As filed with the Securities and Exchange Commission on September 25, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________
SHELDAHL, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0758073
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1150 Sheldahl Road
Northfield, Minnesota 55057
(507) 663-8000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
______________________
James E. Donaghy
Chief Executive Officer
Sheldahl, Inc.
1150 Sheldahl Road
Northfield, Minnesota 55057
(507) 663-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
Charles P. Moorse, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
Minneapolis, Minnesota 55402
Telephone: (612) 371-3211
Fax: (612) 371-3207
Approximate date of commencement of proposed sale to public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box:
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box:
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Proposed Amount of
Class of Amount Maximum Maximum Registration
Securities to to be Offering Price Aggregate Fee (1)
be Registered Registered Per Share (1) Offer Price
Common Stock 6,484,544 $7.03 $45,586,344 $13,448
$.25 par value
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) and based on the average of the high and low sales
prices for the Registrant's Common Stock on September 23, 1998 as reported
on the Nasdaq National Market.
__________________________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
SUBJECT TO COMPLETION, DATED SEPTEMBER 25, 1998
UP TO 6,484,544 SHARES
SHELDAHL, INC.
Common Stock
The up to 6,484,544 shares of Common Stock of Sheldahl, Inc., a
Minnesota corporation (Sheldahl or the Company), offered hereby (the Common
Stock) may be sold from time to time by the stockholders identified herein or
their transferees, pledgees, donees or other successors in interest (the
Selling Shareholders).
The shares of Common Stock to which this Prospectus relates (the Shares)
may be issued to the Selling Shareholders (i) upon conversion of the Company's
Series D Convertible Preferred Stock held by the Selling Shareholders (the
Series D Preferred Stock), (ii) as accrued dividends on the Series D Preferred
Stock and (iii) upon the exercise of outstanding warrants held by the Selling
Shareholders (the Warrants). The Company will not receive any of the proceeds
from the sale of the Shares offered hereby, but the Company will receive
proceeds from the exercise of the Warrants by the Selling Shareholders. There
can be no assurance, however, that the Warrants will be exercised.
Offers and sales of the Shares by the Selling Shareholders may be made
from time to time during the effectiveness of this registration, on one or
more exchanges, in the over-the-counter market, or otherwise, at prices and on
terms then prevailing, or at prices related to the then-current market price,
or in negotiated transactions or in a combination of any such methods of sale.
See Plan of Distribution. The filing by the Company of this Prospectus in
accordance with the requirements of Form S-3 is not an admission that any
person whose Shares are included herein is an affiliate of the Company.
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol SHEL. On September 23, 1998, the last reported sales price of the
Common Stock as reported on the Nasdaq National Market was $7.125 per share.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE RISK FACTORS BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to
sell or solicitation of an offer to buy any security other than securities
offered by this Prospectus, or an offer to sell or a solicitation of an offer
to buy any securities by any person in any jurisdiction in which such offer or
solicitation is not authorized or is unlawful. The delivery of this Prospectus
shall not, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date of this
Prospectus.
September __, 1998
<PAGE>
This Prospectus contains and incorporates by reference certain
forward-looking statements based on current expectations which involve risks
and uncertainties. Actual results and the timing of certain events may differ
materially from those projected in such forward-looking statements due to a
number of risk factors, including those set forth below. The Company has
tried, wherever possible, to identify these forward-looking statements by
using words such as believe, anticipate, estimate, expect and similar
expressions. The Company undertakes no obligation to release publicly the
results of any revisions to any such forward-looking statements that may be
made to reflect events or circumstances after the date of this Prospectus or
to reflect the occurrence of unanticipated events.
THE COMPANY
See Risk Factors for information prospective investors should consider.
Unless the context requires otherwise, all references in this Prospectus to
Sheldahl or the Company refer to Sheldahl, Inc. and its subsidiary. Novaclad,
Novaflex, and ViaArray are registered trademarks of the Company.
Sheldahl is a leading producer of high quality flexible printed
circuitry and flexible laminates, principally for sale to the data
communication and automotive electronics markets. Flexible circuitry is used
to provide electrical connection between components and electronic systems and
also as a substrate to support electronic devices. Flexible circuits consist
of polyester or polyimide film to which copper foil is laminated and processed
through various imaging, etching and plating processes. Flexible circuits can
be further processed by surface mount attachment of electronic components to
produce an interconnect assembly. Flexible circuits provide advantages over
rigid printed circuit boards by accommodating packaging contour and motion and
reducing size and weight.
Over the past four years, the Company has introduced three high
performance products based on proprietary thin film laminate technology:
Novaclad, ViaArray and Via-Thin (high density substrates). These Novaclad-
based products provide substantial benefits compared to traditional flexible
circuits, including the capability for very fine circuit traces (down to 1
mil, or .001") as well as greater heat tolerance and dissipation. The Company
has designed these products to enable integrated circuit (IC) manufacturers to
package future generations of ICs economically by attaching the silicon die to
Via-Thin or a high density substrate manufactured by other circuitry
manufacturers using the Company's Novaclad or ViaArray products. As ICs are
becoming increasingly powerful, they produce more heat and require a greater
number of connections to attach the silicon die, placing substantially greater
demands on IC packaging materials. These products support the industry's
drive for increasing functional performance at a decreasing cost per function.
The Company has invested approximately $60 million in an advanced new
production facility in Longmont, Colorado (the Longmont Facility) to produce
its Novaclad-based products in commercial volumes. As of November 1995, the
Company anticipated investing approximately $38 million in the Longmont
Facility. Changes in the product characteristics of high density substrates
relating to precious metal plating, solder mask overcoat and testing, plus the
installation of assembly equipment not originally anticipated, significantly
increased the original investment to bring the Longmont Facility on line.
Recent purchases of land and equipment needed to increase originally
anticipated capacity also contributed to the total investment in the Longmont
Facility.
The Company originally expected to commence production in the Longmont
Facility in April 1996. However, the realization of full volume production
has been delayed since then initially due to late delivery of certain
production equipment as a result of financial difficulties of a key supplier
as well as a longer than anticipated installation and check out period and
more recently due to a far more rigorous and lengthy qualification process by
the Company's customers and their customers. As of the date hereof, two of
the Company's customers have qualified Via-ThinT substrates for their
operations. Shipments of small volume production orders have begun and the
Company expects that their initial orders will lead to larger orders from
these and other customers.
The Company is a Minnesota corporation and its principal executive
offices are located at 1150 Sheldahl Road, Northfield, Minnesota 55057. Its
telephone number is (507) 663-8000.
<PAGE>
RECENT DEVELOPMENTS
Market Activity in Company Stock. On September 21, 1998, a group of
investors comprised of Irwin L. Jacobs, Daniel T. Lindsay, Dennis M. Mathisen
and Marshall Financial Group, Inc. (the Reporting Persons) filed with the
Securities and Exchange Commission a Schedule 13D reporting their beneficial
ownership of an aggregate of 780,100 shares of the Company's Common Stock,
292,683 shares of Common Stock issuable upon conversion of the Company's
Series D Preferred Stock and 18,000 shares of Common Stock issuable upon
exercise of Warrants, in aggregate representing approximately 10.94% of the
outstanding shares of the Company's Common Stock. Item 4 of the Schedule 13D
states that the Reporting Persons acquired the Common Stock described above in
order to obtain an equity position in the Company. In addition, the Schedule
13D states that the Reporting Persons intend to monitor the Company's
performance and may explore the feasibility of, and strategies for, seeking
control of the Company through various different means. Any activity in the
Company's Common Stock, such as that described above, is subject to the anti-
takeover provisions in the Company's Articles of Incorporation and the
Minnesota Business Corporation Act as well as the Company's Rights Agreement.
See Risk Factors - Anti-Takeover Provisions.
Executive Management Restructuring. On September 17, 1998, the Company
announced that the Board of Directors has elected James E. Donaghy as Chairman
and Edward L. Lundstrom, President, to the additional position of Chief
Executive Officer, effective January 13, 1999. Mr. Donaghy will replace James
S. Womack, who will leave the Board in accordance with the Company retirement
policy for directors.
Introduction of Novaflex VHD. On September 2, 1998, the Company
introduced its new Novaclad-based Novaflex VHD (very high density) product, a
new flexible circuit technology that allows product designs that accommodate
the electronics industry's drive toward miniaturization, which requires
circuitry with ever-smaller vias (holes) and spaces for the greatest possible
density and performance. Novaflex VHD, which is available in prototype and
production quantities, can be provided with industry standard soldermark
materials and surface finishes to accommodate all end-product and assembly
needs. Novaflex VHD is leading-edge technology that meets the needs of
several market segments including computers, disc drives, LCDs,
telecommunications, and medical. The Company estimates the potential market
size for its new product to be $250-300 million in 1998, growing at a
projected rate of 30% per year. However, there can be no assurance that the
Company's new product will achieve market acceptance or that the market size
will develop and grow at rates currently anticipated.
General Motors Strike. The strike and work stoppages by General Motors
workers during fiscal 1998 has had a material adverse effect generally on the
automotive industry and the suppliers thereto. At this time, it is the
Company's estimate that the strike has had a $1.5 million effect on the
Company's results for the fourth quarter of fiscal 1998. There can be no
assurance that the Company's results of the fourth quarter and fiscal year
ending August 28, 1998 will not be more adversely affected by this labor
strike. See Risk Factors - Variability of Quarterly Results.
Series D Preferred Stock. On July 30, 1998, the Company sold an
aggregate of 32,917 shares of Series D Convertible Preferred Stock ("Series D
Preferred Stock"), to the Selling Shareholders pursuant to the Convertible
Preferred Stock Purchase Agreement among the Company and the Selling
Shareholders (the "Agreement"). The Series D Preferred Stock is entitled to
5% cumulative dividends, payable in cash or shares of Common Stock at the
election of the Company. The conversion price for the Series D Preferred
Stock is $6.15 per share. In connection with the issuance of the Series D
Preferred Stock, the Company granted to each Selling Shareholder Warrants to
purchase shares of the Company's Common Stock. The aggregate amount of shares
of Common Stock the Company is obligated to issue under the Warrants is
329,170 shares at an exercise price of $7.6875 per share. The Company also
granted to the Selling Shareholders certain registration rights with respect
to the shares of the Company's Common Stock issuable to the Selling
Shareholders upon conversion of the Series D Preferred Stock, accrued
dividends and the Warrants.
The Company may require holders of Preferred Stock to convert to Common
Stock provided that the Company's Common Stock trades at 200% of the
conversion price.
In connection with the sale of the Preferred Stock, on July 25, 1998,
the Company's Board of Directors amended the Company's Rights Plan to increase
the threshold percentage from fifteen (15%) to twenty-two (22%), subject to
certain conditions with respect to one of the Investors, Molex Incorporated
(Molex) and also approved Molex's acquisition under the Minnesota Business
Combination Act.
Also in connection with the transactions contemplated by the Agreement
and in the related joint venture described below, the Company granted Molex
the right to select one representative for nomination to the Board of
Directors of the Company, a right of first refusal to purchase the Company in
the event that the Board of Directors elects to sell the Company and certain
preemptive rights with respect to future equity offerings. The documentation
memorializing the granting of such rights has not yet been finalized.
This Prospectus relates to the shares of Common Stock issuable to the
Selling Shareholders pursuant to the Agreement. The foregoing description of
the Agreement, the Warrants and the registration rights does not purport to be
complete and is qualified in its entirety by reference to the Company's report
on Form 8-K, filed on August 18, 1998, which includes such agreements as
exhibits and is incorporated herein by reference.
Molex Joint Venture. On July 28, 1998, the Company and Molex
Incorporated (Molex) formed a joint venture to design, market and assemble
modular interconnect systems to replace wiring harnesses in primarily the
automotive market. The new company was named Modular Interconnect Systems,
L.L.C. and it is a Delaware limited liability company (Modular Interconnect).
Modular Interconnect will utilize proprietary flexible products developed by
the Company and proprietary connectors developed by Molex in the development
of the new modular interconnect system as an alternative to conventional
automotive wiring harnesses and flex circuit assemblies. The Company and
Molex will supply their respective products to Modular Interconnect pursuant
to long-term supply contracts.
The Company owns 40% and Molex owns 60% of Modular Interconnect. Each
party has a right of first refusal with respect to the other party's ownership
interest. Modular Interconnect is being funded by contributions from the
Company and Molex. Certain development costs of those components to be
designed and developed by Sheldahl for the new systems will also be reimbursed
by Molex and other development costs may be funded by loans from Molex. Both
the Company and Molex granted Modular Interconnect a non-exclusive license to
certain of their intellectual property for purposes of producing the new
modular interconnect systems. Each license takes effect and is contingent
upon a change of control of the Company or Molex and the purchase of such
person's membership interest in Modular Interconnect.
Modular Interconnect is managed by five managers, three of whom are
designated by Molex and two by Sheldahl. Certain transactions require the
approval of the majority of managers designated by each party.
The Limited Liability Company Agreement of Modular Interconnect (the LLC
Agreement) is filed as Exhibit 10.1 to the Company's current report on Form
8-K filed on August 28, 1998. The Company has requested that certain
portions of the Agreement be granted confidential treatment by the Commission.
Accordingly, certain portions of the Agreement have been deleted and replaced
by brackets with asterisks.
There can be no assurance that the joint venture will be successful or
that the new products will gain market acceptance or be commercialized, if at
all, in a profitable manner by Modular Interconnect. In addition, some
statements made herein may be forward-looking and subject to risks and
uncertainties such as those included in the Company's annual report, 10-K, 10-
Q and other SEC filings, as well as the risks and uncertainties inherent in
embarking upon a new joint venture for the purpose of developing a new
product.
The foregoing description of the LLC Agreement does not purport to be
complete and is qualified in its entirety by reference to the Company's report
on Form 8-K, filed on August 28, 1998, which includes such Agreement as an
exhibit and is incorporated herein by reference.
New Credit Facility. On June 19, 1998, the Company entered into a new
financing arrangement in the form of a debt facility with its existing bank
group, Norwest Business Credit, Inc., Harris Trust and Savings Bank and NED
Bank, as well as a new member, CIT Group. The facility is a three-year
agreement totaling $60 million, consisting of a $25 million capital revolver
and term loan facilities. The term loans are comprised of a $16 million
facility that amortizes over seven years with a balloon payment in May 2001.
Payments are paid monthly commencing January 1999. The second term facility
is a $19 million loan that is amortized over two years with repayments
commencing August 29, 1998. On July 31, 1998, the Company satisfied the $19
million second term facility. Under the terms of the facility, the Company
issued Warrants expiring June 18, 2003 with an exercise price of $6.92
covering an aggregate of 100,000 shares of the Company's Common Stock. The
Company believes the new debt facility along with the Series D preferred
equity placement has strengthened its capital structure and will enable it to
further develop its Micro Products business. The capital liquidity of the
Company is adequate but will remain tight until the cash flow from operations
reflects improvement. See Risk Factors - Liquidity and Possible Need for
Additional Financing.
Third Quarter Results. The Company's unaudited results for the third
quarter of fiscal 1998, including a pretax charge for restructuring costs and
asset impairment charges as well as further charges relating to a tax asset
allowance and the adoption of a FASB pronouncement on start-up costs, resulted
in a net loss for the nine months and quarter ended May 29, 1998 of $33.1
million or $3.57 per share and $19.0 million or $1.98 per share, respectively.
For the third quarter, the Company's core business generated operating pretax
profit of $1.4 million, while its Micro Products business posted a pretax loss
of $4.9 million. The core business, based on increased sales and reduced
costs, improved operating pretax profits by $2.8 million for the third
quarter, as compared to the second quarter. Gross margin in the core business
rose to 19.1 percent compared to 12.7 percent for the second quarter.
Additionally, for the nine months ended May 29, 1998, the loss was due in part
to the following:
The Company's decision to move jobs and make other organizational
efficiencies from its Northfield, Minnesota and Aberdeen, South
Dakota facilities to Mexico has affected 240 jobs and resulted in
a restructuring charge of $4.5 million in the third quarter of
1998 related to the cost of staff reductions, the sale of certain
assets and the closing of the Company's Aberdeen assembly
facility. The Company expects that 200 of the affected jobs will
move to Mexico by the end of September 1998, with the balance
completed in the third quarter of fiscal 1999. The Company
anticipates that it will realize annual costs savings of
approximately $7.0 million associated with this restructuring of
its operations when fully completed.
The write down of equipment amounting to $3.3 million in the third
quarter of 1998, principally at the Company's Longmont, Colorado
facility, which equipment, based upon analysis by management and
anticipated production processes, is not expected to contribute to
the Company's future cash flows.
The decision and analysis by management, based upon recent
restructurings, write-offs and continued losses at the Company's
Micro Products venture, to provide a valuation allowance for its
net deferred tax assets, resulting in a $7.8 million charge to
income during the third quarter of 1998. As a result, the Company
will not reflect in immediate future periods a tax provision or
benefit until such net operating losses are offset by reported
pretax profits or that the degree of certainty increases as to the
future profit performance of the Company to allow for the reversal
of the remaining value of the allowance.
The adoption by the Company of Statement of Position No. 98-5,
Reporting on the Costs of Start-Up Activities, (SOP 98-5) which
requires the expensing of these items as incurred, versus
capitalizing and expensing them over a period of time. The early
adoption of this statement resulted in a cumulative effect of a
change in accounting method of approximately $5.2 million, related
to costs capitalized by the Company from its Micro Products
venture. The adoption of this statement will be retro-active to
the beginning of fiscal 1998, and the Company's first and second
quarters will be restated to reflect this change in accounting, in
accordance with the provisions of SOP 98-5. The Company's
depreciation and amortization expense is reduced by almost $0.5
million per quarter as a result of the adoption of reporting for
start-up costs and the write down of certain equipment, which was
noted above.
<PAGE>
RISK FACTORS
The securities offered hereby involve a high degree of risk.
Accordingly, in analyzing an investment in these securities, prospective
investors should carefully consider the following risk factors, along with
other information referred to herein. No investor should participate in this
offering unless such investor can afford the loss of his or her entire
investment.
Because of the variety and uncertainty of the factors affecting the
Company's operating results, past financial performance and historic trends
may not be a reliable indicator of future performance. These factors, as well
as other factors affecting the Company's operating performance, and the fact
that the Company participates in a highly dynamic and competitive industry,
may result in significant volatility in the Company's Common Stock price.
Liquidity and Possible Need for Additional Financing
The Company believes it will be able to fund its near-term anticipated
working capital and capital expenditure requirements from bank borrowings,
proceeds from the sale of the Company's equity securities and funds generated
from operations. The Company will continue to assess the need for additional
capital recognizing that the amount and form of the capital is directly
dependent on the operational performance of the business and the need to
expand manufacturing capacity. Currently, the Company is being funded through
the working capital borrowing base under its bank line of credit and improving
cash flow from operations. Enhanced cash flow from operations is in part
linked to the expectation that successful full volume production from the
Longmont facility will commence in the third quarter of fiscal 1999. However,
there can be no assurance that unanticipated developments, including but not
limited to possible requirements to redeem the Company's Series B Stock,
failure to achieve full volume production from the Longmont facility, or
failure to achieve any other operational objectives of the Company, will not
create an earlier need for additional capital. If any of these events occur,
the Company could be required to seek additional capital as early as the end
of the second quarter of fiscal 1999. There can be no assurance, however,
that such additional capital will be available when needed by the Company or
that such capital will be available on terms acceptable to the Company.
Utilization of Longmont Facility
The Company has completed construction of, and installation of equipment
to be used in, the Longmont Facility, but has not commenced extensive volume
production of its ViaArray and Via-Thin products at this facility. The
Company had originally expected to begin volume production at the Longmont
Facility in April 1996, but the Company initially suffered delays in delivery
and installation of certain production equipment as a result of financial
difficulties of a key supplier, a longer than anticipated installation and
testing period, and recently is experiencing a far more rigorous and lengthy
qualification process by the Company's customers and their customers than the
Company anticipated. The Company is producing Novaclad for sale to the market
and internal use and has now begun initial production of Via-Thin. Via-Thin
is a product still in the early stages of market acceptance. The Company
believes that it has validated the technical capabilities of its processes and
equipment at the Longmont Facility, although there can be no assurance that
validation problems or difficulties will not materialize once full volume
production has commenced. The Company's ability to begin full volume
production of Via-Thin is subject to final qualification by the Company's
customers, and in some cases, their customers, as well as the ability of its
production equipment to produce sufficient quantities of products at
acceptable quality levels. Once the Longmont Facility has commenced full
volume production of Via-Thin, the Company still expects that it will not
initially produce sufficient sales volume or profit contribution to offset the
depreciation and other expenses related to its operation. As a result, the
Longmont Facility has had a material adverse effect on the Company's results
of operations and will continue to have such an effect until sales of the
Company's Novaclad-based ViaArray and Via-Thin products increase sufficiently
to cover expenses.
Market Acceptance of New Products
A significant portion of the Company's anticipated future success in the
data communication market and a significant portion of future revenue growth
of the Company will depend on market acceptance of its Novaclad-based,
ViaArray and Via-Thin products. Although the Company believes that these
products have attractive performance characteristics and utility in a
potentially broad range of products, sales of its Novaclad-based products will
depend on the Company's ability to (i) convince potential customers that the
advantages and applications of these products justify the expense and
production changes necessary to incorporate the Company's products into the
customer's manufacturing process; (ii) work with designers of integrated
circuit (IC) packages and electronics to incorporate these products; (iii)
qualify these products for inclusion in the customer's products within the
time requirements of the customer's design cycle and (iv) produce sufficient
quantities of these products in a timely manner. Moreover, these products
will compete with certain other thin film laminates or alternative materials
offered by other manufacturers and such materials may achieve wider market
acceptance than the Company's products. Failure of the Company's Novaclad-
based, ViaArray and Via-Thin products to achieve timely or sufficient market
acceptance would have a material adverse effect on the Company's results of
operations.
Dependence on Automotive Market
Sales to the automotive market as a percentage of total sales were
approximately 69.2% in fiscal 1996 and 67.5% in fiscal 1997. The Company's
production of component products for the automotive market fluctuates as
automotive manufacturers begin production of new models and end production of
others. A decrease in the number of the Company's electronic components
included in new models could have a material adverse effect on the Company's
results of operations. A general downturn in the automotive market, such as
the General Motors labor strike, could have and has had a material adverse
effect on the demand for the electronic components supplied by the Company to
its customers in the automotive market. For example, during the Company's
fourth quarter, the Company's sales to the automotive market were adversely
impacted by the General Motors strike by an amount equal to approximately $1.5
million. In addition, as the automotive industry continues to qualify and
reduce the number of suppliers and demand higher performance products at a
lower cost, there can be no assurance that the Company will be able to
maintain its current sales volumes at existing profit margins to automotive
manufacturers and their suppliers.
Capital Intensive Business
The Company's business is capital intensive. In the past four years,
the Company has invested approximately $112 million in total capital
expenditures, including approximately $60 million in the Longmont Facility.
In order to remain competitive, the Company must continue to make significant
expenditures for capital equipment, expansion of operations and research and
development. The Company has had initial success with introducing its
Novaclad-based products but further penetration is required. If the Company
is successful in its Novaclad-based products, it may be required to make
additional capital investments to increase manufacturing capacity before
sufficient positive cash flow can be derived from the initial investment in
the Longmont Facility. Presently, however, capital expenditure plans in
fiscal 1999 are expected to be in the range of $10 to $12 million,
significantly lower than in the recent past.
Customer Concentration
The Company's customer base is concentrated. The Company's ten largest
customers for the 1997 fiscal year accounted for approximately 60.7% of net
sales, and 11.5%, 10.6% and 7.4% of the Company's net sales during fiscal 1997
were to Ford Motor Company, Motorola, Inc. and Molex Incorporated,
respectively. The Company expects that sales to a relatively small number of
customers will continue to account for a significant portion of sales for the
foreseeable future, and the loss of, or a significant decline in orders from,
one of the Company's key customers could have a material adverse effect on the
Company's results of operations.
Variability of Quarterly Results
Historically, the Company's quarterly results of operations have
fluctuated significantly primarily because of the timing of orders from its
larger customers and mix of products manufactured and sold, as impacted from
time to time by work stoppages in the automotive industry and other broad
economic events. Due to this and the inherent uncertainty associated with the
development of new products and production facilities, the Company expects
that its quarterly results of operations will continue to be subject to
significant fluctuations.
Customers' Product Obsolescence and Standards
The Company supplies component products primarily to the automotive
electronics and data communication markets. Substantially all of the products
in these markets which incorporate the Company's component products are
subject to technological obsolescence, performance standards and pricing
requirements. The Company's future success in these markets will depend upon
its ability to (i) work closely with manufacturers to design end products or
applications which incorporate the Company's products and achieve market
acceptance, (ii) develop technologies to meet the evolving market requirements
of its customers, (iii) continue to deliver high-performance, cost-effective
products and (iv) expand its sales and marketing efforts domestically and
internationally. There can be no assurance that the Company will continue to
meet the current qualification requirements of its major customers, meet new
qualification requirements imposed by its customers or continue to be selected
as a supplier by new customers.
Dependence on Key Personnel
The Company's business is dependent on the efforts and abilities of its
executive officers and key personnel, especially in the development, marketing
and manufacturing of its Novaclad-based, ViaArray and Via-Thin products. The
Company's continued success will also depend on its ability to continue to
attract and retain qualified employees. The loss of services of any key
personnel could have a material adverse effect on the Company. The Company
does not have key-person life insurance on any of its employees.
Intense Competition
The market segments served by the Company are highly competitive. Some
of the Company's competitors have substantially greater financial and
marketing resources than the Company. Although the Company believes
performance and price characteristics of its Novaclad-based products will
provide competitive solutions for its customers' needs, there can be no
assurance that its customers will not choose other technologies due to such
customers' familiarity with the competing technology, the financial resources
of the supplier or the ease of incorporating alternative technology into
customers' manufacturing processes. In addition, there can be no assurance
that other competitors will not enter the markets served by the Company. The
Company's results may be adversely affected by the actions of its competitors,
including the development of new technologies, the introduction of new
products or the reduction of prices. There also can be no assurance that the
Company will be able to take actions necessary to maintain its competitive
position.
Possible Volatility of Stock Price
Factors such as unexpected market activity in the Company's Common
Stock, announcements by the Company or its competitors, fluctuations in the
Company's operating results, general conditions in the automotive and data
communication markets or the worldwide economy or changes in earnings or
estimates by analysts could cause the price of the Company's Common Stock to
fluctuate, perhaps substantially. Also, prices for many technology company
stocks, including the Common Stock, may fluctuate widely for reasons that are
not always related to the operating performance of such companies.
Reliance on Specialized Manufacturing Facilities
The Company has separate manufacturing and assembly facilities, certain
of which perform processes dependent upon products produced at its other
facilities. The Company's flexible laminates are produced at facilities in
Longmont and Northfield, Minnesota and further processed into printed
circuitry in a separate facility, also located in Northfield, Minnesota. In
addition, the Company also fabricates ViaThin at the Longmont facility.
Further assembly is performed at one facility in South Dakota and one in
Mexico. Delays or disruption at its flexible laminate facility may result in
an insufficient supply of materials for its flexible printed circuitry
facility and its assembly facilities. The Company's Novaclad-based, ViaArray
and Via-Thin products will be manufactured primarily at the Longmont Facility.
Each of these facilities contains or will contain specialized equipment which
is not quickly replaceable. While the Company carries business interruption
insurance, any natural or other event affecting any one of these facilities or
the manufacturing equipment could materially and adversely affect the
Company's position in its markets and results of operations.
Dependence on Certain Suppliers
The Company is dependent upon single source suppliers for certain of the
raw materials used in the Company's manufacturing processes. While the
Company has not experienced significant problems in the delivery of these
materials or services, the Company believes an interruption in the supply of
such materials or services could have a material adverse effect on the
Company's results of operations.
<PAGE>
Patents, Trademarks and Proprietary Rights
The Company's success depends, to a large extent, on its ability to
maintain a competitive proprietary position in its product areas. The Company
has received certain patents with respect to its products and processes and
has several other patent applications pending. There can be no assurance that
patents will be issued on the basis of the Company's applications, that any
patent issued to the Company will not be challenged, invalidated or
circumvented or that the rights granted under any patent will provide
significant benefits to the Company. The Company is aware of a patent which
may cover certain plated through holes of double-sided circuits made of the
Company's Novaclad material. Although no claims have been made against the
Company under this patent, the owner of the patent may attempt to construe the
patent broadly enough to cover certain Novaclad products manufactured
currently or in the future by the Company. The Company believes that prior
commercial art and conventional technology, including certain patents of the
Company, exist which would allow the Company to prevail in the event any such
claim is made under this patent. Any action commenced by or against the
Company could be time consuming and expensive and could result in requiring
the Company to enter into a license agreement or cease manufacture of any
products ultimately determined to infringe such patent. In addition to patent
protection, the Company also attempts to protect its trademarks through
registration and proper use. The Company also attempts to protect its
proprietary information as trade secrets by taking security precautions at its
facilities. Further, the Company maintains confidentiality through the use of
secrecy or confidentiality agreements and other measures intended to prevent
the public dissemination of trade secret information. There can be no
assurance that these steps will prevent misappropriation of the Company's
proprietary rights or that third parties will not independently develop
functionally equivalent or superior non-infringing technology.
Environmental Matters
The Company's production processes require the use, storage and disposal
of certain substances which are considered hazardous under applicable federal
and state laws. Accordingly, the Company is subject to a variety of
regulatory requirements for the handling of such substances. The Company has
maintained a safety and environmental compliance program for a number of
years. An inadvertent mishandling of materials or similar incident, however,
could adversely affect the operations of the Company and result in costly
administrative or legal proceedings. In addition, future environmental
regulations could add to overall costs of doing business.
Anti-Takeover Provisions
The Company's Articles of Incorporation and the Minnesota Business
Corporation Act include certain anti-takeover provisions. These provisions,
including the power to issue additional stock and to establish separate
classes or series of stock, may, in certain circumstances, deter or discourage
takeover attempts and other changes in control of the Company not approved by
the Board. In addition, in June 1996, the Board of Directors of the Company
adopted a Rights Agreement (the Rights Agreement), commonly called a poison
pill. Pursuant to the terms of the Rights Agreement, one right (a Right) was
issued in respect of each share of the Company's Common Stock outstanding.
Such Rights also attach to each share of Common Stock issued subsequent to the
adoption of the Rights Agreement, including the Shares offered hereby. Each
Right entitles the holder thereof to purchase a fraction of a share of the
Company's Series A Preferred Stock or, in certain instances, Common Stock of
the Company or stock of an Acquiring Person (as defined below) in the event
that (i) a third party or a group (an Acquiring Person) acquires beneficial
ownership of 15% or more of the Common Stock or (ii) a tender offer or
exchange offer that would result in a person or group becoming an Acquiring
Person is commenced. On July 30, 1998, the Company amended Section 1(a) of
the Rights Agreement to provide that when applied to Molex Incorporated and
any of its affiliated parties the 15% threshold for beneficial ownership shall
be 22%. The Rights Agreement will be in effect through June 2006 and could
have the effect of discouraging tender offers or other transactions which
could result in shareholders receiving a premium over the market price of
Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Shareholders. If the Warrants are exercised in full, the Company
will receive approximately $2,531,000. Such amount is intended to be used by
the Company for working capital purposes. There can be no assurance, however,
that the Warrants will be exercised.
SELLING SHAREHOLDERS
The Shares of Common Stock offered hereby by the Selling Shareholders
are issuable (i) upon conversion of the Series D Preferred Stock held by the
Selling Shareholders, (ii) as accrued dividends on the Series D Preferred
Stock and (iii) upon the exercise of outstanding warrants held by the Selling
Shareholders (the Warrants). A total of 32,917 shares of Series D Preferred
Stock and Warrants to purchase up to 329,170 shares of the Company's Common
Stock at an exercise price of $7.6875 per share were issued to the Selling
Shareholders in connection with a private placement in July 1998. Through
September 24, 1998, no shares of the Series D Preferred Stock have been
converted.
The number of Shares registered on the registration statement of which
this Prospectus is a part and the number of Shares offered hereby have been
determined by agreement between the Company and the Selling Shareholders.
The Series D Preferred Stock may be converted into shares of Common Stock from
time to time at a conversion price equal to $6.15. The Warrants are
exercisable for an aggregate of 329,170 Shares of Common Stock.
The amount of Common Stock shown in the following table represents the
amount into which the 32,917 shares of Series D Preferred Stock might have
been converted on September 1, 1998 based on the conversion price of $6.15.
The amount of Common Stock shown in the table also includes 802,920 shares of
Common Stock representing accrued dividends for three years on the shares of
Series D Preferred Stock based on the conversion price of $6.15, as well as
329,170 shares of Common Stock issuable to the Selling Shareholders upon
exercise of the Warrants:
Common Stock Number of
Beneficially Shares of Owned After
Owned Prior Common Stock Offering (2)
To Offering Offered (3) Number
Selling Shareholder (1) (2) Percent
______________________________________________________________________________
Molex Incorporated 1,363,903 2,363,903 340,000 2.1
AO Capital Corporation 109,249 49,249 60,000 *
Jerry D. Armstrong 45,550 29,550 16,000 *
Anvil Investment 295,489 295,489 0 *
Associates, LP
Joseph H. Bander 9,851 9,851 4,770 *
Bander Family 14,621 9,851 4,230 *
Partnership
Robin W. Brooksbank CF 16,051 11,821 0 *
John S. Brooksbank UTMA MN
Robin W. Brooksbank CF 13,791 13,791 0 *
Julia O. Brooksbank UTMA MN
Rex James Bates 78,798 78,798 0 *
Dr. Edward Blender 19,701 19,701 0 *
Ray O. Brownlie 26,201 19,701 6,500 *
Brownlie Family 13,851 9,851 4,000 *
Partnership
F. Hudnall Christopher Jr. 40,951 9,851 31,100 *
C/o Wachovia Capital Management
Colorado State Bank & Trust 9,851 9,851 0 *
As Trustee for George
F. Wood IRA
Maurice Cunniffe 18,851 9,851 9,000 *
C/o Fudiciary Trust
International
Deephaven Opportunity 196,993 196,993 0 *
Master Fund LP
Susan S. Elemendorf 78,798 78,798 0 *
C/o Fiduciary Trust
Company
First Busey Trust & 133,798 78,798 55,000 *
Investment Company as
Custodian for Davis U.
Merwin
John A. Fischer 19,701 19,701 0 *
Alexander F. Giacco, Sr. 25,729 9,851 15,878 *
C/o Fiduciary Trust
International
Edward M. Giles 90,400 39,400 51,000 *
C/o Fiduciary Trust
International
Edward M. Giles (IRA#1) 100,099 59,099 41,000 *
C/o Fiduciary Trust
Interntional
Robert H. Harper 39,400 39,400 38,520 *
Harris Associates
Richard A. Hassel (4) 38,701 19,701 19,000 *
JB Partners 191,083 191,083 0 *
C/o Peter B. Cannell & Co. Inc.
KA Management Limited 137,896 137,896 0 *
KA Trading LP 59,099 59,099 0 *
John Kassakian (5) 19,701 19,701 50,257 *
Larson Capital 98,497 98,497 81,301 1.1
LaSalle Adams Fund 98,497 98,497 0 *
C/o Fiduciary Trust Company
Edward Lundstrom (6) 18,178 9,851 8,327 *
Dennis M. Mathisen (7) 579,586 354,586 225,000 1.4
William R. Miller (UPIT) 4,926 4,926 0 *
Model Charitable Lead Trust 260,095 157,595 102,500 *
C/o Peter Model
Leo Model Foundation 175,297 98,497 76,800 *
C/o Peter Model
Peter Model Trust #2 43,100 39,400 3,700 *
Montrose Investment L.P. 196,993 196,993 0 *
Mr. William E. Rose
Patrick R.D. Paul 87,149 49,249 37,900 *
C/o Fiduciary Trust
Interntional
Roger Quam and Judy Quam (8) 30,484 9,851 20,633 *
Kenneth J. Severinson 20,701 19,701 1,000 *
Richard L. Shepley 19,701 19,701 0 *
Pike H. Sullivan 99,400 39,400 60,000 *
C/o Bank of New York
Wallace Family Partnership 15,351 9,851 5,500 *
Colorado State Bank
Westover Investments L.P. 196,993 196,993 0 *
Mr. William E. Rose
Charles W. Wilcox 64,099 59,099 5,000 *
Julia May Wilcox 118,196 118,196 0 *
Kevin Garner Wilcox 19,701 19,701 0 *
Kevin Garner Wilcox CF 19,701 19,701 0 *
Benjamin D. Raker UTMA ME
Kevin Garner Wilcox CF 9,851 9,851 0 *
Katherine Bess Raker UTMA ME
Kevin Garner Wilcox CF 19,701 19,701 0 *
Samuel H. Raker UTMA ME
Richard S. Wilcox Jr. (9) 175,791 102,436 73,355 *
Richard S. Wilcox Jr. TTE 212,694 177,294 35,400 *
Thomas Patrick Wilcox 39,400 39,400 0 *
6/17/42 Trust b/o Beekman 226,948 68,948 158,000 *
Winthrop US Trust Company
Of New York
Beekman Winthrop Birthday 76,400 39,400 37,000 *
Trust US Trust Company
Of New York
Dudley Winthrop WMI Trust 90,948 68,948 22,000 *
US Trust Company of New York
Winthrop Holdings, L.P. 29,701 19,701 10,000 *
US Trust Company of New York
George F. Wood 49,249 49,249 0 *
Robert H.B. Baldwin (10) 3,941 3,941 0 *
John C. Beck 9,851 9,851 0 *
C/o Beck Mack & Oliver LLC (10)
Joanne C. Kanzler 9,851 9,851 0 *
C/o E. Birke Jr. (10)
John C. Beck GST Trust 1,971 1,971 0 *
C/o Beck Mack & Oliver LLP (10)
John C. Beck Trust 9,851 9,851 0 *
C/o Beck Mack & Oliver LLP (10)
Kenneth J. Roering 63,900 39,400 24,500 *
Thaddeus E. Beck Jr. GST 1,971 1,971 0 *
Trust (10)
Thaddeus E. Beck Jr.
Trust (10) 2,956 2,956 0 *
Arnold M. Berlin (10) 2,956 2,956 0 *
David P. Bicks 1,971 1,971 0 *
LeBoeuf, Lamb, Leiby &
MacRae (10)
Alan I. Brown 3,656 2,956 700 *
C/o Tannenbaum Dubin &
Robinson (10)
Paul C. Bruning (10) 2,956 2,956 0 *
Bemidge L. Copen 9,851 9,851 0 *
Huddleston, Bolen, Beatty,
Porter & Copen (10)
Copen Family Trust 1,971 1,971 0 *
Huddleston, Bolen, Beatty,
Porter & Copen (10)
Warren R. Crane 13,791 13,791 0 *
C/o Roberta Belpanno (10)
Dr. Horace I. Crary (10) 5,911 5,911 0 *
Horace I. Crary, Jr. (10) 3,941 3,941 0 *
Susan P. Crary (10) 2,571 1,971 600 *
Day, Beery & Howard as 1,483 1,183 300 *
Trustee of Retirement Plan
F/B/O Robert J. Miller (10)
Cleveland H. Dodge Foundation 15,761 15,761 0 *
Inc (10)
Christopher J. Elliman (10) 3,656 2,956 700 *
Richard A. Freytag (10) 989 789 200 *
Randall A. Hack (10) 3,941 3,941 0 *
Francine L.R. Haskell (10) 19,701 19,701 0 *
Huddleston Money Purchase 6,111 5,911 200 *
Pension Plan c/o Mr. and
Mrs. B.P. Huddleston (10)
Anne O. Jackson (10) 1,977 1,577 400 *
J.C. Kellogg Foundation 1,971 1,971 0 *
Spear, Leeds & Kellogg (10)
Mr. and Mrs. Vito Lenoci (10) 989 789 200 *
Mannie L. Johnson 19,701 19,701 0 *
C/F Aubrey T. Linen (10) 395 395 0 *
C/F Ethan M. Linen (10) 395 395 0 *
Christopher T. Linen (10) 2,471 1,971 500 *
Jonathan S. Linen (10) 6,026 4,926 1,100 *
Leila Jones Linen (10) 3,856 2,956 900 *
Robin E. Linen (10) 1,186 986 200 *
James Loehlin C/F David 989 789 200 *
Loehlin (10)
Robert C. Loehlin Trust (10) 989 789 200 *
Edgar M. Masinter (10) 8,866 8,866 0 *
Margery F. Masinter (10) 986 986 0 *
Alexander H. Massad 9,851 9,851 0 *
IRA (10)
Trust F/B/O Collin A. McNeil 12,651 9,851 2,800 *
C/o Robert W. Cruckshank (10)
Trust F/B/O Joanna P. McNeil 12,651 9,851 2,800 *
C/o Robert W. Cruckshank (10)
Trust F/B/O Mary V. McNeil 11,851 9,851 2,800 *
C/o Robert W. Cruckshank (10)
Trust F/B/O Nancy M. McNeil 12,651 9,851 2,800 *
C/o Robert W. Cruckshank (10)
Richard Miller 6,326 4,926 1,400 *
C/o Simpson Thacker &
Bartlett (10)
Robert J. Miller (10) 1,977 1,577 400 *
Osprey Partners (10) 9,851 9,851 0 *
Peacock Family Inv. Co. (10) 7,881 7,881 0 *
Frederick H. Sherley (10) 1,971 1,971 0 *
Robert P. Sherley (10) 1,971 1,971 0 *
Robert S. Sherley (10) 9,851 9,851 0 *
Mr. and Mrs. Alan Siegel 4,447 3,547 900 *
(10)
James C. Taylor (10) 1,971 1,971 0 *
Daniel K. Thorne 2,956 2,956 0 *
C/o Theodore S. Lynn (10)
Peter Thornton, President 1,186 986 200 *
Stern & Stern Industries (10)
Renke B. Thye (10) 986 986 0 *
Tolten Ltd. Partnership 11,821 11,821 0 *
C/o Mr. James Billingsley (10)
Alexander B. Trevor (10) 7,511 5,911 1,600 *
C/F Alexander B. Trevor (10) 2,471 1,971 500 *
Ann Wood Trevor Trust (10) 4,447 3,547 900 *
Ellen R. Trevor (10) 1,483 1,483 300 *
Susan Unterberg (10) 7,411 5,911 1,500 *
Harriet Van Vleck (10) 7,411 5,911 1,500 *
Roy T. Van Vleck (10) 4,941 3,941 1,000 *
Tielman Van Vleck (10) 5,141 3,941 1,200 *
Susan B. Wasch GST 1,971 1,971 0 *
Trust (10)
Susan B. Wasch Trust (10) 2,956 2,956 0 *
Watertown Foundation #2 4,447 3,547 900 *
C/o Dr. Dwight J. Miller (10)
Stephen L. Way, President 3,656 2,956 700 *
HCC Insurance Holdings (10)
___________________________
* Less than 1%.
(1) Represents the maximum number of Shares that may be sold by each Selling
Shareholder pursuant to this Prospectus; provided, however, that
pursuant to Rule 416 under the Securities Act of 1933, as amended, the
Registration Statement of which this Prospectus is a part shall also
cover any additional shares of Common Stock which become issuable in
connection with the Shares registered for sale hereby by reason of (i)
any stock dividend, stock split, recapitalization or other transaction
effected without the receipt of consideration which results in an
increase in the Company's number of outstanding shares of Common Stock
or (ii) decreases in the conversion price applicable to the Series D
Preferred Stock. In the event Rule 416 is not available, the Company is
obligated to register such additional shares of Common Stock.
(2) Assumes the sale of all Shares offered hereby to unaffiliated third
parties. The Selling Shareholders may sell all or part of their
respective Shares.
(3) Represents Shares issuable solely upon exercise of Warrants. Includes
1,000 shares held by Mr. Hassel's spouse in an IRA.
(4) Includes 7,997 shares held with his spouse as joint tenants.
(5) Includes 30 shares held by Mr. Lundstrom indirectly.
(6) Includes 65,000 shares held by Marshall Financial Group, Inc. of which
Mr. Mathisen is president and sole shareholders; 30,000 shares held by
Mr. Mathisen's sons. Mr. Mathisen disclaims beneficial ownership of
such shares.
(7) Includes 20,319 shares held by Mr. Quam with his spouse as joint tenants.
(8) Includes 26,455 shares held by Mr. Wilcox in his IRA.
(9) These shares were purchased on behalf of the investor listed by Beck,
Mack & Oliver LLC and reflect only those shares held in the investor's
account with Beck, Mack & Oliver LLC.
PLAN OF DISTRIBUTION
The Shares of Common Stock of the Company offered hereby may be sold by
the Selling Shareholders, or by pledgees, donees, transferees or other
successors in interest thereof.
Offers and sales of the Shares may be made from time to time on one or
more exchanges or in the over-the-counter market, or otherwise, at prices and
on terms then prevailing or at prices related to the then-current market
price, or in negotiated transactions. The methods by which the Shares may be
sold may include, but not be limited to, the following: (a) a block trade in
which the broker or dealer so engaged will attempt to sell the Shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale
by such broker or dealer for its account in accordance with any method of sale
described herein; (c) an exchange distribution in accordance with the rules of
such exchange; (d) ordinary brokerage transactions in which the broker
solicits purchasers; (e) privately negotiated transactions; (f) short sales;
and (g) a combination of any such methods of sale. In effecting sales,
brokers and dealers engaged by the Selling Shareholders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions
or discounts from the Selling Shareholders or from the purchasers in amounts
to be negotiated prior to the sale. The Selling Shareholders may also sell
such Shares in accordance with Rule 144 under the Securities Act of 1933, as
amended (the Securities Act), if available.
From time to time the Selling Shareholders may engage in short sales,
short sales against the box, puts and calls and other transactions in
securities of the Company or derivatives thereof, and may sell and deliver the
Shares in connection therewith. From time to time Selling Shareholders may
pledge their Shares pursuant to the margin provisions of their respective
customer agreements with their respective brokers. Upon a default by a
Selling Shareholder, the broker may offer and sell the pledged Shares of
Common Stock from time to time.
The Company has agreed to use its best efforts to maintain the
effectiveness of the registration of the Shares being offered hereunder for
two years from the date of this Prospectus or such earlier date when all of
the Shares being offered hereunder have been sold or may be sold without
volume or other restrictions pursuant to Rule 144 under the Securities Act, as
determined by counsel to the Company pursuant to a written opinion letter.
The Selling Shareholders and any brokers participating in such sales may
be deemed to be underwriters within the meaning of the Securities Act. There
can be no assurance that the Selling Shareholders will sell any or all of the
Shares of Common Stock offered hereunder.
All proceeds from any such sales will be the property of the Selling
Shareholder who will bear the expense of underwriting discounts and selling
commissions. The Company is required to pay all fees and expenses incident to
the offering and sale of the Shares, but not including fees and disbursements
of counsel to the Selling Shareholders. The Company has agreed to indemnify
the Selling Shareholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain other legal
matters will be passed upon for the Company by Lindquist & Vennum P.L.L.P.,
Minneapolis, Minnesota. Gerald E. Magnuson, Of Counsel to Lindquist & Vennum
P.L.L.P., is a director, officer and holder of Common Stock of the Company.
EXPERTS
The audited financial statements and schedule incorporated by reference
in this registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the Exchange Act), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the Commission). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and the Commission's regional offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may be obtained at prescribed rates
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and other information regarding the Company filed
electronically with the Commission at http://www.sec.gov. The Company's
Common Stock is quoted on the Nasdaq National Market of the National
Association of Securities Dealers Automated Quotations system (Nasdaq), and
such reports, proxy statements and other information regarding the Company can
be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
Shares offered hereby. This Prospectus does not contain all information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Shares offered hereby,
reference is made to such Registration Statement, copies of which may be
inspected in the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and copies of which
may be obtained from the Commission upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents heretofore filed by the
Company with the Securities and Exchange Commission (the "Commission") under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference: (1) Annual Report on Form 10-K for the year
ended August 29, 1997; (2) Quarterly Reports on Form 10-Q for the quarters
ended November 28, 1997, February 27, 1998 and May 27, 1998; (3) Proxy
Statement for Annual Meeting of Shareholders held on January 14, 1998 (except
to the extent portions of such document are not deemed incorporated by
reference into any filing under the Securities Act or the Exchange Act); (4)
Current Report on Form 8-K filed on August 18, 1998; (5) Current Report on
Form 8-K filed on August 28, 1998; and (6) the description of the Company's
Common Stock contained in the Company's Registration Statement on Form S-3
filed with the Commission under the Exchange Act on October 12, 1995, declared
effective on November 15, 1995 (No. 33-63373), and as such description is
supplemented by Form 8-A, filed with the Commission on June 21, 1996, and
amended on July 30, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such reports and documents (except to the extent
portions of such document are not deemed incorporated by reference into any
filing under the Securities Act or the Exchange Act).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests
for such copies should be directed to John V. McManus, Vice President-Finance,
Sheldahl, Inc., 1150 Sheldahl Road, Northfield, Minnesota 55057. Telephone
requests may be directed to John V. McManus at (507) 663-8000.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14: Other Expenses of Issuance and Distribution*
SEC registration fee $ 13,448
Nasdaq listing fee 17,500
Accounting fees and expenses 2,000
Legal fees and expenses 2,500
Printing expenses 0
Blue Sky fees and expenses 0
Transfer agent and registrar fees 500
Miscellaneous 552
Total $ 36,500
__________________
*Except for the SEC registration fee and Nasdaq listing fee, all of the
foregoing expenses have been estimated.
ITEM 15: Indemnification of Directors and Officers
Section 302A.521 of Minnesota Statutes requires the Registrant to
indemnify a person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of the person with respect
to the Registrant, against judgments, penalties, fines, including reasonable
expenses, if such person (1) has not been indemnified by another organization
or employee benefit plan for the same judgments, penalties, fines, including,
without limitation, excise taxes assessed against the person with respect to
an employee benefit plan, settlements, and reasonable expenses, including
attorneys' fees and disbursements, incurred by the person in connection with
the proceeding with respect to the same acts or omissions; (2) acted in good
faith; (3) received no improper personal benefit, and statutory procedure has
been followed in the case of any conflict of interest by a director; (4) in
the case of a criminal proceeding, had no reasonable cause to believe the
conduct was unlawful; and (5) in the case of acts or omissions occurring in
the person's performance in the official capacity of director or, for a person
not a director, in the official capacity of officer, committee member or
employee, reasonably believed that the conduct was in the best interests of
the Registrant, or, in the case of performance by a director, officer or
employee of the Registrant as a director, officer, partner, trustee, employee
or agent of another organization or employee benefit plan, reasonably believed
that the conduct was not opposed to the best interests of the Registrant. In
addition, Section 302A.521, subd. 3, requires payment by the Registrant, upon
written request, of reasonable expenses in advance of final disposition in
certain instances. A decision as to required indemnification is made by a
disinterested majority of the Board of Directors present at a meeting at which
a disinterested quorum is present, or by a designated committee of the Board,
by special legal counsel, by the shareholders or by a court. The Registrant's
Bylaws provide for indemnification of officers, directors and employees to the
fullest extent provided by Section 302A.521.
As permitted by Section 302A.251 of the Minnesota Business Corporation
Act, the Amended and Restated Articles of Incorporation of the Registrant
eliminate the liability of the directors of the Registrant for monetary
damages arising from any breach of fiduciary duties as a member of the
Registrant's Board of Directors (except as expressly prohibited by Minnesota
Statutes, Section 302A.251, subd. 4).
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the Securities Act) may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
referenced in Item 15 of this Registration Statement or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
In addition, the Registration Rights Agreement, filed as an Exhibit
hereto, contains provisions for indemnification by the Selling Shareholders of
the Registrant and its officers, directors, and controlling persons against
certain liabilities under the Securities Act.
Item 16. Exhibits
Exhibit
Number Description
3.1 Amended and Restated Articles of Incorporation, incorporated by
reference from Exhibit 3.1 of the Registrant's Form 10-Q for
the quarter ended December 2, 1994.
3.2 Bylaws, as amended, incorporated by reference from Exhibit 3.2
of the Registrant's Registration Statement on Form S-2 (File
No. 33-79266).
4.1 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock, incorporated by reference
from Exhibit 1 of Registrant's Form 8-A, filed June 21, 1996.
4.2 Convertible Preferred Stock Purchase Agreement among the
Company, Southbrook International Investments, Ltd., HBK Cayman
L.P., HBK Offshore Fund Ltd., HBK Investments L.P., Proprietary
Convertible Investment Group, Inc. and Brown Simpson Strategic
Growth Fund, L.P., incorporated by reference from Exhibit 4.1
of Registrant's Form 8-K filed September 10, 1997.
4.3 Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock, incorporated by reference from
Exhibit 4.2 of Registrant's Form 8-K filed September 10, 1997.
4.4 Form of Warrant issued to Southbrook International Investments,
Ltd., HBK Cayman L.P., HBK Offshore Fund Ltd., Proprietary
Convertible Investment Group, Inc. and Brown Simpson Strategic
Growth Fund, L.P., incorporated by reference from Exhibit 4.3
of Registrant's Form 8-K filed September 10, 1997.
4.5 Registration Rights Agreement among the Company, Southbrook
International Investments, Ltd., HBK Cayman L.P., HBK Offshore
Fund Ltd., HBK Investments L.P., Proprietary Convertible
Investment Group, Inc. and Brown Simpson Strategic Growth Fund,
L.P., incorporated by reference from Exhibit 4.4 of
Registrant's Form 8-K filed September 10, 1997.
4.6 Convertible Preferred Stock Purchase Agreement among the
Company and the Purchasers listed in Exhibit A thereto,
incorporated by reference from Exhibit 4.1 of Registrant's Form
8-K filed August 18, 1998.
4.7 Certificate of Designation, Preferences and Rights of Series D
Convertible Preferred Stock, incorporated by reference from
Exhibit 4.2 of Registrant's Form 8-K filed August 18, 1998.
4.8 Form of Warrant issued to the Purchasers, incorporated by
reference from Exhibit 4.3 of Registrant's Form 8-K filed
August 18, 1998.
4.9 Registration Rights Agreement among the Company and the
Purchasers listed in Exhibit A thereto, incorporated by
reference from Exhibit 4.4 of Registrant's Form 8-K filed
August 18, 1998.
4.10 Form of Warrant issued in connection with Credit and Security
Agreement dated June 19, 1998, among the Registrant, Norwest
Bank Minnesota, N.A., Harris Trust and Savings Bank, NBD Bank,
N.A., and The CIT Group/Equipment Financing, Inc., incorporated
by reference from Exhibit 10.2 of the Registrant's Form S-3
filed July 1, 1998.
5.1 Opinion and Consent of Lindquist & Vennum, counsel to the
Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Lindquist & Vennum P.L.L.P. (included in Exhibit 5.1
to the Registration Statement).
24 Power of Attorney (included in the signature page of the
Registration Statement).
Item 17. Undertakings
The undersigned Registrant hereby undertakes, in accordance with Item
512 of Regulation S-K:
(a) (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(4) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering;
(b) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(c) To deliver or cause to be delivered with the Prospectus, to each
person to whom the Prospectus is sent or given, the latest annual report, to
security holders that is incorporated by reference in the Prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 and Rule
14c-3 under the Exchange Act; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not set forth in
the Prospectus, to deliver, or cause to be delivered to each person to whom
the Prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the Prospectus to provide such
interim financial information.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(i) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Northfield, State of Minnesota, on the 24th day of
September, 1998.
SHELDAHL, INC.
By /s/ James E. Donaghy
James E. Donaghy,
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints James
E. Donaghy and John V. McManus, and each of them (with full power to act
alone), such person's true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully to all intents and
purposes as such person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on September
24, 1998 in the capacities indicated.
Signature Title
/s/ James S. Womack Chairman of the Board and Director
James S. Womack
/s/ James E. Donaghy Chief Executive Officer and
James E. Donaghy Director (principal executive
officer)
/s/ John V. McManus Vice President Finance (principal
John V. McManus financial and accounting officer)
/s/ John G. Kassakian Director
John G. Kassakian
/s/ Gerald E. Magnuson Director
Gerald E. Magnuson
/s/ William B. Miller Director
William B. Miller
/s/ Kenneth J. Roering Director
Kenneth J. Roering
/s/ Beekman Winthrop Director
Beekman Winthrop
<PAGE>
[LINDQUIST & VENNUM P.L.L.P. LETTERHEAD]
Exhibit 5.1
September 24, 1998
Sheldahl,Inc.
1150 Sheldahl Road
Northfield, MN 55057
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-3 filed by
Sheldahl, Inc. (the Company) with the Securities and Exchange Commission,
relating to a public offering of up to 6,484,544 shares of Common Stock, $.25
par value (Common Stock), to be offered and sold by certain Selling
Shareholders (as defined therein), please be advised that as counsel to the
Company, upon examination of such corporate documents and records as we have
deemed necessary or advisable for the purposes of this opinion, it is our
opinion that:
1. The Company is a validly existing corporation in good standing under
the laws of the State of Minnesota.
2. The shares of Common Stock being offered by the Selling Shareholders
are duly authorized and, when issued to the Selling Shareholders and paid for
as contemplated by the Purchase Agreement and the Warrants, as applicable,
included in the Registration Statement as Exhibits 4.8 and 4.10, respectively,
will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the heading
Legal Matters in the Prospectus comprising a part of the Registration
Statement.
Very truly yours,
/s/ Lindquist & Vennum PLLP
LINDQUIST & VENNUM P.L.L.P.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report and to all references to our firm included in or made a part of
this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
September 22, 1998
<PAGE>
