Filed Pursuant to Rule 424(b)(3)
Registration No. 333-56072
Logitech International S.A.
Offer to Exchange
Each Outstanding Share
of Common Stock
of
Labtec Inc.
for
$11.00 net to the seller in cash and a fraction of an American Depositary Share
of
Logitech International S.A.
The offer and withdrawal rights will expire at 12:00 midnight, New York
City time, on March 22, 2001 unless extended. Shares tendered pursuant to
this offer may be withdrawn at any time prior to the expiration of the
offer, but not during any subsequent offering period.
On February 7, 2001, we entered into an Agreement and Plan of Merger with
Labtec for a subsidiary of Logitech to acquire all of the outstanding shares of
Labtec common stock. The Labtec board of directors has unanimously approved the
merger agreement, determined that the offer is fair to, and in the best
interests of, Labtec stockholders and recommends that Labtec stockholders
accept the offer and tender their shares pursuant to the offer.
Through Thunder Acquisition Corp., our indirect wholly owned subsidiary, we
are offering to exchange $11.00, net to the seller in cash, and a fraction of a
Logitech American Depositary Share, or ADS, of Logitech equal to a number, in
the range from .2234 to .2730, determined on the basis of the average closing
bid price for such ADS on the 20 consecutive trading days ending on and
including the trading day that is three business days prior to the day on which
the offer actually expires, for each outstanding share of Labtec common stock
that is validly tendered and not properly withdrawn. Each Logitech ADS
represents one tenth of one of Logitech's registered shares, par value CHF 10
per share, and is evidenced by an American Depositary Receipt, or ADR.
Our obligation to exchange cash and Logitech ADSs for shares of Labtec
common stock is subject to the conditions listed under "The Offer--Conditions
of the Offer." Logitech ADSs are quoted on the Nasdaq National Market under the
symbol "LOGIY" and Logitech registered shares are traded on the Swiss Exchange
under the symbol "LOGN." Labtec's common stock is quoted on the OTC Bulletin
Board under the symbol "LABT.OB."
See "Risk Factors" beginning on page 14 for a discussion of important
factors that you should consider in connection with the offer.
We are not asking you for a proxy and you are requested not to send us a
proxy. Any request for proxies will be made only pursuant to separate proxy
solicitation materials complying with the requirements of Section 14(a) of the
Securities Exchange Act of 1934.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Logitech International S.A.
registered shares or ADSs to be issued under this prospectus or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
This prospectus is dated March 13, 2001.
This document incorporates important business and financial information
about Logitech from documents filed with the SEC that are not included in or
delivered with this document. This information is available at the internet web
site that the SEC maintains at http://www.sec.gov, as well as from other
sources. See "Where You Can Find More Information" on page 4.
You may also request copies of these documents from us, without charge, upon
written or oral request to our information agent, Georgeson Shareholder
Communications Inc., 17 State Street, 10th Floor, New York, New York 10004,
collect at 1-212-440-9800 or toll-free at 1-800-223-2064.
In order to receive timely delivery of the documents before closing of the
offer, you should make your request no later than March 15, 2001.
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION....................... 1
WHERE YOU CAN FIND MORE INFORMATION........................................ 4
SUMMARY.................................................................... 5
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS................... 13
RISK FACTORS............................................................... 14
Risk Factors Relating to the Offer and the Merger........................ 14
Risks Related to Logitech................................................ 17
SELECTED HISTORICAL FINANCIAL DATA......................................... 22
Logitech................................................................. 22
Labtec................................................................... 24
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA....................... 26
COMPARATIVE PER SHARE DATA................................................. 27
MARKET PRICE AND DIVIDEND INFORMATION...................................... 29
THE COMPANIES.............................................................. 31
Logitech................................................................. 31
Labtec................................................................... 31
REASONS FOR THE OFFER...................................................... 32
BACKGROUND TO THE OFFER.................................................... 38
THE OFFER.................................................................. 41
Basic Terms ............................................................. 41
Timing .................................................................. 42
Extension, Termination and Amendment..................................... 42
Exchange of Labtec Shares; Delivery of Consideration..................... 43
Fractional Shares........................................................ 44
Withdrawal Rights........................................................ 44
Procedure for Tendering Shares........................................... 45
Guaranteed Delivery...................................................... 46
Purpose of the Offer; The Merger......................................... 46
Appraisal Rights......................................................... 47
Conditions of the Offer.................................................. 49
Required Regulatory Approvals............................................ 51
Certain Effects of the Offer............................................. 53
Source and Amount of Funds............................................... 53
Relationships with Labtec................................................ 54
Accounting Treatment..................................................... 54
Fees and Expenses........................................................ 55
Stock Exchange Listing................................................... 55
TAXATION................................................................... 56
INTERESTS OF CERTAIN PERSONS............................................... 62
THE MERGER AGREEMENT....................................................... 63
DESCRIPTION OF LOGITECH SHARES............................................. 71
DESCRIPTION OF LOGITECH AMERICAN DEPOSITARY SHARES......................... 74
NATURE OF TRADING MARKET................................................... 80
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TABLE OF CONTENTS
(Continued)
Page
----
COMPARISON OF RIGHTS OF LABTEC STOCKHOLDERS AND LOGITECH SHAREHOLDERS.... 82
LIMITATIONS ON ENFORCEMENT OF U.S. LAWS AGAINST LOGITECH, ITS MANAGEMENT
AND OTHERS.............................................................. 92
CERTAIN INFORMATION REGARDING LABTEC..................................... 93
Overview of Labtec's business.......................................... 93
The Industry........................................................... 93
Labtec's Products...................................................... 94
Customers.............................................................. 95
Research and Development............................................... 96
Patents and Proprietary Rights......................................... 96
Manufacturing.......................................................... 96
Marketing and Distribution............................................. 96
Competition............................................................ 97
Employees.............................................................. 97
Properties............................................................. 97
Legal Proceedings...................................................... 98
Labtec's Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 99
Changes in Independent Accountants..................................... 106
LABTEC'S MANAGEMENT...................................................... 107
LABTEC'S PRINCIPAL STOCKHOLDERS.......................................... 112
LABTEC'S TRANSACTIONS WITH RELATED PARTIES............................... 115
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION....................... 116
EXPERTS.................................................................. 124
VALIDITY OF LOGITECH REGISTERED SHARES................................... 124
INDEX OF FINANCIAL STATEMENTS............................................ F-1
Annex A: Agreement and Plan of Merger, dated February 7, 2001, by and
among Labtec Inc., Logitech International S.A., Logitech Inc.
and Thunder Acquisition Corp.
Annex B: Opinion of Goldsmith, Agio, Helms Securities, Inc.
Annex C: Section 82(e) and Sections 86 through 98 of the Massachusetts
Business Corporation Law.
Schedule A: Information concerning directors and executive officers of
Logitech International S.A., Logitech Inc. and Thunder
Acquisition Corp.
ii
QUESTIONS AND ANSWERS ABOUT THE PROPOSED ACQUISITION
Q:What will I receive in exchange for my shares of Labtec common stock?
A:We are offering to exchange (1) $11.00 in cash and (2) a fraction of a
Logitech ADS for each outstanding share of Labtec common stock that is validly
tendered and not properly withdrawn. The fraction of a Logitech ADS into which,
together with $11.00 in cash, each share of Labtec common stock will be
exchanged (the "exchange ratio") will be determined as follows:
. If the average closing bid price of Logitech ADSs for the 20 consecutive
trading days ending on the third trading day prior to the expiration date
of the offer is equal to or between $25.64 and $31.34, the exchange ratio
will be determined by dividing $7.00 by this 20-day average price.
. If this 20-day average price is less than $25.64, the exchange ratio will
be .2730 of a Logitech ADS for each share of Labtec common stock.
. If this 20-day average price is more than $31.34, the exchange ratio will
be .2234 of a Logitech ADS for each share of Labtec common stock.
You will not receive any fractional Logitech ADSs in the offer. Instead, you
will receive cash in an amount equal to the value of a Logitech ADS used to
calculate the exchange ratio for any fractional shares you would otherwise have
been entitled to receive.
For more information on how the exchange ratio works, please read the
detailed information set forth under "The Offer--Basic Terms" beginning on page
41.
Q:How can I find out the final exchange ratio?
A:No later than two business days before the offer expires, we will notify you
by issuing a press release announcing the final exchange ratio and filing that
press release with the SEC. You can also call our information agent, Georgeson
Shareholder Communications, Inc., collect at 1-212-440-9800 or toll-free at
1-800-223-2064 for the final exchange ratio and the final average trading price
of Logitech ADSs for the 20-day pricing period.
Q:How long will it take to complete the offer and merger?
A:The offer is scheduled to expire on March 22, 2000, the initial scheduled
expiration date, subject to satisfaction or waiver of the conditions of the
offer. We expect to complete the merger as quickly as possible after we
complete the offer.
Q:Will I have to pay any fees or commissions?
A:If you are the record owner of your shares of Labtec common stock and you
tender your shares directly to the exchange agent, you will not have to pay
brokerage fees or incur similar expenses. If you own your shares through a
broker or other nominee, and your broker tenders your shares on your behalf,
your broker may charge you a fee for doing so. You should consult your broker
or nominee to determine whether any charges will apply.
Q:Does Labtec support the offer and the merger?
A:Yes. Labtec's board of directors has unanimously determined that the offer,
the merger and the merger agreement are in the best interests of Labtec and
Labtec's stockholders and recommends that Labtec stockholders accept the offer
and tender their shares pursuant to the offer. Labtec's board of directors has
also approved the merger agreement and the merger. Information about the
recommendation of Labtec's board of directors is more fully set forth under
"Reasons for the Offer--Reasons for the Labtec's Board Recommendation; Factors
Considered" beginning on page 33.
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Q:What percentage of Logitech trading securities will Labtec stockholders own
after the offer and the merger?
A:After completion of the merger, former shareholders of Labtec would own
Logitech ADSs representing approximately 2% of the outstanding Logitech
registered shares, assuming an exchange ratio of .2457 Logitech ADSs for each
share of Labtec common stock and assuming the exercise of all outstanding
Labtec options with an exercise price below $18.00.
Q:What are the most significant conditions to the offer?
A:The offer is subject to several conditions, including:
. 67% of the outstanding shares of Labtec common stock, on a fully-diluted
basis, having been validly tendered and not properly withdrawn (the
"minimum condition"),
. all waiting periods under applicable antitrust laws having expired or
been terminated,
. the registration statement of which this prospectus is a part having been
declared effective by the SEC and not being subject to any stop order,
. Labtec not having breached any covenant, representation or warranty in a
material manner,
. no proceeding having been instituted or pending by a governmental
authority seeking:
--to prohibit or restrain the offer or the merger,
--an order of divestiture of a material part of the business of Labtec or
Logitech, in each case taken as a whole,
--to materially limit Logitech's rights of ownership of Labtec common
stock, and
. no law having been enacted or order entered having the foregoing
consequences.
Q:How do I accept the offer?
A:To tender your shares, you should do the following:
. If you hold shares of Labtec common stock in your own name, complete and
sign the enclosed letter of transmittal and return it with your share
certificates to The Bank of New York, the exchange agent for the offer,
at the appropriate address specified on the back cover page of this
prospectus before the expiration date of the offer.
. If you hold your shares in "street name" through a broker, instruct your
broker to tender your shares before the expiration date.
For more information on the timing of the offer, extensions of the offer
period and your rights to withdraw your shares from the offer before the
expiration date, please refer to "The Offer" beginning on page 41.
Q:What are the U.S. tax consequences to me of the offer and the merger?
A:You will be considered for U.S. federal income tax purposes to have sold your
Labtec shares for cash and Logitech ADSs. As a result, if you are subject to
taxation in the United States, you will recognize gain or loss equal to the
difference between the fair market value of the cash and Logitech ADSs received
(in general, on the expiration date of the offer or at the effective time of
the merger, as the case may be) and your adjusted tax basis in the shares of
Labtec stock surrendered. The gain or loss you recognize if you are subject to
taxation in the United States will be capital gain or loss if the Labtec common
stock was a capital asset in your hands and will be long-term capital gain or
loss if the stock had been held by you for more than one year at, in general,
2
the applicable valuation date discussed above. Tax matters are very complicated
and the tax consequences of the offer and the merger to you will depend on the
facts of your own situation. You should consult your tax advisor for a full
understanding of the tax consequences of the offer and the merger to you. For a
more complete description of the tax consequences of the offer and the merger,
see the section entitled "Taxation" beginning on page 56.
Q:Is Logitech's financial condition relevant to my decision to tender my shares
in the offer?
A:Yes. Shares of Labtec accepted in the offer will be exchanged in part for
Logitech ADSs so you should consider our financial condition before you decide
to become one of our shareholders through the offer. In considering Logitech's
financial condition, you should review the documents incorporated by reference
in this prospectus because they contain detailed business, financial and other
information about us.
Q:If I decide not to tender, how will the offer affect my shares?
A:If you decide not to tender your shares in the offer and the merger occurs,
you will receive in the merger the same amount of cash and the same number of
Logitech ADSs for each share of Labtec common stock you own that you would have
received had you tendered your shares in the offer.
Q:Have any Labtec stockholders agreed to tender their shares?
A:Yes. Labtec stockholders beneficially owning approximately 57% of the
outstanding shares of Labtec common stock have agreed to tender their shares in
the offer.
Q:Where can I find out more information about Logitech?
A:You can find out information about Logitech from various sources described
under "Where You Can Find More Information" on page 4.
Q:Who can I call with questions about the offer?
A:You can call our information agent, Georgeson Shareholder Communications
Inc., collect at 1-212-440-9800 or toll-free at 1-800-223-2064.
3
WHERE YOU CAN FIND MORE INFORMATION
We file periodic reports and other information with the Securities and
Exchange Commission, and Labtec files periodic reports, proxy statements, and
other information with the Securities and Exchange Commission. You may read and
copy any document that either company files with the SEC at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of its
public reference room. Labtec's SEC filings, and some of Logitech's SEC
filings, are also available to the public over the internet at the SEC's web
site (www.sec.gov).
We filed a registration statement on Form F-4 to register with the SEC the
registered shares underlying the American depositary shares to be issued
pursuant to the offer and the merger. This prospectus is a part of that
registration statement. As allowed by SEC rules, this prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement. In addition, we also filed with the SEC
a statement on Schedule TO pursuant to Rule 14d-3 under the Securities Exchange
Act of 1934 to furnish certain information about the offer. You may obtain
copies of the Form F-4 and the Schedule TO (and any amendments to those
documents) in the manner described above.
The SEC allows us to "incorporate by reference" into this document the
information in documents we file with the SEC, which means that we can disclose
important business and financial information about us to you by referring you
to those documents. The information incorporated by reference is an important
part of this document, and information that we file subsequently with the SEC
will automatically update this document and may modify or supersede earlier
information that is incorporated by reference.
We are incorporating by reference into this prospectus the documents listed
below that we have previously filed with the SEC:
. Annual Report on Form 20-F for the fiscal year ended March 31, 2000; and
. Reports of Foreign Issuer on Form 6-K filed for the periods ended June
30, 2000, September 30, 2000 and December 31, 2000.
All documents filed by us with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this prospectus
to the date that shares are accepted for exchange pursuant to our offer (or the
date that our offer is terminated) shall also be deemed to be incorporated by
reference in this prospectus.
Documents incorporated by reference are available from us without charge
upon request to our information agent, Georgeson Shareholder Communications
Inc., collect at 1-212-440-9800 or toll-free at 1-800-223-2064. In order to
ensure timely delivery, any request must be submitted no later than March 15,
2001. If you request any incorporated documents from us, we will mail them to
you by first class mail, or another equally prompt means, within one business
day after we receive your request.
We have not authorized anyone to give any information or make any
representation about our offer that is different from, or in addition to, that
contained in this prospectus or in any of the materials that we have
incorporated by reference into this prospectus. Therefore, if anyone does give
you information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document are unlawful, or
if you are a person to whom it is unlawful to direct these types of activities,
then the offer presented in this document does not extend to you. The
information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date
applies.
4
SUMMARY
The following is a brief summary of information contained in the prospectus.
You should carefully read this entire prospectus and the other documents to
which this prospectus refers you in order to fully understand the offer. See
"Where You Can Find More Information" on page 4.
The Offer and the Merger (Page 41)
We are proposing to acquire Labtec. We are offering to exchange (1) $11.00
in cash and (2) a fraction of a Logitech ADS for each outstanding share of
Labtec common stock that is validly tendered and not properly withdrawn.
The fraction of a Logitech ADS into which, together with $11.00 in cash,
each share of Labtec common stock will be exchanged (the "exchange ratio") will
be determined as follows:
. If the average closing bid price of Logitech ADSs for the 20 consecutive
trading days ending on the third trading day prior to the expiration date
of the offer is equal to or between $25.64 and $31.34, the exchange ratio
will be determined by dividing $7.00 by this 20-day average price.
. If this 20-day average price is less than $25.64, the exchange ratio will
be .2730 of a Logitech ADS for each share of Labtec common stock.
. If this 20-day average price is more than $31.34, the exchange ratio will
be .2234 of a Logitech ADS for each share of Labtec common stock.
Thus, if this 20-day trading average is between $25.64 and $31.34, you will
receive Logitech ADSs with a value of $7.00 plus $11.00 in cash for total
consideration of $18.00 per share of Labtec common stock. If this average is
less than $25.64 or more than $31.34, you will receive $11.00 in cash plus the
minimum or maximum fraction of a Logitech ADS set out above, which will mean
that the value of the Logitech ADS you receive will be less or more than $7.00.
The amount you will actually realize upon resale by you in the market of the
Logitech ADSs received by you in the offer or the merger will depend upon the
market price of Logitech ADSs at the time of resale.
We intend, promptly after completion of the offer, to seek to merge Thunder
Acquisition Corp., or the Purchaser, our indirect wholly owned subsidiary, with
and into Labtec. As a result, Labtec will become an indirect wholly owned
subsidiary of Logitech. Each share of Labtec common stock which has not been
exchanged or accepted for exchange in the offer, other than shares held by
Labtec stockholders who properly exercise their dissenters' rights under
Massachusetts law, would be converted in the merger into the same amount of
cash and the same number of Logitech ADSs as is paid in the offer.
Information about Logitech (Page 31)
LOGITECH INTERNATIONAL S.A.
Apples, Switzerland
c/o Logitech Inc.
6505 Kaiser Drive
Fremont, California 94555
We are a leader in the design, manufacture and marketing of human interface
devices for personal computers. These products include corded and cordless mice
and keyboards, trackballs, joysticks, gamepads, steering wheels, multimedia
speakers and internet video cameras.
5
Over the past 19 years, we have offered PC users a variety of means to
access the world of digital information. Our products provide user-centric
solutions intended to be easy to install and easy to use, and that are combined
with integrated software for seamless compatibility and added functionality.
These products allow users to personalize and enrich their computing
environment, and to easily operate in a variety of applications.
Logitech was founded in Switzerland in 1981, and in 1988 we listed our
shares in an initial public offering in Switzerland. In March 1997, we sold
400,000 registered shares from treasury in a U.S. initial public offering in
the form of 4,000,000 ADSs, and listed the ADSs on the Nasdaq National Market.
Logitech maintains its operational headquarters through its U.S. subsidiary in
Fremont, California, with regional headquarters through local subsidiaries in
Romanel-sur-Morges, Switzerland and Hsinchu, Taiwan. In addition, we have
manufacturing operations in China, with distribution facilities in the United
States, Europe and Asia.
Information about Labtec (Page 93)
LABTEC INC.
1499 SE Tech Center Place
Suite 350
Vancouver, Washington 98683
Labtec is a leading developer and marketer of high-technology peripheral
products and accessories for computing, communications, and entertainment. It
offers an array of proprietary products, including PC and game console speakers
and subwoofers; PC Voice Access headsets and accessories, microphones, and
telephony products; personal audio headphone and earphone products; and 3D
motion controllers.
Labtec's strategy is to offer an assortment of high-technology products
through multiple channels of distribution. It currently sells to numerous
retailers (e.g., Best Buy, CompUSA, Dixons, Fry's Electronics, Media Mart,
Musicland, Office Depot, Sears, Staples, Target, Vobis, and Wal-Mart), master
distributors (e.g., Avnet, Ingram Micro, Merisel, and Tech Data), and original
equipment manufacturers (e.g., ABS, Compaq, Dell, Gateway, Hewlett Packard, and
IBM). Labtec serves these multiple channels of distribution on a worldwide
basis.
Labtec maintains a leading market position in each of its product lines of
PC speakers, PC Voice Access products, 3D motion controllers, and computer
storage products, and a second market position for its personal audio product
line. Labtec is establishing its market position in telephony products.
The Offer (Page 41)
Summary of the Offer
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the related letter of transmittal, to exchange (1)
$11.00 in cash and (2) a fraction of a Logitech ADS, for each outstanding share
of Labtec common stock that is validly tendered and not properly withdrawn.
We will announce the final exchange ratio by issuing a press release and
filing that press release with the SEC no later than two business days before
the offer expires.
The term "expiration date" means 12:00 midnight, New York City time, on
March 22, 2001, unless we extend the period of time during which this offer is
open, in which case the term "expiration date" means the latest time and date
on which the offer, as so extended, expires. See "The Offer--Extension,
Termination and Amendment" on page 42.
6
We are making this offer in order to acquire control and ultimately 100% of
the stock of Labtec. We intend as soon as possible after completion of the
offer to merge Purchaser with and into Labtec. At the effective time of the
merger, each share of Labtec common stock which has not been exchanged or
accepted for exchange in the offer, other than shares held by Labtec
stockholders who properly exercise their dissenters' rights under Massachusetts
law, would be converted into the right to receive the same amount of cash and
the same number of Logitech ADSs as is paid in the offer.
Conditions to the Offer
Our obligation to exchange cash and Logitech ADSs for Labtec common stock
pursuant to the offer is subject to several conditions described under "The
Offer-Conditions to the Offer," including conditions that require a minimum
number of shares of Labtec common stock to be tendered, receipt of all required
regulatory approvals and satisfaction of other conditions that are discussed
below.
Status of Regulatory Approvals
The Federal Trade Commission, or FTC, and the Antitrust Division of the
Department of Justice, or DOJ, frequently scrutinize the legality under the
antitrust laws of transactions such as the offer and the merger. At any time
before or after the merger, the DOJ or the FTC could take whatever action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the merger or seeking divestiture of substantial
assets of Logitech or Labtec or their subsidiaries. Private parties and state
attorneys general may also bring an action under the antitrust laws under
particular circumstances. We cannot guarantee that a challenge to the merger on
antitrust grounds will not be made or, if a challenge is made, of the result.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which
we refer to in this document as the "HSR Act", and the rules and regulations of
the FTC, provides that some merger transactions, including the offer and the
merger, may not be consummated until required information and materials have
been furnished to the DOJ and the FTC and the applicable waiting periods have
expired or been terminated. The exchange of Labtec common stock pursuant to the
offer is subject to these requirements.
Pursuant to the requirements of the HSR Act, each of Logitech and Labtec
filed notification reports, together with requests for early termination of the
waiting period, with the DOJ and the FTC on February 21, 2001. Unless the
waiting period is extended or we receive a request for additional information
and documentary material, the waiting period will expire on March 23, 2001,
unless earlier terminated. We are reviewing with Labtec whether other filings
or approvals may be required or desirable under antitrust laws in other
jurisdictions.
We filed this prospectus and our other offer documents with the Australian
Securities and Investments Commission, or ASIC, on February 23, 2001. We have
also sought class order relief from the ASIC so that we may file this
prospectus, which is a foreign offer document in Australia, with the ASIC. We
will not accept tenders of shares of Labtec common stock from Labtec
stockholders in Australia until the ASIC approves the content of this
prospectus. If the ASIC has not contacted us or our advisers prior to the
expiration date, we will be deemed to have obtained ASIC approval.
Timing of the Offer
Our offer is currently scheduled to expire at 12:00 midnight, New York City
time, on March 22, 2001, subject to satisfaction or waiver of the conditions of
the offer.
7
Extension, Termination and Amendment
We expressly reserve the right, in our sole discretion (subject to the
provisions of the merger agreement), at any time or from time to time, to
extend the period of time during which our offer remains open, and we can do so
by giving oral followed by written notice of an extension to the exchange
agent. If we decide to extend our offer, we will make an announcement to that
effect no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date (defined above). We have agreed,
pursuant to the merger agreement, to extend the offer until the earlier of (1)
the date on which all the conditions to the offer have been satisfied or waived
or (2) July 15, 2001. During any extension, all Labtec common stock previously
tendered and not properly withdrawn will remain subject to the offer, subject
to your right to withdraw your shares of Labtec common stock.
Subject to the SEC's applicable rules and regulations and the terms of the
merger agreement, we also reserve the right, in our sole discretion, at any
time or from time to time, (1) to delay our acceptance for exchange or our
exchange of any shares of Labtec common stock pursuant to our offer, regardless
of whether we previously accepted shares of Labtec common stock for exchange,
(2) on or after July 15, 2001, to terminate our offer and not accept for
exchange or exchange any shares of Labtec common stock not previously accepted
for exchange or exchanged, upon the failure of any of the conditions of the
offer to be satisfied; provided that our failure to fulfill our obligations
under the merger agreement is not the cause of the failure to satisfy any
condition of the offer on or before July 15, 2001, and (3) to waive any
condition (other than the minimum condition), or otherwise to amend the offer
in any respect, provided that we will not (a) make any change in the form of
consideration to be paid, (b) decrease the consideration payable in the offer,
(c) reduce the maximum number of shares of Labtec common stock to be purchased
in the offer, (d) impose conditions to the offer in addition to those set forth
in the merger agreement, or (e) make any other change that is adverse to the
holders of Labtec common stock. However, each condition to the offer, other
than those involving the receipt of necessary governmental approvals, must be
satisfied or waived prior to the expiration date.
We will give oral followed by written notice of any delay, termination or
amendment to the exchange agent and will follow any extension, termination,
amendment or delay, as promptly as practicable, with a public announcement. In
the case of an extension, an announcement will be issued no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date. Subject to applicable law (including Rules 14d-4(c)
and 14d-6(d) under the Securities Exchange Act of 1934, which require that any
material change in the information published, sent or given to shareholders in
connection with the offer be promptly sent to shareholders in a manner
reasonably designed to inform shareholders of the change) and without limiting
the manner in which we may choose to make any public announcement, we assume no
obligation to publish, advertise or otherwise communicate any public
announcement other than by making a release via the PR Newswire.
Exchange of Shares; Delivery of Cash and Logitech American Depositary Shares
Upon the terms and subject to the conditions of our offer (including, if the
offer is extended or amended, the terms and conditions of any extension or
amendment), we will accept for exchange, and will exchange, promptly after the
expiration date, shares validly tendered and not properly withdrawn during the
initial offering period. If we elect to provide a subsequent offering period in
the manner described below, shares validly tendered and not properly withdrawn
during the subsequent offering period will be accepted for exchange, and be
exchanged, promptly after they are tendered. We intend to exchange shares
within three business days from the expiration date and also three business
days from the date shares are tendered during a subsequent offering period.
Pursuant to the merger agreement, Logitech and Labtec have agreed that if the
conditions to the offer were not satisfied, Logitech would extend the offer
period, as necessary, until July 15, 2001, in which case the latest time that
shares validly tendered and not properly withdrawn during the offer period
could be exchanged would be during the third week of July, 2001.
8
Withdrawal Rights
Shares of Labtec common stock tendered pursuant to the offer may be
withdrawn at any time prior to the expiration date, and, unless we previously
accepted them pursuant to the offer, may also be withdrawn at any time after
April 23, 2001. Once we have accepted shares for purchase pursuant to the
offer, all tenders become irrevocable.
Subsequent Offering Period
We may elect to provide a subsequent offering period of three to 20 business
days after the acceptance of shares of Labtec common stock pursuant to the
offer if the requirements under Rule 14d-11 of the Securities Exchange Act of
1934 have been met. You will not have the right to withdraw Labtec common stock
that you tender in any subsequent offering period. If we elect to provide a
subsequent offering period, we will issue a press release announcing the
subsequent offering period no later than 9:00 a.m., New York City time, on the
next business day after the expiration date of the initial offering period, and
announcing the results of the offer, including the approximate number and
percentage of shares tendered to date.
Procedure for Tendering Shares
For you to validly tender Labtec common stock pursuant to our offer:
. you must properly complete and sign a letter of transmittal (or manually
executed facsimile of that document), and include any required signature
guarantees, or an agent's message, which is explained below, if you
tender through a book-entry transfer, and any other required documents,
. the exchange agent must have received all of these documents at one of
its addresses set forth on the back cover of this prospectus, and
. the exchange agent must have received your certificates for tendered
shares of Labtec common stock at one of its addresses, or those shares of
Labtec common stock must be tendered pursuant to the procedures for book-
entry tender described in "The Offer--Procedure for Tendering Shares"
(and a confirmation of receipt of the tender received by the exchange
agent), or if you cannot comply with either of the two preceding delivery
procedures described in this bullet, you must comply with the guaranteed
delivery procedures set forth in "The Offer--Guaranteed Delivery."
All of these procedures must be completed by the expiration date. For more
information on how to exchange your shares in the offer, please see "The
Offer--Procedure for Tendering Shares."
Risk Factors (Page 14)
In deciding whether to tender your shares of Labtec common stock pursuant to
the offer, you should read carefully this prospectus, the accompanying Schedule
14D-9 of Labtec and the documents to which we refer you. You should also
carefully consider the following factors:
Risk Factors Relating to the Offer and the Merger:
. integrating business operations may be difficult and may have a negative
impact on the operating results and financial condition of the combined
businesses, including employee morale and retention, customer and
supplier retention and marketing operations,
. we may be required to recognize additional non-cash charges against
earnings if our management were to determine in the future that the
remaining balance of goodwill was impaired,
9
. the need for governmental approvals may delay consummation of the offer
and the merger, which, among a variety of other factors, may negatively
affect the trading prices of Logitech ADSs and Labtec common stock,
. the acceptance of shares of Labtec common stock in the offer may reduce
the liquidity and market value of the remaining Labtec shares,
. the rights of shareholders in Swiss corporations are different than the
rights of shareholders in United States corporations,
. the market price of Logitech ADSs may decline as a result of the merger,
. Labtec's officers and directors have certain interests which may be
different from the interests of Labtec's stockholders that could
influence them to support or approve the offer and the merger,
. we will incur significant indebtedness to finance the offer, which
indebtedness could materially impact our financial condition, results of
operations and business, and
. failure to complete the offer and the merger could negatively impact
Labtec's stock price and future business and operations.
Risks Related to Logitech:
. our quarterly operating results are difficult to predict, which means
that our results could fall below investors' expectations, which could
cause the price of Logitech ADSs and registered shares to decline
significantly,
. our success depends on the continued viability and financial stability of
our distributors, resellers and OEM customers, as well as continued
demand by these customers for our products,
. product returns and effects of price protection that exceed our accruals
may significantly impact our financial results,
. to continue to be successful, we will need to effectively respond to
future changes in the technology and customer demands,
. a significant amount of our manufacturing operations are located in China
which exposes us to risks associated with doing significant business in
that country,
. the effect of business, legal and political risks associated with foreign
countries and markets may negatively affect us,
. intense competition in our industry may result in decreased demand for
our products, which may result in reduced revenues and gross margins and
loss of market share,
. our reliance on limited or sole suppliers of components used in our
products could result in delays in shipments of our products and
increased production costs,
. if we lose our key personnel or are unable to attract and retain key
personnel, our ability to pursue business opportunities or develop new
products will be limited,
. our effective tax rates may increase in the future, which would adversely
affect our operating results,
. we may be unable to protect our proprietary rights, and unauthorized use
of our technology may result in development of products which compete
with our products, and
. pending lawsuits could adversely impact us.
10
Approval of the Merger (Page 46)
If at the end of the offer we have received between 67% and 90% of the
outstanding shares of Labtec common stock, we will, subject to the conditions
to the merger set forth in the merger agreement, effect a long-form merger as
permitted under Massachusetts law, which would require notice to and approval
by Labtec stockholders. If at the end of the offer, however, we have received
90% or more of the outstanding shares of Labtec common stock, we will, subject
to the conditions to the merger set forth in the merger agreement, effect a
short-form merger as permitted under Massachusetts law, which would not require
advance notice to or approval by Labtec stockholders.
Appraisal or Dissenters' Rights (Page 47)
The offer does not entitle you to appraisal or dissenters' rights with
respect to your Labtec common stock. If you do not tender your shares in the
offer, upon the merger of Purchaser with and into Labtec, you will have a right
to object and demand payment of the judicially appraised fair value of your
Labtec shares under the Massachusetts Business Corporation Law, or MBCL. This
value may be more or less than the $11.00 cash and the market value of the
fraction of a Logitech ADS issuable for each share of Labtec common stock in
the offer and the merger. See "The Merger; Appraisal Rights."
Certain U.S. Federal Income Tax Consequences (Page 56)
The receipt of cash and Logitech ADSs in exchange for your shares of Labtec
common stock pursuant to the offer will be a taxable transaction. You will
recognize gain or loss equal to the difference between (a) the sum of the fair
market value of the Logitech ADSs on, in general, the expiration date and cash
received and (b) the aggregate tax basis of the Labtec common stock that you
tendered. That gain or loss will be capital gain or loss (assuming you hold
your Labtec common stock as a capital asset) and the capital gain or loss will
be long term if, in general, as of that time, you have held the Labtec common
stock for more than one year. Labtec stockholders receiving cash and Logitech
ADSs in the merger will have the same federal income tax consequences, except
that the fair market value of the Logitech ADSs will be determined as of the
effective time of the merger and your holding period of your Labtec stock will,
in general, end as of the effective time. See "Taxation."
Opinion of Labtec's Financial Advisors (Page 34)
On February 7, 2001, Goldsmith, Agio, Helms Securities, Inc., financial
advisor to Labtec, delivered its opinion to Labtec's board of directors that,
as of February 7, 2001, the consideration to be received by holders of Labtec
common stock pursuant to the merger agreement is fair from a financial point of
view to those holders. The full text of the opinion of Goldsmith, Agio, Helms,
which sets forth the assumptions made, matters considered and limitations on
the review undertaken in connection with its opinion, is attached to this
prospectus as Annex B and is incorporated herein by reference. Labtec
stockholders are urged to, and should, read the opinion in its entirety.
Comparative rights of Shareholders of Logitech and Labtec (Page 82)
Logitech ADSs are being offered along with cash for your shares of Labtec
common stock. Because Labtec is a corporation organized under the laws of
Massachusetts and Logitech is a corporation organized under the laws of
Switzerland, there are differences between the rights of Labtec stockholders
and the rights of holders of Logitech ADSs and Logitech registered shares. For
a discussion of some of these differences, see "Comparison of Rights of Labtec
Stockholders and Logitech Shareholders."
11
Interests of Directors and Officers in the Transaction (Page 62)
Directors and executive officers of Labtec hold stock awards which will
become fully vested and exercisable when the offer is completed. As of February
20, 2001, executive officers of Labtec held an aggregate of 204,500 options
that were unvested and that will become vested when the offer is completed. As
of February 20, 2001, non-employee directors held an aggregate of 20,000
options that were unvested and that will become vested when the offer is
completed.
In the interest of ensuring the continuity of Labtec's business, Robert G.
Wick, president and chief executive officer of Labtec, has agreed to serve as
senior vice president and general manager of our newly formed audio business
unit effective as of the effective time of the merger.
As approved by Labtec's unaffiliated directors, upon consummation of the
offer, Sun Multimedia Advisors, Inc. will receive a fee of $4.1 million in
connection with the termination of a management agreement with a wholly owned
subsidiary of Labtec as well as for services rendered by Sun Multimedia
Advisors in connection with, among other things, the sale of Labtec. Sun
Multimedia Advisors is owned by Marc J. Leder and Rodger R. Krouse, two of
Labtec's directors, and is the general partner of Sun Multimedia Partners,
L.P., the beneficial owner of approximately 48% of the outstanding shares of
Labtec common stock.
We have agreed that existing indemnification rights of present and former
directors and officers of Labtec will continue after the effective time of the
merger. We also have agreed to maintain in place for 6 years or until any
claims are resolved an insurance policy for directors and officers of Labtec to
the extent that the annual premium costs are less than 175% of Labtec's annual
premium in effect on the date of the merger agreement.
Dividend Policy of Logitech (Page 30)
Under Swiss law, a corporation pays dividends upon a vote of its
shareholders. This vote typically follows the recommendation of the
corporation's board of directors. Although Logitech has paid dividends in the
past, its board of directors announced in 1997 its intention not to recommend
to shareholders any payment of cash dividends in the future in order to retain
any future earnings for use in the operation and expansion of Logitech's
business.
Stockholder Agreements (Page 69)
As an inducement to us to enter into the merger agreement, Sun Capital
Venture Partners I, L.P., and Sun Multimedia Partners, L.P., which together
beneficially own approximately 57% of the outstanding shares of Labtec common
stock, entered into stockholder agreements. Under these agreements they agreed
to tender in the offer, and not withdraw, all their shares of Labtec common
stock. They also granted us proxies to vote all their shares of Labtec common
stock in favor of adoption and approval of the merger agreement and approval of
the merger, and against any other business combination involving Labtec.
Logitech did not pay additional consideration to either of these stockholders
in connection with the execution and delivery of the stockholder agreements.
Purchase Accounting Treatment (Page 54)
Logitech will account for the acquisition of Labtec as a purchase for
financial reporting purposes.
12
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the safe harbor provisions of the U.S. Private Securities Litigation Reform Act
of 1995. These safe harbor provisions are not available for forward-looking
statements made in the context of the offer. However, you should understand
that any statements we make regarding the benefits of the offer and merger on
Logitech's financial condition and future business strategies, as well as
expectations with respect to future sales, operating efficiencies, and product
expansions, are subject to known and unknown risks, uncertainties and
contingencies, many of which are beyond the control of Logitech, that could
cause results of Logitech and/or Labtec to differ materially from their
respective management's current expectations. Factors that might affect these
forward-looking statements include, among other things:
. the ability to integrate Labtec into Logitech's operations;
. the timing and successful completion of product development;
. the risk that the acquisition cannot be completed successfully;
. the risk that anticipated benefits from the acquisition are not realized;
and
. the ability to retain Labtec's employees and customers.
For a description of some of the factors or uncertainties that exist in
Logitech's operations and business environment that could cause actual results
to differ, you should consult Logitech's Annual Report on Form 20-F for the
year ended March 31, 2000, and its Reports of Foreign Issuer on Form 6-K for
the periods ended June 30, 2000, September 30, 2000 and December 31, 2000, as
filed with the SEC.
13
RISK FACTORS
In deciding whether to tender your shares of Labtec common stock pursuant to
the offer, you should read carefully this prospectus, the accompanying Schedule
14D-9 of Labtec and the documents to which we refer you. You should also
carefully consider the following factors:
Risk Factors Relating to the Offer and the Merger
Integrating business operations may be difficult and may have a negative impact
on the operating results and financial condition of the combined businesses,
including employee morale and retention, customer and supplier retention and
marketing operations.
If we complete the proposed merger, we will integrate two companies that
have previously operated independently. The successful integration of Labtec
with Logitech will require, among other things, integration of Labtec's and our
products, sales and marketing operations, information, software systems and
supply chain systems, the coordination of employee retention, hiring and
training operations and coordination of future research and development
efforts. Integrating Labtec's operations and personnel with ours will be a
complex process. We may not be able to integrate the operations of Labtec with
our operations rapidly or without encountering difficulties, which, if they
occur, may cause us to fail to realize the benefits we currently expect to
result from integration and may cause material adverse short- and long-term
effects on our operating results and financial condition. Among the
difficulties may be negative employee morale, our inability to retain key
Labtec employees or personnel, loss of key customers, loss of retail shelf
space, disruption of manufacturing and marketing operations and maintaining
relationships with Labtec's contract manufacturers.
We may be required to recognize additional non-cash charges against earnings if
our management were to determine in the future that the remaining balance of
goodwill was impaired.
Based on a preliminary valuation of goodwill for purposes of presenting pro
forma financial information, goodwill is estimated to total $86 million after
the acquisition. Although we expect to amortize the goodwill from this
transaction over 20 years, if our management were to determine in the future
that the remaining balance of goodwill was impaired, we would be required to
recognize non-cash charges that would reduce our earnings.
The need for governmental approvals may delay consummation of the offer and the
merger, which, among a variety of other factors, may negatively affect the
trading prices of Logitech ADSs and Labtec common stock.
The offer is conditioned upon, among other things, the expiration or
termination of the applicable waiting period under the HSR Act and the
effectiveness of the Form F-4 registration statement of which this prospectus
forms a part. In addition, other filings with, notifications to and
authorizations and approvals of, various governmental agencies with respect to
the offer, the merger and the other transactions contemplated by the merger
agreement relating primarily to antitrust issues, must be made and received
prior to the consummation of the offer and the merger. Delays in the
consummation of the offer and the merger, among a variety of other factors, may
cause the trading price of Logitech ADSs to decline which could result in
Labtec stockholders receiving Logitech ADSs with a market value lower than
expected. In addition, you should be aware that, among other things:
. all required regulatory approvals may not be obtained on any anticipated
schedule,
. restrictions on the combined operations of Logitech and Labtec, including
divestitures, may be sought by governmental agencies as a condition to
obtaining the required regulatory approvals, and
. operating restrictions and divestitures could decrease the value of the
combined company.
14
We and Labtec are seeking to obtain all required regulatory approvals.
Please refer to "The Offer--Conditions to the Offer" and "-- Regulatory
Approvals" for more information.
The acceptance of shares of Labtec common stock in the offer may reduce the
liquidity and market value of the remaining Labtec shares.
The acceptance of shares of Labtec common stock pursuant to the offer will
reduce the number of holders of shares of Labtec common stock, and the number
of shares of Labtec common stock that might otherwise trade publicly, after
closing the offer and before closing the merger, and may therefore reduce the
liquidity and market value of the shares of Labtec common stock held by the
public during this period.
The rights of shareholders in Swiss corporations are different than the rights
of shareholders in United States corporations.
The rights of holders of Logitech registered shares and, therefore, some of
the rights of holders of Logitech ADSs, are governed by Swiss law. As a result,
the rights of our shareholders differ from, and may be more limited than, the
typical rights of shareholders in a United States corporation such as Labtec.
Among other things, under Swiss law shareholders who dissent from approving
fundamental changes such as a merger do not have appraisal rights. In addition,
there are no statutory quorum requirements under Swiss law for shareholders'
meetings, except for fundamental corporate actions, which means important
business decisions can be made by only a limited number of shareholders if the
other shareholders choose not to participate in the meeting.
U.S. securities laws may restrict the ability of U.S. persons who hold ADSs
to participate in certain rights offerings or share or warrant dividend
alternatives which we may undertake in the future in the event we are unable to
register such securities under the U.S. securities laws and are unable to rely
on an exemption from registration under such laws. While we are not currently
planning any such transaction, we may take such actions in the future and it
may not be feasible to include U.S. persons in any such transaction. If we
issue any such securities in the future, they may be issued to the Depositary,
which may sell the securities for the benefit of the holders of the ADSs. The
Depositary may not receive the appropriate value upon the sale of the
securities. See "Comparison of Rights of Labtec Stockholders and Logitech
Shareholders" beginning on page 82.
The market price of Logitech ADSs may decline as a result of the merger.
The market price of Logitech ADSs may decline as a result of the merger for
a number of reasons including if:
. the integration of Logitech and Labtec is unsuccessful;
. we do not achieve the perceived benefits of the merger as rapidly or to
the extent anticipated by financial or industry analysts; or
. the effect of the merger on our financial results is not consistent with
the expectations of financial or industry analysts.
Labtec's officers and directors have certain interests which may be different
from the interests of Labtec's stockholders that could influence them to
support or approve the offer and the merger.
The officers and directors of Labtec participate in arrangements and have
continuing indemnification against some liabilities that provide them with
interests in the offer and the merger that may be different from, or in
addition to, those of the stockholders of Labtec, including the following:
. Sun Multimedia Advisors, Inc., a corporation owned by two of Labtec's
directors, and the general partner of a limited partnership which
beneficially owns approximately 48% of Labtec's outstanding shares of
common stock, will be entitled to a fee of $4.1 million on the closing of
the offer in connection with the termination of its management agreement
with a wholly owned subsidiary of Labtec, as well as for services
rendered by Sun Multimedia Advisors in connection with, among other
things, the sale of Labtec;
15
. the terms of Labtec's existing stock option agreements with its employees
and directors provide for the acceleration of the vesting of 100% of
unvested options upon consummation of the offer or the merger;
. we have agreed to cause the surviving corporation in the merger to
indemnify each Labtec officer and director against certain liabilities
and to cause the surviving corporation to maintain officers' and
directors' liability insurance to cover certain liabilities for the next
six years; and
. in the interest of ensuring the continuity of Labtec's business, Robert
G. Wick, Labtec's president and chief executive officer, will continue as
senior vice president and general manager of the division that will
comprise the Labtec operations.
For the above reasons, the directors and officers of Labtec could be more
likely to vote to approve or recommend the offer, the merger and merger
agreement than if they did not hold these interests.
We will incur significant indebtedness to finance the offer, which indebtedness
could materially impact our financial condition, results of operations and
business.
We intend to finance the cash portion of the offer with approximately $84.6
million of borrowings under a bridge note facility to be provided by a
commercial bank. The bridge note will mature on the earlier of a year after we
first draw down funds on the facility and March 31, 2002. We will need to
refinance this indebtedness prior to its maturity, either through a debt or
equity financing or new bank facility. We may not be able to complete a
financing or enter into a new bank facility on satisfactory terms or at all. If
we are unable to refinance the indebtedness prior to its maturity and the
lenders request repayment, we may not have funds necessary to repay the bridge
note, which would significantly impact our business and financial condition and
the value of your investment in us. In addition, if we refinance the
indebtedness by effecting an equity financing, the equity financing would
increase the number of our registered shares or ADSs available for sale in the
public markets. Thus, the announcement or closing of an equity financing could
cause the market price of Logitech ADSs to decline.
The bridge note facility will include covenants that may restrict corporate
and other actions that we would otherwise undertake, as well as covenants that
we will need to satisfy on an ongoing basis. Failure to comply with or satisfy
the covenants may constitute a default under the facility which could result in
the acceleration of the maturity of the indebtedness as well as trigger
defaults under our other credit facilities.
As a result of the increased leverage, our principal and interest
obligations will increase substantially. The degree to which we will be
leveraged could adversely affect our ability to obtain additional financing for
working capital, acquisitions or other purposes. The increased leverage could
also adversely affect our liquidity, as a substantial portion of available cash
from operations may have to be applied to meet debt service requirements and,
in the event of a cash shortfall, we could be forced to reduce other
expenditures and forego potential acquisitions to be able to meet such
requirements.
Failure to complete the offer and the merger could negatively impact Labtec's
stock price and future business and operations.
If the offer is not completed for any reason, Labtec may be subject to a
number of material risks, including the following:
. Labtec may be required under limited circumstances to pay us a
termination fee of up to $4.5 million;
. the price of Labtec common stock may decline to the extent that the
current market price of Labtec common stock reflects a market assumption
that the offer and the merger will be completed; and
. some costs incurred by Labtec related to the offer and the merger, such
as regulatory filing and printing fees that would be payable upon
completion of the merger by us, must be paid by Labtec if the offer is
not completed.
16
Risks Related to Logitech
Our quarterly operating results are difficult to predict. This means that our
results could fall below investors' expectations, which could cause the price
of Logitech ADSs and registered shares to decline significantly.
Our operating results in the past have varied significantly from quarter to
quarter and these fluctuations are expected to continue in the future. Future
quarterly operating results may vary significantly due to a number of factors,
including:
. the volume and timing of orders received during the quarter;
. the maturation of product lines;
. the timing of new product introductions by us and our competitors and
their acceptance by the market;
. the impact of competition on our average selling prices and operating
expenses;
. our inventory levels or inventory levels in the distribution channels;
. changes in laws or regulations;
. fluctuations in exchange rates;
. changes in product or distribution channel mix;
. price protection charges;
. product returns from customers;
. deferrals of customer orders in anticipation of new products or
otherwise;
. changes in technologies and their acceptance by the market;
. the performance of our suppliers and third-party product manufacturers;
and
. the rate of economic growth in our principal geographic markets.
Many of these factors are beyond our control. In addition, due to the short
product life cycles inherent in our markets, our failure to introduce new,
competitive products consistently and in a timely manner would adversely affect
results of operations for one or more product cycles.
In addition, the volume and timing of orders received during a quarter are
difficult to forecast. Customers generally order on an as-needed basis.
Accordingly, we have operated with a relatively small backlog, and net sales in
any quarter depend primarily on orders booked and shipped in that quarter. In
spite of the difficulty in forecasting sales in advance of a quarter and the
relatively small backlog at any given time, we generally must plan production,
order components and enter into development, sales and marketing, and other
operating commitments well before each quarter begins. This is particularly
acute because substantially all of our products are manufactured in Asia, and
we rely on suppliers who are located in many other parts of the world.
Consequently, any shortfall in net sales in a given quarter may negatively
impact our results of operations due to an inability to adjust expenses during
such quarter. Excess inventory may negatively impact cash flows and result in
charges associated with inventory write-offs. The foregoing means that our
operating results could fall below investors' expectations, which could cause
the price of Logitech ADSs and registered shares to decline significantly.
Our success depends on the continued viability and financial stability of our
distributors, resellers and OEM customers, as well as continued demand by these
customers for our products.
We sell our products through a domestic and international network of
distributors, resellers and OEM customers, and our success depends on the
continued viability and financial stability of these customers, as well
17
as continued demand by these customers for our products. The OEM, distribution
and reseller industries have been historically characterized by rapid change,
including periods of widespread financial difficulties and consolidations, and
the emergence of alternative distribution channels. Our distributor and
reseller customers generally offer products of several different companies,
including products competitive with our products. Accordingly, there is a risk
that these distributors and resellers may give higher priority, including
greater retail shelf space, to products of other suppliers, which would reduce
demand for, and sales of, our products.
Product returns and effects of price protection that exceed our accruals may
significantly impact our financial results.
As a manufacturer of consumer products, we are exposed to the risk of
product returns, either through the exercise by customers of contractual return
rights or as a result of our assistance in balancing inventories of retailers
and distributors. In addition, we offer price protection to our distributors
and retailers. A portion of our net sales has in the past resulted and may in
the future result in increased inventory at our distributors and resellers,
which has led and could lead to reduced orders by these customers in future
periods. As a result, historical net sales may not be indicative of future net
sales. Overstocking by our distributors and retailers has in the past led and
may in the future lead to higher than normal returns. The short product life
cycles of certain of our products and the difficulty in predicting future sales
increase the risk that new product introductions, price reductions or other
factors affecting the computer industry would result in significant product
returns. In addition, we continuously introduce product upgrades, enhancements
and improved packaging, and thus may experience higher rates of return on our
older products.
We recognize revenue upon product shipment, less amounts for estimated
returns and price protection. Amounts provided for returns and price protection
are estimated based upon historical and anticipated experience and our
assessment of inventory in the channels. Although we believe that we have
provided adequate amounts for projected returns, from time to time we have
experienced return levels in excess of amounts provided and our amounts
provided may not be sufficient for actual returns in future periods. In
addition, our accruals for price protection may not be sufficient in future
periods, and any future price changes may have a significant adverse effect on
our results of operations.
To continue to be successful, we will need to effectively respond to future
changes in technology and customer demands.
The market for our products is characterized by rapidly changing technology
and frequent new product introductions. Our success will depend to a
substantial degree on our ability to develop and introduce in a timely manner
new products and enhancements that meet changing customer requirements and
emerging industry standards. The development of new, technologically-advanced
products and enhancements is a complex and uncertain process requiring high
levels of innovation as well as the anticipation of technology and market
trends. We may not be able to identify, develop, manufacture, market, sell, or
support new products and enhancements successfully, new products or
enhancements may not achieve market acceptance, or we may not be able to
respond effectively to technology changes, emerging industry standards or
product announcements by competitors. In addition, some of our competitors may
have patents or intellectual property rights which prevent us from being able
to respond effectively to new or emerging technologies and changes in customer
requirements. New product announcements by us could cause our customers to
defer purchases of existing products or cause distributors to request price
protection credits or stock rotations. Any of these events could materially
harm our business, financial condition and results of operations.
A significant amount of our manufacturing operations are located in China,
which exposes us to risks associated with doing significant business in that
country.
A significant amount of our manufacturing operations are located in China.
These operations could be severely impacted by economic or political
instability in China, including instability which may occur in
18
connection with a change in leadership in China, by evolving interpretation and
enforcement of legal standards, by strains on Chinese transportation,
communications, trade and other infrastructures related to the rapid
industrialization of an agrarian economy, by conflicts, embargoes, increased
tensions or escalation of hostilities between China and Taiwan, and by other
trade customs and practices that are dissimilar to those in the United States.
Interpretation and enforcement of China's laws and regulations continue to
evolve and we expect differences in interpretation and enforcement to continue
in the foreseeable future. In addition, our Chinese employees in our Suzhou,
China facilities are subject to a number of government regulations regarding
employment practices and customs that are fundamentally different in many
respects from those in the United States and Europe. The Suzhou facilities are
managed by several of our key Taiwanese expatriate employees. The loss of these
employees, either voluntarily or because of a deterioration in relations
between China and Taiwan, may diminish the productivity and effectiveness of
our Suzhou manufacturing operations.
The effect of business, legal and political risks associated with foreign
countries and markets may negatively affect us.
We transact a substantial portion of our business outside the United States.
There are risks inherent in doing business in international markets, including:
. tariffs, customs, duties and other trade barriers,
. difficulties in staffing and managing foreign operations,
. environmental and other related regulations,
. political instability, expropriation, nationalization and other political
risks,
. foreign exchange controls, and
. delays from customs brokers or government agencies.
Any of these risks could adversely impact the success of our international
operations and, in turn, have a material adverse effect on our business,
financial condition and results of operations.
Intense competition in our industry may result in decreased demand for our
products, which may result in reduced revenues and gross margins and loss of
market share.
Our business is characterized by intense competition, a trend of declining
average selling prices in OEM and performance enhancements and new features of
competing retail products. We expect that competition will continue to be
intense and may increase from current or future competitors.
We compete primarily with Creative Technology, Ezonics Corporation,
Guillemot Corporation, Intel, Interact Multimedia, Kensington/Advanced Gravis,
KYE/Mouse Systems, Microsoft, Mitsumi, Philips, Primax, Saitek Industries Ltd.,
and Xirlink Inc. Many of our current and potential competitors have longer
operating histories and significantly greater financial, technical, sales,
marketing and other resources, as well as greater name recognition and larger
customer bases, than us.
Our chief competitor is Microsoft in the market for pointing devices, gaming
devices and keyboards. In the quarter ended December 31, 1999, Microsoft began
shipping two new mouse products that were based on an optical sensing
technology. We responded to Microsoft with optical offerings in the second
quarter of fiscal 2001. In addition, we continued to focus on the advantages of
our cordless offerings to the end user. Microsoft entered into the cordless
mouse category in the second quarter of fiscal 2001, and we expect Microsoft to
add a cordless keyboard to their line in the near future. We are also starting
to see increased competition for cordless desktops from less established
brands, at the lower price selling prices.
Microsoft is also a leading producer of operating systems and applications
with which our pointing and gaming devices are designed to operate. As a result
of our position, Microsoft may be able to make
19
improvements in the functionality of its pointing and gaming devices to
correspond with ongoing modifications and enhancements to its operating systems
and software applications before we are able to make such improvements. This
ability could provide Microsoft with significant lead time advantages for
product development. In addition, Microsoft may be able to offer pricing
advantages on bundled hardware and software products that we are not able to
offer.
Our chief competitor in the market for PC video cameras is Intel. Intel has
also begun offering a family of wireless products for use with a PC, including
a mouse, a keyboard and a gamepad. These products are offered separately and in
various combinations. These products are based on a wireless systems approach
that requires the use of a base station that can connect multiple wireless
devices. It remains to be seen how consumers will respond to this Intel
offering. We also expect Microsoft to make a high profile entry into the PC
video camera category at some point in calendar 2001.
We expect to continue to experience increased competition, significant price
reductions in OEM and performance enhancements of competing products in retail.
This could result in decreased revenue, decreased gross margin, loss of market
share and lack of acceptance of our products. In the event of significant price
competition in the market for our products, we would be required to decrease
costs at least proportionately to any price decreases in order to maintain our
existing margin levels and would be at a significant disadvantage compared to
competitors with substantially greater resources, which could more readily
withstand an extended period of downward pricing pressure. We may not be able
to compete successfully in the future, and competition may significantly harm
our business, financial condition and results of operations.
Our reliance on limited or sole suppliers of components used in our products
could result in delays in shipments of our products and increased production
costs.
Certain key components used in the manufacture of our products, as well as
certain products, are currently purchased by us from single or limited sources
that specialize in these components or products. At present, single-sourced
components include certain of our application-specific integrated circuits,
sensors, other integrated circuits and components, and balls used in some of
our trackballs. We generally do not have long-term agreements with our single
or limited sources of supply. Lead times and prices for materials and
components ordered by us or our contract manufacturers can vary significantly
and depend on factors such as the specific supplier, contract terms and demand
for a component at a given time. From time to time we have experienced supply
excesses shortages and fluctuation in component prices. Shortages or
interruptions in the supply of components or subcontracted products, or our
inability to procure these components or products from alternate sources at
acceptable prices in a timely manner, could delay shipment of our products or
increase our productions costs, which could decrease our revenue or gross
margin. Delays could also adversely affect our business relationships.
If we lose our key personnel or are unable to attract and retain key personnel,
our ability to pursue business opportunities or develop new products will be
limited.
Our success depends to a significant degree on the continued contributions
of our senior management, and other key design, development, manufacturing,
marketing, finance and sales personnel. The loss of any of these personnel
could harm our business. Assimilation and retention of personnel may be made
more difficult by the fact that our management and other key personnel are
dispersed throughout various locations worldwide, thus requiring the
coordination of organizations separated by geography and time zone and the
integration of personnel with disparate business backgrounds, cultures and
languages. In addition, we believe that our future success will depend on our
ability to attract and retain highly skilled managerial, engineering,
operations, marketing and sales personnel, and competition for whom is intense.
We may not be successful in attracting and retaining these personnel, and the
failure to attract and retain key personnel could harm our business.
20
Our effective tax rates may increase in the future, which would adversely
affect our operating results.
We operate in multiple jurisdictions and our profits are taxed pursuant to
the tax laws of these jurisdictions. If our effective tax rate increases in a
future period, our operating results in general will be adversely impacted, and
specifically our net income and earnings per ADS and per registered share, will
decrease. Our effective tax rate may be affected by changes in or
interpretations of tax laws in any given jurisdiction, utilization of net
operating losses and tax credit carry forwards, changes in transfer pricing
that impact the recognition of net sales and allocation of expenses in our
various subsidiaries, and changes in our management's assessment of matters
such as the realizability of deferred tax assets. In the past, we have
experienced substantial fluctuation in our effective income tax rate. Our
effective income tax rates in a given fiscal year reflect a variety of factors
that may not be present in the succeeding fiscal year or years. As a result,
our effective income tax rate may increase in future periods.
We may be unable to protect our proprietary rights. Unauthorized use of our
technology may result in development of products which compete with our
products.
Our future success depends in part on our proprietary technology, technical
know-how and other intellectual property. We rely on a combination of patent,
trade secret, copyright, trademark and other intellectual property laws, and
confidentiality procedures and contractual provisions such as nondisclosure
agreements and licenses, to protect our intellectual property.
We hold various United States patents, together with corresponding patents
from other countries, relating to some of the same inventions. We also have
various United States patent applications pending, together with corresponding
applications from other countries relating to some of the same inventions.
Despite these patents and patent applications, it is possible that any patent
owned by us will be invalidated, deemed unenforceable, circumvented or
challenged, that the rights granted thereunder will not provide competitive
advantages to us, or that any of our pending or future patent applications will
not be issued with claims of the scope sought by us. In addition, other
intellectual property laws, or our confidentiality procedures and contractual
provisions, may not adequately protect our intellectual property. Also, our
competitors may independently develop similar technology, duplicate our
products, or design around our patents or other intellectual property rights.
In addition, unauthorized parties may attempt to copy aspects of our products
or to obtain and use information that we regard as proprietary. Any of these
events could significantly damage our business, financial condition and results
of operations.
We also rely on certain technologies that we license or acquire from others.
We may find it necessary or desirable in the future to obtain licenses or other
rights relating to one or more of our products or to current or future
technologies. These licenses or other rights may not be available on
commercially reasonable terms, or at all.
Pending lawsuits could adversely impact us.
There has been substantial litigation in the technology industry regarding
rights to intellectual property, and we are subject to the risk of claims
against us for alleged infringement of the intellectual property rights of
others. Through our U.S. and China subsidiaries, we are currently involved in
several pending lawsuits with respect to patent infringement claims by third
parties. We believe that all of these pending lawsuits are without merit and
intend to defend against them vigorously. However, the defense of any of these
actions may not be successful. Any judgment in or settlement of any of these
lawsuits may have a material adverse impact on our business, financial
condition and results of operations.
Pending and future litigation involving us, whether as plaintiff or
defendant, regardless of outcome, may result in significant diversion of effort
by our technical and management personnel, result in costly litigation, cause
product shipment delays or require us to enter into royalty or licensing
agreements, any of which could have a material adverse effect on our business,
financial condition and results of operations. Royalty or licensing agreements,
if required, may not be available on terms acceptable to us, or at all. In
addition, our efforts to protect our intellectual property through litigation
may not prevent duplication of our technology or products.
21
SELECTED HISTORICAL FINANCIAL DATA
Logitech
The financial data for the years ended March 31, 2000, 1999, 1998, 1997 and
1996, and the financial condition as of the years then ended have been derived
from our consolidated financial statements. These consolidated financial
statements were audited by PricewaterhouseCoopers LLP, our independent
accountants. This financial data should be read with the consolidated financial
statements for the years ended March 31, 2000, 1999 and 1998, which are
incorporated by reference in this prospectus. The financial data for the nine
months ended December 31, 2000 and 1999, and the financial condition as of the
periods then ended have been derived from our unaudited consolidated financial
statements. The financial data should be read with the unaudited consolidated
financial statements for the periods then ended, which are incorporated by
reference in this prospectus. Our consolidated results of operations are
prepared in accordance with U.S. GAAP. The unaudited interim financial
statements were prepared on a basis consistent with the audited financial
statements and, in the opinion of our management, contain all adjustments
necessary for fair presentation of results of operations and financial
condition.
Nine Months Ended
December 31, Year Ended March 31,
------------------ ------------------------------------------------
2000 1999 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(In thousands, U.S. dollars, except per share amounts)
OPERATING RESULTS:
Net sales............... $563,963 $439,739 $615,664 $470,741 $406,109 $430,007 $368,967
Cost of goods sold...... 372,183 293,250 408,969 308,018 273,266 290,856 259,264
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 191,780 146,489 206,695 162,723 132,843 139,151 109,703
Operating expenses:
Marketing and selling.. 98,172 74,391 102,957 85,350 68,813 71,013 59,654
Research and
development........... 26,760 22,852 31,666 31,378 27,774 26,481 20,705
General and
administrative........ 25,274 21,929 31,102 23,625 19,944 20,380 19,553
Acquired in-process
research and
development (1)....... -- -- -- 6,200 -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income........ 41,574 27,317 40,970 16,170 16,312 21,277 9,791
Interest income
(expense), net......... (359) (403) (163) 906 1,592 (752) (2,304)
Loss on sale of product
line (2)............... -- -- -- (7,272) (3,174) -- --
Other income (expense),
net.................... 1,602 (1,092) (3,252) (1,407) 2,222 2,305 1,747
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes.................. 42,817 25,822 37,555 8,397 16,952 22,830 9,234
Provision for income
taxes.................. 8,563 5,164 7,511 1,260 1,496 1,770 1,041
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 34,254 $ 20,658 $ 30,044 $ 7,137 $ 15,456 $ 21,060 $ 8,193
======== ======== ======== ======== ======== ======== ========
Net income per share
(4):
Basic.................. $ 8.15 $ 5.25 $ 7.55 $ 1.85 $ 4.09 $ 6.50 $ 2.51
Diluted................ $ 7.29 $ 4.96 $ 6.87 $ 1.79 $ 3.91 $ 6.18 $ 2.50
Net income per ADS (10
ADS : 1 share):
Basic.................. $ .82 $ .53 $ .76 $ .19 $ .41 $ .65 $ .25
Diluted................ $ .73 $ .50 $ .69 $ .18 $ .39 $ .62 $ .25
Shares used to compute
net income per share
(4)
Basic.................. 4,201 3,937 3,977 3,867 3,776 3,241 3,260
Diluted................ 4,697 4,163 4,376 3,983 3,954 3,407 3,281
Cash dividend per share
(3) (4)................ $ -- $ -- $ -- $ -- $ -- $ .48 $ --
22
December 31, March 31,
------------------ ------------------------------------------------
2000 1999 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(In thousands of U.S. dollars)
SELECTED FINANCIAL DATA:
Working capital......... $152,483 $ 99,476 $115,738 $ 70,357 $104,531 $ 81,661 $ 45,497
Intangible assets....... 11,593 15,100 14,007 18,247 -- -- --
Total assets............ 416,055 329,234 334,077 294,489 214,701 216,423 181,321
Long-term debt.......... 6,707 3,141 2,934 3,624 3,031 3,188 4,768
Total liabilities....... 195,467 162,206 154,108 154,735 81,967 104,732 109,883
Total shareholders'
equity................. 220,588 167,028 179,969 139,754 132,734 111,691 181,321
OTHER FINANCIAL DATA:
EBITDA (5).............. 60,220 39,401 57,733 23,269 28,739 35,065 21,570
Cash flow provided by
(used in):
Operating activities... (22,411) 13,650 32,866 16,799 43,473 27,450 8,810
Investing activities... (15,923) (17,987) (19,941) (64,804) (7,888) (17,824) 5,372
Financing activities... 6,908 (9,687) (5,821) 19,065 (252) 1,093 (21,385)
--------
(1) In connection with acquisition of Connectix Corporation's PC video camera
business, we recorded a one-time charge of $6.2 million for acquired in-
process research and development.
(2) In fiscal 1998, we sold our scanner product line to Storm Technology Inc.
and recorded a $3.2 million loss on the sale. In 1999, we wrote off $5.8
million related to a convertible note and common stock investment in Storm
made in connection with the sale. The additional expenses in 1999 primarily
relate to costs to conclude certain obligations exceeding our management's
estimate made in 1998.
(3) Dividends were declared in Swiss francs and translated into U.S. dollars.
(4) We completed a two-for-one stock split which was effected in the form of a
stock dividend and distributed on July 5, 2000 payable to stockholders of
record as of July 4, 2000. All references to share and per share data for
all periods presented have been adjusted to give effect to this two-for-one
stock split.
(5) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. We believe EBITDA is a widely accepted financial indicator of
a company's historical ability to service and/or incur indebtedness.
However, EBITDA should not be considered as an alternative to net income,
as a measure of operating results or as a measure of liquidity in
accordance with generally accepted accounting principles. Additionally,
EBITDA as defined herein may not be comparable to similarly titled measures
reported by other companies.
23
Labtec
The financial data for the years ended March 31, 2000, 1999, 1998, 1997 and
1996, and the financial condition as of the years then ended have been derived
from Labtec's consolidated financial statements. The consolidated financial
statements for the year ended March 31, 2000 were audited by Grant Thornton
LLP, Labtec's independent accountants. The consolidated financial statements
for the years ended March 31, 1999, 1998, 1997 and 1996 were audited by
PricewaterhouseCoopers LLP, Labtec's independent accountants. The financial
data for the years ended March 31, 2000 and 1999 should be read with the
consolidated financial statements for the years then ended, which are included
elsewhere in this prospectus. The financial data for the years ended March 31,
1998, 1997 and 1996 should be read with the consolidated financial statements
for the years then ended, which are not included in this prospectus. The
financial data as of and for the nine months ended December 31, 2000 and 1999
have been derived from Labtec's unaudited consolidated financial statements,
which are included elsewhere in this prospectus. The financial data should be
read with the unaudited consolidated financial statements for the periods then
ended. Labtec's consolidated results of operations are prepared in accordance
with U.S. GAAP. The unaudited interim financial statements were prepared on a
basis consistent with the audited financial statements and, in the opinion of
Labtec's management, contain all adjustments necessary for fair presentation of
results of operations and financial condition.
Nine Months
Ended
December 31, Year Ended March 31,
--------------- -------------------------------------------
2000 1999 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- ------- -------
(In thousands, U.S. dollars, except per share amounts)
OPERATING RESULTS:
Net sales............... $78,067 $64,566 $90,512 $64,273 $60,113 $61,943 $43,664
Cost of goods sold...... 46,287 38,802 54,344 40,657 38,163 39,681 29,878
------- ------- ------- ------- ------- ------- -------
Gross profit............ 31,780 25,764 36,168 23,616 21,950 22,262 13,786
Operating expenses:
Marketing and selling.. 15,244 12,029 17,161 14,993 12,009 9,969 7,100
Research and
development........... 1,659 1,706 2,343 1,717 1,507 1,369 --
General and
administrative........ 4,023 3,955 5,969 5,457 3,857 3,448 3,877
Depreciation........... 1,196 1,186 1,514 1,444 943 723 562
Amortization of
goodwill and
intangible assets..... 898 2,611 2,945 2,538 2,130 2,250 2,571
------- ------- ------- ------- ------- ------- -------
Operating income
(loss)................. 8,760 4,277 6,236 (2,533) 1,504 4,503 (324)
Interest expense, net... 3,673 2,942 4,115 3,516 3,254 2,610 2,566
Other nonoperating
(income) expense....... 107 62 153 (8) 2 (31) --
------- ------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary loss and
income taxes........... 4,980 1,273 1,968 (6,041) (1,752) 1,924 (2,890)
Provision (benefit) for
income taxes........... 1,327 626 776 (1,370) 14 1,323 (312)
------- ------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary loss..... 3,653 647 1,192 (4,671) (1,766) 601 (2,578)
Extraordinary loss on
extinguishments of
debt, less applicable
income tax benefit..... -- (1,016) (1,016) (271) (511) -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 3,653 $ (369) $ 176 $(4,942) $(2,277) $ 601 $(2,578)
======= ======= ======= ======= ======= ======= =======
Income (loss) per share
before extraordinary
items:
Basic.................. $ .91 $ .18 $ .32 $ (1.87) $ (1.00) $ .48 $ (2.07)
Diluted................ $ .91 $ .18 $ .32 $ (1.87) $ (1.00) $ .32 $ (2.07)
Net income (loss) per
share:
Basic.................. $ .91 $ (.10) $ .05 $ (1.98) $ (1.29) $ .48 $ (2.07)
Diluted................ $ .91 $ (.10) $ .05 $ (1.98) $ (1.29) $ .32 $ (2.07)
Shares used to compute
net income (loss) per
share:
Basic.................. 4,013 3,575 3,684 2,494 1,770 1,253 1,248
Diluted................ 4,024 3,575 3,715 2,494 1,770 1,861 1,248
24
December 31, March 31,
----------------- --------------------------------------------
2000 1999 2000 1999 1998 1997 1996
------- -------- -------- ------- ------- ------- -------
(In thousands of U.S. dollars)
SELECTED BALANCE SHEET
DATA:
Working capital......... $14,426 $ 11,512 $ 13,078 $14,935 $19,544 $ 3,407 $ 2,997
Intangible assets....... 16,140 18,570 17,038 9,392 1,768 3,535 5,303
Total assets............ 77,623 62,966 63,269 46,968 36,202 34,528 30,034
Long-term debt.......... 25,400 29,489 28,747 26,086 31,986 4,407 6,598
Total liabilities....... 65,821 55,417 55,158 42,267 40,000 27,861 24,007
Total shareholders
equity................. 11,802 7,549 8,111 4,701 (3,798) 6,667 6,027
OTHER FINANCIAL DATA:
EBITDA (1).............. 10,747 8,012 10,542 1,457 4,575 7,509 2,809
Cash flow provided by
(used in):
Operating activities... (899) 3,140 3,374 3,635 1,190 (2,574) (752)
Investing activities... (1,410) (14,950) (14,396) 2,156 (1,537) (743) (1,714)
Financing activities... 2,384 11,890 11,645 (5,982) 1,264 3,046 2,568
--------
(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. We believe EBITDA is a widely accepted financial indicator of
a company's historical ability to service and/or incur indebtedness.
However, EBITDA should not be considered as an alternative to net income,
as a measure of operating results or as a measure of liquidity in
accordance with generally accepted accounting principles. Additionally,
EBITDA as defined herein may not be comparable to similarly titled measures
reported by other companies.
25
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data are
presented to illustrate the effects of the merger on the historical financial
position and operating results of Logitech and the historical financial
position and pro forma operating results for Labtec. This pro forma financial
data is derived from the unaudited pro forma combined financial information
included elsewhere in this prospectus.
Year Ended Nine Months Ended
March 31, 2000 Dec. 31, 2000
-------------- -----------------
(In thousands, except per share
data)
PRO FORMA COMBINED STATEMENT OF OPERATIONS
DATA:
Revenues..................................... $712,004 $642,030
Cost of revenues............................. 466,567 418,470
-------- --------
Gross profit................................. 245,437 223,560
-------- --------
Operating expenses:
Marketing and selling...................... 120,753 113,416
Research and development................... 34,009 28,419
General and administrative (1)............. 46,747 36,104
-------- --------
Total operating expenses................. 201,509 177,939
-------- --------
Income from operations....................... 43,928 45,621
Interest and other expense, net.............. (12,208) (5,924)
-------- --------
Net income before income taxes............... 31,720 39,697
Provision for income taxes................... 6,977 8,037
-------- --------
Income before extraordinary loss............. $ 24,743 $ 31,660
======== ========
Income before extraordinary item:
Earnings per share--basic.................. $ 6.07 $ 7.36
Earnings per share--diluted................ $ 5.51 $ 6.58
Income before extraordinary item per ADS:
Earnings per ADS--basic.................... $ 0.61 $ 0.74
Earnings per ADS--diluted.................. $ 0.55 $ 0.66
Shares used in per share calculation--basic.. 4,076 4,303
Shares used in per share calculation--
diluted..................................... 4,488 4,809
OTHER FINANCIAL DATA:
EBITDA....................................... $ 69,765 $ 70,967
Cash flow provided from (used in):
Operating activities....................... 36,465 (23,310)
Investing activities....................... (21,210) (17,333)
Financing activities....................... 6,251 9,292
Dec. 31, 2000
-------------
PRO FORMA COMBINED BALANCE SHEET DATA:
Cash and cash equivalents....................................... $ 16,722
Working capital................................................. 98,956
Intangible assets............................................... 112,327
Total assets.................................................... 577,897
Convertible subordinated notes and other long-term obligations,
excluding current portion...................................... 22,792
Shareholders' equity............................................ 249,707
--------
(1) A proposed FASB Statement of Financial Standards on Business Combinations
would eliminate amortization of goodwill. Pro forma amortization of
goodwill was $8,174,000 and $6,208,000 for the year ended March 31, 2000
and the nine month period ended December 31, 2000, respectively.
26
COMPARATIVE PER SHARE DATA
The following tables present unaudited historical and pro forma per share
data that reflect the completion of the acquisition based upon the historical
financial statements of Logitech and Labtec. You should read this information
in conjunction with our historical financial statements and related notes
contained in the reports and other information that we have filed with the
Securities and Exchange Commission. See "Where You Can Find More Information"
on page 4. You should also read this information in conjunction with the
historical consolidated financial statements, including the related notes, of
Labtec that are included elsewhere in this prospectus, and in conjunction with
the pro forma financial information under the heading "Unaudited Pro Forma
Combined Financial Information" on page 116. You should not rely on the pro
forma information as being indicative of the historical results that we would
have had if the acquisition had occurred before the periods indicated below or
the future results that we will experience after the merger.
Fiscal Year Ended Nine Months Ended
March 31, 2000 December 31, 2000
----------------- -----------------
Per Per
share Per ADS(5) share Per ADS(5)
------ ---------- ------ ----------
LOGITECH HISTORICAL PER SHARE DATA
Basic net income per common share......... $ 7.55 $0.76 $ 8.15 $0.82
Diluted net income per common share....... $ 6.87 $0.69 $ 7.29 $0.73
Book value per common share at period end
(1)...................................... $43.23 $4.32 $51.55 $5.16
LABTEC HISTORICAL PER SHARE DATA
Basic income before extraordinary item per
common share............................. $ 0.32 -- $ 0.91 --
Diluted income before extraordinary item
per common share......................... $ 0.32 -- $ 0.91 --
Book value per common share at period end
(1)...................................... $ 2.02 -- $ 2.94 --
UNAUDITED PRO FORMA COMBINED LOGITECH
Basic before extraordinary item income per
common share (2)......................... $ 6.07 $0.61 $ 7.36 $0.74
Diluted before extraordinary item income
per common share (2)..................... $ 5.51 $0.55 $ 6.58 $0.66
Book value per common share at period end
(3)...................................... -- -- $57.04 $5.70
EQUIVALENT PRO FORMA COMBINED LABTEC (4)
Basic before extraordinary item income per
common share............................. $ 0.15 $0.15 $ 0.18 $0.18
Diluted before extraordinary item income
per common share......................... $ 0.14 $0.14 $ 0.16 $0.16
Book value per common share at period
end...................................... -- -- $ 1.40 $1.40
Notes to Comparative Per Share Data
(1) Book value per share is computed by dividing stockholders' equity by, in
the case of Logitech, the number of registered shares and ADSs, and, in
the case of Labtec, the number of shares of common stock, in both cases
outstanding at March 31, 2000 and December 31, 2000.
(2) Pro forma combined per share Logitech information combines financial
information of Logitech for the year ended March 31, 2000 and the nine
month period ended December 31, 2000 with the financial information of
Labtec for the year ended March 31, 2000 and the nine month period ended
December 31, 2000, respectively. This information also assumes the merger
occurred as of April 1, 1999 and was accounted for using the purchase
method.
As illustrated in the above table, Logitech's pro forma basic and diluted
net income per registered share and ADS would have declined compared to its
historical data principally due to the effects of (i) increasing the
average registered shares and ADSs outstanding in connection with the offer
and the merger and (ii) the assumed incremental interest, goodwill and
intangible asset amortization expense of $7.2 million and $6.2 million, net
of tax, for the twelve month period ended March 31, 2000 and the nine month
period ended December 31, 2000, respectively. These effects would be offset
by incremental net income of $1.9 million and $3.6 million assumed to be
contributed by Labtec on a pro forma basis for the twelve months ended
March 31, 2000 and the nine month period ended December 31, 2000,
respectively.
27
(3) Pro forma combined book value per is computed by dividing pro forma
stockholders' equity at December 31, 2000 by the pro forma number of
registered shares and Logitech ADSs which would have been outstanding had
the acquisition been consummated as of December 31, 2000.
(4) The equivalent pro forma combined Labtec information is calculated by
multiplying the Logitech pro forma combined per share amounts by an
estimated exchange ratio of .2457 per Logitech ADS and .02457 per
registered share. The actual exchange ratio will not be determined until
three trading days prior to the actual expiration of the offer.
(5) Each Logitech ADS represents one-tenth of one Logitech registered share.
28
MARKET PRICE AND DIVIDEND INFORMATION
Logitech ADSs have been traded on the Nasdaq National Market under the
symbol "LOGIY" since March 27, 1997, the date of our first offering of ADSs in
the United States. In Labtec's initial public offering in December 1995, it was
known as Spacetec IMC Corporation and its common stock traded on the Nasdaq
National Market under the symbol "SIMC" from that time until February 1999,
when its name was changed to Labtec Inc. From February 1999 until December
1999, Labtec's common stock traded on the Nasdaq National Market under the
symbol "LABT." Since December 1999, Labtec's common stock has traded on the OTC
Bulletin Board under the symbol "LABT.OB." Prior to the dates described above,
there was no established public trading market in the United States for either
company's capital stock. The following table sets forth for the periods
indicated the quarterly high and low closing sale prices per share of Logitech
ADSs as reported on the Nasdaq National Market and of Labtec common stock as
reported on the OTC Bulletin Board and the Nasdaq National Market. The price
data reflects all applicable share splits.
LOGITECH ADSs LABTEC
------------- -------------
High Low High Low
------ ------ ------ ------
Fiscal Year Ended March 31, 1998:
First Quarter................................. $ 9.50 $ 8.19 $27.38 $12.00
Second Quarter................................ 9.44 7.00 27.75 15.38
Third Quarter................................. 9.38 7.50 23.25 17.25
Fourth Quarter................................ 8.38 6.69 21.38 18.38
Fiscal Year Ended March 31, 1999:
First Quarter................................. 7.88 6.56 21.75 15.38
Second Quarter................................ 7.19 4.63 18.75 9.38
Third Quarter................................. 6.25 4.25 17.63 7.88
Fourth Quarter................................ 7.06 5.63 16.50 10.13
Fiscal Year Ended March 31, 2000:
First Quarter................................. 7.63 6.13 12.00 8.00
Second Quarter................................ 8.50 6.88 8.88 7.50
Third Quarter................................. 15.38 7.94 9.31 4.75
Fourth Quarter................................ 37.50 13.73 8.75 5.75
Fiscal Year Ended March 31, 2001:
First Quarter................................. 36.50 25.38 10.25 6.00
Second Quarter................................ 38.50 26.00 12.00 8.13
Third Quarter................................. 32.13 18.75 8.75 6.22
Fourth Quarter (through February 21, 2001).... 32.06 23.50 17.44 6.22
Recent Share Price
The table below presents the per share closing prices of Logitech ADSs on
the Nasdaq National Market and Labtec common stock on the OTC Bulletin Board
and the pro forma equivalent market value of the $11.00 in cash and fraction of
a Logitech ADS offered for each share of Labtec common stock in the offer as of
the dates specified. February 6, 2001 was the last trading before the day of
the announcement of the merger agreement. February 21, 2001 was the latest
practicable trading day before the printing of this prospectus.
Labtec
Common Stock
Labtec Equivalent
Logitech ADSs Common Stock Value
------------- ------------ ------------
February 6, 2001..................... $31.69 $11.88 $18.79
February 21, 2001.................... 27.50 17.40 17.43
29
The equivalent per share price for Labtec common stock in the above table
was determined by multiplying the closing prices of Logitech ADSs as of the
specified dates by an assumed exchange ratio of .2457, and adding $11.00 in
cash per Labtec share of common stock. However, the exact fraction of a
Logitech ADS to be received by Labtec stockholders who tender their shares in
the offer will be determined as follows:
. If the average closing bid price of Logitech ADSs for the 20 consecutive
trading days ending on the third trading day prior to the expiration date
of the offer is equal to or between $25.64 and $31.34, the exchange ratio
will be determined by dividing $7.00 by this 20-day average price.
. If this 20-day average price is less than $25.64, the exchange ratio will
be .2730 of a Logitech ADS for each share of Labtec common stock.
. If this 20-day average price is more than $31.34, the exchange ratio will
be .2234 of a Logitech ADS for each share of Labtec common stock.
Labtec stockholders are advised to obtain current market quotations for
Logitech ADSs and Labtec common stock. No assurance can be given as to the
market prices of Logitech ADSs or Labtec common stock at any time before the
consummation of the offer or the merger or as to the market price of Logitech
ADSs at any time after the offer or merger. If the market price of a Logitech
ADS declines below $25.64, the value of the total consideration you receive in
exchange for your shares of Labtec common stock will decline, because the
greatest fraction of a Logitech ADS that will be issued, together with $11.00
in cash, in exchange for a Labtec share is .2730.
Dividends
Under Swiss law, a corporation pays dividends upon a vote of its
shareholders. This vote typically follows the recommendation of the
corporation's board of directors. Although we have paid dividends in the past,
our board of directors announced in 1997 its intention not to recommend to
shareholders any payment of cash dividends in the future in order to retain any
future earnings for use in the operation and expansion of our business.
Labtec has never declared or paid cash dividends on its capital stock.
Pursuant to the merger agreement, Labtec has agreed not to pay cash dividends
pending the effective time of the merger, without the written consent of
Logitech.
30
THE COMPANIES
Logitech
We are a leader in the design, manufacture and marketing of human interface
devices for personal computers. These products include corded and cordless
mice and keyboards, trackballs, joysticks, gamepads, steering wheels,
multimedia speakers and internet video cameras.
Over the past 19 years, we have offered PC users a variety of means to
access the world of digital information. Our products provide user-centric
solutions intended to be easy to install and easy to use, and that are
combined with integrated software for seamless compatibility and added
functionality. These products allow users to personalize and enrich their
computing environment, and to easily operate in a variety of applications.
Logitech was founded in Switzerland in 1981, and in 1988 we listed our
shares in an initial public offering in Switzerland. In March 1997, we sold
400,000 registered shares from treasury in a U.S. initial public offering in
the form of 4,000,000 ADSs, and listed the ADSs on the Nasdaq National Market.
We maintain our operational headquarters through our U.S. subsidiary in
Fremont, California, with regional headquarters through local subsidiaries in
Romanel-sur-Morges, Switzerland and Hsinchu, Taiwan. In addition, we have
manufacturing operations in China, with distribution facilities in the United
States, Europe and Asia.
For further information about Logitech, please see the documents
incorporated by reference into this document, as described under "Where You
Can Find More Information" beginning on page 4.
Labtec
Labtec is a leading developer and marketer of high-technology peripheral
products and accessories for computing, communications, and entertainment.
Labtec offers an array of proprietary products, including personal computer
and game console speakers and subwoofers; PC Voice Access(TM) headsets and
accessories, microphones, and telephony products; personal audio headphone and
earphone products; and 3D motion controllers.
Labtec's strategy is to offer an assortment of high-technology products
through multiple channels of distribution. Labtec currently sells to numerous
retailers, master distributors, and original equipment manufacturers. Labtec
serves these multiple channels of distribution on a worldwide basis.
Labtec maintains a leading market position in each of its product lines of
PC speakers, PC Voice Access(TM) products, 3D motion controllers, and computer
storage products, and a second market position for its personal audio product
line. Labtec is establishing its market position in telephony products.
For more information about Labtec see "Certain Information Regarding
Labtec" beginning on page 93.
31
REASONS FOR THE OFFER
Reasons for the Logitech's Board Recommendation; Factors Considered
In approving the merger agreement, the offer, the merger and the other
transactions contemplated by the merger agreement, Logitech's board of
directors considered a number of factors. In its evaluation, the board
considered several potential benefits of the acquisition of Labtec, the most
important of which included the following:
. the acquisition of Labtec would provide an opportunity for Logitech to
increase its revenue and extend its leadership in the computer control
and human interface device industries;
. the acquisition would provide an opportunity for Logitech to expand its
presence in the Internet voice communication applications market more
quickly than Logitech would likely achieve on its own due to the
combination of Logitech's video products with Labtec's voice access and
telephony products;
. the acquisition would allow Logitech to offer a more comprehensive
product line by combining Labtec products with Logitech products, and
thereby expand OEM and retail sales more than Logitech would on its own;
. the acquisition would allow Logitech to leverage its European sales
organization and contacts with the combined company's expanded product
line;
. the acquisition would allow Logitech to penetrate the United States
retail market to a greater degree than Logitech would on its own due to
the combined company's access to Labtec's existing retail relationships
and Labtec's United States-focused sales organization;
. the merger would allow Logitech the opportunity for increased
profitability through cost savings, efficiencies in sales, marketing,
distribution and other operating areas; and
. the acquisition would allow Logitech to obtain talented and highly
skilled employees with proven capabilities.
Logitech's board of directors consulted with senior management, as well as
its legal counsel, independent accountants and financial advisors, in reaching
its decision. In its evaluation of the acquisition, the Logitech board reviewed
several other factors, including, but not limited to, the following:
. historical information concerning Logitech's and Labtec's respective
businesses, financial performance and condition, operations, technology
and management;
. Logitech management's view of the financial condition, results of
operations and businesses of Logitech and Labtec before and after giving
effect to the acquisition and Logitech board's determination of the
acquisition's effect on stockholder value;
. current financial market conditions and historical market prices,
volatility and trading information;
. the consideration Labtec stockholders will receive in the offer or the
merger in light of comparable transactions;
. the belief by Logitech's senior management that the terms of the merger
agreement are reasonable;
. the potential impact of the acquisition on Logitech's and Labtec's
customers and employees; and
. discussions with management, legal and financial advisors as to the
results of their due diligence investigations of Labtec.
The Logitech board also considered the risk factors set forth under "Risk
Factors--Risk Factors Relating to the Offer and the Merger."
32
The foregoing discussion of the information and factors considered by the
Logitech board is not intended to be exhaustive, but includes the material
factors considered by the Logitech board. In view of the variety of factors
considered in connection with its evaluation of the offer and the merger, the
Logitech board did not find it practicable to, and did not quantify or
otherwise assign relative weight to, the specific factors considered in
reaching its determination. In addition, individual directors may have given
differing weights to different factors. After weighing all of the different
factors, our board of directors unanimously approved the merger agreement, the
offer, the merger and the other transactions contemplated by the merger
agreement.
Reasons for the Labtec's Board Recommendation; Factors Considered
In making the determinations and recommendations described below, the Labtec
board of directors considered a number of factors, including, without
limitation, the following:
. the amount and form of consideration to be received by Labtec's
stockholders in the offer and the merger and Labtec's prospects after the
merger;
. Labtec's prospects if it were to remain independent, and the risks and
benefits inherent in remaining independent, including the risk arising
from the increasing investment required to compete in the market for PC
peripherals and the dependence of Labtec on a steadily decreasing number
of large customers;
. the possible alternatives to the offer and the merger (including the
possibility of continuing to operate Labtec as an independent entity),
the range of possible benefits to Labtec's stockholders of such
alternatives and the timing and likelihood of accomplishing the goal of
any of such alternatives;
. information with regard to the financial condition, results of
operations, business and prospects of Labtec, as well as current economic
and market conditions (including current conditions in the industry in
which Labtec competes);
. the historical and recent market prices of the shares of Labtec common
stock and the fact that the offer and the merger will enable the holders
of the shares to realize a premium over the prices at which shares of
Labtec common stock traded prior to the announcement of the merger
agreement;
. the opinion of Goldsmith Agio Helms to the effect that, as of such date,
and based upon and subject to certain matters stated in such opinion, the
merger consideration to be received by holders of shares of Labtec common
stock (other than Logitech and its affiliates) in the offer and the
merger, taken together as a whole and not separately, was fair, from a
financial point of view, to such holders and the presentation made by
Goldsmith Agio Helms to the board relating to the financial analysis
performed by them in connection with such opinion. The full text of
Goldsmith Agio Helms' written opinion, dated February 7, 2001, which sets
forth the assumptions made, matters considered and limitations on the
review undertaken by Goldsmith Agio Helms, is set forth in Annex B to
this prospectus. Goldsmith Agio Helms' opinion is limited to the
fairness, from a financial point of view, of the merger consideration to
be received in the offer and the merger, taken together as a whole and
not separately, by the holders of the shares of Labtec common stock
(other than Logitech and its affiliates) and does not constitute a
recommendation as to whether any stockholder should tender Labtec shares
pursuant to the offer or how such stockholder should vote with respect to
the merger. Holders of the shares are urged to read such opinion
carefully in its entirety;
. the terms of the merger agreement, including the parties'
representations, warranties and covenants and the conditions to their
respective obligations; and
. the high likelihood that the proposed acquisition would be consummated,
in light of the fact that the offer and merger are not subject to any
financing contingencies.
The Labtec board also considered the actual and potential conflicts of
interest described below under the caption "Interests of Certain Persons." The
Labtec board did not assign relative weights to the above factors or determine
that any factor was of particular importance. Rather, the board viewed its
position and
33
recommendations as being based on the totality of the information presented to
and considered by it. In addition, it is possible that different members of the
Labtec board assigned different weights to the various factors described above.
After weighing all the different factors, Labtec's board of directors
unanimously approved the merger agreement, the offer, the merger and the other
transactions contemplated by the merger agreement, and unanimously recommended
that Labtec's stockholders accept the offer and approve and adopt the merger
agreement and the merger.
Opinion of Labtec's Financial Advisor
Labtec engaged Goldsmith Agio Helms to provide it with financial advisory
services and a financial fairness opinion in connection with the offer and the
merger. The Labtec board selected Goldsmith Agio Helms based on Goldsmith Agio
Helms' qualifications, expertise and reputation and its knowledge of the
business and affairs of Labtec. At the meeting of the Labtec board on February
6, 2001, Goldsmith Agio Helms rendered its oral opinion, subsequently confirmed
in writing, that as of February 7, 2001, and based on and subject to the
considerations in its opinion, the consideration to be received by the holders
of shares of Labtec common stock pursuant to the merger agreement is fair from
a financial point of view to those holders.
The full text of Goldsmith Agio Helms' opinion dated February 7, 2001, which
sets forth, among other things, the assumptions made, procedures followed,
matters considered and limitations on the review undertaken by Goldsmith Agio
Helms in rendering its opinion, is attached as Annex B to this prospectus and
incorporated in it by reference. We urge you to read this opinion carefully and
in its entirety. Goldsmith Agio Helms' opinion is directed to the Labtec board
of directors, addresses only the fairness of the consideration to be received
by the holders of shares of Labtec common stock pursuant to the merger
agreement from a financial point of view to those holders and it does not
address any other aspect of the offer or the merger or constitute a
recommendation as to whether holders of shares of Labtec common stock should
tender their shares in the offer or as to how holders of the shares should vote
at any stockholders' meeting held in connection with the merger. This summary
is qualified in its entirety by reference to the full text of the opinion.
In connection with rendering its opinion, Goldsmith Agio Helms, among other
things:
. reviewed the latest draft of the merger agreement;
. analyzed financial and other information that is publicly available
relating to Logitech;
. analyzed certain internal financial and operating data of Labtec that had
been made available to Goldsmith Agio Helms by Labtec;
. visited certain facilities of Labtec and discussed with management of
Labtec the financial condition, operating results, business outlook and
prospects of Labtec;
. discussed with management of Logitech the financial condition, operating
results, business outlook and prospects of Logitech;
. reviewed the financial and other terms of comparable merger and
acquisition transactions;
. reviewed premiums paid in comparable and other merger and acquisition
transactions;
. analyzed the valuations of publicly traded companies that Goldsmith Agio
Helms deemed comparable to Labtec and Logitech;
. performed a discounted cash flow analysis of Labtec based on financial
projections that Labtec's management provided to Goldsmith Agio Helms;
and
. performed such other analyses and considered such other factors as
Goldsmith Agio Helms deemed appropriate.
34
Goldsmith Agio Helms assumed and relied upon, without independent
verification, the accuracy and completeness of the information reviewed by it
for the purposes of its opinion. With respect to the financial projections,
including information relating to strategic, financial and operational benefits
anticipated from the offer and the merger, Goldsmith Agio Helms assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of Labtec
and Logitech. In addition, Goldsmith Agio Helms assumed that the offer and the
merger will be consummated in accordance with the terms set forth in the merger
agreement. Goldsmith Agio Helms assumed that, in connection with the receipt of
all the necessary regulatory approvals for the offer and the merger, no
restrictions will be imposed that would have a material adverse effect on the
contemplated benefits expected to be derived in the offer and the merger.
Goldsmith Agio Helms has not made any independent valuation or appraisal of the
assets or liabilities of Labtec, nor has it been furnished with any appraisals
regarding the assets or liabilities. Goldsmith Agio Helms' opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to it as of February 7, 2001.
Pursuant to the terms of Labtec's engagement of Goldsmith Agio Helms as its
financial advisor, Labtec has agreed to pay Goldsmith Agio Helms an aggregate
financial advisory fee, including expenses, of approximately $1.2 million,
payable upon consummation of the offer. In addition, Labtec has agreed to pay
Goldsmith Agio Helms a fee of $100,000 for its services in connection with
providing its fairness opinion. Goldsmith Agio Helms has not during the past
two years received, or performed other services entitling it to receive, any
other compensation from Labtec. The fee to be paid for provision of the
fairness opinion is not contingent on the consummation of the offer or the
merger. Labtec also has agreed to indemnify Goldsmith Agio Helms and certain
related parties against certain liabilities, including liabilities under the
federal securities laws, arising out of Goldsmith Agio Helms' engagement.
The following is a summary of all the material financial analyses performed
by Goldsmith Agio Helms in connection with its oral opinion and the preparation
of its written opinion.
Discounted Cash Flow Analysis
Goldsmith Agio Helms analyzed financial projections for Labtec, based on
three-year projections previously developed by Labtec's management for 2002-
2004 but adjusted to reflect the updated estimate for fiscal year 2001
revenues. These projections incorporated an average 24% annual revenue growth.
Projections for 2005-2006 were extrapolated by assuming annual revenue growth
of 10% and EBIT margins consistent with 2004. Goldsmith Agio Helms performed a
discounted cash flow analysis of Labtec based on those projections and a
terminal value based on a perpetuity growth range of 3% to 5%. Goldsmith Agio
Helms discounted the unlevered free cash flows of Labtec at 16.8%, representing
an estimated weighted average cost of capital for Labtec. This discount rate
took into account a small cap equity return premium of 2.2% and a beta of 1.29
based on an assumed industry debt to total capitalization ratio of 8.1%. The
present values obtained equate to estimated Labtec enterprise values, which
were then adjusted for Labtec's debt (net of cash), other off-balance sheet
liabilities, and proceeds from the exercise of options, to arrive at an implied
equity value per share. Based on this analysis, Goldsmith Agio Helms calculated
values representing an implied equity value per share of Labtec common stock
ranging from $14.76 to $17.71.
Comparable Public Company Analysis
Goldsmith Agio Helms reviewed the current valuation of publicly traded
companies in the computer audio peripherals, computer interface devices, and
telephony headset devices sectors, which are considered to be comparable to
Labtec. Goldsmith Agio Helms reviewed measures of valuation including
historical and projected price to earnings ratios, and historical and projected
enterprise value to EBITDA and EBIT before amortization (EBITA) ratios. The
group of selected computer peripheral and telephony companies included Boston
Acoustics, Inc., Creative Technologies, Ltd., Harman International Industries,
Inc., Logitech, and Plantronics, Inc. While none of these companies has the
exact products, strategy, markets, revenue size, or profitability as Labtec,
these companies were selected because they participate in the same industries
as Labtec
35
and are subject to the same macroeconomic forces, such as customer demand,
material supply, regulatory constraints, technological change, and barriers to
entry. Goldsmith Agio Helms observed median trailing twelve month multiples in
the comparable public companies of 0.9 times sales, 12.6 times EBITA, 8.0 times
EBITDA, and 15.6 times net income. Applying these multiples to Labtec's
trailing twelve-month performance resulted in implied equity share prices of
$9.50, $25.85, $15.37, and $3.34 respectively. The mean and median per share
equity values were $13.51 and $12.43.
Comparative Transaction Analysis
Using publicly available information, Goldsmith Agio Helms reviewed recent
historical transactions that were considered to be comparable to this
transaction. While the mergers and acquisitions marketplace is quite active,
very few comparable transactions exist in which target company and purchase
price information is disclosed and available. The following sixteen
transactions were selected because they involved the sale of companies that
participate in the computer peripherals or telephony device industries
(announcement dates in parentheses):
. SBS Technologies acquisition of Bit-3 Computer Corp. (October 1996)
. Greenwich Street Capital Partners acquisition of Mark IV Industries audio
business (December 1996)
. Continental Circuits Corp. acquisition of Hadco Corporation (February
1998)
. LSI Logic Corporation acquisition of Symbios (June 1998)
. Gretag Imaging Group acquisition of Raster Graphics (October 1998)
. 3Dfx Interactive acquisition of STB Systems (December 1998)
. Pinnacle Systems acquisition of Truevision (December 1998)
. Investor group acquisition of Emerson Radio Corp. (December 1998)
. KE Acquisition Corp. acquisition of Kentek Information Systems (May 1999)
. Intel Corp. acquisition of Dialogic Corp. (June 1999)
. PSC acquisition of Percon (November 1999)
. Mackie Designs acquisition of Eastern Acoustic Works (February 2000)
. Welch Allyn acquisition of PSC (June 2000)
. Electronics for Imaging acquisition of Splash Technology Holdings (August
2000)
. GN Netcom acquisition of Hello Direct (June 2000)
. Solectron Corp. acquisition of Centennial Technologies (January 2001)
Based on mean and median valuation multiples for revenues and EBITDA
generated from these fifteen transactions, the implied equity valuation range
for Labtec was $14.12 to $19.54 per share.
Transaction Premium Analysis
Goldsmith Agio Helms reviewed historical transaction premiums paid on
acquisitions of public companies valued between $100 million and $500 million
since 1998, and Labtec's closing price as of January 30, 2001 of $9.875. The
implied valuation range of Labtec is $13.06 to $14.73 per share based on the
median 1-day, 1-week, and 4-week stock premiums. Goldsmith Agio Helms noted
that the purchase price per share of Labtec common stock of $11.00 in cash and
$7.00 in Logitech ADSs, subject to adjustment in the circumstances provided in
the merger agreement, equated to $18.00 in the aggregate based on the 20-day
average closing price of Logitech ADSs of $28.49 as of Tuesday, February 6,
2001 (the last trading day prior to the day of the
36
announcement of the merger agreement). This $18.00 value represents a 37%
premium to the closing price of Labtec common stock of $13.13 on February 6,
2001, an 82% premium to the closing price of Labtec common stock of $9.88 one
week prior to February 6, 2001, and a 157% premium to the closing price of
Labtec common stock of $7.00 four weeks prior to February 6, 2001.
Common Stock Trading History
Goldsmith Agio Helms reviewed the historical trading ranges for the common
stock of Labtec and the Logitech ADSs over a one-year and three-year period
ending January 30, 2001. The one-year high and low of Labtec common stock was
$12.00 on July 14, 2000 and $6.00 on May 23, 2000, and the weighted average
price for the one-year period was $8.23. The one-year high and low of Logitech
ADSs was $38.50 on July 6, 2000 and $18.75 on December 20, 2000, and the
weighted average price for the one-year period was $29.59.
37
BACKGROUND TO THE OFFER
As part of our long-term strategy to increase shareholder value and extend
our leadership in the computer control and human interface device industries,
we have, from time to time, considered various strategic transactions with
other companies.
Similarly, from time to time since March 1999, Labtec's management and board
of directors have reviewed with their legal and financial advisors various
strategic alternatives, including remaining an independent public company, the
possibility of acquisitions or mergers with other companies and other
transactions.
In early 2000, several members of Labtec's board of directors discussed the
possibility of more aggressively exploring those strategic alternatives in
order to improve the return for Labtec's stockholders.
On September 9, 2000, Labtec retained Goldsmith Agio Helms as its financial
advisor to analyze and consider various financial and strategic alternatives
available to Labtec, including a possible sale.
In September and October 2000, Goldsmith Agio Helms worked with Labtec's
management to prepare a confidential memorandum that described Labtec and its
markets and, without disclosing Labtec's name, also contacted over 500
potential strategic and financial partners, including Logitech, to determine
their interest in acquiring Labtec. Eighty of the potential buyers contacted
agreed to sign confidentiality agreements that entitled them to receive
additional information about Labtec. We signed a confidentiality agreement on
October 20, 2000.
In November 2000, Goldsmith Agio Helms distributed the confidential
memorandum on behalf of Labtec, and requested interested parties to submit a
non-binding indication of value for Labtec. Seven parties submitted an
indication of interest, including Logitech.
During December 2000, we retained the investment banking firm of SG Cowen
Securities Corporation as financial advisor and the law firm of Wilson Sonsini
Goodrich & Rosati to advise on the transaction.
During December 2000 and January 2001, five prospective buyers, including
Logitech, reviewed Labtec's operations and met with Labtec's management and
representatives of Goldsmith Agio Helms at Labtec's facilities in Vancouver,
Washington.
In late December 2000, Goldsmith Agio Helms distributed supplemental due
diligence information packages to the five prospective buyers, including
Logitech, and asked them to submit final bids by January 22, 2001.
From January 4, 2001 through January 22, 2001, we and the other prospective
buyers continued due diligence, including site visits to Labtec's facilities,
meetings with Labtec management, and meetings with Labtec's auditors.
On January 17, 2001, our board of directors held a regularly scheduled
meeting at which members of senior management and our financial and legal
advisors provided the board with preliminary advice on the financial and legal
issues presented by the transaction. The board of directors authorized senior
management to submit a proposal to acquire Labtec.
On January 22, 2001, Goldsmith Agio Helms received three proposals. We
submitted a bid of $10.25 per share in cash for all of the issued and
outstanding shares of Labtec common stock. Another buyer submitted an all-cash
bid that was significantly higher. A third buyer proposed to acquire only
certain audio operations from Labtec.
38
On January 23, 2001, Goldsmith Agio Helms received a proposal that was
slightly higher than the highest bid received the previous day. Goldsmith Agio
Helms, at the direction of Marc J. Leder and Rodger R. Krouse, the co-chairmen
of Labtec's board of directors, then informed us that our proposal did not
justify further discussion. Goldsmith Agio Helms continued discussions with
other parties regarding valuation and structure.
Later on January 23, 2001, we contacted Goldsmith Agio Helms with SG Cowen
to express interest in revising our bid if Labtec would be willing to receive
Logitech stock as part of the consideration offered to Labtec's stockholders.
Based on discussions with Labtec, Goldsmith Agio Helms told us that Labtec
would entertain stock as a component of the consideration.
On January 24, 2001, we submitted a revised proposal at approximately $18
per share, which included $11 in cash per share and .263 of a Logitech ADS per
share (representing $7 per share based on the 10-day trailing average closing
price of Logitech ADSs at the time of the proposal). We based our revised
proposal on the assumption that we would not assume certain liabilities.
Between January 23 and January 25, 2001, Goldsmith Agio Helms continued to
have discussions with several parties regarding a potential acquisition of
Labtec.
On January 25, 2001, the Labtec board held a special meeting to review the
various proposals and at which Labtec's legal counsel, Jenkens & Gilchrist
Parker Chapin, and Goldsmith Agio Helms provided analyses of the proposals that
had been received to date. The Labtec board did not approve any of the
proposals but authorized further negotiations with two bidders, Logitech and
the party that had made the highest all-cash proposal. The Labtec board
authorized a counter-proposal to Logitech at $21 per share (in cash and stock),
and assumption of all liabilities. The Labtec board authorized Messrs. Wick,
Leder and Krouse to continue negotiations and to select a party with whom to
negotiate exclusively if it became clear that the party's bid was superior to
any of the alternatives.
Thereafter, Messrs. Leder and Krouse left the meeting and the rest of
Labtec's board discussed terminating the management agreement dated as of
October 7, 1997 between Labtec Corporation (a corporation that became Labtec's
wholly-owned subsidiary in February 1999) and Sun Multimedia Advisors. Sun
Multimedia Advisors is owned by Messrs. Leder and Krouse and is the general
partner of Sun Multimedia Partners, L.P., the beneficial owner of approximately
57% of the shares of Labtec common stock. The Labtec board was advised that
Labtec owed Sun Multimedia Advisors an aggregate of $3.375 million in
management fees under the approximately seven years remaining under the
management agreement. The Labtec board also discussed the advisory fees payable
to Sun Multimedia Advisors under the management agreement in connection with
the merger and acquisition activities of Labtec and the role that Sun
Multimedia Advisors played in providing strategic guidance to Labtec, in
helping to analyze various alternatives for Labtec over a period of time, in
managing the sale of Labtec to Logitech and in obtaining a more favorable
purchase price for the Labtec stockholders than was initially discussed.
Subject to completion of a satisfactory transaction, the Labtec board
determined to have paid to Sun Multimedia Advisors an aggregate fee of $4.1
million, which the Labtec board believed represented the present value of the
remaining management fees due under the management agreement plus the amount of
an advisory fee for the services rendered by Sun Multimedia Advisors in
connection with, among other things, the proposed transaction. The Labtec board
was advised that the fee to be paid by Labtec to Sun Multimedia Advisors was
within the range of fees paid to advisors of acquired companies in comparable
transactions.
On January 26, 2001, Goldsmith Agio Helms spoke with us to make a specific
counter proposal that would be acceptable to Labtec. Goldsmith Agio Helms
proposed $21 per share, and assumption of all liabilities.
On January 27, 2001, SG Cowen on our behalf called Goldsmith Agio Helms with
our response, which was $17.84 per share and assumption of all liabilities,
including off-balance sheet contingent liabilities.
Negotiations continued through January 30, 2001, when we proposed to pay $18
per share ($11 cash and $7 stock) . On the evening of January 30, 2001, Messrs.
Leder and Krouse and Clarence E. Terry, also a
39
director of Labtec, reviewed the final offers of both Logitech and the party
that had submitted the highest all-cash bid. Messrs. Leder, Krouse and Terry
believed that the total value of the consideration offered to Labtec's
stockholders by Logitech was superior.
On February 1, 2001, representatives of Labtec and Logitech discussed the
timing of a possible transaction.
During the period from February 2, 2001 through February 6, 2001,
representatives of Logitech and Labtec and their respective counsels negotiated
specific terms and provisions of the merger agreement, including the conditions
to closing of the offer, the interim covenants, the circumstances under which a
break-up fee would be payable, the non-solicitation provisions, the efforts
required to seek regulatory approvals and the circumstances in which the
parties could terminate the merger agreement.
On February 6, 2001, our board of directors met. After discussions, which
included updates regarding the financial and legal aspects of the proposed
transaction from members of senior management and representatives of our legal
and financial advisors, our board of directors unanimously approved the merger
agreement.
Also on February 6, 2001, Labtec held a special meeting of its board of
directors. After discussion, which included review of all contacts between
Goldsmith Agio Helms and prospective bidders since the meeting on January 25,
2001, updates regarding the financial and legal aspects of the proposed
transaction from members of Labtec's management and from Jenkens & Gilchrist
Parker Chapin, Goldsmith Agio Helms delivered its oral opinion to the effect
that, as of that date, the consideration to be received by holders of shares of
Labtec common stock pursuant to the merger agreement was fair from a financial
point of view to those holders, and Labtec's board of directors unanimously
approved the merger agreement and the transactions contemplated thereby
(including the offer and the merger) in all respects and recommended that
Labtec's stockholders accept the offer and approve and adopt the merger
agreement and the merger.
Thereafter, Messrs. Leder and Krouse left the meeting and the rest of the
Labtec board discussed the fees to be paid to Sun Multimedia Advisors in
connection with the termination of the management agreement and in connection
with the services rendered by Sun Multimedia Advisors in connection with, among
other things, the sale of Labtec. The Labtec board then unanimously approved
the payment to Sun Multimedia Advisors of the $4.1 million fee discussed above.
On February 7, 2001, Goldsmith Agio Helms delivered its written opinion to
the effect that as of that date, the consideration to be received by holders of
Labtec shares, was fair from a financial point of view to those holders, Labtec
and Logitech executed the merger agreement and Logitech issued a press release
announcing the transaction.
40
THE OFFER
Basic Terms
We are offering to exchange (1) $11.00 in cash and (2) a fraction of a
Logitech ADS, for each outstanding share of Labtec common stock that is validly
tendered and not properly withdrawn, upon the terms and subject to the
conditions set forth in this prospectus and in the related letter of
transmittal.
Exchange Ratio. The fraction of a Logitech ADS into which, together with
$11.00 in cash, each share of Labtec common stock will be exchanged will be
determined as follows:
. If the average closing bid price of Logitech ADSs for the 20 consecutive
trading days ending on the third trading day prior to the expiration date
of the offer is equal to or between $25.64 and $31.34, the exchange ratio
will be determined by dividing $7.00 by this 20-day average price.
. If this 20-day average price is less than $25.64, the exchange ratio will
be .2730 of a Logitech ADS for each share of Labtec common stock.
. If this 20-day average price is more than $31.34, the exchange ratio will
be .2234 of a Logitech ADS for each share of Labtec common stock.
We will announce the final exchange ratio by issuing a press release and
filing that press release with the SEC no later than two business days before
the offer expires.
The method for calculating the exchange ratio was determined by negotiation
between us and Labtec. The method was based on the average closing bid price of
Logitech ADSs for the 20 consecutive trading days ending on February 6, 2001,
the last trading day before the day of the announcement of the merger
agreement. This 20-day average was $28.49. The minimum and maximum exchange
ratios of .2234 and .2730 of a Logitech ADS for each share of Labtec common
stock represent $7.00 divided by 110% and 90%, respectively, of $28.49.
Illustrative Table of Exchange Ratios and Value of Offer/Merger
Consideration. The columns in the following table present:
. illustrative values of the average price of Logitech ADSs with a range of
$22.00 to $34.00 per share,
. the exchange ratio illustrating the number of Logitech ADSs that would be
issued for one share of Labtec common stock at each of the average prices
of Logitech ADSs presented in the table, and
. illustrative values of the total consideration that would be issued in
connection with the offer and the merger for one share of Labtec common
stock.
Value of Offer/Merger Consideration
------------------------------------------
20-day Average Price of
Logitech ADSs Exchange Ratio Value of ADSs Cash Total
----------------------- -------------- ------------- ------ ------
$22.00.................... 0.2730 $6.01 $11.00 $17.01
24.00.................... 0.2730 6.55 11.00 17.55
26.00.................... 0.2692 7.00 11.00 18.00
28.00.................... 0.2500 7.00 11.00 18.00
30.00.................... 0.2333 7.00 11.00 18.00
32.00.................... 0.2234 7.15 11.00 18.15
34.00.................... 0.2234 7.59 11.00 18.59
The values of Logitech ADSs in the table above are illustrative only and do
not represent the actual amounts per share of Labtec common stock that might be
realized by any Labtec stockholder on or after consummation of the offer or the
merger. The amount any Labtec stockholder will actually realize upon resale in
the market of Logitech ADSs received by the stockholder in the offer or the
merger will depend upon the market price of Logitech ADSs at the time of resale
by the stockholder, which will fluctuate depending upon any number of reasons,
including those specific to Logitech and those that influence the trading
prices of equity securities generally.
41
You will not receive any fractional Logitech ADSs. Instead, you will receive
cash in an amount equal to the value of a Logitech ADS used to calculate the
exchange ratio for any fractional shares you would otherwise have been entitled
to receive as described below.
The expiration date shall refer to 12:00 midnight, New York City time, on
March 22, 2001, unless we extend the period of time for which the offer is
open, in which case the term expiration date means the latest time and date on
which the offer, as so extended, expires.
Transfer Charges. If you are the record owner of your shares and you tender
your shares directly to the Exchange Agent, you will not incur any brokerage
commissions. If you own your shares through a broker or other nominee, and your
broker tenders the shares on your behalf, your broker may charge you a fee for
doing so. You should consult your broker or nominee to determine whether any
charges will apply. Any transfer taxes on the exchange of Labtec common stock
pursuant to the offer that are imposed on the acquiror of the Labtec stock will
be paid by us or on our behalf. Any transfer taxes on the exchange of shares of
Labtec common stock pursuant to the offer that are imposed on the transferor of
the Labtec shares will be paid by you.
Merger. We are making this offer in order to acquire control and ultimately
100% of the stock of Labtec. We intend as soon as possible after completion of
the offer to merge Thunder Acquisition Corp., our indirect wholly-owned
subsidiary, with and into Labtec. At the effective time of the merger, each
share of Labtec common stock which has not been exchanged or accepted for
exchange in the offer would be converted into the right to receive the same
amount of cash and the same number of Logitech ADSs as is paid in the offer.
Conditions to the Offer. Our obligation to exchange cash and Logitech ADSs
for Labtec shares pursuant to the offer is subject to several conditions
referred to below under "Conditions of the Offer," including the minimum tender
condition, the regulatory clearance condition and other conditions that are
discussed below.
Timing
Our offer is scheduled to expire at 12:00 midnight, New York City time, on
March 22, 2001, but we are obligated, with some exceptions, to extend our offer
from time to time as necessary until the earlier of the date all the conditions
to the offer have been satisfied or waived or July 15, 2001. For more
information, you should read the discussion under the caption "Extension,
Termination and Amendment."
Extension, Termination and Amendment
We expressly reserve the right, in our sole discretion (subject to the
provisions of the merger agreement), at any time or from time to time, to
extend the period of time during which our offer remains open, and we can do so
by giving oral or written notice of the extension to the exchange agent. If we
decide to so extend our offer, we will make an announcement to that effect no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date. Subject to the provisions of the merger
agreement, we are not making any assurance that we will exercise our right to
extend our offer, although the merger agreement, subject to exceptions,
currently obligates us to do so until the earlier of the date on which all
conditions to the offer have been satisfied or waived and July 15, 2001. During
an extension, all Labtec shares previously tendered and not properly withdrawn
will remain subject to the offer, subject to your right to withdraw your Labtec
shares. You should read the discussion under the caption "Withdrawal Rights"
for more details.
Subject to the SEC's applicable rules and regulations and the terms of the
merger agreement, we also reserve the right, in our sole discretion, at any
time or from time to time, (1) to delay our acceptance for exchange or our
exchange of any shares of Labtec common stock pursuant to our offer, regardless
of whether we previously accepted shares of Labtec common stock for exchange,
(2) on or after July 15, 2001, to terminate our offer and not accept for
exchange or exchange any shares of Labtec common stock not previously accepted
for exchange or exchanged, upon the failure of any of the conditions of the
offer to be satisfied; provided that our failure to fulfill our obligations
under the merger agreement is not the cause of the failure to satisfy any
condition of the offer on or before July 15, 2001, and (3) to waive any
condition, other than the
42
minimum condition, or otherwise to amend the offer in any respect, provided
that we will not (a) make any change in the form of consideration to be paid,
(b) decrease the consideration payable in the offer, (c) reduce the maximum
number of shares of Labtec common stock to be purchased in the offer, (d)
impose conditions to the offer in addition to those set forth in the merger
agreement, or (e) make any other change that is adverse to the holders of
Labtec common stock. However, each condition to the offer, other than those
involving the receipt of necessary governmental approvals, must be satisfied or
waived prior to the expiration date.
We intend to request effectiveness of the registration statement filed with
the SEC at least five business days before the initial expiration date of the
offer, which would mean on or before March 15, 2001. If the registration
statement has not been declared effective at the initial expiration of the
offer, we intend to extend the offer and announce the extension via the PR
Newswire no later than 9:00 a.m., New York City time, on March 23, 2001.
We will make a public announcement of any extension, termination, amendment
or delay as promptly as practicable. In the case of an extension, any
announcement will be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date. Subject to
applicable law, including Rules 14d-4(d) and 14d-6(c) 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 sent to
stockholders in a manner reasonably designed to inform stockholders of the
change, and without limiting the manner in which we may choose to make any
public announcement, we assume no obligation to publish, advertise or otherwise
communicate any public announcement other than by making a release via the PR
Newswire.
If we make a material change in the terms of our offer or the information
concerning the offer, or if we waive a material condition of the offer, we will
extend the offer to the extent required under the Exchange Act. If, prior to
the expiration date, we change the percentage of Labtec shares being sought or
the consideration offered to you, that change will apply to all holders whose
Labtec shares are accepted for exchange pursuant to our offer. If at the time
notice of that change is first published, sent or given to you, the offer is
scheduled to expire at any time earlier than the 10th business day from and
including the date that the notice is first so published, sent or given, we
will extend the offer until the expiration of that 10 business day period. For
purposes of our offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
We may, although we do not currently intend to, elect to provide a
subsequent offering period of three to 20 business days after the acceptance of
Labtec shares in the offer if the requirements under the Exchange Act have been
met. You will not have the right to withdraw Labtec shares that you tender in
the subsequent offering period, if any. If we elect to provide a subsequent
offering period, we will issue a press release via the PR Newswire announcing
the subsequent offering period no later than 9:00 a.m., New York City time, on
the next business day after the expiration date of the initial offering period.
Exchange of Labtec Shares; Delivery of Consideration
Upon the terms and subject to the conditions of our offer including, if the
offer is extended or amended, the terms and conditions of the extension or
amendment, we will accept for exchange, and will exchange, Labtec shares
validly tendered and not properly withdrawn as promptly as practicable after
the expiration date and promptly after they are tendered during any subsequent
offering period. In addition, subject to applicable rules of the SEC, we
expressly reserve the right to delay acceptance for exchange or the exchange of
Labtec shares in order to comply with any applicable law. In all cases,
exchange of Labtec shares tendered and accepted for exchange pursuant to the
offer will be made only after timely receipt by the exchange agent of
certificates for those Labtec shares (or a confirmation of a book-entry
transfer of those Labtec shares in the exchange agent's account at The
Depository Trust Company, which we refer to as the "DTC"), a properly completed
and duly executed letter of transmittal or a manually signed facsimile of that
document and any other required documents.
For purposes of the offer, we will be deemed to have accepted for exchange
Labtec shares validly tendered and not properly withdrawn as, if and when we
notify the exchange agent of our acceptance of the tenders of
43
those Labtec shares pursuant to the offer. The exchange agent will deliver
Logitech ADSs and the cash component of the consideration (and cash instead of
any fractional shares of Logitech ADSs) in exchange for Labtec shares pursuant
to the offer as soon as practicable after receipt of our notice. The exchange
agent will act as agent for Logitech for the purpose of receiving this
consideration and transmitting the stock and cash to you. You will not receive
any interest on any cash that we pay you, even if there is a delay in making
the exchange.
If we do not accept any tendered Labtec shares for exchange pursuant to the
terms and conditions of the offer for any reason, or if certificates are
submitted for more Labtec shares than are tendered, we will return certificates
for the unexchanged Labtec shares to the tendering stockholder or, in the case
of Labtec shares tendered by book-entry transfer of unexchanged Labtec shares
into the exchange agent's account at DTC pursuant to the procedures set forth
below under the discussion entitled "Procedure for Tendering," those Labtec
shares will be credited to an account maintained within DTC, as soon as
practicable following expiration or termination of the offer.
Fractional Shares
We will not authorize issuance of certificates representing fractional
Logitech ADSs pursuant to the offer. Instead, you will receive cash in an
amount equal to the value of a Logitech ADS used to calculate the exchange
ratio for any fractional shares you would otherwise have been entitled to
receive.
Withdrawal Rights
Your tender of Labtec shares pursuant to the offer is irrevocable, except
that, other than during a subsequent offering period, Labtec shares tendered
pursuant to the offer may be withdrawn at any time prior to the expiration
date, and, unless we previously accepted them for exchange pursuant to the
offer, may also be withdrawn at any time after April 23, 2001. If we elect to
provide a subsequent offering period under Exchange Act Rule 14d-11, you will
not have the right to withdraw Labtec shares that you tender in the subsequent
offering period.
For your withdrawal to be effective, the exchange agent must receive from
you a written, telex or facsimile transmission notice of withdrawal at one of
its addresses set forth on the back cover of this prospectus. Your notice must
include your name, address, social security number, the certificate number(s)
and the number of Labtec shares to be withdrawn as well as the name of the
registered holder, if it is different from that of the person who tendered
those Labtec shares.
A financial institution must guarantee all signatures on the notice of
withdrawal unless those Labtec shares have been tendered for the account of any
eligible institution. Most banks, savings and loan associations and brokerage
houses are able to provide these signature guarantees for you. The financial
institution must be a participant in the Securities Transfer Agents Medallion
Program, or an "eligible institution." If Labtec shares have been tendered
pursuant to the procedures for book-entry tender discussed under the caption
entitled "Procedure for Tendering," any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn Labtec
shares and must otherwise comply with DTC's procedures. If certificates have
been delivered or otherwise identified to the exchange agent, the name of the
registered holder and the serial numbers of the particular certificates
evidencing the Labtec shares withdrawn must also be furnished to the exchange
agent, as stated above, prior to the physical release of the certificates. We
will decide all questions as to the form and validity (including time of
receipt) of any notice of withdrawal, in our sole discretion, and our decision
shall be final and binding.
Neither we, the exchange agent, the information agent nor any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or will incur any liability for failure to give any
notification. Any Labtec shares properly withdrawn will be deemed not to have
been validly tendered for purposes of our offer. However, you may retender
withdrawn Labtec shares by following one of the procedures discussed under the
captions entitled "Procedure for Tendering" or "Guaranteed Delivery" at any
time prior to the expiration date.
44
Procedure for Tendering Shares
For you to validly tender shares of Labtec common stock pursuant to the
offer:
. you must properly complete and sign a letter of transmittal (or manually
executed facsimile of that document), and include any required signature
guarantees, or an agent's message which is explained below, if you
tendered through a book-entry transfer, and any other required documents,
. the exchange agent must have received all of these documents at one of
its addresses set forth on the back cover of this prospectus, and
. the exchange agent must have received your certificates for tendered
shares of Labtec common stock at one of its addresses set forth on the
back cover of this prospectus, or those shares of Labtec common stock
must be tendered pursuant to the procedures for book-entry tender set
forth below (and a confirmation of receipt of the tender received by the
exchange agent (we refer to this confirmation below as a "book-entry
confirmation"), or if you cannot comply with either of the two preceding
delivery procedures described in this bullet, you must comply with the
guaranteed delivery procedures set forth below.
All of these procedures must be completed by the expiration date.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the participant in DTC tendering the Labtec shares which are the subject of the
book-entry confirmation, that the participant has received and agrees to be
bound by the terms of the letter of transmittal and that we may enforce that
agreement against the participant.
The exchange agent will establish accounts with respect to the Labtec shares
at DTC for purposes of the offer within two business days after the date of
this prospectus, and any financial institution that is a participant in DTC may
make book-entry delivery of the Labtec shares by causing DTC to transfer
tendered Labtec shares into the exchange agent's account in accordance with
DTC's procedure for the transfer. However, although delivery of Labtec shares
may be effected through book-entry at DTC, the letter of transmittal (or a
manually signed facsimile thereof), with any required signature guarantees, or
an agent's message in connection with a book-entry transfer, and any other
required documents, must, in any case, be transmitted to and received by the
exchange agent at one or more of its addresses set forth on the back cover of
this prospectus prior to the expiration date, or the guaranteed delivery
procedures described below must be followed.
Signatures on all letters of transmittal must be guaranteed by an eligible
institution, except in cases in which Labtec shares are tendered either by a
registered holder of Labtec shares who has not completed the box entitled
"Special Issuance Instructions" on the letter of transmittal or for the account
of an eligible institution.
If the certificates for Labtec shares are registered in the name of a person
other than the person who signs the letter of transmittal, or if certificates
for unexchanged Labtec shares are to be issued to a person other than the
registered holder(s), the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered owner or owners appear on the certificates, with the
signature(s) on the certificates or stock powers guaranteed in the manner we
have described above.
The method of delivery of Labtec share certificates and all other required
documents, including delivery through DTC, is at your option and risk, and the
delivery will be deemed made only when actually received by the exchange agent.
If delivery is by mail, we recommend registered mail with return receipt
requested, properly insured. In all cases, you should allow sufficient time to
ensure timely delivery.
To prevent backup federal income tax withholding with respect to cash
received pursuant to our offer, you must provide the exchange agent with your
correct taxpayer identification number and certify whether you are subject to
withholding of federal income tax by completing the substitute form W-9
45
included in the letter of transmittal. Some shareholders (including, among
others, all corporations and some foreign individuals) are not subject to
these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, the shareholder must submit a
Form W-8BEN or other Form W-8, signed under penalties of perjury, attesting to
that individual's exempt status.
Guaranteed Delivery
If you wish to tender Labtec shares pursuant to our offer and your
certificates are not immediately available or you cannot deliver the
certificates and all other required documents to the exchange agent prior to
the expiration date or cannot complete the procedure for book-entry transfer
on a timely basis, your Labtec shares may nevertheless be tendered, so long as
all of the following conditions are satisfied:
. You make your tender by or through an eligible institution;
. The enclosed notice of guaranteed delivery, properly completed and duly
executed, substantially in the form enclosed with this prospectus, is
received by the exchange agent as provided below on or prior to the
expiration date; and
. The certificates for all tendered Labtec shares (or a confirmation of a
book-entry transfer of tendered securities into the exchange agent's
account at DTC as described above), in proper form for transfer, together
with a properly completed and duly executed letter of transmittal (or a
manually signed facsimile thereof), with any required signature
guarantees (or, in the case of a book-entry transfer, an agent's message)
and all other documents required by the letter of transmittal are
received by the exchange agent within three Nasdaq national market
trading days after the date of execution of the notice of guaranteed
delivery.
You may deliver the notice of guaranteed delivery by hand or transmit it by
facsimile transmission or mail to the exchange agent and you must include a
signature guarantee by an eligible institution in the form set forth in that
notice.
In all cases, we will exchange Labtec shares tendered and accepted for
exchange pursuant to our offer only after timely receipt by the exchange agent
of certificates for Labtec shares (or timely confirmation of a book-entry
transfer of tendered securities into the exchange agent's account at DTC as
described above), properly completed and duly executed letter(s) of
transmittal (or a manually signed facsimile(s) thereof), or an agent's message
in connection with a book-entry transfer, and any other required documents.
The tender of Labtec shares pursuant to any of the procedures described
above will constitute a binding agreement between us and you upon the terms
and subject to the conditions of the offer.
Purpose of the Offer; The Merger
Purpose. We are making this offer in order to acquire control and
ultimately 100% of the stock of Labtec.
The Merger. We intend, promptly after completion of the offer, to seek to
merge Purchaser, our indirect wholly owned subsidiary and the purchaser in the
offer, with and into Labtec. The purpose of the merger is to acquire all
shares of Labtec common stock not tendered and exchanged pursuant to the
offer. As a result, Labtec will become an indirect wholly owned subsidiary of
Logitech. Each share of Labtec common stock which has not been exchanged or
accepted for exchange in the offer, other than shares owned by us and shares
held by Labtec's public stockholders, if any, who are entitled to and who
properly exercise their dissenters' rights under the Massachusetts Business
Corporation Law, as described below under "--Appraisal Rights," would be
converted in the merger into the same amount of cash and the same number of
Logitech ADSs as is paid in the offer.
46
Approval of the Merger. If at the end of the offer we have received between
67% and 90% of the outstanding shares of Labtec common stock, we will effect a
long-form merger as permitted under Massachusetts law, which would require
notice to and approval by Labtec stockholders. If at the end of the offer,
however, we have received 90% or more of the outstanding shares of Labtec
common stock, we will effect a short-form merger as permitted under
Massachusetts law, which would not require advance notice to or approval by
Labtec stockholders.
Appointment of Attorneys-in-Fact and Proxies. By executing a letter of
transmittal as set forth above, you will irrevocably appoint our designees as
your attorneys-in-fact and proxies, each with full power of substitution, to
the full extent of your rights with respect to your Labtec shares tendered and
accepted for exchange by us and with respect to any and all other Labtec shares
and other securities (other than the Logitech ADSs) issued or issuable in
respect of the Labtec shares on or after the date of execution of the letter of
transmittal. That appointment is effective, and voting rights will be affected,
when and only to the extent that we deposit the cash and Logitech ADSs for
Labtec shares that you have tendered with the exchange agent. All of these
proxies will be considered coupled with an interest in the tendered Labtec
shares and therefore will not be revocable. Upon the effectiveness of the
appointment, all prior proxies that you have given will be revoked, and you may
not give any subsequent proxies (and, if given, they will not be deemed
effective). Our designees will, with respect to the Labtec shares for which the
appointment is effective, be empowered, among other things, to exercise all of
your voting and other rights as they, in their sole discretion, deem proper at
any annual, special or adjourned meeting of Labtec's stockholders or otherwise.
We reserve the right to require that, in order for Labtec shares to be deemed
validly tendered, immediately upon our exchange of those Labtec shares, we must
be able to exercise full voting rights with respect to the tendered Labtec
shares.
We will determine questions as to the validity, form, eligibility, including
time of receipt, and acceptance for exchange of any tender of Labtec shares, in
our sole discretion, and our determination shall be final and binding. We
reserve the absolute right to reject any and all tenders of Labtec shares that
we determine are not in proper form or the acceptance of or exchange for which
may, in the opinion of our counsel, be unlawful. We also reserve the absolute
right to waive any of the conditions of our offer, other than the minimum
condition, or any defect or irregularity in the tender of any Labtec shares. No
tender of those Labtec shares will be deemed to have been validly made until
all defects and irregularities in tenders of those Labtec shares have been
cured or waived. Neither we, the exchange agent, the information agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any Labtec shares or will incur any liability
for failure to give notification. Our interpretation of the terms and
conditions of our offer (including the letter of transmittal and instructions
thereto) will be final and binding.
Appraisal Rights
Under the Massachusetts Business Corporation Law, or MBCL, stockholders of
Labtec who tender their shares of Labtec common stock in the offer may not
exercise appraisal rights. If we complete the merger, then stockholders of
Labtec who do not tender their shares in the offer and do not vote in favor of
the merger (if the approval of Labtec stockholders is required by the MBCL to
effect the merger) would have the right to demand an appraisal of the fair
value of their shares of Labtec common stock in accordance with the provisions
of Section 82(e) and Sections 86 through 98 of the MBCL. These sections set
forth the rights and obligations of stockholders of Labtec demanding an
appraisal and the procedures to be followed.
The Appraisal Statute.
Under Massachusetts law, if you follow the procedures of Section 82(e) and
Sections 86 through 98 of the MBCL, you will be entitled to have a court
appraise the fair value of your shares and to have us pay the fair value of
your shares together with interest. The following is a summary of Section 82(e)
and Sections 86 through 98 of the MBCL. We qualify this summary in its entirety
by reference to the full text of Section 82(e) and Sections 86 through 98.
Annex C sets forth the full text of these sections of the MBCL. If you fail to
47
follow these procedures, you will lose your appraisal rights. Consequently, you
should carefully review Annex C and consult your legal advisor if you would
like to exercise your appraisal rights.
You should execute any demand for appraisal in your name, as it appears on
your stock certificates. If you own shares in a fiduciary capacity, such as in
a capacity as a trustee, guardian or custodian, you should execute the demand
in that capacity. If more than one person owns the shares, as in a joint
tenancy or tenancy in common, all of the joint owners should execute the
demand. An authorized agent, including one or more joint owners, may execute
the demand for appraisal for a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is acting for such owner or owners.
A record holder such as a broker who holds shares of Labtec common stock as
a nominee for beneficial owners, some of whom desire to demand appraisal, is
required to exercise appraisal rights on behalf of those beneficial owners. In
this case, the written demand for appraisal should set forth the number of
shares covered by it. Unless a demand for appraisal specifies a number of
shares, we will treat the demand as applying to all of the shares held in the
name of the record holder. If you beneficially own shares through a nominee,
you may also notify us of such beneficial ownership and your intention to
exercise appraisal rights before we mail the notice discussed below.
Required Notice and Demand.
Within ten days following the consummation of the merger, we would notify
the Labtec stockholders of record of:
. the effective date of the merger;
. the terms and conditions of the merger; and
. the availability of appraisal rights under Section 82(e) and Sections 86
through 98.
If you are entitled to appraisal rights, you would have the right, within 20
days after the date of mailing of the required notice, to demand in writing
from us an appraisal of your shares of Labtec common stock. Any demand that
reasonably informs us of your identity and your intent to demand an appraisal
of the fair value of your shares would be sufficient. Failure to make such a
timely demand would foreclose your right to appraisal.
You can withdraw your demand for appraisal only with our approval. If you
withdraw your demand for appraisal, you would be entitled to receive $11.00 in
cash plus the fraction of a Logitech ADS paid by us in the offer for each share
of Labtec common stock, without interest.
If, following the merger, you perfect a demand for payment of your shares of
Labtec common stock as provided above, and if we reach agreement with you on
the fair value of the shares, we will pay you the fair value of the shares
within 30 days after the expiration of the 20-day period during which the
demand for appraisal may be made.
The Court's Determination.
If within that 30-day period we cannot reach agreement with you on the fair
value of your shares of Labtec common stock, either of us may elect to have the
fair value of the shares of all dissenting stockholders determined through
judicial proceedings in the Massachusetts Superior Court for Middlesex County
within four months after the 30-day period has expired. We are not under any
obligation, and have no present intention, to elect to have the fair value of
the shares of all dissenting stockholders determined through judicial
proceedings.
Although Massachusetts courts have broad discretion in determining the fair
value of stock of dissenting stockholders, Massachusetts courts have generally
used a weighted average of the market, earnings and asset values for the stock.
The Massachusetts Supreme Judicial Court has recently held that this method is
an
48
appropriate, but not mandated, approach to determining the fair value of stock
of dissenting stockholders. The trial judge may determine the appropriate
valuation method to apply. The MBCL requires us to pay a fair rate of interest
on any award determined by the Court from the date Labtec's board of directors
votes to approve the merger.
If:
. you do not file a suit to determine the value of your shares of Labtec
common stock within four months of the expiration of the 30-day period
during which we and any dissenting stockholders would try to reach
agreement on the value of the dissenters' shares,
. any suit you file to determine the value of your shares of Labtec common
stock is dismissed, or
. you withdraw your demand in writing with our written approval,
then you would only have the right to receive $11.00 in cash plus the fraction
of a Logitech ADS paid by us in the offer for each share of Labtec common
stock.
Under Massachusetts statutory law, your right to receive payment for your
shares in the manner provided by Section 82(e) and Sections 86 through 98 of
the Massachusetts Business Corporation Law is your exclusive remedy if you
object to the merger, except if you object to the merger on the grounds that
completing the merger will be or is illegal or fraudulent. In addition, the
Massachusetts Supreme Judicial Court has held that dissenting stockholders are
not limited to the statutory remedy of judicial appraisal in cases involving
breaches of fiduciary duty.
If you are considering seeking appraisal, you should bear in mind that the
fair value of your shares determined under Section 82(e) and Sections 86
through 98 of the Massachusetts Business Corporation Law could be more, the
same or less than the consideration you would have received in the merger.
Consequences of a Demand for Appraisal.
After the effective date of the merger, you would not be entitled to vote
your shares for any purpose and would not be entitled to receive payment of
dividends or other distributions in respect of your shares of Labtec common
stock.
For federal income tax purposes, stockholders who receive cash for their
shares of Labtec common stock upon exercise of dissenters' rights will realize
taxable gain or loss. Shareholders who exercise dissenters' rights should
consult their own tax advisors regarding tax consequences in light of their
individual circumstances.
The foregoing summary is not a complete statement of the procedures that you
must follow to exercise your dissenting appraisal rights. The full text of the
Massachusetts appraisal statute is attached to this prospectus as Annex C. You
should read Annex C in its entirety because failing to comply with the
procedures set forth in the Massachusetts appraisal statute will result in the
loss of your appraisal rights.
Conditions of the Offer
The offer is subject to a number of conditions, which we describe below.
Minimum Condition
There must be validly tendered and not withdrawn prior to the expiration of
the offer a number of shares of Labtec common stock that, together with the
shares of Labtec common stock then owned by Logitech and Purchaser, will
constitute at least 67% of the total number of outstanding shares of Labtec
common stock on a fully diluted basis (as though all options or other
securities exercisable or exchangeable for, or convertible into,
49
shares of Labtec common stock of Labtec common stock had been so exercised,
exchanged or converted) as of the date that we accept the shares of Labtec
common stock pursuant to our offer. Based on information supplied by Labtec,
the number of shares of Labtec common stock needed to satisfy the minimum
condition would have been 3,048,419 as of February 20, 2001.
Antitrust Condition
All waiting periods under the HSR Act and any applicable foreign antitrust
laws must have expired or been terminated.
Registration Statement Effectiveness Condition
The registration statement on Form F-4 of which this prospectus is a part
must have been declared effective by the SEC and must not be the subject of any
stop order.
Other Conditions of the Offer
The offer is also subject to the conditions that, at or before the
expiration date, there shall not be existing any of the following conditions:
1. if, after the date of the merger agreement, there shall have been
threatened or pending any suit, action or proceeding by any governmental body,
agency, official or authority against the Logitech, Logitech Subsidiary,
Purchaser, Labtec or any subsidiary of Labtec (i) seeking to make illegal,
restrain or prohibit (A) the making of the offer, the acceptance for payment
of, or payment for, any shares of Labtec common stock by Logitech Subsidiary,
or (B) the consummation of the merger, or (ii) seeking to prohibit or impose
any material limitations on Logitech's, Logitech Subsidiary's or Purchaser's
ownership or operation (or that of any of their respective subsidiaries or
affiliates) of all or a material portion of their or Labtec's businesses or
assets, or to compel Logitech Subsidiary, Purchaser or their respective
subsidiaries and affiliates to dispose of or hold separate any material portion
of the business or assets of Labtec or Logitech and their respective
subsidiaries, in each case taken as a whole, or (iii) seeking to impose
material limitations on the ability of the Logitech, Logitech Subsidiary or
Purchaser effectively to exercise full rights of ownership of the shares of
Labtec common stock, including, without limitation, the right to vote the
shares of Labtec common stock purchased by it on all matters properly presented
to Labtec's stockholders;
2. there shall have been (i) entered, enforced or issued by any court of
competent jurisdiction any judgment, order, injunction or decree that makes
illegal, restrains or prohibits the making of the offer, the acceptance for
payment of, or the payment for, any shares of Labtec common stock, by Logitech,
Logitech Subsidiary or Purchaser or (ii) any statute, rule, regulation,
legislation or interpretation enacted, enforced, promulgated, amended or issued
by any governmental body, agency, official or authority applicable to
(A) Logitech, Logitech Subsidiary or Purchaser or Labtec, or (B) any
transaction contemplated by the merger agreement, that in either instance would
result, directly or indirectly, in any of the consequences referred to in
clause (i) to (iii) of paragraph (a) above;
3. the merger agreement shall have been terminated in accordance with its
terms;
4. a Triggering Event (as defined under the heading "The Merger Agreement--
Termination of the Merger Agreement--Termination by Logitech") shall have
occurred;
5. Labtec's representations and warranties in the merger agreement (other
than representations and warranties as to its share capitalization and the
absence of a material adverse change in its business since March 31, 2000),
were incorrect when made on February 7, 2001, and (A) the inaccuracy has or
would reasonably be expected to have a material adverse effect on Labtec or on
its ability to consummate the offer or the merger and (B) (x) the inaccuracy
cannot reasonably be cured or (y) has not been cured within 20 business days
after written notice from Logitech of the inaccuracy;
50
6. Labtec's representations and warranties in the merger agreement (other
than representations and warranties as to its share capitalization and the
absence of a material adverse change in its business since March 31, 2000) are
inaccurate at any time prior to consummation of the offer, and (A) the
inaccuracy has or would reasonably be expected to have a substantial adverse
effect on Labtec and (B) (x) the inaccuracy cannot reasonably be cured or (y)
has not been cured within 20 business days after written notice from Logitech
of the inaccuracy;
7. Labtec's representations and warranties as to its share capitalization
were materially inaccurate when made on February 7, 2001 or are materially
inaccurate at any time prior to consummation of the offer, and (x) the
inaccuracy cannot reasonably be cured or (y) has not been cured within 20
business days after written notice from Logitech of the inaccuracy;
8. Logitech's representations and warranties as to the absence of a material
adverse change in its business since March 31, 2000 were inaccurate when made
on February 7, 2001 and (x) the inaccuracy cannot reasonably be cured or (y)
has not been cured within 20 business days after written notice from Labtec of
the inaccuracy;
9. Labtec shall have breached or failed to perform any material obligation
under the merger agreement or shall have failed to comply with any material
agreement or covenant of Labtec under the merger agreement; or
10. if, after the date of this Agreement, there shall have occurred (i) any
general suspension of trading in, or limitation on prices for, securities on
the Swiss Stock Exchange or on the Nasdaq National Market, for a period in
excess of 24 hours (excluding suspensions or limitations resulting solely from
physical damage or interference with such exchanges not related to market
conditions), (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in Switzerland or the United States (whether or
not mandatory), (iii) any limitation (whether or not mandatory) by any United
States or Swiss governmental authority on the extension of credit generally by
banks or other financial institutions, or (iv) in the case of any of the
foregoing existing at the time of the commencement of the offer, a material
acceleration or worsening thereof.
The conditions of the offer described above are solely for our benefit, and
we may assert them regardless of the circumstances giving rise to them. We may,
in our sole discretion, waive these conditions in whole or in part, other than
the minimum condition (which may only be waived with Labtec's consent). The
failure by us at any time to exercise any of the above rights shall not be
deemed a waiver of that right and the right shall be deemed a continuing right
which may be asserted at any time and from time to time up to the expiration
date or, in the case of conditions involving the receipt of necessary
governmental approvals, up to the time of acceptance for payment of shares of
Labtec common stock. Notwithstanding anything to the contrary in this
prospectus, we have agreed in the merger agreement that if one or more of the
conditions to the offer are not satisfied, but are reasonably capable of being
satisfied, we will extend the offer from time to time until July 15, 2001.
Required Regulatory Approvals
Except as set forth in this prospectus, we are not aware of any licenses or
regulatory permits that appear to be material to the business of Labtec and its
subsidiaries, taken as a whole, and that might be adversely affected by our
acquisition of shares of Labtec common stock in the offer. In addition, except
as set forth in this prospectus, we are not aware of any filings, approvals or
other actions by or with any governmental authority or administrative or
regulatory agency that would be required for our acquisition or ownership of
the shares of Labtec common stock. Should any approval or other action be
required, we expect to seek that approval or action, except as described under
"State Takeover Laws." Should any approval or other action be required, we
cannot be certain that we would be able to obtain the approval or action
required without substantial conditions or that adverse consequences might not
result to Labtec's or its subsidiaries' businesses, or that parts of Labtec's,
Logitech's or any of their respective subsidiaries' businesses might not have
to be
51
disposed of or held separate in order to obtain the required approval or
action. In that event, we may not be required to purchase any shares of Labtec
common stock in the offer.
State Takeover Laws. A number of states have adopted takeover laws and
regulations that purport to be applicable to attempts to acquire securities of
corporations that are incorporated in those states or that have substantial
assets, shareholders, principal executive offices or principal places of
business in those states. To the extent that these state takeover statutes
purport to apply to the offer or the merger, we believe that those laws
conflict with U.S. federal law and are an unconstitutional burden on interstate
commerce. In 1982, the Supreme Court of the United States, in Edgar v. Mite
Corp., invalidated on constitutional grounds the Illinois Business Takeovers
Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. The reasoning in that
decision is likely to apply to certain other state takeover statutes. In 1987,
however, in CTS Corp. v. Dynamics Corp. Of America, the Supreme Court of the
United States held that the State of Indiana could as a matter of corporate law
and, in particular, those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without the prior approval of the remaining
shareholders, as long as those laws were applicable only under certain
conditions.
Chapters 110C, 110D and 110F of the MBCL prohibit, restrict or impose
procedural and disclosure requirements with respect to the acquisition of more
than 5% of the outstanding shares of a Massachusetts corporation, such as
Labtec, and with respect to take-over bids and business combinations involving
a Massachusetts corporation. Labtec and we have taken all actions necessary to
ensure that Chapters 110C, 110D and 110F of the MBCL will not apply in
connection with the offer or the merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations that are incorporated, or have
substantial assets or shareholders, or whose business operations otherwise have
substantial economic effects, in these states. Labtec, directly or through
subsidiaries, conducts business in a number of states throughout the United
States, some of which may have enacted takeover laws as described above.
Logitech and the Purchaser do not believe that any of these takeover statutes
are applicable to the offer or the merger and have not attempted to comply with
any of these state takeover statutes in connection with the offer or the
merger.
Antitrust. The purchase of Labtec common stock pursuant to the offer is
subject to review by the DOJ and the FTC to determine whether it is in
compliance with antitrust laws. Under the provisions of the HSR Act, the offer
may not be consummated until the waiting period requirements of that Act have
been satisfied or terminated. Logitech and Labtec filed notification reports,
together with requests for early termination for the waiting period, with the
DOJ and the FTC on February 21, 2001. Unless the waiting period is extended or
we receive a request for additional information and documentary material, the
waiting period will expire on March 23, 2001, unless earlier terminated.
The DOJ and the FTC frequently scrutinize the legality under the antitrust
laws of transactions such as the offer or the merger. At any time before or
after the offer or the merger, the DOJ 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 offer or the merger or seeking divestiture of
substantial assets of Logitech or Labtec or their subsidiaries. Private parties
and state attorneys general may also bring an action under the antitrust laws
under certain circumstances. We cannot guarantee that a challenge to the merger
on antitrust grounds will not be made or, if such a challenge is made, of the
result.
Foreign Approvals. Logitech and Labtec conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of the offer or the merger.
Logitech and Labtec are currently in the process of reviewing whether other
filings or approvals may be required or desirable in other jurisdictions. In
the event a filing or application is made for the requisite foreign approvals
or consents, we cannot be certain that these approvals or consents will be
granted and, if these approvals or consents are received, we cannot be certain
as to the date of those approvals or consents. In
52
addition, we cannot be certain that we will be able to cause Labtec or its
subsidiaries to satisfy or comply with those laws or that compliance or
noncompliance will not have adverse consequences for Labtec or any subsidiary
of Labtec after purchase of the shares of Labtec common stock pursuant to the
offer or the merger.
Securities Filing in Australia. We filed this prospectus and our other offer
documents with the Australian Securities and Investments Commission, or ASIC,
on February 23, 2001. We have also sought class order relief from the ASIC so
that we may file this prospectus, which is a foreign offer document in
Australia, with the ASIC. We will not accept tenders of shares of Labtec common
stock from Labtec stockholders in Australia until the ASIC approves the content
of this prospectus. If the ASIC has not contacted us or our advisers prior to
the expiration date, we will be deemed to have obtained ASIC approval.
Certain Effects of the Offer
Further Reduced Liquidity; Possibly no Longer Quoted. The tender of Labtec
shares pursuant to the offer will reduce the number of holders of Labtec shares
and the number of Labtec shares that might otherwise trade publicly and could
further restrict the liquidity of the remaining Labtec shares held by the
public and adversely effect their market value. Labtec shares are quoted by one
or more market makers on the OTC Bulletin Board. Following consummation of the
offer, it is possible that Labtec shares would continue to trade in the over-
the-counter market and that price quotations would be reported by other
sources. However, the extent of the public market for the Labtec shares and the
availability of quotations for Labtec shares would depend upon the number of
holders of shares remaining at that time, the interest in maintaining a market
in Labtec 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. We cannot predict whether the reduction in the number of Labtec
shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for, or marketability of, the Labtec shares.
According to Labtec, as of February 20, 2001 there were approximately
4,053,982 shares of Labtec common stock outstanding.
Registration Under the Exchange Act. Labtec shares are currently registered
under the Exchange Act. Labtec can terminate that registration upon application
to the SEC if the outstanding shares are not listed on a national securities
exchange, quoted on an automated inter-dealer quotation system or if there are
fewer than 300 holders of record of Labtec shares. Termination of registration
of the Labtec shares under the Exchange Act would reduce the information that
Labtec must furnish to its stockholders and to the SEC and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirement of furnishing a proxy statement
in connection with stockholders meetings pursuant to Section 14(a) and the
related requirement of furnishing an annual report to stockholders, no longer
applicable with respect to Labtec shares. In addition, if Labtec shares are no
longer registered under the Exchange Act, the requirements of Rule 13e-3 under
the Exchange Act with respect to "going-private" transactions would no longer
be applicable to Labtec. Furthermore, the ability of "affiliates" of Labtec and
persons holding "restricted securities" of Labtec to dispose of these
securities pursuant to Rule 144 under the Securities Act may be impaired or
eliminated.
Source and Amount of Funds
We expect to obtain funds necessary to finance the offer and the merger
partially from our internal resources and also from borrowings under the credit
facility described below. Neither the offer nor the merger is conditioned upon
any financing being obtained. In addition, subject to market conditions, we may
elect to sell debt or equity securities with various maturities in the capital
markets.
Under the terms of a credit facility agreement we entered into with Credit
Suisse and Banque Cantonale Vaudoise on March 5, 2001, up to $90,000,000 is
available to us to finance all or a portion of (1) the cash
53
consideration paid in the offer, (2) on the date of the merger, the remaining
cash consideration payable in respect to the merger, if any, (3) the existing
indebtedness of Labtec (to the extent required to be refinanced in connection
with the offer and the merger), and (4) the related fees and expenses. The
bridge financing facility matures on the earlier of the date that is one year
after all conditions to our first draw down of funds under the facility are
satisfied or waived and March 31, 2002. We currently expect that these
conditions will be satisfied or waived on March 15, 2001.
Our obligations under the credit facility agreement are secured by our
pledge of all of the shares in Logitech Inc., a California corporation and our
wholly-owned subsidiary through which we conduct our U.S. operations. The
interest on funds advanced to us is 92.5 basis points above the LIBOR rate,
each basis point representing 1/100th of a percent, during the first six months
of the credit facility, and increasing to 130 basis points over LIBOR during
the next three months, and then to 180 basis points over LIBOR during the
subsequent three months. The credit facility agreement includes covenants that
restrict corporate and other actions by us, as well as other covenants that we
must satisfy on an ongoing basis. The above summary does not purport to
describe all of the terms of the credit facility agreement, and it is qualified
by the credit facility agreement. The complete text of the credit facility
agreement is attached as an exhibit to the registration statement of which this
prospectus is a part.
We currently expect to repay the bridge financing facility through a
combination of possible sales in the capital markets of debt or equity
securities, subject to market conditions, revenues from operations, and, if
desirable, draw-downs on existing lines of credit. We have not determined the
precise nature or terms of possible sales of securities.
Relationships with Labtec
Except as set forth herein, neither we nor, to the best of our knowledge,
any of our directors, executive officers or other affiliates has any contract,
arrangement, understanding or relationship with any other person with respect
to any securities of Labtec, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any securities of Labtec, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or
the giving or withholding of proxies. Except as described herein, there have
been no contacts, negotiations or transactions since April 1, 1998, between us
or, to the best of our knowledge, any of our directors, executive officers or
other affiliates on the one hand, and Labtec or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets. Except as set forth in this
prospectus, neither we, nor, to the best of our knowledge, any of our
directors, executive officers or other affiliates has since April 1, 1998 had
any transaction with Labtec or any of its executive officers, directors or
affiliates that would require disclosure under the rules and regulations of the
SEC applicable to the offer.
In the ordinary course of business, Logitech and Labtec have engaged in
commercial transactions. These transactions involve the purchase by Logitech
from Labtec of headphones to be bundled with certain Logitech cameras. The
aggregate amount of our purchases from Labtec represented less than 1% of
Labtec's total consolidated revenues for its most recent fiscal year.
Accounting Treatment
The acquisition of Labtec will be accounted for as a "purchase," as this
term is used under generally accepted accounting principles, commonly referred
to as "GAAP," for accounting and financial reporting purposes. Labtec will be
treated as the acquired corporation for these purposes. Labtec's assets,
liabilities and other items will be adjusted to their estimated fair value as
of the closing date of the merger and combined with the historical book values
of the assets and liabilities of Logitech. Applicable income tax effects of
those adjustments will be included as a component of the combined company's
deferred tax asset or liability. The
54
difference between the estimated fair value of the assets, liabilities and
other items (adjusted as discussed above) and the purchase price will be
allocated to identifiable intangibles with any remaining amount recorded as
goodwill. For further information concerning the amount of goodwill to be
recorded in connection with the merger and the amortization thereof, see notes
(D) and (I) of the notes to the unaudited pro forma combined financial
statements.
We have prepared the unaudited pro forma financial information contained in
this prospectus using the purchase accounting method to account for the offer
and the merger. See "Pro Forma Consolidated Financial Statements."
Fees and Expenses
We have retained SG Cowen Securities Corporation to act as our financial
advisor in connection with the offer and the merger. SG Cowen will receive, in
the aggregate, fees of $1.25 million for these services and will be reimbursed
for out-of-pocket expenses, including reasonable expenses of its counsel and
other advisors.
We have agreed to indemnify SG Cowen and related persons against liabilities
and expenses in connection with their services as financial advisors, including
liabilities and expenses under the U.S. federal securities laws. From time to
time, SG Cowen and its affiliates may actively trade the equity securities of
Logitech for their own account or for the accounts of customers and,
accordingly, may hold a long or short position in those securities.
We have retained Georgeson Shareholder Communications, Inc. as information
agent in connection with the offer. The information agent may contact holders
of shares of Labtec common stock by mail, telephone, telex, telegraph and
personal interview and may request brokers, dealers and other nominee
shareholders to forward material relating to the offer to beneficial owners of
shares of Labtec common stock. We will pay the information agent reasonable and
customary compensation for these services in addition to reimbursing the
information agent for its reasonable out-of-pocket expenses. We have agreed to
indemnify the information agent against liabilities and expenses in connection
with the offer, including liabilities under the U.S. federal securities laws.
In addition, we have retained The Bank of New York as the exchange agent. We
will pay the exchange agent reasonable and customary compensation for its
services in connection with the offer, will reimburse the exchange agent for
its reasonable out-of-pocket expenses.
Except as set forth above, we will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of shares of Labtec
common stock pursuant to the offer. We will reimburse brokers, dealers,
commercial banks and trust companies and other nominees, upon request, for
customary clerical and mailing expenses incurred by them in forwarding offering
materials to their customers.
Stock Exchange Listing
Logitech ADSs are listed on the Nasdaq National Market under the symbol
"LOGIY." The Logitech ADSs to be received by Labtec stockholders pursuant to
the offer and the merger will be quoted on the Nasdaq National Market.
55
TAXATION
The following discussion sets forth the material United States federal
income and Swiss tax consequences of the offer and the merger and of the
ownership of Logitech ADSs by a holder that holds Labtec common stock, and will
hold Logitech ADSs, as capital assets. This discussion represents the views of
Fenwick & West LLP, tax counsel to Logitech, insofar as it relates to the U.S.
federal income tax consequences of the offer and the merger. This discussion
also represents the views of Fenwick & West LLP insofar as it relates to the
U.S. federal income tax consequences associated with owning the Logitech ADSs
received in the offer and the merger. In addition, this discussion represents
the views of PricewaterhouseCoopers SA, Swiss tax advisors to Logitech, as to
matters of Swiss tax law.
This discussion is based on the tax laws of Switzerland and the United
States, including the Internal Revenue Code of 1986, as amended (the "Code"),
its legislative history, existing and proposed regulations under the Code,
published rulings and court decisions, as in effect on the date of this
document, as well as the Income Tax Convention Between the United States of
America and Switzerland, which we call the "Treaty," all of which are subject
to change or change in interpretation, possibly with retroactive effect. The
statements in this documents that are described herein are not binding on the
Internal Revenue Service or a court. As a result, Logitech and Labtec cannot
assure you that the tax matters described herein will not be challenged by the
Internal Revenue Service or that any challenge will not be sustained by a
court.
This discussion does not address tax issues that may be important to holders
of Labtec common stock or Logitech ADSs in light of their particular
circumstances or their particular tax status, including the following: tax-
exempt entities; insurance companies; pension funds; financial institutions;
dealers and traders in securities; holders liable for alternative minimum tax
under the Code; holders that actually or constructively own 10% or more of the
voting stock of Logitech; holders that hold Labtec common stock or Logitech
ADSs as part of a straddle or a hedging or conversion transaction; holders
whose functional currency is not the U.S. dollar; holders of Labtec common
stock exercising dissenters' rights; and holders who acquired their Labtec
common stock or Logitech ADSs, as applicable, pursuant to the exercise of
employee stock options or otherwise as compensation or through a tax-qualified
retirement plan.
For purposes of this discussion, a "U.S. holder" is any beneficial owner of
Labtec common stock or Logitech ADSs that is:
. a citizen or resident (as defined in Section 7701(b) of the Code) of the
United States,
. a corporation or other entity taxable as a corporation organized under
the laws of the United States or any political subdivision of the United
States,
. an estate, the income of which is subject to United States federal income
tax without regard to its source, or
. in general, a trust which is subject to the supervision of a court within
the United States and the control of a United States person as described
in Section 7701(a)(30) of the Code.
A "non-U.S. holder" is any beneficial holder of Labtec common stock or
Logitech ADSs other than a U.S. holder or a foreign or domestic partnership. If
a partnership holds Logitech ADSs, the tax treatment of a partner will
generally depend on the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding Logitech ADSs, you
should consult your own tax advisor.
This discussion does not address any aspects of United States taxation other
than federal income taxation. Thus, for example, this discussion does not
address United States state, local, or estate and gift taxation. This
discussion, moreover, does not address any aspects of Swiss taxation other than
income and capital taxation. Holders are urged to consult their own tax
advisors regarding the United States federal, state and local and the Swiss and
other tax consequences of owning and disposing of Labtec common stock and
Logitech ADSs based on their particular circumstances.
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The Offer and the Merger--Swiss Taxation
There are no Swiss tax consequences as a result of the offer and the merger
to holders of Labtec common stock that are not residents of Switzerland for
Swiss income tax purposes or not otherwise subject to a limited tax liability
by virtue of maintaining a permanent establishment in Switzerland or not
subject to taxation in Switzerland for any other reason. Any Swiss stamp duties
potentially becoming due in connection with the merger will be the obligation
of, and borne by, Logitech.
The Offer and the Merger--United States Federal Income Taxation
U.S. Holders
--A Labtec shareholder that receives cash and Logitech ADSs in exchange for
that shareholder's Labtec common stock pursuant to the offer and merger
will recognize gain or loss in an amount equal to the difference between:
--the sum of the fair market value of the Logitech ADSs (in general, on
the expiration date of the offer or at the effective time of the
merger, as the case may be) and cash received, and
--their adjusted tax basis in the surrendered shares of Labtec stock.
--The gain or loss recognized by a U.S. holder will be capital gain or loss
if the Labtec common stock was a capital asset in the hands of the U.S.
holder and will be long-term capital gain or loss if the share has been
held for more than one year as of, in general, the expiration date of the
offer or at the effective time of the merger, as the case may be.
--The aggregate adjusted tax basis of U.S. holders in the Logitech ADSs
received would equal the fair market value of those ADSs at the date of
the recognition of gain or loss discussed above, and the holding period
for those ADSs would begin the day after the offer or the merger,
depending upon which transaction the Logitech ADSs were received.
Non-U.S. Holders
--Non-U.S. holders generally will not recognize gain or loss for U.S.
federal income tax purposes on the surrender of their Labtec common stock
in exchange for Logitech ADSs and cash in the offer and the merger, unless
(1) that gain is "effectively connected" with the non-U.S. holder's
conduct of a trade or business in the United States and, if a relevant
income tax treaty is applicable to the non-U.S. holder, such gain is
attributable to a permanent establishment or fixed base maintained in the
United States by such non-U.S. holder, or (2) the non-U.S. holder is an
individual and present in the United States for at least 183 days in the
taxable year of the offer and the merger and certain other conditions are
met. In such cases, a non-U.S. holder will be taxed in the same manner as
a U.S. holder. A corporate non-U.S. holder may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30%
rate, or at a lower rate if eligible for the benefits of an income tax
treaty that provides for a lower rate, on "effectively connected" gains
recognized.
Ownership of Logitech ADSs--Swiss Taxation
Dividends and Distributions
Dividends paid and similar cash or in-kind distributions made by Logitech to
a holder of Logitech ADSs (including dividends or liquidation proceeds and
stock dividends) are subject to a Swiss federal anticipatory tax at a rate of
35%. The anticipatory tax must be withheld by Logitech from the gross
distribution, and be paid to the Swiss Federal Tax Administration.
A Swiss resident holder and beneficial owner of Logitech ADSs may qualify
for a full refund of the Swiss anticipatory tax withheld from such dividends. A
holder and beneficial owner of Logitech ADSs who is a non-
57
resident of Switzerland, but a resident of a country that maintains a double
tax treaty with Switzerland, may qualify for a full or partial refund of the
Swiss anticipatory tax withheld from such a dividends by virtue of the
provisions of the applicable treaty between Switzerland and the country of
residence of the holder and beneficial owner of the Logitech ADSs.
In accordance with the Treaty, a mechanism is provided whereby a United
States resident (as determined under the Treaty), and United States
corporations, other than U.S. corporations having a "permanent establishment"
or a fixed base as defined in the Treaty, in Switzerland, generally can obtain
a refund of the Swiss anticipatory tax withheld from dividends in respect of
Logitech ADSs, to the extent that 15% of the gross dividend is withheld as
final withholding tax (i.e. 20% of the gross dividend may generally be
refunded). In specific cases, U.S. companies not having a "permanent
establishment" or a fixed base in Switzerland owning at least 10% of Logitech
registered shares may receive a refund of the Swiss anticipatory tax withheld
from dividends to the extent it exceeds 5% of the gross dividend (i.e. 30% of
the gross dividend may be refunded). To get the benefit of a refund, holders
must beneficially own Logitech ADSs at the time such dividend becomes due.
The claim for refund must be filed with the Swiss Federal Tax
Administration, Eigerstrasse 65, 3003 Berne, Switzerland. The form used for
obtaining a refund is Swiss Tax Form 82 (82C for companies; 82E for other
entities; 82I for individuals), which may be obtained from any Swiss Consulate
General in the United States or from the Swiss Federal Tax Administration at
the address above. The form must be filled out in triplicate with each copy
duly completed and signed before a notary public in the United States. Swiss
Tax Form 82 may be filed on or after July 1 or January 1 next following the
date the dividend became due but not later than December 31 of the third year
following the calendar year in which the dividend became due. The form must be
accompanied by suitable evidence of the deduction of withholding tax withheld
at the source. Logitech will examine the possibility of entering into
arrangements to assist shareholders who will hold Logitech ADSs in obtaining
appropriate refunds of Swiss anticipatory tax.
Transfers of Logitech ADSs
The sale of Logitech ADSs, whether by Swiss resident or non-resident holders
(including U.S. holders), will not be subject to a Swiss securities transfer
stamp duty unless it occurs through or with a Swiss bank or other "Swiss
securities dealer" as defined in the Swiss Federal Stamp Tax Act. In addition
to the stamp duty, the sale of Logitech ADSs by or through a member of the SWX
Swiss Exchange may be subject to a stock exchange levy.
Capital gains realized by a U.S. holder upon the sale of Logitech ADSs are
not subject to Swiss income or gains taxes, unless such U.S. holder holds such
shares as business assets of a Swiss business operation qualifying as a
permanent establishment for the purposes of the Treaty. In the latter case,
gains are taxed at ordinary Swiss individual or corporate income tax rates, as
the case may be, and losses are deductible for purposes of Swiss income taxes.
Ownership of Logitech ADSs--United States Federal Income Taxation
This section is based on the assumption that each obligation in the Deposit
Agreement, dated as of March 27, 1997, as amended, between Logitech, the Bank
of New York, as depositary, and the registered holders of the ADRs and the
owners of a beneficial interest in the ADSs, and any related documents, will be
performed in accordance with its terms. Based on this assumption, a U.S. holder
who holds Logitech ADRs evidencing Logitech ADSs will be treated as the owner
of the Logitech registered shares represented by the Logitech ADSs.
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Dividends and Distributions
U.S. Holders
Subject to the passive foreign investment company rules discussed below,
U.S. holders will include in gross income the gross amount of any dividend paid
by Logitech out of its current or accumulated earnings and profits, as
determined under United States federal income tax principles, as ordinary
income when the dividend is actually or constructively received by the U.S.
holder. Distributions in excess of current and accumulated earnings and
profits, as determined under United States federal income tax principles, will
be treated as a return of capital to the extent of the U.S. holder's basis in
its Logitech ADSs and thereafter as capital gain. Logitech believes that
dividends should be income from sources outside the United States for foreign
tax credit limitation purposes, and generally would be "passive income" or
"financial services income," which are treated separately from other types of
income for foreign tax credit limitation purposes. The dividend will not be
eligible for the dividends-received deduction generally allowed to corporations
in respect of dividends received from other U.S. corporations. The amount of
the dividend distribution that must be included in income by a U.S. holder will
be the U.S. dollar value of the payment made, determined at the spot rate of
exchange on the date the dividend distribution is includible in income,
regardless of whether the payment is in fact converted into U.S. dollars.
Generally, any gain or loss resulting from currency exchange fluctuations
during the period from the date the dividend payment is includible in income to
the date the payment is converted into U.S. dollars will be treated as ordinary
income or loss. This exchange gain or loss generally will be income from
sources within the U.S. for foreign tax credit limitation purposes.
Subject to certain limitations, the Swiss tax withheld and paid over to
Switzerland will be creditable against the U.S. holder's United States federal
income tax liability. To the extent a refund of the tax withheld is available
to a U.S. holder under the laws of Switzerland or under the Treaty, the amount
of tax withheld that is refundable will not be eligible for credit against the
U.S. holder's United States federal income tax liability, whether or not the
refund is actually obtained. A U.S. holder also may elect to deduct, rather
than credit, any Swiss tax withheld.
Non-U.S. Holders
A non-U.S. holder is not subject to United States federal income tax with
respect to dividends paid on Logitech ADSs unless (1) the dividends are
"effectively connected" with the non-U.S. holder's conduct of a trade or
business in the United States and, if a relevant income tax treaty is
applicable to the non-U.S. holder, such gain is attributable to a permanent
establishment or fixed base maintained in the United States by such non-U.S.
holder, or (2) the non-U.S. holder is an individual and present in the United
States for at least 183 days in the taxable year of the distribution and
certain other conditions are met. In such cases, a non-U.S. holder will be
taxed in the same manner as a U.S. holder. A corporate non-U.S. holder may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate, or at a lower rate if eligible for the benefits of an
income tax treaty that provides for a lower rate, on "effectively connected"
gains recognized.
Transfers of Logitech ADSs
U.S. Holders
Subject to the passive foreign investment company rules discussed below, a
U.S. holder that sells or otherwise disposes of Logitech ADSs generally will
recognize capital gain or loss for United States federal income tax purposes
equal to the difference between the U.S. dollar value of the amount realized
and the holder's tax basis, determined in U.S. dollars, in the Logitech ADSs.
Capital gain of an individual (non-corporate) U.S. holder is generally taxed at
reduced rates if the Logitech ADSs were held by the individual for more than
one year. The deductibility of capital losses is subject to the normal
limitations on capital losses applicable to U.S. taxpayers. The gain or loss
will generally be income or loss from sources within the United States for
foreign tax credit limitation purposes.
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Non-U.S. Holders
A non-U.S. holder is not subject to United States federal income tax with
respect to sales and other dispositions of Logitech ADSs unless (1) the gain is
"effectively connected" with the non-U.S. holder's conduct of a trade or
business in the United States and, if a relevant income tax treaty is
applicable to the non-U.S. holder, such gain is attributable to a permanent
establishment or fixed base maintained in the United States by such non-U.S.
holder, or (2) the non-U.S. holder is an individual and present in the United
States for at least 183 days in the taxable year of the sale and certain other
conditions are met. In such cases, a non-U.S. holder will be taxed in the same
manner as a U.S. holder. A corporate non-U.S. holder may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate,
or at a lower rate if eligible for the benefits of an income tax treaty that
provides for a lower rate, on "effectively connected" gains recognized.
Additional United States Federal Income Tax Considerations
Passive Foreign Investment Company Rules
Logitech believes that Logitech ADSs should not be treated as stock of a
passive foreign investment company for United States federal income tax
purposes, but this conclusion is a factual determination made annually and thus
may be subject to change. In general, Logitech will be a passive foreign
investment company with respect to a U.S. holder if, for any taxable year in
which the U.S. holder held Logitech ADSs, either at least 75% of the gross
income of Logitech for the taxable year is passive income or at least 50% of
the value, determined on the basis of a quarterly average, of Logitech's assets
for the taxable year is attributable to assets that produce or are held for the
production of passive income. For this purpose, passive income generally
includes dividends, interest, royalties and rents (excluding rents and
royalties derived in the active conduct of a trade or business), annuities, and
gains from assets that produce passive income other than sales of inventory.
Certain exceptions may apply. For example, if Logitech owns, directly or
indirectly, at least 25% of the value of the stock of another corporation,
Logitech will be treated for purposes of applying the passive foreign
investment company rules as owning its proportionate share of the assets of the
other corporation, and as receiving directly its proportionate share of the
other corporation's income. If Logitech were to be treated as a passive foreign
investment company, U.S. holders, upon a sale of the Logitech ADSs or upon
receipt of certain distributions with respect to the ADSs, could be subject to
tax as if the gain or distribution were ordinary income earned ratably over the
holding period for the ADSs, including an interest charge on the deferred tax,
and other adverse tax consequences.
Information Reporting and Backup Withholding
A U.S. holder of ADSs may be subject to information withholding and backup
withholding at a rate of 31% with respect to certain "reportable payments",
including dividend payments and proceeds from the disposition of ADSs or
received in the offer or merger through a broker. These rules apply if the
holder, among other things, (i) fails to furnish a social security number or
other taxpayer identification number ("TIN") certified under penalties of
perjury within a reasonable time after the request therefor, (ii) failed to
report properly interest or dividends, (iii) under certain circumstances, fails
to provide a certified statement, signed under penalties of perjury, that the
TIN furnished is the correct number and that such holder is not subject to
backup withholding, or (iv) if the Internal Revenue Service provides
notification that the U.S. holder has furnished us with an incorrect TIN. Any
amount withheld from a payment to a U.S. holder under the backup withholding
rules is creditable against the U.S. holder's federal income tax liability,
provided that the required information is furnished to the Internal Revenue
Service. Backup withholding will not apply, however, with respect to payments
made to certain holders, including, among others, tax exempt organizations and
certain foreign persons, provided their exemptions from backup withholding are
properly established.
We will report to the U.S. holders of ADSs and to the Internal Revenue
Service the amount of our "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
60
Although non-U.S. holders are generally exempt from information reporting
and backup withholding, a non-U.S. holder may be required to comply with
certification and identification procedures to establish its exemption from
information reporting and backup withholding. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. Holder will be allowed as
a refund or a credit against such non-U.S. holder's U.S. federal income tax
liability, provided that the requisite procedures are followed.
The merger will be accounted for by use of the purchase method of
accounting. This means that Logitech will record the excess of the purchase
price of Labtec over the fair value of Labtec's identifiable assets, including
intangible assets, and liabilities, as goodwill.
61
INTERESTS OF CERTAIN PERSONS
Each material agreement, arrangement or understanding and any actual or
potential conflict of interest between Labtec or its affiliates and Labtec's
executive officers, directors or affiliates, or between Labtec or its
affiliates and Logitech or the Purchaser or their respective executive
officers, directors or affiliates, is either incorporated in this prospectus by
reference or set forth below.
Employment Offer. In the interest of ensuring continuity of Labtec's
business, Robert G. Wick, president and chief executive officer of Labtec, has
agreed to serve, effective as of the effective time of the merger, as senior
vice president and general manager of our newly formed Audio Business Unit.
Arrangement with Sun Multimedia Advisors. Upon consummation of the offer,
Sun Multimedia Advisors, Inc. will receive a fee of $4.1 million in connection
with the termination of the management agreement dated as of October 7, 1997
between Labtec Corporation (a corporation that became Labtec's wholly-owned
subsidiary in February 1999) and Sun Multimedia Advisors and for the services
rendered by it in connection with, among other things, the sale of Labtec. Sun
Multimedia Advisors is owned by Marc J. Leder and Rodger R. Krouse, two of
Labtec's directors, and is the general partner of Sun Multimedia Partners,
L.P., the beneficial owner of approximately 57% of the outstanding shares of
Labtec common stock. The Labtec board of directors approved the fee in light of
Labtec's obligations under the management agreement and in consideration of the
role that Sun Multimedia Advisors played in providing strategic guidance to
Labtec, helping to analyze various alternatives for Labtec over a period of
time, in managing the sale of Labtec to Logitech and in obtaining a more
favorable purchase price for the Labtec stockholders than was initially
discussed. The directors of Labtec who are not affiliated with Sun Multimedia
Advisors unanimously approved the fee arrangement at a meeting held on January
25, 2001 and, upon negotiation of the terms of the transaction with Logitech,
reaffirmed their approval of the arrangement at a meeting held on February 6,
2001.
Treatment of Options. The merger agreement provides that Logitech and Labtec
will take all action necessary so that each option to purchase shares of Labtec
common stock shall, effective as of the consummation of the offer or the
effective time of the merger (depending on the terms of the Labtec option plan
under which the option was granted) will (a) become fully vested and fully
exercisable by the holder of the option, (b) automatically convert into an
option to purchase $11.00 in cash and the fraction of a Logitech ADS per Labtec
share of common stock received by holders of Labtec common stock who exchanged
their Labtec shares in the offer, and (c) have an exercise price equal to the
exercise price of the option per share of Labtec common stock immediately
before the offer or the merger. However, all options, if not exercised, will
terminate at the effective time of the merger.
Directors and executive officers of Labtec hold stock awards which will
become fully vested and exercisable when the offer is completed. As of February
20, 2001, executive officers of Labtec held an aggregate of 204,500 options
that were unvested and that will become vested when the offer is completed. As
of February 20, 2001, non-employee directors held an aggregate of 20,000
options that were unvested and that will become vested when the offer is
completed.
Indemnification. The merger agreement provides that all rights to
indemnification, defense, advancement of expenses and all limitations of
liability in favor of the present and former directors and officers of Labtec
under its articles of organization and bylaws will continue after the effective
time of the merger and will continue in full force and effect for six years
thereafter and, if later, the final disposition of all claims for which such
indemnification, defense, advancement of expenses and all limitations of
liability are provided. The merger agreement also provides that Logitech will
cause the surviving corporation to maintain effective an officers' and
directors' liability insurance policy in respect of acts and omissions
occurring prior to the effective time of the merger to the extent that such
policy may be obtained at an annual cost of not less than 175% of Labtec's
annual premium in effect on the date of the merger agreement.
Stockholder Agreement and Lock-Up Agreement. As an inducement to us to enter
into the merger agreement, Sun Capital Venture Partners I, L.P. and Sun
MultiMedia Partners, L.P. entered into stockholder agreements and a lock-up
agreement. See the descriptions of these agreements in the section entitled
"The Merger Agreement--Agreements with Labtec Principal Stockholders."
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THE MERGER AGREEMENT
The following description of the merger agreement describes the material
terms of the agreement but does not purport to describe all the terms of the
merger agreement. The complete text of the merger agreement is attached as
Annex A to this prospectus. All shareholders are urged to read the merger
agreement in its entirety because it is the legal document that governs the
offer and the merger.
The Offer
Terms of the Offer. The merger agreement provides for the commencement by
Purchaser of this offer to exchange $11.00 in cash and a fraction of a Logitech
ADS for each outstanding share of Labtec common stock that is validly tendered
and not properly withdrawn. The fraction of a Logitech ADS into which each
share of Labtec common stock will be exchanged will be determined as follows:
. If the average closing bid price of Logitech ADSs for the 20 consecutive
trading days ending on the third trading day prior to the expiration date
of the offer is equal to or between $25.64 and $31.34, the exchange ratio
will be determined by dividing $7.00 by this 20-day average price.
. If this 20-day average price is less than $25.64, the exchange ratio will
be .2730 of a Logitech ADS for each share of Labtec common stock.
. If this 20-day average price is more than $31.34, the exchange ratio will
be .2234 of a Logitech ADS for each share of Labtec common stock.
The merger agreement prohibits us from amending or waiving the minimum
condition, without the consent of Labtec, or amending the offer to change the
form of consideration to be paid, decreasing the consideration payable per
share of Labtec common stock or the number of shares of Labtec common stock
sought in the offer, extending the offer except as the merger agreement allows,
imposing additional conditions to the offer or making any other change which is
adverse to the holders of the shares of Labtec common stock.
Mandatory Extensions of the Offer. If any of the conditions to the offer is
not satisfied or waived on the initial or any subsequent scheduled expiration
date and these conditions are reasonably capable of being satisfied, Purchaser
will on the request of Labtec, unless the merger agreement is terminated
pursuant to its terms, extend the offer, until the conditions to the offer are
satisfied or waived; provided that Purchaser is not required to extend the
offer beyond July 15, 2001.
Optional Extensions of the Offer. Purchaser will have the right to extend
the offer (a) for any period required by any rule, regulation, interpretation
or position of the SEC or its staff applicable to the offer or any period
required by applicable law, (b) for one or more periods if, at the scheduled or
extended expiration date of the offer, any of the conditions to the offer has
not been satisfied or waived, until the conditions to the offer are satisfied
or waived, or (c) for an aggregate period of not more than 10 business days if,
as of the expiration date, all of the conditions to the offer have been
satisfied or waived but the number of shares of Labtec common stock validly
tendered and not withdrawn is less than 90% of the outstanding shares of Labtec
common stock on a fully diluted basis.
Prompt Payment for Shares of Labtec Common Stock after the Closing of the
Offer. Subject to the conditions of the offer, Purchaser will accept for
payment and pay for, as soon as practicable after the expiration of the offer,
all shares of Labtec common stock validly tendered and not properly withdrawn
pursuant to the offer.
The Merger
The merger agreement provides that Purchaser will be merged with and into
Labtec as soon as practicable following the satisfaction or waiver of the
conditions to the merger set forth in the merger agreement. Under the terms of
the merger agreement, at the effective time of the merger each share of Labtec
common stock will
63
be canceled and converted into the right to receive from Purchaser the same per
share consideration received by holders of Labtec common stock who exchanged
their shares of Labtec common stock in the offer without interest.
Notwithstanding the foregoing, the merger consideration will not be payable in
respect of shares of Labtec common stock held by Labtec as treasury shares or
by Logitech, Purchaser or any of Logitech's or Purchaser's subsidiaries, or in
respect of shares of Labtec common stock held by Labtec stockholders who
properly exercise their dissenters' rights under Massachusetts law. See "--
Appraisal Rights" beginning on page 47.
Effective Time of the Merger. The merger will become effective upon the
filing of articles of merger with the Secretary of State of Massachusetts or at
a later time as is agreed by Labtec and Logitech and specified in the articles
of merger. The filing of the articles of merger will take place as soon as
practicable after satisfaction or waiver of the conditions described below
under "The Merger Agreement--Conditions of the Merger."
Articles of Incorporation: Bylaws; Directors and Officers. The articles of
incorporation of Labtec in effect at the effective time shall be the articles
of incorporation of the surviving corporation until amended in accordance with
the provisions of the articles of incorporation and as provided under
Massachusetts law. The bylaws of Purchaser in effect at the effective time
shall be the bylaws of the surviving corporation until amended in accordance
with the provisions of the by-laws, the articles of incorporation of the
surviving corporation and the MBCL.
From and after the effective time and until their respective successors are
duly elected or appointed and qualified, or until their earlier death,
resignation or removal in accordance with the surviving corporation's articles
of incorporation and by-laws, the directors and officers of Purchaser at the
effective time shall be the directors and officers of the surviving
corporation.
Labtec Board of Directors
Upon the acceptance for payment of shares of Labtec common stock pursuant to
the offer, Logitech will be entitled to designate a number of Labtec directors
(rounded up to the next whole number) that equals the product of (1) the total
number of directors on Labtec's board of directors and (2) the percentage that
the number of shares beneficially owned by Logitech and Purchaser bears to the
total number of outstanding shares of Labtec common stock. At the same time,
Labtec will use its best efforts to cause individuals designated by Logitech to
constitute the same percentage of members on each committee of Labtec's board
of directors as well as on each board of directors (and each committee of the
board) of each subsidiary of Labtec. Until the merger has become effective,
Labtec will use its commercially reasonable efforts to cause Labtec's board of
directors to consist of at least two members who were directors of Labtec on
February 7, 2001. The merger agreement provides that, prior to the effective
time of the merger, the affirmative vote of a majority of the continuing Labtec
directors (i.e., those directors not designated by Logitech) will be required
to:
. amend the agreement when it requires approval of Labtec's board of
directors,
. terminate the agreement on behalf of Labtec,
. extend the time for performance of Logitech or Purchaser's obligations
under the merger agreement,
. waive compliance with any agreement or condition contained in the merger
agreement for the benefit of Labtec, or
. consent to or approve any action to be taken by Labtec's board of
directors under the merger agreement.
Treatment of Labtec Stock Options. The merger agreement provides that
Logitech and Labtec will take all action necessary so that each option to
purchase shares of Labtec common stock shall, effective as of the consummation
of the offer or the effective time of the merger (depending on the terms of the
Labtec option plan under which the option was granted) will (a) become fully
vested and fully exercisable by the holder of the option, (b) automatically
convert into an option to purchase $11.00 in cash and the fraction of a
Logitech
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ADS per Labtec share of common stock received by holders of Labtec common stock
who exchanged their Labtec shares in the offer, and (c) have an exercise price
equal to the exercise price of the option per share of Labtec common stock
immediately before the offer or the merger. However, all options, if not
exercised, will terminate at the effective time of the merger.
Covenants and Representations and Warranties
Access to Information. Until the consummation of the merger, Labtec will,
upon reasonable notice, give Logitech reasonable access during normal business
hours to its and its subsidiaries' employees, agents, properties, books and
records in order that Logitech may have an opportunity to make reasonable
investigations, provided that requests for access to Labtec's plants,
facilities, employees or agents must be coordinated with Labtec's chief
executive officer or his designee and not materially interfere with Labtec's
business. Labtec will promptly furnish to Logitech other information as
Logitech may reasonably request.
Commercially Reasonable Efforts. The merger agreement provides that each of
Logitech and Labtec will use its commercially reasonable efforts to take all
actions necessary to close the offer and the merger.
Conduct of Business of Labtec Pending Merger. The merger agreement obligates
Labtec, until the closing of the merger, to conduct its operations in the
usual, regular and ordinary course in substantially the same manner as
previously conducted. The merger agreement expressly restricts the ability of
Labtec to engage in certain material transactions as specified in the merger
agreement, such as certain purchases and sales of assets or the sale or
redemption of outstanding securities of Labtec, without the prior written
consent of Logitech, which consent will not be unreasonably withheld or
delayed.
Expenses of the Company. See "Interests of Certain Persons."
No Solicitation of Alternative Transactions. The merger agreement provides
that, except in the circumstances described below, Labtec will not and will not
authorize or permit any of its officers, directors, employees or
representatives to directly or indirectly (1) initiate, solicit or encourage
any Acquisition Proposal (as defined below), (2) participate in any discussions
or negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, or (3) agree to or approve or recommend any Acquisition
Proposal.
However, the merger agreement provides that prior to the expiration date, in
response to a bona fide unsolicited written Acquisition Proposal that the
Labtec board of directors (or a duly authorized committee of the board)
concludes in good faith constitutes a Superior Proposal, Labtec may participate
in discussions or negotiations with or furnish information to the third party
making the Acquisition Proposal if Labtec's board of directors determines in
good faith (after receiving the advice of outside legal counsel) that it is
necessary to take these actions in order to comply with its fiduciary duties
under applicable law. The merger agreement also provides that Labtec's board of
directors may (1) take and disclose to Labtec's stockholders a position with
respect to a tender or exchange offer by a third party required under Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or (2) make any
disclosure to Labtec's stockholders or otherwise which, in the reasonable
judgment of Labtec's board of directors after consultation with its legal
counsel, may be required under applicable law, rules or regulations, including,
without limitation, those of any stock exchange.
"Acquisition Proposal" means, other than Logitech's offer and the merger
described in this prospectus, any tender offer or exchange offer, or any offer
or proposal for (i) a merger or other business combination involving Labtec or
any of its subsidiaries or (ii) the acquisition of 15% or more of the equity
interests in, or 15% or more of the assets of, Labtec or any of its
subsidiaries.
"Superior Proposal" means an Acquisition Proposal relating to the
acquisition of a majority of the outstanding voting securities, or all or
substantially all of the assets, of Labtec with respect to which (A) if any
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cash consideration is involved, Labtec's board of directors has concluded in
good faith (after consultation with Labtec's financial advisors) that the
acquiring party is reasonably likely to obtain any necessary financing, and (B)
Labtec's board of directors has concluded in good faith after consultation with
its financial advisors that the Acquisition Proposal would, if consummated,
result in a transaction more favorable from a financial point of view, to
Labtec and its stockholders than Logitech's offer and the merger described in
this prospectus.
Duty to Provide Information. The merger agreement provides that Labtec will
promptly, and in any case within one business day after receipt, advise
Logitech of any request for information which Labtec reasonably believes would
lead to an Acquisition Proposal or of any Acquisition Proposal and the identity
of the person or group making the request or Acquisition Proposal. Labtec will
also keep Logitech informed of the status and details of the request or
Acquisition Proposal. Labtec will also give Logitech notice at the same time
and in the same manner of its board members of any meeting at which Labtec's
board is reasonably expected to consider an Acquisition Proposal or to
recommend a Superior Proposal to its stockholders.
Duty to Recommend the Merger. The merger agreement provides that, subject to
the fiduciary duties of Labtec's board of directors, prior to termination of
the merger agreement, (1) Labtec will include in its proxy materials for the
meeting of its shareholders to consider the merger, if required, the
recommendation of its board of directors of approval by Labtec stockholders of
the merger, and (2) Labtec shall use its commercially reasonable efforts to
secure Labtec stockholder approval of the merger.
Directors' and Officers' Insurance. See "Interests of Certain Persons."
Labtec Employee Benefits. The merger agreement provides that Labtec will
terminate its 401(k) plan and any group severance, separation or salary
continuation plans or arrangements immediately prior to the effective time of
the merger unless Logitech gives written notice to Labtec that these plans
should not be terminated.
Representations and Warranties. The merger agreement contains a number of
customary representations and warranties relating to each of the parties and
their ability to consummate the offer and the merger. All representations and
warranties of each party expire at the effective time of the merger or
termination of the merger agreement.
Conditions of the Offer
See "The Offer--Conditions to the Offer."
Conditions of the Merger
The obligations of Logitech, Purchaser and Labtec to consummate the merger
are subject to the satisfaction of the following conditions:
. to the extent required by applicable law, the merger shall have been
approved by the Labtec stockholders,
. any applicable waiting periods under the HSR Act and any applicable
antitrust or competition laws of jurisdictions outside the United States
shall have expired or been terminated,
. no provision of any applicable law or regulation and no order, judgment
or decree shall prohibit the consummation of the merger, and
. Purchaser shall have purchased shares of Labtec common stock pursuant to
the offer.
Termination of the Merger Agreement
Termination by Mutual Agreement. The merger agreement may be terminated at
any time prior to the effective time of the merger by mutual written consent of
Logitech and Labtec.
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Termination by either Logitech or Labtec. The merger agreement may be
terminated at any time prior to the effective time of the merger by either
Logitech or Labtec if:
1. the offer has not been consummated on or before July 15, 2001, unless
the failure to consummate the offer is the result of a failure to fulfill
any obligation of the merger agreement by the party seeking termination,
2. if the merger is not approved by Labtec stockholders, if such
approval is required, unless it is Logitech that seeks to terminate the
merger agreement and Logitech did not vote Labtec shares it was legally
entitled to vote in favor of the merger,
3. if there is any applicable law or regulation making the merger
illegal or any governmental authority shall have issued an order, judgment
or decree or taken any other action permanently restricting, enjoining,
restraining or otherwise prohibiting the consummation of the offer or the
merger, and the order, judgment or decree or other action shall have become
final and nonappealable, or
4. if the average closing bid price of Logitech ADSs for the 20
consecutive trading days ending on the third trading day prior to the
expiration date of the offer is less than $18.00, but only if the offer has
not yet been consummated.
Termination by Labtec. The merger agreement may be terminated at any time
prior to the consummation of the offer by Labtec if:
1. Logitech's representations and warranties in the merger agreement
(other than representations and warranties as to its share capitalization
and the absence of a material adverse change in its business since
September 30, 2000), were incorrect when made on February 7, 2001, and (A)
the inaccuracy has or would reasonably be expected to have a material
adverse effect on Logitech or on its ability to consummate the offer or the
merger and (B) (x) the inaccuracy cannot reasonably be cured or (y) has not
been cured within 20 business days after written notice from Labtec of the
inaccuracy;
2. Logitech's representations and warranties in the merger agreement
(other than representations and warranties as to its share capitalization
and the absence of a material adverse change in its business since
September 30, 2000) are inaccurate at any time prior to consummation of the
offer, and (A) the inaccuracy has or would reasonably be expected to have a
substantial adverse effect on Logitech and (B) (x) the inaccuracy cannot
reasonably be cured or (y) has not been cured within 20 business days after
written notice from Labtec of the inaccuracy;
3. Logitech's representations and warranties as to its share
capitalization were materially inaccurate when made on February 7, 2001 or
are materially inaccurate at any time prior to consummation of the offer,
and (x) the inaccuracy cannot reasonably be cured or (y) has not been cured
within 20 business days after written notice from Labtec of the inaccuracy;
4. Logitech's representations and warranties as to the absence of a
material adverse change in its business since September 30, 2000 were
inaccurate when made on February 7, 2001 and (x) the inaccuracy cannot
reasonably be cured or (y) has not been cured within 20 business days after
written notice from Labtec of the inaccuracy; or
5. if Logitech breaches or fails to perform any material agreement or
covenant contained in the merger agreement which (A) cannot reasonably be
cured or (B) has not been cured within 20 business days after written
notice from Labtec of the breach or failure to perform.
Termination by Logitech. The merger agreement may be terminated by Logitech
if at any time prior to consummation of the Offer:
1. Labtec's representations and warranties in the merger agreement
(other than representations and warranties as to its share capitalization
and the absence of a material adverse change in its business since March
31, 2000), were incorrect when made on February 7, 2001, and (A) the
inaccuracy has or would
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reasonably be expected to have a material adverse effect on Labtec or on
its ability to consummate the offer or the merger and (B) (x) the
inaccuracy cannot reasonably be cured or (y) has not been cured within 20
business days after written notice from Logitech of the inaccuracy,
2. Labtec's representations and warranties in the merger agreement
(other than representations and warranties as to its share capitalization
and the absence of a material adverse change in its business since March
31, 2000) are inaccurate at any time prior to consummation of the offer,
and (A) the inaccuracy has or would reasonably be expected to have a
substantial adverse effect on Labtec and (B) (x) the inaccuracy cannot
reasonably be cured or (y) has not been cured within 20 business days after
written notice from Logitech of the inaccuracy.
3. Labtec's representations and warranties as to its share
capitalization were materially inaccurate when made on February 7, 2001 or
are materially inaccurate at any time prior to consummation of the offer,
and (x) the inaccuracy cannot reasonably be cured or (y) has not been cured
within 20 business days after written notice from Logitech of the
inaccuracy,
4. Labtec's representations and warranties as to the absence of a
material adverse change in its business since March 31, 2000 were
inaccurate when made on February 7, 2001 and (x) the inaccuracy cannot
reasonably be cured or (y) has not been cured within 20 business days after
written notice from Logitech of the inaccuracy,
5. if Labtec breaches or fails to perform any material agreement or
covenant contained in the merger agreement which (A) cannot reasonably be
cured or (B) has not been cured within 20 business days after written
notice from Logitech of the breach or failure to perform; or
6. if at any time before the effective time of the merger a Triggering
Event (as defined below) occurs.
A "Triggering Event" will have occurred if, prior to the effective time of
the merger: (i) Labtec's board of directors or any committee of the board
approves or recommends to Labtec's stockholders any Acquisition Proposal, (ii)
Labtec's board of directors or any committee of the board publicly withdraws
or amends or modifies in a manner adverse to Logitech its recommendation in
favor of the offer, the adoption and approval of the merger agreement or the
approval of the merger; (iii) Labtec does not include these recommendations in
the offer documents or the documents it provides to Labtec stockholders
concerning the offer; (iv) Labtec breaches its agreements described in "--No
Solicitation of Alternative Transactions" above in any material respect; or
(v) an Acquisition Proposal is commenced or otherwise publicly announced by a
person unaffiliated with Logitech, and Labtec does not, within 10 business
days after the commencement or public announcement, publicly recommend to
Labtec's stockholders rejection of the Acquisition Proposal. However, a
Triggering Event will not include a "stop look and listen" communication of
the nature contemplated in Rule 14d-9(f) under the Exchange Act with respect
to an unsolicited tender offer or exchange offer that, if concluded in
accordance with its terms, would constitute or result in an Acquisition
Proposal.
Termination Fees
Termination Fees Payable by Labtec to Logitech. The merger agreement
provides that if Logitech terminates the merger agreement after a Triggering
Event, Labtec will promptly, but in any event no later than one business day
after the date of the termination, pay Logitech a fee equal to $4,500,000 in
immediately available funds. In addition, if the merger agreement is
terminated by Logitech or Labtec because the offer has not been consummated on
or before July 15, 2001, without any material failure by Logitech to fulfill
any obligation under the merger agreement having been the primary cause of the
failure to consummate the Offer, and (i) after February 7, 2001 but before the
merger agreement is terminated, any Acquisition Proposal was publicly
announced or become publicly known, and (ii) within 12 months following the
termination of the merger agreement, either a Company Acquisition (as defined
below) is consummated, or Labtec enters into an agreement providing for a
Company Acquisition, then Labtec will pay Logitech $4,500,000 promptly and as
a condition to consummating or entering into a definitive agreement. The
$4,500,000 payment shall be the sole and exclusive remedy of Logitech upon
termination of the merger agreement if the fee has been paid, and
68
remedies shall be limited to $4,500,000 regardless of the circumstances giving
rise to the termination. However, no party will be relieved from liability for
the willful breach of, or fraud in connection with, any of its representations,
warranties, covenants or agreements set forth in the merger agreement.
"Company Acquisition" means any of the following transactions (other than
the offer and the merger): (i) a sale or other disposition by Labtec of a
business or assets representing more than 35% of the consolidated net revenues,
net income or assets of Labtec immediately prior to the sale; (ii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by Labtec), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares representing
more than 35% of any class of equity securities of Labtec; or (iii) a merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Labtec (other than a transactions in which
Labtec's current stockholders retain more than 65%, directly or indirectly, of
the surviving or successor corporation); it being understood that a widely
distributed offering of Labtec common stock shall not constitute a Company
Acquisition.
Amendments
The merger agreement may be amended, modified and supplemented in writing by
the parties to the merger agreement in any and all respects before the
expiration date (notwithstanding the Labtec stockholder approval), by action
taken by the respective boards of directors of Logitech and Labtec or by the
respective officers authorized by the boards of directors or otherwise, as the
case may be; provided, that after Labtec stockholder approval, no amendment
shall be made which by law requires further approval by the stockholders of
Labtec without obtaining further approval of the Labtec stockholders.
Agreements with Labtec Principal Stockholders
As an inducement to us to enter into the merger agreement, Sun Capital
Venture Partners I, L.P. and Sun MultiMedia Partners, L.P. entered into
stockholder agreements and a lock-up agreement. We refer to these stockholders
below as the "Principal Stockholders." The Principal Stockholders together
beneficially own 2,032,161 shares of Labtec common stock representing
approximately 50% of the outstanding Labtec shares. Neither of the Principal
Stockholders or anyone else was paid or offered additional consideration in
connection with the stockholder agreements or the lock-up agreement.
While we believe that the descriptions in this section cover the material
terms of these agreements, these summaries may not contain all of the
information that is important to you. Forms of these agreements are attached as
exhibits to the merger agreement attached as Annex A to this prospectus.
In addition, Sun Multimedia Partners has agreed in its stockholder agreement
to exercise any rights it has under an agreement with The KB Mezzanine Fund II,
L.P. and Labtec to require KB Mezzanine to tender in the offer and/or vote all
of the shares of Labtec common stock over which KB Mezzanine has control in the
same manner that Sun Multimedia Partners is required to do so under its
stockholder agreement. Collectively, KB Mezzanine and the Principal
Stockholders beneficially own an aggregate of 2,386,783 shares of Labtec common
stock representing approximately 59% of the outstanding Labtec shares.
Stockholder Agreements
Under the stockholder agreements with the Principal Stockholders, each of
these stockholders agreed to tender to the offer, and not withdraw, all their
shares of Labtec common stock, unless:
. Labtec terminated the merger agreement in accordance with its terms,
. without the prior consent of the stockholder, we amend our offer to
reduce the amount of cash or Logitech ADSs we are offering to exchange
for each share of Labtec common stock,
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. we reduce the number of shares of Labtec common stock we are seeking to
acquire in the offer, or
. we change the form of consideration payable for Labtec shares in the
offer.
In addition, each of the Principal Stockholders through the stockholder
agreements have irrevocably appointed Logitech their lawful attorney and proxy.
These proxies give Logitech the limited right to vote the shares of Labtec
common stock beneficially owned by these stockholders, including any shares of
Labtec common stock acquired after the date of the stockholder agreements, as
follows:
. in favor of adoption of the merger agreement and approval of the merger
and the other transactions contemplated by the merger agreement and the
merger,
. against approval of any proposal made in opposition to, or in competition
with, our offer and the merger, and
. against any other action that is intended, or could reasonably be
expected to interfere with, delay, discourage or adversely affect our
offer, the merger or any of the other transactions contemplated by the
merger agreement.
The stockholder agreements will terminate upon the earlier to occur of the
termination of the merger agreement and the completion of the merger.
Lock-Up Agreement
As a further inducement to us to enter into the merger agreement, the
Principal Stockholders executed a lock-up agreement. Under this lock-up
agreement, these stockholders have agreed that they will not sell or otherwise
dispose of Logitech ADSs until 60 days after the completion of the offer. At
that time the lock-up restrictions will terminate as to 50% of their Logitech
ADSs. The lock-up restrictions on these stockholders' Logitech ADSs will
terminate completely 120 days after the completion of the offer.
However, under the lock-up agreement the Principal Stockholders may at any
time sell or otherwise dispose of Logitech registered shares, including
Logitech registered shares that they receive upon surrender to the depositary
for our ADRs of any ADSs these stockholders may own or receive in the offer or
merger.
This lock-up agreement terminates on termination of the merger agreement or
if the offer has not been consummated by July 15, 2001.
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DESCRIPTION OF LOGITECH SHARES
Set forth below is a summary description of our registered shares based on
material provisions of our articles of incorporation and the Swiss Code of
Obligations, all as currently in effect. Because it is a summary, it does not
contain all the information that may be important to you, and it is qualified
by reference to our articles of incorporation and Swiss law. An English
translation of our articles of incorporation is attached to our registration
statement on Form F-4 of which this prospectus is a part. Many of the rights
and restrictions affecting our registered shares are discussed in the section
of this prospectus entitled "Comparison of Rights of Labtec Stockholders and
Logitech Shareholders." If you would like more information about the rights of
holders of Logitech ADSs, you should review the section of this prospectus
entitled "Description of Logitech American Depositary Shares."
General
We currently have only one class of capital stock outstanding, our
registered shares with a par value of CHF 10.00 per share. As of January 31,
2001, our authorized share capital was CHF 42,858,530, divided into 4,285,853
registered shares, par value CHF 10.00 per share, all of which are issued and
outstanding. An additional 2,024,147 registered shares have been authorized for
issuance by our shareholders for certain limited purposes, including in
connection with the exercise of stock options, the issuance of registered
shares pursuant to our share purchase program and acquisitions. All of the
issued and outstanding registered shares are fully paid, duly authorized, and
validly issued, and are not subject to calls for additional payments of any
kind. In the following description, a "shareholder" is the person registered in
our share register as the holder of the relevant share. The depositary will be
the shareholder registered in our share register with respect to the registered
shares represented by Logitech ADSs against which ADRs will be issued pursuant
to the deposit agreement.
All shareholders have equal rights and obligations. By a duly adopted
resolution of a shareholders' meeting registered shares may be converted at any
time into bearer shares through a modification of the articles of
incorporation.
General Meetings of Shareholders
Shareholders exercise their rights in shareholders' meetings. Under Swiss
law, an ordinary general meeting must be held within six months of the close of
a corporation's fiscal year. Extraordinary general meetings may be convened by
the board of directors. The board of directors is also required to convene an
extraordinary meeting if so requested by one or more shareholders representing
at least ten percent of the corporation's share capital. Shareholders holding
registered shares with a nominal value of at least CHF 1,000,000 have the right
to place a proposal on the agenda for the next general meeting. A general
meeting is convened by sending a written notice to every shareholder at such
shareholder's address appearing in our share register at least 20 days prior to
such meeting.
Under Swiss law, shareholders have the following powers:
. to amend the articles of incorporation,
. to elect and remove the directors and the statutory auditors,
. to approve the annual report and the financial statements,
. to set the annual dividend, and
. to liquidate the company.
Except as provided by the articles of incorporation or by Swiss law, there
is no quorum requirement for shareholders' meetings. Our articles of
incorporation do not provide for a quorum requirement. Each registered share
carries one vote. Resolutions generally require the approval of a majority of
the votes cast at a general
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meeting. A resolution adopted at a general meeting passed with the approval of
at least two-thirds of the registered shares represented at the meeting is
required under Swiss law for:
. changes to the corporation's corporate purpose,
. issuance of shares with privileged voting rights,
. transfer restrictions on the registered shares, if any,
. authorized or conditional increases in share capital,
. increases in share capital against contributions in kind,
. restriction or elimination of preemptive rights,
. transfer of our registered office, or
. a merger into another corporation.
Each registered share confers one vote, and shareholders may be represented
by proxy. At shareholders' meetings votes are taken by a show of hands unless a
ballot is ordered by the chairman of the meeting or requested by at least 25
shareholders.
There are currently no limitations under Swiss law or in our articles of
incorporation restricting the rights of shareholders outside Switzerland to
hold or vote registered shares or Logitech ADSs representing such shares.
Registered Share Certificates and Transfer
Generally, the registered shares are held in book-entry form at a clearing
organization for Swiss banks. Registered shares may be evidenced by
certificates at the election of the holder. There are no restrictions on
transfer of registered shares under either our articles of incorporation or
Swiss law. However, only such holders of registered shares that are recorded as
owners in our share register are recognized as shareholders, and a transfer of
registered shares is valid only to the extent we are advised of such transfer.
Allocation of Annual Net Profits
Swiss law requires that at least five percent of our annual net profits must
be retained by us as general reserves for so long as these reserves amount to
less than 20% of our nominal share capital. Any net profits remaining may be
distributed as dividends.
As provided by Swiss law, we may pay only one dividend with respect to each
fiscal year and cannot pay interim dividends.
Although we have paid dividends in the past, our board of directors decided
in 1997 not to recommend to shareholders any payment of cash dividends in the
future in order to retain any future earnings for use in the operation and
expansion of our business. Consequently, we do not anticipate paying any cash
dividends in the near future.
Preemptive Rights
Under Swiss law, shareholders have the right to subscribe for new shares
issued in connection with an increase in the share capital, in proportion to
the nominal amount of registered shares held by such shareholder. In certain
circumstances, preemptive rights may be canceled by the approval of at least
two-thirds of the registered shares represented at a shareholders' meeting.
The registered shares represented by the ADSs are not subject to preemptive
rights. In addition, due to the restrictions on the offer and sale of
securities in the United States under U.S. securities laws and regulations,
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any offer of new registered shares to existing shareholders on the basis of
their preemptive rights might not be opened to holders of ADRs.
Borrowing Powers
Neither Swiss law nor our articles of incorporation restrict or limit our
power to borrow and raise funds.
Conflicts of Interests
Swiss corporate law does not have a general provision on conflicts of
interests. However, the Swiss Code of Obligations contains a provision that
requires directors to safeguard the interests of a corporation, and a duty of
loyalty and a duty of care. Breach of these duties entails personal liability
of the directors to the corporation and, in certain circumstances, to the
shareholders and creditors of the corporation.
Repurchase of Registered Shares
Swiss law limits the amount of registered shares that we may hold or
repurchase. We may only repurchase registered shares if we have free reserves
to pay the purchase price and if the amount of the nominal value of such
registered shares does not exceed ten percent of our share capital. Registered
Shares held by us may not be voted in a shareholders meeting. Furthermore, a
reserve must be created on the balance sheet in the amount of the purchase
price of the acquired shares.
Duration; Liquidation
Our duration is unlimited. We may be dissolved at any time by a resolution
of the shareholders. Under Swiss law, we may also be dissolved by a court
order based upon the request of one or more shareholders representing at least
ten percent of our share capital, asserting important grounds for our
dissolution. Swiss law requires that any surplus arising out of a liquidation
payment be distributed to shareholders.
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DESCRIPTION OF LOGITECH AMERICAN DEPOSITARY SHARES
We are offering $11.00 in cash and a fraction of a Logitech ADS for each
share of Labtec common stock. Logitech ADSs will be evidenced by American
depositary receipts, or ADRs. The Bank of New York, acting as the depositary
for the Logitech ADSs, will issue the ADRs in accordance with the Deposit
Agreement, dated as of March 27, 1997, as amended, between us, The Bank of New
York, as depositary, and the registered holders of ADRs and the owners of a
beneficial interest in ADSs. Your rights as a holder of ADRs will be governed
by the deposit agreement.
The following is a summary of the material provisions of the deposit
agreement. Because it is a summary, it does not contain all the information
that may be important to you. For more complete information, you should read
the entire agreement and the form of ADR itself, copies of which have been
filed as an exhibit to the registration statement of which this prospectus is a
part. Copies of the deposit agreement and our articles of incorporation are
also available for inspection at the corporate trust office of The Bank of New
York, currently located at 101 Barclay Street, New York, New York 10286. The
Bank of New York's principal executive office is located at 101 Barclay Street,
New York, New York 10286.
American Depositary Receipts
Each Logitech ADS represents one-tenth of a Logitech registered share. An
ADR may evidence any whole number of ADSs. The Logitech registered shares will
be deposited with the custodian or any successor custodian under the deposit
agreement. Each ADS will also represent securities, cash or other property
deposited with the depositary as a result of a distribution we may make on the
registered shares, but which are not distributed to ADS holders. The
circumstances in which the depositary will deliver to you distributions we make
on the registered shares are described below.
You may hold ADRs either directly or indirectly through your broker or other
financial institution. If you hold ADRs directly, you are an ADR holder. The
ADR will be in physical form if held by you directly, and may be in book-entry
or electronic form if held by a broker other financial institution on your
behalf. This description assumes you hold your Logitech ADSs directly. If you
hold your ADRs indirectly, you must rely on the procedures of your broker or
other financial institution to assert your rights described in this section.
You should consult with your broker or financial institution to find out what
those procedures are.
Because the depositary will actually own the registered shares, you must
rely on it to exercise the rights of a shareholder. The obligations of the
depositary are described in the deposit agreement.
The deposit agreement and the ADRs are generally governed by New York law.
Dividends and Other Distributions
The depositary has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on shares or other deposited
securities, after deducting its fees and expenses. You will receive these
distributions in proportion to the number of shares your ADRs represent. You
must hold the ADRs on the date established by us in order to be eligible for
dividends and other distributions. If we do not establish the date, the
depositary may establish it to determine who is eligible.
For a discussion of the cash dividends we may make on the registered shares,
see "Description of Logitech Shares--Allocation of Annual Net Profits."
Cash. The depositary will convert any cash dividend or other cash
distribution we pay on the shares into U.S. dollars, if it can do so on a
reasonable basis and can transfer the U.S. dollars to the United States. If
that is not possible or if any approval from the government of Switzerland is
needed and cannot be obtained, the
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agreement allows the depositary to distribute U.S. dollars only to those ADR
holders to whom it is possible to do so. It will hold the currency it cannot
convert into U.S. dollars for the account of the ADR holders who have not been
paid. It will not invest the currency it cannot convert and it will not be
liable for any interest.
Before making a distribution, the depositary will deduct any withholding
taxes that must be paid. For U.S. holders, it will distribute only whole U.S.
dollars and cents and will round fractional cents down to the nearest whole
cent. If the exchange rates fluctuate during a time when the depositary cannot
convert the Swiss currency, you may lose some or all of the value of the
distribution.
Registered shares. The depositary may distribute new ADRs representing any
registered shares which we distribute as a dividend or free distribution, if we
furnish it promptly with satisfactory evidence that it is legal to do so. The
depositary will distribute new ADRs in proportion to the number of ADRs you
already own. The depositary will only distribute whole ADRs. It will sell
registered shares which would require it to issue a fractional ADR and
distribute the net proceeds in the same way as it does with cash. If the
depositary does not distribute additional ADRs, each ADR will also represent
the new registered shares.
Rights to receive additional shares. If we offer holders of our securities
any rights to subscribe for additional registered shares or any other rights,
the depositary has discretion as to how these rights become available to you.
We must first instruct the depositary to do so and furnish it with satisfactory
evidence that it is legal to do so. The depositary could decide it is not legal
or practical to make the rights available to you, or it could decide that it is
only legal or practical to make the rights available to some but not all
holders of the ADRs. The depositary may decide to sell the rights. If the
depositary decides it is practical to sell the rights, the depositary will sell
the rights and distribute the proceeds in the same way as it does with cash. If
the depositary decides that it is not legal or practical to make the rights
available to you or to sell the rights, the rights that are not distributed or
sold could lapse. In that case, you will receive no value for them. The
depositary is not responsible for a failure in determining whether or not it is
legal or practical to distribute the rights. However, the depositary is liable
for damages if it acts negligently or in bad faith.
If the depositary makes rights available to you, it will exercise the rights
and purchase the registered shares on your behalf. The depositary will then
deposit the registered shares and issue ADRs to you. It will only exercise
rights if you pay it the exercise price and any other charges the rights
require you to pay.
U.S. securities laws may restrict the sale, deposit, cancellation, and
transfer of the ADRs issued after exercise of rights. For example, you may not
be able to trade the new ADRs freely in the United States. In this case, the
depositary may issue the new ADRs under a separate restricted deposit agreement
which will contain the same provisions as the deposit agreement, except for
changes needed to put the restrictions in place.
Other Distributions. The depositary will send to you anything else we
distribute on deposited securities by any means it thinks is legal, fair and
practical. If it cannot make the distribution in that way, the depositary has a
choice. It may decide to sell what we distributed and distribute the net
proceeds, in the same way as it does with cash. Or, it may decide to hold what
we distributed, in which case ADRs will also represent the newly distributed
property.
The depositary is not responsible if it decides that it is unlawful or
impractical to make a distribution available to any ADR holders. We have no
obligation to register ADRs, registered shares, rights or other securities
under the U.S. Securities Act or the Swiss securities laws. We also have no
obligation to take any other action to permit the distribution of ADRs,
registered shares, rights or anything else to ADR holders. This means you may
not receive the distributions we make on our registered shares or any value for
them if it is illegal or impractical for us to make them available to you.
Deposit, Withdrawal and Cancellation
Method for the depositary to issue ADRs. The depositary will issue ADRs if
you or your broker deposit registered shares or evidence of rights to receive
registered shares with the custodian. Upon payment of its fees
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and expenses and of any taxes or charges, such as stamp taxes or stock transfer
taxes or fees, the depositary will register the appropriate number of ADRs in
the names you request and will deliver the ADRs at its office to the persons
you request.
Method for an ADR Holder to cancel ADRs and obtain registered shares. You
may turn in your ADRs at the depositary's office. Upon payment of its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer
taxes or fees, the depositary will deliver (1) the underlying registered shares
to an account designated by you to the extent legally permissible and (2) any
other deposited securities underlying the ADR at the office of the custodian.
Or, at your request, risk and expense, the depositary will deliver the
registered shares at its office.
Voting Rights
You may instruct the depositary to vote the shares underlying your ADRs. You
could also exercise your right to vote if you withdraw the registered shares.
However, you may not know about the meeting enough in advance to withdraw the
registered shares.
When we notify the depositary of an upcoming vote, the depositary will
notify you of the upcoming vote and arrange to deliver our voting materials to
you. The materials will describe the matters to be voted on, explain how you,
if you hold the ADRs on a date specified by the depositary, may instruct the
depositary to vote the registered shares or other deposited securities
underlying your ADRs as you direct and to request a poll for each matter for
which you gave directions. The materials will also include a statement that, if
you do not give the depositary instructions, the depositary may give a
discretionary proxy to a person that we designate. For your instructions to be
valid, the depositary must receive them in writing on or before a date
specified by the depositary. The depositary will try, as far as practical,
subject to Swiss law and the provisions of our articles of incorporation, to
vote or to have its agents vote the registered shares or other deposited
securities as you instruct. The depositary will only vote or attempt to vote as
you instruct.
If you do not give the depositary instructions, you will be deemed to have
instructed the depositary to give a discretionary proxy to a person designated
by us. However, no instruction will be deemed to have been given, and the
depositary will not give a discretionary proxy, with respect to any matter we
inform the depository that:
(a) we do not wish such a proxy given;
(b) substantial opposition exists; or
(c) materially and adversely affects your rights.
We cannot assure you that you will receive the voting materials in time to
ensure that you can instruct the depositary to vote your shares. In addition,
the depositary and its agents are not responsible for failing to carry out
voting instructions or for the manner of carrying out voting instructions. This
means that you may not be able to exercise your right to vote and there may be
nothing you can do if your registered shares are not voted as you requested.
Reports and Other Communications
The depositary will make available for inspection by you at its corporate
trust office any reports and communications, including any proxy soliciting
material, received from us, which are received by the depositary as the holder
of the ADSs and made generally available to the holders of such ADSs by us. The
depositary will also send to you copies of such reports when furnished by us
pursuant to the deposit agreement. Any such reports and communications,
including any proxy soliciting material, furnished to the depositary by us will
be furnished in English when so required pursuant to any regulations of the
United States Securities and Exchange Commission.
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Fees and Expenses
ADR holders must pay: For:
$5.00 or less per 100 ADSs Each issuance of an ADR, including as a
result of a distribution of registered
shares or rights or other property Each
cancellation of an ADR, including if the
deposit agreement terminates
Each cancellation of an ADR, including if
the deposit agreement terminates
$0.02 or less per ADS Any cash payment
Registration or transfer fees Transfer and registration of registered
shares on the share register of the foreign
registrar from your name to the name of the
depositary or its agent when you deposit or
withdraw registered shares
Expenses of the depositary Conversion of Swiss francs to U.S. dollars
Expenses of the depositary Cable, telex and facsimile transmission
expenses, as expressly provided in the
deposit agreement
Taxes and other governmental As necessary
charges the depositary or custodian
have to pay on any ADR or
registered share underlying an ADR,
for example, stock transfer taxes,
stamp duty or withholding taxes
Payment of Taxes
The depositary may deduct the amounts of taxes owed from any payments to
you. It may also sell deposited securities, by public or private sale, to pay
any taxes owed. You will remain liable if the proceeds of the sale are not
enough to pay the taxes. If the depositary sells deposited securities, it will,
if appropriate, reduce the number of ADRs to reflect the sale and pay to you
any proceeds, or send to you any property remaining after it has paid the
taxes.
Reclassifications, Recapitalizations and Mergers
If we: Then:
. Change the nominal or par value The cash, shares or other securities
of our registered shares received by the depositary will become
deposited securities
. Reclassify, split up or Each ADR will automatically represent its
consolidate any of the deposited equal share of the newly deposited
securities securities
. Distribute securities on the The depositary will, when we ask them to,
registered shares that are not distribute some or all of securities it
distributed to you received, or cash or other consideration in
lieu of the securities
. Recapitalize, reorganize, merge, It may also issue new ADRs or ask you to
liquidate, sell all or surrender your outstanding ADRs in exchange
substantially all of our assets, for new ADRs representing the new deposited
or take any similar action securities
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Amendment and Termination
Amendment of the Deposit Agreement. We may agree with the depositary to
amend the deposit agreement and the ADRs without your consent for any reason.
If the amendment adds or increases fees or charges, except for taxes and other
governmental charges or expenses of the depositary, or prejudices an important
right of ADR holders, it will only become effective 30 days after the
depositary notifies you of the amendment. At the time an amendment becomes
effective, you are considered, by continuing to hold your ADR, to agree to the
amendment and to be bound by the ADRs and the amended deposit agreement.
Termination of the Deposit Agreement. The depositary will terminate the
deposit agreement if we ask to do so. The depositary may also terminate the
deposit agreement if it has told us that it would like to resign and we have
not appointed a new depositary bank within 90 days. In both cases, the
depositary must notify you at least 30 days before termination.
After termination, the depositary and its agents will be required to do only
the following under the deposit agreement:
(1) advise you that the deposit agreement is terminated,
(2) collect distributions on the deposited securities, and
(3) deliver registered shares and other deposited securities upon
cancellation of ADRs.
One year after termination, the depositary will, if practical, sell any
remaining deposited securities by public or private sale. After that, the
depositary will hold the money it received on the sale, as well as any other
cash it is holding under the deposit agreement for the pro rata benefit of the
ADR holders that have not surrendered their ADRs. It will not invest the money
and has no liability for interest.
Limitations on Obligations and Liability to ADR Holders
Limitations on our Obligations and the Obligations of the Depositary;
Limitations on Liability to Holders of ADRs. The deposit agreement expressly
limits our obligations and the obligations of the depositary. It also limits
our liability and the liability of the depositary. We and the depositary:
. are only obligated to take the actions specifically described in the
deposit agreement without negligence or bad faith;
. are not liable if either of us is prevented or delayed by law or
circumstances beyond our control from performing our obligations under
the deposit agreement;
. are not liable if either of us exercises discretion permitted under the
deposit agreement;
. have no obligation to become involved in a lawsuit or other proceeding
related to the ADRs or the deposit agreement on your behalf or on behalf
of any other party; and
. may rely upon any documents we believe in good faith to be genuine and to
have been signed or presented by the proper party.
In the deposit agreement, we agree to indemnify the depositary from any
liability which may arise out of acts performed or omitted by the depositary
other than those arising out of the depositary's bad faith or negligence.
Requirements for Depositary Actions
Before the depositary will issue or register transfer of an ADR, make a
distribution on an ADR, or permit withdrawal of registered shares, the
depositary may require:
. payment of stock transfer or other taxes or other governmental charges
and transfer or registration fees charged by third parties for the
transfer of any registered shares or other deposited securities;
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. production of satisfactory proof of the identity and genuineness of any
signature of other information it deems necessary; and
. compliance with regulations it may establish, from time to time,
consistent with the deposit agreement, including presentation of transfer
documents.
The depositary may refuse to deliver, transfer or register transfers of
ADRs generally when our transfer books or those of the depositary are closed
or at any time if the depositary or we think it is advisable to do so.
Your Right to Receive the Logitech Shares Underlying your ADRs
You have the right to cancel your ADRs and withdraw the underlying
registered shares at any time except:
. When temporary delays arises because: (1) the transfer books are closed
by us or the depositary; (2) the transfer of registered shares is blocked
to permit voting at a shareholders' meeting; or (3) we are paying a
dividend on the registered shares;
. When you or other ADR holders seeking to withdraw registered shares owe
money to pay fees, taxes and similar charges; or
. When it is necessary to prohibit withdrawals to comply with any laws or
governmental regulations that apply to ADRs or to the withdrawal of
registered shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the
deposit agreement.
Pre-Release of ADRs
In limited circumstances, subject to the provisions of the deposit
agreement, the depositary may issue ADRs before deposit of the underlying
registered shares. This is called a pre-release of the ADR. The depositary may
also deliver registered shares upon cancellation of pre-released ADRs, even if
the ADRs are cancelled before the pre-release transaction has been closed out.
A pre-release is closed out as soon as the underlying registered shares are
delivered to the depositary. The depositary may receive ADRs instead of
registered shares to close out a pre-release. The depositary may pre-release
ADRs only under the following conditions:
(1) before or at the time of the pre-release, the person to whom the pre-
release is being made must represent to the depositary in writing that
it or its customer owns the registered shares or ADRs to be deposited;
(2) the pre-release must be fully collateralized with cash or other
collateral that the depositary considers appropriate; and
(3) the depositary must be able to close out the pre-release on not more
than five (5) business days' notice. In addition, the depositary will
limit the number of ADRs that may be outstanding at any time as a
result of pre-release, although the depositary may disregard the limit
from time to time, if it thinks it is appropriate to do so.
The depositary, as it deems appropriate, may also subject the pre-release
to additional indemnities and credit regulations.
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NATURE OF TRADING MARKET
Logitech Registered Shares
The principal trading market for our registered shares is the Swiss
Exchange, on which our registered shares have been traded since 1988. As of
January 31, 2001, there were 4,285,853 registered shares issued and outstanding
held by 5,704 holders of record. In addition, the Logitech ADSs, each
representing one-tenth of a registered share, have since March 27, 1997 been
listed on the Nasdaq National Market under the symbol LOGIY.
Logitech Registered Shares Price Information
Prices for our registered shares on the Swiss Exchange are expressed in
Swiss francs. The table below presents, for the periods indicated, (i) the high
and low closing sales prices quoted in Swiss francs for our registered shares
on the Swiss Exchange, and (ii) the U.S. dollar equivalent based on the Noon
Buying Rate on the last trading day of the periods presented. The "Noon Buying
Rate" is the rate in New York City for cable transfers in selected currencies
as certified for customs purposes by the Federal Reserve Bank of New York.
Price per Registered Share
---------------------------
High Low High Low
------ ------ ------ ------
CHF CHF $ $
Fiscal year ending March 31, 1997:
First quarter................................. 80.00 66.50 63.98 53.18
Second quarter................................ 79.50 63.00 63.32 50.18
Third quarter................................. 97.25 64.50 72.63 48.17
Fourth quarter................................ 149.50 95.25 103.96 66.24
Fiscal year ending March 31, 1998:
First quarter................................. 138.00 120.50 94.39 82.42
Second quarter................................ 144.00 104.15 99.48 71.95
Third quarter................................. 135.00 111.50 92.34 76.27
Fourth quarter................................ 121.50 102.75 79.82 67.50
Fiscal year ending March 31, 1999:
First quarter................................. 120.00 100.75 79.21 66.50
Second quarter................................ 107.50 65.15 77.86 47.17
Third quarter................................. 88.00 55.75 64.07 40.59
Fourth quarter................................ 102.50 76.60 69.38 51.86
Fiscal year ending March 31, 2000:
First quarter................................. 114.50 94.00 73.61 60.43
Second quarter................................ 118.00 106.13 78.55 70.65
Third quarter................................. 242.50 114.50 152.23 71.88
Fourth quarter................................ 625.00 225.00 375.83 135.30
Fiscal year ending March 31, 2001:
First quarter................................. 600.00 350.14 424.50 259.33
Second quarter................................ 624.00 384.78 450.00 260.09
Third quarter................................. 569.00 313.57 332.00 197.22
Fourth quarter (through February 21, 2001).... 530.00 324.00 368.00 229.94
On February 21, 2001, the last reported price for a registered share on the
Swiss Exchange was CHF 468.00.
Trading Practices and Procedures on the Swiss Exchange
The Swiss Exchange is a private organization comprised of 105 members. As of
January 31, 2001, 415 Swiss companies and 163 foreign companies were listed on
the Swiss Exchange. Securities traded on the Swiss Exchange include Swiss and
foreign bonds, equities, investment funds, rights and warrants.
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The Swiss Exchange is an order-driven exchange system. Transactions on the
Swiss Exchange are transmitted electronically via a high-speed computer
processing center. Trading is divided into three separate phases: pre-opening,
opening and continuous trading. During the pre-opening phase, the system is
available for entries into the order book, inquiries and reporting off-exchange
transactions, which are subject to additional regulations. During the opening
phase, the system fixes the opening price for the particular security. During
the continuous trading phase orders are matched. The Swiss Exchange interrupts,
for limited periods, trading in a security that is subject to significant price
fluctuation.
Logitech American Depositary Shares
The Bank of New York serves as depositary with respect to the Logitech ADSs
traded on the Nasdaq National Market. As of February 21, 2001, according to the
records of The Bank of New York, approximately 1,149,150 Logitech ADSs were
outstanding in the United States. At that date, the number of Logitech ADS
holders of record with The Bank of New York was 94.
See "Market Price and Dividend Information" for a table of the reported high
and low quoted prices of Logitech ADSs on the Nasdaq National Market.
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COMPARISON OF RIGHTS
OF LABTEC STOCKHOLDERS AND LOGITECH SHAREHOLDERS
In connection with the offer or the merger, holders of Labtec common stock
will receive Logitech ADSs. Logitech is organized under the laws of
Switzerland, and Labtec is incorporated under the laws of the Commonwealth of
Massachusetts. The following is a summary comparison of material differences
between the rights of a Labtec stockholder and a Logitech shareholder arising
from the differences between the corporate laws of Massachusetts and of
Switzerland, the governing instruments of the two companies, and the securities
laws and regulations governing the two companies. The following summary,
however, is not a complete description of the laws of Massachusetts or of
Switzerland, the other rules or laws referred to in this summary, the Labtec
articles of organization, the Labtec by-laws or the Logitech articles of
incorporation. You are encouraged to obtain and read these documents in their
entirety. See "Where You Can Find More Information" beginning on page 4.
Voting Rights
Labtec
Under Labtec's by-laws, each stockholder is entitled to one vote for each
share of capital stock held by the stockholder unless the articles of
organization provide otherwise. The Labtec articles of organization do not
alter the voting rights of holders of Labtec common stock.
The presence, in person or by proxy, of shares representing a majority of
the votes entitled to be cast at any Labtec stockholders meeting constitutes a
quorum. Proposals are passed upon a vote of the majority of the shares of
Labtec common stock represented at a meeting at which a quorum is present.
Under Massachusetts law, the consummation of a merger requires the affirmative
vote of the holders of at least 66 2/3% of the then-outstanding shares of the
corporation's common stock unless otherwise provided in the articles of
organization. Labtec's articles of organization provide for the approval of
mergers and consolidations by the affirmative vote of a majority of shares
outstanding and entitled to vote.
Logitech
Each holder of Logitech ADSs is entitled to one vote for every ten Logitech
ADSs held, subject to certain registration and declaration requirements and
limitations described above under "Description of Logitech ADSs--Voting
Rights." Votes are generally taken on a show of hands unless a written ballot
is requested by at least 25 shareholders or if the chairman of the meeting so
orders. The Logitech articles of incorporation do not require a minimum number
of shareholders to be present in order to hold a shareholders' meeting.
Under Swiss law, the shareholders pass resolutions and elect directors upon
the vote of an absolute majority of the votes represented, unless provided
otherwise by law or the articles of association. The articles of incorporation
of Logitech provide that shareholders' resolutions are passed by the majority
of the votes cast. Certain resolutions must be approved by at least 66 2/3% of
the votes represented at the meeting, as described above under "Description of
Logitech American Depositary Shares--Voting Rights."
Stockholder Proposals and Shareholder Nominations of Directors
Labtec
Under the Labtec by-laws, any stockholder entitled to vote at an annual
meeting may bring business before the annual meeting, including nominations of
directors, if the stockholder gives timely notice, in writing and in the proper
form, of the stockholder's intention to bring the business before the meeting.
To be timely, a stockholder notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than 50 days nor
more than 75 days prior to the meeting. In addition, SEC rules allow precatory
resolutions to be included in management's proxy statement for annual meetings
of stockholders if, among other conditions required to be met, advance notice
is given to the corporation.
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Logitech
Under Swiss law and the articles of incorporation of Logitech, shareholders
holding shares with an aggregate nominal value of at least one million Swiss
francs have the right to request that a specific proposal be put on the agenda
and voted on at the next shareholders' meeting. The articles of incorporation
of Logitech further specify that the proposals must be submitted in writing at
least 60 days in advance of a meeting and must include the actual motion(s) to
be put forward.
Sources and Payment of Dividends
Labtec
Labtec's articles of organization contain no provisions restricting
dividends on Labtec common stock. However, under Massachusetts Corporation Law,
stockholders to whom a corporation makes a distribution (i.e., dividend,
redemption, or repurchase) which renders the corporation insolvent are liable
to the corporation for the amount received or the amount which exceeds that
which could have been distributed without rendering the corporation insolvent.
Logitech
The articles of incorporation of Logitech, pursuant to Swiss law, provide
that at least 5% of annual net profits must be allocated to the general
statutory reserve for so long as the reserves amount to less than 20% of
Logitech's share capital. The remaining net profit is, subject to the
provisions of the Swiss Code of Obligations, available for distribution to the
shareholders or to be used to establish free or special reserves.
Rights of Purchase and Redemption
Labtec
Under Massachusetts law, any corporation may purchase or redeem its own
shares, except that it may not purchase or redeem these shares if the capital
of the corporation is impaired at the time or would become impaired as a result
of the redemption. Stockholders to whom a corporation makes a distribution
(i.e., dividend, redemption, or repurchase) which renders the corporation
insolvent are liable to the corporation for the amount received or the amount
which exceeds that which could have been distributed without rendering the
corporation insolvent.
Logitech
Swiss law limits the number of its own shares a Swiss corporation may hold
or repurchase. A Swiss corporation may repurchase its own shares only if it has
sufficient free reserves to pay the purchase price, and if the aggregate
nominal value of such shares does not exceed 10% of the nominal share capital.
The same conditions and limits apply if shares of a corporation are repurchased
by a subsidiary. Shares repurchased by a Swiss corporation and its subsidiaries
do not carry any rights to vote at shareholders' meetings. Furthermore, the
Swiss corporation must create a blocked reserve on its balance sheet in the
amount of the purchase price of the shares held as treasury shares.
Appraisal Rights
Labtec
Under Massachusetts law, dissenting stockholders who follow prescribed
statutory procedures would be entitled to have Labtec pay them the full value
of their shares of Labtec capital stock when the stockholders approve:
. the sale, lease or exchange of substantially all of Labtec's property or
assets;
83
. an amendment to Labtec's articles of organization which adversely affects
the rights of the dissenting stockholders; or
. a merger or consolidation with another corporation unless Labtec is the
surviving corporation and a vote of the stockholders of Labtec was
required to approve such merger or consolidation.
Logitech
There are no appraisal rights under Swiss law.
Preemptive Rights
Labtec
Under Massachusetts law, a stockholder is not entitled to preemptive rights
to subscribe for additional issuances of stock or any security convertible into
stock unless preemptive rights are specifically granted in the articles of
organization. No such rights are granted in Labtec's articles of organization.
Logitech
Under Swiss law, shareholders have the right to subscribe for new shares
issued in connection with an increase in the share capital, in proportion to
the nominal amount of registered shares held by such shareholder. In certain
circumstances, preemptive rights may be canceled by the approval of at least
two-thirds of the registered shares represented at a shareholders' meeting.
The registered shares represented by the ADSs offered hereby are not subject
to preemptive rights. In addition, due to the restrictions on the offer and
sale of securities in the United States under U.S. securities laws and
regulations, any offer of new registered shares to existing shareholders on the
basis of their preemptive rights might not be opened to holders of ADRs.
Amendment of Governing Instruments
Labtec
Under Massachusetts law, unless the articles of organization require a
greater vote, an amendment to the articles of organization requires the
affirmative vote of a majority of the outstanding stock entitled to vote on the
amendment.
Labtec, by a vote of a majority of the stock outstanding and entitled to
vote, may authorize the amendment to the articles of organization.
Under Massachusetts law, stockholders have the power to adopt, amend or
repeal by-laws, but the articles of organization may give those powers to the
directors of the corporation as well. The Labtec articles of organization and
by-laws provide that a majority of the board of directors is authorized to
make, amend or repeal the by-laws, without any action on the part of the
stockholders, except with respect to any provision contained in the by-laws,
which by law, the articles of organization or the by-laws requires approval by
the stockholders.
Logitech
Under Swiss law, the articles of incorporation may be amended by the
affirmative vote of the absolute majority of the votes represented at a
shareholders' meeting. However, under the articles of incorporation of
Logitech, the articles may be amended by the affirmative vote of the absolute
majority of the votes cast, except for the resolutions which under the law
require a vote of at least two-thirds of the votes represented at the meeting
as described above under "Description of Logitech American Depositary Shares--
Voting Rights."
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Preferred Stock
Labtec
The Labtec articles of organization authorize the Labtec board of directors
to provide for the issuance of one or more series of preferred stock. At the
date of this document, no preferred stock was outstanding.
Logitech
Under Swiss law, the shareholders may, in accordance with the articles of
incorporation, or by way of an amendment of the articles of incorporation,
resolve or authorize the issuance of preferred shares. Logitech's articles of
incorporation do not provide for preferred shares.
Annual or General Meetings
Labtec
A Massachusetts corporation is required to hold an annual meeting of
stockholders within 6 months after the end of the fiscal year. The Labtec by-
laws provide that all meetings of stockholders are to be held at any place
designated by the co-chairmen or the majority of the Labtec board of directors.
Logitech
Under Swiss law and the articles of incorporation of Logitech, an annual
ordinary shareholders' meeting must be held within six months after the end of
Logitech's financial year. Ordinary shareholders' meetings may be convened by
the board of directors or, in exceptional circumstances, by the statutory
auditors.
Special Meetings
Labtec
Labtec's by-laws state that special meetings of the stockholders may be
called by the majority of the board of directors, any of the co-chairmen of the
board, the president of the corporation or shall be called by the clerk or an
officer upon written application by one or more stockholders holding at least
40% of Labtec's common stock entitled to vote at the special meeting.
Logitech
Under Swiss law and the articles of incorporation of Logitech, an
extraordinary shareholders' meeting may be convened whenever the board of
directors or the auditors consider it necessary. The board of directors is
required to convene an extraordinary shareholders' meeting if so resolved in a
preceding shareholders' meeting or requested by one or more shareholders
representing together at least 10% of the nominal share capital of Logitech, or
if required under the Swiss Code of Obligations.
Notices
Labtec
The Labtec by-laws provide that notice of each meeting of stockholders must
be mailed or personally delivered to stockholders entitled to receive notice of
an annual or special meeting at least 7 days prior to the meeting. However, in
the case of any special meeting called upon the written application of
stockholders, then at least 15 days notice prior to the meeting shall be
provided.
Logitech
Under the articles of incorporation of Logitech, a written notice to every
shareholder is required to be provided by mail at least 20 days prior to a
shareholders' meeting.
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The invitation to Logitech's shareholders' meetings must specify the items
on the agenda and proposals put forward. No later than 20 days prior to the
ordinary shareholders' meeting, Logitech must make available to its
shareholders its annual report and the auditors' report. Each shareholder has
the right to ask for immediate delivery of these reports.
Proxy Statements and Reports
Labtec
Under the U.S. proxy rules, Labtec must comply with notice and disclosure
requirements relating to the solicitation of proxies for stockholders'
meetings.
Logitech
As a foreign private issuer, Logitech is not subject to U.S. proxy
solicitation rules. However, Logitech must comply with the notice and
disclosure provisions of the Nasdaq National Market in respect of shareholder
meetings.
Under the listing rules of the SWX Swiss Exchange, Logitech must publish
interim financial reports (audited or non-audited) in addition to the audited
annual report. This interim report must cover a time frame of six months or
less.
Under the listing rules of the SWX Swiss Exchange, Logitech is in general
required to inform the market of any price-sensitive facts that have arisen in
its sphere of activity and are not public knowledge ("ad hoc publicity").
Moreover, Logitech has certain additional reporting obligations under the rules
of the SWX Swiss Exchange as a condition to maintaining its listing.
As a foreign private issuer, Logitech is not required to file with the SEC
all of the reports and notices that Labtec, as a reporting public company under
the Exchange Act, is required to file. Logitech must, however, file an annual
report on Form 20-F with the SEC within six months of the end of each fiscal
year pursuant to the requirements of the Exchange Act and must also provide
certain other information on Form 6-K upon the occurrence of significant
corporate events.
Shareholders' Votes On Certain Transactions
Labtec
Generally, under Massachusetts law, unless the articles of organization
provide for the vote of a larger portion of the stock, completion of a merger,
a consolidation, or the sale, lease or exchange of all or substantially all of
a corporation's assets or dissolution of the corporation requires:
. the approval of the board of directors; and
. the approval by a vote of the holders of 66 2/3% of the outstanding
stock.
However, Labtec's articles of organization provide that a majority vote of
the outstanding stock of the corporation is required for the above
transactions.
Logitech
Under Swiss law, a resolution passed at a shareholders meeting with a
majority of 66 2/3% of the votes represented is required for the dissolution of
Logitech other than by liquidation, including by way of a merger.
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Rights of Inspection
Labtec
Under Massachusetts law, a corporation's stockholders are entitled to
inspect and copy its charter, by-laws, records of stockholders meetings, and
stock and transfer records. These documents must be either at the corporation's
principal office, the transfer agent's office, or at the office of the
corporation clerk or resident agent. If access to these documents is refused,
the corporation is liable to the requesting stockholder for any actual damages
which result from the refusal. However, the corporation is not obligated to
produce the document for which the inspection is being sought to secure a list
of stockholders or information to be sold or used for purposes unrelated to the
person's interest as a stockholder.
Logitech
Under Swiss law, company books and correspondence may be inspected only with
the express authorization of the shareholders, given at a shareholders'
meeting, or by resolution of the board of directors and subject to the Swiss
laws regarding the safeguarding of business secrets. At the shareholders'
meeting, any shareholder is entitled to request information from the board of
directors concerning the affairs of the corporation and from the corporation's
auditors concerning the execution and results of their examination. The
information will be given to the extent necessary to exercise shareholders'
rights. It may be refused if business secrets or other interests of the
corporation are jeopardized.
In addition, if the shareholders' inspection and information rights prove to
be insufficient, each shareholder may propose to the shareholders' meeting that
specific facts be examined by a special commissioner in a special inspection.
If the shareholders' meeting approves the proposal, the corporation or any
shareholder may, within thirty days from the shareholders' meeting, ask the
courts at the corporation's domicile to appoint the special commissioner. If
the shareholders' meeting rejects the request, one or more shareholders who
hold at least 10% of the share capital or shares in an aggregate nominal value
of at least CHF 2 million may ask the courts to order the appointment of a
special commissioner. Such an order will be granted if the petitioners can
prima facie show that the board of directors, any member thereof or an officer
of the corporation infringed the law or the articles of incorporation and
damaged the corporation or the shareholders. The costs of the investigation are
generally allocated to the corporation and only in exceptional cases to the
petitioner(s).
Standard of Conduct For Directors
Labtec
Massachusetts law sets forth a standard of conduct for directors. A director
is required to act in good faith and in a manner that he reasonably believes to
be in the best interest of the corporation and with such care as an ordinary
prudent person in a like position would use in the circumstances.
Logitech
Under Swiss law, the directors and senior officers of a corporation have to
perform their duties with due care, to safeguard the interests of the
corporation in good faith, and to extend under equal circumstances, equal
treatment to the shareholders.
Classification of the Board of Directors
Labtec
Massachusetts law permits the directors to be divided into one, two or three
classes, with the term of office of one class of directors to expire each year.
However, Labtec's articles of organization stipulate that the board of
directors consists of a single class serving a one-year term.
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Logitech
The Logitech articles of association provide that the term of office of each
director is three years, with the interval between two annual general meetings
being deemed a year for this purpose. The initial term of office of each
director is fixed in a way to assure that approximately one fourth of all the
members has to be re-elected every year.
Removal of Directors
Labtec
Massachusetts law provides that a director may be removed with or without
cause by the holders of a majority in voting power of the shares entitled to
vote at an election of directors. The articles of organization of Labtec
provide further that directors may be removed for cause only, at a special
meeting, called at least in part for that purpose, by the affirmative vote of a
majority of shares present in person or by proxy at such meeting.
Logitech
Under Swiss law, the shareholders appoint the members of the board of
directors and may remove directors at any time in a shareholders' meeting.
Directors may be re-elected by the shareholders. The Logitech articles of
association do not modify this legal standard.
Vacancies on the Board of Directors
Labtec
Under Massachusetts law, unless otherwise provided in the by-laws, vacancies
on a board of directors resulting from death, resignation, removal or other
cause and newly created directorships resulting from an increase in the number
of directors may be filled by a majority of the directors in office.
The Labtec by-laws provide that vacancies on the Labtec board resulting from
death, resignation, removal or other causes or newly created directorships will
be filled only by the affirmative vote of a majority of the remaining directors
in office, even if less than a quorum. The Labtec by-laws also provide that any
directors so chosen to fill a vacancy or newly created directorship will serve
for the remainder of the full term of the relevant directorship and until such
director's successor has been elected and qualified.
The Labtec by-laws provide that the Labtec board of directors may fix the
number of directors from time to time, without decreasing the number to less
than three.
Logitech
The Logitech articles of incorporation provide that vacancies may be filled
by a shareholders' resolution passed by a majority of the votes cast at a
shareholders meeting. Members whose term of office has expired are eligible for
re-election.
Liability of Directors and Officers
Labtec
Massachusetts law permits a corporation's articles of organization to
include a provision eliminating or limiting the personal liability of a
director to the corporation and its stockholders for monetary damages arising
from a breach of fiduciary duty as a director. However, no provision can limit
the liability of a director for
. any breach of the director's duty of loyalty to the corporation or its
stockholders;
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. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. intentional or negligent payment of unlawful dividends or stock purchases
or redemptions; or
. any transaction from which the director derives an improper personal
benefit.
Logitech
Under Swiss law, directors and senior officers who act in violation of their
statutory duties--whether dealing with bona fide third parties or performing
any other acts on behalf of the corporation--may become liable to the
corporation, its shareholders and, in bankruptcy, its creditors for damages.
The directors' liability is joint and several but only to the extent the damage
is attributable to each director based on willful or negligent violation of
duty. If the board of directors lawfully delegated the power to carry out day-
to-day management to a different corporate body, e.g., the executive board, the
board of directors is not vicariously liable for the acts of the members of the
executive board. Instead, the directors can be held liable for their failure to
properly select, instruct or supervise the executive board members. If
directors and officers enter into a transaction on behalf of the corporation
with bona fide third parties in violation of their statutory duties, the
transaction is nevertheless valid as long as it is not excluded by the
corporation's business purpose.
Indemnification of Directors and Officers
Labtec
Massachusetts law provides that a corporation may indemnify any officer or
director who is made a party to any third party suit or proceeding on account
of being a director, officer, employee or agent of the corporation against
expenses, including attorney's fees, judgments, fines and amounts paid in
settlement, reasonably incurred by him in connection with the action, through
the articles of organization or a by-law adopted by the stockholders or a vote
adopted by a majority of the shares of stock entitled to vote for the election
of directors if the officer or director was adjudicated to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation.
The Labtec by-laws provide that, to the extent permitted by Massachusetts
law, Labtec will indemnify any person who is or was a director or officer or is
or was involved in any manner or is threatened to be made so involved in any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director or officer of Labtec, or is
or was serving at the request of Labtec as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by that person in connection with the proceeding.
Labtec maintains directors' and officers' insurance for its directors and
officers.
Logitech
Under Swiss law, a corporation may indemnify a director or officer of the
corporation against losses and expenses, unless arising from his or her gross
negligence or willful misconduct, including attorney's fees, judgments, fines
and settlement amounts actually and reasonably incurred in a civil or criminal
action, suit or preceding by reason of having been the representative of or
serving at the request of the corporation.
Logitech has indemnity agreements with each director and officer, and also
maintains directors' and officers' insurance for its directors and officers.
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Shareholders' Suits
Labtec
Under Massachusetts law, a stockholder may initiate a derivative action to
enforce a right of a corporation if the corporation fails to enforce the right
itself.
Logitech
As a general principle, the board of directors of a Swiss corporation has
the power to institute lawsuits on behalf of the corporation. This authority
may also be granted to specific attorneys-in-fact. A shareholder may not, by
virtue of his or her interest as shareholder, institute a derivative action on
behalf of the corporation except in limited circumstances. However, the
shareholders may invoke the personal liability of the directors if an action by
the directors damages the corporation.
Swiss law permits a shareholder to take legal action against resolutions of
the shareholders' meeting that violate the law or the articles of incorporation
by filing a suit within two months after the shareholders' meeting has taken
place. If the suit is dismissed, the court allocates the costs in its
discretion between the corporation and the plaintiff.
Limitations on Enforceability of Civil Liabilities Under U.S. Federal
Securities Laws
Logitech is a Swiss company headquartered in Switzerland. Some of the
directors and officers of Logitech are residents of countries other than the
U.S. As a result, U.S. investors may find it difficult in a lawsuit based on
the civil liability provisions of the U.S. federal securities laws to:
. effect service within the U.S. upon Logitech and the directors and
officers of Logitech located outside the U.S.;
. enforce in U.S. courts or outside the U.S. judgments obtained against
those persons in U.S. courts;
. enforce in U.S. courts judgments obtained against those persons in courts
in jurisdictions outside the U.S.; and
. enforce against those persons located outside the U.S., whether in
original actions or in actions for the enforcement of judgments of U.S.
courts, civil liabilities based solely upon the U.S. federal securities
laws.
For more information see "Limitations on Enforcement of U.S. Laws against
Logitech, its Management and Others."
"Short Swing" Profits
Labtec
Directors and officers of Labtec are subject to rules under the Securities
Exchange Act that may require directors and officers to forfeit to Labtec any
"short swing" profits realized from purchases and sales, as determined under
the Securities Exchange Act and the related rules, of Labtec securities over
short periods.
Logitech
Swiss law does not explicitly address "short swing" profits. However, short
swing profits realized from purchases and sales by directors and officers of a
Swiss company may constitute insider trading, which is a criminal offense under
the Swiss penal code.
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Certain Provisions Relating to Share Acquisitions
Labtec
Massachusetts law prohibits "business combinations," including mergers,
sales and leases of assets, issuances of securities and similar transactions by
a corporation or a subsidiary with an "interested stockholder" who beneficially
owns 15% or more of a corporation's voting stock, within three years after the
person or entity becomes an interested stockholder, unless:
. the transaction that will cause the person to become an interested
stockholder is approved by the board of directors of the target prior to
the transaction;
. after completion of the transaction in which the person becomes an
interested stockholder, the interested stockholder holds at least 90% of
the voting stock of the corporation not including (a) shares held by
directors who are also officers and (b) shares held by certain employee
benefit plans; or
. after the person becomes an interested stockholder, the business
combination is approved by the corporation's board of directors and
holders of at least 66 2/3% of the outstanding voting stock, excluding
shares held by the interested stockholder.
Logitech
Swiss law does not prohibit business combinations with an interested
shareholder.
Anti-Takeover Measures
Labtec
Massachusetts law imposes procedural and disclosure requirements with
respect to takeover bids for more than 10% of the outstanding shares of a
Massachusetts corporation, such as Labtec, unless, among other things:
. the board of directors of the corporation has consented to the takeover
bid and recommended its acceptance to stockholders; and
. the terms of the bid, including any inducements to officers and directors
not made available to all stockholders, have been furnished to
stockholders.
Logitech
According to the Swiss Stock Exchange Act, from the moment a takeover offer
is published until the result is announced, the board of directors of the
target company may not enter into legal transactions that would have the effect
of altering significantly the assets or liabilities of the company. Decisions
taken by the general shareholders' meeting are not subject to this restriction
and may be implemented irrespective of whether they were adopted before or
after publication of an offer.
Disclosure of Interests in Shares
Logitech
Under the applicable provisions of the Swiss Stock Exchange Act, persons
who, directly or indirectly, acting alone or in concert with others, acquire or
dispose of shares and thereby reach, exceed or fall below any of the thresholds
of 5%, 10%, 20%, 33 1/3%, 50% or 66 2/3% of the voting rights of a Swiss listed
corporation must notify the corporation and the SWX Swiss Exchange of such
transactions, whether or not the voting rights can be exercised. Following
receipt of such notification, the corporation must inform the public of those
transactions. An additional disclosure requirement exists under Swiss company
law, according to which Logitech must disclose the identity of all of its
shareholders who hold more than five percent of its voting rights. This
disclosure must be made once a year in an annex to the financial statements as
published in Logitech's annual report.
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LIMITATIONS ON ENFORCEMENT OF U.S. LAWS
AGAINST LOGITECH, ITS MANAGEMENT AND OTHERS
Logitech International S.A. is a Swiss corporation. Some of our directors
and executive officers, including some of the persons who signed the
registration statement on Form F-4, of which this prospectus is a part, and
some of the experts named in this document, reside outside the United States,
and a substantial portion of Logitech's assets and all or a substantial portion
of the assets of such persons are located outside the United States. As a
result, it may be difficult for you to effect service of process within the
United States upon such persons or to enforce against them judgments of the
courts of the United States predicated upon, among other things, the civil
liability provisions of the federal securities laws of the United States. In
addition, it may be difficult for you to enforce, in original actions brought
in courts in jurisdictions located outside the United States, among other
things, civil liabilities predicated upon such securities laws.
We have been advised by Lenz & Staehelin, our Swiss counsel, that the United
States and Switzerland do not currently have a treaty providing for reciprocal
recognition of and enforcement of judgments in civil and commercial matters.
Therefore, the recognition and enforcement of a judgment of the courts of the
United States in Switzerland is governed by the principles laid out in the
Swiss Federal Act on Private International Law. This statute provides that a
judgment rendered by a non-Swiss court may be enforced in Switzerland only if
(i) the foreign court had jurisdiction (pursuant to the Swiss Federal Act on
Private International Law), (ii) the judgment of the foreign court has become
final and non-appealable, (iii) the judgment of the foreign court does not
contravene Swiss public policy, and (iv) the court procedures and the service
of documents leading to the judgment was in compliance with the principles of
due process of law (as defined in the Swiss Federal Act on Private
International Law).
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CERTAIN INFORMATION REGARDING LABTEC
Overview of Labtec's Business
Labtec is a leading developer and marketer of high-technology peripheral
products and accessories for computing, communications, and entertainment.
Labtec offers an array of proprietary products, including personal computer and
game console speakers and subwoofers; PC Voice Access(TM) headsets and
accessories, microphones, and telephony products; personal audio headphone and
earphone products; and 3D motion controllers.
Labtec's strategy is to offer an assortment of high-technology products
through multiple channels of distribution. Labtec currently sells to numerous
retailers (e.g., Best Buy, CompUSA, Dixons, Fry's Electronics, Media Mart,
Musicland, Office Depot, Sears, Staples, Target, Vobis, and Wal-Mart), master
distributors (e.g., Avnet, Ingram Micro, Merisel, and Tech Data), and original
equipment manufacturers, or OEMs, (e.g., ABS, Compaq, Dell, Gateway, Hewlett
Packard, and IBM). Labtec serves these multiple channels of distribution on a
worldwide basis.
Labtec maintains a leading market position in each of its product lines of
PC speakers, PC Voice Access(TM) products, 3D motion controllers, and computer
storage products, and a second market position for its personal audio product
line. Labtec is establishing its market position in telephony products.
Labtec first introduced the PC speaker in the early 1990s and continues to
provide breadth of product, a recognized industry brand name, and consistent
technological innovations. In the fall of 2000, Labtec introduced its first
speakers designed specifically for the expanding game console market. Through
its personal audio line, Labtec has also taken advantage of growing consumer
trends by offering the first high-quality headphone marketed specifically for
MP3 and other Internet-based music applications.
Labtec believes it was the first to commercialize PC headsets and
accessories, and microphones, beginning in 1996. According to PC Data, Labtec's
PC Voice Access(TM) products have the leading share of the United States
market, as well as a rapidly growing market share in Europe. Labtec Management
believes its PC Voice Access(TM) products will continue to rapidly expand to
support the demand for voice-over-IP and speech recognition applications. In
the fall of 2000, Labtec introduced its first telephony products, i.e. products
which have dual functionality between the PC and the telephone.
Labtec's 3D Motion Control Division is a leading developer and marketer of
controllers and related software enabling the user to manipulate three-
dimensional graphical images in real-time. Unlike traditional hardware
controllers such as keyboards, gamepads, mice, trackballs and joysticks,
Labtec's products enable the user to manipulate images as if the user were
moving actual objects or moving through actual scenes in the real world.
Labtec's products are used in the engineering and design computer-aided design
market, the consumer market, and the emerging desktop market supported by the
Internet.
Labtec's computer storage products are offered through its subsidiary,
Connector Resources Unlimited, Inc., or CRU, which it acquired in August 1999.
Labtec was incorporated in Massachusetts in April 1991 under the name
Spacetec IMC Corporation. On February 17, 1999, SIMC Acquisition Corporation
("SIMC"), a newly formed, wholly owned subsidiary of the company presently
known as Labtec, merged with and into Labtec Corporation. Labtec Corporation
was the surviving legal entity in its merger with SIMC. After the completion of
the merger, Spacetec IMC Corporation changed its name to Labtec Inc. and
contributed substantially all of its assets, except cash and cash equivalents,
and all of its liabilities to a newly formed, wholly owned subsidiary, Spacetec
Corporation.
The Industry
Labtec competes in the worldwide market for personal computer and
workstation products that is estimated at approximately $200 billion for
calendar year 1999 by International Data Corporation. Personal
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computer shipments increased approximately 22% to 110 million units in 1999,
from 90 million units in 1998, according to IDC. The workstation market
increased approximately 9% in 1999 to 2.5 million units, compared to
2.3 million units in the prior year, according to IDC. Despite this growth, the
home penetration rate for PCs in the United States is still far below that of
many other consumer electronic items such as televisions or VCR's. Furthermore,
worldwide PC penetration is substantially lower than in the United States.
Labtec's Products
Within the category of PC peripheral products, Labtec's product lines are
broadly grouped into five types: PC and game console speakers, PC Voice
Access(TM) products, 3D motion controllers, personal audio products, and
computer data storage products.
PC and Game Console Speakers
In fiscal 2000, the PC speaker category represented Labtec's largest product
category, contributing 42.3% of its gross sales. In the fall of 2000, Labtec
introduced its first speakers designed specifically for the expanding game
console market. Labtec presently offers a line of 11 retail speaker models,
ranging in suggested retail price from $19.99 to $149.99, which utilize
proprietary technology such as Dynamic Bass Equalization circuitry, M3D matrix
decoding of surround sound program material, high performance Flat Panel
speakers, and a patented band-pass enclosure. Product positioning covers both
entry-level and upgrade speaker segments, encompassing most addressable
industry volume. Labtec seeks to provide the best performing product based on
sound quality, industrial design, and product features at each retail price
point.
Labtec believes the following industry trends will influence growth of the
PC and game console speaker segment: (i) s hipments of new computer systems
with installed multimedia capabilities, often with low-quality, inexpensive
speakers; (ii) increasing capability and demand for MP3 and other Internet-
based audio; (iii) the growing popularity and increased feature-content of game
consoles; and (iv) introduction of new software titles with ever-improving
audio capabilities.
Labtec's line of PC and game console speakers is oriented toward three
different user groups: Edutainment for the users of basic multimedia software
such as educational or basic music software, Audio Enthusiasts desiring crisp
audio sound for music, and Gamers desiring a strong bass component in their
systems. Labtec offers a variety of models across a wide price range targeted
at users in each of these groups.
PC Voice Access(TM)
Labtec offers a complete line of headsets and accessories, microphones, and
telephony products sold under Labtec's PC Voice Access(TM) brand name. This
product line, which represented 30.5% of total gross sales in fiscal 2000, is
Labtec's fastest growing business segment, with sales increasing 73.6% compared
with fiscal 1999. This line is designed to complement several emerging
applications, including basic PC telephony (voice mail, call forwarding, etc.),
voice-over-IP communications (Internet long distance), speech recognition and
voice command software, gaming (multi-player interaction), and Internet-based
audio (including MP3).
The PC Voice Access(TM) line is composed of 21 retail and OEM products
ranging from $9.99 to $129.99 that break into three product classes: (i)
headsets with boom microphones that allow comfortable hands-free use of voice-
over-IP and speech recognition applications; (ii) PC microphones that allow for
effective voice input for voice command and speech recognition software and
Internet formats; and (iii) telephony products that have dual functionality
between the PC and the telephone. An important element of this emerging
industry is the need for the personal computer to clearly recognize voice
input, in addition to delivering quality sound. Labtec developed and utilizes
Noise Canceling and Amplification Technology (NCAT(TM) and NCAT2(TM)) which
improves performance (i) by focusing on direct voice input, dramatically
reducing ambient background noise, and (ii) through a high output internal
amplification stage, ensuring output compatibility with virtually all
Soundblaster standard soundcards.
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3D Motion Controllers
Labtec is a leading provider of hardware controllers and software for use
with 3D graphical applications used on workstations, PC's, and specialized
graphical and/or digital video design systems. Labtec's technology and products
provide simultaneous six degrees of freedom (6D) through all three possible
axes of motion, thereby enabling a user to intuitively manipulate 3D images in
real-time, as if the user were in the real world. Labtec believes its 3D motion
control technology is the most robust life-like 3D motion control user
interface available commercially. This product line represented 7.7% of
Labtec's gross sales in fiscal 2000.
Three-dimensional graphical capability, once found only in UNIX
workstations, is now widely available and used by computer-aided design
engineers, architectural engineers, industrial designers, film, video and
broadcast television animators, graphic artists, and video game developers.
Labtec believes the use of 3D graphical capability will be influenced by
Microsoft and Intel's present efforts to promote 3D graphical interfaces.
Personal Audio
Personal audio was Labtec's first product line beginning in 1982. This
innovative group of headphones and earphones provides quality audio technology
and lightweight, stylish designs through 23 products ranging from $3.99 to
$29.99. In 1999, Labtec produced the first high-quality headphone marketed
specifically for use with MP3 and other Internet-based audio. As a result, this
product line grew over 36.1% in fiscal 2000 and represented 11.4% of Labtec's
gross sales for the year.
Labtec is currently the second leading brand in the headphone and earphone
market in the U.S. retail sector. This line of products has been significantly
refreshed, including many new products with compelling designs and innovative
new packaging. The line has been segmented to specifically appeal to popular
customer profiles, specifically value-oriented, fashion-oriented, performance-
oriented, and eAudio-oriented customers. The eAudio family of products will
further efforts to capitalize on the emerging market for Internet audio based
on MP3 and other electronic music standards.
Computer Storage
In August 1999, Labtec acquired CRU, a leading supplier of computer storage
products. CRU's patented products include removable storage modules sold under
the brand name DataPort(TM), external drive enclosures, Redundant Array of
Independent Disks (RAID) subsystems, and associated mounting kits, cabling and
hardware.
CRU's DataPort(TM) product line has an installed-base of more than 1,000,000
units. Compatibility and patent issues help protect this base from competitive
pressures. Labtec is focused on growing sales further through increased product
development and greater distribution. In addition, recent events and their
corresponding media coverage have amplified security concerns throughout
government and industry, creating further opportunities for CRU's products with
their security and mobility features.
Customers
Labtec's customers consist of many of the largest retailers, master
distributors, and OEMs in the United States and Europe. Because Labtec's
customer base is so diverse, no customer accounted for more than 10% of net
sales during fiscal 2000. Ingram Micro accounted for 8.0%, 15.7%, and 14.6 % of
net sales in fiscal 2000, 1999 and 1998, respectively. However, the loss of
this customer or a substantial decrease in sales to such customer could have a
material adverse effect on Labtec's sales and operating results. In addition,
customers may demand price concessions from Labtec that could adversely affect
profit margins.
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Research and Development
Product development at Labtec begins with understanding customers' needs and
requirements. This process is typically accomplished through a combination of
primary market research; solicitation of suggestions from retail, master
distributor, and OEM partners; collaboration of industry partners; and internal
brainstorming sessions to anticipate future needs. In addition, technology
developments and the competitive environment are key inputs to Labtec's
development efforts.
Throughout the development process, Labtec involves internal engineers,
outside consultants, and its contract manufacturers to minimize the time to
market and to maximize the probability of a successful product. The product
development process can last up to 12 months for a brand new product, whereas a
derivative can take as little as three months.
Industrial, mechanical, electrical, and acoustical design is managed by
Labtec's in-house engineering team in Vancouver, WA. Labtec's software and
firmware engineers with capabilities in both UNIX and Windows NT are also
located in Vancouver, WA. The engineering team utilizes Labtec's Hong Kong
subsidiary to search for components that meet desired specifications. Labtec
believes this interaction between design engineers and component manufacturers
enables Labtec to develop and produce innovative, high-performance, low-cost
products. Final specification of all components and designs is the
responsibility of the United States-based engineering team.
During the years ended March 31, 2000, 1999, and 1998, Labtec expended $2.34
million, $1.72 million, and $1.51 million, respectively, on its research and
development efforts.
Patents and Proprietary Rights
Labtec relies on a combination of utility and design patents, trademarks,
copyrights, trade secrets, confidentiality procedures, and license arrangements
to establish and protect its proprietary technology.
Labtec has obtained 18 patents in the United States, Japan, Canada,
Australia, Germany, France, the United Kingdom, and other certain European
countries covering its core technologies relating to audio input and output,
and sensing input of its 3D motion controllers. Labtec also has 38 pending
patent applications in the United States and elsewhere related to its core
technologies. In addition, Labtec has four issued patents and four pending
patent applications covering other technologies.
In addition to the protection afforded by patent, trademark, copyright, and
trade secret laws, Labtec employees and consultants are generally required to
execute non-disclosure, non-use, and assignment agreements designed to protect
Labtec's intellectual property. Additionally, certain senior officers and
technical personnel are required to sign non-competition agreements.
Manufacturing
Labtec contracts its production requirements with a number of manufacturers
in Hong Kong, Taiwan, and China. From Labtec's Hong Kong office, Labtec
personnel supervise daily production activities, initiate placement of orders,
expedite shipments, arrange and track transportation, and provide quality
assurance. The 20-person team at Labtec's Hong Kong office plays an important
role in assuring a steady and timely supply of products to distribution centers
in the United States, Europe, and Canada.
Marketing and Distribution
Labtec's sales and distribution strategy is to offer a broad line of high-
technology, multimedia peripheral products through multiple channels of
distribution. Labtec currently sells through numerous retailers, master
distributors, and OEM accounts. In addition, Labtec sells through each of these
three channels both domestically and worldwide.
96
Retailers. Labtec maintains an extensive North American retail distribution
network, selling high-technology multimedia peripheral products to computer
superstores, consumer electronic chains, mass merchandisers, software
retailers, office superstores, and wholesale clubs. In fiscal 2000, Labtec's
retail sales grew 19.8% and represented 64.3% of Labtec's total gross revenues.
Master Distributors. Labtec serves many small to mid-sized accounts through
master distributors, including Avnet, Ingram Micro, Merisel, and Tech Data.
OEM Accounts. Retail and master distributor sales are complemented by
Labtec's sales in the OEM marketplace. Customers include primary computer
manufacturers, component manufacturers, Internet product suppliers, and
"bundlers"--firms which package Labtec's PC speakers, PC Voice Access products,
and 3D motion controllers with other hardware components or complete systems.
Labtec profitably serves such OEM customers as Compaq, Dell, Gateway,
Hewlett Packard, and IBM, though Labtec focuses its efforts on serving the
mid/small OEM market due to its growth potential. Labtec has grown its base of
OEM customers from less than 15 in 1995 to over 50 today. In fiscal 2000,
Labtec's sales through OEM distribution grew 23.3% and represented 19.9% of
total gross revenues.
International Sales. Labtec's international distribution includes more than
40 distributors serving 24 countries. Key retail customers include Byte (U.K.),
Dixon's (U.K.), Fnac (France), Media Market (Germany), Staples (U.K.), Virgin
Megastores (U.K.), and Vobis (Germany). The establishment of subsidiary sales
offices in the U.K. and Germany has enhanced Labtec's performance in Europe.
International gross sales grew 24.0% and represented 21.1% of total sales in
fiscal 2000.
Competition
The computer peripherals industry is intensely competitive and rapidly
changing. Labtec's competitors vary by product line. In the PC speaker
business, competitors include Altec Lansing Technologies, Inc. and Creative
Technology, Ltd. In the headset, microphone, and telephony markets into which
Labtec sells its PC Voice Access(TM) products, competitors include Plantronics,
Inc. and Telex Communications, Inc. In the 3D graphical applications market,
Labtec's competitors include LogiCad 3d GmbH and LogiCad 3d Inc., each
partially owned by Logitech. For the personal audio market, Labtec's primary
competitor is Sony Corporation of America. In the computer data storage market,
Labtec's competitors include Kingston Technology Company and Lian Li Industrial
Co., Ltd. Within each market, these competitors offer similar products to
Labtec and target the same customers as Labtec. Further, many of these
competitors are substantially larger and have significantly greater financial,
technical, and marketing resources than Labtec.
Employees
Labtec currently employs approximately 145 individuals, including 110 in the
United States and 35 who staff Labtec's U.K., Germany, and Hong Kong
subsidiaries. Labtec is not subject to any collective bargaining agreements,
has never been subject to a work stoppage, and believes that its employee
relations are generally good.
Properties
Labtec's corporate headquarters is located in 17,822 square feet of office
space in Vancouver, WA. Labtec also leases an 80,000 square foot warehouse
facility and a 6,000 square foot warehouse facility in Vancouver, WA. The
leases for the headquarters and the larger warehouse facility have terms
through April 2006. The lease for the smaller warehouse facility is a month-to-
month agreement. Labtec also leases a 10,000 square foot facility in Milpitas,
CA, with a term through March 31, 2001. In addition, Labtec maintains offices
in the U.K., Germany, and Hong Kong. Labtec's management believes its current
facilities are adequate to meet its requirements for the near term.
97
Legal Proceedings
Labtec filed a lawsuit in the Clark County Superior Court, State of
Washington, on or about December 9, 1999, against a competitor which has
infringed the intellectual property rights of Labtec related to the industrial
and electrical design of certain computer speakers. Labtec will vigorously
pursue protection of its intellectual property rights and believes it will
prevail in the lawsuit.
In an action related to the above lawsuit, Labtec filed a lawsuit in the
U.S. District Court of the Western District of Washington, on or about
September 15, 2000, against the manufacturer of the infringing computer speaker
products.
Labtec is engaged in litigation with a former sales representative firm
which was terminated for good cause. The former sales representative firm filed
the action in the Hennepin County District Court, State of Minnesota, on or
about December 20, 1999, and Labtec subsequently removed the action to the U.S.
District Court for the District of Minnesota on January 18, 2000. Labtec will
vigorously defend itself and believes it will prevail in the lawsuit. Upon
information and belief, Labtec believes that the former sales representative
firm has or will commence another action in the Hennepin County District Court,
State of Minnesota, asserting related claims which the former sales
representative firm failed to timely bring in the U.S. District Court.
Labtec's subsidiary, Labtec Europe Ltd., is engaged in litigation with a
licensing company claiming infringement of a patent for a certain
implementation of a flat panel speaker. The licensing company filed the action
in the United Kingdom High Court of Justice, Chancery Division, Patents Court,
on or about August 10, 2000. Labtec's subsidiary will vigorously defend itself
and believes it will prevail in the lawsuit.
Labtec is engaged in litigation with a former employee who voluntarily
terminated his employment. The former employee filed the action in the Superior
Court for the County of Middlesex, Commonwealth of Massachusetts, on or about
August 21, 2000. Labtec will vigorously defend itself against the former
employee's claims of national origin discrimination and other claims, and
believes it will prevail in the lawsuit.
Except as stated above, neither Labtec nor any of its properties are subject
to any pending material legal proceedings, and to the knowledge of Labtec, no
such legal proceedings are threatened.
98
Labtec's Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing in this prospectus starting at
page F-1.
This Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements that involve a number of
risks and uncertainties. The following are among the factors that could cause
actual results to differ materially from the forward-looking statements:
business conditions and growth in the personal computer and workstation
industries; general economies, both domestic and international; lower than
expected customer orders or variations in customer order patterns; competitive
factors, including increased competition, new product offerings by competitors
and pricing pressures; the availability of parts and components; changes in
product mix; resource constraints encountered in developing new products; and
product shipment interruptions due to manufacturing difficulties. The forward-
looking statements contained in the MD&A regarding industry trends, product
development and liquidity and future business activities should be considered
in light of these factors.
On August 20, 1999, Labtec completed the acquisition of CRU. As a result,
Labtec acquired all the outstanding shares of CRU for $13,145,956 in cash, and
$1,500,000 in debt. Concurrent with the acquisition of CRU, Labtec entered into
a $43,000,000 credit facility with a bank and also sold 312,500 shares of
common stock for $1,000,000. The net proceeds from the credit facility and
proceeds from the stock sale were used to retire outstanding debt and accrued
interest of $23,400,000; to pay issuance costs and loan fees on the new credit
facility; to pay for certain acquisition costs related to the purchase of CRU;
and to fund the purchase of CRU. CRU designs, develops, and markets computer
peripheral products principally in North America.
Results of Operations
The following table sets forth certain operating data as a percentage of net
sales for the years ended March 31, 2000, 1999 and 1998 and the nine month
periods ended December 31, 2000 and 1999
Nine Month
Period Ended Fiscal Year Ended
December 31, March 31,
-------------- -------------------
2000 1999 2000 1999 1998
------ ------ ----- ----- -----
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales......................... 59.3 60.1 60.0 63.3 63.5
------ ------ ----- ----- -----
Gross margin.......................... 40.7 39.9 40.0 36.7 36.5
Selling and marketing................. 19.5 18.6 19.0 23.3 20.0
General and administrative............ 5.2 6.1 6.6 8.5 6.4
Research and development.............. 2.1 2.6 2.6 2.7 2.5
Depreciation and amortization......... 2.7 5.9 5.0 6.2 5.1
------ ------ ----- ----- -----
Income (loss) from operations......... 11.2 6.6 6.8 (4.0) 2.5
Interest expense and other, net....... 4.8 4.7 4.6 5.5 5.4
------ ------ ----- ----- -----
Income (loss) before extraordinary
loss and income taxes................ 6.4 2.0 2.2 (9.5) (2.9)
Provision (benefit) for income taxes.. 1.7 1.0 0.9 (2.1) (0.0)
Extraordinary loss on extinguishment
of debt.............................. -- (1.6) (1.1) (0.4) (0.8)
------ ------ ----- ----- -----
Net income (loss)..................... 4.7 (0.6) 0.2 (7.8) (3.7)
====== ====== ===== ===== =====
Three and Nine Months Ended December 31, 2000 and December 31, 1999 (dollars in
thousands)
Net sales were $29,800 for the three months ended December 31, 2000 compared
to $27,379 for the three months ended December 31, 1999 and $78,067 for the
nine months ended December 31, 2000 compared to $64,566 for the nine months
ended December 31, 1999. The increase in net sales over the periods was
99
due primarily to the increase in sales for Labtec's personal audio and the PC
Voice Access(TM) line of products. Also, Labtec's North American retail
business increased substantially. Labtec's largest customer represented 10.5%
of sales for the nine months ended December 31, 2000, as compared to 9.4% of
sales for nine months ended December 31, 1999.
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- --------------------------
2000 1999 % Change 2000 1999 % Change
------- ------- -------- ------- ------- --------
(dollars in thousands) (dollars in thousands)
Net Sales............... $29,800 $27,379 9% $78,067 $64,566 21%
Cost of sales increased for the three and nine months ended December 31,
2000 compared to the three and nine months ended December 31, 1999 primarily as
a result of higher net sales. Cost of sales as a percentage of net sales
decreased for the three and nine months ended December 31, 2000 compared to the
three and nine months ended December 31, 1999 primarily as a result of the
change in product mix from a larger portion of higher cost products (speakers)
to a larger portion of lower cost products (PC Voice Access(TM) and personal
audio).
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- --------------------------
2000 1999 % Change 2000 1999 % Change
------- ------- -------- ------- ------- --------
(dollars in thousands) (dollars in thousands)
Cost of sales........... $17,579 $16,526 6% $46,287 $38,802 19%
As a % of net sales..... 59.0% 60.4% 59.3% 60.1%
Selling and marketing expenses increased by $530 to $5,286 for the three
months ended December 31, 2000 from $4,756 for the three months ended December
31, 1999. For the nine months ended December 31, 2000 selling and marketing
expenses increased by $3,215. As a percentage of net sales, selling and
marketing expenses increased slightly to 19.5% for the nine months ended
December 31, 2000 from 18.6% for the nine months ended December 31, 1999. The
dollar increase was primarily a result of additional sales personnel, higher
travel costs to support the increased sales volume, increased variable costs
(such as freight, commissions and coop advertising) related to the increased
sales volume, and increased marketing efforts in the North American retail
portion of the business to maintain market share in this very competitive
market.
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- --------------------------
2000 1999 % Change 2000 1999 % Change
------- ------- -------- ------- ------- --------
(dollars in thousands) (dollars in thousands)
Selling and marketing... $ 5,286 $ 4,756 11.1% $15,244 $12,029 26.7%
As a % of net sales..... 17.7% 17.4% 19.5% 18.6%
General and administrative expenses, which include Labtec's corporate
finance, legal, human resources, and administrative functions, decreased by
$154, or 9.5%, for the three months ended December 31, 2000 as compared to the
three months ended December 31, 1999. For the nine months ended December 31,
2000 general and administrative expenses increased by $68 from the nine months
ended December 31, 1999. As a percentage of net sales, general and
administrative expenses decreased to 5.2% for the nine months ended December
31, 2000 from 6.1% for the prior period. The dollar decrease for the three
months ended December 31, 2000, was due primarily to savings in labor costs
related to the downsizing of administrative personnel after the CRU
acquisition. As a percentage of net sales, general and administrative expenses
decreased primarily due to increased net sales.
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- --------------------------
2000 1999 % Change 2000 1999 % Change
------- ------- -------- ------- ------- --------
(dollars in thousands) (dollars in thousands)
General and
administrative......... $ 1,466 $ 1,620 (9.5)% $ 4,023 $ 3,955 1.7%
As a % of net sales..... 4.9% 5.9% 5.2% 6.1%
100
Research and development expenses decreased by $47 for the nine months ended
December 31, 2000 as compared to the nine months ended December 31, 1999,
primarily due to the decreased investment related to new product introductions,
which was partially offset by an increase in hiring of employees working in
research and development. As a percentage of net sales, research and
development decreased primarily due to increased net sales.
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------- ------------------------
2000 1999 % Change 2000 1999 % Change
---- ---- -------- ------ ------ --------
(dollars in
thousands) (dollars in thousands)
Research and development......... $535 $633 (15.5)% $1,659 $1,706 (2.8)%
As a % of net sales.............. 1.8% 2.3% 2.1% 2.6%
Depreciation dollar amounts increased slightly for the nine months ended
December 31, 2000 compared to the nine months ended December 31, 1999 as the
result of increased capital expenditures for computer equipment and software
and tooling/molds for new products being developed. Depreciation decreased as a
percentage of net sales primarily due to the increase in net sales.
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ ------------------------
2000 1999 % Change 2000 1999 % Change
------ ------ -------- ------ ------ --------
(dollars in thousands) (dollars in thousands)
Depreciation................. $ 416 $ 427 (2.6)% $1,196 $1,186 0.8%
As a % of net sales.......... 1.4% 1.6% 1.5% 1.8%
Amortization decreased in dollar amount in the three and nine months ended
December 31, 2000 compared to the three and nine months ended December 31,
1999. As a percentage of net sales, amortization decreased for the three and
nine months ended December 31, 1999 compared to the same periods ended December
31, 1999. This decrease was primarily the result of changing the Spacetec
amortization of goodwill from three years to 10 years. Goodwill (the purchase
price paid for Spacetec and CRU in excess of the fair value of net tangible
assets) is being amortized over 10 years for Spacetec and 20 years for CRU.
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ ------------------------
2000 1999 % Change 2000 1999 % Change
------ ------ -------- ------ ------ --------
(dollars in thousands) (dollars in thousands)
Amortization................. $ 299 $ 682 (56.2)% $ 898 $2,611 (65.6)%
As a % of net sales.......... 1.0% 2.5% 1.2% 4.0%
Interest expense increased in dollar amount for the three and nine months
ended December 31, 2000 compared to the three and nine months ended December
31, 1999. The increase was primarily the result of Labtec refinancing and
increasing its debt in conjunction with the purchase of CRU in August 1999.
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ ------------------------
2000 1999 % Change 2000 1999 % Change
------ ------ -------- ------ ------ --------
(dollars in thousands) (dollars in thousands)
Interest expense, net........ $1,232 $1,179 4.5% $3,673 $2,942 24.8%
As a % of net sales.......... 4.1% 4.3% 4.7% 4.6%
The provision for income taxes was $551 for the three months ended December
31, 2000, as compared to $371 for the same period in fiscal 2000. The provision
for income taxes was $1,327 for the nine months ended December 31, 2000, as
compared to $626 for the same period in fiscal 2000. The primary reason for the
increase was the increase in pre-tax income. During the three months ended
December 31, 2000, Labtec
101
reduced its deferred tax valuation allowance by the amount of $739 due to an
increase in the limitation on the amount of net operating losses that Labtec
may utilize in any one year.
Fiscal 2000 Compared to Fiscal 1999 (dollars in thousands)
Net sales for fiscal 2000 increased $26,239 to $90,512 from $64,273 for
fiscal 1999. The increase in net sales over the periods was primarily due to
the increase in sales for Labtec's PC Voice Access line of products, and the
addition of sales from the 3D motion control and data storage product lines.
Also, Labtec's North American retail and international business increased
substantially. Labtec's largest customer represented 8.7% of sales for fiscal
2000, as compared to 15.7% of sales for fiscal 1999.
Year Ended March 31,
--------------------------
2000 1999 % Change
------- ------- --------
(in thousands, except %)
Net sales......................................... $90,512 $64,273 41%
Cost of sales increased $13,686 to $54,344 in fiscal 2000 from $40,657 in
fiscal 1999. The increase over the periods was primarily the result of an
increase in net sales. As a percentage of net sales, cost of sales decreased to
60.0% for fiscal 2000 as compared to 63.3% for fiscal 1999. The decrease as a
percentage of net sales was attributable to a change in product mix to a larger
portion of lower cost products (PC Voice Access and 3D motion controllers) from
a larger portion of higher cost products (speakers), as well as to a higher
proportion of lower cost retail sales versus higher cost OEM sales.
Year Ended March 31,
--------------------------
2000 1999 % Change
------- ------- --------
(in thousands, except %)
Cost of Sales..................................... $54,344 $40,657 34%
As a % of net sales............................... 60.0% 63.3%
Selling and marketing expenses increased over the periods by $2,168 to
$17,161 from $14,994. As a percentage of net sales, selling and marketing
expenses decreased to 19.0% from 23.3%. The dollar increase was primarily a
result of additional sales personnel, higher travel costs to support the
increased sales volume, increased variable costs related to the increased sale
volume, and increased marketing efforts in the North American retail portion of
the business to maintain market share in this very competitive market.
Year Ended March 31,
--------------------------
2000 1999 % Change
------- ------- --------
(in thousands, except %)
Selling and marketing............................. $17,161 $14,993 14%
As a % of net sales............................... 19.0% 23.3%
General and administrative expenses, which include Labtec's corporate
finance, legal, human resources, and administrative functions, increased over
the periods by $512 to $5,969 from $5,457. As a percentage of net sales,
general and administrative expenses decreased to 6.6% from 8.5%. The dollar
increase was due primarily to building lease expense related to moving to a
larger warehouse, and to bonuses paid to Labtec's executives. As a percentage
of net sales, general and administrative expenses decreased primarily due to
increased net sales.
Year Ended March 31,
--------------------------
2000 1999 % Change
------- ------- --------
(in thousands, except %)
General and administrative........................ $ 5,969 $ 5,457 9%
As a % of net sales............................... 6.6% 8.5%
102
Research and development expenses increased over the periods by $627 to
$2,343 from $1,716,705, primarily due to the increased investment in the
development of new speaker and PC Voice Access(TM) products and to the
enhancement of current products. Also, the dollar increase reflects the
increased hiring of employees working in research and development.
Year Ended March 31,
------------------------
2000 1999 % Change
------ ------ --------
(in thousands, except
%)
Research and development............................ $2,343 $1,717 36%
As a % of net sales................................. 2.6% 2.7%
Depreciation increased over the periods by $70 to $1,514 from $1,444. The
increase was primarily the result of increased capital expenditures for
computer equipment, retail displays, and tooling and molds for new products
being developed. Depreciation decreased as a percentage of net sales primarily
due to the increase in net sales.
Year Ended March 31,
------------------------
2000 1999 % Change
------ ------ --------
(in thousands, except
%)
Depreciation........................................ $1,514 $1,444 5%
As a % of net sales................................. 1.7% 2.2%
Amortization increased over the periods by $387 to $2,945 from $2,538. This
entire increase was the result of amortization of goodwill associated with the
Spacetec merger and the acquisition of CRU. Goodwill (the purchase price paid
for Spacetec and CRU in excess of the fair value of net tangible assets) is
being amortized over 10 years for Spacetec and 20 years for CRU, which resulted
in an increase in the dollar amount. However, amortization decreased as a
percentage of net sales primarily due to the increase in net sales.
Year Ended March 31,
------------------------
2000 1999 % Change
------ ------ --------
(in thousands, except
%)
Amortization........................................ $2,945 $2,538 16%
As a % of net sales................................. 3.3% 3.9%
Interest expense increased over the periods by $598 to $4,115 from $3,517,
primarily as the result of Labtec's refinancing and increasing its debt in
conjunction with the purchase of CRU. Net interest expense as a percentage of
net sales decreased due to the increase in net sales.
Year Ended March 31,
------------------------
2000 1999 % Change
------ ------ --------
(in thousands, except
%)
Interest expense, net............................... $4,115 $3,516 17%
As a % of net sales................................. 4.5% 5.5%
The provision for income taxes was $776 for fiscal 2000, as compared to a
benefit for income taxes of $1,370 in fiscal 1999. The primary reason for the
provision in fiscal 2000 compared to a benefit in fiscal 1999 was the pre-tax
income of $1,968.
In fiscal 2000 there was an extraordinary loss of $1,016, after tax benefit
of $677, which was due to the write off of debt issuance costs related to the
extinguishment of debt in August 1999.
Fiscal 1999 Compared to Fiscal 1998 (dollars in thousands)
Net sales for fiscal 1999 increased $4,160, or 6.9%, to $64,273 for 1999
from $60,113 for 1998. The increase in net sales over the period was primarily
due to the increase in sales for Labtec's European operation.
103
Labtec's largest customer represented 15.7% of sales for fiscal 1999, as
compared to 14.6% of sales for fiscal 1998.
Cost of sales increased $2,494, or 6.5%, to $40,657 in fiscal 1999 from
$38,163 in fiscal 1998. The increase over the periods was primarily the result
of an increase in net sales. As a percentage of net sales, the cost of sales
decreased slightly to 63.3% for fiscal 1999 as compared to 63.5% for fiscal
1998. The decrease as a percentage of net sales is attributable to a change in
product mix to a larger portion of lower cost products (PC Voice Access(TM) and
personal audio) from a larger portion of higher cost products (speakers), as
well as to a higher proportion of lower cost retail sales versus higher cost
OEM sales.
Selling and marketing expenses increased over the periods by $2,984, or
24.9%, to $14,994 from $12,009. As a percentage of net sales, selling and
marketing expenses increased to 23.3% from 20.0%. The dollar increase and the
increase as a percentage of net sales are due primarily to costs incurred
relating to the introduction of the new PC Voice Access(TM) products and
increased sales efforts in the European and United States markets.
General and administrative expenses, which include Labtec's corporate
finance, legal, human resources, and administrative functions, increased over
the periods by $1,600, or 41.5%, to $5,457 from $3,857. As a percentage of net
sales, general and administrative expenses increased to 8.5% from 6.4%. The
dollar increase and the increase as a percentage of net sales are due primarily
to costs related to the Spacetec merger, compensation expense on Common Stock
sold to management, and severance costs incurred by Labtec in connection with
the termination of three Company officers during 1999.
Research and development expenses increased over the periods by $210, or
13.9%, to $1,717 from $1,507, primarily due to the increased investment in the
development of new speaker and PC Voice Access(TM) products and the enhancement
of current products.
Depreciation increased over the periods by $501, or 53.1%, to $1,444 from
$943. The increase was primarily the result of increased capital expenditures
for tooling, molds, equipment, and retail displays during fiscal 1999 and 1998.
Amortization increased over the periods by $408, or 19.2%, to $2,538 from
$2,129. This entire increase was the result of amortization of goodwill
associated with the Spacetec merger.
Interest expense increased over the periods by $263, or 8.1%, to $3,517 from
$3,254, primarily due to the increased borrowing on Labtec's line of credit.
The benefit for income taxes was $1,370 for fiscal 1999, as compared to a
provision for income taxes of $13,555 in fiscal 1998. The primary reason for
the large benefit in fiscal 1999 was the loss of $6,042.
In fiscal 1999 there was an extraordinary loss of $271, after tax benefit of
$78, which was due to the write off of debt issuance costs related to the
extinguishment of debt on February 17, 1999.
Liquidity and Capital Resources (dollars in thousands)
As of December 31, 2000, Labtec had $1,456 in cash and cash equivalents and
working capital of $14,426. The working capital balance increase from March 31,
2000, was primarily due to the increase in accounts receivable and inventories,
which was partially offset by the increase in borrowing on the line of credit
and accounts payable.
Net cash used for operating activities was $899 for the nine months ended
December 31, 2000, compared to cash provided by operating activities of $3,140
for the same period in fiscal 2000. The increase in net cash used for by
operating activities was primarily due to the increase in accounts receivable
and inventories, which was offset by the increase in net income over the prior
year net loss and the increase in accounts payable.
104
Net cash used in investing activities was $1,410 for the nine months ended
December 31, 2000, compared to net cash used in investing activities of $14,950
in fiscal 2000. The decrease was primarily due to the purchase of CRU in the
period during fiscal 2000.
Financing activities provided net cash of $2,384 for the nine months ended
December 31, 2000, principally due to the increase in short-term borrowing,
which was partially offset by the repayment of long-term debt.
At December 31, 2000, the long-term loans were accruing interest at the
LIBOR rate plus 3.00--3.50%, the subordinated note at 12%, the line of credit
at the prime rate plus 1.50%, and the promissory notes at 10% and 6%,
respectively. In December 1999, Labtec entered into an interest rate swap
agreement with its primary lender in order to fix the interest rate on a
portion of its long-term debt. At December 31, 2000, the amount of debt subject
to the fixed rate was $11,725, for which the rate was 9.44%.
Labtec believes that its existing cash and revolving line of credit,
together with future funds from operations, will satisfy its need for working
capital and other cash requirements for at least the next twelve-month period.
Disclosure Regarding Private Securities Litigation Reform Act of 1995
From time to time, Labtec, through its management, may make forward-looking
public statements in press releases or other communications, such as statements
concerning then expected future revenues or earnings or alliances, product
development, and commercialization, as well as other estimates relating to
future operations. Forward-looking statements may be in reports filed under the
Securities Exchange Act of 1934, as amended, in press releases, or in oral
statements made with the approval of an authorized executive officer. The words
or phrases "believe," "will likely result," "are expected to," "will continue,"
"is anticipated," "estimate," or similar expressions are intended to identify
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933,
as enacted by the Private Securities Litigation Reform Act of 1995.
Labtec wishes to caution readers not to place undue reliance on these
forward-looking statements which speak only as of the date on which they are
made. Various factors could affect Labtec's financial or other performance, and
could cause Labtec's actual results for future periods to differ materially
from any opinions or statements expressed with respect to future periods or
events in any current statement. These facts include, but are not limited to:
business conditions and growth in the personal computer and workstation
industries and general economies, both domestic and international; dependence
on a limited number of retail customers; dependence on a limited number of
source suppliers; lower than expected customer orders or variations in customer
order patterns due to changes in demand for customers' products and customers'
inventory levels; competitive factors, including increased competition, new
product offerings by competitors and pricing pressures; changes in product mix;
dependence on proprietary technology; assertion of intellectual property rights
by third parties; technological difficulties and resource constraints
encountered in developing new products; product shipment interruptions and
other factors discussed herein and in Labtec's other filings with the
Securities and Exchange Commission.
Labtec will not undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any forward-
looking statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events
which may cause management to reevaluate such forward-looking statements.
105
Change In Independent Accountants
On February 8, 2000, Labtec dismissed PricewaterhouseCoopers LLP as its
independent public accountants. The decision to dismiss PricewaterhouseCoopers
was approved by Labtec's board of directors.
PricewaterhouseCoopers' report on the financial statements of Labtec for
each of the past two fiscal years did not contain any adverse opinion or
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principle.
In connection with the audits by PricewaterhouseCoopers of Labtec's
financial statements for its two most recent fiscal years, and the subsequent
interim period through February 8, 2000, there were no disagreements with
PricewaterhouseCoopers on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers,
would have caused PricewaterhouseCoopers to make reference to the subject
matter of the disagreements in connection with its audit report with respect to
financial statements of Labtec for the two most recent fiscal years. The term
"disagreement" is utilized in accordance with Instruction 4 to Item 304 of
Regulation S-K.
During Labtec's two most recent fiscal years, and the subsequent interim
period through February 8, 2000, there were no "reportable events," as that
term is defined in Item 304(a)(1)(v) of Regulation S-K.
On February 8, 2000, Labtec selected Grant Thornton LLP as Labtec's
independent public accountants. The decision to change auditors was approved by
Labtec's board of directors.
During the two most recent fiscal years and the subsequent interim period
through February 8, 2000, neither Labtec nor anyone on behalf of Labtec
consulted Grant Thornton regarding either the application of accounting
principles to a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on the financial statements of
Labtec or any matter that was either the subject of a disagreement, within the
meaning of Item 304(a)(1)(iv) of Regulation S-K, or any reportable event, as
that term is defined in Item 304(a)(1)(v) of Regulation S-K.
106
LABTEC'S MANAGEMENT
Directors and Executive Officers
Terms of Directors
Prior to Labtec's 1999 Annual Meeting of Stockholders, the directors were
divided into three classes. At each annual meeting, the term of one class would
expire. Directors in each class served three-year terms. As of the date hereof,
the directors whose terms do not expire at the 2000 Annual Meeting of
Stockholders to be held in 2001 will serve out the remaining year of their
respective terms and commencing at the 2001 Annual Meeting of Stockholders all
directors will be elected to terms to expire at the next subsequent annual
meeting of stockholders and until their respective successors are chosen and
qualified.
The directors and executive officers of Labtec, their ages and present
positions with Labtec are as follows:
Name Age Position with Labtec
---- --- --------------------
Robert G. Wick................... 38 President, Chief Executive Officer and
Director
Marc J. Leder.................... 38 Co-Chairman, Senior Vice President--
Finance, Chief Financial Officer,
Treasurer, and Director
Rodger R. Krouse................. 38 Co-Chairman, Clerk, and Director
Clarence E. Terry................ 54 Vice President and Director
Bradley A. Krouse................ 34 Director
Joseph Pretlow................... 32 Director
George R. Rea.................... 62 Director
Patrick J. Sullivan.............. 44 Director
Information About Directors
The following is a brief summary of the background of each director:
Robert G. Wick has been President and a director of Labtec since February
1999. In August 1999, Mr. Wick became Chief Executive Officer of Labtec. Prior
thereto, Mr. Wick had been employed by Labtec Corporation, Labtec's wholly-
owned subsidiary ("Labtec Corporation"), since November 1998, and became
Labtec's President in December 1998. Prior thereto, Mr. Wick spent four years
as Vice President of Finance and Logistics at Weiser Lock, a division of Masco
Corporation. In addition, Mr. Wick is a director of JTECH Communications, Inc.
Marc J. Leder has been Co-Chairman, Senior Vice President--Finance, Chief
Financial Officer, Treasurer and a director of Labtec since February 1999. Mr.
Leder has been a Managing Director of Sun Capital Partners, Inc. since May
1995, prior to which he was employed by Lehman Brothers, Inc. since 1987, most
recently as a Senior Vice President. In addition, Mr. Leder is a director of
Nailite International, Inc. and The Atlas Companies, Inc.
Rodger R. Krouse has been Co-Chairman, Clerk, and a director of Labtec since
February 1999. Mr. Krouse has been a Managing Director of Sun Capital Partners,
Inc. since May 1995, prior to which he was employed by Lehman Brothers, Inc.
since 1984, most recently as a Senior Vice President. In addition, Mr. Krouse
is a director of Nailite International, Inc., The Atlas Companies, Inc. and
World Airways, Inc. Mr. Krouse is the brother of Bradley Krouse.
Clarence E. Terry has been a director of Labtec since February 2000. Mr.
Terry has been a Managing Director of Sun Capital Partners, Inc. since
September 1, 1999. Prior thereto, Mr. Terry was Vice President of Consumer
Products at Rainbird Sprinkler Manufacturing Corporation, where he was employed
from 1973 through August 1999.
107
Bradley A. Krouse has been a director of Labtec since February 1999. Mr.
Krouse has been an attorney at Klehr, Harrison, Harvey, Branzburg & Ellers LLP
in Philadelphia since 1995, and a partner since 1997. Mr. Krouse was an
associate at Ballard Spahr Andrews & Ingersoll in Philadelphia from 1990 to
1994. Mr. Krouse is the brother of Rodger Krouse.
Joseph Pretlow has been a director of Labtec since February 1999. Mr.
Pretlow joined Bain Capital in 1992 and has been a principal since 1996. Prior
to joining Bain Capital, Mr. Pretlow spent two years at Lehman Brothers, Inc.
in investment banking, where he specialized in mergers and acquisitions and
corporate finance transactions for retail companies. Previously, he worked as a
consultant at Sibson & Company. Mr. Pretlow is a director of Artisan
Entertainment and Bentley's Luggage.
George R. Rea has been a director of Labtec since September 1997. Mr. Rea
had been the Acting Chief Executive Officer of Labtec from July 1998 to
February 1999. Mr. Rea was a consultant and investor in Labtec since 1997.
Prior thereto, Mr. Rea was Executive Vice President of Conner Peripherals Inc.
from 1992 until his retirement in 1994. In addition, Mr. Rea is a director of
Imaging Technologies International LLC.
Patrick J. Sullivan has been a director of Labtec since February 1997. Mr.
Sullivan has extensive consumer electronics and computer industry experience,
having served as Vice President of the Merchandising Group of Digital Equipment
Corporation, a computer manufacturer, since 1993.
Pursuant to a stockholder agreement dated September 28, 2000 among Labtec,
The KB Mezzanine Fund, II, L.P., or KBMF, and Sun MultiMedia Partners, L.P.,
KBMF has agreed that, until a promissory note in the aggregate principal amount
of $4.5 million issued by Labtec to it has been paid in full, KBMF will vote
all its shares of Labtec common stock in favor of the election of any designee
of Sun MultiMedia Partners to the Labtec board of directors. KBMF is entitled
to accelerate payment of the promissory note on closing of the offer.
Information About Non-Director Executive Officers
The following is a brief summary of the background of each executive officer
of Labtec who is not also a director of Labtec:
Name Age Position with Labtec
---- --- --------------------
Michael Kalb.......................... 30 Vice President
Senior Vice President--3D Motion
Joyce Ouellette....................... 42 Control
Senior Vice President--Operations
Yudhi Patel........................... 46 and Logistics
Senior Vice President and General
Russell B. Weed....................... 37 Counsel
Senior Vice President--Technology
Todd Yuzuriha......................... 47 and Engineering
The following is a brief summary of the background of each non-director
executive officer:
Michael Kalb has been a vice president of Labtec since February 2000. Since
March 1999, Mr. Kalb has served as a vice president of Sun Capital Partners,
Inc. From January 1998 to March 1999, Mr. Kalb served as a Vice President of
Unicapital Corporation. From 1993 to December 1997, Mr. Kalb served as a Senior
Associate of Goldsmith, Agio, Helms Securities, Inc.
Joyce Ouellette has been acting General Manager of Labtec's 3D Motion
Control division since January 1999. From 1991 to January 1999, Ms. Ouellette
served as Senior Vice President of Sales of Labtec's 3D Motion Control
division.
Yudhi Patel has been Senior Vice President, Operations and Logistics since
March 1999. From 1996 to 1999, Mr. Patel was employed by Tektronix, Inc. as a
New Products Material Manager leading the strategic sourcing of major
components for key new products. From 1990 to 1996, Mr. Patel was Director of
Operations at Weiser Lock, a division of Masco Corporation.
108
Russell B. Weed has been Senior Vice President, General Counsel since
December 1999. In addition to providing legal counsel to Labtec, Mr. Weed is
engaged in business development for Labtec. From August 1999 to December 1999,
Mr. Weed was a solo practitioner at the Law Office of Russell B. Weed, P.C.
From October 1996 to August 1999, Mr. Weed was an associate at Sussman Shank
Wapnick Kaplan & Stiles LLP, a law firm. From October 1991 to October 1996, Mr.
Weed was an associate at McEuen Grisvold Rankan & Stewart LLP, a law firm.
Todd Yuzuriha has been Senior Vice President--Technology and Engineering
since April 1999. From Agust 1991 to March 1999, Mr. Yuzuriha was Senior
Director at Sharp Microelectronics, where he directed Sharp's ventures in flat
panel display development.
Compensation Committee Interlocks and Insider Participation
As of March 31, 2000, the Compensation Committee consisted of Bradley A.
Krouse, Rodger R. Krouse, Marc J. Leder, George R. Rea and Patrick Sullivan.
Rodger R. Krouse is Co-Chairman and Clerk of Labtec, and Marc J. Leder is Co-
Chairman, Senior Vice President--Finance, Chief Financial Officer and Treasurer
of Labtec.
Compensation of Directors
Directors receive no compensation for their services. The Labtec board of
directors, in its discretion, may grant options to the directors from time to
time under the 1997 Plan, which was approved by the stockholders.
Meetings of the Board
During the fiscal year ended March 31, 2000, the Labtec board of directors
held seven meetings. Each incumbent director, except Joseph Pretlow, attended
at least 75% (i) of the aggregate number of meetings of the Labtec board of
directors that occurred during his directorship and (ii) of meetings of all
committees of the Labtec board of directors on which such directors served in
fiscal 2000.
Committees of the Board
The Compensation Committee, of which Messrs. B. Krouse, R. Krouse, Leder,
Rea, and Sullivan are currently members, acts for the Labtec board of directors
with respect to Labtec's compensation practices and implementation thereof. The
Compensation Committee's primary functions are to set or amend the compensation
of any employee of the Vice President level and above or whose annual
compensation is equal to or exceeds $100,000. The Compensation Committee held
one meeting in fiscal 2000.
The Labtec board of directors does not have a standing nominating committee.
The Audit Committee, of which Messrs. B. Krouse, R. Krouse, Leder, Rea and
Sullivan are currently members, is responsible for providing the Labtec board
of directors with an independent review of the financial health of Labtec and
its financial controls and reporting. The Audit Committee did not meet in
fiscal 2000. The Audit Committee currently plans to hold its first meeting with
Grant Thornton LLP, the independent auditors of Labtec, in 2001 to discuss the
scope of the audit for the year ended March 31, 2001.
The functions of the Audit Committee include reviewing Labtec's financial
reporting process, systems of internal control and audit process, as well as
Labtec's process for monitoring compliance with the laws, regulations and
Labtec's code of conduct. The Committee also recommends independent auditors to
the Labtec board of directors, reviews and approves the planned scope of the
annual audit, proposed fee arrangements and the results of the annual audit,
reviews the independence of the independent auditors, approves all assignments
to be performed by the independent auditors, reviews transactions between the
Company and its officers and directors and instructs the independent auditors,
as deemed appropriate, to undertake special assignments.
109
Executive Compensation
Summary Compensation Table
The following table provides summary information concerning the cash
compensation and certain other compensation paid, awarded, or accrued by Labtec
to Labtec's President and four most highly compensated executive officers who
were serving as executive officers at the end of fiscal 2000 and whose salary
and bonus exceeded $100,000 for the 2000 fiscal year, for services in all
capacities to Labtec during the 2000, 1999 and 1998 fiscal years.
Annual Compensation Long-Term Compensation
------------------------------ -----------------------------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options (#) Compensation ($)
------------------ ---- -------- -------- ------------ ----------- ----------------
Robert G. Wick......... 2000(a) $197,917 $207,602 -- -- --
President and Chief
Executive 1999(b) $ 43,750 -- -- 71,500 --
Officer, and Director 1998 -- -- -- -- --
Gregory Jones (c)...... 2000 $150,833 $ 71,553 -- -- $ 1,150(d)
Senior Vice President, 1999 $162,116 $ 3,583 -- -- $57,515(e)
Worldwide Sales 1998 $ 7,500 -- -- 48,501(f) --
Joyce Ouellette........ 2000 $150,000 $ 92,198 -- -- $ 1,536(d)
Senior Vice President, 1999 $110,000 $ 32,594 -- 3,333 --
3D Motion Control 1998 $ 98,300 $ 54,545 -- 4,917 --
Yudhi Patel............ 2000 $128,000 $ 39,000 -- 47,500 $ 975(d)
Senior Vice President, 1999 $ 7,640 -- -- -- --
Operations and
Logistics 1998 -- -- -- -- --
Todd Yuzuriha ......... 2000 $126,583 $ 39,000 -- 22,500 $ 975(d)
Senior Vice President, 1999 -- -- -- -- --
Technology and
Engineering 1998 -- -- -- -- --
--------
(a) Mr. Wick became Chief Executive Officer of Labtec in August 1999.
(b) Mr. Wick became President of Labtec in February 1999.
(c) Mr. Jones employment with Labtec terminated on April 14, 2000.
(d) Represents Labtec's contribution to 401(k) plan account of the executive
officer.
(e) Represents the excess of the fair market value of shares of Labtec common
stock purchased by Mr. Jones pursuant to a stock purchase program, over the
purchase price of those shares.
(f) Mr. Jones' employment by Labtec, and his options to purchase 48,501 shares
of Labtec common stock granted under the 1997 Plan, terminated on April 14,
2000.
110
Option Grants in Last Fiscal Year
The table below describes the stock options granted to each of the executive
officers named in the summary compensation table during Labtec's fiscal year
ended March 31, 2000.
Potential Realizable Value
at Assumed Annual Rates
Number of % of Total of Stock Price Appreciation
Securities Options Granted for Option Terms
Underlying to Employees Exercise or Expiration ----------------------------
Name Options Granted in Fiscal 2000 Base Price Date 5% ($) 10% ($)
------------------------ --------------- --------------- ----------- ---------- ------------- --------------
Yudhi Patel............. 47,500(a) 35.4% $10.00 5/28/09 $ 298,725 $ 757,028
Todd Yuzuriha........... 22,500(b) 16.7% $10.00 5/28/09 $ 141,501 $ 358,592
--------
(a) The options are exercisable as to 11,875 shares commencing on each of the
first four anniversaries of the commencement of Mr. Patel's employment with
Labtec on March 8, 1999.
(b) The options are exercisable as to 5,625 shares commencing on each of the
first four anniversaries of the commencement of Mr. Yuzuriha's employment
with Labtec on April 12, 1999.
Option Exercises and Fiscal Year-End Values
The table below describes the options exercised by the executive officers
named in the summary compensation table during Labtec's fiscal year ended March
31, 2000 and the year-end value of these executives' options.
The merger agreement provides that Logitech and Labtec will take all actions
necessary to provide that each outstanding option to acquire shares of Labtec
common stock granted under or governed by Labtec's Amended and Restated 1997
Stock Option Plan, Labtec's Amended and Restated Director Option Plan and
Labtec's Amended and Restated 1993 Option Plan, whether or not such options are
then exercisable and vested will, effective as of the consummation of the offer
or the effective time of the merger (depending on the terms of the plan under
which the option was granted) (a) become fully vested and fully exercisable by
the holder of the option, (b) automatically convert into an option to purchase
$11.00 in cash and the fraction of a Logitech ADS per Labtec share of common
stock received by holders of Labtec common stock who exchanged their Labtec
shares in the offer, and (c) have an exercise price equal to the exercise price
of the option per share of Labtec common stock immediately before the offer or
the merger. However, all options, if not exercised, will terminate at the
effective time of the merger.
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the-Money Options
Acquired Value Options at Fiscal Year End at Fiscal Year End
Name on Exercise Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable(a)
------------------------ ----------- ------------ -------------------------- ----------------------------
Robert G. Wick.......... 0 $ 0 21,625/94,875 $0/$0
Gregory Jones (b)....... 0 $ 0 24,251/24,250 $67,938/$67,938
Joyce Ouellette......... 0 $ 0 8,250/0 $0/$0
Yudhi Patel............. 0 $ 0 11,875/35,625 $0/$0
Todd Yuzuriha........... 0 $ 0 5,625/16,875 $0/$0
--------
(a) Based on the closing price of $7.25 per share of Common Stock at March 31,
2000.
(b) Mr. Jones' employment by Labtec, and his options to purchase 48,501 shares
of Labtec stock granted under the 1997 Plan, terminated on April 14, 2000.
Employment Agreements
Labtec has no employment agreements with any of the executive officers named
on the above summary compensation table.
111
LABTEC'S PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of Labtec common stock as of February 20, 2001 by (1) persons known by Labtec
to be beneficial owners of more than 5% the Labtec common stock, (2) the
executive officers named in the Summary Compensation Table set forth below, (3)
the current directors of Labtec and (4) all current executive officers and
directors of Labtec as a group and the percentage of shares of Labtec common
stock represented thereby. See--"Option Exercises and Fiscal Year--End Values"
for a discussion on the merger agreement's treatment of currently unvested and
unexercisable options.
Number of
Shares
Beneficially Percent Beneficially
Name and Address of Beneficial Owner(a) Owned(b) Owned
--------------------------------------- ------------ --------------------
5% Stockholders:
Sun Multimedia Partners, L.P.(c)(d) ........ 2,291,483 56.5%
5355 Town Center Road, Suite 802
Boca Raton, FL 33486
The KB Mezzanine Fund II, L.P............... 354,622 8.7%
405 Lexington Avenue, 21st Floor
New York, NY 10174
Directors:
Bradley A. Krouse(e)........................ 5,000 *
Rodger R. Krouse(c)(d)(e)(f)................ 2,391,783 58.9%
Marc J. Leder(c)(d)(e)(f)................... 2,391,783 58.9%
Joseph Pretlow(e)........................... 5,000 *
George R. Rea (g)........................... 19,834 *
Patrick J. Sullivan(h)...................... 19,334 *
Clarence E. Terry(i)........................ 0 *
Robert G. Wick(j)........................... 0 *
Named Executive Officers:
Gregory Jones............................... 6,859 *
Joyce Ouellette(k).......................... 11,583 *
Yudhi Patel(l).............................. 11,875 *
Todd Yuzuriha(m)............................ 5,625 *
Directors and executive officers as a group
(12 persons)(n)............................ 2,476,893 60.2%
--------
* Less than one percent.
(a) Except as otherwise indicated, the address of each individual listed is c/o
Labtec Inc., 1499 S.E. Tech Center Place, Suite 350, Vancouver, Washington
98683
(b) Except as otherwise indicated in these footnotes, the persons and entities
named in the table have sole voting and investment power with respect to
all shares beneficially owned by them. Includes shares of Labtec common
stock underlying exercisable options. The inclusion herein of any shares of
Labtec common stock deemed beneficially owned does not constitute an
admission of beneficial ownership of those shares.
(c) Includes 354,622 shares owned by The KB Mezzanine Fund II, L.P. as to which
Sun Multimedia Partners, L.P., Sun Multimedia Advisors, Inc., Marc J. Leder
and Rodger R. Krouse exercise shared voting and dispositive power under a
stockholder agreement dated September 28, 2000 among Labtec, KB Mezzanine
and Sun Multimedia Partners. The stockholder agreement is described above
under the caption "Information About Directors." Sun Multimedia Partners,
L.P., Sun Multimedia Advisors, Inc., Marc J. Leder and Rodger R. Krouse
disclaim beneficial ownership of the shares owned by KB Mezzanine.
112
(d) Sun Multimedia Advisors is the general partner of Sun Multimedia Partners,
and Marc J. Leder and Rodger R. Krouse each owns 50% of Sun Multimedia
Advisors. As a result, Sun Multimedia Advisors, Marc J. Leder and Rodger R.
Krouse may be deemed to be the beneficial owner of shares beneficially
owned by Sun Multimedia Partners, with shared voting and dispositive power
with respect to those shares.
(e) Includes 5,000 shares of Labtec common stock issuable upon exercise of
vested and exercisable options granted under the 1997 Plan. Does not
include 5,000 shares of Labtec common stock issuable upon exercise of
unvested and unexercisable options granted under the 1997 Plan that will
become vested and exercisable in connection with the consummation of the
transactions contemplated by the merger agreement.
(f) Includes (1) 1,936,861 shares of Labtec common stock owned by Sun
Multimedia Partners and (2) 95,300 shares of Labtec common stock owned by
Sun Venture Capital Partners I, L.P. Sun Multimedia Partners, L.P., Sun
Multimedia Advisors, Inc., Marc J. Leder and Rodger R. Krouse disclaim
beneficial ownership of the shares owned by KB Mezzanine. Sun Venture
Advisors, Inc. is the general partner of Sun Venture Capital Partners I,
and Marc J. Leder and Rodger R. Krouse each owns 50% of Sun Venture
Advisors. As a result, Sun Venture Advisors, Marc J. Leder and Rodger R.
Krouse may be deemed to be the beneficial owner of shares beneficially
owned by Sun Venture Capital Partners I, with shared voting and dispositive
power with respect to those shares.
(g) Includes 10,000 shares of Labtec common stock issuable upon exercise of
vested and exercisable options granted under the 1997 Plan, 3,334 shares of
Labtec common stock issuable upon exercise of vested and exercisable
options granted under the 1995 Plan, and 6,500 shares of Labtec common
stock issuable upon exercise of vested and exercisable options granted
under the 1993 Plan. Does not include 5,000 shares of Labtec common stock
issuable upon exercise of unvested and unexercisable options granted under
the 1997 Plan that will become vested and exercisable in connection with
the consummation of the transactions contemplated by the merger agreement.
(h) Includes 10,000 shares of Labtec common stock issuable upon exercise of
vested and exercisable options granted under the 1997 Plan, 3,334 shares of
Labtec common stock issuable upon exercise of vested and exercisable
options granted under the 1995 Plan, and 5,000 shares of Labtec common
stock issuable upon exercise of vested and exercisable options granted
under the 1993 Plan. Does not include 5,000 shares of Labtec common stock
issuable upon exercise of unvested and unexercisable options granted under
the 1997 Plan that will become vested and exercisable in connection with
the consummation of the transactions contemplated by the merger agreement.
(i) Does not include 35,000 shares of Labtec common stock issuable upon
exercise of unvested and unexercisable options granted under the 1997 Plan
that will become vested and exercisable in connection with the consummation
of the transactions contemplated by the merger agreement.
(j) Does not include 78,250 shares of Labtec common stock issuable upon
exercise of unvested and unexercisable options granted under the 1997 Plan
that will become vested and exercisable in connection with the consummation
of the transactions contemplated by the merger agreement.
(k) Includes 8,250 shares of Labtec common stock issuable upon exercise of
vested and exercisable options granted under the 1993 Plan. Does not
include 10,000 shares of Labtec common stock issuable upon exercise of
unvested and unexercisable options granted under the 1997 Plan that will
become vested and exercisable in connection with the consummation of the
transactions contemplated by the merger agreement.
(l) Includes 11,875 shares of Labtec common stock issuable upon exercise of
vested and exercisable options granted under the 1997 Plan. Does not
include 35,625 shares of Labtec common stock issuable upon exercise of
unvested and unexercisable options granted under the 1997 Plan that will
become vested and exercisable in connection with the consummation of the
transactions contemplated by the merger agreement.
113
(m) Includes 5,625 shares of Labtec common stock issuable upon exercise of
vested and exercisable options granted under the 1997 Plan. Does not
include 16,875 shares of Labtec common stock issuable upon exercise of
unvested and unexercisable options granted under the 1997 Plan that will
become vested and exercisable in connection with the consummation of the
transactions contemplated by the merger agreement.
(n) Includes 30,875 shares of Labtec common stock issuable upon exercise of
vested and exercisable options granted under the 1997 Plan, 6,668 shares of
Labtec common stock issuable upon exercise of vested and exercisable
options granted under the 1995 Plan, and 19,750 shares of Labtec common
stock issuable upon exercise of vested and exercisable options granted
under the 1993 Plan. Does not include 204,500 shares of Labtec common stock
issuable upon exercise of unvested and unexercisable options granted under
the 1997 Plan that will become vested and exercisable in connection with
the consummation of the transactions contemplated by the merger agreement.
114
LABTEC'S TRANSACTIONS WITH RELATED PARTIES
On April 11, 1997, the Compensation Committee of the Labtec board of
directors repriced certain outstanding stock options granted to then-current
employees, including options held by Dennis T. Gain, a former Director,
President and Chief Executive Officer of Labtec.
On July 18, 1997, Labtec completed a tender offer for the outstanding shares
of SSL, a stockholder of Labtec. At the time of the tender offer, Mr. Jagelman,
Chairman of the Board of SSL, was a director and stockholder of Labtec.
Pursuant to the tender offer, Labtec exchanged (i) two shares of the common
stock for fifteen shares of SSL and (ii) one share of common stock for every
option to purchase twelve shares of SSL. Concurrent with the completion of the
tender offer, all shares of common stock owned by SSL at the time of the tender
offer were canceled and the license agreement between Labtec and SSL was
terminated. As a result of this transaction, the number of outstanding shares
of Labtec did not change.
On October 7, 1997, Labtec entered into a ten-year management agreement with
Sun Multimedia Advisors, Inc., the general partner of Sun Multimedia Partners,
L.P., which is Labtec's majority stockholder. Marc J. Leder and Rodger R.
Krouse each own 50% of the outstanding capital stock of Sun Multimedia
Advisors, Inc. Pursuant to the terms of the management agreement, Sun
Multimedia Advisors, Inc. receives a management fee of $500,000 per annum, and
receives advisory fees associated with merger and acquisition activities of
Labtec, which included an advisory fee of $391,000 it received with respect to
its participation in the structuring and negotiation of the acquisition by
Labtec (then known as Spacetec IMC Corporation) of Labtec Corporation (then
known as Labtec Inc.) and an advisory fee of $360,000 it received with respect
to its participation in the structuring and negotiation of Labtec's acquisition
of Connector Resources Unlimited, Inc. See "Interests of Certain Persons."
Mr. Gain entered into a Separation Agreement with Labtec on March 18, 1998.
The Separation Agreement provided that Labtec shall pay to or on behalf of Mr.
Gain: (i) severance payments in an aggregate of $12,000 per month for the next
twenty months, (ii) the health insurance premium for his then-existing health
coverage for the next twenty-four months and (iii) a $1,000 automobile
allowance for the next twenty months. In addition, all incentive stock options
previously granted to Mr. Gain, other than 12,000 options of an option grant on
April 29, 1994, converted into non-qualified stock options and Mr. Gain
exercised and sold 12,000 incentive stock options on May 22, 1998. Further,
Labtec sold an automobile purchased by it in March 1997 to Mr. Gain for
$28,471, $11,929 below the fair market value of the automobile. The Labtec
board of directors agreed, subject to its fiduciary and other legal duties, to
nominate Mr. Gain for election to the Labtec board of directors at the
1998 annual meeting of stockholders of Labtec. In connection therewith, Mr.
Gain agreed to return all proprietary information of Labtec, release all claims
and causes of action relating to his employment with Labtec, and to execute a
non-competition, non-disclosure and non-solicitation agreement with Labtec.
On June 5, 1998, Labtec contributed its Open Motion technology and certain
assets related thereto having a net book value of approximately $50,000 to 3D
Open Motion, LLC, which was established by Mr. Gain, majority owner of 3D Open
Motion, in exchange for an initial 20% non-voting interest in 3D Open Motion,
which has since been reduced to 14.6% as a result of subsequent equity
financing in which Labtec did not participate. In connection with the
transaction, Labtec received an option, exercisable beginning January 1, 2000
through May 31, 2000 upon payment of $250,000 to 3D Open Motion, to obtain a
50% discount from the most favorable terms offered to any other customer on all
commercial products developed by 3D Open Motion. Such option was not exercised
by Labtec. Simultaneously with Labtec's contribution, Mr. Gain contributed
291,667 shares of Labtec's common stock to 3D Open Motion. Labtec repurchased
the 291,667 shares on June 17, 1998 from 3D Open Motion pursuant to its stock
buyback plan at $2.40 per share, a 20% discount from the closing price of
Labtec's common stock on the Nasdaq National Market on June 3, 1998, the date
on which Labtec and 3D Open Motion agreed to the terms of the joint venture.
Effective October 20, 1998, Labtec entered into a consulting agreement with
American Asset Management, a management consulting firm wholly owned by Julian
Rubinstein, who served as a director of Labtec from October 1999 until December
1999, to assist in reviewing and reorganizing Labtec's operations. The
agreement, which terminated March 2000, provided for payment of $30,000 per
month. The agreement also contained non-disclosure provisions, assignment of
inventions and provisions regarding a twelve-month non-compete with certain
competitors and a twelve-month non-solicitation of employees.
115
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements are
presented to illustrate the effects of the acquisition on the historical
financial position and operating results of Logitech and the historical
financial position and proforma operating results for Labtec. The pro forma
statements were prepared as if the acquisition had been completed as of April
1, 1999 for statement of operations purposes and as of December 31, 2000 for
balance sheet purposes. The pro forma operating results for Labtec for the
fiscal year ended March 31, 2000 combine the historical results of Labtec for
that period with the results of operations of Connector Resources Unlimited,
Inc. ("CRU") for the period from April 1, 1999 to August 19, 1999. CRU was
acquired by Labtec on August 20, 1999 in a purchase business combination. The
pro forma statements have been derived from, and should be read in conjunction
with, the historical financial statements, including the notes thereto, of each
of Logitech and Labtec. For Logitech, those financial statements are included
in Logitech's Report of Foreign Issuer on Form 6-K for the nine months ended
December 31, 2000, and its Annual Report on Form 20-F for the fiscal year ended
March 31, 2000. For Labtec, those financial statements are included with this
prospectus.
The pro forma statements include adjustments, which are based upon
preliminary estimates, to reflect the allocation of purchase consideration to
the acquired assets and liabilities of Labtec. The final allocation of the
purchase consideration will be determined after the completion of the merger
and will be based on appraisals and a comprehensive final evaluation of the
fair value of Labtec's tangible assets acquired, liabilities assumed,
identifiable intangible assets and goodwill at the time of the acquisition. The
final determination of tangible and intangible assets may result in
depreciation and amortization expenses that are different from the preliminary
estimates of these amounts. To the extent that a portion of the purchase price
is allocated to in-process research and development as is anticipated, a charge
will be recognized for the period in which the acquisition occurs. Any change
to depreciation and amortization expenses may be material to Logitech's results
of operations.
The pro forma statements are provided for illustrative purposes only and do
not purport to represent what the actual consolidated results of operations or
the consolidated financial position of Logitech would have been had the
acquisition occurred on the dates assumed, nor are they necessarily indicative
of future consolidated results of operations or financial position.
The unaudited pro forma combined financial statements should be read in
conjunction with the historical consolidated financial statements and notes
thereto of Logitech, and other financial information pertaining to Logitech
including "Logitech Management's Discussion and Analysis of Financial Condition
and Results of Operations" incorporated by reference, and the historical
financial statements and notes thereto of Labtec, and other financial
information pertaining to Labtec including "Labtec Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risk Factors"
included herein.
116
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT DECEMBER 31, 2000
(in thousands)
Historical
---------------- Pro Forma Pro Forma
Logitech Labtec Adjustments Combined
-------- ------- ----------- ---------
ASSETS
------
Current assets:
Cash and cash equivalents.......... $ 15,266 $ 1,456 $ -- A $ 16,722
Accounts receivable, net........... 179,129 26,305 -- 205,434
Inventories, net................... 121,256 24,398 -- 145,654
Deferred taxes and other current
assets............................ 28,707 2,688 -- 31,395
-------- ------- -------- --------
Total current assets............ 344,358 54,847 399,205
Investments......................... 19,661 -- -- 19,661
Property, plant and equipment, net.. 39,453 2,498 -- 41,951
Deferred taxes...................... -- 1,953 2,600 B 4,553
Debt issuance costs................. -- 1,957 (1,757) C 200
Goodwill, net....................... 3,311 16,140 69,826 D 89,277
Intangible assets, net.............. 8,282 -- 13,550 D 21,832
Other assets........................ 990 228 -- 1,218
-------- ------- -------- --------
Total assets.................... $416,055 $77,623 $ 84,219 $577,897
======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Line-of-credit..................... $ -- $16,647 $(16,647) E $ --
Short-term debt.................... 6,707 2,736 84,600 F 94,043
Accounts payable................... 117,944 17,114 -- 135,058
Accrued and other liabilities...... 67,224 3,924 -- 71,148
-------- ------- -------- --------
Total current liabilities....... 191,875 40,421 67,953 300,249
Long term debt...................... 3,068 25,400 (6,200) E 22,268
Other liabilities................... 524 -- -- 524
Deferred taxes...................... -- -- 5,149 G 5,149
-------- ------- -------- --------
Total liabilities............... 195,467 65,821 66,902 328,190
-------- ------- -------- --------
Total shareholders' equity.......... 220,588 11,802 17,317 H 249,707
-------- ------- -------- --------
Total liabilities and
shareholders' equity........... $416,055 $77,623 $ 84,219 $577,897
======== ======= ======== ========
See accompanying notes to unaudited pro forma combined financial statements
117
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MARCH 31, 2000
(in thousands, except per share data)
CRU Labtec
Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma
Labtec Adjustments Labtec Logitech Adjustments Combined
---------- ----------- --------- ---------- ----------- ---------
Revenues................ $90,512 $5,828 $96,340 $615,664 $ -- $712,004
Cost of revenues........ 54,344 3,254 57,598 408,969 -- 466,567
------- ------ ------- -------- ------- --------
Gross profit............ 36,168 2,574 38,742 206,695 -- 245,437
------- ------ ------- -------- ------- --------
Operating expenses:
Marketing and selling.. 17,161 635 17,796 102,957 -- 120,753
Research and
development........... 2,343 -- 2,343 31,666 -- 34,009
General and
administrative........ 10,428 681 11,109 31,102 4,536 I 46,747
------- ------ ------- -------- ------- --------
Total operating
expenses............ 29,932 1,316 31,248 165,725 4,536 201,509
------- ------ ------- -------- ------- --------
Income from operations.. 6,236 1,258 7,494 40,970 (4,536) 43,928
Interest (expense) and
other, net............. (4,268) (9) (4,277) (3,415) (4,516)J (12,208)
------- ------ ------- -------- ------- --------
Income before income
taxes.................. 1,968 1,249 3,217 37,555 (9,052) 31,720
Provision for income
taxes.................. 776 496 1,272 7,511 (1,806)K 6,977
------- ------ ------- -------- ------- --------
Income before
extraordinary item .... $ 1,192 $ 753 $ 1,945 $ 30,044 $(7,246)O $ 24,743
======= ====== ======= ======== ======= ========
Income before
extraordinary item per
share:
Basic.................. $ .32 -- $ .53 $ 7.55 -- $ 6.07
Diluted................ $ .32 -- $ .52 $ 6.87 -- $ 5.51
Income before
extraordinary item per
ADS: (N)
Basic.................. -- -- -- $ .76 -- $ .61
Diluted................ -- -- -- $ .69 -- $ .55
Shares used in per share
calculation:
Basic.................. 3,684 -- 3,684 3,977 99 L 4,076
Diluted................ 3,715 -- 3,715 4,376 112 L 4,488
Other Financial Data:
EBITDA (M)............. -- -- $12,032 $ 57,733 -- $ 69,765
Cash flow provided by
(used in):
Operating activities
..................... -- -- $ 3,599 $ 32,866 -- $ 36,465
Investing activities.. -- -- $(1,269) $(19,941) -- $(21,210)
Financing activities.. -- -- $11,532 $ (5,281) -- $ 6,251
See accompanying notes to unaudited pro forma combined financial statements
118
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000
(in thousands, except per share data)
Historical
----------------- Pro Forma Pro Forma
Logitech Labtec Adjustments Combined
-------- ------- ----------- ---------
Revenues............................. $563,963 $78,067 $ -- $642,030
Cost of revenues..................... 372,183 46,287 -- 418,470
-------- ------- ------- --------
Gross profit......................... 191,780 31,780 -- 223,560
-------- ------- ------- --------
Operating expenses:
Marketing and selling............... 98,172 15,244 -- 113,416
Research and development............ 26,760 1,659 -- 28,419
General and administrative.......... 25,274 6,117 4,713 I 36,104
-------- ------- ------- --------
Total operating expenses.......... 150,206 23,020 4,713 177,939
-------- ------- ------- --------
Income from operations............... 41,574 8,760 (4,713) 45,621
Interest (expense) and other income,
net................................. 1,243 (3,780) (3,387)J (5,924)
-------- ------- ------- --------
Income before income taxes........... 42,817 4,980 (8,100) 39,697
Provision for income taxes........... 8,563 1,327 (1,853)K 8,037
-------- ------- ------- --------
Net income........................... $ 34,254 $ 3,653 $(6,247)O $ 31,660
======== ======= ======= ========
Net income per share:
Basic............................... $ 8.15 $ .91 -- $ 7.36
Diluted............................. $ 7.29 $ .91 -- $ 6.58
Net income per ADS: (N)
Basic............................... $ .82 -- -- $ .74
Diluted............................. $ .73 -- -- $ .66
Shares used in per share calculation:
Basic............................... 4,202 4,013 101 L 4,303
Diluted............................. 4,697 4,024 112 L 4,809
Other Financial Data:
EBITDA (M).......................... $ 60,257 $10,744 -- $ 70,967
Cash flow provided by (used in):
Operating activities............... $(22,411) $ (899) -- $(23,310)
Investing activities............... $(15,923) $(1,410) -- $(17,333)
Financing activities............... $ 6,908 $ 2,384 -- $ 9,292
See accompanying notes to unaudited pro forma combined financial statements
119
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRO FORMA PRESENTATION
On February 7, 2001, Logitech announced it had executed an agreement to
acquire Labtec in a transaction to be accounted for as a purchase. Under the
terms of the merger agreement, each outstanding share of Labtec common stock at
the closing of the offer or the effective time of the merger will be exchanged
for $11.00 in cash and a fraction of a Logitech ADS, with the fraction being
between .2234 and .2730 depending on Logitech's 20-day trailing closing average
bid price on the date ending three business days prior to the actual expiration
of the offer. Assuming the acquisition was consummated on February 7, 2001, the
stock and option holders of Labtec would have received approximately 1,118,000
Logitech ADSs and $50.0 million in cash based on an assumed per ADS 20-day
average of $28.49 and an assumed exchange ratio of .2457 Logitech ADSs for each
share of Labtec common stock, and assuming the exercise of all outstanding
Labtec options with an exercise price below $18.00. The estimated purchase
price is based on shares and options to purchase shares of Labtec common stock
outstanding at February 7, 2001. The actual number of Logitech ADSs and options
to be issued by Logitech will depend on the actual price of Logitech ADSs as
determined under the merger agreement and the actual number of shares of Labtec
common stock and options outstanding on the closing date. The average market
price of Logitech ADSs of $31.34 is based on the average closing market price
as of February 7, 2001, the date the proposed merger was announced, and for the
two trading days prior to and two trading days subsequent to February 7, 2001.
Under Labtec's option plans, outstanding options will accelerate in full at the
closing date. The options were valued by applying the Black-Scholes valuation
model.
The purchase consideration is estimated as follows (in thousands):
ADS shares....................................................... $ 30,908
Assumption of Labtec options..................................... 1,511
Cash payment to stockholders..................................... 50,049
Cash payment for debt immediately payable........................ 22,847
Estimated transaction costs...................................... 3,200
--------
Total consideration............................................ $108,515
========
Based on the timing of the closing of the transaction, the finalization of
the valuation and purchase price allocation, finalization of the integration
plans and other factors, the final purchase price allocation and related
depreciation and amortization expenses may differ materially from the purchase
price allocation presented in these pro forma combined financial statements. A
change in the values assigned to long-term tangible andintangible assets,
liabilities and in-process research and development ("IPR&D") could result in a
reallocation of the purchase price and a change in the related research and
development expenses, and depreciation and amortization expense, which could
materially affect net income. The statement of operations effects of these
changes will depend on the nature and amount of the assets or liabilities
adjusted. The purchase price allocation, which is subject to change based on
Logitech's final analysis, is as follows (in thousands):
Tangible assets acquired....................................... $ 59,526
Deferred tax assets............................................ 2,600
Intangible assets acquired:
Patents and core technology.................................. 2,900
Existing technology.......................................... 3,800
Trademark/tradename.......................................... 4,100
Workforce.................................................... 2,750
Goodwill..................................................... 85,966
In-process research and development............................ 3,300
Liabilities assumed (includes approximately $21 million in
assumed debt)................................................. (51,278)
Deferred tax liabilities....................................... (5,149)
--------
Total consideration........................................ $108,515
========
120
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
The tangible assets acquired represent the estimated fair value of the net
tangible assets of Labtec Inc. as of December 31, 2000.
In estimating the value of the patents and core technology and trademark and
tradename, the relief from royalty method was employed. The relief from royalty
method is based on the assumption that in lieu of ownership, a company would be
willing to pay a royalty in order to exploit the related benefits of the
assets. Therefore, a portion of the company's earnings, equal to the after-tax
royalty that would have been paid for the use of the patents and core
technology, can be attributed to the company's possession of the patents and
core technology and trademark and tradename. The patents and core technology
and trademark and tradename will each be amortized on a straight-line basis
over their estimated useful lives of four years and five years respectively.
The value of the workforce was derived by estimating the costs to replace
the existing employees, including recruiting, hiring and training costs for
each category of employee. The value of the workforce will be amortized on a
straight-line basis over its estimated useful life of four years.
Where development projects have reached technological feasibility, they will
be classified as existing technology. The existing technology will be amortized
on a straight-line basis over its estimated useful life of four years.
Where the development projects have not reached technological feasibility
and have no future alternative uses, they will be classified as in-process
research and development ("IPR&D"), which will be expensed upon the
consummation of the merger. The value of IPR&D was determined by estimating the
expected cash flows from the projects once commercially viable, discounting the
net cash flows back to their present valued and then applying a percentage of
completion to the calculated value as defined below.
. Net cash flows. The net cash flows from the identified project are based
on estimates of revenue, cost of sales, research and development costs,
selling, general and administrative costs and income taxes from those
projects. These estimates are based on the assumptions mentioned below.
The research and development costs included in the model reflect costs to
sustain projects, but exclude costs to bring in-process projects to
technological feasibility. The estimated revenue is based on projections
of Labtec Inc. for each in-process project. These projections are based
on its estimates of market size and growth, expected trends in technology
and the nature and expected timing of new product introductions by Labtec
Inc. business and its competitors.
Projected gross margins and operating expenses approximate Labtec Inc.'s
recent historical levels.
. Discount rate. Discounting the net cash flows back to their present
valued is based on the industry weighted average cost of capital
("WACC"). The industry WACC is approximately 16%. The discount rate used
in discounting the net cash flows from IPR&D is 28%, a 12 basic point
increase from the industry WACC. This discount rate is higher than the
industry WACC due to inherent uncertainties surrounding the successful
development of the IPR&D, market acceptance of the technology, the useful
life of such technology and the uncertainty of technological advances
which could potentially impact the estimates describes above.
. Percentage of completion. The percentage of completion for each project
was determined using costs incurred to date on each project as compared
to the remaining research and development to be completed to bring each
project to technological feasibility. The percentage of completion varied
by individual project ranging from 25% to 65%.
If the projects discussed above are not successfully developed, the sales
and profitability of the combined company may be adversely affected in future
periods.
121
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
Goodwill represents the excess of the purchase consideration over the values
of the net tangible and identifiable intangible assets acquired and liabilities
assumed and will be amortized over its estimated useful life of 20 years. A
proposed FASB Statement of Financial Standards on Business Combinations would
eliminate amortization of goodwill.
2. PRO FORMA ADJUSTMENTS
The pro forma statements give effect to the allocation of the total purchase
consideration to the assets and liabilities of Labtec based on their respective
fair values and to the amortization of intangible assets at their fair values
over the respective useful lives. The following pro forma adjustments have been
made to the Unaudited Pro Forma Combined Financial Statements:
(A) To record the net cash proceeds of zero arising from short-term borrowings
under a term note payable of $84,600,000 (see footnote F), reduced by
payments to be made upon closing. The payments comprise financing fees of
$200,000, repayment of existing Labtec long-term debt of $6,200,000,
repayment of Labtec line of credit of $16,647,000, payment of obligations
under other Labtec contracts of $5,800,000, payment of expenses of the
acquisition of $5,704,000 including $2,504,000 of expenses incurred by
Labtec, and payment of cash consideration of $50,049,000. The payments due
under other Labtec contracts relate to settlement payments to terminate a
management contract with a major shareholder of Labtec of $4,100,000 and
payments of obligations to selling shareholders' arising from Labtec's
reverse acquisition in 1997; these payments are triggered by and contingent
upon the completion of the acquisition of Labtec by Logitech.
(B) To adjust Labtec's deferred tax assets to the amount expected to be
realizable.
(C) To eliminate deferred debt issuance costs.
(D) To record intangible assets at their preliminary estimated fair values
comprising patent and core technology of $2,900,000, existing technology of
$3,800,000, trademark and tradename of $4,100,000, workforce of $2,750,000
and goodwill of $85,966,000 and to eliminate Labtec's goodwill of
$16,140,000.
(E) To reflect repayment of Labtec's existing line of credit and certain long
term debt payable upon closing.
(F) To reflect borrowings of $84.6 million under a Senior Multi-currency Bullet
Term Loan Credit Facility ("Bridge Loan") with Credit Suisse. The Bridge
Loan is for acquisition costs of up to $100 million, and is repayable on
the earlier of one year from the closing date or March 31, 2002. The Bridge
Loan will bear interest at an annualized rate of LIBOR plus 0.925 percent
for the first six month period, LIBOR plus 1.30 percent for months seven,
eight and nine, and LIBOR plus 1.80 percent for months ten, eleven and
twelve.
(G) To reflect the income tax effect of pro forma adjustments for non-goodwill
intangible assets at a tax rate of 38%.
(H) To eliminate Labtec historical shareholders' equity, record the issuance of
common stock as purchase consideration of $32,419,000, and reduce
shareholders' equity for in-process research and development costs of
$3,300,000. The pro forma combined shareholders' equity, after appropriate
reclassifications, comprises the following (in thousands):
Registered shares................................................ $ 31,033
Additional paid-in capital....................................... 121,497
Treasury shares.................................................. (1,185)
Retained earnings................................................ 115,320
Other comprehensive loss......................................... (16,958)
--------
Total shareholders' equity..................................... $249,707
========
122
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
(I) To record the incremental amortization of goodwill and other identifiable
intangible assets related to the merger as if the transaction occurred on
April 1, 1999. Goodwill is amortized over twenty years and other intangible
assets are amortized over four to five years. The $3.3 million amount
preliminarily allocated to in-process research and development has not been
included in the Unaudited Pro Forma Combined Statement of Operations as it
is nonrecurring, but is included as a reduction of shareholders' equity in
the Unaudited Pro Forma Combined Balance Sheet. This amount will be
expensed in the period the acquisition is consummated. A proposed FASB
Statement of Financial Accounting Standards on Business Combinations would
eliminate goodwill amortization. Pro forma amortization of goodwill was
$8,174,000 and $6,208,000 for the year ended March 31, 2000 and the nine
month period ended December 31, 2000, respectively.
(J) To reflect incremental interest expense resulting from borrowings under the
Bridge Loan, less interest expense incurred under Labtec's existing line of
credit and certain long term debts payable upon closing.
(K) To reflect the income tax effect of pro forma adjustments for non-goodwill
intangible assets and interest expense at a tax rate of 38%.
(L) Shares used to calculate pro forma basic earnings per share were determined
by adding approximately 98,000 unrestricted shares to be issued in exchange
for the outstanding Labtec shares to Logitech's weighted average ADS shares
outstanding (10 ADS = approximately 1 share). Shares used to calculate pro
forma diluted earnings per share were calculated by adding the assumed
number of additional shares of options to be issued determined based on the
treasury method to Logitech's weighted average ADS share equivalents
outstanding, if dilutive.
(M) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. We believe EBITDA is a widely accepted financial indicator of
a company's historical ability to service and/or incur indebtedness.
However, EBITDA should not be considered as an alternative to net income,
as a measure of operating results or as a measure of liquidity in
accordance with generally accepted accounting principles. Additionally,
EBITDA as defined herein may not be comparable to similarly titled measures
reported by other companies.
(N) Each ADS equivalent share represents one tenth of one registered share.
(O) Due to their non-recurring nature, the effects of the write-off of Labtec's
debt issuance costs of $1,757,000, the recording of Labtec's acquisition
related expenses of $2,504,000, the payment of obligations under other
Labtec contracts of $5,800,000, and the expensing of acquired in-process
research and development of $3,300,000 have been excluded from the pro
forma statements of operations. However they are reflected in the pro forma
balance sheet. Also, the extraordinary loss of $1,016,000 on extinguishment
of debt previously recorded in Labtec's statement of operations for the
year ended March 31, 2000, was excluded from the pro forma statement of
operations.
123
EXPERTS
The consolidated financial statements of Logitech, incorporated in this
prospectus by reference from Logitech's Annual Report on Form 20-F for the year
ended March 31, 2000 have been so incorporated by reference in reliance on the
report of PricewaterhouseCoopers SA, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Labtec as of March 31, 2000 and for the year
then ended included in this prospectus have been so included in reliance on the
report of Grant Thornton LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The financial statements of Labtec as of March 31, 1999 and for the two
years then ended included in this prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The financial statements of Connector Resources Unlimited Inc. as of March
31, 1999 and for the year then ended included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
VALIDITY OF LOGITECH REGISTERED SHARES
The validity of the registered shares represented by the Logitech ADSs
offered by this prospectus will be passed upon by Lenz & Staehelin, our Swiss
counsel.
124
INDEX TO FINANCIAL STATEMENTS
Page
----
LABTEC INC.
Report of Independent Certified Public Accountants ....................... F-2
Report of Independent Accountants......................................... F-3
Consolidated Balance Sheets at March 31, 1999 and 2000.................... F-4
Consolidated Statement of Operations and Comprehensive Income (Loss) for
the years ended March 31, 1998, 1999 and 2000............................ F-5
Consolidated Statement of Changes in Shareholders' Equity (Deficit) for
the years ended March 31, 1998, 1999 and 2000............................ F-6
Consolidated Statement of Cash Flows for the years ended March 31, 1998,
1999 and 2000............................................................ F-7
Notes to Consolidated Financial Statements................................ F-8
CONNECTOR RESOURCES UNLIMITED, INC.
Report of Independent Accountants......................................... F-22
Consolidated Balance Sheets at March 31, 1999 and June 30, 1999........... F-23
Consolidated Statement of Operations for the year ended March 31, 1999 and
for the three months ended June 30, 1999 and 1998........................ F-24
Consolidated Statement of Changes in Shareholders' Equity for the year
ended March 31, 1999 and for the three months ended June 30, 1999........ F-25
Consolidated Statement of Cash Flows for the year ended March 31, 1999 and
for the three months ended June 30, 1999 and 1998........................ F-26
Notes to Consolidated Financial Statements................................ F-27
LABTEC INC.
Unaudited Consolidated Balance Sheets at March 31, 2000 and December 31,
2000..................................................................... F-33
Unaudited Consolidated Statement of Operations and Comprehensive Income
(Loss) for the three and nine months ended December 31, 1999 and 2000.... F-34
Unaudited Consolidated Statement of Cash Flows for the nine months ended
December 31, 1999 and 2000............................................... F-35
Notes to Unaudited Consolidated Financial Statements...................... F-36
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Labtec Inc.
We have audited the accompanying consolidated balance sheets of Labtec Inc.
and its subsidiaries as of March 31, 2000 and the related consolidated
statements of operations and comprehensive income (loss), changes in
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Labtec Inc. and its subsidiaries as of March 31, 2000, and the consolidated
results of their operations and their consolidated cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States.
/s/ Grant Thornton LLP
Portland, Oregon
May 15, 2000
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Labtec Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and comprehensive income (loss), of
changes in shareholders' equity (deficit) and of cash flows present fairly, in
all material respects, the financial position of Labtec Inc. and its
subsidiaries (the Company) at March 31, 1999 and the results of their
operations and their cash flows for each of the two years in the period ended
March 31, 1999, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion express above.
/s/ PricewaterhouseCoopers LLP
May 21, 1999
F-3
LABTEC INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
March 31,
------------------
2000 1999
-------- --------
ASSETS
------
Current assets
Cash..................................................... $ 1,373 $ 768
Accounts receivable, net................................. 22,120 17,890
Interest and other receivables........................... 16 211
Income taxes receivable.................................. -- 595
Inventories.............................................. 13,955 10,662
Prepaid expenses......................................... 171 160
Current deferred income taxes............................ 1,854 830
-------- --------
Total current assets................................... 39,489 31,116
Property and equipment--net................................ 2,332 2,330
Noncurrent deferred income taxes........................... 1,953 1,893
Debt issuance costs........................................ 2,277 1,984
Other noncurrent assets.................................... 180 253
Goodwill, net.............................................. 17,038 9,392
-------- --------
$ 63,269 $ 46,968
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Lines of credit.......................................... $ 10,761 $ 4,000
Current portion of long-term debt........................ 2,900 --
Accounts payable......................................... 9,411 8,492
Income taxes payable..................................... 185 --
Accrued payroll and benefits............................. 1,359 1,589
Accrued interest......................................... 256 223
Other accrued expenses................................... 1,539 1,877
-------- --------
Total current liabilities.............................. 26,411 16,181
Long-term debt............................................. 28,747 26,086
-------- --------
55,158 42,267
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $.01, 1,000 shares authorized
and no shares outstanding at March 31, 2000 or 1999..... -- --
Common stock, par value $.01, 25,000 shares authorized,
4,013 and 6,904 shares issued and outstanding at March
31, 2000 and 1999....................................... 40 69
Additional paid-in capital............................... 23,806 20,551
Common stock subscription receivable..................... -- (26)
Accumulated deficit...................................... (15,688) (15,864)
Accumulated other comprehensive income (loss):
Cumulative foreign currency translation adjustment..... (47) (29)
-------- --------
8,111 4,701
-------- --------
$ 63,269 $ 46,968
======== ========
The accompanying notes are an integral part of these statements.
F-4
LABTEC INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
Years Ended March 31,
-------------------------
2000 1999 1998
------- ------- -------
Net sales........................................... $90,512 $64,273 $60,113
Cost of sales....................................... 54,344 40,657 38,163
------- ------- -------
Gross profit........................................ 36,168 23,616 21,950
------- ------- -------
Operating expenses:
Selling and marketing............................. 17,161 14,993 12,009
General and administrative........................ 5,969 5,457 3,857
Research and development.......................... 2,343 1,717 1,507
Depreciation...................................... 1,514 1,444 943
Amortization of goodwill.......................... 2,945 2,176 1,768
Amortization of noncompete agreement.............. -- 362 362
------- ------- -------
29,932 26,149 20,446
------- ------- -------
Income (loss) from operations....................... 6,236 (2,533) 1,504
Interest expense, net............................... 4,115 3,516 3,254
Other nonoperating (income) expense................. 153 (8) 2
------- ------- -------
Income (loss) before extraordinary loss and income
taxes.............................................. 1,968 (6,041) (1,752)
Provision (benefit) for income taxes................ 776 (1,370) 14
------- ------- -------
Income (loss) before extraordinary loss............. 1,192 (4,671) (1,766)
Extraordinary loss on extinguishments of debt, less
applicable income tax benefit of $677, $78, and
$263, respectively................................. (1,016) (271) (511)
------- ------- -------
Net income (loss)............................... $ 176 $(4,942) $(2,277)
======= ======= =======
Net income (loss) per share before extraordinary
loss
Basic............................................. $ .32 $ (1.87) $ (1.00)
======= ======= =======
Diluted........................................... $ .32 $ (1.87) $ (1.00)
======= ======= =======
Net income (loss) per share
Basic............................................. $ .05 $ (1.98) $ (1.29)
======= ======= =======
Diluted........................................... $ .05 $ (1.98) $ (1.29)
======= ======= =======
Comprehensive income (loss)
Net income (loss)................................... $ 176 $(4,942) $(2,277)
Foreign currency translation adjustment............. (18) (29) --
------- ------- -------
Comprehensive income (loss)..................... $ 158 $(4,971) $(2,277)
======= ======= =======
The accompanying notes are an integral part of these statements.
F-5
LABTEC INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Deficit)
Years ended March 31, 2000, 1999 and 1998
(In thousands)
Preferred Accumulated
stock Common stock Additional Common stock other
-------------- ---------------- paid-in subscription Accumulated comprehensive
Shares Amount Shares Amount capital receivable deficit income Total
------ ------- -------- ------ ---------- ------------ ----------- ------------- --------
Balance at March 31,
1997................... 34 $ 2,500 79 $ 1 $ 7,924 $(171) $ (3,588) $-- $ 6,666
Payments on common
stock subscription.... -- -- -- -- -- 36 -- -- 36
Preferred stock
dividend.............. -- -- -- -- -- -- (435) -- (435)
Preferred stock
converted to common
stock................. (34) (2,500) 34 1 2,499 -- -- -- --
Compensation expense on
stock options
granted............... -- -- -- -- 73 -- -- -- 73
Exercise of warrants
(including
cancellation of "put"
rights)............... -- -- 5 -- 1,902 -- -- -- 1,902
Exercise of stock
options............... -- -- 19 -- 1,873 -- -- -- 1,873
8.5823 to 1 stock
split................. -- -- 1,039 10 (10) -- -- -- --
Repurchase and
retirement of common
stock................. -- -- (1,017) (10) (14,261) -- (3,557) -- (17,828)
Issuance of common
stock................. -- -- 1,050 10 5,900 -- -- -- 5,910
Issuance of shares to
subordinated debt
holder -- -- 50 1 281 -- -- -- 282
20 to 1 stock split.... -- -- 23,906 239 (239) -- -- -- --
Net loss............... -- -- -- -- -- -- (2,277) -- (2,277)
--- ------- -------- ----- -------- ----- -------- ---- --------
Balance at March 31,
1998................... -- -- 25,165 252 5,942 (135) (9,857) -- (3,798)
Repurchase and
retirement of common
stock ................ (1,217) (12) (183) 135 -- -- (60)
Translation
adjustment............ -- -- -- -- -- (29) (29)
Issuance of common
stock to management... 1,032 10 1,062 (26) -- -- 1,046
Reduction to common
stock outstanding
related to merger..... (11,133) (111) 111 -- -- -- --
Issuance of shares for
Spacetec IMC
Corporation
acquisition........... 6,847 68 12,735 -- -- -- 12,803
Common stock issued for
the Spacetec employee
stock purchase plan... 18 -- 4 -- -- -- 4
Dividend declared to
former Labtec owners.. -- -- -- -- (1,065) -- (1,065)
Stock options granted
to Spacetec
employees............. -- -- 742 -- -- -- 742
1 to 3 reverse stock
split................. (13,808) (138) 138 -- -- -- --
Net loss............... -- -- -- -- (4,942) -- (4,942)
-------- ----- -------- ----- -------- ---- --------
Balance at March 31,
1999................... 6,904 69 20,551 (26) (15,864) (29) 4,701
Repurchase and
retirement of common
stock................. (27) -- (171) -- -- -- (171)
Translation
adjustment............ -- -- -- -- -- (18) (18)
Issuance of common
stock................. 313 3 997 -- -- -- 1,000
Payment on stock
subscription.......... -- -- -- 26 -- -- 26
Stock options
exercised............. 11 -- 45 -- -- -- 45
Debt for equity swap... 411 4 2,348 -- -- -- 2,352
1 to 2 reverse stock
split................. (3,599) (36) 36 -- -- -- --
Net income............. -- -- -- -- 176 -- 176
-------- ----- -------- ----- -------- ---- --------
Balance at March 31,
2000................... 4,013 $ 40 $ 23,806 $ -- $(15,688) $(47) $ 8,111
======== ===== ======== ===== ======== ==== ========
The accompanying notes are an integral part of these statements.
F-6
LABTEC INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years ended March 31,
---------------------------
2000 1999 1998
-------- ------- --------
Cash flows from operating activities:
Net income (loss)............................... $ 176 $(4,942) $ (2,277)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation................................... 1,514 1,444 943
Amortization of goodwill....................... 2,945 2,176 1,768
Amortization of noncompete agreement........... -- 362 362
Amortization of debt issuance costs............ 433 383 475
Change in deferred income taxes................ 302 (794) (350)
Loss on disposal of assets..................... -- -- 1
Compensation expense on common stock sold to
management.................................... -- 781 --
Compensation expense on stock options.......... 10 -- 73
Write-off of debt issuance costs............... 1,693 348 296
Write-off of unamortized discount on refinanced
subordinated debt............................. -- -- 307
Changes in current assets and liabilities, net
of effects of acquisition:
Accounts receivable............................ (1,885) (3,084) (3,143)
Inventories.................................... (1,074) 2,724 3,433
Interest and other receivables................. 195 47 5
Income taxes receivable........................ 595 (595) --
Prepaid expenses............................... (2) 32 --
Accounts payable............................... (535) 3,225 (273)
Income taxes payable........................... (150) (285) 27
Accrued interest............................... 33 21 76
Accrued payroll and other expenses............. (876) 1,792 (533)
-------- ------- --------
Net cash provided by operating activities.... 3,374 3,635 1,190
-------- ------- --------
Cash flows from investing activities:
Costs associated with purchase of CRU........... (13,146) -- --
Costs associated with purchase of Spacetec...... -- (1,633) --
Capital expenditures............................ (1,323) (1,437) (1,473)
Other assets.................................... 73 20 (64)
Proceeds from sale of securities purchased from
Spacetec....................................... -- 5,206 --
-------- ------- --------
Net cash provided by (used in) investing
activities.................................. (14,396) 2,156 (1,537)
-------- ------- --------
Cash flows from financing activities:
Net increase in short-term credit facility...... 6,761 1,500 2,500
Net decrease in short-term borrowing facility... -- -- (15,673)
Proceeds from issuance of long-term debt........ 27,000 -- 33,000
Repayments of long-term debt.................... (20,587) (7,590) (5,750)
Debt issuance costs............................. (2,419) (100) (2,820)
Proceeds from exercise of stock options and
warrants....................................... 35 -- 2,323
Repurchase and cancellation of common stock..... (171) (61) (17,828)
Proceeds from issuance of common stock.......... 1,000 4 5,911
Preferred stock dividend........................ -- -- (435)
Payments on common stock subscription........... 26 265 36
-------- ------- --------
Net cash provided by (used in) financing
activities.................................. 11,645 (5,982) 1,264
-------- ------- --------
Effect of foreign currency on cash................ (18) (29) --
-------- ------- --------
Net increase (decrease) in cash................... 605 (220) 917
Cash at beginning of year......................... 768 988 71
-------- ------- --------
Cash at end of year.......................... $ 1,373 $ 768 $ 988
======== ======= ========
Cash paid during the year for:
Interest........................................ $ 3,649 $ 3,160 $ 2,758
Income taxes.................................... $ -- $ 200 $ 76
The accompanying notes are an integral part of these statements.
F-7
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
NOTE A--SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Labtec Inc. (Labtec) was formed October 7, 1997. On February 17, 1999,
Labtec Inc. acquired Spacetec IMC Corporation (Spacetec) (see Note B). On
August 20, 1999, Labtec Inc. acquired Connector Resources Unlimited, Inc. (CRU)
(see Note B). The Company designs, manufactures and distributes multimedia
computer peripheral, three-dimensional motion control and data storage
products. Its worldwide customers include original computer equipment
manufacturers, distributors and retailers. The Company's products are
manufactured by various factory suppliers located in Asia and are imported to
the Company's headquarters in Vancouver, Washington and to warehouses in
California, Great Britain, the Netherlands and Canada for distribution.
The principal accounting policies followed by Labtec Inc. and its
subsidiaries in maintaining their financial records and preparing these
consolidated financial statements are as follows:
1. Principles of Consolidation
The accompanying financial statements include the accounts of the Company,
as well as all of the accounts of its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.
2. Revenue Recognition
Revenues are recognized upon shipment of the Company's products, net of an
estimated allowance for sales returns. Gross sales revenues from one customer
were $10.1 million and $8.8 million for the years ended March 31, 1999 and
1998, respectively. Each of these revenue amounts accounted for more than 10%
of consolidated sales for the respective period. There were no individual
customers that accounted for more than 10% of consolidated sales for the year
ended March 31, 2000.
3. Fair value of financial instruments
The recorded amounts of cash, accounts receivable, accounts payable, lines
of credit and current portion of long-term debt, and accrued liabilities as
presented in the financial statements approximate fair value because of the
short-term maturity of these instruments. The recorded amount of long-term debt
approximates fair value because actual interest rates approximate current
competitive rates.
4. Accounts receivable
Accounts receivable are net of allowances for doubtful accounts and for
sales returns. The allowance for doubtful accounts was $706 and $938 at March
31, 2000 and 1999, respectively. The allowance for returns of merchandise was
$584 and $505 at March 31, 2000 and 1999, respectively. At March 31, 2000 and
1999, 13%, and 18%, respectively, of receivables were from one customer.
5. Concentration of credit risk
The Company is subject to credit risk primarily from its accounts
receivable. The Company mitigates its credit risk on receivables by control
procedures to monitor the credit worthiness of its customers and utilization of
credit limits. The Company's customers are concentrated in the technology
industry. Therefore, the Company's operations and collection of its accounts
receivables are directly associated with the results of the technology
industry.
F-8
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Inventories
Inventories are stated at the lower of landed cost (first-in, first-out
method) or market. Landed cost includes the cost of merchandise, freight, duty
and handling fees.
7. Property and equipment
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method for financial reporting purposes and on an accelerated
method for tax purposes over estimated useful lives ranging from three to seven
years. Depreciation expense for the years ended March 31, 2000, 1999 and 1998
was $1,514, $1,444 and $943, respectively. Repair and maintenance costs are
expensed as incurred.
8. Debt issuance costs
Debt issuance costs, including bank fees of $2,419 and other transaction
fees relating to the Company's debt, are included in debt issuance costs and
represent all costs and fees incurred to obtain bank financing for the
refinancing of debt in August 1999 (see Notes B and F). These costs are being
amortized over the term of the related debt. Debt of $19.25 million was paid
off in August 1999. Therefore, debt issuance costs of $1,693 were written off
and included in extraordinary loss on extinguishments of debt in fiscal 2000.
Debt of $5 million was paid off on February 17, 1999. Therefore, debt issuance
costs of $349 were written off and included in extraordinary loss on
extinguishments of debt in fiscal 1999. Debt issuance costs of $296 related to
financing arrangements prior to the Recapitalization (see Note I) were written
off and included in extraordinary loss on extinguishments of debt in October
1997. Amortization expense for fiscal years 2000, 1999 and 1998 was $433, $383
and $286, respectively, and is included in interest expense.
9. Goodwill and other intangible assets
Goodwill represents the excess of acquisition costs over the fair market
value of the net assets of acquired businesses and is being amortized on a
straight-line basis over estimated useful lives ranging from five to twenty
years. Periodically, the Company reviews the recoverability of its intangible
assets based on estimated undiscounted future cash flows from operating
activities compared with the carrying value of the intangible assets. If the
aggregate future cash flows are less than the carrying value, a write-down
would be required, measured by the difference between the fair value and the
carrying value of the intangible assets. The Company has not recorded any
provision related to impairment of intangible assets.
10. Discount of subordinated debt
In connection with the Recapitalization, the Company issued 93 shares of
common stock to a subordinated lender and recorded the $282 of fair value of
these shares as a discount on the face amount of the debt. This non-cash
transaction is excluded from the accompanying statement of cash flows. The
discount is being amortized using the effective interest method over eight
years, which is the life of the subordinated note. Amortization during fiscal
years 2000, 1999 and 1998 aggregated $35, $35 and $18 respectively.
11. Stock subscription
During fiscal year 1999, the Company sold shares of common stock to certain
members of management for a note aggregating $26. This note receivable was
recorded as a reduction of shareholders' equity and was fully repaid during
fiscal 2000.
In fiscal year 1995 the Company issued 28 shares of common stock to the
Company's president in exchange for a note aggregating $177. This note
receivable was recorded as a reduction to shareholders' equity. During fiscal
year 1999, the unpaid balance of $135 was forgiven.
F-9
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Research and development costs
Research and development costs are expensed as incurred.
13. Advertising expenses
The Company expenses advertising costs when incurred. Total advertising
expenses for the years ended March 31, 2000, 1999 and 1998 were $674, $782 and
$819, respectively.
14. Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes.
SFAS 109 requires the recognition of deferred tax assets and liabilities for
the expected tax effects from differences between the financial reporting and
tax bases of assets and liabilities. In estimating future tax effects, SFAS 109
generally considers all expected future events other than enactments of changes
in tax law or statutorily imposed rates.
15. Foreign currency translation
The financial statements and transactions of the Company's foreign
subsidiaries are maintained in their functional currency and translated into
U.S. dollars for purposes of consolidation. Translation adjustments are
accumulated as a separate component of shareholders' equity. The translation
adjustment for 1998 was not significant.
16. Earnings per share
Basic earnings per share (EPS) is computed by dividing net income (loss) by
the weighted-average common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if contracts to issue common
stock were exercised or converted to common stock. All amounts below and
earnings per share amounts in the statement of operations are calculated after
retroactively considering the stock splits that occurred during fiscal 2000 and
1999, and the conversion of Labtec shares as discussed in Note B.
F-10
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth the reconciliation of the denominator
utilized in the computation of basic and diluted income (loss) per share (in
thousands, except per share amounts).
Fiscal 2000
--------------------------
Income Average Per share
(loss) shares amount
------- ------- ---------
Income before extraordinary item.................. $ 1,192 3,684 $ .32
Extraordinary loss, net of tax.................... (1,016) 3,684 (.27)
------- ------
Income per common share....................... 176 3,684 .05
Effect of dilutive securities:
Stock options................................... -- 31 --
------- ----- ------
Income per share--assuming dilution........... $ 176 3,715 $ .05
======= ===== ======
Fiscal 1999
--------------------------
Income Average Per share
(loss) shares amount
------- ------- ---------
Loss before extraordinary item.................... $(4,671) 2,493 $(1.87)
Extraordinary loss, net of tax.................... (271) 2,493 (.11)
------- ------
Loss per common share......................... (4,942) 2,493 (1.98)
Effect of dilutive securities:
Stock options................................... -- -- --
------- ----- ------
Loss per share--assuming dilution............. $(4,942) 2,493 $(1.98)
======= ===== ======
Fiscal 1998
--------------------------
Income Average Per share
(loss) shares amount
------- ------- ---------
Loss before extraordinary item.................... $(1,766) 1,770 $(1.00)
Extraordinary loss, net of tax.................... (511) 1,770 (.29)
------- ------
Loss per common share......................... (2,277) 1,770 (1.29)
Effect of dilutive securities:
Stock options................................... -- -- --
------- ----- ------
Loss per share--assuming dilution............. $(2,277) 1,770 $(1.29)
======= ===== ======
17. Comprehensive income
The Company adopted SFAS No. 130, Reporting Comprehensive Income as of April
1, 1998. Comprehensive income is defined by SFAS No. 130 as the changes in
equity of a business enterprise during a period that results from transactions
and other economic events and circumstances from non-shareholder sources. It
includes all changes in equity during a period except those resulting from
investments by shareholders. Consequently, the Company has reported its Foreign
Currency Translation Adjustment, as required by SFAS No. 130, as other
comprehensive income in the appropriate consolidated financial statements
presented herein.
18. Segment reporting
The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information in fiscal year 1999. This statement
establishes standards for reporting information about operating
F-11
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
segments in annual financial statements and requires selected information about
operating segments in interim financial reports issued to shareholders. The
Company does not have separate operating segments which meet the requirements
for SFAS No. 131 disclosure. The Company does sell its products
internationally. Sales to Europe and Asia were as follows:
Year ended March 31
----------------------
2000 1999 1998
------- ------- ------
Europe................................................ $18,071 $13,397 $9,561
Asia.................................................. $ 1,322 $ 770 $1,168
19. Related parties
The former controlling shareholders of the Company provided certain
management services for which they charged a monthly fee of approximately $15
for April 1, 1998 through September 1, 1998 (prior to the Recapitalization (see
Note I)).
The majority shareholders charge an annual management services fee of $500,
of which $500, $500 and $250 was charged during fiscal 2000, 1999 and 1998,
respectively, and $375 and $750 remained payable at March 31, 2000 and 1999,
respectively.
20. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates and judgments made by the Company include items such as the
collectibility of accounts receivable; the level of sales returns;
realizability of inventories and relizability of intangible assets and deferred
income tax assets.
21. Recent accounting pronouncements
In June 1998 the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. The Statement is effective beginning with
the Company's fiscal year ended March 31, 2002, and will require the Company to
record all derivative instruments at fair value on its balance sheet. The
Company has not elected to adopt the statement early, and does not expect the
standard to have a material effect on the Company's financial position or
results of operations upon adoption.
NOTE B--ACQUISITIONS
Purchase of Spacetec IMC Corporation
Effective February 17, 1999, Labtec merged with Spacetec IMC Corporation, a
publicly traded company. Spacetec is involved in the development, manufacture
and distribution of three-dimensional (3D) input controller devices for the PC
and workstation marketplace used in both CAD/CAM industrial applications and in
consumer electronic games. The merger called for issuance of 0.55430739 (pre-
stock split) of Spacetec common shares for each Labtec common share
outstanding. As a result of the merger, Labtec shareholders acquired 67% of
Spacetec and therefore, Labtec has accounted for the transaction as a purchase
of Spacetec in a "reverse acquisition."
F-12
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The acquisition of Spacetec for 3,424 common shares valued at $12.8 million
has been accounted for under the purchase method of accounting. The financial
statements reflect the allocation of the purchase price and assumption of
Spacetec's liabilities and include its operating results from the date of the
acquisition.
The following sets forth the reconciliation of fair value of the assets
acquired and the liabilities assumed.
Purchase price...................................................... $12,804
Fair value of tangible assets acquired.............................. (8,528)
Liabilities assumed................................................. 2,539
Fair value of options granted to Spacetec employees................. 742
Direct costs of acquisition......................................... 2,243
-------
Excess of purchase price over fair value of tangible assets....... $ 9,800
=======
The excess of purchase price over fair value of tangible assets acquired is
being amortized over an estimated useful life of ten years (see Note C).
In conjunction with the closing of the merger, Spacetec issued a six year
promissory note in the principal amount of $1,065 payable to the holders of
Labtec common stock outstanding just prior to the time of the merger. This
transaction was accounted for as a dividend distribution. This note is
unsecured and accrues interest at the rate of 10% per year.
In conjunction with the acquisition, the Company accrued costs associated
with closing of certain acquired facilities and severance payments to terminate
employees of the acquired company. The following table presents the activity in
the related accrued liabilities:
Facility
closure Employee
costs severance Total
-------- --------- ------
Balance at March 31, 1999......................... $426 $873 $1,299
Payments in fiscal 2000......................... 118 750 868
---- ---- ------
Balance at March 31, 2000..................... $308 $123 $ 431
==== ==== ======
These items are included in accrued payroll costs and other accrued
liabilities in the accompanying balance sheet.
Purchase of Connector Resources Unlimited, Inc. (CRU)
On August 20, 1999, the Company completed the acquisition of all the
outstanding shares of CRU for $13,146 in cash and $1,500 in debt. Concurrent
with the acquisition of CRU, Labtec entered into a $43,000 credit facility with
a lender and also sold 313 shares of common stock for $1,000. The net proceeds
from the credit facility and proceeds from the stock sale were used to retire
outstanding debt and accrued interest totaling $23,400; to pay debt issuance
costs and loan fees on the new credit facility; to pay for certain acquisition
costs related to the purchase of CRU; and to fund the purchase of CRU. CRU
designs, develops, and markets computer peripheral products principally in
North America. The acquisition was accounted for as a purchase and therefore
the operations of CRU have been included with those of the Company since August
20, 1999.
F-13
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following sets forth the reconciliation of fair value of the assets
acquired and the liabilities assumed.
Purchase price...................................................... $14,646
Fair value of tangible assets acquired.............................. (5,338)
Liabilities assumed................................................. 2,098
Direct costs of acquisition......................................... 755
-------
Excess of purchase price over fair value of tangible assets....... $12,161
=======
The excess of the purchase price over fair value of tangible assets acquired
is being amortized over an estimated useful life of twenty years.
In conjunction with the acquisition, the Company accrued costs associated
with closing of certain acquired facilities and severance payments to terminate
employees of the acquired company. The following table presents the activity in
the related accrued liabilities:
Facility
closure Employee
costs severance Total
-------- --------- -----
Balance at March 31, 1999........................... $-- $-- $--
Additions......................................... 335 420 755
Payments in fiscal 2000........................... 158 154 312
---- ---- ----
Balance at March 31, 2000....................... $177 $266 $443
==== ==== ====
These items are included in accrued payroll costs and other accrued
liabilities in the accompanying balance sheet.
The following unaudited pro forma information presents the results of the
Company's operations assuming both the Spacetec and the CRU acquisitions
occurred at the beginning of each period presented:
Year ended March 31,
-------------------------
2000 1999 1998
------- -------- -------
(Unaudited)
Net sales........................................ $96,422 $ 70,411 $66,704
Net income (loss)................................ 243 (11,424) (8,351)
Net income (loss) per share:
Basic and diluted.............................. $ .06 $ (2.29) $ (2.36)
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had both the Spacetec and the CRU
acquisitions been consummated as of the beginning of each period, nor is it
necessarily indicative of future operating results.
NOTE C--GOODWILL
Cost in excess of the fair value of tangible assets of CRU acquired in
fiscal 2000 (Note B) consisted of goodwill associated primarily with the
existing technology acquired and was recorded at $11,406. Direct costs of
acquisition totaled $755. These costs have also been capitalized as part of
cost in excess of fair value of tangible assets acquired. Amortization expense
recognized related to this goodwill was $355 for the year ended March 31, 2000.
Cost in excess of the fair value of tangible assets of Spacetec acquired in
fiscal 1999 (Note B) consisted of goodwill associated primarily with the
existing technology acquired and was recorded at $7,558. Direct costs of
F-14
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
acquisition totaled $2,243. These costs have also been capitalized as part of
cost in excess of fair value of tangible assets acquired. In the fourth quarter
of the year ended March 31, 2000, the Company determined that the estimated
life for goodwill associated with Spacetec should be revised from three to ten
years. This change was accounted for prospectively as of January 1, 2000 and
reduced goodwill amortization in the quarter by approximately $597.
Amortization expense recognized related to this goodwill was $2,590 and $408 in
fiscal 2000 and 1999, respectively.
Costs in excess of the fair value of the net tangible assets of Labtec
acquired in fiscal 1995 consisted primarily of goodwill associated with product
trade names originally recorded at $8,838 and a $3,350 noncompete agreement
with the former owner. Goodwill was being amortized using the straight-line
method over 5 years, which represents the estimated lives of the underlying
product trade names. The noncompete agreement was being amortized using the
double-declining balance method over the agreement's life of 5 years to reflect
management's belief that the noncompete provision has more value in the
earliest years of the noncompete period. Amortization expense recognized
related to this goodwill was $1,768 for years ended March 31, 1999 and 1998.
Amortization expense recognized related to the noncompete agreement was $0,
$362 and $362 for the years ended March 31, 2000, 1999 and 1998, respectively.
NOTE D--INVENTORIES
Inventories represent merchandise produced for the Company by foreign
factories subcontracted by the Company. Of the total inventories, $450 and
$2,170 was in transit at March 31, 2000 and 1999, respectively.
NOTE E--PROPERTY AND EQUIPMENT
Property and equipment consist of:
March 31,
----------------
2000 1999
------- -------
Leasehold improvements..................................... $ 256 $ 239
Tooling and molds.......................................... 2,588 2,329
Furniture and equipment.................................... 2,473 1,879
Retail displays............................................ 2,145 1,527
------- -------
7,462 5,974
Less accumulated depreciation and amortization............. (5,130) (3,644)
------- -------
$ 2,332 $ 2,330
======= =======
NOTE F--LONG-TERM DEBT
In conjunction with the purchase of CRU in August 1999, the Company repaid
its $7,500 revolving line of credit and $19,250 long-term loan with funds
obtained from a $27,000 long-term loan and a $16,000 revolving line of credit
with other lenders. Also a $1,500 seven and one-half year promissory note was
issued to the prior shareholders of CRU. Fees related to the extinguished
credit line are included in the extraordinary loss on extinguishments of debt.
At March 31, 2000 the long-term loans and a portion of the revolving line of
credit were accruing interest at LIBOR plus 3.25-3.50% and the remaining
portion of the revolving line of credit was accruing interest at the prime rate
plus 1.75%. In December 1999, the Company entered into an interest rate swap
agreement with its primary lender in order to fix the interest rate on a
portion of its long-term debt. At March 31, 2000 the amount of debt subject to
the fixed rate was $12,800 for which the rate was 9.69%. The bank line of
credit is collateralized by substantially all of the Company's assets. Loan
fees paid to the banks
F-15
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and transaction fees relating to the term loan, revolving line of credit, and
promissory note were $2,419 and have been recorded in debt issuance costs. The
current line of credit expires in September 2005 and the long-term debt expires
June 30, 2005.
Long-term debt consists of:
March 31,
---------------
2000 1999
------- -------
Bank note payable with varying quarterly payments, interest
at the bank's LIBOR rate plus 3.25-3.50%, (9.69% at March
31, 2000), with the final payment due June 30, 2005,
collateralized by the Company's assets..................... $25,600 $ --
Bank note payable with varying quarterly payments, interest
at the bank's Eurodollar rate plus 3%, (8% at March 31,
1999), with the final payment due September 30, 2004,
collateralized by the Company's assets..................... -- 19,250
Bank subordinated note payable (net of $194 and $229
discount at March 31, 2000 and 1999 respectively) at 12%
with principal due October 1, 2005......................... 4,306 5,771
Note payable to former Labtec shareholders; interest at 10%,
with principal due February 17, 2005 (Note B).............. 241 1,065
Note payable to former CRU shareholders; interest at 6%,
with principal due February 28, 2005 (Note B).............. 1,500 --
------- -------
31,647 26,086
Less amounts payable in one year............................ 2,900 --
------- -------
Total long-term debt...................................... $28,747 $26,086
======= =======
The bank line of credit agreement and long-term debt agreements are subject
to certain restrictive covenants. The Company was in compliance with these
covenants for all periods presented in the accompanying financial statements.
Interest payments for the years ended March 31, 2000, 1999 and 1998 were
$3,649, $3,160 and $2,758, respectively.
Principal repayments of the long-term debt are required as follows:
Fiscal year:
2001.............................................................. $ 2,900
2002.............................................................. 3,000
2003.............................................................. 3,300
2004.............................................................. 3,700
2005.............................................................. 4,341
Thereafter........................................................ 14,600
Less debt discount................................................ (194)
-------
$31,647
=======
NOTE G--EMPLOYEE BENEFITS
The Company has a defined contribution profit sharing plan for its employees
who meet certain requirements of age and length of service. Employees may
voluntarily contribute up to a maximum of 20% of their annual compensation to
the plan. During fiscal year 2000, the Company matched 50% of the employee
F-16
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
contributions up to a maximum of 6%. There was no Company match during fiscal
1999 and during a portion of fiscal 1998 the Company matched 50% of the
employee contributions up to a maximum of 5%. For the years ended March 31,
2000, 1999 and 1998, matching contributions for eligible employees amounted to
$29, $0 and $56, respectively.
Discretionary bonuses of $991, $141 and $175 were awarded to employees for
the years ended March 31, 2000, 1999 and 1998, respectively.
NOTE H--INCOME TAXES
The income tax provision (benefit) consists of the following:
Fiscal year ended March 31,
-----------------------------
2000 1999 1998
------------------ ---------
Current tax expense (benefit).................. $ 474 $ (576) $ 364
Deferred tax expense (benefit)................. 302 (794) (350)
------- ---------- --------
$776 $ (1,370) $ 14
======= ========== ========
Deferred tax assets are comprised of the following:
March 31,
----------------
2000 1999
------- -------
Nondeductible accruals and allowances...................... $ 1,214 $ 652
Capitalized inventory costs................................ 69 177
Property and equipment depreciation........................ 707 536
Intangibles................................................ 1,203 1,357
Research and experimentation credits....................... 522 523
Net operating loss carryforward............................ 2,691 2,986
------- -------
Gross deferred tax asset................................... 6,406 6,231
Valuation allowance........................................ (2,599) (3,508)
------- -------
Net deferred tax assets.................................. $ 3,807 $ 2,723
======= =======
The net decrease of $909 in the valuation allowance for fiscal year 2000
relates to a portion of the net operating loss carryforwards and research and
experimentation credits resulting from the acquisition of Spacetec in fiscal
year 1999. The Company's net operating loss carryforwards aggregate
approximately $7.7 million at March 31, 2000 and expire in 2012-2014. The
utilization of the Spacetec net operating loss carryforwards are limited to
approximately $600 per year for income tax purposes as well as being limited to
the taxable earnings of Spacetec. The credit carryforwards also have a yearly
limitation amount as well as being limited to taxable earnings of Spacetec and
expire in 2012 and 2013. As of March 31, 2000, a valuation allowance has been
provided for a portion of these deferred tax assets because management cannot
conclude that it is presently more likely than not that such deferred income
tax assets will be utilized.
F-17
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The income tax provision is reconciled to the tax computed at the statutory
federal rate as follows:
Fiscal year ended March 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
Tax expense (benefit) at federal
statutory rate....................... 34.00 % (34.00)% (34.00)%
Foreign taxes......................... (7.65) .09 .39
Foreign sales corporation benefit..... (39.01) -- --
Permanent differences................. 17.71 11.41 35.38
Other................................. 34.39 (.18) (1.00)
--------- --------- ---------
39.44 % (22.68)% .77 %
========= ========= =========
Permanent differences primarily include nondeductible goodwill and
nondeductible meals and entertainment expense. Other differences include state
income taxes net of the Federal benefit.
NOTE I--SHAREHOLDERS' EQUITY
On October 7, 1997 the Company undertook the Recapitalization whereby the
Company: (i) refinanced its existing debt by obtaining a $13 million line of
credit, a $27 million term note and a $6 million subordinated term note, and by
issuing 550 shares of common stock for aggregate proceeds of $6,192
representing approximately 87.4% of the stock ownership of the Company; and
(ii) repurchased 509 shares of its previously existing outstanding stock for
aggregate cash consideration of $17,828, including direct expenses of
approximately $690. The repurchase of existing stock resulted in the old
shareholder group maintaining an approximate 12.6% interest in the Company.
All holders of common stock are entitled to one vote per share and are
entitled to dividends, provided that equivalent dividends are declared and paid
on all outstanding shares of common stock. The Company has granted stock
options and warrants to purchase shares of Class A common stock of the Company.
In fiscal year 1996, the Company authorized and issued 34 shares of
preferred stock. At March 31, 1996 and 1997, 34 shares were issued and
outstanding. During fiscal year 1998 all shares of preferred stock were
converted to shares of common stock. The shares were converted in accordance
with the original terms of the preferred stock, resulting in no beneficial
conversion interests.
Certain employees of Spacetec were eligible to participate in an Employee
Stock Purchase Plan. This plan terminated upon Spacetec being acquired by
Labtec and 9 shares were issued at such time.
On September 30, 1998 the Company sold 96 shares of common stock (post stock
splits) to certain members of management for $3.05 per share. Of this, $265 was
received in cash and the remaining $26 in proceeds was recorded as a stock
subscription receivable. The difference between the fair market value of the
Company's common stock and the proceeds received was recorded as compensation
expense aggregating $781 during the year ended March 31, 1999. During the year
ended March 31, 1998, the Company effected a 8.5853 to 1 stock split followed
by a second split at 20 to 1. On February 17, 1999, directly following the
acquisition of Spacetec, the Company effected a 1 for 3 reverse stock split. On
December 1, 1999, the Company effected a 1 for 2 reverse stock split. All share
and per share amounts in the consolidated statement of operations and
comprehensive income (loss) and the notes to consolidated financial statements
have been retroactively adjusted for these splits.
The Company provided an employee stock option plan (the Plan) which
commenced on January 27, 1995. Options under the Plan were granted at the
discretion of the Board of Directors. The exercise price of these options
generally was the fair market value of shares at the date of grant as
determined by the Board of Directors. Such options were exercisable generally
over ten years from the time the options were granted, and vested over a period
of three years. Compensation cost recognized on the Company's stock option
grants which
F-18
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
provided an exercise price below the fair value on the date of the grant was
$73 for the year ended March 31, 1998.
The Plan allowed the granting of options to purchase up to an aggregate of
496 shares (before considering stock splits) of the Company's Class A common
stock. Options granted under the Plan were nonqualified stock options as
defined by the Internal Revenue Code. All options were exercised and the Plan
was terminated pursuant to the completion of the Recapitalization in October of
1997.
In connection with the Recapitalization, the Company established a new
employee stock option plan, which commenced on October 7, 1997 (the New Plan).
The Company reserved 443 shares of common stock for issuance to certain
employees under the New Plan. The exercise price of these options range from
$3.0481 (estimated fair value based upon the price paid for new shares) to
$9.1444 per share. Such options may be exercised generally over 10 years from
the time the options are granted, and vest over a period of four years.
The Company has elected to follow APB No. 25, Accounting for Stock Issued to
Employees ("APB 25"), and related interpretations in accounting for its
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying
stock on the date of the grant, no compensation expense has been recognized.
Pro forma information regarding net income per share is required by SFAS No.
123, Accounting for Stock Based Compensation, and has been determined as if the
Company had accounted for its employee stock options under the fair value
method of that statement. The 1998 options were valued using the minimum value
pricing model as prescribed by SFAS 123 for nonpublic companies. The options
issued subsequent to fiscal 1998 have been valued using the Black-Scholes
pricing model as prescribed by SFAS 123.
The following weighted-average assumptions have been used for grants of
stock options.
2000 1999 1998
------- ------- -------
Risk-free interest rate........................... 5.45% 5.20% 5.61%
Expected dividend yield........................... -- -- --
Expected lives.................................... 5 years 5 years 5 years
Expected volatility............................... 103% 71% --
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in the Company's opinion the existing available models do
not necessarily provide a reliable single measure of the fair value of the
Company's employee stock options.
Using the Black-Scholes option valuation model, the weighted-average grant
date value of options granted during fiscal 2000 and 1999 was $7.98 and $8.06
per option, respectively.
The pro forma effect of applying FAS 123 would have an immaterial effect for
fiscal 1998 and 1997 based on the above assumptions. The Company's pro forma
information for fiscal 2000 and 1999 is as follows:
Year ended Year ended
March 31, 2000 March 31, 1999
------------------ -------------------
Reported Pro Forma Reported Pro Forma
-------- --------- -------- ---------
Net income (loss) (in thousands).... $ 176 $(166) $(4,942) $(4,988)
Net income loss per share:
Basic and diluted................. $0.05 $(.04) $ (1.98) $ (2.00)
F-19
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes the stock option transactions under the Plan
and New Plan described above.
Shares Average
Under Exercise
Option Price
-------- ---------
Balance, March 31, 1997................................. 1,730 $1,082.44
Options exercised..................................... (1,730) 1,082.44
Options granted....................................... 358,591 5.08
Options cancelled..................................... (34,182) 5.08
--------
Balance, March 31, 1998................................. 324,409 5.08
Options granted....................................... 153,925 14.78
Options cancelled..................................... (233,510) 5.08
--------
Balance, March 31, 1999................................. 244,824 12.24
Options granted....................................... 216,325 9.50
Options exercised..................................... (6,925) 5.08
Options cancelled..................................... (82,892) 5.08
--------
Balance, March 31, 2000................................. 371,332 $ 9.24
========
A summary of options outstanding and exercisable at March 31, 2000 is as
follows:
Options Outstanding Options Exercisable
------------------------------- ---------------------
Weighted- Weighted- Weighted-
Average Average Average
Number Remaining Exercise Number Exercise
Outstanding Life Price Exercisable Price
----------- --------- --------- ----------- ---------
$0.00-$5.00........... 78,777 3.42 $ 3.05 28,447 $ 3.05
$5.01-$9.00........... 71,029 8.10 $ 7.68 3,292 $ 6.33
$9.01-$10.00.......... 109,812 8.08 $ 9.69 30,583 $ 9.48
$10.01-$20.00......... 111,714 7.89 $14.15 61,839 $16.89
F-20
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE J--COMMITMENTS AND CONTINGENCIES
1. Commitments
The Company is contractually obligated under various operating lease
agreements for warehouse and office space until April of 2006. The total rent
expense related to warehouse and office space under leases amounted to $982,
$621 and $352 for the fiscal years ended March 31, 2000, 1999 and 1998,
respectively.
Future minimum lease payments under these leases are as follows:
Fiscal year:
------------
2001............................................................... $ 989
2002............................................................... 968
2003............................................................... 903
2004............................................................... 860
2005............................................................... 838
Thereafter......................................................... 911
------
Total minimum lease payments..................................... $5,469
======
2. Contingencies
Pursuant to the Recapitalization agreement, the shareholder group that
received redemption proceeds are contingently entitled to receive from the
Company up to $1,500 upon a "Change in Control" (as defined in the Stockholders
Agreement), or up to $3,000 in the event of an "Initial Public Offering" (as
defined in the Stockholders Agreement).
The Company becomes involved in litigation, disputes, employment matters and
other proceedings in the normal course of its business. In the opinion of
management, and after consultation with legal counsel, the Company's liability,
if any, under any pending matters would not materially affect its financial
condition or results of operations.
F-21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Connector Resources Unlimited, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity present fairly, in all material respects, the financial
position of Connector Resources Unlimited, Inc. and its wholly-owned subsidiary
at March 31, 1999, and the results of their operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
As described in Note 11, on August 20, 1999, all of the Company's common
stock was purchased by a subsidiary of Labtec, Inc. The accompanying financial
statements do not include any adjustments relative to this matter.
/s/ PricewaterhouseCoopers LLP
Portland, Oregon
October 8, 1999
F-22
CONNECTOR RESOURCES UNLIMITED, INC.
CONSOLIDATED BALANCE SHEET
March 31, 1999 and June 30, 1999
March 31, June 30,
1999 1999
---------- -----------
(Unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents............................. $ 112,255 $ 132,565
Accounts receivable, net.............................. 1,583,905 2,423,177
Inventories, net...................................... 2,023,548 1,786,137
Note receivable....................................... 50,000 50,000
Other current assets.................................. 2,500 3,375
Deferred income taxes................................. 192,501 192,501
---------- ----------
Total current assets................................ 3,964,709 4,587,755
Furniture and equipment, net............................ 157,755 163,220
Deferred income taxes................................... 47,698 47,698
---------- ----------
$4,170,162 $4,798,673
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Line of credit........................................ $ 72,681 $ 21,000
Accounts payable...................................... 1,366,403 1,015,387
Accrued expenses...................................... 71,353 132,180
Income taxes payable.................................. 241,168 463,422
Current portion of notes payable...................... 56,488 --
---------- ----------
Total current liabilities........................... 1,808,093 1,631,989
Notes payable, less current portion..................... 5,342 --
---------- ----------
1,813,435 1,631,989
---------- ----------
Commitments and contingencies (Notes 5, 6 and 10)
Shareholders' equity:
Common stock, no par value, 2,500,000 shares
authorized, 889,307 shares issued and outstanding.... 471,880 471,880
Retained earnings..................................... 1,884,847 2,694,804
---------- ----------
Total shareholders' equity.......................... 2,356,727 3,166,684
---------- ----------
$4,170,162 $4,798,673
========== ==========
The accompanying notes are an integral part of these financial statements.
F-23
CONNECTOR RESOURCES UNLIMITED, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999 and
Three Months Ended June 30, 1999 and 1998
Three Months Ended
Year Ended June 30,
March 31, ---------------------
1999 1998 1999
----------- ---------- ----------
(Unaudited)
Sales........................................ $12,158,162 $3,093,543 $3,958,900
Cost of sales................................ 7,382,551 2,146,293 2,025,163
----------- ---------- ----------
Gross profit............................. 4,775,611 947,250 1,933,737
----------- ---------- ----------
Operating Expenses:
Selling and marketing...................... 1,543,255 326,460 396,949
General and administrative................. 985,808 187,712 255,474
Depreciation............................... 10,087 4,461 3,426
Amortization............................... 8,397 3,156 --
----------- ---------- ----------
2,547,547 521,789 655,849
----------- ---------- ----------
Income from operations................... 2,228,064 425,461 1,277,888
Interest expense, net........................ 41,916 16,965 1,970
Other non-operating expense.................. 14,013 -- --
----------- ---------- ----------
Income before income taxes................... 2,172,135 408,496 1,275,918
Provision for income taxes................... 834,948 176,395 465,961
----------- ---------- ----------
Net income............................... $ 1,337,187 $ 232,101 $ 809,957
=========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-24
CONNECTOR RESOURCES UNLIMITED, INC.
CONSOLIDATED STATEMENT CHANGES IN SHAREHOLDERS' EQUITY
For the Year Ended March 31, 1999 and
Three Months Ended June 30, 1999
Common Retained
Shares Stock Earnings Total
--------- --------- ---------- ----------
Balance, April 1, 1998.......... 1,111,157 $ 561,250 $ 767,660 $1,328,910
Net income...................... 1,337,187 1,337,187
Repurchase and retirement of
common stock................... (236,410) (100,000) (220,000) (320,000)
Exercise of stock options....... 14,560 10,630 -- 10,630
--------- --------- ---------- ----------
Balance, March 31, 1999......... 889,307 471,880 1,884,847 2,356,727
Net income (unaudited).......... 809,957 809,957
--------- --------- ---------- ----------
Balance, June 30, 1999
(unaudited).................... 889,307 $ 471,880 $2,694,804 $3,166,684
========= ========= ========== ==========
The accompanying notes are an integral part of these financial statements.
F-25
CONNECTOR RESOURCES UNLIMITED, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended March 31, 1999 and
Three Month Ended June 30, 1999 and 1998
Three Months Ended
Year Ended June 30,
March 31, --------------------
1999 1998 1999
---------- --------- ---------
(Unaudited)
Cash flows from operating activities:
Net income................................. $1,337,187 $ 232,101 $ 809,957
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization............ 111,266 25,921 13,926
Deferred income taxes.................... (127,539) -- --
Loss on disposal of fixed assets......... 14,013 -- --
Changes in certain current assets and
current liabilities:
Accounts receivable...................... (232,729) (415,345) (839,272)
Inventories.............................. (545,878) 331,694 237,411
Other current assets..................... 4,131 (4,036) (875)
Accounts payable......................... 417,884 (166,679) (351,016)
Accrued expenses......................... (69,065) (55,446) 60,827
Income taxes payable..................... 67,740 263 222,254
---------- --------- ---------
Net cash provided by (used in)
operating activities.................. 977,010 (51,527) 153,212
---------- --------- ---------
Cash flows from investing activities:
Issuance of note receivable................ (50,000) -- --
Purchases of property and equipment........ (146,169) (9,403) (19,391)
---------- --------- ---------
Net cash used in investing activities.. (196,169) (9,403) (19,391)
---------- --------- ---------
Cash flows from financing activities:
Payments on line of credit................. (300,000) -- (201,681)
Borrowings on line of credit............... 72,681 -- 150,000
Proceeds from issuance of notes payable.... 225,952 -- --
Principal payments on notes payable........ (517,316) (34,166) (61,830)
Exercise of stock option................... 10,630 -- --
Repurchase of common stock................. (320,000) -- --
---------- --------- ---------
Net cash used in financing activities.. (828,053) (34,166) (113,511)
---------- --------- ---------
Net (decrease) increase in cash and cash
equivalents................................. (47,212) (95,096) 20,310
Cash and cash equivalents at beginning of
period...................................... 159,467 159,467 112,255
---------- --------- ---------
Cash and cash equivalents at end of
period................................ $ 112,255 $ 64,371 $ 132,565
========== ========= =========
The accompanying notes are an integral part of these financial statements.
F-26
CONNECTOR RESOURCES UNLIMITED, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Company
Connector Resources Unlimited, Inc. (the "Company"), a California
corporation formed in 1986, designs, develops, and markets computer peripheral
products principally in North America.
Revenue recognition
Revenues are recognized upon shipment of the Company's products, net of an
estimated allowance for sales returns. Gross revenues in fiscal 1999 from one
customer were $2.9 million or 23.8% of total sales.
Fair value of financial instruments
The recorded amounts of cash, accounts receivable, accounts payable, notes
payable, and accrued liabilities as presented in the financial statements
approximate fair value because of the short-term maturity of these instruments.
Concentration of credit risk
The Company is subject to credit risk primarily from its accounts
receivable. The Company mitigates its credit risk on receivables by control
procedures to monitor the credit worthiness of its customers and utilization of
credit limits. The Company's customers are concentrated in the technology
industry. Therefore, the Company's operations and collection of its accounts
receivable are directly associated with the results of the technology industry.
Cash and cash equivalents
The Company considers short-term investments which are highly liquid,
readily convertible into cash and have original maturities of less than three
months to be cash equivalents.
Inventories
Inventories, net of reserves of $89,739 and $80,055 as of March 31, 1999 and
June 30, 1999, respectively, are stated at the lower of cost or market with
cost being determined on the first-in, first-out (FIFO) method. Inventories
consist primarily of assemblies and purchased finished goods produced for the
Company by foreign factories subcontracted by the Company. Of the total
inventories, $476,120 was in transit at March 31, 1999. The Company takes title
upon shipment from the foreign port.
Furniture and equipment
Furniture and equipment are stated at cost. Depreciation is provided on the
straight-line method for financial reporting purposes and on an accelerated
method for tax purposes over estimated useful lives ranging from three to seven
years. Depreciation expense for the year ended March 31, 1999 was $102,870.
Depreciation expense included in cost of sales for the year ended March 31,
1999 was $92,783.
Repair and maintenance costs are expensed as incurred.
Advertising
The Company expenses advertising costs when incurred. Total advertising
expenses were $378,501 for the year ended March 31, 1999.
F-27
CONNECTOR RESOURCES UNLIMITED, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (FAS 109), Accounting for Income Taxes.
FAS 109 requires the recognition of deferred tax assets and liabilities for the
expected tax effects from differences between the financial reporting and tax
bases of assets and liabilities. In estimating future tax effects, FAS 109
generally considers all expected future events other than enactments of changes
in tax law or statutorily imposed rates.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates and judgements made by the Company include items such as the
collectibility of accounts receivable, the level of sales returns,
realizability of inventories and realizability of deferred income tax assets.
Interim financial information
The accompanying balance sheet as of June 30, 1999 and the statements of
operations and of cash flows for the three-month periods ended June 30, 1998
and 1999, are unaudited. In the opinion of management, these statements have
been prepared on the same basis as the audited financial statements and include
all adjustments, consisting only of normal recurring adjustments, necessary for
the fair presentation of the results of the interim periods. The financial data
and other information disclosed in these notes to the financial statements
related to these periods are unaudited. The results for the three months ended
June 30, 1999 are not necessarily indicative of the results to be expected for
the fiscal year ending March 31, 2000.
Research and development costs
Research and development costs are expensed as incurred.
Comprehensive income
The Company has adopted Statement of Financial Accounting Standards No. 130
Reporting Comprehensive Income as of April 1, 1998. Comprehensive income equals
net income in all periods presented.
Segment reporting
The Company competes in one segment, computer peripherals, and sells their
products mainly in the United States. Accordingly, no further segment
disclosures are necessary.
2. Accounts Receivable
Accounts receivable are net of allowances for doubtful accounts and for
sales returns as follows:
March 31, June 30,
1999 1999
---------- -----------
(Unaudited)
Accounts receivable............................... $1,727,913 $2,486,020
Less:
Allowance for bad debts......................... (20,137) (20,137)
Allowance for sales returns..................... (123,871) (42,706)
---------- ----------
$1,583,905 $2,423,177
========== ==========
At March 31, 1999, 27.4% of accounts receivable were from one customer.
F-28
CONNECTOR RESOURCES UNLIMITED, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Note Receivable
Note receivable consists of an unsecured note from the Company's primary
shareholder. The note bears interest at a rate of 6% per annum. At March 31,
1999 and June 30, 1999, $50,000 was outstanding. The note was repaid in August
1999.
4. Furniture and Equipment
Furniture and equipment consist of:
March 31, June 30,
1999 1999
--------- -----------
(Unaudited)
Leasehold improvements.............................. $ 44,655 $ 44,655
Tooling and molds................................... 355,345 359,645
Furniture and equipment............................. 173,584 188,675
--------- ---------
573,584 592,975
Less accumulated depreciation....................... (415,829) (429,755)
--------- ---------
$ 157,755 $ 163,220
========= =========
5. Borrowings
Notes payable consist of a note payable to a bank. The note is
collateralized by all of the Company's assets and is due in monthly
installments of $4,707, plus interest at the prime rate plus 0.5% (8.25% at
March 31, 1999) per annum. The note was repaid in full during May 1999.
On December 15, 1998, the Company entered into a line of credit agreement
with a bank. Borrowings under the agreement are collateralized by all assets of
the Company, bear interest at the prime rate plus 0.5% (8.25% at March 31,
1999) and are limited to the lesser of $1,500,000 or 80% of eligible accounts
receivable. At March 31, 1999 and June 30, 1999, $72,681 and $21,000,
respectively, was outstanding on the Company's line of credit. The line of
credit agreement requires the Company to comply with various financial
covenants. At March 31, 1999, the Company was not in compliance with the quick
ratio covenant under the line of credit. The Company obtained a waiver from the
bank. The current line of credit expires in December 2002.
Interest payments for the year ended March 31, 1999 and the three months
ended June 30, 1998 and 1999 were $45,070, $16,965 and $2,931, respectively.
Notes payable mature as follows:
Year ending
March 31,
-----------
2000............................................................ $56,488
2001............................................................ 5,342
-------
$61,830
=======
6. Employee Benefit Plan
The Company has implemented a 401(k) Profit Sharing Plan (the "Plan") in
which employees who have met certain service and eligibility requirements may
participate. Each eligible employee may elect to contribute to the Plan, and
the Company may make discretionary matching contributions of up to 8% of
employees' compensation. Matching contributions of approximately $13,100,
$4,613 and $4,357 were made during the year ended March 31, 1999 and the three
months ended June 30, 1998 and 1999, respectively.
F-29
CONNECTOR RESOURCES UNLIMITED, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Income Taxes
The provision of income taxes consists of the following:
Year ended
March 31,
1999
----------
Current
Federal...................................................... $ 761,109
State........................................................ 201,378
---------
962,487
---------
Deferred
Federal...................................................... (119,170)
State........................................................ (8,369)
---------
(127,539)
---------
$ 834,948
=========
Deferred taxes are due to timing differences in recognizing deductions,
primarily related to depreciation, amortization and certain accrued expenses
for income tax and financial reporting purposes.
The income tax benefit differs from the amount computed by applying the
statutory federal income tax rate to pretax income as a result of the following
differences:
Year ended
March 31,
1999
----------
Statutory federal tax rate...................................... 34.0 %
Increase (decrease) in rates resulting from:
State taxes................................................... 8.9
Other......................................................... (4.5)
----
38.4 %
====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets are presented below:
March 31,
1999
---------
State income tax................................................. $ 70,179
Allowance for doubtful accounts and returns...................... 51,174
Allowance for obsolete inventory................................. 35,723
Accrued expenses................................................. 9,460
Inventory adjustment, IRC Section 263(a)......................... 25,965
--------
Current deferred tax asset $192,501
========
Property and equipment........................................... $ 35,979
Other miscellaneous.............................................. 11,719
--------
Long-term deferred tax asset................................... $ 47,698
========
Income taxes paid during the year ended March 31, 1999 and the three months
ended June 30, 1998 and 1999 were $878,815, $176,132 and $243,708,
respectively.
F-30
CONNECTOR RESOURCES UNLIMITED, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Shareholders' Equity
In January 1999, the Company entered into an agreement with a former
minority shareholder to repurchase 236,410 shares of common stock for $320,000.
The common stock was retired upon repurchase. The excess of the cost of the
common stock repurchased, $320,000, less the stated value of the common stock
repurchased, $100,000, was charged to retained earnings.
9. Stock Options
The Company provided a stock option plan (the Plan) which commenced in
September 1993. Options under the Plan were granted at the discretion of the
Board of Directors. The exercise price of these options generally was the fair
market value of shares at the date of grant as determined by the Board of
Directors. Such options were exercisable generally at the time the options were
granted.
The Plan allowed the granting of options to purchase up to an aggregate of
58,248 shares of the Company's common stock. Options granted under the Plan
were either incentive stock options or nonqualified stock options as defined by
the Internal Revenue Code.
The Company has elected to follow APB No. 25, "Accounting for Stock Issued
to Employees" ("APB 25"), and related interpretations in accounting for its
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying
stock on the date of the grant, no compensation expense has been recognized.
Pro forma information regarding net income per share is not required by SFAS
No. 123, "Accounting for Stock-Based Compensation", as all stock options were
granted and were fully vested as of October 1, 1993, which was before the
release of SFAS 123.
The following table summarizes the stock option transactions for the year
ended March 31, 1999, under the plan described above.
Options
---------------------
Number Price
outstanding per share
----------- ---------
Balance, April 1, 1998.............................. 14,560 $.73
Granted............................................ -- --
Exercised.......................................... (14,560) .73
Terminated......................................... -- --
-------
Balance, March 31, 1999............................. --
=======
10. Commitments
The Company leases its facilities under operating lease agreements which
expire through May 2001. The leases require monthly payments of approximately
$9,200. Rent expense paid under these leases was approximately $113,000 for the
year ended March 31, 1999.
The Company also leases equipment under operating lease agreements with
monthly payments totaling approximately $900. The leases expire through October
2001. Rent expense under these leases was approximately $12,200 for the year
ended March 31, 1999.
F-31
CONNECTOR RESOURCES UNLIMITED, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum annual lease payments required under these agreements are as
follows:
Year ending
March 31
-----------
2000........................................................... $ 99,674
2001........................................................... 100,780
2002........................................................... 19,008
--------
$219,462
========
The Company becomes involved in litigation and other proceedings arising in
the normal course of its business. In the opinion of management, the Company's
liability, if any, under any pending litigation would not materially affect its
financial condition or results of operations.
11. Subsequent Events
Stock repurchase
On July 7, 1999, the Company entered into an agreement with a minority
shareholder to repurchase 65,527 shares of the Company's common stock for
$750,000. The excess of the original cost of the common stock repurchased, less
the stated value of the common stock repurchased, $450,000, was charged to
retained earnings.
Sale of the Company
On August 20, 1999, the Company entered into a stock purchase agreement with
CRU Acquisition Corporation, a wholly owned subsidiary of Labtec, Inc., whereby
all of the outstanding shares of the Company's common stock were sold to CRU
Acquisition Corporation for $12,000,000 in cash and debt in the amount of
$1,500,000. At that time the Company became a wholly owned subsidiary of
Labtec, Inc.
F-32
FINANCIAL INFORMATION
LABTEC, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
December 31, March 31,
2000 2000
------------ ---------
(Unaudited)
ASSETS
------
Current Assets:
Cash.................................................. $ 1,456 $ 1,373
Accounts receivable, net.............................. 26,305 22,120
Interest and other receivables........................ 23 16
Inventories........................................... 24,398 13,955
Prepaid expenses...................................... 93 171
Current deferred income taxes......................... 2,572 1,854
-------- --------
Total current assets................................ 54,847 39,489
Property and equipment, net............................. 2,498 2,332
Noncurrent deferred income taxes........................ 1,953 1,953
Debt issuance costs..................................... 1,957 2,277
Other noncurrent assets................................. 228 180
Goodwill, net........................................... 16,140 17,038
-------- --------
$ 77,623 $ 63,269
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities:
Line of credit........................................ $ 16,647 $ 10,761
Current portion of long-term debt..................... 2,736 2,900
Accounts payable...................................... 17,114 9,411
Income taxes payable.................................. 1,456 185
Accrued payroll and benefits.......................... 676 1,359
Accrued interest...................................... 360 256
Other accrued expenses................................ 1,432 1,539
-------- --------
Total current liabilities........................... 40,421 26,411
Long-term debt.......................................... 25,400 28,747
-------- --------
65,821 55,158
-------- --------
Commitments and contingencies
Shareholders' Equity (Deficit):
Preferred stock, par value $.01, 1,000 shares
authorized and no shares outstanding at December 31,
or March 31, 2000.................................... -- --
Common stock, par value $.01, 25,000 shares
authorized, 4,015 and
4,013 shares issued and outstanding at December 31,
and March 31, 2000, respectively..................... 40 40
Additional paid-in capital............................ 23,835 23,806
Accumulated deficit................................... (12,035) (15,688)
Accumulated other comprehensive income (loss):
Cumulative foreign currency translation adjustment.. (38) (47)
-------- --------
11,802 8,111
-------- --------
$ 77,623 $ 63,269
======== ========
The accompanying notes are an integral part of these financial statements.
F-33
LABTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------- -------------------------
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net sales................... $29,800 $27,379 $78,067 $64,566
Cost of sales............... 17,579 16,526 46,287 38,802
------- ------- ------- -------
Gross profit................ 12,221 10,853 31,780 25,764
------- ------- ------- -------
Operating expenses:
Selling and marketing..... 5,286 4,756 15,244 12,029
General and
administrative........... 1,466 1,620 4,023 3,955
Research and development.. 535 633 1,659 1,706
Depreciation.............. 416 427 1,196 1,186
Amortization of goodwill.. 299 682 898 2,611
------- ------- ------- -------
8,002 8,118 23,020 21,487
------- ------- ------- -------
Income from operations.. 4,219 2,735 8,760 4,277
Interest expense, net....... 1,232 1,179 3,673 2,942
Other nonoperating expense.. (22) 3 107 62
------- ------- ------- -------
Total other expense..... 1,210 1,182 3,780 3,004
------- ------- ------- -------
Income before income taxes.. 3,009 1,553 4,980 1,273
Provision for income taxes.. 551 371 1,327 626
------- ------- ------- -------
Net income before
extraordinary items.... 2,458 1,182 3,653 647
Extraordinary loss.......... (1,016)
------- ------- ------- -------
Net income (loss)....... $ 2,458 $ 1,182 $ 3,653 $ (369)
======= ======= ======= =======
Weighted average shares
outstanding
Basic..................... 4,015 3,751 4,013 3,575
Diluted................... 4,024 3,790 4,024 3,575
Net income per share before
extraordinary loss
Basic..................... $ 0.61 $ 0.32 $ 0.91 $ 0.18
======= ======= ======= =======
Diluted................... $ 0.61 $ 0.31 $ 0.91 $ 0.18
======= ======= ======= =======
Net income (loss) per share
Basic..................... $ 0.61 $ 0.32 $ 0.91 $ (0.10)
======= ======= ======= =======
Diluted................... $ 0.61 $ 0.31 $ 0.91 $( 0.10)
======= ======= ======= =======
Comprehensive income (loss):
Net income (loss)......... $ 2,458 $ 1,182 $ 3,653 $ (369)
Change in cumulative
translation adjustment... (8) (8) 9 (18)
------- ------- ------- -------
Comprehensive income
(loss)................. $ 2,450 $ 1,174 $ 3,662 $ (387)
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
F-34
LABTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands, except per share amounts)
(Unaudited)
Nine Months Ended
December 31,
------------------
2000 1999
-------- --------
Cash flow from operating activities:
Net income (loss)........................................ $ 3,653 $ (369)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation........................................... 1,196 1,186
Amortization of goodwill............................... 898 2,611
Amortization of debt issuance costs.................... 329 330
Change in deferred income taxes........................ (718) 13
Compensation expense on stock options.................. 11 --
Write-off of debt issuance costs....................... -- 1,693
Changes in current assets and liabilities:
Accounts receivable.................................... (4,185) (3,182)
Inventories............................................ (10,443) 1,363
Interest and other receivables......................... (7) 144
Income taxes receivables............................... -- 163
Prepaid expenses....................................... 78 (25)
Accounts payable....................................... 7,703 1,008
Income taxes payable................................... 1,271 (449)
Accrued interest....................................... 104 (12)
Accrued payroll and other expenses..................... (789) (1,334)
-------- --------
Net cash provided by (used in) operating activities.. (899) 3,140
-------- --------
Cash flow from investing activities:
Capital expenditures..................................... (1,341) (992)
Other assets............................................. (69) (57)
Costs associated with CRU purchase....................... (13,901)
-------- --------
Net cash used in investing activities................ (1,410) (14,950)
-------- --------
Cash flow from financing activities:
Net increase (decrease) in short-term credit facility.... 5,886 5,202
Proceeds from issuance of long-term debt................. 28,500
Repayment of long-term debt.............................. (3,512) (20,276)
Debt issuance costs...................................... (8) (2,419)
Proceeds from exercise of stock options.................. 18 28
Proceeds from issuance of common stock................... 1,000
Collection on stock subscription......................... 9
Repurchase and cancellation of common stock.............. (154)
-------- --------
Net cash provided by financing activities............ 2,384 11,890
-------- --------
Effect of foreign currency on cash......................... 8 (18)
-------- --------
Net increase (decrease) in cash............................ 83 62
Cash at beginning of period................................ 1,373 768
-------- --------
Cash at end of period...................................... $ 1,456 $ 830
======== ========
The accompanying notes are an integral part of these financial statements.
F-35
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements are unaudited and have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and in the opinion of management include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair statement of results for the interim periods. Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These consolidated financial
statements and notes should be read in conjunction with the audited financial
statements and notes thereto included in the Company's annual report on Form
10-K for the year ended March 31, 2000. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
year.
Reclassifications have been made to amounts in prior years to conform to the
current year presentation. These changes had no impact on previously reported
results of operations or shareholders' equity.
2. Accounts Receivable
Accounts receivable are net of allowances for doubtful accounts and for
sales returns of $1,322 and $1,290 at December 31 and March 31, 2000,
respectively. At December 31 and March 31, 2000, 14.4% and 11%, respectively,
of receivables were from one customer.
3. Inventories
Inventories are manufactured by foreign factories subcontracted by the
Company. Of total inventories, $414 and $450 was in transit at December 31, and
March 31, 2000, respectively.
4. Property and Equipment
Property and equipment consists of the following:
December 31, March 31,
2000 2000
------------ ---------
Leasehold improvements.............................. $ 127 $ 256
Tooling and molds................................... 1,931 2,588
Furniture and equipment............................. 2,827 2,473
Retail displays..................................... 1,588 2,145
------- -------
6,473 7,462
Less: accumulated depreciation...................... (3,975) (5,130)
------- -------
$ 2,498 $ 2,332
======= =======
5. Stock
On December 1, 1999 the Company completed a one-for-two reverse stock split
of its common stock. Subsequent to the reverse stock split, one of the
Company's subordinate debt holders converted $1,500 principal amount of its
Senior Subordinated Note due October 1, 2005 for 262 shares of common stock.
Also, the Company's majority shareholder converted $824 of the Unsecured
Subordinated Promissory Note due February 17, 2005 and $28 of accrued interest
for 149 shares of common stock.
F-36
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Earnings Per Share
Net income (loss) per share on a diluted basis is based on the weighted
average number of shares of common stock and all potentially dilutive
securities outstanding during the periods, computed using the treasury stock
method for stock options. Given the Company's net loss for the nine months
ended December 31, 1999, the dilutive effect of stock options has been excluded
from the computation of the weighted average shares outstanding. For the three
and nine months ended December 31, 2000, the dilutive impact of stock options
are included in the computation of net income per share in accordance with
FAS 128. On December 1, 1999 the Company had a one-for-two reverse stock split.
The weighted average shares outstanding in 1999 have been adjusted to reflect
the reverse split.
Weighted average shares outstanding consist of the following:
For the Three For the Nine
Months Ended Months Ended
December 31, December 31,
------------- -------------
2000 1999 2000 1999
------ ------ ------ ------
Weighted average shares outstanding (basic).. 4,015 3,751 4,013 3,575
Effect of dilutive stock options............. 9 39 11 --
------ ------ ------ ------
Weighted average shares outstanding
(diluted)................................... 4,024 3,790 4,024 3,575
====== ====== ====== ======
7. Purchase of Connector Resources Unlimited, Inc.
On August 20, 1999, Labtec, Inc. ("Labtec") completed the acquisition of all
of the outstanding shares of Connector Resources Unlimited, Inc. ("CRU") for
approximately $13,146 in cash and $1,500 in debt. CRU designs, develops and
markets computer peripheral products principally in North America. The
acquisition was accounted for as a purchase and therefore the operations of CRU
have been included with those of the Company since August 20, 1999.
The following sets forth the reconciliation of fair value of the assets
acquired and the liabilities assumed.
Purchase price................................................... $14,646
Fair value of tangible assets acquired........................... (5,338)
Liabilities assumed.............................................. 2,098
Direct costs of acquisition...................................... 755
-------
Excess of purchase price over fair value of tangible assets.... $12,161
=======
The excess of the purchase price over fair value of tangible assets acquired
is being amortized over an estimated useful life of twenty years.
F-37
LABTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following unaudited pro forma information presents the results of the
Company's operations assuming the CRU acquisition occurred at the beginning of
the respective three and nine month periods, after giving effect to adjustments
for amortization of goodwill, estimated increase in interest expense and the
estimated impact on the income tax provision.
Three Months Nine Months
Ended Ended
December 31, December 31,
--------------- ---------------
2000 1999 2000 1999
------- ------- ------- -------
(unaudited) (unaudited)
Net sales.................................. $29,800 $27,379 $78,067 $70,475
Net income (loss).......................... 2,458 1,182 3,653 575
Net income (loss) per share before
extraordinary loss:
Basic.................................... $ 0.61 $ 0.32 $ 0.91 $ 0.15
Diluted.................................. 0.61 0.31 0.91 0.15
The unaudited pro forma financial information is not necessarily indicative
of the operating results that would have occurred had the CRU acquisition been
consummated as of the beginning of each period, nor is it necessarily
indicative of future operating results. The unaudited pro forma information
should be read in conjunction with the current report of the Company on Form 8-
K dated August 20, 1999 and the current report of the Company on Form 8-K/A
filed November 2, 1999.
8. Borrowings
In conjunction with the purchase of CRU in August 1999, the Company repaid
its $7,500 revolving line of credit and $19,250 long-term loan with funds
obtained from a $27,000 long-term loan and a $16,000 revolving line of credit
with other lenders. Also, a $1,500 seven and one-half year promissory note was
issued to the prior shareholders of CRU. Fees related to the extinguished
credit line are included in the extraordinary loss on extinguishment of debt.
At December 31, 2000, the long-term loans and a portion of the revolving line
of credit were accruing interest at LIBOR plus 3.00-3.50% and the remaining
portion of the revolving line of credit was accruing interest at the prime rate
plus 1.50%. In December 1999, the Company entered into an interest rate swap
agreement with its primary lender in order to fix the interest rate on a
portion of its long-term debt. At December 31, 2000, the amount of debt subject
to the fixed rate was $11,725 for which the rate was 9.44%. The bank line of
credit is secured by substantially all of the Company's assets. Loan fees paid
to the banks and transaction fees relating to the term loan, revolving line of
credit and promissory note were $2,419 and have been recorded in debt issuance
costs. The current line of credit expires in September 2005 and the long-term
debt expires June 30, 2005.
F-38
Annex A
AGREEMENT AND PLAN OF MERGER
among
LABTEC INC.
LOGITECH INTERNATIONAL S.A.
LOGITECH INC.
and
THUNDER ACQUISITION CORP.
Dated February 7, 2001
TABLE OF CONTENTS
Page
----
Preamble................................................................ A-1
Recitals................................................................ A-1
Article I The Offer.................................................. A-2
Section 1.1 The Offer.................................... A-2
Section 1.2 Action by the Company........................ A-3
Section 1.3 Directors.................................... A-4
Section 1.4 Stockholder Agreement........................ A-5
Section 1.5 Material Adverse Effect...................... A-5
Section 1.6 Substantial Adverse Effect................... A-5
Article II The Merger................................................. A-6
Section 2.1 The Merger................................... A-6
Section 2.2 Effective Time............................... A-6
Section 2.3 Closing...................................... A-6
Section 2.4 Conversion of Shares......................... A-6
Section 2.5 Dissenters' Rights........................... A-7
Section 2.6 Exchange of Certificates..................... A-8
Section 2.7 No Further Ownership Rights in Shares........ A-9
Section 2.8 No Liability................................. A-9
Section 2.9 Lost, Stolen or Destroyed Certificates....... A-9
Section 2.10 Withholding Rights........................... A-9
Section 2.11 Termination of Exchange Fund; Charges and
Expenses..................................... A-9
Section 2.12 Treatment of Company Options................. A-10
Article III The Surviving Corporation.................................. A-10
Section 3.1 Articles of Organization..................... A-10
Section 3.2 Bylaws....................................... A-10
Section 3.3 Directors and Officers....................... A-10
Section 3.4 Purpose...................................... A-10
Section 3.5 Authorized Stock............................. A-10
Article IV Representations and Warranties of the Company.............. A-11
Section 4.1 Corporate Existence and Power; Organizational
Documents.................................... A-11
Section 4.2 Corporate Authorization; Binding Effect...... A-11
Section 4.3 Governmental Authorization................... A-11
Section 4.4 Non-Contravention............................ A-12
Section 4.5 Capitalization............................... A-12
Section 4.6 Subsidiaries................................. A-12
Section 4.7 Public Information........................... A-13
Section 4.7A No Undisclosed Liabilities................... A-13
Section 4.8 Absence of Certain Changes................... A-14
Section 4.9 Litigation................................... A-14
Section 4.10 Tax.......................................... A-14
Section 4.11 Employee Benefit Plans; Employee Matters..... A-16
Section 4.12 Compliance with Laws; Licenses............... A-17
Section 4.13 Environment.................................. A-17
Section 4.14 Restrictions on Business Activities.......... A-18
Section 4.15 Title to Property............................ A-18
Section 4.16 Intellectual Property........................ A-19
Section 4.16A Agreements, Contracts and Commitments........ A-20
Section 4.17 Insurance.................................... A-21
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TABLE OF CONTENTS--(Continued)
Page
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Section 4.18 Customers................................... A-21
Section 4.19 Finders' Fees............................... A-21
Section 4.20 Opinion of Financial Advisor................ A-21
Section 4.21 State Takeover Statutes..................... A-22
Section 4.22 Company Disclosure Documents................ A-22
Article V Representations and Warranties of Logitech Subsidiary and
Merger Sub............................................... A-22
Section 5.1 Corporate Existence and Power;
Organizational Documents.................... A-22
Section 5.2 Corporate Authorization; Binding Effect..... A-23
Section 5.3 Governmental Authorization.................. A-23
Section 5.4 Non-Contravention........................... A-23
Section 5.5 Finders' Fees............................... A-24
Section 5.6 Financing................................... A-24
Section 5.7 Interested Stockholder...................... A-24
Section 5.8 Merger Sub's Operations..................... A-24
Section 5.9 Capitalization.............................. A-24
Section 5.10 Public Information.......................... A-25
Section 5.11 Absence of Certain Changes.................. A-25
Section 5.12 Litigation.................................. A-25
Section 5.13 Compliance with Laws; Licenses.............. A-26
Section 5.14 Offer Documents............................. A-26
Article VI Covenants of the Company.................................. A-26
Section 6.1 Conduct of the Company...................... A-26
Section 6.2 Access to Information....................... A-28
Section 6.3 No Solicitation............................. A-29
Section 6.4 Termination of 401(k) Plan.................. A-30
Article VII Covenants of Logitech Subsidiary and Merger Sub........... A-30
Section 7.1 Obligations of Merger Sub................... A-30
Section 7.2 Director and Officer Liability.............. A-30
Section 7.3 Matters Regarding ADRs...................... A-31
Section 7.4 Expenses of the Company..................... A-31
Article VIII Covenants of the Parties.................................. A-31
Section 8.1 Commercially Reasonable Efforts; Notice..... A-31
Section 8.2 Conveyance Tax Filings...................... A-32
Section 8.3 Conveyance Taxes............................ A-32
Section 8.4 Third Party Consents........................ A-32
Section 8.5 Special Meeting; Company Disclosure
Documents................................... A-32
Section 8.6 Affiliates of the Company................... A-33
Article IX Conditions to the Merger.................................. A-34
Section 9.1 Conditions to Obligations of Each Party..... A-34
Article X Termination............................................... A-34
Section 10.1 Termination................................. A-34
Section 10.2 Effect of Termination....................... A-37
Article XI Miscellaneous............................................. A-37
Section 11.1 Costs and Expenses.......................... A-37
Section 11.2 Notices..................................... A-38
Section 11.3 Survival of Representations and Warranties.. A-39
Section 11.4 Amendment................................... A-39
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TABLE OF CONTENTS--(Continued)
Page
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Section 11.5 No Waiver.............................. A-39
Section 11.6 Section Headings....................... A-40
Section 11.7 Successors and Assigns; Guarantee of
Merger Sub Obligations................. A-40
Section 11.8 Governing Law.......................... A-40
Section 11.9 Jurisdiction........................... A-40
Section 11.10 Severability........................... A-40
Section 11.11 Parties in Interest.................... A-40
Section 11.12 Public Announcements................... A-41
Section 11.13 Entire Agreement....................... A-41
Section 11.14 Counterparts; Effectiveness............ A-41
Signatures.............................................................. A-42
Annex
Annex A Conditions to the Offer............................... A-43
Exhibits
Exhibit A Stockholder Agreement................................. A-45
Exhibit B Form of Company Affiliate Letter...................... A-58
Company Disclosure Schedules
Schedule 4.3 Governmental Authorizations
Schedule 4.4 Non-Contravention
Schedule 4.5 Capitalization
Schedule 4.6 Company Subsidiaries
Schedule 4.7 Public Information
Schedule 4.7A No Undisclosed Liabilities
Schedule 4.8 Absence of Certain Changes
Schedule 4.9 Litigation
Schedule 4.11(a) Employee Benefit Plans
Schedule 4.11(d) ERISA Obligations
Schedule 4.15 Real Property
Schedule 4.16 Company Intellectual Property
Schedule 4.16A Agreements, Contracts and Commitments
Schedule 4.18 Customers
Schedule 4.21 State Takeover Statutes
Schedule 6.1 Conduct of the Company
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (as the same may be amended, supplemented
or modified in accordance with the terms hereof, this "Agreement") dated
February 7, 2001 is among Labtec Inc., a Massachusetts corporation (together
with its successor and assigns, the "Company"), for the purposes of Sections
1.1(b) and 11.7 only, Logitech International S.A., a Swiss corporation
(together with its successor and assigns, "Parent"), Logitech Inc., a
California corporation and a wholly-owned subsidiary of Parent (together with
its successors and assigns, "Logitech Subsidiary"), and Thunder Acquisition
Corp., a Massachusetts corporation and a direct wholly-owned subsidiary of
Logitech Subsidiary (together with its successor and assigns, "Merger Sub").
Recitals
The parties desire that Logitech Subsidiary acquire the Company, upon the
terms and conditions set forth herein and in accordance with the Massachusetts
Business Corporation Law and Chapter 156B of the Massachusetts General Laws
(collectively, the "MBCL").
In furtherance of such acquisition, it is proposed that Merger Sub shall,
and Logitech Subsidiary shall cause Merger Sub to, make an exchange offer (as
it may be amended from time-to-time as permitted under this Agreement, the
"Offer") to acquire, upon the terms and subject to the conditions of this
Agreement and the Offer, all of the issued and outstanding shares (each, a
"Share" and collectively, the "Shares") of the Company's common stock, par
value $.01 per share ("Company Common Stock"), at a price for each Share of (i)
$11.00 in cash (such price, or such higher price per share in cash that may be
made pursuant to the Offer, is referred to as the "Cash Portion"), and (ii) a
fraction of an American depositary share (each, a "Parent ADS") of Parent equal
to the Stock Portion (as defined in Section 1.1(d) below) (each Parent ADS
representing one-tenth of a registered share, par value CHF 10 per share, of
Parent and evidenced by an American depositary receipt ("Parent ADR") issued in
accordance with the Deposit Agreement dated as of March 27, 1997 among Parent,
The Bank of New York, as depositary, and all owners from time to time of Parent
ADSs, as amended on July 5, 2000 (as so amended, the "Deposit Agreement").
Also in furtherance of such acquisition, it is proposed that, following the
consummation of the Offer, Merger Sub will merge with and into the Company (the
"Merger") and that the Shares not tendered and accepted pursuant to the Offer
will thereupon be converted into the right to receive both cash and a fraction
of a Parent ADS in the amounts set forth in Section 2.4(c) hereof.
The respective boards of directors of the Company, Parent, Logitech
Subsidiary and Merger Sub have authorized, adopted and approved this Agreement
and deem this Agreement, the Offer and the Merger desirable and in the best
interests of their respective corporations and stockholders.
This Agreement and the Merger have been adopted and approved by Logitech
Subsidiary as the sole stockholder of Merger Sub and will be submitted to the
stockholders of the Company for their adoption and approval.
Concurrently herewith, Logitech Subsidiary and two stockholders of the
Company have entered into a Stockholder Agreement (the "Stockholder Agreement")
in the form attached hereto as Exhibit A, providing that, among other things,
such stockholders will tender their Shares pursuant to the Offer and vote their
Shares and those Shares over which they have voting power in favor of the
adoption and approval of this Agreement, and that the Parent ADSs to be
received by such stockholders shall be subject to a contractual lock-up as
provided therein.
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Agreement
Logitech Subsidiary, Merger Sub and the Company agree as follows:
ARTICLE I
The Offer
Section 1.1 The Offer
(a) Provided that this Agreement shall not have been terminated and subject
to the provisions of this Agreement and the conditions set forth on Annex A
hereto, as promptly as practicable after the date hereof, but in no event later
than ten business days following the public announcement of the terms of this
Agreement, Merger Sub shall, and Logitech Subsidiary shall cause Merger Sub to,
commence, within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Offer. The obligation of Merger Sub
to, and of Logitech Subsidiary to cause Merger Sub to, accept for payment any
Shares tendered in the Offer shall be subject to the satisfaction of only those
conditions set forth on Annex A. The initial expiration date of the Offer shall
be the 20th "business day" (as such term is defined in Rule 14d-1(g)(3) under
the Exchange Act) following the commencement of the Offer (determined using
Rules 14d-1(g)(3) and 14d-2 under the Exchange Act). Merger Sub and Logitech
Subsidiary expressly reserve the right to waive any condition to the Offer or
modify the terms of the Offer, except that, without the consent of the Company,
Merger Sub shall not, and Logitech Subsidiary shall not cause Merger Sub to,
(i) reduce the number of shares of Company Common Stock subject to the Offer,
(ii) reduce the Cash Portion or reduce the Stock Portion, (iii) waive or change
the Minimum Condition (as defined in Annex A), (iv) modify in any manner
adverse to the holders of Company Common Stock or add to the conditions to the
obligation of Merger Sub to, or Logitech Subsidiary to cause Merger Sub to,
accept for payment any Shares tendered in the Offer set forth in Annex A, (v)
except as provided in the next two sentences, extend the Offer or (vi) change
the form of consideration payable in the Offer. Notwithstanding the foregoing,
Merger Sub may, and Logitech Subsidiary may cause Merger Sub to, without the
consent of the Company, (x) extend the Offer for any period required by any
rule, regulation, interpretation of the Securities and Exchange Commission (the
"SEC") or the staff thereof; (y) from time to time extend the Offer, if at the
scheduled expiration date of the Offer any of the conditions to the Offer shall
not have been satisfied or waived, until such time as such conditions are
satisfied or waived; or (z) extend the Offer for any reason on one or more
occasions for an aggregate period of not more than 10 business days beyond the
latest expiration date that would otherwise be permitted under clause (x) or
(y) of this sentence if on such expiration date there shall not have been
tendered (and not properly withdrawn) at least 90% of the outstanding Shares on
a Fully Diluted Basis. Logitech Subsidiary and Merger Sub agree that, if any
one or more of the conditions to the Offer set forth on Annex A are not
satisfied then, provided that such conditions are reasonably capable of being
satisfied, Merger Sub shall, at the request of the Company, extend the Offer
from time to time unless any such condition is no longer reasonably capable of
being satisfied or any such event has occurred; provided, however, that in no
event shall Merger Sub be required to extend the Offer beyond July 15, 2001.
Following expiration of the Offer, Merger Sub may, and Logitech Subsidiary may
cause Merger Sub to, make available a "subsequent offering period" in
accordance with Rule 14d-11 of the Exchange Act. On the terms and subject to
the conditions of the Offer and this Agreement, Merger Sub shall, and Logitech
Subsidiary shall cause Merger Sub to, accept for payment and pay for all Shares
validly tendered and not withdrawn pursuant to the Offer as soon as practicable
after the expiration of the Offer. With respect to any such Shares the Cash
Portion shall be net to the seller thereof in cash, subject to reduction only
for any applicable federal back-up withholding or stock transfer taxes payable
by such seller.
(b) On the date of commencement of the Offer, Parent shall file with the SEC
a Registration Statement on Form F-4, which will include a preliminary
prospectus containing the information required under Rule 14d-4(b) under the
Exchange Act to register the offer and sale of Registered Parent Shares
represented by Parent ADSs pursuant to the Offer (as the same may be
supplemented or amended, the "Form F-4"). On the date of commencement of the
Offer, Logitech Subsidiary and Merger Sub shall file with the SEC a Tender
Offer
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Statement on Schedule TO (together with any communications filed with the SEC
under cover of Schedule TO prior to commencement of the Offer in accordance
with Rule 14d-2(b) under the Exchange Act, and as such Schedule TO may be
supplemented or amended, the "Schedule TO") with respect to the Offer, which
shall contain an offer to purchase and a related letter of transmittal and
summary advertisement (such Schedule TO, the Form F-4 and the documents
included therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "Offer Documents"). Each of Logitech
Subsidiary, Merger Sub and the Company shall promptly correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
each of Logitech Subsidiary and Merger Sub shall, upon becoming aware that such
information shall have become false or misleading in any material respect, take
all steps necessary to amend or supplement the Offer Documents and to cause the
Schedule TO and Form F-4 as so amended or supplemented to be filed with the SEC
and for the other Offer Documents, as so amended or supplemented, to be
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. Logitech Subsidiary and Merger
Sub shall give the Company and its counsel a reasonable opportunity to review
and comment on the Offer Documents prior to their being filed with the SEC or
disseminated to the stockholders of the Company. Logitech Subsidiary and Merger
Sub shall provide the Company and its counsel in writing with any comments
Logitech Subsidiary or Merger Sub or their counsel may receive from the SEC or
its staff with respect to the Offer Documents promptly after the receipt of
such comments and shall provide the Company and its counsel with a reasonable
opportunity to participate in the response of Logitech Subsidiary and/or Merger
Sub to such comments. Parent shall not issue certificates or scrip representing
fractional Parent ADSs pursuant to the Offer. Logitech Subsidiary will pay cash
in lieu of fractional Parent ADSs in accordance with the provision set forth in
the last two sentences of Section 2.4(d) hereof.
(c) Logitech Subsidiary and Merger Sub shall, and Logitech Subsidiary shall
cause Merger Sub to, provide or cause to be provided to the Exchange Agent (as
defined in Section 2.6 below) on, prior to or promptly after the expiration of
the Offer (and thereafter on a timely basis) Parent ADRs and funds necessary to
make payment for any Shares that Logitech Subsidiary or Merger Sub become
obligated to purchase pursuant to the Offer.
(d) The "Stock Portion" shall be determined as follows:
(i) if the Average Market Price (as defined below) is equal to a
price that is not more than $31.34 or not less than $25.64, the Stock
Portion shall be equal to (x) $7.00 divided by (y) the Average Market
Price;
(ii) if the Average Market Price is more than $31.34, the Stock
Portion shall be equal to 0.2234; and
(iii) if the Average Market Price is less than $25.64, the Stock
Portion shall be equal to 0.2730.
(e) "Average Market Price" means the average closing bid price for a Parent
ADS as reported by Bloomberg Financial Markets (or such other source as the
parties hereto shall agree in writing), on the 20 consecutive trading days
ending on and including the trading day that is three business days prior to
the day on which the Offer actually expires.
Section 1.2 Action by the Company
(a) Subject to Section 6.3, the Company hereby (i) approves of and consents
to the Offer, (ii) represents that its board of directors (the "Company
Board"), at a meeting duly called and held, has (A) unanimously determined that
each of the Offer, the Merger and this Agreement are in the best interests of
the Company's stockholders, approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, in all respects, and
(B) resolved to recommend acceptance of the Offer and approval and adoption of
this Agreement and the Merger by the Company's stockholders, and (iii) consents
to the inclusion of such recommendation and approval in the Offer Documents.
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(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer, including an information statement (such
Schedule 14D-9, as amended and supplemented from time to time, the "Schedule
14D-9") that shall describe the recommendations referred to in Section 1.2(a),
or any permitted withdrawal or modification in accordance with Section 6.3, and
shall mail the Schedule 14D-9, together with the Offer Documents that are
required to be so mailed, to the holders of Company Common Stock. Each of the
Company, Logitech Subsidiary and Merger Sub shall promptly correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect, and the Company shall, upon becoming aware that such information shall
have become false or misleading in any material respect, take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated
to the Company's stockholders, in each case as and to the extent required by
applicable federal securities laws. The Company shall provide Logitech
Subsidiary and Merger Sub and their counsel in writing with any comments the
Company or its counsel may receive from the SEC or its staff with respect to
the Schedule 14D-9 promptly after the receipt of such comments, and shall give
Logitech Subsidiary and Merger Sub and their counsel a reasonable opportunity
to participate in the Company's response to such comments.
(c) In connection with the Offer, the Company shall cause its transfer agent
to furnish Merger Sub with a recent list of the names and addresses of the
holders of record of Shares, mailing labels and a securities position listing
to the extent within the Company's access. The Company shall also provide
Merger Sub with such additional information (including, without limitation,
updated lists of stockholders, mailing labels and securities position listings)
and assistance as Merger Sub may reasonably request in communicating the Offer
to the Company's stockholders. All such information shall be considered
Confidential Information (as such term is defined in the Confidentiality
Agreement dated as of October 20, 2000 (the "Confidentiality Agreement")
between Goldsmith Agio Helms & Lynner Ltd., on behalf of the Company, and
Logitech Subsidiary), which shall remain in full force and effect after the
date hereof.
(d) Solely in connection with the tender and purchase of Shares pursuant to
the Offer and the consummation of the Merger, the Company hereby waives any and
all rights of first refusal it may have with respect to Shares owned by, or
issuable to, any person, other than rights to repurchase unvested shares, if
any, that may be held by persons pursuant to the grant of restricted stock
purchase rights or following exercise of employee stock options.
Section 1.3 Directors
(a) Effective upon the acceptance for payment by Merger Sub of any Shares,
Merger Sub shall be entitled to designate the number of directors, rounded up
to the next whole number, to the Company Board that equals the product of (i)
the total number of directors on the Company Board (giving effect to the
election of any additional directors pursuant to this Section or the
resignation of any individuals who are directors on the date hereof) and (ii)
the percentage obtained by dividing the number of Shares beneficially owned
(within the meaning of Rule 13d-3 under the Exchange Act), other than shares
beneficially owned by the Company, by Merger Sub by the total number of Shares
that are issued and outstanding at the time of such acceptance, and the Company
shall take all action necessary to cause Merger Sub's designees to be elected
or appointed to the Company Board. Effective upon such acceptance, the Company
shall use its best efforts to cause the individuals designated by Logitech
Subsidiary to constitute the same percentage as is on the Company Board of (x)
each committee of the Company Board, (y) each board of directors of each
subsidiary of the Company (subject to applicable law) and (z) each committee of
each such board of directors. Notwithstanding the foregoing, the Company shall
use its commercially reasonable efforts to ensure that two of the members of
the Company Board as of the date hereof (the "Continuing Directors") shall
remain members of such Board until the Effective Time (as defined in Section
2.2). If a Continuing Director resigns from the Company Board, Logitech
Subsidiary, Merger Sub and the Company shall permit the remaining Continuing
Director or Directors to appoint the resigning Director's successor who shall
be deemed to be a Continuing Director.
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(b) The Company's obligations to appoint designees to the Company Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. The Company shall promptly take all actions required pursuant to
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this
Section 1.3 and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 1.3.
Merger Sub shall, and Logitech Subsidiary shall cause Merger Sub to, supply to
the Company in writing and be solely responsible for any information with
respect to itself and its nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1.
(c) From and after the time, if any, that any of Merger Sub's designees have
been so elected or appointed to the Company Board (and prior to the Effective
Time), any amendment of this Agreement, any termination of this Agreement by
the Company, any extension of time for performance of any of the obligations of
Logitech Subsidiary or Merger Sub hereunder, any waiver of any condition to the
obligations of the Company or any of the Company's rights hereunder or other
action by the Company hereunder or in connection with the transactions
contemplated hereby shall require the concurrence of a majority of the
Continuing Directors.
Section 1.4 Stockholder Agreement
Concurrently with the execution and delivery of this Agreement, Sun
Multimedia Partners, L.P., a Delaware limited partnership, and Sun Venture
Capital Partners I, L.P., a Delaware limited partnership (collectively, the
"Principal Stockholders"), are each executing and delivering a Stockholder
Agreement.
Section 1.5 Material Adverse Effect
When used in connection with the Company or any Company Subsidiaries (as
defined in Section 4.6(a) below), or Parent or any Parent Subsidiaries (as
defined in Section 5.3 below), as the case may be, the term "Material Adverse
Effect" means any one or more changes, effects, events or circumstances that,
individually or when taken together with all other such changes, effects,
events or circumstances that occurred prior to the date of determination (and
are continuing as of such date), (a) is materially adverse to the Company and
the Company Subsidiaries or Parent and the Parent Subsidiaries, as the case may
be, in each instance taken as a whole, or (b) prevents or materially delays the
consummation of the transactions contemplated hereby.
Section 1.6 Substantial Adverse Effect
When used in this Agreement in connection with the Company or any Company
Subsidiaries or Parent or any Parent Subsidiaries, as the case may be, the term
"Substantial Adverse Effect" means, as of any date, any one or more changes,
effects, events or circumstances that, individually or when taken together with
all other such changes, effects, events or circumstances that occurred prior to
such date (and are continuing as of such date), is materially adverse to the
financial condition as of such date, the results of operations through such
date or properties on such date of the Company and the Company Subsidiaries or
Parent and the Parent Subsidiaries, as the case may be, in each instance taken
as a whole; provided, however, that in no event shall a Substantial Adverse
Effect include any one or more changes, effects, events or circumstances to the
extent they arise out of, result from or are caused by:
(a) the announcement of this Agreement or any of the transactions
contemplated hereby, including, without limitation, any action, suit or
proceeding on or after the date hereof brought by a current or former
stockholder or current or former purported stockholder of the Company against
the Company or Parent or any of their respective officers, directors or
affiliates in connection with this Agreement or any of the transactions
contemplated hereby;
(b) any change, effect, event or circumstance that generally affects the PC
peripheral sector;
(c) any change in the market price of Company Common Stock, Parent
Registered Shares or Parent ADRs;
A-5
(d) regional, national or global industry or economic conditions;
(e) regional, national or international financial markets or conditions; or
(f) fluctuations in sales or profitability in the ordinary course of
business or the failure of the Company or Parent, as the case may be, to meet
analysts' expectations;
provided, further, however, that in no event shall a Substantial Adverse
Effect, as of any date, include any one or more changes, effects, events or
circumstances that is, as of such date, materially adverse to the prospects of
the Company and the Company Subsidiaries or Parent and Parent Subsidiaries, as
the case may be, in each instance taken as a whole on such date, except to the
extent that such change, effect, event or circumstance is materially adverse to
the financial condition as of such date, results of operations prior to such
date or properties on such date of the Company and the Company Subsidiaries or
Parent and the Parent Subsidiaries, as the case may be, in each instance taken
as a whole.
ARTICLE II
The Merger
Section 2.1 The Merger
Upon the terms and subject to the conditions set forth herein, at the
Effective Time (as defined in Section 2.2 below), Merger Sub shall be merged
with and into the Company in accordance with the MBCL, whereupon the separate
existence of Merger Sub shall cease, and the Company shall be the surviving
corporation (the "Surviving Corporation").
Section 2.2 Effective Time
As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger set forth in Article IX of
this Agreement, the Company and Merger Sub shall file the articles of merger
with the Secretary of State of the Commonwealth of Massachusetts and make all
other filings or recordings required by the MBCL in connection with the Merger.
The Merger shall become effective on such date as the articles of merger shall
have been accepted for filing by the Secretary of State of the Commonwealth of
Massachusetts, or at such later date as is agreed to in writing by the parties
and as is specified in the articles of merger (the "Effective Time"). From and
after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises and be subject to all of the
restrictions, disabilities, liabilities and duties of the Company and Merger
Sub, all as provided under the MBCL.
Section 2.3 Closing
The closing of the Merger (the "Closing") shall take place at 10:00 a.m. on
a date specified by the parties, which (subject to the prior satisfaction or
waiver of the conditions set forth in Section 9.1 of this Agreement) shall be
no later than the fifth business day after the day on which the conditions set
forth in Section 9.1 have been satisfied or waived, at the offices of Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, or
at such other time, date or place as is agreed to in writing by the parties
(the "Closing Date").
Section 2.4 Conversion of Shares
At the Effective Time by virtue of the Merger and without any action on the
part of Logitech Subsidiary, Merger Sub or any holder of Shares:
(a) Each share of Company Common Stock held by the Company as treasury stock
and each Share owned by Parent, Logitech Subsidiary, Merger Sub or any other
subsidiary of Parent immediately prior to the Effective Time shall
automatically be cancelled, retired and cease to exist and no payment shall be
made with respect thereto.
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(b) Each share of capital stock of Merger Sub outstanding immediately prior
to the Effective Time shall be converted into and become one share of common
stock of the Surviving Corporation with the same rights, powers and privileges
as the shares so converted and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
(c) Except as otherwise provided in Section 2.4(a), or as provided in
Section 2.5 with respect to Shares as to which appraisal rights shall have been
exercised, each Share outstanding immediately prior to the Effective Time shall
be converted into the right to receive (x) the Cash Portion in cash per Share
from the Surviving Corporation, without any interest thereon and (y) a fraction
of a Parent ADS equal to the Stock Portion (the Cash Portion and the Stock
Portion are collectively referred to as the "Merger Consideration"). From and
after the Effective Time, all such Shares shall no longer be outstanding and
shall automatically be cancelled, retired and cease to exist and each holder of
a certificate (a "Certificate") representing any such Shares shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender thereof in accordance with Section
2.6 hereof.
(d) No certificates or scrip representing fractional Parent ADSs shall be
issued upon the surrender for exchange of Certificates pursuant to this Article
II, no dividend or distribution of Parent shall relate to such fractional
interests, and such fractional interests will not entitle the owner thereof to
vote or to any rights of a holder of Parent ADSs. For purposes of this Section
2.4(d), all fractional Parent ADSs to which a single record holder would be
entitled shall be aggregated and calculations shall be rounded to four decimal
places. Logitech Subsidiary shall pay to each former holder of Company Common
Stock an amount in cash equal to the product obtained by multiplying (x) the
fractional interest to which such former holder (after taking into account all
Shares held at the Effective Time by such holder) would otherwise be entitled
by (y) (i) the Average Market Price if the Average Market Price is not more
than $31.34 or not less than $25.64, (ii) $31.34 if the Average Market Price is
more than $31.34, or (iii) $25.64 if the Average Market Price is less than
$25.64. Logitech Subsidiary will deposit or will cause to be deposited a
sufficient amount of cash with the Exchange Agent to cover the payments
required to be made pursuant to this Section 2.4(d).
Section 2.4A Adjustments to the Stock Portion and the Cash Portion.
The Stock Portion and the Cash Portion shall be adjusted appropriately to
reflect the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Company
Common Stock), extraordinary cash dividends, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with
respect to the Company Common Stock occurring on or after the date hereof and
prior to the Effective Time. The Stock Portion shall be adjusted appropriately
to reflect the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Parent
Registered Shares or Parent ADSs), extraordinary cash dividends,
reorganization, recapitalization, reclassification, combination, exchange of
shares or other like change with respect to the Parent Registered Shares or the
Parent ADSs occurring on or after the date hereof and prior to the Effective
Time.
Section 2.5 Dissenters' Rights
(a) Any Shares that are outstanding immediately prior to the Effective Time
and that are held by a holder of Shares who has not voted such Shares to adopt
and approve this Agreement and who has properly exercised, preserved and
perfected dissenters' rights with respect to such Shares in accordance with the
MBCL, including Sections 86 through 98 thereof (the "Dissenting Provisions")
and, as of the Effective Time, has neither effectively withdrawn nor lost its
right to exercise such dissenters' rights ("Dissenting Shares"), will not be
converted into or represent a right to receive the Merger Consideration
pursuant to Section 2.4(c), but the holder thereof will be entitled to payment
of the fair value of such Dissenting Shares in accordance with the Dissenting
Provisions.
(b) If any holder of Shares who demands dissenters' rights with respect to
such holder's Shares under the MBCL effectively withdraws or loses (through
failure to perfect or otherwise) its dissenters' rights, then as
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of the Effective Time or the occurrence of such event, whichever later occurs,
such holder's Shares will automatically be converted into and represent only
the right to receive the Merger Consideration as provided in Section 2.4(c),
without interest thereon, upon surrender of the certificate or certificates
formerly representing such Shares.
(c) The Company will give Logitech Subsidiary (x) prompt notice of any
written intent to demand payment of the fair value of any Shares, withdrawals
of such demands and any other instruments served pursuant to the MBCL received
by the Company and (y) the opportunity to direct all negotiations and
proceedings with respect to dissenters' rights under the MBCL. The Company may
not voluntarily make any payment with respect to any exercise of dissenters'
rights and may not, except with the prior written consent of Logitech
Subsidiary, settle or offer to settle any such dissenters' rights.
Section 2.6 Exchange of Certificates
(a) Prior to the Effective Time, Logitech Subsidiary shall (i) designate, or
shall cause to be designated, a bank or trust company reasonably acceptable to
the Company to act as exchange agent for the payment of the Merger
Consideration (the "Exchange Agent") upon surrender of Certificates, (ii)
deposit, or cause to be deposited, with the Exchange Agent (A) an amount in
cash equal to the product of the Cash Portion and the number of Shares that are
issued and outstanding at the Effective Time and (B) ADRs representing a number
of Parent ADSs equal to the product of the Stock Portion and the number of
Shares outstanding at the Effective Time, and (iii) the cash amount payable in
lieu of fractional Shares in accordance with Section 2.4(d). For purposes of
determining the aggregate Merger Consideration to be so deposited, Parent shall
assume that, other than with respect to stockholders of the Company with
respect to whom the Company has been informed intend to exercise their
appraisal rights (the Company shall give Parent prompt notice of the receipt by
the Company of its receipt of notice of any such intent), Parent shall assume
that no stockholder of the Company shall perfect any right of appraisal of his,
her or its shares. If for any reason the Exchange Fund is inadequate to pay the
amounts to which holders of Shares shall be entitled under this Section 2.6(a),
Logitech Subsidiary shall take all steps necessary to enable or cause the
Surviving Corporation promptly to deposit additional cash with the Exchange
Agent sufficient to make all payments required under this Agreement, and
Logitech Subsidiary and the Surviving Corporation shall in any event be liable
for payment thereof. The Exchange Fund shall not be used for any purpose except
as expressly provided in this Agreement.
(b) As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of a Certificate that immediately prior to the Effective Time
represented outstanding Shares whose shares were converted into the right to
receive Merger Consideration pursuant to Section 2.4(c):
(i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates held by
such person shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in customary form and have such other
provisions as Logitech Subsidiary may reasonably specify); and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration.
(c) Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly completed and validly executed,
and such other documents as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive in exchange
therefor an amount equal to the product of the Merger Consideration and the
number of Shares represented by such Certificate, and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Shares that is not registered in the stock transfer books of the
Company, the proper amount of cash and Parent ADSs may be paid in exchange
therefor to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to a
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person other than the registered holder of such Certificate the Merger
Consideration or establish to the satisfaction of Logitech Subsidiary that such
tax has been paid or is not applicable. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Certificate.
Section 2.7 No Further Ownership Rights in Shares
The Merger Consideration paid upon the surrender of a Certificate in
accordance with the terms of this Article II shall be deemed to have been paid
in full satisfaction of all rights pertaining to the Shares formerly
represented by such Certificate. At the Effective Time the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for transfer or any other reason, they shall be cancelled
and exchanged as provided in this Article II.
Section 2.8 No Liability
To the fullest extent permitted by applicable law, none of Parent, Logitech
Subsidiary, Merger Sub, the Company or the Exchange Agent shall be liable to
any person in respect of any cash or Parent ADSs from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have been surrendered
prior to six years after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration would otherwise escheat to or
became the property of any Governmental Entity (as defined in Section 4.3
below)), any such Merger Consideration in respect thereof shall, to the fullest
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person previously
entitled thereto.
Section 2.9 Lost, Stolen or Destroyed Certificates
In the event that any Certificate shall have been lost, stolen or destroyed,
the Surviving Corporation or Exchange Agent shall pay the Merger Consideration
in exchange for such lost, stolen or destroyed Certificate, upon the making of
an affidavit of that fact by the holder thereof in form and substance
reasonably satisfactory to the Surviving Corporation or Exchange Agent, as the
case may be; provided, however, that the Surviving Corporation may, in its
discretion and as a condition precedent to the payment of such Merger
Consideration, require the owner of such lost, stolen or destroyed Certificate
to deliver a bond in such sum as the Surviving Corporation may reasonably
direct as indemnity against any claim that may be made against the Surviving
Corporation or the Exchange Agent with respect to such Certificate.
Section 2.10 Withholding Rights
Logitech Subsidiary shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement such amounts as
Logitech Subsidiary is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Logitech Subsidiary, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was
made by Logitech Subsidiary.
Section 2.11 Termination of Exchange Fund; Charges and Expenses
(a) Any portion of the Exchange Fund that remains undistributed to the
holders of Shares for six months after the Effective Time shall be returned to
Logitech Subsidiary, upon demand, and any holder of Shares shall look as a
general creditor only to Logitech Subsidiary for payment of such cash and
Parent ADSs to which such holder may be due subject to applicable law.
(b) The Surviving Corporation shall pay all charges and expenses, including
those of the Exchange Agent, in connection with the exchange of cash and Parent
ADSs for Shares.
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Section 2.12 Treatment of Company Options
Logitech Subsidiary and the Company shall take all actions necessary to
provide that each outstanding employee and/or director stock option to acquire
shares of Company Common Stock granted under or governed by the Company's
Amended and Restated 1997 Stock Option Plan, the Company's Amended and Restated
Director Option Plan and the Company's Amended and Restated 1993 Option Plan
(collectively, the "Company Option Plans"), whether or not such options are
then exercisable and vested (each such option a "Company Option"), shall,
effective as of the consummation of the Offer or the Effective Time, as the
case may be (in accordance with the terms of the Company Option Plan pursuant
to which such Company Options were granted), (a) become fully exercisable and
vested, (b) represent an option solely to acquire a unit consisting of (i) the
Cash Portion and (ii) the Stock Portion, and (c) have an exercise price per
such unit equal to the exercise price of such Company Option per share of
Company Common Stock immediately prior to the Effective Time. Unless exercised
prior thereto, all of the Company Options shall terminate at the Effective
Time.
ARTICLE III
The Surviving Corporation
Section 3.1 Articles of Organization
The articles of organization of the Company in effect at the Effective Time
shall be the articles of organization of the Surviving Corporation until
amended in accordance with applicable law.
Section 3.2 Bylaws
The bylaws of Merger Sub in effect at the Effective Time shall be the bylaws
of the Surviving Corporation until amended in accordance with applicable law.
Section 3.3 Directors and Officers
From and after the Effective Time, the directors of Merger Sub at the
Effective Time shall be the initial directors of the Surviving Corporation and
the officers of Merger Sub at the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors
are duly elected and qualified or until their earlier resignation or removal.
Section 3.4 Purpose
From and after the Effective Time, the purpose of the Surviving Corporation
shall be as set forth in Article II of the articles of organization of the
Surviving Corporation.
Section 3.5 Authorized Stock
From and after the Effective Time, the total number of shares of stock that
the Surviving Corporation shall be authorized to issue, the par value of the
shares of stock that the Surviving Corporation shall be authorized to issue and
a description of the preferences, voting powers, qualifications and special or
relative rights or privileges of each class of stock of the Surviving
Corporation or any series thereof shall each be as set forth in the articles of
organization of the Surviving Corporation.
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ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to Logitech Subsidiary and Merger Sub
that:
Section 4.1 Corporate Existence and Power; Organizational Documents
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and has all
corporate power and authority to own its properties and assets and to carry on
its business as presently conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) The Company has previously furnished to Logitech Subsidiary a complete
and correct copy of its articles of organization and bylaws, each as amended to
date (together, the "Company Charter Documents"). The Company Charter Documents
and the organizational documents of each Company Subsidiary (as defined in
Section 4.6 below) are in full force and effect. The Company is not in
violation of any of the provisions of the Company Charter Documents, and no
Company Subsidiary is in violation of its equivalent organizational documents
except where the violation of the Company Charter Documents or any such
organizational documents of a Company Subsidiary would not, individually or in
the aggregate, have a Material Adverse Effect.
Section 4.2 Corporate Authorization; Binding Effect
The Company has the corporate power to execute, deliver and, subject, with
respect to the Merger, to approval of the stockholders of the Company of the
Merger (if required), perform this Agreement and all other documents executed
and delivered or to be executed and delivered by it pursuant to this Agreement,
and, subject, with respect to the Merger, to approval of the stockholders of
the Company of the Merger (if required), has taken all necessary corporate
action to authorize the execution, delivery and performance by it of this
Agreement and such related documents. This Agreement has been duly executed and
delivered by the Company and, assuming due and valid authorization, execution
and delivery by the other parties hereto, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws and principles now or hereafter in effect, affecting
creditors' rights generally, (b) rules or principles of equity affecting the
enforcement of obligations generally, whether at law, in equity or otherwise,
or (c) the exercise of the discretionary powers of any court or other authority
before which a proceeding may be brought seeking equitable remedies, including
specific performance and injunctive relief.
Section 4.3 Governmental Authorization
Except as set forth in Schedule 4.3, the execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not require the Company to obtain any
consent of, or to make any filing with, any governmental body, agency, official
or authority (each, a "Governmental Entity") other than: (a) the filing of the
articles of merger in accordance with the MBCL, (b) compliance with any
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the applicable antitrust or competition
laws and regulations of jurisdictions outside the United States (the "Foreign
Filings"), (c) compliance with any applicable requirements of the Nasdaq Over-
the-Counter Market or the Exchange Act, including without limitation, the
filing with the SEC of the Schedule 14D-9 and a Schedule 14A, proxy statement,
proxy card and other related materials in connection with the Special Meeting
(as defined in Section 6.2 below) and (d) such other consents and filings
which, if not obtained or made, would not have a Material Adverse Effect.
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Section 4.4 Non-Contravention
The execution, delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated hereby do not
and will not, except as set forth in Schedule 4.4 and assuming compliance with
the matters referred to in Section 4.3, (a) contravene or conflict with the
articles of organization or bylaws of the Company or the organizational
documents of any Company Subsidiary, (b) contravene or conflict with, or
constitute a violation of, any provision of any law, regulation, judgment,
injunction, order or decree binding upon the Company or any Company Subsidiary
or any of their respective properties or assets, (c) with or without the giving
of notice or passage of time or both, constitute a breach or default under, or
impair the rights of the Company or any Company Subsidiary under, or give any
rights of termination, amendment, acceleration or cancellation to any third
parties under, any agreement, contract or other instrument binding upon the
Company or any Company Subsidiary or any License (as defined in Section 4.12
below) held by the Company or any Company Subsidiary, or (d) result in the
creation or imposition of any lien (each, a "Lien") on any asset of the Company
or any Company Subsidiary, except with respect to the foregoing clauses (c) or
(d) such contraventions, conflicts, violations, breaches, defaults or Liens
which would not, individually or in the aggregate, have a Material Adverse
Effect and will not materially impair the ability of the Company to consummate
the transactions contemplated hereby.
Section 4.5 Capitalization
(a) The authorized capital stock of the Company consists of 25,000,000
shares of Company Common Stock and 1,000,000 shares of preferred stock, par
value $.01 per share ("Preferred Stock"). There are (a) 4,014,982 shares of
Company Common Stock issued and outstanding, (b) no shares of Company Common
Stock held by the Company in its treasury, and (c) 534,897 shares of Company
Common Stock reserved for issuance pursuant to outstanding stock options under
the Company Option Plan. No shares of Preferred Stock are issued or
outstanding. All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as set forth above or as set forth in Schedule 4.5, (i) no shares of capital
stock of the Company are issued, reserved for issuance or are outstanding, (ii)
no securities of the Company or of any Company Subsidiary convertible into or
exchangeable for shares of capital stock of the Company are outstanding and
(iii) there are no options or other rights to acquire from the Company, and no
obligation of the Company to issue, any capital stock or securities convertible
into or exchangeable for capital stock or voting securities of the Company (the
items in clauses (i), (ii) and (iii) being referred to collectively as the
"Company Securities"). Except as set forth in Schedule 4.5, there are no
outstanding obligations of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any Company Securities.
(b) Schedule 4.5 sets forth the following information with respect to each
Company Option outstanding as of the date of this Agreement: (i) the name and
address of the optionee; (ii) the number of shares of Company Common Stock
subject to such Company Option; (iii) the exercise price of such Company
Option; (iv) the date on which such Company Option was granted; and (v) the
date on which such Company Option expires. The Company has made available to
Logitech Subsidiary accurate and complete copy of the Company Option Plans
pursuant to which Company has granted Company Options that are currently
outstanding and the form of all stock option agreements evidencing such Company
Options. The Company Option Plans are the only plan, contract, arrangement or
understanding currently in force (x) pursuant to which the Company has granted
currently outstanding options or other rights to acquire Company Common Stock
or other securities of the Company or (y) the terms of which govern any such
options or other rights.
Section 4.6 Subsidiaries
(a) Each Company Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has all power
(corporate or other) and authority to own its properties and assets and to
carry on its business as presently conducted. Each Company Subsidiary is duly
qualified to do business and is in good standing in each jurisdiction where the
character of the property owned or leased by it
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or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect. For purposes of this Agreement,
"Company Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are
directly or indirectly owned by the Company. Schedule 4.6 sets forth all
Company Subsidiaries and their respective jurisdictions of organization ,
authorized capitalization, the Company's ownership interest therein, and, to
the knowledge of the Company, the ownership interests of any other security
holders of such subsidiary. Except as set forth in Schedule 4.6, the Company
does not own, directly or indirectly, any securities or other ownership
interests in any other corporation or other entity.
(b) Except as set forth on Schedule 4.6, all of the outstanding capital
stock of, or other ownership interests in, each Company Subsidiary, is owned by
the Company, directly or indirectly, free and clear of all Liens. All of the
outstanding capital stock of each Company Subsidiary is duly authorized,
validly issued, fully paid and nonassessable. Except as set forth on Schedule
4.6, there are no outstanding (i) securities of the Company or any Company
Subsidiary convertible into or exchangeable for shares of capital stock or
other ownership interests in any Company Subsidiary, or (ii) options or other
rights to acquire from the Company or any Company Subsidiary, and no other
obligation of the Company or any Company Subsidiary to issue, any capital stock
or other ownership interests in, or any securities convertible into or
exchangeable for any capital stock or ownership interests in, any Company
Subsidiary (the items in clauses (i) and (ii) being referred to collectively as
the "Company Subsidiary Securities"); and there are no outstanding obligations
of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any
outstanding Company Subsidiary Securities.
Section 4.7 Public Information
The Company has made available to Logitech Subsidiary a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by it with the SEC (as any such documents have since the time
of their original filing been amended, the "Company Filings") since March 31,
1999, which, except as set forth on Schedule 4.7, are all the documents (other
than preliminary material) that it was required to file with the SEC since such
date. As of their respective dates, the Company Filings did not, and the
Company's Quarterly Report on Form 10-Q for the nine-month period ended
December 31, 2000 (the "Third Quarter 10-Q") will not, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. As of their respective dates, the
Company Filings complied, and the Third Quarter 10-Q will comply, in all
material respects, with the applicable requirements of the Securities Act of
1933 (the "Securities Act") and the Exchange Act and the rules and regulations
promulgated under such statutes. The financial statements contained in the
Company Filings and in the Company's press release dated January 22, 2001 as
released on PR Newswire (the "Third Quarter Release") were prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods indicated (except as may be indicated in the notes
thereto, or, in the case of unaudited financial statements, as permitted by
Form 10-Q), and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries at said
dates and the consolidated results of operations and cash flows of the Company
and its consolidated subsidiaries for the periods then ended. For purposes of
this Agreement, "Balance Sheet Date" means March 31, 2000.
Section 4.7A No Undisclosed Liabilities.
Neither the Company nor any Company Subsidiary has any liabilities
(absolute, accrued, contingent or otherwise) except (i) liabilities provided
for in the Company's balance sheet as of December 31, 2000 set forth in the
Third Quarter Release, (ii) liabilities incurred since December 31, 2000 in the
ordinary course of business, which liabilities in the aggregate do not
materially affect such December 31, 2000 balance sheet and (iii) liabilities
set forth on Schedule 4.7A.
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Section 4.8 Absence of Certain Changes
Since the Balance Sheet Date, or except as set forth in Schedule 4.8, or as
explicitly contemplated by this Agreement, the Company and the Company
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or,
except in connection with the exercise of Company Options pursuant to the
Company's stock option and other compensation plans and arrangements, any
repurchase, redemption or other acquisition by the Company or any Company
Subsidiary of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any Company Subsidiary;
(c) any incurrence, assumption or guarantee by the Company or any Company
Subsidiary of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent in all material
respects with past practices;
(d) any creation or assumption by the Company or any Company Subsidiary of
any Lien on any asset other than in the ordinary course of business consistent
with past practice;
(e) any change in any method of accounting or accounting practice by the
Company or any Company Subsidiary, except for any such change required by law
or generally accepted accounting principles;
(f) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any Company Subsidiary, (ii) entering
into of any employment, deferred compensation or other similar agreement (or
any amendment to any such existing agreement) with any director, officer or
employee of the Company or any Company Subsidiary, or (iii) increase in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any Company Subsidiary, in each case, other than
pursuant to employment contracts or arrangements in effect on the Balance Sheet
Date, Plans (as defined in Section 4.11 below) in effect on the Balance Sheet
Date, or in the ordinary course of business consistent with past practices;
(g) entry by the Company or any Company Subsidiary into any licensing or
other agreement with regard to the acquisition or disposition of any Company
Intellectual Property (as defined in Section 4.16) other than licenses in the
ordinary course of business consistent with past practice or any amendment or
consent with respect to any licensing agreement filed or required to be filed
by the Company with the SEC; or
(h) any revaluation by the Company of any of its material assets, other than
in the ordinary course of business.
Section 4.9 Litigation
Except as set forth in the Company Filings or on Schedule 4.9, there is no
action, suit, investigation or proceeding pending against, or to the knowledge
of the Company, threatened against, the Company or any Company Subsidiary or
any Plan (as defined in Section 4.11 below) or the assets of any Plan or any of
their respective properties before any court or arbitrator or any Governmental
Entity which, if determined or resolved adversely to the Company or any Company
Subsidiary in accordance with the plaintiff's demands, could reasonably be
expected to have a Material Adverse Effect.
Section 4.10 Tax
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use
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and occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for Taxes of a predecessor
or transferor entity.
(b) Tax Returns and Audits.
(i) The Company and each Company Subsidiary have timely filed all
federal, state, local and foreign returns, estimates, forms,
information statements and reports ("Returns") relating to Taxes
required to be filed by the Company and each Company Subsidiary with
any Tax authority, except such Returns which are not, individually or
in the aggregate, material to the Company and its subsidiaries, taken
as a whole. All such Returns were correct and complete in all material
respects, and the Company and each Company Subsidiary have paid all
Taxes shown to be due on such Returns, other than any Taxes being
contested in good faith through appropriate procedures.
(ii) The Company and each Company Subsidiary have withheld with
respect to its employees or other persons all federal and state income
Taxes, Taxes pursuant to the Federal Insurance Contribution Act, Taxes
pursuant to the Federal Unemployment Tax Act and other Taxes required
to be withheld, except such Taxes with respect the failure to so
withhold would not, individually or in the aggregate, have a Material
Adverse Effect.
(iii) There is no material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against the Company or any
Company Subsidiary. Neither Company or any Company Subsidiary has
executed any unexpired waiver of any statute of limitations on or
extension of any period for the assessment or collection of any Tax.
(iv) To the knowledge of the Company, no audit or other examination
of any Return of the Company or any Company Subsidiary by any Tax
authority is presently in progress, nor has Company or any Company
Subsidiary been notified of any request for such an audit or other
examination.
(v) No adjustment relating to any Returns filed or required to be
filed by the Company or any Company Subsidiary has been proposed in
writing, formally or informally, by any Tax authority to the Company or
any Company Subsidiary or any representative thereof.
(vi) Neither the Company nor any Company Subsidiary has any
liability for any material unpaid Taxes (whether or not required to be
shown on any Return) which has not been accrued for or reserved on the
Balance Sheet Date in accordance with generally accepted accounting
principles, consistently applied, whether asserted or unasserted,
contingent or otherwise, which are, individually or in the aggregate
material to Company, other than any liability for unpaid Taxes that may
have accrued since the Balance Sheet Date in connection with the
operation of the business of Company and its subsidiaries in the
ordinary course. There are no liens with respect to Taxes on any of the
assets of the Company or any Company Subsidiary, other than liens that
would not, individually or in the aggregate, have a Material Adverse
Effect, or customary liens for current Taxes not yet due and payable
(vii) There is no contract, agreement, plan or arrangement to which
the Company or any Company Subsidiary is a party; including but not
limited to the provisions of this Agreement, that, individually or
collectively, could give rise to the payment of any amount that would
not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
There is no contract, agreement, plan or arrangement to which the
Company or any Company Subsidiary is a party or by which it is bound to
compensate any individual for excise taxes paid pursuant to Section
4999 of the Code.
(viii) Neither the Company nor any Company Subsidiary has filed
any consent agreement under Section 341(f) of the Code.
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(ix) Neither the Company nor any Company Subsidiary is party to or
has any obligation under any tax sharing, tax indemnity or tax
allocation agreement or arrangement.
(x) Neither the Company nor any Company Subsidiary has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section
355 of the Code (x) since February 7, 1999 or (y) in a distribution
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(xi) To the knowledge of the Company, the Company and each Company
Subsidiary is in substantial compliance with the material terms and
conditions of agreements with any foreign taxing authority to which
Company or a subsidiary is a party relating to any tax exemption, tax
holiday or other reduction of tax and the consummation of the Merger
will not have an adverse effect on the continued validity and
effectiveness of such agreements.
Section 4.11 Employee Benefit Plans; Employee Matters
(a) Except as set forth in the Company Filings or on Schedule 4.11(a), all
employee benefit plans that have ever been maintained, contributed to, or
required to be contributed to, by the Company or any Company Subsidiary for the
benefit of employees or former employees of the Company or any Company
Subsidiaries ("Plans") have been administered substantially in accordance with
their respective terms and, to the extent subject to the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder ("ERISA") and, to the extent applicable, the Code and
all other applicable laws, and are in material compliance with ERISA, the Code
and all other applicable laws. Each Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (each, a "Company Pension
Plan") and which is intended to be qualified under Section 401(a) of the Code,
has received a favorable determination letter from the Internal Revenue Service
and such Company Pension Plan has been administered in substantial compliance
with Code Section 401(a). Neither the Company nor any Company Subsidiary has
engaged in a transaction with respect to any Company Pension Plan that would
subject the Company or any of Company Subsidiary to a material tax or material
penalty imposed by either Sections 4975 through 4980 of the Code or Section
502(i) of ERISA. Each Plan (other than any stock option plan) can be amended,
terminated, or otherwise discontinued after the Effective Time, without
material liability to Parent, the Company or any Company Subsidiary (other than
ordinary administration expenses). There are no audits, inquiries, or
proceedings pending or, to the knowledge of the Company, threatened by the
Internal Revenue Service, Department of Labor, or any other governmental agency
or entity with respect to any Plan. Neither a Plan, nor the Company or any
Company Subsidiary has represented provided, or has any liability to provide
retiree health to any person for any reason, except as required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(b) No material liability under Subtitles C or D or Title IV of ERISA has
been or is expected to be incurred by the Company or any Company Subsidiaries
with respect to any ongoing, frozen or terminated Company Pension Plan,
currently or formerly maintained, contributed to, or required to be contributed
to by any of them, or the Plans of any person which is considered one employer
with the Company under Section 4001 of ERISA or Section 414 of the Code. No
legal or administrative action has been taken by the Pension Benefit Guaranty
Corporation ("PBGC") to terminate or to appoint a trustee to administer the
Company Pension Plan and no liability to the PBGC under Title IV of ERISA has
been incurred by the Company or any Company Subsidiary that has not been
satisfied in full. Each Company Pension Plan is fully-funded on a termination
basis and no pension Plan has incurred a reportable event within the meaning of
Section 4043 of ERISA and no Company Pension Plan has incurred any event
described in Section 4041, 4062, or 4063 of ERISA.
(c) Neither any Company Pension Plan nor any single-employer plan of the
Company or any Company Subsidiaries has incurred an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA.
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(d) Except to the extent set forth on Schedule 4.11(d) or as may result from
the termination of the 401(k) plan referred to, and as contemplated by, Section
6.4 below, the execution and delivery of this Agreement does not, and the
performance of the transactions contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events),
constitute an event under any of the Plans that will result in any payment
(whether of severance or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
(such resulting events being collectively referred to as the "ERISA
Obligations") with respect to any employee of the Company or any of its
Subsidiaries, which ERISA Obligations could reasonably be expected to have a
Material Adverse Effect.
(e) (i) Neither the Company nor any Subsidiary is a party to a collective
bargaining agreement or other labor union contract applicable to individuals
employed by the Company or any Subsidiary, (ii) there is no pending or, to the
Company's knowledge, threatened union organizational effort, material labor
dispute, strike or similar work stoppage against the Company or any Company
Subsidiary and (iii) to the Company's knowledge, there is no pending or
threatened charge or complaint against the Company or any Company Subsidiaries
by the National Labor Relations Board or any comparable state agency.
(f) Each Plan that has been adopted or maintained by the Company or any
Company Subsidiary, whether informally or formally, or with respect to which
the Company or any Company Subsidiary will or may have any liability, for the
benefit of current or former employees who perform services outside the United
States (collectively, the "International Employee Plan") has been established,
maintained and administered in compliance with its terms and conditions and
with the requirements prescribed by any and all statutory or regulatory laws
that are applicable to such International Employee Plan. Furthermore, no
International Employee Plan has unfunded liabilities, that as of the Effective
Time, will not be offset by insurance or fully accrued. Except as required by
law, no condition exists that would prevent the Company or Logitech Subsidiary
from terminating or amending any International Employee Plan at any time for
any reason without liability to Parent, Logitech Subsidiary, the Company or
Company Subsidiaries (other than ordinary administration expenses or routine
claims for benefits).
Section 4.12 Compliance with Laws; Licenses
(a) Neither the Company nor any Company Subsidiary is or has been in
violation of any applicable provisions of any laws, statutes, ordinances or
regulations except where such violations would not have a Material Adverse
Effect.
(b) Each of the Company and the Company Subsidiaries has and is in
compliance with all permits, licenses and authorizations (collectively,
"Licenses") which are necessary for it to conduct its business in the manner in
which it is presently conducted except where the failure to have any such
permits, licenses and authorizations would not have a Material Adverse Effect.
Section 4.13 Environment
(a) Neither the Company nor any Company Subsidiary is in conflict with, or
in default or violation of, any Environmental Laws (as defined in Section
4.13(c)(ii) below) or any order, judgment or decree under any Environmental
Law, applicable to the Company or any Company Subsidiary or by which its or any
of their respective properties is bound or affected, except where such
conflict, default or violation does not have a Material Adverse Effect. No
investigation or review by any governmental or regulatory body or authority is
pending or, to the knowledge of the Company, threatened against the Company or
the Company Subsidiaries, nor has any governmental or regulatory body or
authority indicated to Company an intention to conduct the same, other than, in
each such case, those the outcome of which would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) The Company has not disposed of, released, discharged or emitted any
Hazardous Materials (as defined in Section 4.13(c)(i) below) into the soil or
groundwater at any properties owned or leased at any time
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by the Company, or, to the knowledge of the Company, at any other property, or
exposed any employee or other individual to any Hazardous Materials or any
workplace or environmental condition in such a manner as would result in any
material liability or clean-up obligation of any kind or nature to the Company.
To the knowledge of the Company, no Hazardous Materials are present in, on, or
under any properties owned, leased or used at any time by the Company, and no
reasonable likelihood exists that any Hazardous Materials will come to be
present in, on, or under any properties owned, leased or used at any time by
the Company, so as to give rise to any material liability or clean-up
obligation under any Environmental Laws.
(c) Definitions.
(i) "Hazardous Material" is any material or substance that is
prohibited or regulated by any Environmental Law or that has been
designated by any governmental authority to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the
environment.
(ii) "Environmental Laws" are all applicable Laws, rules,
regulations, orders, treaties, statutes, and codes promulgated by any
governmental authority which prohibit, regulate or control any
Hazardous Material or any Hazardous Material activity, including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Resource Recovery and
Conservation Act of 1976, the Federal Water Pollution Control Act, the
Clean Air Act, the Hazardous Materials Transportation Act, the Clean
Water Act, comparable laws, rules, regulations, ordinances, orders,
treaties, statutes, and codes of other governmental authorities, the
regulations promulgated pursuant to any of the foregoing, and all
amendments and modifications of any of the foregoing, all as amended to
date.
Section 4.14 Restrictions on Business Activities
There is no agreement, commitment, judgment, injunction, order or decree
binding upon the Company or the Company Subsidiaries or to which the Company or
any Company Subsidiary is a party that has or could reasonably be expected to
have the effect of prohibiting or materially impairing any material business
practice of the Company or any Company Subsidiary, any acquisition of property
by the Company or any Company Subsidiary or the conduct of business by the
Company or any Company Subsidiary as currently conducted.
Section 4.15 Title to Property
(a) Neither Company nor any Company Subsidiary owns any material real
property. The Company and each Company Subsidiary has good and defensible title
to all of their material properties and assets, free and clear of all liens,
charges and encumbrances except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not materially
detract from the value of or materially interfere with the present use of the
property affected thereby.
(b) All leases (the "Leases") pursuant to which the Company or any Company
Subsidiary leases from others real or personal property are valid and effective
in accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default of the Company or any Company
Subsidiary or, to the Company's knowledge, any other party (or any event which
with notice or lapse of time, or both, would constitute a default and in
respect of which Company or such the Company Subsidiary has not taken adequate
steps to prevent such default from occurring), except for any defaults or
events of default that would be reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect.
(c) Schedule 4.15 sets forth a list of all real property currently leased by
the Company. The Company has provided Logitech Subsidiary with true, complete
and correct copies of each such Lease; no term or condition of any such Lease
has been modified, amended or waived except as shown in such copies; each such
Lease constitutes the entire agreement of the landlord and the tenant
thereunder; and there are no other agreements or arrangements whatsoever
relating to the Company's use or occupancy of any of the premises described in
such
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Leases. The Company has not transferred or assigned any interest in any such
Lease, nor has the Company subleased or otherwise granted rights of use or
occupancy of any of the premises described therein to any other person or
entity.
(d) To the knowledge of the Company, the landlord under each Lease has
complied with all of the requirements, conditions, representations, warranties
and covenants of the landlord thereunder, including, without limitation, the
timely completion of construction of the leased premises in a good and
workmanlike manner and otherwise in accordance with the Leases.
(e) There is not pending or, to the Company's knowledge, threatened
condemnation or similar proceeding affecting any leased property or any portion
thereof.
Section 4.16 Intellectual Property
(a) The Company and the Company Subsidiaries own, or possess, free and clear
of any material liens, adequate licenses or other valid rights to use
(including the right to sublicense to customers, suppliers, or others as
needed), all of the material Company Intellectual Property (as defined below)
that is used in the conduct of Company's or Company Subsidiaries' businesses.
Schedule 4.16 sets forth a complete list of all registered Company Intellectual
Property. Schedule 4.16 lists all material contracts, licenses and agreements
to which Company or any Company Subsidiary is a party: (i) with respect to
Company Intellectual Property licensed or transferred to any third party (other
than agreements relating to the sale or distribution of the Company's products
entered into in the ordinary course); or (ii) pursuant to which a third party
has licensed or transferred any material intellectual property to Company which
is incorporated in the Company's current products.
(b) Neither the Company nor any of the Company Subsidiaries has received
from a third party any written notice of infringement or misappropriation of or
conflict with, in any material respects, Company Intellectual Property. To the
knowledge of the Company, the use of such Company Intellectual Property in
connection with the business and operations of the Company and the Company's
Subsidiaries does not infringe, in any material respects, on the rights of any
person or entity. No material claim by any third party contesting the validity,
enforceability, use or ownership of any of the Company Intellectual Property
owned by the Company or any of the Company Subsidiaries, is currently
outstanding or is, to the knowledge of the Company, threatened. The Company has
not received any written notices of any material infringement or
misappropriation by any third party with respect to the Company Intellectual
Property. Neither the Company nor any Company Subsidiary is aware of any claim
by any other person or entity that any of the products, processes or business
methods of the Company or any Company Subsidiary infringe or may infringe upon
any intellectual property rights of any other person or entity. The Company and
each of the Company Subsidiaries have taken reasonable actions to maintain and
protect its Company Intellectual Property, except for those actions, which the
failure to take, individually or in the aggregate, would not have a Material
Adverse Effect.
(c) As used herein, "Company Intellectual Property" means all trademarks,
trademark registrations, trademark rights and renewals thereof, trade names,
trade name rights, patent, patent rights, patent applications, industrial
models, inventions, designs, utility models, inventor rights, software,
computer programs, computer systems, copyrights, copyright registrations and
renewals thereof, servicemarks, servicemark registrations and renewals thereof,
servicemark rights, trade secrets, applications for trademark and servicemark
registrations, know-how, confidential information and other proprietary rights,
used or held for use in connection with the businesses of the Company and/or
the Company Subsidiaries as currently conducted by them, together with all
applications currently pending or in process for any of the foregoing.
(d) The Company and each of the Company Subsidiaries has taken reasonable
steps to protect the Company's and the Company Subsidiaries' rights in the
Company's confidential information and trade secrets that it wishes to protect
or any trade secrets or confidential information of third parties provided to
the Company or any Company Subsidiary, and, without limiting the foregoing,
each of the Company and the Company Subsidiaries has and uses commercially
reasonable efforts to enforce a policy requiring each
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employee and contractor to execute a proprietary information/confidentiality
agreement substantially in the form provided to Logitech Subsidiary and all
current and former employees and contractors of the Company and any Company
Subsidiary have executed such an agreement, except where the failure to do so
is not, individually or in the aggregate, reasonably likely to materially
impair the Company's or the Company Subsidiaries' rights in the Company
Intellectual Property.
Section 4.16A Agreements, Contracts and Commitments.
Except as set forth in Schedule 4.16A, neither Company nor any Company
Subsidiary is a party to or is bound by:
(a) any written employment or consulting agreement, contract or commitment
with any officer, director, employee or member of the Board of Directors of the
Company or any Company Subsidiary, other than (i) those that are terminable by
Company or any Company Subsidiary on no more than 30 days' notice without
liability or financial obligation to Company, all Company Benefit Plans and
International Benefit Plans and (ii) employment or similar agreements with
foreign employees;
(b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement;
(c) any material agreement of indemnification or any material guaranty,
other than inter-company guaranties;
(d) any material agreement, contract or commitment containing any covenant
limiting in any respect the right of Company or any Company Subsidiary to
compete with any person or entity in any line of business or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to the
disposition or acquisition by Company or any Company Subsidiary after the date
of this Agreement of assets not in the ordinary course of business or pursuant
to which Company or any Company Subsidiary has any ownership interest in any
corporation, partnership, joint venture or other business enterprise other than
Company's subsidiaries;
(f) any dealer, distributor, joint marketing or development agreement
currently in force under which Company or any Company Subsidiary have
continuing material obligations to jointly market any product, technology or
service and which may not be cancelled without penalty upon notice of 90 days
or less, or any material agreement pursuant to which Company or any Company
Subsidiary have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by Company
or any Company Subsidiary and which may not be canceled without penalty upon
notice of 90 days or less;
(g) any agreement, contract or commitment currently in force to license any
third party to manufacture or reproduce any Company product, service or
technology or any agreement, contract or commitment currently in force to sell
or distribute any Company products, service or technology except agreements
with manufacturers, distributors or sales representative in the normal course
of business cancelable without penalty upon notice of 90 days or less and
substantially in the form previously provided to Logitech Subsidiary;
(h) any agreement, contract or commitment currently in force to provide
source code to any third party for any product or technology;
(i) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments evidencing the borrowing
of money or extension of credit;
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(j) any settlement agreement under which Company or any Company Subsidiary
has ongoing obligations; or
(k) any agreement with a customer of the Company involving revenues to the
Company for the fiscal year ended March 31, 2000 in excess of $500,000.
Neither the Company nor any Company Subsidiary, nor to the Company's
knowledge any other party to a Company Contract (as defined below), is in
material breach, violation or default under, and neither the Company nor any
Company Subsidiary has received written notice that it has materially breached,
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which the Company or any Company
Subsidiary is a party or by which it is bound that are required to be disclosed
pursuant to this Article IV (any such agreement, contract or commitment, a
"Company Contract").
Section 4.17 Insurance
The Company maintains and will continue to maintain insurance policies and
fidelity bonds covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company and the Company
Subsidiaries (collectively, the "Insurance Policies") which are of the type and
in amounts customarily carried by persons conducting businesses similar to
those of the Company and the Company Subsidiaries. There is no material claim
by the Company or any Company Subsidiary pending under any of the material
Insurance Policies as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds.
Section 4.18 Customers
Schedule 4.18 sets forth a complete and accurate list of each customer of
the Company that accounted for more than 5% of the revenues of the Company
during the first nine months of the Company's fiscal year 2001. All sales of
the Company's products to such customers were made in accordance with the
Company's standard form terms and conditions, a copy of which the Company has
provided to Logitech Subsidiary. During such period the Company has not
extended credit terms, paid additional or discretionary marketing allowances,
or made commitments as to price protection or return rights of such customers
that are not provided for in such standard form terms and conditions.
Section 4.19 Finders' Fees
No broker, investment banker, financial advisor or other person, other than
Goldsmith Agio Helms (the "Financial Advisor") and the general partner of one
of the Principal Stockholders, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of the Company Subsidiaries. The Company has
provided to Logitech Subsidiary true and correct copies of the engagement
letters pursuant to which the Financial Advisor and the general partner of one
of the Principal Stockholders are entitled to the fees referred to in the prior
sentence. Transaction fees incurred by the Company in connection with the
consummation of the transactions contemplated hereby, including, without
limitation, any fees incurred by the Company on behalf of one of the Principal
Stockholders, (excluding fees payable to the general partner of one of the
Principal Stockholders) shall not exceed $2,500,000.
Section 4.20 Opinion of Financial Advisor
The Company has received the opinion of the Financial Advisor, dated the
date hereof, to the effect that, as of the date hereof, the Merger
Consideration is fair to the Company's stockholders from a financial point of
view and will provide to Logitech Subsidiary a copy of the written confirmation
of such opinion promptly after receipt thereof.
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Section 4.21 State Takeover Statutes
The Board of Directors of the Company has approved the Offer, this Agreement
and the consummation of the other transactions contemplated hereby and,
assuming the accuracy of the representation of Logitech Subsidiary and Merger
Sub in Section 5.7, such approval is, except as set forth on Schedule 4.21,
sufficient to render inapplicable to the Offer, the Merger, this Agreement and
the consummation of the transactions contemplated hereby, the provisions of
Chapters 110C, 110D and 110F of the Massachusetts General Laws to the extent,
if any, such chapters are applicable to the transactions contemplated hereby.
No other "fair price," "merger moratorium," "control share acquisition" or
other anti-takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement, the Offer or any of the
transactions contemplated hereby or thereby.
Section 4.22 Company Disclosure Documents
The Proxy Statement and the Schedule 14D-9 referred to in Section 1.2(b)
(collectively, the "Company Disclosure Documents"), when filed, will comply as
to form in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations promulgated thereunder and will not,
(i) with regard to the Proxy Statement or any amendment or supplement thereto,
at the time it is first mailed to stockholders of the Company and as at the
date of the Special Meeting (as the same may be amended or supplemented prior
to the date it is first mailed to stockholders of the Company or at the Special
Meeting, as applicable), and (ii) with regard to the Schedule 14D-9, at the
time of filing thereof or at the time of the consummation of the Offer and the
Effective Time (as the same may be amended or supplemented prior to the
consummation of the Offer or the Effective Time, as applicable), contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the foregoing covenant shall not apply to information with respect to Parent,
Parent Subsidiaries or Merger Sub furnished to the Company in writing by
Logitech Subsidiary specifically for use in the Company Disclosure Documents.
The information furnished by the Company to Logitech Subsidiary in writing for
use in the Offer Documents will not contain, at the time of filing thereof, any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE V
Representations and Warranties of Logitech Subsidiary and Merger Sub
Logitech Subsidiary and Merger Sub jointly and severally represent and
warrant to the Company that:
Section 5.1 Corporate Existence and Power; Organizational Documents
(a) Each of Parent, Logitech Subsidiary and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and authority to own
its properties and assets and to carry on its business as presently conducted.
Each of Parent and Logitech Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Logitech Subsidiary has previously furnished to the Company a complete
and correct copy of its and Parent's articles of incorporation and bylaws, each
as amended to date (together, the "Parent Charter Documents"). The Parent
Charter Documents and the organizational documents of each Parent Subsidiary
(as defined in Section 5.3 below) are in full force and effect. Parent is not
in violation of any of the provisions of
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the Parent Charter Documents, and no Parent Subsidiary is in violation of its
equivalent organizational documents except where the violation of the Parent
Charter Documents or any such organizational documents of a Parent Subsidiary
would not, individually or in the aggregate, have a Material Adverse Effect.
Section 5.2 Corporate Authorization; Binding Effect
Each of Parent, Logitech Subsidiary and Merger Sub each have the corporate
power to execute, deliver and perform this Agreement and all other documents
executed and delivered or to be executed and delivered by either of them
pursuant to this Agreement have taken all necessary corporate action to
authorize the execution, delivery and performance by each of them of this
Agreement and such related documents. This Agreement has been duly executed and
delivered by Parent, Logitech Subsidiary and Merger Sub and, assuming due and
valid authorization, execution and delivery by the Company, constitutes a valid
and binding agreement of each of Parent, Logitech Subsidiary and Merger Sub,
enforceable against Parent, Logitech Subsidiary and Merger Sub in accordance
with its terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws and principles now or hereafter in effect, affecting
creditors' rights generally, (b) rules or principles of equity affecting the
enforcement of obligations generally, whether at law, in equity or otherwise,
or (c) the exercise of the discretionary powers or any court or other authority
before which a proceeding may be brought seeking equitable remedies, including
specific performance and injunctive relief.
Section 5.3 Governmental Authorization
The execution, delivery and performance by Parent, Logitech Subsidiary and
Merger Sub of this Agreement and the consummation by Parent, Logitech
Subsidiary and Merger Sub of the transactions contemplated hereby do not
require Parent, Logitech Subsidiary or Merger Sub to obtain any consent of, or
to make any filing with, any Governmental Entity other than (a) the filing of
the articles of merger in accordance with the MBCL, (b) compliance with any
applicable requirements of the HSR Act or the Foreign Filings, (c) compliance
with any applicable requirements of the Securities Act, the Swiss Stock
Exchange, the Nasdaq National Market or the Exchange Act, including, without
limitation, the filing with the SEC of the Schedule TO and (d) such other
consents and filings which, if not obtained or made, would not have a Material
Adverse Effect. For purposes of this Agreement, "Parent Subsidiaries" is the
collective reference to each corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are
directly or indirectly owned by Parent.
Section 5.4 Non-Contravention
The execution, delivery and performance by Parent, Logitech Subsidiary and
Merger Sub of this Agreement and the consummation by Parent, Logitech
Subsidiary and Merger Sub of the transactions contemplated hereby do not and
will not (a) contravene or conflict with the articles of incorporation of
Parent or the articles of organization of Logitech Subsidiary or Merger Sub or
the bylaws of any of them, (b) assuming compliance with the matters referred to
in Section 5.3, contravene or conflict with, or constitute a violation of any
provision of law, regulation, judgment, injunction, order or decree binding
upon Parent, Logitech Subsidiary or Merger Sub or any of their respective
properties or assets, or any governmental licenses, authorizations, consents
and approvals held by Parent, Logitech Subsidiary or Merger Sub, (c) with or
without the giving of notice or passage of time or both, constitute a breach or
default under any agreement, contract or other instrument binding upon Parent,
Logitech Subsidiary or Merger Sub, or (d) result in the creation or imposition
of any Lien on any asset of Parent, Logitech Subsidiary or Merger Sub except
with respect to the foregoing clauses (c) or (d) such contraventions,
conflicts, violations, breaches, defaults or Liens which would not,
individually or in the aggregate, have a Material Adverse Effect or materially
impair the ability of the Parent, Logitech Subsidiary or Merger Sub to
consummate the transactions contemplated hereby.
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Section 5.5 Finders' Fees
No broker, investment banker, financial advisor or other person, other than
SG Cowen Securities, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent, Logitech Subsidiary or Merger Sub.
Section 5.6 Financing
Logitech Subsidiary and Merger Sub have or will have upon receipt by
Logitech Subsidiary of the funding of Logitech Subsidiary described in the
commitment letter dated as of the date hereof, a copy of which Logitech
Subsidiary has provided to the Company, pursuant to its terms sufficient
immediately available funds to purchase all of the Shares and to make all
payments in respect of all Company Options as required by this Agreement, to
pay all related fees and expenses in connection with this Agreement and the
transactions contemplated hereby and to otherwise consummate the transactions
contemplated hereby.
Section 5.7 Interested Stockholder
As of the date hereof (excluding any beneficial ownership that may be
attributed to Parent, Logitech Subsidiary or Merger Sub by virtue of any
transaction contemplated by this Agreement or by the execution of this
Agreement), (a) none of Parent, Logitech Subsidiary, Merger Sub nor any of
their respective affiliates is, with respect to the Company, an "Interested
Stockholder," as such term is defined in Chapter 110F of the MBCL and (b) none
of Parent, Logitech Subsidiary or Merger Sub nor, to the knowledge of Logitech
Subsidiary or Merger Sub, any of their respective affiliates, beneficially owns
any Shares.
Section 5.8 Merger Sub's Operations
Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated hereby and since its date of incorporation has not engaged in any
activities or conducted any operations other than in connection with the
transactions contemplated hereby.
Section 5.9 Capitalization
(a) As of December 31, 2000, (i) the share capital of Parent amounted to CHF
42,794,240 divided into 4,279,424 registered shares with a par value of CHF 10
each, all of which are issued and outstanding (the "Parent Registered Shares");
(ii) 13,742 of the Parent Registered Shares were held by Parent in treasury;
and (iii) the conditional share capital of Parent amounted to CHF 10,305,760
divided into 1,030,576 registered shares with a par value of CHF 10 each, of
which 816,554 were reserved for issuance upon exercise of options granted to
current or former employees and directors of Parent and Parent Subsidiaries and
214,022 were reserved for issuance upon ungranted options. As of the date
hereof, (i) the total of the share capital and conditional share capital of
Parent amounts to CHF 50,310,000, divided into registered shares and shares
reserved for issuance upon granted and outstanding or ungranted options; and
(ii) the authorized share capital of Parent amounts to CHF 10,000,000 and is
divided into 1,000,000 registered shares. All issued and outstanding shares of
capital stock of Parent have been duly authorized and validly issued and are
fully paid and nonassessable, and were not issued in violation of, or subject
to, any preemptive rights or other rights to subscribe for or purchase
securities. The Parent Registered Shares underlying the Parent ADSs to be
issued in the Offer and the Merger have been duly authorized for issuance and
sale to the stockholders of the Company in the Offer and the Merger and, when
issued and deposited under the Deposit Agreement in accordance with the terms
hereof and the Deposit Agreement, will be duly and validly issued and fully
paid and nonassessable, and will be sold free and clear of any Lien, and no
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of shareholders exists with respect to any of the Parent
Registered Shares underlying the Parent ADSs to be issued in the Offer and the
Merger or the issuance and sale thereof, other than those that have been
expressly waived prior to the date hereof.
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(b) All issued and outstanding shares of capital stock of each Parent
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable, and were not issued in violation of, or subject to, any
preemptive rights or other rights to subscribe for or purchase securities.
Parent owns all of the capital stock of the Parent Subsidiaries free and clear
of any and all Liens. Except as set forth in Section 5.9(a) or in the Parent
Filings, as of the date hereof, neither Parent nor any Parent Subsidiary has
any outstanding options to purchase, or receive any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations.
Section 5.10 Public Information
Logitech Subsidiary has made available to the Company a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by it with the SEC since March 31, 1999 (as any such documents
have since the time of their original filing been amended, the "Parent
Filings"), which are all the documents (other than preliminary material) that
it was required to file with the SEC since such date. As of their respective
dates, the Parent Filings did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. As of their respective dates, the Parent Filings
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
under such statutes. The financial statements contained in the Parent Filings
were prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated (except as may be
indicated in the notes thereto or, in the case of unaudited financial
statements, as permitted by applicable federal securities laws), and fairly
present in all material respects the consolidated financial position of the
Parent and its consolidated subsidiaries at said dates and the consolidated
results of operations and cash flows of the Parent and its consolidated
subsidiaries for the periods then ended. For purposes of this Agreement,
"Parent Balance Sheet Date" means September 30, 2000.
Section 5.11 Absence of Certain Changes
Since the Parent Balance Sheet Date, or as explicitly contemplated by this
Agreement, Parent and the Parent Subsidiaries have conducted their business in
the ordinary course consistent with past practice and there has not been:
(a) any Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Parent, or,
except in connection with the exercise of options pursuant to Parent's stock
option and other compensation plans and arrangements, any repurchase,
redemption or other acquisition by Parent or any Parent Subsidiary of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, Parent or any Parent Subsidiary, except open-market acquisitions
of Parent ADSs or Parent Registered Shares by Parent or Logitech Subsidiary; or
(c) any material change in any method of accounting or accounting practice
by the Parent or any Parent Subsidiary, except for any such material change
required by a concurrent change of generally accepted accounting principles.
Section 5.12 Litigation
Except as set forth in the Parent Filings, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of Parent,
threatened against, Parent or any Parent Subsidiary or any of their respective
properties before any court or arbitrator or any Governmental Entity which, if
determined or resolved adversely to Parent or any Parent Subsidiary in
accordance with the plaintiff's demands, could reasonably be expected to have a
Material Adverse Effect.
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Section 5.13 Compliance with Laws; Licenses
(a) Except as set forth in the Parent Filings, neither the Parent nor any
Parent Subsidiary is in violation of any applicable provisions of any laws,
statutes, ordinances or regulations except where such violations would not have
a Material Adverse Effect.
(b) Each of Parent and Parent Subsidiaries has all permits, licenses and
authorizations which are necessary for it to conduct its business in the manner
in which it is presently conducted except where the failure to have any such
permits, licenses and authorizations would not have a Material Adverse Effect.
Section 5.14 Offer Documents
The Offer Documents, when filed, will comply as to form in all material
respects with the applicable requirements of the Exchange Act and the
Securities Act and the rules and regulations promulgated under both of them and
will not, at the time of the filing thereof, at the time of any distribution
thereof or at the time of the consummation of the Offer and the Effective Time
(as the same may be amended or supplemented prior to consummation of the Offer
or the Effective Time, as applicable), contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the foregoing covenant shall not apply
to information with respect to the Company and the Company Subsidiaries
furnished to Logitech Subsidiary in writing by the Company specifically for use
in the Offer Documents. The information furnished by Logitech Subsidiary or
Merger Sub to the Company in writing for use in the Company Disclosure
Documents will not contain, at the time of filing thereof, any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances in which they
were made, not misleading.
ARTICLE VI
Covenants of the Company
Section 6.1 Conduct of the Company
From the date hereof until earliest to occur of the Effective Time, the date
of the appointment of Merger Sub's designees to the Company Board pursuant to
Section 1.3 and the termination of this Agreement, except as set forth on
Schedule 6.1, the Company shall carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially
reasonable efforts consistent with past practices and policies to (i) preserve
intact its present business organization, (ii) keep available the services of
its present officers and employees and (iii) preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others with which
it has significant business dealings.
In addition, except as permitted by the terms of this Agreement and except
as provided in Schedule 6.1, without the prior written consent of Logitech
Subsidiary (which consent shall not be unreasonably delayed or withheld),
during the period from the date of this Agreement and continuing until the
earlier of the Effective Time, the termination of this Agreement pursuant to
its terms or the date of the appointment of Merger Sub's designees to the
Company Board pursuant to Section 1.3, the Company shall not, and shall cause
each of the Company Subsidiaries not to:
(a) adopt any change in its articles of organization or bylaws;
(b) except for the Merger, acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or a portion of the
assets (other than in the ordinary course of business) of, or by any
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other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to enter into any joint ventures, strategic partnerships or alliances;
(c) sell, lease, license or otherwise dispose of any material assets or
property except (i) pursuant to existing contracts or commitments, or (ii)
sales of inventory in the ordinary course of business consistent with past
practices;
(d) waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of restricted stock (except as specified in Section
2.12 hereof), or reprice options granted under any employee, consultant,
director or other stock plans;
(e) grant or agree or offer to grant any severance or termination pay to any
officer or employee except pursuant to written agreements outstanding, or
policies existing, on the date hereof and as previously disclosed in writing or
made available to Logitech Subsidiary, or adopt any new severance plan, or
amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(f) transfer or license to any person or entity or otherwise extend, amend
or modify any rights to the Company Intellectual Property, or enter into grants
to transfer or license to any person future patent rights, other than in the
ordinary course of business consistent with past practices, provided that in no
event shall Company license on an exclusive basis or sell any Company
Intellectual Property;
(g) (i) set aside or pay any dividends on, or make other distributions in
respect of, its capital stock, other than dividends and distributions by a
direct or indirect wholly-owned Company Subsidiary to its parent, (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of its capital stock, or (iii) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its Subsidiaries
or any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(h) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, other than the issuance of the shares of
Company Common Stock pursuant to currently outstanding Company Options granted
pursuant to the Company Option Plans in accordance with their present terms;
(i) make any material change to its accounting methods, principles or
practices, except as may be required by law or generally accepted accounting
principles;
(j) except as may be required by law or as contemplated by this Agreement,
(i) adopt, create, terminate or amend any Plan or arrangement for the benefit
or welfare of any current or former director, officer, employee or consultant
of the Company or any Company Subsidiary, (ii) increase in any material manner
the compensation (including salary, wage rates, contract rates, fringe
benefits, or rights to severance or indemnification) of, or pay any bonus to,
any director, officer, employee or consultant of the Company or any Company
Subsidiary (except for increases and bonuses required pursuant to the terms of
contracts and arrangements currently in effect with any such director, officer,
employee or consultant of the Company or any Company Subsidiary); or (iii)
grant any awards under any of the Plans, including the Company Option Plan,
except as required pursuant to the terms of contracts currently in effect with
any such director, officer, employee or consultant of the Company or any
Company Subsidiary, or except as required under the terms of the Plans;
(k) modify or amend in any material respect or terminate any existing lease,
license or contract affecting the use, possession or operation of any such
properties or assets; grant or otherwise create or consent to the creation of
any easement, covenant, restriction, assessment or charge affecting any owned
property or leased
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property or any part thereof; convey, assign, sublease, license or otherwise
transfer all or any portion of any owned property or leased property or any
interest or rights therein; or make any material changes in the construction
or condition of any such property;
(l) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person (other than (i) in the ordinary course of
business consistent with past practice in an amount not to exceed $50,000 and
(ii) performance guarantees, letters of credit and similar arrangements
entered into with respect to the commercial contracts in the ordinary course
of business consistent with past practice), issue or sell any debt securities
or options, warrants, calls or other rights to acquire any debt securities of
the Company, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing other than in connection with the
financing of working capital consistent with past practice;
(m) adopt or amend any employee benefit plan, policy or arrangement or any
employee stock purchase or employee stock option plan; or enter into any
employment contract or collective bargaining agreement, except, in each case,
as may be required by law;
(n) (i) pay, discharge, settle or satisfy any litigation (whether or not
commenced prior to the date of this Agreement) or any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than (A) the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities recognized or disclosed in
the most recent consolidated financial statements (or the notes thereto) of
Company included in the Company Filings or incurred since the date of such
financial statements, and (B) the payment, discharge, settlement or
satisfaction, of any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise) in an amount that do not, in
the aggregate, exceed $50,000, or (ii) waive any material benefits of, agree
to modify in any manner, terminate, release any person from or knowingly fail
to enforce any material confidentiality or similar agreement to which the
Company or any Company Subsidiary is a party or of which the Company or any
Company Subsidiary is a beneficiary;
(o) except in the ordinary course of business consistent with past
practice, modify, amend or terminate any material contract or agreement to
which the Company or any subsidiary thereof is a party or waive, delay the
exercise of, release or assign any material rights or claims thereunder;
(p) incur or enter into any agreement, contract or commitment requiring the
Company or any Company Subsidiary to pay in excess of $100,000, except that
the Company or any Company Subsidiary may incur or enter into commitments of
up to $500,000 per commitment for the production of products by manufacturers
currently who contract with the Company or any Company Subsidiary, provided
that any such commitment is in the ordinary course of business based on past
practice;
(q) make any Tax election or accounting method change inconsistent with
past practice that, individually or in the aggregate, would be reasonably
likely to adversely affect in any material respect the Tax liability or Tax
attributes of the Company or any Company Subsidiary, settle or compromise any
material Tax liability, or consent to any extension or waiver of any
limitation period with respect to Taxes; or
(r) agree in writing or otherwise to take any of the actions described in
Section 6.1(a) through (q) above.
Section 6.2 Access to Information
From the date hereof until the Effective Time, the Company will give
Logitech Subsidiary, its counsel, financial advisors, auditors and other
representatives reasonable access during normal business hours to the offices,
properties, books and records of the Company and the Company Subsidiaries,
will furnish to Logitech Subsidiary, its counsel, financial advisors, auditors
and other representatives such information as such persons may reasonably
request, and will instruct the Company's employees, counsel, financial
advisors, auditors and
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other representatives to cooperate with Logitech Subsidiary in its further
investigation of the business of the Company and the Company Subsidiaries;
provided, however, that all requests for information to visit plants or
facilities or to interview the Company's employees or agents shall be directed
to, and coordinated with, the Chief Executive Officer of the Company or his
designee upon reasonable advance notice and in a manner that will not
materially interfere with or interrupt the Company's business; provided,
further, however, that any and all information received by Logitech Subsidiary,
its counsel, financial advisors, auditors and other representatives shall be
and remain subject to the Confidentiality Agreement.
Section 6.3 No Solicitation
(a) The Company and the Company Subsidiaries will immediately cease any and
all existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal (as defined in Section
6.3(e) below). From and after the date hereof until the earlier to occur of the
termination hereof and the Effective Time, the Company and the Company
Subsidiaries will not, and nor will they authorize or permit any of their
respective officers, directors, employees or any investment banker, attorney or
other advisor or representative retained by any of them to, directly or
indirectly, (i) initiate, solicit or encourage any Acquisition Proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to, any Acquisition Proposal, or (iii) agree to or approve
or recommend any Acquisition Proposal. The Company will take all necessary
steps to promptly inform the individuals or entities referred to in the
preceding sentence of the obligations undertaken in this Section 6.3 and to
cause them to comply with such obligations. Without limiting the foregoing, it
is understood that any violation of the restrictions set forth in this Section
6.3 by any officer, director, affiliate or employee of the Company or any of
the Company Subsidiaries or any investment banker, attorney or other advisor or
representative of the Company or any of the Company Subsidiaries shall be
deemed to be a breach of this Section 6.3 by the Company.
(b) From and after the date hereof until the earlier to occur of the
termination hereof and the Effective Time, the Company will promptly notify
Logitech Subsidiary after receipt of any Acquisition Proposal or any request
for nonpublic information relating to the Company or any Company Subsidiary by
any person that to the Company's knowledge may be considering making or has
made an Acquisition Proposal and will keep Logitech Subsidiary informed on a
current basis of the status and details of any such Acquisition Proposal or
request. In addition to the foregoing, the Company shall (x) provide Logitech
Subsidiary with notice of any meeting of the Company Board at which the Company
Board is reasonably expected to consider an Acquisition Proposal in the same
manner and at the same time that such notice is provided to the Company Board
(notwithstanding Section 11.2 hereof) and (y) provide Logitech Subsidiary with
notice of any meeting of the Company Board at which the Company Board is
reasonably expected to recommend a Superior Proposal to its stockholders in the
same manner and at the same time that such notice is provided to the Company
Board (notwithstanding Section 11.2 hereof).
(c) Nothing contained in this Section 6.3 shall prohibit (i) the Company
from, in response to an unsolicited, bona fide written Acquisition Proposal
that the Company Board (or a duly authorized committee thereof) concludes in
good faith constitutes a Superior Proposal (as defined in Section 6.3(f)
below), engaging in discussions or participating in negotiations with, and
furnishing information to, the party making such Acquisition Proposal to the
extent the Company Board (or such committee), after consultation with it legal
counsel, determines in good faith that it is necessary to do so for it to act
in accordance with its fiduciary duties under applicable law or (ii) the
Company Board from taking and disclosing to the Company's stockholders a
position with respect to a tender or exchange offer by a third party required
under Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to the Company's stockholders or otherwise which, in the
reasonable judgment of the Board of Directors after consultation with its legal
counsel, may be required under applicable law, rules or regulations, including,
without limitation, those of any stock exchange.
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(d) In addition to the obligations of the Company set forth in paragraph (a)
of this Section 6.3, prior to the termination hereof, the Company shall as
promptly as practicable, and in any event within one business day after receipt
thereof, advise Logitech Subsidiary orally and in writing of any request for
information which the Company reasonably believes would lead to an Acquisition
Proposal or of any Acquisition Proposal; the material terms and conditions of
such request, Acquisition Proposal or inquiry; and the identity of the person
or group making any such request, Acquisition Proposal or inquiry. The Company
will keep Logitech Subsidiary informed in all material respects of the status
and details (including material amendments or proposed amendments) of any such
request, Acquisition Proposal or inquiry.
(e) For purposes of this Agreement, "Acquisition Proposal" means, other than
the transactions contemplated by this Agreement, any tender offer or exchange
offer, or any offer or proposal for (i) a merger or other business combination
involving the Company or any Company Subsidiary, or (ii) the acquisition of 15%
or more of the equity interests in, or 15% or more of the assets of, the
Company or any Company Subsidiary.
(f) For purposes of this Agreement, "Superior Proposal" means an Acquisition
Proposal relating to the acquisition of a majority of the outstanding voting
securities, or all or substantially all of the assets, of the Company with
respect to which (A) if any cash consideration is involved, the Company Board
shall have concluded in good faith (after consultation with Company's financial
advisors) that the acquiring party is reasonably likely to obtain any necessary
financing, and (B) the Company Board shall have concluded in good faith after
consultation with its financial advisors that the Acquisition Proposal would,
if consummated, result in a transaction more favorable from a financial point
of view, to the Company and its stockholders than the Offer and the Merger.
Section 6.4 Termination of 401(k) Plan
Effective as of the day immediately preceding the Effective Time, the
Company and each Company Subsidiary, as applicable, shall each terminate any
and all group severance, separation or salary continuation plans, programs or
arrangements and any and all plans intended to include a Code Section 401(k)
arrangement (unless Logitech Subsidiary provides written notice to the Company
that such 401(k) plans shall not be terminated) (collectively, "Company
Employee Plans"). Unless Logitech Subsidiary provides such written notice to
the Company, no later than three business days prior to the Effective Time, the
Company shall provide Logitech Subsidiary with evidence that such Company
Employee Plan(s) have been terminated (effective as of the day immediately
preceding the Effective Time) pursuant to resolutions of the Company's, or the
Company's Subsidiary's, Board of Directors, as applicable. The form and
substance of such resolutions shall be subject to review and approval of
Logitech Subsidiary. The Company also shall take such other actions in
furtherance of terminating such Company Employee Plan(s) as Logitech Subsidiary
may reasonably require.
ARTICLE VII
Covenants of Logitech Subsidiary and Merger Sub
Section 7.1 Obligations of Merger Sub
Logitech Subsidiary will take all action necessary to cause Merger Sub to
perform its obligations under this Agreement and to consummate the Merger on
the terms and conditions set forth in this Agreement.
Section 7.2 Director and Officer Liability
All rights to indemnification, defense, advancement of expenses and all
limitations of liability existing in favor of the present and former directors
and officers of the Company and its Subsidiaries in connection with the
transactions contemplated by this Agreement pursuant to the indemnification
provisions under the Company Charter Documents as in effect on the date hereof
shall survive the Merger and continue in full force and effect for a period of
six years from and after the Effective Time and, if later, the final
disposition of all claims
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referred to in the next succeeding sentence. In the event that any claim or
claims are asserted or made within such six-year period, all such rights to
indemnification, defense and advancement of expenses shall continue until the
final dispositions of such claims. Logitech Subsidiary will cause the Surviving
Corporation to provide officers' and directors' liability insurance in respect
of acts and omissions occurring on or prior to the Effective Time covering each
person presently covered by the Company's officers' and directors' liability
insurance in effect on the date of this Agreement on terms with respect to
coverage and in amounts no less favorable than those of such policy in effect
on the date of this Agreement; provided, however, that in no such event will
Logitech Subsidiary or the Surviving Corporation be required to expend an
annual premium for such coverage in excess of 175% of the annual premium
currently paid by the Company.
Section 7.3 Matters Regarding ADRs
Logitech Subsidiary shall use its commercially reasonable efforts to cause
The Bank of New York, the depositary under the Deposit Agreement, to waive the
$0.05 per Parent ADS cancellation fee under the Deposit Agreement applicable to
the cancellation of surrendered Parent ADRs upon the withdrawal of Parent
Registered Shares represented by Parent ADRs issued in the Offer or the Merger.
Section 7.4 Expenses of the Company
From and after the time of consummation of the Offer, Logitech Subsidiary
shall cause the Company to pay when due any and all fees and expenses incurred
by the Company in connection with the consummation of the transactions
contemplated by the Offer or the Merger including, without limitation, the fees
and expenses set forth on Schedule 4.7A.
ARTICLE VIII
Covenants of the Parties
Section 8.1 Commercially Reasonable Efforts; Notice
(a) Subject to the terms and conditions of this Agreement, each party will
use its commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things reasonably necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the Offer, the Merger and the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, each party shall
use its commercially reasonable efforts and cooperate in preparing and filing
as soon as practicable, notifications under the HSR Act and the Foreign Filings
(the filing fees thereunder shall be shared equally by Logitech Subsidiary and
the Company) and to respond as promptly as practicable to any inquiries or
requests received from any Governmental Entity for additional information or
documentation.
(b) The Company shall give prompt notice to Logitech Subsidiary upon
becoming aware that any representation or warranty made by it contained in this
Agreement was, in any material respect, untrue or inaccurate when made or has
become untrue or inaccurate in any material respect, or of any failure of the
Company to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(c) Logitech Subsidiary shall give prompt notice to the Company upon
becoming aware that any representation or warranty made by it or Merger Sub
contained in this Agreement was, in any material respect, untrue or inaccurate
when made or has become untrue or inaccurate in any material respect, or of any
failure of Parent, Logitech Subsidiary or Merger Sub to comply with or satisfy
in any material respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
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Section 8.2 Conveyance Tax Filings
Logitech Subsidiary, Merger Sub and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereunder that are required or
permitted to be filed on or before the Effective Time.
Section 8.3 Conveyance Taxes
Logitech Subsidiary shall timely pay or cause to be paid any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes imposed upon the Company which become payable in connection with the
transactions contemplated hereunder.
Section 8.4 Third Party Consents
As soon as practicable following the date hereof, Logitech Subsidiary,
Merger Sub and the Company will each use commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions
contemplated hereby.
Section 8.5 Special Meeting; Company Disclosure Documents
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through its Board of Directors, shall, prior to the termination
of this Agreement and in accordance with applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as soon as reasonably
practicable following the acceptance for payment and purchase of Shares
by the Purchaser pursuant to the Offer for the purpose of considering
and taking action upon this Agreement;
(ii) prepare and file with the SEC a post-effective amendment to the
Form F-4 for the offer and sale of the Parent Registered Shares
represented by Parent ADSs pursuant to the Merger and in which a proxy
statement or information statement pursuant to Rule 14c-2 under the
Exchange Act prepared by the Company and Logitech Subsidiary relating
to the Special Meeting (as amended or supplemented from time to time,
the "Proxy Statement"), as applicable, which will be included as a
prospectus (the "Post-Effective Amendment");
(iii) subject to the applicable provisions of this Agreement and the
fiduciary duties of the Company Board, include in the Proxy Statement
the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of
this Agreement; and
(iv) use its commercially reasonable efforts to solicit from holders
of Shares proxies in favor of the Merger and shall take all other
action reasonably necessary or advisable to secure the approval of
stockholders required by the MBCL to effect the Merger.
(b) Logitech Subsidiary agrees that it will vote, or cause to be voted, all
of the Shares then owned by it or any of its other subsidiaries and affiliates
in favor of the approval of the Merger and the adoption of this Agreement.
(c) Each of the Company and Logitech Subsidiary shall notify the other (and
their respective counsel) promptly of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to the Post-Effective Amendment or the Proxy Statement for
additional
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information and shall supply the other with copies of all correspondence
between it or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Post-Effective Amendment or the
Proxy Statement. Each of the Company and Logitech Subsidiary shall use its
commercially reasonable efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto. No filing of, or amendment or
supplement to, or correspondence to the SEC or its staff with respect to, the
Post-Effective Amendment or the Proxy Statement will be made by either party,
without providing the other party a reasonable opportunity to review and
comment thereon. Each of the Company and Logitech Subsidiary shall use its
commercially reasonable efforts to have the Post-Effective Amendment declared
effective under the Securities Act as promptly as practicable after its filing.
The Company will use its commercially reasonable efforts to cause the Proxy
Statement to be mailed to holders of the Company's capital stock as promptly as
practicable after the Post-Effective Amendment is declared effective under the
Securities Act. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required to be taken under any
applicable state securities laws in connection with the issuance of Parent ADSs
pursuant to the Offer and the Merger, and the Company shall furnish all
information concerning the Company and its stockholders as may be reasonably
requested in connection with any such action and the preparation, filing and/or
distribution of the Proxy Statement. If at any time prior to the Effective Time
any information relating to the Company or Parent or Logitech Subsidiary or any
of their respective affiliates, officers or directors, should be discovered by
the Company or Logitech Subsidiary which should be set forth in an amendment or
supplement to any of the Post-Effective Amendment or the Proxy Statement, so
that any of such documents would not include a misstatement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the
party which discovers such information shall promptly notify the other parties
hereto, and an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and, to the extent required by law,
disseminated by the Company to holders of the Company's capital stock.
(d) Notwithstanding Section 8.5(a), (b) or (c) hereof, in the event that
Parent, Logitech Subsidiary, Merger Sub or any other subsidiary of Parent shall
acquire at least 90% of the outstanding shares of each class of capital stock
of the Company entitled to vote on the Merger, pursuant to the Offer or
otherwise, the parties hereto agree, at the request of Logitech Subsidiary and
subject to Article 10 hereof, to take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stockholders of the Company, in accordance
with Section 82 of the MBCL.
Section 8.6 Affiliates of the Company
The Company has delivered herewith written agreements substantially in the
form attached hereto as Exhibit B executed by, to the Company's knowledge, all
"affiliates" of the Company for purposes of Rule 145 under the Securities Act
("Rule 145") as of the date hereof. Promptly following consummation of the
Offer, the Company shall use commercially reasonable efforts to deliver to
Logitech Subsidiary a letter identifying all other persons who, to the
Company's knowledge, may, at the time of the commencement of the Offer and/or
the time this Agreement is submitted to the holders of Shares for approval, be
deemed to be "affiliates" of the Company for purposes of Rule 145, except to
the extent the Company and Lighting Subsidiary shall otherwise agree that Rule
145 does not apply to Shares tendered pursuant to the Offer. The Company shall,
except to the extent the Company and Lighting Subsidiary shall otherwise agree
that Rule 145 does not apply to Shares tendered pursuant to the Offer, use
commercially reasonable efforts to cause each such other person who is a holder
of Shares at the commencement of the Offer and/or following consummation of the
Offer to deliver to Logitech Subsidiary, prior to the Closing Date, a written
agreement substantially in the form attached hereto as Exhibit B.
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ARTICLE IX
Conditions to the Merger
Section 9.1 Conditions to Obligations of Each Party
The obligations of the Company, Logitech Subsidiary and Merger Sub to
consummate the Merger are subject to the satisfaction of each of the following
conditions:
(a) the approval of the stockholders of the Company shall have been
obtained, if required;
(b) any applicable waiting period under the HSR Act and any Foreign Filings
shall have expired or been terminated;
(c) no Governmental Entity shall have enacted, enforced, promulgated,
amended or issued any statute, rule, regulation, legislation, decree, temporary
restraining order, preliminary or permanent injunction or other order that
prohibits the consummation of the Merger; and
(d) Merger Sub (or Parent or Logitech Subsidiary) shall have purchased
Shares pursuant to the Offer.
ARTICLE X
Termination
Section 10.1 Termination
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time (notwithstanding any approval of this Agreement by
the stockholders of the Company):
(a) by mutual written consent of the Company, Logitech Subsidiary and Merger
Sub;
(b) by either the Company or Logitech Subsidiary as follows:
(i) if the Offer shall not have been consummated on or before July
15, 2001; provided, however, that the right to terminate this Agreement
under this Section 10.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been
the cause of, or resulted in, the failure of Logitech Subsidiary to
consummate the Offer;
(ii) if the Special Meeting (including as it may be adjourned from
time to time) shall have concluded without approval by the Company's
stockholders of the Merger and this Agreement; provided, however, that
Logitech Subsidiary may not terminate this Agreement under this Section
10.1(b)(ii) if the Shares owned by Parent, Logitech Subsidiary or Merger
Sub or any other subsidiary or affiliate of Parent that can be voted by
them under applicable law shall not all have been voted in favor of the
Merger and this Agreement;
(iii) if there shall be any applicable law or regulation that makes
consummation of the Merger illegal or if any Governmental Entity shall
have issued an order, decree or ruling, or taken any other action (which
such order, decree, ruling or other action the parties hereto shall use
their reasonable efforts to lift), in each case permanently enjoining,
restraining or otherwise prohibiting the Merger and the consummation of
the transactions contemplated by this Agreement, which such order,
decree, ruling or other action shall have become final and non-
appealable; or
(iv) if the Average Market Price is less than $18.00; provided,
however, that the Company or Logitech Subsidiary may exercise their
right to terminate this Agreement under this Section 10.1(b)(iv) only
prior to consummation of the Offer.
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(c) by the Company:
(i) at any time prior to consummation of the Offer if:
(A) the representations and warranties of Logitech Subsidiary and
Merger Sub set forth in Article V of this Agreement (other than the
representations and warranties set forth in Sections 5.9 and 5.11(a)
above), when read without any exception or qualification as to
materiality or Material Adverse Effect, shall not have been true and
correct when made on the date of this Agreement (except for
representations and warranties that speak as of a specific date,
which shall not have been true and correct as of such date, as if
made on such date), except where the failure to be so true and
correct would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect; provided, however, that in
no event may the Company terminate this Agreement pursuant to this
Section 10.1(c)(i)(A) with respect to a failure of such
representations and warranties to be so true and correct that is
reasonably capable of cure unless the Company shall have given
Logitech Subsidiary written notice that such representations and
warranties shall have failed to be so true and correct and such
failure is not cured within 20 business days after the giving of
such notice;
(B) the representations and warranties of Logitech Subsidiary and
Merger Sub set forth in Article V of this Agreement (other than the
representations and warranties set forth in Sections 5.9 and 5.11(a)
above), when read without any exception or qualification as to
materiality or Material Adverse Effect, shall not be true and
correct at such time, as if made at such time (except for
representations and warranties that speak as of a specific date, as
to which this Section 10.1(c)(i)(B) shall not apply), except where
the failure to be so true and correct would not, individually or in
the aggregate, be reasonably likely to have a Substantial Adverse
Effect; provided, however, that in no event may the Company
terminate this Agreement pursuant to this Section 10.1(c)(i)(B) with
respect to a failure of such representations and warranties to be so
true and correct that is reasonably capable of cure unless the
Company shall have given Logitech Subsidiary written notice that
such representations and warranties shall have failed to be so true
and correct and such failure is not cured within 20 business days
after the giving of such notice;
(C) the representations and warranties of Logitech Subsidiary and
Merger Sub set forth in Section 5.9 of this Agreement shall not have
been true and correct in all material respects when made on the date
of this Agreement and at such time, as if made at such time;
provided, however, that in no event may the Company terminate this
Agreement pursuant to this Section 10.1(c)(i)(C) with respect to a
failure of such representations and warranties to be so true and
correct that is reasonably capable of cure unless the Company shall
have given Logitech Subsidiary written notice that such
representations and warranties shall have failed to be so true and
correct and such failure is not cured within 20 business days after
the giving of such notice; or
(D) the representations and warranties of Logitech Subsidiary and
Merger Sub set forth in Section 5.11(a) of this Agreement shall not
have been true and correct when made on the date of this Agreement;
provided, however, that in no event may the Company terminate this
Agreement pursuant to this Section 10.1(c)(i)(D) with respect to a
failure of such representations and warranties to be so true and
correct that is reasonably capable of cure unless the Company shall
have given Logitech Subsidiary written notice that such
representations and warranties shall have failed to be so true and
correct and such failure is not cured within 20 business days after
the giving of such notice; or
(ii) at any time prior to consummation of the Offer if Logitech
Subsidiary and/or Merger Sub shall have breached or failed to perform
any material obligation of Logitech Subsidiary and/or Merger Sub under
this Agreement or shall have failed to comply with any material
agreement or covenant of Logitech Subsidiary and/or Merger Sub under
this Agreement, but only if, with respect to any breach or failure
referred to in this Section 10.1(c)(ii) that is reasonably capable of
cure, the Company shall have given Logitech Subsidiary written notice
of any such breach or failure and such breach or failure is not cured
within 20 business days after the giving of such notice; or
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(d) by Logitech Subsidiary if:
(i) at any time prior to consummation of the Offer if:
(A) the representations and warranties of the Company set forth
in Article IV of this Agreement (other than the representations and
warranties set forth in Sections 4.5 and 4.8(a) above), when read
without any exception or qualification as to materiality or Material
Adverse Effect, shall not have been true and correct when made on
the date of this Agreement (except for representations and
warranties that speak as of a specific date, which shall not have
been true and correct as of such date, as if made on such date),
except where the failure to be so true and correct would not,
individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect; provided, however, that in no event may
Logitech Subsidiary terminate this Agreement pursuant to this
Section 10.1(d)(i)(A) with respect to a failure of such
representations and warranties to be so true and correct that is
reasonably capable of cure unless Logitech Subsidiary shall have
given the Company written notice that such representations and
warranties shall have failed to be so true and correct and such
failure is not cured within 20 business days after the giving of
such notice;
(B) the representations and warranties of the Company set forth
in Article IV of this Agreement (other than the representations and
warranties set forth in Section 4.5 and 4.8(a) above), when read
without any exception or qualification as to materiality or Material
Adverse Effect, shall not be true and correct at such time, as if
made at such time (except for representations and warranties that
speak as of a specific date, as to which this Section 10.1(d)(i)(B)
shall not apply), except where the failure to be so true and correct
would not, individually or in the aggregate, be reasonably likely to
have a Substantial Adverse Effect; provided, however, that in no
event may Logitech Subsidiary terminate this Agreement pursuant to
this Section 10.1(d)(i)(B) with respect to a failure of such
representations and warranties to be so true and correct that is
reasonably capable of cure unless Logitech Subsidiary shall have
given the Company written notice that such representations and
warranties shall have failed to be so true and correct and such
failure is not cured within 20 business days after the giving of
such notice;
(C) the representations and warranties of the Company set forth
in Section 4.5 of this Agreement shall not have been true and
correct in all material respects when made on the date of this
Agreement and at such time, as if made at such time; provided,
however, that in no event may Logitech Subsidiary terminate this
Agreement pursuant to this Section 10.1(d)(i)(C) with respect to a
failure of such representations and warranties to be so true and
correct that is reasonably capable of cure unless Logitech
Subsidiary shall have given the Company written notice that such
representations and warranties shall have failed to be so true and
correct and such failure is not cured within 20 business days after
the giving of such notice; or
(D) the representations and warranties of the Company set forth
in Section 4.8(a) of this Agreement shall not have been true and
correct when made on the date of this Agreement; provided, however,
that in no event may Logitech Subsidiary terminate this Agreement
pursuant to this Section 10.1(d)(i)(D) with respect to a failure of
such representations and warranties to be so true and correct that
is reasonably capable of cure unless Logitech Subsidiary shall have
given the Company written notice that such representations and
warranties shall have failed to be so true and correct and such
failure is not cured within 20 business days after the giving of
such notice; or
(ii) at any time prior to consummation of the Offer the Company
shall have breached or failed to perform any material obligation of the
Company under this Agreement or shall have failed to comply with any
material agreement or covenant of the Company under this Agreement, but
only if, with respect to any breach or failure referred to in this
Section 10.1(d)(ii) that is reasonably capable of cure, Logitech
Subsidiary shall have given the Company written notice of any such
breach or failure and such breach or failure is not cured within 20
business days after the giving of such notice; or
A-36
(iii) a Triggering Event (as defined below) shall have occurred.
For purposes of this Agreement, a "Triggering Event" shall be deemed to have
occurred if, prior to the Effective Time: (i) the Board of Directors of Company
or any committee thereof shall have approved or recommended to the Company's
stockholders any Acquisition Proposal, (ii) the Board of Directors of the
Company or any committee thereof shall for any reason have publicly withdrawn
or shall have amended or modified in a manner adverse to Logitech Subsidiary
its recommendation in favor of the Offer, the adoption and approval of the
Agreement or the approval of the Merger (the "Recommendations"); (iii) Company
shall have failed to include the Recommendations in the Offer Documents or the
Schedule 14D-9; (iv) the Company shall have breached the provisions of Section
6.3 in any material respect; or (v) an Acquisition Proposal shall have been
commenced or otherwise publicly announced by a person unaffiliated with
Logitech Subsidiary, and the Company shall not, within 10 business days after
such commencement or public announcement, publicly recommended to the Company's
stockholders rejection of such Acquisition Proposal, provided, however, that in
no event shall a Triggering Event include a "stop look and listen"
communication of the nature contemplated in Rule 14d-9(f) under the Exchange
Act with respect to an unsolicited tender offer or exchange offer that, if
concluded in accordance with the terms thereof, would constitute or result in
an Acquisition Proposal.
The party desiring to terminate this Agreement pursuant to this Section 10.1
(other than pursuant to Section 10.1(a) above) shall give notice of such
termination to the other party.
Section 10.2 Effect of Termination
If this Agreement is terminated pursuant to Section 10.1, this Agreement
shall become void and have no effect without any liability or obligation on the
part of any party hereto, (a) other than liabilities and obligations under the
Confidentiality Agreement and (b) except as provided in Section 11.1(b) and
Section 11.3 below and except that no such termination shall relieve any party
thereto of any liability for damages resulting from any willful breach by such
party of this Agreement.
ARTICLE XI
Miscellaneous
Section 11.1 Costs and Expenses
(a) Except as otherwise provided in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby will be paid by the party incurring such expenses; provided, however,
that Logitech Subsidiary and the Company shall share equally the costs and
expenses (other than legal and accounting fees) incurred in connection with the
filing, printing and mailing of the Offer Documents and all regulatory filings.
(b) If Logitech Subsidiary shall have terminated this Agreement pursuant to
Section 10.1(d)(iii), the Company shall promptly, but in any event no later
than one business day after the date of such termination, pay Logitech
Subsidiary a fee equal to $4,500,000 in immediately available funds (the
"Termination Fee"). In addition, if this Agreement is terminated by Logitech
Subsidiary or the Company, as applicable, prior to the Effective Time pursuant
to Section 10.1(b)(i) without any material failure by Logitech Subsidiary to
fulfill any obligation under this Agreement having been the primary cause of
the failure of Logitech Subsidiary to consummate the Offer, and (i) following
the date of this Agreement and prior to the termination of this Agreement, any
Acquisition Proposal shall have been publicly announced or shall have become
publicly known, and (ii) within 12 months following the termination of this
Agreement, either a Company Acquisition (as defined below) is consummated, or
the Company shall enter into an agreement providing for a Company Acquisition,
then the Company shall pay Logitech Subsidiary the Termination Fee promptly and
as a condition to so consummating or entering into a definitive agreement. The
Company acknowledges that the agreements contained in this Section 11.1(b) are
an integral part of the transactions contemplated by this Agreement, and
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that, without these agreements, Logitech Subsidiary would not enter into this
Agreement. Accordingly, if the Company fails to pay in a timely manner the
amounts due pursuant to this Section 11.1(b), and, in order to obtain such
payment, Logitech Subsidiary makes a claim that results in a judgment against
the Company, the Company shall pay to Logitech Subsidiary its reasonable costs
and expenses (including reasonable attorneys' fees and expenses) in connection
with such suit, together with interest on the amounts set forth in this Section
11.1(b) at the prime rate Bank of America N. T. and S. A. in effect on the date
such payment was required Logitech Subsidiary to be made. Logitech Subsidiary
agrees that the payment provided for in this Section 11.1(b) shall be the sole
and exclusive remedy of Logitech Subsidiary and Merger Sub upon termination of
this Agreement where such fee has been paid, and such remedies shall be limited
to the sum stipulated in this Section 11.1(b), regardless of the circumstances
giving rise to such termination; provided, however, that nothing herein shall
relieve either party hereto from liability for the willful breach of, or fraud
in connection with, any of its representations, warranties, covenants or
agreements set forth in this Agreement.
For the purposes of this Agreement, "Company Acquisition" shall mean any of
the following transactions (other than the transactions contemplated by this
Agreement): (i) a sale or other disposition by Company of a business or assets
representing more than 35% of the consolidated net revenues, net income or
assets of the Company immediately prior to such sale; (ii) the acquisition by
any person or group (including by way of a tender offer or an exchange offer or
issuance by the Company), directly or indirectly, of beneficial ownership or a
right to acquire beneficial ownership of shares representing more than 35% of
any class of equity securities of Company; or (iii) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company (other than a transactions in which the
Company's current stockholders retain more than 65%, directly or indirectly, of
the surviving or successor corporation); it being understood that a widely
distributed offering of Company Common Stock shall not constitute a Company
Acquisition.
Section 11.2 Notices
All notices and other communications required or permitted to be given
pursuant to this Agreement shall be in writing signed by the sender, and shall
be deemed duly given (a) on the date delivered if personally delivered, (b) on
the date sent by telecopier with automatic confirmation by the transmitting
machine showing the proper number of pages were transmitted without error, (c)
on the business day after being sent by Federal Express or another recognized
overnight mail service for next day or next business day delivery, or (d) five
business days after mailing, if mailed by United States postage-prepaid
certified or registered mail, return receipt requested, in each case addressed
to following addresses (or at such other address or telecopier number for a
party as shall be specified by like notice):
(a) If to Logitech Subsidiary or Merger Sub, to:
650 Kaiser Drive
Fremont, California 94555
Telecopier No. (510) 795-7496
Attention: Kristen Onken
with a copy to:
Wilson Sonsini Goodrich &Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Telecopier No.: (650) 461-5375
Attention: Steven V. Bernard
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and a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market
Spear Tower, Suite 3300
San Francisco, California 94105
Telecopier No.: (415) 947-2099
Attention: Steve L. Camahort
(a) if to the Company, to:
1499 SE Tech Center Plaza, Suite 350
Vancouver, Washington 98683
Telecopier No. (360) 896-2020
Attention: Robert G. Wick
with a copy to:
Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Telecopier No.: (212) 704-6288
Attention: Michael Weinsier
Section 11.3 Survival of Representations and Warranties
The representations and warranties contained herein and in any certificate
or other writing delivered pursuant hereto shall not survive the Effective Time
or the termination of this Agreement. All covenants and agreements contained
herein which by their terms are to be performed in whole or in part subsequent
to the Effective Time shall survive the Merger in accordance with their terms.
Nothing contained in this Section 11.3 shall relieve any party from liability
for any willful breach of this Agreement.
Section 11.4 Amendment
Any provision of this Agreement may be amended, modified, waived or
supplemented prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by the Company,
Logitech Subsidiary and Merger Sub or, in the case of a waiver, by each party
against whom the waiver is to be effective; provided, however, that, after the
approval of this Agreement by the stockholders of the Company, there shall be
no such amendment, modification, waiver or supplement that by law requires
further approval by the stockholders of the Company without the further
approval of such stockholders; provided, further, however, that after the
adoption of this Agreement by the stockholders of the Company, no such
amendment, modification, waiver or supplement shall, without the further
approval of such stockholders, (x) reduce the amount, or change the form, of
the Merger Consideration or (y) alter or change any of the other terms or
conditions of this Agreement if such alteration would adversely effect the
holders of any shares of capital stock of the Company.
Section 11.5 No Waiver
No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
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Section 11.6 Section Headings
The section headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 11.7 Successors and Assigns; Guarantee of Merger Sub Obligations
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto (including, without limitation, Parent) and their
respective successors and assigns; provided, however, that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto. Parent hereby
unconditionally guarantees the full and punctual performance by Logitech
Subsidiary and Merger Sub of all of the obligations of Logitech Subsidiary and
Merger Sub or any of their assignees hereunder. The terms and provisions of
Sections 11.2, 11.4 through 11.6 and 11.8 through 11.14 and its obligations set
forth in Section 1.1(b) and the prior two sentences shall apply to Parent as if
such terms and provisions expressly applied to Parent (whether or not such
terms and provisions expressly apply to Parent), and the address for notices to
Parent shall be the same as the address for notices to Lighting Subsidiary set
forth in Section 11.2. In connection with the obligations of Parent under this
Section 11.7, Parent hereby waives any and all rights, notices and defenses to
which it otherwise would or may be entitled as a surety or otherwise, under
this Agreement, any other agreement or applicable law.
Section 11.8 Governing Law
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York that apply to agreements
made and performed entirely within such state, except that the MBCL shall apply
to matters relating to the internal governance of the Company and Merger Sub,
the laws of Switzerland shall apply to matters relating to the internal
governance of Parent, and the California Corporations Code shall apply to
matters relating to the internal governance of Logitech Subsidiary.
Section 11.9 Jurisdiction
Each of the parties hereto hereby irrevocably consents and submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of California in connection with any dispute arising out of or
relating to this Agreement or the transactions contemplated hereby, waives any
objection to venue in such District (unless such court lacks jurisdiction with
respect to such proceeding, in which case, each of the parties hereto
irrevocably consents to the jurisdiction of the courts of the State of
California in connection with such proceeding and waives any objection to venue
in the State of California), and agrees that service of any summons, complaint,
notice or other process relating to such dispute may be effected in the manner
provided by Section 11.2.
Section 11.10 Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated herein is not affected in any manner materially adverse to any
party hereto.
Section 11.11 Parties in Interest
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended
to, or shall confer upon, any other person any right, benefit or remedy of any
nature whatsoever under, or by reason of, this Agreement, including, without
limitation, by way of subrogation; provided, however, that Section 7.2 is
intended for the benefit of the indemnified parties referenced therein and may
be enforced by such indemnified parties.
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Section 11.12 Public Announcements
Logitech Subsidiary and the Company will consult with each other before
issuing any press release or making any public statement with respect to this
Agreement and the transactions contemplated hereby, and will not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law, rule or regulation, or as
otherwise permitted by this Agreement, in which case reasonable efforts to
consult with the other party will be made prior to any such release or public
statement.
Section 11.13 Entire Agreement
This Agreement, including any exhibits or schedules hereto, and the
Confidentiality Agreement constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement.
Section 11.14 Counterparts; Effectiveness
This Agreement may be signed in one or more counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by all of
the other parties hereto.
[The next page is the signature page]
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The parties have executed and delivered this Agreement and Plan of Merger as
of the date first written above.
Solely for the purpose of Section
1.1(b) and Section 11.7:
LOGITECH INTERNATIONAL S.A.
/s/ Guerrino De Luca
By: _________________________________
Name: Guerrino De Luca
Title: President and CEO
/s/ Kristen Onken
By: _________________________________
Name: Kristen Onken
Title: Chief Financial Officer
[Seal] THUNDER ACQUISITION CORP.
/s/ Guerrino De Luca
By: _________________________________
Name: Guerrino De Luca
Title: President and CEO
/s/ Kristen Onken
By: _________________________________
Name: Kristen Onken
Title: Chief Financial Officer
LOGITECH INC.
/s/ Guerrino De Luca
By: _________________________________
Name: Guerrino De Luca
Title: President and CEO
/s/ Kristen Onken
By: _________________________________
Name: Kristen Onken
Title: Chief Financial Officer
[Seal] LABTEC INC.
/s/ Robert G. Wick
By: _________________________________
Name: Robert G. Wick
Title: President
/s/ Marc J. Leder
By: _________________________________
Name: Marc J. Leder
Title: Treasurer
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Annex A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of this Agreement, Merger Sub shall not
be required to, and Logitech Subsidiary shall not be required to cause Merger
Sub to, accept for payment or, subject to any applicable rules and regulations
of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to the
Merger Sub's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any Shares tendered pursuant to the Offer unless:
(i) there shall be validly tendered and not withdrawn prior to the
expiration of the Offer a number of Shares that, together with any
shares of Company Common Stock owned by Logitech Subsidiary, Merger Sub
or any direct or indirect subsidiaries or affiliates of either of them,
represents at least 67% of the number of Fully-Diluted Shares (as
defined below) (the "Minimum Condition"); and
(ii) any applicable waiting period under the HSR Act and any Foreign
Filings shall have expired or been terminated.
The term "Fully-Diluted Shares" shall mean, at any time, all shares of
Company Common Stock that are issued and outstanding at such time and all
shares of Company Common Stock that are issuable upon exercise, exchange or
conversion of securities of the Company that are exercisable or exchangeable
for, or convertible into, Company Common Stock at such time.
Furthermore, notwithstanding any other term of the Offer or this Agreement,
Merger Sub shall not be required to, and Logitech Subsidiary shall not be
required to cause Merger Sub to, accept for payment or, subject as aforesaid,
to pay, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares if at any
time on or after the date of the Agreement and before the time of acceptance
for payment for any such Shares, any of the following conditions exists:
(a) if, after the date of this Agreement, there shall have been threatened
or pending any suit, action or proceeding by any Governmental Entity against
the Parent, Logitech Subsidiary, Merger Sub, the Company or any subsidiary of
the Company (i) seeking to make illegal, restrain or prohibit (A) the making of
the Offer, the acceptance for payment of, or payment for, any Shares by
Logitech Subsidiary, or (B) or the consummation of the Merger, or (ii) seeking
to prohibit or impose any material limitations on Parent's, Logitech
Subsidiary's or Merger Sub's ownership or operation (or that of any of their
respective subsidiaries or affiliates) of all or a material portion of their or
the Company's businesses or assets, or to compel Logitech Subsidiary, Merger
Sub or their respective subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or
Parent and their respective subsidiaries, in each case taken as a whole, or
(iii) seeking to impose material limitations on the ability of the Parent,
Logitech Subsidiary or Merger Sub effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote the
Shares purchased by it on all matters properly presented to the Company's
stockholders;
(b) there shall have been (i) entered, enforced or issued by any court of
competent jurisdiction any judgment, order, injunction or decree that makes
illegal, restrains or prohibits the making of the Offer, the acceptance for
payment of, or the payment for, any Shares, by Parent, Logitech Subsidiary or
Merger Sub or (ii) any statute, rule, regulation, legislation or interpretation
enacted, enforced, promulgated, amended or issued by any Governmental Entity
applicable to (A) Parent, Logitech Subsidiary or Merger Sub or the Company, or
(B) any transaction contemplated by this Agreement, that in either instance
would result, directly or indirectly, in any of the consequences referred to in
clause (i) to (iii) of paragraph (a) above;
(c) this Agreement shall have been terminated in accordance with its terms;
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(d) a Triggering Event;
(e) the representations and warranties of the Company set forth in Article
IV of this Agreement (other than the representations and warranties set forth
in Sections 4.5 and 4.8(a) above), when read without any exception or
qualification as to materiality or Material Adverse Effect, shall not have been
true and correct when made on the date of this Agreement (except for
representations and warranties that speak as of a specific date, which shall
not have been so true and correct as of such date, as if made on such date),
except where the failure to be so true and correct would not, individually or
in the aggregate, be reasonably likely to have a Material Adverse Effect;
(f) the representations and warranties of the Company set forth in Article
IV of this Agreement (other than the representations and warranties set forth
in Section 4.5 and 4.8(a) above), when read without any exception or
qualification as to materiality or Material Adverse Effect, shall not be so
true and correct immediately prior to the time of consummation of the Offer, as
if made at such time (except for representations and warranties that speak as
of a specific date, as to which this Section (f) shall not apply), except where
the failure to be so true and correct would not, individually or in the
aggregate, be reasonably likely to have a Substantial Adverse Effect;
(g) the representations and warranties of the Company set forth in Section
4.5 of this Agreement shall not (i) have been true and correct in all material
respects when made on the date of this Agreement and (ii) be true and correct
in all material respects at the time of consummation of the Offer, as if made
at such time;
(h) the representations and warranties of the Company set forth in Section
4.8(a) of this Agreement shall not have been true and correct when made on the
date of this Agreement;
(i) the Company shall have breached or failed to perform any material
obligation of the Company under this Agreement or shall have failed to comply
with any material agreement or covenant of the Company under this Agreement;
(j) if, after the date of this Agreement, there shall have occurred (i) any
general suspension of trading in, or limitation on prices for, securities on
the Swiss Stock Exchange or on the Nasdaq National Market, for a period in
excess of 24 hours (excluding suspensions or limitations resulting solely from
physical damage or interference with such exchanges not related to market
conditions), (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in Switzerland or the United States (whether or
not mandatory), (iii) any limitation (whether or not mandatory) by any United
States or Swiss governmental authority on the extension of credit generally by
banks or other financial institutions, or (iv) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof; or
(k) the Form F-4 shall not have been declared effective by the Securities
and Exchange Commission or a stop order suspending the effectiveness of the
Form F-4 shall have been issued and not withdrawn.
The foregoing conditions are for the sole benefit of Logitech Subsidiary and
Merger Sub and may be waived by Logitech Subsidiary and Merger Sub, in whole or
in part at any time and from time to time in their sole discretion, subject in
each instance to the terms of this Agreement. The failure by Logitech
Subsidiary or Merger Sub 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 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.
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Exhibit A
STOCKHOLDER AGREEMENT
This Stockholder Agreement (as the same may be amended, supplemented or
modified in accordance with the terms hereof, this "Agreement") is entered into
as of February 7, 2001 between Logitech Inc., a California corporation
(together with its successors and assigns, "Logitech Subsidiary"), and [Sun
Multimedia Partners, L.P.] [Sun Venture Capital Partners I, L.P.], a Delaware
limited partnership (together with its successors and assigns, the
"Stockholder").
Recitals
Stockholder owns beneficially and of record an aggregate of [1,936,861]
[95,300] shares (the "Initial Stockholder Shares") of common stock, par value
$.01 per share, of Labtec Inc., a Massachusetts corporation (the "Company").
Logitech Subsidiary, Logitech S.A., a Swiss Corporation ("Parent") and the
direct parent of Logitech Subsidiary, Thunder Acquisition Corp., a
Massachusetts corporation ("Merger Sub"), and the Company are parties to an
Agreement and Plan of Merger entered into as of the date hereof (as the same
may be amended, supplemented or modified in accordance with its terms, the
"Merger Agreement"). Capitalized terms used but not defined herein have the
meanings assigned to them in the Merger Agreement.
The Merger Agreement provides, among other things, that Logitech Subsidiary
shall make the Offer to purchase each issued and outstanding share of Common
Stock for (i) the Cash Portion in cash per Share, without any interest thereon
and (ii) a fraction of a Parent ADS equal to the Stock Portion (the Cash
Portion and the Stock Portion are collectively referred to as the "Initial
Transaction Consideration"), and that Merger Sub shall thereafter merge with
and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in the Merger Agreement.
As a condition to the willingness of Parent, Logitech Subsidiary and Merger
Sub to enter into the Merger Agreement, and as an inducement to them to do so,
the Stockholder has agreed to tender the Stockholder Shares (as defined in
Section 1.1(a)(i) below) pursuant to the Offer, to vote all the Stockholder
Shares, and all other securities of the Company over which the Stockholder has
or controls voting power, in favor of the Merger, and is executing and
delivering herewith a lock-up agreement with respect to the Parent ADSs to be
received by the Stockholder in the Merger in the form attached hereto as
Exhibit A.
Agreement
The parties agree as follows:
ARTICLE I
The Offer
Section 1.1 Tender of Shares; No Withdrawal.
(a) Promptly, and in no even later than the fifteenth business day following
the commencement of the Offer or, if later, the fifth business day
following receipt of the applicable Offer Documents, the Stockholder shall
tender to the Exchange Agent:
(i) a letter of transmittal with respect to the Initial Stockholder
Shares (and any and all non-cash dividends, distributions, rights,
other shares of Common Stock of the Company or other securities issued
or issuable in respect thereof) (collectively, including the Initial
Stockholder Shares, the "Stockholder Shares") complying with the terms
of the Offer to Purchase (the "Offer to Purchase") distributed by
Logitech Subsidiary in connection with the Offer;
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(ii) the certificates representing the Stockholder Shares; and
(iii) all other documents or instruments required to be delivered
pursuant to the terms of the Offer to Purchase and such letter of
transmittal.
(b) Prior to the termination of this Agreement, the Stockholder shall not
withdraw the tender of the Stockholder Shares effected in accordance with
Section 1.1(a); provided, however, that the Stockholder may decline to tender,
or may withdraw, any and all of the Stockholder Shares if, (i) the Company
shall terminate the Merger Agreement in accordance with its terms or (ii)
without the prior consent of the Stockholder, Logitech Subsidiary amends the
Offer to (A) reduce the Cash Portion or the Stock Portion, (B) reduce the
number of shares of Company Common Stock subject to the Offer, or (C) change
the form of consideration payable in the Offer.
Section 1.2 No Purchase.
Logitech Subsidiary may allow the Offer to expire without accepting for
payment or paying for any Stockholder Shares, on the terms and conditions set
forth in the Offer to Purchase. If all Stockholder Shares validly tendered and
not withdrawn are not accepted for payment and paid for in accordance with the
terms of the Offer to Purchase, they shall be returned to the Stockholder,
whereupon they shall, prior to the termination of this Agreement, continue to
be held by the Stockholder subject to the terms and conditions of this
Agreement.
ARTICLE II
Consent and Voting
Section 2.1 Voting.
The Stockholder hereby revokes any and all previous proxies granted with
respect to the Stockholder Shares. By entering into this Agreement, the
Stockholder hereby consents to the Merger Agreement and the transactions
contemplated thereby, including the Merger. So long as this Agreement is in
effect and has not been terminated, the Stockholder hereby agrees to vote all
Stockholder Shares now or hereafter acquired by the Stockholder, and all other
shares of Common Stock (and any other securities of the Company with voting
power) over which the Stockholder has or controls voting power:
(a) in favor of adoption of the Merger Agreement and approval of the Merger
and the other transactions contemplated thereby;
(b) against approval of any proposal made in opposition to, or in
competition with, consummation of the Merger and the Merger Agreement; and,
(c) against any of the following actions (other than those actions that
relate to the Merger and are contemplated by the Merger Agreement): (A) any
merger, consolidation, business combination, sale of assets, reorganization or
recapitalization of the Company with any party; (B) any dissolution,
liquidation or winding up of the Company; (C) any joint venture or material
strategic relationship with any party; (D) any material change in the
capitalization of the Company or the Company's capital structure; or (E) any
other action that is intended, or could reasonably be expected to impede,
interfere with, delay, postpone, discourage or adversely affect the Merger or
any of the transactions contemplated by the Merger Agreement
The Stockholder shall not commit or agree to take any action inconsistent
with the foregoing.
Section 2.2 Proxy.
To fully implement the agreement of the Stockholder set forth in Section 2.1
above, the Stockholder hereby irrevocably appoints Logitech Subsidiary, its
officers and designees, with full power of substitution
A-46
(each of Logitech Subsidiary, its officers and designees and its substitutes
being referred to herein as the "Proxy"), and each of them as the true and
lawful attorney and proxy of the Stockholder until the termination of this
Agreement, to vote all Stockholder Shares on matters as to which such
Stockholder is entitled to vote at a meeting of the stockholders of the Company
or to which such Stockholder is entitled to express consent or dissent to
corporate action in writing without a meeting of stockholders, in the Proxy's
absolute, sole and binding discretion, on the matters specified in Section 2.1
above. The Stockholder agrees that the Proxy may, prior to the termination of
this Agreement, in such Stockholder's name and stead, (i) attend any annual or
special meeting of the stockholders of the Company and vote all Stockholder
Shares at any such annual or special meeting as to the matters specified in
Section 2.1 above, and (ii) execute with respect to all Stockholder Shares any
written consent to, or dissent from, corporate action respecting any matter
specified in Section 2.1 above. Prior to the termination of this Agreement, the
Stockholder agrees to refrain from, without the prior written consent of
Logitech Subsidiary, (x) voting the Stockholder Shares of such Stockholder at
any annual or special meeting of the stockholders of the Company in any manner
inconsistent with the terms of this Agreement, (y) executing any written
consent in lieu of a meeting of the stockholders of the Company in any manner
inconsistent with the terms of this Agreement, and (z) granting any proxy or
authorization to any person with respect to the voting of the Stockholder
Shares, except pursuant to this Agreement, or taking any action contrary to or
in any manner inconsistent with the terms of this Agreement. The Stockholder
agrees that this grant of proxy and appointment of attorney is irrevocable and
coupled with an interest and agrees that the person designated as Proxy
pursuant hereto may at any time name any other person as its substituted Proxy
to act pursuant hereto, either as to a specific matter or as to all matters.
Section 2.3 Transfer.
(a) Until this Agreement is terminated, the Stockholder shall not, directly
or indirectly: (i) offer to sell, sell short, transfer (including gift),
assign, pledge or otherwise dispose of (each, a "Transfer") any interest in, or
encumber with any Lien (as defined in Section 3.5 below), any of the
Stockholder Shares; (ii) enter into any contract, option, put, call, "collar"
or other agreement or understanding with respect to any Transfer of any or all
of the Stockholder Shares or any interest therein; (iii) deposit the
Stockholder Shares into a voting trust or enter into a voting agreement or
arrangement with respect thereto; or (iv) take any other action with respect to
the Stockholder Shares that would in any way restrict, limit or interfere with
the performance of its obligations hereunder.
(b) Until this Agreement is terminated, any and all certificates evidencing
the Stockholder Shares shall bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO A STOCKHOLDER AGREEMENT
BETWEEN LOGITECH INC. AND [SUN MULTIMEDIA PARTNERS, L.P.] [SUN VENTURE
CAPITAL PARTNERS I, L.P.] ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN
VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO
EFFECT WHATSOEVER. A COPY OF THE AGREEMENT, AS THE SAME MAY BE AMENDED FROM
TIME TO TIME, IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY.
ARTICLE III
Representations and Warranties of the Stockholder
The Stockholder represents and warrants to Logitech Subsidiary that:
Section 3.1 Existence and Power.
The Stockholder is duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all power and authority to
consummate the transactions contemplated hereby.
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Section 3.2 Corporate Authorization.
The Stockholder has the power to execute, deliver and perform this
Agreement, and has taken all necessary action to authorize the execution,
delivery and performance by it of this Agreement and such related documents.
This Agreement has been duly executed and delivered by the Stockholder and,
assuming due and valid authorization, execution and delivery by Logitech
Subsidiary, constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms, except as
such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws and
principles now or hereafter in effect, affecting creditors' rights generally,
(b) rules or principles of equity affecting the enforcement of obligations
generally, whether at law, in equity or otherwise, or (c) the exercise of the
discretionary powers or any court or other authority before which a proceeding
may be brought seeking equitable remedies, including specific performance and
injunctive relief.
Section 3.3 Governmental Authorization.
The execution, delivery and performance by the Stockholder of this Agreement
and the consummation by the Stockholder of the transactions contemplated hereby
do not require the Stockholder to obtain any consent of, or to make any filing
with, any Governmental Entity other than: (a) compliance with any applicable
requirements of the HSR Act; (b) compliance with any applicable requirements of
the Exchange Act; and (c) such other consents and filings which, if not
obtained or made, would not have a material adverse effect on the ability of
the Stockholder to consummate the transactions contemplated hereby.
Section 3.4 Non-Contravention.
The execution, delivery and performance by the Stockholder of this Agreement
and the consummation by the Stockholder of the transactions contemplated hereby
do not and will not, (a) contravene or conflict with any organizational
document of the Stockholder, (b) contravene or conflict with, or constitute a
violation of, any provision of any law, regulation, judgment, injunction, order
or decree binding upon the Stockholder or any of its properties or assets, (c)
with or without the giving of notice or passage of time or both, constitute a
breach or default under any agreement, contract or other instrument binding
upon the Stockholder or, to the Stockholder's knowledge, the Company, or (d)
result in the creation or imposition of any Lien on the Stockholder Shares,
except with respect to the foregoing clauses (c) or (d) such contraventions,
conflicts, violations, breaches, defaults or Liens which would not,
individually or in the aggregate, be reasonably likely to have a material
adverse effect on the ability of the Stockholder to consummate the transactions
contemplated hereby.
Section 3.5 Ownership.
The Stockholder is the sole, true, lawful record and beneficial owner of the
Stockholder Shares (other than to the extent that beneficial ownership may be
attributed to others under Rule 13d-3 under the Exchange Act) and that, except
as set forth on Schedule 3.5 hereto, there are no restrictions on voting rights
or rights of disposition pertaining to the Stockholder Shares. The Stockholder
will convey good and valid title to the Stockholder Shares being acquired by
Logitech Subsidiary pursuant to the Offer or the Merger, as the case may be,
free and clear of any and all liens, restrictions, security interests or any
encumbrances whatsoever, other than restrictions under applicable securities
laws (collectively, "Liens").
Section 3.6 Total Shares.
The Stockholder Shares are the only shares of capital stock of the Company
beneficially owned by the Stockholder, the number and class of the Stockholder
Shares are set forth on Schedule 3.6 hereto and, except as set forth on
Schedule 3.6 hereto, the Stockholder has no option to purchase or right to
subscribe for or otherwise acquire any securities of the Company and has no
other interest in or voting rights with respect to any other securities of the
Company.
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ARTICLE IV
Representations and Warranties of Logitech Subsidiary
Logitech Subsidiary represents and warrants to the Stockholder that:
Section 4.1 Existence and Power.
Logitech Subsidiary is a corporation, duly organized, validly existing and
in good standing under the laws of California and has all corporate power and
authority to consummate the transactions contemplated hereby.
Section 4.2 Corporate Authorization.
Logitech Subsidiary has the corporate power to execute, deliver and perform
this Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of this Agreement and such related
documents. This Agreement has been duly executed and delivered by Logitech
Subsidiary and, assuming due and valid authorization, execution and delivery by
the Stockholder, constitutes a valid and binding obligation of Logitech
Subsidiary, enforceable against Logitech Subsidiary in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws and principles now or hereafter in effect, affecting
creditors' rights generally, (b) rules or principles of equity affecting the
enforcement of obligations generally, whether at law, in equity or otherwise,
or (c) the exercise of the discretionary powers or any court or other authority
before which a proceeding may be brought seeking equitable remedies, including
specific performance and injunctive relief.
Section 4.3 Governmental Authorization.
The execution, delivery and performance by Logitech Subsidiary of this
Agreement and the consummation by Logitech Subsidiary of the transactions
contemplated hereby do not require Logitech Subsidiary to obtain any consent
of, or to make any filing with, any Governmental Entity other than: (a)
compliance with any applicable requirements of the HSR Act and applicable
antitrust or competition laws of foreign states; (b) compliance with any
applicable requirements of the Swiss Stock Exchange, the Nasdaq National Market
and the Exchange Act; and (c) such other consents and filings which, if not
obtained or made, would not have a material adverse effect on the ability of
Logitech Subsidiary to consummate the transactions contemplated hereby.
Section 4.4 Non-Contravention.
The execution, delivery and performance by Logitech Subsidiary of this
Agreement and the consummation by Logitech Subsidiary of the transactions
contemplated hereby do not and will not, (a) contravene or conflict with the
certificate of incorporation or bylaws of Logitech Subsidiary, (b) contravene
or conflict with, or constitute a violation of, any provision of any law,
regulation, judgment, injunction, order or decree binding upon Logitech
Subsidiary or any of its properties or assets, (c) with or without the giving
of notice or passage of time or both, constitute a breach or default under any
agreement, contract or other instrument binding upon Logitech Subsidiary, or
(d) result in the creation or imposition of any Lien on the business,
properties or assets of Logitech Subsidiary, except with respect to the
foregoing clauses (b), (c) or (d) such contraventions, conflicts, violations,
breaches, defaults or Liens which would not, individually or in the aggregate,
have a material adverse effect on the ability of Logitech Subsidiary to
consummate the transactions contemplated hereby.
Section 4.5 Acquisition for Logitech Subsidiary Account.
Any Stockholder Shares to be acquired upon consummation of the Offer will be
acquired by Logitech Subsidiary or Merger Sub for its or their own account and
not with a view to the public distribution thereof and will not be transferred
except in compliance with the Securities Act of 1933, and the rules and
regulations thereunder.
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ARTICLE V
Additional Agreements
Section 5.1 Agreement of the Stockholder.
The Stockholder hereby covenants and agrees that:
(a) From the date hereof until the earlier of the termination hereof and the
Effective Time, the Stockholder shall not (and it shall not permit any of its
officers, directors, agents or affiliates to), directly or indirectly, take any
action that would cause the Company to breach Section 6.3 of the Merger
Agreement. The Stockholder shall promptly notify Logitech Subsidiary after
receipt of any Acquisition Proposal or any request for nonpublic information
relating to the Company or any Company Subsidiary by any person that to the
Stockholder's knowledge may be considering making or has made an Acquisition
Proposal and shall keep Logitech Subsidiary informed of the status and details
of any such Acquisition Proposal or request.
(b) In the event of any change in the Company's capital stock by reason of
stock dividends, stock splits, mergers, consolidations, recapitalization,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, or other changes in the corporate or capital structure of the
Company which would have the effect of diluting or changing Logitech
Subsidiary's rights hereunder, the number and kind of shares or securities
subject to this Agreement and the price set forth herein at which the
Stockholder Shares may be purchased from the Stockholder pursuant to the Offer
shall be appropriately and equitably adjusted so that Logitech Subsidiary shall
receive pursuant to the Offer the number and class of shares or other
securities or property that Logitech Subsidiary would have received in respect
of the Stockholder Shares purchasable pursuant to the Offer if such purchase
had occurred immediately prior to such event.
(c) [The Stockholder shall promptly exercise any rights it has under that
certain letter agreement dated September 28, 2000 among the Stockholder, the
Company and The KB Mezzanine Fund II., L.P. ("KB") to cause KB to tender and/or
vote all shares of Common Stock of the Company over which KB has control in the
same manner as the Stockholder is required to tender and/or vote the
Stockholder Shares under this Agreement.]
ARTICLE VI
Miscellaneous
Section 6.1 Expenses.
All costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such expenses[, except that the Company shall bear the costs and
expenses incurred by the Stockholder in connection with this Agreement and the
transactions contemplated hereby to the extent provided in Section 4.19 of the
Merger Agreement].
Section 6.2 Further Assurances.
Logitech Subsidiary and the Stockholder will execute and deliver or cause to
be executed and delivered all further documents and instruments and use its
commercially reasonable efforts to secure such consents and take all such
further action as may be reasonably necessary in order to consummate the
transactions contemplated hereby.
Section 6.3 Specific Performance.
The parties acknowledge and agree that performance of their respective
obligations hereunder will confer a unique benefit on the other and that a
failure of performance will not be compensable by money damages. The parties
therefore agree that this Agreement shall be specifically enforceable and that
specific enforcement and injunctive relief shall be available to Logitech
Subsidiary or the Stockholder for any breach by the other party or parties of
any agreement, covenant or representation hereunder.
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Section 6.4 Notices.
All notices and other communications required or permitted to be given
pursuant to this Agreement shall be in writing signed by the sender, and shall
be deemed duly given (a) on the date delivered if personally delivered, (b) on
the date sent by telecopier with automatic confirmation by the transmitting
machine showing the proper number of pages were transmitted without error, (c)
on the business day after being sent by Federal Express or another recognized
overnight mail service for next day or next business day delivery, or (d) five
business days after mailing, if mailed by United States postage-prepaid
certified or registered mail, return receipt requested, in each case addressed
to following addresses (or at such other address or telecopier number for a
party as shall be specified by like notice):
(a) If to Logitech Subsidiary, to:
Logitech Inc.
6505 Kaiser Drive
Fremont, California 94555
Telecopier No. (510) 795-7496
Attention: Kristen Onken
with a copy to:
Wilson Sonsini Goodrich &Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Telecopier No.: (650) 461-5375
Attention: Steven V. Bernard
and a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market
Spear Tower, Suite 3300
San Francisco, California 94105
Telecopier No.: (415) 947-2099
Attention: Steve L. Camahort
(b) if to the Stockholder, to:
c/o Sun Capital Partners, Inc.
5355 Town Center Road, Suite 802
Telecopier: (561) 394-0540
Boca Raton, Florida 33486
Attention: Marc J. Leder and Rodger R. Krouse
with a copy to:
Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Telecopier No.: (212) 704-6288
Attention: Michael Weinsier
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Section 6.5 Survival of Representations and Warranties.
The representations and warranties contained in Articles III and IV of this
Agreement shall survive delivery of the Stockholder Shares pursuant to Section
1.1 hereof. None of the representations and warranties contained in this
Agreement shall survive the termination of this Agreement or (except for the
representations and warranties of the Stockholder in Sections 3.5 and 3.6) the
acceptance for payment and payment for the Stockholder Shares pursuant to the
Offer.
Section 6.6 Amendments; Termination.
Any provision of this Agreement may be amended, modified, waived for
supplemented if, and only if, such amendment, modification, waiver or
supplement is in writing and signed, in the case of an amendment, modification
or supplement, by Logitech Subsidiary and the Stockholder or, in the case of a
waiver, by the party against whom the waiver is to be effective. This Agreement
shall terminate upon the earlier of (i) the Effective Time and (ii) the
termination of the Merger Agreement in accordance with its terms. Upon any
termination of this Agreement, the obligations of the parties hereunder shall
be of no further force or effect; provided, however, that no termination of
this Agreement shall relieve any party hereto from any liability from any
breach of any provision of this Agreement prior to termination.
Section 6.7 Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that neither party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party.
Section 6.8 Governing Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of New York that apply to agreements made and performed
entirely within such state, except that the MBCL shall apply to matters
relating to the internal governance of the Company.
Section 6.9 Jurisdiction.
Each of the parties hereto hereby irrevocably consents and submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of California in connection with any dispute arising out of or
relating to this Agreement or the transactions contemplated hereby, waives any
objection to venue in such District (unless such court lacks jurisdiction with
respect to such proceeding, in which case, each of the parties hereto
irrevocably consents to the jurisdiction of the courts of the State of
California in connection with such proceeding and waives any objection to venue
in the State of California), and agrees that service of any summons, complaint,
notice or other process relating to such dispute may be effected in the manner
provided by Section 6.4.
Section 6.10 Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated herein is not affected in any manner materially adverse to any
party hereto.
Section 6.11 Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended
to, or shall confer upon, any other person any right, benefit or remedy of any
nature whatsoever under, or by reason of, this Agreement, including, without
limitation, by way of subrogation.
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Section 6.12 Stockholder Capacity.
The Stockholder signs solely in its capacity as the record holder and
beneficial owner of the Stockholder Shares of the Stockholder and nothing
herein shall limit or affect any actions taken by such Stockholder in his or
her capacity as an officer or director of the Company and no such actions shall
be deemed a breach of this agreement.
Section 6.13 Entire Agreement.
This Agreement, including any exhibits or schedules hereto and the
Confidentiality Agreement constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement.
Section 6.14 Counterparts; Effectiveness.
This Agreement may be signed in one or more counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by all of
the other parties hereto.
[The next page is the signature page]
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The parties have executed and delivered this Stockholder Agreement as of the
date first written above.
LOGITECH INC.
By: _________________________________
Name: Guerrino De Luca
Title: President and CEO
By: _________________________________
Name: Kristen Onken
Title: Chief Financial Officer
[SUN MULTIMEDIA PARTNERS, L.P]
[SUN VENTURE CAPITAL PARTNERS I,
L.P.]
By: _________________________________
Name:
Title:
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Exhibit A
Lock-Up Agreement
February 7, 2001
Logitech Inc.
6505 Kaiser Drive
Fremont, California 94555-3615
RE: Labtec Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock"). The Company proposes to enter
into an Agreement and Plan of Merger with Logitech International S.A.,
("Parent"), Logitech Inc., a wholly-owned subsidiary of Parent, and Thunder
Acquisition Corp. (the "Merger Agreement"). Pursuant to the terms of the Merger
Agreement, Merger Sub will make an exchange offer for all the outstanding
shares of the Company (the "Offer") and subsequently Merger Sub will be merged
with and into the Company with the Company to be the surviving corporation in
the merger (the "Merger"). The undersigned acknowledges that the transactions
contemplated by the Merger Agreement will be of significant benefit to the
undersigned and that you are relying on the representations and agreements of
the undersigned contained in this letter in carrying out and entering into the
Merger Agreement.
As a result of the Offer or the Merger, the undersigned will receive
American Depositary Shares (each a "Parent ADS"), each of which represents one-
tenth of one registered share, par value Chf 10 per share, of Parent (the
"Parent Registered Shares").
In consideration of the foregoing, the undersigned hereby agrees that from
the date hereof, the undersigned will not offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any Parent ADSs now owned or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) as a distribution to
partners or shareholders of such person, provided that the distributees thereof
agree in writing to be bound by the terms of this restriction, or (ii) with the
prior written consent of Parent. The foregoing restrictions will terminate (i)
with respect to fifty percent (50%) of the number of Parent ADSs received as a
result of the Offer or the Merger on the 60th day after the completion of the
Offer, and (ii) in full 120 days after the Closing of the Offer (the "Lock-Up
Period"). The foregoing restriction has been expressly agreed to preclude the
holder of the Parent ADSs from engaging in any hedging or other transaction
which is designed to or reasonably expected to lead to or result in a
Disposition of any Parent ADSs during the Lock-Up Period, even if such Parent
ADSs would be disposed of by someone other than such holder. Such prohibited
hedging or other transactions would include, without limitation, any short sale
(whether or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any
Parent ADSs or with respect to any security (other than a broad-based market
basket or index) that included, relates to or derives any significant part of
its value from Parent ADSs. The undersigned also agrees and consents to the
entry of stop transfer instructions with the Parent's transfer agent and
registrar against the transfer of Parent ADSs held by the undersigned except in
compliance with the foregoing restrictions.
Notwithstanding the foregoing, (i) the restrictions described above in this
letter agreement shall not apply to any Parent Registered Shares (A) now owned
or hereafter acquired directly by the undersigned (including Parent Registered
Shares received from the Depositary for the Parent ADSs upon surrender of the
American Depositary Receipt(s) representing the Parent ADSs) or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
(B) that the undersigned may distribute to the partners or shareholders of
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such person, and (ii) the surrender to the Depositary for the Parent ADSs of
any or all Parent ADSs to be received by the undersigned as a result of either
the Offer or the Merger shall not be considered a "Disposition" for purposes of
this letter agreement.
Notwithstanding any provision of this Agreement to the contrary, this
Agreement shall terminate upon termination of the Merger Agreement.
[The next page is the signature page]
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This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned. In the event the Offer has not been consummated on or before July
15, 2001, this Lock-Up Agreement shall be of no further force or effect.
SUN MULTIMEDIA PARTNERS, L.P.
By: SUN MULTIMEDIA ADVISORS, INC.,
its general partner
By: _________________________________
Name: Rodger R. Krouse
Title: Vice President
SUN VENTURE CAPITAL PARTNERS I, L.P.
By: SUN VENTURE CAPITAL ADVISORS,
INC., its general partner
By: _________________________________
Name: Rodger R. Krouse
Title: Vice President
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Exhibit B
February 7, 2001
Logitech International S.A.
6505 Kaiser Drive
Fremont, CA 94555-3615
Ladies and Gentlemen:
The undersigned has been advised that, as of the date of this letter, the
undersigned may be deemed to be an "affiliate" of Labtec Inc., a Massachusetts
corporation (the "Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"). Pursuant to the terms of
the Agreement and Plan of Merger dated as of February 7, 2001 (the "Merger
Agreement") among the Company, Logitech International S.A., a Swiss corporation
("Parent"), Logitech Inc., a California corporation and wholly-owned subsidiary
of Parent and Thunder Acquisition Corp., a Massachusetts corporation ("Merger
Sub"), Merger Sub will make an exchange offer for all the outstanding shares of
the Company (the "Offer") and subsequently Merger Sub will be merged with and
into the Company with the Company to be the surviving corporation in the merger
(the "Merger").
As a result of the Offer or the Merger, the undersigned will receive
American Depository Shares (each a "Parent ADS") of Parent in exchange for
shares owned by the undersigned of common stock, par value $0.01, of the
Company (the "Company Common Stock"). Each Parent ADS represents one-tenth of
one registered share, par value Chf 10 per share, of Parent (the "Parent
Registered Shares", and together with the Parent ADSs, the "Parent
Securities").
The undersigned represents, warrants and covenants to Parent and the Company
that, as of the respective date the undersigned receives any Parent Securities
as a result of either the Offer or the Merger:
A. The undersigned shall not make any sale, transfer or other disposition of
the Parent Securities in violation of the 1933 Act or the Rules and
Regulations.
B. The undersigned has read this letter and the Merger Agreement and
discussed, to the extent the undersigned felt necessary with the undersigned's
counsel or counsel for the Company, the requirements of such documents and
other applicable limitations upon the undersigned's ability to sell, transfer
or otherwise dispose of Parent Securities.
C. The undersigned has been advised that the issuance of Parent Securities
to the undersigned pursuant to the Offer or the Merger will be registered with
the SEC under the 1933 Act on a Registration Statement on Form F-4. The
undersigned has also been advised that, because, at the time the Offer is made
to the undersigned or the Merger is submitted for a vote of the stockholders of
the Company, the undersigned may be deemed an affiliate of the Company, and, if
the undersigned is such an affiliate, the undersigned may not sell, transfer or
otherwise dispose of Parent Securities issued to the undersigned in the Offer
or the Merger unless such sale, transfer or other disposition (i) has been
registered under the 1933 Act, (ii) is made in conformity with Rule 145
promulgated by the SEC under the 1933 Act, (iii) in the opinion of counsel
reasonably acceptable to Parent, or pursuant to a "no action" letter obtained
by the undersigned from the SEC staff, is otherwise exempt from registration
under the 1933 Act, or (iv) with respect to Parent Securities issued pursuant
to the Offer, to the extent the Company and Logitech Inc. shall otherwise agree
that Rule 145 does not apply to such Parent Securities.
D. The undersigned understands that Parent is under no obligation to
register the sale, transfer or other disposition of the Parent Securities by
the undersigned or on the undersigned's behalf under the 1933 Act or to
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take any other action necessary in order to enable the undersigned to make such
sale, transfer or other disposition in compliance with an exemption from such
registration.
E. The undersigned also understands that there will be placed on the
certificates for the Parent Securities issued to the undersigned, or on any
substitutions therefor, a legend stating in substance the following (provided
that, with respect to Parent Securities issued pursuant to the Offer, to the
extent the Company and Logitech Inc. shall otherwise agree that Rule 145 does
not apply to such Parent Securities, such legend shall not be placed on such
certificate):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE WITH THE TERMS OF A
LETTER AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND LOGITECH
INTERNATIONAL S.A., A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF LOGITECH INTERNATIONAL S.A."
F. The undersigned also understands that, unless the transfer by the
undersigned of the undersigned's Parent Securities have been registered under
the 1933 Act or is a sale made in conformity with the provisions of Rule 145,
Parent reserves the right to put the following legend on the certificates
issued to the undersigned's transferee (provided that, with respect to Parent
Securities issued pursuant to the Offer, to the extent the Company and Logitech
Inc. shall otherwise agree that Rule 145 does not apply to such Parent
Securities, such legend shall not be placed on such certificate):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SECURITIES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SECURITIES HAVE NOT BEEN
ACQUIRED BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH,
ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that, except as Parent may otherwise agree, the
legends set forth in paragraphs E and F above shall be removed by delivery of
substitute certificates without such legend if (i) the securities represented
thereby have been registered for sale by the undersigned under the 1933 Act or
(ii) Parent has received either an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to Parent, or a "no-action" letter
obtained by the undersigned from the SEC staff to the effect that the
restrictions imposed by Rule 145 under the 1933 Act no longer apply to the
undersigned.
G. The undersigned further understands and agrees that the representations,
warranties, covenants and agreements of the undersigned set forth herein are
for the benefit of Parent, the Company and the Surviving Corporation (as
defined in the Merger Agreement) and will be relied upon by such firms and
their respective counsel and accountants.
H. The undersigned understands and agrees that this letter agreement shall
apply to all Parent Securities that are acquired by the undersigned in the
Offer or the Merger.
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Execution of this letter should not be considered an admission on the part
of the undersigned that the undersigned is an "affiliate" of the Company as
described in the first paragraph of this letter, nor as a waiver of any rights
that the undersigned may have to object to any claim that the undersigned is
such an affiliate on or after the date of this letter.
Very truly yours,
By: _________________________________
Name:
Title:
Accepted this day of , 2001
LOGITECH INTERNATIONAL S.A.
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
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ANNEX B
Goldsmith, Agio, Helms Securities, Inc.
Member: National Association Securities Dealers
U.S. BANK PLACE . THE FORTY-SIXTH FLOOR
Tel 612 339 0500 601 Second Avenue South, Minneapolis, Minnesota 55402 Fax
612 339 0507
February 7, 2001
Personal and Confidential
The Board of Directors
Labtec Inc.
1499 SE Tech Center Drive
Vancouver, WA 98683
Re: Fairness Opinion
Members of the Board of Directors:
We understand that Labtec Inc., a Massachusetts corporation ("Labtec" or the
"Company"), Logitech International S.A., a Swiss corporation ("Logitech" or
"Parent"), Logitech, Inc., a California corporation and a wholly-owned
subsidiary of Parent ("Logitech Subsidiary"), and Thunder Acquisition Corp., a
Massachusetts corporation and an indirect wholly-owned subsidiary of Parent
("Merger Sub"), propose to enter into an Agreement and Plan of Merger dated as
of February 7, 2001 (the "Merger Agreement"), which provides, among other
things for: (i) the commencement of an exchange offer (the "Offer") to purchase
all of the issued and outstanding shares of the common stock, par value $.01
per share, of the Company ("Common Stock"), for $11.00 per share, net to the
seller in cash, and a fraction of an American depositary share of Parent worth
$7.00, subject to adjustment in certain circumstances set forth in the Merger
Agreement (collectively, the "Consideration"); and (ii) the subsequent merger
(the "Merger") of Merger Sub with and into the Company. Pursuant to the Merger,
the Company will become an indirect wholly-owned subsidiary of Parent, and each
outstanding share of Common Stock of the Company, other than shares, if any,
held in treasury by Parent or any subsidiary of Parent, will be converted into
the right to receive the Consideration. The terms and conditions of the Offer
and the Merger are more fully set forth in the Merger Agreement. Capitalized
terms used herein, unless otherwise defined herein, will have the meanings
ascribed to them in the Merger Agreement.
As a customary part of its investment banking business, Goldsmith, Agio, Helms
Securities, Inc. is engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, private placements, and valuations
for corporate and other purposes. In return for our services in
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The Board of Directors
Labtec Inc.
February 7, 2001
Page 2 of 3
connection with providing this opinion, the Company will pay us a fee, which
fee is not contingent upon the consummation of the Offer or the Merger, and
indemnify us against certain liabilities. We also are acting as a financial
advisor to the Company in connection with the Offer and the Merger for which we
will receive certain other fees, a significant portion of which is contingent
upon the consummation of the Offer and the Merger.
In arriving at our opinion, we have undertaken such reviews, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have (i) reviewed the latest draft of the Merger Agreement;
(ii) analyzed financial and other information that is publicly available
relating to Logitech; (iii) analyzed financial and other information that is
publicly available relating to the Company; (iv) analyzed certain internal
financial and operating data of the Company that has been made available to us
by the Company; (v) visited certain facilities of the Company and discussed
with management of the Company the financial condition, operating results,
business outlook and prospects of the Company; (vi) discussed with management
of Logitech the financial condition, operating results, business outlook and
prospects of Logitech; (vii) reviewed the financial and other terms of
comparable merger and acquisition transactions; (viii) reviewed premiums paid
in comparable and other merger and acquisition transactions; (ix) analyzed the
valuations of publicly traded companies that we deemed comparable to the
Company and Logitech; (x) performed a discounted cash flow analysis of the
Company based on financial projections that the Company's management provided
to us; and (xi) performed such other analyses and considered such other factors
as we deemed appropriate.
We have relied upon and assume the accuracy, completeness, and fairness of the
financial statements and other information furnished by, or publicly available
relating to, the Company or Logitech, or otherwise made available to us, and
relied upon and assumed that the representations and warranties of the Company
and Logitech contained in the Merger Agreement are true and correct. We were
not engaged to, and did not attempt to or assume responsibility to, verify
independently such information. We have further relied upon assurances by the
Company that the information provided to us has a reasonable basis, and with
respect to projections and other business outlook information, reflects the
best currently available estimates, and that the Company is not aware of any
information or fact that would make the information provided to us incomplete
or misleading. We also assumed that the Company and Logitech each will perform
all of the covenants and agreements to be performed by it under the Merger
Agreement and that the conditions to the Merger as set forth in the Merger
Agreement would be satisfied and that the Merger would be consummated on a
timely basis in the manner contemplated by the Merger Agreement. In arriving at
our opinion, we have not performed any appraisals or valuations of specific
assets or liabilities of the Company or Logitech and express no opinion
regarding the liquidation value of the Company or Logitech or any of their
respective assets. Our opinion is based upon the information available to us
and the facts and circumstances as they exist and are subject to evaluation on
the date hereof; events occurring after the date hereof could materially affect
the assumptions used in preparing this opinion. However, we do not have any
obligation to update, revise, or reaffirm this opinion.
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The Board of Directors
Labtec Inc.
February 7, 2001
Page 3 of 3
We have relied, with respect to legal and accounting matters related to the
Merger Agreement, on the advice of the Company's legal and accounting advisors.
We have made no independent investigation of any legal or accounting matters
that may affect the Company or Logitech and have assumed the correctness of the
legal and accounting advice provided to the Company and Logitech, and their
respective Boards of Directors.
Our opinion is rendered for the benefit and use of the Board of Directors of
the Company in connection with the Board's consideration of the Offer and the
Merger and does not constitute a recommendation to any holder of Common Stock
whether to tender such stock in the Offer or how such shareholder should vote
with respect to the Merger. We do not opine on, nor does our opinion consider,
the tax consequences of the Offer or the Merger, including tax consequences to
any holder of Company common stock. We have not been asked to, nor do we,
express an opinion as to the relative merits of the Offer or the Merger as
compared to any alternative business strategies that might exist for the
Company, the effect of any other transaction in which the Company might engage,
or the form of the Agreement or the terms contained therein. Furthermore, we
express no opinion as to the prices at which Labtec or Logitech stock may trade
following the date of this opinion or following consummation of the Offer or
the Merger. This opinion may not be published or otherwise used or referred to
publicly without our written consent; provided, however, that this opinion may
be included in its entirety in any filing with the Securities and Exchange
Commission with respect to the Offer or the Merger.
Based upon and subject to the foregoing, and based upon such other facts as we
consider relevant, it is our opinion that, as of the date hereof, the
Consideration to be received by the Company's shareholders for their Common
Stock pursuant to the Merger Agreement is fair to such shareholders from a
financial point of view.
Sincerely,
/s/ Goldsmith, Agio, Helms Securities, Inc.
Goldsmith, Agio, Helms Securities, Inc.
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ANNEX C
SEC. 82. MERGER OF SUBSIDIARY INTO PARENT CORPORATION
(e) If all the stock of a subsidiary Massachusetts corporation party to a
merger effected under this section is not owned by the parent corporation
immediately prior to the merger, any stockholder in such subsidiary
Massachusetts corporation (but no stockholder in a parent Massachusetts
corporation) who objects to such merger may demand payment for his stock from
the parent corporation and an appraisal thereof. Within ten days after the
effective date of the merger the parent corporation shall send written notice
by registered or certified mail to each stockholder of such subsidiary
Massachusetts corporation at his last known address as it appears in the
records of such subsidiary corporation, stating:
1. The date upon which such articles were filed and the effective date
of the merger.
2. The terms and conditions of the merger.
3. The right of any stockholder of such subsidiary Massachusetts
corporation who objects to the merger to demand in writing from the
parent corporation within twenty days after the mailing of such
notice payment for his stock and an appraisal thereof.
If any such stockholder shall demand in writing from the parent corporation
within twenty days after the mailing of such notice payment for his stock and
an appraisal thereof, such stockholder and the parent corporation shall
thereafter have the rights and duties and follow the procedures set forth in
sections eighty-nine to ninety-eight, inclusive. Added by St. 1964, c. 723,
sec. 1. Amended by St. 1965, c. 685, sec. 37, 38; St. 1980, c. 365, sec. 3.
SEC. 86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any section
of this chapter provides that a stockholder who objects to such action shall
have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have
such right unless (1) he files with the corporation before the taking of the
vote of the shareholders on such corporate action, written objection to the
proposed action stating that he intends to demand payment for his shares if the
action is taken and (2) his shares are not voted in favor of the proposed
action. Added by St. 1964, c. 723, sec. 1. Amended by St. 1965, c. 685, sec.
40; St. 1973, c. 749, sec. 1.
SEC. 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING;
FORM
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of
notice shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in
writing from the corporation (or, in the case of a consolidation or merger,
the name of the resulting or surviving corporation shall be inserted),
within twenty days after the date of mailing to him of notice in writing
that the corporate action has become effective, payment for his
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shares and an appraisal of the value thereof. Such corporation and any such
stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of
the General Laws of Massachusetts." Added by St. 1964, c. 723, sec. 1.
Amended by St. 1973, c. 749, sec. 2.
SEC. 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified
mail, addressed to the stockholder at his last known address as it appears in
the records of the corporation. Added by St. 1964, c. 723, sec. 1. Amended by
St. 1973, c. 749, sec. 3.
SEC. 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under subsection
(e) of section eighty-two, subsection (f) of section eighty-three, or section
eighty-eight, any stockholder to whom the corporation was required to give such
notice shall demand in writing from the corporation taking such action, or in
the case of a consolidation or merger from the resulting or surviving
corporation, payment for his stock, the corporation upon which such demand is
made shall pay to him the fair value of his stock within thirty days after the
expiration of the period during which such demand may be made. Added by St.
1964, c. 723, sec. 1. Amended by St. 1973, c. 749, sec. 4.
SEC. 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county
where the corporation in which such objecting stockholder held stock had or has
its principal office in the commonwealth. Added by St. 1964, c. 723, sec. 1.
SEC. 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties respondent
all stockholders who have demanded payment for their shares and with whom the
corporation has not reached agreement as to the value thereof. If the bill is
filed by a stockholder, he shall bring the bill in his own behalf and in behalf
of all other stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to
each stockholder party to the bill by registered or certified mail, addressed
to the last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice. Added by St. 1964, c.
723, sec. 1.
C-2
SEC. 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of
and payment for their shares, and shall order the corporation to make payment
of such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and
shall be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action. Added by St. 1964, c. 723,
sec. 1. Amended by St. 1983, c. 522, sec. 22.
SEC. 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report
the same to the court, all in accordance with the usual practice in suits in
equity in the superior court. Added by St. 1964, c. 723, sec. 1.
SEC. 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in
itsrecords with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order. Added by St. 1964, c. 723, sec. 1. Amended by St. 1983,
c. 522, sec. 23.
SEC. 95. COSTS; INTEREST
The costs of the bill, including the reasonable compensation and expenses of
any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided
in this chapter shall be paid by the corporation. Interest shall be paid upon
any award from the date of the vote approving the proposed corporate action,
and the court may on application of any interested party determine the amount
of interest to be paid in the case of any stockholder. Added by St. 1964, c.
723, sec. 1. Amended by St. 1965, c. 685, sec. 41.
SEC. 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends
or other distributions payable to stockholders of record at a date which is
prior to the date of the vote approving the proposed corporate action) unless:
1. A bill shall not be filed within the time provided in section
ninety;
2. A bill, if filed, shall be dismissed as to such stockholder; or
3. Such stockholder shall with the written approval of the corporation,
or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his
objections to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter. Added by St. 1964, c. 723,
sec. 1. Amended by St. 1982, c. 149.
C-3
SEC. 97. TREASURY STOCK, ETC.
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities. Added by St. 1964, c.
723, sec. 1. Amended by St. 1965, c. 685, sec. 42.
SEC. 98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him. Added by
St. 1964, c. 723, sec. 1. Amended by St. 1965, c. 685, sec. 43.
C-4
SCHEDULE A
INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS OF LOGITECH INTERNATIONAL S.A., LOGITECH INC. AND THUNDER
ACQUISITION CORP.
1. Directors and Executive Officers of Parent. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Logitech International S.A., or Parent. Each
such person is a citizen of the United States, unless otherwise noted, and the
business address of each such person is c/o Logitech Inc., 6505 Kaiser Drive,
Fremont, California 94555-3615.
Present Principal Occupation or Employment and
Name and Business Address Office(s) Five-Year Employment History
------------------------- ---------------------------- ------------------------------------------------------
Daniel Borel Chairman of the Board Daniel Borel, a founder of the Parent, has been the
Chairman of the Board since July 1992. From July 1992
to February 1998, Mr. Borel also served as Chief
Executive Officer of the Parent. He has held various
other executive positions with the Parent and
its predecessors since their founding. Mr. Borel holds
an MS in Computer Science from Stanford University and
a degree in Physics from the Ecole Polytechnique
Federale, Lausanne, Switzerland. Mr. Borel is a
citizen of Switzerland.
Guerrino De Luca President, Chief Executive Guerrino De Luca joined the Parent as President and
Officer and Director Chief Executive Officer in February 1998, and became a
member of the Board of Directors in June 1998. Prior
to that time, Mr. De Luca served as Executive Vice
President of Worldwide Marketing for Apple Computer,
Inc., a personal computer company, from February 1997
to September 1997, and as President of Claris
Corporation, a personal computing software vendor,
from February 1995 to February 1997. Prior to this,
Mr. De Luca held various positions with Apple in the
United States and Europe. Mr. De Luca holds a BS in
Electronic Engineering from the University of Rome,
Italy. Mr. De Luca is a citizen of Italy.
Gregory Chambers Sr. Vice President Worldwide Gregory Chambers joined the Parent as Senior Vice
Sales and Marketing President in July 1998. Prior to joining Logitech,
Mr. Chambers served from September 1995 as Vice
President of Marketing for Fujistu PC Corporation, and
from May 1993 as Director, Channel Marketing at Acer
America. Mr. Chambers holds a BS in Industrial
Technology from California State Polytechnic
University and an MS in Management from the University
of Southern California.
Present Principal Occupation or Employment and
Name and Business Address Office(s) Five-Year Employment History
------------------------- ------------------------------ ------------------------------------------------
Erh-Hsun Chang Sr. Vice President, Operations Erh-Hsun Chang joined the Parent as Vice
and General Manager, Far East President, General Manager, Far Eastern Area and
Worldwide Operations in December 1995. In April
1997, Mr. Chang was named Senior Vice President,
General Manager, Far Eastern Area and Worldwide
Operations. During 1986 and 1987, Mr. Chang held
various other positions with the Parent. From
January 1994 to December 1995, Mr. Chang was
Vice President, Sales and Marketing, Power
Supply Division, of Taiwan Liton Electronics
Ltd., and from December 1991 to January 1994,
Mr. Chang was Vice President, Manufacturing
Consulting at KPMG Peat Marwick. Mr. Chang holds
a BS in Civil Engineering from Chung Yuang
University, Taiwan, an MBA from the University
of Dallas, and an MS in Industrial Engineering
from Texas A&M University. Mr. Chang is a
citizen of the Republic of China.
Wolfgang Hausen Sr. Vice President and General Wolfgang Hausen has been Senior Vice President
Manager, Control Devices and General Manager, Control Devices Business
Division Division of the Parent since July 1997. Prior to
that time, Mr. Hausen served as President and
Chief Executive Officer of Cardinal
Technologies, Inc., a PC multimedia and modem
company from May 1994. From March 1989 to
December 1993, Mr. Hausen was Vice President and
General Manager of Quantum Corporation, a global
supplier of storage products. Mr. Hausen holds
an MSEE from the Technical University of
Darmstadt, Germany and an MBA from Santa Clara
University, California.
Kristen Onken Sr. Vice President, Finance, Kristen Onken joined the Parent as Senior Vice
and Chief Financial Officer President, Finance, and Chief Financial Officer
in February 1999. From February 1996 to February
1999, Ms. Onken served as Vice President of
Finance at Fujitsu PC Corporation. From 1991 to
February 1996, Ms. Onken was employed by Sun
Microsystems, Inc. first as Controller of the
Southwest Area; then from 1992 to 1996 she
served as Director of Finance, Sun Professional
Services. Ms. Onken holds a BS degree from
Southern Illinois University and an MBA in
Finance from the University of Chicago,
Illinois.
2
Present Principal Occupation or Employment
and
Name and Business Address Office(s) Five-Year Employment History
------------------------- -------- ------------------------------------------
Pier Carlo Falotti Director Pier Carlo Falotti has been a director of
Logitech International S.A. since June
1996. Since September 1996, Mr. Falotti
serves as Executive Vice President for
Europe, Middle East and Africa of Oracle
Corporation. From February 1994 until
September 1996, Mr. Falotti was Executive
Vice President of International Operations
for AT&T, where he also served as
President and Chief Executive Officer for
Europe, Middle East and Africa. From 1992
to 1994, Mr. Falotti was President and
Chief Executive Officer of The Ask Group,
Inc. From 1969 to 1992, Mr. Falotti was
with Digital Equipment Corporation,
serving as President and Chief Executive
Officer of Digital Europe, Middle East and
Africa from 1983. Mr. Falotti holds a
degree in Electrical Engineering from the
Institute Avogadro, Torino, Italy. Mr.
Falotti is a citizen of Italy.
Jean-Louis Gassee Director Jean-Louis Gassee has been a director
since June 1993. Since October 1990, Mr.
Gassee has been Chief Executive Officer of
Be Inc. Before founding Be, Mr. Gassee
held various executive positions with
Apple Computer, Inc. during the period
December 1980 to September 1990, including
President of the Apple Products Division.
He currently serves on the boards of Be
Inc., Electronics For Imaging Inc. and
3Com Corporation. Mr. Gassee holds a
science degree from the Universite de
Paris. Mr. Gassee is a citizen of France.
Frank Gill Director Frank Gill has been a director since June
1999. Mr. Gill served in a variety of
positions in sales and marketing, product
development and manufacturing operations
at Intel Corporation from 1975 until his
retirement in June 1998, including
Executive Vice President in 1996, General
Manager of the Internet and Communications
Group from 1995 and from 1990 through
1994, General Manager of Intel's Systems
Group. He currently serves on the Boards
of Tektronix Inc., Inktomi Corporation,
Niku Corporation, Telcom Semiconductor
Inc., McAfee.com Inc. and Pixelworks Inc.
Mr. Gill holds a BS in Electrical
Engineering from the University of
California, Davis.
3
Present Principal Occupation or Employment and
Name and Business Address Office(s) Five-Year Employment History
------------------------- -------- -----------------------------------------------
Kee-Lock Chua Director Mr. Kee Lock Chua has served as a member of the
Board of Directors of LISA since June 2000. In
October 2000, Mr. Chua became Chief Executive
Officer and a member of the Board of Directors
of Intraco Limited, a Singapore company with
interests in telecommunications, commodities,
food and engineering services. Prior to that
time, from October 1997, Mr. Chua served as
President and a member of the Board of
Directors of MediaRing.com, a global internet
company listed on the Stock Exchange of
Singapore. Prior to joining MediaRing.com, Mr.
Chua was employed by Natsteel Ltd, most
recently as Executive Vice President,
responsible for the commercial group,
production planning, strategic planning and
several overseas operations. Mr. Chua was also
a director of Natsteel Electronics Ltd and
NatSteel Broadway Ltd, both of which companies
are involved in contract manufacturing and are
listed in the Singapore Stock Exchange. Prior
to joining Natsteel Ltd, Mr. Chua worked for
Transpac Capital, where he served as Vice
President, in charge of direct investments into
companies in the United States. Mr. Chua holds
a B.S. degree in Mechanical Engineering from
the University of Wisconsin, and an M.S. degree
from Stanford University. Mr. Chua is a citizen
of Singapore.
2. Directors and Executive Officers of Logitech Sub. The following table
sets forth the name and present principal occupation or employment, and
material occupations, positions, offices or employments for the past five
years, of each director and executive officer of Logitech Inc., or Logitech
Sub. Each such person is a citizen of the United States, unless otherwise
noted, and the business address of each such person is c/o Logitech Inc.,
6505 Kaiser Drive, Fremont, California 94555-3615.
Present Principal Occupation or Employment and
Name and Business Address Office(s) Five-Year Employment History
------------------------- --------------------- ---------------------------------------------------
Daniel Borel Chairman of the Board Daniel Borel, a founder of the Parent, has been the
Chairman of the Board since July 1992. From
July 1992 to February 1998, Mr. Borel also served
as Chief Executive Officer of the Parent. He has
held various other executive positions with the
Parent and its predecessors since their founding.
Mr. Borel holds an MS in Computer Science from
Stanford University and a degree in Physics from
the Ecole Polytechnique Federale, Lausanne,
Switzerland. Mr. Borel is a citizen of Switzerland.
4
Present Principal Occupation or Employment and
Name and Business Address Office(s) Five-Year Employment History
------------------------- ------------------------------------ ----------------------------------------------
Guerrino De Luca President, Chief Executive Guerrino De Luca joined the Parent as
Officer and Director President and Chief Executive Officer in
February 1998, and became a member of the
Board of Directors in June 1998. Prior to
that time, Mr. De Luca served as
Executive Vice President of Worldwide
Marketing for Apple Computer, Inc., a
personal computer company, from February
1997 to September 1997, and as President
of Claris Corporation, a personal
computing software vendor, from February
1995 to February 1997. Prior to this,
Mr. De Luca held various positions with
Apple in the United States and Europe.
Mr. De Luca holds a BS in Electronic
Engineering from the University of Rome,
Italy. Mr. De Luca is a citizen of Italy.
Wolfgang Hausen Sr. Vice President and General Wolfgang Hausen has been Senior Vice
Manager, Control Devices Division President and General Manager, Control
Devices Business Division of the Parent
since July 1997. Prior to that time, Mr.
Hausen served as President and Chief
Executive Officer of Cardinal
Technologies, Inc., a PC multimedia and
modem company from May 1994. From March
1989 to December 1993, Mr. Hausen was
Vice President and General Manager of
Quantum Corporation, a global supplier of
storage products. Mr. Hausen holds an
MSEE from the Technical University of
Darmstadt, Germany and an MBA from Santa
Clara University, California.
Kristen Onken Sr. Vice President, Finance, Kristen Onken joined the Parent as Senior
Chief Financial Officer and Director Vice President, Finance, and Chief
Financial Officer in February 1999. From
February 1996 to February 1999, Ms. Onken
served as Vice President of Finance at
Fujitsu PC Corporation. From 1991 to
February 1996, Ms. Onken was employed by
Sun Microsystems, Inc. first as
Controller of the Southwest Area; then
from 1992 to 1996 she served as Director
of Finance, Sun Professional Services.
Ms. Onken holds a BS degree from Southern
Illinois University and an MBA in Finance
from the University of Chicago, Illinois.
5
Present Principal Occupation or Employment and
Name and Business Address Office(s) Five-Year Employment History
------------------------- ---------------------------- ----------------------------------------------
Gregory Chambers Sr. Vice President Worldwide Gregory Chambers joined the Parent as Senior
Sales and Marketing Vice President in July 1998. Prior to
joining Logitech, Mr. Chambers served from
September 1995 as Vice President of
Marketing for Fujistu PC Corporation, and
from May 1993 as Director, Channel Marketing
at Acer America. Mr. Chambers holds a BS in
Industrial Technology from California State
Polytechnic University and an MS in
Management from the University of Southern
California.
3. Directors and Executive Officers of Purchaser. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Thunder Acquisition Corp., or Purchaser. Each
such person is a citizen of the United States, unless otherwise noted, and the
business address of each such person is c/o Logitech Inc., 6505 Kaiser Drive,
Fremont, California 94555-3615.
Present Principal Occupation or Employment and
Name and Business Address Office(s) Five-Year Employment History
------------------------- ---------------------------- ----------------------------------------------
Guerrino De Luca President, Chief Executive Guerrino De Luca joined the Parent as
Officer and Director President and Chief Executive Officer in
February 1998, and became a member of the
Board of Directors in June 1998. Prior to
that time, Mr. De Luca served as Executive
Vice President of Worldwide Marketing for
Apple Computer, Inc., a personal computer
company, from February 1997 to September
1997, and as President of Claris
Corporation, a personal computing software
vendor, from February 1995 to February 1997.
Prior to this, Mr. De Luca held various
positions with Apple in the United States
and Europe. Mr. De Luca holds a BS in
Electronic Engineering from the University
of Rome, Italy. Mr. De Luca is a citizen of
Italy.
Kristen Onken Treasurer and Director Kristen Onken joined the Parent as Senior
Vice President, Finance, and Chief Financial
Officer in February 1999. From February 1996
to February 1999, Ms. Onken served as Vice
President of Finance at Fujitsu PC
Corporation. From 1991 to February 1996, Ms.
Onken was employed by Sun Microsystems, Inc.
first as Controller of the Southwest Area;
then from 1992 to 1996 she served as
Director of Finance, Sun Professional
Services. Ms. Onken holds a BS degree from
Southern Illinois University and an MBA in
Finance from the University of Chicago,
Illinois.
6
Present Principal Occupation or
Employment and
Name and Business Address Office(s) Five-Year Employment History
------------------------- ------------------ ---------------------------------
Margaret Wynne Clerk and Director Margaret J. Wynne has been Vice
President, Legal and General
Counsel of the Parent since April
1994. Prior to that time, Ms.
Wynne was Director of Legal
Affairs from July 1992 to April
1994. From September 1990 to June
1992, Ms. Wynne was an Associate
Professor at Golden Gate
University School of Law. Ms.
Wynne joined Pillsbury, Madison &
Sutro as an associate in
September 1982 becoming a member
of the firm in January 1990. Ms.
Wynne holds a BA in French from
San Francisco State University
and a JD from Hastings College of
the Law of the University of
California.
7
Facsimile copies of letters of transmittal, properly completed and duly
executed, will be accepted. The appropriate letter of transmittal, certificates
for shares of Labtec common stock and any other required documents should be
sent delivered by each Labtec stockholder or his broker, dealer, commercial
bank, trust company or other nominee to the exchange agent at one of its
addresses set forth below.
The Exchange Agent for the offer is:
THE BANK OF NEW YORK
By Mail: By Hand or Overnight Courier:
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
----------------
Any questions or requests for assistance or additional copies of the
prospectus, the letter of transmittal and the notice of guaranteed delivery and
related exchange offer materials may be directed to the information agent at
its telephone number and location listed below. You may also contact your local
broker, commercial bank, trust company or nominee for assistance concerning the
offer.
The Information Agent for the offer is:
[LOGO OF GEORGESON SHAREHOLDER COMUNICATIONS INC.]
17 State Street, 10th Floor
New York, New York 10004
Banks and Brokers, Call Collect: (212) 440-9800
All Others, Call Toll Free: (800) 223-2064