SCHEDULE 14C INFORMATION
Information Statement pursuant to Section 14(C)
of the Securities Exchange Act of 1934
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[ ] Preliminary Information Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14C-5(D)(2))
[ X ] Definitive Information Statement
ACTERNA CORPORATION
(Name of Registrant as Specified in Charter)
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ACTERNA CORPORATION
20410 Observation Drive
Germantown, Maryland 20876
INFORMATION STATEMENT
March 5, 2002
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
GENERAL
Why is this Information Statement being furnished to the stockholders of the
Company?
On January 15, 2002, Acterna LLC (the "Issuer"), a wholly-owned
subsidiary of Acterna Corporation (the "Company"), issued and sold at par $75
million aggregate principal amount of 12% Senior Secured Convertible Notes Due
2007 (the "Notes") to Clayton, Dubilier & Rice Fund VI Limited Partnership
("Fund VI"), pursuant to an Investment Agreement, dated as of December 27, 2001
(the "Investment Agreement"), among the Issuer, the Company and Fund VI. The net
proceeds of the Notes were used to repay a portion of the Company's debt under
its revolving credit facility. The amounts repaid remain available to be
reborrowed by the Company.
This Information Statement is being furnished to the stockholders of
the Company in connection with the potential issuance of shares of common stock,
par value $0.01 per share, of the Company (the "Common Stock") upon the
conversion of the Notes (or the exercise of any Warrants, as described below).
More specifically, the Company is furnishing this Information Statement to
comply with Rule 4350 of The Nasdaq National Market (the "Nasdaq"), where the
Common Stock is listed. Rule 4350 requires the Company to obtain stockholder
approval of any issuance or potential issuance of shares of Common Stock (or
securities convertible into or exercisable for Common Stock) constituting 20% or
more of the Common Stock outstanding immediately prior to such issuance or
potential issuance at a price per share less than the market price of such
Common Stock on the date such issuance or potential issuance is agreed to. On
December 27, 2001, the date the Issuer agreed to sell the Notes to Fund VI, the
conversion price of the Notes was less than the market price of the Common Stock
and the number of shares of Common Stock issuable upon conversion of the Notes
(on a
fully-accreted basis through the Maturity Date) exceeded 20% of the outstanding
Common Stock.
Accordingly, the terms of the Notes provide, and, if any are issued,
the terms of the Warrants will provide, that no Note or Warrant may be converted
or exercised, as the case may be, until the stockholders of the Company have
approved the issuance of shares of Common Stock upon such conversion or exercise
(such approval, the "Approval of Issuance").
The Company intends to mail this Information Statement on or about
March 5, 2002 to its stockholders of record on February 22, 2002 (the "Record
Date"), and to obtain the Approval of Issuance not less than twenty calendar
days after such mailing is completed. The two largest stockholders of the
Company are Clayton, Dubilier & Rice Fund V Limited Partnership ("Fund V") and
Fund VI; without giving effect to the issuance and sale of the Notes, they
together own approximately 80% of the Company's outstanding Common Stock.
Pursuant to Section 216 of the Delaware General Corporation Law (the "Delaware
Law"), a majority of the outstanding shares of voting capital stock entitled to
vote thereon is required in order to grant the Approval of Issuance, and Fund V
and Fund VI have already informed the Company that they intend to vote their
shares of Common Stock in favor of the Approval of Issuance. Therefore, in order
to best comply with the Nasdaq rules by obtaining the Approval of Issuance as
expeditiously as possible, the Company has decided not to hold a special meeting
of all of its stockholders, but to obtain the Approval of Issuance by the
written consent of Fund V and Fund VI.
The Company is not required to hold a special meeting of stockholders
to obtain the Approval of Issuance because Section 228 of the Delaware Law and
the Company's by-laws provide that the written consent of the holders of
outstanding shares of voting capital stock having not less than the minimum
number of votes which would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted may
be substituted for such a special meeting. When a stockholder action is taken by
written consent, however, the Federal securities laws require the Company to
furnish an Information Statement, such as this Information Statement, to all of
the stockholders who would otherwise have been entitled to vote on the action so
taken.
What are the basic terms of the Notes? Under what circumstances will Warrants be
issued to holders of Notes?
The Notes bear interest at 12% per annum and mature on December 31,
2007 (the "Maturity Date"). Interest on the Notes is payable semi-annually in
arrears on each March 31st and September 30th, with interest payments commencing
on March 31, 2002. At the option of the Issuer, interest is payable in cash or
in-kind by the issuance of additional Notes. Due to limitations imposed by its
senior secured credit facility, the Issuer expects to pay interest on the Notes
in-kind by issuing additional Notes. The
Notes are secured by a second lien on all of the assets of the Company and its
subsidiaries that secure the Company's senior secured credit facility, and are
guaranteed by the Company and its domestic subsidiaries (other than the Issuer).
At the option of Fund VI (or any subsequent holder of Notes), at any
time prior to the Maturity Date, but only after the Approval of Issuance has
been obtained by the Company, the Notes may be converted into newly-issued
shares of Common Stock at a conversion price of $3.00 per share, subject to
customary antidilution adjustments. (On December 27, 2001 (the date on which the
Investment Agreement was executed by the parties), the closing market price per
share of Common Stock was $3.63, and on January 15, 2002 (the date on which the
Notes were issued and sold to Fund VI), the closing market price per share of
Common Stock was $2.45.)
The Issuer may redeem the Notes, in whole or in part, and without
penalty or premium, at any time prior to the Maturity Date, and is required to
offer to repurchase the Notes upon a change of control and upon the disposition
of certain assets. However, if any Note is redeemed, repurchased or repaid for
any reason prior to the Maturity Date, the holder thereof will be entitled to
receive from the Company a warrant (a "Warrant") to purchase a number of
newly-issued shares of Common Stock equal to the number of shares of Common
Stock that such Note was convertible into immediately prior its redemption,
repurchase or repayment, for an exercise price per share of Common Stock equal
to the conversion price of the Note immediately prior to its redemption,
repurchase or repayment, subject to customary antidilution adjustments. As with
the Notes, however, no Warrant may be exercised until the Approval of Issuance
has been obtained by the Company.
How will I know when the Approval of Issuance has been obtained?
Pursuant to Section 228 of the Delaware Law, the Company is required to
provide prompt notice of the taking of the corporate action without a meeting to
stockholders who would otherwise have been entitled to vote on the action so
taken. Accordingly, the Company will notify its stockholders of the effective
date of the Approval of Issuance in its next Annual Report on Form 10-K (which
will be filed by the Company with the Securities and Exchange Commission
following the end of the Company's fiscal year ended March 31, 2002).
EXECUTIVE OFFICES
The Company's principal executive offices are located at 20410
Observation Drive, Germantown, Maryland 20876. Its telephone number is (301)
353-1550.
OUTSTANDING VOTING STOCK OF THE COMPANY
As of the Record Date, there were approximately 217,247,507 shares of
Common Stock outstanding, which number of shares includes 25,000,000 shares
initially issuable upon conversion of the Notes (subject to the Approval of
Issuance, as described in this Information Statement). No other shares of
capital stock are outstanding. The Common Stock is the sole class of voting
securities of the Company. Each share of Common Stock entitles the holder
thereof to one vote on all matters submitted to stockholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Common Stock as of the Record Date,
with respect to: (i) each current director and each currently serving executive
officer of the Company; (ii) all current directors and executive officers of the
Company as a group; and (iii) each current beneficial owner of five percent or
more of Common Stock.
Amount and Nature Percent of
of Beneficial Common Stock
Name Ownership (1) (2)
- ----
Clayton, Dubilier & Rice Fund V Limited Partnership (3) 123,290,770 56.8%
Clayton, Dubilier & Rice Fund VI Limited Partnership (4)(5) 55,625,000 25.6%
Directors and Executive Officers:
- --------------------------------
Ned C. Lautenbach 307,692 *
John R. Peeler (6) 3,033,043 1.4%
John D. Ratliff (7) 140,000 *
Robert W. Woodbury (8) 824,556 *
Samuel W. Tishler (9) 610,688 *
Dennis E. Ferguson (10) 662,797 *
Mark V.B. Tremallo (11) 278,373 *
Allan M. Kline (12) 1,226,201 *
Brian H. Rowe (13) 161,531 *
Marvin L. Mann (14) 164,090 *
William O. McCoy (15) 174,919 *
Victor A. Pelson (16) 155,419 *
Peter M. Wagner (17) 84,000 *
All current directors and executive officers as a group (15 persons) (18) 187,051,151 86.1%
The symbol "*" denotes less than 1% of outstanding Common Stock.
(1) Unless otherwise noted, each person has sole voting and investment
power with respect to the number of shares of Common Stock set forth
opposite his name.
(2) Based upon 217,247,507 shares of Common Stock outstanding as of
the Record Date, which number of shares includes 25,000,000 shares
initially issuable upon conversion of the Notes (subject to the
Approval of Issuance, as described in this Information Statement).
For the purposes of this table, "Common Stock" includes all shares
of outstanding Common Stock plus, as required for the purpose of
determining beneficial ownership (in accordance with Rule 13d-1
promulgated pursuant to the U.S. Securities Exchange Act of 1934, as
amended), all shares of Common Stock subject to any right of
acquisition by such person, through exercise or conversion of any
security, within sixty days of the Record Date. The percentage of
Common Stock owned by each person listed in the table has been
calculated based upon the number of shares outstanding and the
number of shares initially issuable upon conversion of the Notes,
but does not include shares issuable upon the exercise of
outstanding options. Fund V and Fund VI do not hold any options.
(3) CD&R Associates V Limited Partnership ("Associates V") is the
general partner of Fund V and has the power to direct Fund V as to
the voting and disposition of shares of Common Stock held by Fund V.
CD&R Investment Associates II, Inc. ("Associates II Inc.") is the
managing general partner of Associates V and has the power to direct
Associates V as to its direction of Fund V's voting and disposition
of the shares of Common Stock held by Fund V. No single person
controls the voting and dispositive power of Associates II Inc. with
respect to the shares owned by Fund V. Each of Associates V and
Associates II Inc. expressly disclaims beneficial ownership of the
shares owned by Fund V. The business address of Associates II Inc.,
Associates V and Fund V is 1403 Foulk Road, Suite 106, Wilmington,
Delaware 19803.
(4) Includes 25,000,000 shares initially issuable upon conversion of the
Notes (subject to the Approval of Issuance, as described in this
Information Statement). The Issuer currently expects to pay interest
on the Notes in-kind and, as a result, the number of shares of
Common Stock into which the Notes are convertible will increase on
each interest payment date. Accordingly, assuming that (i) no
antidilution adjustments are made to the conversion price
of the Notes, (ii) all interest on the Notes is paid in-kind and
(iii) none of the Notes are redeemed, repurchased or repaid for any
reason prior to the Maturity Date, on the Maturity Date the Notes
will be convertible into 50,103,217 shares of Common Stock.
(5) CD&R Associates VI Limited Partnership ("Associates VI") is the
general partner of Fund VI and has the power to direct Fund VI as to
the voting and disposition of shares of Common Stock held by Fund
VI. CD&R Investment Associates VI, Inc. ("Associates VI Inc.") is
the managing general partner of Associates VI and has the power to
direct Associates VI as to its direction of Fund VI's voting and
disposition of the shares of Common Stock held by Fund VI. No single
person controls the voting and dispositive power of Associates VI
Inc. with respect to the shares of Common Stock owned by Fund VI.
Each of Associates VI and Associates VI Inc. expressly disclaims
beneficial ownership of the shares owned by Fund VI. The business
address of Associates VI Inc., Associates VI and Fund VI is 1403
Foulk Road, Suite 106, Wilmington, Delaware 19803.
(6) Includes 2,060,866 shares of Common Stock issuable upon exercise
of stock options which are exercisable within sixty days of the
Record Date. Includes 729,166 shares held by trusts for which Mr.
Peeler may be deemed to have shared voting and investment power.
Does not include 1,076 shares held by Mr. Peeler's wife for which
he disclaims beneficial ownership.
(7) Includes 140,000 shares of Common Stock issuable upon exercise
of stock options which are exercisable within sixty days of the
Record Date.
(8) Includes 824,339 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date.
(9) Includes 610,079 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date.
(10) Includes 610,840 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date. Includes 56,187 shares held by a trust for which Mr.
Ferguson may be deemed to have shared voting and investment power.
(11) Includes 251,309 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date.
(12) Mr. Kline is no longer an executive officer of the Company, but he
remains a director. Includes 1,110,600 shares of Common Stock
issuable upon exercise of stock options which are exercisable within
sixty
days of the Record Date. Includes 20,835 shares held by trusts for
which Mr. Kline may be deemed to have shared voting and investment
power.
(13) Includes 15,000 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date. Includes 119,031 shares held by trusts for which Mr. Rowe
may be deemed to have shared voting and investment power, and
26,000 deferred shares.
(14) Includes 15,000 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date. Includes 76,923 shares held by trusts for which Mr. Mann may
be deemed to have shared voting and investment power.
(15) Includes 15,000 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date. Includes 18,000 shares held in a family partnership for
which Mr. McCoy may be deemed to have shared voting and investment
power, and 22,000 deferred shares.
(16) Includes 10,000 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date. Includes 18,000 deferred shares.
(17) Includes 10,000 shares of Common Stock issuable upon exercise of
stock options which are exercisable within sixty days of the Record
Date.
(18) Includes 5,643,033 shares of Common Stock issuable upon exercise
of stock options which are exercisable within sixty days of the
Record Date. Includes 123,290,770 shares of Common Stock owned by
Fund V and 55,625,000 shares of Common Stock owned by Fund VI. Ned
C. Lautenbach, Brian D. Finn, and Richard J. Schnall may be deemed
to share beneficial ownership of the shares owned of record by the
Fund V and Fund VI by virtue of their status as stockholders of
Associates II Inc., and Associates VI Inc., the managing general
partners of Associates V and Associates VI, respectively, the
general partners of Fund V and Fund VI, respectively, but each
expressly disclaims such beneficial ownership of the shares of
Common Stock owned by Fund V and Fund VI. The voting stockholders of
Associates II Inc. and Associates VI Inc. share investment and
voting power with respect to securities owned by Fund V and Fund VI,
respectively, but no one individual controls such investment or
voting power.
INTEREST OF CERTAIN PERSONS IN MATTER TO BE ACTED UPON
Ned C. Lautenbach serves as Chairman and Chief Executive Officer of the
Company and as a director of the Company. Brian D. Finn and Richard J. Schnall
serve as directors of the Company. Messrs. Lautenbach, Finn and Schnall are
principals of Clayton, Dubilier & Rice, Inc., the manager of Fund V and Fund VI.
Without giving effect to the issuance and sale of the Notes, Fund V and Fund VI
together own approximately 80% of the outstanding Common Stock. Messrs.
Lautenbach, Finn and Schnall may be deemed to share beneficial ownership of the
shares of Common Stock owned by Fund V and Fund VI and the shares of Common
Stock issuable upon conversion of the Notes or, if any are issued, exercise of
the Warrants, by virtue of their status as stockholders of Associates II Inc.
and Associates VI Inc., the managing general partners of Associates V and
Associates VI, respectively, the general partners of Fund V and Fund VI,
respectively, but each expressly disclaims such beneficial ownership of the
shares of Common Stock owned by Fund V and Fund VI.
Because the Notes were issued and sold to Fund VI, one of the Company's
largest shareholders, a special committee of independent directors of the
Company (which was represented by its own financial and legal advisors)
evaluated the terms of the Notes and unanimously determined that such terms were
fair to the Company from a financial point of view. Based in part upon the
determination of the special committee, the board of directors of the Company
also unanimously approved the issuance and sale of the Notes. The Company did
not execute the Investment Agreement until the special committee and the board
of directors had made their respective determinations and approvals.
NO DISSENTERS' RIGHTS
Under the Delaware Law, stockholders of the Company will not be
entitled to dissenters' rights of appraisal as a result of the Approval of
Issuance.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Mark V.B. Tremallo
------------------------------------
Name: Mark V.B. Tremallo
Title: Corporate Vice President,
General Counsel and Secretary