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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): December 28, 2000
Sheldahl, Inc.
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(Exact name of Registrant as specified in its charter)
Minnesota 0-45 41-0758073
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1150 Sheldahl Road
Northfield, Minnesota 55057
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (507) 663-8000
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Item 1. Changes in Control of Registrant
Merger
On December 28, 2000, Sheldahl, Inc., a Minnesota corporation
("Sheldahl" or the "Company"), acquired all of the outstanding securities of
International Flex Technologies, Inc. ("IFT") for approximately 9.7 million
shares of Sheldahl's common stock, $.25 par value ("Common Stock") under the
terms of a previously announced definitive merger agreement, as amended, (the
"Merger Agreement") by and among Sheldahl, IFT West Acquisition Company, a newly
formed subsidiary of Sheldahl ("West"), International Flex Holdings, Inc., the
sole shareholder and operating company of IFT ("Holdings"), and the stockholders
of Holdings (the "Stockholders"). Under the terms of the Merger Agreement, West
merged with and into Holdings, with Holdings surviving and becoming a
wholly-owned subsidiary of Sheldahl (the "Merger"). As consideration for the
Merger, holders of outstanding shares of Holdings' common stock, Class A Stock,
Class B Stock and Series A Preferred Stock received shares of Sheldahl Common
Stock. Holdings' option holders and warrant holder received equivalent options
and a warrant to purchase shares of Sheldahl Common Stock. The total number of
shares of Sheldahl Common Stock to be issued, including shares to be issued upon
exercise of options and warrants, is 9.7 million.
The Merger Agreement is incorporated herein by reference as Exhibits
2.0 and 2.1 hereto. The foregoing description of the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to such
exhibit.
Common Stock and Series G Investment
Concurrent with consummating the Merger, Sheldahl completed the
previously announced equity investment pursuant to an amended stock purchase
agreement (the "Stock Purchase Agreement") by and among Sheldahl, and three
accredited investors including Morgenthaler Venture Partners V, L.P.
("Morgenthaler V"), and Ampersand IV Limited Partnership and Ampersand IV
Companion Fund Limited Partnership (collectively the "Ampersand Funds"). Under
the terms of the Stock Purchase Agreement, Morgenthaler V and the Ampersand
Funds (the "Investors") collectively invested an aggregate of $25.0 million in
equity capital in exchange for approximately 9.8 million shares of Sheldahl
Common Stock and 11,303 shares of a newly created 11.06% Series G Convertible
Preferred Stock of Sheldahl, par value $1.00 per share (the "Series G Stock"),
such shares being convertible in the aggregate into approximately 8.1 million
shares of Sheldahl Common Stock (the "Equity Investment"). The cash used by the
Investors to complete the Equity Investment came from the liquid assets of the
Investors.
The Series G Stock is convertible into shares of the Company's Common
Stock at any time. Each holder of the Series G Stock is entitled to convert each
share of Series G Stock into that number of shares of Common Stock that equals
$1,000 plus accrued dividends divided by the Conversion Price. The Conversion
Price is $1.40 per share and is subject to adjustment from time-to-time under
certain customary anti-dilution provisions. The Series G Stock is entitled to
11.06%
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dividends, payable annually. For a period of twenty-four (24) months from the
date of issuance, Sheldahl is obligated to pay the dividend in shares of its
Common Stock at a Dividend Conversion Price of $1.625, as adjusted from
time-to-time under customary anti-dilution provisions. Thereafter, Sheldahl may
pay the dividend in shares of its Common Stock, or, at its option, cash. One
year of dividends at the Dividend Conversion Price would equate to approximately
769,300 shares.
The Series G Stock is subordinate to the Company's Series D, E and F
Convertible Preferred Stock with regard to payment of dividends and proceeds
upon liquidation. Upon a liquidation of all of the assets of Sheldahl, the
holders of the Series G Stock would be entitled to receive $25.0 million plus
any accrued but unpaid dividends less the market value of the shares of Common
Stock purchased under the Stock Purchase Agreement and retained by the holders
of the Series G Stock following the adoption of a plan of liquidation, provided
that any shares of Common Stock purchased under the Stock Purchase Agreement may
be turned into the Company for cancellation at the election of the holders of
the Series G Stock. The Company may require holders of the Series G Stock to
convert to Common Stock provided that the Company's Common Stock trades at
certain pre-set price levels.
The Stock Purchase Agreement and the Certificate of Designation for the
Series G Stock, are incorporated herein by reference as Exhibits 4.0, 4.1 and
4.2 hereto. The foregoing description of the Stock Purchase Agreement and the
Series G Stock does not purport to be complete and is qualified in its entirety
by reference to such Exhibits.
Subordinated Notes and Warrant Purchase Investment
Concurrent with consummating the Merger and Equity Investment, Sheldahl
consummated the previously announced debt investment pursuant to an amended and
restated subordinated notes and warrant purchase agreement (the "Debt
Agreement") by and among Sheldahl, Morgenthaler V, the Ampersand Funds and Molex
Incorporated, Sheldahl's largest shareholder ("Molex"). Under the terms of the
Debt Agreement, Morgenthaler V, the Ampersand Funds and Molex (the "Purchasers")
purchased $6.5 million of 12% Senior Subordinated Notes ("Notes") and related
warrants (the "Warrants") (the "Debt Investment"). In addition, the Purchasers
collectively received Warrants to purchase 1,526,814 shares of Sheldahl Common
Stock. The Warrants issued under the Debt Agreement are exercisable at $.01 per
share and are exercisable for seven years from the date of issuance. The cash
used by the Purchasers to complete the Debt Investment came from the liquid
assets of the Purchasers.
The Debt Agreement, the Notes and Warrants issued thereunder, are
incorporated herein by reference as Exhibits 4.3 through 4.11 hereto. The
foregoing description of the Debt Agreement, the Notes and the Warrants does not
purport to be complete and is qualified in its entirety by reference to such
Exhibits.
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Registration Rights
Under the Merger Agreement, the Stock Purchase Agreement and the Debt
Agreement, the Company granted Morgenthaler V, the Ampersand Funds, the
Stockholders of Holdings and Molex certain registration rights. The registration
rights cover all shares of Common Stock issued or issuable to the Stockholders
of Holdings, the Investors and Purchasers (i) under the Merger Agreement and the
Stock Purchase Agreement, (ii) upon conversion of shares of the Series G Stock,
(iii) as accrued dividends on the Series G Stock, and (iv) upon exercise of the
Warrants. The Company is obligated to file a shelf Registration Statement on or
before nine (9) months after the closing date of the Merger, Equity Investment
and the Debt Investment and to use its best efforts to have a such Registration
Statement declared effective as promptly as possible thereafter, but in any
event prior to the first anniversary of the closing date of the Merger, the
Equity Investment and the Debt Investment.
The Registration Rights Agreement between the Company and the Investors
and Purchasers specifying the terms of the registration rights is incorporated
herein by reference as Exhibit 4.12 hereto. The foregoing description of the
Registration Rights does not purport to be complete and is qualified in its
entirety by reference to such Exhibit.
Governance Agreement
Concurrent with the closing of the Merger, the Equity Investment and
the Debt Investment (collectively, the "Transactions"), Sheldahl entered into a
governance agreement by and among it and Morgenthaler V, the Ampersand Funds and
Sound Beach Technology Partners, LLC, a former IFT stockholder ("Sound Beach")
(collectively, the "Parties") establishing the terms and conditions regarding
(i) future purchases and sales of the Company's securities, and (ii) the
Parties' relationship with the Company (the "Governance Agreement"). Molex is
not a party to the Governance Agreement.
Under the terms of the Governance Agreement, until the third
anniversary of the closing of the Transactions, the Parties and their respective
affiliates are restricted from beneficially owning any Sheldahl securities in
excess of that issued or issuable (i) in the Merger, (ii) under the Stock
Purchase Agreement, (iii) upon conversion of the Series G Stock, (iv) issuable
in respect of dividends due on the Series G Stock, and (v) upon exercise of the
Warrants issued under the Debt Agreement. The Parties are also restricted from
doing a business combination or proxy solicitation during the same period. This
restriction does not include, however, acquiring securities directly from the
Company or making business combination or tender offer proposals to the Company
or conducting a proxy solicitation in response to the same made by third
parties.
Also under the terms of the Governance Agreement, for one year from the
date of the closing of the Transactions, the Parties are restricted from
transferring any of their shares of Common Stock, Series G Stock and Warrants,
other than to their Affiliates or Associates. At any time prior to the third
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anniversary of the closing of the Transactions, any transferees of such parties,
other than a partner or a member of a Party, must become a signatory to the
Governance Agreement. After one year, any of the Parties that is an investment
fund may distribute its shares to its partners and members.
The terms of the Governance Agreement also require that the initial
composition of Board of Directors of Sheldahl after the closing of the
Transactions be comprised of (i) three continuing directors from Sheldahl (each
a "Continuing Director"), (ii) the director appointed by Molex (the "Molex
Director"), and (iii) three directors nominated by Morgenthaler V, the Ampersand
Funds and Sound Beach. The number of directors which may be nominated by
Morgenthaler V, the Ampersand Funds and Sound Beach will be reduced as their
collective ownership in the Company is reduced. The terms of the Governance
Agreement require that the identity of directors to stand for election by the
Company's shareholders or to fill vacancies on the Board of Directors be
determined by a nominating committee of the Board of Directors (the "Nominating
Committee"). For the first regular meeting of the Company's shareholders
subsequent to the closing of the Transactions, the Nominating Committee is to be
comprised of one director appointed by Morgenthaler V, the Ampersand Funds and
Sound Beach together, one Continuing Director and the Molex Director.
In the event the Company desires to enter into a transaction with any
of the holders of the Series G Stock or their affiliates, the Governance
Agreement requires that such transaction must be approved by a majority vote of
the Board of Directors, excluding any Series G Director who is a party to or
otherwise has an interest in the transaction.
Without the consent of Morgenthaler V and the Ampersand Funds, the
Company may not authorize or enter into any agreement relating to a merger, sale
or lease of substantially all of the Company's assets, set the number of
directors at a number other than seven (7), subject to an amendment to the
Company's Bylaws to reduce the current number of directors from nine (9) to
seven (7), or repurchase or redeem any equity securities of the Company, as long
as such Party continues to hold at least 15% of the shares of Common Stock
issued or issuable to it pursuant to the Transactions.
The Governance Agreement between the Company and the Parties is
incorporated herein by reference as Exhibit 4.13 hereto. The foregoing
description of the Governance Agreement does not purport to be complete and is
qualified in its entirety by reference to such Exhibit.
Investment Banker Warrant
As part of its compensation as the Company's investment banker and in
connection with its representation of Sheldahl in the consummation of the
Transactions, US Bancorp Piper Jaffray received a warrant to purchase 175,000
shares of the Company's Common Stock (the "Piper Warrant"). The Piper Warrant is
exercisable for seven years at the price of approximately $2.77 per share. The
Piper Warrant is incorporated herein by reference as Exhibit 4.14 hereto. The
foregoing description of such amendment does not purport to be complete and is
qualified in its entirety by reference to such Exhibit.
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Post Transactions Ownership
After completion of all the Transactions, the parties that acquired
securities in the Transactions (the "Parties") collectively hold securities
representing ownership of approximately 60% of Sheldahl on a fully diluted basis
(assuming conversion of all Sheldahl convertible securities).
On a beneficial basis, calculated in conformance with Rule 13d-1 of the
Securities Exchange Act of 1934, as amended, the Parties have the approximate
ownership as follows:
o Morgenthaler V owns or has the right to acquire 18,968,549
shares of Sheldahl Common Stock, representing 51.75% of
Sheldahl.
o The Ampersand Funds owns or has the right to acquire 5,533,314
shares of Sheldahl Common Stock, representing 16.67% of
Sheldahl.
o Molex owns or has the right to acquire 3,835,020 shares of
Sheldahl Common Stock, representing 11.32% of Sheldahl.
o Sound Beach owns or has the right to acquire 2,679,405 shares
of Sheldahl Common Stock, representing 8.76% of Sheldahl.
o Other former Stockholders of Holdings collectively own or have
the right to acquire 955,088 shares of Sheldahl Common Stock,
representing 3.08% of Sheldahl.
Reference should be made to future filings by such parties for a full
description of their holdings of Sheldahl securities.
Item 2. Acquisition or Disposition of Assets
See description of the Transactions in Item 1. above.
Item 5. Other Events
In connection with the consummation of the Transactions, Edward L.
Lundstrom and Jill D. Burchill resigned their positions with the Company. Donald
R. Friedman, former Chief Executive Officer of IFT, was appointed Chief
Executive Officer ("CEO") of Sheldahl and Peter Duff, former Chief Financial
Officer of IFT, was appointed Vice President - Finance of Sheldahl. In addition,
three members of Sheldahl's Board of Directors, James E. Donaghy, Gerald E.
Magnuson and Edward L. Lundstrom resigned their positions as directors and were
replaced by John D. Lutsi (Chairman), Stuart A. Auerbach and Donald R. Friedman.
Subsequent to the consummation of the Transactions, Sheldahl
reorganized its business and created two divisions for their operations.
Sheldahl's Micro Products operations have been combined with the former IFT
operations in Endicott, New York and will be called the International Flex
Technologies ("IFT") Division. The second business unit consisting primarily of
Sheldahl's Northfield operations will be called the Sheldahl Materials and Flex
Interconnect ("MFI") Division.
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Donald R. Friedman, in addition to serving as Sheldahl's CEO, will become acting
President of the IFT Division. William E. Offenberg has been appointed President
of the Sheldahl MFI Division.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(A) Financial Statements of Business Acquired
To be provided by amendment in accordance with Item 7(a)(4) of Form
8-K.
(B) Pro Forma Financial Information
To be provided by amendment in accordance with Item 7(a)(4) of Form
8-K.
(C) Exhibits
Exhibit 2.0 Agreement and Plan of Merger dated November 10,
2000 among Sheldahl Inc., IFT West Acquisition
Company, International Flex Holdings, Inc., and
the stockholders of International Flex Holdings,
Inc. (incorporated by reference from Exhibit 2.0
of Sheldahl's Form 8-K filed November 13, 2000)
Exhibit 2.1 Amendment No. 1 to Agreement and Plan of Merger
among Sheldahl Inc., IFT West Acquisition
Company, International Flex Holdings, Inc., and
the stockholders of International Flex Holdings,
Inc.
Exhibit 3.0 Bylaws of Sheldahl, Inc., as amended.
Exhibit 4.0 Stock Purchase Agreement dated November 10, 2000
among Sheldahl, Inc. and the individuals and
entities listed on Exhibit A thereto.
(incorporated by reference from Exhibit 4.0 of
Sheldahl's Form 8-K filed November 13, 2000).
Exhibit 4.1 First Amendment to Stock Purchase Agreement
among Sheldahl, Inc. and the individuals and
entities listed on Exhibit A thereto.
Exhibit 4.2 Certificate of Designation, Preferences and
Rights of Series G Convertible Preferred Stock.
Exhibit 4.3 Amended and Restated Subordinated Notes and
Warrant Purchase Agreement among Sheldahl, Inc.
and the entities listed on Schedule I thereto.
Exhibit 4.4 Note to Morgenthaler Venture Partners V, L.P.
issued under Subordinated Notes and Warrant
Purchase Agreement
Exhibit 4.5 Note to Ampersand IV Limited Partnership issued
under Subordinated Notes and Warrant Purchase
Agreement
Exhibit 4.6 Note to Ampersand IV Companion Fund Limited
Partnership issued under Subordinated Notes and
Warrant Purchase Agreement
Exhibit 4.7 Note to Molex Incorporated issued under
Subordinated Notes and Warrant Purchase
Agreement
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Exhibit 4.8 Warrant of Morgenthaler Venture Partners V, L.P.
issued under Subordinated Notes and Warrant
Purchase Agreement
Exhibit 4.9 Warrant of Ampersand IV Limited Partnership
issued under Subordinated Notes and Warrant
Purchase Agreement
Exhibit 4.10 Warrant of Ampersand IV Companion Fund Limited
Partnership issued under Subordinated Notes and
Warrant Purchase Agreement
Exhibit 4.11 Warrant of Molex Incorporated issued under
Subordinated Notes and Warrant Purchase
Agreement
Exhibit 4.12 Registration Rights Agreement among Sheldahl,
Inc. and the individuals listed on Exhibit A
hereto.
Exhibit 4.13 Governance Agreement among Sheldahl, Inc. and
the individuals and entities listed on the
signature pages thereto.
Exhibit 4.14 Warrant of U.S. Bancorp Piper Jaffray
Exhibit 4.15 Warrant of Dublind Investments, LLC
Exhibit 99.0 Press Release of December 19, 2000.
Exhibit 99.1 Press Release of December 21, 2000.
Exhibit 99.2 Press Release of December 29, 2000.
Exhibit 99.3 Press Release of January 11, 2001.
Item 8. Change in Fiscal Year
Subsequent to the Merger of IFT and Sheldahl, on January 5, 2001
Sheldahl's Board of Directors determined that it would be in the best interests
of the Company going forward to change its fiscal year end to the Friday closest
to December 31 of each year beginning with December 29, 2000. Accordingly,
Sheldahl will be filing a Form 10-K within 90 days of December 29, 2000 for such
transition. Sheldahl currently anticipates that it will hold a meeting of its
shareholders in the second quarter of 2001 and will file a notice of and proxy
statement for such meeting as required under the Securities Exchange Act of
1934, as amended.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sheldahl, Inc.
By /s/ Donald R. Friedman
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Donald R. Friedman, President and
Chief Executive Officer
Dated: January 12, 2001
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