of the consideration such shareholder
may otherwise receive in the transaction. The limitations on the availability of
appraisal rights under the DGCL are different from those under the CGCL.
Under the DGCL, appraisal rights are not available to: (i) stockholders with
respect to a merger or consolidation by a corporation, the shares of which are
either listed on a national securities exchange or designated as a national
market security on a interdealer quotation system by the National Association of
Securities Dealers, Inc. or are held of record by more than 2,000 holders if
such stockholders receive only shares of the surviving corporation or shares of
any other corporation which are either listed on a national securities exchange
or designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or are held of
record by more than 2,000 holders; or (ii) stockholders of a corporation
surviving a merger if no vote of the stockholders of a corporation is required
to approve the merger because, among other things, the number of shares to be
issued in the merger does not exceed 20% of the shares of the surviving
corporation outstanding immediately prior to the merger, and if certain other
conditions are met.
Shareholders of a California corporation whose shares are listed on a
national securities exchange or on a list of over-the-counter margin stocks
issued by the Board of Governors of the Federal Reserve System generally do not
have appraisal rights unless the holders of at least 5% of the class of
outstanding shares claim the right. See "Approval of the Merger and Related
Transactions--Rights of Eltron Dissenting Shareholders." Appraisal rights are
unavailable, however, if the shareholders of a corporation or the corporation
itself, or both, immediately prior to a reorganization shall own (immediately
after the reorganization) more than five-sixths of the voting power of the
surviving or acquiring corporation or its parent.
The DGCL also does not provide stockholders of a corporation with appraisal
rights when the corporation acquires another business through the issuance of
its capital stock: (i) in exchange for all or substantially all of the assets of
the business to be acquired, (ii) in exchange for more than fifty percent of the
outstanding shares of the corporation to be acquired, or (iii) in a merger of
the corporation to be acquired with a subsidiary of the acquiring corporation.
The CGCL generally treats these kinds of acquisitions in the same manner as a
direct merger of the acquiring corporation with the corporation to be acquired.
DISSENTERS' RIGHTS MAY, IN CERTAIN CIRCUMSTANCES, BE AVAILABLE TO
SHAREHOLDERS OF ELTRON WITH RESPECT TO THE MERGER. SEE "APPROVAL OF THE
MERGER--RIGHTS OF DISSENTING ELTRON SHAREHOLDERS."
DISSOLUTION
Under the DGCL, unless approved by stockholders holding 100% of the total
voting power of the corporation, a dissolution must be initiated by the board of
directors and approved by the affirmative vote of the holders of a majority of
the outstanding stock of the corporation entitled to vote thereon.
76
<PAGE>
Under the CGCL, shareholders holding 50% or more of the voting power may
authorize a corporation's dissolution, with or without the approval of the
corporation's board of directors, and this right may not be modified by the
corporations' articles of incorporation.
EXPERTS
The consolidated financial statements and financial statement schedule of
Zebra as of December 31, 1996 and 1997, and for each of the years in the
three-year period ended December 31, 1997, have been incorporated by reference
in reliance upon the reports of KPMG Peat Marwick LLP, independent auditors,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements and financial statement schedule of
Eltron as of December 31, 1996 and 1997, and for each of the three years in the
period ended December 31, 1997, incorporated by reference in this Joint Proxy
Statement/Prospectus, have been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
that firm as experts in accounting and auditing.
With respect to Zebra's unaudited interim consolidated financial information
for the periods ended July 4, 1998, June 28, 1997, April 4, 1998 and March 29,
1997 incorporated by reference herein, KPMG Peat Marwick LLP, independent
certified public accountants, have reported that they applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate reports included in the Company's quarterly reports on
Form 10-Q for the quarters ended July 4, 1998 and April 4, 1998 and incorporated
by reference herein, state that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of section 11 of the Securities Act for
their reports on the unaudited interim financial information because those
reports are not a "report" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of sections 7 and 11 of the
Securities Act.
LEGAL MATTERS
Certain legal matters relating to the issuance and validity of the Class B
Shares issuable in connection with the Merger and certain federal income tax
matters for Zebra will be passed upon for Zebra by Katten Muchin & Zavis,
Chicago, Illinois. Certain legal matters relating to federal income tax matters
will be passed upon for Eltron by Troy & Gould Professional Corporation, Los
Angeles, California.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We each file annual, quarterly and special reports, proxy statements and
other information with the Commission. You may read and copy any reports,
statements or other information we file at the Commission's public reference
rooms at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as
at the Commission's regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of these materials may also be obtained from the Commission at
prescribed rates by writing to the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549. Our filings are also available
to the public from commercial document retrieval services and at the web site
maintained by the Commission at "http:// www.sec.gov."
The Class A Shares and the Eltron Common Stock are quoted on the Nasdaq
National Market. The Class B Shares are not traded or quoted on any securities
exchange. Reports and other information concerning Zebra and Eltron may be
inspected at the offices of The National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Zebra has filed with the Commission a Registration Statement on Form S-4
with respect to (1) the Class B Shares to be issued to holders of Eltron Common
Stock (other than shares owned by Zebra and its affiliates) pursuant to the
Merger Agreement and (2) the Class A Shares issuable upon conversion of such
Class B Shares. This Joint Proxy Statement/Prospectus constitutes the prospectus
of Zebra that is filed as part of the Registration Statement. Other parts of the
Registration Statement are omitted from this Joint Proxy Statement/Prospectus in
accordance with the rules and regulations of the Commission. Copies of the
Registration Statement, including exhibits, may be inspected, without charge, at
the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies may be obtained from the Commission at prescribed rates.
The Commission allows us to "incorporate by reference" information into this
Joint Proxy Statement/ Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the Commission. The following documents previously filed with the Commission by
Eltron (Commission File Number 000-23342) are incorporated by reference into
this Joint Proxy Statement/Prospectus:
1. Eltron's Annual Report on Form 10-K for the fiscal year ended December
31, 1997;
2. Eltron's Current Report on Form 8-K filed with the Commission on April
10, 1998;
3. Eltron's Quarterly Report on Form 10-Q for the quarterly period ended
July 4, 1998 (referred to as June 30, 1998 for the basis of
presentation);
4. Eltron's Quarterly Report on Form 10-Q for the quarterly period ended
April 4, 1998 (referred to as March 31, 1998 for the basis of
presentation); and
5. The description of Eltron Common Stock contained in the Registration
Statement on Form SB-2 filed with the Commission on February 8, 1994.
The following documents previously filed with the Commission by Zebra
(Commission File Number 000-19406) are incorporated by reference into this Joint
Proxy Statement/Prospectus:
1. Zebra's Annual Report on Form 10-K for the fiscal year ended December
31, 1997;
2. Zebra's Quarterly Report on Form 10-Q for the quarterly period ended
July 4, 1998;
3. Zebra's Quarterly Report on Form 10-Q for the quarterly period ended
April 4, 1998; and
4. The description of the Class A Common Stock contained in the
Registration Statement on Form 8-A filed with the Commission on July 15,
1991.
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<PAGE>
We are also incorporating by reference additional documents that we file
with the Commission between the date of this Joint Proxy Statement/Prospectus
and the dates of the meetings of our stockholders.
If you are a Zebra stockholder or an Eltron shareholder, we may have sent
you some of the documents incorporated by reference, but you can obtain any of
them through us or the Commission. Documents incorporated by reference are
available from us without charge, excluding all exhibits unless we have
specifically incorporated by reference an exhibit in this Joint Proxy
Statement/Prospectus. You may obtain documents incorporated by reference in this
Joint Proxy Statement/Prospectus by requesting them in writing or by telephone
from the appropriate party at the following address:
Eltron International, Inc. Zebra Technologies Corporation
41 Moreland 333 Corporate Woods Parkway
Simi Valley, CA 93065-1692 Vernon Hills, IL 60061-3109
Tel: (805) 579-1800 Tel: (847) 634-6700
Attn: Kriston D. Qualls Attn: Doug Fox
If you would like to request documents from us, please do so by October 19,
1998 to receive them before the meetings.
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus to vote on the Zebra
proposals and the Eltron proposals. We have not authorized anyone to provide you
with information that is different from what is contained in this Joint Proxy
Statement/Prospectus. This Joint Proxy Statement/Prospectus is dated September
21, 1998. You should not assume that the information contained in the Joint
Proxy Statement/Prospectus is accurate as of any date other than such date, and
neither the mailing of this Joint Proxy Statement/Prospectus to you nor the
issuance of Zebra Common Stock in the Merger shall create any implication to the
contrary.
This Joint Proxy Statement/Prospectus is being furnished:
(1) to Eltron's shareholders in connection with the solicitation of proxies
by the Eltron Board of Directors for use at the Eltron Special Meeting.
Each copy of this Joint Proxy Statement/ Prospectus mailed to the Eltron
shareholders is accompanied by a form of proxy for use at the Eltron
Special Meeting. This Joint Proxy Statement/Prospectus is also being
furnished by Zebra to holders of Eltron Common Stock as a prospectus in
connection with the Class B Shares to be issued upon consummation of the
Merger; and
(2) to Zebra's stockholders in connection with the solicitation of proxies
by the Zebra Board of Directors for use at the Zebra Special Meeting.
Each copy of this Joint Proxy Statement/ Prospectus mailed to the Zebra
stockholders is accompanied by a form of proxy for use at the Zebra
Special Meeting.
Zebra has supplied all information contained or incorporated by reference in
this Joint Proxy Statement/Prospectus relating to Zebra, and Eltron has supplied
all such information relating to Eltron.
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<PAGE>
SELECTED HISTORICAL AND UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following tables set forth certain selected historical financial data
for Zebra and Eltron, and selected unaudited pro forma condensed combined
financial data after giving effect to the Merger as a pooling-of-interests for
accounting purposes, assuming the Merger had occurred at the beginning of the
periods presented.
The selected unaudited pro forma condensed combined financial data of Zebra
and Eltron is derived from the unaudited pro forma condensed combined financial
statements included in this Joint Proxy Statement/Prospectus, gives effect to
the Merger as a pooling-of-interests, and should be read in conjunction with
such unaudited pro forma statements, the notes thereto, and other financial
information contained or incorporated herein by reference.
The unaudited pro forma financial information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the Merger had been consummated
nor is it necessarily indicative of future operating results or financial
position.
SELECTED HISTORICAL FINANCIAL DATA
SELECTED ZEBRA CONSOLIDATED FINANCIAL DATA--The following selected
consolidated historical financial data of Zebra for each of the five years in
the period ended December 31, 1997 have been derived from the Zebra historical
consolidated financial statements, as audited by KPMG Peat Marwick LLP,
independent accountants, and should be read in conjunction with such financial
statements, the notes thereto and other financial information included elsewhere
in this Joint Proxy Statement/Prospectus or incorporated herein by reference.
The consolidated statement of operations data of Zebra for the six-month periods
ended June 28, 1997 and July 4, 1998 and the consolidated balance sheet data of
Zebra as of July 4, 1998 are unaudited but have been prepared on the same basis
as the audited consolidated financial statements of Zebra and, in the opinion of
management of Zebra, contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for such periods. The results of operations for the six-month periods
ended June 28, 1997 and July 4, 1998 are not necessarily indicative of results
to be expected for any future period.
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<PAGE>
ZEBRA SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31,
----------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JUNE 28, JULY 4,
1993 1994 1995(1) 1996(1) 1997(1) 1997(1) 1998
--------- --------- --------- --------- --------- ----------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF INCOME DATA:
Net sales............................................ $ 87,456 $ 107,103 $ 145,348 $ 163,980 $ 192,071 $ 88,853 $ 105,567
Cost of sales........................................ 43,889 55,080 76,241 85,302 93,871 44,124 50,637
--------- --------- --------- --------- --------- ----------- ---------
Gross profit......................................... 43,567 52,023 69,107 78,678 98,200 44,729 54,930
Operating expenses:
Sales and marketing................................ 9,204 9,011 12,421 15,445 19,951 8,945 10,937
Research and development........................... 4,619 5,835 7,771 9,615 10,784 5,167 6,360
General administrative............................. 4,847 6,834 8,934 11,155 14,690 6,917 8,532
Merger costs....................................... -- -- -- 315 -- -- --
Acquired in-process technology(2).................. -- -- -- 1,117 -- -- --
--------- --------- --------- --------- --------- ----------- ---------
Total operating expenses............................. 18,670 21,680 29,126 37,647 45,425 21,029 25,829
--------- --------- --------- --------- --------- ----------- ---------
Operating income..................................... 24,897 30,343 39,981 41,031 52,775 23,700 29,101
Other income, net(3)................................. 3,571 2,533 5,444 6,358 13,959 9,358 4,863
--------- --------- --------- --------- --------- ----------- ---------
Income from continuing operations before income
taxes.............................................. 28,468 32,876 45,425 47,389 66,734 33,058 33,964
Income taxes......................................... 10,213 11,803 15,851 16,536 23,924 11,887 12,243
--------- --------- --------- --------- --------- ----------- ---------
Net income from continuing operations................ 18,255 21,073 29,574 30,853 42,810 21,171 21,721
Loss from discontinued operations (less applicable
income tax benefit)(4)............................. -- -- 7,010 1,938 1,692 2,655 --
Loss on disposal of discontinued operations.......... -- -- -- -- 963 -- --
--------- --------- --------- --------- --------- ----------- ---------
Net income........................................... $ 18,255 $ 21,073 $ 22,564 $ 28,915 $ 40,155 $ 18,516 $ 21,721
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
Basic earnings per share from continuing
operations......................................... $ 0.76 $ 0.88 $ 1.23 $ 1.27 $ 1.77 $ 0.87 $ 0.89
Diluted earnings per share from continuing
operations......................................... $ 0.76 $ 0.87 $ 1.22 $ 1.27 $ 1.76 $ 0.87 $ 0.89
Basic earnings per share............................. $ 0.76 $ 0.88 $ 0.94 $ 1.19 $ 1.66 $ 0.76 $ 0.89
Diluted earnings per share........................... $ 0.76 $ 0.87 $ 0.93 $ 1.19 $ 1.65 $ 0.76 $ 0.89
Weighted average shares outstanding.................. 24,020 23,947 24,113 24,203 24,255 24,242 24,298
Weighted average and equivalent shares outstanding... 24,020 24,222 24,166 24,241 24,318 24,281 24,412
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------------- JULY 4,
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA:
Cash and cash equivalents and investments and marketable
securities.............................................. $ 41,498 $ 54,203 $ 71,858 $ 94,540 $ 128,853 $ 144,542
Working capital........................................... 55,972 76,241 99,833 130,053 164,906 181,960
Total assets.............................................. 76,697 95,043 131,071 164,386 203,584 226,344
Long-term debt, less current portion...................... 293 236 2,177 2,326 263 17
Total shareholders' equity................................ 60,635 82,032 108,206 140,456 179,551 201,723
</TABLE>
- ------------------------
(1) As of June 28, 1997, Zebra made the decision to discontinue the operations
of its VTI subsidiary. VTI was acquired in July 1995.
(2) In conjunction with the purchase of Fenestra Computer Services in February
1996, acquired in-process technology valued at $1,117 was expensed
immediately.
(3) Other income includes a one-time pretax gain of $5,458 during the first
quarter of 1997 from the sale of Zebra's investment in Norand Corporation
common stock.
(4) In conjunction with the acquisition of VTI in July 1995, acquired in-process
technology valued at $6,028 was expensed immediately.
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<PAGE>
SELECTED ELTRON CONSOLIDATED FINANCIAL DATA--The following selected
historical financial data of Eltron for the five years in the period ended
December 31, 1997 have been derived from the Eltron historical financial
statements as audited by Coopers & Lybrand L.L.P., independent accountants, and
should be read in conjunction with such financial statements, the notes thereto
and other financial information included elsewhere in this Joint Proxy
Statement/Prospectus or incorporated herein by reference. The statement of
income data for Eltron for the six-month periods ended June 30, 1997 and 1998
and the balance sheet data of Eltron as of June 30, 1998 are unaudited but have
been prepared on the same basis as the audited financial statements of Eltron
and, in the opinion of management of Eltron, contain all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results of operations for such periods.
ELTRON SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------- ---------
1993(1) 1994(1) 1995(1) 1996 1997 1997
----------- ----------- ----------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF INCOME DATA(1):
Sales.................................................... $ 17,989 $ 29,276 $ 54,971 $ 88,510 $ 105,029 $ 50,683
Cost of goods sold....................................... 10,961 16,253 30,124 50,171 59,521 28,295
----------- ----------- ----------- --------- --------- ---------
Gross profit............................................. 7,028 13,023 24,848 38,339 45,508 22,388
Operating expenses:
Selling, general and administrative.................... 3,984 5,803 11,270 16,399 19,894 9,632
Research and product development....................... 1,592 1,885 2,932 5,309 7,127 3,431
Gain on sale of subsidiary's assets.................... -- -- -- -- -- --
Write-off of acquired in-process technology and other
costs associated with acquisition.................... -- -- -- 3,528 -- --
----------- ----------- ----------- --------- --------- ---------
Total operating expenses................................. 5,576 7,688 14,202 25,236 27,021 13,063
----------- ----------- ----------- --------- --------- ---------
Income from operations................................... 1,452 5,335 10,646 13,103 18,487 9,325
Other income (expense), net.............................. (379) (116) 115 211 132 136
----------- ----------- ----------- --------- --------- ---------
Income before income tax expense......................... 1,073 5,219 10,761 13,314 18,619 9,461
Provision for income taxes............................... 73 1,596 3,641 6,215 6,982 3,499
----------- ----------- ----------- --------- --------- ---------
Net income............................................... $ 1,000 $ 3,623 $ 7,120 $ 7,099 $ 11,637 $ 5,962
----------- ----------- ----------- --------- --------- ---------
----------- ----------- ----------- --------- --------- ---------
Net income per basic share............................... $ 0.33 $ 0.64 $ 1.07 $ 0.98 $ 1.57 $ 0.81
Net income per diluted share............................. $ 0.28 $ 0.58 $ 0.97 $ 0.91 $ 1.49 $ 0.76
Basic weighted shares outstanding........................ 3,000 5,627 6,683 7,226 7,395 7,351
Diluted weighted shares outstanding...................... 3,542 6,212 7,349 7,821 7,802 7,884
<CAPTION>
1998
---------
<S> <C>
HISTORICAL STATEMENT OF INCOME DATA(1):
Sales.................................................... $ 62,303
Cost of goods sold....................................... 36,651
---------
Gross profit............................................. 25,652
Operating expenses:
Selling, general and administrative.................... 11,329
Research and product development....................... 4,193
Gain on sale of subsidiary's assets.................... (404)
Write-off of acquired in-process technology and other
costs associated with acquisition.................... --
---------
Total operating expenses................................. 15,118
---------
Income from operations................................... 10,534
Other income (expense), net.............................. 191
---------
Income before income tax expense......................... 10,725
Provision for income taxes............................... 4,076
---------
Net income............................................... $ 6,649
---------
---------
Net income per basic share............................... $ 0.88
Net income per diluted share............................. $ 0.85
Basic weighted shares outstanding........................ 7,597
Diluted weighted shares outstanding...................... 7,800
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------
1993(1) 1994(1) 1995(1) 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA(1):
Cash and cash equivalents and short-term investments......... $ 432 $ 5,850 $ 16,281 $ 9,237 $ 10,466
Working capital.............................................. 2,553 10,463 31,536 34,625 44,956
Total assets................................................. 7,655 19,494 45,624 54,245 66,862
Long-term debt, less current portion......................... 504 -- 751 811 50
Total shareholders' equity................................... 1,969 11,780 36,185 43,551 56,669
<CAPTION>
AS OF JUNE
30,
1998
-----------
(UNAUDITED)
<S> <C>
HISTORICAL BALANCE SHEET DATA(1):
Cash and cash equivalents and short-term investments......... $ 10,641
Working capital.............................................. 43,335
Total assets................................................. 78,194
Long-term debt, less current portion......................... 33
Total shareholders' equity................................... 63,417
</TABLE>
- ------------------------
(1) Effective March 1, 1996, Eltron acquired RJS, Incorporated in a business
combination accounted for as a pooling-of-interests. Financial information
prior to March 1, 1996 has been restated to give effect to the combination.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The accompanying unaudited pro forma condensed combined financial
information combines the historical results of Zebra and Eltron as if the Merger
occurred on January 1, 1993. The unaudited pro forma condensed combined
financial statements are presented for illustrative purposes only and do not
purport to represent what the combined company's results of operations or
financial position would have been had the Merger between Zebra and Eltron
occurred on the dates indicated or for any future period or date, and are
therefore qualified in their entirety by reference to and should be read in
conjunction with the historical financial statements of Zebra and Eltron, from
the companies' annual reports on Form 10-K for the year ended December 31, 1997
and quarterly reports on Form 10-Q for the quarters ended July 4, 1998 and June
30, 1998, respectively, incorporated herein by reference.
UNAUDITED SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------------------------------------- --------------------
JUNE 28, JULY 4,
1993 1994 1995 1996 1997 1997 1998(2)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA STATEMENT OF INCOME DATA:
Net sales.......................................... $ 105,445 $ 136,379 $ 200,319 $ 252,490 $ 297,100 $ 139,536 $ 167,870
Cost of sales...................................... 54,850 71,333 106,365 135,473 153,392 72,419 87,288
--------- --------- --------- --------- --------- --------- ---------
Gross profit....................................... 50,595 65,046 93,954 117,017 143,708 67,117 80,582
Operating expenses:
Selling, general and administrative.............. 18,035 21,648 32,625 42,999 54,535 25,494 30,798
Research and development......................... 6,211 7,720 10,703 14,924 17,911 8,598 10,553
Merger costs..................................... -- -- -- 315 -- -- --
Gain on sale of subsidiary's assets.............. -- -- -- -- -- -- (404)
Acquired in-process technology................... -- -- -- 4,645 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses........................... 24,246 29,368 43,328 62,883 72,446 34,092 40,947
--------- --------- --------- --------- --------- --------- ---------
Operating income................................... 26,349 35,678 50,626 54,134 71,262 33,025 39,635
Other income, net(3)............................... 3,192 2,417 5,559 6,569 14,091 9,494 3,384
--------- --------- --------- --------- --------- --------- ---------
Income from continuing operations before income
taxes............................................ 29,541 38,095 56,185 60,703 85,353 42,519 43,019
Income taxes....................................... 10,286 13,399 19,492 22,751 30,906 15,386 15,717
--------- --------- --------- --------- --------- --------- ---------
Net income from continuing operations.............. $ 19,255 $ 24,696 $ 36,693 $ 37,952 $ 54,447 $ 27,133 $ 27,302
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic earnings per share from continuing
operations....................................... $ 0.72 $ 0.85 $ 1.22 $ 1.24 $ 1.76 $ 0.88 $ 0.88
Diluted earnings per share from continuing
operations....................................... $ 0.71 $ 0.83 $ 1.19 $ 1.21 $ 1.74 $ 0.86 $ 0.87
Weighted average shares outstanding................ 26,720 29,011 30,128 30,706 30,910 30,858 30,912
Weighted average and equivalent shares
outstanding...................................... 27,208 29,813 30,780 31,280 31,340 31,377 31,209
</TABLE>
<TABLE>
<CAPTION>
AS OF
JULY 4,
1998(1)(2)
-----------
<S> <C>
PRO FORMA BALANCE SHEET DATA:
Cash and cash equivalents and investments and marketable securities................................. $ 145,232
Working capital..................................................................................... 209,930
Total assets........................................................................................ 294,587
Long-term debt, less current portion................................................................ 50
Total shareholders' equity.......................................................................... 250,377
</TABLE>
- ------------------------
(1) Adjusted to reflect estimated nonrecurring transaction costs of $5,414,
consisting of investment banking and professional fees, which will be
expensed at the time the merger is consummated. This estimate does not
include costs to integrate the combining companies.
(2) Adjusted to reflect the elimination of Zebra's intercorporate investment in
Eltron Common Stock as of July 4, 1998 and related gains on such investment
for the six months then ended.
(3) Other income includes a one-time pretax gain of $5,458 during the first
quarter of 1997 from the sale of Zebra's investment in Norand Corporation
common stock.
83
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined balance sheet and
statements of income give effect to the Merger of Zebra and Eltron as if the
Merger had been effective for all periods presented. The Merger will be
accounted for by the pooling-of-interests method of accounting. The unaudited
pro forma condensed combined balance sheet and statements of income do not
purport to be indicative of the financial position or the results of operations
of Zebra had the transaction actually been completed as of the beginning of the
periods presented, or which may be obtained in the future.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JULY 4, 1998
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO
ZEBRA ELTRON ADJUSTMENT FORMA
-------- ------- --------------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 9,372 $ 3,818 $ -- $ 13,190
Investment and marketable
securities.......................... 135,170 6,823 (9,951)(c) 132,042
Accounts receivable, net.............. 38,194 22,994 -- 61,188
Inventories........................... 19,853 21,547 -- 41,400
Prepaid expenses and other current
assets.............................. 773 1,093 -- 1,866
Deferred income taxes................. 2,365 1,804 -- 4,169
-------- ------- --------------- --------
Total current assets.................... 205,727 58,079 (9,951) 253,855
Property and equipment, net............. 16,581 19,046 -- 35,627
Goodwill................................ -- 597 -- 597
Other assets............................ 4,036 472 -- 4,508
-------- ------- --------------- --------
TOTAL ASSETS............................ $226,344 $78,194 $(9,951) $294,587
-------- ------- --------------- --------
-------- ------- --------------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 12,778 $ 8,121 $ -- $ 20,899
Accrued liabilities................... 6,713 4,445 5,414(b) 16,572
Earnout obligation.................... -- 980 -- 980
Short-term note payable............... 137 -- -- 137
Current portion of obligation under
capital lease with related party.... 66 -- -- 66
Income taxes payable.................. 4,073 1,198 -- 5,271
-------- ------- --------------- --------
Total current liabilities............... 23,767 14,744 5,414 43,925
Obligation under capital lease with
related party, less current portion... 17 -- -- 17
Long-term obligations................... -- 33 -- 33
Other................................... 260 -- -- 260
Deferred income taxes................... 577 -- (602)(c) (25)
-------- ------- --------------- --------
Total liabilities....................... 24,621 14,777 4,812 44,210
Total shareholders' equity.............. 201,723 63,417 (9,349)(a)(c) 250,377
(5,414)(b)
-------- ------- --------------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY................................ $226,344 $78,194 $(9,951) $294,587
-------- ------- --------------- --------
-------- ------- --------------- --------
</TABLE>
- --------------------------
(a) The pro forma amount assumes 6,502,181 shares of Zebra Class B Common Stock
are issued in the Merger, based on the Exchange Ratio of 0.90 shares of
Zebra Class B Common Stock for each share of Eltron Common Stock outstanding
as of June 30, 1998 (excluding 372,000 shares of Eltron Common Stock owned
by Zebra at that date). The actual number of shares of Zebra Class B Common
Stock to be issued will be determined at the time the Merger is consummated.
(b) Adjusted to reflect estimated nonrecurring transaction costs of $5,414,
consisting of investment banking and professional fees, which will be
expensed at the time the Merger is consummated. This estimate does not
include costs to integrate the combining companies.
(c) Adjusted to eliminate Zebra's intercorporate investment of 372,000 shares of
Eltron Common Stock as of July 4, 1998.
See accompanying notes to unaudited pro forma condensed combined financial
statements.
84
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JULY 4, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ZEBRA ELTRON ADJUSTMENT PRO FORMA
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................... $105,567 $62,303 $-- $167,870
Cost of sales........................... 50,637 36,651 -- 87,288
------- ------- ----------- ---------
Gross profit.......................... 54,930 25,652 -- 80,582
Operating expenses...................... 25,829 15,118 -- 40,947
------- ------- ----------- ---------
Operating income...................... 29,101 10,534 -- 39,635
Other income, net....................... 4,863 191 (1,859)(b) 3,384
189(b)
------- ------- ----------- ---------
Income before income taxes.............. 33,964 10,725 (1,670) 43,019
Income taxes............................ 12,243 4,076 (602)(b) 15,717
------- ------- ----------- ---------
Net income.............................. $21,721 $ 6,649 ($1,068) $27,302
------- ------- ----------- ---------
------- ------- ----------- ---------
Basic earnings per share................ $ 0.89 $ 0.88 $ 0.88
Diluted earnings per share.............. $ 0.89 $ 0.85 $ 0.87
Weighted average shares outstanding..... 24,298 7,597 (760)(a) 30,912
(223)(b)
Weighted average and equivalent shares
outstanding........................... 24,412 7,800 (780)(a) 31,209
(223)(b)
</TABLE>
- ------------------------
(a) The calculation of basic and diluted net earnings per common share for the
pro forma financial statements uses the applicable weighted average number
of outstanding shares of Zebra and Eltron Common Stock adjusted to
equivalent shares of Zebra Common Stock.
(b) Adjusted to eliminate gains of $1,859 related to the increase in the fair
market value of Zebra's intercorporate investment in Eltron Common Stock and
to reflect the assumed weighted return of $189 on the cost of $8,092 of such
intercorporate investment at Zebra's average return on its portfolio of
investments and marketable securities of approximately 7%, the related tax
effect of $602 of such adjustments, and the decreasing effect of 223 shares
on the weighted average shares outstanding and weighted average and
equivalent shares outstanding by eliminating such intercorporate investment.
See accompanying notes to unaudited pro forma condensed combined financial
statements.
85
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 28, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ZEBRA ELTRON ADJUSTMENT PRO FORMA
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................... $88,853 $50,683 $-- $139,536
Cost of sales........................... 44,124 28,295 -- 72,419
------- ------- ----- ---------
Gross profit.......................... 44,729 22,388 -- 67,117
Operating expenses...................... 21,029 13,063 -- 34,092
------- ------- ----- ---------
Operating income...................... 23,700 9,325 -- 33,025
Other income, net....................... 9,358 136 -- 9,494
------- ------- ----- ---------
Income from continuing operations before
income taxes.......................... 33,058 9,461 -- 42,519
Income taxes............................ 11,887 3,499 -- 15,386
------- ------- ----- ---------
Net income from continuing operations... $21,171 $ 5,962 $-- $27,133
------- ------- ----- ---------
------- ------- ----- ---------
Basic earnings per share from continuing
operations............................ $ 0.87 $ 0.81 $ 0.88
Diluted earnings per share from
continuing operations................. $ 0.87 $ 0.76 $ 0.86
Weighted average shares outstanding..... 24,242 7,351 (735)(a) 30,858
Weighted average and equivalent shares
outstanding........................... 24,281 7,884 (788)(a) 31,377
</TABLE>
- ------------------------
(a) The calculation of basic and diluted net earnings per common share for the
pro forma financial statements uses the applicable weighted average number
of outstanding shares of Zebra and Eltron Common Stock adjusted to
equivalent shares of Zebra Common Stock.
See accompanying notes to unaudited pro forma condensed combined financial
statements.
86
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ZEBRA ELTRON ADJUSTMENT PRO FORMA
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................... $192,071 $105,029 $-- $297,100
Cost of sales........................... 93,871 59,521 -- 153,392
-------- -------- ----- ---------
Gross profit.......................... 98,200 45,508 -- 143,708
Operating expenses...................... 45,425 27,021 -- 72,446
-------- -------- ----- ---------
Operating income...................... 52,775 18,487 -- 71,262
Other income, net....................... 13,959 132 -- 14,091
-------- -------- ----- ---------
Income from continuing operations before
income taxes.......................... 66,734 18,619 -- 85,353
Income taxes............................ 23,924 6,982 -- 30,906
-------- -------- ----- ---------
Net income from continuing operations... $ 42,810 $ 11,637 $-- $ 54,447
-------- -------- ----- ---------
-------- -------- ----- ---------
Basic earnings per share from continuing
operations............................ $ 1.77 $ 1.57 $ 1.76
Diluted earnings per share from
continuing operations................. $ 1.76 $ 1.49 $ 1.74
Weighted average shares outstanding..... 24,255 7,395 (740)(a) 30,910
Weighted average and equivalent shares
outstanding........................... 24,318 7,802 (780)(a) 31,340
</TABLE>
- ------------------------
(a) The calculation of basic and diluted net earnings per common share for the
pro forma financial statements uses the applicable weighted average number
of outstanding shares of Zebra and Eltron Common Stock adjusted to
equivalent shares of Zebra Common Stock.
See accompanying notes to unaudited pro forma condensed combined financial
statements.
87
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ZEBRA ELTRON ADJUSTMENT PRO FORMA
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................... $163,980 $88,510 $-- $252,490
Cost of sales........................... 85,302 50,171 -- 135,473
-------- ------- ----- ---------
Gross profit.......................... 78,678 38,339 -- 117,017
Operating expenses...................... 37,647 25,236 -- 62,883
-------- ------- ----- ---------
Operating income...................... 41,031 13,103 -- 54,134
Other income, net....................... 6,358 211 -- 6,569
-------- ------- ----- ---------
Income from continuing operations before
income taxes.......................... 47,389 13,314 -- 60,703
Income taxes............................ 16,536 6,215 -- 22,751
-------- ------- ----- ---------
Net income from continuing operations... $ 30,853 $ 7,099 $-- $ 37,952
-------- ------- ----- ---------
-------- ------- ----- ---------
Basic earnings per share from continuing
operations............................ $ 1.27 $ 0.98 $ 1.24
Diluted earnings per share from
continuing operations................. $ 1.27 $ 0.91 $ 1.21
Weighted average shares outstanding..... 24,203 7,226 (723)(a) 30,706
Weighted average and equivalent shares
outstanding........................... 24,241 7,821 (782)(a) 31,280
</TABLE>
- ------------------------
(a) The calculation of basic and diluted net earnings per common share for the
pro forma financial statements uses the applicable weighted average number
of outstanding shares of Zebra and Eltron Common Stock adjusted to
equivalent shares of Zebra Common Stock.
See accompanying notes to unaudited pro forma condensed combined financial
statements.
88
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ZEBRA ELTRON ADJUSTMENT PRO FORMA
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................... $145,348 $54,971 $-- $200,319
Cost of sales........................... 76,241 30,124 -- 106,365
-------- ------- ----- ---------
Gross profit.......................... 69,107 24,847 -- 93,954
Operating expenses...................... 29,126 14,202 -- 43,328
-------- ------- ----- ---------
Operating income...................... 39,981 10,645 -- 50,626
Other income, net....................... 5,444 115 -- 5,559
-------- ------- ----- ---------
Income from continuing operations before
income taxes.......................... 45,425 10,760 -- 56,185
Income taxes............................ 15,851 3,641 -- 19,492
-------- ------- ----- ---------
Net income from continuing operations... $ 29,574 $ 7,119 $-- $ 36,693
-------- ------- ----- ---------
-------- ------- ----- ---------
Basic earnings per share from continuing
operations............................ $ 1.23 $ 1.07 $ 1.22
Diluted earnings per share from
continuing operations................. $ 1.22 $ 0.97 $ 1.19
Weighted average shares outstanding..... 24,113 6,683 (668)(a) 30,128
Weighted average and equivalent shares
outstanding........................... 24,166 7,349 (735)(a) 30,780
</TABLE>
- ------------------------
(a) The calculation of basic and diluted net earnings per common share for the
pro forma financial statements uses the applicable weighted average number
of outstanding shares of Zebra and Eltron Common Stock adjusted to
equivalent shares of Zebra Common Stock.
See accompanying notes to unaudited pro forma condensed combined financial
statements.
89
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE A--DESCRIPTION OF MERGER
On July 9, 1998, Zebra signed a definitive agreement to acquire all of the
outstanding capital stock of Eltron in exchange for approximately 7,323,655
shares of Zebra Class B Common Stock and to assume Eltron stock options which
will convert into options to purchase approximately 702,000 shares of Zebra
Class B Common Stock. Zebra will exchange 0.9 of a share of Zebra Class B Common
Stock for each share of Eltron Common Stock (other than shares of Eltron Common
Stock held by Zebra and its affiliates). Eltron will become a wholly owned
subsidiary of Zebra. The closing of the definitive merger agreement is subject
to approval by the stockholders of Zebra and the shareholders of Eltron as well
as the satisfaction of conditions customary in such agreements. It is expected
that the acquisition will qualify as a tax-free reorganization and will be
accounted for as a pooling-of-interests.
The unaudited pro forma condensed combined financial data are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the periods presented
and should not be construed as representative of future operations.
Zebra and Eltron estimate that they will incur merger-related expenses of
approximately $5.414 million, consisting primarily of transaction costs for
financial advisory fees, attorneys, accountants, financial printing and one-time
charges related to the transaction. These nonrecurring expenses will be charged
to operations in the fiscal quarter in which the Merger is consummated. Such
charges have not been reflected in the pro forma statements of income and do not
include costs to integrate the combining companies.
NOTE B--BASIS OF PRESENTATION
The financial statements of Zebra for the second quarter of 1998 are as of
and for the twenty-six weeks ended July 4, 1998. The financial statements of
Eltron for the second quarter of 1998 are as of and for the six months ended
July 4, 1998 (referred to as June 30, 1998 for basis of presentation).
NOTE C--RECLASSIFICATIONS
Certain historical amounts have been reclassified to conform to the pro
forma combined presentation.
90
<PAGE>
UNAUDITED QUARTERLY RESULTS
Net sales and operating results fluctuate from quarter to quarter as a
result of a number of factors including the mix of products shipped, the changes
in product prices by Zebra and Eltron, the market acceptance of new products,
the historical disproportionate level of orders received and sales made by Zebra
and Eltron during the last few weeks of each fiscal quarter, and changes in
general economic conditions. The timing of net sales varies from quarter to
quarter because of the operating cycles of Zebra and Eltron, the size and scope
of orders and general economic conditions. Because of these and other factors,
any inaccuracies in forecasting could adversely affect the combined company's
financial position, results of operations and cash flows.
ZEBRA--The following table sets forth certain unaudited quarterly operating
information for each of the ten quarters ending July 4, 1998. These data have
been prepared on the same basis as the audited financial statements contained
elsewhere herein and include all normal recurring adjustments necessary for the
fair presentation of the information for the periods presented, when read in
conjunction with Zebra's consolidated financial statements and related notes
thereto. Results for any previous fiscal quarter are not necessarily indicative
of results for the full year or for any future quarter.
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------------------------
MAR. 30, JUNE 29, SEPT. 28, DEC. 31, MAR. 29, JUNE 28, SEPT. 27, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $ 36,256 $ 38,920 $ 41,858 $ 46,676 $ 41,009 $ 47,844 $ 49,889 $ 53,329
Cost of sales............... 18,961 20,468 21,763 24,110 20,603 23,546 24,878 24,844
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit................ 17,565 18,452 20,095 22,566 20,406 24,298 25,011 28,485
Operating expenses.......... 10,236 9,759 8,345 9,307 9,234 11,768 11,360 13,063
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income............ 7,329 8,693 11,750 13,259 11,172 12,530 13,651 15,422
Other income, net........... 1,282 1,529 1,399 2,148 7,231 2,236 1,888 2,604
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income from continuing
operations before income
taxes..................... 8,611 10,222 13,149 15,407 18,403 14,766 15,539 18,026
Income taxes................ 2,903 3,440 4,526 5,667 6,876 5,121 5,594 6,333
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income from continuing
operations................ 5,708 6,782 8,623 9,740 11,527 9,645 9,945 11,693
Loss from discontinued
operations (less
applicable income tax
benefits)................. (459) (522) 92 (1,049) (292) (1,400) -- --
Loss on disposal of
discontinued operations... -- -- -- -- -- (963) -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.................. $ 5,249 $ 6,260 $ 8,715 $ 8,691 $ 11,235 $ 7,282 $ 9,945 $ 11,693
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
APR. 4, JULY 4,
1998 1998
--------- ---------
<S> <C> <C>
Net sales................... $ 50,214 $ 55,353
Cost of sales............... 24,074 26,563
--------- ---------
Gross profit................ 26,140 28,790
Operating expenses.......... 12,960 12,860
--------- ---------
Operating income............ 13,180 15,930
Other income, net........... 3,148 1,707
--------- ---------
Income from continuing
operations before income
taxes..................... 16,328 17,637
Income taxes................ 5,894 6,349
--------- ---------
Net income from continuing
operations................ 10,434 11,288
Loss from discontinued
operations (less
applicable income tax
benefits)................. -- --
Loss on disposal of
discontinued operations... -- --
--------- ---------
Net income.................. $ 10,434 $ 11,288
--------- ---------
--------- ---------
</TABLE>
91
<PAGE>
ELTRON--The following table sets forth certain unaudited quarterly operating
information for each of the ten quarters ended July 4, 1998 (referred to as June
30, 1998 for basis of presentation). This information has been prepared on the
same basis as the audited financial statements contained elsewhere herein and
includes all normal recurring adjustments necessary for the fair presentation of
the information for the periods presented, when read in conjunction with
Eltron's consolidated financial statements and related notes thereto. Results
for any previous fiscal quarter are not necessarily indicative of results for
the full year or for any future quarter.
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales...................... $ 19,019 $ 22,730 $ 24,013 $ 22,748 $ 23,170 $ 27,513 $ 25,609 $ 28,737
Cost of sales.............. 10,251 12,790 14,055 13,076 12,860 15,436 13,997 17,229
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit............... 8,768 9,940 9,958 9,672 10,310 12,077 11,612 11,508
Total operating expenses... 8,171 5,441 5,734 5,891 6,285 6,779 6,324 7,633
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income from operations..... 596 4,500 4,224 3,782 4,025 5,298 5,288 3,876
Other income (expense),
net...................... 42 19 57 94 113 25 84 (90)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income tax
expense.................. 638 4,519 4,281 3,876 4,138 5,323 5,372 3,786
Provision for income
taxes.................... 1,381 1,695 1,605 1,534 1,530 1,970 1,866 1,616
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss).......... $ (743) $ 2,824 $ 2,676 $ 2,341 $ 2,608 $ 3,354 $ 3,506 $ 2,169
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
MAR. 31, JUNE 30,
1998 1998
----------- -----------
<S> <C> <C>
Sales...................... $ 30,652 $ 31,651
Cost of sales.............. 17,912 18,739
----------- -----------
Gross profit............... 12,740 12,912
Total operating expenses... 7,503 7,615
----------- -----------
Income from operations..... 5,237 5,297
Other income (expense),
net...................... 150 41
----------- -----------
Income before income tax
expense.................. 5,387 5,338
Provision for income
taxes.................... 2,048 2,028
----------- -----------
Net income (loss).......... $ 3,339 $ 3,310
----------- -----------
----------- -----------
</TABLE>
92
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ZEBRA TECHNOLOGIES CORPORATION,
SPRUCE ACQUISITION CORP.,
AND
ELTRON INTERNATIONAL, INC.
DATED AS OF JULY 9, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
ARTICLE I The Merger; Effective Time; Closing.................... A-2
1.1 The Merger............................................. A-2
1.2 Effective Time......................................... A-2
1.3 Closing................................................ A-2
1.4 Effect of the Merger................................... A-2
ARTICLE II Certificate of Incorporation and By-Laws of the
Surviving Corporation................................ A-2
2.1 Certificate of Incorporation; Name..................... A-2
2.2 By-Laws................................................ A-2
ARTICLE III Directors and Officers of the Surviving Corporation.... A-2
3.1 Directors.............................................. A-2
3.2 Officers............................................... A-3
ARTICLE IV Merger Consideration; Conversion or Cancellation of
Shares in the Merger................................. A-3
4.1 Share Consideration for the Merger; Conversion or
Cancellation of Shares in the Merger................. A-3
4.2 Payment for Shares in the Merger....................... A-4
4.3 Cash For Fractional Parent Shares...................... A-5
4.4 Transfer of Shares after the Effective Time............ A-5
ARTICLE V Representations and Warranties......................... A-5
5.1 Representations and Warranties of Parent and Merger
Sub.................................................. A-5
</TABLE>
<TABLE>
<S> <C> <C> <C>
(a) Corporate Organization and
Qualification......................... A-5
(b) Capitalization.......................... A-6
(c) Fairness Opinion........................ A-6
(d) Authority Relative to this Agreement.... A-6
(e) Present Compliance with Obligations and
Laws.................................. A-7
(f) Consents and Approvals; No Violation.... A-7
(g) Litigation.............................. A-8
(h) SEC Reports; Financial Statements....... A-8
(i) No Liabilities; Absence of Certain
Changes or Events..................... A-8
(j) Brokers and Finders..................... A-9
(k) S-4 Registration Statement and Proxy
Statement/Prospectus.................. A-9
(l) Taxes................................... A-9
(m) Employee Benefits....................... A-10
(n) Parent Intangible Property.............. A-13
(o) Certain Contracts....................... A-14
(p) Accounting Matters...................... A-14
(q) Unlawful Payments and Contributions..... A-15
(r) Listings................................ A-15
(s) Environmental Matters................... A-15
(t) Title to Properties; Liens; Condition of
Properties............................ A-15
(u) Inventories............................. A-16
(v) Accounts Receivable and Payable......... A-16
(w) Labor and Employee Relations............ A-16
(x) Permits................................. A-17
(y) Warranty or Other Claims................ A-17
(z) Powers of Attorney...................... A-17
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C> <C> <C>
(aa) Insurance............................... A-18
(bb) Corporate Books and Records............. A-18
(cc) Transactions with Affiliates............ A-18
(dd) Disclosure.............................. A-18
5.2 Representations and Warranties of the Company........... A-18
(a) Corporate Organization and
Qualification......................... A-18
(b) Capitalization.......................... A-18
(c) Fairness Opinion........................ A-19
(d) Authority Relative to this Agreement.... A-19
(e) Present Compliance with Obligations and
Laws.................................. A-19
(f) Consents and Approvals; No Violation.... A-19
(g) Litigation.............................. A-20
(h) SEC Reports; Financial Statements....... A-20
(i) No Liabilities; Absence of Certain
Changes or Events..................... A-21
(j) Brokers and Finders..................... A-21
(k) S-4 Registration Statement and Proxy
Statement/Prospectus.................. A-21
(l) Taxes................................... A-22
(m) Employee Benefits....................... A-23
(n) Company Intangible Property............. A-26
(o) Certain Contracts....................... A-26
(p) Accounting Matters...................... A-27
(q) Unlawful Payments and Contributions..... A-27
(r) Listings................................ A-27
(s) Environmental Matters................... A-27
(t) Title to Properties; Liens; Condition of
Properties............................ A-28
(u) Inventories............................. A-28
(v) Accounts Receivable and Payable......... A-29
(w) Labor and Employee Relations............ A-29
(x) Permits................................. A-29
(y) Warranty or Other Claims................ A-30
(z) Powers of Attorney...................... A-30
(aa) Insurance............................... A-30
(bb) Corporate Books and Records............. A-30
(cc) Transactions with Affiliates............ A-30
(dd) Disclosure.............................. A-30
</TABLE>
<TABLE>
<S> <C> <C>
ARTICLE VI Additional Covenants and
Agreements....................... A-31
6.1 Conduct of Business................ A-31
6.2 No Solicitation.................... A-32
6.3 Meeting of Stockholders............ A-34
6.4 Registration Statement............. A-34
6.5 Best Efforts....................... A-35
6.6 Access to Information.............. A-35
6.7 Publicity.......................... A-35
6.8 Indemnification of Directors and
Officers......................... A-35
6.9 Affiliates of the Company and
Parent........................... A-36
6.10 Maintenance of Insurance........... A-36
6.11 Representations and Warranties..... A-36
6.12 Filings; Other Action.............. A-36
6.13 Notification of Certain Matters.... A-36
6.14 Pooling Accounting................. A-37
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C> <C>
6.15 Pooling Letter..................... A-37
6.16 Tax-Free Reorganization
Treatment........................ A-37
6.17 Employment Agreements.............. A-37
6.18 Stockholders Agreements............ A-37
6.19 Board Seat......................... A-37
6.20 Rights Agreement................... A-37
ARTICLE VII Conditions......................... A-38
7.1 Conditions to Each Party's
Obligations...................... A-38
7.2 Conditions to the Obligations of
the Company...................... A-38
7.3 Conditions to the Obligations of
Parent........................... A-39
ARTICLE VIII Termination........................ A-40
8.1 Termination by Mutual Consent...... A-40
8.2 Termination by either the Company
or Parent........................ A-40
8.3 Termination by the Company......... A-40
8.4 Termination by Parent.............. A-41
8.5 Effect of Termination; Termination
Fee.............................. A-41
ARTICLE IX Miscellaneous and General.......... A-42
9.1 Payment of Expenses................ A-42
9.2 Non-Survival of Representations and
Warranties....................... A-42
9.3 Modification or Amendment.......... A-42
9.4 Waiver of Conditions............... A-42
9.5 Counterparts....................... A-42
9.6 Governing Law...................... A-22
9.7 Notices............................ A-42
9.8 Entire Agreement; Assignment....... A-43
9.9 Parties in Interest................ A-43
9.10 Certain Definitions................ A-43
9.11 Obligation of the Company.......... A-44
9.12 Severability....................... A-44
9.13 Specific Performance............... A-44
9.14 Recovery of Attorney's Fees........ A-44
9.15 Captions........................... A-45
</TABLE>
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<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
Stockholders Agreement (Company)............................................. Exhibit A-1
<S> <C>
Stockholders Agreement (Parent).............................................. Exhibit A-2
Form of Parent Affiliate Letter.............................................. Exhibit B-1
Form of Company Affiliate Letter............................................. Exhibit B-2
Agreement of Merger.......................................................... Exhibit C
Company Representation Letter................................................ Exhibit D-1
Parent Representation Letter................................................. Exhibit D-2
Employment Agreement (A)..................................................... Exhibit E-1
Employment Agreement (B)..................................................... Exhibit E-2
Employment Agreement (C)..................................................... Exhibit E-3
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated July 9, 1998, is by
and among Zebra Technologies Corporation, a Delaware corporation ("Parent"),
Spruce Acquisition Corp., a California corporation and a direct wholly-owned
subsidiary of Parent ("Merger Sub"), and Eltron International, Inc., a
California corporation (the "Company"). Parent, Merger Sub and the Company are
referred to collectively herein as the "Parties."
RECITALS
WHEREAS, the Board of Directors of each of Parent, Merger Sub and the
Company have determined that it is in the best interests of each corporation and
their respective stockholders that the Company and Merger Sub combine into a
single corporation through the merger of Merger Sub with and into the Company
(the "Merger") and, in furtherance thereof, have approved the Merger;
WHEREAS, pursuant to the Merger, among other things, the outstanding shares
of Common Stock of the Company shall be converted into shares of Class B Common
Stock of Parent at the rate determined herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling-of-interests;
WHEREAS, concurrently with the execution hereof, certain holders (each a
"Voting Stockholder and collectively the "Voting Stockholders") of Company
Shares and of Parent Shares (in each case, as defined in Section 4.1(a)) are
entering into a stockholder voting agreement, in each case in the forms attached
as EXHIBIT A-1 and A-2 hereto (each, a "Stockholders Agreement");
WHEREAS, Parent has delivered to the Company a letter identifying all
persons (each, a "Parent Affiliate") who are, at the date hereof, "affiliates"
of Parent for purposes of Rule 145 under the Securities Act of 1933, as amended
(the "Securities Act"), and each Parent Affiliate has delivered to the Company a
letter (each, a "Parent Affiliate Letter") relating to (i) the transfer, prior
to the Effective Time (as defined in Section 1.2), of the Parent Shares (as
defined in Section 4.1(a)) beneficially owned by such Parent Affiliate on the
date hereof, (ii) the transfer of the Parent Shares to be received by such
Parent Affiliate in the Merger and (iii) the obligations of such Parent
Affiliate to deliver to Katten Muchin & Zavis, counsel to Parent, a Parent
Affiliate Letter substantially in the form attached hereto as EXHIBIT B-1;
WHEREAS, the Company has delivered to Parent a letter identifying all
persons (each, a "Company Affiliate") who are, at the date hereof, "affiliates"
of the Company for purposes of Rule 145 under the Securities Act and each
Company Affiliate has delivered to Parent a letter (each, a "Company Affiliate
Letter") relating to (i) the transfer, prior to the Effective Time (as defined
in Section 1.2), of the Company Shares (as defined in Section 4.1(a))
beneficially owned by such Company Affiliate on the date hereof, (ii) the
transfer of the Parent Shares (as defined in Section 4.1(a)) to be received by
such Company Affiliate in the Merger and (iii) the obligations of such Company
Affiliate to deliver to Troy & Gould, counsel to the Company, a Company
Affiliate Letter substantially in the form attached hereto as EXHIBIT B-2;
WHEREAS, certain of the Parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
A-1
<PAGE>
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the Parties hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the General Corporation Law of the State
of California (the "CGCL"), at the Effective Time (as defined in Section 1.2),
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall thereupon cease and the Company shall be the
successor or surviving corporation. The Company, as the surviving corporation
after the consummation of the Merger, is sometimes hereinafter referred to as
the "Surviving Corporation."
1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
Parties shall cause the Merger to be consummated by filing the agreement of
merger of Merger Sub and the Company (the "Agreement of Merger") with the
Secretary of State of the State of California in such form as required by, and
executed in accordance with, the relevant provisions of the CGCL, as soon as
practicable on or before the Closing Date (as defined in Section 1.3). The
Merger shall become effective upon such filing or at such time thereafter as is
provided in the Agreement of Merger (the "Effective Time"). The Agreement of
Merger is attached hereto as EXHIBIT C.
1.3 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article
VIII, the closing of the Merger (the "Closing") shall take place at 10:00 a.m.,
local time, at the offices of counsel for Parent, on the second business day
after the receipt of Requisite Stockholder Approval (as defined in Section 6.3),
provided that on or prior thereto, all of the conditions to the obligations of
the Parties to consummate the Merger as set forth in Article VII have been
satisfied or waived, or such other date, time or place as is agreed to in
writing by the Parties (the "Closing Date").
1.4 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
CGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION; NAME. At the Effective Time, the
Articles of Incorporation of the Company immediately prior to the Effective Time
shall remain the Articles of Incorporation of the Surviving Corporation, and the
name of the Surviving Corporation shall be the Company's name.
2.2 BY-LAWS. At the Effective Time, the by-laws of the Company in effect
immediately prior to the Effective Time shall remain the by-laws of the
Surviving Corporation.
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1 DIRECTORS. The directors of Merger Sub shall include Donald K. Skinner
and such directors shall be the initial directors of the Surviving Corporation,
until their respective successors have been duly
A-2
<PAGE>
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Articles of Incorporation
and By-Laws.
3.2 OFFICERS. The officers of Merger Sub shall be the initial officers of
the Surviving Corporation, until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and By-
Laws.
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
4.1 SHARE CONSIDERATION FOR THE MERGER; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER. At the Effective Time, the manner of converting or
canceling shares of the Company and Parent shall be as follows:
(a) Each share of Common Stock of the Company (collectively, the
"Company Shares") issued and outstanding immediately prior to the Effective
Time, shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted automatically into the right to receive
nine-tenths (0.90) of one share of Class B Common Stock, $.01 par value per
share, of Parent (collectively, "Parent Shares"). All Company Shares to be
converted into Parent Shares pursuant to this Section 4.1(a) shall, by
virtue of the Merger and without any action on the part of the holders
thereof, cease to be outstanding, be canceled and retired and cease to
exist, and each holder of a certificate representing any such Company Shares
shall thereafter cease to have any rights with respect to such Company
Shares, except the right to receive for each of Company Shares, upon the
surrender of such certificate in accordance with Section 4.2, the number of
Parent Shares specified above. The ratio of Company Shares per share of
Parent Shares is sometimes hereinafter referred to as the "Exchange Ratio."
(b) Each share of Common Stock of Merger Sub issued and outstanding
immediately prior to the Effective Time, shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted
automatically into and exchanged for one (1) validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate representing any shares of Merger Sub shall continue to
represent ownership of such shares of capital stock of the Surviving
Corporation.
(c) Each outstanding option to purchase Company Shares (each, a "Company
Option") issued pursuant to the 1992 Stock Option Plan, 1993 Stock Option
Plan and the 1996 Stock Option Plan of Company and each of the Stock Option
Agreements set forth in Section 5.2(b) of Company Disclosure Schedule
(collectively, the "Company Option Plans") shall be assumed by Parent and
each such assumed option shall be converted into and represent an option to
purchase the number of Parent Shares (a "Substitute Option") (rounded down
to the nearest full share) determined by multiplying (i) the number of
Company Shares subject to such Company Option immediately prior to the
Effective Time by (ii) the Exchange Ratio, at an exercise price per share of
Parent Shares (rounded up to the nearest tenth of a cent) equal to the
exercise price per share of Company Shares immediately prior to the
Effective Time divided by the Exchange Ratio. Parent shall pay cash to
holders of Company Options in lieu of issuing fractional Parent Shares upon
the exercise of Substitute Options for Parent Shares, unless in the judgment
of Parent such payment would adversely affect the ability to account for the
Merger under the pooling of interests method. After the Effective Time,
except as provided above, each Substitute Option shall be subject to the
same terms and conditions as were applicable under the related Company
Option immediately prior to the Effective Time. The Company agrees that it
will not grant any stock appreciation rights or limited stock appreciation
rights and will not permit cash payments to holders of Company Options in
lieu of the substitution therefor
A-3
<PAGE>
of Substitute Options, as described herein. As soon as practicable after the
Effective Time, Parent shall deliver to each holder of a Company Option an
appropriate notice setting forth such holder's right to acquire Parent
Shares and Company Option agreements of such holder shall be deemed to be
appropriately amended so that such Company Options shall represent rights to
acquire Parent Shares on substantially the same terms and conditions as
contained in the outstanding Company Options.
(d) The shares of the Company owned by Parent shall automatically cease
to be outstanding, shall be canceled and retired and shall cease to exist.
(e) Parent shall file and use commercially reasonable efforts to cause
there to be effective within one week of the Effective Time a registration
statement on Form S-8 (or any successor form) or other appropriate forms,
with respect to Parent Shares subject to such Company Options and shall use
commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as
such Company Options remain outstanding.
4.2 PAYMENT FOR SHARES IN THE MERGER. The manner of making payment for
Shares (as defined below) in the Merger shall be as follows:
(a) On or prior to the Closing Date, Parent shall make available to
Harris Trust and Savings Bank (the "Exchange Agent") for the benefit of the
holders of Company Shares, a sufficient number of certificates representing
the Parent Shares required to effect the delivery of the aggregate
consideration in Parent Shares and cash for the Fractional Securities Fund
(as defined in Section 4.3) required to be issued pursuant to Section 4.1
(collectively, the "Share Consideration" and the certificates representing
the Parent Shares comprising such aggregate Share Consideration being
referred to hereinafter as the "Stock Merger Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the Parent Shares
contemplated to be issued pursuant to Section 4.1 and effect the sales
provided for in Section 4.3 out of the Stock Merger Exchange Fund. The Stock
Merger Exchange Fund shall not be used for any other purpose than as set
forth herein.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Company Shares (the
"Certificates") (i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the surrender
of the Certificates for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and any other required documents, the holder of such
Certificates shall be entitled to receive for each of the Company Shares
represented by such Certificates the Share Consideration, without interest,
and the Certificates so surrendered shall forthwith be canceled. Until so
surrendered, such Certificates shall represent solely the right to receive
the Share Consideration and any cash in lieu of fractional Parent Shares as
contemplated by Section 4.3 with respect to each of the Company Shares
represented thereby.
(c) No dividends or other distributions that are declared after the
Effective Time on Parent Shares and payable to the holders of record thereof
after the Effective Time will be paid to persons entitled by reason of the
Merger to receive Parent Shares until such persons surrender their
Certificates as provided above. Upon such surrender, there shall be paid to
the person in whose name the Parent Shares are issued any dividends or other
distributions having a record date after the Effective Time and payable with
respect to such Parent Shares between the Effective Time and the time of
such surrender. After such surrender there shall be paid to the person in
whose name the Parent Shares are issued any dividends or other distributions
on such Parent Shares which shall have a record date after the Effective
Time. In no event shall the persons entitled to receive such dividends or
other distributions be entitled to receive interest on such dividends or
other distributions.
A-4
<PAGE>
(d) If any certificate representing Parent Shares is to be issued in a
name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the
Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange shall
pay to the Exchange Agent any transfer or other taxes required by reason of
the issuance of certificates for such Parent Shares in a name other than
that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
(e) Notwithstanding the foregoing, neither the Exchange Agent nor any of
the Parties shall be liable to a holder of Company Shares for any Parent
Shares or dividends thereon, or, in accordance with Section 4.3, cash in
lieu of fractional Parent Shares, delivered to a public official pursuant to
applicable escheat law. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the Parent Shares held by
it from time to time hereunder, except that it shall receive and hold all
dividends or other distributions paid or distributed with respect to such
Parent Shares for the account of the persons entitled thereto.
(f) Subject to applicable law, any portion of the Stock Merger Exchange
Fund and the Fractional Securities Fund (as defined in Section 4.3) which
remains unclaimed by the former stockholders of the Company for one (1) year
after the Effective Time shall be delivered to Parent, upon demand of
Parent, and any former stockholder of the Company shall thereafter look only
to Parent for payment of their applicable claim for the Share Consideration
for their Company Shares.
4.3 CASH FOR FRACTIONAL PARENT SHARES. No fractional Parent Shares shall
be issued in the Merger. Each holder of Parent Shares shall be entitled to
receive in lieu of any fractional Parent Shares to which such holder otherwise
would have been entitled pursuant to Section 4.2 (after taking into account all
Parent Shares then held of record by such holder) a cash payment in an amount
equal to the product of (i) the fractional interest of a Parent Share to which
such holder otherwise would have been entitled and (ii) the closing price of a
Parent Share on the NNM on the trading day immediately prior to the Effective
Time (the cash comprising such aggregate payments in lieu of fractional Parent
Shares being hereinafter referred to as the "Fractional Securities Fund").
4.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. No transfers of Company
Shares shall be made on the stock transfer books of the Company after the close
of business on the day prior to the date of the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent and
Merger Sub hereby represent and warrant to the Company that the statements
contained in this Section 5.1 are true and correct, except to the extent set
forth on the disclosure schedule previously delivered by Parent to the Company
(the "Parent Disclosure Schedule"). The Parent Disclosure Schedule shall be
initialed by the Parties and shall be arranged in sections and paragraphs
corresponding to the letter and numbered paragraphs contained in this Section
5.1.
(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and
is qualified and in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by it require such qualification, except where failure to so
qualify or be in good standing as a foreign corporation would not have a
Material Adverse Effect (as defined in Section 9.10). Each of Parent and its
subsidiaries has all requisite power and authority (corporate or otherwise)
to own its properties and to carry on its business as it is now being
conducted. All of the subsidiaries of Parent, together with an
organizational
A-5
<PAGE>
chart, are set forth in Section 5.1(a) of the Parent Disclosure Schedule.
Parent has heretofore made available to the Company complete and correct
copies of its Certificate of Incorporation and By-Laws, as amended. Merger
Sub is a direct, wholly-owned subsidiary of Parent, was formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
(b) CAPITALIZATION. The authorized capital stock of Parent consists of
(i) 50,000,000 shares of Class A Common Stock, $0.01 par value per share
("Class A Shares"), of which 19,421,019 shares were issued and outstanding
on July 7, 1998, (ii) 28,358,189 shares of Class B Common Stock, $0.01 par
value per share, of which 4,890,609 were issued and outstanding on July 7,
1998, and (iii) 10,000,000 shares of preferred stock, $.01 par value per
share, none of which are issued or outstanding. All of the outstanding
shares of capital stock of Parent and its subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable. The
Parent Shares and Class A Shares into which the Parent Shares are
convertible will be, when issued, validly authorized and issued, fully-paid
and non-assessable. Parent has no outstanding stock appreciation rights,
phantom stock or similar rights. No Parent Shares are owned by any
subsidiary of Parent. All outstanding shares of capital stock or other
equity interests of the subsidiaries of Parent are owned by Parent or a
direct or indirect wholly-owned subsidiary of Parent, free and clear of all
liens, pledges, charges, encumbrances, claims and options of any nature.
Except for options outstanding on the date hereof to purchase 656,213 Parent
Shares under the Parent's stock option plans, there are not as of the date
hereof and there will not be at the Effective Time any outstanding or
authorized options, warrants, calls, rights (including preemptive rights),
commitments or any other agreements of any character which Parent or any of
its subsidiaries is a party to, or may be bound by, requiring it to issue,
transfer, grant, sell, purchase, redeem or acquire any shares of capital
stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock of Parent
or any of its subsidiaries. There are not as of the date hereof and there
will not be at the Effective Time any stockholder agreements, voting trusts
or other agreements or understandings to which Parent is a party or to which
it is bound relating to the voting of any shares of the capital stock of
Parent.
(c) FAIRNESS OPINION. The Board of Directors of Parent has received an
opinion from William Blair & Company, L.L.C., addressed to its Board of
Directors, to the effect that the Exchange Ratio is fair to Parent from a
financial point of view. As of the date hereof, such opinion has not been
withdrawn, revoked or modified.
(d) AUTHORITY RELATIVE TO THIS AGREEMENT. The Board of Directors of
Merger Sub has declared the Merger advisable and Merger Sub has the
requisite corporate power and authority to approve, authorize, execute and
deliver this Agreement and to consummate the transactions contemplated
hereby (subject to the approval of the Merger by the stockholders of Merger
Sub in accordance with the CGCL). The Board of Directors of Parent has
declared the issuance of Parent Shares advisable and Parent has the
requisite corporate power and authority to approve, authorize, execute and
deliver this Agreement and to consummate the transactions contemplated
hereby (subject to the approval of the issuance of the Parent Shares by the
stockholders of Parent in accordance with the NNM listing requirements).
This Agreement and the consummation by Parent of the transactions
contemplated hereby have been duly and validly authorized by the Boards of
Directors of Parent and Merger Sub and no other corporate proceedings on the
part of Parent or Merger Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than the approval of
the Merger by the stockholders of Merger Sub in accordance with the CGCL and
the approval of the issuance of Parent Shares by the stockholders of Parent
in accordance with the NNM listing requirements). This Agreement has been
duly and validly executed and delivered by Parent and Merger Sub and,
assuming this Agreement constitutes the valid and binding agreement of the
Company constitutes the valid and binding agreement of Parent and Merger
Sub, enforceable against
A-6
<PAGE>
Parent and Merger Sub in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general principles of equity.
(e) PRESENT COMPLIANCE WITH OBLIGATIONS AND LAWS. Neither Parent nor
any of its subsidiaries is: (i) in violation of its Certificate of
Incorporation or Bylaws; (ii) in default in the performance of any
obligation, agreement or condition of any debt instrument which (with or
without the passage of time or the giving of notice, or both) affords to any
person the right to accelerate any indebtedness or terminate any right;
(iii) in default under or breach of (with or without the passage of time or
the giving of notice) any other contract to which it is a party or by which
it or its assets are bound; or (iv) in violation of any law, regulation,
administrative order or judicial order, decree or judgment (domestic or
foreign) applicable to it or its business or assets, except where any
violation, default or breach under items (ii), (iii), or (iv) would not,
individually or in the aggregate, have a Material Adverse Effect. The
stockholders of Merger Sub and its subsidiaries will not have appraisal
rights with respect to the Merger.
(f) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement nor the consummation by Parent of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation (or
other similar documents) or By-Laws (or other similar documents) of Parent
or any of its subsidiaries; (ii) require any consent, approval,
authorization or permit of, or registration or filing with or notification
to, any governmental or regulatory authority, except (A) in connection with
the applicable requirements, if any, of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B) pursuant to the
applicable requirements of the Securities Act, and the rules and regulations
promulgated thereunder, and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated thereunder,
(C) the filing of the Certificate of Merger pursuant to the CGCL and
appropriate documents with the relevant authorities of other states in which
Parent is authorized to do business, (D) as may be required by any
applicable state securities or takeover laws, (E) such filings and consents
as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement,
(F) the consents, approvals, orders, authorizations, registrations,
declarations and filings required under the laws of foreign countries, as
set forth in Section 5.1(f) of the Parent Disclosure Schedule or (G) where
the failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification, would not in the aggregate have a Material
Adverse Effect or adversely affect the ability of Parent to consummate the
transactions contemplated hereby; (iii) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration or
lien or other charge or encumbrance) under any of the terms, conditions or
provisions of any indenture, note, license, lease, agreement or other
instrument or obligation to which Parent or any of its subsidiaries or any
of their assets may be bound, except for such violations, breaches and
defaults (or rights of termination, cancellation or acceleration or lien or
other charge or encumbrance) as to which requisite waivers or consents have
been obtained or which, in the aggregate, would not have a Material Adverse
Effect or adversely affect the ability of Parent to consummate the
transactions contemplated hereby; (iv) cause the suspension or revocation of
any authorizations, consents, approvals or licenses currently in effect
which would have a Material Adverse Effect; or (v) assuming the consents,
approvals, authorizations or permits and filings or notifications referred
to in this Section 5.1(f) are duly and timely obtained or made and the
approval of the Merger and the approval of this Agreement by Parent's
stockholders has been obtained, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its subsidiaries
or to any of their respective assets, except for violations which would not
in the aggregate have a Material Adverse Effect or adversely affect the
ability of Parent to consummate the transactions contemplated hereby.
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(g) LITIGATION. Except as disclosed in the Parent SEC Reports (as
defined in Section 5.1(h)) there are no actions, suits, investigations or
proceedings pending or, to the knowledge of Parent, threatened against
Parent or any of its subsidiaries that, alone or in the aggregate, (i) if
adversely determined, would be reasonably likely to result in any claims
against or obligations or liabilities of Parent or any of its subsidiaries
that, alone or in the aggregate, would have a Material Adverse Effect, (ii)
question the validity of this Agreement or any action to be taken by Parent
in connection with the consummation of the transactions contemplated hereby
or (iii) would prevent Parent from performing its obligations under this
Agreement, or (iv) would delay, limit or enjoin the transactions
contemplated by this Agreement.
(h) SEC REPORTS; FINANCIAL STATEMENTS.
(i) Since January 1, 1995, Parent has filed all forms, reports and
documents with the Securities and Exchange Commission (the "SEC")
required to be filed by it pursuant to the federal securities laws and
the SEC rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the Securities Act
and the Exchange Act and the rules and regulations promulgated thereunder
(collectively, the "Parent SEC Reports"). None of the Parent SEC Reports,
including, without limitation, any financial statements or schedules
included therein, at the time filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(ii) The consolidated balance sheets and the related consolidated
statements of income, stockholders' equity (deficit) and cash flows
(including the related notes thereto) of Parent included in the Parent
SEC Reports (collectively, "Parent Financial Statements") comply as to
form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods (except as otherwise
noted therein), and present fairly the consolidated financial position of
Parent and its consolidated subsidiaries as of their respective dates,
and the consolidated results of their operations and their cash flows for
the periods presented therein (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments). Since
January 1, 1995, there has not been any material change, or any
application or request for any material change, by Parent or any of its
subsidiaries in accounting principles, methods or policies for financial
accounting purposes that have affected or will affect the Parent
Financial Statements or for tax purposes.
(iii) The books of account of Parent and its subsidiaries are
complete and correct in all material respects and have been maintained on
a materially consistent basis.
(i) NO LIABILITIES; ABSENCE OF CERTAIN CHANGES OR EVENTS. Neither
Parent nor any of its subsidiaries has any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted), and, to the knowledge of Parent, there is no basis for the
assertion of any claim or liability of any nature against Parent or any of
its subsidiaries, except for liabilities (i) which are fully reflected in,
reserved against or otherwise described in the Parent Financial Statements,
or (ii) which have been incurred after December 31, 1997 in the ordinary
course of business. Except as disclosed in the Parent SEC Reports since
December 31, 1997, the business of Parent and its subsidiaries has been
carried on only in the ordinary and usual course and there has not been any
material adverse change in its business, properties, operations, financial
condition or prospects and no event has occurred and no fact or set of
circumstances has arisen which has resulted in or could reasonably be
expected to result in a Material Adverse Effect with respect to Parent and
its subsidiaries. To the knowledge of Parent, no material
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customer or supplier of Parent intends to or has threatened to alter
materially its relationship with Parent.
(j) BROKERS AND FINDERS. Except for the fees and expenses payable to
William Blair & Company, L.L.C., which fees and expenses are reflected in
its agreement with Parent, a true and complete copy of which (including all
amendments) has been furnished to the Company, Parent has not employed any
investment banker, broker, finder, consultant or intermediary in connection
with the transactions contemplated by this Agreement which would be entitled
to any investment banking, brokerage, finder's or similar fee or commission
in connection with this Agreement or the transactions contemplated hereby.
(k) S-4 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS. None of
the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in the S-4 Registration Statement or the Joint
Proxy Statement (as such terms are defined in Section 6.4) will (i) in the
case of the S-4 Registration Statement, at the time it becomes effective or
at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading, or (ii) in the case
of the Joint Proxy Statement, at the time of the mailing of the Joint Proxy
Statement and at the time of the Stockholder Meeting (as such term is
defined in Section 6.3), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to Parent, Merger Sub or any of their respective
affiliates, officers and directors or any of its subsidiaries should occur
which is required to be described in an amendment of, or a supplement to,
the Joint Proxy Statement or the S-4 Registration Statement, such event
shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders
of Parent. The S-4 Registration Statement will (with respect to Parent and
Merger Sub) comply as to form in all material respects with the requirements
of the Securities Act and the rules and regulations promulgated thereunder.
The Joint Proxy Statement will (with respect to Parent and Merger Sub)
comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
(l) TAXES.
(i) Parent and each of its subsidiaries has timely filed all federal,
state, local and foreign returns, information statements and reports
relating to Taxes ("Returns") required by applicable Tax law to be filed
by Parent and each of its subsidiaries, except for any such failures to
file that could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Parent. All Taxes owed by
Parent or any of its subsidiaries to a taxing authority, or for which
Parent or any of its subsidiaries is liable, whether to a taxing
authority or to other persons or entities under a Significant Tax
Agreement, as of the date hereof, have been paid and, as of the Effective
Time, will have been paid, except for any such failure to pay that could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. Parent has made (A) accruals for Taxes
on the Parent Financial Statements and (B) with respect to periods after
the date of the Parent Financial Statements, provisions on a periodic
basis consistent with past practice on the Parent's or one of its
subsidiaries' books and records or financial statements, in each case
which are adequate to cover any Tax liability of the Parent and each of
its subsidiaries determined in accordance with generally accepted
accounting principles through the date of the Parent Financial Statements
or the date of the provision, as the case may be, except where failures
to make such accruals or provisions could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
Parent.
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(ii) Except to the extent that any such failure to withhold could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent, Parent and each of its subsidiaries
have withheld with respect to its employees all federal and state income
taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed or assessed
against Parent or any of its subsidiaries, except any such deficiency
that, if paid, could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent. Neither Parent nor
any of its subsidiaries executed or requested any waiver of any statute
of limitations on or extending the period for the assessment or
collection of any federal or material state Tax.
(iv) No federal or state Tax audit or other examination of Parent or
any of its subsidiaries is presently in progress, nor has Parent or any
of its subsidiaries been notified in writing of any request for such
federal or material state Tax audit or other examination, except in all
cases for Tax audits and other examinations which could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
(v) Neither Parent nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by Parent.
(vi) Neither Parent nor any of its subsidiaries is a party to (A) any
agreement with a party other than Parent or any of its subsidiaries
providing for the allocation or payment of Tax liabilities or payment for
Tax benefits with respect to a consolidated, combined or unitary Return
which Return includes or included Parent or any subsidiary or (B) any
Significant Tax Agreement other than any Significant Tax Agreement
described in (A).
(vii) Except for the group of which Parent and its subsidiaries are
now presently members, neither Parent nor any of its subsidiaries has
ever been a member of an affiliated group of corporations within the
meaning of Sections 1504 of the Code.
(viii) Neither Parent nor any of its subsidiaries has agreed to make
nor is it required to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise.
(ix) Parent is not, and has not at any time been, a "United States
Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code.
(m) EMPLOYEE BENEFITS.
(i) Except for liabilities reflected in the accruals and reserves on
the Parent Financial Statements, none of Parent or any current or former
Plan Affiliate of Parent has at any time maintained, sponsored, adopted,
made contributions to, obligated itself or had any liability with respect
to: any "employee pension benefit plan" (as such term is defined in
Section 3(2) of ERISA); any "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA); any personnel or payroll policy
(including vacation time, holiday pay, service awards, moving expense
reimbursement programs and sick leave) or material fringe benefit; any
severance agreement or plan or any medical, hospital, dental, life or
disability plan; any excess benefit plan, bonus or incentive plan
(including any equity or equity-based plan), tuition reimbursement,
automobile use, club membership, parental or family leave, top hat plan
or deferred compensation plan, salary reduction agreement,
change-of-control agreement, employment agreement, consulting agreement,
collective bargaining agreement, indemnification agreement, or retainer
agreement; or any other benefit plan, policy, program, arrangement,
agreement or contract, whether or not written or terminated, with respect
to any employee, former employee, director,
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independent contractor, or any beneficiary or dependent thereof (all such
plans, policies, programs, arrangements, agreements and contracts,
whether or not set forth in Section 5.1(m) of the Parent Disclosure
Schedule are referred to in this Agreement as "Parent Scheduled Plans").
(ii) Parent has delivered to the Company a complete and accurate copy
of each written Parent Scheduled Plan, together with, if applicable, a
copy of audited financial statements, actuarial reports and Form 5500
Annual Reports (including required schedules), if any, for the three (3)
most recent plan years, the most recent IRS determination letter or IRS
recognition of exemption; each other material letter, ruling or notice
issued by a governmental body with respect to each such plan, a copy of
each trust agreement, insurance contract or other funding vehicle, if
any, with respect to each such plan, the most recent PBGC Form 1 with
respect to each such plan, if any, the current summary plan description
or summary of material modifications with respect to each such plan, Form
5310 and any related filings with the PBGC and with respect to the last
six Plan years for each Plan subject to Title IV of ERISA, general
notification to employees of their rights under Code Section 4980B and
form of letter(s) distributed upon the occurrence of a qualifying event
described in Code Section 4980B, in the case of a Plan that is a "group
health plan" as defined in Code Section 162(i), and a copy or description
of each other general explanation or written or oral communication which
describes a material term of each such plan that has not previously been
disclosed to the Company pursuant to this Section. Section 5.1(m) of the
Parent Disclosure Schedule contains a description of the material terms
of any unwritten Parent Scheduled Plan as comprehended to the Closing
Date. There are no negotiations, demands or proposals which are pending
or threatened which concern matters now covered, or that would be
covered, by the foregoing types of Plans.
(iii) Except as could not reasonably give rise, whether individually
or in the aggregate, to material liability to Parent or Merger Sub:
(1) each Parent Scheduled Plan (A) has been and currently
complies in form and in operation in all material respects with all
applicable requirements of ERISA and the Code, and any other legal
requirements; (B) has been and is operated and administered in
compliance with its terms (except as otherwise required by law); (C)
has been and is operated in compliance with applicable legal
requirements in such a manner as to qualify, where appropriate, for
both Federal and state purposes, for income tax exclusions to its
participants, tax-exempt income for its funding vehicle, and the
allowance of deductions and credits with respect to contributions
thereto; and (D) where appropriate, has received a favorable
determination letter or recognition of exemption from the Internal
Revenue Service.
(2) with respect to each Parent Scheduled Plan, there are no
claims or other proceedings pending or threatened with respect to the
assets thereof (other than routine claims for benefits), and there
are no facts which could reasonably give rise to any liability, claim
or other proceeding against any Parent Scheduled Plan, any fiduciary
or plan administrator or other person dealing with any Parent
Scheduled Plan or the assets of any such plan.
(3) with respect to each Parent Scheduled Plan, no person: (A)
has entered into any "prohibited transaction," as such term is
defined in ERISA or the Code and the regulations, administrative
rulings and case law thereunder; (B) has breached a fiduciary
obligation or violated Sections 402, 403, 405, 503, 510 or 511 of
ERISA; (C) has any liability for any failure to act or comply in
connection with the administration or investment of the assets of
such plans; or (D) engaged in any transaction or otherwise acted with
respect to such plans in such a manner which could subject the
Company, or any fiduciary or plan administrator or any other person
dealing with any such plan, to liability under Sections 409 or 502 of
ERISA or Sections 4972 or 4976 through 4980B of the Code.
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(4) each Parent Scheduled Plan may be amended, terminated,
modified or otherwise revised by Parent, on and after the Closing,
without further liability to Parent, including any withdrawal
liability under ERISA for any multi-employer plan. For purposes of
this paragraph, termination of a Parent Scheduled Plan includes the
requirement of a cessation of liability for claims incurred after the
termination date regardless of any status having been obtained or
achieved.
(5) none of Parent or any current or former Parent Plan Affiliate
has at any time participated in, made contributions to or had any
other liability with respect to any Parent Scheduled Plan which is a
"multi-employer plan" as defined in Section 4001 of ERISA, a
"multi-employer plan" within the meaning of Section 3(37) of ERISA, a
"multiple employer plan" within the meaning of Section 413(c) of the
Code or a "multiple employer welfare arrangement" within the meaning
of Section 3(40) of ERISA.
(6) none of Parent or any current or former Parent Plan Affiliate
has at any time maintained, contributed to or obligated itself or
otherwise had any liability with respect to any funded or unfunded
employee welfare plan, whether or not terminated, which provides
medical, health, life insurance or other welfare-type benefits for
current or future retirees or current or future former employees,
their spouses or dependents or any other persons (except for limited
continued medical benefit coverage for former employees, their
spouses and other dependents as required to be provided under Section
4980B of the Code and Part 6 of Subtitle B of Title I of ERISA and
the accompanying proposed regulations or state continuation coverage
laws ("COBRA")).
(7) no Parent Scheduled Plan has incurred an "accumulated funding
deficiency" as such term is defined in Section 302 of ERISA or
Section 412 of the Code, whether or not waived, or has posted or is
required to provide security under Code Section 401(a)(29) or Section
307 of ERISA; no event has occurred which has or could result in the
imposition of a lien under Code Section 412 or Section 302 of ERISA,
nor has any liability to the Pension Benefit Guaranty Corporation
(the "PBGC") (except for payment of premiums) been incurred or
reportable event within the meaning of Section 4043 of ERISA occurred
with respect to any such plan; and the PBGC has not threatened or
taken steps to institute the termination of any such plan;
(8) the requirements of COBRA have been satisfied with respect to
each Parent Scheduled Plan.
(9) all contributions, payments, premiums, expenses,
reimbursements or accruals for all periods ending prior to or as of
the Closing for each Parent Scheduled Plan (including periods from
the first day of the then current plan year to the Closing) shall
have been made or accrued on Parent financial statements (in
accordance with generally applied accounting principal, including FAS
87, 88, 106 and 112) and each such plan otherwise does not have nor
could have any unfunded liability (including benefit liabilities as
defined in Section 4001(a)(16) of ERISA) which is not reflected on
Parent financial statements. Any contribution made or accrued with
respect to any Parent Scheduled Plan is fully deductible by Parent.
(10) neither Parent nor a Plan Affiliate has any liability (A)
for the termination of any single employer plan under Section ERISA
Section 4062 of ERISA or any multiple employer plan under Section
ERISA Section 4063 of ERISA, (B) for any lien imposed under Section
Section 302(f) of ERISA or Section 412(n) of the Code, (C) for any
interest payments required under Section Section 302(e) of ERISA or
Section 412(m) of the Code, (D) for any excise tax imposed by Code
Sections 4971, 4972, 4977, or 4979, or (E) for any minimum funding
contributions under Section Section 302(c)(11) of ERISA or Code
Section 412(c)(11).
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(11) all Parent Scheduled Plans to the extent applicable, are in
compliance with Section 1862(b)(1)(A)(i) of the Social Security Act
and neither Parent nor any Plan Affiliate has any liability for any
excise tax imposed by Code Section 5000.
(12) with respect to any Parent Scheduled Plan which is a
welfare plan as defined in Section 3(1) of ERISA; (A) each such
welfare plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the Code
meets such requirements; (B) there is no disqualified benefit (as
such term is defined in Code Section 4976(b)) which would subject
Parent or any Plan Affiliate to a tax under Code Section 4976(a); and
(C) each and every such welfare plan which is a group health plan (as
such term is defined in Code Section 162(i)(3)) complies and in each
and every case has complied with the applicable requirements of Code
Section 4980B, Title XXII of the Public Health Service Act and the
applicable provisions of the Social Security Act.
(iv) Other than by reason of actions taken by Parent following the
Closing, the consummation of the transactions contemplated by this
Agreement will not (A) entitle any current or former employee of Parent
to severance pay, unemployment compensation or any other payment, (B)
accelerate the time of payment or vesting of any payment, forgive any
indebtedness, or increase the amount of any compensation due to any such
employee or former employee, (C) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which
an exemption is not available, or (D) give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section 280G
of the Code.
(v) As used in this Agreement, with respect to any person ("First
Person") the term "Plan Affiliate" shall mean each other person or entity
with whom the First Person constitutes or has constituted all or part of
a controlled group, or which would be treated or has been treated with
the First Person as under common control or whose employees would be
treated or have been treated as employed by the First Person, under
Section 414 of the Code and any regulations, administrative rulings and
case law interpreting the foregoing.
(n) PARENT INTANGIBLE PROPERTY.
(i) Section 5.1(n) of the Parent Disclosure Schedule sets forth a
true, correct and complete list of each patent, trademark, trade name,
service mark, brand mark, brand name, industrial design and copyright
owned or used in business by Parent and its subsidiaries, as well as all
registrations thereof and pending applications therefor, and each license
or other contract relating thereto (collectively with any other
intellectual property owned or used in the business by Parent and its
subsidiaries, and all of the goodwill associated therewith, the "Parent
Intangible Property") and indicates, with respect to each item of Parent
Intangible Property listed thereon, the owner thereof and, if applicable,
the name of the licensor and licensee thereof and the terms of such
license or other contract relating thereto. Except as set forth in
Section 5.1(n) of the Parent Disclosure Schedule, each of the foregoing
is owned free and clear of any and all liens, mortgages, pledges,
security interests, levies, charges, options or any other encumbrances of
any kind whatsoever and none of Parent or any of its subsidiaries has
received any notice to the effect that any other entity has any claim of
ownership with respect thereto. To the knowledge of Parent, the use of
the foregoing by Parent and its subsidiaries does not conflict with,
infringe upon, violate or interfere with or constitute an appropriation
of any right, title, interest or goodwill, including, without limitation,
any intellectual property right, patent, trademark, trade name, service
mark, brand mark, brand name, computer program, industrial design,
copyright or any pending application therefor of any other person or
entity. Except as set forth in Section 5.1(n) of the Parent Disclosure
Schedule, no claims have been made, and none of Parent or any of its
subsidiaries has received any notice, nor does Parent or any of its
subsidiaries have any knowledge of any basis for any claims, that any of
the foregoing is invalid, conflicts with the
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asserted rights of other entities, or has been used or enforced (or has
failed to be used or enforced) in a manner that would result in the
abandonment, cancellation or unenforceability of any item of the Parent
Intangible Property.
(ii) Parent and each of its subsidiaries possesses all Parent
Intangible Property, including, without limitation, all know-how,
formulae and other proprietary and trade rights and trade secrets,
necessary for the conduct of their businesses as now conducted. None of
Parent or any of its subsidiaries has taken or failed to take any action
that would result in the forfeiture or relinquishment of any such Parent
Intangible Property used in the conduct of their respective businesses as
now conducted.
(o) CERTAIN CONTRACTS. Section 5.1(o) of the Parent Disclosure
Schedule lists all of the following contracts, agreements and commitments,
whether oral or written, to which Parent or a subsidiary is a party or by
which any one of them or any of their properties or assets may be bound (the
"Parent Listed Agreements"): (i) all employment or other contracts with any
officer or director of Parent or any subsidiary of Parent (or any company
which is controlled by any such individual) and employment agreements with
any employee which are not terminable at will without any payment upon
termination; (ii) union, guild or collective bargaining contracts relating
to employees of Parent or any subsidiary; (iii) instruments relating to
credit or money borrowed (including, without limitation, any indentures,
guarantees, loan agreements, sale and leaseback agreements, or purchase
money obligations incurred in connection with the acquisition of property
other than in the ordinary course of business) involving individually or in
the aggregate in excess of $250,000; (iv) underwriting, purchase or similar
agreements entered into in connection with Parent's or any of its
subsidiaries' currently existing indebtedness; (v) agreements for
acquisitions or dispositions (by merger, purchase, liquidation or sale of
assets or stock or otherwise) of material assets entered into within the
last three (3) years, as to which the transactions contemplated have been
consummated or are currently pending; (vi) joint venture, strategic alliance
or similar partnership agreements; (vii) material licensing, merchandising
and distribution contracts; (viii) contracts granting any person or other
entity registration rights; (ix) guarantees, suretyships, indemnification
and contribution agreements, involving individually or in the aggregate in
excess of $250,000; (x) material agreements regarding the use, license or
other disposition of intellectual property; (xi) franchise agreements; (xii)
agreements regarding the purchase of supplies, equipment, materials or
components greater than $1,000,000 or one year in duration; (xiii)
agreements for the sale of products greater than $1,000,000 or one year in
duration; (xiv) agreements restricting competition; (xv) contracts with any
governmental or quasi-governmental entity; (xvi) existing material leases of
real or personal property and material contracts to purchase or sell real
property; and (xvii) other contracts which materially affect the business,
properties or assets of Parent and its subsidiaries taken as a whole, and
are not otherwise disclosed in this Agreement or which were entered into
other than in the ordinary course of business on a basis consistent with
past practice. Except as set forth on Section 5.1(o) of the Parent
Disclosure Schedule, a true and complete copy (including all amendments) of
each Parent Listed Agreement, or a summary of each oral contract, has been
made available to the Company. Neither Parent nor any subsidiary (i) is in
breach or default in any material respect under any of Parent Listed
Agreements or (ii) has any knowledge of any other material breach or default
under any Parent Listed Agreement by any other party thereto or by any other
person or entity bound thereby, except in the case of (i) or (ii) breaches
or defaults which would not, individually or in the aggregate, have a
Material Adverse Effect with respect to Parent. Except as provided for
herein, at the Effective Time, no person will have the right, by contract or
otherwise, to become, nor does any entity have the right to designate or
cause Parent to appoint a person as, a director of Parent or any subsidiary
of Parent.
(p) ACCOUNTING MATTERS. Neither Parent nor, to its Knowledge, any of
its affiliates, has taken or agreed to take any action that would prevent
Parent from accounting for the business combination to be effected by the
Merger as a "pooling-of-interests." Parent has not failed to bring to the
attention of
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the Company any actions, agreements or understandings, whether written or
oral, that would be reasonably likely to prevent Parent from accounting for
the Merger as a pooling-of-interests. Parent has received a letter from KPMG
Peat Marwick LLP ("KPMG") to the effect that, if consummated in accordance
with the terms of this Agreement, the Merger shall be accounted for as a
pooling of interests.
(q) UNLAWFUL PAYMENTS AND CONTRIBUTIONS. To the knowledge of Parent,
neither Parent, any subsidiary of Parent nor any of their respective
directors, officers, employees or agents has, with respect to the businesses
of Parent or its subsidiaries, (i) used any funds for any unlawful
contribution, endorsement, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee; (iii)
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any person or
entity.
(r) LISTINGS. Parent's securities are not listed, or quoted, for
trading on any U.S. domestic or foreign securities exchange, other than the
NNM.
(s) ENVIRONMENTAL MATTERS. Except as disclosed in Parent's SEC
Reports, (i) Parent and its subsidiaries and the operations, assets and
properties thereof are in material compliance with all Environmental Laws
(as defined below); (ii) there are no judicial or administrative actions,
suits, proceedings or investigations pending or, to the knowledge of Parent,
threatened against Parent or any subsidiary of Parent alleging the violation
of any Environmental Law and neither Parent nor any subsidiary of Parent has
received notice from any governmental body or person alleging any violation
of or liability under any Environmental Laws, in either case which could
reasonably be expected to result in material Environmental Costs and
Liabilities; (iii) to the knowledge of Parent, there are no facts,
circumstances or conditions relating to, arising from, associated with or
attributable to Parent or its subsidiaries or any real property currently or
previously owned, operated or leased by Parent or its subsidiaries that
could reasonably be expected to result in material Environmental Costs and
Liabilities; and (iv) to the knowledge of Parent, Parent has not ever
generated, transported, treated, stored, handled or disposed of any
Hazardous Material (as hereinafter defined) at any site, location or
facility in a manner that could create any material Environmental Costs and
Liabilities under any Environmental Law; and no such Hazardous Material has
been or is currently present on, in, at or under any real property owned or
used by Parent in a manner that could create any Environmental Costs and
Liabilities (including without limitation, containment by means of any
underground or aboveground storage tank). For the purpose of Sections 5.1(s)
and 5.2(t), the following terms have the following definitions: (X)
"Environmental Costs and Liabilities" means any losses, liabilities,
obligations, damages, fines, penalties, judgments, actions, claims, costs
and expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the costs
of investigation and feasibility studies, remedial or removal actions and
cleanup activities) arising from or under any Environmental Law; (Y)
"Environmental Laws" means any applicable federal, state, local, or foreign
law (including common law), statute, code, ordinance, rule, regulation or
other requirement relating to the environment, natural resources, or public
or employee health and safety; and (Z) "Hazardous Material" means any
substance, material or waste regulated by federal, state or local
government, including, without limitation, any substance, material or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "toxic waste" or "toxic substance" under any provision of
Environmental Law and including but not limited to petroleum and petroleum
products.
(t) TITLE TO PROPERTIES; LIENS; CONDITION OF PROPERTIES.
(i) Parent and its subsidiaries have good and marketable title to, or
a valid leasehold interest in, the real and personal property, located on
their premises or shown on their most
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recent balance sheet or acquired after the date thereof. None of the
property owned or used by Parent or any of its subsidiaries is subject to
any mortgage, pledge, deed of trust, lien (other than for taxes not yet
due and payable), conditional sale agreement, security title,
encumbrance, or other adverse claim or interest of any kind. There has
not been prior to Closing any sale, lease, or any other disposition or
distribution by Parent of any of its material assets or properties, now
owned or hereafter acquired, except transactions in the ordinary and
regular course of business.
(ii) Parent has delivered to the Company true, correct and complete
copies of all material leases, subleases, rental agreements, contracts of
sale, tenancies or licenses related to any of the real or personal
property used by Parent or any of its subsidiaries in their respective
businesses. All such leases are valid, binding and enforceable in
accordance with their terms against the parties thereto, and each such
lease is subsisting and no default exists under any thereof. Neither
Parent nor any of its subsidiaries has received notice that any party to
any such lease intends to cancel, terminate or refuse to renew the same
or to exercise or decline to exercise any option or any right thereunder.
(iii) All buildings, machinery and equipment of Parent and any of its
subsidiaries are in good condition, working order and repair, normal wear
and tear and excepted, and adequate for the uses to which they are being
put, have been well maintained, conform in all material respects with all
applicable ordinances, regulations and zoning, safety or other laws, and
to the knowledge of Parent do not encroach on property of others. As of
the date hereof, neither Parent nor any of its subsidiaries has received
written notice of or otherwise become aware of any pending or threatened
change of any such ordinance, regulation or zoning, safety or other law
and there is no pending or, to Parent's knowledge, threatened
condemnation of any such property.
(u) INVENTORIES. All inventories of finished goods and work in process
of Parent and its subsidiaries are as of the date hereof, and those existing
at the Closing will be in all material respects, good and merchantable and
of a quality and quantity salable in the ordinary course of the business of
Parent and its subsidiaries at prevailing market prices without discounts,
except for inventory reserved against in accordance with GAAP. All inventory
of raw materials are of a quality and quantity usable in the ordinary course
of business. Parent's purchase commitments for raw materials and parts are
not in excess of normal requirements, and none are at prices materially in
excess of current market prices and no inventory items have been sold or
disposed of except through sales in the ordinary course of business and
consistent with past practice at prices no less than prevailing market
prices, and in no event less than cost.
(v) ACCOUNTS RECEIVABLE AND PAYABLE. Parent's accounts receivable have
arisen in bona-fide arms length transactions in the ordinary course of
business and to Parent's knowledge represent valid and binding obligations
of the account debtors and will be collected in the ordinary course of
business. To the extent required under GAAP, Parent's accounts payable
reflect all amounts owed by Parent in respect of trade accounts due and
other payables and the actual liability of Parent in respect of such
obligations is reflected on Parent's financial statements as contained in
the Parent SEC Reports.
(w) LABOR AND EMPLOYEE RELATIONS.
(i) Parent is not a party to any employment, consulting,
non-competition, severance, golden parachute, indemnification agreement
or any other agreement providing for payments or benefits or the
acceleration of payments or benefits upon the change of control of Parent
(including, without limitation, any contract to which Parent is a party
involving employees of Parent).
(ii) (A) None of the employees of Parent or any of its subsidiaries
is represented in his or her capacity as an employee of such company by
any labor organization; (B) neither Parent nor any of its subsidiaries
has recognized any labor organization nor has any labor organization been
elected as the collective bargaining agent of any of their employees, nor
has Parent or any of its
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subsidiaries signed any collective bargaining agreement or union contract
recognizing any labor organization as the bargaining agent of any of
their employees; and (C) to the knowledge of Parent there is no active or
current union organization activity involving the employees of Parent or
any of its subsidiaries, nor has there ever been union representation
involving employees of Parent or any of its subsidiaries.
(iii) There are no complaints against Parent or any of its
subsidiaries pending or, to the knowledge of Parent, overtly threatened
before the National Labor Relations Board or any similar foreign, state
or local labor agencies, or before the Equal Employment Opportunity
Commission or any similar foreign, state or local agency, or before any
other governmental agency or entity by or on behalf of any employee or
former employee of Parent or any of its subsidiaries.
(iv) Neither Parent nor any of its subsidiaries have any material
contingent liability for severance pay or similar items. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not trigger any severance pay
obligation under any contract or at law.
(v) Parent has provided to the Company a description of all written
and other material employment policies under which Parent and each
subsidiary has operated.
(vi) Parent and each of its subsidiaries is in compliance with all
Federal, foreign (as applicable), and state laws regarding employment
practices, including laws relating to workers' safety, sexual harassment
or discrimination, except where the failure to so be in compliance,
individually or in the aggregate, would not have a Material Adverse
Effect.
(vii) To the knowledge of Parent, no executive, key employee or group
of employees has any plans to terminate his or her employment with Parent
or any of its subsidiaries.
(x) PERMITS. Parent and each of its subsidiaries hold all licenses,
permits, registrations, orders, authorizations, approvals and franchises
which are required to permit it to conduct its businesses as presently
conducted, except where the failure to hold such licenses, permits,
registrations, orders, authorizations, approvals or franchises would not,
individually or in the aggregate, have a Material Adverse Effect. All such
material licenses, permits, registrations, orders, authorizations, approvals
and franchises are listed in Section 5.1(x) of the Parent Disclosure
Schedule and are now, and will be after the Closing, valid and in full force
and effect, and Parent shall have full benefit of the same, except where the
failure to have the benefit of any such license, permit, registration,
order, authorization, approval or franchise would not, individually or in
the aggregate, have a Material Adverse Effect. Neither Parent nor any of its
subsidiaries has received any notification of any asserted present failure
(or past and unremedied failure) by it to have obtained any such license,
permit, registration, order, authorization, approval or franchise.
(y) WARRANTY OR OTHER CLAIMS. No product manufactured, sold, leased or
delivered by Parent or any of its subsidiaries is subject to any guaranty,
warranty, right of return or other indemnity beyond the applicable standard
terms and conditions of sale or lease, which have been provided in writing
to the Company. There are no existing or, to the knowledge of Parent,
threatened claims or any facts upon which a claim could be based, against
Parent or any of its subsidiaries for services or merchandise which are
defective or fail to meet any service or product warranties which would,
individually or in the aggregate, have a Material Adverse Effect. No claim
has been asserted against Parent or any of its subsidiaries for
renegotiation or price redetermination of any business transaction, and
Parent has no knowledge of any facts upon which any such claim could be
based.
(z) POWERS OF ATTORNEY. To the knowledge of Parent, neither Parent nor
any of its subsidiaries has granted any powers of attorney or similar powers
of agency.
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(aa) INSURANCE. Section 5.1(aa) of the Parent Disclosure Schedule
lists all insurance policies in force covering the businesses, properties
and assets of Parent and its subsidiaries and all outstanding claims against
such policies. All such policies are currently in effect, and neither Parent
nor any of its subsidiaries has received notice of cancellation or
termination of, or material premium increase with respect to, of any such
insurance in effect on the date hereof or within the past (2) years. All
such policies are issued by an insurer that is financial sound and reputable
and provide adequate insurance coverage for the assets and operations of
Parent and its subsidiaries for all risks customarily insured against by a
person or entity engaged in similar businesses as Parent or its
subsidiaries.
(bb) CORPORATE BOOKS AND RECORDS. The minute books and stock ledgers
of Parent, copies of which have been made available for inspection by the
Company, have been kept in due course, accurately record all material action
taken by Parent's stockholders, board of directors and committees thereof
and are complete in all material respects.
(cc) TRANSACTIONS WITH AFFILIATES. Except or as disclosed in the
Parent SEC Reports, Parent is not a party to any affiliate transactions
through the date of this Agreement and has no existing commitments to engage
in any affiliate transactions in the future.
(dd) DISCLOSURE. No representation or warranty by Parent in this
Agreement and no statement contained in the Parent Disclosure Schedule or
any certificate delivered by Parent to the Company pursuant to this
Agreement, contains any untrue statement of a material fact or omits any
material fact necessary to make the statements herein or therein not
misleading when taken together in light of the circumstances in which they
were made, it being understood that as used in this Section 5.1(dd)
"material" means material to Parent and its subsidiaries taken as a whole.
5.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Parent and Merger Sub that the statements contained
in this Section 5.2 are true and correct, except to the extent set forth on the
disclosure schedule previously delivered by the Company to Parent and Merger Sub
(the "Company Disclosure Schedule"). The Company Disclosure Schedule shall be
initialed by the Parties and shall be arranged in sections and paragraphs
corresponding to the letter and numbered paragraphs contained in this Section
5.2.
(a) CORPORATE ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and is qualified and in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except where failure to so qualify or be in good standing as
a foreign corporation would not have a Material Adverse Effect (as defined
in Section 9.10). Each of the Company and its subsidiaries has all requisite
power and authority (corporate or otherwise) to own its properties and to
carry on its business as it is now being conducted. All of the subsidiaries
of the Company, together with an organizational chart, are set forth in
Section 5.2(a) of the Company Disclosure Schedule. The Company has
heretofore made available to Parent complete and correct copies of its
Articles of Incorporation and By-Laws, as amended.
(b) CAPITALIZATION. The authorized capital stock of the Company consists
of (i) 30,000,000 common shares of which 7,663,355 shares were issued and
outstanding on June 26, 1998, and (ii) 10,000,000 shares of preferred stock,
$.01 par value per share, none of which is issued or outstanding. All of the
outstanding shares of capital stock of the Company and its subsidiaries have
been duly authorized and validly issued and are fully paid and
nonassessable. The Company has no outstanding stock appreciation rights,
phantom stock or similar rights. All outstanding shares of capital stock or
other equity interests of the subsidiaries of the Company are wholly-owned
by the Company or a direct or indirect wholly-owned subsidiary of the
Company, free and clear of all liens, pledges, charges, encumbrances, claims
and options of any nature. Except for options outstanding on the date hereof
to purchase 779,935 Company Shares under the Company Option Plans, there are
not as of the date hereof and there will not be at the Effective Time any
outstanding or authorized
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options, warrants, calls, rights (including preemptive rights), commitments
or any other agreements of any character which the Company or any of its
subsidiaries is a party to, or may be bound by, requiring it to issue,
transfer, grant, sell, purchase, redeem or acquire any shares of capital
stock or any of its securities or rights convertible into, exchangeable for,
or evidencing the right to subscribe for, any shares of capital stock of the
Company or any of its subsidiaries. There are not as of the date hereof and
there will not be at the Effective Time any stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party
or to which it is bound relating to the voting of any shares of the capital
stock of the Company. No existing rights with respect to the registration of
Company Shares under the Securities Act, including, but not limited to,
demand rights or piggy-back registration rights, shall apply with respect to
any Parent Shares issuable in connection with the Merger.
(c) FAIRNESS OPINION. The Board of Directors of the Company has received
an opinion from BancAmerica Robertson Stephens LLC, addressed to its Board
of Directors, to the effect that the consideration to be received by the
holders of Common Shares in the Merger is fair to such holders from a
financial point of view. As of the date hereof, such opinion has not been
withdrawn, revoked or modified.
(d) AUTHORITY RELATIVE TO THIS AGREEMENT. The Board of Directors of the
Company has declared the Merger advisable and the Company has the requisite
corporate power and authority to approve, authorize, execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than the approval of the Merger by
the stockholders of the Company in accordance with the CGCL). This Agreement
has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes the valid and binding agreement of
Parent and Merger Sub, constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.
(e) PRESENT COMPLIANCE WITH OBLIGATIONS AND LAWS.Neither the Company nor
any of its subsidiaries is: (i) in violation of its Articles of
Incorporation or Bylaws; (ii) in default in the performance of any
obligation, agreement or condition of any debt instrument which (with or
without the passage of time or the giving of notice, or both) affords to any
person the right to accelerate any indebtedness or terminate any right;
(iii) in default, under or breach of (with or without the passage of time or
the giving of notice) any other contract to which it is a party or by which
it or its assets are bound; or (iv) in violation of any law, regulation,
administrative order or judicial order, decree or judgment (domestic or
foreign) applicable to it or its business or assets, except where any
violation, default or breach under items (ii), (iii), or (iv) would not,
individually or in the aggregate, have a Material Adverse Effect.
(f) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of its Articles of Incorporation and
By-Laws; (ii) require any consent, approval, authorization or permit of, or
registration or filing with or notification to, any governmental or
regulatory authority, except (A) in connection with the applicable
requirements, if any, of the HSR Act, (B) pursuant to the applicable
requirements of the Securities Act and the Exchange Act, (C) the filing of
the Certificate of Merger pursuant to the CGCL and appropriate documents
with the relevant authorities of other states in which the Company is
authorized to do business, (D) as may be required by any applicable state
securities or takeover laws, (E) such filings and consents as may be
required under any environmental, health or safety law or
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regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement,
(F) such filings, consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of
any foreign country, (G) filings with, and approval of, the NNM or, (H)
where the failure to obtain such consent, approval, authorization or permit,
or to make such filing or notification, would not in the aggregate have a
Material Adverse Effect or adversely affect the ability of the Company to
consummate the transactions contemplated hereby; (iii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration or lien or other charge or encumbrance) under any of the terms,
conditions or provisions of any indenture, note, license, lease, agreement
or other instrument or obligation to which the Company or any of its
subsidiaries or any of their assets may be bound, except for such
violations, breaches and defaults (or rights of termination, cancellation,
or acceleration or lien or other charge or encumbrance) as to which
requisite waivers or consents have been obtained or which, in the aggregate,
would not have a Material Adverse Effect or adversely affect the ability of
the Company to consummate the transactions contemplated hereby; (iv) cause
the suspension or revocation of any authorizations, consents, approvals or
licenses currently in effect which would have a Material Adverse Effect; or
(v) assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in this Section 5.2(f) are duly and timely
obtained or made, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or any of its subsidiaries or to any
of their respective assets, except for violations which would not in the
aggregate have a Material Adverse Effect or adversely affect the ability of
the Company to consummate the transactions contemplated hereby.
(g) LITIGATION. Except as disclosed in Company SEC Reports (as defined
in Section 5.2(h)), there are no actions, suits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries that, alone or in the aggregate, (i)
if adversely determined, would be reasonably likely to result in any claims
against or obligations or liabilities of the Company or any of its
subsidiaries that would have a Material Adverse Effect, (ii) question the
validity of this Agreement or any action to be taken by the Company in
connection with the consummation of the transactions contemplated hereby,
(iii) would prevent the Company from performing its obligations under this
Agreement, or (iv) would delay, limit or enjoin the transactions
contemplated by this Agreement.
(h) SEC REPORTS; FINANCIAL STATEMENTS.
(i) Since January 1, 1995, the Company has filed all forms, reports
and documents with the SEC required to be filed by it pursuant to the
federal securities laws and the SEC rules and regulations thereunder, all
of which complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act (the "Company SEC
Reports"). None of the Company SEC Reports, including, without
limitation, any financial statements or schedules included therein, at
the time filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) The consolidated balance sheets and the related statements of
income, stockholders' equity and cash flow (including the related notes
thereto) of the Company included in the Company SEC Reports
(collectively, the "Company Financial Statements") comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods (except as otherwise
noted therein), and present fairly the consolidated financial position of
the Company and its consolidated subsidiaries as of their respective
dates, and the results of its operations and its cash flow for the
periods presented therein (subject, in the case of the unaudited interim
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financial statements, to normal year-end adjustments). Since January 1,
1995, there has not been any material change, or any application or
request for any material change, by the Company or any of its
subsidiaries in accounting principles, methods or policies for financial
accounting purposes that have affected or will affect the Company
Financial Statements or for tax purposes.
(iii) The books of account of the Company and its subsidiaries are
complete and correct in all material respects and have been maintained on
a materially consistent basis.
(i) NO LIABILITIES; ABSENCE OF CERTAIN CHANGES OR EVENTS. Neither the
Company nor any of its subsidiaries has any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted), and, to the knowledge of the Company, there is no basis for the
assertion of any claim or liability of any nature against the Company or any
of its subsidiaries, except for liabilities (i) which are fully reflected
in, reserved against or otherwise described in the Company Financial
Statements, or (ii) which have been incurred after December 31, 1997 in the
ordinary course of business. Except as disclosed in the Company SEC Reports,
since December 31, 1997, the business of the Company and its subsidiaries
has been carried on only in the ordinary and usual course and there has not
been any material adverse change in its business, properties, operations,
financial condition or prospects and no event has occurred and no fact or
set of circumstances has arisen which has resulted in or could reasonably be
expected to result in a Material Adverse Effect with respect to the Company
and its subsidiaries. To the knowledge of the Company, no material customer
or supplier of the Company intends to or has threatened to alter materially
its relationship with the Company.
(j) BROKERS AND FINDERS. Except for the fees and expenses payable to
BancAmerica Robertson Stephens LLC, which fees and expenses are reflected in
its agreement with the Company, a true and complete copy of which (including
all amendments) has been furnished to the Company, neither the Company nor
its subsidiaries has employed any investment banker, broker, finder,
consultant or intermediary in connection with the transactions contemplated
by this Agreement which would be entitled to any investment banking,
brokerage, finder's or similar fee or commission in connection with this
Agreement or the transactions contemplated hereby.
(k) S-4 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS. None of
the information supplied or to be supplied by the Company or its
subsidiaries for inclusion or incorporation by reference in the S-4
Registration Statement or the Joint Proxy Statement (as such terms are
defined in Section 6.4) will (i) in the case of the S-4 Registration
Statement, at the time it becomes effective or at the Effective Time,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, or (ii) in the case of the Joint
Proxy Statement, at the time of the mailing of the Joint Proxy Statement and
at the time of the Stockholder Meeting (as such term is defined in Section
6.3), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event
with respect to the Company, its officers and directors or any of its
subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, the Joint Proxy Statement or the S-4 Registration
Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The S-4 Registration
Statement will (with respect to the Company) comply as to form in all
material respects with the requirements of the Securities Act and the rules
and regulations promulgated thereunder. The Joint Proxy Statement will (with
respect to the Company) comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
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(l) TAXES.
(i) The Company and each of its subsidiaries has timely filed all
Returns required by applicable Tax law to be filed by the Company and
each of its subsidiaries, except for any such failures to file that could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. All Taxes owed by the Company or
any of its subsidiaries to a taxing authority, or for which the Company
or any of its subsidiaries is liable, whether to a taxing authority or to
other persons or entities under a Significant Tax Agreement, as of the
date hereof, have been paid and, as of the Effective Time, will have been
paid, except for any such failure to pay that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company. The Company has made (A) accruals for Taxes on the
Company Financial Statements and (B) with respect to periods after the
date of the Company Financial Statements, provisions on a periodic basis
consistent with past practice on the Company's or one of its
subsidiaries' books and records or financial statements, in each case
which are adequate to cover any Tax liability of the Company and each of
its subsidiaries determined in accordance with generally accepted
accounting principles through the date of the Company Financial
Statements or the date of the provision, as the case may be, except where
failures to make such accruals or provisions could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
(ii) Except to the extent that any such failure to withhold could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company, the Company and each of its
subsidiaries have withheld with respect to its employees all federal and
state income taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed or assessed
against the Company or any of its subsidiaries, except any such
deficiency that, if paid, could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company. Neither the Company nor any of its subsidiaries executed or
requested any waiver of any statute of limitations on or extending the
period for the assessment or collection of any federal or material state
Tax.
(iv) No federal or state Tax audit or other examination of the
Company or any of its subsidiaries is presently in progress, nor has the
Company or any of its subsidiaries been notified in writing of any
request for such federal or material state Tax audit or other
examination, except in all cases for Tax audits and other examinations
which could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(v) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company.
(vi) Neither the Company nor any of its subsidiaries is a party to
(A) any agreement with a party other than the Company or any of its
subsidiaries providing for the allocation or payment of Tax liabilities
or payment for Tax benefits with respect to a consolidated, combined or
unitary Return which Return includes or included the Company or any
subsidiary or (B) any Significant Tax Agreement other than any
Significant Tax Agreement described in (A).
(vii) Except for the group of which the Company and its subsidiaries
are now presently members, neither the Company nor any of its
subsidiaries has ever been a member of an affiliated group of
corporations within the meaning of Sections 1504 of the Code.
(viii) Neither the Company nor any of its subsidiaries has agreed to
make nor is it required to make any adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise.
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(ix) The Company is not, and has not at any time been, a "United
States Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code.
(m) EMPLOYEE BENEFITS.
(i) Except for liabilities reflected in the accruals and reserves on
the Company Financial Statements, none of the Company or any current or
former Plan Affiliate of the Company has at any time maintained,
sponsored, adopted, made contributions to, obligated itself or had any
liability with respect to: any "employee pension benefit plan" (as such
term is defined in Section 3(2) of ERISA); any "employee welfare benefit
plan" (as such term is defined in Section 3(1) of ERISA); any personnel
or payroll policy (including vacation time, holiday pay, service awards,
moving expense reimbursement programs and sick leave) or material fringe
benefit; any severance agreement or plan or any medical, hospital,
dental, life or disability plan; any excess benefit plan, bonus or
incentive plan (including any equity or equity-based plan), tuition
reimbursement, automobile use, club membership, parental or family leave,
top hat plan or deferred compensation plan, salary reduction agreement,
change-of-control agreement, employment agreement, consulting agreement,
or collective bargaining agreement, indemnification agreement, retainer
agreement; or any other benefit plan, policy, program, arrangement,
agreement or contract, whether or not written or terminated, with respect
to any employee, former employee, director, independent contractor, or
any beneficiary or dependent thereof (all such plans, policies, programs,
arrangements, agreements and contracts, whether or not set forth in
Section 5.2(m) of the Company Disclosure Schedule are referred to in this
Agreement as "Company Scheduled Plans").
(ii) The Company has delivered to Parent a complete and accurate
copy, as of the Closing, of each written Company Scheduled Plan, together
with, if applicable, a copy of audited financial statements, actuarial
reports and Form 5500 Annual Reports (including required schedules), if
any, for the three (3) most recent plan years, the most recent IRS
determination letter or IRS recognition of exemption; each other material
letter, ruling or notice issued by a governmental body with respect to
each such plan, a copy of each trust agreement, insurance contract or
other funding vehicle, if any, with respect to each such plan, the most
recent PBGC Form 1 with respect to each such plan, if any, the current
summary plan description or summary of material modifications with
respect to each such plan, Form 5310 and any related filings with the
PBGC and with respect to the last six Plan years for each Plan subject to
Title IV of ERISA, general notification to employees of their rights
under Code Section 4980B and form of letter(s) distributed upon the
occurrence of a qualifying event described in Code Section 4980B, in the
case of a Plan that is a "group health plan" as defined in Code Section
162(i), and a copy or description of each other general explanation or
written or oral communication which describes a material term of each
such plan that has not previously been disclosed to Parent pursuant to
this Section. Section 5.2(m) of the Company Disclosure Schedule contains
a description of the material terms of any unwritten Company Scheduled
Plan as comprehended to the Closing Date. There are no negotiations,
demands or proposals which are pending or threatened which concern
matters now covered, or that would be covered, by the foregoing types of
Plans.
(iii) Except as could not reasonably give rise, whether individually
or in the aggregate, to material liability to the Company, Parent, or
Merger Sub:
(1) each Company Scheduled Plan (A) has been and currently
complies in form and in operation in all material respects with all
applicable requirements of ERISA and the Code, and any other legal
requirements; (B) has been and is operated and administered in
compliance with its terms (except as otherwise required by law); (C)
has been and is operated in compliance with applicable legal
requirements in such a manner as to qualify, where appropriate, for
both Federal and state purposes, for income tax exclusions to its
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participants, tax-exempt income for its funding vehicle, and the
allowance of deductions and credits with respect to contributions
thereto; and (D) where appropriate, has received a favorable
determination letter or recognition of exemption from the Internal
Revenue Service.
(2) with respect to each Company Scheduled Plan, there are no
claims or other proceedings pending or threatened with respect to the
assets thereof (other than routine claims for benefits), and there
are no facts which could reasonably give rise to any liability, claim
or other proceeding against any Company Scheduled Plan, any fiduciary
or plan administrator or other person dealing with any Company
Scheduled Plan or the assets of any such plan.
(3) with respect to each Company Scheduled Plan, no person: (A)
has entered into any "prohibited transaction," as such term is
defined in ERISA or the Code and the regulations, administrative
rulings and case law thereunder; (B) has breached a fiduciary
obligation or violated Sections 402, 403, 405, 503, 510 or 511 of
ERISA; (C) has any liability for any failure to act or comply in
connection with the administration or investment of the assets of
such plans; or (D) engaged in any transaction or otherwise acted with
respect to such plans in such a manner which could subject Parent, or
any fiduciary or plan administrator or any other person dealing with
any such plan, to liability under Sections 409 or 502 of ERISA or
Sections 4972 or 4976 through 4980B of the Code.
(4) each Company Scheduled Plan may be amended, terminated,
modified or otherwise revised by the Company or Parent, on and after
the Closing, without further liability to the Company or Parent,
including any withdrawal liability under ERISA for any multi-employer
plan. For purposes of this paragraph, termination of a Company
Scheduled Plan includes the requirement of a cessation of liability
for claims incurred after the termination date regardless of any
status having been obtained or achieved.
(5) none of the Company or any current or former Company Plan
Affiliate has at any time participated in, made contributions to or
had any other liability with respect to any Company Scheduled Plan
which is a "multi-employer plan" as defined in Section 4001 of ERISA,
a "multi-employer plan" within the meaning of Section 3(37) of ERISA,
a "multiple employer plan" within the meaning of Section 413(c) of
the Code or a "multiple employer welfare arrangement" within the
meaning of Section 3(40) of ERISA.
(6) none of the Company or any current or former Company Plan
Affiliate has at any time maintained, contributed to or obligated
itself or otherwise had any liability with respect to any funded or
unfunded employee welfare plan, whether or not terminated, which
provides medical, health, life insurance or other welfare-type
benefits for current or future retirees or current or future former
employees, their spouses or dependents or any other persons (except
for limited continued medical benefit coverage for former employees,
their spouses and other dependents as required to be provided under
Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA and the accompanying proposed regulations or state continuation
coverage laws ("COBRA")).
(7) no Company Scheduled Plan has incurred an "accumulated
funding deficiency" as such term is defined in Section 302 of ERISA
or Section 412 of the Code, whether or not waived, or has posted or
is required to provide security under Code Section 401(a)(29) or
Section 307 of ERISA; no event has occurred which has or could result
in the imposition of a lien under Code Section 412 or Section 302 of
ERISA, nor has any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") (except for payment of premiums) been
incurred or reportable event within the meaning of Section 4043 of
ERISA occurred with
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respect to any such plan; and the PBGC has not threatened or taken
steps to institute the termination of any such plan;
(8) the requirements of COBRA have been satisfied with respect to
each Company Scheduled Plan.
(9) all contributions, payments, premiums, expenses,
reimbursements or accruals for all periods ending prior to or as of
the Closing for each Company Scheduled Plan (including periods from
the first day of the then current plan year to the Closing) shall
have been made or accrued on the Company financial statements (in
accordance with generally applied accounting principal, including FAS
87, 88, 106 and 112) and each such plan otherwise does not have nor
could have any unfunded liability (including benefit liabilities as
defined in Section 4001(a)(16) of ERISA) which is not reflected on
the Company financial statements. Any contribution made or accrued
with respect to any Company Scheduled Plan is fully deductible by the
Company.
(10) neither the Company nor a Plan Affiliate has any liability
(A) for the termination of any single employer plan under Section
4062 of ERISA or any multiple employer plan under Section 4063 of
ERISA, (B) for any lien imposed under Section 302(f) of ERISA or
Section 412(n) of the Code, (C) for any interest payments required
under Section 302(e) of ERISA or Section 412(m) of the Code, (D) for
any excise tax imposed by Code Sections 4971, 4972, 4977, or 4979, or
(E) for any minimum funding contributions under Section 302(c)(11) of
ERISA or Code Section 412(c)(11).
(11) all the Company Scheduled Plans to the extent applicable,
are in compliance with Section 1862(b)(1)(A)(i) of the Social
Security Act and neither the Company nor any Plan Affiliate has any
liability for any excise tax imposed by Code Section 5000.
(12) with respect to any Company Scheduled Plan which is a
welfare plan as defined in Section 3(1) of ERISA; (A) each such
welfare plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the Code
meets such requirements; (B) there is no disqualified benefit (as
such term is defined in Code Section 4976(b)) which would subject the
Company or any Plan Affiliate to a tax under Code Section 4976(a);
and (C) each and every such welfare plan which is a group health plan
(as such term is defined in Code Section 162(i)(3)) complies and in
each and every case has complied with the applicable requirements of
Code Section 4980B, Title XXII of the Public Health Service Act and
the applicable provisions of the Social Security Act.
(13) Other than by reason of actions taken by Parent following
the Closing, the consummation of the transactions contemplated by
this Agreement will not (A) entitle any current or former employee of
the Company to severance pay, unemployment compensation or any other
payment, (B) accelerate the time of payment or vesting of any
payment, forgive any indebtedness, or increase the amount of any
compensation due to any such employee or former employee, (C) result
in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available, or
(D) give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(14) As used in this Agreement, with respect to any person
("First Person") the term "Plan Affiliate" shall mean each other
person or entity with whom the First Person constitutes or has
constituted all or part of a controlled group, or which would be
treated or has been treated with the First Person as under common
control or whose employees would be treated or have been treated as
employed by the First Person, under Section 414 of the Code and any
regulations, administrative rulings and case law interpreting the
foregoing.
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(n) COMPANY INTANGIBLE PROPERTY.
(i) Section 5.2(n) of the Company Disclosure Schedule sets forth a
true, correct and complete list of each patent, trademark, trade name,
service mark, brand mark, brand name, industrial design and copyright
owned or used in business by the Company and its subsidiaries, as well as
all registrations thereof and pending applications therefor, and each
license or other contract relating thereto (collectively with any other
intellectual property owned or used in the business by the Company and
its subsidiaries, and all of the goodwill associated therewith, the
"Company Intangible Property") and indicates, with respect to each item
of Company Intangible Property listed thereon, the owner thereof and, if
applicable, the name of the licensor and licensee thereof and the terms
of such license or other contract relating thereto. Except as set forth
in Section 5.2(n) of the Company Disclosure Schedule, each of the
foregoing is owned free and clear of any and all liens, mortgages,
pledges, security interests, levies, charges, options or any other
encumbrances of any kind whatsoever and none of the Company or any of its
subsidiaries has received any notice to the effect that any other entity
has any claim of ownership with respect thereto. To the knowledge of the
Company, the use of the foregoing by the Company and its subsidiaries
does not conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, patent,
trademark, trade name, service mark, brand mark, brand name, computer
program, industrial design, copyright or any pending application therefor
of any other person or entity. Except as set forth in Section 5.2(n) of
the Company Disclosure Schedule, no claims have been made, and none of
the Company or any of its subsidiaries has received any notice, nor does
the Company or any of its subsidiaries have any knowledge of any basis
for any claims that any of the foregoing is invalid, conflicts with the
asserted rights of other entities, or has been used or enforced (or has
failed to be used or enforced) in a manner that would result in the
abandonment, cancellation or unenforceability of any item of Company
Intangible Property.
(ii) The Company and each of its subsidiaries possesses all Company
Intangible Property, including, without limitation, all know-how,
formulae and other proprietary and trade rights and trade secrets,
necessary for the conduct of their businesses as now conducted. None of
the Company or any of its subsidiaries has taken or failed to take any
action that would result in the forfeiture or relinquishment of any such
Company Intangible Property used in the conduct of their respective
businesses as now conducted.
(o) CERTAIN CONTRACTS. Section 5.2(o) of the Company Disclosure
Schedule lists all of the following contracts, agreements and commitments,
whether oral or written, to which the Company or its subsidiaries is a party
or by which any one of them or any of their properties or assets may be
bound (the "Company Listed Agreements"): (i) all employment or other
contracts with any officer or director of the Company or any subsidiary of
the Company (or any company which is controlled by any such individual) and
any employment agreements with any employee which are not terminable at will
without any payment upon termination; (ii) union, guild or collective
bargaining contracts relating to employees of the Company or any subsidiary;
(iii) instruments for credit or money borrowed (including, without
limitation, any indentures, guarantees, loan agreements, sale and leaseback
agreements, or purchase money obligations incurred in connection with the
acquisition of property other than in the ordinary course of business)
involving individually or in the aggregate in excess of $250,000; (iv)
underwriting, purchase, liquidation or similar agreements entered into in
connection with the Company or any of its subsidiaries' currently existing
indebtedness; (v) agreements for acquisitions or dispositions (by merger,
purchase, liquidation or sale of assets or stock or otherwise) of material
assets entered into within the last three (3) years, as to which the
transactions contemplated have been consummated or are currently pending;
(vi) joint venture, strategic alliance or similar partnership agreements;
(vii) material licensing, merchandising and distribution contracts; (viii)
contracts granting any person or other entity registration rights; (ix)
guarantees, suretyships,
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indemnification and contribution agreements, involving individually or in
the aggregate in excess of $250,000; (x) material agreements regarding the
use, license or other disposition of intellectual property; (xi) franchise
agreements; (xii) agreements regarding the purchase of supplies, equipment,
materials or components greater than $1,000,000 or one year in duration;
(xiii) agreements for the sale of products greater than $1,000,000 or one
year in duration; (xiv) agreements restricting competition; (xv) contracts
with any governmental or quasi-governmental entity; (xvi) existing material
leases of real or personal property and material contracts to purchase or
sell real property; and (xvii) other contracts which materially affect the
business, properties or assets of the Company and its subsidiaries taken as
a whole, and are not otherwise disclosed in this Agreement or which were
entered into other than in the ordinary course of business on a basis
consistent with past practice. Except as set forth on Section 5.2(o) of the
Company Disclosure Schedule, a true and complete copy (including all
amendments) of each Company Listed Agreement, or a summary of each oral
contract, has been made available to the Company. Neither the Company nor
any subsidiary (i) is in breach or default in any material respect under any
of the Company Listed Agreements or (ii) has any knowledge of any other
material breach or default under any Company Listed Agreement by any other
party thereto or by any other person or entity bound thereby, except in the
case of (i) or (ii) breaches or defaults which would not, individually or in
the aggregate, have a Material Adverse Effect with respect to the Company.
Except as set forth in the Company Schedules, there is no agreement,
judgment, injunction, order or decree binding upon the Company or its
subsidiaries or their properties (including, without limitation, their
intellectual properties) which has or could reasonably be expected to have
the effect of prohibiting or materially impairing any material acquisition
of property by the Company or any of its subsidiaries or the conduct of the
business by the Company or any of its subsidiaries including any exclusive
distribution or licensing agreements which cannot be terminated on less than
30 days notice without any cost or expense to the Company or its
subsidiaries. Except as provided for herein, at the Effective Time, no
person will have the right, by contract or otherwise, to become, nor does
any entity have the right to designate or cause the Company to appoint a
person as, a director of the Company, any subsidiary of the Company or
Parent.
(p) ACCOUNTING MATTERS. Neither the Company nor, to its Knowledge, any
of its affiliates, has taken or agreed to take any action that would prevent
the Parent from accounting for the business combination to be effected by
the Merger as a "pooling-of-interests." The Company has not failed to bring
to the attention of Parent any actions, agreements or understandings,
whether written or oral, that would be reasonably likely to prevent Parent
from accounting for the Merger as a pooling-of-interests. The Company has
received a letter from Coopers & Lybrand LLP ("C&L") to the effect that the
Company is a poolable entity.
(q) UNLAWFUL PAYMENTS AND CONTRIBUTIONS. To the knowledge of the
Company, neither the Company, any subsidiary of the Company nor any of their
respective directors, officers, employees or agents has, with respect to the
businesses of the Company or its subsidiaries, (i) used any funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee;
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any person or
entity.
(r) LISTINGS. The Company's securities are not listed, or quoted, for
trading on any U.S. domestic or foreign securities exchange, other than the
NNM.
(s) ENVIRONMENTAL MATTERS. Except as disclosed in the Company SEC
Reports, (i) the Company and its subsidiaries and the operations, assets and
properties thereof are in material compliance with all Environmental Laws
(as defined in Section 5.1(s)); (ii) there are no judicial or administrative
actions, suits, proceedings or investigations pending or, to the knowledge
of the Company, threatened against the Company or any subsidiary of the
Company alleging the violation of any Environmental
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Law and neither the Company nor any subsidiary of the Company has received
notice from any governmental body or person alleging any violation of or
liability under any Environmental Laws, in either case which could
reasonably be expected to result in material Environmental Costs and
Liabilities (as defined in Section 5.1(s); (iii) to the knowledge of the
Company, there are no facts, circumstances or conditions relating to,
arising from, associated with or attributable to the Company or its
subsidiaries or any real property currently or previously owned, operated or
leased by the Company or its subsidiaries that could reasonably be expected
to result in material Environmental Costs and Liabilities; and (iv) to the
knowledge of the Company, the Company has not ever generated, transported,
treated, stored, handled or disposed of any Hazardous Material at any site,
location or facility in a manner that could create any material
Environmental Costs and Liabilities under any Environmental Law; and no such
Hazardous Material has been or is currently present on, in, at or under any
real property owned or used by the Company in a manner that could create any
Environmental Costs and Liabilities (including without limitation,
containment by means of any underground or aboveground storage tank).
(t) TITLE TO PROPERTIES; LIENS; CONDITION OF PROPERTIES.
(i) The Company and its subsidiaries have good and marketable title
to, or a valid leasehold interest in, the real and personal property,
located on their premises or shown on their most recent balance sheet or
acquired after the date thereof. None of the property owned or used by
the Company or any of its subsidiaries is subject to any mortgage,
pledge, deed of trust, lien (other than for taxes not yet due and
payable), conditional sale agreement, security title, encumbrance, or
other adverse claim or interest of any kind. There has not been prior to
Closing any sale, lease, or any other disposition or distribution by the
Company of any of its material assets or properties, now owned or
hereafter acquired, except transactions in the ordinary and regular
course of business.
(ii) The Company has delivered to Parent true, correct and complete
copies of all material leases, subleases, rental agreements, contracts of
sale, tenancies or licenses related to any of the real or personal
property used by the Company or any of its subsidiaries in their
respective businesses. All such leases are valid, binding and enforceable
in accordance with their terms against the parties thereto, and each such
lease is subsisting and no default exists under any thereof. Neither the
Company nor any of its subsidiaries has received notice that any party to
any such lease intends to cancel, terminate or refuse to renew the same
or to exercise or decline to exercise any option or any right thereunder.
(iii) All buildings, machinery and equipment of the Company and any
of its subsidiaries are in good condition, working order and repair,
normal wear and tear and excepted, and adequate for the uses to which
they are being put, have been well maintained, conform in all material
respects with all applicable ordinances, regulations and zoning, safety
or other laws, and to the knowledge of the Company do not encroach on
property of others. As of the date hereof, neither the Company nor any of
its subsidiaries has received written notice of or otherwise become aware
of any pending or threatened change of any such ordinance, regulation or
zoning, safety or other law and there is no pending or, to the Company's
knowledge, threatened condemnation of any such property.
(u) INVENTORIES. All inventories of finished goods and work in process
of the Company and its subsidiaries are as of the date hereof, and those
existing at the Closing will be in all material respects, good and
merchantable and of a quality and quantity salable in the ordinary course of
the business of the Company and its subsidiaries at prevailing market prices
without discounts, except for inventory reserved against in accordance with
GAAP. All inventories of raw materials are of a quality and quantity usable
in the ordinary course of business. The Company's purchase commitments for
raw materials and parts are not in excess of normal requirements, and none
are at prices materially in
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excess of current market prices and no inventory items have been sold or
disposed of except through sales in the ordinary course of business and
consistent with past practice at prices no less than prevailing market
prices, and in no event less than cost.
(v) ACCOUNTS RECEIVABLE AND PAYABLE. The Company's accounts receivable
have been arisen in bona-fide arms length transactions in the ordinary
course of business, and to the Company's knowledge, represent valid and
binding obligations of the account debtors and will be collected in the
ordinary course of business. To the extent required under GAAP, the
Company's accounts payable reflect all amounts owed by the Company in
respect of trade accounts due and other payables and the actual liability of
the Company in respect of such obligations is reflected on the Company's
financial statements as contained in the Company SEC Reports.
(w) LABOR AND EMPLOYEE RELATIONS.
(i) The Company is not a party to any employment, consulting,
non-competition, severance, golden parachute, indemnification agreement
or any other agreement providing for payments or benefits or the
acceleration of payments or benefits upon the change of control of the
Company (including, without limitation, any contract to which the Company
is a party involving employees of the Company).
(ii) (A) None of the employees of the Company or any of its
subsidiaries is represented in his or her capacity as an employee of such
company by any labor organization; (B) neither the Company nor any of its
subsidiaries has recognized any labor organization nor has any labor
organization been elected as the collective bargaining agent of any of
their employees, nor has the Company or any of its subsidiaries signed
any collective bargaining agreement or union contract recognizing any
labor organization as the bargaining agent of any of their employees; and
(C) to the knowledge of the Company, there is no active or current union
organization activity involving the employees of the Company or any of
its subsidiaries, nor has there ever been union representation involving
employees of the Company or any of its subsidiaries.
(iii) There are no complaints against the Company or any of its
subsidiaries pending or, to the knowledge of the Company, overtly
threatened before the National Labor Relations Board or any similar
foreign, state or local labor agencies, or before the Equal Employment
Opportunity Commission or any similar foreign, state or local agency, or
before any other governmental agency or entity by or on behalf of any
employee or former employee of the Company or any of its subsidiaries.
(iv) Neither the Company nor any of its subsidiaries have any
material contingent liability for severance pay or similar items. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not trigger any
severance pay obligation under any contract or at law.
(v) The Company has provided to Parent a description of all written
and other material employment policies under which the Company and each
subsidiary has operated.
(vi) The Company and each of its subsidiaries is in compliance with
all Federal, foreign (as applicable), and state laws regarding employment
practices, including laws relating to workers' safety, sexual harassment
or discrimination, except where the failure to so be in compliance,
individually or in the aggregate, would not have a Material Adverse
Effect.
(vii) To the knowledge of the Company, no executive, key employee or
group of employees has any plans to terminate his or her employment with
the Company or any of its subsidiaries.
(x) PERMITS. The Company and each of its subsidiaries hold all
licenses, permits, registrations, orders, authorizations, approvals and
franchises which are required to permit it to conduct its
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businesses as presently conducted, except where the failure to hold such
licenses, permits, registrations, orders, authorizations, approvals or
franchises would not, individually or in the aggregate, have a Material
Adverse Effect. All such material licenses, permits, registrations, orders,
authorizations, approvals and franchises are listed in Section 5.2(x) of the
Company Disclosure Schedule and are now, and will be after the Closing,
valid and in full force and effect, and Parent shall have full benefit of
the same, except where the failure to have the benefit of any such license,
permit, registration, order, authorization, approval or franchise would not,
individually or in the aggregate, have a Material Adverse Effect. Neither
the Company nor any of its subsidiaries has received any notification of any
asserted present failure (or past and unremedied failure) by it to have
obtained any such license, permit, registration, order, authorization,
approval or franchise.
(y) WARRANTY OR OTHER CLAIMS. No product manufactured, sold, leased or
delivered by the Company or any of its subsidiaries is subject to any
guaranty, warranty, right of return or other indemnity beyond the applicable
standard terms and conditions of sale or lease, which have been provided to
Parent. There are no existing or, to the knowledge of the Company,
threatened claims or any facts upon which a claim could be based, against
the Company or any of its subsidiaries for services or merchandise which are
defective or fail to meet any service or product warranties which would,
individually or in the aggregate, have a Material Adverse Effect. No claim
has been asserted against the Company or any of its subsidiaries for
renegotiation or price redetermination of any business transaction, and the
Company has no knowledge of any facts upon which any such claim could be
based.
(z) POWERS OF ATTORNEY. To the knowledge of the Company, neither the
Company nor any of its subsidiaries has granted any outstanding powers of
attorney or similar powers of agency.
(aa) INSURANCE. Section 5.2(aa) of the Company Disclosure Schedule
lists all insurance policies in force covering the businesses, properties
and assets of the Company and its subsidiaries and all outstanding claims
against such policies. All such policies are currently in effect, and
neither the Company nor any of its subsidiaries has received notice of
cancellation or termination of, or material premium increase with respect
to, of any such insurance in effect on the date hereof or within the past
two (2) years. All such policies are issued by an insurer that is financial
sound and reputable and provide adequate insurance coverage for the assets
and operations of the Company or its subsidiaries for all risks customarily
insured against by a person or entity engaged in a similar businesses as the
Company and its subsidiaries.
(bb) CORPORATE BOOKS AND RECORDS. The minute books and stock ledgers
of the Company, copies of which have been made available for inspection by
Parent, have been kept in due course, accurately record all material action
taken by the Company's stockholders, board of directors and committees
thereof and are complete.
(cc) TRANSACTIONS WITH AFFILIATES. The Company is not a party to any
affiliate transactions through the date of this Agreement and has no
existing commitments to engage in any affiliate transactions in the future.
(dd) DISCLOSURE. No representation or warranty by the Company in this
Agreement and no statement contained in the Company Disclosure Schedule or
any certificate delivered by the Company to Parent pursuant to this
Agreement, contains any untrue statement of a material fact or omits any
material fact necessary to make the statements herein or therein not
misleading when taken together in light of the circumstances in which they
were made, it being understood that as used in this Section 5.2(dd)
"material" means material to the Company and its subsidiaries taken as a
whole.
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ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS.
(a) Parent and the Company each covenant and agree that, during the
period from the date of this Agreement to the Effective Time (unless the
Parties shall otherwise agree in writing and except as otherwise
contemplated by this Agreement), Parent and the Company each will, and will
cause each of their subsidiaries to, conduct their operations according to
their ordinary and usual course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence and effort
than would be applied in the absence of this Agreement, seek to preserve
intact their current business organizations, use their best efforts to keep
available the service of its current officers and employees and preserve
their relationships with customers, suppliers and others having business
dealings with them to the end that goodwill and ongoing businesses shall be
unimpaired at the Effective Time.
(b) Without limiting the generality of the foregoing, and except as
otherwise permitted in this Agreement, prior to the Effective Time, none of
Parent, the Company, or any of its subsidiaries will, without the prior
written consent of the other Parties:
(i) accelerate, amend or change the period of exercisability of any
outstanding options or restricted stock, or reprice options granted under
the Company Option Plans or authorize cash payments in exchange for any
options granted under any of such plans;
(ii) except (x) as set forth in Section 6.1(b) of the Parent
Disclosure Schedule or the Company Disclosure Schedule, as the case may
be, and (y) for shares to be issued upon exercise of the outstanding
Options or warrants, issue, deliver, sell, dispose of, pledge or
otherwise encumber, or authorize or propose the issuance, sale,
disposition or pledge or other encumbrance of (A) any additional shares
of capital stock of any class, or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for any
shares of capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or
acquire any shares of capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of capital stock, or (B) any other securities in respect
of, in lieu of, or in substitution for, shares outstanding on the date
hereof;
(iii) redeem, purchase or otherwise acquire, or offer to redeem,
purchase or otherwise acquire, any of its outstanding securities
(including the Parent Shares or the Company Shares, as the case may be);
(iv) split, combine, subdivide or reclassify any shares of its
capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such;
(v) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization (other than the Merger as provided for herein);
(vi) adopt any amendments to its Certificate or Articles of
Incorporation, as the case may be, or By-Laws or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any its subsidiaries;
(vii) make any acquisition, by means of merger, consolidation or
otherwise, or disposition, of assets (except in the ordinary course of
business) or securities;
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(viii) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money or guarantee any
such indebtedness or make any loans, advances or capital contributions
to, or investments in, any other person, other than the Merger and loans
or advances to employees in accordance with past practice and of less
than $20,000 individually or $300,000 in the aggregate;
(ix) make or revoke any material Tax election, settle or compromise
any material federal, state, local or foreign Tax liability or change (or
make a request to any taxing authority to change) any material aspect of
its method of accounting for Tax purposes (except for Tax elections which
are consistent with prior such elections (in past years); provided, that
this subparagraph (ix) shall not apply to any such action by Parent or
its subsidiaries;
(x) incur any liability for Taxes other than in the ordinary course
of business; or
(xi) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(c) Between the date hereof and the Effective Time, except as
contemplated herein, Parent, the Company and their subsidiaries shall not
(without the prior written consent of the Parties hereto) (A) grant any
increases in the compensation of any of their directors or officers and,
except in the ordinary course of business and in accordance with its
customary past practices, grant increases to any key employees; (B) pay or
agree to pay any pension, retirement allowance or other employee benefit not
required or contemplated by any of the existing benefit, severance, pension
or employment plans, agreements or arrangements as in effect on the date
hereof to any such director, officer or key employee, whether past or
present; (C) enter into any new or amend any existing employment or
severance agreement with any such director, officer or key employee, except
as contemplated by Section 6.17 hereof; or (D) except as may be required to
comply with applicable law, become obligated under any new pension plan,
welfare plan, multi-employer plan, employee benefit plan, severance plan,
benefit arrangement, or similar plan or arrangement, which was not in
existence on the date hereof, or amend any such plan or arrangement in
existence on the date hereof if such amendment would have the effect of
enhancing any benefits thereunder.
6.2 NO SOLICITATION.
(a) From and after the date of this Agreement until the Effective Time
or the earlier termination of this Agreement in accordance with its terms,
the Company and its subsidiaries will not, and will not permit their
respective directors, officers, investment bankers and affiliates to, and
will use their best efforts to cause their respective employees,
representatives and other agents not to, directly or indirectly, (i)
solicit, initiate, or encourage any inquiries or proposals that constitute,
or could reasonably be expected to lead to, any Acquisition Proposal (as
defined below), (ii) engage in negotiations or discussions concerning, or
provide any non-public information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to, approve, recommend or otherwise
endorse or support any Acquisition Proposal. As used herein, the term
"Acquisition Proposal" shall mean any proposal or actual (i) merger,
consolidation or similar transaction involving the Company or any subsidiary
of the Company, (ii) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise, of any
assets of the Company or any subsidiary of the Company representing 20% or
more of the assets of the Company on a consolidated basis, (iii) issue, sale
or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or
warrants to purchase or securities convertible into, such securities)
representing 20% or more of the votes attached to the outstanding securities
of the Company, (iv) transaction in which any person shall acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act), or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed
which beneficially
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owns or has the right to acquire beneficial ownership of, 20% or more of the
outstanding the Company Shares, (v) liquidation, dissolution, or other similar
type of transaction with respect to the Company or any subsidiary of the
Company, or (vi) transaction which is similar in form, substance or purpose to
any of the foregoing transactions, provided, however, that the term "Acquisition
Proposal" shall not include the Merger and the transactions contemplated
thereby. The Company will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(b) Notwithstanding the provisions of paragraph (a) above, nothing
contained in this Agreement shall prevent the Company or its Board of
Directors, directly or through representatives or agents on behalf of the
Board, from (A) furnishing non-public information to, or entering into
discussions or negotiations with any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity
or recommending such an unsolicited bona fide written Acquisition Proposal
to the stockholders of the Company, if the Board of Directors determines in
good faith that (1) after consultation with and receipt of a written opinion
from its financial advisors, such Acquisition Proposal would, if
consummated, result in a transaction more favorable to the Company's
stockholders (after due consideration to, among other matters, the financial
terms of the Acquisition Proposal, the advantages and benefits of the Merger
to the Company's stockholders, including but not limited to, the tax
treatment of the Merger, and the ability of the person or entity making such
proposal to obtain any financing necessary for the Acquisition Proposal)
than the Merger (any such more favorable Acquisition proposal being referred
to in this Agreement as a "Superior Proposal"), (2) the failure to take such
action would constitute a breach of the fiduciary duties of the Company's
Board of Directors to the Company's stockholders under California Law based
upon the advice of Troy & Gould, the Company's outside corporate counsel,
and (3) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such person or entity, the Company's Board
of Directors (x) notifies Parent of such Acquisition Proposal and notifies
Parent that the Company intends to furnish such information or enter into
such negotiations, and (y) receives from such person or entity an executed
confidentiality agreement with confidentiality provisions not materially
less favorable to such party than those contained in the Confidentiality
Agreement dated May 12, 1998 between Parent and the Company; or (B)
complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act
or other applicable law with regard to an Acquisition Proposal.
(c) The Company will (i) notify Parent within 48 hours if any
Acquisition Proposal is made or proposed to be made or any information or
access to properties, books or records of the Company is requested in
connection with an Acquisition Proposal and (ii) within 48 hours communicate
to Parent the principal terms and conditions of any such Acquisition
Proposal or potential Acquisition Proposal or inquiry (and will disclose any
written materials received by the Company in connection with such
Acquisition Proposal, potential Acquisition Proposal or inquiry, unless the
Board of Directors determines, based on the advice of outside legal counsel
to the Company, that disclosing such materials would cause the Board of
Directors to violate its fiduciary duties to the Company's stockholders
under applicable law) and the identity of the party making such Acquisition
Proposal, potential Acquisition Proposal or inquiry.
(d) Except as set forth herein, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Parent or Merger Sub, the
approval or recommendation by the Board of Directors of the Company or such
committee of this Agreement or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal, or (iii) enter
into any agreement with respect to any Acquisition Proposal. Notwithstanding
the foregoing, the Board of Directors of the Company may (subject to the
terms of this and the following sentence) withdraw or modify its approval or
recommendation of this Agreement or the Merger, approve or recommend a
Superior Proposal or enter into an agreement with respect to a Superior
Proposal at any time after the second
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business day following Parent's receipt of written notice advising Parent
that the Board of Directors of the Company has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the party making such Superior Proposal; PROVIDED, that the
Company shall not enter into an agreement with respect to a Superior
Proposal unless the Company shall have furnished Parent with written notice
not later than noon (Chicago time) two business days in advance of any date
that it intends to enter into such agreement and shall have caused its
financial and legal advisors to negotiate with Parent to make such
amendments to the terms and conditions of this Agreement as would make this
Agreement as so amended at least as favorable to the Company's stockholders
(based upon consideration of the financial terms of the Superior Proposal,
the advantages and benefits of the Merger to the Company's stockholders,
including but not limited to, the tax treatment of the Merger, and the
ability of the party making the Superior Proposal to obtain any financing
necessary for the Superior Proposal) as the Superior Proposal. In addition,
if the Company proposes to enter into an agreement with respect to any
Acquisition Proposal, it shall concurrently with entering into such
agreement pay, or cause to be paid, to Parent the Termination Fee (as
defined in Section 8.5) subject to the provisions of Section 8.5.
6.3 MEETING OF STOCKHOLDERS. Parent, on the one hand, and the Company on
the other, shall each take all action necessary in accordance with applicable
law and its Certificate of Incorporation (or Articles of Incorporation) and
By-Laws to convene a meeting of its stockholders (the "Stockholder Meetings") as
promptly as practicable to consider and vote upon the approval of the Merger and
the issuance of the Parent Shares, as the case may be. Subject to the fiduciary
duties of the each Party's Board of Directors under applicable law after
consultation with and based upon the advice of independent legal counsel (who
may be the Party's regularly engaged independent legal counsel), the Board of
Directors of Parent, on the one hand, and the Company on the other, shall each
recommend and declare advisable such approval and Parent, on the one hand, and
the Company on the other, shall take all lawful action to solicit, and use its
best efforts to obtain, such approval (the requisite approval by stockholders of
the Company as well as by stockholders of Parent is hereinafter referred to
collectively as the "Requisite Stockholder Approval").
6.4 REGISTRATION STATEMENT. Parent will, as promptly as practicable,
prepare and file with the SEC a registration statement on Form S-4 (the "S-4
Registration Statement"), containing a proxy statement/ prospectus and a form of
proxy, in connection with the registration under the Securities Act of the
Parent Shares issuable upon conversion of the Shares and the other transactions
contemplated hereby. The Company and Parent will, as promptly as practicable,
prepare and file with the SEC a proxy statement that will be the same proxy
statement/prospectus contained in the S-4 Registration Statement and a form of
proxy, in connection with the vote of the Company's and Parent's stockholders
with respect to the Merger and the issuance of the Parent Shares (such proxy
statement/prospectus, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to the Company's and Parent's
stockholders, is herein called the "Joint Proxy Statement"). The Company and
Parent will, and will cause their accountants and lawyers to, use their best
efforts to have or cause the S-4 Registration Statement declared effective as
promptly as practicable, including, without limitation, causing their
accountants to deliver necessary or required instruments such as opinions,
consents and certificates, and will take any other action required or necessary
to be taken under federal or state securities laws or otherwise in connection
with the registration process, it being understood and agreed that Katten Muchin
& Zavis, counsel to Parent, and Troy & Gould, counsel to the Company, will each
render the tax opinions referred to in Section 7.1(g) and 7.1(h), respectively,
on (i) the date the preliminary Joint Proxy Statement is filed with the SEC and
(ii) the date the S-4 Registration Statement is filed with the SEC. The Company
and Parent will each use their best efforts to cause the Joint Proxy Statement
to be mailed to their respective stockholders at the earliest practicable date
and will coordinate and cooperate with one another with respect to the timing of
the Stockholder Meetings and the Company and Parent shall each use their
commercially reasonable efforts to hold such Stockholder Meetings as soon as
practicable after the date hereof.
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6.5 BEST EFFORTS. The Parties shall: (i) promptly make their respective
filings and thereafter make any other required submissions under all applicable
laws with respect to the Merger and the other transactions contemplated hereby;
and (ii) use their best efforts to promptly take, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement as soon as practicable.
6.6 ACCESS TO INFORMATION. Upon reasonable notice, Parent, on the one
hand, and the Company on the other, shall (and shall cause each of their
subsidiaries to) afford to officers, employees, counsel, accountants and other
authorized representatives of the other such party (the "Authorized
Representatives") reasonable access, during normal business hours throughout the
period prior to the Effective Time, to their properties, assets, books and
records and, during such period, shall (and shall cause each of their
subsidiaries to) furnish promptly to such Authorized Representatives all
information concerning their business, properties, assets and personnel as may
reasonably be requested for purposes of appropriate and necessary due diligence,
provided that no investigation pursuant to this Section 6.6 shall affect or be
deemed to modify any of the representations or warranties made by the Parties.
The Parties each agree to treat (and cause their Authorized Representatives to
treat) any and all information provided pursuant to this Section 6.6 in strict
compliance with the terms of that certain Confidentiality Agreement, entered by
and between the Company and Parent, dated May 12, 1998 (the "Confidentiality
Agreement").
6.7 PUBLICITY. The Parties agree that they will consult with each other
concerning any proposed press release or public announcement pertaining to the
Merger in order to agree upon the text of any such press release or the making
of such public announcement, which agreement shall not be unreasonably withheld.
6.8 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) From and after the Effective Time, Parent shall, and in addition
shall cause the Surviving Corporation to, indemnify, defend and hold
harmless the present and former officers and directors of the Company and
any of their subsidiaries against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring on or prior to the
Effective Time (including, without limitation, the transactions contemplated
by this Agreement) to the full extent (not otherwise covered by insurance)
permitted or required under applicable law (and shall also advance expenses
as incurred to the fullest extent permitted under applicable law, provided
that the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification); PROVIDED, HOWEVER, the indemnification
provided hereunder by Parent shall not be greater than (x) the
indemnification permissible pursuant to the Company's Articles of
Incorporation and By-Laws, as in effect as of the date hereof or (y) the
indemnification actually provided by the Company as of the date hereof.
Parent agrees that all rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
existing in favor of the present or former directors, officers, employees,
fiduciaries and agents of the Company, Parent or any of their subsidiaries
(collectively, the "Indemnified Parties") as provided in, as the case may
be, the Company's Articles of Incorporation or By-Laws or pursuant to other
agreements, or articles or certificates of incorporation or by-laws or
similar documents of any of the Company's or Parent's subsidiaries, as in
effect as of the date hereof, with respect to matters occurring through the
Effective Time, shall survive the Merger; PROVIDED, HOWEVER, that all rights
to indemnification in respect of any claim asserted or made within such
period shall continue until the disposition of such claim.
(b) Parent shall cause to be maintained in effect for not less than five
(5) years the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by the Company,
Parent and their subsidiaries with respect to matters occurring prior to the
Effective Time to the extent required to cover the types of actions and
omissions currently covered by such policies; PROVIDED, HOWEVER, that (i)
Parent may substitute therefor policies of substantially the same coverage
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containing terms and conditions which are not less advantageous, in any
material respect, to the Indemnified Parties and (ii) Parent shall not be
required to pay an annual premium for such insurance in excess of 200% of
current aggregate policies but in such case shall purchase as much coverage
as possible for such amount.
(c) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated by this Agreement is
commenced, whether before or after the Closing, the parties hereto agree to
cooperate and use their respective commercially reasonable efforts to
vigorously defend against and respond thereto.
(d) This Section 6.8 is intended to benefit the Indemnified Parties and
shall be binding on all successors and assigns of the Parties.
6.9 AFFILIATES OF THE COMPANY AND PARENT. Parent has identified to the
Company each Parent Affiliate and the Company has identified to Parent each the
Company Affiliate (Parent Affiliates and the Company Affiliates are collectively
referred to as the "Affiliates") and each Affiliate has delivered to the Company
and Parent on or prior to the date hereof, a written agreement (i) that such
Affiliate will not sell, pledge, transfer or otherwise dispose of any Shares
issued to such Affiliate pursuant to the Merger, except in compliance with Rule
145 promulgated under the Securities Act or an exemption from the registration
requirements of the Securities Act and (ii) that on or prior to the earlier of
(x) the mailing of the Proxy Statement/Prospectus or (y) the thirtieth day prior
to the Effective Time such Affiliate will not thereafter sell or in any other
way reduce such Affiliate's risk relative to any Shares received in the Merger
(within the meaning of the SEC's Financial Reporting Release No. 1,
"Codification of Financing Reporting Policies," Section 201.01 47 F.R. 21028
(April 15, 1982)), until such time as financial results (including combined
sales and net income) covering at least 30 days of post-merger operations have
been published, except as permitted by Staff Accounting Bulletin No. 76 issued
by the SEC. Parent agrees to use commercially reasonable efforts to make
publicly available financial statements reflecting at least 30 days of combined
operations of Parent and the Company as soon as practicable.
6.10 MAINTENANCE OF INSURANCE. Between the date hereof and through the
Effective Time each of the Company and Parent will maintain in full force and
effect all of their presently existing policies of insurance or insurance
comparable to the coverage afforded by such policies.
6.11 REPRESENTATIONS AND WARRANTIES. Neither Parent, on the one hand, nor
the Company, on the other, will take any action that would cause any of their
respective representations and warranties set forth in Section 5.1 or 5.2, as
the case may be, not to be true and correct in all material respects at and as
of the Effective Time.
6.12 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Parties shall: (a) promptly make their respective filings and
thereafter make any other required submissions under the HSR Act, the Securities
Act and the Exchange Act with respect to the Merger; (b) cooperate in the
preparation of such filings or submissions under the HSR Act; and (c) use best
efforts promptly to take, or cause to be taken, all other actions and do, or
cause to be done, all other things necessary, proper or appropriate under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable.
6.13 NOTIFICATION OF CERTAIN MATTERS. Each of the Company and Parent shall
give prompt notice to the other of (a) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses or results of
operations of it and its subsidiaries taken as a whole to which it or any of its
subsidiaries is a party or is subject, (b) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement, or
(c) any material adverse change in their respective financial condition,
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properties, businesses or results of operations, taken as a whole, other than
changes resulting from general economic conditions.
6.14 POOLING ACCOUNTING. None of the Parties will take any action that
could prevent the Merger from being accounted for as a pooling-of-interests and
Parent will bring to the attention of the Company, and the Company will bring to
the attention of Parent, any actions, occurrences, or agreements or
understandings, whether written or oral, which could be reasonably likely to
prevent Parent from accounting for the Merger as a pooling-of-interests.
6.15 POOLING LETTER. Prior to Closing, the Company shall cause C&L to
deliver to the Company a letter to the effect that pooling-of-interests
accounting is appropriate for the Merger if it is closed and consummated in
accordance with the terms of this Agreement. Prior to Closing, Parent shall
cause KPMG to deliver to Parent a letter to the effect that pooling-of-interests
accounting is appropriate for the Merger if it is closed and consummated in
accordance with the terms of this Agreement. Each of the Company and Parent
shall use commercially reasonable efforts to cause their respective auditors to
cooperate fully with each other in furtherance of the foregoing (including,
without limitation, sharing information, analysis and work product, engaging in
active discussions and taking other reasonable actions as the Parties or their
auditors deem necessary).
6.16 TAX-FREE REORGANIZATION TREATMENT. The Company shall execute and
deliver to Troy & Gould, counsel to the Company, a representation letter
substantially in the form attached hereto as EXHIBIT D-1 at such time or times
as reasonably requested by such law firm in connection with its delivery of an
opinion with respect to the transactions contemplated hereby, and shall provide
a copy thereof to Parent. Parent shall execute and deliver to Katten Muchin &
Zavis, counsel to Parent, a representation letter substantially in the form
attached hereto as EXHIBIT D-2 at such time or times as reasonably requested by
such law firm in connection with its delivery of an opinion with respect to the
transactions contemplated hereby, and shall provide a copy thereof to the
Company. Prior to the Effective Time, the Parties shall use their best efforts
to cause the Merger to be treated as a reorganization within the meaning of
Section 368 of the Code and shall not knowingly take or fail to take any action
which action or failure to act would jeopardize the qualification of the Merger
as a reorganization within Section 368 of the Code.
6.17 EMPLOYMENT AGREEMENTS. As of the date hereof, each of Donald K.
Skinner, Hugh K. Gagnier, and Patrice Foliard shall enter into an employment
agreement with the Company in the forms attached hereto as EXHIBIT E-1, E-2 and
E-3, respectively, which agreements shall be effective as of the Effective Time
and shall replace their respective employment agreements with the Company
existing as of the date hereof. In addition, as of the date hereof, each of
Roger Hay and Kriston D. Qualls shall enter into an amendment to their
respective employment agreements with the Company in such forms as are mutually
agreed upon by the Parties, which amendments shall be effective as of the
Effective Time.
6.18 STOCKHOLDERS AGREEMENTS. Concurrently with the execution and delivery
of this Agreement, the Company and Parent shall cause each of the Voting
Stockholders to execute and deliver each Stockholders Agreement, as applicable.
6.19 BOARD SEAT. Parent agrees to take all actions necessary so as to
cause Donald K. Skinner to be nominated and elected to the Board of Directors of
Parent and to be appointed Vice Chairman of Parent as of the Closing.
6.20 RIGHTS AGREEMENT. At or prior to the Closing, the Company shall take
all action which may be necessary under the Rights Agreement, dated as of March
28, 1998, between the Company and U.S. Stock Transfer Corporation, as Rights
Agent (the "Rights Agreement"), so that the execution of this Agreement and any
amendments thereto by the parties hereto and the consummation of the
transactions contemplated hereby shall not cause (i) Parent and/or Merger Sub or
their respective Affiliates or Associates to become an Acquiring Person (as such
terms are defined in the Rights Agreement) unless this Agreement has been
terminated in accordance with its terms or (ii) a Distribution Date, a Shares
Acquisition Date or
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a Triggering Event (as such terms are defined in the Rights Agreement) to occur,
irrespective of the number of Company Shares acquired pursuant to the Merger or
other transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction or waiver by
each of the Parties of the following conditions:
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(b) the S-4 Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect;
(c) no writ, order, decree or injunction of a court of competent
jurisdiction or governmental entity shall have been entered against the
Company, Parent or their subsidiaries which prohibits the consummation of
the Merger;
(d) the waiting period(s), if any, under the HSR Act shall have expired;
and
(e) Parent shall have received a letter as described in Section 6.15
herein to the effect that Parent may treat the Merger as a
"pooling-of-interests" for accounting purposes;
(f) The Company shall have received a letter as described in Section
6.15 herein to the effect that the Company may treat the Merger as a
"pooling-of-interests" for accounting purposes;
(g) Parent shall have received an opinion from Katten Muchin & Zavis,
dated the Closing Date, based upon certain factual representations of Parent
and the Company, to the effect that the Merger will constitute a
reorganization for federal income tax purposes within the meaning of Section
368(a) of the Code and no gain or loss will be recognized by Parent or its
stockholders as a result of the Merger, other than with respect to the
receipt of cash in lieu of fractional shares; and
(h) The Company shall have received an opinion from Troy & Gould, dated
the Closing Date, based upon certain factual representations of Parent and
the Company, to the effect that the Merger will constitute a reorganization
for federal income tax purposes within the meaning of Section 368(a) of the
Code and no gain or loss will be recognized by the Company or its
stockholders as a result of the Merger, other than with respect to the
receipt of cash in lieu of fractional shares.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the Merger are subject to the fulfillment at or prior to
the Effective Time of the following conditions, any or all of which may be
waived in whole or in part by the Company to the extent permitted by applicable
law.
(a) Parent and its subsidiaries shall have obtained all of the waivers,
permits, consents, approvals or other authorizations, and effected all of
the registrations, filings and notices, referred to in Section 5.1(f) that
are reasonably deemed necessary by the Company, upon advice of counsel, to
provide for the continuation of all material agreements and to consummate
the Merger;
(b) the representations and warranties of Parent set forth in Section
5.1 shall be true and correct in all material respects (except for
representations qualified by materiality or Material Adverse Effect which
shall be correct in all respects) as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time, except for
representations and warranties made as of a specific date, which shall be
true and correct in all material respects (except for representations
qualified by materiality or Material Adverse Effect which shall be correct
in all respects) as of such specific date;
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(c) Parent and its subsidiaries shall have performed or complied in all
material respects with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Effective Time;
(d) Parent shall have delivered to the Company a certificate of its
Chief Executive Officer and Chief Financial Officer to the effect that each
of the conditions specified in Section 7.1 (as it relates to Parent) and
clauses (a) through (c) and (e) of this Section 7.2 is satisfied in all
respects;
(e) no action, suit or proceeding shall be pending or threatened before
any governmental entity or authority wherein an unfavorable judgment, order,
decree, stipulation or injunction would (i) prevent consummation of any of
the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Parent to own,
operate or control any of the assets and operations of the Surviving
Corporation and its subsidiaries following the Merger, and no such judgment,
order, decree, stipulation or injunction shall be in effect;
(f) from the date of this Agreement to the Effective Time, there shall
not have been any event or development which results in a Material Adverse
Effect upon the business of Parent, nor shall there have occurred any event
or development which could reasonably be likely to result in a Material
Adverse Effect upon the business of Parent in the future;
(g) all actions to be taken by Parent and Merger Sub in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect
the transactions contemplated hereby shall be reasonably satisfactory in
form and substance to the Company and its counsel; and
(h) the Class A Shares into which the Parent Shares to be issued to the
stockholders of the Company are convertible shall have been approved for
listing on the NNM.
7.3 CONDITIONS TO THE OBLIGATIONS OF PARENT. The obligation of Parent to
consummate the Merger is subject to the fulfillment at or prior to the Effective
Time of the following conditions, any or all of which may be waived in whole or
in part by Parent to the extent permitted by applicable law.
(a) the Company and its subsidiaries shall have obtained all of the
waivers, permits, consents, approvals or other authorizations, and effected
all of the registrations, filings and notices, referred to in Section 5.2(f)
that are reasonably deemed necessary by Parent, upon advice of counsel, to
provide for the continuation of all material agreements and to consummate
the Merger;
(b) the representations and warranties of the Company set forth in
Section 5.2 shall be true and correct in all material respects (except for
representations qualified by materiality or Material Adverse Effect which
shall be correct in all respects) as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time, except for
representations and warranties made as of a specific date, which shall be
true and correct in all material respects (except for representations
qualified by materiality or Material Adverse Effect which shall be correct
in all respects) as of such specific date;
(c) the Company and its subsidiaries shall have performed or complied
with in all material respects its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the
Effective Time;
(d) the Company shall have delivered to Parent a certificate of its
Chief Executive Officer and Chief Financial Officer to the effect that each
of the conditions specified in Section 7.1 and clauses (a) through (c) and
(e) of this Section 7.3 is satisfied in all respects;
(e) no action, suit or proceeding shall be pending or threatened before
any governmental entity or authority wherein an unfavorable judgment, order,
decree, stipulation or injunction would
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(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation or (iii) affect adversely the right
of Parent to own, operate or control any of the assets and operations of the
Surviving Corporation and its subsidiaries following the Merger, and no such
judgment, order, decree, stipulation or injunction shall be in effect;
(f) from the date of this Agreement to the Effective Time, there shall
not have been any event or development which results in a Material Adverse
Effect upon the business of the Company, nor shall there have occurred any
event or development which could reasonably be likely to result in a
Material Adverse Effect upon the business of the Company in the future; and
(g) all actions to be taken by the Company in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form
and substance to Parent and its counsel.
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after gaining Requisite Stockholder Approval, by the mutual written consent of
the Company and Parent.
8.2 TERMINATION BY EITHER THE COMPANY OR PARENT. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either the Company or Parent if:
(a) the Merger shall not have been consummated by December 31, 1998
(provided that the right to terminate this Agreement under this Section
8.2(i) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date);
(b) any court of competent jurisdiction in the United States or some
other governmental body or regulatory authority shall have issued an order,
decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and nonappealable; or
(c) at the duly held Stockholders Meetings (including any adjournments
thereof), the Requisite Stockholder Approval shall not have been obtained;
PROVIDED, HOWEVER, that the right to terminate this Agreement under this
Section 8.2(c) shall not be available to any Party which has not complied
with its obligations under Sections 6.3 and 6.4.
8.3 TERMINATION BY THE COMPANY. This Agreement may be terminated upon
written notice to Parent and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval by holders of the Company
Shares, by action of the Board of Directors of the Company, if:
(a) Parent shall have failed to comply in any material respect with any
of the covenants or agreements contained in this Agreement to be complied
with or performed by Parent at or prior to such date of termination, which
failure to comply has not been cured within five (5) business days following
receipt by Parent of notice of such failure to comply;
(b) any representation or warranty of Parent contained in the Agreement
shall not be true in all material respects when made or, if a representation
or warranty relates to a particular date, shall not be true in all material
respects as of such date (provided such breach is capable of being cured and
has not been cured within five (5) business days following receipt by Parent
of notice of the breach) or on and as of the Effective Time as if made on
and as of the Effective Time; or
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(c) the Company enters into a definitive agreement relating to a
transaction that constitutes a Superior Proposal, provided the Company shall
have complied with all of the provisions of Section 6.2 hereof and has made
payment of the Termination Fee required by Section 8.5 hereof.
8.4 TERMINATION BY PARENT. This Agreement may be terminated upon written
notice to the Company and the Merger may be abandoned at any time prior to the
Effective Time, before or after the approval by holders of Parent Shares, by
action of the Board of Directors of Parent, if:
(a) the Company shall have failed to comply in any material respect with
any of the covenants or agreements contained in this Agreement to be
complied with or performed by the Company at or prior to such date of
termination, which failure to comply has not been cured within five (5)
business days following receipt by the breaching party of notice of such
failure to comply;
(b) any representation or warranty of the Company contained in this
Agreement shall not be true in all material respects when made or, if a
representation or warranty relates to a particular date, shall not be true
in all material respects as of such date (provided such breach is capable of
being cured and has not been cured within five (5) business days following
receipt by the breaching party of notice of the breach) or on and as of the
Effective Time as if made on and as of the Effective Time; or
(c) (i) the Board of Directors of the Company amends, withholds or
withdraws its recommendation of the Merger in a manner adverse to Parent or
Merger Sub or shall have resolved or publicly announced or disclosed to any
third party its intention to recommend or enter into an agreement or any
agreement in principal with respect to an Acquisition Proposal (or a
proposal or offer therefor), or (ii) the Merger is not submitted to the
Company's stockholders as contemplated by this Agreement (provided that
Parent is not in material breach of the terms of this Agreement and this
Agreement has not otherwise been terminated pursuant to this Article VIII),
or (iii) a tender offer or exchange offer for twenty percent (20%) or more
of the outstanding the Company Shares shall have been commenced or a
registration statement with respect thereto shall have been filed (other
than by Parent of an affiliate thereof) and the Board of Directors of the
Company shall have (A) recommended that the stockholders of the Company
tender their shares in such tender or exchange offer or (B) publicly
announced its intention to take no position with respect to such tender
offer.
8.5 EFFECT OF TERMINATION; TERMINATION FEE.
(a) Except as set forth in this Section 8.5, in the event of termination
of this Agreement by either Parent or the Company as provided in this
Article VIII, this Agreement shall forthwith become void and there shall be
no liability or obligation on the part of the Parties or their respective
affiliates, officers, directors or stockholders except (x) with respect to
the treatment of confidential information pursuant to Section 6.6 and the
payment of expenses pursuant to Section 9.1 and (y) to the extent that such
termination results from the breach of a Party of any of its representations
or warranties, or any of its covenants or agreements, in each case, as set
forth in this Agreement.
(b) If this Agreement shall be terminated pursuant to Section 8.3(c) or
8.4(c), then, provided that Parent is not then in material breach of the
terms of this Agreement, the Company shall pay to Parent the aggregate sum
of $12,000,000 (the "Termination Fee"). If this Agreement is terminated
pursuant to Section 8.2(c) as a result of the failure to obtain the
Requisite Stockholder Approval and at the time of such termination an
Acquisition Proposal by any third party shall have been announced, and if
the Company, within twelve (12) months after such termination, enters into a
definitive agreement with such third party with respect to an Acquisition
Proposal, then the Company shall pay to Parent the Termination Fee
concurrently with entering into such agreement. In addition, if this
Agreement is terminated pursuant to Section 8.2(c) as a result of the
failure to obtain the Requisite Stockholder Approval, and within six (6)
months after such termination the Company or any of its subsidiaries enters
into a definitive agreement for the consummation of an Acquisition Proposal
with
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any person or entity, then the Company shall pay to Parent the Termination
Fee, provided that in no event shall there be more than one payment of the
Termination Fee.
(c) Any payment required to be made pursuant to Section 8.5(b) shall be
made as promptly as practicable but not later than three (3) business days
after written notice of termination of this Agreement is received by the
party obligated to make such payment and shall be made by wire transfer of
immediately available funds to an account designated by the party so owed.
(d) Each of the Parties agrees that the payment in full of the
Termination Fee shall be the exclusive remedy for any action which results
in the payment of the Termination Fee to Parent, unless the termination of
this Agreement results from the breach by a Party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, in which event the non-breaching Party shall have all rights,
powers and remedies against the breaching Party which may be available at
law or in equity. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise of any such right, power
or remedy by any Party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such Party.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES. Whether or not the Merger shall be consummated,
each Party shall pay its own expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby, provided that the Surviving Corporation shall pay any and
all property or transfer taxes imposed on the Surviving Corporation. The filing
fee and the cost of printing the S-4 Registration Statement and the Joint Proxy
Statement shall be borne equally by the Company and Parent. The filing fee for
the required filing under the HSR Act shall be borne by Parent.
9.2 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made herein shall not survive beyond the Effective Time or a
termination of this Agreement, except to the extent a breach or such
representation formed the basis for such termination. This Section 9.2 shall not
limit any covenant or agreement of the Parties which by its terms contemplates
performance after the Effective Time.
9.3 MODIFICATION OR AMENDMENT. Subject to the applicable provisions of the
CGCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; PROVIDED, HOWEVER, that after
approval of the Merger by the Requisite Stockholder Approval is obtained, no
amendment shall be made which changes the consideration payable in the Merger or
adversely affects the rights of the Company's or Parent's stockholders (as the
case may be) hereunder without the approval of such stockholders.
9.4 WAIVER OF CONDITIONS. The conditions to each of the Parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.5 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
9.7 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other Parties shall be deemed delivered upon
actual receipt and shall be in writing and delivered
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personally or sent by registered or certified mail, postage prepaid, reputable
overnight courier, or by facsimile transmission (with a confirming copy sent by
reputable overnight courier), as follows:
<TABLE>
<S> <C>
(a) if to Parent or Merger Sub, to:
Zebra Technologies Corporation
333 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attention: Edward L. Kaplan
Facsimile: (847) 634-2058
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Herbert S. Wander, Esq.
Facsimile: (312) 902-1061
(b) if to the Company, to:
Eltron International, Inc.
41 Moreland Road
Simi Valley, California 93066
Attention: Donald K. Skinner
Facsimile: (805) 579-1808
with a copy to:
Troy & Gould Professional Corporation
1801 Century Park East
16th Floor
Los Angeles, California 90067
Attention: Yvonne E. Chester, Esq.
Facsimile: (310) 201-4746
</TABLE>
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
9.8 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, including the Disclosure
Schedules and Confidentiality Agreement, (i) constitutes the entire agreement
among the Parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, among the
Parties or any of them with respect to the subject matter hereof, and (ii) shall
not be assigned by operation of law or otherwise.
9.9 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, other than the right to
receive the consideration payable in the Merger pursuant to Article IV hereof,
is intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
PROVIDED, HOWEVER, that the provisions of Section 6.8 shall inure to the benefit
of and be enforceable by the Indemnified Parties.
9.10 CERTAIN DEFINITIONS. As used herein:
(a) "ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
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(b) "Software" means all computer software and subsequent versions
thereof, including but not limited to, source code, object code, objects,
comments, screens, user interfaces, report formats, templates, menus,
buttons and icons, and all files, data, materials manuals, design notes and
other items and documentation related thereto or associated therewith.
(c) "Malfunction" means the failure to: (i) accurately recognize dates
falling before, on or after the year 2000; (ii) accurately record, store,
retrieve and process data input and date information; (iii) function in a
manner which does not create any ambiguity as to century; and (iv)
accurately manage and manipulate single century and multi-century formulae,
including leap year calculations.
(d) "subsidiary" shall mean, when used with reference to any entity, any
entity fifty percent (50%) or more of the outstanding voting securities or
interests of which are owned directly or indirectly by such former entity.
(e) "Material Adverse Effect" shall mean any adverse change in the
properties, financial condition, business or results of operations of Parent
or any of its subsidiaries or the Company or any of its subsidiaries, as the
case may be, which is material to Parent and its subsidiaries, taken as a
whole, or the Company and its subsidiaries, taken as a whole, as the case
may be.
(f) "Tax" or "Taxes" refers to any and all federal, state, local and
foreign, taxes, assessments and other governmental charges, duties,
impositions and liabilities relating to taxes, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and
including any liability for taxes of a predecessor entity.
(g) "Significant Tax Agreement" is any agreement to which any Party or
any subsidiary of any Party is a party under which such Party or such
subsidiary could reasonably be expected to be liable to another party under
such agreement in an amount in excess of $10,000 in respect of Taxes payable
by such other party to any taxing authority.
(h) "Knowledge" with respect to a party hereto shall mean the knowledge,
after due inquiry, of any of the executive officers or directors of such
party.
9.11 OBLIGATION OF THE COMPANY. Whenever this Agreement requires Parent,
the Company or Merger Sub to take any action, such requirement shall be deemed
to include an undertaking on the part of the Company to cause such party to take
such action.
9.12 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
9.13 SPECIFIC PERFORMANCE. The parties hereto acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall, however, not be exclusive and
shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.
9.14 RECOVERY OF ATTORNEY'S FEES. In the event of any litigation between
the parties relating to this Agreement, the prevailing party shall be entitled
to recover its reasonable attorney's fees and costs (including court costs) from
the non-prevailing party, provided that if both parties prevail in part, the
reasonable attorney's fees and costs shall be awarded by the court in such
manner as it deems equitable to reflect the relative amounts and merits of the
parties' claims.
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9.15 CAPTIONS. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the Parties hereto and shall be effective as of
the date first hereinabove written.
ZEBRA TECHNOLOGIES CORPORATION
By: /s/ EDWARD L. KAPLAN
--------------------------------------
Name: Edward L. Kaplan
Its: CHIEF EXECUTIVE OFFICER
SPRUCE ACQUISITION CORP.
By: /s/ EDWARD L. KAPLAN
--------------------------------------
Name: Edward L. Kaplan
Its: CHIEF EXECUTIVE OFFICER
ELTRON INTERNATIONAL, INC.
By: /S/ DONALD K. SKINNER
--------------------------------------
Name: Donald K. Skinner
Its:CHAIRMAN OF BOARD AND CHIEF
EXECUTIVE OFFICER
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<PAGE>
APPENDIX B
July 8, 1998
Board of Directors
Zebra Technologies Corporation
333 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to Zebra Technologies Corporation (the "Company") of the Merger
Consideration (as defined below) to be paid by the Company pursuant to the terms
and subject to the conditions set forth in the Agreement and Plan of Merger
dated as of July 9, 1998 (the "Merger Agreement") by and among, the Company,
Spruce Acquisition Corp., a wholly-owned subsidiary of the Company ("Merger
Sub"), and Eltron International, Inc. ("Eltron"). Pursuant to the terms of and
subject to the conditions set forth in the Merger Agreement, Merger Sub will be
merged into Eltron (the "Merger") and each share of common stock of Eltron, no
par value per share, will be converted into nine-tenths (0.90) of one share (the
"Merger Consideration") of Class B common stock, $.01 par value per share, of
the Company.
In connection with our review of the proposed Merger and the preparation of
our opinion herein, we have examined: (a) Merger Agreement; (b) certain audited
financial statements of the Company for the five fiscal years ended December 31,
1997 and certain audited financial statements of Eltron for the last three years
ended December 31, 1997; (c) the unaudited financial statements of the Company
for the quarter ended April 4, 1998 and the unaudited financial statements of
Eltron for the quarter ended March 31, 1998; (d) certain internal business,
operating and financial information and forecasts of the Company and Eltron
("Forecasts"), prepared by the senior management of the Company and Eltron,
respectively; (e) the pro forma impact of the Merger on the earnings per share
of the Company based on certain pro forma financial information prepared by the
senior management of the Company and Eltron, respectively; (f) historical
revenues, operating earnings, operating cash flows, net income and
capitalization, as to the Company, Eltron and certain publicly held companies in
businesses we believe to be comparable to the Company and Eltron, respectively;
(i) information regarding publicly available financial terms of certain
recently-completed transactions which we believed to be relevant; (j) current
and historical market prices and trading volumes of the common stock of the
Company and Eltron; and (k) certain other publicly available information on the
Company and Eltron. We also have held discussions with members of the senior
management of the Company and Eltron to discuss the foregoing, have considered
other matters which we have deemed relevant to our inquiry and have taken into
account such accepted financial and investment procedures and considerations as
we have deemed relevant.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all the information examined
by or otherwise reviewed or discussed with us for purposes of this opinion. We
have not attempted to verify independently any of such information, nor have we
made or obtained an independent valuation or appraisal of the assets,
liabilities or solvency of the Company or Eltron. We have been advised by the
management of the Company and Eltron that the Forecasts examined by us have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the managements of the Company and Eltron, as the case may be.
We express no opinion with respect to the Forecasts or the estimates and
judgments on which they are based. Our opinion herein is based upon economic,
market, financial and other conditions existing on, and other information
disclosed to us as of, the date of this letter. It should be understood that,
although subsequent developments may affect this opinion, we do not have any
obligation to update, revise or reaffirm this opinion. We have further assumed,
with your consent, that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles and that it will
qualify as a tax free reorganization
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<PAGE>
for U.S. federal income tax purposes. We have relied as to all legal matters on
advice of counsel to the Company, and we have assumed that the Merger will be
consummated on the terms described in the Merger Agreement, without any waiver
of any material terms or conditions by the Company.
William Blair & Company has been engaged in the investment banking business
since 1935. We continually undertake the valuation of investment securities in
connection with public offerings, private placements, business combinations,
estate and gift tax valuations and similar transactions. We have acted as
investment banker to the Company in connection with the Merger and will receive
a fee from the Company for our services. Such fee is contingent upon completion
of the Merger. In the past, we have also performed investment banking and other
services for the Company and have received usual and customary compensation for
our services including underwriting fees. In addition, the Company has agreed to
indemnify us against certain liabilities arising out of our engagement.
We are expressing no opinion herein at which the price of the common stock
of the Company and Eltron will trade at any future time or as to the effect of
the Merger on the trading price of the common stock of the Company or Eltron.
Such trading price may be affected by a number of factors, including, but not
limited to (i) dispositions of the common stock of the Company by stockholders
within a short period of time after the effective time of the Merger, (ii)
changes in prevailing interest rates and other factors which generally influence
the price of securities, (iii) adverse changes in the current capital markets,
(iv) the occurrence of adverse changes in the financial condition, business,
assets, results of operations or prospects of the Company or of Eltron or in
their product markets, (v) any necessary actions by or restrictions of federal,
state or other governmental agencies or regulatory authorities, and (vi) timely
completion of the Merger on terms and conditions that are acceptable to all
parties at interest.
Our investment banking services and our opinion were provided for the use
and benefit of the Board of Directors of the Company in connection with its
consideration of the transaction contemplated by the Merger Agreement. Our
opinion is limited to the fairness, from a financial point of view, of the
Merger Consideration to be paid by the Company, in connection with the Merger,
and we do not address the merits of the underlying decision by the Company to
engage in the Merger and this opinion does not constitute a recommendation to
any stockholder as to how such stockholder should vote on the proposed Merger.
It is understood that this letter may not be disclosed or otherwise referred to,
without prior written consent, except that the opinion may be included in its
entirety in a proxy statement mailed to the stockholders by the Company with
respect to the Merger.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Merger Consideration to be paid by the
Company is fair, from a financial point of view, to the Company.
Very truly yours,
/s/ WILLIAM BLAIR & COMPANY, L.L.C.
WILLIAM BLAIR & COMPANY, L.L.C.
B-2
<PAGE>
APPENDIX C
BANCAMERICA
ROBERTSON STEPHENS
July 8, 1998
Board of Directors
Eltron International, Inc.
41 Moreland Road
Simi Valley, CA 93065
Members of the Board:
You have asked our opinion with respect to the fairness of the Exchange
Ratio (as defined below) to holders of the common stock (the "Company Common
Stock") of Eltron International, Inc. ("Eltron" or the "Company"), from a
financial point of view and as of the date hereof. Pursuant to the Agreement and
Plan of Merger, dated as of July 8, 1998 (the "Merger Agreement"), among Eltron,
Zebra Technologies Corporation ("Zebra") and Spruce Acquisition Corp. ("Merger
Sub"), Merger Sub will be merged with and into Eltron (the "Merger") and Eltron
will become a wholly-owned subsidiary of Zebra. Each share of the Company Common
Stock will be converted into the right to receive .90 shares (the "Exchange
Ratio") of Class B common stock, par value $.01 per share (the "Zebra Common
Stock"), of Zebra. The "Holders of Company Common Stock" includes all holders of
the Company Common Stock except for Zebra or any affiliate of Zebra. The Merger
Agreement states that the parties intend, and we have assumed, that the Merger
will qualify as a tax-free reorganization and be accounted for as a pooling of
interests in accordance with U.S. generally accepted accounting principles. The
terms and conditions of the Merger are set out more fully in the Agreement.
For purposes of this opinion we have: (i) reviewed certain financial
information relating to Eltron furnished to us by the management of Eltron,
including certain internal financial analyses and forecasts prepared by the
management of Eltron; (ii) reviewed certain publicly available information
relating to each of Eltron and Zebra, including their respective stock price and
trading histories; (iii) held discussions with the respective management of each
of Zebra and Eltron concerning the businesses, past and current business
operations, financial condition and results of operations and future prospects
of Zebra and Eltron respectively; (iv) reviewed the Merger Agreement and certain
related documents; (v) reviewed the valuations of publicly traded companies that
we deemed comparable to Eltron; (vi) prepared discounted cash flow analyses of
Eltron; (vii) compared the financial terms of the Merger with the financial
terms, to the extent publicly available, of other transactions that we deemed
relevant; (viii) prepared pro-forma merger analyses of the Merger; (ix) prepared
a relative contribution analysis for Eltron and Zebra; and (x) made such other
studies and inquiries, and reviewed such other data, as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all publicly available information that we have reviewed and all
other information furnished (or made available) to us by or on behalf of Eltron
or otherwise used by us in connection with our engagement by Eltron with respect
to the Merger, and we have not undertaken any independent verification of such
information. We have relied upon the assurances of management of Eltron that it
is not aware of any facts that would make such information inaccurate or
misleading. Furthermore, we did not obtain or make, or assume responsibility for
obtaining or making, any independent appraisal of the properties, assets or
liabilities (contingent or otherwise) of Eltron or Zebra, nor were we furnished
with any such evaluations or
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appraisals. With respect to the financial and operating forecasts (and the
assumptions and bases therefor) of Eltron that we have reviewed, we have assumed
that such forecasts have been reasonably prepared in good faith by the
management of Eltron on the basis of reasonable assumptions and reflect the best
currently available estimates and judgments of Eltron's management of the future
financial condition and performance of Eltron, and we have further assumed that
such projections and forecasts will be realized in the amounts and in the time
periods currently estimated by the management of Eltron. We have assumed that
the Merger will be consummated upon the terms set forth in the Agreement without
material alteration thereof. We have relied as to all legal matters relevant to
rendering our opinion on the advice of counsel.
This opinion is necessarily based upon financial, market, economic and other
conditions that exist and can be evaluated as of the date of this letter, and on
the information made available to us as of the date hereof. It should be
understood that subsequent developments may affect this opinion and that we
disclaim any undertaking or obligation to advise any person of any change in any
fact or matter affecting this opinion which may come or be brought to our
attention after the date of this opinion. Our opinion is limited to the fairness
from a financial point of view to the Holders of Company Common Stock of the
Exchange Ratio and does not address the underlying business decision of the
Board of Directors of Eltron to engage in the Merger. We do not express any
opinion as to the value of any employee agreements or arrangements entered into
in connection with the Merger Agreement or the Merger. We further express no
opinion as to the future value of the shares of Zebra Common Stock.
BARS ("Robertson Stephens") is acting as financial advisor to Eltron in
connection with the Merger, for which a portion of our fee is due and payable
contingent upon the closing of the Merger. In the past, we have provided
investment banking services to Eltron and may continue to do so, and have
received, and may receive, fees for the rendering of such services. In the
ordinary course of business, we may actively trade the securities of Eltron and
Zebra for our own account or for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities. In addition,
Michael Smith, a member of the Board of Directors of Zebra, is a managing
director of BancAmerica Robertson Stephens and was a managing director of BA
Partners, the investment banking division of the Bank of America prior to the
acquisition of Robertson Stephens. BA Partners has in the past provided
investment banking services to Zebra, including acting as financial advisor to
Zebra in connection with a prior proposed transaction between Eltron and Zebra.
Our opinion is directed to the Board of Directors of Eltron and is not
intended to be and does not constitute a recommendation to any shareholder of
Eltron as to how such shareholder should vote upon or take any other action with
respect to the Merger. This opinion may be included in a registration statement
to be filed with the Securities and Exchange Commission in which the joint proxy
statement/prospectus to be distributed to Holders of Company Common Stock in
connection with their consideration of the Merger will be included; provided,
that this opinion is reproduced therein in full and any description of, or
reference to, this opinion therein is in a form and substance acceptable to us
and our legal counsel. Except as provided in the previous sentence, this opinion
shall not be published or otherwise used or referred to, nor shall any public
reference to Robertson Stephens be made, without our prior written consent.
Based upon and subject to the foregoing considerations, it is our opinion,
that, as of the date hereof, the Exchange Ratio is fair to the Holders of
Company Common Stock from a financial point of view.
Very truly yours,
/s/ BANCAMERICA ROBERTSON STEPHENS
BANCAMERICA ROBERTSON STEPHENS
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APPENDIX D
CALIFORNIA GENERAL CORPORATION
LAW, SECTIONS 1300 THROUGH 1312
SECTION 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of such corporation entitled to
vote on the transaction and each shareholder of a disappearing corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split,
reserve stock split or share dividend which become effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of Governors
of the Federal Reserve System, and the notice of meeting of shareholders to
act upon the reorganization summarizes the provisions of this section and
Section as 1301, 1302, 1303 and 1304; provided, however, that this provision
does not apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply to any
class of shares described in clause subparagraph (A) or (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in this paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
SECTION 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND
FOR PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraph (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
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of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the Shareholder's shares for cash under Section 1300, subject to compliance with
paragraph (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant subdivision
(a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SECTION 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR
MARKET VALUE; FILING; TIME OF PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
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SECTION 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF
ISSUES; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares are dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SECTION 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of such dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SECTION 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST.
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together
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with interest at the legal rate on judgments until the date of payment, but
subordinate to all other creditors in any liquidation proceeding, such debt to
be payable when permissible under the provisions of Chapter 5.
SECTION 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
SECTION 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
SECTION 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
SECTION 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
SECTION 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION;
CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the
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reorganization or short-form merger, or to have the reorganization or short-form
merger set aside or rescinded, except in an action to test whether the number of
shares required to authorize or approve the reorganization have been legally
voted in favor thereof; but any holder of shares of a class whose terms and
provisions specifically set forth the amount to be paid in respect to them in
the event of a reorganization or short-form merger is entitled to payment in
accordance with those terms and provisions or, if the principal terms of the
reorganization are approved pursuant to subdivision (b) of Section 1202, is
entitled to payment in accordance with the terms and provisions of the approved
reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
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APPENDIX E
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "AGREEMENT"), dated as of July , 1998 (the
"COMMENCEMENT DATE"), is by and among Zebra Technologies Corporation, a Delaware
corporation ("ZEBRA"), and the individuals listed on the signature pages hereof
(each, a "STOCKHOLDER" and collectively, the "STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Eltron International, Inc., a California
corporation ("ELTRON"), Zebra, and Spruce Acquisition Corp., a Delaware
corporation and a direct wholly-owned subsidiary of Zebra ("MERGER SUB") are
entering into an Agreement and Plan of Merger (as such agreement may hereafter
be amended from time to time, the "MERGER AGREEMENT"; capitalized terms used and
not defined herein have the respective meanings ascribed to them in the Merger
Agreement) pursuant to which Merger Sub will be merged with and into Eltron with
Eltron continuing as the surviving corporation and as a direct wholly-owned
subsidiary of Zebra (the "MERGER");
WHEREAS, each Stockholder owns shares, par value $.01 per share, of common
stock of Eltron (the "SHARES" or "ELTRON COMMON STOCK") in the amount set forth
opposite such Stockholder's name on the signature pages hereof; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Zebra has required that Stockholders agree, and each Stockholder has
agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Zebra and the Stockholders agree as follows:
1. PROVISIONS CONCERNING ELTRON COMMON STOCK. The Stockholders hereby
agree that during the period commencing on the Commencement Date and continuing
until the first to occur of (a) the Effective Time or (b) termination of the
Merger Agreement in accordance with its terms, at any meeting of the holders of
Eltron Common Stock, however called, or in connection with any written consent
of the holders of Eltron Common Stock, each Stockholder shall vote (or cause to
be voted) the Shares held of record or Beneficially Owned (as defined below) by
such Stockholder, whether heretofore owned or hereafter acquired: (i) in favor
of approval of the Merger Agreement and any actions required in furtherance
thereof and hereof; (ii) against any action or agreement that would result in a
breach, in any respect, of any covenant, representation or warranty or any other
obligation or agreement of Eltron under the Merger Agreement (after giving
effect to any materiality or similar qualifications contained therein); and
(iii) except as otherwise agreed to in writing in advance by Zebra, against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving Eltron; (B) a
sale, lease or transfer of a material amount of assets of Eltron, or a
reorganization, recapitalization, dissolution or liquidation of Eltron; (C) (1)
any change in a majority of the persons who constitute the board of directors of
Eltron; (2) any change in the present capitalization of Eltron or any amendment
of Eltron's Certificate of Incorporation or By-Laws; (3) any other material
change in Eltron's corporate structure or business; or (4) any other action
which, in the case of each of the matters referred to in clauses C (1), (2), (3)
or (4), is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, or materially and adversely affect the Merger and the
transactions contemplated by this Agreement and the Merger Agreement. Each
Stockholder shall not enter into any agreement or understanding with any Person
(as defined below) the effect of which would be inconsistent or violative of the
provisions and agreements contained in Section 1 or 2 hereof. For purposes of
this Agreement, the terms
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"BENEFICIALLY OWN", "BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" (including
all derivative forms of such terms) with respect to any securities shall mean
having "beneficial ownership" of such securities (as determined pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT")), including pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting of the same securities
by the same holder, securities Beneficially Owned by a Person shall include
securities Beneficially Owned by all other Persons with whom such Person would
constitute a "group" as within the meanings of Section 13(d)(3) of the Exchange
Act. For purposes of this Agreement, "PERSON" shall mean any individual,
corporation, limited liability company, partnership, joint venture, association,
trust, unincorporated organization or other entity.
2. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. Each Stockholder
hereby represents and warrants to Zebra as follows:
(a) OWNERSHIP OF SHARES. Such Stockholder is the record and Beneficial
Owner of the number of Shares as set forth opposite such Stockholder's name
on the signature the signature pages hereof. On the Commencement Date, the
Shares set forth opposite such Stockholder's name on the signature pages
hereof constitute all of the Shares owned of record or Beneficially Owned by
such Stockholder or to which such Stockholder has voting power by proxy,
voting agreement, voting trust or other similar instrument. Such Stockholder
has sole voting power and sole power to issue instructions with respect to
the matters set forth in Section 1 hereof, sole power of disposition, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares as set forth opposite such Stockholder's name
on the signature pages hereof with no limitations, qualifications or
restrictions on such rights.
(b) POWER; BINDING AGREEMENT. Such Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by such Stockholder will not violate any other agreement to
which such Stockholder is a party including, without limitation, any voting
agreement, stockholders agreement, voting trust, trust or similar agreement.
This Agreement has been duly and validly executed and delivered by such
Stockholder and constitutes a valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its
terms. There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which such Stockholder is trustee whose
consent is required for the execution and delivery of this Agreement or the
consummation by such Stockholder of the transactions contemplated hereby. If
such Stockholder is married and such Stockholder's Shares constitute
community property, this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, such
Stockholder's spouse, enforceable against such person in accordance with its
terms.
(c) NO CONFLICTS. (A) No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby and
(B) none of the execution and delivery of this Agreement by such
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby or compliance by such Stockholder with any of the
provisions hereof shall (1) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Stockholder is a party or by which such
Stockholder or any of such Stockholder's properties or assets may be bound,
or (2) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder or any of such
Stockholder's properties or assets.
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(d) NO FINDER'S FEES. Other than existing financial advisory and
investment banking arrangements and agreements set forth in the Merger
Agreement, no broker, investment banker, financial adviser or other person
is entitled to any broker's, finder's, financial adviser's or other similar
fee or commission in connection with the transactions contemplated by the
Merger Agreement based upon arrangements made by or on behalf of such
Stockholder.
(e) NO SOLICITATION. Except as set forth in Section 6.2 of the Merger
Agreement, from and after the date hereof until termination of the Merger
Agreement, such Stockholder shall not, in his, her or its capacity as a
Stockholder, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any inquiries
or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Transaction, or enter into or maintain
or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Acquisition Transaction or
agree to or endorse any Acquisition Transaction, or authorize or permit any
of such Stockholder's agents to do any of the above and such Stockholder
shall promptly notify Zebra orally (in all events within two business days)
and in writing (as promptly thereafter as practicable) of the material terms
and status of all inquiries and proposals which he, she or it, or any such
agent, may receive after the date hereof relating to any of such matters
and, if such inquiry or proposal is in writing, such Stockholder shall
deliver to Zebra a copy of such inquiry or proposal promptly. Such
Stockholder will immediately cease and cause to be terminated any existing
activities, discussions or negotiations, with any parties conducted
heretofore with respect to any of the foregoing.
(f) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Such
Stockholder shall not, directly or indirectly: (i) except as contemplated by
the Merger Agreement, offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or
other disposition of, any or all of such Stockholder's Shares or any
interest therein; (ii) except as contemplated by this Agreement, grant any
proxies or powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares; or (iii) take any
action that would make any representation or warranty of such Stockholder
contained herein untrue or incorrect or have the effect of preventing or
disabling such Stockholder from performing such Stockholder's obligations
under this Agreement.
(g) RELIANCE BY ZEBRA. Such Stockholder understands and acknowledges
that Zebra is entering into, and causing Merger Sub to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement.
3. FURTHER ASSURANCES. From time to time, at Zebra's request and without
further consideration, each Shareholder shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
4. STOP TRANSFER. Each Stockholder agrees with, and covenants to, Zebra
that such Stockholder shall not request that Eltron register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of such Stockholder's Shares, unless such transfer is made in
compliance with this Agreement. Without limiting the covenants in Section 1, in
the event of a stock dividend or distribution, or any change in Eltron Common
Stock by reason of any stock dividend, split-up, recapitalization, combination,
exchange of shares or the like, the term "Shares" shall be deemed to refer to
and include the Shares as well as all such stock dividends and distributions and
any shares into which or for which any or all of the Shares may be changed or
exchanged.
5. TERMINATION. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares shall terminate upon the
earlier of (a) termination of the Merger Agreement in accordance with its terms
or (b) the Effective Time.
E-3
<PAGE>
6. STOCKHOLDER CAPACITY. No Shareholder who is or becomes during the term
hereof a director of Eltron makes any agreement or understanding herein in his
or her capacity as such director. Each Stockholder signs solely in his or her
capacity as the record and beneficial owner of such Stockholder's Shares.
7. RELEASE. Each Stockholder, solely in such capacity as a stockholder of
Eltron, hereby releases and discharges Eltron and its officers, directors,
stockholders, employees, agents, attorneys, representatives, successors and
assigns (and the respective heirs, executors, administrators, representatives,
successors and assigns of such officers, directors, stockholders, employees,
agents, attorneys and representatives) from any and all claims, actions, causes
of action, suits, debts, sums of money, controversies, agreements, promises,
damages, judgments, claims and demands whatsoever, at law or in equity, which
each Stockholder, solely as a result of his, her or its status as a stockholder
of Eltron, had, now have or hereafter can, shall or may have for, upon, or by
reason of any matter, cause or thing whatsoever relating, directly or
indirectly, to Zebra or Eltron as the case may be.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the
subject matter hereof and thereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect
to the subject matter hereof.
(b) CERTAIN EVENTS. Subject to Section 2(f) hereof, each Stockholder
agrees that this Agreement and the obligations hereunder shall attach to
such Stockholder's Shares and shall be binding upon any person or entity to
which legal or beneficial ownership of such Shares shall pass, whether by
operation of law or otherwise, including, without limitation, such
Stockholder's heirs, guardians, administrators or successors.
Notwithstanding any such transfer of Shares, the transferor shall remain
liable for the performance of all obligations under this Agreement of the
transferor.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the parties hereto;
PROVIDED, THAT Zebra may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly owned subsidiary of
Zebra, but no such assignment shall relieve Zebra of its obligations
hereunder if such assignee does not perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, with
respect to any Stockholder, except upon the execution and delivery of a
written agreement executed by the parties hereto; PROVIDED, THAT any
stockholder of Eltron who agrees to be bound by the terms of this Agreement
may become a signatory hereto without the agreement of any other party
hereto, and thereafter such added stockholder shall be treated as a
"Stockholder" for all purposes of this Agreement.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any nationally recognized
expedited delivery service (such as Federal
E-4
<PAGE>
Express) providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
<TABLE>
<S> <C>
If to a Stockholder: At the address set forth opposite such
Stockholder's name on the signature pages
hereof
with a copy to: Troy & Gould Professional Corporation
1801 Century Park East
16th Floor
Los Angeles, California 90067
Attention: Yvonne E. Chester, Esq.
Telephone: (310) 553-4441
Facsimile: (310) 201-4746
If to Zebra: Zebra Technologies Corporation
333 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attention: Edward L. Kaplan
Telephone: (805) 579-1800
Facsimile: (805) 579-2058
with a copy to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: Herbert S. Wander, Esq.
Telephone: (312) 902-5200
Facsimile: (312) 902-1061
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth in
this Subsection (e).
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision of this Agreement in
such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore
each of the parties hereto agrees that in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in
equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any such
rights, powers or remedies by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
E-5
<PAGE>
(i) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(1) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING IN
CONNECTION WITH THIS AGREEMENT.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
(o) RECOVERY OF ATTORNEY'S FEES. In the event of any litigation
between the parties relating to this Agreement, the prevailing party shall
be entitled to recover its reasonable attorney's fees and costs (including
court costs) from the non-prevailing party, PROVIDED, THAT if both parties
prevail in part, the reasonable attorney's fees and costs shall be awarded
by the court in such manner as it deems equitable to reflect the relative
amounts and merits of the parties' claims.
* * *
E-6
<PAGE>
IN WITNESS WHEREOF, Zebra and the Stockholders have caused this Agreement to
be duly executed as of the Commencement Date.
ZEBRA TECHNOLOGIES CORPORATION
<TABLE>
<S><C> <C>
/s/ EDWARD L. KAPLAN
------------------------------
Edward L. Kaplan,
CHAIRMAN OF THE BOARD
By:AND CHIEF EXECUTIVE OFFICER
</TABLE>
<TABLE>
<CAPTION>
NO. OF SHARES
BENEFICIALLY
ADDRESS OWNED
------------------------------ -----------------
<C> <S> <C>
/s/ DONALD K. SKINNER
-------------------------------------------
DONALD K. SKINNER 521,844(1)
/s/ HUGH K. GAGNIER
-------------------------------------------
HUGH K. GAGNIER 41,000
/s/ PATRICE J. FOLIARD
-------------------------------------------
PATRICE J. FOLIARD 15,875
/s/ ROBERT G. BARTIZAL
-------------------------------------------
ROBERT G. BARTIZAL 56,000
/s/ GEORGE L. BRAGG
-------------------------------------------
GEORGE L. BRAGG 45,000
/s/ WILLIAM R. HOOVER
-------------------------------------------
WILLIAM R. HOOVER 32,500
/s/ KRISTON D. QUALLS
-------------------------------------------
KRISTON D. QUALLS 3,000
/s/ ROGER HAY
-------------------------------------------
ROGER HAY 0
BANCAMERICA ROBERTSON STEPHENS,
as Trustee of the Donald K. Skinner
Irrevocable Trust, dated January 26, 1998 240,000
</TABLE>
<TABLE>
<S><C> <C>
/s/ DANA WELCH
By:------------------------------
Dana Welch
Name:
GENERAL COUNSEL
Robertson Stephens Division
Title:
</TABLE>
- ------------------------
(1) Includes 240,000 shares held in the Donald K. Skinner Irrevocable Trust,
dated January 26, 1998.
E-7
<PAGE>
APPENDIX F
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "AGREEMENT"), dated July 9, 1998 (the
"COMMENCEMENT DATE"), is by and among Eltron International, Inc., a California
corporation ("ELTRON"), and the individuals listed on the signature pages hereof
(each, a "STOCKHOLDER" and collectively, the "STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Eltron, Zebra Technologies Corporation, a
Delaware corporation ("ZEBRA") and Spruce Acquisition Corp., a California
corpo-ration and a direct wholly-owned subsidiary of Zebra ("MERGER SUB"), are
entering into an Agreement and Plan of Merger (as such agreement may hereafter
be amended from time to time, the "MERGER AGREEMENT"; capitalized terms used and
not defined herein have the respective meanings ascribed to them in the Merger
Agreement) pursuant to which Merger Sub will be merged with and into Eltron,
with Eltron continuing as the surviving corporation and as a direct wholly-owned
subsidiary of Zebra (the "MERGER");
WHEREAS, each Stockholder owns shares, par value $.01 per share, of common
stock of Zebra (the "SHARES" or "ZEBRA COMMON STOCK") in the amounts set forth
opposite such Stockholder's name and signature on the signature pages hereof;
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Eltron has required that the Stockholders agree, and the Stockholders
have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Eltron and the Stockholders agree as follows:
1. PROVISIONS CONCERNING ZEBRA COMMON STOCK. Each Stockholder hereby
agrees that during the period commencing on the Commencement Date hereof and
continuing until the first to occur of (a) the Effective Time or (b) termination
of the Merger Agreement in accordance with its terms, at any meeting of the
holders of Zebra Common Stock, however called, or in connection with any written
consent of the holders of Zebra Common Stock, such Stockholder shall vote (or
cause to be voted) the Shares held of record or Beneficially Owned (as defined
below) by such Stockholder, whether heretofore owned or hereafter acquired: (i)
in favor of approval of the Merger Agreement and any actions required in
furtherance thereof and hereof; (ii) against any action or agreement that would
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of Zebra under the Merger Agreement (after
giving effect to any materiality or similar qualifications contained therein);
and (iii) except as otherwise agreed to in writing in advance by Eltron, against
the following actions (other than the Merger and the transactions contemplated
by the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving Zebra; (B) a sale,
lease or transfer of a material amount of assets of Zebra, or a reorganization,
recapitalization, dissolution or liquidation of Zebra; (C) (1) any change in a
majority of the persons who constitute the board of directors of Zebra; (2) any
change in the present capitalization of Zebra or any amendment of Zebra's
Certificate of Incorporation or By-Laws; (3) any other material change in
Zebra's corporate structure or business; or (4) any other action which, in the
case of each of the matters referred to in clauses C (1), (2), (3) or (4), is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, or materially and adversely affect the Merger and the transactions
contemplated by this Agreement and the Merger Agreement. Such Stockholder shall
not enter into any agreement or understanding with any Person (as defined below)
the effect of which would be inconsistent or violative of the provisions, and
agreements contained in Section 1 or 2 hereof. For purposes of this Agreement,
"BENEFICIALLY OWN", "BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" (or any other
derivative of such terms) with respect to any securities shall mean having
"beneficial ownership" of such securities (as determined
F-1
<PAGE>
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as within the meanings of Section 13(d)(3) of
the Exchange Act. For purposes of this Agreement, "PERSON" shall mean an
individual, corporation, partnership, joint venture, association, trust,
unincorporated organization or other entity.
2. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. Each Stockholder
hereby represents and warrants to Eltron as follows:
(a) OWNERSHIP OF SHARES. Such Stockholder is the record and Beneficial
Owner of the number of Shares as set forth opposite such Stockholder's name
on the signature pages hereof. On the Commencement Date, the Shares set
forth opposite such Stockholder's name on the signature pages hereof
constitute all of the Shares owned of record or Beneficially Owned by such
Stockholder or to which such Stockholder has voting power by proxy, voting
agreement, voting trust or other similar instrument. Such Stockholder has
sole voting power and sole power to issue instructions with respect to the
matters set forth in Section 1 hereof, sole power of disposition, sole power
of conversion, sole power to demand appraisal rights and sole power to agree
to all of the matters set forth in this Agreement, in each case with respect
to all of the Shares as set forth opposite such Stockholder's name on the
signature pages hereof, with no limitations, qualifications or restrictions
on such rights.
(b) POWER; BINDING AGREEMENT. Such Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by such Stockholder will not violate any other agreement to
which such Stockholder is a party including, without limitation, any voting
agreement, stockholders agreement, voting trust, trust or similar agreement.
This Agreement has been duly and validly executed and delivered by such
Stockholder and constitutes a valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its
terms. There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which such Stockholder is Trustee whose
consent is required for the execution and delivery of this Agreement or the
consummation by such Stockholder of the transactions contemplated hereby. If
such Stockholder is married and such Stockholder's Shares constitute
community property, this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, such
Stockholder's spouse, enforceable against such person in accordance with its
terms.
(c) NO CONFLICTS. (A) No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby and
(B) none of the execution and delivery of this Agreement by such
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby or compliance by such Stockholder with any of the
provisions hereof shall (1) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Stockholder is a party or by which such
Stockholder or any of such Stockholder's properties or assets may be bound,
or (2) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder or any of such
Stockholder's properties or assets.
(d) NO FINDER'S FEES. Other than existing financial advisory and
investment banking arrangements and agreements set forth in the Merger
Agreement, no broker, investment banker, financial adviser or other person
is entitled to any broker's, finder's, financial adviser's or other similar
fee or
F-2
<PAGE>
commission in connection with the transactions contemplated by the Merger
Agreement based upon arrangements made by or on behalf of such Stockholder.
(e) NO SOLICITATION. Except as set forth in Section 6.2 of the Merger
Agreement, from and after the date hereof until termination of the Merger
Agreement, such Stockholder shall not, in his, her or its capacity as a
Stockholder, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any inquiries
or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Transaction, or enter into or maintain
or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Acquisition Transaction or
agree to or endorse any Acquisition Transaction, or authorize or permit any
of such Stockholder's agents to do any of the above and such Stockholder
shall promptly notify Eltron orally (in all events within two business days)
and in writing (as promptly thereafter as practicable) of the material terms
and status of all inquiries and proposals which he, she or it, or any such
agent, may receive after the date hereof relating to any of such matters
and, if such inquiry or proposal is in writing, such Stockholder shall
deliver to Eltron a copy of such inquiry or proposal promptly. Such
Stockholder will immediately cease and cause to be terminated any existing
activities, discussions or negotiations, with any parties conducted
heretofore with respect to any of the foregoing.
(f) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Such
Stockholder shall not, directly or indirectly: (i) except as contemplated by
the Merger Agreement, offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or
other disposition of, any or all of such Stockholder's Shares or any
interest therein; (ii) except as contemplated by this Agreement, grant any
proxies or powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares; or (iii) take any
action that would make any representation or warranty of such Stockholder
contained herein untrue or incorrect or have the effect of preventing or
disabling such Stockholder from performing such Stockholder's obligations
under this Agreement.
(g) RELIANCE BY ELTRON. Such Stockholder understands and acknowledges
that Eltron is entering into the Merger Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
3. FURTHER ASSURANCES. From time to time, at Eltron's request and without
further consideration, each Shareholder shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
4. STOP TRANSFER. Each Stockholder agrees with, and covenants to, Eltron
that such Stockholder shall not request that Zebra register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of such Stockholder's Shares, unless such transfer is made in
compliance with this Agreement. Without limiting the covenants in Section 1, in
the event of a stock dividend or distribution, or any change in Zebra Common
Stock by reason of any stock dividend, split-up, recapitalization, combination,
exchange of shares or the like, the term "Shares" shall be deemed to refer to
and include the Shares as well as all such stock dividends and distributions and
any shares into which or for which any or all of the Shares may be changed or
exchanged.
5. TERMINATION. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares shall terminate upon the
earlier of (a) termination of the Merger Agreement in accordance with its terms
or (b) the Effective Time.
6. STOCKHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director of Zebra makes any agreement or
understanding herein in his or her capacity as such director. Each Stockholder
signs solely in his or her capacity as the record and beneficial owner of such
Stockholder's Shares.
F-3
<PAGE>
7. RELEASE. Each of the Stockholders, solely in such person's capacity as
a stockholder of Zebra, hereby releases and discharges Zebra and its officers,
directors, stockholders, employees, agents, attorneys, representatives,
successors and assigns (and the respective heirs, executors, administrators,
representatives, successors and assigns of such officers, directors,
stockholders, employees, agents, attorneys and representatives) from any and all
claims, actions, causes of action, suits, debts, sums of money, controversies,
agreements, promises, damages, judgments, claims and demands whatsoever, at law
or in equity, which any of the Stockholders, solely as a result of such person's
status as a stockholder of Zebra, had, now has or hereafter can, shall or may
have for, upon, or by reason of any matter, cause or thing whatsoever relating,
directly or indirectly, to Zebra.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the
subject matter hereof and thereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect
to the subject matter hereof.
(b) CERTAIN EVENTS. Subject to Section 2(f) hereof, each Stockholder
agrees that this Agreement and the obligations hereunder shall attach to
such Stockholder's Shares and shall be binding upon any person or entity to
which legal or beneficial ownership of such Shares shall pass, whether by
operation of law or otherwise, including, without limitation, such
Stockholder's heirs, guardians, administrators or successors.
Notwithstanding any such transfer of Shares, the transferor shall remain
liable for the performance of all obligations under this Agreement of the
transferor.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other parties
hereto, provided that Eltron may assign, in its sole discretion, its rights
and obligations hereunder to any direct or indirect wholly owned subsidiary
of Eltron, but no such assignment shall relieve Eltron of its obligations
hereunder if such assignee does not perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, with
respect to any one or more Stockholders, except upon the execution and
delivery of a written agreement executed by the parties hereto; PROVIDED,
THAT any Stockholder of Zebra who agrees to be bound by the terms of this
Agreement may become a signatory hereto without the agreement of any other
party hereto, and thereafter such added stockholder shall be treated as a
"Stockholder" for all purposes of this Agreement.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any nationally recognized
expedited delivery service (such as Federal Express), providing proof of
delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
<TABLE>
<S> <C>
If to a Stockholder: At the address set forth
opposite such Stockholder's
name on the signature pages hereof
with a copy to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: Herbert S. Wander, Esq.
Telephone: (312) 902-5200
Facsimile: (312) 902-1061
</TABLE>
F-4
<PAGE>
<TABLE>
<S> <C>
If to Eltron: Eltron International, Inc.
41 Moreland Road
Simi Valley, California 93065-1692
Attention: Donald K. Skinner
Telephone: (805) 579-1800
Facsimile: (805) 579-1808
with a copy to: Troy & Gould Professional Corporation
1801 Century Park East
16th Floor
Los Angeles, California 90067
Attention: Yvonne E. Chester, Esq.
Telephone: (310) 553-4441
Facsimile: (310) 201-4746
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth in
this Subsection (e).
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision of this Agreement in
such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore
each of the parties hereto agrees that in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in
equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any of
such rights, powers or remedies by any party shall not preclude the
simultaneous or later exercise of any other such right, power or remedy by
such party.
(i) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(1) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING IN
CONNECTION WITH THIS AGREEMENT.
F-5
<PAGE>
(m) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
(o) RECOVERY OF ATTORNEY'S FEES. In the event of any litigation between
the parties relating to this Agreement, the prevailing party shall be
entitled to recover its reasonable attorney's fees and costs (including
court costs) from the non-prevailing party, provided that if both parties
prevail in part, the reasonable attorney's fees and costs shall be awarded
by the court in such manner as it deems equitable to reflect the relative
amounts and merits of the parties' claims.
* * *
IN WITNESS WHEREOF, Eltron and the Stockholders have caused this Agreement
to be duly executed as of the Commencement Date.
ELTRON INTERNATIONAL, INC.
By: /s/ DONALD K. SKINNER
---------------------------------
Donald K. Skinner, Chairman & Chief Executive Officer
<TABLE>
<CAPTION>
NUMBER OF BENEFICIALLY
"STOCKHOLDERS": ADDRESS OWNED SHARES
- ------------------------------------------ ---------------------------------------- ----------------------------
<S> <C> <C>
/s/ EDWARD L. KAPLAN c/o Zebra Technologies Corporation 1,409,737
- ------------------------------ 333 Corporate Woods Parkway (Class B Common)
Edward L. Kaplan Vernon Hills, Illinois 60061
/s/ GERHARD CLESS c/o Zebra Technologies Corporation 2,368,312 (1)
- ------------------------------ 333 Corporate Woods Parkway (Class B Common)
Gerhard Cless Vernon Hills, Illinois 60061
/s/ CAROL K. KAPLAN c/o Zebra Technologies Corporation 290,448
- ------------------------------ 333 Corporate Woods Parkway (Class B Common)
Carol K. Kaplan Vernon Hills, Illinois 60061
/s/ RUTH I. CLESS c/o Zebra Technologies Corporation 783,804
- ------------------------------ 333 Corporate Woods Parkway (Class B Common)
Ruth I. Cless Vernon Hills, Illinois 60061
/s/ CHRISTOPHER KNOWLES
- ------------------------------
Christopher Knowles
/s/ MICHAEL SMITH
- ------------------------------
Michael Smith
/s/ DAVID P. RILEY
- ------------------------------
David P. Riley
</TABLE>
(1) Excludes 140,000 shares of Class A Common Stock held by foundation of which
Mr. Cless is director over which Mr. Cless does not have voting power.
F-6
