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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
FIRST AMENDED AND RESTATED SOLICITATION/RECOMMENDATION
STATEMENT PURSUANT TO SECTION 14(d)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
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ADFLEX SOLUTIONS, INC.
(NAME OF SUBJECT COMPANY)
ADFLEX SOLUTIONS, INC.
(NAME OF PERSON FILING STATEMENT)
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COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
006866107
(CUSIP NUMBER OF CLASS OF SECURITIES)
NEIL DIAL, PRESIDENT AND CHIEF OPERATING OFFICER
ADFLEX SOLUTIONS, INC.
2001 WEST CHANDLER BOULEVARD
CHANDLER, ARIZONA 85224
(602) 963-4584
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
COPIES OF COMMUNICATIONS TO:
KAREN C. MCCONNELL
ROBERT J. HACKETT
AUDREY V. DORCH
FENNEMORE CRAIG, P.C.
3003 NORTH CENTRAL AVENUE, SUITE 2600
PHOENIX, ARIZONA 85012
(602) 916-5000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is ADFlex Solutions, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 2001 West Chandler Boulevard, Chandler, Arizona 85224. The title
of the class of equity securities to which this First Amended and Restated
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement" or
this "Schedule 14D-9") relates is the common stock, par value $0.01 per share,
of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer (the "Offer") described in the
Tender Offer Statement on Schedule 14D-1, dated July 7, 1999 (as amended or
supplemented, the "Schedule 14D-1"), filed by Innovex, Inc., a Minnesota
corporation ("Parent"), and its wholly-owned subsidiary Innovex Acquisition
Corp., a Delaware corporation ("Merger Sub" or "Purchaser"), with the Securities
and Exchange Commission (the "Commission"), involving an offer by Purchaser to
purchase all of the issued and outstanding Shares at a price of $3.80 per Share,
net to the seller in cash (subject to reduction for any applicable federal
back-up withholding or stock transfer taxes payable by the seller), without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in Purchaser's Offer to Purchase, dated July 7, 1999, and
the related Letter of Transmittal (together with any amendments or supplements
thereto, the "Offer Documents"). The Offer is being made pursuant to an
Agreement and Plan of Merger, dated as of July 1, 1999 (as it may be amended or
supplemented from time to time, the "Merger Agreement"), among Parent, Merger
Sub and the Company, a copy of which is filed as Exhibit 4 to this Schedule
14D-9 and is incorporated herein by reference in its entirety.
The Merger Agreement provides, among other things, for the making of the
Offer by Purchaser, and further provides that, following the completion of the
Offer, upon the terms and subject to the conditions of the Merger Agreement, and
in accordance with the Delaware General Corporation Law (the "DGCL"), Merger Sub
will be merged with and into the Company (the "Merger"). Following the effective
time of the Merger (the "Effective Time"), the Company will continue as the
surviving corporation (the "Surviving Corporation") and become a wholly-owned
subsidiary of Parent. At the Effective Time, each Share then issued and
outstanding immediately prior to the Effective Time (other than Shares held by
the Company or by any subsidiary of the Company, or owned by Parent, Purchaser
or any other subsidiary of Parent, which shall be canceled, and other than
Shares, if any (collectively, "Dissenting Shares"), held by stockholders who
have properly exercised appraisal rights under Section 262 of the DGCL) will, by
virtue of the Merger and without any action on the part of the holders of the
Shares, be converted into the right to receive in cash the per Share price paid
in the Offer (the "Per Share Price"), payable to the holder thereof, without
interest, upon surrender of the certificate formerly representing such Share,
less any required withholding taxes. The Merger Agreement is more fully
described in Item 3 of this Schedule 14D-9. The Schedule 14D-1 indicates that
the principal executive offices of Purchaser are located at c/o Innovex, Inc.,
530 11th Avenue South, Hopkins, Minnesota 55343, and the principal executive
offices of Parent are located at 530 11th Avenue South, Hopkins, Minnesota
55343.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above and incorporated herein by
reference. Unless the context otherwise requires, references to the Company in
this Schedule 14D-9 are to the Company and its subsidiaries, viewed as a single
entity.
(b) Except as described or referred to in the attached Annex I (Information
Statement), or set forth in this Item 3(b), to the knowledge of the Company, as
of the date hereof, there are no material contracts, agreements, arrangements,
understandings or any actual or potential conflicts of interest between the
Company or its affiliates and (i) the Company, its officers, directors or
affiliates, or (ii) Parent, Purchaser, or their executive officers, directors or
affiliates. The following summaries of agreements, including the Merger
Agreement and the Tender Agreement, as well as the other agreements described or
referred to in Annex I, are qualified in their entirety by reference to the
copies thereof filed as exhibits to this Schedule 14D-9.
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In considering the recommendation of the Company's Board of Directors set
forth in Item 4 below, the Company's stockholders should be aware that certain
members of management and the Board have interests in the Offer and the Merger,
which are described herein and in Annex I hereto and which may present them with
certain conflicts of interest. The Board of Directors was aware of these
potential conflicts of interest and considered them along with the factors
described in Item 4 below.
THE MERGER AGREEMENT
The following description of certain provisions of the Merger Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Merger Agreement, a copy of which is filed as Exhibit 4 to this Schedule
14D-9 and incorporated herein by reference. For the purposes of this Item 3(b),
capitalized terms used and not otherwise defined herein have the meanings given
to such terms in the Merger Agreement.
The Offer
The Merger Agreement provides that as promptly as practicable (but in any
event no later than three business days after the announcement of the Merger
Agreement), Parent will cause Purchaser to commence the Offer. The parties to
the Merger Agreement have agreed in the Merger Agreement that the obligation of
Purchaser to consummate the Offer, and to accept for payment and pay for the
Shares tendered pursuant to the Offer and not withdrawn, is subject to the
conditions of the Offer described under "Certain Conditions of the Offer" below
(the "Offer Conditions").
Pursuant to the Merger Agreement, the Offer will be made by means of an
offer to purchase which will contain as conditions only the Minimum Condition
and the other Offer Conditions described below, and, subject to the succeeding
sentence, will otherwise contain, and be entirely consistent with, the terms and
conditions of the Offer as described in the Merger Agreement. Under the Merger
Agreement, each of Purchaser and Parent, on behalf of Purchaser, expressly
reserved the right, in its sole discretion, to waive any such condition and to
make any other changes to the terms of the Offer, provided, that, without the
prior written consent of the Company, Purchaser will not, and Parent will cause
Purchaser not to, (i) decrease or change the form of the Per Share Amount, (ii)
decrease the number of Shares subject to the Offer, (iii) amend or waive the
Minimum Condition, or impose conditions other than the Offer Conditions on the
Offer, (iv) except as provided in Section 1.1(b) of the Merger Agreement, extend
the expiration date of the Offer, or (v) amend any term of the Offer in a manner
materially adverse to holders of Shares. The Merger Agreement provides that the
price per Share will be net to the sellers in cash, without interest, subject to
reduction only for any applicable federal back-up withholding taxes or stock
transfer taxes payable by the seller. Under the Merger Agreement, Purchaser may,
without the consent of the Company, subject to the Company's right to terminate
the Merger Agreement, (i) extend the Offer from time to time if at the initial
expiration date of the Offer (which shall be 20 business days following
commencement of the Offer) or any extension thereof any of the Offer Conditions
shall not have been satisfied or waived, until such time as such conditions are
satisfied or waived, but not beyond December 31, 1999, and (ii) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the Commission or the staff thereof applicable to the Offer, but not beyond
December 31, 1999. The Merger Agreement also provides that Purchaser will, from
time to time, at the request of the Company, extend the Offer if at any
scheduled expiration date of the Offer any of the Offer Conditions has not been
satisfied or waived or until such time as such conditions are satisfied or
waived; provided, however, that Purchaser shall not be required to extend the
Offer beyond December 31, 1999.
The Merger Agreement provides that, assuming the satisfaction or waiver of
the Offer Conditions, Parent will cause Purchaser to accept for payment and pay
for all, in accordance with the terms of the Offer, all Shares validly tendered
and not withdrawn pursuant to the Offer as soon as practicable after expiration
of the Offer. The Merger Agreement further provides that the Offer Conditions
are solely for the benefit of Purchaser and may be waived by Purchaser or Parent
on behalf of Purchaser, in whole or in part, from time to time in its sole
discretion, and the failure by Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right and each such
right will be deemed an ongoing right and may be asserted at any time and from
time to time.
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Certain Conditions of the Offer
Notwithstanding any other provisions of the Offer, Purchaser will not be
required to accept for payment, or subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(C) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
promptly after expiration or termination of the Offer), to pay for any Shares
and, subject to any such rules or regulations, may postpone the acceptance for
payment or payment for any Shares tendered, and, subject to the terms and
conditions of the Merger Agreement may amend or terminate the Offer (whether or
not any Shares have then been purchased or paid for pursuant to the Offer), (a)
unless the following conditions have been satisfied: (i) prior to the Purchase
Date there will have been validly tendered and not withdrawn that number of
Shares which constitutes a majority of the total number of then outstanding
Shares (including for purposes of this calculation all Shares issuable upon
exercise of all vested options and all options that will vest on or before
December 31, 1999, and conversion of all convertible securities or other rights
to purchase or acquire the Shares) (the "Minimum Condition"), and (ii) any
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), shall have expired or been terminated
(the "HSR Condition"), or (b) if at any time on or after the date of the Merger
Agreement and before the Purchase Date (whether or not any Shares have then been
accepted for payment or paid for pursuant to the Offer), any of the following
shall have occurred:
(i) any Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order which is in effect, or there shall be initiated,
instituted or pending any such action having any effect, and which (A)
restricts, prevents or prohibits consummation of the transactions
contemplated by the Merger Agreement, including the Offer or the Merger,
(B) prohibits, limits or otherwise adversely affects the ownership or
operation by Parent or any of its subsidiaries or compels the Company,
Parent or any of their subsidiaries to dispose of or hold separate all or
any portion of the business or assets of the Company and its subsidiaries;
or (C) imposes material limitations on the ability of Purchaser to exercise
effectively full rights of ownership of any Shares, including the right to
vote any Shares acquired by Purchaser pursuant to the Offer or otherwise on
all matters properly presented to the Company's stockholders;
(ii) the representations and warranties of the Company contained in
the Merger Agreement shall not be true and correct in all material respects
as of the Purchase Date as though made anew as of such date;
(iii) the Company shall not have performed or complied in all material
respects with its covenants under the Merger Agreement and such failure
continues until the later of (A) 15 calendar days after actual receipt by
it of written notice from Parent setting forth in detail the nature of such
failure, or (B) the Purchase Date;
(iv) there shall have occurred any change, effect, event or condition
constituting a Company Material Adverse Effect;
(v) the Merger Agreement shall have been terminated in accordance with
its terms;
(vi) the Company Board shall have (A) withdrawn or materially modified
(including by amendment of this Schedule 14D-9) in a manner adverse to
Purchaser or Parent or taken a position inconsistent with its approval or
recommendation of the Offer, the Merger or the Merger Agreement, (B)
approved or recommended any Company Takeover Proposal, (C) taken any action
referred to in Section 5.2 of the Merger Agreement that is prohibited
thereby or would be so prohibited but for the exceptions thereto, or (D)
resolved or publicly disclosed any intention to do the foregoing;
(vii) there shall have occurred (A) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
(B) a decline of at least 10% in either the Dow Jones Average of Industrial
Stocks or Standard & Poor's 500 Index from the date of the Merger
Agreement, (C) the declaration of a banking moratorium or any limitation or
suspension of payments in respect of the extension of credit by banks or
other lending institutions in the United States, (D) any commencement of
war, armed hostilities or other international or national calamity directly
involving the United
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States or having a significant adverse effect on the functionality of
financial markets in the United States, or (E) in the case of any of the
foregoing existing at the time of commencement of the Offer, a material
acceleration or worsening thereof; or
(viii) it shall have been publicly disclosed or Parent shall have
otherwise learned that (A) any Person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or its affiliates or any
group of which any of them is a member or any affiliates controlled by
them, shall have acquired beneficial ownership (determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of more than 20% of the
outstanding Shares or (B) any Person or group shall have entered into a
Company Acquisition Agreement or an agreement in principle with respect
thereto.
Notwithstanding the foregoing, the institution of an action or suit that
challenges the transactions contemplated by the Merger Agreement shall not be
deemed the failure of the foregoing conditions except in the circumstances
described in clause (i) above.
The failure by Purchaser at any time to exercise any of the foregoing
rights will not be deemed a waiver of any such right, and each such right will
be deemed an ongoing right that may be asserted at any time and from time to
time. Pursuant to the Merger Agreement, a "Company Material Adverse Effect"
means any change or effect, event or condition (other than an action or suit
challenging the transactions contemplated by the Merger Agreement) that would
(i) have a material adverse effect on the business, properties, results of
operations, financial condition or prospects of the Company and its subsidiaries
taken as a whole, (ii) prevent or materially delay the consummation of any of
the transactions contemplated by the Merger Agreement, or (iii) prevent or
materially delay the Company's ability to consummate the transactions
contemplated by the Merger Agreement.
Directors Following the Offer
The Merger Agreement provides that, promptly upon the purchase of Shares by
Purchaser pursuant to the offer in accordance with the terms of the Merger
Agreement, and from time to time thereafter, (i) Parent will be entitled to
designate such number of directors ("Parent's Designees"), rounded up to the
next whole number, as will give Parent, subject to compliance with Section 14(f)
of the Exchange Act, representation on the Company Board equal to the product of
(A) the number of directors on the Company Board (giving effect to any increase
in the number of directors pursuant to the provisions below) and (B) the
percentage that such number of Shares so purchased bears to the aggregate number
of Shares outstanding (such number being the "Board Percentage"); provided,
however, that if the number of Shares purchased pursuant to the Offer equals or
exceeds a majority of the outstanding Shares, the Board Percentage will in all
events be at least a majority of the members of the Company Board, and (ii) the
Company will, upon request by Parent, promptly satisfy the Board Percentage by
(A) increasing the size of the Company Board or (B) using reasonable efforts to
secure the resignations of such number of directors as is necessary to enable
Parent's Designees promptly to be so elected, subject in all instances to
compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. At the request of Parent, the Company will take all lawful action
necessary to effect any such election.
The Merger Agreement provides that, notwithstanding any other provision of
the Merger Agreement, of the certificate of incorporation or bylaws of the
Company or of applicable law to the contrary, following the election or
appointment of Parent's Designees, and prior to the Effective Time, the
affirmative vote of a majority of the directors of the Company who were
directors of the Company as of the date of the Merger Agreement (who will act as
an independent committee of the Board of Directors for this purpose) (the
"Continuing Directors") will be required in addition to the approval of the
Company Board, to (i) amend or terminate the Merger Agreement, (ii) extend the
time for performance or waiver of Parent's and Merger Sub's respective
obligations or other acts of Parent or Merger Sub under the Merger Agreement, or
(iii) waive any of the Company's rights under the Merger Agreement.
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The Merger
Pursuant to the Merger Agreement, upon the terms and subject to the
conditions of the Merger Agreement, and in accordance with the DGCL, at the
Effective Time, Merger Sub will be merged with and into the Company. The Merger
Agreement provides that as a result of the Merger, the separate corporate
existence of Merger Sub will cease and the Company will continue as the
Surviving Corporation. The terms of the Merger Agreement provide that at the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
will be amended and restated to be identical to the Certificate of Incorporation
of Merger Sub as in effect immediately prior to the Effective Time; provided,
that the name of the Surviving Corporation will be the name of the Company. The
Merger Agreement further provides that at the Effective Time and without any
further action on the part of the Company or Merger Sub, the Bylaws of the
Surviving Corporation shall be amended and restated to be identical to the
Bylaws of Merger Sub as in effect immediately prior to the Effective time;
provided, that the name of the Surviving Corporation will be the name of the
Company. Pursuant to the terms of the Merger Agreement, the directors of Merger
Sub immediately prior to the Effective Time will be the initial directors of the
Surviving Corporation, and the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation, in
each case retaining their respective positions and terms of office.
The terms of the Merger Agreement provide that at the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities: (i) each Share (other
than any Shares to be canceled pursuant to clause (ii) below and any Dissenting
Shares) will be canceled, extinguished and converted automatically into the
right to receive the Per Share Amount payable to the holder thereof, without
interest, upon surrender of the certificate that prior to the Merger represented
such Share, less any required withholding or stock transfer taxes; (ii) each
Share held in the treasury of the Company or any subsidiary and each Share owned
by Parent, Purchaser or any other direct or indirect wholly-owned subsidiary of
Parent immediately prior to the Effective Time, other than shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties, will be automatically canceled and retired
without any conversion thereof and no payment or distribution will be made with
respect thereto; and (iii) each share of Common Stock, $0.01 par value per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time will be converted into one share of Common Stock, $0.01 par value per
share, of the Surviving Corporation.
The Merger Agreement provides that, upon the consummation of the Offer,
each holder of a then-outstanding option to purchase Shares under the Company's
1993 Equity Incentive Plan, 1994 Stock Incentive Plan and Employee Stock
Purchase Plan (collectively, the "Stock Option Plans"), whether or not then
exercisable (the "Options"), will, in settlement thereof, receive from the
Company for each Share subject to such Option an amount (subject to any
applicable withholding tax) in cash equal to the difference between the Per
Share Amount and the per Share exercise price of such Option to the extent such
difference is a positive number (the "Option Consideration"); provided, however,
that with respect to any person subject to Section 16(a) of the Exchange Act,
any such amount will be paid as soon as practicable after the first date payment
can be made without any liability to such person under Section 16(b) of the
Exchange Act. Under the terms of the Merger Agreement, at the Effective Time,
each Option will be canceled, and any and all rights the holder had or may have
had in respect to such Option shall be released.
The Company has agreed in the Merger Agreement to use reasonable efforts to
obtain all necessary consents or releases from holders of Options under the
Stock Option Plans and to take all such other lawful action as may be necessary
to provide that (i) the Stock Option Plans shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
the Company or any subsidiary thereof shall be canceled as of the Effective
Time, and (ii) following the Effective Time the Company will use all reasonable
efforts to assure that following the Effective Time, no participant in the Stock
Option Plans or other plans, programs or arrangements shall have any right
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary thereof.
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The Merger Agreement provides that each dissenting Share will be converted
into the right to receive payment from the Surviving Corporation with respect
thereto in accordance with the provisions of the DGCL.
Representations and Warranties
The Merger Agreement contains various customary representations and
warranties of the parties thereto including, without limitation, representations
and warranties by the Company as to the Company's organization, standing and
corporate power, subsidiaries, capital structure, authorization, recommendation
and required stockholder vote for the Merger Agreement, noncontravention of any
governing instruments, laws or other agreements, filings with the Commission,
financial statements and undisclosed liabilities, information provided in the
Offer documents and this Schedule14D-9, absence of certain changes or events,
litigation, compliance with laws, employee benefit plans, taxes, environmental
matters, contracts, amendment of rights agreement, intellectual property,
millennium compliance, ownership of assets, brokers, and the opinion of the
Company's financial advisor. In addition, the Merger Agreement contains
representations and warranties of Parent and Purchaser concerning their
organization and standing, authorization, recommendation and required
stockholder vote for the Merger Agreement, noncontravention of any governing
instruments, laws or other agreements, information provided in the Offer
documents and the Proxy Statement, financing, brokers, SEC documents and
financial statements.
Interim Operations of the Company
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, except (i) as expressly provided in the Merger Agreement, or (ii) as
expressly and specifically described in Section 5.1 of the Company Disclosure
Letter, during the period from the date of the Merger Agreement and prior to the
Effective Time, the Company will not, and will not permit any of its
subsidiaries to:
(A) amend its certificate of incorporation or bylaws or similar
organizational documents;
(B) other than dividends or distributions (including liquidating
dividends) by the Company's direct or indirect wholly-owned subsidiaries,
or by a subsidiary that is partially owned by the Company or any of its
subsidiaries, provided that the Company or any such subsidiary receives its
proportionate share thereof, (1) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital
stock, (2) 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 (3) purchase, redeem
or otherwise acquire any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(C) except upon exercise of the Options or with respect to the July
31, 1999 purchase under the Employee Stock Purchase Plan, 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;
(D) 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, limited liability company, partnership, joint venture,
association or other business organization or division thereof;
(E) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets, other
than in the ordinary course of business consistent with past practice;
(F) (1) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities or warrants or
other rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another Person, 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 short-term borrowings
incurred in the ordinary course of business consistent with past practice,
or (2) make any loans, advances or capital contributions to, or investments
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in, any other Person, other than to the Company or any subsidiaries of the
Company or to officers and employees of the Company or any of its
subsidiaries for travel, business or relocation expenses in the ordinary
course of business;
(G) make or agree to make any capital expenditure or capital
expenditures other than capital expenditures set forth in the capital
budget of the Company;
(H) make any changes to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;
(I) except as required by law or contemplated by the Merger Agreement,
enter into, adopt or amend in any material respect or terminate any Stock
Option Plan or any other agreement, plan or policy involving the Company or
any of its subsidiaries and one or more of their directors, officers or
employees, or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any Company pension plans, or
change the manner in which contributions to any Company pension plans are
made or the basis on which such contributions are determined;
(J) increase the compensation of any director or executive officer of
the Company or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of the Merger Agreement to any such
Person;
(K) hire any new domestic employees, or enter into consulting or
similar agreements, other than employees providing direct labor; or
(L) authorize, or commit or agree to take, any of the foregoing
action.
Access to Information
In the Merger Agreement, the Company has agreed, during the period prior to
the Effective Time, to (i) allow all designated officers, attorneys, accountants
and other representatives of Parent, reasonable access at all reasonable times
to the offices, records, files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs, of the parties
and their respective subsidiaries, as the case may be, and (ii) furnish to
Parent and its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
persons may reasonably request. The Merger Agreement further provides that,
subject to the requirements of applicable laws, and except for such actions as
are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Offer and the Merger, the parties will, and will
instruct each of their respective affiliates, associates, partners, employees,
agents and advisors to, hold in confidence all such information as is
confidential or proprietary and to use such information only in connection with
the Offer and the Merger.
Filings; Reasonable Efforts
The Merger Agreement provides that, subject to the terms and conditions
therein provided, each of the parties thereto 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 Offer, the Merger and the other transactions
contemplated by the Merger Agreement, which actions will include, without
limitation, (i) seeking to obtain all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and making all necessary
registrations and filings (including filings with Governmental Entities) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) seeking to obtain all necessary consents, approvals or waivers from third
parties, (iii) defending any lawsuits or other legal proceedings, whether
judicial or administrative, challenging the Merger Agreement or the consummation
of the transaction contemplated thereby, including seeking to have any adverse
order entered by any court or other Governmental Entity vacated or reversed and
(iv) execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purpose
of, the Merger Agreement.
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Pursuant to the Merger Agreement, in case at any time after the Effective
Time any further action becomes necessary or desirable to carry out the purposes
of the Merger Agreement, each party thereto will use all reasonable efforts to
take, or cause to be taken, all such necessary actions.
Employee Matters
The Merger Agreement provides that from and after the Effective Time, the
Surviving Corporation will have sole discretion over the hiring, promotion,
retention, firing and other terms and conditions of the employment of employees
of the Surviving Corporation. Subject to the immediately preceding sentence,
Parent will provide, or will cause the Surviving Corporation to provide, for the
benefit of employees of the Surviving Corporation or its subsidiaries who were
employees of the Company immediately prior to the Effective Time, at the
election of Parent, employee benefit plans that are either (i) in the aggregate
substantially comparable to the employee benefit plans provided to such
individuals by the Company on the date of the Merger Agreement, or (ii) in the
aggregate substantially comparable to the employee benefit plans provided to
similarly situated employees of Parent or its subsidiaries who were not
employees of the Company immediately prior to the Effective Time; provided,
however, that notwithstanding the foregoing, (i) nothing in the Merger Agreement
will be deemed to require Parent to modify the benefit formulas under any
pension plan of the Company in a manner that increases the aggregate expenses
thereof as of the date hereof in order to comply with the requirements of ERISA,
the Code or the Tax Reform Act of 1986, (ii) employee stock ownership, stock
option and similar equity-based plans, programs and arrangements of the Company
or any of its subsidiaries are not encompassed within the meaning of the term
"employee benefit plans" under the Merger Agreement, (iii) nothing in the Merger
Agreement will obligate Parent or the Surviving Corporation to continue any
particular employee benefit plan for any period after the Effective Time, and
(iv) Parent may substitute any benefit available to employees whom it determines
are similarly situated in other parts of its business for any employee benefit
under any such plan.
Under the terms of the Merger Agreement, Parent will cause the Surviving
Corporation to honor (subject to any withholdings under applicable law) all
employment, consulting and severance agreements or arrangements to which the
Company or any of its subsidiaries is presently a party.
No Solicitation
Pursuant to the terms of the Merger Agreement, the Company, its affiliates
and their respective officers, directors, employees, representatives and agents,
will immediately cease any discussions or negotiations, if any, with any parties
conducted with respect to any Company Takeover Proposal. The Merger Agreement
further provides that the Company will not, nor will it permit any of its
subsidiaries to, nor will it authorize or permit any of its officers, directors
or employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to, directly
or indirectly, (i) solicit, initiate or encourage (including without limitation
by way of furnishing information), or take any other action designed or
reasonably likely to facilitate, any inquiries or the making of any proposal
which constitutes or reasonably may give rise to any Company Takeover Proposal,
or (ii) participate in any discussions or negotiation regarding any Company
Takeover Proposal; provided, however, that if, at any time prior to the Purchase
Date the Company Board determines in good faith, after taking into account the
advice of its legal counsel, that it is necessary to do so in order to comply
with its fiduciary duties to the Company's stockholders, the Company may, in
response to a Company Takeover Proposal that was not solicited by it and did not
otherwise result from a breach of any provision of the Merger Agreement, (i)
furnish information with respect to the Company and each of its subsidiaries to
any Person pursuant to a customary confidentiality agreement no more favorable
to the recipient of such information than the Non-Disclosure Agreement, dated as
of April 30, 1999, between Purchaser and the Company, and (ii) participate in
negotiations regarding such Company Takeover Proposal. A "Company Takeover
Proposal", for purposes of the Merger Agreement, means any inquiry, proposal or
offer from any Person relating to any direct or indirect acquisition or purchase
of 25% or more of the assets of the Company and its subsidiaries or 25% or more
of any class of equity securities of the Company or any of its subsidiaries, any
tender offer or exchange offer for Shares or any class of equity securities of
the Company or any of its subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation,
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dissolution or similar transaction involving the Company or any of its
subsidiaries, other than the transactions contemplated by the Merger Agreement,
or any other transaction that is intended or could reasonably be expected to
prevent the completion of the transactions contemplated by the Merger Agreement.
The Merger Agreement provides that, except as expressly permitted by
Section 5.2(b) thereof, neither the Company Board nor any committee thereof may
(i) withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent or Purchaser, the approval or recommendation by the Company
Board or such committee of the Offer, the Merger or the Merger Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any Company
Takeover Proposal, (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement related
to any Company Takeover Proposal (each, a "Company Acquisition Agreement").
Notwithstanding the foregoing, in the event that prior to the Effective Time,
and not less than two business days after notice of its intention to do so has
been given Parent, the Company Board determines in good faith after receipt of a
Superior Proposal and after taking into account the advice of its legal counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
the Company's stockholders, the Company Board may withdraw or modify its
approval or recommendation of the Offer, the Merger or the Merger Agreement,
approve or recommend a Company Takeover Proposal, or terminate the Merger
Agreement pursuant to Section 7.3(c) thereof. For purposes of the Merger
Agreement, "Superior Proposal" means a Company Takeover Proposal (x) that
involves the direct or indirect acquisition or purchase of 75% or more of the
assets of the Company or 75% or more of every class of equity securities of the
Company or any of its subsidiaries and (y) which Company Takeover Proposal is
otherwise on terms which the Board determines in its good faith judgment (after
consultation with a financial advisor of nationally recognized reputation) to be
reasonably capable of being completed (taking into account all material legal,
financial, regulatory and other aspects of the proposal) and more favorable to
the Company's stockholders from a financial point of view than the Offer and the
Merger, and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Board, is capable of being obtained by
such third party.
In addition to the obligations of the Company set forth in the preceding
two paragraphs, the Merger Agreement provides that the Company will (i)
immediately advise Parent orally and in writing of any request for information
or of any Company Takeover Proposal, the material terms and conditions of such
request or Company Takeover Proposal and the Person making such request or
Company Takeover Proposal, and (ii) keep Parent reasonably informed of the
status and details (including amendments or proposed amendments) of any such
request of Company Takeover Proposal.
In addition, the Merger Agreement will not restrict the Company's Board of
Directors from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act; provided, however, that
neither the Company nor the Company Board nor any committee thereof may, except
as expressly permitted by Section 5.2, withdraw or modify, or propose publicly
to withdraw or modify, its position with respect to the Offer, the Merger
Agreement or the Merger or approve or recommend, or propose publicly to approve
or recommend, a Company Takeover Proposal.
Publicity
The Merger Agreement provides that the initial press release relating to
the Merger Agreement will be a joint press release and thereafter, the Company
and Parent will, subject to their respective legal obligations (including
requirements of stock exchanges and other similar regulatory bodies), consult
with each other, and use reasonable efforts to agree upon the text of any press
release, before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated by the Merger Agreement
and in making any filings with any Governmental Entity or with any national
securities exchange with respect thereto.
Directors' and Officers' Insurance and Indemnification
The Merger Agreement provides that all rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time existing in favor of the current or former directors or
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officers of the Company or each of its subsidiaries as provided in their
respective certificates of incorporation or bylaws (or comparable organizational
documents) will be assumed by Parent and Parent will be directly responsible for
such indemnification, without further action, as of the Effective Time and such
rights will continue in force and effect in accordance with their respective
terms. In addition, from and after the Effective Time, directors and officers of
the Company who become or remain directors or officers of Parent or the
Surviving Corporation will be entitled to the same indemnity rights and
protections (including those provided by directors' and officers' liability
insurance) of Parent.
Pursuant to the terms of the Merger Agreement, Parent has agreed that it
will, and will cause the Surviving Corporation to, maintain in effect for not
less than three years after the Effective Time policies of directors' and
officers' liability insurance equivalent in all material respects to those
maintained by or on behalf of the Company and its subsidiaries on the date of
the Merger Agreement (and having at least the same coverage and containing terms
and conditions which are no less advantageous to the Persons currently covered
by such policies as insured), with respect to matters existing or occurring at
or prior to the Effective Time; provided, however, that if the aggregate annual
premiums for such insurance at any time during such period exceed per annum the
rate of premium currently paid by the Company and its subsidiaries for such
insurance on the date of the Merger Agreement, then Parent will cause the
Surviving Corporation to, and the Surviving Corporation will, provide the
maximum coverage that shall then be available at an annual premium equal to such
rate.
Proxy Statement; Company Stockholders Meeting
The Company and Parent have agreed, under the terms of the Merger
Agreement, that they will cooperate and promptly prepare, and the Company will
file with the Commission as soon as practicable, a proxy or information
statement with respect to the required Company stockholder approval of the
Merger Agreement (the "Proxy Statement"), and promptly thereafter will mail the
Proxy Statement to its stockholders. The Proxy Statement will contain the
recommendation of the Company Board that stockholders of the Company approve and
adopt the Merger Agreement and approve the Merger and the other transactions
contemplated thereby. The Company has agreed, pursuant to the terms of the
Merger Agreement, that if at any time prior to the Company Stockholders' Meeting
any event or circumstance relating to the Company or any of its subsidiaries or
affiliates, or its or their respective officers or directors, should be
discovered by the Company that is required to be set forth in a supplement to
any Proxy Statement, the Company shall promptly inform Parent and Purchaser to
supplement such Proxy Statement and mail such supplement to its stockholders.
The Merger Agreement provides that the Company will take all action
necessary pursuant to applicable law and its certificate of incorporation and
bylaws to convene a meeting of its stockholders as promptly as practicable to
consider and vote upon the adoption of the Merger Agreement. The Merger
Agreement further provides that the Board of Directors of the Company will
recommend adoption of the Merger Agreement by the stockholders of the Company,
and the Company will take all lawful action to solicit such approval, including
without limitation timely mailing any Proxy Statement; provided, however, that
if the Company Board determines in good faith, after taking into account the
advice of its legal counsel, that it is necessary to do so in order to comply
with its fiduciary duties to the Company's stockholders under applicable law,
the Company Board may change such recommendation or solicitation (but not such
actions to convene the Company Stockholders' Meeting), including any withdrawal
or change of its recommendation. The Merger Agreement further provides that,
without limiting the generality or effect, the Company's obligations pursuant to
the first sentence of this paragraph will not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
Company Takeover Proposal.
The Merger Agreement provides that, notwithstanding the foregoing, in the
event that Parent, Purchaser or any other subsidiary of Parent acquires at least
90% of the outstanding shares pursuant to the Offer or otherwise, the parties
agree to take all necessary and appropriate action to cause the Merger to become
effective in accordance with the DGCL without a meeting of the stockholders of
the Company as soon as practicable after the acceptance for payment and purchase
of Shares by Purchaser pursuant to the Offer. Finally, the Merger Agreement
provides that Purchaser shall vote all shares owned by it for the Merger.
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Offer; Documents
Pursuant to the terms of the Merger Agreement, as soon as practicable
following the date of consummation of the Offer, Parent and Purchaser filed or
caused to be filed with the Commission a Tender Offer Statement on Schedule
14D-1 (the "Schedule 14D-1"), which contained an offer to purchase and related
letter of transmittal and other ancillary offer documents and instruments
pursuant to which the Offer was made (collectively with any supplements or
amendments thereto, the "Offer Documents"). The Merger Agreement provides that
Parent, Purchaser and the Company will each promptly correct any information
provided by them for use in the Offer Documents if and to the extent that it
becomes false or misleading in any material respect and Parent and Purchaser
will jointly and severally take all lawful action necessary to cause the Offer
Documents as so corrected to be filed promptly with the Commission and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable law. Parent agreed, under the terms of the Merger Agreement, to give
the Company and its counsel a reasonable opportunity to review and comment on
the Offer Documents and any amendments thereto prior to their being filed with
the Commission.
Merger Conditions
The Merger Agreement provides that the obligations of the Company, on the
one hand, and Parent and Merger Sub, on the other hand, to consummate the Merger
are subject to the satisfaction at or prior to the Closing Date of the following
conditions: (i) Purchaser shall have purchased the Shares pursuant to the Offer
(provided that the foregoing condition shall be deemed to have been satisfied if
Purchaser fails to accept for payment or pay for Shares pursuant to the Offer in
violation of the terms of the Offer or of the Merger Agreement); (ii) the Merger
Agreement shall have been approved in the manner required by applicable law by
the holders of all of the issued and outstanding shares of capital stock of the
Company; and (iii) no order or law enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Governmental Entity or
other legal restraint or prohibition (collectively, "Restraints") preventing the
consummation of the Merger shall be in effect. The Merger Agreement further
provides that the obligation of Parent and Purchaser to effect the Merger will
be subject to the fulfillment at or prior to the Closing Date (or such other
date as may be specified in the Merger Agreement) of the additional condition
that the Company shall have performed in all material respects its agreements
contained in the Merger Agreement required to be performed on or prior to the
Closing Date.
Retirement of Bank Debt
The Company is a party to a credit agreement, as amended (the "Credit
Agreement"), among the Company, certain lenders and BankBoston N.A. as agent for
the lenders. BankBoston N.A. is affiliated with BancBoston Robertson Stephens
Inc. ("BancBoston Robertson Stephens") Prior to October 30, 1998, the credit
facility consisted of a $35,000,000 term loan and a $25,000,000 revolving line
of credit, secured by the Company's assets and 66 2/3% of the stock of its
subsidiaries. On October 30, 1998, the Company and the lenders amended the
Credit Agreement to reduce the term loan to $30,000,000, change the amortization
schedule of the term loan, reduce the revolver to $20,000,000, and change the
financial covenants.
As of March 28, 1999, the Company was in default under certain financial
covenants of the Credit Agreement, giving the lenders certain remedies,
including acceleration of maturity of the entire principal balance of the loans.
The Company is currently in default under its loans. At March 28, 1999,
$18,267,905 was outstanding under the term loan (less warrant discounts of
$232,095) and the Company had $12,700,000 available under the revolving line of
credit. Subsequent to March 28, 1999, the Company and the lenders engaged in
extensive negotiations concerning a forbearance arrangement with respect to the
existing defaults, although no such arrangement was reached. On June 3, 1999,
the lenders notified the Company in writing that the financing commitments were
terminated, and that the lenders were no longer obligated to lend funds to the
Company pursuant to the Credit Agreement. Although the lenders have not
accelerated or demanded payment of the outstanding principal balance of the
loans, BankBoston N.A., as agent for the lenders, has reserved its right to take
any actions and seek any remedies available to it under the Credit Agreement. As
a result of the Merger, the Company's indebtedness to its lenders, which
approximated $33.8 million at June 25,
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1999, will be paid in full and BankBoston N.A. may receive certain additional
fees related to the prepayment of such amounts.
Termination
The Merger Agreement provides that it may be terminated and the
transactions contemplated therein may be abandoned at any time prior to the
Purchase Date, whether before or after stockholder approval thereof: (i) by the
mutual consent of Parent and the Company; (ii) by action of the Board of
Directors of either of the Company or Parent if (A) the Merger has not been
consummated by December 31, 1999; provided, that no party may terminate the
Merger Agreement under this clause to the extent that the delay in consummating
the Merger is due to such party's failure to fulfill any of its obligations
under the Merger Agreement; (B) if any governmental entity has issued a
Restraint or taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the Offer, the Merger or any of the
other transactions contemplated by the Merger Agreement and such Restraint will
have become final and non-appealable; or (C) the Offer expires or is terminated
or withdrawn pursuant to its terms without any Shares being purchased thereunder
by Purchaser as a result of the occurrence of any of the events set forth in
Annex A to the Merger Agreement.
Pursuant to the terms of the Merger Agreement, the Merger Agreement may be
terminated and the transactions contemplated therein may be abandoned at any
time prior to the Purchase Date, whether before or after stockholder approval
thereof, by action of the Board of Directors of the Company, if (i) there has
been a material breach by Parent or Purchaser of any representation or warranty
contained in the Merger Agreement which is not curable or, if curable, is not
cured by December 31, 1999 and such breach would have a Parent Material Adverse
Effect, (ii) there has been a material breach of any of the covenants set forth
in the Merger Agreement on the part of Parent or Purchaser, which breach is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by the Company to Parent, or (iii) in accordance with Section
5.2(b) of the Merger Agreement.
The Merger Agreement provides that it may be terminated and the
transactions contemplated therein may be abandoned at any time prior to the
Purchase Date, whether before or after stockholder approval thereof, by Parent,
if (a) the Board of Directors of the Company shall have (i) withdrawn or
modified in a manner adverse to Parent or Purchaser its approval or
recommendation of the Merger Agreement, the Offer or the Merger or failed to
reconfirm its approval or recommendation within five business days after a
written request to do so, (ii) approved or recommended, or proposed publicly to
approve or recommend, a third-party Company Takeover Proposal to the Company's
stockholders, (iii) caused the Company to take any action referred to in Section
5.2 of the Merger Agreement that would have constituted a breach thereof but for
the exceptions thereunder, including without limitation authorizing the Company
to enter into a Company Acquisition Agreement, (iv) approved the breach of the
Company's obligations under Section 5.2 of the Merger Agreement, or (v) resolved
to take any of the foregoing actions, (b) there has been a material breach by
the Company of any representation or warranty contained in the Merger Agreement
which is not curable or, if curable, is not cured by December 31, 1999 and such
breach had or would have a Company Material Adverse Effect, (c) there has been a
material breach of any of the covenants set forth in the Merger Agreement on the
part of the Company, which breach is not curable or, if curable, is not cured
within five days after written notice of such breach is given by Parent to the
Company, or (d) any Person or group (as defined in Section 13(d)(3) of the
Exchange Act) other than Parent, Purchaser or any of their respective affiliates
shall have become the beneficial owner of more than 10% of the Shares.
Effect of Termination
The Merger Agreement provides that in the event of the termination of the
Merger Agreement as described above, written notice thereof will forthwith be
given to the other party or parties specifying the provision thereof pursuant to
which such termination is made, and the Merger Agreement will forthwith become
null and void except for the provisions of Section 7.5 and 8.14 thereof, and
there will be no liability on the part of Parent, Purchaser or the Company
except as set forth below. The Merger Agreement also provides that in the event
of the termination of the Merger Agreement, nothing therein shall prejudice the
ability of the
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non-breaching party from seeking damages from any other party for any prior
breach of the Merger Agreement, including without limitation attorneys' fees and
the right to pursue any remedy at law or in equity.
Under the terms of the Merger Agreement, (i) if the Merger Agreement is
terminable pursuant to Sections 7.2, 7.3(c) or 7.4 thereof, then (A) the Company
will, not later than two business days after receipt of notice from Parent, pay
to Purchaser an amount equal to Parent's documented Expenses not to exceed
$600,000, and (B) in the event that (x) a Company Takeover Proposal is made
known to the Company or any of its subsidiaries or has been made directly to
stockholders generally or any Person publicly announces an intention (whether or
not conditional) to make a Company Takeover Proposal, and (y) thereafter the
Merger Agreement is terminated (1) by either Parent or the Company pursuant to
Section 7.2(a) or (c) of the Merger Agreement, or (2) by the Company pursuant to
Section 7.3(c) of the Merger Agreement, or by Parent pursuant to Section 7.4(a)
or (d) of the Merger Agreement, the Company will pay Purchaser a fee of
$1,500,000 cash; provided, however, that if the Merger Agreement is terminated
by Parent as a result of a breach by the Company, Parent may pursue any remedies
available to it at law or in equity and will, in addition to its expenses, be
entitled to recover such additional amounts as Purchaser may be entitled to
receive at law or in equity.
Costs and Expenses
The Merger Agreement provides that, except as expressly otherwise provided
in the Merger Agreement, all fees and expenses incurred in connection with the
Merger Agreement and the consummation of the transactions contemplated thereby
will be paid by the party incurring such fees or expenses.
Amendment and Modification
The Merger Agreement provides that, subject to applicable law, the Merger
Agreement may be amended, whether before or after any vote of the stockholders
of the Company contemplated thereby, only by written agreement of the parties
thereto, pursuant to action taken by their respective Boards of Directors, at
any time before or after approval of matters presented in connection with the
Merger by the stockholders of the Company; provided, however, that after the
approval of the Merger Agreement by the stockholders of the Company, no such
amendment which by law requires prior approval of the stockholders of the
Company or shareholders of Parent will be made unless such approval has been
obtained.
Waiver; Remedies Cumulative
The Merger Agreement provides that the waiver by any party thereto of a
breach of any provision thereunder will not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision.
NON-DISCLOSURE AGREEMENT
Pursuant to a Non-Disclosure Agreement dated as of April 30, 1999 (the
"Non-Disclosure Agreement") between Parent and the Company, the Company has
supplied Parent with certain confidential non-public information. The term of
the Non-Disclosure Agreement is two years from the date of the Non-Disclosure
Agreement, and the obligations thereunder shall remain in force for a period of
ten years from the date of disclosure. The parties have agreed in the
Non-Disclosure Agreement that Parent shall keep confidential all such
information and shall use it only in connection with the discussions between the
two companies; provided, however, that the non-disclosure obligations shall not
apply to the extent that any of the information (i) is or becomes part of the
public domain through no fault of Parent, (ii) is rightfully known to Parent
prior to the disclosure by the Company, as established by written records (iii)
is subsequently rightfully received by Parent from a third party, or (iv) can be
shown by written documentation to have been developed independently of the
Company's information.
Parent has agreed that it shall not disclose the information or any part
thereof to any other person, firm or corporation and shall restrict the
circulation of the information in its own organization. Under the terms of the
Non-Disclosure Agreement the Company's personnel are not authorized to receive
confidential information
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relating to Parent and, except as may be agreed to, all communication from
Parent to the Company is to be made on a non-confidential basis. The
Non-Disclosure Agreement may be terminated by either party upon 15 days written
notice, which termination shall not affect the obligations thereunder with
respect to any previously disclosed information.
EXCLUSIVITY AGREEMENT
On June 7, 1999, in connection with the transactions contemplated by the
Merger Agreement, the Company entered into a non-binding letter agreement (the
"Exclusivity Agreement") with Parent. The Exclusivity Agreement provided that
(i) until the Termination Time (as defined in the Exclusivity Agreement) the
Company (A) would not entertain any offers from parties other than Parent, (B)
would immediately notify Parent of any contact it had with any other person
regarding an offer, proposal or related inquiry, and (C) would immediately
suspend all discussions with other potential buyers; (ii) the Company would
negotiate exclusively with Parent until the Termination Time, afford Parent
access to its business records and properties and operate its business in the
ordinary course, refraining from any extraordinary transactions; and (iii) other
than as required by law, or in discussions between the Company and its lenders,
neither party, without the prior consent of the other party, would make any
public announcement of their negotiations or the terms, conditions or other
aspects of the Exclusivity Agreement. The Exclusivity Agreement would have
automatically terminated on June 30, 1999, under its original terms. However, on
June 30, 1999, the Exclusivity Agreement was extended by mutual agreement of the
parties to July 1, 1999.
CHANGE IN CONTROL AGREEMENTS
The Company has entered into agreements (the "Change In Control
Agreements") outlining certain arrangements applicable to Neil Dial, Donald E.
Frederick, R. Charles Furniss and David M. Rzasa, each of whom is an executive
officer of the Company, that would be effective upon a change in control of the
Company. The term of the Change In Control Agreements is three years and they
are automatically extended for successive one year periods thereafter. Under the
Change In Control Agreements, the executive officers named above are entitled to
receive certain benefits if, within one year following a change in control of
the Company, any of them resigns for good reason or is terminated by the
Company. The form of Change In Control Agreement is filed as Exhibit 9 to this
Statement and is hereby incorporated by reference. The term "good reason" for
purposes of the Change In Control Agreements means certain reductions in base
salary, certain relocations, the assignment of duties materially inconsistent
with the duties prior to the change in control, or a significant reduction in
the officer's position, in each case which occur without the executive officer's
express prior written consent. The term "change in control" for purposes of the
Change In Control Agreements includes the acquisition of beneficial ownership by
certain persons of securities possessing more than 50% of the total combined
voting power of the Company's outstanding securities, a change in composition of
the Board over a period of 36 consecutive months or less such that the current
Board members of the Company cease to constitute a majority thereof (except that
any new Board member approved by at least a majority of the current Board is
considered to be a member of the current Board), or certain events relating to
reorganizations, mergers, consolidations, liquidations or sales of all or
substantially all of the Company's assets. The Merger will constitute a "change
in control" under the Change In Control Agreements.
TENDER AGREEMENT
Concurrently with the execution and delivery of the Merger Agreement,
Parent and Purchaser entered into a Tender Agreement (the "Tender Agreement")
with Havant International Holdings Limited ("HIHL"), which is a stockholder of
the Company that beneficially owns 1,392,347 Shares (the "Subject Shares").
Pursuant to the Tender Agreement, HIHL agreed, among other things, to validly
tender (and not withdraw) its Subject Shares to Purchaser pursuant to and in
accordance with the terms of the Offer.
Additionally, pursuant to the Tender Agreement, HIHL agreed that, during
the time that the Tender Agreement is in effect, at any meeting of the
stockholders of the Company, however called, or in any written consent in lieu
thereof, HIHL will (i) vote the Subject Shares owned by it in favor of the
Merger and any
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<PAGE> 16
related agreements or related matters; and (ii) unless and until the Merger
Agreement is terminated in accordance with its terms, vote the Subject Shares
against any (A) Company Acquisition Agreement, (B) reorganization,
recapitalization, liquidation or winding up of the Company or any other
extraordinary transaction involving the Company, (C) corporate action the
consummation of which would frustrate the purposes, or prevent or delay the
consummation, of the transactions contemplated by the Merger Agreement, or (D)
other matters relating to, or in connection with any of the foregoing matters.
HIHL has appointed Purchaser as attorney-in-fact and proxy, with full power
of substitution, and has agreed to use its reasonable effort to cause any record
owner of Shares to grant to Purchaser a proxy to the same effect as that
contained in the Tender Agreement; provided, however, that HIHL shall not be
required to expend any monies in the exercise of such efforts; and provided
further, however, that the proxy granted by HIHL and all other obligations of
HIHL shall be revoked upon termination of the Merger Agreement in accordance
with its terms.
INDEMNITY AND LIMITATION OF LIABILITY
The Company has entered into indemnification agreements with each of its
directors by which the Company provides such persons with the maximum
indemnification allowed under applicable law, with regard to all judgments,
penalties, fines, amounts paid in settlement and expenses (including attorneys'
fees) whatsoever arising out of any event or occurrence related to the fact that
such person is or was a director of the Company, with certain limitations and
exceptions. A copy of the form of such indemnification agreement is filed as
Exhibit 11 to this statement and is hereby incorporated by reference.
To the extent that the Company maintains an insurance policy or policies
providing liability insurance for directors, officers, employees or agents of
the Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise that such person serves at the request
of the Company, the indemnified person shall be covered by such policy or
policies in accordance with its or their terms to the maximum extent of the
coverage available for such director, officer, employee or agent under such
policy or policies. The agreements are binding upon any successor to the
Company. The agreements continue in effect regardless of whether the indemnified
person continues to serve as a director or officer of the Company.
Article V of the By-laws of the Company also provides that the Company
will, to the full extent permitted by the DGCL and its Certificate of
Incorporation, indemnify each person whom it may indemnify pursuant thereto. A
copy of the By-laws and the amendment to the By-laws are filed as Exhibit 12 and
Exhibit 13, respectively, to this statement and are hereby incorporated herein
by reference.
Delaware law obligates the Company, as the Surviving Corporation in the
Merger, to fulfill and honor after the consummation of the Offer its current
obligations under the indemnification agreements and By-laws.
To the full extent permitted by Delaware law, Article Eighth of the
Restated Certificate of Incorporation of the Company eliminates the personal
liability of a director or officer against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement or actually or reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom. A copy of the Restated Certificate of
Incorporation is filed as Exhibit 14 to this statement and is hereby
incorporated herein by reference.
The Merger Agreement obligates Parent, as of the Effective Time, to
indemnify the present and former directors and officers of the Company in
respect of certain actions taken prior to the Effective Time and to continue in
effect liability insurance for a period of at least three years.
LIABILITY INSURANCE
Each of the Company's directors and executive officers is insured against
liabilities incurred by them in connection with their service in such
capacities. The insurance policy provides aggregate coverage of $7,000,000
(including defense costs) for claims made during the effective period of the
policy.
The Merger Agreement provides that Parent will, and will cause the
Surviving Corporation to, maintain in effect directors' and officers' liability
insurance with respect to matters existing or occurring at or prior to
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<PAGE> 17
the Effective Time of the Merger, on terms and conditions no less favorable to
such persons than those in effect under the Company's directors' and officers'
liability insurance as was in effect on the date of the Merger Agreement;
provided, however, that if the aggregate annual premiums for such insurance at
any time during such period exceed the per annum rate of premium paid by the
Company and its subsidiaries on the date of the Merger Agreement, then Parent
will cause the Surviving Corporation to, and the Surviving Corporation will,
provide the maximum coverage that is then available at an annual premium equal
to such rate.
DIRECTOR BONUSES
On June 4, 1999, the Company granted a bonus to Steve Sanghi of $100,000
and to Wade Meyercord of $25,000, for services provided in connection with the
management and operation of the Company following the resignation of Rolando
Esteverena, the Company's former chief executive officer. Such bonuses are
payable in full only on the successful completion of a financing or strategic
transaction involving the Company the effect of which results in payment in full
of the existing credit facilities. The closing of the Merger would trigger
payment of the bonuses.
OTHER MATERIAL TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
The standard compensation and stock option grant policies for Company Board
members, and the 1998 compensation and option grants to certain executive
officers, are described in the Information Statement attached as Annex I to this
Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS
THE COMPANY BOARD HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT, THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS,
HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT THE STOCKHOLDERS ACCEPT
THE OFFER.
A letter to stockholders communicating the Board's recommendations is filed
as Exhibit 1 hereto and is hereby incorporated herein in its entirety by
reference.
(B) BACKGROUND; REASONS FOR RECOMMENDATION
The Company faced many operating challenges during 1998. Overall net sales
were substantially below net sales from the prior year, due to weak demand from
certain customers, in particular those supplying the personal computer, hard
disk drive and communications markets, and intense price competition of Asian
suppliers as they inherited the benefits from currency devaluation and tried to
mitigate the demand void caused by the Asian financial crisis. The combination
of weak demand coupled with intense price competition adversely affected the
Company's operating results, causing the Company to default under certain of the
financial covenants in its credit facilities and straining cash resources. In
the fall of 1998, in response to pressure from its lenders, the Company
contacted BancBoston Robertson Stephens and requested that such firm assist the
Company in securing additional capital.
In October 1998, the Company began the marketing process for a $20,000,000
private placement of Senior Subordinated Notes with warrants. More than 30
potential investors were approached, but no serious interest in the offering was
expressed.
In December 1998, the market size of the offering was reduced to
$15,000,000 and the number of shares of common stock of the Company issuable in
exchange for the warrants was increased. No serious interest in the offering was
expressed.
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<PAGE> 18
In February 1999, the Company began discussions with investors regarding a
$5,000,000 -- $10,000,000 private placement of resettable convertible
securities. Representatives of the Company began negotiations with several
parties regarding their possible interest in the private placement, but no
agreement on terms could be reached. At the same time, the Company pursued a
$5,000,000 -- $10,000,000 private placement of equity securities, but no serious
interest was expressed by any of the more than a dozen potential investors who
were approached. Also in February 1999, the Company began discussions with three
financial buyers that the Company had approached in connection with its
financing efforts regarding a possible merger or acquisition. The discussions
with two buyers broke down after several weeks of due diligence, while the third
buyer concluded it would put discussions on hold after conducting due diligence
on the results of operations of the first quarter. On March 5, 1999, the Board
held a special meeting to discuss the abandonment of discussions with these
three buyers and possible other financing alternatives.
For the quarter ended March 28, 1999, the Company reported significantly
reduced sales and an operating loss. The Board of Directors approved a
reorganization plan which included closing the U.K. facility, downsizing the
Mexican facility and transferring programs from Mexico to the new Thailand
facility. The Company ended the quarter in default under its credit facilities
and began extensive negotiations with its lenders with a view to restructuring
the covenants to allow the Company to work through its operational difficulties.
The Company's President and Chief Executive Officer, Rolando C. Esteverena,
resigned effective April 5, 1999. The Board appointed Neil Dial as President and
Chief Operating Officer.
On April 13, 1999, the Board held a special meeting to discuss the filing
of bankruptcy for the U.K. subsidiary and various banking and financing issues.
Mr. Dial and Steve Sanghi, who was acting as Chairman of the Company, reported
on their discussions with the lenders to date, and advised the Board that the
lenders were not willing to restructure the credit facilities in a way that they
believed would permit the Company to meet its reorganization plan. Rather, the
lenders indicated their strong desire that the loans be paid in full, and
advised the Company that they would like the Company to consider strategic
alternatives, including a sale. Mr. Sanghi further reported on the lack of
success with respect to management's capital raising efforts, and noted that
potential investors were insisting that the Company return to and sustain
profitability before they would consider an investment. BancBoston Robertson
Stephens discussed a number of financing alternatives with the Board, including
public and private equity offerings and a recapitalization of the Company. Mr.
Sanghi said that he would continue to work on possible financing scenarios and
with the lenders while management focused on implementing the reorganization
plan and attaining break-even operations.
In April, May and June 1999, representatives of the Company began
discussions with five parties, including Purchaser, who expressed an interest in
acquiring or merging with the Company. On or about April 16, 1999, William P.
Murnane, President and Chief Operating Officer of Parent, had a telephone
conversation with Mr. Sanghi, regarding the Company's interest in seeking a
strategic partner. Mr. Sanghi indicated that the Company's senior executive team
was considering this strategy and had identified a limited number of candidates
they believed would best suit the future needs of all of the current
constituencies of the Company. Mr. Sanghi also indicated that Parent was one of
the Company's primary candidates for a strategic partner. As a result of that
conversation, a meeting was scheduled in Chandler, Arizona on April 23, 1999.
On April 23, 1999, representatives of Parent and the Company, including Mr.
Murnane and Mr. Sanghi, met to discuss the possible acquisition of the Company.
During the same time, the Company engaged in discussions with another interested
party, who was a competitor of the Company, regarding its interest in acquiring
the Company and another flexible circuit company in a three-way merger
transaction for stock in the surviving corporation of the merger.
On April 28, 1999, the Board held a regularly-scheduled meeting. Among
other normal agenda items, the Board discussed the Company's bank default and
the lenders' insistence that the Company engage the services of a crisis
management consultant. The Board discussed the possible actions the Company
could take if the lenders elected to call the loans, including the filing of a
petition for reorganization under the bankruptcy laws.
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<PAGE> 19
On April 29, 1999, management met with the lenders and presented a proposal for
restructuring the credit facilities.
On or about April 30, 1999, Parent and the Company entered into a
non-disclosure agreement, following which the Company presented to Parent
detailed documentation concerning the Company.
On May 28, 1999, Parent proposed a $3.00 per share cash tender offer. In
further negotiations between Messrs. Murnane and Sanghi, the proposed price was
increased to $3.50 per share.
On June 2, 1999, the Board held a special meeting to discuss banking and
financing issues and possible acquisition opportunities. The Board discussed and
rejected the proposed three-way merger because the competitor making the offer
was not financially strong, had significant debt and was adversely affected by
the same market factors that had been negatively impacting the Company's
financial performance. At this meeting the Board also discussed with BancBoston
Robertson Stephens the strategic and financing alternatives available to the
Company. The Board discussed the fact that a quarterly amortization payment of
$750,000 was due on the bank loan at the end of June, and that the lenders had
not agreed to restructure this payment or grant any forbearance. The Board
concluded that it was unlikely the Company would have enough cash to meet its
obligations during the third quarter without further financing. In light of the
Company's liquidity concerns, the Board preliminarily directed management of the
Company to pursue a transaction with Parent and one other potential buyer.
On June 2 and June 3, 1999, Mr. Murnane and Mr. Sanghi held numerous
telephonic negotiations. Also on June 3, the lenders notified the Company in
writing that the financing commitments under the existing credit facilities had
terminated and that the lenders were no longer obligated to lend funds to the
Company pursuant to the Credit Agreement. In addition, on June 3, the other
potential buyer indicated that it could not proceed with an acquisition
transaction on the Company's time-frame. On June 7, 1999, the Company and Parent
entered into an exclusivity agreement (the "Exclusivity Agreement"), whereby the
Company granted Parent the exclusive right to negotiate an agreement for a cash
tender offer for the Company at $3.80 per share. Over the course of the
succeeding weeks, Parent's representatives conducted further due diligence, and
the parties negotiated the terms of the Merger Agreement.
On June 28, 1999, the Company Board met telephonically to review the
proposed terms of the cash tender offer and received presentations by the
Company's management and by BancBoston Robertson Stephens. The Board directed
management of the Company to pursue a transaction with Parent.
On June 28, 29 and 30, 1999, management and counsel for the Company and
BancBoston Robertson Stephens negotiated the Merger Agreement and the terms of
the Offer with Parent.
On June 30, 1999, the Board met and after presentations by Company
management and the Company's legal and financial advisors, approved the Merger
Agreement and the transactions contemplated thereby. Also on June 30, 1999, the
exclusivity provision of the Exclusivity Agreement, which was scheduled to
terminate on June 30, 1999, was extended until July 1, 1999.
The Merger Agreement and related agreements were finalized and executed and
delivered on July 1, 1999, and the transaction was announced as soon as possible
thereafter on July 1, 1999.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders tender their Shares pursuant to the Offer, the
Board of Directors considered a number of factors, including the following:
(i) the Board's familiarity with, and information provided by the
Company's management as to, the business, financial condition, results of
operations, current business strategy and future prospects of the Company,
the volatile nature of the markets in which the Company operates, the
Company's position in such markets, current market dynamics, including
increased price competition and reduced demand, the historical and current
market prices for the Shares, and the information provided by BancBoston
Robertson Stephens as to the Company's strategic and other alternatives;
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<PAGE> 20
(ii) the terms of the Merger Agreement, including (x) the proposed
structure of the Offer and the Merger involving an immediate cash tender
offer followed by a merger for the same consideration, and (y) the fact
that financing is not a condition to the Offer and the Merger, and the
Board's view, based on BancBoston Robertson Stephens' advice, that Parent
would be able to finance the transaction;
(iii) that the per Share price contemplated by the Merger Agreement,
at $3.80, approximated recent trading prices of the Shares and
substantially exceeded trading prices of the Shares at the time that
discussions regarding a possible acquisition of the Company by Purchaser
commenced;
(iv) the oral opinion of BancBoston Robertson Stephens (confirmed in
writing on July 1, 1999) to the effect that, as of the date of such
opinion, and based on the assumptions made, matters considered and limits
of review described therein, the consideration to be received by the
holders of the Shares in the Offer and the Merger was fair from a financial
point of view to such holders. The opinion addresses only the fairness from
a financial point of view of the consideration to be received by the
holders of Shares of the Company in the Offer and the Merger and does not
constitute a recommendation to any holder as to whether to tender Shares in
the Offer or to vote in favor of the approval of the Merger Agreement. The
Company has obtained the necessary consents to reproduce the BancBoston
Robertson Stephens opinion as an exhibit to this Schedule 14D-9 and to
summarize, describe and refer to the opinion herein. (A COPY OF THE
BANCBOSTON ROBERTSON STEPHENS OPINION IS ATTACHED AS EXHIBIT 5 TO THIS
FIRST AMENDED AND RESTATED SOLICITATION/RECOMMENDATION STATEMENT ON
SCHEDULE 14D-9 AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE
URGED TO READ SUCH OPINION CAREFULLY IN ITS ENTIRETY);
(v) probable adverse effects on the business and operations of the
Company resulting from a prolonged sale process, particularly in light of
the existing situation under the credit facilities and the results obtained
by the Company in its financing efforts;
(vi) that the Merger Agreement permits the Company to furnish
nonpublic information to, and to participate in negotiations with, any
third party that has submitted a Superior Proposal as defined in the Merger
Agreement, if the Board determines in its good faith judgment, after taking
into account the advice of its legal counsel, that it is necessary to do so
in order to comply with its fiduciary duties to its stockholders, and that
the Merger Agreement permits the Company's Board to terminate the Merger
Agreement upon two business days' prior notice to Parent, in order to
accept a proposal which the Board of Directors has determined is a Superior
Proposal after the Board has concluded in good faith, after taking into
account the advice of its legal counsel, that it is necessary to accept
such Superior Proposal in order to comply with its fiduciary duties to its
stockholders;
(vii) the termination provisions of the Merger Agreement, which under
certain circumstances could obligate the Company to pay a $1.5 million
termination fee to Parent plus reimbursement to Parent of expenses up to
$600,000, and the Board's belief that such fees and damages provisions are
reasonable in the circumstances and would not deter a higher offer;
(viii) strategic considerations, such as the Company's competitive
position and the need for additional capital to support operations of the
Company and further growth;
(ix) alternatives to the proposed sale of the Company, including
seeking additional proposals from other parties and accepting the
uncertainties associated therewith (including with respect to timing,
valuation and the likelihood of completion of any such proposals that might
be received) and continuing to maintain the Company as an independent
public corporation and not engaging in any extraordinary transaction; and
(x) the process undertaken by the Company to pursue strategic
alternatives, including possible business combinations.
The foregoing discussion addresses the material information and factors
considered by the Board in its deliberations regarding and approval of the Offer
and the Merger. In view of the variety of factors and the
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<PAGE> 21
amount of information considered, the Board did not find it practicable to
provide specific assessments of, quantify or otherwise assign relative weights
to the specific factors considered in reaching its determination that any factor
was of particular importance. The determination to recommend that stockholders
tender their shares in the Offer was made after consideration of all of the
factors taken as a whole. In addition, individual members of the Board may have
given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
BancBoston Robertson Stephens was retained by the Company to act as its
financial advisor with respect to the Offer, the Merger and matters arising in
connection therewith. Pursuant to the engagement letter between BancBoston
Robertson Stephens and the Company dated June 7, 1999 (the "Engagement Letter"),
the Company agreed to pay BancBoston Robertson Stephens as follows: (i) a
"Transaction Fee" in the amount of $800,000 payable in the event the transaction
is completed, (ii) if less than 50% of the Company's voting stock or assets is
sold in a transaction (or series of related transactions), a "Minority
Investment Transaction Fee" equal to 6% of that portion of the Aggregate
Transaction Value (as defined in the Engagement Letter) that is related to
minority investments by parties that have been identified to the Company by
BancBoston Robertson Stephens or contacted by BancBoston Robertson Stephens
concerning the possibility of entering into a minority investment transaction,
subject to a minimum fee of $500,000 and a maximum fee equal to $800,000, and
(iii) in the event BancBoston Robertson Stephens delivers an opinion, an opinion
fee of $250,000, which is earned at the time of issuance and credited against
the Transaction Fee and paid on the earlier of the completion of the transaction
or six months following delivery of the opinion. The full Transaction Fee will
become payable by the Company when control of 50% or more of the Shares changes
hands.
The Company also agreed to indemnify BancBoston Robertson Stephens against
certain liabilities in connection with its engagement. In the ordinary course of
its business, BancBoston Robertson Stephens may effect transactions for its own
account or the account of its customers and therefore, at any time may hold long
or short positions in debt or equity securities of the companies which may be
the subject of the transactions contemplated by the Merger Agreement.
BancBoston Robertson Stephens is affiliated with BankBoston N.A., the
Company's primary lender. The Company is currently in default under its loans
and has been in such covenant default since the first quarter of 1999. The
lenders have elected not to enter into any forbearance agreement with the
Company. The financing commitments have been terminated, and pursuant to the
terms of the loan documents the lenders have the right currently to accelerate
and demand payment of the loans. Although BankBoston N.A. has not accelerated or
demanded payment of the outstanding principal balance of the loans, BankBoston
N.A. has reserved its rights to take any actions and to seek any remedies
available to it under the loan documents. As a result of the Merger, the
Company's indebtedness to its lenders, which approximated $33.8 million at June
25, 1999, will be paid in full and BankBoston N.A. may receive certain
additional fees related to the prepayment of such amounts. The Board understands
that BankBoston N.A. will benefit from the consummation of the Offer and the
Merger and the repayment of the Company's indebtedness.
Except as described above, neither the Company, nor any person acting on
its behalf, currently intends to employ, retain or compensate any other person
to make solicitations or recommendations to stockholders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in the Shares have been
effected by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director, affiliate and subsidiary of the Company currently intends to tender
all Shares to Purchaser which are held of record or beneficially by such person
or over which any of them has sole dispositive power pursuant to the Offer.
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to, or would result in, one or more of the events referred to in Item 7(a)
above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
INFORMATION STATEMENT
The Information Statement required by Section 14(f) and Rule 14f-1 of the
Exchange Act, and referenced in Item 3(b), is attached hereto as Annex I.
RIGHTS AGREEMENT
The Company and BankBoston N.A. (formerly First National Bank of Boston,
NA) (the "Rights Agent") are parties to a Preferred Shares Rights Agreement,
dated as of July 10, 1996. In connection with the Rights Agreement, the Company
Board declared a dividend of one one-hundredth of a share of Series A
Participating Preferred Stock (subject to adjustment, the "Rights") for each
share of common stock outstanding at the close of business on July 22, 1996,
which Rights may be triggered by certain events. In connection with the
negotiation of the Merger Agreement, the Board of Directors amended the Rights
Agreement so that Board-approved tender offers such as the Offer would not
trigger the Rights. Accordingly, the transactions contemplated by the Merger
Agreement will not trigger the Rights.
ANTITRUST
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission ("FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares pursuant to the Offer is subject to such requirements.
Parent will file a Notification and Report Form with respect to the Offer
under the HSR Act as soon as practicable following commencement of the Offer.
The waiting period under the HSR Act with respect to the Offer will expire at
11:59 p.m. New York City time, on the 15th day after the date such form is
filed, unless early termination of the waiting period is granted. In addition,
the Antitrust Division or the FTC may extend such waiting periods by requesting
additional information or documentary material from Parent. If such a request is
made with respect to the Offer, the waiting period related to the Offer will
expire at 11:59 p.m. New York City time on the 10th day after substantial
compliance by Parent with such request. With respect to each acquisition, the
Antitrust Division or the FTC may issue only one request for additional
information. In practice, complying with a request for additional information or
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties may engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction while such negotiations continue.
Expiration or termination of applicable waiting periods under the HSR Act is a
condition to the obligation to accept for payment and pay for Shares tendered
pursuant to the Offer.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of the Shares
pursuant to the Offer. At any time before or after
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<PAGE> 23
such purchase, the Antitrust Division or the FTC could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the transaction or seeking divestiture of the Shares
so acquired or divestiture of substantial assets of Parent or the Company.
Litigation seeking similar relief could be brought by private parties. There can
be no assurance that a challenge to the Offer and the other transactions
contemplated by the Merger Agreement on antitrust grounds will not be made, or
if such a challenge is made, what the result will be.
STATE TAKEOVER STATUTES
The Company is incorporated under the laws of the State of Delaware and
operations are conducted throughout the United States. A number of states
throughout the United States have enacted takeover statutes that purport, in
varying degrees, to be applicable to attempts to acquire securities of
corporations that are incorporated or have assets, stockholders, executive
offices or principal places of business in such states. In Edgar v. MITE Corp.,
the Supreme Court of the United States held that the Illinois Business Takeover
Act, which involved state securities laws that made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate commerce
and therefore was unconstitutional. In CTS Corp. V. Dynamics Corp. Of America,
however, the Supreme Court of the United States held that a state may, as a
matter of corporate law and, in particular, those laws concerning corporate
governance, constitutionally disqualify a potential acquirer from voting on the
affairs of a target corporation without prior approval of the remaining
stockholders, provided that such laws were applicable only under certain
conditions. Subsequently, a number of federal courts ruled that various state
takeover statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment. The Company, pursuant to an
amendment to its By-laws, elected out of the Arizona Control Share Acquisition
Statute, rendering that state's takeover statute inapplicable to the Offer and
the Merger.
The Company is subject to the provisions of Section 203 of the DGCL with
respect to restrictions upon business combinations involving the Company. In
general, Section 203 of the DGCL prevents an "interested stockholder" (e.g., a
person who owns or has the right to acquire 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" (defined to
include mergers and certain other transactions) with a Delaware corporation for
a period of three years following the time such person became an interested
stockholder unless, among other things, the corporation's board of directors
approves such business combination or the transaction in which the interested
stockholder becomes such prior to the time the interested stockholder becomes
such. The Company's Board of Directors has approved the Offer, the Merger and
the Merger Agreement for the purposes of Section 203 of the DGCL.
Except as described above with respect to Section 203 of the DGCL and the
Arizona Control Share Acquisition Statute, none of the Company, Parent or
Purchaser has attempted to comply with any other state takeover laws in
connection with the Offer and each of them believes that none of such laws are
applicable to the Offer. Should any person seek to apply any state takeover
laws, Parent and Purchaser have reserved the right to take such action as then
appears desirable, which may include challenging the validity or applicability
of any such statute allegedly applicable to the Offer in appropriate court
proceedings. In the event it is asserted that one or more state takeover law is
applicable to the Offer or the Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer, Parent and
Purchaser might be required to file certain information with, or receive
approvals from the relevant state authorities. In addition, if enjoined,
Purchaser might be unable to accept for payment or pay for any Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer and
the Merger. In such case, Purchaser might not be obligated to accept for payment
or pay for any Shares tendered.
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<PAGE> 24
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <C> <S>
1 -- Letter to Stockholders, dated July 7, 1999, from Neil Dial,
President and Chief Operating Officer of the Company.
2 -- Offer to Purchase, dated July 7, 1999 (incorporated by
reference to Exhibit (a)(1) of Schedule 14D-1).
3 -- Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) of Schedule 14D-1).
4 -- Agreement and Plan and Merger, dated as of July 1, 1999,
among Parent, Purchaser and the Company (incorporated by
reference to the Company's Form 8-K dated July 7, 1999).
5 -- Fairness Opinion of BancBoston Robertson Stephens Inc.,
dated July 1, 1999.
6 -- Joint Press Release issued by the Company and Parent on July
1, 1999 (incorporated by reference to the Company's Form 8-K
dated July 7, 1999).
7 -- Non-Disclosure Agreement by and among Parent, Purchaser and
the Company, dated April 30, 1999, in favor of the Company.
8 -- Exclusivity Agreement, dated June 7, 1999, between the
Company and Parent.
9 -- Form of Change In Control Agreement.
10 -- Tender Agreement, dated as of June 30, 1999, by and among
the Parent, Purchaser and Havant International Holdings
Limited (incorporated by reference to Exhibit (c)(2) of
Schedule 14D-1).
11 -- Form of Director Indemnification Agreement entered into
between the Company and its Directors (incorporated by
reference to the Company's Form 10-K for the fiscal year
ended December 27, 1998).
12 -- By-Laws of the Company (incorporated by reference to the
Company's Registration Statement on Form S-1 (No. 33-80324)
or amendments thereto, filed with the Securities and
Exchange Commission on June 16, 1994).
13 -- Amendment to By-laws adopted January 31, 1996 (incorporated
by reference to the Company's Form 10-K for the fiscal year
ended December 31, 1995).
14 -- Restated Certificate of Incorporation of the Company
(incorporated by reference to the Company's Registration
Statement on Form S-1 (No. 33-80324) or amendments thereto,
filed with the Securities and Exchange Commission on June
16, 1994).
15 -- Preferred Shares Rights Agreement, dated as of July 10,
1996, between the Company and BankBoston N.A., formerly
First National Bank of Boston, N.A., as Rights Agent
(incorporated by reference to the Company's Form 8-K dated
July 10, 1996).
16 -- Amendment to Preferred Shares Rights Agreement, dated as of
July 1, 1999, between the Company and BankBoston N.A.,
formerly First National Bank of Boston N.A., as Rights
Agent.
17 -- Credit Agreement, dated June 5, 1997, among the Company,
BankBoston N.A., and BankBoston N.A., as agent for the
lenders (incorporated by reference to the Company's Form
10-Q for the quarter ended June 30, 1997).
18 -- Third Amendment to Credit Agreement, dated October 30, 1998,
among the Company, BankBoston N.A., and BankBoston N.A., as
agent for the lenders (incorporated by reference to the
Company's Form 10-Q for the quarter ended September 30,
1998).
19 -- Fourth Amendment to Credit Agreement, dated January 15,
1999, among the Company, BankBoston N.A., and BankBoston
N.A., as agent for the lenders (incorporated by reference to
the Company's Form 10-K for the fiscal year ended December
27, 1998).
20 -- Fifth Amendment to Credit Agreement, dated February 19,
1999, among the Company, BankBoston N.A., and BankBoston
N.A., as agent for the lenders (incorporated by reference to
the Company's Form 10-K for the fiscal year ended December
27, 1998).
</TABLE>
23
<PAGE> 25
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
ADFLEX SOLUTIONS, INC.
/s/ NEIL DIAL
--------------------------------------
Neil Dial, President and Chief
Operating Officer
July 23, 1999
24
<PAGE> 26
ANNEX I
ADFLEX SOLUTIONS, INC.
2001 WEST CHANDLER BOULEVARD,
CHANDLER, ARIZONA 85224
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about July 7, 1999 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to holders of the Common Stock, par value $0.01 per share ("Shares"), of
ADFlex Solutions, Inc. (the "Company"). Capitalized terms used and not otherwise
defined herein shall have the respective meanings set forth in the Schedule
14D-9. You are receiving this Information Statement in connection with the
possible election of persons designated by Innovex, Inc. ("Parent"), to a
majority of the seats on the Board of Directors of the Company by means other
than through a meeting of the Company's stockholders.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder. You are urged to read this Information Statement
carefully. You are not, however, required to take any action. The information
contained in this Information Statement concerning Parent and Purchaser has been
furnished to the Company by Parent, and the Company assumes no responsibility
for the accuracy, completeness or fairness of any such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
At the close of business on July 1, 1999, there were 8,984,518 Shares
issued and outstanding, each of which entitles its record holder to one vote.
The Shares represent the only class of securities outstanding having the right
to vote for the election of the Company's directors.
PARENT DESIGNEES
On July 1, 1999, the Company, Parent and Merger Sub entered into an
Agreement and Plan of Merger (the "Merger Agreement") and, in accordance with
the terms and subject to the conditions therein, (a) Purchaser agreed to
commence a tender offer (the "Offer") for any and all outstanding Shares at a
price of $3.80 per Share, net to the seller in cash (subject to reduction for
any applicable federal back-up withholding or stock transfer taxes payable by
the seller), without interest thereon (the "Offer Price") and (b) at the
Effective Time (as defined in the Merger Agreement) Merger Sub will be merged
with and into the Company (the "Merger").
The Merger Agreement provides that, promptly upon the purchase of Shares by
Purchaser pursuant to the Offer, and from time to time thereafter, (a) Parent
will be entitled to designate such number of directors ("Parent's Designees"),
rounded up to the next whole number, as will give Parent, subject to compliance
with Section 14(f) of the Exchange Act, representation on the Company Board
equal to the product of (i) the number of directors on the Company Board (giving
effect to any increase in the number of directors pursuant to these provisions
and the provisions below) and (ii) the percentage that such number of Shares so
purchased bears to the aggregate number of Shares outstanding (such number being
the "Board Percentage"); provided, however, that if the number of Shares
purchased pursuant to the Offer equals or exceeds a majority of the outstanding
Shares, the Board Percentage will in all events be at least a majority of the
members of the Company Board, and (b) the Company will, upon request by Parent,
promptly satisfy the Board Percentage by (i) increasing the size of the Company
Board or (ii) using reasonable efforts to secure the resignations of such number
of directors as is necessary to enable Parent's Designees promptly to be so
elected, subject in all
I-1
<PAGE> 27
instances to compliance with Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. At the request of Parent, the Company will take all
lawful action necessary to effect any such election.
The Merger Agreement provides that, notwithstanding any other provision of
the Merger Agreement, following the election or appointment of Parent's
Designees, pursuant to these provisions and prior to the Effective Time, in
addition to the approval of the Company Board, the affirmative vote of a
majority of the directors of the Company who were directors of the Company as of
the date of the Merger Agreement (who will act as an independent committee of
the Board of Directors for this purpose) (the "Continuing Directors") will be
required to (i) amend or terminate the Merger Agreement, (ii) extend the time
for performance or waiver of Parent's and Merger Sub's respective obligations or
other acts of Parent or Merger Sub under the Merger Agreement, or (iii) waive
any of the Company's rights under the Merger Agreement.
Parent has informed the Company that it designates William P. Murnane,
Timothy S. McIntee and Douglas W. Keller to be elected as directors of the
Company. Parent has informed the Company that each has consented to act as a
director. Biographical information concerning each is presented below, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
WILLIAM P. MURNANE, age 37, has been President and Chief Operating Officer
of Parent since July, 1998. Mr. Murnane served as a Vice President of Parent
from 1995 to 1998, and as Chief Operating Officer of Boutwell, Owens & Co., a
private manufacturer of packaging, from 1993 to 1995.
TIMOTHY S. MCINTEE, age 41, has been Senior Vice President, Corporate of
Parent since July 1998. Mr. McIntee joined Parent in August 1997 as Vice
President, Corporate Development. From 1985 to 1997, Mr. McIntee practiced as an
attorney with the law firm of Lindquist & Vennum, in the Mergers and
Acquisitions Division.
DOUGLAS W. KELLER, age 41, has been Vice President of Finance of Parent
since October 1996 and an officer of Parent since May 1992. Mr. Keller joined
Parent as its corporate controller in January 1990.
Messrs. Murnane, McIntee and Keller are citizens of the United States. None
(i) is currently a director of, or holds any position with, the Company, (ii)
has a familial relationship with any of the directors or executive officers of
the Company, or (iii) to Parent's knowledge, beneficially owns any securities
(or rights to acquire any securities) of the Company. The Company has been
advised by Parent that, to Parent's knowledge, none has been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates which is required to be disclosed pursuant to the rules and
regulations of the Commission, except transactions between Parent and/or
Purchaser and the Company disclosed in the Schedule 14D-9.
CURRENT DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The Board of Directors currently consists of four members. Directors are
elected by the stockholders of the Company for one-year terms and hold office
until the next annual meeting of stockholders and until their successors are
elected and qualified. The persons named below are current members of the
Company's Board of Directors. The following sets forth as to each director his
age, principal occupation and business experience, and the period during which
he has served as a director of the Company.
STEVE SANGHI, age 43, has been a Director of the Company since June 1994
and has been Chairman of the Board since April 1999. Mr. Sanghi is the
President, Chief Executive Officer and Chairman of the Board of Directors of
Microchip Technology Incorporated, a manufacturer of programmable
micro-controllers and related specialty memory products. He has been employed by
Microchip since February 1990. Mr. Sanghi also serves as a Director of Vivid
Semiconductor, Inc.
RICHARD P. CLARK, age 51, has been a Director of the Company since June
1994. For the past 28 years, Mr. Clark has been employed by AMP Incorporated
("AMP"), an interconnect company. From July 1995 through April 1999, Mr. Clark
was the President and Chief Executive Officer of M/A-COM
I-2
<PAGE> 28
and also Divisional Vice President of Global Wireless Products Group, both of
which are AMP subsidiaries that manufacture radio frequency and microwave
components. From July 1989 through July 1995, Mr. Clark was the Associate
Director of Corporate Development of AMP. Mr. Clark is also a Director of
BroadBand Technologies, Inc., a supplier of telecommunications equipment.
WADE MEYERCORD, age 58, has been a Director of the Company since December
1996. Mr. Meyercord has been the President of Meyercord & Associates, Inc., a
management consulting firm, since September 1987. He has also served as Senior
Vice President of Diamond Multimedia Systems, Inc. since November 1997. Mr.
Meyercord also is the Chairman and a Director of California Micro Devices, a
semiconductor manufacturer.
WILLIAM KENNEDY WILKIE, age 50, has been a Director of the Company since
January 1996. Since November 1994, Mr. Wilkie has been the Chief Executive and a
Director of Havant International Holdings Limited ("HIHL") and its related
subsidiaries. From June 1973 through November 1994, Mr. Wilkie was employed by
IBM United Kingdom Ltd. and held executive positions in the IBM United Kingdom
Manufacturing Division.
EXECUTIVE OFFICERS
The executive officers of the Company serve until their successors have
been chosen or until their earlier resignation or removal. Information
concerning the executive officers of the Company is set forth below.
NEIL DIAL was appointed as President and Chief Operating Officer in April
1999. Mr. Dial has served as Executive Vice President of Operations since
October 1997. From May 1994 until joining the Company, he was President of
Alphatec's Bangkok operations. From 1991 to July 1994, Mr. Dial was Assistant
General Manager of Motorola's manufacturing facility in Kuala Lumpur, Malaysia.
DAVID M. RZASA has served as the Senior Vice President of Worldwide Sales
and Marketing since January 1999. From October 1996 until he joined the Company,
Mr. Rzasa served as Vice President and General Manager for Digi International,
based in Minnetonka, Minnesota. Prior to 1996, Mr. Rzasa was Chief Operating
Officer for Three Five Systems in Tempe, Arizona, and also served as President,
Group General Manager and Director of Operations for Rosemount, Inc. in
Minnesota.
DONALD E. FREDERICK has served as the Vice President, Chief Financial
Officer and Secretary of the Company since June 1997. From May 1995 until
joining the Company, Mr. Frederick served as Vice President of Finance for
Flextronics International, based in San Jose, California. From January 1992
through May 1995, he was Director of Finance for Sony Electronics.
R. CHARLES FURNISS has served as the Vice President Human Resources of the
Company since November 1994. From July 1987 through June 1994, Mr. Furniss was
the Senior Vice President Human Resources of Calcomp Inc., a wholly-owned
subsidiary of Lockheed, Inc.
ERIC H. BERT has served as Vice President Asia/Pacific Operations and
Managing Director ADFlex (Thailand), Ltd. (ATL) since November 1997. From
November 1996 to November 1997, Mr. Bert served as a Director of ATL. Mr. Bert
joined the Company in May 1995 as a Business Unit Manager, and has also served
as a Program Manager and ATL Director. From November 1993 until joining the
Company, Mr. Bert served as Marketing Manager for Parlex Corporation, a flexible
circuit manufacturer.
TODD E. PATANELLA has served as Vice President of Corporate Materials since
September 1998. Mr. Patanella has been with the Company or its predecessor,
Rogers Corporation, since 1992, serving in various manufacturing and operations
management positions.
I-3
<PAGE> 29
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 7, 1999, with respect
to beneficial ownership of the Company's Common Stock by (i) each director, (ii)
the Chief Executive Office and the other executive officers of the Company named
in the Summary Compensation Table, (iii) the executive officers and directors as
a group, and (iv) each person known to the Company to beneficially own 5% or
more of the outstanding shares of its Common Stock. Unless otherwise indicated,
the address of all such persons is c/o ADFlex Solutions, Inc., 2001 West
Chandler Boulevard, Chandler, Arizona 85224. Unless otherwise indicated, each of
the stockholders has sole voting and investment power with respect to the shares
beneficially owned, except to the extent that authority is shared by spouses
under applicable law. The Company's Common Stock is the only outstanding class
of equity securities of the Company. As of June 7, 1999, there were 87 record
holders of Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OF CLASS(1)
- ---------------- ---------------- ----------------------
<S> <C> <C>
Rolando C. Esteverena.................................... 164,719 1.8%
Neil Dial(2)............................................. 27,377 *
R. Charles Furniss(3).................................... 23,538 *
Eric H. Bert(4).......................................... 13,084 *
Todd E. Pantanella(5).................................... 8,089 *
Steve Sanghi(6).......................................... 54,000 *
Richard P. Clark(7)...................................... 16,500 *
William Kennedy Wilkie(8)................................ 1,393,347 15.5%
P.O. Box 6
Langstone Road
Havant, Hampshire P09 1SA
Wade Meyercord........................................... 10,000 *
J. & W. Seligman & Co. Incorporated(10).................. 1,041,100 11.6%
100 Park Avenue
New York, NY 10017
Dimensional Fund Advisors, Inc.(11)...................... 635,600 7.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Havant International Holdings Limited(8)................. 1,392,347 15.5%
P.O. Box 6
Langstone Road
Havant, Hampshire P09 1SA
Executive officers and directors as a group including
those named above (ten persons)(12).................... 1,726,348 18.9%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
(1) Shares of Common Stock subject to options which are currently exercisable
or exercisable within 60 days of June 7, 1999 are deemed outstanding for
computing the percentage of the person holding such options but are not
deemed outstanding for computing the percentage of any other person.
Percentage of ownership is based upon 8,983,018 shares of Common Stock
outstanding on June 7, 1999.
(2) Includes options to acquire 24,374 shares of Common Stock currently
exercisable or exercisable within 60 days following June 7, 1999.
(3) Includes options to acquire 23,538 shares of Common Stock currently
exercisable or exercisable within 60 days following June 7, 1999.
(4) Includes options to acquire 10,455 shares of Common Stock currently
exercisable or exercisable within 60 days following June 7, 1999.
(5) Includes options to acquire 7,186 shares of Common Stock currently
exercisable or exercisable within 60 days following June 7, 1999.
I-4
<PAGE> 30
(6) Includes options to acquire 37,000 shares of Common Stock currently
exercisable or exercisable within 60 days following June 7, 1999.
(7) Includes options to acquire 13,000 shares of Common Stock currently
exercisable or exercisable within 60 days following June 7, 1999.
(8) Includes 1,392,347 shares of Common Stock owned by HIHL. Mr. Wilkie is the
Chief Executive and a Director of HIHL. He disclaims beneficial ownership
of all shares held by HIHL.
(9) Includes options to acquire 9,000 shares of Common Stock currently
exercisable or exercisable within 60 days following June 7, 1999.
(10) According to its Schedule 13G dated February 10, 1999, of the 1,041,100
shares, 1,000,000 shares are owned by Seligman Communications and
Information Fund, Inc., a registered investment company which is managed by
J&W Seligman Company Incorporated ("JWS"), a registered investment advisor.
Accordingly, JWS and Mr. Morris may be deemed to beneficially own and have
shared voting power and shared dispositive power of such shares. Of the
remaining 41,000 shares, JWS and Mr. Morris beneficially own and have
shared voting power and shared dispositive power of such shares.
(11) According to its Schedule 13G dated February 11, 1999, Dimensional Fund
Advisors, Inc., an investment advisor, has sole voting power and the sole
power to dispose of all shares reported.
(12) Includes options to acquire 146,218 shares of Common Stock currently
exercisable or exercisable within 60 days following June 7, 1999. Also
includes 1,392,347 shares of Common Stock held by HIHL of which Mr. Wilkie
disclaims beneficial ownership. See note (8) above.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
CERTAIN RELATIONSHIPS
Effective December 31, 1995, the Company completed its acquisition of the
flexible circuit division of Xyratex (subsequently renamed "ADFlex Solutions
Limited"), a private company located in England, engaged in the design,
manufacture, assembly and sale of flexible circuit products. In consideration
for the outstanding shares of the division, the Company delivered $12.4 million
in cash, a $10 million subordinated debenture and 1,242,347 shares of restricted
Common Stock. The debenture, dated January 7, 1996, was paid in full in June
1997.
The shares of Common Stock issued to HIHL at the closing were equal to 15%
of the Company's outstanding capital stock after giving effect to their
issuance. HIHL has agreed not to sell or otherwise dispose of the shares for a
period of two years (the "Holding Period") except as security for borrowed money
or with the approval of the Company. The Holding Period expired in January 1998.
The parties executed a Registration Rights and Standstill Agreement under
which the Company granted to HIHL demand registration rights under the
Securities Act of 1933 generally effective at the conclusion of the Holding
Period. Pursuant to the Share Sale and Purchase Agreement, HIHL is entitled to a
nominee to the Company's Board of Directors. William Kennedy Wilkie was
appointed to the Board and is nominated for reelection pursuant to these
contractual obligations. The Company also granted HIHL the right, in the event
of a "Qualified Stock Offering" by the Company, to acquire such additional
shares such that would allow HIHL to maintain its percentage ownership held
immediately prior to the commencement of the Qualified Stock Offering, subject
to approval of the Company's principal underwriter and other conditions. HIHL
agreed to not increase its ownership interest in the Company beyond 20.5%.
RELATED TRANSACTIONS
The Company derived 0.01%, 1.1% and 1.9% of its net sales in 1998, 1997 and
1996, respectively, from sales to Xyratex, a major shareholder of the Company
with William K. Wilkie as a representative who serves on the Company's Board of
Directors.
I-5
<PAGE> 31
Richard P. Clark was first elected to the Board of Directors as of June 2,
1994 pursuant to certain contractual commitments with AMP, which commitments
terminated effective September 27, 1994 upon the Company's initial public stock
offering. AMP has been an important supplier to the Company in the past and is
expected to continue as such. Purchases from AMP for the years ended December
27, 1998, and December 31, 1997 and 1996 were approximately $1.4 million, $4.5
million and $2.6 million, respectively.
The Company's Certificate of Incorporation and By-laws provide for
indemnification of all Directors and officers. In addition, each Director of the
Company has entered into a separate indemnification agreement with the Company.
The Board of Directors has adopted a policy that all related party
transactions be on terms that are at least as favorable to the Company than
those that could have been negotiated with unrelated third parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's Directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission ("SEC") and the
National Association of Securities Dealers initial reports of ownership and
reports of changes in ownership of shares of the Company's Common Stock.
Officers, directors and greater than 10% stockholders are required by SEC
regulations to provide the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than 10% stockholders were satisfied
during 1998, except that Todd E. Patanella filed his initial report on Form 3
late.
GENERAL INFORMATION WITH RESPECT
TO THE BOARD OF DIRECTORS
During 1998, the Board of Directors met six times. The Board of Directors
has established an Audit Committee and a Compensation Committee. The Board does
not have a Nominating Committee, and the entire Board is responsible for the
size and composition of the Board and for recommending nominees to serve on the
Board.
COMMITTEES OF THE BOARD
Audit Committee
The Audit Committee, which is comprised of Richard P. Clark (Chairman),
Steve Sanghi and Wade Meyercord, is responsible for: (i) reviewing and
recommending the engagement each year of the Company's independent auditors;
(ii) consulting with independent auditors on the adequacy and effectiveness of
the Company's internal controls; (iii) reviewing, with the independent auditors,
the scope of the audit and audit procedures, the financial statements contained
in the annual report to stockholders and the auditors' reports on the Company's
financial statements; (iv) reviewing accounting and financial human resources
and succession planning; and (v) taking such other steps as the Audit Committee
deems necessary to carry out the normal functions of an audit committee. The
Audit Committee held two meetings in 1998.
Compensation Committee
The Compensation Committee, which is comprised of Steve Sanghi (Chairman),
Richard P. Clark and William Kennedy Wilkie, is responsible for: (i) determining
the compensation of the Company's senior officers; (ii) reviewing
recommendations by management as to the compensation of other officers and key
personnel; and (iii) reviewing management's succession program. Further, the
Compensation Committee administers the Company's 1993 Equity Incentive Plan, the
1994 Stock Incentive Plan and 1994 Employee Stock Purchase Plan. The
Compensation Committee held four meetings in 1998.
I-6
<PAGE> 32
DIRECTORS' COMPENSATION
FEES; OPTION GRANTS
The Company compensates its eligible non-employee directors at the rate of
$10,000 per year plus $1,000 per meeting of the Board attended. There is no
compensation for telephonic Board meetings or committee meetings held on the
same day as Board meetings. Further, all directors are reimbursed for their
reasonable, out-of-pocket expenses incurred in connection with their attendance
at Board and committee meetings. Eligible non-employee directors also receive
automatic grants of options under the Company's 1994 Stock Incentive Plan. Both
the director fees and the automatic option grant program are limited to those
persons who serve as non-employee members of the Board and who do not
beneficially own, directly or indirectly, or represent any stockholder that
beneficially owns, directly or indirectly, more than 5% of the Company's Common
Stock outstanding from time to time. Each eligible non-employee director is
automatically granted a nonqualified option to purchase 12,000 shares of Common
Stock upon his appointment to the Board. On the date of each annual meeting,
each eligible non-employee director is automatically granted a nonqualified
option to purchase 3,000 shares of Common Stock, provided that such person has
served as a member of the Board for at least six months. There is no limit on
the number of automatic option grants that any one eligible non-employee
director may receive. All grants under the Stock Incentive Plan have a maximum
term of 10 years from the automatic grant date, vest in a series of three equal
installments, and have an exercise price equal to the fair market value of the
Company's Common Stock on the grant date. In the event of certain changes of
control, all outstanding director options automatically vest and become fully
exercisable and remain exercisable following the change of control until the
expiration or sooner termination of the option term. Immediately following a
change of control, the automatic option grant program will terminate.
On June 4, 1999, the Company granted a bonus to Steve Sanghi of $100,000
and to Wade Meyercord of $25,000, for services provided in connection with the
management and operation of the Company following the resignation of Rolando C.
Esteverena, the Company's former Chief Executive Officer. Such bonuses are
payable in full only on the successful completion of a financing or strategic
transaction involving the Company the effect of which results in payment in full
of the existing credit facilities. The closing of the Merger would trigger
payment of the bonuses.
I-7
<PAGE> 33
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Chief Executive
Officer and the next four, most highly compensated executive officers who were
serving as such at December 27, 1998 for services rendered in all capacities to
the Company during the periods indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSA-
TION AWARDS
ANNUAL COMPENSATION -------------
----------------------------------------- SECURITIES ALL
OTHER ANNUAL UNDERLYING OTHER
COMPENSATION OPTIONS COMPENSA-
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($)(2) BONUS($)(4) ($)(5) (# SHARES)(6) TION($)(7)
- --------------------------- ------- ------------ ----------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Rolando C. Esteverena 1998 $255,147 $ 35,771 $ -- 50,000 $4,390
Former President and 1997 238,518 244,503 -- 20,000 2,302
Chief Executive Officer(3) 1996 215,000 -- -- -- 2,133
Neil Dial 1998 $155,769 $ -- $ 8,122 90,000 $1,750
President and Chief 1997 45,200 -- 2,200 50,000 --
Operating Officer(8) 1996 -- -- -- -- --
Donald E. Frederick 1998 $171,634 $ 15,575 -- 80,000 $1,229
Vice President, Chief 1997 97,596 33,377 $103,554 50,000 499
Financial Officer and Secretary 1996 -- -- -- -- --
R. Charles Furniss 1998 $127,500 $ 23,012 $ -- 20,000 $2,080
Vice President 1997 126,558 89,763 -- 10,000 930
Human Resources 1996 120,000 -- 69,306 -- 878
Eric H. Bert 1998 $120,088 $ 7,450 $ -- 14,000 $1,160
Vice President Asia/Pacific 1997 97,654 53,953 26,065 1,000 616
Operations and Managing Director 1996 77,077 -- -- -- 359
ATL
</TABLE>
- ---------------
(1) Mr. Frederick and Mr. Dial joined the Company in June and October, 1997,
respectively. No compensation was earned by either from the Company prior to
that time. Mr. Dial was appointed President and Chief Operating Officer on
April 5, 1999.
(2) Mr. Bert's salary for 1998 includes additional compensation of $27,949,
which relates to a cost of living adjustment in effect during his relocation
to Thailand.
(3) All bonuses were paid to Mr. Esteverena under the Management Bonus Plan. The
1997 bonus was paid in part during the year earned and in part during the
following year. Mr. Esteverena resigned from the Company on April 5, 1999.
(4) Bonuses include $262 in 1998 and $700 in 1997 under the Profit Sharing Bonus
Plan for Mr. Frederick, Mr. Furniss and Mr. Bert. All other bonuses were
paid to Mr. Frederick, Mr. Furniss and Mr. Bert under the Management Bonus
Plan. The 1997 bonuses under the Management Bonus Plan were paid in part
during the year earned and in part during the following year.
(5) The amounts disclosed in this column primarily include relocation expenses
paid out by the Company. In 1998, the Company paid relocation expenses for
Mr. Dial in the amount of $8,122. In 1997, the Company paid relocation
expenses to Mr. Bert, Mr. Dial and Mr. Frederick in the amount of $26,065,
$2,200 and $103,554, respectively. Relocation expenses paid by the Company
for Mr. Furniss in 1996 were $69,306.
I-8
<PAGE> 34
Excluded from this column are perquisites and other personal benefits, which
in no case in the aggregate exceeded the lesser of either $50,000 or 10% of
the total annual salary and bonus of any named executive officer.
(6) Included in this column are the number of shares underlying new options
granted to each named executive officer in place of previously granted
options. See "Information Regarding Repricing, Replacement or Cancellation
and Regrant of Option Grants".
(7) The amounts disclosed in this column include Company 401(k) matching
contributions and the dollar value of insurance premiums paid by the Company
for term life insurance. Company 401(k) matching contributions for the named
executive officers in 1998, 1997 and 1996, respectively, were as follows:
Mr. Esteverena, $1,120, $1,187, $1,183; Mr. Dial, $1,350, $0, $0; Mr.
Frederick, $974, $350, $0; Mr. Furniss, $1,619, $483, $475; and Mr. Bert,
$1,120, $565, $330. During 1998, term life insurance premiums paid by the
Company were $1,890, $400, $255, $461 and $40 for Messrs. Esteverena, Dial,
Frederick, Furniss and Bert. During 1997, term life insurance premiums paid
by the Company were $1,115, $0, $149, $446, and $50 for Messrs. Esteverena,
Dial, Furniss and Bert, respectively. During 1996, term life insurance
premiums paid by the Company were $950, $403 and $30 for Messrs. Esteverena,
Furniss and Bert, respectively.
(8) Mr. Dial was appointed President and Chief Operating Officer upon Mr.
Esteverena's resignation effective April 5, 1999.
OPTION GRANTS
The following table provides information with respect to stock option
grants made to each of the named executive officers during the year ended
December 27, 1998. No stock appreciation rights were granted to these
individuals during 1998. The Company granted additional stock options to certain
Company executives in 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER PERCENT OF AT ASSUMED ANNUAL RATES
OF SECURITIES TOTAL OPTIONS EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(6)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(5) DATE 5% 10%
- ---- ------------- ------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roland C. Esteverena 50,000(2) 6.3% $17.063 4/07/2008 $536,550 $1,359.700
Neil Dial 50,000(3) 6.3% 8.500 6/22/2008 267,500 677,500
40,000(3) 5.0% 8.500 6/22/2008 214,000 542,000
Donald E. Frederick 50,000(3) 6.3% 8.500 6/22/2008 267,500 677,500
30,000(3) 3.8% 160,500 406,500
R. Charles Furniss 20,000(3) 2.5% 8.500 6/22/2008 107,000 271,000
Eric H. Bert 10,000(3) 1.2% 8.500 6/22/2008 53,500 135,500
4,000(4) 0.5% 8.203 11/05/2008 20,516 52,308
</TABLE>
- ---------------
(1) Options were granted pursuant to the 1994 Stock Incentive Plan, as amended.
(2) Options granted will vest as to 1/24th of the shares covered thereby on the
second anniversary of the grant date and as to an additional 1/24th of the
shares per month thereafter, with the options being fully vested on the
fourth anniversary of the grant date.
(3) Options granted for Mr. Dial, Mr. Frederick, Mr. Furniss and Mr. Bert,
respectively, in June 1998 in replacement of previously granted options (see
"Information Regarding Repricing, Replacement or Cancellation and Regrant of
Option Grants") which vest as to 25% of the shares covered thereby on the
I-9
<PAGE> 35
first anniversary of the grant date and as to the remaining 75% of the
shares on a monthly basis thereafter for a period of three years.
(4) Options granted will vest as to 25% of the shares covered thereby on the
first anniversary of the grant date and as to the remaining 75% of the
shares on a monthly basis thereafter for a period of three years.
(5) The exercise price was equal to the fair market value of the shares of
Common Stock underlying the options on the grant date as determined by the
Board of Directors pursuant to the 1994 Stock Incentive Plan, and may be
paid in cash or in shares of the Company's Common Stock valued at their fair
market value on the exercise date.
(6) The 5% and 10% assumed rates of compounded stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
INFORMATION REGARDING REPRICING, REPLACEMENT OR CANCELLATION AND REGRANT OF
OPTION GRANTS
On June 22, 1998 the Compensation Committee unanimously agreed to reprice
certain options previously granted by providing employees new options to replace
previously granted options. No stock appreciation rights were granted to these
individuals during 1998. The following table sets forth certain information
concerning the repricing, replacement or cancellation and regrant of options,
within the last ten fiscal years, of options held by executive officers of the
Company.
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
VALUE ON ORIGINAL NEW OPTION TERM
NUMBER DATE OF EXERCISE EXERCISE REMAINING AT
DATE OF OF OPTIONS REPRICING PRICE PRICE DATE OF
NAME AND PRINCIPAL POSITION REPRICING REPRICED(1) ($/SHARE) ($/SHARE) ($/SHARE) REPRICING
- --------------------------- --------- ----------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Rolando C. Esteverena 7/2/97 20,000 $14.875 $ 27.25 $14.875 8 Years
Former President and Chief
Executive Officer(2)
Neil Dial 6/22/98 50,000 $ 8.50 $22.063 $ 8.50 10 Years
President and Chief 6/22/98 40,000 $ 8.50 $17.063 $ 8.50
Operating Officer(2)
Donald E. Frederick 6/22/98 30,000 8$.50.... $15.500 $ 8.50 10 Years
Vice President, Chief 6/22/98 30,000 $ 8.50 $17.063 $ 8.50
Financial Officer and Secretary
R. Charles Furniss 6/22/98 20,000 $ 8.50 $17.063 $ 8.50 10 Years
Vice President Human Resources 7/2/97 10,000 $14.875 $ 27.25 14.875 8 Years
Eric H. Bert 6/22/98 10,000 $ 8.50 $17.063 $ 8.50 10 Years
Vice President Asia/Pacific 7/2/97 1,000 $14.875 $ 27.25 14.875 8 Years
Operations and Managing
Director ATL
</TABLE>
- ---------------
(1) Options were repriced pursuant to the 1994 Stock Incentive Plan, as amended.
All options vest as to 25% of the shares covered thereby on the first
anniversary of the new grant date and as to the remaining 75% of the shares
on a monthly basis thereafter for a period of three years.
(2) Mr. Dial was appointed President and Chief Operating Officer upon Mr.
Esteverena's resignation effective April 5, 1999.
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<PAGE> 36
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of
stock options by the named executive officers during 1998 and the number and
value of unexercised options held by the named executive officers at December
27, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON REALIZED (#)EXERCISABLE/ ($)EXERCISABLE/
NAME EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- ---- ----------- -------- --------------- -------------------
<S> <C> <C> <C> <C>
Rolando C. Esteverena(3)............ 0 $ 0 33,123/131,877 $0
Neil Dial(3)........................ 0 $ 0 0/90,000 0
Donald E. Frederick................. 0 $ 0 0/80,000 0
R. Charles Furniss.................. 0 $ 0 13,999/42,001 0
Eric H. Bert........................ 1,373 $10,984 5,551/28,576 0
</TABLE>
- ---------------
(1) The amounts shown were calculated based upon the difference between the
exercise price and the fair market value of the Company's Common Stock as of
the date of exercise.
(2) Calculated based upon the difference between the closing market price per
share for the Company's Common Stock on December 27, 1998 as reported by the
Nasdaq National Market and the exercise price.
(3) Mr. Dial was appointed President and Chief Operating Officer upon Mr.
Esteverena's resignation effective April 5, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Steve Sanghi, Richard P.
Clark and William Kennedy Wilkie. It is primarily responsible for approving the
Company's general compensation policies and setting compensation levels for the
Company's executive officers. The Compensation Committee also administers the
Company's 1993 Equity Incentive Plan, 1994 Stock Incentive Plan and 1994
Employee Stock Purchase Plan, as amended.
Richard P. Clark was first elected to the Board of Directors as of June 2,
1994 pursuant to certain contractual commitments with AMP, which commitments
terminated effective September 27, 1994 upon the Company's initial public stock
offering. AMP has been an important supplier to the Company in the past and is
expected to continue as such. Purchases from AMP for the years ended December
27, 1998 and December 31, 1997 and 1996 were $1,392,027, $4,514,000 and
$2,582,000, respectively.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
The Compensation Committee has approved an agreement outlining certain
arrangements applicable to Mr. Frederick, Mr. Rzasa, Mr. Dial and Mr. Furniss
that would be effective upon a change in control of the Company. The term of the
agreement is for three years and will be automatically extended for successive
one year periods thereafter. Under the agreement, the executive officers named
above would be entitled to receive the following benefits if, within one year
following a change in control of the Company, any of them resigns for good
reason or is terminated by the Company:
(i) The Company would pay to the executive a lump sum amount (no later
than the thirtieth day following the date of termination) equal to his full
base salary through the date of termination at the greater of either the
rate in effect at the time of termination or the rate in effect immediately
prior to the
I-11
<PAGE> 37
change in control (collectively, the "Base Rate"). In addition, the Company
will pay an amount equal to 1.1 multiplied by the sum of (a) one year's
base salary at the Base Rate plus (b) the greater of either his target
bonus in effect under the Company's management bonus plan at the time of
termination or the target bonus in effect under the Company's management
bonus plan immediately prior to the change in control.
(ii) The Company would maintain for the executive officer and eligible
beneficiaries the benefits pursuant to the Company-sponsored benefit plans,
programs or other arrangements in which he is entitled to participate
immediately prior to the change in control until either (a) his attainment
of comparable benefits upon alternate employment or (b) one year following
the date of termination, whichever occurs first.
(iii) The Company would use reasonable efforts to continue insurance
coverage or other provisions for indemnification and defense of officers or
directors of the Company which are in effect on the date of the change in
control.
(iv) Subject to Section 16 of the Exchange Act, all stock options and
other stock incentive awards which are not vested at the date of
termination shall vest as of the date of termination and may be exercised
in accordance with the terms of the plans and agreements pursuant to which
such options and other awards were issued.
(v) To the extent necessary to avoid the disallowance of the
deductibility of the payments to be made as described above, such payments
would be limited by Section 280G of the Internal Revenue Code of 1986.
With respect the aforementioned, "good reason" means certain reductions in base
salary, certain relocations, the assignment of duties materially inconsistent
with the duties prior to the change in control, or a significant reduction in
the officer's position, all of which occurred without the executive officer's
express prior written consent. A "change in control" includes the acquisition of
beneficial ownership by certain persons of securities possessing more than 50%
of the total combined voting power of the Company's outstanding securities, a
change in composition of the Board over a period of 36 consecutive months or
less such that the current Board members of the Company cease to constitute a
majority thereof (except that any new Board member approved by at least a
majority of the current Board is considered to be a member of the current
Board), or certain events relating to reorganizations, mergers, consolidations,
liquidations or sales of all or substantially all of the Company's assets.
Except as provided above, none of the Company's other executive officers
has an employment contract with the Company, and their employment may be
terminated at any time at the discretion of the Board of Directors. However, the
Compensation Committee has the authority as administrator of the 1994 Stock
Incentive Plan to provide for the accelerated vesting of the shares of Common
Stock subject to outstanding options and other awards held by the Chief
Executive Officer and the Company's other executive officers on any unvested
shares actually held by those individuals under the 1994 Stock Incentive Plan,
in the event their employment were to be terminated (whether involuntarily or
through a forced resignation) following a hostile take-over of the Company
effected through a successful tender for more than 50% of the Company's
outstanding Common Stock or through a change in the majority of the Board as a
result of one or more contested elections for Board membership.
I-12
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <C> <S>
1 -- Letter to Stockholders, dated July 7, 1999, from Neil Dial,
President and Chief Operating Officer of the Company.
2 -- Offer to Purchase, dated July 7, 1999 (incorporated by
reference to Exhibit (a)(1) of Schedule 14D-1).
3 -- Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) of Schedule 14D-1).
4 -- Agreement and Plan and Merger, dated as of July 1, 1999,
among Parent, Purchaser and the Company (incorporated by
reference to the Company's Form 8-K dated July 7, 1999).
5 -- Fairness Opinion of BancBoston Robertson Stephens Inc.,
dated July 1, 1999.
6 -- Joint Press Release issued by the Company and Parent on July
1, 1999 (incorporated by reference to the Company's Form 8-K
dated July 7, 1999).
7 -- Non-Disclosure Agreement by and among Parent, Purchaser and
the Company, dated April 30, 1999, in favor of the Company.
8 -- Exclusivity Agreement, dated June 7, 1999, between the
Company and Parent.
9 -- Form of Change In Control Agreement.
10 -- Tender Agreement, dated as of June 30, 1999, by and among
the Parent, Purchaser and Havant International Holdings
Limited (incorporated by reference to Exhibit (c)(2) of
Schedule 14D-1).
11 -- Form of Director Indemnification Agreement entered into
between the Company and its Directors (incorporated by
reference to the Company's Form 10-K for the fiscal year
ended December 27, 1998).
12 -- By-Laws of the Company (incorporated by reference to the
Company's Registration Statement on Form S-1 (No. 33-80324)
or amendments thereto, filed with the Securities and
Exchange Commission on June 16, 1994).
13 -- Amendment to By-laws adopted January 31, 1996 (incorporated
by reference to the Company's Form 10-K for the fiscal year
ended December 31, 1995).
14 -- Restated Certificate of Incorporation of the Company
(incorporated by reference to the Company's Registration
Statement on Form S-1 (No. 33-80324) or amendments thereto,
filed with the Securities and Exchange Commission on June
16, 1994).
15 -- Preferred Shares Rights Agreement, dated as of July 10,
1996, between the Company and BankBoston N.A., formerly
First National Bank of Boston, N.A., as Rights Agent
(incorporated by reference to the Company's Form 8-K dated
July 10, 1996).
16 -- Amendment to Preferred Shares Rights Agreement, dated as of
July 1, 1999, between the Company and BankBoston N.A.,
formerly First National Bank of Boston N.A., as Rights
Agent.
17 -- Credit Agreement, dated June 5, 1997, among the Company,
BankBoston N.A., and BankBoston N.A., as agent for the
lenders (incorporated by reference to the Company's Form
10-Q for the quarter ended June 30, 1997).
18 -- Third Amendment to Credit Agreement, dated October 30, 1998,
among the Company, BankBoston N.A., and BankBoston N.A., as
agent for the lenders (incorporated by reference to the
Company's Form 10-Q for the quarter ended September 30,
1998).
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <C> <S>
19 -- Fourth Amendment to Credit Agreement, dated January 15,
1999, among the Company, BankBoston N.A., and BankBoston
N.A., as agent for the lenders (incorporated by reference to
the Company's Form 10-K for the fiscal year ended December
27, 1998).
20 -- Fifth Amendment to Credit Agreement, dated February 19,
1999, among the Company, BankBoston N.A., and BankBoston
N.A., as agent for the lenders (incorporated by reference to
the Company's Form 10-K for the fiscal year ended December
27, 1998).
</TABLE>
