<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------
SYMETRICS INDUSTRIES, INC.
(Name of Subject Company)
SYMETRICS INDUSTRIES, INC.
(Name of Persons(s) Filing Statement)
COMMON STOCK, PAR VALUE $.25 PER SHARE
(Title of Class of Securities)
871 52 1100
(CUSIP Number of Class of Securities)
DUDLEY E. GARNER, JR.
CHAIRMAN OF THE BOARD AND PRESIDENT
SYMETRICS INDUSTRIES, INC.
1615 WEST NASA BOULEVARD
MELBOURNE, FLORIDA 32901
(407) 254-1500
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of the Persons(s) Filing Statement)
Copy to:
SUZAN A. ABRAMSON, ESQ.
GROCOCK, LOFTIS & ABRAMSON
126 EAST JEFFERSON STREET
ORLANDO, FLORIDA 32801
(407) 422-0300
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Symetrics Industries, Inc., a Florida
corporation ("Symetrics" or the "Company"), and the address of its principal
executive offices is 1615 West NASA Blvd., Melbourne, Florida 32901. The title
of the class of equity securities to which this statement relates is the Common
Stock, $.25 par value, of the Company (the "Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer by TSHCo., Inc. ("Purchaser"), a
Delaware corporation, and a wholly owned subsidiary of Tel-Save Holdings, Inc.,
a Delaware corporation ("TSH" or "Parent"), to purchase all of the outstanding
Shares held by the Company's stockholders other than Parent or its affiliates at
$15.00 per Share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in Purchaser's Offer to Purchase dated
December 22, 1997 (the "Offer to Purchase") and the related Letter of
Transmittal (which together with the Offer to Purchase constitute the "Offer"),
copies of which are filed respectively as Exhibits 1 and 2 hereto and are
incorporated herein by reference in their entirety. The Offer is conditioned
upon, among other things, there having been validly tendered prior to the
Expiration Date (as hereinafter defined) and not withdrawn that number of Shares
representing, together with Shares currently owned by Parent, at least a
majority of all outstanding shares of Common Stock of the Company on a fully
diluted basis on the date of purchase (the "Minimum Condition"). The Offer is
disclosed in a Tender Offer Statement on Schedule 14D-1 dated December 22, 1997
(the "Schedule 14D-1") which has been filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules promulgated by the SEC thereunder.
The Offer is being made by Purchaser pursuant to an Agreement and Plan of
Merger, dated as of December 18, 1997, by and among Parent, Purchaser and the
Company (as the same may be amended from time to time, the "Merger Agreement"),
a copy of which is filed as Exhibit 3 hereto and incorporated herein by
reference in its entirety.
According to Parent's and Purchaser's Schedule 14D-1, the address of the
principal executive offices of Parent is 6805 Route 202, New Hope, Pennsylvania
18938, and the address of the principal executive offices of the Purchaser is
6805 Route 202, New Hope, Pennsylvania 18938.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as described herein and in the section titled "Executive
Compensation" in the Company's Proxy Statement dated June 6, 1997 relating to
the Company's 1997 Annual Meeting of Stockholders (the "1997 Proxy Statement")
(a copy of the above section of the 1997 Proxy Statement is filed as Exhibit 4
hereto and incorporated herein by reference), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements, arrangements
or understandings, or any potential or actual conflicts of interest between the
Company or its affiliates and (i) the Company, its executive officers, directors
or affiliates, or (ii) the Purchaser, its executive officers, directors or
affiliates.
Since the mailing of the 1997 Proxy Statement, the following has occurred:
On December 15, 1997 the Company extended for an additional three year term
effective January 1, 1998, its employment agreement with Dudley E. Garner, Jr.,
its President, Chief Executive Officer, and Chairman of the Board, upon the same
terms and conditions set forth in Mr. Garner's Employment Agreement dated
February 9, 1994 described in the 1997 Proxy Statement.
Pursuant to a letter agreement dated December 18, 1997 between the Company
and Parent (the "Letter Agreement"), the Purchaser and Parent have agreed that:
(i) at the Effective Time (as hereinafter defined) of the Merger (as hereinafter
defined), the Company shall pay to Mr. Garner a cash amount equal to the portion
of his base salary that would have been payable under his employment agreement
for a period of eighteen months (Mr. Garner's 1997 base salary was $183,643);
(ii) at Parent's request, Mr. Garner shall
1
<PAGE> 3
remain employed by the Company for a mutually agreed upon time not to exceed six
months in consideration of his compensation payable under his employment
agreement; and (iii) at the Effective Time of the Merger; the Company shall pay
to Mr. Garner the amount of deferred compensation that has been duly accrued
pursuant to his Deferred Compensation and Salary Continuation Agreement dated as
of November 1, 1983 (described in the 1997 Proxy Statement), which amount shall
not exceed $440,000.
Pursuant to the Letter Agreement, Parent has also agreed to cause the
Company and its subsidiary, American Digital Switching, Inc. ("ADS") (the
Company and ADS are hereinafter sometimes collectively referred to as the
"Company") to retain the following executive officers of the Company in the same
or in a substantially comparable position with the Company, at compensation at
least commensurate with the level of such employee's current compensation for a
period of two years from the Effective Time of the Merger: Earl J. Claire,
Richard F. Ostrow, Karl W. Kettner, Robert A. Lyons, Jr., Jerry L. Sinclair, W.
Campbell McKegg, Jr., D. Mitchell Garner, Anton Szpendyk, and Richard E.
Nichols.
Parent has further agreed to use its reasonable best efforts to negotiate
individual contractual arrangements with each of the aforementioned officers
relating to their employment with the Company on or before the Effective Time of
the Merger. Such individual arrangements shall supersede any arrangements set
forth in the Letter Agreement.
Pursuant to the Letter Agreement, the aforementioned officers may be
terminated for cause, as defined therein. "Cause" is defined as such employee's
(i) failure to perform substantially the employee's duties owed to the Company
after a written demand for substantial performance is delivered to such employee
which specifically identifies the nature of such nonperformance, or (ii)
engaging in dishonorable or disruptive behavior which would be reasonably
expected to harm the Company, its business or its employees. In the event such
employee is terminated without cause (which shall include relocation of such
employee required by the Company, Parent or Purchaser), such terminated employee
shall be entitled to receive in a lump sum by Company check on the day of
termination of employment, the portion of the base salary to which such employee
would have been entitled as indicated in the Letter Agreement, had such employee
remained employed by the Company until the end of the two-year period referred
to above.
Parent has also agreed that with respect to Earl J. Claire, President of
ADS and a member of the Board of Directors of the Company, Mr. Claire shall be
entitled to receive the same payment on the same terms as set forth above in the
event of his termination with cause, as he would have been entitled to receive
had such termination occurred without cause. Effective December 8, 1997, Mr.
Claire's base salary was increased to $112,008 per year as a result of his 90
day performance review.
Pursuant to the Company's Stock Option Plan, on December 17, 1997, the
Board of Directors of the Company elected to accelerate the vesting of all
outstanding stock options under such plan. All such options will become fully
vested and exercisable with respect to 100% of the shares covered thereby
immediately prior to the Effective Time of the Merger.
The following table sets forth the net value of Company options (if fully
vested) to be received by reason of the consummation of the Merger by each
director and executive officer of the Company.
<TABLE>
<CAPTION>
NAME TITLE NET VALUE
- ------------------------------------- ------------------------ ---------
<S> <C> <C>
Anton Szpendyk....................... Vice President $ 111,300
W. Campbell McKegg, Jr............... Vice President $ 37,200
D. Mitchell Garner................... Vice President $ 37,200
Earl J. Claire....................... President -- ADS $ 59,325
Jane J. Beach........................ Director $ 11,130
Jerry L. Sinclair.................... Vice President $ 37,200
Michael E. Terry..................... Director $ 5,565
Richard E. Nichols................... Vice President $ 61,875
Robert A. Lyons...................... Vice President $ 45,750
</TABLE>
2
<PAGE> 4
(b)(2) In connection with the Offer, (i) the Company has entered into the
Merger Agreement with Parent and Purchaser, and a Stock Option Agreement, dated
as of December 18, 1997 with Parent (the "Stock Option Agreement"), and (ii)
each of Jane J. Beach, Earl J. Claire, Dudley E. Garner, Jr., Michael E. Terry,
Edwin H. Eichler , Donald W. Ingram, Michael D. Jensen, D. Mitchell Garner,
Robert A. Lyons, W. Campbell McKegg, Jr., Richard E. Nichols, Jerry Sinclair and
Anton Szpendyk has entered into a Tender and Option Agreement, dated as of
December 18, 1997 on identical terms (the "Tender and Option Agreements") with
Parent. Summaries of the Merger Agreement, the Stock Option Agreement, and the
Tender and Option Agreements are set forth below. Copies of such agreements are
filed as Exhibits 3, 7, and 6 hereto, respectively, and are incorporated herein
by reference in their entirety. The following summaries are qualified in their
entirety by reference to the text of such agreements.
THE MERGER AGREEMENT
THE OFFER. Purchaser commenced the Offer in accordance with the terms of
the Merger Agreement.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL") and the Florida Business
Corporation Act (the "FBCA"), Purchaser shall be merged with and into the
Company. Following the effective time of the Merger (the "Effective Time"), the
separate corporate existence of Purchaser will cease and the Company will
continue as the corporation surviving the Merger (sometimes referred to herein
as the "Surviving Corporation") and will succeed to and assume all the rights
and obligations of the Purchaser in accordance with the FBCA. The Articles of
Incorporation of the Company shall become the Articles of Incorporation of the
Surviving Corporation and the By-Laws of Purchaser shall become the By-Laws of
the Surviving Corporation.
CONVERSION OF SHARES. At the Effective Time, each Share issued and
outstanding immediately prior thereto (other than Shares held by the Company as
treasury Shares and Shares owned by Purchaser or Parent) will be converted into
and become solely the right to receive $15.00 net in cash (adjusted for stock
splits or other similar events) per share without interest upon the surrender of
the certificate formerly representing such Share. All Shares held as treasury
shares and shares held by the Purchaser or any of its affiliates will be
canceled at the Effective Time. All shares of capital stock of Purchaser issued
and outstanding immediately prior to the Effective Time shall be converted and
changed into an equal number of shares of capital stock of the Surviving
Corporation.
COMPANY STOCK OPTIONS. Pursuant to the Merger Agreement, at the Effective
Time, each option to purchase Shares issued by the Company (the "Company Stock
Options") which is outstanding at the Effective Time shall be canceled by virtue
of the Merger. Purchaser has agreed to pay to each holder thereof cash in an
amount per Share subject to such canceled Company Stock Option equal to the
excess of $15.00 over the exercise price per Share of such Company Stock Option.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Purchaser and
Parent, including, but not limited to, representations and warranties relating
to the Company's organization and qualification, its subsidiaries, its
capitalization, its authority to enter into the Merger Agreement and carry out
the transactions contemplated thereby, filings made by the Company with the SEC
under the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act (including financial statements included in the documents filed by
the Company under these acts for the fiscal year ended March 31, 1997), its
litigation, and compliance with the Company's government contracts.
Purchaser and Parent have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to Purchaser's and Parent's organization and authority to
enter into the Merger Agreement, that Purchaser will have sufficient funds
available to it to purchase the Shares and that none of Purchaser or Parent owns
(other than possibly through their employee benefit plans) any Shares, other
than as disclosed in filings with the SEC.
3
<PAGE> 5
COVENANTS RELATING TO THE CONDUCT OF BUSINESS. Pursuant to the Merger
Agreement, the Company has agreed that it will, and will cause its subsidiaries
to, carry on in all material respects, their respective businesses in the
ordinary course, not issue any capital stock, except as specified in the Merger
Agreement, or take any other action with respect to its capital stock, not take
any action to sell or encumber in any manner their capital stock or material
assets other than in the ordinary course of business, not amend or propose to
amend their Articles of Incorporation or By-laws or similar governing
instruments, not incur any indebtedness other than in the ordinary course of
business, not enter into any agreement to change any of their existing
contracts, not enter into or change any employment agreements, not amend or
adopt any employee benefit plans and, to the extent consistent therewith, use
their reasonable best efforts to keep intact their insurance policies, preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them.
ACQUISITION PROPOSALS. The Company has agreed in the Merger Agreement that
from the date of the Merger Agreement until the termination of the Merger
Agreement, (a) it and its subsidiaries will not directly or indirectly make,
solicit, initiate or encourage submission of proposals or offers from any
persons (including any of its officers or employees) with respect to an
Acquisition Proposal, and (b) subject to the fiduciary duties of the Company's
Board of Directors, it will immediately cease and cause to be terminated all
discussions or negotiations with third parties with respect to any Acquisition
Proposal and promptly notify Purchaser after receipt of any bona fide
Acquisition Proposal or any inquiry from any person relating thereto and
promptly provide Purchaser with a reasonable summary of the financial and other
material terms of such
Acquisition Proposal. An "Acquisition Proposal" is defined in the Merger
Agreement as any proposal or offer involving liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or
substantially all of the assets of, or equity interest in, the Company or other
similar transaction or business combination involving the Company or its
subsidiaries. The Merger Agreement also provides that to the extent that the
Company's Board of Directors, acting in good faith, after receiving advice from
outside legal counsel or its financial advisors that the following action is
necessary or appropriate in order to act in a manner which is consistent with
its fiduciary duties under applicable law, may furnish or cause to be furnished
information to third parties concerning itself and its businesses, properties or
assets, engage in discussions or negotiations with a third party regarding an
Acquisition Proposal initiated by a third party, or, following receipt of an
Acquisition Proposal, take or disclose to its stockholders a position
contemplated by Rule 14e-2(a) under the Exchange Act or otherwise make
disclosure to the Company's stockholders or withdraw, modify or amend its
recommendation of the transactions contemplated by the Merger Agreement and/or
enter into an agreement providing for the consummation of such Acquisition
Proposal.
INDEMNIFICATION. The Merger Agreement provides that from and after the
Effective Time, Purchaser will indemnify, defend and hold harmless all officers,
directors and employees of the Company or any of its subsidiaries against all
losses, expenses, claims, damages or liabilities arising out of claims brought
or made by third parties including, without limitation, derivative claims in
connection with the transactions contemplated by the Merger Agreement to the
fullest extent permitted or required under applicable law and shall advance
expenses prior to the final disposition of these claims and liabilities.
Purchaser has also agreed to continue to keep in effect all rights to
indemnification now existing in favor of the directors, officers or employees of
the Company or any of its subsidiaries including, without limitation, any person
who was or becomes a director, officer or employee prior to the Effective Time
(the "Indemnified Parties") under the FBCA or as provided in the Company's
Articles of Incorporation or By-Laws with respect to matters occurring on or
prior to the Effective Time and for a period of not less than six years after
the Effective Time (or, in the case of claims or other matters occurring on or
prior to the expiration of such six year period, which have not been resolved
prior to the expiration of such six year period, until such matters are finally
resolved) and Purchaser shall honor, and shall cause the Surviving Corporation
to honor, all such rights. Purchaser shall cause to be maintained in effect for
not less than six years from the Effective Time, an insurance and
indemnification policy for the Company's current directors, officers and
employees that covers events occurring at or prior to the Effective Time (the
"D&O Insurance") that is no less favorable than the existing policy of the
Company or, if substantially equivalent insurance coverage is unavailable, the
best available coverage. Purchaser and the Surviving Corporation will not be
required, however, to pay an annual premium for the D&O Insurance in
4
<PAGE> 6
excess of 150% of the amount that the Company spent for these purposes in the
last fiscal year. Parent may also substitute therefor policies of at least the
same coverage containing terms and conditions which are no less advantageous.
EMPLOYEE MATTERS. The Purchaser has agreed in the Merger Agreement that the
employer provided benefits and compensation for nonunion employees under the
Company's employee benefit plans and payroll which are in effect as of the
Effective Time (other than any feature of any such plan that relates to the
Shares) will not be reduced after the Effective Time (except to the extent
consistent with the terms of the Merger Agreement and except to the extent
necessary to comply with applicable law) at least until the second anniversary
of the Effective Time. In addition, in connection with the Merger Agreement,
Parent has agreed in the Letter Agreement with the Company to permit certain key
employees of the Company to remain in their current (or comparable) positions
for a period of two years from the Effective Time at compensation levels at
least comparable to their current levels.
ADDITIONAL EFFORTS. Upon the terms and subject to the conditions set forth
in the Merger Agreement, the Company, Purchaser and Parent agree to use all
reasonable efforts to take all actions and to do all things necessary, proper or
advisable to consummate and make effective, as promptly as practicable, the
transactions contemplated by the Offer and the Merger Agreement.
CONDITIONS PRECEDENT TO MERGER. The respective obligations of the Company,
Purchaser and Parent to effect the Merger are subject to the fulfillment at or
prior to the Effective Time of the following conditions: (a) the Offer shall
have been consummated in accordance with its terms; provided, however, that this
condition shall be considered satisfied if Purchaser fails to accept for payment
and pay for Shares pursuant to the Offer other than as a result of a failure of
the conditions to the Offer set forth in the Merger Agreement; (b) the waiting
period applicable to the consummation of the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), shall have
expired or been terminated; (c) no law, statute, rule or regulation, domestic or
foreign, shall have been enacted or promulgated or is in effect which has the
effect of making the acquisition of Shares illegal or otherwise prohibits
consummation of the Merger, and (d) no preliminary or final injunction or
temporary restraining order or other order or decree has been issued by any
foreign or United States federal or state court or foreign or United States
federal or administrative agency enjoining, restraining or otherwise prohibiting
the Offer, the Merger or the acquisition by Purchaser of Shares.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether prior to or after approval by the stockholders of
the Company: (a) by mutual written consent of Purchaser and the Company; (b) by
either Purchaser or the Company if: (i) the Offer shall not have been
consummated by March 1, 1998; or (ii) at any time after June 30, 1998, if any of
the conditions set forth in the immediately preceding paragraph (Conditions
Precedent to Merger) have not been satisfied or waived; (c) by Purchaser: (i) if
the Board of Directors of the Company shall have failed to recommend, or shall
have withdrawn, its approval or recommendation of the Offer or the Merger or
shall have resolved to do any of the foregoing or if the Company shall have
entered into a definitive agreement to accept an Acquisition Proposal (as the
term is defined above); (ii) if the Company's Board of Directors modifies its
approval of the Offer or the Merger in a manner adverse to Purchaser and the
Minimum Condition shall not have been met on the Expiration Date; or (iii) if as
a result of the failure of any conditions set forth in the Merger Agreement, the
Offer shall have terminated or expired without Purchaser or a subsidiary of
Parent having purchased any Shares in the Offer; or (d) by the Company, if the
Company's Board of Directors, acting in good faith, after receiving advice from
outside counsel or its financial advisors that the following action is necessary
or appropriate in order for it to act in a manner which is consistent with its
fiduciary duties under applicable law, (i) following receipt of an Acquisition
Proposal from a third party, withdraws, modifies or amends its recommendations
of the Offer or the Merger or (ii) enters into an agreement providing for the
consummation of an Acquisition Proposal following receipt of an Acquisition
Proposal from a third party. Notwithstanding the foregoing, the Merger Agreement
provides that the right to terminate the Merger Agreement pursuant to any of the
events set forth above will not be available to any party if the event which
gave rise to such termination right is a result of or arose in connection with
any action or inaction of the party seeking to terminate taken or not taken in
breach of the terms of the Merger Agreement.
5
<PAGE> 7
FEES AND EXPENSES. Except as described in the next sentence, pursuant to
the Merger Agreement, each of the Company and Purchaser agreed to pay its own
respective costs and expenses incurred in connection with the Merger Agreement
and the transactions contemplated thereby. The Company also agreed in the Merger
Agreement that, if the Merger Agreement is terminated pursuant to: (1) clause
(b)(ii) (set forth above in "Termination") and at the time of such termination
any person, entity or group (as defined in Section 13(d)(3) of the Exchange Act)
(other than Purchaser or Parent) shall have become the beneficial owner of more
than 20% of the outstanding Shares (with appropriate adjustments for
reclassifications of capital stock, stock dividends, stock splits, reverse stock
splits and similar events) and such person, entity or group (or any subsidiary
of such person, entity or group) thereafter enters into a definitive agreement
with the Company to accept an Acquisition Proposal at any time on or prior to
the date which is six months after the termination of the Merger Agreement and
such transaction is thereafter consummated; (2) clause (c)(ii) (set forth above
in "Termination") and at the time of termination of the Merger Agreement, the
Company shall enter into a definitive agreement to accept an Acquisition
Proposal at any time on or prior to the date which is six months after the
termination of the Merger Agreement; (3) clause (c)(iii) (set forth above in
"Termination") and such failure was the result of any action taken by or on
behalf of the Company giving rise to an Event specified in clause (a), (b), (c),
(d), (f), (g) or (i) (set forth below in "Certain Conditions to Purchaser's
Obligations") and such action was in breach of the Company's obligations under
the Merger Agreement and, with respect to an Event (as hereinafter defined)
specified in clause (g), if such action was taken by the Company for the purpose
of causing Purchaser to terminate the Merger Agreement; or (4) clause (d) or
clause (c)(i) (each as set forth above under "Termination"); then the Company
shall grant to Purchaser an option, pursuant to the Stock Option Agreement, to
purchase that number of Shares which would equal 19.9% of the aggregate number
of Shares outstanding after giving effect to the exercise of such option.
CERTAIN CONDITIONS TO PURCHASER'S OBLIGATIONS. Purchaser will not be
required to continue the Offer or to accept for payment or pay for any Shares
tendered, may postpone the acceptance for payment, purchase of and/or payment
for Shares, may amend or terminate the Offer, and may extend the Offer beyond
January 21, 1998 (the "Initial Expiration Date," in which event the expiration
date ("Expiration Date") shall mean the latest time and date which the Offer as
so extended by Purchaser shall expire) whether or not any Shares have
theretofore been purchased or paid for, (i) if the Minimum Condition shall not
have been satisfied or (ii) if, at any time on or after December 22, 1997 and
prior to the time of payment for any such Shares any of following events (each
referred to as an "Event") have occurred (each of paragraphs (a) through (j)
providing a separate and independent condition to Purchaser's obligations
pursuant to the Offer); provided, however, that Purchaser may waive any Event at
any time:
(a) there shall be in effect any preliminary or final injunction or
temporary restraining order or other order or decree issued by any foreign
or United States federal or state court or foreign or United States federal
or administrative agency or authority, enjoining, restraining or otherwise
prohibiting the Offer, the Merger or the acquisition by Parent or Purchaser
of Shares;
(b) an action or a proceeding shall have been commenced by any
governmental agency under federal or state antitrust laws or any other
applicable law before any court or any governmental or other administrative
or regulatory authority or agency, domestic or foreign, or there shall be
an imminent threat which would reasonably be expected to result in the
foregoing, or any of the authorizations required to be obtained pursuant to
the provisions of the Merger Agreement shall have been conditioned in such
a manner, that would reasonably be expected to (i) materially restrict or
prohibit consummation of the Offer or the Merger or any other merger or
business combination between the Company, Parent and Purchaser, (ii) impose
material limitations on the ability of Parent or Purchaser effectively to
acquire or hold or to exercise full rights of ownership of the Shares
acquired by it, including, but not limited to, the right to vote the Shares
purchased by it on all matters properly presented to the stockholders of
the Company, or (iii) impose material limitations on the ability of either
Purchaser or the Company to continue effectively to conduct all or any
material portion of its respective business as heretofore conducted or to
continue to own or operate effectively all or any material portion of its
respective assets as heretofore owned or operated;
6
<PAGE> 8
(c) there shall have been any law, statute, rule or regulation,
domestic or foreign, enacted, promulgated or proposed that, directly or
indirectly, would reasonably be expected to result in any of the
consequences referred to in paragraph (b) above;
(d) a material adverse change in the business, property, financial
condition or results of operations of the Company and its subsidiaries
taken as a whole shall have occurred;
(e) there shall have occurred (i) any general suspension of trading in
securities on the New York Stock Exchange, (ii) a declaration of a banking
moratorium or any suspension of payments by United States authorities on
the extension of credit by lending institutions, or (iii) a commencement of
a war, armed hostilities or other international or national calamity
directly or indirectly involving the United States which would reasonably
be expected to have a material adverse effect on the business, property,
financial condition or results of operations of the Company and its
subsidiaries taken as a whole;
(f) any representation or warranty of the Company in the Merger
Agreement shall at any time prove to have been incorrect in any material
respect at the time made;
(g) the Company shall fail to perform or comply in any material
respect with any covenant or agreement to be performed or complied with by
the Company under the Merger Agreement;
(h) the Company and Purchaser shall have agreed to terminate the
Offer, or the Merger Agreement or the Tender and Option Agreements are no
longer in full force and effect;
(i) the Board of Directors of the Company or the Company, as the case
may be, shall have (i) publicly (including by amendment of the Schedule
14D-9) withdrawn its recommendation to stockholders of acceptance of the
Offer and adoption of the Merger Agreement, or shall have resolved to do
so; or (ii) entered into an agreement with a third party providing for the
acquisition or purchase of all or substantially all of the assets of, or
equity interest in, the Company by such third party; and
(j) the Offer shall not have been consummated by March 1, 1998.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent and Purchaser regardless of the circumstances
giving rise to such condition or may be waived by parent or Purchaser in whole
at any time or in part from time to time in its reasonable discretion. The
failure by Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right and may be asserted at any time and from time to
time. If the Offer is terminated pursuant to the foregoing provision, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering stockholders.
THE TENDER AND OPTION AGREEMENTS AND THE STOCK OPTION AGREEMENT
In connection with the transactions contemplated by the Merger Agreement,
Parent has entered into Tender and Option Agreements, dated as of December 18,
1997, with certain directors and officers of the Company (the "Management"),
pursuant to which, among other things, the Management has agreed to tender
validly in the Offer, and not withdraw, all of the Shares that it now owns or
subsequently may acquire (the "Management Shares") which, based on the Company's
records, amounted to 329,699 Shares beneficially owned (including options
currently exercisable for Shares) as of December 18, 1997, and which constitute
approximately 18.25% of the Shares on a fully diluted basis. In addition, the
Management agreed in the Tender and Option Agreements that, at any meeting of
the Company's stockholders (however called), it would (i) vote the Management
Shares in favor of the Merger, (ii) vote the Management Shares against any
action or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation of the Company
under the Merger Agreement, and (iii) vote the Management Shares against any
action or agreement that would impede, interfere with, delay, postpone or
attempt to discourage the Merger or the Offer. The Tender and Option Agreements
provide that for a period of six months from the date thereof Parent shall have
(i) the option to purchase the Management Shares if a third party makes an
Acquisition Proposal (as defined in the Merger Agreement) and (ii) a right of
first refusal if any Management holder intends to sell his or her Shares to a
third party. The Tender and Option
7
<PAGE> 9
Agreements shall terminate on the first to occur of (a) the Effective Time and
(b) the termination of the Merger Agreement.
The Company, Parent and Purchaser have entered into a Stock Option
Agreement, dated as of December 18, 1997, pursuant to which, in the event the
Merger Agreement is terminated under certain circumstances, including the
acquisition by a person other than Parent or Purchaser of 20% or more of the
Shares, the Company shall grant to Purchaser an option to purchase at a price of
$15.00 per Share that number of Shares which would equal 19.9% of the aggregate
number of Shares outstanding after giving effect to the exercise of such option.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) The Company's Board of Directors (the "Company Board") has unanimously
determined that each of the Offer and the Merger is fair to, and in the best
interests of, the public stockholders of the Company and the Company Board
unanimously recommends that the public stockholders of the Company accept the
Offer and tender their Shares pursuant to the Offer.
(b) Background of the Offer and the Merger.
In mid-November 1997, certain operations personnel of Parent were contacted
by sales representatives of the Company's subsidiary, American Digital
Switching, Inc. ("ADS"), in the ordinary course of business, seeking to market
certain services and products offered by ADS. Parent was particularly interested
in the switching products, and began a review of publicly available information
about the products offered by the Company.
During the first week of December, 1997, the Company was initially
contacted by Parent concerning Parent's interest in acquiring stock in the
Company. The Company referred Parent to VistaQuest, Inc., an investor relations
firm which represents the Company.
During the later part of the first week in December, the Company and Parent
had further telephonic discussions in which Parent expressed an interest in
acquiring the Company, or ADS. The Company and Parent discussed possible
valuations of the Company and possible forms a transaction might take. No
understanding was reached and no commitments were made by either party. In
response to this inquiry the Company Board met by telephone conference on
December 5, 1997 to discuss Parent's expressed interest. During this meeting,
the Company Board authorized Mr. Garner, Chairman of the Board and President of
the Company, to continue discussions with Parent regarding a potential
acquisition by Parent.
As a result of this contact from Parent, on December 12, 1997, the Company
retained Raymond James & Associates, Inc. ("Raymond James") as its financial
advisor to assist the Company Board in evaluating any potential transactions.
Between December 12 and December 14, 1997, Parent continued discussions with the
Company through Raymond James resulting in a proposal from Parent to acquire all
of the Company's Common Stock for a cash price of $13.00 per share. On December
15, 1997, Parent, the Company and a representative of Raymond James had various
conversations relating to the possible structures and the range of prices at
which Parent would be interested in acquiring the Company, culminating in a
proposal from Parent to acquire all of the Company's Common Stock for a cash
price of $15.00 per share.
At a meeting of the Company Board on the evening of December 15, 1997, the
Company Board discussed the status of negotiations with Parent and authorized
management to continue negotiations with Parent. Discussions between the two
parties continued, with representatives of the Company inquiring as to the
possibility of whether Parent might be willing to raise its offer. In the
evening on December 15, 1997, Parent indicated that its cash offer of $15.00 per
share was its highest and best offer. The Company Board ultimately authorized
the Company's management and counsel to commence as soon as possible negotiation
of a merger agreement with Parent on acceptable terms. Negotiations were held on
December 16, and 17, 1997, and the Merger Agreement was submitted to the Company
Board for consideration at meetings held on December 17, 1997.
8
<PAGE> 10
At such meetings on December 17, 1997, the Company Board considered the
proposed Merger Agreement and the transactions contemplated thereby. Raymond
James presented its analysis of the proposed consideration to be received by the
Company's stockholders and delivered its oral opinion to the Company Board
(which was subsequently confirmed by delivery of a written opinion dated
December 18, 1997), to the effect that, as of the date thereof, the cash
consideration to be received by the stockholders in the transactions
contemplated by the Offer and the Merger Agreement was fair, from a financial
point of view, to those stockholders. After lengthy discussion, the Company
Board unanimously (i) approved and authorized the Offer, the Merger Agreement,
the Stock Option Agreement, and the execution by certain shareholders of the
Tender and Option Agreements, subject to negotiation of final terms of the
Merger Agreement and related agreements by the directors and officers authorized
by the Company Board to do so; (ii) determined that the aggregate consideration
to be received by the Company's shareholders pursuant to the Offer and the
Merger Agreement, is fair to those shareholders from a financial point of view
and (iii) authorized the directors and officers of the Company to proceed with
the transaction on terms consistent with those discussed.
On the evening of December 18, 1997, Mr. Garner, pursuant to the authority
delegated to him by the Board of Directors, finalized all aspects of the
agreements between the Company and Parent. The Merger Agreement, the Tender and
Option Agreements and the Stock Option Agreement were executed on December 18,
1997, and on December 19, 1997 each of the Company and Parent issued a press
release before the opening of the U.S. stock markets announcing such execution.
The press release by the Company announcing the Offer and related transactions
and the Company's letter to its shareholders are filed as Exhibits 5 and 9
hereto, respectively, and are incorporated by reference herein.
On December 22, 1997, the Purchaser commenced the Offer.
RECOMMENDATIONS OF THE COMPANY BOARD; FAIRNESS OF THE OFFER AND THE MERGER
The Company Board has unanimously determined that the Offer and the Merger
is fair to, and in the best interests of, the stockholders of the Company (other
than Parent and Purchaser), and the Company Board unanimously recommends that
the Company's stockholders accept the Offer, tender their Shares pursuant to the
Offer and approve the Merger. In reaching these determinations, the Company
Board considered the following factors, each of which, in the view of the
Company Board, supported such determinations:
(i) The Company Board believed, after reviewing written reports and
analyses prepared by Raymond James, that values comparable to the total
acquisition price to be paid by the Purchaser would be difficult to achieve
under current market conditions through the possible alternatives to a sale
of the Company, including, in the near term, a continuation of the Company
as an autonomous, publicly-owned entity;
(ii) The Company Board considered that although Company management
expects continued growth and profitability, the Share price was not likely
to approach the acquisition price in the near term;
(iii) The total acquisition price to be paid by the Purchaser compares
favorably with trading multiples of comparable companies and recent
comparable acquisition multiples and is only slightly less than the highest
price at which the Shares have traded in this decade;
(iv) The historical market prices and recent trading activity of the
Shares, including the fact that the $15.00 per Share cash consideration to
be received by the stockholders of the Company (other than Parent and
Purchaser) in the Offer and Merger represents a premium of approximately
50% over the reported closing price on the last full trading day preceding
the public announcement of execution of the Merger Agreement, and a premium
of approximately 89% and 102% over the average closing price for the 30 and
60 day periods, respectively, immediately preceding such date, and the fact
that such price would be payable in cash, thus eliminating any
uncertainties in valuing the consideration to be received by the Company's
stockholders;
(v) The Company Board received the oral opinion of Raymond James,
confirmed by its written opinion in the form of Exhibit 10 hereto, that, as
of the date thereof the cash consideration to be received
9
<PAGE> 11
by the shareholders in the Offer and the Merger Agreement, was fair, from a
financial point of view, to those shareholders;
(vi) The Merger Agreement permits the Company Board (a) in response to
unsolicited inquiries or proposals and in the discharge of its fiduciary
duties based on the advice of legal counsel or its financial advisors, to
furnish information to, and participate in discussions and negotiations
with, third parties relating to an acquisition transaction involving the
Company and (b) to withdraw its recommendation and terminate the Merger
Agreement in the exercise of its fiduciary duties based upon the advice of
legal counsel or its financial advisors;
(vii) The Offer and the Merger and the purchase of Shares are not
subject to any financing contingency, and TSH purports to have all funds,
or the ability to obtain all funds, necessary to complete the Offer, the
Merger, and the purchase of Shares pursuant to the Merger Agreement;
(viii) The history of the negotiations between the Company Board and
its representatives and Parent and its representatives, including the
Company Board's belief that Parent and the Purchaser would not further
increase the Offer Price and that $15.00 per Share was the highest price
that could be obtained from Parent and the Purchaser; and
(ix) TSH and the Company negotiated the Merger Agreement on an
arms-length basis.
In making the determinations described above, the Company Board also
considered the following:
(a) The review of the possible alternatives to the Offer and Merger,
the range of possible benefits and risks to the Company's stockholders of
such alternatives, and the timing and the likelihood of actually
accomplishing any such alternatives;
(b) The timing of the transactions and the premiums currently being
obtained for corporations engaged in similar businesses;
(c) Information with respect to the business, properties, management,
financial condition, results of operations, and prospects of the Company,
as well as the likelihood of achieving those prospects, and the going
concern value of the Company (as reflected in part by the Company's
historical and projected operating results);
(d) That the Company might potentially be required to pursue
additional financing to fund the future growth of the Company which might
impact the Company's business and prospects and could possibly dilute
stockholder's interests in the Company;
(e) The likelihood that the proposed acquisition will be consummated,
including the experience, reputation, and financial condition of Parent;
(f) The financial aspects of the Merger Agreement, including the
proposed terms, timing, and structure for the acquisition and the nature,
adequacy, and fairness of the consideration offered;
(g) General economic conditions, particularly in the electronics and
telecommunications industries, and the business, marketing, and competitive
consequences of the proposed acquisition to the Company, including Parent's
business plans for the Company and their effects on corporate
constituencies;
(h) The possibility that, because of an unanticipated future decline
in the Company's business, the trading price of the Shares or the stock
market in general, the consideration that the stockholders of the Company
(other than Parent and Purchaser) would obtain in a future transaction
might be less advantageous than the consideration they would receive
pursuant to the Offer and the Merger;
(i) The legal, social, economic, and other effects of the proposed
acquisition on the Company's customers, employees, and suppliers and on the
societies and communities in which the Company operates;
(j) Oral presentations and written reports and analyses provided to
the Company Board by Raymond James, which included its valuation analyses
of the Company and the total acquisition price;
10
<PAGE> 12
(k) The terms and conditions of the Merger Agreement, including the
absence of any financing contingency and the Company Board's view that it
appeared unlikely that there existed other viable buyers at an equivalent
price given the timing of the acquisition;
(l) The structure of the transaction, which is designed, among other
things, to result in receipt by the stockholders at the earliest
practicable time of the consideration to be paid in the Offer and the fact
that the per Share consideration to be paid in the Offer and the Merger is
the same; and
(m) The trading history of the Shares, as well as similar information
for other comparable companies.
A Copy of Raymond James' written opinion, which sets forth the assumptions,
qualifications, and procedures on which it is based, is attached to this
Statement as Exhibit 10, and is incorporated by reference in it, and the
Company's shareholders are urged to read that opinion in its entirety.
The members of the Company Board evaluated the various factors listed above
in light of their knowledge of the business, financial condition and prospects
of the Company and based upon the advice of financial and legal advisors. In
light of the number and variety of factors that the Company Board considered in
connection with its evaluation of the Offer and the Merger, the Company Board
did not find it practicable to assign relative weights to the foregoing factors
and, accordingly, the Company Board did not do so. In addition to the factors
listed above, the Company Board considered the fact that while consummation of
the Offer would result in the stockholders of the Company receiving a premium
for their Shares over the trading prices of the Shares prior to the public
announcement of the fact that Parent and the Company had executed the Merger
Agreement, consummation of the Offer and the Merger would eliminate any
opportunity for stockholders of the Company (other than Parent and Purchaser) to
participate in the potential future growth prospects of the Company. The Company
Board determined, however, that the loss of opportunity is reflected in the
Offer Price.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Raymond James is acting as the Company's financial advisor in connection
with the Offer and the Merger. Pursuant to a letter agreement dated December 12,
1997 between the Company and Raymond James (the "Raymond James Agreement"), the
Company will pay Raymond James (i) a $50,000 retainer, with such fee to be
credited against any further fees payable pursuant to the Raymond James
Agreement, (ii) a transaction fee in an amount equal to 1% of the total
Consideration (as defined in the Raymond James Agreement) at closing, and (iii)
if a fairness opinion is requested by the Company, a fee in an amount equal to
1% of the total Consideration (as defined in the Raymond James Agreement) at
closing. In addition, the Company has agreed to reimburse Raymond James for its
out-of-pocket and incidental expenses, including the fees and disbursements of
its counsel, and to indemnify Raymond James against certain liabilities incurred
in connection with its engagement, including liabilities under federal
securities laws.
Except as set forth 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 shareholders on its behalf with respect
to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the best knowledge of the Company, no transactions in Shares have
been effected during the past 60 days by the Company or any of its executive
officers, directors or affiliates except that, on December 5, 1997, an executive
officer of the Company sold 3,000 Shares at $9.25 per Share.
(b) To the best knowledge of the Company, all of its executive officers,
directors or affiliates presently intend to tender all Shares to Purchaser
pursuant to the Offer, which are owned beneficially by such persons, subject to
and consistent with any fiduciary obligations in the case of Shares held by
fiduciaries. Reference is also made to the Tender and Option Agreements referred
to in Item 3(b).
11
<PAGE> 13
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in Item 3 above, the Company is not engaged in any
negotiations 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 of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (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 described in Item 3(b) above, there are no transactions,
Board of Directors' resolutions, agreements in principle or signed contracts in
response to the Offer that relate 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
The purchase of the Shares by Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by the public.
NASDAQ LISTING. Depending on the number of Shares acquired pursuant to the
Offer, the Shares may no longer meet the requirements for continued listing on
NASDAQ. According to NASDAQ's published guidelines, NASDAQ would consider
delisting the Shares if, as a result of the Offer, the number of round lot
holders of Shares were reduced to less than 400, the number of Shares publicly
held (excluding those held by officers and directors of the Company, members of
their immediate families and persons owning 10% or more of the Shares
outstanding) were reduced to less than 750,000, or the aggregate market value of
the publicly-held Shares were reduced to less than $5,000,000. In addition, if
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be eligible for listing on NASDAQ. If, as a result of the
purchase of Shares pursuant to the Offer, the Shares no longer meet the
requirements of NASDAQ for continued listing, the market for Shares could be
adversely affected.
REGISTRATION UNDER THE EXCHANGE ACT. The Shares currently are registered
under the Exchange Act. Such registrations may be terminated upon application by
the Company to the SEC if there are fewer than 300 record holders of Shares. It
is the intention of Purchaser to seek to cause an application for such
termination to be made as soon after consummation of the Offer as the
requirements for termination of registration of the Shares are met. Termination
of registration of the Shares under the Exchange Act would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement or information statement pursuant to
Sections 14(a) or 14(c) of the Exchange Act in connection with stockholders'
meetings or action by written consent and the related requirement of furnishing
an annual report to stockholders and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144 or
144A promulgated under the Securities Act may be impaired or eliminated.
The Shares currently are "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations it is possible that
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities."
APPRAISAL RIGHTS. Holders of Shares do not have dissenters' rights as a
result of the Offer. If the Merger is effected with a vote of the Company's
shareholders and if on the record date fixed to determine the shareholders
entitled to vote, the Shares are listed on NASDAQ or on a national securities
exchange or are held of record by 2,000 or more of such shareholders, then
holders of Shares will not have dissenters' rights
12
<PAGE> 14
under the FBCA. If, however, the Merger is consummated with or without the vote
of the Company's shareholders but the Shares are not so listed or designated or
are not held of record by at least 2,000 shareholders, holders of Shares will
have certain rights pursuant to the provisions of Sections 607.1301, 607.1302
and 607.1320 of the FBCA to dissent and demand determination of, and to receive
payment in cash of the fair value of, their Shares. If the statutory procedures
were complied with, such rights could lead to a judicial determination of the
fair value required to be paid in cash to such dissenting holders for their
Shares. Any such judicial determination of the fair value of Shares or the
market value of the Shares could be more or less than the Offer Price or the
price provided for in the Merger Agreement. Section 607.1301(2) of FBCA defines
"fair value" as the value of the shares excluding any appreciation or
depreciation in anticipation of the transaction unless such exclusion would be
inequitable.
If any holder of Shares who asserts dissenters' rights under the FBCA fails
to perfect, or effectively withdraws or loses his dissenters' rights, as
provided in the FBCA, the Shares of such shareholder will be converted into the
right to receive the price provided for in the Merger Agreement in accordance
with the Merger Agreement. A shareholder may withdraw his notice of election to
dissent by delivery to Parent of a written withdrawal of his notice of election
to dissent and acceptance of the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE
PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRES STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF SECTIONS 607.1301, 607.1302 AND 607.1320 OF THE FBCA,
AND WILL ONLY BE AVAILABLE IN CONNECTION WITH THE CONSUMMATION OF THE MERGER.
TAX MATTERS. The following is a summary of the anticipated material federal
income tax consequences to holders whose Shares are purchased pursuant to the
Offer or whose Shares are converted to cash in the Merger (including dissenting
Shares). This discussion applies only to a holder of Shares who is holding the
Shares as a capital asset and who is a U.S. person (as defined in Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended (the "Code")). This
discussion is not a complete description of the federal income tax consequences
of the Offer and the Merger and may not apply to a holder of Shares subject to
special treatment under the Code, such as a holder that is a non-U.S. Person, a
financial institution, an insurance company, a tax-exempt organization or a
person who acquired the Shares pursuant to the exercise of an employee stock
option or otherwise as compensation. In addition, this discussion does not
address the state, local or foreign tax consequences of the Offer and the
Merger.
BECAUSE OF THE COMPLEXITIES OF THE TAX LAWS AND BECAUSE INDIVIDUAL
CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN
TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH
STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER TO SUCH
STOCKHOLDER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including Dissenting Shares) will be a taxable transaction for federal income
tax purposes. In general, for federal income tax purposes, a holder of Shares
will recognize gain or loss equal to the difference between (a) such holder's
adjusted tax basis for the Shares sold pursuant to the Offer or converted to
cash in the Merger (including conversion pursuant to the exercise of dissenters
rights), and (b) the amount of cash received therefor (which amount does not
include any interest paid to a holder of dissenting Shares). Gain or loss must
be determined separately for each block of Shares (e.g., Shares acquired at the
same cost in a single transaction) sold pursuant to the Offer or converted to
cash in the Merger. Such gain or loss generally will be capital gain or loss and
will be long-term capital gain or loss if, on the date of sale (or, if
applicable, the date of the Merger), the Shares were held for more than one
year. The amount of any interest paid to a holder of dissenting Shares will be
treated for federal income tax purposes as ordinary interest income.
13
<PAGE> 15
Federal income tax rates on long-term capital gain received by an
individual vary based on the individual's income and the holding period for the
asset. In particular, different maximum federal income tax rates will apply to
gains recognized by an individual from the sale of or exchange of Shares (i)
held for more than one year but not more than 18 months (presently 28%) and (ii)
held for more than 18 months (presently 20%). In addition, net long-term capital
losses may be subject to limits on deductibility.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31% unless the holder complies with certain
identification or exemption requirements. Any amounts so withheld will be
allowed as a credit against the holder's income tax liability, or refunded,
provided certain information is provided to the Internal Revenue Service. A
tendering stockholder may be able to prevent backup withholding by completing
the Substitute Form W-9 included in the Letter of Transmittal. Similarly, a
stockholder who receives cash in exchange for Shares pursuant to the Merger or
upon exercise of dissenters rights should be able to prevent backup withholding
by completing a Form W-9 or an acceptable substitute therefor. Each stockholder
should consult with such stockholder's own tax advisor as to such stockholder's
qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1 Form of Offer to Purchase, dated December 22, 1997 (incorporated herein by
reference to Exhibit (a)(1) to the Schedule 14D-1 filed by Purchaser and Parent
with the SEC on December 22, 1997).
Exhibit 2 Form of Letter of Transmittal (incorporated herein by reference to Exhibit (a)(2)
to the Schedule 14D-1 filed by Purchaser and Parent with the SEC on December 22,
1997).
Exhibit 3 Agreement and Plan of Merger, dated as of December 18, 1997 by and among Parent,
Purchaser and the Company (incorporated herein by reference to Exhibit (c)(1) to
the Schedule 14D-1 filed by Purchaser and Parent with the SEC on December 22,
1997).
Exhibit 4 Portions of the Proxy Statement of the Company dated June 6, 1997 relating to the
Company's 1997 Annual Meeting of Stockholders.
Exhibit 5 Text of Press Release, dated December 19, 1997, issued by the Company.
Exhibit 6 Form of Tender and Option Agreement, dated as of December 18, 1997, among
Purchaser, Parent and certain officers and directors of the Company (incorporated
herein by reference to Exhibit (c)(2) to the Schedule 14D-1 filed by Purchaser
and Parent with the SEC on December 22, 1997).
Exhibit 7 Form of Stock Option Agreement, dated as of December 18, 1997, by and between
Parent and the Company (incorporated herein by reference to Exhibit (c)(3) to the
Schedule 14D-1 filed by Purchaser and Parent with the SEC on December 22, 1997).
Exhibit 8 Letter Agreement dated as of December 18, 1997, between the Company and Parent
(incorporated herein by reference to Exhibit (c)(4) to the Schedule 14D-1 filed
by Purchaser and Parent with the SEC on December 22, 1997).
Exhibit 9 Letter to stockholders of the Company dated December 22, 1997.*
Exhibit 10 Opinion of Raymond James & Associates, Inc., dated December 18, 1997.*
</TABLE>
- ---------------
*Included with Schedule 14D-9 mailed to stockholders.
14
<PAGE> 16
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.
SYMETRICS INDUSTRIES, INC.
By: /s/ Dudley E. Garner, Jr.
------------------------------------
Dated: December 22, 1997
Name: Dudley E. Garner, Jr.
Title: President and Chairman
15
<PAGE> 17
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------
SYMETRICS INDUSTRIES, INC.
(Name of Subject Company)
SYMETRICS INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
================================================================================
<PAGE> 1
Exhibit 4
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table is a three-year summary of the compensation awarded or
paid to, or earned by, the Company's Chief Executive Officer. No other
executive officer of the Company had total compensation exceeding $100,000
during the Company's last completed fiscal year.
<TABLE>
<CAPTION>
Long-Term All Other
Name and Principal Annual Compensation(1) Compensation Compensation
Position Year Salary Bonus LTIP Payout (2)(3)
- ------------------ ------ -------- ------- -------------- ------------
<S> <C> <C> <C> <C> <C>
D.E. Garner, Jr. 1997 $167,860 $ 71,353 $80,000 $11,890
President & CEO 1996 $172,108 $120,542 -- $12,066
1995 $166,165 $ 84,530 -- $11,637
</TABLE>
(1) Other Annual Compensation for Mr. Garner is not included in this table, as
the amount of such compensation does not exceed the lesser of $50,000 or 10% of
total salary and bonus for Mr. Garner.
(2) All other compensation for the Company's fiscal year ended March 31, 1997
includes (i) insurance benefits in the amount of $5,428 and (ii) the Company
contribution to the 401(k) Plan in the amount of $6,462.
(3) The terms of Mr. Garner's employment contract are described on page 7.
STOCK OPTION INFORMATION
The Company has in effect the Symetrics Industries, Inc. Stock Option Plan
(the "Plan"), pursuant to which options to purchase shares of the Company's
common stock may be granted to key employees, officers and directors of the
Company and its Subsidiary. A total of 50,268 options were granted and 10,500
options were exercised during the Company's fiscal year ended March 31, 1997.
The Company's prior Incentive Stock Option Plan has now been terminated. Mr.
Dudley Garner does not hold any options to purchase common stock of the Company.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS.
Effective January 1, 1997, the Company extended for one year its employee
agreement with Dudley E. Garner, Jr., its Present and Chief Executive Officer,
providing for an annual base salary of $183,643. In the event of termination
without cause, the Company is required to pay Mr. Garner a minimum of $367,286
determined by the amount equal to the greater of (i) two years base salary or
(ii) the base salary for the remaining term of the employment agreement. The
agreement also provides for a bonus in the event the Company's pre-tax income
equals or exceeds 5% of contract revenues for fiscal year 1997.
On November 1, 1983, the Company entered into a Deferred Compensation and
Salary Continuation Agreement with Dudley E. Garner Jr. The agreement provides
that Mr. Garner will perform consulting services for the Company for a period of
three years following termination of his employment, and that he will not
compete with the Company during his employment or during the term of his
consulting services. Pursuant to the agreement as amended, Mr. Garner or his
estate, at their discretion, is entitled to receive a lump sum or annual
benefits equivalent to $80,000 for eight more years. In fiscal year 1997,
Mr. Garner received $80,000 as benefits under the agreement.
Effective January 1, 1990, the Company established a profit-sharing plan,
as provided for under Section 401(k) of the Internal Revenue Code, whereby all
eligible employees are entitled to defer up to the lesser of $9,500 or fifteen
(15%) of their salary. Substantially all employees are eligible to participate
in the plan depending on the length of service and attainment of minimum age
requirements. Under the terms of the plan, the Company contributes an amount
equal to seventy-five percent (75%) of the first six percent (6%) of
compensation each employee elects to defer. At the discretion of the Board of
Directors, the Company may make additional contributions to the plan or modify
the employer matching contribution percentages. Employer contributions to the
plan in fiscal 1997 were $70,319, including $6,462 for Mr. Garner.
<PAGE> 1
Exhibit 5
[SYMETRICS LOGO]
SYMETRICS INDUSTRIES, INC. TO BE ACQUIRED
BY TEL-SAVE HOLDINGS, INC.
Melbourne, FL, December 19, 1997 - Symetrics Industries, Inc. today
announced it has executed a definitive merger agreement with Tel-Save Holdings,
Inc. pursuant to which Tel-Save will acquire all the outstanding shares of
Symetrics Industries, Inc. for $15.00 per share in cash. Symetrics has
approximately 1,628,000 shares outstanding.
Headquartered in Melbourne, Florida, Symetrics is a diversified electronics
company servicing both the defense and telecommunications industries; the
latter, benefiting from proprietary products, is a rapidly growing segment of
total operations.
Speaking on behalf of the Board of Directors, Chairman of the Board, Dudley
E. Garner, Jr. said "we believe this acquisition represents a fair value for our
shareholders, and we look forward to working with Tel-Save and continuing to
serve our customers as part of this excellent organization."
As the first step in the transaction, a subsidiary of Tel-Save will
commence a cash tender offer promptly for all outstanding Symetrics shares at
$15.00 per share. The offer will be conditioned, among other things, upon a
majority of the issued and outstanding shares of Symetrics being properly
tendered and not withdrawn prior to the expiration of the offer. Following
successful completion of the tender offer, the Tel-Save subsidiary will be
merged into Symetrics and each outstanding Symetrics share will be converted
into the right to receive $15.00 in cash. In connection with the transaction,
certain of the officers and directors of Symetrics have agreed to tender their
shares (which in the aggregate represent approximately 20% of Symetrics'
outstanding stock) in the offer and to grant to Tel-Save an option to purchase
such shares under certain circumstances if the offer is not consummated. In
addition, Symetrics has granted Tel-Save an option to acquire approximately
19.9% of Symetrics' authorized but unissued stock, exercisable under certain
circumstances.
The Board of Directors of Symetrics has approved the offer and merger. The
tender offer is expected to close in late January.
###
<PAGE> 1
EXHIBIT 9
[SYMETRICS INDUSTRIES, INC. LOGO]
December 22, 1997
Dear Fellow Shareholder:
We are pleased to inform you that Symetrics Industries, Inc. ("Symetrics"
or the "Company") has entered into an agreement with Tel-Save Holdings, Inc.
("TSH"), pursuant to which a wholly-owned subsidiary of TSH has commenced a
tender offer today to purchase all the outstanding common stock of Symetrics for
$15.00 per share in cash. Under the agreement the tender offer will be followed
by a merger in which any remaining shares of common stock will be acquired for
$15.00 per share in cash, or any higher price paid per share pursuant to the
tender offer, and the Company will become a wholly-owned subsidiary of TSH.
Your Board of Directors has unanimously determined that the tender offer
and the merger are fair to, and in the best interest of, the Company's
shareholders, has approved the offer and the merger, and recommends that
shareholders accept the offer and tender their shares pursuant to it. In
addition to the benefit of this transaction to our shareholders, we believe that
the combination will benefit greatly both companies.
In connection with the transaction, certain executive officers and
directors of the Company have granted to TSH options to acquire the
approximately 18% of the outstanding stock of the Company on a fully diluted
basis, owned by such persons, and the Company has granted to TSH an option under
certain circumstances to acquire 19.9% of the amount of Company stock that would
be outstanding if the option were exercised.
Enclosed are TSH's Offer to Purchase, Letter of Transmittal, and other
related documents. These documents set forth the terms and conditions of the
tender offer. In determining to approve the merger agreement and the
transactions contemplated by it, your Board gave careful consideration to a
number of factors described in the attached Schedule 14D-9, which has been filed
by the Company with the Securities and Exchange Commission. Among other things,
the Board considered the opinion of Raymond James & Associates, Inc., to the
effect that, as of the date thereof, the consideration to be received by the
shareholders in the tender offer and in the merger is fair, from a financial
point of view, to them. The Schedule 14D-9 and TSH's offer to purchase describe
in more detail the reasons for the Boards' conclusions and contain other
important information regarding the tender offer. The Board urges you to
consider this information carefully.
Symetrics' Board, management, and employees thank you sincerely for your
loyal support throughout the years.
On behalf of the Board of Directors
Sincerely,
/s/ Dudley E. Garner, Jr.
Dudley E. Garner, Jr.,
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 10
LOGO
December 18, 1997
The Board of Directors
Symetrics Industries, Inc.
1615 W. NASA Boulevard
Melbourne, FL 32901
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the common stock of Symetrics Industries, Inc.
("Symetrics") of the consideration to be received by such holders pursuant to
the terms and subject to the conditions set forth in the Agreement and Plan of
Merger, dated December 18, 1997 (the "Merger Agreement"), by and among Tel-Save
Holdings, Inc. ("Tel-Save"), and Symetrics. As more fully described in the
Merger Agreement, (i) Tel-Save will commence a tender offer to purchase all
outstanding shares of the common stock, par value $0.25 per share, of Symetrics
(the "Symetrics Common Stock") at a purchase price of $15.00 per share, net to
the seller in cash (the "Tender Offer") and (ii) subsequent to the Tender Offer,
Symetrics will be merged with and into Tel-Save (the "Merger" and, together with
the Tender Offer, the "Transaction") and each outstanding share of Symetrics
Common Stock not previously tendered will be converted into the right to receive
$15.00 in cash.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Symetrics and certain senior officers of Tel-Save concerning the
business, operations and prospects of Symetrics and Tel-Save. We examined
certain publicly available business and financial information relating to
Symetrics as well as certain financial forecasts and other information and data
for Symetrics which were provided to or otherwise discussed with us by the
management of Symetrics. We reviewed the financial terms of the Transaction as
set forth in the Merger Agreement in relation to, among other things: current
and historical market prices and trading volumes of Symetrics Common Stock; the
historical and projected earnings and other operating data of Symetrics; and the
capitalization and financial condition of Symetrics. We considered, to the
extent publicly available, the financial terms of similar transactions recently
effected which we considered relevant in evaluating the Transaction and analyzed
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations we considered
relevant in evaluating those of Symetrics. In addition to the foregoing, we
conducted such other analyses and examinations and considered such other
financial, economic and market criteria as we deemed appropriate in arriving at
our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of Symetrics that such forecasts and other information
and data were reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of the management of Symetrics as to
the future financial performance of Symetrics, and we have relied upon Symetrics
to advise us promptly if any information previously provided became inaccurate
or was required to be updated during the period of our review. We have not made
or been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Symetrics nor have we made any physical
inspection of the properties
[RAYMOND JAMES & ASSOCIATES LETTERHEAD]
<PAGE> 2
or assets of Symetrics. We express no opinion as to the underlying business
decision to enter into the Transaction or the availability of any alternatives
to the Transaction. Our opinion is necessarily based upon information available
to us, and financial, stock market and other conditions and circumstances
existing and disclosed to us, as of the date hereof, and any material change in
such conditions and circumstances would require a reevaluation of this opinion.
Raymond James & Associates, Inc. has been engaged to render financial
advisory services to Symetrics in connection with the proposed Transaction and
will receive a fee for such services, a significant portion of which is
contingent upon the consummation of the Transaction. We also will receive a fee
for the delivery of this opinion. In addition, Symetrics has agreed to indemnify
us against certain liabilities arising out of our engagement. Raymond James &
Associates, Inc. is actively engaged in the investment banking business and
regularly undertakes the valuation of investment securities in connection with
public offerings, private placements, business combinations and similar
transactions. In the ordinary course of our business, we and our affiliates may
actively trade or hold the securities of Symetrics for our own account or for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Symetrics in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether or not such
stockholder should tender shares of Symetrics Common Stock in the Tender Offer
or how such stockholder should vote on the proposed Merger. Our opinion may not
be published or otherwise used or referred to, nor shall any public reference to
Raymond James & Associates, Inc. be made, without our prior written consent;
provided that, this opinion letter may be included in its entirety in the
Solicitation/Recommendation Statement of Symetrics relating to the proposed
Transaction.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the cash consideration to be
received by the holders of Symetrics Common Stock in the Transaction is fair,
from a financial point of view, to such holders.
Very truly yours,
/s/ RAYMOND JAMES & ASSOCIATES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
[RAYMOND JAMES & ASSOCIATES, INC. LETTERHEAD]
