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EXHIBIT 1(a)
OFFER TO PURCHASE FOR CASH
ALL ISSUED AND OUTSTANDING SHARES OF COMMON STOCK
OF
SMARTFLEX SYSTEMS, INC.
AT
$10.50 NET PER SHARE
BY
SSI ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SATURN ELECTRONICS & ENGINEERING, INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 11, 1999,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER DATED
AS OF JULY 6, 1999 AMONG SATURN ELECTRONICS & ENGINEERING, INC. (THE "PARENT"),
SSI ACQUISITION CORP. (THE "PURCHASER") AND SMARTFLEX SYSTEMS, INC. (THE
"COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED AND
FOUND ADVISABLE THE MERGER AGREEMENT, THE OFFER AND THE MERGER REFERRED TO
HEREIN, UNANIMOUSLY DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND
TENDER THEIR SHARES (AS DEFINED HEREIN).
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
A MAJORITY OF THE OUTSTANDING SHARES AND RIGHTS TO ACQUIRE SHARES AT THE TIME OF
ACCEPTANCE FOR PAYMENT. SEE SECTIONS 1 AND 15 BELOW FOR ADDITIONAL TERMS AND
CONDITIONS OF THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (i) complete and sign the Letter of Transmittal or a
facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal or such facsimile, or, in the case of a book-entry transfer effected
pursuant to the procedure set forth in Section 2, an Agent's Message (as defined
herein), and any other required documents, to the Depositary (as defined herein)
and either deliver the certificates for such Shares to the Depositary along with
the Letter of Transmittal or facsimile or deliver such Shares pursuant to the
procedure for book-entry transfer set forth in Section 2 or (ii) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such stockholder. A stockholder having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if such stockholder desires to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply in a
timely manner with the procedure for book-entry transfer, or who cannot deliver
all required documents to the Depositary prior to the expiration of the Offer,
may tender such Shares by following the procedure for guaranteed delivery set
forth in Section 2.
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Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
or any other tender offer materials may be directed to Georgeson Shareholder
Communications Inc., who is acting as the Information Agent, at its address and
telephone numbers set forth on the back cover of this Offer to Purchase.
Additional copies of this Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery and other related materials may be obtained from
the Information Agent or from brokers, dealers, commercial banks, trust
companies and other nominees.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON SHAREHOLDER COMMUNICATIONS INC. LOGO
July 14, 1999
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TABLE OF CONTENTS
PAGE
----
INTRODUCTION................................................ 1
THE TENDER OFFER............................................ 3
1. Terms of the Offer...................................... 3
2. Procedure for Tendering Shares.......................... 4
3. Withdrawal Rights....................................... 7
4. Acceptance for Payment and Payment...................... 7
5. Certain Federal Income Tax Consequences................. 8
6. Price Range of the Shares; Dividends on the Shares...... 10
7. Effect of the Offer on the Market for the Shares; Stock
Quotation; Exchange Act Registration; Margin
Regulations............................................. 10
8. Certain Information Concerning the Company.............. 12
9. Certain Information Concerning the Purchaser and the
Parent.................................................... 13
10. Source and Amount of Funds.............................. 14
11. Contacts with the Company; Background of the Offer...... 14
12. The Merger Agreement and the Stockholder Agreements..... 15
13. Purpose of the Offer; Plans for the Company............. 24
14. Dividends and Distributions............................. 24
15. Certain Conditions of the Offer......................... 24
16. Certain Legal Matters................................... 25
17. Fees and Expenses....................................... 27
18. Miscellaneous........................................... 27
SCHEDULE I--Directors and Executive Officers of the
Purchaser and the Parent.................................. 29
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To the Holders of Common Stock of Smartflex Systems, Inc.:
INTRODUCTION
SSI Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Saturn Electronics & Engineering, Inc., a Michigan
corporation (the "Parent"), hereby offers to purchase all issued and outstanding
shares of common stock, $.0025 par value (the "Shares"), of Smartflex Systems,
Inc., a Delaware corporation (the "Company"), at $10.50 per Share (the "Offer
Price"), net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer").
Tendering stockholders whose Shares are registered in their own name and
who tender Shares directly to the Depositary (as defined below) will not be
obligated to pay brokerage fees or commissions to the Purchaser or the
Depositary or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
Stockholders who hold their Shares through a bank or broker should check with
such institution as to whether they charge any service fees. The Purchaser will
pay the fees and expenses of BankBoston, N.A., which is acting as the Depositary
(the "Depositary"), and Georgeson Shareholder Communications Inc., which is
acting as Information Agent (the "Information Agent"), in connection with the
Offer. See Section 17.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
A MAJORITY OF THE OUTSTANDING SHARES AND RIGHTS TO ACQUIRE SHARES AT THE TIME OF
ACCEPTANCE FOR PAYMENT (THE "MINIMUM CONDITION").
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED AND FOUND
ADVISABLE THE MERGER AGREEMENT, THE OFFER AND THE MERGER REFERRED TO HEREIN,
UNANIMOUSLY DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER
THEIR SHARES.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of July 6, 1999 (the "Merger Agreement") among the Parent, the Purchaser and
the Company. Following the satisfaction or waiver of certain conditions,
including approval by stockholders of the Company, if such approval is required
by applicable law, the Purchaser will be merged with and into the Company, with
the Company surviving the merger (as such, the "Surviving Corporation") as a
wholly owned subsidiary of the Parent (the "Merger"). At the effective time of
the Merger (the "Effective Time"), each outstanding Share (other than Shares
owned by the Company or by the Parent, the Purchaser or any other direct or
indirect wholly owned subsidiary of the Parent or the Company, or Shares with
respect to which appraisal rights are properly exercised under Delaware law
("Dissenting Shares")) will be converted into the right to receive the Offer
Price in cash, without interest (the "Merger Consideration"). See Section 12.
In the event the Purchaser acquires 90% or more of the outstanding Shares
pursuant to the Offer or otherwise, the Purchaser would be able to effect the
Merger pursuant to the short-form merger provisions of the Delaware General
Corporation Law ("DGCL"), without prior notice to, or any action by, any other
stockholder of the Company. In such event, the Purchaser is required to effect
the Merger without prior notice to, or any action by, any other stockholder of
the Company, promptly after its acceptance for payment of Shares tendered into
the Offer. In the Merger Agreement, the Parent, the Purchaser and the Company
have agreed that the Purchaser may extend the Offer for one or more periods not
to exceed 30 days in the aggregate without the prior written consent of the
Company. If immediately after the expiration of the Offer at least a majority
but less than 90% of the outstanding Shares on a fully-diluted basis have been
tendered in the Offer and not withdrawn, then the parties have agreed that the
Purchaser will purchase all Shares tendered pursuant to the Offer and the
Company will promptly convene a special meeting of the stockholders of the
Company for the purpose of considering the Merger and taking action on the
Merger Agreement and the transactions contemplated thereby (the "Transactions").
The Company has agreed, as soon as practicable after the
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consummation of the Offer, to file a proxy statement relating to the Merger with
the Securities and Exchange Commission (the "Commission"). See Section 12.
The Purchaser and the Parent have entered into Stock Tender and Voting
Agreements each dated as of July 6, 1999 (the "Stockholder Agreements") with
certain stockholders of the Company (the "Stockholders"), including all of its
directors and executive officers, who own 299,933 outstanding Shares in the
aggregate on the date of the Merger Agreement, representing approximately 5% of
the outstanding Shares. Under the Stockholder Agreements, each Stockholder
agreed, among other things, to validly tender the Shares beneficially owned by
it, as well as any Shares subsequently acquired by it. In addition, each
Stockholder agreed to vote its Shares in favor of the Merger, the adoption by
the Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement, and agreed
to vote against (a) any action or agreement that would result in a breach of any
covenant or any representation or warranty or any other obligation or agreement
of the Company under or pursuant to the Merger Agreement and (b) any action or
agreement that would impede, interfere with, delay, postpone or attempt to
discourage the Merger or the Offer. Each Stockholder also agreed, without
limiting the foregoing, to consult with the Parent and vote all Shares
beneficially owned by it in such manner as is determined by the Parent to be in
compliance with the provisions of the Stockholder Agreements. The Stockholder
Agreements are more fully described in Section 12. Pursuant to the Stockholder
Agreements, each Stockholder has delivered to the Parent, contemporaneously with
the execution of its Stockholder Agreement, an irrevocable proxy (each an
"Irrevocable Proxy") pursuant to which each Stockholder irrevocably appointed
Wallace K. Tsuha, Jr., Jereen G. Trudell and the Parent, as its proxies and
attorneys-in-fact to exercise the proxy to vote the Shares in the foregoing
manner at any time until the earlier to occur of the valid termination of the
Merger Agreement or the Effective Time.
SG Cowen Securities Corporation ("Cowen"), investment banker to the
Company, has delivered to the Board of Directors of the Company its written
opinion dated July 6, 1999 that, as of such date and based upon and subject to
the matters set forth therein, the consideration to be received by the
stockholders of the Company (other than the Purchaser and its affiliates) in the
Offer and the Merger is fair to such stockholders from a financial point of
view. Such opinion is set forth in full as an exhibit to the Company's
Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to stockholders of the Company concurrently herewith.
The Company has represented and warranted to the Purchaser that, as of July
6, 1999, there were 6,493,994 Shares issued and outstanding, and 994,502 Shares
reserved for issuance upon exercise of outstanding options to purchase Shares
granted under the Company Stock Option Plans (as defined in the Merger
Agreement) or otherwise (the "Company Stock Options"). As provided in the Merger
Agreement, all outstanding Company Stock Options on the effective date of the
Merger will become fully vested and will be cancelled. The holders of such
Company Stock Options will be entitled to receive from the Company a cash
payment equal to the product of (i) the number of Shares previously subject to
such option and (ii) the excess, if any, of the Merger Consideration over the
exercise price per Share previously subject to such option.
As of July 6, 1999, the Minimum Condition would be satisfied if the
Purchaser acquired 3,744,249 Shares.
The Merger Agreement and the Stockholder Agreements are more fully
described in Section 12. Certain Federal income tax consequences of the sale of
Shares pursuant to the Offer and the exchange of Shares for the Merger
Consideration pursuant to the Merger are described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), the Purchaser will accept for payment and pay, as promptly as
practicable after the Expiration Date, for all Shares validly tendered prior to
the Expiration Date and not theretofore properly withdrawn in accordance with
Section 3. The term "Expiration Date" means 12:00 Midnight, New York City time,
on Wednesday, August 11, 1999, unless and until (i) the Purchaser, in its sole
discretion (but subject to the terms of the Merger Agreement), or (ii) the
Purchaser and the Company, shall have extended the period of time during which
the Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Offer, as so extended by the Purchaser, or by
the Purchaser and the Company, shall expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition. See Section 15. If such conditions are not satisfied prior to
the Expiration Date, the Purchaser reserves the right (but shall not be
obligated), subject to the terms of the Merger Agreement, to (i) decline to
purchase any of the Shares tendered and terminate the Offer, (ii) waive any of
the conditions to the Offer, to the extent permitted by applicable law, and,
subject to complying with applicable rules and regulations of the Commission,
purchase all Shares validly tendered or (iii) extend the Offer and, subject to
the right of stockholders to withdraw Shares until the Expiration Date, retain
the Shares tendered during the period or periods for which the Offer is
extended.
Subject to the Merger Agreement, including the restrictions discussed
below, and the applicable rules and regulations of the Commission, the Purchaser
reserves the right, in its sole discretion, at any time and from time to time,
and regardless of whether any of the events set forth in Section 15 have
occurred or been determined by the Purchaser to have occurred, to (a) subject to
the limitation described below, extend the period of time during which the Offer
is open, and thereby delay acceptance for payment of any Shares, by giving oral
or written notice of such extension and delay to the Depositary or (b) waive any
condition or amend the Offer in any other respect by giving oral or written
notice of such waiver or amendment to the Depositary. During any such extension,
all Shares previously tendered and not properly withdrawn will remain subject to
the Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares. See Section 3. Under no circumstances will interest be
paid on the purchase price for tendered Shares, whether or not the Purchaser
exercises its right to extend the Offer. In the Merger Agreement, the Parent,
the Purchaser and the Company have agreed that the Purchaser may extend the
Offer for one or more periods not to exceed 30 days in the aggregate without the
prior written consent of the Company. In addition, the Purchaser has agreed in
the Merger Agreement that it will not, without the express written consent of
the Company, (i) reduce the maximum number of Shares subject to the Offer, (ii)
reduce the Offer Price or change or waive the Minimum Condition, (iii) add to or
modify the conditions set forth in Section 15, (iv) extend the Offer, except as
provided above, or (v) change the form of consideration payable in the Offer.
The rights reserved by the Purchaser in the two preceding paragraphs are in
addition to the Purchaser's rights pursuant to Section 15. There can be no
assurance that the Purchaser will exercise its right to extend the Offer. Any
extension, amendment, delay, waiver or termination will be followed as promptly
as practicable by public announcement. In the case of an extension, Rule
14e-1(d) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires that the announcement be issued no later than the earlier of (i)
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date, or (ii) the first opening of the Nasdaq National
Market of the Nasdaq Stock Market ("Nasdaq") on the next business day after the
previously scheduled Expiration Date, in accordance with the public announcement
requirements of Rule 14e-1 under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change), and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to
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the Dow Jones News Service. As used in this Offer to Purchase, "business day"
has the meaning set forth in Rule 14d-1 under the Exchange Act.
If the Offer is extended, or if the Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its acceptance for payment of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 3. However, the ability of
the Purchaser to delay the payment for Shares that the Purchaser has accepted
for payment is limited by Rule 14e-1 under the Exchange Act, which requires that
a bidder pay the consideration offered or return the securities deposited by or
on behalf of holders of securities promptly after the termination or withdrawal
of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in the percentage of
securities sought or any dealer solicitation fee, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. With respect to a change in price or a change in the
percentage of securities sought, a minimum period of 10 business days is
generally required to allow for adequate dissemination of such information to
stockholders.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition and the other conditions set forth in Section 15. Subject to the terms
and conditions contained in the Merger Agreement, the Purchaser reserves the
right (but shall not be obligated) to waive any or all such conditions.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed to record holders of Shares and
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
lists or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
2. PROCEDURE FOR TENDERING SHARES
Valid Tender. For a stockholder validly to tender Shares pursuant to the
Offer, either (i) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees or, in
the case of a book-entry transfer, an Agent's Message (as defined below), and
any other documents required by the Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase, and either certificates for tendered Shares must be received by the
Depositary at one of such addresses or such Shares must be delivered pursuant to
the procedure for book-entry transfer set forth below (and a Book-Entry
Confirmation (as defined below) received by the Depositary), in each case prior
to the Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedure set forth below.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message, and any other required documents, must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase
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prior to the Expiration Date, or the tendering stockholder must comply with the
guaranteed delivery procedure described below. The confirmation of a book-entry
transfer of Shares into the Depositary's account at the Book-Entry Transfer
Facility as described above is referred to herein as a "Book-Entry
Confirmation."
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered holder
of Shares (which, for purposes of this Section, includes any participant in the
Book-Entry Transfer Facility's system whose name appears on a security position
listing as the owner of the Shares) tendered therewith and such registered
holder has not completed either the box entitled "Special Delivery Instructions"
or the box entitled "Special Payment Instructions" on the Letter of Transmittal
or (ii) such Shares are tendered for the account of a firm that is a participant
in the Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution"). In all other cases, all signatures on the
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for Shares
not tendered or not accepted for payment are to be issued to a person other than
the registered holder of the certificates surrendered, the tendered certificates
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name or names of the registered holders or owners appear
on the certificates, with the signatures on the certificates or stock powers
guaranteed as described above. See Instructions 1 and 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other documents
required by the Letter of Transmittal, are received by the Depositary
within three trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day," for purposes of the preceding
sentence, is any day on which the Nasdaq National Market is open for
business.
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The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares (or a timely
Book-Entry Confirmation of a transfer of such Shares as described in Section 2),
(ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message, and (iii) any other documents required by the
Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares or Book-Entry
Confirmations are actually received by the Depositary. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID BY THE PURCHASER ON THE PURCHASE PRICE OF THE SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above
(including through delivery of an Agent's Message), the tendering stockholder
will irrevocably appoint designees of the Purchaser as such stockholder's
attorneys-in-fact and proxies in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser and with respect to any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after the date hereof. All such proxies shall be considered
irrevocable and coupled with an interest in the tendered Shares. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts for payment Shares tendered by such stockholder as provided herein. Upon
such acceptance for payment, all prior powers of attorney and proxies given by
such stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be empowered to exercise all voting and
other rights with respect to such Shares or other securities or rights in
respect of any annual, special or adjourned meeting of the Company's
stockholders, or otherwise, as they in their sole discretion deem proper. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares, the Purchaser must be able to exercise full voting and other rights
with respect to such Shares and other securities or rights, including voting at
any meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in any tender with respect to any particular Shares,
whether or not similar defects or irregularities are waived in the case of other
Shares. No tender of Shares will be deemed to have been validly made until all
defects or irregularities relating thereto have been cured or waived. None of
the Purchaser, the Parent, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding on all parties.
Backup Withholding. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must provide the Depositary with such stockholder's correct
taxpayer identification number ("TIN") on a Substitute Form W-9 and certify
under penalty of perjury that such TIN is correct and that such stockholder is
not subject to backup withholding. Certain stockholders (including, among
others, all corporations and certain foreign individuals
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and entities) are not subject to backup withholding. If a stockholder does not
provide its correct TIN or fails to provide the certifications described above,
the Internal Revenue Service ("IRS") may impose a penalty on such stockholder
and payment of cash to such stockholder pursuant to the Offer may be subject to
backup withholding of 31%. All stockholders surrendering Shares pursuant to the
Offer should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and the
Depositary). Noncorporate foreign stockholders should complete and sign the main
signature form and a Form W-8, Certificate of Foreign Status, a copy of which
may be obtained from the Depositary, in order to avoid backup withholding. See
Instruction 9 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after September 10, 1999.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must specify
the name of the person having tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry delivery set forth in Section 2, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with the
Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered by again following one
of the procedures described in Section 2 at any time prior to the Expiration
Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, the Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and pay, as promptly as
practicable after the Expiration Date, for all Shares validly tendered prior to
the Expiration Date and not properly withdrawn in accordance with Section 3. Any
determination concerning the satisfaction of such terms and conditions will be
within the discretion of the Purchaser, and such determination will be final and
binding on all tendering stockholders. See Sections 1 and 15. The Purchaser
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of or payment for Shares in order to comply in whole or in part with any
applicable law. Any such delays will be effected in compliance with Rule
14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after the termination or withdrawal of
the Offer).
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In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as
described in Section 2), (ii) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and (iii) any
other documents required by the Letter of Transmittal. The per Share
consideration paid to any stockholder pursuant to the Offer will be the highest
per Share consideration paid to any other stockholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered to the Purchaser and
not properly withdrawn as, if and when the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance for payment of such
Shares. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders whose Shares have been
accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE
PURCHASER ON THE PURCHASE PRICE OF THE SHARES, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
Upon the deposit of funds with the Depositary for the purpose of making
payments to tendering stockholders, the Purchaser's obligation to make such
payment shall be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. The Purchaser will pay
stock transfer taxes with respect to the transfer and sale to it or its order
pursuant to the Offer, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, as well as any charges and expenses of the Depositary and
the Information Agent.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to exercise, and duly exercise, withdrawal
rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer because of
an invalid tender or otherwise, the certificates for such Shares will be
returned, and if certificates are submitted for more Shares than are tendered,
new certificates for the Shares not tendered will be sent, in each case without
expense, to the tendering stockholder (or, in the case of Shares delivered by
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility pursuant to the procedure set forth in Section 2,
such Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to the Parent, or to one or more direct or indirect wholly
owned subsidiaries of the Parent, the right to purchase Shares tendered pursuant
to the Offer. Any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Sales of Shares pursuant to the Offer (and the receipt of cash by
stockholders of the Company pursuant to the Merger) will be taxable transactions
for Federal income tax purposes under the Internal Revenue Code of 1986, as
amended (the "Code"), and may also be taxable transactions under applicable
state, local, foreign and other tax laws. Generally, for federal income tax
purposes, a tendering stockholder will generally recognize gain or loss equal to
the difference between the amount of cash received by the stockholder pursuant
to the Offer (or pursuant to the Merger) and the aggregate tax basis in the
Shares tendered by the stockholder and
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purchased pursuant to the Offer (or converted pursuant to the Merger). Gain or
loss will be calculated separately for each block of Shares tendered and
purchased pursuant to the Offer (or converted pursuant to the Merger).
In general, cash received in respect of Dissenting Shares, if any, will
result in the recognition of capital gain or loss to the beneficial owner of
such Shares. Any such beneficial owner should consult such owner's tax advisor
in that regard.
If tendered Shares are held by a tendering stockholder as capital assets,
gain or loss recognized by the tendering stockholder will be capital gain or
loss, which will be long-term capital gain or loss if the tendering
stockholder's holding period for the Shares exceeds one year. Long-term capital
gains recognized by a tendering individual stockholder will generally be taxed
at a maximum federal income tax rate of 20%. The ability to deduct capital
losses is subject to limitations.
A stockholder (other than certain exempt stockholders including, among
others, all corporations) that tenders Shares may be subject to 31% backup
withholding unless the stockholder provides its TIN and certifies that such
number is correct or properly certifies that it is awaiting a TIN and certifies
as to no loss of exemption from backup withholding and otherwise complies with
the applicable requirements of the backup withholding rules. A stockholder that
does not furnish its correct TIN or that does not otherwise establish a basis
for an exemption from backup withholding may be subject to a penalty imposed by
the IRS. Each stockholder should complete and sign the Substitute Form W-9
included as part of the Letter of Transmittal so as to provide the information
and certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and the
Depositary).
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY
NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED AS COMPENSATION OR WITH
RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE
CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF
SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES, SUCH AS PERSONS WHO HOLD THEIR
SHARES AS A HEDGE OR AS PART OF A HEDGING, STRADDLE, CONVERSION OR OTHER RISK
REDUCTION TRANSACTION. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION
AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE
OFFER AND THE MERGER.
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6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded on Nasdaq and prices reflecting such trading are
published by the National Association of Securities Dealers, Inc. under the
symbol "SFLX." The following table sets forth, for each of the periods
indicated, the high and low sales prices per Share as reported in publicly
available sources for the periods indicated.
SALES PRICE
----------------
HIGH LOW
------ ------
1997
First Quarter............................................... $18.00 $10.25
Second Quarter.............................................. 15.25 9.25
Third Quarter............................................... 12.25 9.50
Fourth Quarter.............................................. 12.00 8.75
1998
First Quarter............................................... 11.63 8.00
Second Quarter.............................................. 12.25 5.75
Third Quarter............................................... 12.00 5.63
Fourth Quarter.............................................. 9.00 5.50
1999
First Quarter............................................... 8.25 3.38
Second Quarter (through July 13, 1999)...................... 9.94 2.50
On July 1, 1999, the last full day of trading before the Company publicly
announced that it had engaged an investment banker in connection with the
potential sale of the Company, the reported closing sale price of the Shares on
the Nasdaq National Market was $4 3/4 per Share. On July 13, 1999, the last full
day of trading before the commencement of the Offer, the reported last sale
price of the Shares on the Nasdaq National Market was $9.94 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
Since its inception, the Company has not declared or paid any dividends on
shares of its capital stock.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS
The Purchaser intends to seek to cause the Company to terminate the
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met. If registration
of the Shares is not terminated prior to the Merger, the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
Market for the Common Shares. The purchase of Shares pursuant to the Offer
will reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of Nasdaq for continued designation
for the Nasdaq National Market. To maintain such designation, a security must
substantially meet one of two maintenance standards. The first maintenance
standard requires that (i) there be at least 750,000 publicly held shares, (ii)
the publicly held shares have a market value of at least $5 million, (iii) the
issuer have net tangible assets of at least $4 million, (iv) there be at least
400 stockholders of round lots, (v) the minimum bid price per share be at least
$1.00 and (vi) there be at least two registered and active market makers. The
second maintenance standard requires that (i) the issuer have either (A) a
market capitalization of at least $50 million or (B) total assets and total
revenue of at least $50 million each for the most recently completed fiscal year
or two of the last three most recently completed fiscal years, (ii) there be at
least 1,100,000 shares publicly held, (iii) the publicly held shares have
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a market value of at least $15 million, (iv) the minimum bid price per share be
at least $5.00, (v) there be at least 400 stockholders of round lots and (vi)
there be at least four registered and active market makers.
If these standards for continued designation for the Nasdaq National Market
are not met, the Shares might nevertheless continue to be included in the Nasdaq
SmallCap Market. Continued inclusion in the Nasdaq SmallCap Market, however,
would require that (i) there be at least 300 round lot holders, (ii) there be at
least 500,000 publicly held shares, (iii) the publicly held shares have a market
value of at least $1 million, (iv) there be at least two registered and active
market makers, of which one may be entering stabilizing bids and (v) the issuer
have either (A) net tangible assets of at least $2 million, (B) market
capitalization of at least $35 million or (C) net income of at least $500,000 in
the most recently completed fiscal year or in two of the last three most
recently completed fiscal years. Shares held directly or indirectly by
directors, officers or beneficial owners of more than 10% of the Shares are not
considered as being publicly held for the purpose of determining whether either
of the Nasdaq listing criteria were met. According to the Company, as of July 6,
1999, there were approximately 83 holders of record of Shares and 6,493,994
Shares outstanding.
If the purchase of Shares pursuant to the Offer causes the Shares to no
longer meet the requirements for continued inclusion in the Nasdaq National
Market or the Nasdaq SmallCap Market as a result of a reduction in the number or
market value of publicly held Shares or the number of round lot holders or
otherwise, as the case may be, the market for Shares could be adversely
affected. It is possible that the Shares would continue to trade in the
over-the-counter market and that price quotations would be reported by other
sources. The extent of the public market for the Shares and the availability of
such quotations, however, would depend upon the number of holders of Shares
remaining at such time, the interests in maintaining a market in Shares on the
part of securities firms, the possible termination of registration of the Shares
under the Exchange Act, as described below, and other factors.
Exchange Act Registration. Registration of the Shares under the Exchange
Act may be terminated upon application of the Company to the Commission if the
Shares are neither listed on a national securities exchange nor held by 500 or
more holders of record. Termination of registration of the Shares under the
Exchange Act would, subject to Section 15(d) of the Exchange Act, substantially
reduce the information required to be furnished by the Company to its
stockholders and to the Commission and would make certain provisions of the
Exchange Act no longer applicable to the Company, such as the shortswing profit
recovery provisions of Section 16(b) of the Exchange Act, the requirement of
furnishing a proxy or information statement pursuant to Section 14(a) or (c) of
the Exchange Act in connection with stockholders' meetings 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 of
1933, as amended, may be impaired or eliminated. The Purchaser intends to seek
to cause the Company to apply for termination of registration of the Shares
under the Exchange Act as soon after the completion of the Offer as the
requirements for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
trading of the Shares will cease to be reported on Nasdaq and the registration
of the Shares under the Exchange Act will be terminated following the
consummation of the Merger.
Margin Regulations. The Shares are currently "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" or be eligible for Nasdaq
reporting.
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8. CERTAIN INFORMATION CONCERNING THE COMPANY
General. The Company is a Delaware corporation with its principal
executive offices at 14312 Franklin Avenue, Tustin, California 92781, telephone
no. (714) 838-8737. According to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (the "Annual Report"), the Company is a
technology leader in electronics manufacturing services, providing a diverse
range of services to customers to achieve their product realization needs. These
services include product, Application Specific Integrated Circuits, software and
Radio Frequency design; modeling, and package/enclosure management; and the
precision assembly of comprehensive advanced interconnect solutions, utilizing
precision surface mount and Direct-Chip-Attach technologies. Prototype through
high volume manufacturing of electronic circuit board and box build services is
provided through nine facilities worldwide for customers in the Americas, Europe
and Asia. The Company believes it is a leading supplier of advanced surface
mount technology, Chip-On-Flex, and Flip-Chip-On-Flex assemblies to the hard
disk drive ("HDD") and non-HDD markets.
Selected Financial Information. Set forth below is certain selected
consolidated financial information with respect to the Company excerpted or
derived from the information contained in the Annual Report, as well as from the
information contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, which are incorporated herein by reference. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary is
qualified in its entirety by reference to such reports and such other documents
and all the financial information (including any related notes) contained
therein. Such reports and other documents should be available for inspection and
copies thereof should be obtainable in the manner set forth below under
"Available Information."
SMARTFLEX SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------ --------------------------------
1999 1998 1998 1997 1996
------- ------- -------- -------- --------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Net revenues................................ $23,152 $37,005 $107,601 $133,347 $146,100
Operating income (loss)..................... 316 263 967 (6,795) 10,446
Net income (loss)........................... (4,854) 828 1,516 (4,129) 7,157
AT MARCH 31, AT DECEMBER 31,
------------ ------------------
1999 1998 1997
------------ ------- -------
(UNAUDITED)
BALANCE SHEET DATA:
Working capital............................................. $25,415 $32,719 $33,640
Total assets................................................ 86,365 72,291 81,906
Long-Term obligations....................................... 15,341 5,526 1,689
Total stockholders' equity.................................. 46,166 51,019 49,089
Available Information. The Company is subject to the reporting
requirements of the Exchange Act and, in accordance therewith, is required to
file reports and other information with the Commission relating to its business,
financial condition and other matters. Certain information as of particular
dates concerning the Company's directors and officers, their remuneration, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located in the Northwestern Atrium Center, 500 West
Madison Street (Suite 1400), Chicago,
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Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies should be obtainable, by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide
Web site on the internet at http://www.sec.gov that contains reports and certain
other information regarding registrants that file electronically with the
Commission. Such information should also be on file at The Nasdaq Stock Market,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Company Information. The information concerning the Company contained
herein has been taken from or based upon publicly available documents on file
with the Commission and other publicly available information. Although the
Purchaser and the Parent do not have any knowledge that any such information is
untrue, neither the Purchaser nor the Parent takes any responsibility for the
accuracy or completeness of such information or for any failure by the Company
to disclose events that may have occurred and may affect the significance or
accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT
The Purchaser, a Delaware corporation and a wholly owned subsidiary of the
Parent, was organized in June 1999 to facilitate the Parent's acquisition of
control of, and the entire equity interest in, the Company upon the successful
completion of the Merger. The principal offices of the Purchaser are located at
255 Rex Boulevard, Auburn Hills, Michigan 48326, telephone no. (248) 853-5724.
All outstanding shares of capital stock of the Purchaser are owned by the
Parent. The Purchaser does not have any significant assets or liabilities and
has not engaged in activities other than those incidental to its formation and
capitalization, its execution of the Merger Agreement and preparation of the
Offer and the Merger. Because the Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding the
Purchaser is available.
The Parent, a Michigan corporation, has its principal office located at 255
Rex Boulevard, Auburn Hills, Michigan 48326, telephone no. (248) 853-5724. The
Parent is a privately-held company providing electronic, electromechanical and
electrical systems for automotive and nonautomotive applications.
Neither the Parent, nor the Purchaser are subject to the reporting
requirements of the Exchange Act and, therefore, they do not file reports or
other information with the Commission relating to their business, financial
condition or other matters.
Except as described in this Offer to Purchase, neither the Parent nor the
Purchaser (together, the "Purchasing Entities") nor, to the best knowledge of
the Purchasing Entities, any of the persons listed in Schedule I (or any
associate or majority owned subsidiary of the Purchasing Entities or any of the
persons so listed), beneficially owns any equity security of the Company, and
none of the Purchasing Entities or, to the best knowledge of the Purchasing
Entities, any of the other persons referred to above, or any of the respective
directors, executive officers or subsidiaries of any of the foregoing, has
effected any transaction in any equity security of the Company during the past
60 days. Wallace K. Tsuha, Jr., President, Chief Executive Officer and Chairman
of the Company, directly owns 1,500 Shares. Gene R. Smith, Jr., Executive Vice
President, Business Management, of the Company, sold 1,000 Shares on May 24,
1999 for $3.58 per Share in a market transaction.
Except as described in this Offer to Purchase, (i) there have not been any
contacts, transactions or negotiations between the Purchasing Entities, any of
their respective subsidiaries or, to the best knowledge of the Purchasing
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand, that
are required to be disclosed pursuant to the rules and regulations of the
Commission and (ii) none of the Purchasing Entities or, to the best knowledge of
the Purchasing Entities, any of the persons listed in Schedule I has any
contract, arrangement, understanding or relationship with any person with
respect to any securities of the Company.
Except as described in this Offer to Purchase, during the last five years,
none of the Purchasing Entities or, to the best knowledge of the Purchasing
Entities, any of the persons listed in Schedule I (i) has been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors) or
(ii) was a party
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to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, Federal or state securities laws or finding any violation of such
laws. The name, business address, present principal occupation or employment,
five year employment history and citizenship of each of the directors and
executive officers of the Purchaser and the Parent are set forth in Schedule I.
10. SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned upon any financing arrangement. The Parent
estimates that the total amount of funds required by the Purchaser to acquire
the tendered Shares pursuant to the Offer, to consummate the Merger under the
Merger Agreement, to refinance any indebtedness of the Company which may become
payable as a result of the Offer and the Merger, to pay holders of Company Stock
Options in connection with the Offer and Merger and to pay estimated fees and
expenses related to the Offer and the Merger will be approximately $73.5
million. The Purchaser expects to obtain all funds needed to consummate the
Offer and the Merger from contributions from Parent. Parent expects to obtain
funds for its distribution to the Purchaser pursuant to a Credit Agreement to be
entered into in accordance with a financing commitment letter (the "Commitment
Letter") dated July 2, 1999 from Comerica Bank, as administrative agent (the
"Agent") for several lenders (the "Lenders"). Pursuant to the Commitment Letter,
Comerica Bank has agreed to provide Parent a $125,000,000 secured revolving
credit facility for general corporate purposes, including the acquisition of the
stock of the Company, subject to customary fees.
The Commitment Letter is subject to customary conditions. The credit
facility will be guaranteed by all wholly-owned subsidiaries of Parent or all
wholly-owned subsidiaries of Parent will be co-obligors of the credit facility,
and will be secured by a security interest in substantially all tangible and
intangible assets of Parent and its wholly-owned subsidiaries.
The credit facility will have a maturity of three years from the date of
closing of the Facility, and will bear interest, at the Parent's option, at (i)
the higher of (A) Comerica Bank's prime rate or (B) the federal funds rate plus
100 basis points, plus the Applicable Margin (as defined in the Commitment
Letter) or (ii) Comerica Bank's Eurodollar rate, plus the Applicable Margin.
The Commitment Letter also includes an obligation on the part of the
Company to indemnify the Lenders against certain liabilities. The foregoing
summary of the Commitment Letter is qualified in its entirety by references to
the text of the Commitment Letter, which is filed with the Commission as an
exhibit to the Tender Offer Statement on Schedule 14D-1 (the "Tender Offer
Statement") filed by the Parent and the Purchaser.
It is currently anticipated that the indebtedness incurred in connection
with the Offer and the Merger will be repaid from current funds, and additional
funds generated internally by the Parent and its subsidiaries after the Merger,
and through other sources that may be available from time to time.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER
In July 1997, the Parent inquired of the Company's management as to the
Company's desire to conduct discussions concerning an acquisition by the Parent
of the Company or other strategic initiative. Corporate marketing brochures and
general product and service information of the Parent and the Company were
exchanged. The Company's management indicated that it had no desire to enter
into any such discussions at that time.
During 1998, the Parent contacted the Company's executive management
several times and reinforced the Parent's desire to explore strategic
initiatives. The Company's management informed the Parent that it did not wish
to consider a merger or sale, but that the Company would be willing to consider
collaborating on a program if incremental value for the Company could be
created. The Parent and the Company discussed the pursuit of a catalyst program,
but no such program was ever pursued by them.
In January 1999, the Parent again contacted the Company and expressed its
desire to meet with the Company's management to explore areas of mutual benefit.
The Company's executive management agreed to
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such a meeting. A mutual confidentiality agreement was signed by the parties on
February 2, 1999 and amended on February 3, 1999.
The initial meeting between the Parent and the Company's executive
management was held on February 25, 1999. Financial and strategic information
was exchanged and the Parent and the Company concluded that further discussions
were warranted.
In early March, 1999, the Parent's business development representative and
representatives of the Company met to explore possible opportunities. The
meeting was exploratory in nature and generally provided each party with a
better understanding of the other's capabilities and expectations.
In late March, the Parent received information from the Company's
management that the Company's Board of Directors had instructed the Company's
management to cease discussions with the Parent because prolonged discussions
would be a management distraction and dilute management's efforts to improve the
Company's operations.
On April 22, 1999, the Parent sent the Company's Chief Executive Officer an
unsolicited letter of interest to explore a possible combination of the Parent
and the Company in a negotiated transaction. Shortly thereafter, the Company
expressed its willingness to have a group of the Company's directors meet with
representatives of the Parent so that the Parent could express its interest to
that group.
On May 18, 1999, representatives of the Parent met with two of the members
of the Board of Directors of the Company and with the Company's legal counsel to
review the Parent's proposal. The representatives of the Company indicated that
the Company's Board of Directors would consider the Parent's proposal and inform
the Parent as to whether the Company had any interest in pursuing it. The
following week, the Company informed the Parent that it would engage an
investment banking firm to explore and evaluate the Company's strategic
alternatives. On June 11, the Parent received notice that a meeting could take
place among the Parent, the Company's management and the Company's investment
banker.
On June 16, 1999, representatives of the Parent, the Company and the
Company's advisors met. The Company reviewed its financial forecast and
discussed management's confidence levels, customer program assumptions and
comparable transactions. The Parent's executive emphasized that based on the
information reviewed and the market comparables, a range of $8.00 to $10.00 per
fully diluted Share appeared to be the appropriate valuation. The meeting
adjourned with both sides agreeing that none of the representatives had the
authority to negotiate an agreement, and that the matter should be resolved by
the Parent's chief executive officer and the Company's lead Board of Directors
representative.
On June 21, 1999, the Parent sent the Company's Chairman a letter which
indicated that a combination of the parties could be accomplished in which the
Company's common shares would be valued at $9.00 per Share.
On June 22, the Parent's Chief Executive Officer and the Company's lead
Board representative agreed to continue to explore a business combination on the
assumption that the price per Share would be in the range of $10.00 to $12.00.
After their discussion, they verbally agreed to a price per Share of $10.50.
Later on June 22, 1999, the Parent sent the Company's Chairman a letter
confirming the price per Share of $10.50.
From noon on June 28, 1999 through noon on July 1, 1999, representatives of
the Parent and the Company met to conduct in-depth discussions concerning a
merger, to commence negotiating a definitive agreement, and to commence due
diligence.
On July 1, 1999, the Parent's Board of Directors approved the acquisition
of the Company for a price of $10.50 per Share.
12. THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENTS
The following is a summary of certain provisions of the Merger Agreement
and the Stockholder Agreements. This summary is qualified in its entirety by
reference to the Merger Agreement and the Stockholder Agreements which are
incorporated by reference and copies of which have been filed with the
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Commission as exhibits to the Tender Offer Statement. The Merger Agreement and
the Stockholder Agreements may be examined and copies may be obtained at the
places set forth in Section 8 of this Offer to Purchase under "Available
Information."
(A) THE MERGER AGREEMENT
The Offer. The Merger Agreement provides that if none of the events set
forth in Section 15 shall have occurred or is existing, the Purchaser will
commence the Offer as promptly as reasonably practicable after the date of the
Merger Agreement, but in no event later than five business days after the date
thereof. The obligation of the Purchaser to accept for payment and pay for
Shares tendered pursuant to the Offer is subject to the condition that at least
a majority of the Company's outstanding shares (calculated on a fully diluted
basis) be tendered and not withdrawn (the "Minimum Condition") and the other
conditions set forth in Section 15. Pursuant to the Merger Agreement, the
Purchaser expressly reserves the right to waive any such condition, to increase
the price per Share payable in the Offer, and to make any other changes in the
terms and conditions of the Offer; provided, however, that, without the prior
written consent of the Company, no change may be made (i) which decreases the
price per Share payable in the Offer or which changes or waives the Minimum
Condition, (ii) which changes the form of consideration payable in the Offer,
(iii) which extends the period that the Offer is outstanding for one or more
periods not to exceed 30 days in the aggregate, (iv) which reduces the maximum
number of Shares to be purchased in the Offer or (v) which imposes conditions
other than those set forth in Section 15.
Company Action. The Merger Agreement provides that, subject to the
conditions thereof, the Company has approved of and consented to the Offer. The
Board of Directors of the Company, at a meeting duly called and held on July 6,
1999, has unanimously (i) determined that the Merger Agreement and the
Stockholder Agreements, and the Transactions, including, without limitation, the
Offer, the Merger and the tender of the Shares pursuant to the Stockholder
Agreements, are fair to and in the best interests of the stockholders of the
Company, (ii) approved and adopted the Merger Agreement and the Stockholders
Agreement, and the Transactions, including, without limitation, the Offer, the
Merger and the tender of the Shares pursuant to the Stockholder Agreements,
(iii) taken all action to render the provisions of the Company's stockholder
rights plan and of Section 203 of the DGCL inapplicable to the Offer, the Merger
and the Stockholder Agreements, and (iv) recommended that the stockholders of
the Company accept the Offer and approve and adopt the Merger Agreement and the
Transactions, including, without limitation, the Merger.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with the DGCL, at the Effective
Time, the Purchaser will be merged with and into the Company. As a result of the
Merger, the separate corporate existence of the Purchaser will cease and the
Company will continue as the Surviving Corporation, and shall continue to be
governed by the laws of the State of Delaware. The Merger Agreement provides
that the Parent, the Purchaser and the Company shall use their reasonable best
efforts to consummate the Merger as soon as practicable.
Pursuant to the Merger Agreement, at the Effective Time, each Share issued
and outstanding immediately prior to the Effective Time (other than any Shares
held by the Purchaser, the Parent or any direct or indirect wholly owned
subsidiary of the Parent or the Company, which will be canceled and retired
without any conversion thereof and no payment or distribution shall be made with
respect thereto, or Shares that are owned by stockholders, if any, who are
entitled to and who properly exercise dissenter's rights under the DGCL) shall
be canceled and shall be converted automatically into the right to receive an
amount equal to the Merger Consideration, payable, without interest, to the
holder of such Shares, upon surrender in accordance with the Merger Agreement,
of the certificate that formerly evidenced such Shares. In addition, at the
Effective Time, each share of common stock of the Purchaser issued and
outstanding immediately prior to the Effective Time will be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock, $.0025 par value, of the Surviving Corporation.
The Merger Agreement provides that each outstanding option to purchase
Shares granted under the Company Stock Option Plans (as defined in the Merger
Agreement) or otherwise will be canceled at the Effective Time, and each holder
of a canceled option (whether issued pursuant to a Company Stock Option Plan or
otherwise) will be entitled to receive, at the Effective Time or as soon as
practicable thereafter, from
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the Company, in consideration for the cancellation of such option, an amount in
cash equal to the product of (i) the number of Shares previously subject to such
option and (ii) the excess, if any, of the Merger Consideration over the
exercise price per Share previously subject to such option.
The Merger Agreement provides that the Certificate of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation, and that the By-Laws
of the Purchaser, as in effect immediately prior to the Effective Time, will be
the By-Laws of the Surviving Corporation, in each case, until amended in
accordance with applicable law. The Merger Agreement also provides that the
directors of the Purchaser immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation and that the officers of the
Purchaser immediately prior to the Effective Time will be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
Special Stockholders' Meeting. Immediately after the expiration of the
Offer, subject to the conditions thereof, if at least a majority of the
outstanding shares on a fully-diluted basis have been tendered in the Offer and
not withdrawn, unless the Purchaser is able to conduct a "short-form" merger
without stockholder approval under the DGCL, then the Purchaser will purchase
all Shares tendered pursuant to the Offer and the Company will promptly, in
accordance with applicable law and its Certificate of Incorporation and Bylaws,
(i) duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as practicable following the expiration of the Offer for
the purpose of considering and taking action on the Merger Agreement and the
Transactions (the "Special Stockholders' Meeting") and (ii) subject to certain
provisions of the Merger Agreement, (a) include in the proxy statement to be
prepared in connection with such meeting (the "Proxy Statement") the unanimous
recommendation of the Board of Directors of the Company that the stockholders of
the Company approve and adopt the Merger Agreement and the Transactions,
including without limitation, the Merger and (b) use its best efforts to obtain
such approval and adoption.
Proxy Statement. The Merger Agreement provides that, as soon as
practicable following the date of the consummation of the Offer, the Company
will file the Proxy Statement with the Commission under the Exchange Act, unless
not required under the applicable "short-form" merger provisions of the DGCL,
and the Company will use its best efforts to have the Proxy Statement cleared by
the Commission. The parties will cooperate with one another in this endeavor.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date of the Merger Agreement to the Effective Time, the Company will,
and will cause the Company's subsidiaries (the "Subsidiaries") and the officers,
directors, employees, auditors and other agents of the Company and the
Subsidiaries to, afford the officers, employees and agents of the Parent and the
Purchaser access at all reasonable times to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Company and each Subsidiary, will instruct its independent auditors to make
available its accountants' work papers to the officers, employees or agents of
the Parent and the Purchaser, and will furnish the Parent and the Purchaser with
all financial, operating and other data and information as the Parent or the
Purchaser, through its officers, employees or agents, may reasonably request.
All information obtained by the Parent or the Purchaser pursuant to the above
sentence will be kept confidential in accordance with the amended
Confidentiality Agreement between the Parent and the Company, a copy of which is
filed with the Commission as an exhibit to the Tender Offer Statement.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to the Parent and the
Purchaser with respect to, among other things, its organization and
qualification, the Subsidiaries, capitalization, authority, required filings and
consents, compliance with law, financial statements, the absence of certain
changes or events concerning the Company or any of the Subsidiaries since
December 31, 1998, the absence of litigation, employee benefit plans, labor
matters, information in the Tender Offer Statement, this Offer to Purchase and
such other documents, together with all supplements and amendments thereto
(collectively, the "Offer Documents"), the Schedule 14D-9 and the Proxy
Statement, real property matters, intellectual property matters, taxes,
environmental matters, material contracts, brokers and counsel, Year 2000
compliance and certain other matters. The Parent and the Purchaser have made
customary representations and warranties to the Company with respect to,
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among other things, their organization, authority, no conflicts, required
filings and consents, financing for the Offer, information in the Offer
Documents and the Proxy Statement, and brokers.
Conduct of Business by the Company. Pursuant to the Merger Agreement, the
Company has agreed that, from the date of the Merger Agreement to the Effective
Time, unless the Parent shall otherwise agree in writing, the business of the
Company and the Subsidiaries will be conducted only in, and the Company and the
Subsidiaries will not take any action except in, the ordinary course of business
and in a manner consistent with past practice; and the Company will use its best
efforts to preserve substantially intact the business organization of the
Company and the Subsidiaries, to keep available the services of the current
officers, employees and consultants of the Company and the Subsidiaries and to
preserve the current relationships of the Company and the Subsidiaries with
customers, suppliers and other persons with which the Company or any Subsidiary
has significant business relationships.
Pursuant to the Merger Agreement, neither the Company nor any Subsidiary
will, from the date of the Merger Agreement to the Effective Time, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Parent: (i) amend its Certificate of Incorporation or Bylaws or
equivalent organizational documents; (ii) issue, sell, pledge, dispose of,
grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of (a) any shares of capital stock of any class of the Company or
any Subsidiary or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the Company
or any Subsidiary (except for the issuance of a maximum of 994,502 Shares
issuable pursuant to stock options outstanding or any rights to purchase Shares
under the Company's 1995 Employee Stock Purchase Plan in effect on the date of
the Merger Agreement) or (b) any assets of the Company, any Subsidiary, except
for sales in the ordinary course of business and in a manner consistent with
past practice; (iii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock; (iv) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(v)(1) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets or any other business combination) another entity
or any assets, (2) incur indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, pledge in respect of or otherwise as
an accommodation become responsible for the obligations of any person, or make
loans or advances, except in the ordinary course of business consistent with
past practice, but in no event shall there be more than $1,000,000 of
indebtedness outstanding at one time in addition to the total amount of
indebtedness outstanding as of the date of the Merger Agreement, (3) enter into
any contract or agreement other than purchases of inventory in the ordinary
course of business or contracts or agreements entered into in the ordinary
course of business consistent with past practice and which require payments by
the Company or the Subsidiaries in an aggregate amount of less than $100,000,
(4) terminate, cancel or permit any change in, or agree to any change in, any
Material Contract (as defined in the Merger Agreement), except in the ordinary
course of business consistent with past practice, (5) terminate, cancel or
permit any change in, or agree to any change in, any Affiliate Contract, Broker
Agreement or Attorney Engagement (as defined in the Merger Agreement), (6)
authorize any single capital expenditure which is above specified dollar
thresholds, or (7) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this subparagraph (v); (vi)
increase the compensation of, or grant any severance or termination pay to,
directors, officers and employees (except for normal compensation increases
consistent with past practice for employees who are not officers); (vii) change
accounting policies or practices; (viii) make any tax election or settle or
compromise any material federal, state, local or foreign income tax liability;
(ix) pay, discharge or satisfy any claim, liability or obligation; or (x)
announce an intention, enter into any formal or informal agreement, or otherwise
make a commitment to do any of the foregoing.
No Solicitation of Transactions. Pursuant to the Merger Agreement, neither
the Company nor any Subsidiary shall, directly or indirectly, through any
officer, director, agent or otherwise, solicit, initiate or encourage the
submission of any proposal or offer from any person relating to the acquisition
or purchase of all or any material portion of the assets of, or any equity
interest in, the Company or any Subsidiary or any merger, consolidation,
business combination, reorganization, recapitalization or similar transaction
involving
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the Company or any Subsidiary (each a "Competing Transaction") or participate in
any discussions or negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The Company and each of the
Subsidiaries will cease and cause to be terminated any existing activities,
discussions or negotiations by or on its behalf with any other person conducted
prior to the execution of the Merger Agreement with respect to any Competing
Transaction and will promptly notify the Parent following receipt of any request
by any person relating to any possible Competing Transaction or information
concerning the Company. The Company agreed that it will not disclose any of the
terms of the Merger Agreement or the matters referred to therein to any other
prospective acquiror of the Company until the Effective Time or earlier if the
Merger Agreement is terminated in accordance with its terms, except to the
extent such disclosure is required by law or the regulations of Nasdaq. Nothing
contained in the Merger Agreement shall prohibit the Board of Directors of the
Company from furnishing information to, or entering into discussions or
negotiations with, any person in connection with an unsolicited (from the date
of the Merger Agreement) proposal involving a fully-financed (as represented by
such person) Competing Transaction which is made in writing by such person and
which, if consummated, would provide consideration per Share to the stockholders
of the Company in excess of the Offer Price (a "Superior Proposal"), if, and
only to the extent that, the Board of Directors of the Company determines in
good faith, based upon the advice of the SG Cowen Securities Corporation and the
written advice of its counsel, that such action is required for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
under the DGCL.
Employee Benefits Matters. The Merger Agreement provides that for a period
of one year from the Effective Time, the Parent shall, or shall cause the
Company or the Surviving Corporation to, maintain the Plans (as defined in the
Merger Agreement) (other than the Company Stock Option Plans and the Company's
1995 Employee Stock Purchase Plan and 1999 Key Employees Stock Ownership Plan)
which the Company maintains for the benefit of, or which are open to, a majority
of the employees of the Company on the terms in effect on the date of the Merger
Agreement, or such other plans, arrangements or programs as will provide
employees with benefits that in the aggregate are substantially equivalent to
those provided under the Plans (other than the Company Stock Option Plans and
the Company's 1995 Employee Stock Purchase Plan and 1999 Key Employees Stock
Ownership Plan) as in effect on the date of the Merger Agreement. In addition,
the Parent shall, or shall cause the Company or the Surviving Corporation to,
assume and agree to perform certain agreements and policies in the same manner
and to the same extent that the Company is required to perform such agreements
and policies.
Directors' and Officers' Indemnification and Insurance. The Merger
Agreement provides that the Articles of Incorporation and Bylaws of the
Surviving Corporation must contain provisions no less favorable with respect to
indemnification than are set forth in the Bylaws of the Company and these
provisions may not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time, were directors,
officers, employees, fiduciaries or agents of the Company, unless such
modification shall be required by law.
The Merger Agreement provides that the Company agrees, to the extent
permitted by Delaware Law, to indemnify and hold harmless, and, after the
Effective Time, the Surviving Corporation agrees to indemnify and hold harmless,
to the extent permitted by Delaware Law, each present and former director,
officer, employee, fiduciary and agent of the Company and each Subsidiary
(collectively, the "Indemnified Parties") against any costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as an
officer, director, employee, fiduciary or agent, whether occurring before or
after the Effective Time, for a period of six years after the date of the Merger
Agreement. In the event of such claim, action, suit, proceeding or
investigation, (a) the Company or the Surviving Corporation, as the case may be,
shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Company or the Surviving Corporation, promptly after statements therefor are
received and (b) the Company and the
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Surviving Corporation will cooperate in the defense of any such matter;
provided, however, that neither the Company nor the Surviving Corporation shall
be liable for any settlement effected without its written consent (which consent
will not be unreasonably withheld); provided further that neither the Company
nor the Surviving Corporation shall be obligated to pay the fees and expenses of
more than one counsel for all Indemnified Parties in any single action except to
the extent that two or more of such Indemnified Parties shall have conflicting
interests in the outcome of the action; and provided further that, in the event
that any claim for indemnification is asserted or made within such six-year
period, all rights to indemnification in respect of such claim shall continue
until the disposition of such claim.
The Merger Agreement provides that the Surviving Corporation shall use its
best efforts to maintain in effect for six years from the Effective Time, if
available, the current directors' and officers' liability insurance policies
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring on or prior to the Effective Time; provided, however, that in no event
shall the Surviving Corporation be required to expend more than an amount per
year equal to 150% of current annual premiums paid by the Company for such
insurance, which amount shall be increased by 5% for each year hereafter. The
Merger Agreement requires that any successor corporation or assignee of the
Company or the Surviving Corporation assume these insurance and indemnification
obligations.
Board Representation. The Merger Agreement provides that after the
purchase by the Purchaser of Shares pursuant to the Offer, the Parent will be
entitled to designate at its option up to that number of directors of the
Company's Board of Directors as will make the Parent's representation on the
Company's Board of Directors equal to the percentage of the outstanding Shares
held by the Parent or any of its subsidiaries and the Company shall, at such
time, increase the size of Board of Directors, or use its best efforts to secure
the resignation of directors, or both, as necessary to permit the Parent's
designees to be so elected to the Company's Board of Directors. However, in the
event that the Parent's designees are elected to the Board of Directors of the
Company, until the Effective Time, such Board of Directors shall have at least
two directors who are Continuing Directors. "Continuing Directors" means
directors of the Company on the date of the Merger Agreement. From and after the
time that the Parent's designees constitute a majority of the Board and prior to
the Effective Time, any amendment or termination of the Merger Agreement, any
extension of time for the performance of the obligations of the Purchaser or the
Parent, any waiver of rights of the Company under the Merger Agreement and
certain other actions may only be effected by the action of a majority of the
Continuing Directors.
Waiver. The Merger Agreement provides that, at any time prior to the
Effective Time, any party thereto may (i) extend the time for the performance of
any obligation or other act of any other party thereto, (ii) waive any
inaccuracy in the representations and warranties contained therein or in any
document delivered pursuant thereto and (iii) waive compliance with any
agreement or condition contained therein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
Conditions to the Merger. The Merger Agreement provides that if the
conditions set forth in Section 15 have been satisfied or, where permitted,
waived, the respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions: (i) the Merger Agreement and the Transactions, including, without
limitation, the Merger, shall have been approved and adopted by the affirmative
vote of the stockholders of the Company (unless the vote of stockholders is not
required by the DGCL); (ii) no foreign, United States or state governmental
authority, agency or commission shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order which is then in effect and has the effect of making
the acquisition of Shares by the Parent or the Purchaser or any affiliate of
either of them or the consummation of the Merger illegal or otherwise
restricting, preventing or prohibiting the consummation of the Transactions;
(iii) the Purchaser shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that this condition shall
only be applicable to the obligations of the Parent and the Purchaser if the
Purchaser's failure to purchase such Shares is not in breach of the Merger
Agreement or the terms of the Offer; and (iv) any waiting period applicable to
the consummation of the Merger under the Hart-Scott-Rodino Antitrust
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Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act") shall have expired or been terminated, and
consummation of the Merger shall not result in a violation of any applicable
material foreign antitrust or competition law, rule or regulation.
Termination. The Merger Agreement provides that it may be terminated and
the Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the stockholders
of the Company:
(i) By mutual written consent duly authorized by the Boards of
Directors of the Parent, the Purchaser and the Company; or
(ii) By the Parent, the Purchaser or the Company if (a) the Effective
Time shall not have occurred on or before December 31, 1999; provided,
however, that the right to terminate the Merger Agreement under this
section shall not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date or
(b) any court of competent jurisdiction in the United States or other
governmental authority shall have issued an order, decree, ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Offer
or the Merger and such order, decree, ruling or other action shall have
become final and nonappealable; or
(iii) By the Parent, upon approval of its Board of Directors, if (a)
due to an occurrence or circumstance that would result in a failure to
satisfy any of the conditions set forth in Section 15, the Purchaser shall
have (1) failed to commence the Offer within 60 days following the date of
the Merger Agreement, (2) terminated the Offer without having accepted any
Shares for payment thereunder or (3) failed to pay for Shares pursuant to
the Offer within 90 days following the commencement of the Offer unless
such action or inaction under (1), (2) or (3) shall have been caused by or
resulted from the failure of the Parent or the Purchaser to perform in any
material respect any covenant or agreement of either of them contained in
the Merger Agreement or the material breach by the Parent or the Purchaser
of any representation or warranty of either of them contained in this
Agreement or (b) prior to the purchase of Shares pursuant to the Offer, the
Board of Directors of the Company or any committee thereof shall have
publicly withdrawn or modified in a manner adverse to the Purchaser or the
Parent or, after receipt of a proposal involving a Competing Transaction,
upon the request of the Parent, shall not have, within four business days
after receipt of the Parent's request, publicly reaffirmed its approval or
recommendation of the Offer, the Merger Agreement, the Merger, the
Stockholder Agreements or any other Transaction, or shall have recommended
another merger, consolidation, business combination, recapitalization,
reorganization or similar transaction involving, or acquisition of, the
Company or its assets, or another tender offer or exchange offer for
Shares, or shall have resolved to do any of the foregoing; or
(iv) By the Parent, upon approval of its Board of Directors, if the
Company shall have materially breached its obligations discussed under "No
Solicitation of Transactions" above; or
(v) By the Company, upon approval of the Board of Directors of the
Company, if Parent or Purchaser shall materially breach any of its
obligations under the Merger Agreement and shall fail to cure such breach
within ten days after written notice thereof from the Company or if due to
an occurrence or circumstance that would result in a failure to satisfy any
of the conditions set forth in Section 15, the Purchaser shall have (a)
failed to commence the Offer within 60 days following the date of the
Merger Agreement, (b) terminated the Offer without having accepted any
Shares for payment thereunder or (c) failed to pay for Shares pursuant to
the Offer within 90 days following the commencement of the Offer; unless
such action or inaction under (a), (b) and (c) shall have been caused by or
resulted from the failure of the Company to perform in any material respect
any covenant or agreement of it contained in the Merger Agreement or the
material breach by the Company of any representation or warranty of it
contained in the Merger Agreement; or
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(vi) By the Company or the Parent, prior to the purchase of Shares
pursuant to the Offer, if the Board of Directors of the Company, in full
compliance with the provisions discussed in "No Solicitation of
Transactions" above, shall have approved the execution by the Company of a
definitive agreement relating to a Superior Proposal.
Effect of Termination. In the event of the termination of the Merger
Agreement pursuant to the foregoing, the Merger Agreement will then become void,
and there will be no liability on the part of any party thereto, except as set
forth in Sections 8.03 (Fees and Expenses) and 9.01 (Non-Survival of
Representations and Warranties) of the Merger Agreement. This, however, will not
relieve any party from liability for any breach of the Merger Agreement.
Fees and Expenses. The Merger Agreement provides that in the event that
(a) any person shall have commenced a tender or exchange offer for 25% or more
(or which, assuming the maximum amount of securities which could be purchased,
would result in any person beneficially owning 25% or more) of the then
outstanding Shares or otherwise publicly announced a Competing Transaction for
the direct or indirect acquisition of the Company or all or substantially all of
its assets and (1) the Board of Directors of the Company does not recommend
against the Competing Transaction, (2) the Offer shall have remained open for at
least 20 business days, (3) the Minimum Condition shall not have been satisfied
and (4) the Merger Agreement shall have been terminated; or (b) the Merger
Agreement is terminated pursuant to clauses (iii)(b), (iv) or (vi) under
"Termination" above; then, in any such event, the Company shall pay the Parent
promptly (but in no event later than one business day after the first of such
events shall have occurred) a fee of $2,500,000, in immediately available funds.
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement and the Transactions shall be paid by the
party incurring such expenses, whether or not any Transaction is consummated.
(B) THE STOCKHOLDER AGREEMENTS.
Each of the Stockholders of the Company listed on Schedule I to the Merger
Agreement, including all directors and executive officers of the Company, has
entered into a Stockholder Agreement with the Parent and the Purchaser.
Agreement to Tender. Pursuant to the Stockholder Agreements, each
Stockholder will tender all Shares beneficially owned by it pursuant to the
Offer within 10 business days of commencement of the Offer.
Voting and Irrevocable Proxy. Pursuant to the Stockholder Agreements, each
Stockholder will (i) vote all Shares beneficially owned by it in favor of the
Merger, (ii) vote all Shares beneficially owned by it against any action or
agreement that would result in a breach of any covenant or any representation or
warranty or any other obligation or agreement of the Company under or pursuant
to the Merger Agreement, (iii) vote all Shares beneficially owned by it against
any action or agreement that would impede, interfere with, delay, postpone or
attempt to discourage the Merger or the Offer, and (iv) without limiting the
foregoing, consult with the Parent and vote all Shares beneficially owned by it
in such manner as is determined by the Parent to be in compliance with this
paragraph. Pursuant to the Stockholder Agreements, each Stockholder will deliver
to the Parent contemporaneously with the execution of the Stockholder Agreement
an Irrevocable Proxy pursuant to which each Stockholder irrevocably appoints and
constitutes Wallace K. Tsuha, Jr., Jereen G. Trudell and the Parent to exercise
the proxy to vote the Shares in the foregoing manner at any time until the
earlier to occur of the valid termination of the Merger Agreement or the
Effective Time.
Termination. The Stockholder Agreements provide that they will terminate
on the earliest to occur of (a) the date on which the Purchaser accepts for
payment the Shares tendered in the Offer, so long as the Shares are so tendered
and not withdrawn, (b) the Effective Time and (c) the date of the termination of
the Merger Agreement in accordance with its terms. The Purchaser shall not
purchase the Shares subject to the Stockholder Agreements pursuant to the Offer
unless the Purchaser purchases pursuant to the Offer that number of Shares such
that the Minimum Condition is satisfied.
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Certain Covenants of Stockholder. Pursuant to the Stockholder Agreements,
each Stockholder agrees not to: (a) sell, transfer, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, any of the Shares; (b) grant any proxies,
deposit any Shares into a voting trust or enter into a voting agreement with
respect to any Shares; or (c) directly or indirectly through any agent or
otherwise, solicit, initiate or encourage the submission of any proposal or
offer from any person (other than the Parent or the Purchaser) relating to any
Competing Transaction, or participate in any discussions or negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any person (other than the Parent and the
Purchaser) to do or seek any of the foregoing. Pursuant to the Stockholder
Agreements, each Stockholder has agreed to cease and cause to be terminated any
existing activities, discussions or negotiations by or on its behalf with any
person (other than the Parent and the Purchaser) conducted prior to entering
into such agreement with respect to any Competing Transaction and agreed to
promptly notify the Parent following receipt of any request by any person (other
than the Parent or the Purchaser) relating to any possible Competing Transaction
or information concerning the Company. The Stockholder Agreements provide that
the Stockholder may, solely in his or her capacity as a member of the Board of
Directors of the Company, furnish information to, or enter into discussions or
negotiations with, any person in connection with an unsolicited proposal
involving a fully-financed (as represented by such person) Competing Transaction
which is made in writing by such person and which, if consummated, would provide
consideration per share of Common Stock to the stockholders of the Company in
excess of the Offer Price if, and only to the extent that, the Board of
Directors of the Company determines in good faith, based upon the advice of SG
Cowen Securities Corporation and the written advice of its counsel, that such
action is required for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders under the DGCL.
(C) APPRAISAL RIGHTS
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company will
have certain rights under the DGCL to dissent and demand appraisal of, and to
receive payment in cash for the fair value of, their Shares. Such rights to
dissent, if the stockholder does not vote in favor of the Merger and complies
with certain statutory procedures, could lead to a judicial determination of the
fair value of the Shares (excluding any element of value arising from the
accomplishment or expectation of the Merger) required to be paid in cash to such
dissenting holders for their Shares. Such value could be less than, equal to, or
more than the Offer Price. In addition, such dissenting stockholders may be
entitled to receive payment of interest from the date of consummation of the
Merger on the amount determined to be the fair value of their Shares. In
determining the fair value of the Shares, a Delaware court would be required to
take into account all relevant factors. Accordingly, such determination could be
based upon considerations other than, or in addition to, the market value of the
Shares, including, among other things, asset values and earning capacity.
(D) RULE 13E-3
The Commission has adopted Rule 13e-3 under the Exchange Act that is
applicable to certain "going private" transactions and that may under certain
circumstances be applicable to the Merger following the purchase of Shares
pursuant to the Offer in which the Purchaser seeks to acquire any remaining
Shares. Rule 13e-3 should not be applicable to the Merger if the Merger is
consummated within one year after the expiration or termination of the Offer and
the price paid in the Merger is not less than the price per Share paid pursuant
to the Offer. However, in the event that the Purchaser is deemed to have
acquired control of the Company pursuant to the Offer and if the Merger is
consummated more than one year after completion of the Offer or an alternative
acquisition transaction is effected whereby stockholders of the Company receive
consideration less than that paid pursuant to the Offer, in either case at a
time when the Shares are still registered under the Exchange Act, the Purchaser
may be required to comply with Rule 13e-3 under the Exchange Act. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger or such alternative transaction and the consideration offered to minority
stockholders in the Merger or such alternative
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transaction, be filed with the Commission and disclosed to stockholders prior to
consummation of the Merger or such alternative transaction. The purchase of a
substantial number of Shares pursuant to the Offer may result in the Company
being able to terminate its Exchange Act registration. See Section 7. If such
registration were terminated, Rule 13e-3 would be inapplicable to any such
future Merger or such alternative transaction.
13. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY
Purpose of the Offer. The purpose of the Offer and the Merger is to enable
the Parent to acquire control of, and the entire equity interest in, the
Company. The Offer, as the first step in the acquisition of the Company, is
intended to facilitate the acquisition of all the Shares. The Parent will
consummate the Merger as soon as practicable following the consummation of the
Offer. The purpose of the Merger is to acquire all Shares not purchased pursuant
to the Offer or otherwise.
Plans for the Company. It is expected that, initially following the
Merger, the business and operations of the Company and its Subsidiaries will
continue without substantial change. The Parent intends to conduct a detailed
review of the Company and its Subsidiaries and their assets, corporate
structure, operations, properties, policies, management and personnel and to
consider, subject to the terms of the Merger Agreement, what, if any, changes
would be desirable in light of the circumstances then existing. The Parent
reserves the right to take such actions and make such changes as it deems
desirable. Such changes could include changes in the Company's business,
corporate structure, capitalization, dividend policy, Board of Directors or
management or personnel.
Except as otherwise described in this Offer to Purchase, the Purchaser and
the Parent have no current, definite plans or proposals that would relate to, or
result in, any extraordinary corporate transaction involving the Company, such
as a merger, reorganization or liquidation involving the Company or any of its
Subsidiaries, a sale or transfer of a material amount of assets of the Company
or any of its Subsidiaries, any change in the Company's capitalization or
dividend policy or any other material change in the Company's business,
corporate structure, present Board of Directors or management or personnel.
The Merger Agreement provides that the directors of the Purchaser, at the
effective time of the Merger, will be the initial directors of the Company after
the Merger. For the potential effects of the Offer and the Merger on the listing
of the Shares on Nasdaq and their registration under the Exchange Act, see
Section 7.
14. DIVIDENDS AND DISTRIBUTIONS
The Merger Agreement provides that, prior to the Effective Time, without
the prior written consent of the Parent, neither the Company nor any Subsidiary
of the Company will directly or indirectly do, or propose to do, any of the
following: (i) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (a) any shares
of capital stock of any class of the Company or any Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any Subsidiary
(except for the issuance of a maximum of 994,502 Shares issuable pursuant to
stock options outstanding on the date of the Merger Agreement and to the
issuance of shares pursuant to the Company's Employee Stock Purchase Plan) or
(b) any assets of the Company or any Subsidiary, except for sales in the
ordinary course of business and in a manner consistent with past practice; or
(ii) declare, set aside, make or pay any dividend or other distribution, payable
in cash, stock, property or otherwise, with respect to any of its capital stock.
15. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall 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 the Purchaser's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to pay
for any Shares tendered pursuant to the Offer if (i) the Minimum Condition shall
not have been satisfied, (ii) any applicable waiting period under
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the HSR Act shall not have expired or been terminated prior to the expiration of
the Offer, (iii) acceptance for payment and payment for the Shares tendered
would result in a violation of any applicable material foreign antitrust or
competition law, rule or regulation, or (iv) at any time on or after the date of
the Merger Agreement and prior to the expiration of the Offer, any of the
following conditions exist:
(a) there shall have been entered any order, preliminary or permanent
injunction, decree, judgment or ruling in any action or proceeding before
any court or governmental, administrative or regulatory authority or
agency, which makes illegal or otherwise directly or indirectly restrains
or prohibits or makes materially more costly the making of the Offer, the
acceptance for payment of, or payment for, any Shares by the Parent, the
Purchaser or any other affiliate of the Parent, or the consummation of any
other transaction contemplated by the Merger Agreement;
(b) there shall have occurred any Material Adverse Effect (as defined
in the Merger Agreement) with respect to the Company;
(c) (i) the Board of Directors of the Company or any committee thereof
(x) shall have publicly withdrawn or modified in a manner adverse to the
Parent or the Purchaser the approval or recommendation of the Offer, the
Merger, the Stockholder Agreements or the Merger Agreement, (y) after the
Company's receipt of a proposal involving a Competing Transaction (as
defined in the Merger Agreement), shall have failed to reaffirm such
approval or recommendation upon request by the Parent within four business
days after the Company's receipt of Parent's request or (z) shall have
approved or recommended any takeover proposal or any other acquisition of
Shares other than the Offer and the Merger, or (ii) the Board of Directors
of the Company or any committee thereof shall have resolved to do any of
the foregoing;
(d) there shall have been any breach of warranty by the Company in the
Merger Agreement as a result of which, individually or in the aggregate,
there may reasonably be expected to occur a Material Adverse Effect with
respect to the Company;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or complied
with by it under the Agreement;
(f) the Merger Agreement shall been terminated in accordance with its
terms; or
(g) the Purchaser and the Company shall have agreed (i) that the
Purchaser shall terminate the Offer or (ii) that the Purchaser shall
postpone the acceptance for payment of or payment for Shares thereunder
which, in the sole judgment of the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by the
Parent or any of its affiliates) giving rise to any such condition, makes
it inadvisable to proceed with such acceptance for payment or payment.
The Merger Agreement provides that the foregoing conditions are for the
sole benefit of the Purchaser and the Parent and may be asserted by the
Purchaser or the Parent regardless of the circumstances giving rise to any such
condition or may be waived by the Purchaser or the Parent in whole or in part at
any time and from time to time in their sole discretion. The Merger Agreement
provides that the failure by the Parent or the Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS
Based on a review of publicly available filings made by the Company with
the Commission and other publicly available information concerning the Company,
neither the Purchaser nor the Parent is aware of any license or regulatory
permit that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the
Purchaser's acquisition of Shares as contemplated herein or of any approval or
other action, except as otherwise described in this Section 16, by any
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governmental, administrative or regulatory agency or authority, domestic,
foreign or supernational, that would be required for the acquisition or
ownership of Shares by the Purchaser as contemplated herein. Should any such
approval or other action be required, the Purchaser and the Parent currently
contemplate that such approval or other action will be sought, except as
described below under "State Takeover Laws." While, except as otherwise
expressly described in this Section 16, the Purchaser does not presently intend
to delay the acceptance for payment of or payment for Shares tendered pursuant
to the Offer pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other actions
were not taken in order to obtain any such approval or other action. If certain
types of adverse action are taken with respect to the matters discussed below,
the Purchaser could, subject to the terms and conditions of the Merger
Agreement, decline to accept for payment or pay for any Shares tendered. See
Section 15 for certain conditions to the Offer.
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. No Delaware takeover statute or similar statute or
regulation, including, without limitation, Section 203 the DGCL which the
Company has taken all action to render inapplicable to the Transactions, imposes
restrictions materially adversely affecting (or materially delaying) the
consummation of the Offer or the Merger or would, as a result of the Offer, the
Merger, the Transactions or the acquisition of securities of the Company by the
Parent or the Purchaser, (A) restrict or impair the ability of the Parent to
vote, or otherwise to exercise the rights of a stockholder with respect to,
securities of the Company or the Surviving Corporation that may be acquired or
controlled by the Parent or (B) entitle any stockholder to acquire securities of
the Company or the Surviving Corporation on a basis not available to the Parent.
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 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
acquiror 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.
Based on information supplied by the Company and its own review, the Parent
and the Purchaser do not believe that any other state takeover statutes purport
to apply to the Offer or the Merger. Neither the Purchaser nor the Parent has
currently complied with any state takeover statute or regulation. The Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of such right. If it is asserted that any state takeover
statute 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 or the
Merger, the Purchaser might be required to file certain information with, or to
receive approvals from, the relevant state authorities, and the Purchaser might
be unable to accept for payment or pay for Shares tendered pursuant to the
Offer, or be delayed in consummating the Offer or the Merger. In such case, the
Purchaser may not be obligated to accept for payment or pay for any Shares
tendered pursuant to the Offer. See Section 15.
U.S. Antitrust. Under the provisions of the HSR Act applicable to the
Offer, the acquisition of Shares under the Offer may be consummated following
the expiration of a 15-day waiting period following the filing by Parent of a
Premerger Notification and Report Form with respect to the Offer, unless Parent
receives a request for additional information or documentary material from the
Department of Justice, Antitrust Division
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(the "Antitrust Division") or the Federal Trade Commission ("FTC") or unless
early termination of the waiting period is granted. Parent expects to make such
a filing on July 15, 1999. If, within the initial 15-day waiting period, either
the Antitrust Division or the FTC requests additional information or documentary
material concerning the Offer, then the waiting period will be extended through
the tenth day after the date of substantial compliance by all parties receiving
such requests. Complying with a request for additional information or
documentary material can take a significant amount of time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, 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 purchase of Shares pursuant to the
Offer or the consummation of the Merger, or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of the
Company or its Subsidiaries or Parent or its subsidiaries. Private parties may
also bring legal action under the antitrust laws under certain circumstances.
There can be no assurance that a challenge to the Offer, the consummation of the
Merger, or the sale of the Shares on antitrust grounds will not be made, or, if
such a challenge is made, of the result thereof.
If any applicable waiting period under the HSR Act applicable to the Offer
has not expired or been terminated prior to the Expiration Date, the Purchaser
will not be obligated to proceed with the Offer or the purchase of any Shares
not theretofore purchased pursuant to the Offer. See Section 15.
At any time before or after the Purchaser's purchase of Shares pursuant to
the Offer, an antitrust enforcement agency in jurisdictions other than the
United States could take such action under the applicable antitrust laws, if
any, as it deems necessary or desirable in the public interest. Private parties
may also be able to bring legal action under such antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Offer on such
antitrust grounds will not be made or, if such a challenge is made, of the
results thereof.
17. FEES AND EXPENSES
The Purchaser has retained Georgeson Shareholder Communications Inc. to act
as the Information Agent and BankBoston, N.A., to serve as the Depositary in
connection with the Offer. The Information Agent and the Depositary each will
receive reasonable and customary compensation for their services, be reimbursed
for certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the Federal securities laws.
Neither the Purchaser nor the Parent will pay any fees or commissions to
any broker or dealer or other person (other than the Information Agent) in
connection with the solicitation of tenders of Shares pursuant to the Offer.
Brokers, dealers, commercial banks and trust companies will be reimbursed by the
Purchaser upon request for customary mailing and handling expenses incurred by
them in forwarding material to their customers.
18. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Neither the Purchaser nor the Parent is aware of any jurisdiction
in which the making of the Offer or the tender of Shares in connection therewith
would not be in compliance with the laws of such jurisdiction. To the extent the
Purchaser or the Parent becomes aware of any state law that would limit the
class of offerees in the Offer, the Purchaser will amend the Offer and,
depending on the timing of such amendment, if any, will extend the Offer to
provide adequate dissemination of such information to holders of Shares prior to
the expiration of the Offer. In any jurisdiction where securities or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Purchaser by one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser or the Parent has filed with the Commission the Tender Offer
Statement pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer. In addition, the Company has
filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the
Exchange Act setting forth its recommendation with respect to the Offer and the
reasons for such recommendation and furnishing certain additional related
information. Such Schedules and any amendments thereto, including exhibits,
should be available for inspection and copies should be obtainable in the manner
set forth in Sections 8 and 9 (except that they will not be available at the
regional offices of the Commission).
SSI ACQUISITION CORP.
July 14, 1999
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND THE PARENT
1. GENERAL. SSI Acquisition Corp., a Delaware corporation (the
"Purchaser"), is a wholly owned subsidiary of Saturn Electronics & Engineering,
Inc., a Michigan corporation (the "Parent"). Information with regard to the
directors and executive officers of the Parent and the Purchaser is set forth in
Items 2 and 3 below, respectively. The principal address and current business
address for each of the entities described in this Item 1 is c/o Saturn
Electronics & Engineering, Inc., 255 Rex Boulevard, Auburn Hills, Michigan
48366.
2. DIRECTORS AND EXECUTIVE OFFICERS OF SATURN ELECTRONICS & ENGINEERING,
INC. The name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers of
the Parent are set forth below. Unless otherwise indicated, the business address
of each such director and each such executive officer is c/o Saturn Electronics
& Engineering, Inc., 255 Rex Boulevard, Auburn Hills, Michigan 48326. All
executive officers listed below are citizens of the United States.
POSITION WITH THE PARENT; PRINCIPAL
OCCUPATION OR EMPLOYMENT;
NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
------------------------- -----------------------------------
Wallace K. Tsuha, Jr. Chief Executive Officer (1995 to present),
President (1985 to March 1995; December 1995
to present) and Chairman of the Board (1985
to present).
Donald J. Cowie Chief Financial Officer, Executive Vice
President, Treasurer and Assistant Secretary
(1996 to present). Group Vice President --
OEM of International Jensen Incorporated
(1993 to 1995).
Nick Najmolhoda Executive Vice President of Operations (1996
to present). Vice President of Electro
Mechanical of Parent (1995 to 1996).
Executive Vice President of Operations of
MascoTech Controls (1994 to 1995).
Gene R. Smith, Jr. Executive Vice President, Business Management
(1996 to present). Independent consultant
(1994 to 1996). Vice President -- Electronics
of Parent (1993 to 1994).
William T. Anderson Director of Parent. Vice President and
MascoTech Corporation Controller of MascoTech Corporation (1998 to
21001 VanBorn Road present). Vice President, Operational
Taylor, Michigan 48180 Accounting of MascoTech Corporation (1994 to
1998).
David E. Cole Director of Parent. Director of Office for
University of Michigan the Study of Automotive Transportation,
Transportation Research Institute University of Michigan (1975 to present).
2901 Baxter
Ann Arbor, Michigan 48109
Sherman L. Cruz Director of Parent. Independent consultant
970 Golfview (1996 to present). Chief Financial Officer of
Rochester Hills, Michigan 48307 Parent (1991 to 1996).
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POSITION WITH THE PARENT; PRINCIPAL
OCCUPATION OR EMPLOYMENT;
NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
------------------------- -----------------------------------
Forest J. Farmer Director of Parent. Chairman and Chief
Trilium Teamologies, Inc. Executive Officer of The Farmer Group (1994
219 S. Main Street, Suite 300 to present). President of Chrysler Acustar
Royal Oak, Michigan 48067 (1988 to 1994).
Rick Inatome Director of Parent. Chairman of Inacom Corp.
Inacom Corp. (1991 to present).
1800 West Maple Road
Troy, Michigan 48084
3. DIRECTORS AND EXECUTIVE OFFICERS OF SSI ACQUISITION CORP. The name of
each of the directors and executive officers of the Purchaser are set forth
below. The business address, present principal occupation or employment and
five-year employment history of such individuals are set forth above in Item 2
of this Schedule I. All directors and executive officers listed below are
citizens of the United States.
POSITION WITH SSI ACQUISITION CORP.
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
------------------------- -----------------------------------
Wallace K. Tsuha, Jr. Director and President.
Vice President, Treasurer and Chief Financial
Donald J. Cowie Officer.
Gene R. Smith, Jr. Vice President.
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Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
BANKBOSTON, N.A.
By Overnight, Certified
By First Class Mail: By Hand: or Express Mail:
BankBoston, N.A. Securities Transfer & BankBoston, N.A.
ATTN: Corporate Actions Reporting Services, Inc. ATTN: Corporate Actions
P.O. Box 8029 c/o Boston EquiServe LP 150 Royall Street
Boston, MA 02266-8029 100 William Street, Galleria Canton, MA 02021
New York, NY 10038
By Facsimile Transmission:
(For Eligible Institutions only)
(781) 575-2233/2232
For Information or Confirmation:
(781) 575-3400
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
or any other tender offer materials may be directed to the Information Agent at
the address and telephone numbers listed below. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
Georgeson Shareholder Communications Inc. Logo
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect (212) 440-9800
All Others Call Toll Free (800) 223-2064