<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1997
REGISTRATION NO. 333-36521
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SANMINA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3672 77-0228183
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
JURE SOLA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SANMINA CORPORATION
355 EAST TRIMBLE ROAD
SAN JOSE, CALIFORNIA 95131
(408) 435-8444
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
CHRISTOPHER D. MITCHELL, ESQ. ALAN C. MENDELSON, ESQ.
WILSON SONSINI GOODRICH & ROSATI COOLEY GODWARD LLP
PROFESSIONAL CORPORATION FIVE PALO ALTO SQUARE
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94306
PALO ALTO, CALIFORNIA 94304 (650) 843-5000
(650) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: UPON
CONSUMMATION OF THE MERGER REFERRED TO HEREIN.
------------------------
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH
GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
======================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED(1) REGISTERED(2) PER UNIT OFFERING PRICE FEE
- ------------------------------------------------------------------------------------------------------
Common Stock, par value
$0.01 per share........... 3,480,951 shares $86.75 (3) $301,972,499(3) $91,506.82(4)
======================================================================================================
</TABLE>
(1) The Registration Statement relates to securities of the Registrant issuable
to holders of common stock of Elexsys International, Inc., a Delaware
corporation ("Elexsys"), in the proposed merger (the "Merger") of a
wholly-owned subsidiary of the Registrant with and into Elexsys.
(2) Represents the maximum number of shares of Registrant's Common Stock
issuable upon consummation of the Merger, assuming the exercise prior to the
Merger of all outstanding options to purchase Elexsys Common Stock.
(3) Pursuant to Rule 457(f) and estimated solely for the purpose of calculating
the registration fee. Amounts are based on the average of the high and low
prices of the Registrant's Common Stock on September 24, 1997.
(4) Previously paid.
------------------------
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 WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
LOGO
October 8, 1997
Dear Stockholder:
At our Special Meeting of Stockholders (the "Special Meeting") on November
5, 1997, you will be asked to vote upon the approval and adoption of the
Agreement and Plan of Merger dated as of July 22, 1997 (the "Merger Agreement"),
among Sanmina Corporation ("Sanmina"), SANM Acquisition Subsidiary, Inc., a
wholly owned subsidiary of Sanmina ("Merger Sub"), and Elexsys International,
Inc. ("Elexsys") providing for the merger of Merger Sub with and into Elexsys
upon the terms and subject to the conditions of the Merger Agreement (the
"Merger"). The foregoing proposal is described more fully in the accompanying
Proxy Statement/Prospectus.
After careful consideration, the Elexsys Board of Directors has unanimously
determined that the terms of the Merger Agreement and the Merger are fair to,
and in the best interests of, Elexsys and its stockholders. Accordingly, the
Elexsys Board of Directors has unanimously approved the Merger Agreement and
unanimously recommends that the stockholders of Elexsys vote FOR approval and
adoption of the Merger Agreement. The approval and adoption of the Merger
Agreement requires the affirmative vote of holders of at least a majority of the
outstanding shares of common stock of Elexsys. Pursuant to stockholder
agreements with Sanmina, the directors of Elexsys, holding approximately 43% of
the outstanding shares of Elexsys common stock, have agreed to, among other
things, vote (or cause to be voted) their shares of Elexsys common stock in
favor of approval and adoption of the Merger Agreement.
Stockholders are urged to review carefully the information contained in the
Proxy Statement/Prospectus attached hereto prior to deciding how to vote their
shares at the Special Meeting.
Whether or not you expect to attend the Special Meeting in person, please
complete, sign and promptly return the enclosed proxy card in the enclosed
postage-prepaid envelope to assure representation of your shares. You may revoke
your proxy at any time before it has been voted, and if you attend the Special
Meeting you may vote in person, even if you previously returned your proxy card.
Your prompt cooperation will be greatly appreciated.
Sincerely,
[Milan Mandaric Signature]
Milan Mandaric
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
ELEXSYS INTERNATIONAL, INC.
4405 FORTRAN COURT
SAN JOSE, CALIFORNIA 95134
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 5, 1997
------------------------
TO THE STOCKHOLDERS OF ELEXSYS INTERNATIONAL, INC.
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Elexsys International, Inc., a Delaware corporation ("Elexsys"),
will be held on November 5, 1997 at 8:00 a.m., local time, at Elexsys' principal
offices at 4405 Fortran Court, San Jose, California 95134.
At the Special Meeting you will be asked to consider and vote upon the
following proposal:
To (i) approve and adopt the Agreement and Plan of Merger dated as of
July 22, 1997 (the "Merger Agreement"), among Sanmina Corporation, a
Delaware corporation ("Sanmina"), SANM Acquisition Subsidiary, Inc., a
Delaware corporation and a wholly owned subsidiary of Sanmina ("Merger
Sub"), and Elexsys and (ii) approve the merger of Merger Sub with and into
Elexsys upon the terms and subject to the conditions of the Merger
Agreement (the "Merger").
Pursuant to the Merger Agreement (a) each share of common stock, par value
$1.00 per share, of Elexsys ("Elexsys Common Stock") issued and outstanding at
the effective time of the Merger will be converted into 0.33 fully paid and
nonassessable shares of common stock, par value $0.01 per share, of Sanmina
("Sanmina Common Stock"), and (b) each option to purchase shares of Elexsys
Common Stock ("Elexsys Option") that is not exercised prior to the consummation
of the Merger and that is included on a list to be provided by Elexsys to
Sanmina prior to the consummation of the Merger will be converted into that
number of shares of Sanmina Common Stock equal to the difference between (a) the
number of shares of Sanmina Common Stock derived by multiplying the number of
shares of Elexsys Common Stock underlying the Elexsys Option by the Exchange
Ratio and (b) the number of shares of Sanmina Common Stock derived by dividing
the aggregate exercise price of the Elexsys Option by the fair market value of
one share of Sanmina Common Stock as of the closing date of the Merger.
THE BOARD OF DIRECTORS OF ELEXSYS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
Detailed information concerning the Merger Agreement and the Merger is
contained in the attached Proxy Statement/Prospectus; please read it carefully.
For the Board of Directors,
[Milan Mandaric Signature]
Milan Mandaric
Chairman of the Board
and Chief Executive Officer
San Jose, California
October 8, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. A STOCKHOLDER WHO EXECUTES A PROXY MAY REVOKE IT AT ANY
TIME BEFORE IT IS EXERCISED BY GIVING WRITTEN NOTICE OF REVOCATION TO ELEXSYS,
BY SUBSEQUENTLY FILING ANOTHER PROXY OR BY ATTENDING THE SPECIAL MEETING AND
VOTING IN PERSON.
HOLDERS OF ELEXSYS COMMON STOCK SHOULD NOT SEND
STOCK CERTIFICATES WITH THEIR PROXY CARDS.
<PAGE> 4
ELEXSYS INTERNATIONAL, INC.
PROXY STATEMENT
SANMINA CORPORATION
PROSPECTUS
This Proxy Statement/Prospectus is being furnished to the stockholders of
Elexsys International, Inc., a Delaware corporation ("Elexsys"), in connection
with the solicitation of proxies by the Board of Directors of Elexsys (the
"Elexsys Board") for use at the Special Meeting of Stockholders of Elexsys to be
held on November 5, 1997 at 8:00 a.m., local time, at Elexsys' principal offices
at 4405 Fortran Court, San Jose, California 95134, including any adjournments or
postponements thereof (the "Special Meeting").
At the Special Meeting, the holders of common stock, par value $1.00 per
share, of Elexsys ("Elexsys Common Stock") will consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of July
22, 1997 (the "Merger Agreement"), among Sanmina Corporation, a Delaware
corporation ("Sanmina"), SANM Acquisition Subsidiary, Inc., a Delaware
corporation and a wholly owned subsidiary of Sanmina ("Merger Sub"), and Elexsys
and approve the merger of Merger Sub with and into Elexsys upon the terms and
subject to the conditions of the Merger Agreement (the "Merger"). Pursuant to
the Merger Agreement (a) each share of Elexsys Common Stock issued and
outstanding at the effective time of the Merger will be converted into 0.33
fully paid and nonassessable shares of common stock, par value $0.01 per share,
of Sanmina ("Sanmina Common Stock"), and (b) each option to purchase shares of
Elexsys Common Stock ("Elexsys Option") that is not exercised prior to the
consummation of the Merger and that is included on a list to be provided by
Elexsys to Sanmina prior to the consummation of the Merger will be converted
into that number of shares of Sanmina Common Stock equal to the difference
between (i) the number of shares of Sanmina Common Stock derived by multiplying
the number of shares of Elexsys Common Stock underlying the Elexsys Option by
the Exchange Ratio and (ii) the number of shares of Sanmina Common Stock derived
by dividing the aggregate exercise price of the Elexsys Option by the fair
market value of one share of Sanmina Common Stock as of the closing date of the
Merger.
The Elexsys Board has unanimously determined that the terms of the Merger
Agreement and the Merger are fair to, and in the best interests of, Elexsys and
its stockholders. Accordingly, the Elexsys Board has unanimously approved the
Merger Agreement and unanimously recommends that the stockholders of Elexsys
vote FOR approval and adoption of the Merger Agreement and approval of the
Merger, pursuant to which Elexsys will become a wholly owned subsidiary of
Sanmina and stockholders of Elexsys will become stockholders of Sanmina. Certain
members of the Elexsys Board may be deemed to have a conflict of interest in
recommending stockholder approval of the Merger. See "THE MERGER -- Interests of
Certain Persons in the Merger."
This Proxy Statement/Prospectus also serves as a prospectus of Sanmina
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the shares of Sanmina Common Stock issuable in connection with the Merger.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to stockholders of Elexsys on or about October 8, 1997.
------------------------
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER 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 PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS OCTOBER 8, 1997.
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/ PROSPECTUS,
IN CONNECTION WITH THE SOLICITATION AND THE OFFERING MADE BY THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES IN ANY
JURISDICTION IN WHICH SUCH SOLICITATION OR OFFERING MAY NOT LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF SANMINA OR
ELEXSYS SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION.................................................................. 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................ 1
SUMMARY................................................................................ 3
Special Meeting...................................................................... 3
The Merger........................................................................... 4
Risk Factors......................................................................... 7
Market Price Data.................................................................... 8
SELECTED HISTORICAL FINANCIAL DATA..................................................... 9
Sanmina Selected Historical Consolidated Financial Information....................... 9
Elexsys Selected Historical Consolidated Financial Information....................... 10
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA......................... 11
COMPARATIVE PER SHARE DATA............................................................. 12
RISK FACTORS........................................................................... 13
COMPARATIVE STOCK PRICES AND DIVIDEND POLICY........................................... 17
THE SPECIAL MEETING.................................................................... 18
Date, Time, Place and Purpose........................................................ 18
Record Date; Shares Entitled to Vote; Vote Required.................................. 18
Proxies; Proxy Solicitation.......................................................... 19
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS OF ELEXSYS................. 20
THE COMPANIES.......................................................................... 21
Sanmina Corporation.................................................................. 21
Elexsys International, Inc........................................................... 21
THE MERGER............................................................................. 22
Background of the Merger............................................................. 22
Certain Information Concerning Sanmina............................................... 25
Certain Information Concerning Elexsys............................................... 26
Elexsys' Reasons For The Merger -- Recommendation of the Elexsys Board............... 27
Opinion of Elexsys' Financial Advisor................................................ 29
Certain Federal Income Tax Consequences.............................................. 33
Anticipated Accounting Treatment..................................................... 34
Interests of Certain Persons in the Merger........................................... 34
Resale of Sanmina Common Stock....................................................... 36
</TABLE>
i
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE MERGER AGREEMENT................................................................... 37
The Merger........................................................................... 37
Merger Consideration................................................................. 37
Additional Information for Holders of Elexsys Options; Elexsys' Discretion with
Respect to Net Exercise Treatment................................................. 39
Exchange Agent; Exchange Procedures; Dividends; No Further Ownership Rights in
Elexsys Common Stock; No Fractional Shares........................................ 41
Representations and Warranties....................................................... 42
Business of Elexsys Pending the Merger............................................... 43
Business of Sanmina Pending the Merger............................................... 44
Certain Additional Agreements........................................................ 45
Conditions to the Consummation of the Merger......................................... 46
No Solicitation...................................................................... 47
Right of the Elexsys Board to Withdraw Recommendation................................ 48
Expenses............................................................................. 48
Termination Fee...................................................................... 48
Termination, Amendment and Waiver.................................................... 49
The Stockholder Agreements........................................................... 50
Management and Operations after the Merger........................................... 51
OTHER MATTERS.......................................................................... 51
Governmental and Regulatory Matters.................................................. 51
Absence of Appraisal Rights.......................................................... 51
DESCRIPTION OF SANMINA CAPITAL STOCK................................................... 52
EXPERTS................................................................................ 53
LEGAL MATTERS.......................................................................... 54
STOCKHOLDER PROPOSALS.................................................................. 54
UNAUDITED PRO FORMA FINANCIAL INFORMATION.............................................. F-1
</TABLE>
ANNEXES
<TABLE>
<S> <C>
Annex I Agreement and Plan of Merger
Annex II Form of Stockholder Agreement
Annex III Opinion of Needham & Company, Inc.
</TABLE>
ii
<PAGE> 8
AVAILABLE INFORMATION
Sanmina and Elexsys are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
with the Exchange Act, Sanmina and Elexsys file proxy statements, reports and
other information with the Securities and Exchange Commission (the "SEC"). This
filed material can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following Regional Offices of the SEC: Chicago Regional Office
(Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661)
and New York Regional Office (Seven World Trade Center, 13th Floor, New York,
New York 10048). The filed material also is available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at "http://www.sec.gov." Copies of such material also can be obtained by mail
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such material can be
inspected at the offices of the National Association of Securities Dealers, Inc.
(the "NASD"), 1935 K Street, N.W., Washington, D.C. 20006.
Sanmina has filed a Registration Statement on Form S-4 (the "Registration
Statement") with the SEC under the Securities Act with respect to the Sanmina
Common Stock to be issued upon consummation of the Merger. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto, certain portions of which have
been omitted as permitted by the rules and regulations of the SEC. Copies of the
Registration Statement are available from the SEC, upon payment of prescribed
rates. For further information, reference is made to the Registration Statement
and the exhibits filed therewith. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by reference in this Proxy
Statement/Prospectus relating to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
Statement being qualified in all respects by such reference. All material
elements of the subject documents are described in this Proxy
Statement/Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following Sanmina documents are incorporated by reference in this Proxy
Statement/Prospectus: (i) Sanmina's Annual Report on Form 10-K for the fiscal
year ended September 30, 1996 (filed with the Securities and Exchange Commission
("SEC") on December 24, 1996), as amended by reports on Form 10-K/A (filed with
the SEC on December 27, 1996 and March 25, 1997); (ii) Sanmina's Quarterly
Report on Form 10-Q for the quarters ended December 28, 1996 (filed with the SEC
on February 7, 1997), March 29, 1997 (filed with the SEC on May 13, 1997) and
June 28, 1997 (filed with the SEC on July 30, 1997); (iii) Sanmina's Current
Report on Form 8-K (filed with the SEC on November 15, 1996), as amended by a
report on Form 8-K/A (filed with the SEC on January 15, 1997); (iv) Sanmina's
Current Report on Form 8-K (filed with the SEC on June 23, 1997); and (v) the
description of Sanmina Common Stock contained in Sanmina's Registration
Statement on Form 8-A (filed with the SEC on February 19, 1993). Sanmina's SEC
file number for reports filed pursuant to the Exchange Act is 0-21272.
The following Elexsys documents are incorporated by reference in this Proxy
Statement/Prospectus: (i) Elexsys' Annual Report on Form 10-K for the fiscal
year ended September 30, 1996 (filed with the SEC on December 27, 1996); (ii)
Elexsys' Quarterly Reports on Form 10-Q for the quarters ended December 28, 1996
(filed with the SEC on February 11, 1997), March 29, 1997 (filed with the SEC on
May 9, 1997) and June 28, 1997 (filed with the SEC on July 31, 1997); (iii)
Elexsys' Quarterly Report on Form 10-Q/A for the period ended December 28, 1996
(filed with the SEC on February 21, 1997); (iv) the description of Elexsys
Common Stock contained in Elexsys' Registration Statement on Form 8-A (filed
with the SEC on March 8, 1984); and (v) the description of Elexsys Common Stock
contained in Elexsys' Registration on Form 8-B (filed with the SEC on May 29,
1987). Elexsys' SEC file number for reports filed pursuant to the Exchange Act
is 0-11691.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS CONSIST OF THE
DOCUMENTS DESCRIBED IN THE IMMEDIATELY PRECEDING
<PAGE> 9
TWO PARAGRAPHS IN THIS SECTION ENTITLED "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." A COPY OF THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE WILL BE PROVIDED BY FIRST-CLASS MAIL WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER OF ELEXSYS COMMON STOCK, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST OF ANY SUCH
PERSON. WITH RESPECT TO SANMINA'S DOCUMENTS, REQUESTS SHOULD BE DIRECTED TO THE
OFFICE OF THE CHIEF FINANCIAL OFFICER, 355 EAST TRIMBLE ROAD, SAN JOSE,
CALIFORNIA 95131 (TELEPHONE (408) 435-8444). WITH RESPECT TO ELEXSYS' DOCUMENTS,
REQUESTS SHOULD BE DIRECTED TO THE OFFICE OF THE CHIEF FINANCIAL OFFICER,
ELEXSYS INTERNATIONAL, INC., 4405 FORTRAN COURT, SAN JOSE, CALIFORNIA 95134
(TELEPHONE (408) 935-6300). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS
IN ADVANCE OF THE SPECIAL MEETING TO WHICH THIS PROXY STATEMENT/PROSPECTUS
RELATES, ANY SUCH REQUEST SHOULD BE MADE BY OCTOBER 29, 1997.
All reports and definitive proxy or information statements filed by Sanmina
and Elexsys pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date of this Proxy Statement/Prospectus and prior to the date
of the Special Meeting shall be deemed to be incorporated by reference into this
Proxy Statement/Prospectus from the dates of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference into this Proxy Statement/Prospectus shall be deemed to be modified or
superseded for purposes of this Proxy Statement/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 modifies or supersedes such
statement.
All information contained in this Proxy Statement/Prospectus relating to
Sanmina has been supplied by Sanmina, and all information relating to Elexsys
has been supplied by Elexsys.
2
<PAGE> 10
SUMMARY
Other than statements of historical fact, statements made in this Proxy
Statement/Prospectus, including statements as to the benefits expected to result
from the Merger and as to future financial performance and the analyses
performed by the financial advisor to Elexsys, are forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Actual results could differ materially from those anticipated in
such forward-looking statements as a result of certain factors, including those
set forth in "Risk Factors" below, which Elexsys stockholders should carefully
review.
The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. Reference is made to, and this summary is
qualified in its entirety by, a more detailed account of the material elements
of such information contained elsewhere in this Proxy Statement/Prospectus, in
the attached Annexes and in the documents incorporated herein by reference.
Stockholders are urged to read carefully this Proxy Statement/Prospectus and the
attached Annexes in their entirety.
SPECIAL MEETING
Date, Time, Place and Purpose. This Proxy Statement/Prospectus is being
furnished to Elexsys stockholders in connection with the solicitation of proxies
by the Elexsys Board for use at the Special Meeting to be held on November 5,
1997 at 8:00 a.m., local time, at Elexsys' principal offices at 4405 Fortran
Court, San Jose, California 95134. Only holders of record of Elexsys Common
Stock at the close of business on September 12, 1997 (the "Record Date") will be
entitled to notice of, and to vote at, the Special Meeting. At the Special
Meeting, holders of Elexsys Common Stock will be asked to consider and vote upon
a proposal to approve and adopt the Merger Agreement, a copy of which is
attached as Annex I to this Proxy Statement/Prospectus, and approve the Merger
of Merger Sub with and into Elexsys upon the terms and subject to the conditions
of the Merger Agreement. If the Merger is consummated, Elexsys will be the
surviving corporation in the Merger (the "Surviving Corporation") and will
become a wholly owned subsidiary of Sanmina. See "THE SPECIAL MEETING -- Date,
Time, Place and Purpose."
Record Date; Shares Entitled to Vote; Vote Required. The close of business
on September 12, 1997 has been fixed as the Record Date for determining the
holders of Elexsys Common Stock who are entitled to notice of and to vote at the
Special Meeting. As of the Record Date, there were 9,550,151 shares of Elexsys
Common Stock outstanding, of which 4,100,461 shares (approximately 43% of the
outstanding shares) of Elexsys Common Stock were owned by directors (in their
capacity as stockholders) of Elexsys. The directors of Elexsys are: Milan
Mandaric, C. Bradford Jeffries, Roger Johnson and Alan C. Mendelson. As
indicated below, all such directors of Elexsys have indicated that they intend
to vote all such shares in favor of the approval and adoption of the Merger
Agreement and approval of the Merger and have granted irrevocable proxies to
that effect to Jure Sola and Randy Furr, in their respective capacities as
officers of Sanmina. The executive officers of Elexsys (other than executive
officers who are directors) own a total of 37,960 shares of Elexsys Common
Stock, or approximately 0.4% of the outstanding Elexsys Common Stock. Elexsys is
unaware of any executive officer of Elexsys who intends to vote against the
Merger. The holders of record on the Record Date of shares of Elexsys Common
Stock are entitled to one vote per share of Elexsys Common Stock on each matter
submitted to a vote at the Special Meeting. The presence in person or by proxy
of the holders of shares representing a majority of the voting power of Elexsys
Common Stock entitled to vote is necessary to constitute a quorum for the
transaction of business at the Special Meeting. Under the Delaware General
Corporation Law (the "DGCL"), the affirmative vote of holders of at least a
majority of the shares of the Elexsys Common Stock outstanding on the Record
Date is required for approval and adoption of the Merger Agreement and approval
of the Merger ("Stockholder Approval"). An abstention from voting or a broker
non-vote (as described below under "THE SPECIAL MEETING -- Record Date; Shares
Entitled to Vote; Vote Required") will have the practical effect of voting
against approval and adoption of the Merger Agreement and approval of the Merger
since a vote to abstain or a broker non-vote represents one less vote for such
approval and adoption. See "THE SPECIAL MEETING -- Record Date; Shares Entitled
to Vote; Vote Required."
3
<PAGE> 11
As indicated above, pursuant to the terms of stockholder agreements dated
as of July 22, 1997, between Sanmina and each of the directors of Elexsys (the
"Stockholder Agreements"), such directors (in their capacity as stockholders),
have agreed, among other things, to vote (or cause to be voted) their shares of
Elexsys Common Stock in favor of approval and adoption of the Merger Agreement
and approval of the Merger at the Special Meeting. No stockholders of Elexsys,
other than the directors of Elexsys, have entered into Stockholder Agreements.
Together, such stockholders held on the Record Date 4,100,461 shares
(approximately 43% of the outstanding shares) of Elexsys Common Stock.
Consequently, holders of only approximately 7% of Elexsys Common Stock who are
not parties to the Stockholder Agreements need vote in favor of approval and
adoption of the Merger Agreement and approval of the Merger for Stockholder
Approval to be obtained. The general effect of the Stockholder Agreements is to
increase the likelihood that Stockholder Approval will be obtained. See "THE
MERGER -- Interests of Certain Persons in the Merger" and "THE MERGER
AGREEMENT -- The Stockholder Agreements."
No approval by stockholders of Sanmina is required to effect the Merger.
THE MERGER
The Parties. Sanmina is a leading independent provider of customized
integrated electronics manufacturing services, including turnkey electronic
assembly and manufacturing management services, to original equipment
manufacturers ("OEMs") in the electronics industry. Sanmina's electronic
manufacturing services consist primarily of the manufacture of complex printed
circuit board assemblies using surface mount ("SMT") and pin through-hole
("PTH") interconnection technologies, the manufacture of custom designed
backplane assemblies, fabrication of complex multi-layer printed circuit boards,
and testing and assembly of completed systems. In addition to assembly, turnkey
manufacturing management also involves procurement and materials management, as
well as consultation on printed circuit board design and manufacturability.
Sanmina, through its Golden Eagle Systems ("Golden Eagle") subsidiary, which was
acquired in January 1996, also manufactures custom cable assemblies for
electronics industry OEMs.
The principal executive offices of Sanmina are located at 355 East Trimble
Road, San Jose, California 95131. The telephone number is (408) 435-8444.
Merger Sub, a Delaware corporation, is a wholly owned subsidiary of Sanmina
formed solely for the purpose of effecting the Merger. Merger Sub has no
material assets and has not engaged in any activities except in connection with
the Merger. The principal offices of Merger Sub are located at 355 East Trimble
Road, San Jose, California 95131. The telephone number is (408) 954-5500.
Elexsys is a leading manufacturer of interconnect products used in advanced
electronic equipment. Elexsys manufactures complex products in the mid-volume
sector of the electronic interconnect industry. Elexsys offers to its customers
complete original design capability for top level assembly, as Elexsys' products
generally require greater engineering and manufacturing expertise than
mass-produced, less complex products. Elexsys manufactures custom-designed,
press-fit backpanels, surface mount backpanel assemblies and subsystems (known
as card cages) complete with an assembled backpanel, power supply, fan and cable
attachments as well as multilayer, high density printed circuit boards. Elexsys
works closely with its customers, beginning with the early stages of the
customer's product design and development.
The principal offices of Elexsys are located at 4405 Fortran Court, San
Jose, California 95134. The telephone number is (408) 935-6300.
Merger Consideration. At the effective time of the Merger (the "Effective
Time"), each issued and outstanding share of Elexsys Common Stock, other than
shares owned by Sanmina, Merger Sub or Elexsys, will be converted into 0.33
fully paid and nonassessable shares of Sanmina Common Stock (the "Exchange
Ratio"). No fractional shares of Sanmina Common Stock will be issued in the
Merger and holders of shares of Elexsys Common Stock who would otherwise have
been entitled to receive a fraction of a share of Sanmina Common Stock will be
entitled to a cash payment in lieu of any such fractional shares. Based upon the
number of shares of Sanmina Common Stock issued and outstanding on September 5,
1997, and after giving effect to the Sanmina Common Stock that is expected to be
issued in the Merger and assuming the exercise of
4
<PAGE> 12
all outstanding Elexsys Options, the former holders of Elexsys Common Stock
would hold and have voting power with respect to approximately 16.9% of
Sanmina's issued and outstanding shares (16.4% if all outstanding Elexsys
Options are instead exchanged on a "Net Exercise" basis as described below). See
"THE MERGER AGREEMENT -- Merger Consideration" and "-- Exchange Agent; Exchange
Procedures; Dividends; No Further Ownership Rights in Elexsys Common Stock; No
Fractional Shares."
At the Effective Time, each Elexsys Option that has not been exercised
prior to the Effective Time and that is included on a list to be provided by
Elexsys to Sanmina prior to the consummation of the Merger will be converted
into that number of shares of Sanmina Common Stock equal to the difference
between (a) the number of shares of Sanmina Common Stock derived by multiplying
the number of shares of Elexsys Common Stock underlying the Elexsys Option by
the Exchange Ratio and (b) the number of shares of Sanmina Common Stock derived
by dividing the aggregate exercise price of the Elexsys Option by the fair
market value of one share of Sanmina Common Stock as of the closing date of the
Merger. The shares so converted will be further reduced for income tax
withholding. See "THE MERGER AGREEMENT -- Merger Consideration" and
"-- Additional Information for Holders of Elexsys Options; Elexsys' Discretion
with Respect to Net Exercise Treatment."
Elexsys' Reasons for the Merger -- The Recommendation of the Elexsys
Board. The Elexsys Board has unanimously determined that the terms of the Merger
Agreement and the Merger are fair to, and in the best interests of, Elexsys and
its stockholders. Accordingly, the Elexsys Board has unanimously approved the
Merger Agreement and unanimously recommends that the stockholders of Elexsys
vote FOR approval and adoption of the Merger Agreement and approval of the
Merger. Certain members of the Elexsys Board may be deemed to have a conflict of
interest in recommending stockholder approval of the Merger. See "THE
MERGER -- Interests of Certain Persons in the Merger." In reaching its decision
to approve the Merger Agreement and recommend the Merger, the Elexsys Board
considered a number of factors. See "THE MERGER -- Background of the Merger" and
"-- Elexsys' Reasons for the Merger -- Recommendation of the Elexsys Board."
Opinion of Elexsys' Financial Advisor. Needham & Company, Inc. ("Needham")
has acted as financial advisor to Elexsys in connection with the Merger and has
delivered its written opinion to the Elexsys Board dated July 22, 1997, to the
effect that, as of such date and subject to certain assumptions and other
matters described therein, the consideration to be received by the stockholders
of Elexsys in the Merger was fair to such stockholders from a financial point of
view. The full text of Needham's July 22, 1997 opinion, which sets forth the
assumptions made, matters considered, and limitations on and scope of the review
undertaken by Needham, is attached to this Proxy Statement/Prospectus as Annex
III and should be carefully read in its entirety. Needham's opinion is directed
only to the fairness to the Elexsys stockholders, from a financial point of
view, of the consideration to be received by such stockholders in the Merger,
does not address any other aspect of the Merger, and does not constitute a
recommendation to any stockholder of Elexsys as to how such stockholder should
vote at the Special Meeting. See "THE MERGER -- Opinion of Elexsys' Financial
Advisor."
Certain Federal Income Tax Consequences. It is a condition to the
obligations of Elexsys and Sanmina to consummate the Merger that each receive
the opinion of its respective legal counsel to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Such opinions assume that the
Merger will take place as described in the Merger Agreement and that certain
factual matters represented by Sanmina, Merger Sub, Elexsys and certain Elexsys
stockholders are true and correct at the Effective Time. However, all Elexsys
stockholders are urged to consult their tax advisors. See "THE MERGER -- Certain
Federal Income Tax Consequences."
Anticipated Accounting Treatment. Sanmina intends to treat the Merger as a
pooling of interests for accounting and financial reporting purposes. See "THE
MERGER -- Anticipated Accounting Treatment."
Interests of Certain Persons in the Merger. As of the Record Date,
directors and executive officers of Elexsys owned (i) 4,138,421 shares of
Elexsys Common Stock for which they will receive the same consideration in
connection with the Merger as other Elexsys stockholders and (ii) unexercised
options to acquire 432,600 shares of Elexsys Common Stock (the "Stock Options"),
which will be treated as described below under "THE MERGER
AGREEMENT -- Additional Information for Holders of Elexsys Options;
5
<PAGE> 13
Elexsys' Discretion with Respect to Net Exercise Treatment." Approximately 40%
of the Elexsys Options are held by directors and executive officers of Elexsys.
Sanmina has entered into a registration rights agreement (the "Registration
Rights Agreement") with the Chief Executive Officer of Elexsys, under which
Sanmina will, if requested by such individual, register for resale the shares of
Sanmina Common Stock issued to him in the Merger. Sanmina and the Chief
Operating Officer of Elexsys have entered into an agreement for continued
employment of such individual by Sanmina. Sanmina also has agreed to indemnify
each of Elexsys' directors and officers against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
liabilities, and amounts paid in settlement, in connection with any claim,
action, suit, proceeding or investigation, to the extent such claim, action,
suit, proceeding or investigation arises out of or pertains to certain
instances. See "THE MERGER -- Interests of Certain Persons in the Merger."
Governmental and Regulatory Matters. The consummation of the Merger is
subject to the expiration or termination of the relevant waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). Sanmina and Elexsys have filed notification and report forms under the
HSR Act. The waiting period under the HSR Act terminated on August 30, 1997. See
"OTHER MATTERS -- Governmental and Regulatory Matters."
Conditions to the Merger. The obligations of Sanmina and Elexsys to
consummate the Merger are subject to various conditions, including, without
limitation, obtaining Stockholder Approval, approval for listing (subject to
official notice of issuance) on the Nasdaq National Market of the Sanmina Common
Stock to be issued in connection with the Merger and the absence of any
injunction or other legal restraint preventing the consummation of the Merger.
See "THE MERGER AGREEMENT -- Conditions to the Consummation of the Merger."
No Solicitation. The Merger Agreement provides that Elexsys will not, nor
will it authorize or instruct any of its officers, directors or employees or any
investment banker, attorney or other advisor or representative retained by it
to, directly or indirectly, (i) solicit, initiate or knowingly encourage the
submission of any Takeover Proposal (as defined in the Merger Agreement and
described below under "THE MERGER AGREEMENT -- No Solicitation") or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any nonpublic information with respect to, or take any other action
intended or reasonably expected to facilitate the making of any inquiry or
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal. However, if the Elexsys Board determines in good faith, after
consultation with outside counsel, that failure to do so would create a
substantial risk of liability for breach of its fiduciary duties to the
stockholders of Elexsys under applicable law, Elexsys may, prior to the receipt
of Stockholder Approval, in response to a Takeover Proposal that was unsolicited
and subject to certain other conditions, furnish nonpublic information with
respect to Elexsys to any person pursuant to a customary and reasonable
confidentiality agreement and participate in discussions and negotiations
regarding a Takeover Proposal. See "THE MERGER AGREEMENT -- No Solicitation."
Right of the Elexsys Board to Withdraw Recommendation. Under the Merger
Agreement, neither the Elexsys Board nor any committee of the Elexsys Board may
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Sanmina or Merger Sub, the approval or recommendation by such Board or any such
committee of the Merger Agreement or the Merger, (ii) approve or recommend any
Takeover Proposal or (iii) cause Elexsys to enter into any letter of intent,
agreement in principle, acquisition agreement or similar agreement with respect
to any Takeover Proposal. However, the Elexsys Board, to the extent it
determines in good faith, after consultation with outside counsel, that failure
to do so would create a substantial risk of liability to the Elexsys Board for
breach of its fiduciary duties to the stockholders of Elexsys under applicable
law, may, prior to receipt of Stockholder Approval, withdraw or modify its
approval or recommendation of the Merger Agreement or the Merger and/or approve
or recommend any Takeover Proposal (as described below under "THE MERGER
AGREEMENT -- Right of the Elexsys Board to Withdraw Recommendation"). See "THE
MERGER AGREEMENT -- Right of the Elexsys Board to Withdraw Recommendation" and
"-- Termination Fee."
Termination. The Merger Agreement may be terminated, and the Merger may be
abandoned, at any time prior to the Effective Time, whether before or after
receipt of Stockholder Approval, (i) by mutual
6
<PAGE> 14
written consent of Sanmina, Merger Sub and Elexsys; (ii) by either Sanmina or
Elexsys if (A) the Special Meeting (including any adjournments thereof) shall
have been held and completed and Elexsys' stockholders shall have taken a final
vote on the proposal referred to herein and Stockholder Approval shall not have
been obtained, (B) the Merger is not consummated by December 31, 1997 (subject
to certain exceptions), (C) certain legal restraints or prohibitions are in
effect preventing the consummation of the Merger or (D) the Elexsys Board
withholds, withdraws or modifies its approval or recommendation of the Merger or
approves a Superior Proposal (as defined below), subject to certain conditions,
including, in certain instances, the obligation of Elexsys to pay the
Termination Fee (as defined below); and (iii) by either Sanmina or Elexsys if
there are certain breaches of, or inaccuracies contained in, the other party's
representations, warranties, covenants or agreements and such breaches or
inaccuracies are not cured within 45 days, subject to certain conditions and
limitations. See "THE MERGER AGREEMENT -- Termination, Amendment and Waiver."
Termination Fee. The Merger Agreement requires Elexsys to pay Sanmina $7.5
million (the "Termination Fee") only if (i) the Merger Agreement is validly
terminated by either Elexsys or Sanmina in the event that the Elexsys Board or
any committee thereof withholds, withdraws or modifies in a manner adverse to
Sanmina its approval or recommendation of the Merger or Merger Agreement or
approves or recommends a Superior Proposal (as defined below) or the Elexsys
Board resolves to take any of the foregoing actions and (ii) Sanmina shall not
have materially breached the Merger Agreement. Elexsys is not required to pay a
Termination Fee in any other circumstance, including the other events permitting
termination described in "Termination" above. A "Superior Proposal" means any
bona fide proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the voting
power of the Elexsys Common Stock or all or substantially all the assets of
Elexsys and otherwise on terms which the Elexsys Board determines in its good
faith judgment (after consultation with its financial advisor) to be more
favorable to Elexsys' stockholders than the Merger and for which financing, to
the extent required, is then committed or which, in the good faith judgment of
the Elexsys Board, is capable of being obtained by such third party. The
Termination Fee is payable in installments as follows: $2.5 million promptly,
but in no event later than five business days after termination, $2.5 million on
the 180th day after termination and $2.5 million on the 270th day after
termination, provided that if a transaction contemplated by a Superior Proposal
accepted by Elexsys is consummated prior to payment of either the second or
third installments, any such unpaid amounts shall be payable upon consummation
of such transaction. The Termination Fee does not accrue under the circumstances
described in items i, ii(A), ii(B), ii(C), or iii above under the subsection
entitled "Termination." See "THE MERGER AGREEMENT -- Termination Fee."
Absence of Appraisal Rights. In accordance with Section 262 of the DGCL,
holders of Elexsys Common Stock are not entitled to appraisal rights in
connection with the Merger. See "OTHER MATTERS -- Absence of Appraisal Rights."
Certain Considerations. In considering whether to vote in favor of the
approval and adoption of the Merger Agreement and approval of the Merger,
Elexsys stockholders should consider the following: (i) the Exchange Ratio is
fixed at 0.33 shares of Sanmina Common Stock per share of Elexsys Common Stock,
(ii) the market price of a share of Sanmina Common Stock at the Effective Time
can be expected to vary from its price as of the date of this Proxy
Statement/Prospectus due to changes in the business, operations or prospects of
Sanmina, general market and economic conditions and other factors, and (iii) the
specific value of the consideration to be received by Elexsys stockholders in
connection with the Merger will depend on the market price of Sanmina Common
Stock at the Effective Time.
RISK FACTORS
The Merger and an investment in securities of Sanmina involve a significant
degree of risk, including uncertainties related to integration of the companies,
risks associated with a fixed exchange ratio, Sanmina's dependence on the
electronics industry, fluctuations in results of operations from period to
period, customer concentration, risks associated with acquisitions and
expansions, competition and technological change, environmental matters,
international operations, leverage, and possible volatility of prices of
securities. Stockholders of Elexsys should carefully consider the information
set forth under "RISK FACTORS."
7
<PAGE> 15
MARKET PRICE DATA
Sanmina Common Stock (symbol: SANM) and Elexsys Common Stock (symbol: ELEX)
are quoted on the Nasdaq National Market.
The following table sets forth the last reported sales prices per share of
Sanmina Common Stock and of Elexsys Common Stock on the Nasdaq National Market
on July 22, 1997, the last trading day before announcement of the Merger
Agreement, and on October 2, 1997:
<TABLE>
<CAPTION>
SANMINA COMMON STOCK ELEXSYS COMMON STOCK
-------------------- --------------------
<S> <C> <C>
July 22, 1997..................................... $ 675/16 $ 23 1/8
October 2, 1997................................... $ 845/16 $ 27 1/2
</TABLE>
Elexsys stockholders are advised to obtain recent market quotations for
Sanmina Common Stock prior to the Special Meeting.
8
<PAGE> 16
SELECTED HISTORICAL FINANCIAL DATA
SANMINA SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The selected historical financial data as of September 30, 1992, 1993, and
1994 and for the years ended September 30, 1992 and 1993 are derived from
audited financial statements of Sanmina not included or incorporated by
reference herein. The historical consolidated statement of operations data for
each of the three years in the period ended September 30, 1996 and the selected
historical balance sheet data at September 30, 1995 and 1996 are derived from
the audited consolidated financial statements of Sanmina incorporated by
reference in this Proxy Statement/Prospectus. These statements have been audited
by Arthur Andersen LLP, independent public accountants, whose report therein is
also incorporated by reference in this Proxy Statement/Prospectus. The
historical financial information as of June 28, 1997 and for the nine-month
periods ended June 29, 1996 and June 28, 1997 are derived from unaudited
consolidated financial statements of Sanmina and, in the opinion of Sanmina,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair representation of the financial information. Operating
results for the interim period are not necessarily indicative of the results of
Sanmina that may be expected for the entire year. The following summary
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the consolidated
financial statements and related notes and other financial information contained
in Sanmina's Form 10-K for the fiscal year ended September 30, 1996 and Form
10-Q for the quarterly period ended June 28, 1997.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, -------------------
HISTORICAL STATEMENT OF OPERATIONS -------------------------------------------------- JUNE 29, JUNE 28,
DATA: 1992 1993 1994 1995 1996 1996 1997
- -------------------------------------- ------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............................. $65,096 $88,474 $115,125 $167,787 $265,076 $186,574 $290,974
Unusual items(1)...................... (952) -- (14,819) -- -- -- --
Income from operations................ 2,641 12,405 3,226 27,067 45,229 31,771 49,391
Extraordinary items(2)................ -- (824) -- -- -- -- --
Net income (loss)..................... (1,450) 5,097 (3,109) 16,954 28,095 19,744 29,907
Net income (loss) per common share
Primary net income per share
Income (loss) before extraordinary
item............................ $ (0.16) $ 0.52 $ (0.20) $ 1.01 $ 1.60 $ 1.13 $ 1.64
Extraordinary item................ -- (0.07) -- -- -- -- --
Net income................... (0.16) 0.45 (0.20) 1.01 1.60 1.13 1.64
Fully diluted net income per share
Income (loss) before extraordinary
item............................ (0.16) 0.52 (0.20) 1.00 1.50 1.07 1.51
Extraordinary item................ -- (0.07) -- -- -- -- --
Net income................... $ (0.16) $ 0.45 $ (0.20) $ 1.00 $ 1.50 $ 1.07 $ 1.51
Common and common equivalent shares
used in computing per share amounts
Primary............................. 8,932 11,448 15,488 16,812 17,532 17,472 18,214
Fully Diluted....................... 8,932 11,448 15,488 17,392 20,812 20,584 21,362
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF
------------------------------------------------- JUNE 28,
HISTORICAL CONSOLIDATED BALANCE SHEET DATA: 1992 1993 1994 1995 1996 1997
- ------------------------------------------------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Working capital.................................. $ 6,968 $ 8,394 $38,055 $128,904 $145,309 $155,180
Total assets..................................... 45,768 45,553 64,467 188,106 230,541 281,305
Long-term obligations............................ 35,145 4,438 -- 86,250 86,250 86,500
Stockholders' equity............................. 86 26,123 46,738 67,181 103,685 137,472
</TABLE>
- ---------------
(1) In 1992 and 1994, Sanmina recorded write-offs of goodwill of $952 and
$11,190, respectively. In 1994, the Company recorded a charge to operations
of $3,629 to provide for the closure of two of its facilities.
(2) In 1993, Sanmina paid-off long-term debt and recognized a related
extraordinary charge for writing off previously deferred financing expenses
of $824.
9
<PAGE> 17
ELEXSYS SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The selected historical financial data as of September 30, 1992, 1993, and
1994 and for the years ended September 30, 1992 and 1993 are derived from
audited financial statements of Elexsys not included or incorporated by
reference herein. The historical combined statement of operations data for each
of the three years in the period ended September 30, 1996 and the historical
balance sheet data at September 30, 1995 and 1996 are derived from the audited
consolidated financial statements of Elexsys incorporated by reference in this
Proxy Statement/Prospectus. These statements have been audited by Deloitte &
Touche LLP, independent auditors, whose report therein is also incorporated by
reference in this Proxy Statement/Prospectus. The unaudited historical financial
information as of June 28, 1997 and for the nine-month periods ended June 29,
1996 and June 28, 1997 are derived from unaudited consolidated financial
statements of Elexsys and, in the opinion of Elexsys, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
representation of the financial information. Operating results for the interim
period are not necessarily indicative of the results of Elexsys that may be
expected for the entire year. The following summary financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the consolidated financial statements
and related notes and other financial information contained in Elexsys' Form
10-K for the fiscal year ended September 30, 1996 and Form 10-Q for the
quarterly period ended June 28, 1997.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------
FISCAL YEAR ENDED SEPTEMBER 30, JUNE
HISTORICAL STATEMENT OF OPERATIONS --------------------------------------------------- 29, JUNE 28,
DATA: 1992 1993 1994 1995 1996 1996 1997
- ------------------------------------- -------- -------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............................ $101,396 $ 99,272 $95,680 $103,970 $126,906 $90,140 $118,802
Unusual items(1)..................... -- (3,000) (2,100) -- -- -- --
Income (loss) from operations........ (11,929) (14,892) (5,606) 5,284 10,100 7,237 7,965
Extraordinary items(2)............... -- -- 10,167 1,833 -- -- --
Net income (loss).................... (12,674) (16,331) 2,554 5,132 8,470 6,203 6,006
Net income (loss) per common share...
Primary net income per share
Income (loss) before
extraordinary item............. (2.46) (3.18) (1.28) 0.37 0.89 0.65 0.61
Extraordinary item............... -- -- 1.82 0.20 -- -- --
Net income.................. (2.46) (3.18) 0.54 0.57 0.89 0.65 0.61
Fully diluted net income per share
Income (loss) before
extraordinary item............. (2.46) (3.18) (0.91) 0.36 0.89 0.65 0.61
Extraordinary item............... -- -- 1.30 0.20 -- -- --
Net income.................. $ (2.46) $ (3.18) $ 0.39 $ 0.56 $ 0.89 $ 0.65 $ 0.61
Common and common equivalent shares
used in computing per share amounts
Primary............................ 5,161 5,133 6,387 9,018 9,553 9,548 9,844
Fully Diluted...................... 5,161 5,133 8,769 9,087 9,553 9,548 9,844
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF
----------------------------------------------- JUNE 28,
HISTORICAL CONSOLIDATED BALANCE SHEET DATA: 1992 1993 1994 1995 1996 1997
- --------------------------------------------------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Working capital.................................... $18,003 $ 7,172 $ 3,791 $ 7,174 $10,570 $ 19,119
Total assets....................................... 65,013 48,040 36,983 45,139 62,105 80,926
Long-term obligations.............................. 501 456 406 1,280 2,448 12,154
Convertible subordinated debentures................ 32,000 32,000 16,000 12,000 12,000 12,000
Stockholders' equity (deficit)..................... 14,639 (1,669) 6,085 13,908 24,552 31,534
</TABLE>
- ---------------
(1) In 1993 and 1994, Elexsys recorded restructuring charges of $3,000 and
$2,100, respectively.
(2) In 1994 and 1995, Elexsys recorded extraordinary gains of $10,167 and
$1,833, respectively, from the exchange of debentures for common stock.
10
<PAGE> 18
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
SANMINA AND ELEXSYS UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth the unaudited selected pro forma combined
financial data of Sanmina and Elexsys. The unaudited pro forma combined balance
sheet has been prepared as if the Merger with Elexsys, which will be accounted
for as a pooling of interests by Sanmina, was consummated as of June 28, 1997.
The unaudited pro forma combined statement of operations data for the years
ended September 30, 1994, 1995, and 1996 and the nine-month periods ended June
29, 1996 and June 28, 1997 gives effect to the Merger with Elexsys as if the
Merger with Elexsys was completed at the beginning of the periods presented. The
unaudited selected pro forma combined financial data is derived from the
unaudited Pro Forma Condensed Combined Financial statements and notes thereto
included elsewhere in this Proxy Statement/Prospectus and should be read in
conjunction with such unaudited pro forma condensed combined financial
statements and notes thereto.
The unaudited selected pro forma combined financial data is provided for
illustrative purposes only and is not necessarily indicative of the combined
financial position or combined results of operations that would have been
reported had the Merger occurred on the date indicated, nor does it represent a
forecast of the combined financial position or results of operations for any
future period. No pro forma adjustments have been included herein which reflect
potential effects of (i) the efficiencies which may be obtained by combining the
operations of Sanmina and Elexsys or (ii) the costs of restructuring,
integrating or consolidating such operations.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER NINE MONTHS ENDED
30, -------------------
PRO FORMA COMBINED STATEMENT OF INCOME ------------------------------ JUNE 29, JUNE 28,
DATA: 1994 1995 1996 1996 1997
- ----------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales................................ $210,805 $271,757 $391,982 $276,714 $409,195
Unusual items(1)......................... (16,919) -- -- -- --
Income (loss) from operations............ (2,380) 32,351 55,329 39,008 57,356
Income (loss) before extraordinary
item................................... (7,296) 20,253 36,565 25,947 35,913
Income (loss) per common share before
extraordinary item
Primary................................ $ 0.42 $ 1.03 $ 1.77 $ 1.26 $ 1.67
Fully Diluted.......................... (0.39) 1.01 1.65 1.19 1.55
Common and common equivalent shares used
in computing per share amounts
Primary................................ 17,596 19,788 20,684 20,623 21,463
Fully Diluted.......................... 18,382 20,391 23,964 23,735 24,611
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 28,
PRO FORMA COMBINED BALANCE SHEET DATA: 1997
- ------------------------------------------------------------------------------- ------------
<S> <C>
Working capital................................................................ $172,799
Total assets................................................................... 362,231
Long-term obligations.......................................................... 110,654
Stockholders' equity........................................................... 167,506(2)
</TABLE>
- ---------------
(1) Reflects in 1994 write-off of goodwill of $11,190, plant closure costs of
$3,629 and restructuring charges of $2,100.
(2) Reflects estimated expenses of Merger of $1,500.
11
<PAGE> 19
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Sanmina
and Elexsys and combined per share data on an unaudited pro forma combined basis
after giving effect to the Merger with Elexsys as if the Merger was completed at
the beginning of the respective periods for net income per common share data.
The Exchange Ratio assumes that the Merger was consummated on June 28, 1997. The
pro forma book value per common share assumes that the Merger was consummated on
June 28, 1997 and September 30, 1996. The following data should be read in
conjunction with the Unaudited Pro Forma Financial Information and the separate
historical financial statements of Sanmina and Elexsys incorporated by reference
or included elsewhere herein. The unaudited pro forma combined per common share
data is provided for illustrative purposes only and is not necessarily
indicative of the combined financial position or combined results of operations
that would have been reported had the Merger occurred on the date indicated, nor
does it represent a forecast of the combined financial position or results of
operations for any future period. No pro forma adjustments have been included
herein which reflect potential effects of (i) the efficiencies which may be
obtained by combining Sanmina and Elexsys operations or (ii) the costs of
restructuring, integrating or consolidating such operations.
COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
AS OF OR FOR
THE NINE
FISCAL YEARS ENDED MONTHS ENDED
SEPTEMBER 30, -------------------
---------------------- JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
------ ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Historical -- Sanmina:
Primary net income (loss) per share................. $(0.20) $1.01 $1.60 $ 1.13 $ 1.64
Fully diluted net income (loss) per share........... (0.20) 1.00 1.50 1.07 1.51
Book value per common share (1)..................... -- -- 6.14 -- 8.01
Historical -- Elexsys:
Primary net income per share
Income (loss) before extraordinary item.......... (1.28) 0.37 0.89 0.65 0.61
Extraordinary item............................... 1.82 0.20 -- -- --
----- ----- ----- ----- -----
Net income....................................... 0.54 0.57 0.89 0.65 0.61
Fully diluted net income per share
Income (loss) before extraordinary item.......... (0.91) 0.36 0.89 0.65 0.61
Extraordinary item............................... 1.30 0.20 -- -- --
----- ----- ----- ----- -----
Net income....................................... 0.39 0.56 0.89 0.65 0.61
Book value per common share (1)..................... -- -- 2.64 -- 3.32
Pro Forma Combined Per Sanmina Share:
Income (loss) before extraordinary item
Primary.......................................... (0.42) 1.03 1.77 1.26 1.62
Fully diluted.................................... (0.39) 1.01 1.65 1.19 1.55
Book value per common share (1)..................... -- -- 6.31 -- 8.16
Equivalent Pro Forma Combined per Elexsys Share (2):
Income (loss) before extraordinary item
Primary.......................................... (0.14) 0.34 0.58 0.42 0.53
Fully diluted.................................... (0.13) 0.33 0.54 0.39 0.51
Book value per common share (1)..................... -- -- 2.08 -- 2.69
</TABLE>
- ---------------
(1) The historical book value per common share is computed by dividing total
stockholders' equity by the number of shares of common stock outstanding at
the end of the period. The pro forma book value per share is computed by
dividing pro forma stockholders' equity by the pro forma number of shares of
Sanmina at the end of the period.
(2) The equivalent Elexsys pro forma per share amounts are calculated by
multiplying the Sanmina combined pro forma per share amounts by 0.33, the
Exchange Ratio.
12
<PAGE> 20
RISK FACTORS
This Proxy Statement/Prospectus contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
elsewhere in this Proxy Statement/Prospectus. The following factors should be
considered carefully by holders of Elexsys Common Stock in evaluating whether to
approve and adopt the Merger Agreement and approve the Merger. These factors
should be considered in conjunction with the other information included or
incorporated by reference in this Proxy Statement/Prospectus, including the
forward-looking statements made herein. For periods following the Merger,
references to Sanmina should be considered to refer to Sanmina and its
subsidiaries, including Elexsys, unless the context otherwise requires.
Uncertainty Relating to Integration. The successful combination of Sanmina
and Elexsys will require substantial effort from each company, including the
coordination of their sales and marketing efforts. The diversion of the
attention of management and any difficulties encountered in the transition
process (including, the interruption of, or a loss of momentum in, Elexsys'
activities, problems associated with integration of management information and
reporting systems, and delays in implementation of consolidation plans) could
have an adverse impact on Sanmina's ability to realize the anticipated benefits
of the Merger. There can be no assurance that Sanmina will be able to retain
Elexsys' key management, technical, sales and marketing personnel, or that
Sanmina will realize the anticipated benefits of the Merger.
Risks Associated with Fixed Exchange Ratio. As a result of the Merger, each
outstanding share of Elexsys Common Stock will be converted into 0.33 fully paid
and nonassessable shares of Sanmina Common Stock. Because the Exchange Ratio is
fixed and will not increase or decrease due to fluctuations in the market price
of either Sanmina Common Stock or Elexsys Common Stock, the specific value of
the consideration to be received by Elexsys stockholders in the Merger will
depend on the market price of Sanmina Common Stock at the Effective Time. In the
event that the market price of Sanmina Common Stock decreases or increases prior
to the Effective Time, the market value at the Effective Time of Sanmina Common
Stock to be received by Elexsys stockholders in the Merger would correspondingly
decrease or increase. The market prices of Sanmina Common Stock and Elexsys
Common Stock as of a recent date are set forth herein under "COMPARATIVE STOCK
PRICES AND DIVIDEND POLICY." Elexsys stockholders are advised to obtain recent
market quotations for Sanmina Common Stock and Elexsys Common Stock. No
assurance can be given as to the market prices of Sanmina Common Stock or
Elexsys Common Stock at any time before the Effective Time or as to the market
price of Sanmina Common Stock at any time thereafter. See "COMPARATIVE STOCK
PRICES AND DIVIDEND POLICY."
Dependence on Electronics Industry. Sanmina's customers are manufacturers
in the telecommunications, networking (data communications), industrial and
medical instrumentation and computer systems segments of the electronics
industry. These industry segments, and the electronics industry as a whole, are
subject to rapid technological change and product obsolescence. Discontinuance
or modification of products containing components manufactured by Sanmina could
adversely affect Sanmina's results of operations. The electronics industry is
also subject to economic cycles and has in the past experienced, and is likely
in the future to experience, recessionary periods. A general recession in the
electronics industry could have a material adverse effect on Sanmina's business,
financial condition and results of operations. Sanmina typically does not obtain
long-term volume purchase contracts from its customers and has recently
experienced reduced lead times in customer orders. Nonetheless, customer orders
may be canceled and volume levels may be changed or delayed. The timely
replacement of canceled, delayed or reduced contracts with new business cannot
be assured.
Factors Affecting Operating Results. Sanmina's results of operations have
varied and may continue to fluctuate significantly from period to period,
including on a quarterly basis. Operating results are affected by a number of
factors, including timing of orders from major customers, mix of product ordered
by and shipped to major customers, the volume of orders as related to Sanmina's
capacity, ability to effectively manage inventory and fixed assets, timing of
expenditures in anticipation of future sales, economic conditions in the
electronics industry and the mix of products between backplane assemblies and
printed circuit boards. Operating results
13
<PAGE> 21
can also be significantly influenced by development and introduction of new
products by Sanmina's customers. From time to time, Sanmina experiences changes
in the volume of sales to each of its principal customers, and operating results
may be affected on a period-to-period basis by these changes. Sanmina's
customers generally require short delivery cycles, and a substantial portion of
Sanmina's backlog is typically scheduled for delivery within 120 days. Quarterly
sales and operating results therefore depend in large part on the volume and
timing of bookings received during the quarter, which are difficult to forecast.
Sanmina's backlog also affects its ability to plan production and inventory
levels, which could lead to fluctuations in operating results. In addition, a
significant portion of Sanmina's operating expenses are relatively fixed in
nature and planned expenditures are based in part on anticipated orders. Any
inability to adjust spending quickly enough to compensate for any revenue
shortfall may magnify the adverse impact of such revenue shortfall on Sanmina's
results of operations. Results of operations in any period should not be
considered indicative of the results to be expected for any future period, and
fluctuations in operating results may also result in fluctuations in the price
of Sanmina Common Stock.
Customer Concentration. A small number of customers are responsible for a
significant portion of Sanmina's net sales. In fiscal 1996 and fiscal 1995, DSC
Communications and Alcatel each accounted for more than 10% of Sanmina's net
sales. In addition, during fiscal 1996 and 1995, Sanmina's ten largest customers
accounted for approximately 65% and 67%, respectively, of Sanmina's net sales.
Although there can be no assurance that Sanmina's principal customers will
continue to purchase products and services from Sanmina at current levels, if at
all, Sanmina expects to continue to depend upon its principal customers for a
significant portion of its net sales. Sanmina's customer concentration could
increase or decrease, depending on future customer requirements, which will be
dependent in large part on market conditions in the electronics industry
segments in which Sanmina's customers participate. The loss of one of more major
customers or declines in sales to major customers could have a material adverse
effect on Sanmina's business, financial condition and results of operations.
Risks Associated with Acquisitions and Expansions. Sanmina has, for the
past several fiscal years, pursued a strategy of growth. This growth has come in
part through acquisitions. In addition to the acquisition of Elexsys as
contemplated by the Merger Agreement, these acquisitions have involved both
acquisitions of entire companies, such as the June 1995 acquisition of Assembly
Solutions in Manchester, New Hampshire and the January 1996 acquisition of
Golden Eagle, and acquisitions of selected assets, principally equipment,
inventory and customer contracts, and, in certain cases, facilities or facility
leases. Such acquisitions include the November 1996 acquisitions of the
Guntersville, Alabama and Guaymas, Mexico operations of Comptronix Corporation
and certain assets of the custom manufacturing services division of Lucent
Technologies. In addition to these acquisitions, Sanmina has also grown its
operations through internal expansion, such as the opening of its Richardson,
Texas assembly facility, its Raleigh, North Carolina assembly facility and its
Dublin, Ireland assembly facility. Acquisitions of companies and businesses and
expansion of operations involve certain risks, including (i) the potential
inability to successfully integrate acquired operations and businesses or
realize anticipated synergies, economics of scale or other value, (ii) diversion
of management's attention, (iii) difficulties in scaling up production at new
sites and coordinating management of operations at new sites and (iv) loss of
key employees of acquired operations. No assurance can be given that Sanmina
will not incur problems in integrating the Elexsys operations or the former
Lucent and Comptronix operations acquired in November 1996 or any future
acquisition, and there can be no assurance that these acquisitions or any other
future acquisition will result in a positive contribution to Sanmina's results
of operations. Furthermore, there can be no assurance that Sanmina will realize
value from any such acquisition, including in particular the Elexsys
acquisition, which equals or exceeds the consideration paid. In addition, there
can be no assurance that Sanmina will realize anticipated strategic and other
benefits from expansion of existing operations to new sites. Any such problems
could have a material adverse effect on Sanmina's business, financial condition
and results of operations. In addition, future acquisitions by Sanmina may
result in dilutive issuances of equity securities, the occurrence of additional
debt, large one-time write-offs and the creation of goodwill or other intangible
assets that could result in amortization expense. These factors could have a
material adverse effect on Sanmina's business, financial condition and results
of operation.
14
<PAGE> 22
Competition and Technological Change. The electronic interconnect product
industry is highly fragmented and it is characterized by intense competition.
Sanmina competes in the technologically advanced segment of the interconnect
product market, which is also highly competitive but is much less fragmented
than the industry as a whole. Sanmina's competitors consist primarily of larger
manufacturers of interconnect products, and some of these competitors have
greater manufacturing and financial resources than Sanmina as well as greater
SMT assembly capacity. As a participant in the interconnect industry, Sanmina
must continually develop improved manufacturing processes to accommodate its
customers' needs for increasingly complex products. During periods of recession
in the electronics industry, Sanmina's competitive advantages in the areas of
quick turnaround manufacturing and responsive customer service may be of reduced
importance to electronics OEMs, who may become more price sensitive. In
addition, captive interconnect product manufacturers seek orders in the open
market to fill excess capacity, thereby increasing price competition. Sanmina
may be at a competitive disadvantage with respect to price when compared to
manufacturers with lower cost structures, particularly those with offshore
facilities where labor and other costs are lower.
Environmental Matters. Proper waste disposal is a major consideration for
printed circuit board manufacturers because metals and chemicals are used in the
manufacturing process. Water used in the printed circuit board manufacturing
process must be treated to remove metal particles and other contaminants before
it can be discharged into the municipal sanitary sewer system. Maintenance of
environmental controls is also important in the electronics assembly process,
notwithstanding the fact that these processes generate significantly less waste
water than the printed circuit board fabrication process. Each of Sanmina's
printed circuit board and electronics assembly plants has personnel responsible
for monitoring environmental compliance. These individuals report to Sanmina's
director of environmental compliance, who has overall responsibility for
environmental matters. Each plant operates under effluent discharge permits
issued by the appropriate governmental authority. These permits must be renewed
periodically and are subject to revocation in the event of violations of
environmental laws. There can be no assurance that violations will not occur in
the future as a result of human error, equipment failure or other causes. In the
event of a future violation of environmental laws, Sanmina could be held liable
for damages and for the costs of remedial actions and could be also subject to
revocation of effluent discharge permits. Any such revocation could require
Sanmina to cease or limit production at one or more of its facilities, thereby
having an adverse impact on Sanmina's results of operations. Sanmina is also
subject to environmental laws relating to the storage, use and disposal of
chemicals, solid waste and other hazardous materials as well as air quality
regulations. Furthermore, environmental laws could become more stringent over
time, and the costs of compliance with and penalties associated with violation
of more stringent laws could be substantial.
In addition, Elexsys is currently involved in environmental testing and
related remediation activities at certain of its facilities' locations and could
be required by regulatory authorities to undertake additional remediation
activities, including groundwater and soil remediation. Costs associated with
such remediation activities could be substantial and could have a material
adverse effect on the business, financial condition and results of operations of
the combined company.
Risks Associated with International Operations. Sanmina has recently opened
its first overseas facility, located in Dublin, Ireland. Elexsys also operates a
printed circuit board fabrication facility in Peterborough, England. A number of
risks are inherent in international operations and transactions. International
sales and operations may be limited or disrupted by the imposition of government
controls, export license requirements, political instability, trade
restrictions, changes in tariffs, and difficulties in staffing, coordinating
communications among and managing international operations. Additionally,
Sanmina's business, financial condition and results of operations may be
adversely affected by fluctuations in international currency exchange rates as
well as increases in duty rates, difficulties in obtaining export licenses,
constraints on its ability to maintain or increase prices and competition. There
can be no assurance that Sanmina will realize the anticipated strategic benefits
of its expansion in Ireland or that Sanmina's international operations will
contribute positively to Sanmina's business, financial condition and results of
operations. Furthermore, difficulties encountered in scaling up production at
the new Irish facility or in coordinating Sanmina's United States and Irish
operations,
15
<PAGE> 23
as well as any failure of the Irish operations to realize anticipated revenue
growth, could, individually or in the aggregate, have a material adverse effect
on Sanmina's business, financial condition and results of operations.
Leverage. On August 16, 1995, Sanmina issued $86.25 million principal
amount of 5.5% Convertible Subordinated Notes due on August 15, 2002 (the
"Notes") under an indenture dated August 15, 1995 (the "Indenture") which
increased Sanmina's ratio of long-term debt to total capitalization. As a result
of this indebtedness, Sanmina's principal and interest obligations have
increased substantially. In addition, Elexsys had $12.1 million of long-term
obligations outstanding as of June 28, 1997. As a result, Sanmina's leverage
would increase if the Merger is consummated. The degree to which Sanmina is
leveraged could adversely affect Sanmina's ability to obtain additional
financing for working capital, acquisitions or other purposes and could make it
more vulnerable to industry downturns and competitive pressures. The Notes are
convertible into Common Stock, at the option of the Note holder, at a conversion
price of $28.1925 per share, subject to adjustments in certain events. The
conversion of the Notes, which have a conversion price below the prevailing
market price for Sanmina Common Stock, would result in the issuance of 3.06
million shares of Sanmina Common Stock, which would result in a reduction in the
percentage of the issued and outstanding shares of Common Stock of the combined
company held by the Elexsys stockholders.
Possible Volatility of Stock Price. The trading price of the Sanmina Common
Stock could be subject to significant fluctuations in response to variations in
quarterly operating results, developments in the electronics industry, general
economic conditions, changes in securities analysts' recommendations regarding
Sanmina's securities and other factors. In addition, the stock market in recent
years has experienced significant price and volume fluctuations which have
affected the market prices of technology companies and which have often been
unrelated to or disproportionately impacted by the operating performance of such
companies. These broad market fluctuations may adversely affect the market price
of the Common Stock.
16
<PAGE> 24
COMPARATIVE STOCK PRICES AND DIVIDEND POLICY
Sanmina Common Stock (symbol: SANM) and Elexsys Common Stock (symbol: ELEX)
are quoted on the Nasdaq National Market. The following table sets forth, for
the periods indicated, the high and low sale prices per share of Sanmina Common
Stock and of Elexsys Common Stock on the Nasdaq National Market. Sanmina and
Elexsys have never paid cash dividends on shares of Sanmina Common Stock and
Elexsys Common Stock, respectively. In addition, the Merger Agreement restricts
Elexsys' and Sanmina's ability to pay cash dividends between the date of the
Merger Agreement and the Effective Time. Elexsys' bank credit agreement also
prohibits the payment of cash dividends without the approval of the bank.
Sanmina does not currently intend to pay any cash dividends in the future.
<TABLE>
<CAPTION>
SANMINA ELEXSYS
COMMON COMMON
STOCK STOCK
----------- -----------
HIGH LOW HIGH LOW
--- --- --- ---
<S> <C> <C> <C> <C>
FISCAL 1994
First Quarter......................................... 14 3/4 9 1/2 3/4 1/8
Second Quarter........................................ 15 3/4 8 3/4 1 3/8
Third Quarter......................................... 11 5/8 7 5/8 1 7/8 1 1/16
Fourth Quarter........................................ 12 1/4 7 7/8 2 1/4 1 1/4
FISCAL 1995
First Quarter......................................... 13 7/8 10 1/8 4 5/16 1 1/4
Second Quarter........................................ 17 12 7/8 5 5/8 3 5/8
Third Quarter......................................... 20 3/8 14 5/8 7 3/8 3 1/2
Fourth Quarter........................................ 25 1/4 18 7/8 15 5/8 6 3/4
FISCAL 1996
First Quarter......................................... 28 5/8 18 7/8 19 3/4 12 1/2
Second Quarter........................................ 32 3/4 20 1/4 17 1/2 11 1/4
Third Quarter......................................... 39 1/4 26 1/2 16 1/8 8 1/2
Fourth Quarter........................................ 41 3/4 21 12 1/2 8 1/2
FISCAL 1997
First Quarter......................................... 56 3/4 38 21 3/8 10 1/2
Second Quarter........................................ 64 1/8 38 25 9
Third Quarter......................................... 66 1/2 43 1/16 17 1/4 10
Fourth Quarter........................................ 90 3/4 60 7/8 29 1/2 16 1/2
FISCAL 1998
First Quarter (to October 2, 1997).................... 87 83 1/2 28 3/4 27 1/2
</TABLE>
- ---------------
(1) Per share amounts for Sanmina Common Stock have been restated to
retroactively reflect a two-for-one stock split effected in January 1996.
The following table sets forth the last reported sales prices per share of
Sanmina Common Stock and of Elexsys Common Stock on the Nasdaq National Market
on July 22, 1997, the last trading day before announcement of the Merger
Agreement, and on October 2, 1997:
<TABLE>
<CAPTION>
SANMINA ELEXSYS
COMMON STOCK COMMON STOCK
-------------- --------------
<S> <C> <C>
July 22, 1997................................................ $ 675/16 $ 23 1/8
October 2, 1997.............................................. $ 845/16 $ 27 1/2
</TABLE>
ELEXSYS STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
SANMINA COMMON STOCK AND ELEXSYS COMMON STOCK IN CONNECTION WITH VOTING THEIR
SHARES.
17
<PAGE> 25
THE SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE
This Proxy Statement/Prospectus is being furnished to Elexsys stockholders
in connection with the solicitation of proxies by the Elexsys Board for use at
the Special Meeting to be held on November 5, 1997 at 8:00 a.m., local time, at
Elexsys' principal offices at 4405 Fortran Court, San Jose, California 95134.
Only holders of record of Elexsys Common Stock at the close of business on the
Record Date will be entitled to notice of, and to vote at, the Special Meeting.
At the Special Meeting, holders of Elexsys Common Stock will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement, a
copy of which is attached as Annex I to this Proxy Statement/Prospectus, and
approve the Merger of Merger Sub with and into Elexsys upon the terms and
subject to the conditions of the Merger Agreement. Elexsys will be the Surviving
Corporation in the Merger and will become a wholly owned subsidiary of Sanmina.
At the Effective Time, each issued and outstanding share of Elexsys Common
Stock, other than shares owned by Sanmina, Merger Sub or Elexsys, will be
converted into 0.33 fully paid and nonassessable shares of Sanmina Common Stock.
No fractional shares of Sanmina Common Stock will be issued in the Merger. Each
holder of shares of Elexsys Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of Sanmina
Common Stock will receive, in lieu thereof, cash (without interest) in an
amount, less the amount of any withholding taxes which may be required thereon,
equal to such fraction of a share of Sanmina Common Stock multiplied by the per
share last reported sale price of Sanmina Common Stock on the closing date of
the Merger as such price is reported on the Nasdaq National Market. Sanmina will
make available to the Exchange Agent (as defined in the Merger Agreement and
described below under "THE MERGER AGREEMENT -- Exchange Agent; Exchange
Procedures; Dividends; No Further Ownership Rights in Elexsys Common Stock; No
Fractional Shares") from time to time, as needed, funds sufficient to pay cash
in lieu of fractional shares. At the Effective Time, each Elexsys Option that
has not been exercised prior to the Effective Time and that is included on a
list (the "Net Exercise List") to be provided by Elexsys to Sanmina prior to the
consummation of the Merger will be converted to that number of shares of Sanmina
Common Stock equal to the difference between (a) the number of shares of Sanmina
Common Stock derived by multiplying the number of shares of Elexsys Common Stock
underlying the Elexsys Option by the Exchange Ratio and (b) the number of shares
of Sanmina Common Stock derived by dividing the aggregate exercise price of the
Elexsys Option by the fair market value of one share of Sanmina Common Stock as
of the closing date of the Merger.
THE ELEXSYS BOARD HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, ELEXSYS
STOCKHOLDERS. ACCORDINGLY, THE ELEXSYS BOARD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF ELEXSYS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
CERTAIN MEMBERS OF THE ELEXSYS BOARD MAY BE DEEMED TO HAVE A CONFLICT OF
INTEREST IN RECOMMENDING STOCKHOLDER APPROVAL OF THE MERGER. SEE "THE
MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
The Sanmina Board of Directors (the "Sanmina Board") has unanimously
approved the Merger Agreement and the Merger and the issuance of Sanmina Common
Stock in connection with the Merger. Sanmina, as the sole stockholder of Merger
Sub, and the Board of Directors of Merger Sub, have each approved the Merger
Agreement and the Merger. No approval by stockholders of Sanmina is required to
effect the Merger.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED
The close of business on September 12, 1997 has been fixed as the Record
Date for determining the holders of Elexsys Common Stock who are entitled to
notice of and to vote at the Special Meeting. As of the Record Date, there were
9,550,151 shares of Elexsys Common Stock outstanding, of which 4,100,461 shares
(approximately 43% of the outstanding shares) of Elexsys Common Stock were owned
by directors (in their capacity as stockholders) of Elexsys. As indicated below,
all such directors of Elexsys have indicated that they intend to vote all such
shares in favor of the approval and adoption of the Merger Agreement and
approval of
18
<PAGE> 26
the Merger. The holders of record on the Record Date of shares of Elexsys Common
Stock are entitled to one vote per share of Elexsys Common Stock on each matter
submitted to a vote at the Special Meeting. The presence in person or by proxy
of the holders of shares representing a majority of the voting power of Elexsys
Common Stock entitled to vote is necessary to constitute a quorum for the
transaction of business at the Special Meeting. Under the DGCL, the affirmative
vote of holders of at least a majority of the outstanding shares of the Elexsys
Common Stock is required for Stockholder Approval. An abstention from voting or
a broker non-vote will have the practical effect of voting against approval and
adoption of the Merger Agreement and approval of the Merger since a vote to
abstain or a broker non-vote represents one less vote for such approval and
adoption. A "broker non-vote" occurs when brokers who hold shares in street name
for customers who are the beneficial owners of such shares do not give a proxy
to vote such customers' shares because the customers have failed to give the
broker specific instructions concerning the voting of the customers' shares.
As indicated above, pursuant to the terms of the Stockholder Agreements,
the directors of Elexsys (in their capacity as stockholders) have agreed, among
other things, to vote (or cause to be voted) their shares of Elexsys Common
Stock in favor of approval and adoption of the Merger Agreement and approval of
the Merger at the Special Meeting. Together, such stockholders held on the
Record Date 4,100,461 shares (approximately 43% of the outstanding shares) of
Elexsys Common Stock. Consequently, holders of only approximately 7% of Elexsys
Common Stock who are not parties to the Stockholder Agreements need vote in
favor of approval and adoption of the Merger Agreement and approval of the
Merger for Stockholder Approval to be obtained. The general effect of the
Stockholder Agreements is to increase the likelihood that Stockholder Approval
will be obtained. See "THE MERGER -- Interests of Certain Persons in the Merger"
and "THE MERGER AGREEMENT -- The Stockholder Agreements."
PROXIES; PROXY SOLICITATION
Shares of Elexsys Common Stock represented by properly executed proxies
received at or prior to the Special Meeting that have not been revoked will be
voted at the Special Meeting in accordance with the instructions contained
therein. Shares of Elexsys Common Stock represented by properly executed proxies
for which no instruction is given will be voted FOR approval and adoption of the
Merger Agreement and approval of the Merger. Elexsys stockholders are requested
to complete, sign and return promptly the enclosed proxy card in the enclosed
postage-prepaid envelope to ensure that their shares are voted at the Special
Meeting. An Elexsys stockholder may revoke a proxy by submitting at any time
prior to the vote on the approval and adoption of the Merger Agreement and the
approval of the Merger a later dated proxy with respect to the same shares, by
delivering written notice of revocation to the Secretary of Elexsys at any time
prior to such vote or by attending the Special Meeting and voting in person.
Mere attendance at the Special Meeting will not in and of itself revoke a proxy.
If an Elexsys stockholder is not the registered direct holder of his or her
shares, such stockholder must obtain appropriate documentation from the
registered holder in order to be able to vote the shares in person.
If the Special Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Special Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the meeting (except for any proxies which have effectively been revoked or
withdrawn), notwithstanding that they may have been effectively voted in the
same or any other manner at a previous meeting.
In addition to solicitation by mail, directors, officers and employees of
Sanmina and Elexsys may solicit proxies by telephone, telegram or otherwise.
Such directors, officers and employees of Sanmina and Elexsys will not be
additionally compensated for such solicitation but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of Elexsys Common Stock held of record by them will
be reimbursed for their reasonable expenses incurred in forwarding such
material. Elexsys may retain D.F. King & Co., Inc. to aid in soliciting proxies
from its stockholders. The fees of such firm are estimated not to exceed
$25,000, plus reimbursement of out-of-pocket expenses. Elexsys will bear the
cost of solicitation of proxies from the stockholders.
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<PAGE> 27
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL
STOCKHOLDERS OF ELEXSYS
The following table sets forth certain information regarding beneficial
ownership of Elexsys Common Stock as of September 5, 1997 (except as otherwise
noted) by (i) each director of Elexsys, (ii) Elexsys' Chief Executive Officer
and each of the four other most highly compensated executive officers of Elexsys
during the fiscal year ended September 30, 1996 and one additional individual
currently among the four most highly compensated executive officers of Elexsys
for whom information would have been provided but for the fact that he was not
serving as an executive officer at the end of the last completed fiscal year,
(iii) all directors and executive officers of Elexsys as a group, and (iv) all
those known by Elexsys to be beneficial owners of more than five percent of the
outstanding shares of Elexsys Common Stock. This table is based on information
provided to Elexsys or filed with the SEC by Elexsys' directors, executive
officers and principal stockholders. Unless otherwise indicated in the footnotes
below, and subject to community property laws where applicable, each of the
named persons has sole voting and investment power with respect to shares shown
as beneficially owned. Applicable percentages are based on 9,534,201 shares
outstanding on September 5, 1997, adjusted as required by rules promulgated by
the SEC.
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF
BENEFICIAL OUTSTANDING
OWNERSHIP OF COMMON STOCK
BENEFICIAL OWNER(1) COMMON STOCK(2) STOCK OWNED
- -------------------------------------------------------------- --------------- ------------
<S> <C> <C>
Milan Mandaric................................................ 4,072,961 42.7%
C. Bradford Jeffries.......................................... 30,000 *
Roger W. Johnson.............................................. 22,000 *
Alan C. Mendelson(3).......................................... 35,500 *
Michael S. Shimada(4)......................................... 38,680 *
W.F. (Barry) Hegarty.......................................... 255,000 2.6%
Michael Giggey(5)............................................. 65,560 *
George Dudnikov, Jr.(6)....................................... 40,000 *
Robert DeLaurentis............................................ 50,000 *
All executive officers and directors as a group (8 persons)... 4,571,021 47.9%
</TABLE>
- ---------------
* Less than one percent.
(1) The mailing address of each stockholder (other than Mr. Shimada) is c/o
Elexsys International, Inc., 4405 Fortran Court, San Jose, California 95134.
(2) The figures shown include the following number of shares that the persons
have the right to acquire pursuant to options which will become fully
exercisable at the Effective Time pursuant to the terms of the Company's
Stock Option Plans. Mr. Jeffries, 20,000; Mr. Johnson, 20,000; Mr.
Mendelson, 20,000; Mr. Hegarty, 225,000; Mr. Giggey, 57,600; Mr. Dudnikov,
40,000; Mr. DeLaurentis, 50,000; and all directors and executive officers as
a group, 432,600.
(3) Includes 12,000 shares held by a trustee of a profit sharing trust for the
benefit of Mr. Mendelson who has sole voting and investment power with
respect to these shares. Also includes 2,000 shares as to which Mr.
Mendelson holds voting and dispositive power as trustee under two
irrevocable trusts; Mr. Mendelson disclaims beneficial ownership of such
2,000 shares.
(4) Mr. Shimada ceased to be an executive officer of Elexsys in June 1997.
(5) Does not include 1,000 shares held by Mr. Giggey's wife in an Individual
Retirement Account.
(6) Does not include 20,000 shares owned by Mr. Dudnikov's wife, an employee of
Elexsys. Mr. Dudnikov disclaims beneficial ownership of such shares.
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<PAGE> 28
THE COMPANIES
SANMINA CORPORATION
Sanmina is a leading independent provider of customized integrated
electronics manufacturing services, including turnkey electronic assembly and
manufacturing management services, to original equipment manufacturers ("OEMs")
in the electronics industry. Sanmina's electronic manufacturing services consist
primarily of the manufacture of complex printed circuit board assemblies using
surface mount ("SMT") and pin through-hole ("PTH") interconnection technologies,
the manufacture of custom designed backplane assemblies, fabrication of complex
multi-layer printed circuit boards, and testing and assembly of completed
systems. In addition to assembly, turnkey manufacturing management also involves
procurement and materials management, as well as consultation on printed circuit
board design and manufacturability. Sanmina, through its Golden Eagle Systems
("Golden Eagle") subsidiary, which was acquired in January 1996, also
manufactures custom cable assemblies for electronics industry OEMs.
SMT and PTH printed circuit board assemblies are printed circuit boards on
which various electronic components, such as integrated circuits, capacitors,
microprocessors and resistors have been mounted. These assemblies are key
functional elements of many types of electronic products. Backplane assemblies
are large printed circuit boards on which connectors are mounted to interconnect
printed circuit boards, integrated circuits and other electronic components.
Interconnect products manufactured by Sanmina generally require greater
manufacturing expertise and have shorter delivery cycles than mass produced
interconnect products and therefore typically have higher profit margins.
Sanmina's customers include leading OEMs in the telecommunications,
networking (data communications), industrial and medical instrumentation and
computer systems sectors. Sanmina's manufacturing and assembly plants are
located in Northern California; Richardson, Texas; Manchester, New Hampshire;
Raleigh, North Carolina; Guntersville, Alabama and Dublin, Ireland. Golden
Eagle's manufacturing facility is located in Carrollton, Texas.
Sanmina was incorporated in Delaware in 1989 to acquire the printed circuit
board and backplane operations of its predecessor company, which had been in the
printed circuit board and backplane business since 1980.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
The principal executive offices of Sanmina are located at 355 East Trimble
Road, San Jose, California 95131. The telephone number is (408) 435-8444.
ELEXSYS INTERNATIONAL, INC.
Elexsys is a leading manufacturer of interconnect products used in advanced
electronic equipment. Elexsys manufactures complex products in the mid-volume
sector of the electronics interconnect industry. Elexsys offers to its customers
complete original design capability for top level assembly, as Elexsys' products
generally require greater engineering and manufacturing expertise than
mass-produced, less complex products. Elexsys manufactures custom-designed,
press-fit backpanels, surface mount backpanel assemblies and subsystems (known
as card cages) complete with an assembled backpanel, power supply, fan and cable
attachments as well as multilayer, high density printed circuit boards. Elexsys
works closely with its customers, beginning with the early stages of the
customer's product design and development.
Elexsys believes its capabilities both in providing value added
manufacturing services and manufacturing multilayer, high density printed
circuit boards position Elexsys to serve high growth OEMs in the rapidly
changing electronics markets. Elexsys' OEM customers include a diversified base
of manufacturers in the telecommunications, data communications, computer,
industrial systems and medical systems segments of the electronics industry.
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<PAGE> 29
Elexsys' strategy is to continue to utilize its well established high
technology printed circuit board manufacturing and engineering capabilities to
further expand into the rapidly growing outsourcing market, providing products
including complex press-fit backpanels, surface mount backpanel assemblies and
subsystems. Key elements of this strategy include providing its customers with
the highest levels of quality, superior service and leading edge technology.
Elexsys was originally incorporated in California in 1980 and
reincorporated in Delaware in 1987.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
The principal offices of Elexsys are located at 4405 Fortran Court, San
Jose, California 95134. The telephone number is (408) 935-6300.
THE MERGER
BACKGROUND OF THE MERGER
The terms and conditions of the Merger Agreement are the result of arm's
length negotiations between representatives of Elexsys and representatives of
Sanmina. Set forth below is a summary of the background of these negotiations.
Elexsys and Sanmina have been familiar with each others' businesses for
many years. Milan Mandaric, Chairman of the Board and Chief Executive Officer of
Elexsys, was the founder of Sanmina and was a director of Sanmina until February
1994, and was President, Chief Executive Officer and Chairman of the Board of
Sanmina from 1980 until September 1989. W.F. Barry Hegarty, the President and
Chief Operating Officer of Elexsys, was Vice President of Sales and Marketing of
Sanmina from 1987 to 1995. Jure Sola, Chairman of the Board and Chief Executive
Officer of Sanmina, has been a director of Sanmina since 1989.
On June 9, 1997, Mr. Mandaric met with Jure Sola. Mr. Mandaric and Mr. Sola
have known one another for a number of years, and over the years have met
regularly to discuss matters of mutual interest. During the June 9 meeting,
Messrs. Mandaric and Sola discussed a number of matters, including the expected
future direction of the electronics contract manufacturing industry. During the
meeting, Mr. Sola suggested that the two companies explore the possible benefits
of a combination of the two companies.
Mr. Mandaric believed that the possible combination of Elexsys and Sanmina
would be beneficial for a number of reasons. Mr. Mandaric believed that the
electronic contract manufacturing industry was going through a period of
consolidation, caused by a number of industry trends, including shifts to new
assembly equipment and customer demand that vendors perform a wider range of
assembly services at plants located close to customer manufacturing facilities.
Mr. Mandaric was aware that Elexsys' balance sheet was relatively weaker than
that of many competitors, including Sanmina, and believed that a combination
with Sanmina would provide Elexsys with greater resources and a stronger balance
sheet to compete in the electronic contract manufacturing industry. In
particular, Mr. Mandaric believed that the combination with Sanmina would
provide Elexsys with improved resources to acquire needed assembly equipment as
described above, and would provide the combined company with additional plants
close to customer manufacturing facilities, avoiding the need for the
construction or acquisition of additional facilities.
On June 11, 1997, Messrs. Mandaric and Sola met again to discuss the
possible synergies that could be achieved by a merger involving Elexsys and
Sanmina, the possible benefits that such a merger would have to the companies'
respective stockholders, customers and employees and certain matters relating to
the valuation of Elexsys. At the conclusion of that meeting, Messrs. Mandaric
and Sola determined to continue to evaluate a possible merger. Following this
meeting, Mr. Mandaric informed the members of the Elexsys Board of these
meetings. Mr. Mandaric thereafter informally advised the members of the Elexsys
Board of the progress of discussions with Sanmina.
From June 12, 1997 through June 16, 1997, Messrs. Mandaric and Sola talked
by telephone regarding a possible merger involving Elexsys and Sanmina,
including how a combination of Elexsys and Sanmina could
22
<PAGE> 30
best be achieved. During the period from June 17, 1997 through the end of June
1997, while Mr. Mandaric was in Europe, Messrs. Mandaric and Sola had additional
telephone conversations regarding a possible merger. In late June 1997, Messrs.
Mandaric and Sola agreed that it would be beneficial to begin more formal
negotiations and to involve outside legal counsel and financial advisors.
Also in June, Mr. Mandaric had a telephone conversation with the Chairman
and Chief Executive Officer of another public company in the electronic contract
manufacturing business concerning the possibility of an acquisition of Elexsys
by such company. This telephone conversation, which was initiated by such
company, led to meetings between the two men on June 16, 1997 and on or about
June 25, 1997 during which it was agreed that a divisional vice president of
such company would meet with Mr. Hegarty. At the meeting with Mr. Hegarty, which
took place on July 7, 1997, it became evident that a combination of the two
companies would not have significant synergies for the other public company and
that there was no possibility of a transaction at a price that would be superior
to that being discussed with Sanmina.
On June 30, 1997, Wilson Sonsini Goodrich & Rosati, Sanmina's outside legal
counsel, delivered a draft merger agreement to Cooley Godward LLP, Elexsys'
outside legal counsel, and suggested that a meeting of representatives of
Elexsys and representatives of Sanmina be held on July 3, 1997 to discuss the
draft merger agreement and the status of the contemplated transaction. The draft
merger agreement (i) contained provisions that, among other things, required
certain stockholders of Elexsys to indemnify Sanmina after the closing for
breaches of representations and warranties contained in the merger agreement,
and (ii) provided broad termination rights in favor of Sanmina. The draft merger
agreement did not contain provisions permitting Elexsys to terminate the merger
agreement if the Elexsys Board determined that its fiduciary duties required it
to do so.
On July 1, 1997 and July 2, 1997, Elexsys' outside legal counsel and
Sanmina's outside legal counsel discussed a number of provisions contained in
the draft merger agreement, and Elexsys' outside legal counsel indicated that
Elexsys was reluctant to meet with Sanmina on July 3, 1997 unless an
understanding relating to requested changes to certain provisions contained in
the merger agreement could be reached prior to the scheduled meeting. At the
conclusion of such discussions, it was determined that representatives of
Elexsys and representatives of Sanmina would meet on July 3, 1997.
On July 3, 1997, Messrs. Mandaric and Hegarty and Elexsys' outside legal
counsel met with Mr. Sola, Randy W. Furr, the President and Chief Operating
Officer of Sanmina, and Sanmina's outside legal counsel to discuss the draft
merger agreement. After discussing the draft merger agreement and the general
terms of a noncompetition agreement that Sanmina was seeking from Mr. Mandaric,
the parties determined to continue to negotiate a possible merger involving
Elexsys and Sanmina and discussed the schedule for moving forward with such a
transaction. Following the meeting on July 3, 1997, Elexsys contacted Needham
and requested Needham to render certain financial advisory services relating to
the proposed Merger, including an analysis of the financial terms thereof, and
requested Needham to render an opinion as to the fairness from a financial point
of view to the Elexsys stockholders of the consideration proposed to be paid in
the merger. Needham was formally engaged on July 9, 1997. In this regard,
Needham provided to the Elexsys Board, at its July 9, 1997 meeting, the
financial analyses described below. On July 9, 1997, Sanmina engaged Montgomery
Securities as its financial advisor in connection with such possible merger
transaction.
Also on July 3, 1997, Mr. Mandaric and Mr. Hegarty met with the Chief
Executive Officer of a third publicly-held electronics contract manufacturing
company (in a meeting initiated by such company) to discuss a number of matters,
including a possible acquisition of Elexsys by such other company. Mr. Mandaric
and such Chief Executive Officer agreed to schedule a further meeting to discuss
the possibility of such a transaction.
During the week of July 7, 1997, Elexsys and Sanmina negotiated and
executed non-disclosure agreements. In addition, during the week of July 7,
1997, Elexsys and Sanmina continued their business and legal due diligence
review of each other's businesses through discussions with representatives and a
review of financial information, material contracts and other due diligence
materials and continued negotiating the Merger Agreement. The business review
ongoing during the week of July 7, 1997 was a traditional business and legal due
diligence review by the parties of the respective companies, including review of
financial information, material contracts and other due diligence materials.
23
<PAGE> 31
On July 9, 1997, the Elexsys Board held a special meeting to discuss the
status of negotiations between Elexsys and Sanmina, the terms of the proposed
Merger Agreement, the potential valuation of Elexsys and other matters. Needham
made a financial presentation to the Elexsys Board at this meeting. The
presentation by Needham included a review and analysis of the material financial
terms of the proposed Merger Agreement, an analysis of the stock trading
histories of Elexsys' and Sanmina's common stock, and a financial analysis of
other companies and merger and acquisition transactions in the contract
manufacturing and printed circuit board assembly industries. The Needham
presentation was based upon and subject to, as of the date of such presentation,
the same assumptions, matters considered and scope of and limitations on the
review undertaken by Needham as set forth below under "Opinion of Elexsys'
Financial Advisor." Needham presented, for the period beginning on January 2,
1996 and ending on July 7, 1997, its stock trading history analysis and noted
the same results for such period as the analysis and results set forth below
under "Opinion of Elexsys' Financial Advisor -- Stock Trading History." Needham
also presented the results of its contribution analysis set forth below under
"Opinion of Elexsys' Financial Advisor -- Contribution Analysis." Needham
presented its comparable company analysis, as set forth below under "Opinion of
Financial Advisor -- Comparable Company Analysis," based upon the closing prices
for the common stock of the companies analyzed as of July 7, 1997, and noted
similar results as those set forth below in the description of such analysis
under such heading. Needham also presented its comparable transaction analysis,
as set forth below under "Opinion of Financial Advisor -- Comparable Transaction
Analysis," and noted similar results as those set forth below in the description
of such analysis under such heading, except that the one-day and four-week stock
price premiums for the proposed Merger, based on the closing prices of Elexsys
Common Stock and Sanmina Common Stock on July 8, 1997 and the exchange ratio of
0.33, were 9.1% and 35.9%, respectively. Elexsys' legal counsel also
participated in this meeting.
On July 10, 1997, representatives of Elexsys and representatives of Sanmina
met at the offices of Sanmina's legal counsel to discuss a number of due
diligence items. At that meeting, Sanmina requested that certain stockholders of
Elexsys agree to indemnify Sanmina after the closing for breaches of
representations and warranties contained in the Merger Agreement relating to
certain contingent liabilities. Elexsys refused to agree to any post-closing
indemnification by its stockholders.
On July 11, 1997, Messrs. Mandaric and Sola met to discuss further the
issue of post-closing indemnification. Because the parties could not reach an
agreement regarding post-closing indemnification, the negotiations were
temporarily suspended.
On July 11, 1997, Messrs. Mandaric and Hegarty again met with
representatives of the third publicly-held electronics contract manufacturing
company referred to above to discuss a possible acquisition of Elexsys by such
other company.
On July 14, 1997, the Elexsys Board held a regularly scheduled board
meeting, at which it discussed the status of discussions between Elexsys and
Sanmina and other matters, including other long term strategies for Elexsys,
including remaining independent. The Elexsys Board also considered in general
terms whether to seek strategic alliances with third parties, although no
specific strategic alliances were identified. Mr. Hegarty discussed the
possibility that Elexsys would need to raise equity capital if it were to remain
independent, the amount of capital that could reasonably be raised in the near
term and the competitive position of Elexsys given the industry trends noted
above. In part because of the perceived difficulties in raising sufficient
capital to compete effectively in a changing industry, the Elexsys Board
determined that proceeding with the Merger was a superior alternative to
remaining independent or pursuing strategic alliances. The Elexsys Board also
authorized Mr. Mandaric to continue discussions with the third publicly held
electronics contract manufacturing company.
Also on July 14, 1997, Messrs. Mandaric and Sola discussed the possibility
that the parties would recommence negotiations and the due diligence review of
each other's businesses, including a review of certain contingent liabilities,
and decided that the due diligence review should be recommenced.
On July 15, Mr. Mandaric and Mr. Hegarty met with representatives of the
third publicly held electronics contract manufacturing company. At the July 15
meeting, the representatives of such company made it clear that, in part because
of current market prices for such company's stock, the company was not prepared
to
24
<PAGE> 32
move forward with acquisition discussions at that time. Following the July 15
meeting, Elexsys and such other company decided not to proceed with further
discussions.
Between July 15, 1997 and July 17, 1997, Elexsys and Sanmina continued
their due diligence review of each other's businesses. On July 17, 1997,
representatives of Elexsys (including Elexsys' legal counsel) met with
representatives of Sanmina (including Sanmina's legal counsel) to discuss the
results of the parties' due diligence investigation and the principal terms of
the proposed merger. It was agreed at that meeting that Sanmina would not
require post-closing indemnification from any of Elexsys' stockholders and that
the parties would proceed to negotiate the final terms of the Merger Agreement.
From July 18, 1997 through July 22, 1997, representatives of Elexsys met
with representatives of Sanmina to continue to review each other's business, and
to discuss plans for communicating information to employees and customers
following the announcement of the Merger.
On July 21, 1997 and July 22, 1997, legal counsel for Elexsys and Sanmina
met to negotiate and finalize the terms of the Merger Agreement, including the
formulation of the Exchange Ratio. No members of management of either Elexsys or
Sanmina attended the meetings of outside legal counsel on July 21 and July 22,
1997.
On July 22, 1997, the Elexsys Board held a special meeting to review the
status of the transaction, including a review of the terms of the draft Merger
Agreement, which had been revised to contain (i) a provision permitting the
Elexsys Board to withhold, withdraw or modify in a manner adverse to Sanmina the
Elexsys Board's approval or recommendation of the Merger and to terminate the
Merger Agreement under certain circumstances if the Elexsys Board approved or
recommended a higher offer by a third party to acquire a majority of Elexsys'
stock or substantially all of its assets, and (ii) a $7.5 million "break-up" fee
(rather than a $10 million "break-up" fee that was contained in earlier drafts
of the Merger Agreement) triggered by a more limited set of events, including
the events listed in clause (i) above, than was contemplated in earlier drafts
of the Merger Agreement. The Elexsys Board received presentations by Elexsys'
legal counsel and by Needham, including Needham's oral opinion that, as of such
date and subject to certain assumptions and other matters set forth in its
written opinion dated July 22, 1997 and subsequently provided to the Elexsys
Board, the consideration to be received by the stockholders of Elexsys in the
Merger was fair from a financial point of view to such stockholders. See below
"-- Opinion of Elexsys' Financial Advisor." After discussion, the Elexsys Board
unanimously approved the terms of the Merger Agreement and directed the officers
of Elexsys to finalize and execute the Merger Agreement.
On July 22, 1997, the Sanmina Board also held a special meeting to review
the status of the transaction, including a review of the terms of the draft
Merger Agreement. The Sanmina Board received presentations by Sanmina's legal
counsel and by Montgomery Securities ("Montgomery"), including Montgomery's oral
opinion that the consideration to be paid by Sanmina pursuant to the Merger was
fair to Sanmina from a financial point of view, and after discussion unanimously
approved the terms of the Merger Agreement and directed the officers of Sanmina
to finalize and execute the Merger Agreement.
The Merger Agreement was executed on behalf of Elexsys, Sanmina and Merger
Sub on July 22, 1997. Elexsys and Sanmina announced the execution of the Merger
Agreement following the closing of the market on July 22, 1997.
CERTAIN INFORMATION CONCERNING SANMINA
As a matter of course, Sanmina does not publicly disclose forward-looking
financial information. Nevertheless, because in connection with its review of
Sanmina's business, Needham and the management and Board of Directors of
Elexsys, as well as Montgomery and the management and Board of Directors of
Sanmina, reviewed preliminary financial projections furnished by Sanmina,
Sanmina has disclosed such financial projections below. Such financial
projections indicate that, in fiscal 1997 and 1998, Sanmina may achieve net
revenues of $398 million and $510 million, respectively, and net income of $41
million and $52 million, respectively. Such financial projections also indicate
that, in fiscal 1997 and 1998, Sanmina may achieve earnings per share of $2.05
and $2.51, respectively. Such earnings per share projections are not
25
<PAGE> 33
materially different from the high end of the current range of the publicly
available earnings estimates of securities analysts that cover Sanmina. As of
the date hereof, the high end of the current range of such analysts' estimates
of Sanmina's earnings per share is $2.05 and $2.55 for fiscal 1997 and 1998,
respectively.
The statements regarding Sanmina's preliminary financial projections
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act and are subject to the safe
harbors created thereby. These preliminary financial projections were prepared
in July 1997 and have not been adjusted to, and do not, reflect or take into
account any circumstances or events occurring after that date. In addition, the
projections set forth above do not take into account the combination of the
operations of Sanmina and Elexsys or any changes that might result from or
relate to the Merger. The projections provided by Sanmina were based upon the
subjective judgment of Sanmina's management, including, without limitation, the
assumptions that competitive conditions within the electronics manufacturing
services industry would not change materially or adversely; that the market for
telecommunications, networking (data communications), industrial and medical
instrumentation and computer systems, and hence the market for electronics
manufacturing services, would remain strong; and that there would be no material
adverse change in Sanmina's operations or business. Such assumptions involve
judgments with respect to, among other things, future economic, competitive and
regulatory conditions, financial market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of Sanmina. While Sanmina believes that the
assumptions underlying the preliminary financial projections were reasonable at
the time the projections were made, any of the assumptions could prove
inaccurate; therefore, there can be no assurance that the forward-looking
financial information will prove to be accurate or that projected results could
be realized. In addition, as disclosed elsewhere in this Proxy
Statement/Prospectus under "Risk Factors," the business and operations of
Sanmina are subject to substantial risks which increase the uncertainty inherent
in such preliminary financial projections. Any of the factors disclosed under
"Risk Factors" could cause the actual net revenues, net income and earnings per
share of Sanmina to differ materially from the preliminary financial projections
described above. Accordingly, for these reasons, it is expected that there will
be differences between the actual and projected results, and actual results may
be materially higher or lower than those indicated above.
In light of the significant uncertainties inherent in forward-looking
financial information of any kind, the inclusion of such information herein
should not be regarded as a representation by Sanmina or any other person that
the preliminary financial projections will be achieved. Investors are cautioned
that these preliminary financial projections should not be regarded as fact and
should not be relied upon as an accurate representation of future results.
Further, the preliminary financial projections furnished by Sanmina were not
prepared with a view to public disclosure or in compliance with the established
guidelines concerning financial projections promulgated by the American
Institute of Certified Public Accountants. In addition, such preliminary
financial projections do not purport to present operations in accordance with
generally accepted accounting principles and have not been audited, compiled or
otherwise examined by Arthur Andersen LLP, Sanmina's independent auditors, or by
any other independent auditor. Accordingly, neither Arthur Andersen LLP nor any
other independent auditor assumes any responsibility for the preliminary
financial projections disclosed herein. The preliminary financial projections
are being presented solely because they were furnished to Elexsys, Needham and
Montgomery, and they should not be interpreted as suggesting that Elexsys,
Needham or Montgomery relied solely upon such projections in evaluating any
proposed transaction. Sanmina has advised Elexsys, Needham and Montgomery that
its preliminary financial projections are, in general, prepared solely for
internal use and capital budgeting and other management decisions, and are
subjective in many respects and thus susceptible to interpretations and periodic
revision based on actual experience and business developments. Sanmina does not
intend publicly to update or otherwise publicly to revise the preliminary
financial projections disclosed above to reflect circumstances existing after
the date such projections were initially prepared.
CERTAIN INFORMATION CONCERNING ELEXSYS
As a matter of course, Elexsys does not publicly disclose forward-looking
financial information. Nevertheless, because in connection with its review of
Elexsys's business, Montgomery and the management
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<PAGE> 34
and Board of Directors of Sanmina, as well as Needham and the management and
Board of Directors of Elexsys, reviewed preliminary financial projections
furnished by Elexsys, Elexsys has disclosed such financial projections below.
Such financial projections indicate that in fiscal 1997 and 1998, Elexsys may
achieve net revenues of $163 million and $208 million, respectively, and net
income of $6 million and $15 million, respectively. Such financial projections
also indicate that, in fiscal 1997 and 1998, Elexsys may achieve earnings per
share of $0.60 and $1.54, respectively.
The statements regarding Elexsys' preliminary financial projections
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act and were subject to the safe
harbors created thereby. These preliminary financial projections were prepared
in July 1997 and have not been adjusted to, and do not, reflect or take into
account any circumstances or events occurring after that date. For example, the
projections set forth above have not been adjusted to, and do not, reflect or
take into account, the effects of a decision by Elexsys management to close
three manufacturing facilities, including the expected accounting charge related
thereto. While Elexsys has not yet determined the extent of such accounting
charge related to the closure of such manufacturing facilities, Elexsys
currently expects that such charge is likely to exceed $3 million. In addition,
the projections set forth above do not take into account the combination of the
operations of Sanmina and Elexsys or any changes that might result from or
relate to the Merger. The projections provided by Elexsys were based upon the
subjective judgment of Elexsys' management, including, without limitation, the
assumptions that competitive conditions within the electronics manufacturing
services industry would not change materially or adversely; that the market for
telecommunications, networking (data communications), industrial and medical
instrumentation and computer systems, and hence the market for electronics
manufacturing services, would remain strong; and that there would be no material
adverse change in Elexsys' operations or business. Such assumptions involve
judgments with respect to, among other things, future economic, competitive and
regulatory conditions, financial market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of Elexsys. While Elexsys believes that the
assumptions underlying the preliminary financial projections were reasonable at
the time such projections were made, any of the assumptions could prove
inaccurate; therefore, there can be no assurance that the forward-looking
financial information will prove to be accurate or that projected results could
be realized. In addition, as disclosed elsewhere in this Proxy
Statement/Prospectus under "Risk Factors," the business and operations of
Elexsys are subject to substantial risks which increase the uncertainty inherent
in such preliminary financial projections. Any of the factors disclosed under
"Risk Factors" could cause the actual net revenues, net income and earnings per
share of Elexsys to differ materially from the preliminary financial projections
described above. Accordingly, for these reasons, it is expected that there will
be differences between the actual and projected results, and actual results may
be materially higher or lower than those indicated above.
In light of the significant uncertainties inherent in forward-looking
financial information of any kind, the inclusion of such information herein
should not be regarded as a representation by Elexsys or any other person that
the preliminary financial projections will be achieved. Investors are cautioned
that these preliminary financial projections should not be regarded as fact and
should not be relied upon as an accurate representation of future results.
Further, the preliminary financial projections furnished by Elexsys were not
prepared with a view to public disclosure or in compliance with the established
guidelines concerning financial projections promulgated by the American
Institute of Certified Public Accountants. In addition, such preliminary
financial projections do not purport to present operations in accordance with
generally accepted accounting principles and have not been audited, compiled or
otherwise examined by Deloitte & Touche LLP, Elexsys' independent auditors, or
by any other independent auditor. Accordingly, neither Deloitte & Touche LLP nor
any other independent auditor assumes any responsibility for the preliminary
financial projections disclosed herein. The preliminary financial projections
are being presented solely because they were furnished to Sanmina, Montgomery
and Needham, and they should not be interpreted as suggesting that Sanmina,
Montgomery or Needham relied solely upon such projections in evaluating any
proposed transaction. Elexsys has advised Sanmina, Montgomery and Needham that
its preliminary financial projections are, in general, prepared solely for
internal use and capital budgeting and other management decisions, and are
subjective in many respects and thus susceptible to interpretations and periodic
revision based on actual experience and business developments. Elexsys does not
intend publicly to update or otherwise publicly to revise the
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preliminary financial projections disclosed above to reflect circumstances
existing after the date such projections were initially prepared.
ELEXSYS' REASONS FOR THE MERGER -- RECOMMENDATION OF THE ELEXSYS BOARD
The Elexsys Board has unanimously determined that the terms of the Merger
Agreement and the Merger are fair to, and in the best interests of, Elexsys and
its stockholders. Accordingly, the Elexsys Board has unanimously approved the
Merger Agreement and unanimously recommends that the stockholders of Elexsys
vote FOR approval and adoption of the Merger Agreement and approval of the
Merger. In reaching its decision to approve the Merger Agreement and recommend
the Merger, the Elexsys Board consulted with Elexsys' management, as well as its
legal counsel and financial advisor, and gave significant consideration to a
number of factors bearing on its decision. The Elexsys Board did not consider it
practical to, nor did it attempt to, quantify or otherwise assign relative
weight to the factors it considered in reaching its decision. Certain members of
the Elexsys Board may be deemed to have a conflict of interest in recommending
stockholder approval of the Merger. See "-- Interests of Certain Persons in the
Merger."
Elexsys' Reasons for the Merger. The following are the reasons the Elexsys
Board believes the Merger will be beneficial to Elexsys and its stockholders:
- Following the Merger, Elexsys' stockholders will be able to participate
in the potential growth of Sanmina.
- Industry trends towards consolidation, and customer demands for new
equipment, greater integration of operations and more facilities all tend
to favor larger competitors with stronger balance sheets than Elexsys as
an independent company.
- The Merger should provide Elexsys with greater resources to invest in
capital equipment and infrastructure, as well as access to additional
working capital. As holders of Sanmina Common Stock following the Merger,
Elexsys stockholders will benefit to some extent in the event that access
to such resources improves Elexsys' operating results.
In addition to the factors set forth above, in the course of its
deliberations concerning the Merger, the Elexsys Board consulted with Elexsys'
legal counsel and financial advisors as well as Elexsys' management, and
reviewed a number of other factors relevant to the Merger, including (i) oral
reports from management and legal and financial advisors on specific terms of
the Merger Agreement; (ii) information concerning the financial performance,
business operations and prospects of Sanmina presented at meetings of the
Elexsys Board, including among other things, Sanmina's recent and historical
stock and earnings performance; (iii) Elexsys' belief that the management styles
and corporate cultures of the two companies would be complementary; (iv) the
expected tax and accounting treatment of the Merger; (v) financial presentations
by Needham and Needham's opinion to the effect that, as of July 22, 1997 and
based upon and subject to certain matters stated in such opinion, the
consideration to be received by the stockholders of Elexsys was fair from a
financial point of view to such stockholders; and (vi) the fact that the Merger
Agreement would permit the Elexsys Board to terminate the agreement under
certain circumstances; and (vii) the unsuccessful discussions with two potential
merger partners prior to the execution of the Merger Agreement.
The Elexsys Board also considered a number of potentially negative factors
in its deliberations concerning the Merger, including:
- The possibility of management disruption associated with the Merger and
the risk that key personnel of Elexsys might not continue with Elexsys.
- The risks associated with obtaining necessary approvals of the Merger and
the possibility that the Merger may not be consummated even if approved
by Elexsys' stockholders.
- The possibility that the Merger might adversely affect Elexsys'
relationship with certain of its customers.
- The possibility of a decline in the value of Sanmina Common Stock.
- The risk that the potential benefits of the Merger might not be realized.
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- The fact that certain elements of the financial analysis conducted by
Needham indicated that the Merger was not as favorable to the Elexsys
stockholders as certain comparable transactions, most notably the small
one day premium to market and the disproportionately larger contribution
of Elexsys to the combined Elexsys' and Sanmina revenues, and to a lesser
extent, assets.
The Elexsys Board concluded, however, that the benefits of the transaction
to Elexsys and its stockholders outweighed the risks associated with the
foregoing negative factors.
Although Elexsys had acquisition discussions with the two publicly held
electronics contract manufacturing companies as disclosed above, Elexsys did not
seek alternative acquisition offers from, or strategic alliances with, other
third parties following the initiation of discussions with Sanmina. Elexsys
believed that the proposed merger with Sanmina was in the best interests of its
stockholders, had not identified other potential bidders or strategic partners
that were deemed likely to make a superior offer to the Sanmina offer, and
believed that exploring such potential offers would present a risk that the
Sanmina offer might not be consummated.
The foregoing discussion of the information and factors considered by the
Elexsys Board in connection with its evaluation of the Merger is not intended to
be exhaustive but includes all of the material factors considered by the
directors. In view of the wide variety of factors considered by the Elexsys
Board, the directors did not find it practical to, and did not, quantify or
otherwise assign relative weights to the specific factors considered.
Recommendation of Elexsys' Board of Directors. At a special meeting of the
Elexsys Board held on July 22, 1997, the directors unanimously determined that
the Merger is fair to and in the best interests of Elexsys and its stockholders,
unanimously approved the Merger Agreement and the Merger, and unanimously
recommended approval and adoption of the Merger Agreement and approval of the
Merger by Elexsys' stockholders. Certain members of the Elexsys Board may be
deemed to have a conflict of interest in recommending stockholder approval of
the Merger. See below "-- Interests of Certain Persons in the Merger."
OPINION OF ELEXSYS' FINANCIAL ADVISOR
Pursuant to an engagement letter dated July 9, 1997 (the "Engagement
Letter"), Elexsys retained Needham to render an opinion as to whether or not the
consideration to be received by the stockholders of Elexsys in the Merger was
fair to the stockholders of Elexsys from a financial point of view and to render
certain financial advisory services relating to the proposed Merger, including
an analysis of the financial terms thereof. Needham was not requested to, and
did not, make any recommendation to the Elexsys Board as to the Exchange Ratio
to be provided for in the Merger, which Exchange Ratio was determined through
arm's length negotiations between Elexsys and Sanmina. Except as described in
this section, no other limitations were imposed by Elexsys on Needham with
respect to the investigations made or procedures followed by Needham in
rendering its opinion.
At a meeting of the Elexsys Board on July 22, 1997, Needham delivered its
oral opinion (subsequently confirmed in writing) that, as of such date and based
upon and subject to certain assumptions and other matters described in its
written opinion, the consideration to be received by the stockholders of Elexsys
in the Merger was fair to such stockholders from a financial point of view.
NEEDHAM'S OPINION IS ADDRESSED TO THE ELEXSYS BOARD, IS DIRECTED ONLY TO THE
FINANCIAL TERMS OF THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY STOCKHOLDER OF ELEXSYS AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE
SPECIAL MEETING.
Needham is not expressing any opinion as to what the value of Sanmina
Common Stock will be when issued to the stockholders of Elexsys pursuant to the
Merger or the prices at which Sanmina Common Stock will actually trade at any
time. The full text of Needham's July 22, 1997 opinion (the "Needham Opinion"),
which sets forth the assumptions made, matters considered, and limitations on
and scope of the review undertaken by Needham, is attached to this Proxy
Statement/Prospectus as Annex III, and the summary of the Needham Opinion set
forth in the Proxy Statement/Prospectus is qualified in its entirety by
reference to the Needham Opinion. All material elements of the Needham Opinion
are described in this Proxy
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Statement/Prospectus. ELEXSYS STOCKHOLDERS ARE URGED TO READ THE NEEDHAM OPINION
CAREFULLY AND IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE
FACTORS CONSIDERED, AND THE ASSUMPTIONS MADE BY NEEDHAM. IT IS NOT CURRENTLY
EXPECTED THAT THE NEEDHAM OPINION WILL BE FURTHER UPDATED. THE NEEDHAM OPINION
STATES THAT IT MAY BE USED IN CONNECTION WITH THIS PROXY STATEMENT/PROSPECTUS SO
LONG AS THE NEEDHAM OPINION IS QUOTED IN FULL HEREIN.
In arriving at its opinion, Needham, among other things: reviewed the
Merger Agreement; reviewed certain other documents relating to the Merger;
reviewed certain publicly available information concerning Sanmina and Elexsys
and certain other relevant financial and operating data of Sanmina and Elexsys
made available from the internal records of Sanmina and Elexsys; reviewed the
historical stock prices and trading volumes of Sanmina's Common Stock and
Elexsys Common Stock; held discussions with members of senior management of
Sanmina and Elexsys concerning their current and future business prospects;
reviewed certain financial forecasts and projections prepared by the respective
managements of Sanmina and Elexsys; compared certain publicly available
financial data of companies whose securities are traded in the public markets,
which Needham deemed generally comparable to the business of Elexsys, to similar
data for Elexsys; reviewed the financial terms of certain other business
combinations that Needham deemed generally relevant; and performed and/or
considered such other studies, analyses, inquiries and investigations as Needham
deemed appropriate. Needham assumed and relied upon, without independent
verification, the accuracy and completeness of the information it reviewed for
purposes of its opinion. Needham assumed, with the consent of the Elexsys Board,
that the Merger will be accounted for under the pooling of interests method of
accounting, the Merger will constitute a tax-free reorganization, and that any
material liabilities (contingent or otherwise, known or unknown) of Sanmina and
Elexsys, respectively, were included. With respect to Sanmina's and Elexsys'
financial forecasts provided to Needham by their respective managements, Needham
assumed that such forecasts have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of such managements, at the
time of preparation, of the future operating and financial performance of
Sanmina and Elexsys. Needham did not assume any responsibility for or make or
obtain any independent evaluation, appraisal or physical inspection of the
assets or liabilities of Elexsys or Sanmina. The Needham Opinion states that it
was based on economic, monetary and market conditions existing as of the date of
such opinion. Furthermore, Needham expresses no opinion as to what the value of
Sanmina Common Stock will be when issued to the stockholders of Elexsys pursuant
to the Merger or the prices at which Sanmina Common Stock will actually trade at
any time.
Based on this information, Needham performed a variety of financial
analyses of the Merger and the consideration to be received by the Elexsys
stockholders. The following paragraphs summarize the material financial analyses
performed by Needham in arriving at its opinion presented to the Elexsys Board.
Contribution Analysis. Needham reviewed and analyzed the pro forma
contribution of each of Sanmina and Elexsys to pro forma combined operational
and financial information as of March 29, 1997 and for the twelve months ended
March 31, 1997 ("LTM"), projected fiscal 1997 operating results, and projected
fiscal 1998 operating results. Needham reviewed, among other things, the pro
forma contributions to revenues, net income, assets and stockholders' equity.
This analysis did not take into account any transaction adjustments or potential
synergies that may arise from the Merger; no such potential synergies had been
quantified by Sanmina or Elexsys management as of the date of the Needham
Opinion. Based on this analysis, Elexsys contributed 29.7% of the LTM pro forma
combined revenues, 29.0% of the projected fiscal 1997 pro forma combined
revenues, 29.0% of the projected fiscal 1998 pro forma combined revenues, 12.4%
of the LTM pro forma combined net income, 13.0% of the projected fiscal 1997 pro
forma combined net income, and 23.6% of the projected fiscal 1998 pro forma
combined net income. In addition, Elexsys contributed 23.0% of the pro forma
combined assets as of March 29, 1997, and 18.7% of the pro forma combined
stockholders' equity as of March 29, 1997. Based on the Exchange Ratio (and
assuming full exercise of all outstanding Elexsys Options), Elexsys'
stockholders will own approximately 17% of Sanmina after the Merger. Needham
noted that, based upon the foregoing, Elexsys' stockholders' ownership of
Sanmina after the Merger was less than Elexsys' contributions to LTM, projected
fiscal 1997 and projected fiscal 1998 pro forma combined revenues, less than
projected fiscal 1998 pro forma combined net income of Sanmina after the Merger,
and less than Elexsys' contributions to pro forma combined assets and
stockholders' equity as of March 29, 1997,
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but greater than Elexsys' contributions to LTM and projected fiscal 1997 pro
forma combined income. As noted below, Needham considered all of its analyses as
a whole in reaching its conclusion as to the fairness, from a financial point of
view, of the consideration to be received by the Elexsys stockholders in the
Merger. The results of the contribution analysis are not necessarily indicative
of the contributions that the respective businesses may have in the future.
Comparable Company Analysis. To provide contextual data and comparative
market information, Needham compared selected historical and projected operating
and stock market data and operating and financial ratios for Elexsys to the
corresponding data and ratios of certain publicly traded contract manufacturing
and printed circuit board assembly companies which it deemed generally
comparable to Elexsys. Such data and ratios included total market capitalization
to historical and projected revenue, price per share to historical and projected
earnings per share and market value to historical book value.
Companies deemed to be generally comparable to Elexsys included Altron
Incorporated, Continental Circuits Corp., Hadco Corporation, Merix Corporation,
Praegitzer Industries, Inc., and Sanmina in the contract manufacturing industry
(collectively, the "Comparable Manufacturers"); and The DII Group, Inc.,
Flextronics International Ltd., Jabil Circuit, Inc., SCI Systems, Inc., and
Solectron Corporation in the printed circuit board assembly industry
(collectively, the "Comparable Assemblers"). Needham deemed the Comparable
Manufacturers and Comparable Assemblers to be generally comparable to Elexsys
because such companies are publicly traded companies in the same industries as
Elexsys.
Needham calculated ratios for Elexsys based on the closing price of Sanmina
Common Stock on July 18, 1997 of $67.00 and the resulting equivalent price per
share for the Elexsys Common Stock of $22.11 based upon the Exchange Ratio of
0.33. For the Comparable Manufacturers (excluding Sanmina), the multiples of
total market capitalization to LTM revenues ranged from 0.8 to 2.0 with a mean
of 1.4 and a median of 1.4; the multiples of market capitalization to projected
calendar 1997 revenues ranged from 0.7 to 1.3 with a mean of 1.1 and a median of
1.2; the multiples of market capitalization to projected calendar 1998 revenues
ranged from 0.6 to 1.1 with a mean of 0.9 and a median of 1.0; the LTM
price-earnings multiples ranged from 15.5 to 33.4 with a mean of 24.8 and a
median of 23.5; the projected calendar 1997 price-earnings multiples ranged from
13.3 to 44.6 with a mean of 16.4 and a median of 22.7; the projected calendar
1998 price-earnings multiples ranged from 10.9 to 19.4 with a mean of 13.4 and a
median of 11.3; and the multiples of market value to historical book value
ranged from 1.6 to 8.9 with a mean of 4.1 and a median of 2.8.
For the Comparable Assemblers, the multiples of total market capitalization
to LTM revenues ranged from 0.4 to 2.2 with a mean of 1.3 and a median of 1.4;
the multiples of market capitalization to projected calendar 1997 revenues
ranged from 0.4 to 1.7 with a mean of 0.9 and a median of 1.0; the multiples of
market capitalization to projected calendar 1998 revenues ranged from 0.3 to 1.2
with a mean of 0.7 and a median of 0.8; the LTM price-earnings multiples ranged
from 21.5 to 55.6 with a mean of 33.2 and a median of 21.5; the projected
calendar 1997 price-earnings multiples ranged from 19.1 to 30.1 with a mean of
24.1 and a median of 24.7; the projected calendar 1998 price-earnings multiples
ranged from 13.8 to 22.1 with a mean of 17.7 and a median of 17.8; and the
multiples of market value to historical book value ranged from 3.6 to 12.5 with
a mean of 6.2 and a median of 5.4.
For Sanmina, the ratios were as follows: total market capitalization to LTM
revenues of 3.3; total market capitalization to projected calendar 1997 revenues
of 2.6; total market capitalization to projected calendar 1998 revenues of 2.1;
LTM price-earnings multiple of 37.4; projected calendar 1997 price-earnings
multiple of 32.1; projected calendar 1998 price-earnings multiple of 25.2; and
market value to historical book value multiple of 9.1.
These ratios compared with the following ratios for Elexsys: total market
capitalization to LTM revenues of 1.7; total market capitalization to projected
calendar 1997 revenues of 1.4; total market capitalization to projected calendar
1998 revenues of 1.1; LTM price-earnings multiple of 43.0; projected calendar
1997 price-earnings multiple of 37.2; projected calendar 1998 price-earnings
multiple of 14.3; and market value to historical book value multiple of 7.3.
Needham compared the data and ratios for Elexsys, based on the July 18, 1997
Sanmina Common Stock closing price and the Exchange Ratio, to those for the
Comparable Manufacturers and Comparable Assemblers, to provide an understanding
of how such valuation-related data
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and ratios for Elexsys compared with the ranges, means and medians for those of
the other companies in its industries. Needham also compared the data and ratios
for Sanmina to provide similar contextual and comparative market information.
Needham noted that the calculated ratios for Elexsys, based upon the Exchange
Ratio, were within or above the ranges for such ratios derived for the
Comparable Manufacturers and Comparable Assemblers and that the ratios for
Sanmina were generally above or in the higher end of the ranges for such ratios
derived for the Comparable Manufacturers and Comparable Assemblers.
Comparable Transaction Analysis. Needham also analyzed publicly available
financial information for five selected mergers and acquisitions involving
companies in the printed circuit board industry that had transaction values in
excess of $10 million and were completed since 1990. The five completed
technology transactions analyzed by Needham were: Zycon Corporation / Hadco
Corporation; ElectroStar, Inc. / Tyco International Ltd.; Circo Craft Co.
Inc. / Viasystems Group, Inc. (Hicks, Muse, Tate & Furst, Incorporated);
Citation Circuits, Inc. / Sigma Circuits, Inc.; and Advance Circuits,
Inc. / Johnson Matthey PLC. In examining these transactions, Needham analyzed
certain premium information and income statement and balance sheet parameters of
the acquired companies relative to the consideration offered, such as one-day
and four-week premiums of the consideration offered to the target's stock price;
aggregate transaction value as multiples of LTM revenues, earnings before
interest and taxes ("EBIT"), and earnings before interest, taxes, depreciation
and amortization ("EBITDA"); and multiples of market value to LTM net income and
historical book value.
Needham also calculated premiums and ratios for Elexsys, based on the
closing price of Sanmina Common Stock on July 18, 1997 and the Exchange Ratio of
0.33, and compared these calculations to similar calculations for the five
transactions mentioned above. For such five transactions mentioned above the
one-day stock price premium ranged from 7.3% to 39.5% with a mean of 16.8% and a
median of 10.1%, as compared with a premium for Elexsys of 1.7%, the four-week
stock price premium ranged from 16.7% to 94.6% with a mean of 51.5% and a median
of 47.3%, as compared with a premium for Elexsys of 38.2%. The multiples of
transaction value to LTM sales ranged from 0.6 to 1.7 with a mean of 1.1 and a
median of 1.0, as compared with a multiple for Elexsys of 1.6; the LTM EBIT
multiples ranged from 11.2 to 16.3 with a mean of 13.0 and a median of 11.5, as
compared with a multiple for Elexsys of 23.2; and the LTM EBITDA multiples
ranged from 5.7 to 7.6 with a mean of 6.4 and a median of 6.1, as compared with
a multiple for Elexsys of 14.2. The multiples of market value to LTM net income
ranged from 10.5 to 29.2 with a mean of 18.4 and a median of 17.6, as compared
with a multiple for Elexsys of 42.5; and the multiples of market value to book
value ranged from 1.5 to 4.1 with a mean of 2.9 and a median of 3.1, as compared
with a multiple for Elexsys of 7.3. Needham noted that the one-day stock price
premium for Elexsys was below the range for the comparable transactions, that
the four-week stock price premium was within the range for the comparable
transactions, and that four of the calculated multiples were above and the fifth
multiple was within the range for the comparable transactions.
Needham also reviewed 11 additional mergers and acquisitions involving
companies in the printed circuit board industry that had transaction values in
excess of $10 million and were completed since 1990, but because financial data
were not generally available for most aspects of such transactions, Needham
focused on the above-described five transactions. The additional transactions
reviewed by Needham were: PG Design Electronics, Inc./Milwaukee Land Company;
Current Electronics, Inc. / Electronic Fab Technology Corp.; XCEL
Corporation / MicroTel International, Inc.; Comptronix Corporation / Sanmina
Corporation; Alternate Circuit Technology, Inc. / Zycon Corporation; Cray
Research, Inc. (Printed Circuit Board business) / Johnson Matthey PLC; Citation
Circuits, Inc. / Sigma Circuits, Inc.; Multilayer Technology, Inc. / DOVatron
International, Inc.; Computer Logics Limited / Digital Communications
Associates, Inc.; Kollmorgen Corporation (Discrete Wiring Systems
business) / Hitachi Chemical; XCEL Corporation / Scientific Imaging Instruments,
Inc.; and Kollmorgen Corporation (Additive Products Company and PCK Technology
division graphics business) / Investor Group.
No company or transaction used in any comparable analysis as a comparison
is identical to Elexsys, Sanmina or the Merger. Accordingly, these analyses are
not simply mathematical; rather, they involve complex considerations and
judgments concerning differences in the financial and operating characteristics
of
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the comparable companies and other factors that could affect the public trading
value of the comparable companies and transactions to which they are being
compared.
Stock Trading History. Needham examined, for the period beginning on
January 2, 1996 and ending on July 18, 1997, the history of trading prices and
volumes for Elexsys Common Stock and Sanmina Common Stock and the relationship
between movements of Elexsys Common Stock and Sanmina Common Stock and movements
of a composite index composed of the common stocks of the Comparable
Manufacturers. This analysis showed that Elexsys Common Stock underperformed the
composite index at almost all times during the period and at all times since
February 1997 and that Sanmina Common Stock outperformed the composite index at
almost all times during the period and at all times since April 1996. Needham
also noted that the average trading volumes of Sanmina Common Stock were
significantly higher than those of Elexsys Common Stock, that the price-earnings
ratio of Sanmina Common Stock was consistently and significantly higher than
that of the Elexsys Common Stock over the period from January 1997 to July 1997,
and that the Sanmina Common Stock had a significantly higher percentage of
institutional ownership and institutional stockholders than the Elexsys Common
Stock.
The summary set forth above does not purport to be a complete description
of the analyses performed by Needham in connection with the rendering of its
opinion. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, Needham believes that its analyses must be
considered as a whole and that considering any portions of such analyses and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying its opinion. In
its analyses, Needham made numerous assumptions with respect to industry
performance, general business and economic and other matters, many of which are
beyond the control of Elexsys or Sanmina. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable as set
forth therein. Additionally, analyses relating to the values of business or
assets do not purport to be appraisals or necessarily reflect the prices at
which businesses or assets may actually be sold.
Pursuant to the terms of the Engagement Letter, Elexsys has agreed to pay
Needham an advisory fee of $50,000 and a fee for rendering the Needham Opinion
of $100,000. Needham will also receive an additional transaction fee, upon
consummation of the Merger, of $100,000. Elexsys has also agreed to reimburse
Needham for certain of its reasonable out-of-pocket expenses and to indemnify it
against certain liabilities relating to or arising out of services performed by
Needham as financial advisor to Elexsys.
Needham is a nationally recognized investment banking firm. As part of its
investment banking services, Needham is frequently engaged in the evaluation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities, private
placements and other purposes. Needham was retained by the Elexsys Board to act
as Elexsys' financial advisor in connection with the Merger based on Needham's
experience as a financial advisor in mergers and acquisitions as well as
Needham's familiarity with the electronics contract manufacturing and printed
circuit board industries. In the normal course of its business, Needham may
actively trade the equity securities of Elexsys or Sanmina for its own account
or for the account of its customers and, therefore, may at any time hold a long
or short position in such securities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the conversion of shares of Elexsys Common Stock into
Sanmina Common Stock pursuant to the Merger that are generally applicable to
holders of Elexsys Common Stock. This discussion is based on currently existing
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing and proposed Treasury Regulations thereunder and current administrative
rulings and court decisions, all of which are subject to change. Any such
change, which may or may not be retroactive, could affect the continuing
validity of this discussion.
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Elexsys stockholders should be aware that this discussion does not deal
with all federal income tax considerations that may be relevant to particular
Elexsys stockholders in light of their particular circumstances, such as
stockholders who are dealers in securities, who are subject to the alternative
minimum tax provisions of the Code, who are foreign persons, who do not hold
their Elexsys Common Stock as capital assets or who acquired their shares in
connection with stock option or stock purchase plans or in other compensatory
transactions. In addition, the following discussion does not address the tax
consequences of the Merger under foreign, state or local tax laws, or the tax
consequences of transactions effectuated prior or subsequent to, or concurrently
with, the Merger (whether or not any such transactions are undertaken in
connection with the Merger), including without limitation any transaction in
which shares of Elexsys Common Stock are acquired or shares of Sanmina Common
Stock are disposed of. ACCORDINGLY, ELEXSYS STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES.
The parties are not requesting a ruling from the Internal Revenue Service
(the "IRS") in connection with the Merger. Instead, Elexsys has received an
opinion from its tax counsel, Cooley Godward LLP, and Sanmina has also received
a similar opinion from its tax counsel, Wilson Sonsini Goodrich & Rosati, to the
effect that, for federal income purposes, the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code (a
"Reorganization"). These opinions will neither bind the IRS nor preclude the IRS
from adopting a contrary position. In addition, these opinions are subject to
certain assumptions and qualifications and will be based on the continuing truth
and accuracy of certain representations made by Sanmina, Merger Sub and Elexsys,
including representations made by the respective managements of Sanmina, Merger
Sub and Elexsys, and by certain stockholders of Elexsys.
The discussion below assumes that the Merger will qualify as a
Reorganization, based upon the opinions of counsel described above, and
accordingly the Merger will generally result in the following Federal income tax
consequences. The discussion in paragraphs (a) through (e) below represents the
conclusions of Sanmina. Counsel to Sanmina and Elexsys have stated in writing to
Sanmina and Elexsys, respectively, their respective views that such discussion
fairly presents the current federal income tax law applicable to the Merger and
the material federal income tax consequences to Sanmina, Elexsys and the
stockholders of Elexsys.
(a) No gain or loss will be recognized by holders of Elexsys Common
Stock solely as a result of the conversion of their shares of Elexsys
Common Stock into shares of Sanmina Common Stock in the Merger.
(b) The aggregate tax basis of Sanmina Common Stock received by
Elexsys stockholders in the Merger will be the same as the aggregate tax
basis of Elexsys Common Stock converted pursuant to the Merger (except for
the tax basis attributable to fractional shares).
(c) Cash payments in lieu of fractional shares will be treated as if a
fractional share of Sanmina Common Stock had been received in the Merger
and then redeemed by Sanmina. An Elexsys stockholder receiving such cash
will generally recognize gain or loss upon such payment equal to the
difference (if any) between such stockholder's basis in the fractional
share and the amount of cash received.
(d) The holding period of Sanmina Common Stock received by each
Elexsys stockholder in the Merger will include the period for which Elexsys
Common Stock surrendered in exchange therefor was considered to be held,
provided that Elexsys Common Stock so surrendered is held as a capital
asset at the time of the Merger.
(e) Neither Sanmina nor Elexsys will recognize any gain solely as a
result of the Merger.
A successful IRS challenge to the reorganization status of the Merger would
result in Elexsys stockholders recognizing taxable gain or loss with respect to
each share of Elexsys Common Stock surrendered equal to the difference between
such stockholder's basis in such share and the fair market value, as of the
Effective Time, of Sanmina Common Stock received in exchange therefor. In such
event, the stockholder's
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<PAGE> 42
aggregate basis in Sanmina Common Stock so received would equal its fair market
value, and the stockholder's holding period for such stock would begin the day
after the Merger.
ANTICIPATED ACCOUNTING TREATMENT
Sanmina intends to treat the Merger as a pooling of interests for
accounting and financial reporting purposes.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Elexsys Board with respect to the
approval and adoption of the Merger Agreement and approval of the Merger,
stockholders of Elexsys should be aware that certain members of the management
of Elexsys and the Elexsys Board may have certain interests in the Merger that
are different from, or in addition to, the interests of Elexsys stockholders
generally.
Elexsys will be the Surviving Corporation in the Merger and, following the
Merger, will be a wholly owned subsidiary of Sanmina. As of the Record Date,
directors and executive officers of Elexsys owned (i) 4,138,421 shares of
Elexsys Common Stock for which they will receive the same consideration in
connection with the Merger as other Elexsys stockholders and (ii) 432,600
unexercised Elexys Options which will be treated as described below. See "THE
MERGER AGREEMENT -- Additional Information for Holders of Elexsys Options;
Elexsys' Discretion with Respect to Net Exercise Treatment." Members of Elexsys
management hold approximately 40% of the Elexsys Options. The Elexsys Options
held by directors and executive officers of Elexsys will be treated the same as
Elexsys Options held by other employees of Elexsys.
The following indicates the aggregate value of Elexsys Options held on the
close of business on September 5, 1997, by each executive officer and director
of Elexsys (assuming that each and every Elexsys Option is exercised),
respectively, which Elexsys Options will become fully exercisable at the
Effective Time:
<TABLE>
<CAPTION>
BENEFICIAL OWNER STOCK OPTION VALUE(1)
---------------------------------------------------------- ---------------------
<S> <C>
EXECUTIVE OFFICERS:
Robert DeLaurentis........................................ $ 756,250
George Dudnikov, Jr....................................... $ 9,670,000
Michael Giggey............................................ $ 1,044,300
W. F. Barry Hegarty....................................... $ 4,181,000
OUTSIDE DIRECTORS:
Bradford Jeffries......................................... $ 261,050
Roger Johnson............................................. $ 232,500
Alan C. Mendelson......................................... $ 261,250
</TABLE>
- ---------------
(1) Stock Option Value for each Elexsys Option is determined as the difference
between $26.375 (the closing sale price of Elexsys' Common Stock as of the
close of business on September 5, 1997) and the exercise price of such
Elexsys Option. The closing sale price of Elexsys' Common Stock on September
24, 1997 was $27.813.
Employment and Noncompetition Agreements. Sanmina will enter into a
noncompetition agreement (the "Noncompetition Agreement") with Milan Mandaric,
the Chairman and Chief Executive Officer of Elexsys, under which Mr. Mandaric
will agree to refrain from competing with Sanmina in certain portions of the
electronics contract manufacturing business as conducted by Elexsys as of the
Effective Time. The Noncompetition Agreement will have a term of five years and
will cover North America, the United Kingdom and Ireland. Mr. Mandaric will not
receive any consideration for such Noncompetition Agreement other than Sanmina
Common Stock issuable to him in connection with the Merger. Mr. Hegarty has
entered into an employment agreement with Sanmina. Such employment agreement
(the "Employment Agreement")
35
<PAGE> 43
provides that Mr. Hegarty will serve as Vice President of Strategic Marketing
and will report to the Chairman and Chief Executive Officer of Sanmina. Under
the Employment Agreement, Mr. Hegarty also agrees, commencing on the Effective
Date and for a period of three years thereafter, not (a) to engage in any other
employment, occupation, consulting or other business activity directly related
to the business in which Sanmina is now involved or becomes involved during the
term of Mr. Hegarty's employment or (b) to engage in any other activities that
conflict with his obligations to Sanmina. In consideration for his services, Mr.
Hegarty will receive a base salary of $220,000 per year and will be eligible to
receive a bonus and certain other benefits. In addition, in consideration for
the noncompetition covenant referred to above, if, at any time during the three
year period beginning on the Effective Date: (a) Mr. Hegarty resigns for any
reason or (b) Mr. Hegarty is terminated by Sanmina, other than for "Justifiable
Cause," Mr. Hegarty will be entitled to receive severance pay at the rate of
$250,000 per annum during the first 24 months of such period and $220,000 per
annum during the last 12 months of such period. "Justifiable Cause" is defined
in the Employment Agreement as (i) a willful act which constitutes gross
misconduct and is injurious to Sanmina, (ii) a willful breach of a material
provision of the Employment Agreement, or (iii) a material and willful violation
of a federal or state law or of regulations applicable to the business of
Sanmina). Mr. Hegarty will also receive a continuation of benefits for a period
of six months if he is terminated for Justifiable Cause or if he resigns for any
reason within the three year period beginning on the Effective Date.
Stockholder Agreements. Each of the directors of Elexsys (in his capacity
as a stockholder) has entered into a Stockholder Agreement relating to the
Merger. The general effect of the Stockholder Agreements is to increase the
likelihood that Stockholder Approval will be obtained. See "THE MERGER
AGREEMENT -- The Stockholder Agreements."
Registration Rights Agreement. Sanmina has entered into a registration
rights agreement (the "Registration Rights Agreement") with Milan Mandaric, the
Chairman of the Elexsys Board and Chief Executive Officer of Elexsys, under
which Sanmina will, if requested by Mr. Mandaric, register for resale the shares
of Sanmina Common Stock issuable to Mr. Mandaric in connection with the Merger.
Sanmina is obligated to maintain the effectiveness of such registration
statement for up to two years. See "THE MERGER AGREEMENT -- Resale of Sanmina
Common Stock."
Indemnification Pursuant to the Merger Agreement. Sanmina has agreed that,
from and after the Effective Time, Sanmina will cause the Surviving Corporation
to fulfill and honor in all respects the obligations of Elexsys pursuant to (i)
each indemnification agreement currently in effect between Elexsys and each
person who is or was a director or officer of Elexsys at or prior to the
Effective Time and (ii) any indemnification provision under the Elexsys
Certificate of Incorporation or the Elexsys Bylaws as each is in effect on the
date hereof (such persons to be indemnified are referred to as, collectively,
the "Indemnified Parties"). The Merger Agreement also provides that the
Certificate of Incorporation and Bylaws of the Surviving Corporation will
contain the provisions with respect to indemnification and exculpation from
liability set forth in the Elexsys Certificate of Incorporation and the Elexsys
Bylaws on the date of the Merger Agreement, which provisions may not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of any
Indemnified Party.
During the period ending six years after the Effective Time, Sanmina also
has agreed, to the fullest extent permitted under applicable law, to indemnify
and hold harmless each Indemnified Party against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, to the extent such claim, action, suit,
proceeding or investigation arises out of or pertains to (a) any action or
omission, or alleged action or omission, in his or her capacity as a director or
officer of Elexsys or any of its subsidiaries, or (b) any of the transactions
contemplated by the Merger Agreement. Sanmina has also agreed to maintain
Elexsys' existing directors and officers insurance during such six-year period,
subject to certain limitations on the maximum amount of premiums payable by
Sanmina with respect to such insurance.
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<PAGE> 44
RESALE OF SANMINA COMMON STOCK
The Sanmina Common Stock issued in connection with the Merger will be
transferable under the Securities Act except for shares issued to any Elexsys
stockholder who may be deemed to be an affiliate of Elexsys (an "Affiliate") for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"). An Affiliate is defined generally as including, without
limitation, directors of certain executive officers of and certain other persons
who control a company. Elexsys has agreed to use its reasonable efforts to cause
each Affiliate to deliver to Sanmina on or prior to the Closing Date, a written
agreement (an "Affiliate Agreement") providing, among other things, that such
Affiliate will not transfer any Sanmina Common Stock received in connection with
the Merger, except in compliance with the Securities Act, and the Merger
Agreement provides that Sanmina's obligation to consummate the Merger is subject
to Sanmina receiving such Affiliate Agreements from the Affiliates.
In addition, Sanmina has also entered into a Registration Rights Agreement
with Milan Mandaric, the Chairman of the Elexsys Board and Chief Executive
Officer of Elexsys, under which Sanmina will, if requested by Mr. Mandaric,
register for resale the shares of Sanmina Common Stock issuable to Mr. Mandaric
in connection with the Merger. Sanmina is obligated to maintain the
effectiveness of the registration statement for up to two years.
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Annex I to this Proxy Statement/Prospectus and
is incorporated herein by reference. Such summary is qualified in its entirety
by reference to the Merger Agreement. All material elements of the Merger
Agreement are described in this Proxy Statement/Prospectus.
THE MERGER
The Merger. The Merger Agreement provides that, following the approval and
adoption of the Merger Agreement and approval of the Merger by the stockholders
of Elexsys and the satisfaction or waiver of the other conditions to the Merger,
Merger Sub will be merged with and into Elexsys (with Elexsys being the
Surviving Corporation).
Effective Time. The Merger shall become effective at such time as a
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware, or at such other time as Elexsys and Sanmina shall agree should be
specified in such Certificate of Merger. The Merger Agreement provides that
Sanmina and Elexsys will cause a Certificate of Merger to be filed as soon as
practicable on or after the Closing Date.
MERGER CONSIDERATION
Common Stock. At the Effective Time, each issued and outstanding share of
Elexsys Common Stock, other than shares owned by Sanmina, Merger Sub or Elexsys,
will be converted into 0.33 fully paid and nonassessable shares of Sanmina
Common Stock. As of the Effective Time, all shares of Elexsys Common Stock will
no longer be outstanding and will automatically be canceled and retired and will
cease to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of Elexsys Common Stock will cease to
have any rights with respect thereto, except the right to receive certificates
representing the number of fully paid and nonassessable shares of Sanmina Common
Stock into which such shares of Elexsys Common Stock were converted at the
Effective Time and any cash in lieu of fractional shares of Sanmina Common
Stock, without interest.
Any shares of Elexsys Common Stock owned by Sanmina, Merger Sub or Elexsys
will automatically be canceled and retired and will cease to exist, and no
consideration will be delivered in exchange therefor.
As of September 5, 1997, an aggregate of 9,534,201 shares of Elexsys Common
Stock and options to purchase an aggregate of 1,061,185 shares of Elexsys Common
Stock were outstanding. Based upon the number of shares of Sanmina Common Stock
issued and outstanding on September 5, 1997, and after giving
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<PAGE> 45
effect to the Sanmina Common Stock that is expected to be issued in the Merger
and assuming the exercise of all outstanding Elexsys Options, the former holders
of Elexsys Common Stock would hold and have voting power with respect to
approximately 16.9% of Sanmina's issued and outstanding shares (16.4% if all
outstanding Elexsys Options are instead exchanged on a "Net Exercise" basis as
described below). The foregoing numbers of shares and percentages are subject to
change to reflect any changes in the capitalization of either Sanmina or Elexsys
subsequent to the date indicated and prior to the Effective Time, and there can
be no assurance as to the actual capitalization of Sanmina or Elexsys at the
Effective Time or Sanmina at any time following the Effective Time.
The terms of Elexsys' stock option plans (collectively, the "Stock Option
Plans") and the agreements evidencing Elexsys Options provide for the
acceleration prior to the Effective Time of the vesting of each unexercised
Elexsys Option granted thereunder and held by employees or directors of Elexsys
(i.e., each such Elexsys Option will be fully vested and exercisable immediately
prior to the Effective Time), and for the termination of all unexercised Elexsys
Options as of the Effective Time.
The Merger Agreement provides that certain holders of Elexsys Options may
cause such options to be exchanged in connection with the Merger on a net basis
directly for shares of Sanmina Common Stock as described below. Prior to the
Effective Time, Elexsys shall deliver to Sanmina a Net Exercise List specifying
those Elexsys Options with respect to which Sanmina is to issue shares of
Sanmina Common Stock as of the Effective Time. As of the Effective Time, Sanmina
shall issue, with respect to each such Elexsys Option that remains unexercised
as of the Effective Time, in the name of the holder thereof, a number of shares
of Sanmina Common Stock equal to:
<TABLE>
<S> <C> <C>
A * C
A * B - D
</TABLE>
where:
A = the maximum number of shares of Elexsys Common Stock purchasable
immediately prior to the Effective Time upon exercise of the
applicable Specified Option
B = the Exchange Ratio
C = the per share exercise price of the applicable Specified Option
D = the per share last reported sale price of Sanmina Common Stock on the
Nasdaq National Market (as reported in The Wall Street Journal or, if
not reported thereby, any other authoritative source), on the Closing
Date.
Holders of Elexsys Options that elect to exchange such options directly for
shares of Sanmina Common Stock as set forth above will not be able to treat such
Elexsys Options as incentive stock options for federal income tax purposes.
Accordingly, such holders will, at the time of the exchange of their Elexsys
Options for Sanmina Common Stock, recognize ordinary income in an amount equal
to the fair market value of the Sanmina Common Stock issued to them in such "net
exercise" transaction.
All Stock Option Plans will terminate as of the Effective Time, and
following the Effective Time no holder of an Elexsys Option or any participant
in any Stock Option Plan shall have any right thereunder to acquire any capital
stock of Elexsys, Sanmina or the Surviving Corporation except as described
above. Elexsys has delivered to the holders of Elexsys Options appropriate
notices describing the transactions contemplated by the Merger Agreement and the
effect that consummation of those transactions will have on outstanding Elexsys
Options.
As of the close of business on September 5, 1997, Elexsys Options to
purchase 1,061,185 shares of Elexsys Common Stock were outstanding (of which
432,600 were held by affiliates of Elexsys) at exercise prices ranging from
$1.00 to $24.375 per share. As of such date, all of such Elexsys Options were
"in the money" (i.e., had exercise prices below the market price of Elexsys
Common Stock on such date).
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<PAGE> 46
Elexsys Employee Stock Purchase Plan. Elexsys has adopted a 1996 Employee
Stock Purchase Plan (the "Purchase Plan"). Under the Purchase Plan, eligible
Elexsys employees may purchase shares of Elexsys Common Stock through payroll
deductions. The Purchase Plan is implemented by offerings of rights to all
eligible employees from time to time by the Elexsys Board. Generally, each such
offering is six months in duration. The purchase price per share at which shares
are sold in an offering under the Purchase Plan is the lower of (a) 85% of the
fair market value of a share of Elexsys Common Stock on the date of commencement
of the offering, or (b) 85% of the fair market value of a share of Elexsys
Common Stock on the last day of the purchase period. Elexsys has pending an
offering under the Purchase Plan that will terminate on October 31, 1997. At the
Effective Time, each outstanding right under the currently ongoing "offering
period" to purchase Elexsys Common Stock under the Purchase Plan (an "Assumed
Purchase Right") shall be deemed to constitute a purchase right to acquire, on
the same terms and conditions as were applicable under the Purchase Plan
immediately prior to the Effective Time, a number of shares of Sanmina Common
Stock determined as provided in the Purchase Plan except that the purchase price
of such shares of Sanmina Common Stock under each Assumed Purchase Right shall
be eighty-five percent (85%) of the lower of (i) the quotient determined by
dividing the fair market value of the Elexsys Common Stock on the offering date
of each offering period that is ongoing as of the Effective Time by the Exchange
Ratio or (ii) the fair market value of the Sanmina Common Stock on each exercise
date occurring after the Effective Time with respect to each offering period
that is ongoing as of the Effective Time. The Assumed Purchase Rights, in
accordance with their terms, shall be subject to further adjustment upon a stock
split, stock dividend, recapitalization or similar transaction after the
Effective Time. As soon as practicable after the Effective Time (and in any
event within 5 days after the Effective Time), Sanmina is required to deliver to
the participants in the Purchase Plan an appropriate notice setting forth such
participants' rights pursuant thereto and stating that the Assumed Purchase
Rights pursuant to the Purchase Plan shall continue in effect on the same terms
and conditions.
Convertible Debentures. Elexsys has entered into an Indenture (the
"Indenture"), dated as of February 15, 1987, with Manufacturers Hanover Trust
Company, a New York corporation, as Trustee, pursuant to which $12,000,000 in
aggregate principal amount of 5 1/2% Convertible Subordinated Debentures due
March 1, 2012 (the "Convertible Debentures"), were outstanding as of the Record
Date. At the option of the holders of the Convertible Debentures, the
Convertible Debentures may be converted into shares of Elexsys Common Stock, at
a conversion price of $39.50 per share, subject to adjustment. Such conversion
right expires at the close of business on February 29, 2012. A total of 303,797
shares of Elexsys Common Stock are reserved for issuance pursuant to the
conversion of the Convertible Debentures.
Pursuant to the Indenture, at the Effective Time the Convertible Debentures
will become convertible into shares of Sanmina Common Stock, with appropriate
adjustments as to the conversion price and the number of shares of stock into
which the Convertible Debentures are convertible. Pursuant to the Merger
Agreement, Sanmina has agreed to take such action as may be required by the
Indenture relating to the Convertible Debentures in connection with the
consummation of the Merger. Promptly after the Effective Time, Sanmina has
agreed to either (i) commence a tender offer for the outstanding Convertible
Debentures at a price not less than the prevailing market price for such
Convertible Debentures or (ii) cause the redemption of such Convertible
Debentures in accordance with the redemption provisions of the Indenture
relating thereto. Until the Convertible Debentures are acquired or redeemed by
Sanmina or Elexsys, Sanmina has agreed to reserve sufficient shares of Sanmina
Common Stock for issuance upon conversion of the Convertible Debentures.
ADDITIONAL INFORMATION FOR HOLDERS OF ELEXSYS OPTIONS; ELEXSYS' DISCRETION WITH
RESPECT TO NET EXERCISE TREATMENT
In connection with the Merger, holders of Elexsys Options will have three
alternatives. Holders may (i) elect Net Exercise Treatment, as described below,
(ii) exercise their Elexsys Options prior to the Effective Time and receive
shares of Elexsys Common Stock (which will be exchanged in the Merger for shares
of Sanmina Common Stock at the Exchange Ratio), or (iii) take no action, with
the result that their Elexsys Options will terminate at the Effective Time
without the holder receiving any value. Unexercised Elexsys Options which have
not received Net Exercise Treatment will not automatically convert into options
to purchase Sanmina Common Stock at the Effective Time; rather, under the terms
of the Elexsys Stock Option
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<PAGE> 47
Plans governing the Elexsys Options, any such unexercised Elexsys Options will
terminate at the Effective Time.
At the Effective Time, each Elexsys Option that has not been exercised
prior to the Effective Time and that is included on the Net Exercise List to be
provided by Elexsys to Sanmina prior to the consummation of the Merger will be
converted into that number of shares of Sanmina Common Stock equal to the
difference between (a) the number of shares of Sanmina Common Stock derived by
multiplying the number of shares of Elexsys Common Stock underlying the Elexsys
Option by the Exchange Ratio and (b) the number of shares of Sanmina Common
Stock derived by dividing the aggregate exercise price of the Elexsys Option by
the fair market value of one share of Sanmina Common Stock as of the closing
date of the Merger (a "Net Exercise"). Holders of Elexsys Options who wish to
engage in a Net Exercise of Elexsys Options must deliver a Notice of Interest in
Net Exercise (a "Notice of Interest") to Robert DeLaurentis, the Vice President
and Chief Financial Officer of Elexsys, prior to the Closing Date (as defined in
the Merger Agreement). Upon receiving the Notice of Interest, Elexsys will
determine, in its discretion, whether to offer the holder Net Exercise
treatment. If a Notice of Interest is accepted, Elexsys Options held by the
holder will be placed on the Net Exercise List, and the holder will, prior to
the Effective Time, receive an offer from Elexsys to receive a Net Exercise
payment in exchange for the Elexsys Options held by such holder. Holders whose
Elexsys Options are placed on the Net Exercise List will no longer be entitled
to exercise such Elexsys Options for Elexsys Common Stock. Holders of Elexsys
Options may, if they wish (and if permitted to do so by Elexsys), elect Net
Exercise treatment with respect to a portion of the Elexsys Options held by
them.
Elexsys' current intention and expectation is that all holders of Elexsys
Options who so request will receive Net Exercise Treatment. Elexsys might,
however, deny Net Exercise Treatment to a holder of Elexsys Options if such
holder's employment with Elexsys is terminated for cause. In the event that a
holder of Elexsys Options were to be denied Net Exercise Treatment or fail to
elect Net Exercise Treatment, then (unless the Elexsys Option is exercised for
Elexsys Common Stock in accordance with its terms prior to the Effective Time)
such Elexsys Option will terminate at the Effective Time without the holder
receiving any value.
The federal income tax consequences to holders of Elexsys Options depend
upon whether the holder elects Net Exercise treatment and whether the Elexsys
Options are incentive stock options ("ISOs") or nonstatutory stock options
("NSOs").
ISOs generally have the following tax consequences. There generally are no
federal income tax consequences to the optionee or to Elexsys by reason of the
exercise of an ISO. However, the exercise of an ISO may increase the optionee's
alternative minimum tax liability, if any. If an optionee holds stock acquired
through exercise of an ISO for more than two years from the date on which the
option is granted and more than one year from the date on which the shares are
transferred to the optionee upon exercise of the option, any gain or loss on a
disposition of such stock will be capital gain or loss. Generally, if the
optionee disposes of the stock before the expiration of either of these holding
periods (a "disqualifying disposition"), at the time of disposition the optionee
will recognize taxable ordinary income equal to the lesser of (i) the excess of
the stock's fair market value on the date of exercise over the exercise price,
or (ii) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain or any loss upon the disqualifying disposition will
be a capital gain or loss. Any capital gain or loss recognized by an optionee on
a qualifying disposition or a disqualifying disposition of stock acquired
through exercise of an ISO will be long-, mid- or short-term depending on
whether the stock was held for more than eighteen months (long-term), less than
eighteen months and more than one year (mid-term) or one year or less
(short-term). To the extent the optionee recognizes ordinary income by reason of
a disqualifying disposition, Elexsys generally will be entitled (subject to the
requirement of reasonableness and the satisfaction of a reporting obligation) to
a corresponding business expense deduction in the tax year in which the
disposition occurs.
NSOs generally have the following federal income tax consequences. Upon
exercise of an NSO normally the optionee will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date of exercise
over the exercise price. Generally, with respect to employees, Elexsys is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized.
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<PAGE> 48
Subject to the requirement of reasonableness and the satisfaction of a reporting
obligation, Elexsys generally will be entitled to a business expense deduction
equal to the taxable ordinary income recognized by the optionee. Upon
disposition of the stock, the optionee will recognize a capital gain or loss
equal to the difference between the selling price and the sum of the amount paid
for such stock plus any amount recognized as ordinary income upon exercise of
the option. Such gain or loss will be long-, mid- or short-term depending on
whether the stock was held for more than eighteen months (long-term), less than
eighteen months and more than one year (mid-term) or one year or less
(short-term). If the holder exercises an NSO, the option spread will be subject
to income and FICA tax withholding. The holder can satisfy the withholding
obligation by delivering cash in an amount necessary to satisfy the withholding
obligation (34% of the spread for federal and California income taxes, plus an
additional amount necessary to satisfy FICA taxes). If the holder chooses Net
Exercise treatment, the holder will have shares withheld from the stock the
holder would otherwise receive to pay the withholding tax.
In the event that Net Exercise treatment is elected (and if Elexsys permits
such Net Exercise treatment), the full value of the shares of Sanmina Common
Stock that the holder receives (before taxes) in exchange for the Elexsys
Options surrendered will be ordinary income. Sanmina shares in excess of those
withheld to pay the exercise price will be withheld from the shares otherwise
due to satisfy income and FICA tax withholding.
EXCHANGE AGENT; EXCHANGE PROCEDURES; DIVIDENDS; NO FURTHER OWNERSHIP RIGHTS IN
ELEXSYS COMMON STOCK; NO FRACTIONAL SHARES
Exchange Agent. The Merger Agreement requires Sanmina to deposit as of the
Effective Time, with Norwest Bank Minnesota, N.A. (or such other bank or trust
company designated by Sanmina and acceptable to Elexsys) (the "Exchange Agent"),
for the benefit of the holders of shares of Elexsys Common Stock, certificates
representing the shares of Sanmina Common Stock issuable in exchange therefor.
Exchange Procedures. As soon as reasonably practicable after the Effective
Time, Sanmina will cause the Exchange Agent to mail to each holder of record of
a certificate or certificates, which immediately prior to the Effective Time
represented outstanding shares of Elexsys Common Stock (the "Certificates"),
whose shares were converted into shares of Sanmina Common Stock pursuant to the
Merger Agreement, (i) a letter of transmittal (which shall specify that delivery
will be effected, and risk of loss and title to the Certificates will pass, only
upon delivery of the Certificates to the Exchange Agent and will be in customary
form and have such other provisions as Sanmina may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Sanmina Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate will be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Sanmina Common Stock which such holder has the right to receive
pursuant to the Merger Agreement, cash in lieu of fractional shares of Sanmina
Common Stock to which such holder is entitled and any dividends or other
distributions to which such holder is entitled, and the Certificate so
surrendered will forthwith be canceled. In the event of a transfer of ownership
of Elexsys Common Stock that is not registered in the transfer records of
Elexsys, a certificate representing the proper number of shares of Sanmina
Common Stock may be issued to a person other than the person in whose name the
Certificate so surrendered is registered, if, upon presentation to the Exchange
Agent, such Certificate will be properly endorsed or otherwise be in proper form
for transfer and the person requesting such payment pays any transfer or other
taxes required by reason of the issuance of shares of Sanmina Common Stock to a
person other than the registered holder of such Certificate or establishes to
the reasonable satisfaction of Sanmina that such taxes have been paid or are
nonapplicable. Until surrendered, each Certificate will be deemed at any time
after the Effective Time to represent only the shares of Sanmina Common Stock
into which the shares of Elexsys Common Stock represented thereby were converted
at the Effective Time, and the right to receive cash in lieu of any fractional
shares of Sanmina Common Stock and any dividends or other distributions to which
such holder is entitled. No interest will be paid or will accrue on any cash
payable pursuant to the exchange provisions of the Merger Agreement.
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<PAGE> 49
ELEXSYS STOCKHOLDERS SHOULD NOT FORWARD ELEXSYS STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED FORMS OF LETTERS OF TRANSMITTAL. ELEXSYS
STOCKHOLDERS SHOULD NOT RETURN ELEXSYS STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
Dividends. No dividends or other distributions with respect to Sanmina
Common Stock with a record date after the Effective Time will be paid to the
holder of any unsurrendered Certificate with respect to the shares of Sanmina
Common Stock represented thereby, and no cash payment in lieu of fractional
shares will be paid to any such holder until the holder of record of such
Certificate surrenders such Certificate. Following surrender of any such
Certificate, there will be paid to the record holder of the certificate
representing whole shares of Sanmina Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Sanmina Common Stock to which such
holder is entitled and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Sanmina Common Stock and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time, but prior to such surrender, and a payment date subsequent to
such surrender payable with respect to such whole shares of Sanmina Common
Stock.
No Further Ownership Rights in Elexsys Common Stock. All shares of Sanmina
Common Stock issued in the Merger (and any cash paid) will be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Elexsys Common Stock, subject, however, to the obligation of the Surviving
Corporation (as defined in the Merger Agreement) to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been declared or made by Elexsys on such shares of Elexsys Common Stock in
accordance with the terms of, or prior to the date of, the Merger Agreement and
which remain unpaid at the Effective Time, and there will be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Elexsys Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they will be canceled and exchanged as described in the Merger
Agreement.
No Fractional Shares. No certificates or scrip representing fractional
shares of Sanmina Common Stock will be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Sanmina. Each holder of
shares of Elexsys Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Sanmina Common
Stock will receive, in lieu thereof, cash (without interest) in an amount, less
the amount of any withholding taxes which may be required thereon, equal to such
fraction of a share of Sanmina Common Stock multiplied by the per share closing
price of Sanmina Common Stock as of the Closing Date, as such price is reported
on the Nasdaq National Market (as published in The Wall Street Journal or, if
not published therein, in any other authoritative source).
Certificate of Incorporation and By-laws. The Merger Agreement provides
that the Certificate of Incorporation of Merger Sub as in effect immediately
prior to the Effective Time will be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law except that the name of the Surviving Corporation will be
changed to be "Elexsys International, Inc." in such Certificate of
Incorporation. The Merger Agreement provides that the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time will be the Bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law. The Merger Agreement provides that Sanmina will cause the
Surviving Corporation to fulfill and honor and maintain certain indemnification
and exculpation provisions of the Elexsys Certificate of Incorporation and the
Elexsys By-laws. See "THE MERGER -- Interests of Certain Persons in the Merger."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement includes various representations and warranties of the
parties thereto, each of which is qualified by reference to certain documents
filed by such parties with the SEC and in certain other
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respects. The Merger Agreement includes representations and warranties by
Elexsys as to, among other things, (i) the organization, standing and corporate
power of Elexsys; (ii) the absence of undisclosed subsidiaries of Elexsys; (iii)
Elexsys' capital structure (the "Elexsys Capital Structure Representations");
(iv) the authorization, execution, delivery, and enforceability of the Merger
Agreement, the Merger's noncontravention of any agreement, law, or charter or
bylaw provision and the absence of the need for governmental or third-party
filings, consents, approvals or actions with respect to any transaction
contemplated by the Merger Agreement (except for certain filings specified in
the Merger Agreement) (the "Elexsys Authority Representations"); (v) compliance
as to form of, and the accuracy of information contained in, documents filed
with the SEC; (vi) the accuracy of information supplied by Elexsys in connection
with this Proxy Statement/Prospectus and the Registration Statement; (vii) the
absence of certain material changes or events since the date of the most recent
financial statements filed with the SEC, including the absence of any material
adverse change in Elexsys, any material change in Elexsys' accounting methods,
any material reevaluation of Elexsys' assets or any declaration, setting aside
or payment of a dividend or other distribution, with respect to Elexsys' capital
stock; (viii) the absence of material litigation or investigations; (ix) the
disclosure of material contracts; (x) compliance with laws applicable to the
business of Elexsys, including environmental laws; (xi) compliance with
applicable labor laws (xii) the absence of certain material changes in the
benefit plans of Elexsys or labor relations; (xiii) the compliance with
applicable laws of the benefit plans of Elexsys and certain other matters
relating to ERISA; (xiv) the filing of tax returns and payment of taxes; (xv)
the absence of "excess parachute payments" under the Code; (xvi) good and valid
title to, or valid leasehold interests in (and compliance with the terms of such
leaseholds), all material property and assets necessary to conduct Elexsys'
business; (xvii) ownership of or the right to use, and no infringement of
others' rights to, and lack of licensing of, the intellectual property necessary
to conduct Elexsys' business; (xviii) the voting requirements for the approval
of the Merger; (xix) compliance with applicable state takeover laws; (xx)
certain broker's or advisor's fees; (xxi) the receipt of an opinion of Needham;
(xxii) the absence of actions taken or agreed to be taken which would prevent
pooling of interests accounting treatment for the Merger; and (xxiii) certain
matters with respect to equipment and personal property leases, product and
service warranties, customers and inventories.
The Merger Agreement also includes representations and warranties by
Sanmina and Merger Sub as to, among other things, (i) the organization, standing
and corporate power of Sanmina and Merger Sub; (ii) the subsidiaries of Sanmina;
(iii) Sanmina's capital structure (iv) the authorization, execution, delivery,
and enforceability of the Merger Agreement and related matters, the Merger
Agreement's noncontravention of any agreement, law, or charter or bylaw
provision and the absence of the need for governmental or third-party filings,
consents, approvals or actions with respect to any transaction contemplated by
the Merger Agreement or the Stockholder Agreements (except for certain filings
specified in the Merger Agreement) (the "Sanmina and Merger Sub Authority
Representations"); (v) compliance as to form of, and the accuracy of information
contained in, documents filed with the SEC; (vi) the accuracy of information
supplied by Sanmina or Merger Sub in connection with this Proxy
Statement/Prospectus and the Registration Statement; (vii) the absence of
certain material changes or events since the date of the most recent audited
financial statements filed with the SEC, including the absence of any material
adverse change in Sanmina, any material change in Sanmina's accounting methods,
any material reevaluation of Sanmina's assets or any declaration, setting aside
or payment of any dividend or other distribution with respect to Sanmina's
capital stock; (viii) the absence of material litigation or investigations; (ix)
the disclosure of material contracts; (x) compliance with laws applicable to the
business of Sanmina, including environmental laws; (xi) compliance with
applicable labor laws; (xii) the absence of certain material changes in the
benefit plans of Sanmina; (xiii) the filing of tax returns and payment of taxes;
(xiv) good and valid title to, or valid leasehold interests in (and compliance
with the terms of such leaseholds), all material property and assets necessary
to conduct Sanmina's business; (xv) ownership of or the right to use, and no
infringement of others' rights to, and lack of licensing of, the intellectual
property necessary to conduct Sanmina's business; (xvi) the absence of a
stockholder voting requirements for the approval of the Merger; (xvii) certain
broker's or advisor's fees; (xviii) the receipt of an opinion of Montgomery
Securities; (xix) the absence of actions taken or agreed to be taken which would
prevent pooling of interests accounting treatment for the Merger; (xx) certain
matters with respect to product
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and service warranties, customers and inventories; (xxi) the absence of prior
activities of Merger Sub; and (xxii) the Sanmina Common Stock to be issued in
connection with the Merger.
BUSINESS OF ELEXSYS PENDING THE MERGER
Elexsys has agreed that, prior to the Effective Time, it will carry on its
businesses in the ordinary course consistent with prior conduct and, to the
extent consistent therewith, use reasonable efforts to preserve intact its
current business organization, and preserve its relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with it. Elexsys has also agreed that, prior to the Effective Time,
without Sanmina's consent (which consent will not be unreasonably withheld) or
except as contemplated or permitted by or not inconsistent with the Merger
Agreement, it will not, among other things: (i)(x) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its capital
stock, (y) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (other than the issuance of Elexsys
Common Stock upon the exercise of Elexsys Options outstanding on the date of,
and in accordance with their terms as of the date of, the Merger Agreement or as
contemplated by the Merger Agreement) or (z) purchase, redeem or otherwise
acquire any shares of capital stock of Elexsys or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities; (ii) amend the Elexsys Certificate of Incorporation or the Elexsys
Bylaws; (iii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than pursuant to employee stock
purchase plans, to convertible indebtedness in effect as of the date of the
Merger Agreement, to stock option plans, or the grant of Elexsys Options to
employees of Elexsys in an amount not to exceed options for 50,000 shares of
Elexsys Common Stock); (iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or (y)
any asset, except in the ordinary course of business and except for capital
expenditures which are not outside the ordinary course of business or
inconsistent with past practice(which are described below under subsection
(vii)); (v) sell, lease, license, mortgage or otherwise encumber or otherwise
dispose of any of its properties or assets, except sales in the ordinary course
of business consistent with past practice and except for subjecting any of its
properties or assets to certain Liens (as defined and permitted under the Merger
Agreement); (vi) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, except for short-term borrowings incurred in the
ordinary course of business consistent with past practice and borrowings of up
to $32 million in the aggregate under a new credit facility (approximately $20
million of which will be used to refinance an existing credit facility) and
borrowings under existing facilities and modifications not to increase such
facilities by more than 20%; (vii) make any material payment outside the
ordinary course of business to settle any dispute; (viii) except in the ordinary
course of business, modify, amend or terminate any material contract or
agreement to which Elexsys is a party or waive, release or assign any material
rights or claims thereunder; (ix) except as required to comply with applicable
law and except for actions which do not materially increase Elexsys'
compensation expense or benefits to employees taken as a whole, (A) adopt, enter
into, terminate or amend any benefit plan or other arrangement for the benefit
or welfare of any current or former employee, officer or director, (B) increase
in any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases of cash compensation
or cash bonuses in the ordinary course of business consistent with past
practice), (C) pay any benefit not provided for under any benefit plan, (D)
except as permitted in clause (B), grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or benefit plan (including
the grant of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock or the removal of existing
restrictions in any benefit plans or agreements or awards made thereunder) or
(E) except as permitted in clauses (A) through (D), take any action to fund or
in any other way secure the payment of compensation or benefits under any
employee plan, agreement, contract or arrangement or benefit plan; (x) form any
subsidiary of Elexsys; (xi) allow Elexsys or any of Elexsys' subsidiaries or any
significant portion of their respective assets to be acquired; (xii) enter into
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any transaction that is extraordinary in nature or magnitude (when compared to
transactions historically entered into by Elexsys); or (xiii) authorize any of,
or commit or agree to take any of, the foregoing actions.
BUSINESS OF SANMINA PENDING THE MERGER
Sanmina has agreed that, prior to the Effective Time, it will carry on its
businesses in the ordinary course consistent with prior conduct and, to the
extent consistent therewith, use commercially reasonable efforts to preserve
intact its current business organization, and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it. Sanmina has also agreed that, prior to the Effective
Time, without Elexsys' consent (which consent will not be unreasonably
withheld), it will not, among other things: (i)(x) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its capital
stock, (y) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of capital stock of Sanmina or any other securities
thereof or any rights, warranties or options to acquire any such shares or other
securities; (ii) amend the Sanmina Restated Certificate of Incorporation or the
Sanmina Bylaws; (iii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than in the ordinary
course of business and consistent with past practice pursuant to stock option
plans, employee stock purchase plans and convertible indebtedness in effect as
of the date of the Merger Agreement, or pursuant to acquisitions of businesses
involving the issuance by Sanmina of less than 1,000,000 shares in the aggregate
for all such acquisitions); (iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof except
that Sanmina shall not be prohibited from effecting an acquisition of any other
business if (A) such acquisition would not materially affect the ability of
Sanmina to, or materially delay Sanmina's ability to, complete the transactions
contemplated by the Merger Agreement, and (B) such acquisition would involve the
issuance by Sanmina of equity securities and, when considered together with all
other acquisitions effected by Sanmina, would not involve the issuance of more
than 1,000,000 shares of Sanmina's capital stock or securities convertible into
or exercisable for more than 1,000,000 shares of Sanmina's capital stock; (v)
sell, lease, license, mortgage or otherwise encumber or subject to any Lien (as
defined in the Merger Agreement) or otherwise dispose of any substantial part of
its (or any of its subsidiaries') material properties, assets or business,
except sales made in the ordinary course of business and except for subjecting
any of its properties to Parent Permitted Liens (as defined in the Merger
Agreement); (vi) make any material payments outside the ordinary course of
business for purposes of settling any dispute; (vii) allow Sanmina or any of its
subsidiaries, or any significant portion of their respective businesses or
assets, to be acquired (by merger, tender offer, purchase or otherwise); (viii)
enter into (directly or through any subsidiary) any transaction that is
extraordinary in nature or magnitude (when compared to the transactions
historically entered into by Sanmina); or (ix) authorize any of, or commit or
agree to take any of, the foregoing actions.
Each of Sanmina and Elexsys also have agreed to (i) file all tax returns
and reports ("Post-Signing Returns") required to be filed by it (after taking
into account any extensions); (ii) pay timely all taxes due and payable with
respect to such Post-Signing Returns that are so filed; (iii) notify the other
party promptly of any action, suit, proceeding, claim or audit (collectively,
"Actions") pending against or with respect to the notifying party in respect of
any tax where there is a reasonable possibility of a determination or decision
which would have a material adverse effect on such party's tax liabilities or
tax attributes; and (iv) not make any material tax election without the other
party's consent. Elexsys has agreed to not settle or compromise any such Action
without Sanmina's consent.
CERTAIN ADDITIONAL AGREEMENTS
The Merger Agreement contains additional covenants relating to, among other
things, (i) Elexsys promptly establishing a record date and calling a
stockholder meeting; (ii) the use of reasonable efforts to obtain "comfort
letters" from each party's accountants regarding the financial statements
contained in or incorporated by reference in this Proxy Statement/Prospectus;
(iii) each party having reasonable access to the
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others' properties, books, contracts, commitments, personnel and records; (iv)
each party consulting with the other party regarding any press release or other
public statement relating to the transactions contemplated by the Merger
Agreement; (v) each party's use of reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other party in doing, all things necessary, proper and advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by the Merger Agreement; (vi)
each party identifying all persons who are, at the time the Merger Agreement is
submitted for approval to the stockholders of Elexsys, Affiliates of such party
for purposes of Rule 145 under the Securities Act or for purposes of qualifying
the Merger for pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations and to use
its reasonable efforts to cause each such person to deliver to the other party
at least thirty days prior to the Effective Time an Affiliate Agreement (as
described under "THE MERGER -- Resale of Sanmina Common Stock"); (viii) each
party's use of reasonable efforts to cause the transactions contemplated by the
Merger Agreement, including the Merger, to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations; and (ix) each party not taking action or failing to take
any action, which action or failure to act would prevent, or would be reasonably
likely to prevent, the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. In addition, Sanmina has agreed (i) to
maintain all rights of indemnification in favor of the Indemnified Parties as
described above under "THE MERGER -- Interests of Certain Persons in the Merger"
and (ii) to cause the shares of Sanmina Common Stock to be issued in connection
with the Merger to be approved for listing on the Nasdaq National Market.
Under the Merger Agreement, Elexsys has also agreed not to solicit other
Takeover Proposals or to withdraw its recommendation of the Merger except as set
forth below under "-- No Solicitation" and "-- Right of the Elexsys Board to
Withdraw Recommendation."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Conditions to Each Party's Obligations to Effect the Merger. The respective
obligation of each party to effect the Merger is subject to the satisfaction or
waiver of the following conditions: (i) the Merger Agreement having received
Stockholder Approval; (ii) the shares of Sanmina Common Stock issuable to
Elexsys security holders pursuant to the Merger Agreement having been approved
for listing on the Nasdaq National Market, subject to official notice of
issuance; (iii) the waiting period (and any extensions thereof) under the HSR
Act applicable to the Merger having expired or having been terminated; (iv)
there not being in effect any temporary restraining order, preliminary or
permanent injunction or other order of any U.S. federal or state court of
competent jurisdiction or other legal restraint or prohibition issued by a U.S.
federal or state governmental entity preventing the consummation of the Merger;
(v) the Registration Statement having become effective under the Securities Act
and not being the subject of any stop order suspending the effectiveness thereof
or any proceeding seeking such a stop order; and (vi) Elexsys having received
from Deloitte & Touche LLP, independent public accountants for Elexsys, a letter
to the effect that Deloitte & Touche LLP concurs with Elexsys' management's
conclusion that Elexsys would meet the applicable specific criteria for a
pooling of interests in accordance with generally accepted accounting
principles, as such criteria relate only to Elexsys (and not to Sanmina) and
Sanmina having received from Arthur Andersen LLP, independent public accountants
for Sanmina, a letter to the effect that Arthur Andersen LLP concurs with
Sanmina's management's conclusion that no conditions exist that would preclude
Sanmina from accounting for the Merger as a pooling of interests.
Conditions to the Obligations of Sanmina and Merger Sub. The obligations of
Sanmina and Merger Sub to effect the Merger are further subject to the following
conditions: (i) the representations and warranties of Elexsys contained in the
Merger Agreement being accurate (excluding any representation or warranty that
refers specifically to "the date of the Merger Agreement" or any other date
other than the Closing Date) in all material respects as of the Closing Date
(except that (x) any inaccuracy that does not have a material adverse effect on
Elexsys shall be disregarded, (y) any inaccuracy that results from or relates to
general business, economic or industry conditions shall be disregarded, and (z)
any inaccuracy that results from or relates to the taking of any action
contemplated or permitted by the Merger Agreement or the announcement or
pendency
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of the Merger shall be disregarded); (ii) Elexsys having performed in all
material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the Closing Date; (iii) Sanmina having received
from each Affiliate of Elexsys for purposes of Rule 145 under the Securities Act
or for purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations an executed Affiliate Agreement; (iv) Sanmina having
received the opinion of Wilson Sonsini Goodrich & Rosati, counsel to Sanmina, to
the effect that the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code; and (v) the execution by Elexsys and its Chairman
and Chief Executive Officer of the Noncompetition Agreement in the form attached
as Exhibit C to the Merger Agreement.
Conditions to the Obligations of Elexsys. The obligation of Elexsys to
effect the Merger is further subject to the following conditions: (i) the
representations and warranties of Sanmina and Merger Sub contained in the Merger
Agreement being accurate (excluding any representation or warranty that refers
specifically to "the date of the Merger Agreement" or any other date other than
the Closing Date) in all material respects as of the Closing Date (except that
(x) any inaccuracy that does not have a material adverse effect on Sanmina shall
be disregarded, (y) any inaccuracy that results from or relates to general
business, economic or industry conditions shall be disregarded, and (z) any
inaccuracy that results from or relates to the taking of any action contemplated
or permitted by the Merger Agreement or the announcement or pendency of the
Merger shall be disregarded); (ii) Sanmina having performed in all material
respects all obligations required to be performed by it under the Merger
Agreement at or prior to the Closing Date; (iii) Elexsys having received from
each Affiliate of Sanmina for purposes of qualifying the Merger for pooling of
interests accounting treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations an executed Affiliate Agreement;
(iv) Elexsys having received the opinion of Cooley Godward LLP, counsel to
Elexsys, to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code; and (v) Sanmina shall have taken such
action (if any) as may be required by the Indenture relating to the Convertible
Debentures in connection with the Merger.
NO SOLICITATION
The Merger Agreement provides that Elexsys will not, nor will it authorize
or instruct any of its officers, directors or employees or any investment
banker, attorney or other advisor or representative retained by it to, directly
or indirectly, (i) solicit, initiate or knowingly encourage the submission of
any Takeover Proposal (as hereinafter defined) by any person (other than Sanmina
or its affiliates or representatives) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any nonpublic information with
respect to, or take any other action intended or reasonably expected to
facilitate the making of any inquiry or proposal to Elexsys that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal by any person
(other than Sanmina or its affiliates or their respective representatives);
provided, however, that if, at any time prior to receipt of Stockholder Approval
the Elexsys Board determines in good faith, after consultation with outside
counsel, that failure to do so would create a substantial risk of liability for
breach of its fiduciary duties to Elexsys stockholders under applicable law,
Elexsys may, prior to receipt of Stockholder Approval, in response to a Takeover
Proposal that was unsolicited or that did not otherwise result from a breach of
the terms described in this paragraph, and subject to compliance with the notice
requirements described in the following paragraph, (x) furnish nonpublic
information with respect to Elexsys and its subsidiaries to any person pursuant
to a customary and reasonable confidentiality agreement and (y) participate in
discussions and negotiations regarding such Takeover Proposal. Under the Merger
Agreement, any violation of the foregoing restrictions by any officer, director
or employee of Elexsys or any investment banker, attorney or other advisor or
representative of Elexsys, acting on behalf of and with the authorization of
Elexsys, shall be deemed to be a breach of the foregoing nonsolicitation
provision by Elexsys. Under the Merger Agreement, "Takeover Proposal" means any
proposal or offer from any person (other than Sanmina or its affiliates or their
respective representatives) for any acquisition by such person of a substantial
amount of assets of Elexsys (other than an acquisition of assets of Elexsys in
the ordinary course of business or as permitted under the terms of the Merger
Agreement) having a fair market value (as determined by the Elexsys Board in
good faith) in excess of 25% of the fair market value of all the assets of
Elexsys and its subsidiaries immediately prior to such acquisition or more than
a 25% interest in the total voting securities of Elexsys or any tender offer
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or exchange offer that if consummated would result in any person beneficially
owning 25% or more of any class of equity securities of Elexsys or any merger,
consolidation, or business combination of Elexsys with any unaffiliated third
party, other than the transactions contemplated by the Merger Agreement or the
Stockholder Agreements.
Under the Merger Agreement, Elexsys has also agreed to promptly advise
Sanmina orally and in writing of any request for nonpublic information which
Elexsys reasonably believes could lead to a Takeover Proposal, of any Takeover
Proposal submitted to Elexsys or any inquiry with respect to or which Elexsys
reasonably believes could lead to any Takeover Proposal, the material terms and
conditions of such request, Takeover Proposal or inquiry and the identity of the
person making any such Takeover Proposal or inquiry. Elexsys has agreed to keep
Sanmina informed in all material respects of the status and details (including
amendments or proposed amendments) of any such Takeover Proposal or inquiry,
except to the extent that the Elexsys Board determines in good faith, after
consultation with outside counsel, that to do so would create a substantial risk
of liability for breach of its fiduciary duties to the Elexsys stockholders
under applicable law.
Nothing contained in the Merger Agreement prohibits Elexsys from (i) taking
and disclosing to its stockholders a position contemplated by Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act (which set forth Elexsys'
obligations to respond to tender offer proposals made by third parties,
including Elexsys' duty to either (x) recommend to its stockholders the
acceptance or rejection of a bidder's tender offer, (y) express no opinion and
remain neutral as to the tender offer, or (z) express that it is unable to take
a position with respect to the bidder's tender offer) or (ii) making any
disclosure to Elexsys stockholders or any public announcement if, in the good
faith judgment of the Elexsys Board, after consultation with independent
counsel, failure to so disclose would be inconsistent with applicable laws,
rules, regulations or duties of the Elexsys Board; provided that Elexsys shall
not, except in accordance with the provisions of the Merger Agreement described
in the next succeeding paragraph, withdraw or modify, or propose to withdraw or
modify, its recommendation of the Merger or approve or recommend, or propose to
approve or recommend, a Takeover Proposal.
RIGHT OF THE ELEXSYS BOARD TO WITHDRAW RECOMMENDATION
Except as expressly permitted by the terms of the Merger Agreement
described in this paragraph, neither the Elexsys Board nor any committee of the
Elexsys Board may (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Sanmina, the approval or recommendation by the Elexsys Board
or any such committee of the Elexsys Board of the Merger Agreement or the
Merger, (ii) approve or recommend any Takeover Proposal or (iii) cause Elexsys
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement with respect to any Takeover Proposal.
Notwithstanding the foregoing or any other provision of the Merger Agreement,
prior to the adoption and approval of the Merger Agreement and the approval of
the Merger by the holders of a majority of the shares of Elexsys Common Stock
outstanding on the Record Date, the Elexsys Board, to the extent it determines
in good faith, after consultation with outside counsel, that failure to do so
would create a substantial risk of liability for breach of its fiduciary duties
to Elexsys' stockholders under applicable law, may (x) withdraw or modify its
approval or recommendation of the Merger Agreement or the Merger and/or (y)
approve or recommend any Takeover Proposal.
EXPENSES
The Merger Agreement provides that (except under the circumstances
described below under "-- Termination Fee") all fees and expenses incurred in
connection with the Merger, the Merger Agreement and the transactions
contemplated by the Merger Agreement will be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated, except that expenses
incurred in connection with printing and mailing this Proxy Statement/Prospectus
and the Registration Statement will be shared equally by Sanmina and Elexsys.
TERMINATION FEE
The Merger Agreement requires Elexsys to pay Sanmina a fee in the aggregate
amount of $7.5 million (the "Termination Fee") if (i) the Merger Agreement is
validly terminated pursuant to Section 7.1(b)(iv) of
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<PAGE> 56
the Merger Agreement by any party to the Merger Agreement in the event that the
Elexsys Board (or any committee thereof) withholds, withdraws or modifies in a
manner adverse to Sanmina its approval or recommendation of the Merger or
approves or recommends a Superior Proposal (as defined below) or the Elexsys
Board resolves to take any of the foregoing actions and (ii) Sanmina shall not
have materially breached the Merger Agreement. The Termination Fee is only due
if the Merger Agreement is terminated pursuant to Section 7.1(b)(iv) and is not
due if the Merger Agreement is terminated for any other reason. A "Superior
Proposal" means any bona fide proposal made by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 50% of the voting power of Elexsys Common Stock or all or
substantially all the assets of Elexsys and otherwise on terms which the Elexsys
Board determines in its good faith judgment (after consultation with its
financial advisor) to be more favorable to Elexsys' stockholders than the Merger
and for which financing, to the extent required, is then committed or which, in
the good faith judgment of the Elexsys Board, is capable of being obtained by
such third party. The Termination Fee is payable in installments as follows:
$2.5 million promptly, but in no event later than five business days after
termination, $2.5 million on the 180th day after termination and $2.5 million on
the 270th day after termination, provided that if a transaction contemplated by
a Superior Proposal accepted by Elexsys is consummated prior to payment of
either the second or third installments, any such unpaid amounts shall be
payable upon consummation of such transaction.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement may be terminated, and the Merger may be abandoned, at
any time prior to the Effective Time, whether before or after receipt of
Stockholder Approval; (i) by mutual written consent of Sanmina, Merger Sub and
Elexsys; (ii) by either Sanmina or Elexsys if the Merger is not consummated by
December 31, 1997 (subject to exceptions described in the Merger Agreement);
(iii) by either Sanmina or Elexsys, if any temporary restraining order,
preliminary or permanent injunction or other order issued by any U.S. federal or
state court of competent jurisdiction or other material legal restraint or
prohibition issued or promulgated by a U.S. Federal or state governmental entity
having the effect of preventing the consummation of the Merger shall be in
effect and shall have become final and nonappealable; (iv) by either Sanmina or
Elexsys if (x) the Special Meeting (including any adjournments thereof) shall
have been held and completed and Elexsys's stockholders shall have taken a final
vote on a proposal to approve and adopt the Merger Agreement and to approve the
Merger, and (y) the adoption and approval of the Merger Agreement and the
approval of the Merger by the holders of a majority of the shares of Elexsys
Common Stock outstanding on the Record Date shall not have been obtained; (v) by
either Sanmina or Elexsys if (x) the Elexsys Board or any committee thereof
shall have withheld, withdrawn or modified in a manner adverse to Sanmina its
approval or recommendation of the Merger, or approved or recommended any
Superior Proposal, or (y) the Elexsys Board shall have resolved to take any of
the foregoing actions; (vi) by Elexsys, upon a breach of any representation,
warranty, covenant or agreement on the part of Sanmina set forth in the Merger
Agreement, or if any such representation or warranty of Sanmina shall have
become inaccurate, in either case such that the conditions in the Merger
Agreement relating to accuracy of representations and warranties of Sanmina and
compliance with covenants by Sanmina would not be satisfied as of the time of
such breach or as of the time such representation or warranty shall have become
inaccurate; provided, that if such inaccuracy in Sanmina's representations and
warranties or breach by Sanmina is curable, then (x) Elexsys may not terminate
the Merger Agreement under the applicable provisions of the Merger Agreement
relating to termination due to breaches of representations, warranties,
covenants or agreements on the part of Sanmina with respect to a particular
breach or inaccuracy prior to or during the 45-day period commencing upon
delivery by Elexsys of written notice to Sanmina describing such breach or
inaccuracy, provided Sanmina continues to exercise reasonable efforts to cure
such breach or inaccuracy and (y) Elexsys may not, in any event, terminate the
Merger Agreement under the applicable provisions of the Merger Agreement
relating to termination due to breaches of representations, warranties,
covenants or agreements on the part of Sanmina if such inaccuracy or breach
shall have been cured in all material respects; and, provided further that
Elexsys may not terminate the Merger Agreement under the applicable provisions
of the Merger Agreement relating to termination due to breaches of
representations, warranties, covenants or agreements on the part of Sanmina if
Elexsys shall have wilfully and materially breached the Merger Agreement; or
(vii) by Sanmina, upon a breach of any
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<PAGE> 57
representation, warranty, covenant or agreement on the part of Elexsys set forth
in the Merger Agreement, or if any such representation or warranty of Elexsys
shall have become inaccurate, in either case such that the conditions in the
Merger Agreement relating to accuracy of representations and warranties of
Elexsys and compliance with covenants by Elexsys, as the case may be, would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become inaccurate; provided, that if such inaccuracy in
Elexsys' representations and warranties or breach by Elexsys is curable, then
(x) Sanmina may not terminate the Merger Agreement under the applicable
provisions of the Merger Agreement related to termination due to breaches of
representations, warranties, covenants or agreements on the part of Elexsys with
respect to a particular breach or inaccuracy prior to or during the 45-day
period commencing upon delivery by Sanmina of written notice to Elexsys
describing such breach or inaccuracy, provided Elexsys continues to exercise
reasonable efforts to cure such breach or inaccuracy and (y) Sanmina may not, in
any event, terminate the Merger Agreement under the applicable provisions of the
Merger Agreement related to termination due to breaches of representations,
warranties, covenants or agreements on the part of Elexsys if such inaccuracy or
breach shall have been cured in all material respects; and, provided further
that Sanmina may not terminate the Merger Agreement under the applicable
provisions of the Merger Agreement related to termination due to breaches of
representations, warranties, covenants or agreements on the part of Elexsys if
Sanmina shall have wilfully and materially breached the Merger Agreement.
Subject to applicable law, (i) the Merger Agreement may be modified or
amended by written agreement executed and delivered by the respective duly
authorized officers of Sanmina, Merger Sub and Elexsys (except that after
Stockholder Approval has been obtained, no amendment may be made which requires
the approval by such stockholders without the further approval of such
stockholders) and (ii) the parties, by written agreement signed by each party,
may extend the time for performance of any of the obligations or other acts of
the other parties to the Merger Agreement, waive inaccuracies in representations
and warranties or waive compliance with any of the agreements or conditions of
the other parties contained in the Merger Agreement. In the event that an
amendment to, or waiver of, a provision of the Merger Agreement would materially
affect the information available to holders of Elexsys Common Stock, Elexsys
will resolicit proxies with respect to approval of the Merger Agreement.
THE STOCKHOLDER AGREEMENTS
The description of the Stockholder Agreements contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the Stockholder Agreements, the form of which is
attached hereto as Annex II and incorporated herein by reference. All material
elements of the Stockholder Agreements are described in this Proxy
Statement/Prospectus.
Sanmina entered into the Stockholder Agreements dated as of July 22, 1997
with the directors of Elexsys (in their capacities as stockholders) (the
"Stockholder Parties"). Together, the Stockholder Parties held as of the Record
Date 4,100,461 shares of Elexsys Common Stock (approximately 43% of the
outstanding shares). Consequently, holders of only approximately 7% of Elexsys
Common Stock who are not parties to the Stockholder Agreements need vote in
favor of approval and adoption of the Merger Agreement for Stockholder Approval
to be obtained. The general effect of the Stockholder Agreements is to increase
the likelihood that Stockholder Approval will be obtained.
Pursuant to the terms of the Stockholder Agreements, each Stockholder Party
has agreed to vote (or cause to be voted), at the Special Meeting or in any
other circumstances upon which a vote, consent or other approval with respect to
the Merger and the Merger Agreement is sought, his shares of Elexsys Common
Stock (together, the "Subject Shares") in favor of approval and adoption of the
Merger Agreement and approval of the Merger.
Each Stockholder Party also has irrevocably granted to, and appointed,
Sanmina and two of Sanmina's officers, in their capacities as officers of
Sanmina, and each of them individually, such Stockholder Party's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of such Stockholder Party, to vote such Stockholder Party's Subject
Shares, or grant a consent or approval in respect of such Subject Shares, in
favor of approval and adoption of the Merger Agreement and approval of the
Merger.
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Under the Stockholder Agreements, each Stockholder Party has agreed not to
(i) sell, transfer, pledge, assign or otherwise dispose of (including by gift)
(collectively, "Transfer"), consent to any Transfer of, or enter into any
contract, option or other arrangement (including any profit sharing arrangement)
with respect to the Transfer of, any or all of the Subject Shares (or any
interest therein) to any person other than pursuant to the terms of the Merger
or (ii) enter into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection with, directly or indirectly, any Takeover Proposal (as
defined in the Merger Agreement and described above under "-- No Solicitation"),
and has agreed not to commit or agree to take any of the foregoing actions;
provided, however, that notwithstanding anything to the contrary contained in
the Merger Agreement, each Stockholder Party may, without the consent of Sanmina
or any other person, transfer any or all of the Subject Shares (or any interest
therein) to one or more members of the Stockholder Party's family, any trust for
the benefit of the Stockholder Party or one or more members of such Stockholder
Party's family or any entity controlled by the Stockholder Party so long as the
transferee of such Subject Shares (or such interest therein) agrees to be bound
by the applicable provisions of the Stockholder Agreement.
Each Stockholder Party has agreed not to instruct any agent or any
investment banker, attorney or other adviser or representative of such
Stockholder Party to, directly or indirectly, (i) solicit, initiate or knowingly
encourage the submission to Elexsys of, any Takeover Proposal or (ii)
participate in any discussions or negotiations with any person (other than
Sanmina and its affiliates, agents and representatives) regarding, or furnish to
any such person any nonpublic information with respect to, or take any other
action intended to facilitate the making of any inquiry or proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal.
Under each Stockholder Agreement, Sanmina has agreed to indemnify and hold
harmless each Stockholder Party against any costs or expenses (including
reasonable attorneys' fees), demands, judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement incurred in connection with any
claim, action, suit, proceeding, that arises from or relates to the execution,
delivery or performance of the Stockholder Agreements or any of the transactions
contemplated by the Stockholder Agreements.
The Stockholder Agreements will terminate on the earlier of the Effective
Time or the date upon which the Merger Agreement is terminated in accordance
with its terms.
Section 12(g) of each of the Stockholder Agreements provides that nothing
in the Stockholder Agreement shall be deemed to prevent the Stockholder Party
from acting in accordance with his fiduciary duties as a director of Elexsys or
otherwise limit the ability of the Stockholder Party to take any action in his
capacity as a director or officer of Elexsys. The effect of this provision is to
permit the Elexsys directors to take any action that might be required by their
fiduciary duties to Elexsys and its stockholders (including without limitation
action with respect to Takeover Proposals) without thereby violating the
Stockholder Agreements.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Directors and Officers. The directors of Merger Sub immediately prior to
the Effective Time will become the directors of the Surviving Corporation until
their respective successors have been duly elected and qualified or until their
earlier resignation or removal. The officers of Elexsys at the Effective Time
will be the officers of the Surviving Corporation until their respective
successors have been duly appointed and qualified or until their earlier
resignation or removal.
OTHER MATTERS
GOVERNMENTAL AND REGULATORY MATTERS
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain acquisition transactions may not be consummated
unless notice has been given and certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and specified waiting period requirements have been
satisfied. Sanmina and Elexsys each filed with the Antitrust Division and the
FTC a Notification and Report Form with respect to the Merger on July 31, 1997.
The waiting period under the HSR Act terminated on August 30, 1997. At any time
before or after the Effective Time, the FTC or the Antitrust Division could take
such action under
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<PAGE> 59
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the Merger or seeking the divestiture of Elexsys by
Sanmina, in whole or in part, or the divestiture of substantial assets of
Sanmina, Elexsys or their respective subsidiaries. State Attorneys General and
private parties may also bring legal actions under federal or state antitrust
laws in certain circumstances. Based on an examination of information available
to Sanmina and Elexsys relating to the businesses in which Sanmina, Elexsys and
their respective subsidiaries are engaged, Sanmina and Elexsys believe that the
consummation of the Merger will not violate the antitrust laws.
Sanmina and Elexsys do not believe that any other material governmental
approvals or actions will be required for consummation of the Merger. See "THE
MERGER AGREEMENT -- Conditions to the Consummation of the Merger."
ABSENCE OF APPRAISAL RIGHTS
Holders of Elexsys Common Stock will not be entitled to appraisal rights as
a result of the Merger. Under Delaware law, appraisal rights are unavailable to
holders of Elexsys Common Stock because Elexsys Common Stock was, on the Record
Date, quoted on the Nasdaq National Market and will be converted into shares of
Sanmina Common Stock, which at the Effective Time will also be quoted on the
Nasdaq National Market.
DESCRIPTION OF SANMINA CAPITAL STOCK
The authorized capital stock of Sanmina consists of 75,000,000 shares of
Sanmina Common Stock and 5,000,000 shares of Preferred Stock.
The following summary of certain provisions of the Sanmina Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of Sanmina's Restated Certificate of
Incorporation and by the provisions of applicable law. All material elements of
the Sanmina Restated Certificate of Incorporation are described in this Proxy
Statement/Prospectus.
Common Stock. The holders of shares of Sanmina Common Stock are entitled to
one vote per share on all matters to be voted on by stockholders. Subject to
preferences of any Preferred Stock that may be issued in the future, the holders
of Sanmina Common Stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Sanmina Board out of funds legally
available for that purpose. In the event of a liquidation, dissolution or
winding up of Sanmina, the holders of Sanmina Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. The Sanmina
Common Stock has no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
Sanmina Common Stock. All outstanding shares of Sanmina Common Stock are fully
paid and nonassessable, including the Sanmina Common Stock to be issued in
connection with the Merger.
Preferred Stock. The Sanmina Board has the authority, without further
action by the stockholders, to issue up to 5,000,000 shares of Preferred Stock
in one or more series and to fix the rights, qualifications, preferences,
privileges, limitations and restrictions of each such series, including the
dividend rights, dividend rate or rates, conversion rights, voting rights, terms
of redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares constituting any series or the
designations of such series, without any further vote or action by the
stockholders. Thus, any series may, if so determined by the Sanmina Board, have
disproportionately high voting rights or class voting rights, be convertible
into or exchangeable for Sanmina Common Stock or another security of Sanmina, be
redeemable, carry the right to specified participating dividends (which may be
fixed or adjustable and which may be cumulative) and have such other relative
rights, preferences and limitations as the Sanmina Board shall determine.
Issuance of authorized but unissued shares of Sanmina Common Stock or Preferred
Stock (including issuance upon conversion of any convertible Preferred Stock)
could cause a dilution of the book value of the Sanmina Common Stock and (in the
case of Sanmina Common Stock and Preferred Stock with voting rights) would
dilute the voting power of the then current stockholders. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of Sanmina without further action
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<PAGE> 60
by the stockholders, may discourage bids for Sanmina's Common Stock at a premium
over the market price of Sanmina Common Stock and may adversely affect the
market price of Sanmina Common Stock.
The ability to issue Preferred Stock will enhance Sanmina's flexibility in
connection with possible future corporate financing needs such as equity
financing, acquisitions, raising of capital for infusion into its subsidiaries
or other corporate purposes deemed appropriate by the Sanmina Board. Preferred
Stock may have significant advantages in certain financing situations over the
issuance of debt securities or Sanmina Common Stock and Sanmina's Restated
Certificate of Incorporation allows the Sanmina Board the flexibility to tailor
the rights and terms of future Preferred Stock issuances to the requirements of
specific situations.
Change of Control Provisions. Certain provisions of the Sanmina's Restated
Certificate of Incorporation and Bylaws may have the effect of preventing,
discouraging or delaying any change in control of Sanmina. The authorization of
undesignated Preferred Stock makes it possible for the Sanmina Board to issue
Preferred Stock with voting or other rights or preferences that could impede the
success of any attempt to change control of Sanmina. There are also a
substantial number of authorized but unissued shares of Sanmina Common Stock
that could be issued for such purpose.
Section 203 of the DGCL ("Section 203") prohibits certain "Business
Combination" transactions (as defined in Section 203) between a publicly held
Delaware corporation, such as Sanmina, and any "interested stockholder" (as
defined in Section 203) for a period of three years after the date such
stockholder becomes an interested stockholder unless (a) prior to such
stockholder becoming an interested stockholder, either the proposed Business
Combination or the proposed acquisition of stock that would make such
stockholder an interested stockholder was approved by the corporation's board of
directors, or (b) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (i) by persons who are directors and also
officers and (ii) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (c) the interested
stockholder obtained the approval of the corporation's board of directors and
the approval of the holders of at least two-thirds of the outstanding shares of
the corporation's voting stock, other than any shares of voting stock held by
the interested stockholder.
For purposes of Section 203, an "interested stockholder" is any person or
entity that (a) beneficially owns 15% or more of the outstanding voting stock of
the corporation or (b) is an affiliate or associate of the corporation and at
any time within the preceding three-year period was the beneficial owner of 15%
or more of the outstanding voting stock of the corporation, together in each
case with the affiliates and associates of such person.
The "Business Combination" transactions to which Section 203 applies
include (a) any merger or consolidation of the corporation or any of its
majority-owned subsidiaries with an interested stockholder, (b) any disposition
or pledge to an interested stockholder (except proportionately as a stockholder
of the corporation) of assets of the corporation or any of its majority-owned
subsidiaries having an aggregate market value equal to 10% or more of either the
aggregate market value of all of the assets of the corporation and its
subsidiaries or of all of the outstanding stock of the corporation; (c) any
issuance or transfer of stock to the interested stockholder except (i) pursuant
to the exercise of previously outstanding options, rights or convertible
securities or (ii) pursuant to options, rights or convertible securities offered
on the same terms or distributed pro rata by the corporation to all stockholders
so long as the interested stockholder's percentage ownership does not increase
and (d) any loan or other financial benefit provided by or through the
corporation or any of its majority-owned subsidiaries to the interested
stockholder, except proportionately as a stockholder of such corporation.
Debentures. Sanmina has outstanding an aggregate of $86,250,000 principal
amount of 5 1/4% Convertible Debentures due August 15, 2002 (the "Sanmina
Debentures"). The Sanmina Debentures are convertible into Sanmina Common Stock
at any time at the option of the holders thereof at a conversion price of
$28.125 per share of Sanmina Common Stock. Sanmina has filed, and has agreed to
maintain effective through August 15, 1998, a registration statement covering
the resale of the Sanmina Common Stock issuable upon conversion of
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the Sanmina Debentures. Interest on the Sanmina Debentures is payable twice
annually, on February 15 and August 15 of each year. There is no sinking fund
applicable to the Sanmina Debentures. The Sanmina Debentures are redeemable by
Sanmina in whole or in part after August 15, 1998 upon at least 30 days' prior
written notice to the holders initially at 103.143% of the issue price and at
decreasing prices thereafter to 100% at maturity, in each case together with
accrued interest.
Transfer Agent and Registrar. The transfer agent and registrar for
Sanmina's Common Stock is Norwest Bank Minnesota, N.A. Its address is 161 North
Concord Exchange, South St. Paul, Minnesota 55075-0738 and its telephone number
is (800) 468-9716.
EXPERTS
The audited consolidated financial statements of Sanmina incorporated by
reference in this Proxy Statement/Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated by reference in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements as of September 30, 1996 and 1995 and
for each of the three years in the period ended September 30, 1996 and the
related financial statement schedule of Elexsys incorporated in this Proxy
Statement/Prospectus by reference from the Annual Report on Form 10-K of Elexsys
for the year ended September 30, 1996 have been audited by Deloitte & Touche
LLP, independent public accountants, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
Representatives for Deloitte & Touche LLP, principal accountants for
Elexsys for the current year and for the most recently completed fiscal year:
(i) are expected to be present at the Special Meeting; (ii) will have the
opportunity to make a statement if they desire to do so; and (iii) are expected
to be available to respond to appropriate questions.
LEGAL MATTERS
The legality of the shares of Sanmina Common Stock offered hereby will be
passed upon for Sanmina by Wilson Sonsini Goodrich & Rosati, Palo Alto,
California. Mario M. Rosati, a director of Sanmina, and Christopher D. Mitchell,
Assistant Secretary of Sanmina, are members of Wilson Sonsini Goodrich & Rosati.
Wilson Sonsini Goodrich & Rosati, counsel for Sanmina, and Cooley Godward
LLP, counsel for Elexsys, have delivered opinions concerning certain federal
income tax consequences of the Merger. See "THE MERGER -- Certain Federal Income
Tax Consequences" and "THE MERGER AGREEMENT -- Conditions to the Consummation of
the Merger." As of the date of this Proxy Statement/Prospectus, certain members
of Cooley Godward LLP and investment partnerships of which such persons are
partners beneficially own approximately 37,000 shares of Elexsys Common Stock.
Alan Mendelson, a director of Elexsys, is a partner of Cooley Godward LLP. C.
Bradford Jeffries, a director of Elexsys, is a retired partner, currently of
counsel of Cooley Godward LLP.
STOCKHOLDER PROPOSALS
If the Merger is not consummated, the only proposals of holders of Elexsys
Common Stock eligible to be considered for inclusion in the proxy statement and
form of proxy statement relating to the Annual Meeting of the Stockholders of
Elexsys (the "Annual Meeting") to be held in 1998 will be those which have been
duly received by Elexsys, at 4405 Fortran Court, San Jose, CA 95134, no later
than September 17, 1997 (which date is 120 days prior to the anticipated mailing
date of the proxy statement and form of proxy relating to such Annual Meeting).
If the Merger is approved at the Special Meeting, no Annual Meeting will be held
in 1998.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
give effect to the Merger with Elexsys and should be read in conjunction with
historical financial statements and accompanying notes for Sanmina and Elexsys
incorporated by reference. The Merger with Elexsys is subject to approval by the
stockholders of Elexsys.
The unaudited pro forma combined statements of operations for the fiscal
years ended September 30, 1994, 1995, and 1996 and the nine-month periods ended
June 29, 1996 and June 28, 1997 give effect to the proposed Merger with Elexsys,
which will be accounted for as a pooling of interests, as if the Merger were
completed at the beginning of the periods presented. The unaudited pro forma
condensed combined balance sheet has been prepared as if the Merger were
completed as of June 28, 1997.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had been consummated at the beginning of
the earliest period presented, nor is it necessarily indicative of future
operating results or financial position.
F-1
<PAGE> 63
SANMINA AND ELEXSYS
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 28, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
SANMINA ELEXSYS ADJUSTMENTS BALANCES
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales....................................... $290,974 $118,802 $ (581)(2) $ 409,195
Cost of sales................................... 222,633 98,362 (581)(2) 320,414
-------- -------- ------- --------
Gross profit.................................... 68,341 20,440 -- 88,781
-------- -------- ------- --------
Expenses:
Selling, general and administrative............. 17,446 12,274 29,720
Research and development........................ -- 201 201
Amortization expense............................ 1,504 -- 1,504
-------- -------- ------- --------
18,950 12,475 -- 31,425
-------- -------- ------- --------
Operating income................................ 49,391 7,965 -- 57,356
Interest expense................................ (366) (1,590) (1,956)
-------- -------- ------- --------
Income before provision for income taxes........ 49,025 6,375 -- 55,400
Provision for income taxes...................... 19,118 369 19,487
-------- -------- ------- --------
Net income...................................... $ 29,907 $ 6,006 -- $ 35,913
======== ======== ======= ========
Earnings per share
Primary....................................... $ 1.64 $ 0.61 $ 1.67
Fully diluted................................. 1.51 0.61 1.55
Shares used in computing per share amounts
Primary....................................... 18,214 9,844 (6,595)(1) 21,463
Fully diluted................................. 21,362 9,844 (6,595)(1) 24,611
</TABLE>
- ---------------
(1) Reflects the exchange of all Elexsys Common Stock for Sanmina Common Stock
at a ratio of 0.33 shares of Sanmina Common Stock for one share of Elexsys
Common Stock.
(2) To eliminate intercompany sales.
F-2
<PAGE> 64
SANMINA AND ELEXSYS
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 29, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
SANMINA ELEXSYS ADJUSTMENTS BALANCES
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales....................................... $186,574 $90,140 -- $ 276,714
Cost of sales................................... 141,744 73,527 215,271
-------- ------- ------- --------
Gross profit.................................... 44,830 16,613 -- 61,443
-------- ------- ------- --------
Expenses:
Selling, general and administrative............. 11,838 9,165 21,003
Research and development........................ -- 211 211
Amortization expense............................ 1,221 -- 1,221
-------- ------- ------- --------
13,059 9,376 -- 22,435
-------- ------- ------- --------
Operating income................................ 31,771 7,237 -- 39,008
Interest income(expense), net................... 71 (982) (911)
-------- ------- ------- --------
Income before provision for income taxes........ 31,842 6,255 -- 38,097
Provision for income taxes...................... 12,098 52 12,150
-------- ------- ------- --------
Net income...................................... $ 19,744 $ 6,203 -- $ 25,947
======== ======= ======= ========
Earnings per share
Primary....................................... $ 1.13 $ 0.65 $ 1.26
Fully diluted................................. 1.07 0.65 1.19
Shares used in computing per share amounts
Primary....................................... 17,472 9,548 (6,397)(1) 20,623
Fully diluted................................. 20,584 9,548 (6,397)(1) 23,735
</TABLE>
- ---------------
(1) Reflects the exchange of all Elexsys Common Stock for Sanmina Common Stock
at a ratio of 0.33 shares of Sanmina Common Stock for one share of Elexsys
Common Stock.
F-3
<PAGE> 65
SANMINA AND ELEXSYS
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
SANMINA ELEXSYS ADJUSTMENTS BALANCES
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales....................................... $265,076 $126,906 -- $ 391,982
Cost of sales................................... 201,531 103,696 305,227
-------- -------- ------- --------
Gross profit.................................... 63,545 23,210 -- 86,755
-------- -------- ------- --------
Expenses:
Selling, general and administrative............. 16,593 12,852 29,445
Research and development........................ -- 258 258
Amortization expense............................ 1,723 -- 1,723
-------- -------- ------- --------
18,316 13,110 -- 31,426
-------- -------- ------- --------
Operating income................................ 45,229 10,100 -- 55,329
Interest income(expense), net................... 83 (1,428) (1,345)
-------- -------- ------- --------
Income before provision for income taxes........ 45,312 8,672 53,984
Provision for income taxes...................... 17,217 202 17,419
-------- -------- ------- --------
Net income...................................... $ 28,095 $ 8,470 -- $ 36,565
======== ======== ======= ========
Earnings per share
Primary....................................... $ 1.60 $ 0.89 $ 1.77
Fully diluted................................. 1.50 0.89 1.65
Shares used in computing per share amounts
Primary....................................... 17,532 9,553 (6,401)(1) 20,684
Fully diluted................................. 20,812 9,553 (6,401)(1) 23,964
</TABLE>
- ---------------
(1) Reflects the exchange of all Elexsys Common Stock for Sanmina Common Stock
at a ratio of 0.33 shares of Sanmina Common Stock for one share of Elexsys
Common Stock.
F-4
<PAGE> 66
SANMINA AND ELEXSYS
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
SANMINA ELEXSYS ADJUSTMENTS BALANCES
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $167,787 $103,970 -- $ 271,757
Cost of sales.................................. 128,677 88,137 216,814
-------- -------- ------- --------
Gross profit................................... 39,110 15,833 -- 54,943
-------- -------- ------- --------
Expenses:
Selling, general and administrative............ 11,752 10,154 21,906
Research and development....................... -- 395 395
Amortization expense........................... 291 -- 291
-------- -------- ------- --------
12,043 10,549 -- 22,592
-------- -------- ------- --------
Operating income............................... 27,067 5,284 32,351
Interest income(expense), net.................. 924 (1,765) (841)
-------- -------- ------- --------
Income before provision for income taxes and
extraordinary item........................... 27,991 3,519 -- 31,510
Provision for income taxes..................... 11,037 220 11,257
-------- -------- ------- --------
Income before extraordinary item............... $ 16,954 $ 3,299 -- $ 20,253
======== ======== ======= ========
Earnings per share before extraordinary item
Primary...................................... $ 1.01 $ 0.37 $ 1.03
Fully diluted................................ 1.00 0.36 1.01
Shares used in computing per share amounts
Primary...................................... 16,812 9,018 (6,042)(1) 19,788
Fully diluted................................ 17,392 9,087 (6,088)(1) 20,391
</TABLE>
- ---------------
(1) Reflects the exchange of all Elexsys Common Stock for Sanmina Common Stock
at a ratio of 0.33 shares of Sanmina Common Stock for one share of Elexsys
Common Stock.
F-5
<PAGE> 67
SANMINA AND ELEXSYS
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
SANMINA ELEXSYS ADJUSTMENTS BALANCES
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................................... $115,125 $95,680 -- $ 210,805
Cost of sales....................................... 87,175 88,301 175,476
-------- ------ ------- --------
Gross profit........................................ 27,950 7,379 -- 35,329
-------- ------ ------- --------
Expenses:
Selling, general and administrative................. 9,240 10,167 19,407
Research and development............................ -- 718 718
Amortization expense................................ 665 -- 665
Write-off of goodwill............................... 11,190 -- 11,190
Provision for restructuring of operations........... 3,629 2,100 5,729
-------- ------ ------- --------
24,724 12,985 -- 37,709
-------- ------ ------- --------
Operating income (loss)............................. 3,226 (5,606) (2,380)
Interest income (expense), net...................... 369 (2,007) (1,638)
-------- ------ ------- --------
Income (loss) before provision for income taxes and
extraordinary item................................ 3,595 (7,613) -- (4,018)
Provision (benefit) for income taxes................ 6,704 -- (3,426)(2) 3,278
-------- ------ ------- --------
Loss before extraordinary item...................... $ (3,109) $(7,613) $ 3,426 $ (7,296)
======== ====== ======= ========
Loss per share before extraordinary item
Primary........................................... $ (0.20) $ (1.28) $ (0.42)
Fully diluted..................................... (0.20) (0.91) (0.39)
Shares used in computing per share amounts
Primary........................................... 15,488 6,387 (4,279)(1) 17,596
Fully diluted..................................... 15,488 8,769 (5,875)(1) 18,382
</TABLE>
- ---------------
(1) Reflects the exchange of all Elexsys Common Stock for Sanmina Common Stock
at a ratio of 0.33 shares of Sanmina Common Stock for one share of Elexsys
Common Stock.
(2) To adjust the provision (benefit) for income taxes due to Elexsys loss based
upon a 45% effective tax rate.
F-6
<PAGE> 68
SANMINA AND ELEXSYS
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 28, 1997
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
PRO
FORMA
SANMINA ELEXSYS ADJUSTMENTS BALANCES
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents................... $ 34,754 $ 1,063 -- $ 35,817
Short-term investments...................... 68,054 -- 68,054
Accounts receivable, net.................... 51,484 24,813 76,297
Inventories................................. 50,466 16,737 67,203
Deferred income taxes....................... 6,852 -- 6,852
Prepaid expenses and other.................. 903 1,744 2,647
-------- ------- ------ --------
Total Current Assets................ 212,513 44,357 -- 256,870
Property, plant & equipment, net.............. 60,215 32,526 92,741
Deposits and other............................ 8,577 4,043 12,620
-------- ------- ------ --------
Total Assets........................ $281,305 $80,926 -- $362,231
======== ======= ====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable............................ $ 39,011 $14,444 $ 1,500(1) $ 54,955
Accrued liabilities......................... 15,606 5,278 20,884
Income taxes payable........................ 2,716 -- 2,716
Short term borrowings....................... -- 4,633 4,633
Current portion of long term debt........... -- 883 883
-------- ------- ------ --------
Total Current Liabilities........... 57,333 25,238 1,500 84,071
-------- ------- ------ --------
Long Term Liabilities
Convertible subordinated notes.............. 86,250 12,000 98,250
Long term debt.............................. 250 12,154 12,404
-------- ------- ------ --------
Total Long Term liabilities......... 86,500 24,154 -- 110,654
-------- ------- ------ --------
Stockholders' Equity
Common stock and additional paid-in
capital.................................. 65,556 17,414 82,970
Unrealized holding gain on investments...... 32 -- 32
Retained earnings........................... 71,884 13,985 (1,500)(1) 84,369
Cumulative foreign currency translation
adjustment............................... -- 135 135
-------- ------- ------ --------
Total Stockholders' Equity.................... 137,472 31,534 (1,500) 167,506
-------- ------- ------ --------
Total Liabilities and Stockholders' Equity.... $281,305 $80,926 $ 0 $362,231
======== ======= ====== ========
</TABLE>
- ---------------
(1) Reflects expenses of merger.
F-7
<PAGE> 69
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS OF SANMINA AND ELEXSYS
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined statements of income combine the
historical statements of income of Sanmina and Elexsys for all periods presented
following the pooling method of accounting. No adjustments were necessary to
conform the accounting policies of the combining companies.
NOTE 2. PRO FORMA NET INCOME PER SHARE
The pro forma combined net income per share is based on the combined
weighted average number of common and dilutive equivalent shares of Sanmina and
Elexsys based upon the exchange ratio of 0.33 of a share of Sanmina Common Stock
for each share of Elexsys Common Stock. The pro forma fully diluted earnings per
share amounts assume the full conversion of Sanmina debentures into common
shares and the elimination of the related interest requirements, net of tax. The
computations do not assume the conversion of Elexsys debentures into common
shares since such conversion would not be dilutive.
NOTE 3. MERGER RELATED EXPENSES OF SANMINA AND ELEXSYS
Sanmina and Elexsys estimate that they will incur merger-related expenses,
consisting primarily of transaction costs for investment banker fees, attorneys,
accountants, financial printing and other related charges, of approximately $1.5
million. This estimate is preliminary and is therefore subject to change. These
nonrecurring expenses will be charged to operations during the period in which
the Merger is consummated. The pro forma combined balance sheet gives effect to
such expenses as if they had been incurred as of June 28, 1997, but the pro
forma condensed statements of income do not give effect to such expenses as such
expenses are non-recurring.
F-8
<PAGE> 70
ANNEXES TO THE PROXY STATEMENT/PROSPECTUS
ANNEX I Agreement and Plan of Merger
ANNEX II Form of Stockholder Agreement
ANNEX III Opinion of Needham & Company, Inc.
<PAGE> 71
ANNEX I
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 22, 1997
AMONG
SANMINA CORPORATION
SANM ACQUISITION SUBSIDIARY, INC.
AND
ELEXSYS INTERNATIONAL, INC.
<PAGE> 72
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE I The Merger.................................................................. 1
SECTION 1.1 The Merger........................................................ 1
SECTION 1.2 Closing........................................................... 1
SECTION 1.3 Effective Time.................................................... 1
SECTION 1.4 Effects of the Merger............................................. 2
SECTION 1.5 Certificate of Incorporation and Bylaws........................... 2
SECTION 1.6 Directors......................................................... 2
SECTION 1.7 Officers.......................................................... 2
ARTICLE II Effect of the Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates............................................................. 2
SECTION 2.1 Effect on Capital Stock........................................... 2
SECTION 2.2 Exchange of Certificates.......................................... 3
ARTICLE III Representations and Warranties............................................ 5
SECTION 3.1 Representations and Warranties of the Company..................... 5
(a) Organization, Standing and Corporate Power........................ 5
(b) Subsidiaries...................................................... 5
(c) Capital Structure................................................. 5
(d) Authority; Noncontravention....................................... 6
(e) SEC Documents..................................................... 7
(f) Information Supplied.............................................. 7
(g) Absence of Certain Changes or Events.............................. 8
(h) Litigation........................................................ 8
(i) Contracts......................................................... 8
(j) Compliance with Laws.............................................. 8
(k) Labor Matters..................................................... 10
(l) Absence of Changes in Benefit Plans............................... 10
(m) ERISA Compliance.................................................. 10
(n) Taxes............................................................. 12
(o) No Excess Parachute Payments...................................... 12
(p) Title to Properties............................................... 12
(q) Intellectual Property............................................. 13
(r) Voting Requirements............................................... 13
(s) State Takeover Statutes........................................... 13
(t) Brokers........................................................... 13
(u) Opinion of Financial Advisor...................................... 13
(v) Accounting Matters................................................ 13
(w) Equipment and Other Personal Property Leases...................... 13
(x) Product and Service Warranties.................................... 14
(y) Customers......................................................... 14
(z) Inventory......................................................... 14
SECTION 3.2 Representations and Warranties of Parent and Sub.................. 14
(a) Organization, Standing and Corporate Power........................ 14
(b) Subsidiaries...................................................... 14
(c) Capital Structure................................................. 14
(d) Authority; Noncontravention....................................... 15
(e) SEC Documents..................................................... 16
</TABLE>
i
<PAGE> 73
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
(f) Information Supplied.............................................. 16
(g) Absence of Certain Changes or Events.............................. 17
(h) Litigation........................................................ 17
(i) Contracts......................................................... 17
(j) Compliance with Laws.............................................. 17
(k) Labor Matters..................................................... 18
(l) Absence of Changes in Benefit Plans............................... 19
(m) Taxes............................................................. 19
(n) Title to Properties............................................... 19
(o) Intellectual Property............................................. 20
(p) Voting Requirements............................................... 20
(q) Brokers........................................................... 20
(r) Opinion of Financial Advisor...................................... 20
(s) Accounting Matters................................................ 20
(t) Product and Service Warranties.................................... 20
(u) Customers......................................................... 20
(v) Inventory......................................................... 20
(w) Interim Operations of Sub......................................... 21
(x) Parent Common Stock............................................... 21
ARTICLE IV Covenants Relating to Conduct of Business.................................. 21
SECTION 4.1 Conduct of Business by Parent and the Company..................... 21
SECTION 4.2 No Solicitation................................................... 24
ARTICLE V Additional Agreements....................................................... 25
SECTION 5.1 Preparation of Form S-4 and Proxy Statement; Stockholders
Meeting........................................................... 25
SECTION 5.2 Letters of the Company's Accountants.............................. 26
SECTION 5.3 Letters of Parent's Accountants................................... 26
SECTION 5.4 Access to Information; Confidentiality............................ 26
SECTION 5.5 Reasonable Efforts; Notification.................................. 27
SECTION 5.6 Stock Options and Other Employee Benefits......................... 27
SECTION 5.7 Indemnification and Insurance..................................... 29
SECTION 5.8 Fees and Expenses................................................. 30
SECTION 5.9 Public Announcements.............................................. 31
SECTION 5.10 Affiliates........................................................ 31
SECTION 5.11 Nasdaq National Market Listing.................................... 31
SECTION 5.12 Pooling of Interests.............................................. 31
SECTION 5.13 Stop Transfer..................................................... 31
SECTION 5.14 Tax Treatment..................................................... 31
SECTION 5.15 Convertible Debentures............................................ 32
ARTICLE VI Conditions Precedent....................................................... 32
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger........ 32
SECTION 6.2 Conditions to Obligations of Parent and Sub....................... 32
SECTION 6.3 Conditions to Obligation of the Company........................... 33
ARTICLE VII Termination, Amendment and Waiver......................................... 34
SECTION 7.1 Termination....................................................... 34
SECTION 7.2 Effect of Termination............................................. 35
SECTION 7.3 Amendment......................................................... 35
SECTION 7.4 Extension; Waiver................................................. 35
</TABLE>
ii
<PAGE> 74
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE VIII General Provisions....................................................... 35
SECTION 8.1 Nonsurvival of Representations and Warranties..................... 35
SECTION 8.2 Notices........................................................... 35
SECTION 8.3 Definitions....................................................... 36
SECTION 8.4 Interpretation.................................................... 36
SECTION 8.5 Counterparts...................................................... 36
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.................... 36
SECTION 8.7 Governing Law..................................................... 37
SECTION 8.8 Assignment........................................................ 37
SECTION 8.9 Enforcement....................................................... 37
SECTION 8.10 Severability...................................................... 37
EXHIBIT A Elexsys International, Inc. Affiliate Agreement............................. A-1
EXHIBIT B Sanmina Corporation Affiliate Agreement..................................... B-1
EXHIBIT C Noncompetition Agreement.................................................... C-1
</TABLE>
iii
<PAGE> 75
AGREEMENT AND PLAN OF MERGER dated as of July 22, 1997, among SANMINA
CORPORATION, a Delaware corporation ("Parent"), SANM ACQUISITION SUBSIDIARY,
INC., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"),
and ELEXSYS INTERNATIONAL, INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company,
and Parent, acting as the sole stockholder of Sub, have approved the merger of
Sub with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $1.00 per share, of the Company ("Company
Common Stock"), other than Company Common Stock owned by Parent, Sub or the
Company, will be converted into common stock, par value $.01 per share, of
Parent ("Parent Common Stock");
WHEREAS, substantially concurrently herewith and as a condition and
inducement to Parent's willingness to enter into this Agreement, Parent and
certain stockholders of the Company are entering into Stockholder Agreements
(the "Stockholder Agreements");
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as defined in Section 1.3). Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL. At the election
of Parent, any direct or indirect wholly owned subsidiary (as defined in Section
8.3) of Parent may be substituted for Sub as a constituent corporation in the
Merger. In such event, the parties hereto agree to execute an appropriate
amendment to this Agreement in order to reflect such substitution.
SECTION 1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Article VI (as such date may be extended, but not for
more than 30 days, by the Company, in its sole discretion) (the "Closing Date"),
at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
650 Page Mill Road, Palo Alto, CA 94304, unless another date or place is agreed
to in writing by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file with
the Delaware Secretary of State a certificate of merger (the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Delaware Secretary of State, or at such other time as Parent and
the Company shall agree should be specified in the Certificate of Merger (the
time the Merger becomes effective being the "Effective Time").
<PAGE> 76
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.5 Certificate of Incorporation and Bylaws.
(a) Subject to Section 5.7(a), the Certificate of Incorporation of Sub, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law, except that the name of the Surviving
Corporation in such Certificate of Incorporation will be changed to be Elexsys
International, Inc.
(b) Subject to Section 5.7(a), the Bylaws of Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
SECTION 1.6 Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock that is owned by the Company and each share of
Company Common Stock that is owned by Parent or Sub shall automatically be
canceled and retired and shall cease to exist, and no Parent Common Stock
or other consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.2(e),
each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(b)) shall be converted
into thirty three hundredths (0.33) (such fraction, as it may be adjusted
pursuant to the final sentence of this Section 2.1(c), being referred to as
the "Exchange Ratio") of a fully paid and nonassessable share of Parent
Common Stock. As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
which immediately prior to the Effective Time represented any such shares
of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive certificates representing the number
of fully paid and nonassessable shares of Parent Common Stock into which
such shares of Company Common Stock were converted at the Effective Time
and any cash in lieu of fractional shares of Parent Common Stock to be
issued or paid in consideration therefor upon surrender of such certificate
in accordance with Section 2.2, without interest. Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination, exchange of shares or any similar transaction or if Parent
pays an extraordinary dividend or makes an extraordinary distribution, the
Exchange Ratio shall be appropriately adjusted to reflect such
-2-
<PAGE> 77
stock dividend, subdivision, reclassification, recapitalization, split,
combination, exchange or other similar transaction or extraordinary
dividend or distribution.
SECTION 2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit with
Norwest Bank Minnesota, N.A. or such other bank or trust company as may be
designated by Parent prior to the Effective Time (with the approval of the
Company) (the "Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article II, through
the Exchange Agent, certificates representing the shares of Parent Common Stock
issuable pursuant to Section 2.1 and cash sufficient to make payments in lieu of
fractional shares in accordance with Section 2.2(e) (such shares of Parent
Common Stock, together with any dividends or distributions with respect thereto
with a record date after the Effective Time, and the cash so deposited, being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into Parent Common Stock pursuant to Section 2.1(c),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in customary
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive
pursuant to the provisions of this Article II after taking into account all the
shares of Company Common Stock then held by such holder under all such
Certificates so surrendered, cash in lieu of fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.2(e) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(c), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a person
other than the person in whose name the Certificate so surrendered is
registered, if, upon presentation to the Exchange Agent, such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of shares of Parent Common Stock to a person other than
the registered holder of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.2(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the shares of Parent Common
Stock into which the shares of Company Common Stock represented thereby were
converted at the Effective Time, and the right to receive cash in lieu of any
fractional shares of Parent Common Stock as contemplated by Section 2.2(e) and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.2(c). No interest will be paid or will accrue on any cash payable
pursuant to Sections 2.2(c) or 2.2(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.2(e) until the holder of record of such Certificate shall surrender
such Certificate. Following surrender of any such Certificate, there shall be
paid to the record holder of the certificate representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e)
and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective
-3-
<PAGE> 78
Time but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued pursuant to this Article II (and any cash paid
pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued and
paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock, subject, however, to the Surviving Corporation's obligation to pay
any dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Parent.
(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Parent Common Stock (after taking into account all Certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in
an amount, less the amount of any withholding taxes which may be required
thereon, equal to such fraction of a share of Parent Common Stock
multiplied by the per share closing price of Parent Common Stock as of the
Closing Date as such price is reported on the Nasdaq National Market (as
published by The Wall Street Journal, or, if not published therein, any
other authoritative source).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Parent upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for certificates evidencing Parent Common Stock,
any cash in lieu of fractional shares of Parent Common Stock and any dividends
or distributions with respect to Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund in each case properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue and pay in exchange for such lost, stolen or destroyed Certificate
(i) a certificate representing the shares of Parent Common Stock into which the
shares of Company Common Stock represented by such Certificate were converted
pursuant to Section 2.1, and (ii) any cash in lieu of fractional shares, and
unpaid dividends and distributions on such shares of Parent Common Stock,
pursuant to this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. Except as set
forth on the disclosure schedule delivered by the Company to Parent prior to the
execution of this Agreement (the "Company Disclosure Schedule"), and except as
set forth in the Company SEC Documents (as defined in Section 3.1(e)), or in the
exhibits thereto, the Company represents and warrants to Parent and Sub as
follows:
(a) Organization, Standing and Corporate Power. The Company and each
of its subsidiaries (as defined in Section 8.3) is a corporation or other
legal entity duly organized, validly existing and in good standing (with
respect to jurisdictions that recognize such concept) under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified or
licensed to do business and is in good standing (with respect to
jurisdictions that recognize such concept) in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
individually or in the aggregate would not have a material adverse effect
(as defined in Section 8.3) on the Company. The Company has delivered to
Parent complete and correct copies of its Restated Certificate of
Incorporation and Bylaws, in each case as amended to the date hereof.
(b) Subsidiaries. The Company has no subsidiaries and does not own as
of the date hereof, directly or indirectly, beneficially or of record, any
shares of capital stock or other equity security of any other entity or any
other similar investment in any other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and 1,000,000 shares
of preferred stock, par value $1.00 per share ("Company Preferred Stock").
At the close of business on July 21, 1997, (i) 9,492,676 shares of Company
Common Stock were issued and outstanding, (ii) no shares of Company Common
Stock were held by the Company in its treasury, (iii) 1,055,660 shares of
Company Common Stock were subject to issuance pursuant to outstanding
options to purchase shares of Company Common Stock, (iv) 303,797 shares of
Company Common Stock were reserved for issuance pursuant to the conversion
of the Company's 5 1/2% Convertible Subordinated Debentures due March 1,
2012 (the "Convertible Debentures"), (v) 250,000 shares of Company Common
Stock were reserved for issuance under the Company's 1996 Employee Stock
Purchase Plan (the "Company ESPP") (stock options granted by the Company
are referred to in this Agreement as "Company Options"), and (vi) no shares
of Company Preferred Stock were issued or outstanding. Except as set forth
above and except for Company Common Stock issued between July 21, 1997 and
the date of this Agreement upon the exercise of options to purchase Company
Common Stock, at the close of business on July 22, 1997, no shares of
capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. All outstanding shares of capital
stock of the Company are, and all shares which may be issued pursuant to
Company Options will be, when issued in accordance with the terms thereof,
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except for the Convertible Debentures, there
are no bonds, debentures, notes or other indebtedness of the Company
outstanding having the right to vote (or convertible into securities having
the right to vote) on any matters on which stockholders of the Company may
vote. Except as set forth above and except for (a) Company Common Stock
issued between July 21, 1997 and the date of this Agreement upon the
exercise of options to purchase Company Common Stock and (b) "rights" to
purchase Company Common Stock outstanding under the Company ESPP, as of the
date of this Agreement, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company is a party, or by which it is bound, obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of the
Company or obligating the Company to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are not
any outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of capital stock or other securities
of
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the Company. As of the date of this Agreement, and except as contemplated
by this Agreement, there are no stockholder agreements, voting trusts or
other agreements or understandings to which the Company is a party or by
which it is bound relating to the voting of any shares of capital stock of
the Company. All of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and
clear of any Lien (as defined in Section 3.1(d)) or any other limitation or
restriction (including any restriction on the right to vote or sell the
same, except as may be provided as a matter of law), except for shares of
capital stock or other similar ownership interests of certain subsidiaries
of the Company that may be owned by certain nominee equity holders as
required by the applicable law of the jurisdiction of organization of such
subsidiaries. There are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire
from the Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the
issuance or sale, directly or indirectly, of, any capital stock or other
ownership interests in, or any other equity securities of, any subsidiary
of the Company. As of the date of this Agreement, there are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or
other ownership interests in any subsidiary of the Company.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to
the adoption and approval of this Agreement and the approval of the Merger
by the holders of a majority of the shares of Company Common Stock
outstanding on the record date for the Stockholders Meeting (as defined in
Section 5.1), to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on
the part of the Company, subject, in the case of this Agreement and the
Merger, to approval and adoption of this Agreement and approval of the
Merger by the holders of a majority of the shares of Company Common Stock
outstanding on the record date for the Stockholders Meeting. This Agreement
has been duly executed and delivered by the Company and, assuming the due
authorization, execution, and delivery of this Agreement by Parent and
Merger Sub, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and similar laws, both state and federal,
affecting the enforcement of creditors' rights or remedies in general as
from time to time in effect or (ii) the exercise by courts of equity
powers. The execution and delivery of this Agreement by the Company do not,
and the consummation by the Company of the transactions contemplated by
this Agreement and compliance by the Company with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the
creation of any pledge, adverse claim, lien, charge, encumbrance or
security interest of any kind or nature whatsoever (collectively, "Liens")
in or upon any of the properties or assets of the Company under any
provision of (i) the Restated Certificate of Incorporation or Bylaws of the
Company, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or its properties or assets
and to which the Company is a party as of the date of this Agreement or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any (A) statute, law, ordinance, rule or regulation
applicable to the Company or (B) judgment, order or decree applicable to
the Company or its properties or assets, other than, in the case of clause
(ii) and clause (iii)(A), any such conflicts, violations, defaults, rights,
losses or Liens that individually or in the aggregate would not (x) have a
material adverse effect on the Company, (y) impair in any material respect
the ability of the Company to perform its obligations under this Agreement,
or (z) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any third
party, including any federal, state or local government or any court,
administrative agency or commission or other governmental authority or
agency, domestic or foreign (a "Governmental Entity"), is required to be
made or obtained by the Company at or before the Effective
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<PAGE> 81
Time in connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
by this Agreement, except for (1) the filing of a premerger notification
and report form by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and any applicable
filings under the antitrust laws of any foreign country, (2) the filing
with the Securities and Exchange Commission (the "SEC") of a proxy
statement relating to the adoption and approval by the Company's
stockholders of this Agreement and approval by the Company's stockholders
of the Merger (as amended or supplemented from time to time, the "Proxy
Statement") and such reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (3) the
filing of the Certificate of Merger with the Delaware Secretary of State
and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, and (4) such other consents,
approvals, orders, authorizations, registrations, declarations and filings,
which if not obtained or made, would not, individually or in the aggregate,
have a material adverse effect on the Company or prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement.
(e) SEC Documents. The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC between
September 30, 1994 and the date of this Agreement. All reports, schedules,
forms, statements and other documents filed by the Company with the SEC
between September 30, 1994 and the date of this Agreement (other than any
exhibits to such reports, schedules, forms, statements and documents) are
collectively referred to in this Agreement as the "Company SEC Documents."
As of the time each of the Company SEC Documents was filed with the SEC
(or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), (i) the Company SEC Documents
complied in all material respects with the requirements of the Securities
Act of 1933 (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Company SEC Documents, and (ii) except to the extent
that information contained in any Company SEC Document has been revised or
superseded by a later-filed Company SEC Document, none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the Company SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented the consolidated
financial position of the Company as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Between March 31, 1997 and the date of this Agreement,
the Company has not incurred any liabilities of the type required to be
disclosed in the liabilities column of a balance sheet prepared in
accordance with U.S. generally accepted accounting principles, except for
(i) liabilities incurred in the ordinary course of business, and (ii)
liabilities that would not, individually or in the aggregate, have a
material adverse effect on the Company.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Parent in connection with the issuance of Parent Common Stock in
connection with the Merger (the "Form S-4") will, at the time the Form S-4
is filed with the SEC, at any time it is amended or supplemented and at the
time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading and (ii) the
Proxy Statement will, at the date it is first mailed to the Company's
stockholders and at the time of the Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein,
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in light of the circumstances under which they are made, not misleading.
The Proxy Statement will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by the Company with
respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Between March 31, 1997 and
the date of this Agreement, there has not occurred (i) any material adverse
change in the Company, (ii) any material change by the Company in its
accounting methods, principles or practices except as required by
concurrent changes in U.S. generally accepted accounting principles, (iii)
any material reevaluation by the Company of any of its assets, including,
without limitation, writing down the value of capitalized inventory or
writing off notes or accounts receivable other than in the ordinary course,
or (iv) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock.
(h) Litigation. There is no suit, action or proceeding pending, and no
person has overtly threatened in a writing delivered to the Company since
January 1, 1997 to commence any suit, action or proceeding, against or
affecting the Company or any of its subsidiaries that would, individually
or in the aggregate, have a material adverse effect on the Company, nor is
there any judgment, decree, injunction, or order of any Governmental Entity
or arbitrator outstanding against, or, to the knowledge of the Company,
pending investigation by any Governmental Entity involving, the Company or
any of its subsidiaries that individually or in the aggregate would have a
material adverse effect on the Company.
(i) Contracts. As of the date this Agreement, there are no contracts
or agreements that are of a nature required to be filed by the Company as
an exhibit to a Report on Form 10-K under the Exchange Act and the rules
and regulations promulgated thereunder. Neither the Company nor any of its
subsidiaries is in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice or
both would cause such a violation of or default under) any lease, permit,
concession, franchise, license or any other contract, agreement,
arrangement or understanding to which any of them is a party or by which
any of their properties or assets is bound, except for violations or
defaults that individually or in the aggregate would not have a material
adverse effect on the Company.
(j) Compliance with Laws.
(i) The Company and each of its subsidiaries is in compliance with
all applicable statutes, laws, ordinances, regulations, rules,
judgments, decrees and orders of any Governmental Entity (collectively,
"Legal Provisions") applicable to their business or operations, except
for instances of possible noncompliance that, individually or in the
aggregate, would not have a material adverse effect on the Company or
prevent or materially delay the consummation of the Merger. The Company
and each of its subsidiaries has in effect all federal, state, local and
foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights, including all
authorizations under Environmental Laws (as hereinafter defined)
("Permits"), necessary for them to own, lease or operate their
properties and assets and to carry on their business substantially as
now conducted, and there currently exists no default under, or violation
of, any such Permit, except for the lack of Permits and for defaults
under, or violations of, Permits which lack, default or violation
individually or in the aggregate would not have a material adverse
effect on the Company. Between January 1, 1997 and the date of this
Agreement, the Company has not received any written notice or other
written communication from any Governmental Entity alleging any
violation of any Legal Provision by the Company (except for (A) notices
of violations which have been cured or corrected in all material
respects (B) notices which have been rescinded or withdrawn, and (C)
notices which would not have a material adverse effect on the Company).
(ii) The term "Hazardous Material" means any material or substance
that has been designated by any Governmental Entity to be radioactive,
toxic, hazardous or otherwise a danger to health, reproduction or the
environment. The term "Company Business Facility" means any property
including the land, the improvements thereon, the groundwater thereunder
and the surface water
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thereon, that is or at any time has been owned, operated, occupied,
controlled or leased by the Company or any of its subsidiaries in
connection with the operation of its business. The term "Disposal Site"
means a landfill, disposal agent, waste hauler or recycler of Hazardous
Materials. The term "Environmental Laws" means all applicable laws,
rules, regulations, orders, treaties, statutes, and codes promulgated by
any Governmental Entity which prohibit, regulate or control any
Hazardous Material or any Hazardous Material Activity, including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Resource Recovery and
Conservation Act of 1976, the Federal Water Pollution Control Act, the
Clean air Act, the Hazardous Materials Transportation Act, the Clean
Water Act, comparable laws, rules, regulations, orders, treaties,
statutes, and codes of other Governmental Entities the regulations
promulgated pursuant to any of the foregoing, and all amendments and
modifications of any of the foregoing, all as amended to date. The term
"Hazardous Materials Activity" means the transportation, transfer,
recycling, storage, use, treatment, manufacture, removal, remediation,
release, exposure of others to, sale, or distribution of any Hazardous
Material or any product containing a Hazardous Material. The term
"Company Environmental Permit" means any approval, permit, license,
clearance or consent required to be obtained from any private person or
any Governmental Entity with respect to a Hazardous Materials Activity
which is or was conducted by the Company or any of its subsidiaries.
(iii) To the knowledge of the Company, no Hazardous Materials are
present on any Company Business Facility currently owned, operated,
occupied, controlled or leased by the Company or any of its subsidiaries
except in such cases as would not reasonably be expected to have a
material adverse effect on the Company. There are no underground storage
tanks, asbestos which is friable or likely to become friable or PCBs
present on any Company Business Facility currently owned, operated,
occupied, controlled or leased by the Company or any of its subsidiaries
except in such cases as would not reasonably be expected to have a
material adverse effect on the Company.
(iv) The Company and each of its subsidiaries are conducting all
Hazardous Material Activities in compliance in all material respects
with all applicable Environmental Laws except where the failure to
comply would not have a material adverse effect on the Company. To the
knowledge of the Company after reasonable inquiry, the Hazardous
Materials Activities of the Company and each of its subsidiaries have
not resulted in the exposure of any person to a Hazardous Material in a
manner which has resulted in said person currently having a claim
against the Company that is likely to be adversely determined against
the Company and that would reasonably be expected to have a material
adverse effect on the Company.
(v) The Company Environmental Permits held by the Company and each
of its subsidiaries are all of the Environmental Permits necessary for
the continued conduct of any Hazardous Material Activity of the Company
and each of its subsidiaries as such activities are currently being
conducted, except for those permits the absence of which could not
reasonably be expected to result in a material adverse effect on the
Company. All such Company Environmental Permits are valid and in full
force and effect except where the failure to be valid and in full force
and effect would not have a material adverse effect on the Company. The
Company and its subsidiaries are in compliance in all material respects
with all covenants and conditions of any Company Environmental Permit
which are in force with respect to their Hazardous Materials Activities,
except where the failure to comply with such covenants and conditions
would not have a material adverse effect on the Company. To the
knowledge of the Company, no circumstance exists which would reasonably
be expected to cause any Company Environmental Permit to be revoked,
modified, or rendered non-renewable upon payment of the permit fee,
except to the extent such revocation, modification, or non-renewability
would not have a material adverse effect on the Company.
(vi) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending against the Company or
its subsidiaries by any Governmental Entity, and no person has overtly
threatened in a writing delivered to the Company since January 1, 1997
to commence any action, proceeding, revocation proceeding or amendment
procedure against the Company or its subsidiaries, concerning or
relating to any Company Environmental Permit or any Hazardous
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Materials Activity of the Company or any of its subsidiaries, or to any
Company Business Facility currently owned, operated, occupied,
controlled or leased by the Company or any of its subsidiaries, which
could reasonably be expected to have a material adverse effect on the
Company.
(vii) To the knowledge of the Company after reasonable inquiry, no
action, proceeding, or claim exists, and no person has overtly
threatened in a writing delivered to the Company since January 1, 1997
to commence any action or proceeding, against any Disposal Site or
against the Company or any of its subsidiaries with respect to any
transfer or release of Hazardous Materials by the Company to a Disposal
Site which could reasonably be expected to have a material adverse
effect on the Company.
(viii) The Company has delivered to Parent or made available for
inspection by Parent and its agents and employees all material records
in the Company's possession as of the date of this Agreement concerning
the current Hazardous Materials Activities of the Company and each of
its subsidiaries and all environmental audits and environmental
assessments of any Company Business Facility conducted at the request
of, or otherwise in the possession of, the Company or any of its
subsidiaries as of the date of this Agreement.
(k) Labor Matters. As of the date of this Agreement, there are no
collective bargaining agreements or other labor union agreements to which
the Company or any of its subsidiaries is a party, or by which they are
bound. The Company and each of its subsidiaries are in compliance with all
federal, state and local laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are
not engaged in any unfair labor practice except where the failure to
comply, or the engaging in such practice, would not have a material adverse
effect on the Company. As of the date of this Agreement, there is no unfair
labor practice complaint against the Company or any of its subsidiaries
pending, and no person has overtly threatened in a writing delivered to the
Company since January 1, 1997 to commence any unfair labor practices
complaint before the National Labor Relations Board or the United States
Department of Labor. There is no labor strike, slowdown or stoppage in
progress, and no person has overtly threatened in a writing delivered to
the Company since January 1, 1997 to commence any strike, slowdown or
stoppage, against or involving the Company or any of its subsidiaries. No
written agreement restricts the Company or any of its subsidiaries from
relocating, closing or terminating any of its operations or facilities.
Neither the Company nor any of its subsidiaries has, in the past three
years, experienced any labor strike, slowdown or stoppage.
(l) Absence of Changes in Benefit Plans. Between March 31, 1997 and
the date of this Agreement, there has not been any adoption or amendment in
any material respect by the Company or any of its subsidiaries of any
collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding providing benefits for which the Company or
any of its subsidiaries will be responsible to any current or former
employee, officer or director of the Company (collectively, "Benefit
Plans"). As of the date of this Agreement, there exist no employment,
consulting, severance, termination or indemnification agreements,
arrangements or understandings between the Company and any current or
former employee, officer or director of the Company, which is either
currently effective or will become effective at the Closing Date.
(m) ERISA Compliance.
(i) Each Benefit Plan has been administered in accordance with its
terms, and the Company and all the Benefit Plans are all in compliance
with applicable provisions of ERISA and the Code, except where the
failure to so administer the Benefit Plans or to so comply would not
have a material adverse effect on the Company.
(ii) Neither the Company nor any person or entity that, together
with the Company, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (the Company and each such other person or
entity, a "Commonly Controlled Entity") has maintained, contributed or
been
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obligated to contribute to any Benefit Plan that is subject to Title IV
of ERISA; and neither the Company nor any Commonly Controlled Entity is
obligated to make any contribution, other than discretionary
contributions, to any Benefit Plan.
(iii) With respect to any Benefit Plan that is an "employee welfare
benefit plan," (as defined in Section 3(l) of ERISA) there are no
agreements, written or oral, that would prevent any such plan (including
any such plan covering retirees or other former employees) from being
amended or terminated without material adverse effect on the Company on
or at any time after the Effective Time.
(iv) Neither the Company nor any of its subsidiaries contributes to
or has any material liability to the Pension Benefit Guaranty
Corporation or any other person, plan or entity under or with respect to
(A) a pension plan subject to Title IV of ERISA or Section 412 of the
Code, or (B) a multi-employer pension plan, as defined in Section 3(37)
of ERISA. Neither the Company nor any of its subsidiaries maintains an
employee welfare benefit plan providing health or medical benefits for
retired employees.
(v) No employee welfare benefit plan of the Company or any of its
subsidiaries provides for continuing benefits or coverage after
termination or retirement from employment, except with respect to any
"group health plan" as defined in Section 4980B(g) of the Code and
Section 607 of ERISA. With respect to any Benefit Plan which is a "group
health plan," as so defined, the Company warrants that in all "qualified
events" (including those resulting from the Merger) occurring prior to
or on the Closing Date, the Company has or will offer to its eligible
employees and their "qualified beneficiaries" the opportunity to elect
continuation coverage under Section 602 of ERISA to the extent required
by ERISA Sections 601-607 and will provide that coverage, if elected, at
no expense to Parent.
(vi) There is no Benefit Plan covering any employee or former
employee of the Company or any of its subsidiaries that, individually or
collectively, could give rise to the payment of an amount that would not
be deductible pursuant to the terms of Sections 280G or 162 of the Code.
(vii) Neither the Company nor any entity under common control with
the Company has ever participated in or withdrawn from a multi-employer
plan as defined in Section 4001(a)(3) of Title IV of ERISA, and neither
the Company nor any of its subsidiaries has incurred or owes any
liability as a result of any partial or complete withdrawal by any
employer from such a multi-employer plan as described under Sections
4201, 4203, or 4205 of ERISA.
(viii) No executive officer of the Company or, to the Company's
knowledge, other employee of the Company or any of its subsidiaries is
obligated under any agreement or judgment that would conflict with such
employee's obligation to use his best efforts to promote the interests
of the Company or would conflict with the Company's business as
conducted or proposed to be conducted. No executive officer of the
Company or, to the Company's knowledge, other employee of the Company or
any of its subsidiaries is, by virtue of his or her employment by the
Company or any of its subsidiaries, in material violation of the terms
of any employment agreement or any other agreement relating to such
employee's relationship with any previous employer and no litigation is
pending, and no person has overtly threatened in a writing delivered to
the Company since January 1, 1997 to commence any litigation, against
the Company with regard thereto.
(ix) Schedule 3.1(m)(ix) to the Company Disclosure Schedule lists
all Company Options outstanding as of the date of this Agreement,
showing for each such option: (1) the number of shares issuable under
each option grant, and (2) the exercise price thereof.
(x) No employee of the Company will be entitled to any additional
compensation or benefits or any acceleration of the time of payment or
vesting of any compensation or benefits under any Benefit Plan as a
result of the transactions contemplated by this Agreement except as
described in the Company Option Plans.
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(xi) The deduction of any amount payable pursuant to the terms of
the Benefit Plans will not be subject to disallowance under Section
162(m) of the Code.
(n) Taxes. As of the date of this Agreement, the Company has filed all
tax returns and reports required to be filed by it and has paid all taxes
that are shown on such tax returns as due and payable, and the most recent
financial statements contained in the Company SEC Documents reflect an
adequate reserve for all taxes payable by the Company for all taxable
periods and portions thereof through the date of such financial statements.
As of the date of this Agreement, no material deficiencies for any taxes
have been proposed, asserted or assessed against the Company, nor is there,
to the knowledge of the Company after reasonable inquiry, any reasonable
basis for the assertion of any such deficiency. No requests for waivers of
the time to assess any such taxes are pending as of the date of this
Agreement. No material special charges, penalties, fines, liens, or similar
encumbrances are owed by or pending against the Company with respect to
payment of or failure to pay any taxes. The Company is not a party to any
executory agreements extending the period for assessment or collection of
any taxes. Proper amounts have been withheld by the Company from employee
compensation payments for all periods in compliance with the tax
withholding provisions of applicable federal and state laws, except where
the failure to withhold proper amounts would not have a material adverse
effect on the Company. As of the date of this Agreement, none of the
Federal income tax returns of the Company have been examined by the United
States Internal Revenue Service for the fiscal years through September 30,
1996. The Company has not taken any action nor does it have any knowledge
of any fact or circumstance that is reasonably likely to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of
the Code. As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever.
(o) No Excess Parachute Payments. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any
of the transactions contemplated by this Agreement by any employee, officer
or director of the Company or any of its subsidiaries who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.28OG-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in
effect would be an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code). No such person is entitled to receive any
additional payment from the Company, the Surviving Corporation or any other
person (a "Parachute Gross-Up Payment") in the event that the excise tax of
Section 4999(a) of the Code is imposed on such person. No officer, director
or employee of the Company or any of its subsidiaries has been granted any
right to receive any Parachute Gross-Up Payment by the Company or any of
its subsidiaries.
(p) Title to Properties.
(i) The Company and each of its subsidiaries has good title to, or
valid leasehold interests in, all its material properties and assets
except for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive
covenants and other encumbrances that individually or in the aggregate
would not materially interfere with the ability of the Company and its
subsidiaries to conduct their business as currently conducted. All such
material assets and properties, other than assets and properties in
which the Company or any of its subsidiaries has a leasehold interest,
are free and clear of all Liens except for Liens that (A) are created or
arise in the ordinary course of business, (B) are created, arise or
exist under or in connection with any of the contracts or other matters
referred to in the Company Disclosure Schedule or in the Company SEC
Documents or the exhibits thereto, (C) relate to any taxes or other
governmental charges or levies that are not yet due and payable, (D)
relate to, or are created, arise or exist in connection with, any legal
proceeding that is being contested in good faith, or (E) individually or
in the aggregate would not materially interfere with the ability of the
Company and each of its subsidiaries to conduct their business as
currently conducted ("Company Permitted Liens").
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(ii) The Company and each of its subsidiaries are in compliance in
all material respects with the terms of all material leases to which
they are a party and under which they are in occupancy, and all such
leases are in full force and effect except where the failure to be in
compliance or the failure to be in full force and effect would not have
a material adverse effect on the Company. As of the date of this
Agreement, the Company and/or one or more of its subsidiaries enjoys
peaceful and undisturbed possession under all such material leases,
except for failures to do so that would not individually or in the
aggregate have a material adverse effect on the Company.
(q) Intellectual Property. The Company owns, or is validly licensed or
otherwise has the right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service
mark rights, copyrights and other proprietary intellectual property rights
and computer programs (collectively, "Intellectual Property Rights") which
are material to the conduct of the business of the Company and its
subsidiaries taken as a whole. As of the date of this Agreement, no suits,
actions or proceedings are pending, and no person has overtly threatened in
a writing delivered to the Company since January 1, 1997 to commence any
suit, action or proceeding, alleging that the Company or any of its
subsidiaries is infringing the rights of any person with regard to any
Intellectual Property Right, except for suits, actions or proceedings
which, individually or in the aggregate, would not have a material adverse
effect on the Company. To the knowledge of the Company, no person is
infringing the rights of the Company or any of its subsidiaries with
respect to any Intellectual Property Right, except for infringements which
individually or in the aggregate, would not have a material adverse effect
on the Company. Neither the Company nor any of its subsidiaries is
licensing, or otherwise granting, to any third party, any rights in or to
any Intellectual Property Rights which would have a material adverse effect
on the Company.
(r) Voting Requirements. The affirmative vote of the holders of a
majority of the shares of Company Common Stock outstanding as of the record
date for the Stockholders Meeting is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated by this Agreement.
(s) State Takeover Statutes. The Board of Directors of the Company has
approved the Merger and this Agreement and such approval is sufficient to
render inapplicable to the Merger and this Agreement the provisions of
Section 203 of the DGCL to the extent, if any, such Section is applicable
to the Merger and this Agreement To the best of the Company's knowledge, no
other state takeover statute or similar statute or regulation applies to or
purports to apply to the Merger or this Agreement.
(t) Brokers. No broker, investment banker, financial advisor or other
person, other than Needham & Company, the fees and expenses of which will
be paid by the Company, is entitled to any broker's, finder's or financial
advisor's fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Company.
(u) Opinion of Financial Advisor. The Company has received the opinion
of Needham & Company, dated the date hereof, to the effect that, as of such
date, the consideration to be received in the Merger by the Company's
stockholders is fair to the Company's stockholders from a financial point
of view, a copy of which opinion has been delivered to Parent for
informational purposes only.
(v) Accounting Matters. The Company has not taken or agreed to take
any action that would prevent the business combination to be effected by
the Merger to be accounted for as a pooling of interests.
(w) Equipment and Other Personal Property Leases. All of the material
items of equipment and personal property leased by the Company or any of
its subsidiaries from any third party is currently used by the Company
and/or one or more of its subsidiaries in the ordinary course of their
businesses. All leases in effect as of the date of this Agreement pursuant
to which the Company leases material items of equipment or other material
items of personal property are valid, subsisting and in full force and
effect, and neither the Company nor any other party thereto is in default
of any of its obligations under any of such leases, except for defaults and
failures to be valid, subsisting and in full force and effect which would
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not have a material adverse effect on the Company. No consent to the
consummation of the transactions contemplated by this Agreement is required
from the lessors under such leases except for any such consent the failure
to obtain which would not have a material adverse effect on the Company.
(x) Product and Service Warranties. Between January 1, 1997 and the
date of this Agreement, the Company has not received any written notice
pursuant to which any third party has made any claims against the Company
or its subsidiaries regarding any product or service warranties sold or
provided by the Company or its subsidiaries, except for (i) claims which
have been fully settled and (ii) unresolved claims that would not have a
material adverse effect on the Company.
(y) Customers. As of the date of this Agreement, neither the Company
nor any of its subsidiaries has received any information from any current
material Customer that such Customer will not continue as a customer of the
Company, such subsidiary or Parent after the Closing or that any such
Customer intends to terminate or materially modify any such Customer
Contract, except where the termination or modification of a customer
relationship would not have a material adverse effect on the Company.
(z) Inventory. The inventory of the Company is in all material
respects of good and merchantable quality and is in all material respects
usable and saleable in the ordinary course of the Company's and its
subsidiaries' businesses, except for items of obsolete materials and
materials of below standard quality, substantially all of which have been
written down to realizable market value or for which adequate reserves have
been provided.
SECTION 3.2 Representations and Warranties of Parent and Sub. Except as set
forth on the disclosure schedule delivered by Parent to the Company prior to the
execution of this Agreement (the "Parent Disclosure Schedule"), and except as
set forth in the Parent SEC Documents (as defined in Section 3.2(e)), or in the
exhibits thereto, Parent represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and has all requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent
and Sub is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure
to be so qualified or licensed individually or in the aggregate would not
have a material adverse effect on Parent. Parent has delivered to the
Company complete and correct copies of its Certificate of Incorporation and
Bylaws and the Certificate of Incorporation and Bylaws of Sub, in each case
as amended to the date hereof.
(b) Subsidiaries. Parent has no subsidiaries and does not own as of
the date hereof, directly or indirectly, beneficially or of record, any
shares of capital stock or other equity security of any other entity or any
other similar investment in any other entity.
(c) Capital Structure. The authorized capital stock of Parent consists
of 75,000,000 shares of Common Stock, par value $0.01 per share, and
5,000,000 shares of preferred stock, par value $0.01 per share ("Parent
Preferred Stock"). At the close of business on July 21, 1997, (i)
17,159,618 shares of Parent Common Stock were issued and outstanding, (ii)
no shares of Parent Common Stock were held by the Company in its treasury,
(iii) 2,957,152 shares of Parent Common Stock were reserved for issuance
pursuant to Parent's stock option and employee stock purchase plans
("Parent Equity Incentive Plans"), (iv) 3,059,324 shares of Parent Common
Stock were reserved for issuance pursuant to the conversion of Parent's
5 1/4% Convertible Subordinated Debentures due August 15, 2002 (the "Parent
Convertible Debentures"), and (v) no shares of Parent Preferred Stock were
issued or outstanding. Except as set forth above, at the close of business
on July 22, 1997, no shares of capital stock or other voting securities of
Parent were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of Parent are, and all shares which may be issued
pursuant to the Parent Equity Incentive Plans will be, when issued in
accordance with the terms thereof, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. Except for the
Parent Convertible Debentures, there are no bonds, debentures, notes or
other indebtedness of Parent outstanding having the right to vote
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(or, other than the Parent Convertible Debentures, convertible into
securities having the right to vote) on any matters on which stockholders
of Parent may vote. Except as set forth above, there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Parent is a party, or by which it is
bound, obligating Parent to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of Parent or obligating Parent to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this Agreement,
are not any outstanding contractual obligations of Parent to repurchase,
redeem or otherwise acquire any shares of capital stock or other securities
of Parent. As of the date of this Agreement, there are no stockholder
agreements, voting trusts or other agreements or understandings to which
Parent is a party or by which it is bound relating to the voting of any
shares of capital stock of Parent. All of the outstanding capital stock of
Parent's subsidiaries is owned by Parent, directly or indirectly, free and
clear of any Lien or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be
provided as a matter of law), except for shares of capital stock or other
similar ownership interests of certain subsidiaries of Parent that may be
owned by certain nominee equity holders as required by the applicable law
of the jurisdiction of organization of such subsidiaries. There are no
securities of Parent or its subsidiaries convertible into or exchangeable
for, no options or other rights to acquire from Parent or its subsidiaries,
and no other contract, understanding, arrangement or obligation (whether or
not contingent) providing for the issuance or sale, directly or indirectly,
of any capital stock or other ownership interests in, or any other equity
securities of, any subsidiary of Parent. As of the date of this Agreement,
there are no outstanding contractual obligations of Parent or its
subsidiaries to repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other ownership interests in any subsidiary of
Parent.
(d) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement (and, in the
case of Parent, the Stockholder Agreements), and to consummate the
transactions contemplated by this Agreement (and, in the case of Parent,
those contemplated by the Stockholder Agreements). The execution and
delivery of this Agreement by Parent and Sub (and, in the case of Parent,
the Stockholder Agreements), and the consummation by Parent and Sub of the
transactions contemplated by this Agreement (and, in the case of Parent,
those contemplated by the Stockholder Agreements), have been duly
authorized by all necessary corporate action on the part of Parent and Sub.
This Agreement (and, in the case of Parent, the Stockholder Agreements) has
been duly executed and delivered by Parent and Sub, and, assuming the due
authorization, execution, and delivery of this Agreement by the Company,
constitutes a valid and binding obligation of Parent and Sub, enforceable
against Parent and Sub in accordance with its terms, except as enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium and similar laws, both state and federal, affecting the
enforcement of creditors' rights or remedies in general as from time to
time in effect or (ii) the exercise by courts of equity powers. The
execution and delivery of this Agreement by Parent and Sub (and, in the
case of Parent, the Stockholder Agreements), do not, and the consummation
by Parent and Sub of the transactions contemplated by this Agreement (and,
in the case of Parent, the Stockholder Agreements) and compliance by Parent
and Sub with the provisions of this Agreement (and, in the case of Parent,
the Stockholder Agreements) will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of Parent or any
of its subsidiaries under any provision of (i) the Certificate of
Incorporation or Bylaws of Parent or Sub, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent
or Sub or their respective properties or assets and to which Parent or Sub
is a party as of the date of this Agreement or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any (A) statute, law, ordinance, rule or regulation applicable to
Parent or Sub or (B) judgment, order or decree applicable to Parent, Sub or
their respective properties or assets, other than, in the case of clause
(ii) and clause (iii)(A), any such conflicts, violations, defaults, rights,
losses or Liens that individually or in the aggregate would not (x) have a
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material adverse effect on Parent, (y) impair in any material respect the
ability of Parent and Sub to perform their respective obligations under
this Agreement or (z) prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be made or obtained by Parent or Sub at
or before the Effective Time in connection with the execution and delivery
of this Agreement (and, in the case of Parent, the Stockholder Agreements)
by Parent and Sub or the consummation by Parent and Sub of the transactions
contemplated by this Agreement (and, in the case of Parent, those
contemplated by the Stockholder Agreements), except for (1) the filing of a
premerger notification and report form by Parent under the HSR Act and any
applicable filings under the antitrust laws of any foreign country, (2) the
filing with the SEC of the Form S-4 and such reports under the Exchange Act
as may be required in connection with this Agreement or the Stockholder
Agreements and the transactions contemplated by this Agreement or the
Stockholder Agreements, (3) the filing of the Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which Parent is qualified to do business and
(4) such other consents, approvals, orders, authorizations, registrations,
declarations and filings, which if not obtained or made, would not,
individually or in the aggregate, have a material adverse effect on Parent
or prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
(e) SEC Documents. Parent has filed all required reports, schedules,
forms, statements and other documents with the SEC between September 30,
1994 and the date of this Agreement. All reports, schedules, forms,
statements and other documents filed by Parent with the SEC between
September 30, 1994 and the date of this Agreement (other than any exhibits
to such reports, schedules, forms, statements and documents) are
collectively referred to in this Agreement as the "Parent SEC Documents."
As of the time each of the Parent SEC Documents was filed with the SEC (or,
if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing), (i) the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and (ii)
except to the extent that information contained in any Parent SEC Document
has been revised or superseded by a later-filed Parent SEC Document, none
of the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents complied as to
form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly presented the
consolidated financial position of Parent as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Between March 31, 1997 and the date of this Agreement,
Parent has not incurred any liabilities of the type required to be
disclosed in the liabilities column of a balance sheet prepared in
accordance with U.S. generally accepted accounting principles, except for
(i) liabilities incurred in the ordinary course of business, and (ii)
liabilities that would not, individually or in the aggregate, have a
material adverse effect on Parent.
(f) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with
the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) the Proxy
Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
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misleading. The Form S-4 will comply as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
thereunder, except that no representation is made by Parent or Sub with
respect to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or
incorporation by reference in the Form S-4.
(g) Absence of Certain Changes or Events. Between March 31, 1997 and
the date of this Agreement, there has not occurred (i) any material adverse
change in Parent, (ii) any material change by Parent in its accounting
methods, principles or practices except as required by concurrent changes
in U.S. generally accepted accounting principles, (iii) any material
reevaluation by Parent of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or
accounts receivable other than in the ordinary course, (iv) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Parent's
capital stock.
(h) Litigation. There is no suit, action or proceeding pending, and no
person has overtly threatened in a writing delivered to Parent since
January 1, 1997 to commence any suit, action or proceeding, against or
affecting Parent or any of its subsidiaries that would, individually or in
the aggregate, have a material adverse effect on Parent, nor is there any
judgment, decree, injunction, or order of any Governmental Entity or
arbitrator outstanding against, or, to the knowledge of Parent, pending
investigation by any Governmental Entity involving, Parent or any of its
subsidiaries that individually or in the aggregate would have a material
adverse effect on Parent.
(i) Contracts. As of the date of this Agreement, there are no
contracts or agreements that are of a nature required to be filed by Parent
as an exhibit to a Report on Form 10-K under the Exchange Act and the rules
and regulations promulgated thereunder. Neither Parent nor any of its
subsidiaries is in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice or
both would cause such a violation of or default under) any lease, permit,
concession, franchise, license or any other contract, agreement,
arrangement or understanding to which any of them is a party or by which
any of their properties or assets is bound, except for violations or
defaults that individually or in the aggregate would not have a material
adverse effect on Parent.
(j) Compliance with Laws.
(i) Parent and each of its subsidiaries is in compliance with all
Legal Provisions applicable to their business or operations, except for
instances of possible noncompliance that, individually or in the
aggregate, would not have a material adverse effect on Parent or prevent
or materially delay the consummation of the Merger. Parent and each of
its subsidiaries has in effect all Permits, necessary for them to own,
lease or operate their properties and assets and to carry on their
business substantially as now conducted, and there currently exists no
default under, or violation of, any such Permit, except for the lack of
Permits and for defaults under, or violations of, Permits which lack,
default or violation individually or in the aggregate would not have a
material adverse effect on Parent. Between January 1, 1997 and the date
of this Agreement, Parent has not received any written notice or other
written communication from any Governmental Entity alleging any
violation of any Legal Provision by Parent (except for (A) notices of
violations which have been cured or corrected in all material respects,
(B) notices which have been rescinded or withdrawn, and (C) notices
which would not have a material adverse effect on Parent).
(ii) The term "Parent Business Facility" means any property
including the land, the improvements thereon, the groundwater thereunder
and the surface water thereon, that is or at any time has been owned,
operated, occupied, controlled or leased by Parent or any of its
subsidiaries in connection with the operation of its business. The term
"Parent Environmental Permit" means any approval, permit, license,
clearance or consent required to be obtained from any private person or
any Governmental Entity with respect to a Hazardous Materials Activity
which is or was conducted by Parent or any of its subsidiaries.
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(iii) To the knowledge of Parent, no Hazardous Materials are
present on any Parent Business Facility currently owned, operated,
occupied, controlled or leased by Parent or any of its subsidiaries
except in such cases as would not reasonably be expected to have a
material adverse effect on Parent. There are no underground storage
tanks, asbestos which is friable or likely to become friable or PCBs
present on any Parent Business Facility currently owned, operated,
occupied, controlled or leased by Parent or any of its subsidiaries
except in such cases as would not reasonably be expected to have a
material adverse effect on Parent.
(iv) Parent and each of its subsidiaries are conducting all
Hazardous Material Activities in compliance in all material respects
with all applicable Environmental Laws except where the failure to
comply would not have a material adverse effect on Parent. To the
knowledge of Parent after reasonable inquiry, the Hazardous Materials
Activities of Parent and each of its subsidiaries have not resulted in
the exposure of any person to a Hazardous Material in a manner which has
resulted in said person currently having a claim against Parent that is
likely to be adversely determined against Parent and that would
reasonably be expected to have a material adverse effect on Parent.
(v) The Parent Environmental Permits held by Parent and each of its
subsidiaries are all of the Environmental Permits necessary for the
continued conduct of any Hazardous Material Activity of Parent and each
of its subsidiaries as such activities are currently being conducted,
except for those permits the absence of which could not reasonably be
expected to result in a material adverse effect on Parent. All such
Parent Environmental Permits are valid and in full force and effect
except where the failure to be valid and in full force and effect would
not have a material adverse effect on Parent. Parent and its
subsidiaries are in compliance in all material respects with all
covenants and conditions of any Parent Environmental Permit which are in
force with respect to their Hazardous Materials Activities, except where
the failure to comply with such covenants and conditions would not have
a material adverse effect on Parent. To the knowledge of Parent, no
circumstance exists which would reasonably be expected to cause any
Parent Environmental Permit to be revoked, modified, or rendered
non-renewable upon payment of the permit fee, except to the extent such
revocation, modification, or non-renewability would not have a material
adverse effect on Parent.
(vi) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending against Parent or its
subsidiaries by any Governmental Entity, and no person has threatened in
a writing delivered to Parent since January 1, 1997 to commence any
action, proceeding, revocation proceeding or amendment procedure against
Parent or its subsidiaries, concerning or relating to any Parent
Environmental Permit or any Hazardous Materials Activity of Parent or
any of its subsidiaries, or to any Parent Business Facility currently
owned, operated, occupied, controlled or leased by Parent or any of its
subsidiaries which could reasonably be expected to have a material
adverse effect on Parent.
(vii) To the knowledge of Parent after reasonable inquiry, no
action, proceeding or claim exists, and no person has overtly threatened
in a writing delivered to Parent since January 1, 1997 to commence any
action or proceeding, against any Disposal Site or against Parent or any
of its subsidiaries with respect to any transfer or release of Hazardous
Materials by Parent to a Disposal Site which could reasonably be
expected to have a material adverse effect on Parent.
(viii) Parent has delivered to the Company or made available for
inspection by the Company and its agents and employees all material
records in Parent's possession as of the date of this Agreement
concerning the current Hazardous Materials Activities of Parent and each
of its subsidiaries and all environmental audits and environmental
assessments of any Parent Business Facility conducted at the request of,
or otherwise in the possession of, Parent or any of its subsidiaries as
of the date of this Agreement.
(k) Labor Matters. As of the date of this Agreement, there are no
collective bargaining agreements or other labor union agreements to which
Parent or any of its subsidiaries is a party, or by which they are bound.
Parent and each of its subsidiaries are in compliance with all federal,
state and local laws respecting employment and employment practices, terms
and conditions of employment and wages and
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hours, and are not engaged in any unfair labor practice except where the
failure to comply, or the engaging in such practice, would not have a
material adverse effect on Parent. As of the date of this Agreement, there
is no unfair labor practice complaint against Parent or any of its
subsidiaries pending, and no person has overtly threatened in a writing
delivered to Parent since January 1, 1997 to commence and unfair labor
practices complaint before the National Labor Relations Board or the United
States Department of Labor. There is no labor strike, slowdown or stoppage
in progress, and no person has overtly threatened in a writing delivered to
Parent since January 1, 1997 to commence any strike, slowdown or stoppage
against or involving Parent or any of its subsidiaries. No written
agreement restricts Parent or any of its subsidiaries from relocating,
closing or terminating any of its operations or facilities. Neither Parent
nor any of its subsidiaries has, in the past three years, experienced any
labor strike, slowdown or stoppage.
(l) Absence of Changes in Benefit Plans. Between March 31, 1997 and
the date of this Agreement, there has not been any adoption or amendment in
any material respect by Parent or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding providing benefits for which Parent or any of its
subsidiaries will be responsible to any current or former employee, officer
or director of Parent (collectively, "Parent Benefit Plans").
(m) Taxes. As of the date of this Agreement, Parent has filed all tax
returns and reports required to be filed by it and has paid all taxes that
are shown on such tax returns as due and payable, and the most recent
financial statements contained in the Parent SEC Documents reflect an
adequate reserve for all taxes payable by Parent for all taxable periods
and portions thereof through the date of such financial statements. As of
the date of this Agreement, no material deficiencies for any taxes have
been proposed, asserted or assessed against Parent, nor is there, to the
knowledge of Parent after reasonable inquiry, any reasonable basis for the
assertion of any such deficiency. No requests for waivers of the time to
assess any such taxes are pending as of the date of this Agreement. No
material special charges, penalties, fines, liens, or similar encumbrances
are owed by or pending against Parent with respect to payment of or failure
to pay any taxes. Parent is not a party to any executory agreements
extending the period for assessment or collection of any taxes. Proper
amounts have been withheld by Parent from employee compensation payments
for all periods in compliance with the tax withholding provisions of
applicable federal and state laws, except where the failure to withhold
proper amounts would not have a material adverse effect on Parent. As of
the date of this Agreement, none of the Federal income tax returns of
Parent have been examined by the United States Internal Revenue Service for
the fiscal years through September 30, 1996. Parent has not taken any
action nor does it have any knowledge of any fact or circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(n) Title to Properties.
(i) Parent and each of its subsidiaries has good title to, or valid
leasehold interests in, all its material properties and assets except
for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive
covenants and other encumbrances that individually or in the aggregate
would not materially interfere with the ability of Parent and its
subsidiaries to conduct their business as currently conducted. All such
material assets and properties, other than assets and properties in
which Parent or any of its subsidiaries has a leasehold interest, are
free and clear of all Liens except for Liens that (A) are created or
arise in the ordinary course of business, (B) are created, arise or
exist under or in connection with any of the contracts or other matters
referred to in the Parent Disclosure Schedule or in the Parent SEC
Documents or the exhibits thereto, (C) relate to any taxes or other
governmental charges or levies that are not yet due and payable, (D)
relate to, or are created, arise or exist in connection with, any legal
proceeding that is being contested in good faith, or (E) individually or
in the aggregate would not materially interfere with the ability of
Parent and each of its subsidiaries to conduct their business as
currently conducted ("Parent Permitted Liens").
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(ii) Parent and each of its subsidiaries are in compliance in all
material respects with the terms of all material leases to which it is a
party and under which they are in occupancy, and all such leases are in
full force and effect, except where the failure to be in compliance or
the failure to be in full force and effect would not have a material
adverse effect on Parent. As of the date of this Agreement, Parent
and/or one or more of its subsidiaries enjoys peaceful and undisturbed
possession under all such material leases, except for failures to do so
that would not individually or in the aggregate have a material adverse
effect on Parent.
(o) Intellectual Property. Parent owns, or is validly licensed or
otherwise has the right to use all Parent Intellectual Property Rights
which are material to the conduct of the business of Parent and its
subsidiaries taken as a whole. As of the date of this Agreement, no suits,
actions or proceedings are pending, and no person has overtly threatened in
a writing delivered to Parent since January 1, 1997 to commence any suit,
action or proceeding, alleging that Parent or any of its subsidiaries is
infringing the rights of any person with regard to any Intellectual
Property Right, except for suits, actions or proceedings which,
individually or in the aggregate, would not have a material adverse effect
on Parent. To the knowledge of Parent, no person is infringing the rights
of Parent or any of its subsidiaries with respect to any Intellectual
Property Right, except for infringements which individually or in the
aggregate, would not have a material adverse effect on Parent. Neither
Parent nor any of its subsidiaries is licensing, or otherwise granting, to
any third party, any rights in or to any Intellectual Property Rights which
would have a material adverse effect on Parent.
(p) Voting Requirements. Assuming the accuracy of the representations
and warranties of the Company in Sections 3.1(c) and 3.1(m)(x), no vote of
or other action by the holders of Parent's Common Stock (or securities
convertible into Parent's Common Stock) is required (by law, by the
Marketplace Rules of The Nasdaq Stock Market or otherwise) in connection
with the execution, delivery or performance of this Agreement or the
consummation by Parent of any of the transactions contemplated hereby.
(q) Brokers. No broker, investment banker, financial advisor or other
person, other than Montgomery Securities, the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's or financial
advisor's fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of Parent.
(r) Opinion of Financial Advisor. Parent has received the opinion of
Montgomery Securities, dated the date hereof, to the effect that, as of
such date, the Merger (including the consideration to be paid by Parent) is
fair to Parent's stockholders from a financial point of view, a copy of
which opinion has been delivered to the Company for informational purposes
only.
(s) Accounting Matters. Parent has not taken or agreed to take any
action that would prevent the business combination to be effected by the
Merger to be accounted for as a pooling of interests.
(t) Product and Service Warranties. Between January 1, 1997 and the
date of this Agreement, Parent has not received any written notice pursuant
to which any third party has made any claims against Parent or its
subsidiaries regarding any produce or service warranties sold or provided
by Parent or its subsidiaries, except for (i) claims which have been fully
settled and (ii) unresolved claims that would not have a material adverse
effect on Parent.
(u) Customers. As of the date of this Agreement, neither Parent nor
any of its subsidiaries has received any information from any current
material Customer that such Customer will not continue as a customer of
Parent, such subsidiary or the Company after the Closing or that any such
Customer intends to terminate or materially modify any such Customer
Contract, except where the termination or modification of a customer
relationship would not have a material adverse effect on Parent.
(v) Inventory. The inventory of Parent is in all material respects of
good and merchantable quality and is in all material respects usable and
saleable in the ordinary course of Parent's and its subsidiaries'
businesses, except for items of obsolete materials and materials of below
standard quality, substantially all
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of which have been written down to realizable market value or for which
adequate reserves have been provided.
(w) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
(x) Parent Common Stock. The Parent Common Stock to be issued in
connection with the Merger (including the Parent Common Stock to be issued
in accordance with Article II and the Parent Common Stock to be issued in
accordance with Section 5.6(b)) has been duly authorized by all necessary
corporate action, and when issued in accordance with this Agreement, will
be validly issued, fully paid and nonassessable and not subject to
preemptive rights, and will be freely tradable except for restrictions on
transfer (applicable to affiliates of the Company) required in order to
preserve pooling of interests accounting treatment of the Merger. Without
limiting the generality of the foregoing and subject to the provisions of
Rule 145 under the Securities Act, none of the shares of Parent Common
Stock to be issued in connection with the Merger will constitute
"restricted securities" within the meaning of Rule 144 under the Securities
Act.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by Parent and the Company.
(a) Conduct of Business by Parent. During the period from the date of this
Agreement to the Effective Time and except (i) to the extent the Company shall
otherwise consent in writing (which consent will not be unreasonably withheld),
(ii) as set forth in the Parent Disclosure Schedule or (iii) as contemplated or
permitted by or not inconsistent with this Agreement, Parent shall carry on its
businesses in the ordinary course consistent with the manner as heretofore
conducted and, to the extent consistent therewith, use reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it. Without limiting the generality of the foregoing,
except as set forth in the Parent Disclosure Schedule or as contemplated or
permitted by or not inconsistent with this Agreement, during the period from the
date of this Agreement to the Effective Time, Parent shall not, without the
written consent of the Company (which consent will not be unreasonably
withheld):
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (z) purchase, redeem or otherwise acquire
any shares of capital stock of Parent or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities;
(ii) amend its Restated Certificate of Incorporation or Bylaws;
(iii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than in the
ordinary course of business and consistent with past practice pursuant to
stock option plans, employee stock purchase plans and convertible
indebtedness in effect as of the date of this Agreement, or pursuant to
acquisitions of businesses involving the issuance by Parent of less than
1,000,000 shares in the aggregate for all such acquisitions);
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner (including through any of its subsidiaries), any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof, except that this Section 4.1(a)(iv) shall
not prohibit Parent from effecting an acquisition of any other business if
(A) such acquisition would not materially affect the ability of Parent to,
or materially
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delay Parent's ability to, complete the transactions contemplated by this
Agreement, and (B) such acquisition would involve the issuance by Parent of
equity securities and, when considered together with all other acquisitions
effected by Parent, would not involve the issuance of more than 1,000,000
shares of Parent's capital stock or securities convertible into or
exercisable for more than 1,000,000 shares of Parent's capital stock;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any substantial part of its (or any of its
subsidiaries') material properties, assets or business, except sales made
in the ordinary course of business and except for subjecting any of its
properties to Parent Permitted Liens;
(vi) make any material payments outside the ordinary course of
business for purposes of settling any dispute;
(vii) allow Parent or any of its subsidiaries, or any significant
portion of their respective businesses or assets, to be acquired (by
merger, tender offer, purchase or otherwise);
(viii) enter into (directly or through any subsidiary) any transaction
that is extraordinary in nature or magnitude (when compared to the
transactions historically entered into by Parent); or
(ix) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Conduct of Business by the Company. During the period from the date of
this Agreement to the Effective Time and except (i) to the extent Parent shall
otherwise consent in writing (which consent will not be unreasonably withheld),
(ii) as set forth in the Company Disclosure Schedule or (iii) as contemplated or
permitted by or not inconsistent with this Agreement, the Company shall carry on
its businesses in the ordinary course consistent with the manner as heretofore
conducted and, to the extent consistent therewith, use reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it. Without limiting the generality of the foregoing,
except as set forth in the Company Disclosure Schedule or as contemplated or
permitted by or not inconsistent with this Agreement, during the period from the
date of this Agreement to the Effective Time, the Company shall not, without the
written consent of Parent (which consent will not be unreasonably withheld):
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (z) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) amend its Restated Certificate of Incorporation or Bylaws;
(iii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than (A) the
sale of shares of Company Common Stock in the ordinary course to employees
under the Company's ESPP (B) the issuance of shares of Company Common Stock
pursuant to the conversion of the Convertible Debentures in accordance with
the terms thereof, (C) the issuance of shares of Company Common Stock upon
the exercise of Company Options outstanding on the date of this Agreement
in accordance with the present terms of such Company Options and the
issuance of shares of Company Common Stock upon the exercise of Company
Options granted after the date of this Agreement as permitted by this
Agreement, and (D) the issuance of options to purchase up to 50,000 shares
of Common Stock under the stock option plans of the Company (the "Company
Option Plans");
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner (including through any of its subsidiaries), any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof or (y) any asset except in the ordinary
course of business;
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(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its (or any of its subsidiaries')
material properties, assets, or business except sales made in the ordinary
course of business and except for subjecting any of its properties or
assets to Company Permitted Liens;
(vi) (y) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person (other than a subsidiary of the
Company), issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company, guarantee any debt securities
of another person (other than a subsidiary of the Company), enter into any
"keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for (i) short-term
borrowings incurred in the ordinary course of business consistent with past
practice, (ii) borrowings pursuant to existing credit facilities in the
ordinary course of business or pursuant to any modifications, renewals or
replacements of such credit facilities (it being understood that the
maximum amount of borrowing which may be made under such credit facilities
may be increased by up to 20% of the current maximum amount) and (iii)
borrowings under a new credit facility to be entered into by the Company,
which borrowings will not exceed $32 million (of which approximately $20
million will be used to refinance existing bank debt) or (z) make any
loans, advances or capital contributions to, or investments in, any other
person other than a subsidiary of the Company, and other than advances to
employees in the ordinary course of business consistent with past practice;
(vii) make or agree to make any new capital expenditure or
expenditures which are outside the ordinary course of business or
inconsistent with past practice;
(viii) make any material payments outside the ordinary course of
business for purposes of settling any dispute;
(ix) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which the Company is a
party or waive, release or assign any material rights or claims thereunder;
(x) except as required to comply with applicable law and except for
actions which do not materially increase the Company's compensation expense
or benefits to employees taken as a whole, (A) adopt, enter into, terminate
or amend any Benefit Plan or other arrangement for the benefit or welfare
of any director, officer or current or former employee, (B) increase in any
manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases of cash
compensation or cash bonuses in the ordinary course of business consistent
with past practice), (C) pay any benefit not provided for under any Benefit
Plan, (D) except as permitted in clause (B), grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement or
Benefit Plan (including the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or
restricted stock or the removal of existing restrictions in any Benefit
Plans or agreements or awards made thereunder) or (E) except as permitted
in clauses (A) through (D), take any action to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Benefit Plan;
(xi) form any subsidiary of the Company;
(xii) allow any of its subsidiaries, or any significant portion of
their respective businesses or assets, to be acquired (by merger, tender
offer, purchase or otherwise);
(xiii) enter into (directly or through any subsidiary) any transaction
that is extraordinary in nature or magnitude (when compared to the
transactions historically entered into by the Company); or
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions.
(c) Certain Tax Matters. From the date hereof until the Effective Time, (i)
each of the Company and Parent will file all tax returns and reports
("Post-Signing Returns") required to be filed by it (other than the Company's
federal and state tax return for the year ended September 30, 1996, which will
be filed promptly following the receipt by the Company of information necessary
for such return); (ii) each of the Company
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and Parent will timely pay all taxes due and payable with respect to such
Post-Signing Returns that are so filed; (iii) each of the Company and Parent
will promptly notify the other of any action, suit, proceeding, claim or audit
(collectively, "Actions") pending against or with respect to such party in
respect of any tax where there is a reasonable possibility of a determination or
decision which would have a material adverse effect on the other party 's tax
liabilities or tax attributes, and the Company will not settle or compromise any
such Action without Parent's consent; and (iv) each of the Company and Parent
will not make any material tax election without the consent of the other (which
consent will not be unreasonably withheld).
SECTION 4.2 No Solicitation.
(a) The Company shall not, nor shall it authorize or instruct any of its
officers, directors or employees or any investment banker, attorney or other
advisor or representative retained by it to, directly or indirectly, (i)
solicit, initiate or knowingly encourage the submission of any Takeover Proposal
(as hereinafter defined) by any person (other than Parent or its affiliates or
representatives) or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action intended or reasonably expected to facilitate the
making of any inquiry or proposal to the Company that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal by any person (other
than Parent or its affiliates or their respective representatives); provided,
however, that notwithstanding anything to the contrary contained in this Section
4.2(a) or elsewhere in this Agreement, if, at any time prior to receipt of the
Stockholder Approval, the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that failure to do so would
create a substantial risk of liability for breach of its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response to a
Takeover Proposal that was unsolicited or that did not otherwise result from a
breach of this Section 4.2(a), and subject to compliance with Section 4.2(c),
(x) furnish nonpublic information with respect to the Company and its
subsidiaries to any person pursuant to a customary and reasonable
confidentiality agreement and (y) participate in discussions and negotiations
regarding such Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director or employee of the Company or any investment
banker, attorney or other advisor or representative of the Company, acting on
behalf of and with the authorization of the Company, shall be deemed to be a
breach of this Section 4.2(a) by the Company. For purposes of this Agreement,
"Takeover Proposal" means any proposal or offer from any person (other than
Parent or its affiliates or their respective representatives) for any
acquisition by such person of a substantial amount of assets of the Company
(other than an acquisition of assets of the Company in the ordinary course of
business or as permitted under the terms of this Agreement) having a fair market
value (as determined by the Board of Directors of the Company in good faith) in
excess of 25% of the fair market value of all the assets of the Company and its
subsidiaries immediately prior to such acquisition or more than a 25% interest
in the total voting securities of the Company or any tender offer or exchange
offer that if consummated would result in any person beneficially owning 25% or
more of any class of equity securities of the Company or any merger,
consolidation, or business combination of the Company with any unaffiliated
third party, other than the transactions contemplated by this Agreement or the
Stockholder Agreements. Notwithstanding anything to the contrary contained in
this 4.2(a) or elsewhere in this Agreement, at any time after the date hereof,
the Company may file with the SEC a report on Form 8-K with respect to this
Agreement and may file a copy of this Agreement and any related agreements as an
exhibit to such report.
(b) Except as expressly permitted by this Section 4.2, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by such Board of Directors or any such committee of
this Agreement or the Merger, (ii) approve or recommend any Takeover Proposal or
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement with respect to any
Takeover Proposal. Notwithstanding the foregoing or anything else contained in
this Agreement, prior to the adoption and approval of this Agreement and the
approval of the Merger by the holders of a majority of the shares of Company
Common Stock outstanding on the record date for the Stockholders Meeting, the
Board of Directors of the Company, to the extent it determines in good faith,
after consultation with outside counsel, that failure to do so would create a
substantial risk of liability for breach of
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its fiduciary duties to the Company's stockholders under applicable law, may (1)
withdraw or modify its approval or recommendation of this Agreement or the
Merger and/or (2) approve or recommend any Takeover Proposal.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.2, the Company promptly shall advise Parent orally
and in writing of any request to the Company for nonpublic information which the
Company reasonably believes could lead to a Takeover Proposal or of any Takeover
Proposal submitted to the Company, or any inquiry directed to the Company with
respect to or which the Company reasonably believes could lead to any Takeover
Proposal, the material terms and conditions of such request, Takeover Proposal
or inquiry, and the identity of the person making any such Takeover Proposal or
inquiry. The Company will keep Parent informed in all material respects of the
status and details (including amendments or proposed amendments) of any such
Takeover Proposal or inquiry, except to the extent that the Board of Directors
of the Company determines in good faith, after consultation with outside
counsel, that to do so would create a substantial risk of liability for breach
of its fiduciary duties to the Company's stockholders under applicable law.
(d) Nothing contained in this Section 4.2 or elsewhere in this Agreement
shall prohibit the Company from (i) taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 or 14e-2(a) promulgated under the Exchange
Act or (ii) making any disclosure to the Company's stockholders or any public
announcement if, in the good faith judgment of the Board of Directors of the
Company, after consultation with outside counsel, failure to so disclose would
be inconsistent with any applicable law, rule or regulation or any duty of the
Board of Directors; provided that the Company shall not, except in accordance
with the provisions of Section 4.2(b), withdraw or modify, or propose to
withdraw or modify, its recommendation of the Merger or approve or recommend, or
propose to approve or recommend, a Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of Form S-4 and Proxy Statement; Stockholders
Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and the Company shall file with the SEC the
Proxy Statement and Parent shall prepare and file with the SEC the Form S-4, in
which the Proxy Statement will be included as a prospectus. Each of the Company
and Parent shall use all reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
To the extent that presenting this Agreement and the Merger to the Company's
stockholders would not violate or otherwise be inconsistent with applicable law,
the Company will use its reasonable efforts to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after the Form
S-4 is declared effective under the Securities Act. Parent shall also take any
action (other than qualifying to do business in any jurisdiction in which it is
not now so qualified) required to be taken under any applicable state securities
laws or other applicable laws, rules or regulations in connection with the
issuance of Parent Common Stock pursuant to Article II and Section 5.6(b) and
under the Company Option Plans and the Company ESPP. Each of Parent and the
Company shall furnish all information concerning itself to the other as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Proxy Statement.
(b) The Company will, as soon as reasonably practicable following the date
of this Agreement, establish a record date (which will be as soon as practicable
following the date of this Agreement) for, and, to the extent that convening and
holding a meeting would not violate or otherwise be inconsistent with applicable
law, duly call, give notice of, convene and hold a meeting of its stockholders
(the "Stockholders Meeting") for the purpose of approving and adopting this
Agreement. Except to the extent the Board of Directors of the Company determines
in good faith, after consultation with outside counsel, that to do so would
create a substantial risk of liability for breach of its fiduciary duties to the
Company's stockholders under applicable law, the Company will, through its Board
of Directors, recommend to its stockholders approval and adoption of this
Agreement.
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SECTION 5.2 Letters of the Company's Accountants.
(a) The Company shall use its reasonable efforts to cause to be delivered
to Parent two letters from Deloitte and Touche LLP, the Company's independent
public accountants, one dated a date within three business days before the date
on which the Form S-4 shall become effective and one dated a date within three
business days before the Closing Date, each addressed to Parent, in customary
form, relating to the performance by Deloitte & Touche LLP of its procedures
with respect to the financial statements of the Company contained in or
incorporated by reference in the Form S-4.
(b) The Company shall use its reasonable efforts to cause to be delivered
to Parent a copy of a letter from Deloitte and Touche LLP, addressed to the
Company, dated as of the Closing Date (which letter may contain customary
qualifications and assumptions), to the effect that Deloitte & Touche LLP
believes that the Company would meet the applicable specific criteria for a
pooling of interests in accordance with generally accepted accounting principles
as such criteria relate only to the Company (and not to Parent).
SECTION 5.3 Letters of Parent's Accountants.
(a) Parent shall use reasonable efforts to cause to be delivered to the
Company two letters from Arthur Andersen LLP, Parent's independent public
accountants, one dated a date within three business days before the date on
which the Form S-4 shall become effective and one dated a date within three
business days before the Closing Date, each addressed to the Company, in
customary form, relating to the performance by Arthur Andersen LLP of its
procedures with respect to the financial statements of Parent contained in or
incorporated by reference in the Form S-4.
(b) Parent shall use its reasonable efforts to cause to be delivered to the
Company a copy of a letter from Arthur Andersen LLP, addressed to Parent, dated
as of the Closing Date (which letter may contain customary qualifications and
assumptions), stating that Arthur Andersen LLP concurs with Parent's
management's conclusion that no conditions exist that would preclude Parent from
accounting for the Merger as a pooling of interests transaction under Opinion 16
of the Accounting Principles Board and applicable SEC rules and regulations.
SECTION 5.4 Access to Information; Confidentiality. The Company shall
afford to Parent, and to Parent's officers, employees, accountants, counsel,
financial advisors and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time or the termination
of this Agreement to all its properties, books, contracts, commitments,
personnel and records and, during such period, the Company shall furnish
promptly to Parent (a) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of Federal or state securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request; provided,
however, that (i) Parent shall not contact, and Parent shall ensure that none of
its officers, employees, accountants, counsel, financial advisors or other
representatives contacts, any employee of the Company or any of its subsidiaries
without the prior authorization of the Company's Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer, and (ii) Parent shall ensure that
none of its employees, accountants, counsel, financial advisors or other
representatives interferes with or otherwise disrupts the business or operations
of the Company while exercising the rights provided under this Section 5.4.
Parent shall afford to the Company, and to the Company's officers, employees,
accountants, counsel, financial advisors and other representatives, reasonable
access during normal business hours during the period prior to the Effective
Time or the termination of this Agreement to all its properties, books,
contracts, commitments, personnel and records and, during such period, Parent
shall furnish promptly to the Company (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as the
Company may reasonably request; provided, however, that (i) the Company shall
not contact, and the Company shall ensure that none of its officers, employees,
accountants, counsel, financial advisors or other representatives contacts, any
employee of Parent or any of its subsidiaries without the prior authorization of
Parent's Chief Executive Officer, Chief Operating Officer or Chief Financial
Officer, and (ii) the Company shall ensure that none of its employees,
accountants, counsel, financial advisors or other representatives interferes
with or otherwise disrupts the business or operations of Parent while exercising
the
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rights provided under this Section 5.4. Parent and Company will each hold, and
will cause their respective officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any and all
information received from the other party, directly or indirectly, in
confidence, in accordance with the respective Confidentiality Agreements dated
as of July 3, 1997.
SECTION 5.5 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
avoid an action or proceeding by any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties (other than
consents, approval or waivers, the failure to obtain which would not have a
material adverse effect on the Company or Parent, as the case may be), (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement; provided, however, that
notwithstanding anything to the contrary contained in this Section 5.5 or
elsewhere in this Agreement, the Company shall not be required to take any
action or do any thing if the Board of Directors of the Company determines in
good faith, after consultation with outside counsel, that the taking of such
action or the doing of such thing would create a substantial risk of liability
for breach of its fiduciary duties to the Company's stockholders under
applicable law. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Merger or this
Agreement, use all reasonable efforts to ensure that the Merger may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and this Agreement.
(b) The Company shall give prompt notice to Parent of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.2(a) would
not be satisfied as a result thereof, or (ii) the failure by it to comply with
or satisfy in any material respect any covenant or agreement to be complied with
or satisfied by it under this Agreement such that the condition set forth in
Section 6.2(b) would not be satisfied as a result thereof; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement. Parent shall give prompt notice to the Company
of (i) any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate such that the condition set forth in Section
6.3(a) would not be satisfied as a result thereof or (ii) the failure by it to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement such that
the condition set forth in Section 6.3(b) would not be satisfied as a result
thereof; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 5.6 Stock Options and Other Employee Benefits.
(a) Subject to Section 5.6(b), Parent and the Company shall take all
actions necessary to implement the provisions of the Company Option Plans and
the agreements evidencing Company Options, including the provisions therein
relating to acceleration and termination.
(b) The Company shall cause to be delivered to Parent, prior to the
Effective Time, a list specifying those Company Options (the "Specified
Options") with respect to which Parent is to issue shares of Parent Common Stock
pursuant to this Section 5.6(b) as of the Effective Time. As of the Effective
Time, Parent
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shall issue, with respect to each Specified Option that remains unexercised as
of the Effective Time, in the name of the holder thereof, a number of shares of
Parent Common Stock equal to:
<TABLE>
<S> <C>
A * C
A * B - D
</TABLE>
where:
A = the maximum number of shares of Company Common Stock purchasable
immediately prior to the Effective Time upon exercise of the applicable
Specified Option
B = the Exchange Ratio
C = the per share exercise price of the applicable Specified Option
D = the per share closing price of Parent Common Stock on the Nasdaq
National Market (as reported in The Wall Street Journal or, if not
reported thereby, any other authoritative source), on the Closing Date
No certificates or scrip representing fractional shares of Parent Common Stock
shall be issued in connection with the issuance of Parent Common Stock pursuant
to this Section 5.6(b). Any holder of a Specified Option who would otherwise
have been entitled to receive a fraction of a share of Parent Common Stock in
connection with the issuance of Parent Common Stock pursuant to this Section
5.6(b) (after aggregating all fractional shares of Parent Common Stock that
otherwise would be received by such holder pursuant to this Section 5.6(b))
shall receive, in lieu thereof, cash (without interest) in an amount, less the
amount of any withholding taxes which may be required thereon, equal to such
fraction of a share of Parent Common Stock multiplied by the per share closing
price of Parent Common Stock on the Nasdaq National Market, as reported in The
Wall Street Journal (or, if not reported thereby, any other authoritative
source), on the Closing Date. Parent agrees to use reasonable efforts to take
such actions as are necessary to provide for the reservation, issuance and
listing of Parent Common Stock to be issued pursuant to this Section 5.6(b).
(c) Subject to Section 5.6(b), all Company Option Plans shall terminate as
of the Effective Time, and the Company shall ensure that following the Effective
Time no holder of a Company Option or any participant in any Company Option Plan
shall have any right thereunder to acquire any capital stock of the Company.
(d) Parent shall ensure that all employees of the Company and all employees
of each of the Company's subsidiaries are allowed and are eligible to
participate in Parent's employee benefit plans after the Effective Time, to the
same extent as if they were employees of Parent. Without limiting the generality
of the foregoing, (i) to the extent that any employee of the Company or any of
the Company's subsidiaries becomes eligible to participate in any employee
benefit plan of Parent after the Effective Time, Parent, the Surviving
Corporation and their subsidiaries shall credit such employee's service with the
Company or its subsidiaries, to the same extent as such service was credited
under the similar employee benefit plans of the Company and its subsidiaries
immediately prior to the Effective Time, for purposes of determining eligibility
to participate in and vesting under, and for purposes of calculating the
benefits under, such employee benefit plan of Parent, and (ii) to the extent
permitted by such employee benefit plan of Parent and applicable law, Parent,
the Surviving Corporation and its subsidiaries shall waive any pre-existing
condition limitations, waiting periods or similar limitations under such
employee benefit plan of Parent and shall provide each such employee with credit
for any co-payments previously made and any deductibles previously satisfied.
(e) At the Effective Time, each outstanding right under the currently
ongoing "offering period", to purchase Company Common Stock under the Company
ESPP (an "Assumed Purchase Right") shall be deemed to constitute a purchase
right to acquire, on the same terms and conditions as were applicable under the
Company ESPP immediately prior to the Effective Time, a number of shares of
Parent Common Stock determined as provided in the Company ESPP except that the
purchase price of such shares of Parent Common Stock under each Assumed Purchase
Right shall be eighty-five percent (85%) of the lower of (i) the quotient
determined by dividing the fair market value of the Company Common Stock on the
offering date of each offering period that is ongoing as of the Effective Time
by the Exchange Ratio or (ii) the fair
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market value of the Parent Common Stock on each exercise date occurring after
the Effective Time with respect to each offering period that is ongoing as of
the Effective Time. The Assumed Purchase Rights, in accordance with their terms,
shall be subject to further adjustment upon a stock split, stock dividend,
recapitalization or similar transaction after the Effective Time. As soon as
practicable after the Effective Time (and in any event within 5 days after the
Effective Time), Parent shall deliver to the participants in the Company ESPP an
appropriate notice setting forth such participants' rights pursuant thereto and
stating that the Assumed Purchase Rights pursuant to the Company ESPP shall
continue in effect on the same terms and conditions.
(f) As soon as reasonably practical (and in any event within five days)
after the Effective Time, Parent shall file a registration statement on Form S-8
with respect to the Assumed Purchase Rights and the shares of Parent Common
Stock issuable under the Company ESPP, and shall maintain the effectiveness of
such registration statement thereafter until the later of the date on which no
Assumed Purchase Rights remain outstanding or the Company ESPP is terminated.
(g) Parent shall reserve sufficient shares of Parent Common Stock for
issuance with respect to the employee benefit plans referred to in this Section
5.6.
(h) This Section 5.6 will survive the consummation of the Merger and the
Effective Time, is intended to benefit and may be enforced by each of the
persons who participate in any of the employee benefit plans referred to in this
Section 5.6, and will be binding on all successors and assigns of Parent and the
Surviving Corporation.
SECTION 5.7 Indemnification and Insurance.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to (i) each indemnification agreement currently in effect between the
Company and each person who is or was a director or officer of the Company at or
prior to the Effective Time and (ii) any indemnification provision under the
Company's Restated Certificate of Incorporation or By-Laws as each is in effect
on the date hereof (the persons to be indemnified pursuant to the agreements or
provisions referred to in clauses (i) and (ii) of this Section 5.7(a) shall be
referred to as, collectively, the "Indemnified Parties"). The Certificate of
Incorporation and By-Laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in the Company's Restated Certificate of Incorporation and By-Laws on the
date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years after the Effective Time in any
manner that would adversely affect the rights thereunder of any Indemnified
Party.
(b) Without limiting the provisions of Section 5.7(a), during the period
ending six years after the Effective Time, Parent will indemnify and hold
harmless each Indemnified Party against and from any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, to the extent such claim, action, suit,
proceeding or investigation arises out of or pertains to (1) any action or
omission or alleged action or omission in his or her capacity as a director or
officer of the Company or any of its subsidiaries (regardless of whether such
action or omission, or alleged action or omission, occurred prior to, on or
after the Closing Date) or (2) any of the transactions contemplated by this
Agreement; provided, however, that if, at any time prior to the sixth
anniversary of the Effective Time, any Indemnified Party delivers to Parent a
written notice asserting a claim for indemnification under this Section 5.7(b),
then the claim asserted in such notice shall survive the sixth anniversary of
the Effective Time until such time as such claim is fully and finally resolved.
In the event of any such claim, action, suit, proceeding or investigation, (i)
Parent will have the right to control the defense thereof after the Effective
Time (it being understood that, by electing to control the defense thereof,
Parent will be deemed to have waived any right to object to the Indemnified
Parties' entitlement to indemnification hereunder with respect thereto), (ii)
any counsel retained by the Indemnified Parties with respect to the defense
thereof for any period after the Effective Time must be reasonably satisfactory
to Parent, and (iii) after the Effective Time, Parent will pay the reasonable
fees and expenses of such counsel, promptly after statements therefor are
received (provided that in the event that any Indemnified Party is not entitled
to indemnification hereunder,
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any amounts advanced on his or her behalf shall be remitted to the Surviving
Corporation); provided, however, that neither Parent nor the Surviving
Corporation nor any Indemnified Party, will be liable for any settlement
effected without its express written consent. The Indemnified Parties as a group
may retain only one law firm (in addition to local counsel) to represent them
with respect to any single action unless counsel for any Indemnified Party
determines in good faith that, under applicable standards of professional
conduct, a conflict exists or is reasonably likely to arise on any material
issue between the positions of any two or more Indemnified Parties.
Notwithstanding anything to the contrary contained in this Section 5.7(b) or
elsewhere in this Agreement, Parent agrees that it will not settle or compromise
or consent to the entry of any judgment or otherwise seek termination with
respect to any claim, action, suit, proceeding or investigation for which
indemnification may be sought under this Agreement unless such settlement,
compromise, consent or termination includes an unconditional release of all
Indemnified Parties from all liability arising out of such claim, action, suit,
proceeding or investigation.
(c) For six years after the Effective Time, Parent shall maintain in effect
the current level and scope of directors' and officers' liability insurance
covering those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a copy of which has been heretofore
delivered to Parent); provided, however, that in no event shall Parent be
required to expend in any one year an amount in excess of 150% of the annual
premium currently paid by the Company for such insurance, and provided, further,
that if the annual premiums of such insurance coverage exceed such amount,
Parent shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(d) Parent and the Surviving Corporation jointly and severally agree to pay
all expenses, including attorneys' fees, that may be incurred by the Indemnified
Parties in enforcing the indemnity and other obligations provided for in this
Section 5.7.
(e) This Section 5.7 shall survive the consummation of the Merger and the
Effective Time, is intended to benefit and may be enforced by the Company,
Parent, the Surviving Corporation and the Indemnified Parties, and shall be
binding on all successors and assigns of Parent and the Surviving Corporation.
SECTION 5.8 Fees and Expenses.
(a) All fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated, except that expenses incurred in connection with printing and
mailing the Proxy Statement and the Form S-4 shall be shared equally by Parent
and the Company.
(b) In the event that this Agreement is validly terminated pursuant to
Section 7.1(b)(iv) and Parent shall not have materially breached this Agreement,
the Company shall pay to Parent a fee in the aggregate amount of $7,500,000, in
cash, in immediately available funds, according to the following schedule:
(i) promptly, but in no event later than five business days after the
date of such termination, the Company shall pay to Parent the amount of
$2,500,000;
(ii) on the date that is 180 days after the date of such termination,
the Company shall pay to Parent the amount of $2,500,000; provided,
however, that if, prior to such 181st day, the Company shall consummate the
transaction contemplated by a Superior Proposal accepted by the Company,
then the Company shall pay to Parent such $2,500,000 amount on the date of
the consummation of such transaction; and
(iii) on the date that is 270 days after the date of such termination,
the Company shall pay to Parent the amount of $2,500,000; provided,
however, that if, prior to such 270th day, the Company shall consummate the
transaction contemplated by a Superior Proposal accepted by the Company,
then the Company shall pay to Parent such $2,500,000 amount on the date of
the consummation of such transaction.
In no event shall the receipt by the Company of any Superior Proposal or any
consummation of any transaction by the Company be a condition to any obligation
of the Company pursuant to this Section 5.8(b). For purposes of this Agreement,
a "Superior Proposal" means any bona fide proposal made by a third party to
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acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the voting power of the Company Common Stock or all
or substantially all the assets of the Company and otherwise on terms which the
Board of Directors of the Company determines in its good faith judgment (after
consultation with its financial advisor) to be more favorable to the Company's
stockholders than the Merger and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the Board of Directors of
the Company, is capable of being obtained by such third party.
SECTION 5.9 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and to
the extent reasonably practicable, give each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.10 Affiliates.
(a) Prior to the Closing Date, the Company shall deliver to Parent a letter
identifying all persons who in the Company's judgment are or may be deemed to
be, at the time this Agreement is submitted for approval to the stockholders of
the Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act or for purposes of qualifying the Merger for pooling of interests
accounting treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations. The Company shall use its reasonable
efforts to cause each such person to deliver to Parent at least 30 days prior to
the Closing Date a written agreement substantially in the form attached as
Exhibit A hereto.
(b) As soon as practicable after the execution of this Agreement, Parent
shall deliver to the Company a letter identifying all persons who, in Parent's
reasonable judgment, are or may be deemed to be, as of the date of such letter,
"affiliates" of Parent under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations. Parent shall use its reasonable efforts to
cause each such person to deliver to the Company at least 30 days prior to the
Closing Date a written agreement substantially in the form of Exhibit B hereto.
SECTION 5.11 Nasdaq National Market Listing. Parent shall use its
reasonable efforts to cause the shares of Parent Common Stock to be issued
pursuant to Article II and Section 5.6(b), and such other shares of Parent
Common Stock required to be reserved for issuance with respect to the Company
ESPP and the Convertible Debentures, to be approved for listing on the Nasdaq
National Market, subject to official notice of issuance, prior to the Closing
Date.
SECTION 5.12 Pooling of Interests. Each of the Company and Parent will use
reasonable efforts to cause the Merger to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations, and such accounting treatment to be accepted by each of
the Company's and Parent's independent public accountants, and by the SEC,
respectively, and each of the Company and Parent agrees that it will voluntarily
take no action that would cause such accounting treatment not to be obtained.
SECTION 5.13 Stop Transfer. The Company shall not register the transfer of
any Certificate representing any Subject Shares (as defined in the Stockholder
Agreements), unless such transfer is made to Parent or Sub or otherwise in
compliance with the Stockholder Agreements.
SECTION 5.14 Tax Treatment. Each of Parent and the Company shall not
(before or after the Effective Time) take any action and shall not (before or
after the Effective Time) fail to take any action which action or failure to act
would prevent, or would be reasonably likely to prevent, the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code,
and each shall use reasonable efforts to obtain the opinions of counsel referred
to in Sections 6.2(d) and 6.3(d), respectively.
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SECTION 5.15 Convertible Debentures. Parent shall take such action (if
any) as may be required by the indenture relating to the Convertible Debentures
in connection with the consummation of the Merger. Promptly after the Effective
Time, Parent shall either (i) commence a tender offer for the outstanding
Company Convertible Debentures at a price not less than the prevailing market
price for such Convertible Debentures or (ii) cause the redemption of such
Convertible Debentures in accordance with the redemption provisions of the
indenture relating thereto. Until the Convertible Debentures are acquired or
redeemed by Parent or the Company, Parent shall reserve sufficient shares of
Parent Common Stock for issuance upon conversion of the Convertible Debentures.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of a majority of the shares
of Company Common Stock outstanding as of the record date for the
Stockholders Meeting.
(b) Nasdaq Market Listing. The shares of Parent Common Stock issuable
to the Company's securityholders pursuant to Article II and Section 5.6(b),
shall have been approved for listing on the Nasdaq National Market, subject
to official notice of issuance.
(c) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any U.S.
federal or state court of competent jurisdiction or other material legal
restraint or prohibition issued or promulgated by a U.S. federal or state
Governmental Entity preventing the consummation of the Merger shall be in
effect.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(f) Pooling Letters. The Company shall have received from Deloitte &
Touche LLP, independent accountants for the Company, a letter addressed to
the Company dated the Closing Date (which may contain customary
qualifications and assumptions) to the effect that Deloitte & Touche LLP
believes that the Company would meet the applicable specific criteria for a
pooling of interests in accordance with generally accepted accounting
principles as such criteria relate only to the Company (and not to Parent),
and Parent shall have been provided with a copy of such letter; and Parent
shall have received from Arthur Andersen LLP, independent accountants for
Parent, a letter dated the Closing Date (which may contain customary
qualifications and assumptions) to the effect that Arthur Andersen LLP
concurs with Parent's management's conclusion that no conditions exist that
would preclude Parent from accounting for the Merger as a pooling of
interests, and the Company shall have been provided with a copy of such
letter.
SECTION 6.2 Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are further subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement (excluding any representation or
warranty that refers specifically to "the date of this Agreement," "the
date hereof" or any other date other than the Closing Date) shall be
accurate in all material respects as of the Closing Date as if made on and
as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of the
Closing Date, (i) any inaccuracy that does not have a material adverse
effect on the Company shall be disregarded, (ii) any inaccuracy that
results from or relates to general business, economic or industry
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conditions shall be disregarded, and (iii) any inaccuracy that results from
or relates to the taking of any action contemplated or permitted by this
Agreement or the announcement or pendency of the Merger shall be
disregarded).
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) Letters from Company Affiliates. Parent shall have received from
each person named in the letter referred to in Section 5.10(a) an executed
copy of an agreement substantially in the form of Exhibit A hereto.
(d) Tax Opinion. The opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel to Parent, in form and substance
reasonably satisfactory to Parent, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(A) of the
Code, and based on certain letters provided by Parent and Sub and the
Company, respectively, in customary form dated on or about the date that is
two business days prior to the date the Proxy Statement is first mailed to
stockholders of the Company, shall have been delivered to Parent and shall
not have been withdrawn or modified in any material respect; provided,
however, that if Wilson Sonsini Goodrich & Rosati, Professional
Corporation, does not render such opinion or withdraws or modifies such
opinion, this condition shall nonetheless be deemed to be satisfied if
counsel to the Company renders such opinion to Parent. In rendering such
opinion, such firm may rely on such representations, warranties and
certificates as it deems reasonable or appropriate under the circumstances.
(e) Noncompetition Agreement. At or before the Effective Time, the
Company and the Company's Chairman and Chief Executive Officer shall have
executed a Noncompetition Agreement in substantially the form attached
hereto as Exhibit C.
SECTION 6.3 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Sub set forth in this Agreement (excluding any representation
or warranty that refers specifically to "the date of this Agreement," "the
date hereof" or any other date other than the Closing Date) shall be
accurate in all material respects as of the Closing Date as if made on and
as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of the
Closing Date, (i) any inaccuracy that does not have a material adverse
effect on Parent or Sub shall be disregarded, (ii) any inaccuracy that
results from or relates to general business, economic or industry
conditions shall be disregarded, and (iii) any inaccuracy that results from
or relates to the taking of any action contemplated or permitted or the
announcement or pendency of the Merger by this Agreement shall be
disregarded).
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. The opinion of Cooley Godward LLP, counsel to the
Company, in form and substance reasonably satisfactory to the Company, to
the effect that the Merger will constitute a reorganization within the
meaning of Section 368(A) of the Code, and based on certain letters
provided by Parent and Sub and the Company, respectively, in customary form
dated on the date that is two business days prior to the Proxy Statement is
first mailed to stockholders of the Company, shall have been delivered to
the Company and shall not have been withdrawn or modified in any material
respect; provided, however, that if Cooley Godward LLP does not render such
opinion or withdraws or modifies such opinion, this condition shall
nonetheless be deemed to be satisfied if counsel to Parent renders such
opinion to the Company. In rendering such opinion, such firm may rely on
such representations, warranties and certificates as it deems reasonable or
appropriate under the circumstances.
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(d) Letters from Parent Affiliates. The Company shall have received
from each person named in the letter referred to in Section 5.10(b) an
executed copy of an agreement substantially in the form of Exhibit B
hereto.
(e) Indenture. Parent shall have performed all obligations required to
performed by it pursuant to the first sentence of Section 5.15.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated, and the Merger
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by December 31,
1997 for any reason; provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to any
party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date if
such action or failure to act constitutes a wilful and material breach
of this Agreement;
(ii) if any temporary restraining order, preliminary or permanent
injunction or other order issued by any U.S. federal or state court of
competent jurisdiction or other material legal restraint or prohibition
issued or promulgated by a U.S. federal or state Governmental Entity
having any of the effects set forth in Section 6.1(d) shall be in effect
and shall have become final and nonappealable;
(iii) if (A) the Stockholders Meeting (including any adjournments
thereof) shall have been held and completed and the Company's
stockholders shall have taken a final vote on a proposal to approve and
adopt this Agreement and to approve the Merger, and (B) the adoption and
approval of this Agreement and the approval of the Merger by the holders
of a majority of the shares of Company Common Stock outstanding on the
record date for the Stockholders Meeting shall not have been obtained;
or
(iv) if (A) the Board of Directors of the Company or any committee
thereof shall have withheld, withdrawn or modified in a manner adverse
to Parent its approval or recommendation of the Merger, or approved or
recommended any Superior Proposal or (B) the Board of Directors of the
Company shall have resolved to take any of the foregoing actions;
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or
if any such representation or warranty of Parent shall have become
inaccurate, in either case such that the conditions set forth in Section
6.3(a) or Section 6.3(b), as the case may be, would not be satisfied as of
the time of such breach or as of the time such representation or warranty
shall have become inaccurate; provided, that if such inaccuracy in Parent's
representations and warranties or breach by Parent is curable by Parent,
then (i) the Company may not terminate this Agreement under this Section
7.1(c) with respect to a particular breach or inaccuracy prior to or during
the 45-day period commencing upon delivery by the Company of written notice
to Parent describing such breach or inaccuracy, provided Parent continues
to exercise reasonable efforts to cure such breach or inaccuracy and (ii)
the Company may not, in any event, terminate this Agreement under this
Section 7.1(c) if such inaccuracy or breach shall have been cured in all
material respects; and, provided further that the Company may not terminate
this Agreement pursuant to this Section 7.1(c) if it shall have wilfully
and materially breached this Agreement; or
(d) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any such representation or warranty of the Company shall
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have become inaccurate, in either case such that the conditions set forth
in Section 6.2(a) or Section 6.2(b), as the case may be, would not be
satisfied as of the time of such breach or as of the time such
representation or warranty shall have become inaccurate; provided, that if
such inaccuracy in the Company's representations and warranties or breach
by the Company is curable by the Company, then (i) Parent may not terminate
this Agreement under this Section 7.1(d) with respect to a particular
breach or inaccuracy prior to or during the 45-day period commencing upon
delivery by Parent of written notice to the Company describing such breach
or inaccuracy, provided the Company continues to exercise reasonable
efforts to cure such breach or inaccuracy and (ii) Parent may not, in any
event, terminate this Agreement under this Section 7.1(d) if such
inaccuracy or breach shall have been cured in all material respects; and,
provided further that Parent may not terminate this Agreement pursuant to
this Section 7.1(d) if it shall have wilfully and materially breached this
Agreement.
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of the last sentence of Section 5.4, Section 5.8, Section 5.9, this
Section 7.2 and Article VIII and except to the extent that such termination
results from the wilful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties hereto
at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time,
any party may to the extent legally allowed (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties made to such party
pursuant to this Agreement or in any document delivered pursuant hereto or (c)
subject to the proviso of Section 7.3, waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None of the
representations or warranties contained in this Agreement or in any certificate
or instrument delivered pursuant hereto shall survive the Effective Time. This
Section 8.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
if to Parent or Sub, to:
Sanmina Corporation
355 East Trimble Road
San Jose, CA 95131
Attention: Jure Sola
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with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
Attention: Christopher D. Mitchell
if to the Company, to:
Elexsys International, Inc.
4405 Fortran Court
San Jose, CA 95134
Attention: Milan Mandaric
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Alan C. Mendelson
SECTION 8.3 Definitions. For purposes of this Agreement:
an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
an "agreement," "arrangement," "contract," "commitment," "plan,"
"purchase order," "understanding" or "undertaking" when used in this
Agreement shall mean a legally binding, written agreement, arrangement,
contract, commitment, plan, purchase order, understanding or undertaking,
as the case may be;
"material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change or effect that is
materially adverse to the business, financial condition or results of
operations of either the Company and its subsidiaries or Parent and its
subsidiaries, taken as a whole, as the case may be;
"person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity;
a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person;
SECTION 8.4 Interpretation. When a reference is made in this Agreement to
a Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the Confidentiality Agreement (a) constitute the entire agreement, and
supersede all prior agreements and understandings, both
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written and oral, among the parties with respect to the subject matter of this
Agreement and the Confidentiality Agreement and (b) except for the provisions of
Article II, Section 5.6, Section 5.7 and Section 5.14 are not intended to confer
upon any person other than the parties any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any court of the United States located in the State of
Delaware or of any Delaware state court in the event any dispute arises out of
this Agreement or the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or the transactions contemplated by
this Agreement in any court other than a court of the United States located in
the State of Delaware or a Delaware state court.
SECTION 8.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
SANMINA CORPORATION
By: /s/ JURE SOLA
------------------------------------
Name: Jure Sola
Title: Chairman and CEO
SANM ACQUISITION SUBSIDIARY, INC.
By: /s/ JURE SOLA
------------------------------------
Name: Jure Sola
Title: Chairman and CEO
ELEXSYS INTERNATIONAL, INC.
By: /s/ WILLIAM (BARRY) HEGARTY
------------------------------------
Name: William (Barry) Hegarty
Title: President
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EXHIBIT A
ELEXSY INTERNATIONAL, INC. AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "Agreement") is made as of , 1997,
between Sanmina Corporation, a Delaware corporation ("Parent"), Elexsys
International, Inc., a Delaware corporation ("Company"), and the undersigned
(the "Affiliate").
WHEREAS, Parent and Company have entered into an Agreement and Plan of
Merger ("Merger Agreement") pursuant to which Parent and Company intend to enter
into a business combination transaction to pursue their long term business
strategies (the "Merger") (capitalized terms used and not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement);
WHEREAS, pursuant to the Merger, at the Effective Time, all of the issued
and outstanding shares of Company Common Stock, including any shares owned by
Affiliate as of the Effective Time, will be converted into shares of Parent
Common Stock as set forth in the Merger Agreement;
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of Company, as the term "affiliate" is used (i) for purposes of
paragraphs (c) and (d) of Rule 145 of the Rules and Regulations of the
Securities and Exchange Commission (the "SEC") and (ii) in the SEC's Accounting
Series Releases 130 and 135, as amended, although nothing contained herein shall
be construed as an admission by Affiliate that Affiliate is in fact an affiliate
of the Company;
WHEREAS, it is intended that the Merger will be accounted for as a pooling
of interests under Accounting Principles Board Opinion No. 16;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to Parent to enter into the Merger Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and
understands that the representations, warranties and covenants by Affiliate
set forth herein will be relied upon by Parent, Company, and their
respective affiliates, counsel and accounting firms for purposes of
determining Parent's eligibility to account for the Merger as a "pooling of
interests." Affiliate has carefully read this Agreement and the Merger
Agreement and has had an opportunity to discuss the requirements of this
Agreement with Affiliate's professional advisors.
2. Compliance with Rule 145 and the Act.
(a) Affiliate has been advised that (i) the issuance of shares of
Parent Common Stock in connection with the Merger is expected to be
effected pursuant to a Registration Statement on Form S-4 under the
Securities Act of 1933, as amended (the "Act"), and as such will not be
deemed "restricted securities" within the meaning of Rule 144
promulgated thereunder, (ii) resale of such shares will not be subject
to any restrictions other than as set forth in Rule 145 under the Act
and (iii) Affiliate may be deemed to be an affiliate of the Company.
Affiliate accordingly agrees not to sell, transfer or otherwise dispose
of any Parent Common Stock issued to Affiliate in the Merger unless (1)
such shares of Parent Common Stock are registered under the Act or are
transferred pursuant to an appropriate exemption from registration, (2)
such sale, transfer or other disposition is made in conformity with the
requirements of Rule 145(d) promulgated under the Act, (3) an authorized
representative of the SEC takes the position in writing to the effect
that the SEC would take no action, or that the staff of the SEC would
not recommend that the SEC take action, with respect to such sale,
transfer or other disposition, and a copy of such written position ("No
Action Correspondence") is delivered to Parent, (4) Affiliate delivers
to Parent a written opinion of counsel, reasonably acceptable to Parent
in form and substance, that such sale, transfer or other disposition is
otherwise exempt from registration under the Act, or (5) such sale,
transfer or disposition occurs after the earlier of (A) the first
anniversary of the Effective Time, or (B) the date
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<PAGE> 114
on which the restrictions upon sale, transfer or disposition under Rule
145 are eliminated pursuant to action of the SEC.
(b) Parent will give stop transfer instructions to its transfer
agent with respect to any Parent Common Stock received by Affiliate
pursuant to the Merger and there will be placed on the certificates
representing such Parent Common Stock, or any substitutions therefor
issued prior to the termination of the restrictions described in Section
2(a) above, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES AND MAY ONLY BE TRANSFERRED (A) IN
CONFORMITY WITH RULE 145(d) UNDER SUCH ACT, (B) IN ACCORDANCE WITH A
WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN
FORM AND SUBSTANCE THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR (C) AS IS OTHERWISE
PERMITTED UNDER THAT CERTAIN AFFILIATE AGREEMENT DATED AS OF
, 1997, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE ISSUER."
The legend set forth above shall be removed from any certificates
representing shares of Parent Common Stock received by Affiliate pursuant
to the Merger (by delivery of a substitute certificate without such
legend), and Parent shall instruct its transfer agent to remove such
legend, if the shares of Parent Common Stock evidenced by any such
certificates are registered under the Act or if Affiliate delivers to
Parent (i) satisfactory written evidence that the shares have been sold in
compliance with Rule 145 (in which case, the substitute certificate will be
issued in the name of the transferee), (ii) a copy of the No Action
Correspondence, (iii) an opinion of counsel, in form and substance
reasonably satisfactory to Parent to the effect that public sale of the
shares by the holder thereof is no longer subject to Rule 145, or (iv) a
written request for removal of such legend after the earlier of (x) the
inapplicability of Rule 145 by its terms, or (y) the effective date of any
action by the SEC eliminating the restrictions upon sale, transfer or
disposition under Rule 145 or otherwise rendering compliance with such
restrictions unnecessary.
3. Covenants Related to Pooling of Interests. In accordance with SAB
65, during the period contemplated by SAB 65, until the earlier of (A)
Parent's public announcement of financial results covering at least 30 days
of combined operations of Parent and Company or (B) the Merger Agreement is
terminated in accordance with its terms, Affiliate will not sell, exchange,
transfer, pledge, distribute, or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter
into any similar transaction (through derivatives or otherwise) having the
effect, directly or indirectly, of reducing his risk relative to: (A) any
shares of Company Common Stock, except pursuant to and upon the
consummation of the Merger; or (B) any shares of Parent Common Stock
received by Affiliate in the Merger; provided, however, that Affiliate may
(after consulting with Parent) transfer or otherwise reduce his risk
relative to shares of Company Common Stock or Parent Common Stock during
such period if the transfer of or reduction of risk relative to such
Company Common Stock or Parent Common Stock would not reasonably be
expected to adversely affect the ability of Parent to account for the
Merger as a pooling of interests. Parent may, at its discretion, cause a
restrictive legend covering the restrictions referred to in this Section 3
to be placed on Parent Common Stock certificates issued to Affiliate in the
Merger and place a stock transfer notice consistent with the restrictions
referred to in this Section 3 with its transfer agent with respect to such
certificates, provided that such restrictive legend shall be removed and/or
such notice shall be countermanded promptly upon expiration of the
necessity therefor at the request of Affiliate.
4. Permitted Transfers. Notwithstanding anything to the contrary
contained in this Agreement, Affiliate may: (a) transfer shares of Company
Common Stock to Company in payment of the exercise price of options to
purchase Company Common Stock; (b) transfer shares of Parent Common Stock
to Parent in payment of the exercise price of options to purchase Parent
Common Stock, (c) transfer shares
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<PAGE> 115
of Company Common Stock to any organization qualified under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, so long as such
organization has traditionally been supported by contributions from the
general public (as opposed to being supported largely by a specific donor),
and (d) transfer shares of Company Common Stock or shares of Parent Common
Stock to a trust established for the benefit of Affiliate and/or for the
benefit of one or more members of Affiliate's family, or make a bona fide
gift of shares of Company Common Stock or shares of Parent Common Stock to
one or more members of Affiliate's family, provided that in the case of a
transfer or gift pursuant to this clause (d), a transferee of such shares
agrees to be bound by the limitations set forth in this Agreement.
5. Specific Performance. Affiliate agrees that irreparable damages
would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms, or were otherwise
breached. It is, accordingly, agreed that Parent shall be entitled to
injunctive relief to prevent breaches of the provisions of this Agreement,
and to enforce specifically the terms and provisions hereof, in addition to
any other remedy to which Parent may be entitled at law or in equity.
6. Miscellaneous.
(a) For the convenience of the parties hereto, this Agreement may
be executed in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and
assigns" shall mean, where the context so permits, heirs, executors,
administrators, trustees and successor trustees, and personal and other
representatives.
(c) This Agreement shall be governed by and construed, interpreted
and enforced in accordance with the internal laws of the State of
California (without regard to the principles of conflict of laws
thereof).
(d) If a court of competent jurisdiction determines that any
provision of this Agreement is not enforceable or enforceable only if
limited in time and/or scope, this Agreement shall continue in full
force and effect with such provision stricken or so limited.
(e) Counsel to and accountants for the parties to this Agreement
shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written
agreement signed by both parties.
(g) Notwithstanding any other provision contained herein, this
Agreement and all obligations of and restrictions imposed on Affiliate
hereunder shall terminate upon the termination of the Merger Agreement
in accordance with its terms.
(h) Parent currently intends to file on a timely basis, from and
after the Effective Time and as long as is necessary in order to permit
Affiliate to sell Parent Common Stock held by Affiliate pursuant to Rule
145, all reports required to be filed by it pursuant to the Exchange
Act, and currently intends to otherwise make available adequate
information regarding Parent in such manner as may be required to
satisfy the requirements of Rule 144(c) under the Act as now in effect.
[(i) Nothing contained in this Agreement shall limit any of
Affiliate's rights or any of Parent's obligations under the Registration
Rights Agreement of even date herewith between Parent and Affiliate.]
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<PAGE> 116
Executed as of the date shown on the first page of this Agreement.
SANMINA CORPORATION
By:
Name:
Title:
ELEXSYS INTERNATIONAL, INC.
By:
Name:
Title:
AFFILIATE
By:
Name of Affiliate:
Name of Signatory:
(if different from Affiliate)
Title of Signatory
(if applicable):
Number of shares of Company Common Stock beneficially owned by Affiliate:
Number of shares of Company Common Stock subject to options beneficially owned
by Affiliate:
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<PAGE> 117
EXHIBIT B
SANMINA CORPORATION AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "Agreement") is made as of , 1997,
between Sanmina Corporation, a Delaware corporation ("Parent"), Elexsys
International, Inc., a Delaware corporation ("Company"), and the undersigned
(the "Affiliate").
WHEREAS, Parent and Company have entered into an Agreement and Plan of
Merger ("Merger Agreement") pursuant to which Parent and Company intend to enter
into a business combination transaction to pursue their long term business
strategies (the "Merger") (capitalized terms used and not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement);
WHEREAS, pursuant to the Merger, at the Effective Time, all of the issued
and outstanding shares of Company Common Stock will be converted into shares of
Parent Common Stock as set forth in the Merger Agreement;
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of Parent, as the term "affiliate" is used in the SEC's Accounting
Series Releases 130 and 135, as amended, although nothing contained herein shall
be construed as an admission by Affiliate that Affiliate is in fact an affiliate
of Parent;
WHEREAS, it is intended that the Merger will be accounted for as a pooling
of interests under Accounting Principles Board Opinion No. 16;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to the Company to enter into the Merger Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and
understands that the representations, warranties and covenants by Affiliate
set forth herein will be relied upon by Parent, Company, and their
respective affiliates, counsel and accounting firms for purposes of
determining Parent's eligibility to account for the Merger as a "pooling of
interests". Affiliate has carefully read this Agreement and the Merger
Agreement and has had an opportunity to discuss the requirements of this
Agreement with Affiliate's professional advisors.
2. Covenants Related to Pooling of Interests. In accordance with SAB
65, during the period contemplated by SAB 65, until the earlier of (A)
Parent's public announcement of financial results covering at least 30 days
of combined operations of Parent and Company or (B) the Merger Agreement is
terminated in accordance with its terms, Affiliate will not sell, exchange,
transfer, pledge, distribute, or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter
into any similar transaction (through derivatives or otherwise) having the
effect, directly or indirectly, of reducing his risk relative to, any
shares of Parent Common Stock; provided, however, that Affiliate may (after
consulting with Parent and Company) transfer or otherwise reduce his risk
relative to shares of Parent Common Stock during such period if the
transfer of or reduction of risk relative to such Parent Common Stock would
not reasonably be expected to adversely affect the ability of Parent to
account for the Merger as a pooling of interests. Parent may, at its
discretion, cause a restrictive legend covering the restrictions referred
to in this Section 2 to be placed on Parent Common Stock certificates
issued to Affiliate and place a stock transfer notice consistent with the
restrictions referred to in this Section 2 with its transfer agent with
respect to such certificates, provided that such restrictive legend shall
be removed and/or such notice shall be countermanded promptly upon
expiration of the necessity therefor at the request of Affiliate.
3. Permitted Transfers. Notwithstanding anything to the contrary
contained in this Agreement, Affiliate may: (a) transfer shares of Parent
Common Stock to any organization qualified under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, so long as such organization has
traditionally been supported by contributions from the general public (as
opposed to being supported largely by a specific donor); and (b) transfer
shares of Parent Common Stock to a trust established for
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the benefit of Affiliate and/or for the benefit of one or more members of
Affiliate's family, or make a bona fide gift of shares of Parent Common
Stock to one or more members of Affiliate's family, provided that in the
case of a transfer or gift pursuant to this clause (b), a transferee of
such shares agrees to be bound by the limitations set forth in this
Agreement.
4. Specific Performance. Affiliate agrees that irreparable damages
would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms, or were otherwise
breached. It is, accordingly, agreed that Parent and Company shall be
entitled to injunctive relief to prevent breaches of the provisions of this
Agreement, and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which Parent or Company may be entitled at
law or in equity.
5. Miscellaneous.
(a) For the convenience of the parties hereto, this Agreement may
be executed in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and
assigns" shall mean, where the context so permits, heirs, executors,
administrators, trustees and successor trustees, and personal and other
representatives.
(c) This Agreement shall be governed by and construed, interpreted
and enforced in accordance with the internal laws of the State of
California (without regard to the principles of conflict of laws
thereof).
(d) If a court of competent jurisdiction determines that any
provision of this Agreement is not enforceable or enforceable only if
limited in time and/or scope, this Agreement shall continue in full
force and effect with such provision stricken or so limited.
(e) Counsel to and accountants for the parties to this Agreement
shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written
agreement signed by both parties.
(g) Notwithstanding any other provision contained herein, this
Agreement and all obligations of and restrictions imposed by Affiliate
hereunder shall terminate upon the termination of the Merger Agreement
in accordance with its terms.
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Executed as of the date shown on the first page of this Agreement.
SANMINA CORPORATION
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
ELEXSYS INTERNATIONAL, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
AFFILIATE
By:
------------------------------------
Name of Affiliate:
----------------------------------------------------------------------------
Name of Signatory:
--------------------------------------
(if different from Affiliate)
Title of Signatory
(if applicable):
--------------------------------------
Number of shares of Company Common Stock beneficially owned by Affiliate:
Number of shares of Company Common Stock subject to options beneficially owned
by Affiliate:
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EXHIBIT C
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement") is made as
of , 1997, by and among Sanmina Corporation, a Delaware
corporation ("Parent"), Elexsys International, Inc., a Delaware corporation
("Company"), and Milan Mandaric (the "Shareholder").
RECITALS
A. As an employee and shareholder of Company, the Shareholder has obtained
extensive and valuable knowledge and information concerning the business of
Company (including confidential information relating to Company and its
operations, assets, contracts, customers, personnel, plans and prospects).
B. Concurrently with the execution and delivery of this Agreement, Parent
is acquiring Company through a merger of Company with a wholly-owned subsidiary
of Parent (the "Merger") pursuant to an Agreement and Plan of Merger dated as of
July 22, 1997 (the "Reorganization Agreement"). Section 6.2(e) of the
Reorganization Agreement requires that a noncompetition agreement be executed
and delivered by the Shareholder as a condition to the completion of the Merger,
and the Shareholder is entering into this Agreement in order to induce Parent to
complete the Merger.
C. Company has conducted and is conducting its business throughout North
America and the United Kingdom.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. Definitions. Capitalized terms used but not expressly defined in
this Agreement shall have the meanings ascribed to them in the
Reorganization Agreement.
2. Acknowledgments by the Shareholder. The Shareholder acknowledges
that the Shareholder has occupied a position of trust and confidence with
Company prior to the date hereof and has become familiar with the following
information, any and all of which constitute confidential information of
Company (collectively the "Confidential Information"): (a) any and all
trade secrets belonging to, and concerning the business and affairs of,
Company, and any and all data, know-how, compositions, processes, customer
lists, current and anticipated customer requirements, price lists, market
studies and business plans that are confidential and proprietary in nature
and that belong to, and pertain to the business and affairs of, Company;
(b) any and all other information that is confidential and proprietary in
nature belonging to, and concerning the business and affairs of, Company
(which includes the following information to the extent it is confidential
and proprietary in nature and it belongs to, and pertains to the business
and affairs of, Company: historical financial statements, financial
projections and budgets, historical and projected sales, capital spending
budgets and plans, the names and backgrounds of key personnel and personnel
training techniques and materials), however documented; and (c) any and all
notes, analysis, compilations, studies, summaries, and other material
prepared by or for Company containing or based, in whole or in part, on any
information included in the foregoing; provided, however, that,
notwithstanding anything to the contrary contained in this Agreement,
"Confidential Information" does not and will not include any information
that is in or enters the public domain or that otherwise is or becomes
generally available to the public or within the electronics manufacturing
services industry other than as a direct result of the improper and
unauthorized disclosure thereof by the Shareholder. The Shareholder further
acknowledges that (i) Parent has required that the Shareholder make the
covenants set forth in this Agreement as a condition to the consummation of
the Merger by Parent, (ii) the provisions of this Agreement are reasonable
and necessary to protect and preserve Company's business, and (iii) Company
would be irreparably damaged if the Shareholder were to breach the
covenants set forth in Sections 3, 4 and 5 of this Agreement.
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3. Confidential Information. The Shareholder acknowledges and agrees
that all Confidential Information is the property of Company. Therefore,
the Shareholder agrees that the Shareholder will not, for a period of two
years after the Effective Time, disclose to any unauthorized persons or use
for his own account or for the benefit of any third party any Confidential
Information, whether the Shareholder has such information in the
Shareholder's memory or embodied in writing or other physical form, without
Parent's written consent; provided, however, that, notwithstanding anything
to the contrary contained in this Agreement, the Shareholder may furnish
and otherwise disclose Confidential Information (a) to his legal advisers
or accountants who are advised or otherwise made aware that such
information is confidential, and (b) to the extent that the Shareholder
determines in good faith that disclosure thereof may be required by any
law, regulation, judicial order, administrative order, subpoena,
interrogatory, discovery request, investigative demand or other legal
requirement or legal process. The Shareholder agrees to deliver to Parent
at any time after the Effective Time that Parent may request, all
documents, memoranda, notes, plans, records, reports and other
documentation, models, components or computer software, whether embodied in
a disk or in other form (and all copies of all of the foregoing), relating
to the businesses, operations, or affairs of Company to the extent they
constitute Confidential Information and any other Confidential Information
that the Shareholder may then possess or have under the Shareholder's
control.
4. Noncompetition. As an inducement for Parent to consummate the
Merger, the Shareholder agrees that, except as provided below, during the
Noncompetition Period (as hereinafter defined), the Shareholder will not
engage in Competitive Activities (as hereinafter defined) in North America,
the United Kingdom and Ireland, or invest in, own, manage, operate,
control, or participate in the ownership, management, operation, or control
of, be employed by, or render services or advice to, any Competing Entity
(as hereinafter defined). For purposes of this Agreement (a) "Competitive
Activities" shall mean designing, manufacturing, selling or developing
complex custom-designed, press-fit backpanels (of the type being designed,
manufactured, sold or developed by Company as of the Effective Time),
surface mount backpanel assemblies (of the type being designed,
manufactured, sold or developed by Company as of the Effective Time),
related subsystems (of the type being designed, manufactured, sold or
developed by Company as of the Effective Time) or high density multi-layer
printed circuit boards (of the type being designed, manufactured, sold or
developed by Company as of the Effective Time) in or for the mid-volume
sector of the electronic interconnect industry, and (b) "Competing Entity"
shall mean an entity that is engaged in Competitive Activities in North
America, the United Kingdom or Ireland; provided, however, that an entity
shall not, and shall not be deemed to, constitute a Competing Entity if the
total consolidated gross revenues derived by such entity from Competitive
Activities in any twelve month period represents less than 20% of the total
consolidated gross revenues of such entity during such twelve month period.
Notwithstanding anything to the contrary contained in this Agreement, (A)
the Shareholder may purchase or otherwise acquire, and own, directly or
indirectly, up to (but not more than) nineteen and nine-tenths percent
(19.9%) of any class of securities of any Competing Entity, (B) the
Shareholder may render services or advice to or be employed by a Competing
Entity if the services or advice rendered by the Shareholder, or the
primary responsibilities of the Shareholder, do not relate directly to
Competitive Activities, (C) the Shareholder may loan money to or guaranty
the loans of any Competing Entity, (D) the Shareholder may engage in any
Competitive Activity, and the Shareholder may invest in, own, manage,
operate, control or participate in the ownership, management, operation or
control of, be employed by or render services or advice to, any Competing
Entity that is engaged in any Competitive Activity, if Parent ceases to
derive more than $50 million in consolidated gross revenues from such
Competitive Activity in any twelve month period, (E) the Shareholder may
continue to serve as a special limited partner of Behrman Capital (even if
such entity invests in, owns, manages, operates or controls, or renders
services or advice to, one or more Competing Entities), and the Shareholder
may serve as an investor (including as a partner) in any other entity that
invests in, owns, manages, operates or controls, or renders services or
advice to, one or more Competing Entities, so long as (unless otherwise
permitted under this Agreement) the Shareholder does not actively
participate in the management or operation of, or render services or advice
to, any such Competing Entity, and (F) after the first anniversary of the
Effective Time, the Shareholder may serve as a non-employee director (but
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<PAGE> 122
not as the Chairman of the Board) of any Competing Entity in which the
Shareholder or any person or entity affiliated with or related to the
Shareholder has a direct or indirect ownership interest. The Shareholder
agrees that this covenant is reasonable with respect to its duration,
geographical area, and scope. As used herein, the "Noncompetition Period"
shall commence upon the Effective Time and end upon the date five years
after the Effective Time.
5. Nonsolicitation. The Shareholder further agrees that for a period
of five years after the Effective Time, he will not knowingly and
intentionally:
(a) personally or through others, encourage, induce, attempt to
induce, solicit or attempt to solicit (on the Shareholder's own behalf
or on behalf of any other person or entity) any employee of Company who
was employed by Company as of the Effective Time and whose annual salary
exceeded $100,000 as of the Effective Time (a "Specified Employee") to
leave his or her employment with such firm and become employed in any
Competing Entity; or
(b) employ in any Competing Entity, or permit any Competing Entity
over which the Shareholder exercises any control, to employ any
Specified Employee who has terminated his or her employment with Parent
or Company during such five-year period and who has not been
subsequently employed by another person or entity.
Nothing in this Agreement shall prevent or limit the Shareholder, any
entity over which the Shareholder exercises any control or any other person
or entity from (i) publishing any advertisement or similar notice in any
newspaper and hiring any person who responds to such advertisement or
notice without prior solicitation by the Shareholder, or (ii) engaging any
recruiting firm or similar organization to identify or solicit persons for
employment and hiring any person identified or solicited by such firm
without the participation of the Shareholder or identification by the
Shareholder of particular Specified Employees to be recruited.
6. Independence of Obligations. The covenants of the Shareholder set
forth in this Agreement shall be construed as independent of any other
agreement or arrangement between the Shareholder, on the one hand, and
Parent or Company, on the other. The existence of any claim or cause of
action by the Shareholder against Parent or Company shall not constitute a
defense to the enforcement of such covenants against the Shareholder.
7. Remedies. If the Shareholder breaches the covenants set forth in
this Agreement, each of Parent and Company will be entitled to the
following remedies:
(a) damages from the Shareholder; and
(b) in addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any
breach or threatened breach or otherwise to specifically enforce any
provision of this Agreement, it being agreed that money damages alone
would be inadequate to compensate Parent or Company and would be an
inadequate remedy for such breach.
Notwithstanding anything to the contrary contained in this Agreement,
no conduct or action shall be deemed to constitute a breach by the
Shareholder of any provision of this Agreement unless (i) Parent shall have
delivered to the Shareholder a written notice describing in reasonable
detail the conduct or action that Parent believes constitutes a breach of
this Agreement, and (ii) the Shareholder shall have failed to discontinue
such conduct or action within 15 days after receiving such written notice.
8. Non-Exclusivity. The rights and remedies of Parent and Company
hereunder are not exclusive of or limited by any other rights or remedies
which Parent or Company may have, whether at law, in equity, by contract or
otherwise, all of which shall be cumulative (and not alternative). Without
limiting the generality of the foregoing, the rights and remedies of Parent
and Company hereunder, and the obligations and liabilities of the
Shareholder hereunder, are in addition to their respective rights,
remedies, obligations and liabilities under the law of unfair competition,
misappropriation of trade secrets and the like.
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<PAGE> 123
9. Indemnification. Without in any way limiting any of the rights or
remedies otherwise available to Company, the Shareholder shall hold
harmless and indemnify Company from and against any damages which are
directly suffered or incurred at any time by Parent or Company, or to which
Parent or Company otherwise becomes subject (regardless of whether or not
such damages relate to a third-party claim) and that arise directly from
any breach of any covenant or obligation of the Shareholder contained
herein.
10. Waiver. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement will operate
as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party; (b) no
waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or
of the right of the party giving such notice or demand to take further
action without notice or demand as provided in this Agreement.
11. Governing Law. This Agreement will be governed by the laws of the
State of California without regard to conflicts of laws principles.
12. Jurisdiction; Service of Process. Any legal action or other legal
proceeding relating to this Agreement or the enforcement of any provision
of this Agreement shall be brought or otherwise commenced in any state or
federal court located in the County of Santa Clara, California. Each party
to this Agreement:
(a) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the County of
Santa Clara, California (and each appellate court located in the State
of California) in connection with any such legal proceeding;
(b) agrees that each state and federal court located in the County
of Santa Clara, California shall be deemed to be a convenient forum; and
(c) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or
federal court located in the County of Santa Clara, California, any
claim that such party is not subject personally to the jurisdiction of
such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or
that this Agreement or the subject matter of this Agreement may not be
enforced in or by such court.
13. Severability. If any provision of this Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be
deemed amended to conform to applicable laws so as to be valid and
enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances
and in such jurisdiction shall not affect the validity or enforceability of
such provision or part thereof under any other circumstances or in any
other jurisdiction, and (c) such invalidity or enforceability of such
provision or part thereof shall not affect the validity or enforceability
of the remainder of such provision or the validity or enforceability of any
other provision of this Agreement. Each provision of this Agreement is
separable from every other provision of this Agreement, and each part of
each provision of this Agreement is separable from every other part of such
provision.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
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15. Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Agreement unless
otherwise specified. All words used in this Agreement will be construed to
be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words
or terms.
16. Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been
duly given when (a) delivered by hand, (b) sent by facsimile, provided that
a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight
delivery service or registered mail (receipt requested), in each case to
the appropriate addresses and facsimile numbers set forth below (or to such
other addresses and facsimile numbers as a party may designate by notice to
the other parties):
Shareholder: Milan Mandaric
4405 Fortran Court
San Jose, CA 95134
Phone: (408) 935-6300
Fax: (408) 942-1252
Parent: Sanmina Corporation
355 East Trimble Road
San Jose, CA 95131
Attn: Chief Executive Officer
Phone: (408) 954-5500
Fax: (408) 943-1401
with a copy to:Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: Christopher D. Mitchell
Phone: (415) 493-9300
Fax: (415) 845-5000
Company: Elexsys International, Inc.
4405 Fortran Court
San Jose, CA 95134
Phone: (408) 935-6300
Fax: (408) 942-1252
with a copy to:Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94304
Attn: Alan C. Mendelson
Phone: (415) 843-5141
Fax: (415) 857-0663
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17. Further Assurances. The Shareholder shall execute and/or cause to
be delivered to Parent or Company such instruments and other documents as
Parent or Company may reasonably request to effectuate the intent and
purposes of this Agreement.
18. Assignment. This Agreement and all obligations hereunder are
personal to the Shareholder and may not be transferred or assigned by the
Shareholder at any time. Each of Parent and Company may assign its
respective rights under this Agreement to any entity in connection with any
sale or transfer of all or substantially all of its respective assets to
such entity.
19. Binding Nature. Subject to Section 18, this Agreement will be
binding upon the Shareholder, and will inure to the benefit of Parent and
Company and their respective successors and assigns.
20. Attorneys' Fees and Expenses. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Agreement
is brought by any party hereto against any other party hereto, the
prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled).
21. Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral agreements and understandings among
Parent, Company and the Shareholder with respect to the subject matter of
this Agreement. This Agreement may not be amended except by a written
agreement executed by all parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
<TABLE>
<S> <C>
PARENT: SHAREHOLDER:
By: By:
------------------- -------------------
</TABLE>
COMPANY:
By:
--------------------------------
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ANNEX II
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement") dated as of July 22, 1997, among
Sanmina Corporation, a Delaware corporation ("Parent"), and the individual
identified on Schedule A attached hereto (the "Stockholder").
WHEREAS Sanmina Corporation, SANM Acquisition Subsidiary, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and Elexsys
International, Inc., a Delaware corporation (the "Company"), propose to enter
into an Agreement and Plan of Merger dated as of the date hereof (as the same
may be amended or supplemented, the "Merger Agreement"; capitalized terms used
but not defined herein shall have the meanings set forth in the Merger
Agreement) providing for the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in the Merger
Agreement; and
WHEREAS the Stockholder owns of record the number of shares of common
stock, par value $1.00 per share, of the Company (the "Common Stock"), set forth
opposite his name on Schedule A attached hereto; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that the Stockholder enter into this Agreement;
NOW, THEREFORE, to induce Parent to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the promises and
the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Definition. For purposes of this Agreement, "Subject Shares" shall
mean all issued and outstanding shares of Common Stock of the Company owned
of record or beneficially by the Stockholder as of the record date for
persons entitled (a) to receive notice of, and to vote at, a meeting of the
stockholders of the Company called for the purpose of voting on the matter
referred to in Section 4(a), or (b) to take action by written consent of
the stockholders of the Company with respect to the matter referred to in
Section 4(a). Notwithstanding anything to the contrary contained in this
Agreement, the "Subject Shares" shall not include, and the Stockholder
shall not be deemed to be the beneficial owner of, any shares of Common
Stock of the Company that the Stockholder may acquire upon the exercise of
any stock option (unless such option has been exercised and such shares
have been issued to the Stockholder and are held by the Stockholder as of
such record date).
2. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent as of the date hereof as follows:
(a) Authority. The Stockholder has all requisite capacity to enter
into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the
Stockholder enforceable against the Stockholder in accordance with its
terms. Except for informational filings with the SEC, the execution and
delivery of this Agreement by the Stockholder do not, and the
consummation by the Stockholder of the transactions contemplated hereby
and compliance by the Stockholder with the terms hereof will not, (i)
conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any trust agreement, loan
or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to the Stockholder or to the
Stockholder's property or assets, (ii) require any filing by the
Stockholder on or before the Closing Date with, or require the
Stockholder to obtain on or before the Closing Date, any permit,
authorization, consent or approval of, any Federal, state or local
government or any court, tribunal, administrative agency or commission
or other governmental or regulatory authority or agency,
<PAGE> 128
domestic or foreign, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Stockholder or the
Subject Shares.
(b) The Shares. The Stockholder is the record and beneficial owner
of, and has good and valid title to, the shares of Common Stock set
forth opposite his name on Schedule A attached hereto, free and clear of
any Liens whatsoever. The Stockholder does not own, of record or
beneficially, any shares of capital stock of the Company other than the
shares of Common Stock set forth opposite his name on Schedule A
attached hereto. The Stockholder has the sole right to vote such shares,
and none of such shares is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting of such
shares, except as contemplated by this Agreement.
3. Representations and Warranties of Parent. Parent hereby represents
and warrants to the Stockholder that Parent has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by Parent and constitutes a valid and binding
obligation of Parent enforceable against Parent in accordance with its
terms. Except for informational filings with the SEC, the execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or
lapse of time or both) under any provision of, the certificate of
incorporation or bylaws of Parent, or any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable to
Parent or to Parent's property or assets.
4. Covenants of the Stockholder. Until the termination of this
Agreement in accordance with Section 11, the Stockholder agrees as follows:
(a) Subject to Section 5, at any meeting of stockholders of the
Company called to vote upon the Merger and the Merger Agreement or at
any adjournment thereof or in any other circumstances upon which a vote,
consent or other approval (including by written consent) with respect to
the Merger and the Merger Agreement is sought from the Company's
stockholders in their capacities as such, the Stockholder shall,
including by executing a written consent if requested by Parent, vote
(or cause to be voted) the Subject Shares in favor of the Merger, and
the adoption and approval by the Company of the Merger Agreement.
(b) The Stockholder shall not (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"),
consent to any Transfer of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to
the Transfer of, any or all of the Subject Shares (or any interest
therein) to any person other than pursuant to the terms of the Merger or
(ii) enter into any voting arrangement, whether by proxy, voting
agreement or otherwise, in connection with, directly or indirectly, any
Takeover Proposal, and agrees not to commit or agree to take any of the
foregoing actions; provided, however, that notwithstanding anything to
the contrary contained in this Agreement, the Stockholder may, without
the consent of Parent or any other person, transfer any or all of the
Subject Shares (or any interest therein) to one or more members of the
Stockholder's family, any trust for the benefit of the Stockholder or
one or more members of the Stockholder's family or any entity controlled
by the Stockholder so long as the transferee of such Subject Shares (or
such interest therein) agrees to be bound by the applicable provisions
of this Agreement.
(c) The Stockholder shall not, nor shall he instruct any agent or
any investment banker, attorney or other adviser or representative of
the Stockholder to, directly or indirectly, (i) solicit, initiate or
knowingly encourage the submission to the Company of, any Takeover
Proposal or (ii) participate in any discussions or negotiations with any
person (other than Parent and its affiliates, agents and
representatives) regarding, or furnish to any such person any non-public
information with respect to, or take any other action intended to
facilitate the making of any inquiry or proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal.
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<PAGE> 129
(d) If, at the time the Merger Agreement is submitted for approval
to the stockholders of the Company, the Stockholder is an "affiliate" of
the Company for purposes of Rule 145 under the Securities Act or for
purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, the Stockholder shall deliver to
Parent on or prior to the Closing Date a written agreement substantially
in the form attached as Exhibit A to the Merger Agreement.
5. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Until the termination of this Agreement in accordance with
Section 11, the Stockholder hereby irrevocably grants to, and appoints,
Parent and Jure Sola and Randy W. Furr, in their respective capacities
as officers of Parent, and any individual who shall hereafter succeed to
any such office of Parent, and each of them individually, the
Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of the Stockholder,
to vote the Subject Shares, or grant a consent or approval in respect of
the Subject Shares, in favor of approval of the Merger and the adoption
and approval of the Merger Agreement.
(b) The Stockholder represents that any proxies heretofore given in
respect of the Subject Shares are not irrevocable, and that all such
proxies are hereby revoked.
(c) The Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. The
Stockholder hereby ratifies and confirms all that such proxies and
attorneys in fact may lawfully do or cause to be done by virtue hereof.
Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law.
6. Further Assurances. The Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional
or further consents, documents and other instruments as Parent may
reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
7. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Subject Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of
such Subject Shares shall pass, whether by operation of law or otherwise,
including such Stockholder's heirs, guardians, administrators or
successors. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure
of the Company affecting the Company's Common Stock, or the acquisition of
additional shares of Common Stock or other voting securities of the Company
by the Stockholder, the number of Subject Shares shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach
to any additional shares of Common Stock or other voting securities of the
Company issued to or acquired by the Stockholder.
8. Registration Rights. If the Stockholder determines in good faith
after consultation with the Stockholder's counsel that any shares of common
stock of Parent received by the Stockholder in connection with the Merger
("Merger Shares") may be deemed to be "restricted securities" under Rule
144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), or are otherwise subject to any restriction on resale
(other than restrictions imposed by Rule 145 promulgated under the
Securities Act or restrictions imposed by Accounting Series Release 135),
then, as soon as practicable after the Effective Time (and in any event
within 30 days after the Effective Time), Parent, at its sole expense,
shall (a) file a registration statement permitting the resale of the Merger
Shares, (b) take all actions reasonably necessary to cause such
registration statement to be declared effective, (c) maintain the
effectiveness and availability of such registration statement until the
first anniversary of the Effective Time, (d) use commercially reasonable
efforts to register or qualify the Merger Shares
-3-
<PAGE> 130
under the Blue Sky laws of such jurisdictions as the Stockholder shall
reasonably request, and maintain the effectiveness of such registrations
and qualifications for as long as such registration statement remains
effective, and (e) take such other actions as are reasonably necessary to
enable the Stockholder to sell the Merger Shares without restriction. To
the extent permitted by law, Parent shall indemnify and hold harmless the
Stockholder against and from any costs, expenses (including reasonable
attorneys' fees), settlement payments, claims, demands, judgments, fines,
penalties, losses, damages and liabilities that arise out of or are related
to any inaccuracy in, or omission with respect to, such registration
statement.
9. Indemnification. Parent shall indemnify and hold harmless the
Stockholder and the Stockholder's affiliates, agents, advisers and
representatives (the "Indemnified Parties") against and from any costs,
expenses (including reasonable attorneys' fees), settlement payments,
claims, demands, judgments, fines, penalties, losses, damages and
liabilities incurred in connection with any claim, suit, action or
proceeding (whether asserted, commenced or arising before or after the
Effective Time) that arises directly or indirectly from or relates directly
or indirectly to (a) the execution, delivery or performance of this
Agreement, or (b) any of the transactions contemplated by this Agreement.
In the event any such claim, suit, action or proceeding is asserted or
commenced against any Indemnified Party, (i) Parent shall advance and pay
the reasonable fees and expenses of any counsel retained by such
Indemnified Party in connection with such claim, suit, action or proceeding
promptly after receipt of a request therefor from such Indemnified Party,
and (ii) Parent shall cooperate with such Indemnified Party and such
Indemnified Party's counsel in the defense of such claim, suit, action or
proceeding. Parent agrees to pay all expenses, including attorneys' fees,
that may be incurred by any of the Indemnified Parties in enforcing the
indemnity and other obligations provided for in this Section 9.
10. Assignment. Except as otherwise provided in Section 4(b), neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by the Stockholder, on the one hand, without the prior
written consent of Parent nor by Parent, on the other hand, without the
prior written consent of the Stockholder, except that Parent may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder (other than Parent's obligations under Sections 8 and 9) to any
direct or indirect wholly owned subsidiary of Parent (provided that in the
case of any assignment by Parent to any such subsidiary of Parent, Parent
shall remain jointly and severally liable for the due and timely
performance of any obligations so assigned) . Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and
be enforceable by the parties and their respective representatives,
executors, administrators, estate, heirs, successors and assigns.
11. Termination. This Agreement (including the proxy referred to in
Section 5) and all rights of Parent and all obligations of the Stockholder
hereunder, shall terminate upon the first to occur of (i) the Effective
Time or (ii) the date on which the Merger Agreement is terminated in
accordance with its terms; provided, however, that notwithstanding anything
to the contrary contained in this Agreement, the rights of the Stockholder
and the obligations of Parent pursuant to Sections 8 and 9, and the
provisions contained in Sections 12, 13 and 15, shall survive any
termination of this Agreement
12. General Provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Parent in accordance
with Section 8.2 of the Merger Agreement and to the Stockholder at his
address set forth on Schedule A attached hereto (or at such other
address for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
-4-
<PAGE> 131
interpretation of this Agreement. Wherever the words "include,"
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be deemed to be one and the same
agreement, and shall become effective when one or more of the
counterparts have been signed by each of the parties and delivered to
the other party, it being understood that each party need not sign the
same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. The Agreement
(including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect
to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto (and the other persons referred to
in Section 9) any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof.
(g) No Limitations. Nothing in this Agreement shall, and nothing in
this Agreement shall be deemed to, prevent the Stockholder from acting
in accordance with his fiduciary duties as a director of the Company or
otherwise limit the ability of the Stockholder to take any action in his
capacity as a director or officer of the Company.
(h) Voidability. If prior to the execution hereof, the Board of
Directors of the Company shall not have duly and validly authorized and
approved by all necessary corporate action, the Merger Agreement and the
transactions contemplated thereby, so that by the execution and delivery
hereof Parent or Sub would become, or could reasonably be expected to
become an "interested stockholder" within the meaning of Section 203 of
the DGCL, then this Agreement shall be void and unenforceable until such
time as such authorization and approval shall have been duly and validly
obtained.
13. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the State of Delaware or in a
Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of
any court of the United States located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party
will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (iii) agrees that such party
will not bring any action relating to this Agreement or the transactions
contemplated hereby in any court other than a court of the United States
located in the State of Delaware or a Delaware state court and (iv) waives
any right to trial by jury with respect to any claim or proceeding related
to or arising out of this Agreement or any of the transactions contemplated
hereby.
14. Public Announcement. Except to the extent required by law or
regulation, the Stockholder shall not issue any press release or other
public statement with respect to the transactions contemplated by this
Agreement and the Merger Agreement without the prior written consent of
Parent.
15. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled
to the extent possible.
-5-
<PAGE> 132
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by its
officer thereunto duly authorized and the Stockholder has signed this Agreement,
all as of the date first written above.
Parent,
By:
------------------------------------
Name:
Title:
------------------------------------
-6-
<PAGE> 133
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
NAME AND ADDRESS OF STOCKHOLDER OWNED OF RECORD
- ----------------------------------------------------------------------------- ----------------
<S> <C>
</TABLE>
<PAGE> 134
ANNEX III
[Needham & Company, Inc. letterhead]
July 22, 1997
Board of Directors
Elexsys International, Inc.
4405 Fortran Court
San Jose, California 94134
Gentlemen:
We understand that Elexsys International, Inc. ("Elexsys"), Sanmina
Corporation ("Sanmina"), and a wholly-owned subsidiary of Sanmina ("Merger
Sub"), have entered into an Agreement and Plan of Merger (the "Merger
Agreement") whereby Merger Sub will be merged with and into Elexsys and Elexsys
will become a wholly-owned subsidiary of Sanmina (the "Merger"). The terms of
the Merger are set forth more fully in the Merger Agreement.
Pursuant to the Merger Agreement, we understand that at the Effective Time
(as defined in the Merger Agreement), each issued and outstanding share of
common stock, par value $1.00 per share, of Elexsys will be converted into the
right to receive 0.33 of a share of common stock, par value $.01 per share, of
Sanmina (the "Sanmina Common Stock").
You have asked us to advise you as to the fairness, from a financial point
of view, of the consideration to be received by the stockholders of Elexsys in
the Merger. Needham & Company, Inc., as part of its investment banking business,
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of securities, private placements and valuations. We have acted as
financial advisor to Elexsys in connection with the Merger and will receive a
fee for our services, a portion of which is contingent on the consummation of
the Merger. In addition, Elexsys has agreed to indemnify us for certain
liabilities arising out of the rendering of this opinion.
For purposes of this opinion we have, among other things: (i) reviewed the
Merger Agreement; (ii) reviewed certain other documents relating to the Merger;
(iii) reviewed certain publicly available information concerning Sanmina and
Elexsys and certain other relevant financial and operating data of Sanmina and
Elexsys made available from the internal records of Sanmina and Elexsys; (iv)
reviewed the historical stock prices and trading volumes of Sanmina's and
Elexsys's common stock; (v) held discussions with members of senior management
of Sanmina and Elexsys concerning their current and future business prospects;
(vi) reviewed certain financial forecasts and projections prepared by the
respective managements of Sanmina and Elexsys; (vii) compared certain publicly
available financial data of companies whose securities are traded in the public
markets, which we deemed generally comparable to the business of Elexsys, to
similar data for Elexsys; (viii) reviewed the financial terms of certain other
business combinations that we deemed generally relevant; and (ix) performed
and/or considered such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In connection with our review and arriving at our opinion, we have not
assumed any responsibility to independently verify any of the foregoing
information, have relied on such information, and have assumed that all such
information is complete and accurate in all material respects. In addition, we
have assumed, with your consent, that (i) the Merger will be accounted for under
the pooling-of-interests method of accounting,
1
<PAGE> 135
(ii) the Merger will constitute a tax-free reorganization, and (iii) any
material liabilities (contingent or otherwise, known or unknown) of Sanmina and
Elexsys are as set forth in the consolidated financial statements of Sanmina and
Elexsys, respectively. With respect to Sanmina's and Elexsys's financial
forecasts provided to us by their respective managements, we have assumed for
purposes of our opinion that such forecasts have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of such
managements, at the time of preparation, of the future operating and financial
performance of Sanmina and Elexsys. We have not assumed any responsibility for
or made or obtained any independent evaluation, appraisal or physical inspection
of the assets or liabilities of Sanmina or Elexsys. Further, our opinion is
based on economic, monetary and market conditions existing as of the date
hereof, and in rendering this opinion, we have relied without independent
verification on the accuracy, completeness and fairness of all historical
financial and other information which was either publicly available or furnished
to us by Sanmina and Elexsys. Our opinion as expressed herein is limited to the
fairness, from a financial point of view, of the consideration to be received by
the stockholders of Elexsys in the Merger and does not address Elexsys's
underlying business decision to engage in the Merger. Our opinion does not
constitute a recommendation to any stockholder of Elexsys as to how such
stockholder should vote on the proposed Merger.
We are not expressing any opinion as to what the value of Sanmina Common
Stock will be when issued to the stockholders of Elexsys pursuant to the Merger
or the prices at which Sanmina Common Stock will actually trade at any time.
In the ordinary course of our business, we may actively trade the equity
securities of Elexsys or Sanmina for our own account or for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This letter and the opinion expressed herein are provided at the request
and for the information of the Board of Directors of Elexsys and may not be
quoted or referred to or used for any purpose without our prior written consent,
except that this letter may be disclosed in connection with any registration
statement or proxy statement used in connection with the Merger so long as this
letter is quoted in full in such registration statement or proxy statement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the stockholders of Elexsys in
the Merger is fair to the stockholders of Elexsys from a financial point of
view.
Very truly yours,
/s/ NEEDHAM & COMPANY, INC.
--------------------------------------
Needham & Company, Inc.
2
<PAGE> 136
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VIII of the Registrant's Certificate of Incorporation provides for
the indemnification of directors to the fullest extent permissible under
Delaware law.
Article VI of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the corporation if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
The general effect of Section 145 of the Delaware General Corporation Law,
the Company's charter documents and the indemnification agreements is to provide
indemnification to officers and directors for liabilities that may arise by
reason of their status as officers or directors, other than liabilities arising
from willful or intentional misconduct, acts or omissions not in good faith,
unlawful distributions of corporate assets or transactions from which the
officer or director derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger dated as of July 22, 1997 among the Registrant,
Elexsys International, Inc. and SANM Acquisition Subsidiary, Inc. (included as
Annex I to the Proxy Statement/Prospectus which is a part of this Registration
Statement on Form S-4).
2.2 Form of Stockholder Agreement dated as of July 22, 1997 among the Registrant,
Elexsys and certain stockholders of Elexsys (included as Annex II to the Proxy
Statement/Prospectus which is a part of this Registration Statement on Form S-4).
2.3+ Form of Registration Rights Agreement to be entered into between Registrant and
Milan Mandaric.
3.2(1) Restated Certificate of Incorporation of Registrant.
3.3(2) Bylaws of Registrant, as amended.
4.2(2) Specimen Stock Certificate.
5.1+ Opinion of Wilson Sonsini Goodrich & Rosati ("WSGR") relating to validity of
shares registered hereby.
8.1+ Tax opinion of WSGR.
8.2+ Tax opinion of Cooley Godward LLP.
10.4(3) Form of Indemnification Agreement.
10.2(5) Amended 1990 Incentive Stock Plan.
10.3(2) 1993 Employee Stock Purchase Plan.
10.10(2) Lease for premises at 2109 O'Toole Avenue, Suites A-E, San Jose, California
(Portion of Plant I).
10.11(2) Lease for premises at 2101 O'Toole Avenue, San Jose, California (Portion of Plant
I).
</TABLE>
II-1
<PAGE> 137
<TABLE>
<S> <C>
10.12(2) Lease for premises at 2539 Scott Boulevard, Santa Clara, California (Plant III).
10.14(2) Lease for premises at 2060-2068 Bering Drive, San Jose, California (Plant II).
10.15(2) Lease for premises at 4220 Business Center Drive, Fremont, California (Plant V).
10.16(2) Lease for premises at McCarthy Boulevard, Milpitas, California (Plant VI).
10.17(2) Lease for premises at 2121 O'Toole Avenue, San Jose, California (Corporate
Headquarters).
10.19(3) Lease for premises at 1250 American Parkway, Richards, Texas (Plant VII).
10.20(3) Lease for premises at 6453 Kaiser Drive, Fremont, California (Plant VIII).
10.21(4) Asset Purchase Agreement dated September 28, 1994 between Registrant and
Comptronix Corporation.
10.22(5) Lease for premises at 355 East Trimble Road, San Jose, California.
10.23(6) Stock Purchase Agreement dated May 31, 1995 between Sanmina Corporation, Assembly
Solutions, Inc. and the principal stockholders of Assembly Solutions, Inc.
10.24(7) Indenture dated August 15, 1995 between Registrant and Norwest Bank Minnesota,
N.A. as Trustee.
10.25(8) Asset Purchase Agreement dated September 20, 1996 between Registrant and
Comptronix Corporation.
21(1) Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche
23.3+ Consents of WSGR as to legal matters and tax opinion (included in Exhibits 5.1 and
8.1, respectively)
23.4+ Consent of Cooley Godward (included in Exhibit 8.2).
</TABLE>
- ---------------
+ Previously filed.
(1) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Report on Form 10-K for the fiscal year ended September
30, 1996 filed with the Securities and Exchange Commission ("SEC") on
December 24, 1996, as amended by reports on Form 10-K/A filed December 27,
1996 and March 25, 1997.
(2) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1, No. 33-70700 filed
with the SEC on February 19, 1993.
(3) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1 No. 33-70700 filed with
the SEC on October 22, 1993.
(4) Incorporated by reference to exhibit no. 2 previously filed with
Registrant's Report on Form 8-K filed with the SEC on October 28, 1994.
(5) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Report on Form 10-K filed with the SEC on December 29,
1994.
(6) Incorporated by reference to the like-numbered exhibit previously filed with
Registrant's Report on Form 10-Q filed with the SEC on July 31, 1995.
(7) Incorporated by reference to the like-numbered exhibit previously filed with
Registrant's Report on Form 10-K for the fiscal year ended September 30,
1995.
(8) Incorporated by reference to exhibit 2 previously filed with the
Registrant's Report on Form 8-K filed with the SEC on November 15, 1996.
(B) FINANCIAL STATEMENT SCHEDULES
None.
II-2
<PAGE> 138
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement.
(i) to include any prospectus required by section 10(a) (3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and
(iii) 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;
(b) that, for the purpose of determining any liability under the Securities
Act of 1933, each such posteffective amendment shall be deemed to be a now
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;
(c) 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;
(d) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(e) that prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145 (c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form;
(f) that every prospectus (i) that is filed pursuant to paragraph (c)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a) (3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, 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;
(g) 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
II-3
<PAGE> 139
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;
(h) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request; and
(i) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
II-4
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to Registration Statement 333-36521 to be signed on
its behalf by the undersigned, thereunto duly authorized, in San Jose,
California on the 6th of October, 1997.
SANMINA CORPORATION
By: /s/ JURE SOLA*
------------------------------------
Jure Sola, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement 333-36521 has been signed below
by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------- -------------------
<C> <S> <C>
President, Chief Executive October 6, 1997
/s/ JURE SOLA* Officer and Director
- --------------------------------------------- (Principal Executive
(Jure Sola) Officer)
Vice President and Chief October 6, 1997
/s/ BERNARD WHITNEY Financial Officer
- --------------------------------------------- (Principal Financial and
(Bernard Whitney) Accounting Officer)
/s/ MARIO ROSATI* Director October 6, 1997
- ---------------------------------------------
(Mario Rosati)
/s/ BERNARD VONDERSCHMITT* Director October 6, 1997
- ---------------------------------------------
(Bernard Vonderschmitt)
/s/ NEIL BONKE* Director October 6, 1997
- ---------------------------------------------
(Neil Bonke)
/s/ JOHN BOLGER* Director October 6, 1997
- ---------------------------------------------
(John Bolger)
*By: /s/ BERNARD WHITNEY Attorney-in-fact
- ---------------------------------------------
(Bernard Whitney)
</TABLE>
II-5
<PAGE> 141
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of July 22, 1997 among the Registrant,
Elexsys International, Inc. and SANM Acquisition Subsidiary, Inc. (included as
Annex I to the Proxy Statement/Prospectus which is a part of this Registration
Statement on Form S-4).
2.2 Form of Stockholder Agreement dated as of July 22, 1997 among the Registrant,
Elexsys and certain stockholders of Elexsys (included as Annex II to the Proxy
Statement/Prospectus which is a part of this Registration Statement on Form
S-4).
2.3+ Form of Registration Rights Agreement to be entered into between Registrant and
Milan Mandaric.
3.2(1) Restated Certificate of Incorporation of Registrant.
3.3(2) Bylaws of Registrant, as amended.
4.2(2) Specimen Stock Certificate.
5.1+ Opinion of Wilson Sonsini Goodrich & Rosati ("WSGR") relating to validity of
shares registered hereby.
8.1+ Tax opinion of WSGR.
8.2+ Tax opinion of Cooley Godward.
10.4(3) Form of Indemnification Agreement.
10.2(5) Amended 1990 Incentive Stock Plan.
10.3(2) 1993 Employee Stock Purchase Plan.
10.10(2) Lease for premises at 2109 O'Toole Avenue, Suites A-E, San Jose, California
(Portion of Plant I).
10.11(2) Lease for premises at 2101 O'Toole Avenue, San Jose, California (Portion of
Plant I).
10.12(2) Lease for premises at 2539 Scott Boulevard, Santa Clara, California (Plant III).
10.14(2) Lease for premises at 2060-2068 Bering Drive, San Jose, California (Plant II).
10.15(2) Lease for premises at 4220 Business Center Drive, Fremont, California (Plant V).
10.16(2) Lease for premises at McCarthy Boulevard, Milpitas, California (Plant VI).
10.17(2) Lease for premises at 2121 O'Toole Avenue, San Jose, California (Corporate
Headquarters).
10.19(3) Lease for premises at 1250 American Parkway, Richards, Texas (Plant VII).
10.20(3) Lease for premises at 6453 Kaiser Drive, Fremont, California (Plant VIII).
10.21(4) Asset Purchase Agreement dated September 28, 1994 between Registrant and
Comptronix Corporation.
10.22(5) Lease for premises at 355 East Trimble Road, San Jose, California.
10.23(6) Stock Purchase Agreement dated May 31, 1995 between Sanmina Corporation,
Assembly Solutions, Inc. and the principal stockholders of Assembly Solutions,
Inc.
10.24(7) Indenture dated August 15, 1995 between Registrant and Norwest Bank Minnesota,
N.A. as Trustee.
10.25(8) Asset Purchase Agreement dated September 20, 1996 between Registrant and
Comptronix Corporation.
21(1) Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche
</TABLE>
<PAGE> 142
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
23.3+ Consents of WSGR as to legal matters and tax opinion (included in Exhibits 5.1
and 8.1, respectively)
23.4+ Consent of Cooley Godward (included in Exhibit 8.2).
</TABLE>
- ---------------
+ Previously filed.
(1) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Report on Form 10-K for the fiscal year ended September
30, 1996 filed with the Securities and Exchange Commission ("SEC") on
December 24, 1996, as amended by reports on Form 10-K/A filed December 27,
1996 and March 25, 1997.
(2) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1, No. 33-70700 filed
with the SEC on February 19, 1993.
(3) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1 No. 33-70700 filed with
the SEC on October 22, 1993.
(4) Incorporated by reference to exhibit no. 2 previously filed with
Registrant's Report on Form 8-K filed with the SEC on October 28, 1994.
(5) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Report on Form 10-K filed with the SEC on December 29,
1994.
(6) Incorporated by reference to the like-numbered exhibit previously filed with
Registrant's Report on Form 10-Q filed with the SEC on July 31, 1995.
(7) Incorporated by reference to the like-numbered exhibit previously filed with
Registrant's Report on Form 10-K for the fiscal year ended September 30,
1995.
(8) Incorporated by reference to exhibit 2 previously filed with the
Registrant's Report on Form 8-K filed with the SEC on November 15, 1996.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our reports dated October 23,
1996 included (or incorporated by reference) in Sanmina's Form 10-K for the year
ended September 30, 1996 and to all references to our firm included in this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
San Jose, California
October 6, 1997
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement of Sanmina of our
report dated October 18, 1996 (except as to the 5th paragraph of note 14 which
is dated November 14, 1996) included in Elexsys' Form 10-K for the year ended
September 30, 1996 and to the references to our firm included in this
Registration Statement under the headings "Experts," "Selected Historical
Financial Data," and "Certain Information Concerning Elexsys."
DELOITTE & TOUCHE
Costa Mesa, California
October 6, 1997
