-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W0xmgBf9RfQFgXDCqwNjGUr9Ll/Tnx18qxPefSSlwZ33k+cMj0ReFHkMkKatjD5o KYo3PEF+1hJFCCk1p1/M2g== 0000950135-98-003792.txt : 19980612 0000950135-98-003792.hdr.sgml : 19980612 ACCESSION NUMBER: 0000950135-98-003792 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980502 FILED AS OF DATE: 19980611 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HADCO CORP CENTRAL INDEX KEY: 0000729533 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 042393279 STATE OF INCORPORATION: MA FISCAL YEAR END: 1030 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12102 FILM NUMBER: 98646482 BUSINESS ADDRESS: STREET 1: 12A MANOR PKWY CITY: SALEM STATE: NH ZIP: 03079 BUSINESS PHONE: 6038988000 MAIL ADDRESS: STREET 1: 12A MONOR PARKWAY CITY: SALEM STATE: NH ZIP: 03079 10-Q 1 HADCO CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) of THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MAY 2, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER 0-12102 HADCO CORPORATION ------------------------------------------------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 04-2393279 - ------------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 12A MANOR PARKWAY, SALEM, NEW HAMPSHIRE 03079 - --------------------------------------- ----- (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 898-8000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Registrant has 13,242,127 shares of Common Stock, $0.05 Par Value, outstanding at June 8, 1998. 2 HADCO CORPORATION AND SUBSIDIARIES INDEX
PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Condensed Balance Sheets as of May 2, 1998 and October 25, 1997, respectively...................... 3 Consolidated Condensed Statements of Operations for the Three Months ended May 2, 1998 and April 26, 1997 and six months ended May 2, 1998 and April 26, 1997, respectively........................................................ 4 Consolidated Condensed Statements of Cash Flows for the six months ended May 2, 1998 and April 26, 1997, respectively.................................... 5 Notes to Consolidated Condensed Financial Statements.......................................................... 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.............................. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings.................................................. 26 Item 2. Changes in Securities ............................................. 26 Item 4. Submission of Matters to a Vote of Security Holders .............. 26 Item 6. Exhibits and Reports on Form 8-K .................................. 27 SIGNATURE..................................................................... 30
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
HADCO CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited) (In thousands) ASSETS May 2, October 25, 1998 1997 -------- ----------- Current Assets: Cash and cash equivalents ............................. $ 4,997 $ 12,171 Short-term investments ................................ - 1,562 Accounts receivable, net of allowance for doubtful accounts of $2,589 in 1998 and $1,700 in 1997, respectively ......................... 114,352 92,222 Inventories ........................................... 75,095 46,000 Deferred tax asset .................................... 20,106 10,483 Prepaid and other current expenses .................... 8,058 4,245 -------- -------- Total Current Assets ............................. 222,608 166,683 Property, Plant and Equipment, net .................... 318,335 231,490 Acquired Intangible Assets, net ....................... 195,026 101,131 Other Assets .......................................... 3,472 3,213 -------- -------- $739,441 $502,517 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Short-term debt and current portion of long-term debt.. $ 4,837 $ 5,064 Accounts payable ...................................... 74,169 68,594 Accrued Payroll and other employee benefits ........... 29,246 28,279 Accrued Taxes ......................................... 494 1,775 Other accrued expenses ................................ 15,229 9,278 -------- -------- Total Current Liabilities ........................ 123,975 112,990 -------- -------- Long Term Debt, net of current portion .................... 359,037 109,716 -------- -------- Deferred Tax Liability .................................... 51,668 30,685 -------- -------- Other Long-Term Liabilities ............................... 9,192 9,214 -------- -------- Commitments and Contingencies Stockholders' investment: Common stock, $.05 par value - Authorized 50,000 shares in 1998 and 25,000 in 1997 Issued and outstanding 13,212 in 1998 and 13,086 in 1997 ............................... 662 655 Paid-in capital ........................................... 171,466 168,246 Deferred compensation ..................................... (75) (117) Retained earnings ......................................... 23,516 71,128 -------- -------- Total Stockholders' Investment ................... 195,569 239,912 -------- -------- $739,441 $502,517 ======== ========
The accompanying notes are an integral part of these consolidated condensed financial statements. 3 4
HADCO CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited ) (In thousands, except share data) Three Months Ended Six Months Ended ------------------ ---------------- May 2, April 26, May 2, April 26, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Net Sales .................................................. $ 209,587 $ 180,662 $ 407,863 $ 292,198 Cost of Sales .............................................. 172,857 142,199 332,065 227,358 ----------- ----------- ----------- ----------- Gross Profit .......................................... 36,730 38,463 75,798 64,840 Operating Expenses ......................................... 21,526 17,999 39,310 28,819 Restructuring and other non-recurring charges (Note 7) ..... 5,947 - 5,947 - Write-off of acquired in-process research and development ................................. 63,050 - 63,050 78,000 ----------- ----------- ----------- ----------- Income (Loss) From Operations .............................. (53,793) 20,464 (32,509) (41,979) Interest and Other Income (Expense), net ................... 844 (70) 1,377 806 Interest Expense ........................................... (4,195) (4,318) (6,294) (5,251) ----------- ----------- ----------- ----------- Income (Loss) Before Provision for Income Taxes ................................. (57,144) 16,076 (37,426) (46,424) Provision for Income Taxes ................................. 2,595 6,123 10,186 12,788 Net Income (Loss) .......................................... $ (59,739) $ 9,953 $ (47,612) $ (59,212) ----------- ----------- ----------- ----------- Income (loss) per common and common equivalent Shares (Note 1) Basic Net Income (Loss) Per Share.......................... $(4.54) $.95 $(3.63) $(5.67) ====== ==== ====== ====== Diluted Net Income (Loss) Per Share........................ $(4.54) $.91 $(3.63) $(5.67) ====== ==== ====== ====== Weighted average common and common equivalent Shares outstandingc (Note 1) Basic .................................................... 13,161,078 10,458,213 13,130,418 10,434,555 =========== =========== =========== =========== Diluted .................................................. 13,161,078 10,956,458 13,130,418 10,434,555 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated condensed financial statements. 4 5
HADCO CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited) (In thousands) Six Months Ended ---------------- May 2, April 26, 1998 1997 ----- --------- Total Cash Provided From Operating Activities .................................... $ 12,595 $ 13,990 --------- --------- Cash Flows From Investing Activities: Purchases of short-term investments ......................................... (2,020) - Maturities of short-term investments ........................................ 3,582 9,401 Purchases of property, plant and equipment .................................. (48,186) (29,611) Acquisitions of Continental in 1998 and Zycon in 1997 ....................... (190,032) (209,661) --------- --------- Net Cash Used In Investing Activities ............................................ (236,656) (229,871) Cash Flows From Financing Activities: Principal payments of long-term debt ........................................ (43,218) (36,621) Proceeds from issuance of long-term debt .................................... 256,878 225,000 Proceeds from exercise of stock options ..................................... 477 435 Tax benefit from exercise of stock options .................................. 1,270 1,387 Proceeds from the sale of Common Stock ...................................... 1,480 - --------- --------- Net Cash Provided by Financing Activities ........................................ 216,887 190,201 --------- --------- Net decrease in Cash and Cash Equivalents ........................................ (7,174) (25,680) Cash and Cash Equivalents Beginning of Period .................................... 12,171 32,786 --------- --------- Cash and Cash Equivalents End of Period .......................................... $ 4,997 $ 7,106 ========= ========= Supplemental disclosure of cash flow information: Cash paid during period for: Interest ................................................................... $ 4,689 $ 4,282 ========= ========= Income taxes (net of refunds) ............................................. $ 10,906 $ 9,070 ========= ========= Acquisitions of Continental in 1998 and Zycon in 1997: Fair value of assets acquired ............................................... $ 140,123 $ 212,509 Liabilities assumed ......................................................... (47,905) (114,993) Cash paid ................................................................... (186,083) (204,885) Acquisition costs incurred .................................................. (3,949) (7,600) Write-off of acquired in-process research and development ................................................... 63,050 78,000 --------- --------- Goodwill .................................................................... $ (34,764) $ (36,969) ========= =========
The accompanying notes are an integral part of these consolidated condensed financial statements. 5 6 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Hadco Corporation's (the "Company" or "Hadco") principal products are multilayer rigid printed circuits and backplane assemblies. The consolidated condensed financial statements reflect the application of certain accounting policies. For information as to the significant accounting policies followed by the Company and other financial and operating information, see this note and elsewhere in the accompanying notes to consolidated condensed financial statements, as well as the Company's Annual Report on Form 10-K for the fiscal year ended October 25, 1997, Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1998, Current Reports on From 8-K dated February 18, 1998. February 20, 1998, and May 1, 1998 and current report on From 8-K dated March 26, 1998 as amended by Current Report on Form 8-K/A dated May 1, 1998. These financial statements should be read in conjunction with the financial statements included in those above-referenced SEC filings. FOREIGN CURRENCY TRANSLATION The functional currency of the Company's Malaysian subsidiary is the United States dollar. Accordingly, all remeasurement gains and losses resulting from transactions denominated in currencies other than United States dollars are included in the consolidated condensed statements of operations. To date, the resulting gains and losses have not been material. RECLASSIFICATION The Company has reclassified certain prior year information to conform with the current year's presentation. INTERIM FINANCIAL STATEMENTS The accompanying consolidated condensed balance sheet as of May 2, 1998, and the consolidated statements of operations and cash flows for the six month periods ended May 2, 1998 and April 26, 1997 are unaudited but, in the opinion of management, include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of results for these interim periods. Results of operations for the interim period are not necessarily indicative of results to be expected for the entire year or any future period. NET INCOME (LOSS) PER SHARE The Company adopted SFAS No. 128, "Earnings per share", effective for the quarter ended January 31, 1998 which replaces the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Prior period amounts have been restated to conform to the current period presentation. Under SFAS No. 128, basic net income (loss) per common share is computed based on income (loss) available to common stockholders and the weighted average number of common shares outstanding during the period. The dilutive net income (loss) per share is computed based on including the number of additional common shares that would have been outstanding if the dilutive potential of common shares had been issued. 6 7 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) Basic and diluted shares outstanding, are as follows:
Three Months Ended Six Months Ended ------------------ ---------------- (in thousands, except per share data) May 2, April 26, May 2, April 26, 1998 1997 1998 1997 ---- ---- ---- ---- Basic weighted average shares outstanding 13,161 10,458 13,130 10,435 Weighted average common equivalent shares - 498 - - ------ ------ ------ ------ Diluted weighted average shares outstanding 13,161 10,956 13,130 10,435 ====== ====== ====== ======
Diluted weighted average shares outstanding for the three month periods ended May 2, 1998 and April 26, 1997, do not include 383,997 and 575,366 common equivalent shares, respectively, as their effect would be anti-dilutive. Diluted weighted averages shares outstanding for the six month periods ended May 2, 1998 and April 26, 1997, respectively, do not include 401,798 and 571,815 common equivalent shares as their effect would be anti- dilutive. 2. AQUISITIONS On January 10, 1997, the Company acquired (the "Zycon Acquisition") all of the outstanding common stock of Zycon Corporation ("Zycon"), and on March 20, 1998, the Company acquired (the "Continental Acquisition", and together with the Zycon Acquistion, the "Acquisitions") all of the outstanding common stock of Continental Circuits Corp. ("Continental"). These acquisitions were financed by the $400 million unsecured senior revolving credit facility with a group of banks, which amended and restated an existing credit facility (the "Amended Credit Facility"), under which the Company borrowed approximately $215,000,000 upon consummation of the Zycon Acquisition and approximately $220,000,000 upon consummation of the Continental Acquisition. These acquisitions were accounted for as purchases in accordance with Accounting Principles Board Opinion No. 16, and accordingly, Zycon's and Continental's operating results since the respective dates of acquisition are included in the accompanying consolidated condensed financial statements. In accordance with ABP Opinion No. 16, the Company allocated the purchase price of the Acquisitions based on the fair value of assets acquired and liabilities assumed. Significant portions of the purchase price of both Acquisitions were identified in independent appraisals as intangible assets using proven valuation procedures and techniques. These intangible assets include approximately $78,000,000 and $63,050,000 for Zycon and Continental, respectively, for acquired in-process research and development ("in-process R&D") for projects that did not have a future alternative use. Acquired intangibles include developed technology, customer relationships, assembled workforce, trade names and trademarks. These intangibles are being amortized over their estimated useful lives of 12 to 30 years. Unaudited pro forma operating results for the Company, assuming the acquisitions of Zycon and Continental occurred on October 27, 1996, are as follows: 7 8 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) ACQUISITIONS (CONTINUED)
Three Months Ended Six Months Ended ------------------ ---------------- (in thousands, except per share data) May 2, April 26, May 2, April 26, 1998 1997 1998 1997 ---- ---- ---- ---- Net Sales ............................ $226,196 $212,524 $459,814 $414,633 Net Income ........................... $ (473) $ 9,010 $ 8,880 $ 16,275 Basic Net Income (Loss) Per Share .... $(.04) $.86 $.68 $1.56 Diluted Net Income (Loss) Per Share .. $(.04) $.82 $.66 $1.49
For purposes of these pro forma operating results, the acquired in-process R&D was assumed to have been written off prior to October 27, 1996, so that the operating results presented include only recurring costs. 3. INVENTORIES Inventories are stated at the lower of cost, first-in, first-out (FIFO), or market and consist of the following (in thousands):
May 2, October 25, 1998 1997 ---- ---- Raw Materials....................... $33,656 $14,167 Work-in-process..................... 41,439 31,833 ------- ------- $75,095 $46,000 ======= =======
4. INTANGIBLE ASSETS The Company has assessed the realizability of its acquired intangible assets in accordance with SFAS No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. " Under SFAS No. 121, the Company is required to assess the valuation of its long-lived assets, including intangible assets, based on the estimated cash flows to be generated by such assets. See Note 7. 5. LINES OF CREDIT The Company's $400 million Amended Credit Facility is pursuant to an Amended and Restated Revolving Credit Agreement, as amended (the "Agreement). The Agreement provides for direct borrowings or letters of credit for up to $400 million and expires January 8, 2002. Borrowings under the Agreement bear interest, at the Company's option, at either: (i) the Eurodollar Rate plus the Applicable Eurodollar Rate Margin (both as defined in the Agreement) ranging between .5% and 1.1375%, based on certain financial 8 9 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) LINES OF CREDIT (CONTINUED) ratios of the Company, or (ii) the Base Rate (as defined in the Agreement). The Company is required to pay a quarterly commitment fee ranging from .2% to .375% per annum, based on certain financial ratios of the Company, of the unused commitment under the Agreement. If the Company obtains certain debt financing, as defined, the banks may require the Company to repay up to $150,000,000 of amounts outstanding under the Agreement. At May 2, 1998, borrowings of $345,000,000 were outstanding under the agreement at a weighted average interest rate of 6.56%. The Agreement places several restrictions on the Company, including limitations on mergers, acquisitions and sales of a substantial portion of its assets, as well as certain limitations on liens, guarantees, additional borrowings, changes in the Company's capitalization, as defined, and investments. The Agreement also requires the Company to maintain certain financial covenants, including, among other things, minimum levels of consolidated net worth, a maximum ratio of consolidated funded debt to EBITDA, maximum capital expenditures and minimum interest coverage, as defined, during the term of the Agreement. At May 2, 1998, the Company was in compliance with all loan covenants. The Company has a line of credit arrangement with a Malaysian bank denominated in Malaysian ringgits and U.S. dollars for aggregate borrowings of $3.4 million for the purpose of acquiring land, facilities and equipment for the Company's Malaysian subsidiary. The arrangement is renewable annually. At May 2, 1998, there were no amounts outstanding under this arrangement. 6. LONG TERM DEBT
May 2, October 25, 1998 1997 ------- ----------- (In thousands) Loan agreements in connection with the expansion of a building. The loans bear interest at rates from 1% to 7% through March, 2011 and are collateralized by property and an irrevocable letter of credit. Payments of principal and interest are quarterly............................. $ 778 $ 820 Revolving credit agreement (Note 5)................ 345,000 100,000 Obligations under capital leases................... 18,096 13,960 -------- -------- 363,874 114,780 Less - Current portion............................. 4,837 5,064 -------- -------- $359,037 $109,716 ======== ========
9 10 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) 7. RESTRUCTURING AND OTHER NON-RECURRING CHARGES On April 6, 1998, the Company announced the planned consolidation of its two East Coast quick-turn prototype facilities into the larger of the two facilities located at Haverhill, MA. The Company incurred and recorded in the fiscal quarter ended May 2, 1998 non-recurring charges in connection with the consolidation totaling $5.9 million. The component of this charge classified as restructuring-related met the criteria set forth in Emerging Issues and Task Force Issue ("EITF") 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The amount recorded as a liability, which totaled $1.5 million, relates to severance and other payroll-related costs, as well as lease termination costs. Non-recurring costs include costs associated with the abandonment of assets at one of the facilities. The components of the restructuring and other non-recurring costs during the three months ended May 2, 1998 are as follows:
Amount (in thousands) Loss on abandonment of assets ................................ $1,965 Severance benefits and associated legal costs ................ 129 Lease termination loss ....................................... 1,336 ------ Total Restructuring Charges .................................. 3,430 Other Non-recurring Charges .................................. 2,517 ------ Total Restructuring and Other Charges ........................ $5,947 ======
Included in the restructuring and other charges is $2.5 million, which represents the write-down of existing assets to their net realizable value, in accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." 8. ENVIRONMENTAL MATTERS The Company is required to comply with all federal, state, county and municipal regulations regarding protection of the environment. There can be no assurance that more stringent environmental laws will not be adopted in the future and, if adopted, the costs of compliance with more stringent environmental laws could be substantial. Waste treatment and disposal are major considerations for printed circuit manufacturers. The Company uses chemicals in the manufacture of its products that are classified by the Environmental Protection Agency (EPA) as hazardous substances. The Company is aware of certain chemicals that exist in the ground at certain of its facilities. The Company has notified various governmental agencies and continues to work with them to monitor and resolve these matters. During March 1995, the Company received a Record Of Decision (ROD) from the New York State Department of Environmental Conservation (NYSDEC), 10 11 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ENVIRONMENTAL MATTERS (CONTINUED) regarding soil and groundwater contamination at its Owego, New York facility. Based on a Remedial Investigation and Feasibility Study (RIFS) for apparent on-site contamination at that facility and a Focused Feasibility Study (FFS), each prepared by environmental consultants of the Company, the NYSDEC has approved a remediation program of groundwater withdrawal and treatment and iterative soil flushing. The Company has executed a Modification of the Order on Consent to implement the approved ROD. The cost, based upon the FFS, to implement this remediation is estimated to be $4.6 million, and is expected to be expended as follows: $260,000 for capital equipment and $4.3 million for operation and maintenance costs which will be incurred and expended over the estimated life of the program of 30 years. NYSDEC has notified the Company that it will take additional samples from a wetland area near the Company's Owego facility. Analytical reports of earlier sediment samples indicated the presence of certain inorganics. There can be no assurance that the Company and/or other third parties will not be required to conduct additional investigations and remediation at that location, the costs of which are currently indeterminable due to the numerous variables described in the fifth paragraph of this Environmental Matters note. From 1974 to 1980, the Company operated a printed circuit manufacturing facility in Florida as a lessee of property that is now the subject of a pending lawsuit (the "Florida Lawsuit") and investigation by the Florida Department of Environmental Protection (FDEP). Hadco and others are participating in alternative dispute resolution regarding the site with an independent mediator. In connection with mediation, in February 1992 the FDEP presented computer-generated estimates of remedial costs, for activities expected to be spread over a number of years, that ranged from approximately $3.3 million to $9.7 million. Mediation sessions were conducted in March 1992 but were then suspended during ongoing assessment and feasibility activities. On June 9, 1992, the Company entered into a Cooperating Parties Agreement in which it and Gould, Inc., another prior lessee of the site, agreed to fund certain assessment and feasibility study activities at the site. The cost of such activities is not expected to be material to the Company. Management believes it is likely that it will participate in implementing a continuing remedial program for the site, the costs of which are currently unknown. In June 1995, Hadco was named a third-party defendant in the Florida Lawsuit. See Note 9 below. The Company has commenced the operation of a groundwater extraction system at its Derry, New Hampshire facility to address certain groundwater contamination and groundwater migration control issues. Further investigation is underway to determine the areal extent of the groundwater contaminant plume. Because of the uncertainty regarding both the quantity of contaminants beneath the building at the site and the long-term effectiveness of the groundwater migration control system the Company has installed, it is not possible to make a reliable estimate of the length of time remedial activity will have to be performed. However, it is anticipated that the groundwater extraction system will be operated for at least 30 years. There can be no assurance that the Company will not be required to conduct additional investigations and remediation relating to the Derry facility. The total costs of such groundwater extraction system and of conducting any additional investigations and remediation relating to the Derry facility are not fully determinable due to the numerous variables described in the fifth paragraph of this Environmental Matters note. 11 12 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ENVIRONMENTAL MATTERS (CONTINUED) The City of Santa Clara adopted an ordinance that, as of April 1, 1997, reduced the amount of waste, including copper and nickel, that companies such as the Company may discharge into the city sanitary sewer. The ordinance provides for substantial penalties for intentional or negligent violations. These penalties include fines ranging from $10,000 to $50,000 per day, revocation of required business permits, the issuance of a cease and desist order and, under certain circumstances, up to nine months' imprisonment. Under the ordinance, the Company is subject to stringent requirements on the amount of water it can discharge. The concentration limit for Hadco's copper discharge was reduced from 2.70 milligrams per liter to 1.02 milligrams per liter, and the concentration limit for Hadco's nickel discharge was reduced from 2.60 milligrams per liter to 0.15 milligrams per liter. The Company believes it is currently in compliance with new discharge limits. The Company accrues estimated costs associated with known environmental matters, when such costs can be reasonably estimated. The cost estimates relating to future environmental clean-up are subject to numerous variables, the effects of which can be difficult to measure, including the stage of the environmental investigations, the nature of potential remedies, possible joint and several liability, the magnitude of possible contamination, the difficulty of determining future liability, the time over which remediation might occur, and the possible effects of changing laws and regulations. Management believes the ultimate disposition of above known environmental matters described in this "Environmental Matters" note will not have a material adverse effect upon the liquidity, capital resources, business or consolidated financial position of the Company. However, one or more of such environmental matters could have a significant negative impact on the Company's consolidated financial results for a particular reporting period. 9. LEGAL PROCEEDINGS AND CLAIMS The Company is one of 33 entities which have been named as potentially responsible parties in a lawsuit pending in the federal district court of New Hampshire concerning environmental conditions at the Auburn Road, Londonderry, New Hampshire landfill site. Local, state and federal entities and certain other parties to the litigation seek contribution for past costs, totaling approximately $20 million, allegedly incurred to assess and remediate the Auburn Road site. In December 1996, following publication and comment period, the EPA amended the ROD to change the remedy at the Auburn Road site from active groundwater remediation to future monitoring. Other parties to the lawsuit also allege that future monitoring will be required. The Company is contesting liability, but is participating in mediation with 27 other parties in an effort to resolve the lawsuit. In connection with the Florida Lawsuit pending in the Circuit Court for Broward County, Florida (described in Note 8 above), each of Hadco and Gould, Inc., another prior lessee of the site of the printed circuit manufacturing facility in Florida, was served with a third-party complaint in June 1995, as third-party defendants in such pending Florida Lawsuit by a party who had previously been named as a defendant when the Florida Lawsuit was commenced in 1993 by the FDEP. The Florida Lawsuit seeks damages relating to environmental pollution and FDEP costs and expenses, civil penalties, and declaratory and injunctive relief to require the parties to complete assessment and remediation of soil and groundwater contamination. The other parties include alleged owners of the property and Fleet Credit Corporation, a secured lender to a prior lessee of the property. 12 13 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS LEGAL PROCEEDINGS AND CLAIMS (CONTINUED) In March 1993, the EPA notified Hadco Santa Clara (formerly Zycon) of its potential liability for maintenance and remediation costs in connection with a hazardous waste disposal facility operated by Casmalia Resources, a California Limited Partnership, in Santa Barbara County, California. The EPA identified Hadco Santa Clara as one of the 65 generators which had disposed the greatest amounts of materials at the site. Based on the total tonnage contributed by all generators, Hadco Santa Clara's share is estimated at approximately 0.2% of the total weight. The Casmalia site was regulated by the EPA during the period when the material was accepted. There is no allegation that Hadco Santa Clara violated any law in the disposal of material at the site, rather the EPA's actions stemmed from the fact that Casmalia Resources may not have the financial means to implement a closure plan for the site and because of Hadco Santa Clara's status as a generator of hazardous waste. In June 1997, the United States District Court in Los Angeles, California approved and entered a Consent Decree among the EPA and 49 entities (including Hadco Santa Clara) acting through the Casmalia Steering Committee (CSC). The Consent Decree sets forth the terms and conditions under which the CSC will carry out work aimed at final closure of the site. Certain closure activities will be performed by the CSC. Later work will be performed by the CSC, if funded by other parties. Under the Consent Decree, the settling parties will work with the EPA to pursue the non-settling parties to ensure they participate in contributing to the closure and long-term operation and maintenance of the facility. The EPA will continue as the lead regulatory agency during the final closure work. Because long-term maintenance plans for the site will not be determined for a number of years, it has not yet been decided which regulatory agency will oversee this phase of the work plan or how the long-term costs will be funded. However, the agreement provides a mechanism for ensuring that an appropriate federal, state or local agency will assume regulatory responsibility for long-term maintenance. The future costs in connection with the lawsuits described in the preceding paragraphs are currently indeterminable due to such factors as the unknown timing and extent of any future remedial actions which may be required, the extent of any liability of the Company and of other potentially responsible parties, and the financial resources of the other potentially responsible parties. On March 27, 1998, the Company received a written notice from legal counsel for the Lemelson Medical, Education & Research Foundation Limited Partnership (the "Lemelson Partnership"), alleging that the Company is infringing certain patents held by the Lemelson Partnership and offering to license such patents to the Company. The ultimate outcome of this matter is not currently determinable, and there can be no assurance that the outcome of this matter will not have a material adverse effect upon the Company's business, financial condition and results of operations. 13 14 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS LEGAL PROCEEDINGS AND CLAIMS (CONTINUED) Litigation with respect to patents and other intellectual property matters can result in substantial damages, require the cessation of the manufacture, use and sale of infringing products and the use of certain processes, or require the infringing party to obtain a license to the relevant intellectual property. On January 12, 1998, Hadco Santa Clara (formerly Zycon) received notice of the filing of a lawsuit, before the Superior Court (County of Santa Clara, California), against it by Jackie Riley, Keith Riley and Richard Riley for damages (including punitive damages) for alleged injuries suffered, including Richard Riley's cancer, as a result of the alleged emission at a Zycon facility of effluent from allegedly toxic and hazardous chemical substances. Because this matter is at an early stage, the Company believes it cannot assess the potential range of damages that might be awarded should the plaintiffs prevail. 10. SUBSEQUENT EVENT - DEBT OFFERING On May 18, 1998, the Company sold $200.0 million aggregate principal amount of its 9-1/2% Senior Subordinated Notes due 2008 (the "Notes") to certain purchasers. The purchasers subsequently resold the Notes to "qualified institutional buyers" in reliance upon Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and offshore purchasers pursuant to Rule 904 of Regulation S under the Securities Act. The Notes were so resold at a price equal to 99.66% of their principal amount. Interest on the Notes is payable semiannually on each June 15 and December 15, commencing December 15, 1998. The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after June 15, 2003, at 104.75% of their principal amount, plus accrued interest, with such percentages declining ratably to 100% of their principal amount, plus accrued interest. At any time on or prior to June 15, 2001 and subject to certain conditions, up to 35% of the aggregate principal amount of the Notes may be redeemed, at the option of the Company, with the proceeds of certain equity offerings of the Company at 109.50% of the principal amount thereof, plus accrued interest. In addition, at any time prior to June 15, 2003, the Company may redeem the Notes, at its option, in whole or in part, at a price equal to the principal amount thereof, together with accrued interest, plus the Applicable Premium (as defined in the Indenture governing the Notes). The Notes are guaranteed, on a senior subordinated basis, by each of the Company's U.S. Restricted Subsidiaries (as defined in the Indenture) (the "Guarantors"). The net proceeds received by the Company from the issuance and sale of the Notes, approximately $193,820 million, was used to repay outstanding indebtedness under the Amended Credit Facility previously incurred to, among other things, finance the Acquisitions. The Indenture under that which the Notes were issued (the "Indenture") imposes certain limitations on the ability of the Company, its subsidiaries and, in certain circumstances, the Guarantors, to, among other things, incur indebtedness, pay dividends, prepay subordinated indebtedness, repurchase capital stock, make investments, create liens, engage in transactions with stockholders and affiliates, sell assets and engage in mergers and consolidations. 14 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for the historical information contained herein, the matters discussed below or elsewhere in this quarterly report including, without limitation, "Environmental Matters," are forward-looking statements that involve risks and uncertainties. The Company makes such forward-looking statements under the provisions of the "Safe Harbor" section of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements should be considered in light of the factors described below under "Factors That May Affect Future Results." Actual results may vary materially from those projected, anticipated or indicated in any forward-looking statements. In this quarterly report, the words "anticipates," "believes," "expects," "estimates," "intends," "may," "future," "could," "will," and similar words or expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements. RESULTS OF OPERATIONS SECOND QUARTER Net sales for the second quarter of 1998 increased 16.0% over the same period in 1997. The increase resulted from several factors including the acquisition of Continental on March 20, 1998, which added $16.8 million to printed circuit net sales in the quarter, and an increase in backplane assembly net sales. Backplane assembly net sales increased 104.4 % due to higher product volume and shipments. Printed circuit net sales decreased 0.5% due to lower production volume and shipments, and a 4.4% decrease in average pricing. The shift towards printed circuits with more layers and greater densities partially offset the decrease in the volume of shipments and decrease in price. Net sales from backplane assemblies increased to 15.6% of net sales from 8.8% in the second quarter of 1997. The gross profit margin decreased to 17.5% in the second quarter of 1998 from 21.3% in the comparable period in fiscal 1997. The decrease resulted from lower capacity utilization from printed circuit operations, and lower overall gross margins from the Hadco Santa Clara (formerly Zycon) and Hadco Phoenix (formerly Continental) operations. Operating expenses, as a percent of net sales, increased to 10.3% in the second quarter of 1998 from 10.0% in the comparable period in fiscal 1997 due to increased goodwill and purchased intangibles amortization expenses from the acquisition of Continental. Income from operations for the second quarter of 1998 was reduced by approximately $63 million due to a non-recurring write-off relating to acquired in-process research and development recorded in connection with the Continental Acquisition, and by approximately $5.9 million in restructuring and other non-recurring charges related to the consolidation of the Company's East Coast Tech Center operations. The remaining goodwill and purchased intangibles from the Continental Acquisition will be amortized over 12 to 20 years, with an average amortization period of 16 years, which will reduce income from operation by approximately $1.5 million per fiscal quarter. Income from operations, as a percent of net sales, decreased prior to the write-off of acquired in-process research and development and the restructuring and other non-recurring charges to 7.3% in the second quarter of 1998 from 11.3% in the comparable period in fiscal 1997, primarily as a result of the decrease in gross profits. 15 16 SECOND QUARTER (CONTINUED) Interest income decreased in the second quarter of 1998 as compared to the second quarter of 1997 due to lower average cash balances available for investing. Interest expense decreased slightly in the second quarter of 1998 as compared to the second quarter of 1997, due to lower average outstanding debt balances for the second quarter of 1998 compared to the second quarter of 1997. The Company includes in operating expenses charges for actual expenditures and accruals, based on estimates, for environmental matters. To the extent and in amounts Hadco believes circumstances warrant, it will continue to accrue and charge to operating expenses cost estimates relating to environmental matters. The Company believes the ultimate disposition of known environmental matters will not have a material adverse effect upon the liquidity, capital resources, business or consolidated financial position of the Company. However, one or more of such environmental matters could have a significant negative impact on the Company's consolidated financial results for a particular reporting period. The Company believes that excess capacity may exist in the printed circuit and electronic assembly industries. In addition, growth rates in the electronics industry as a whole have fluctuated historically. These factors could have a material adverse effect on future orders and pricing. However, the Company has historically needed to increase its manufacturing capacity to maintain and expand its market position, although the Company's manufacturing capacity needs could change at any time or times in the future. The Company also believes that the potential exists for a shortage of materials in the printed circuit and electronic assembly industries, which could have a material adverse effect on future unit costs. In response to such concerns, the Company engages in the normal industry practices of maintaining primary and secondary vendors and diversifying its customer base. There can be no assurances, however, that such measures will be sufficient to protect the Company against any shortages of materials. YEAR TO DATE Net sales for the six months ended May 2, 1998 increased 39.6% over net sales for the six months ended April 26, 1997. The increase resulted from several factors including the acquisitions of Zycon and Continental, which added $80.2 million to printed circuit net sales in the six month period, and an increase in both backplane assembly and printed circuit net sales (excluding these Acquisitions). Backplane assembly net sales increased due to higher production volume and shipments. Printed circuit net sales increased due to higher production volume and shipments and a shift towards products with more layers and greater densities. In addition, average pricing for printed circuits decreased 3.4% for the first six months of fiscal 1998 over the same period in fiscal 1997. Net sales from backplane assemblies increased to 14.2% of net sales from 11.7% in the first six months of fiscal 1997. The gross profit margin decreased to 18.6% in the six months ended May 2, 1998 from 22.2% in the comparable period in fiscal 1997. The decrease resulted from lower capacity utilization from printed circuit facilities, and lower overall gross margins from the Hadco Santa Clara and Hadco Phoenix operations. Operating expenses, as a percent of net sales, decreased to 9.6% in the six months ended May 2, 1998 from 9.9% in the comparable period in fiscal 1997, due to increased net sales and the fixed nature of the Company's operating expenses. The decrease was partially offset by goodwill and purchased intangibles amortization. 16 17 YEAR TO DATE (CONTINUED) Income from operations for the six months ended May 2, 1998 and April 26, 1997, was reduced by $63 million and $78 million, respectively, over the comparable respective preceding periods, due to non-recurring write-offs of acquired in-process research and development recorded in connection with the Continental and Zycon acquisitions. The remaining goodwill and purchased intangibles will be amortized over 12 to 30 years, with an average amortization period of 17 years, which will reduce income from operations by approximately $3.1 million per fiscal quarter. In addition, income from operations for the six months ended May 2, 1998, was reduced by approximately $5.9 million for restructuring and other non-recurring charges related to the consolidation of the Company's East Coast Tech Center operations. Excluding the non-recurring write-off and restructuring charges, income from operations as a percent of net sales, decreased to 8.9% for the six months ended May 2, 1998 from 12.3% in the comparable period in fiscal 1997, primarily as a result of the same factors affecting gross profit margins, and of goodwill and purchased intangibles amortization from the acquisitions. Interest income increased in the six months ended May 2, 1998 as compared to the six months ended April 26, 1997, due to higher daily average cash balances available for investing. Interest expense increased in the six months ended May 2, 1998 as compared to the six months ended April 26, 1997, due to an increase in outstanding debt as a result of the acquisitions. INCOME TAXES In accordance with generally accepted accounting principles, the Company provides for income taxes on an interim basis, using its effective annual income tax rate. Although the Company has recorded a loss before income taxes in 1998 and 1997, the Company anticipates an effective annual income tax rate for fiscal 1998 of 39.75%, which is slightly less than the combined federal and state statutory rates. The effective rate was increased by amortization of goodwill which is not tax deductible, and was offset by the tax benefit of the Company's foreign sales corporation and various state investment tax credits. The effective tax rate for fiscal 1998 is based on current tax laws. LIQUIDITY AND CAPITAL RESOURCES At May 2, 1998, the Company had working capital of approximately $98.6 million and a current ratio of 1.80, compared to working capital of approximately $53.7 million and a current ratio of 1.48 at October 25, 1997. Cash, cash equivalents and short-term investments at May 2, 1998 were approximately $5.0 million, a decrease of $8.7 million from approximately $13.7 million at October 25, 1997. In December 1997, the Company negotiated a $400 million unsecured senior revolving credit loan facility with a group of banks, which amended and restated an existing credit facility (the "Amended Credit Facility"). Interest on loans outstanding under the Amended Credit Facility is, at the Company's option, payable at either (1) the Eurodollar Rate plus the Applicable Eurodollar Rate Margin (both as defined in the Amended Credit Facility), or (2) the Base Rate as defined in the Amended Credit Facility. At May 2, 1998, $345 million was outstanding under the Amended Credit Facility. The Amended Credit Facility matures in January 2002. See Notes 5 and 10 of Notes to Consolidated Condensed Financial Statements above. 17 18 LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The Company believes its existing working capital and borrowing capacity, coupled with the funds generated from the Company's operations will be sufficient to fund its anticipated working capital, capital expenditure and debt payment requirements through fiscal 1998. Because the Company's capital requirements cannot be predicted with certainty, however, there is no assurance that the Company will not require additional financing during this period. There is no assurance that any additional financing will be available on terms satisfactory to the Company or not disadvantageous to the Company's security holders. DEBT OFFERING On May 18, 1998, the Company sold $200.0 million aggregate principal amount of its 9-1/2% Senior Subordinated Notes due 2008 (the "Notes") to certain purchasers. The purchasers subsequently resold the Notes to "qualified institutional buyers" in reliance upon Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and offshore purchasers pursuant to Rule 904 of Regulation S under the Securities Act. The Notes were so resold at a price equal to 99.66% of their principal amount. The Notes are guaranteed, on a senior subordinated basis, by each of the Company's U.S. Restricted Subsidiaries (as defined in the Indenture) (the "Guarantors"). The net proceeds received by the Company from the issuance and sale of the Notes, approximately $193,820 million, was used to repay outstanding indebtedness under the Amended Credit Facility previously incurred to, among other things, finance the Acquisitions. The Indenture under that which the Notes were issued (the "Indenture") imposes certain limitations on the ability of the Company, its subsidiaries and, in certain circumstances, the Guarantors, to, among other things, incur indebtedness, pay dividends, prepay subordinated indebtedness, repurchase capital stock, make investments, create liens, engage in transactions with stockholders and affiliates, sell assets and engage in mergers and consolidations. See Note 10 of Notes to Consolidated Condensed Financial Statements above. YEAR 2000 COMPLIANCE The Company is reviewing the areas within its business and operations which could be adversely affected by Year 2000 issues and evaluating the costs associated with modifying and testing its systems for the Year 2000. Although the company is not yet able to estimate its incremental cost for Year 2000 issues, based on its preliminary review to date, the Company does not believe Year 2000 issues will have a material adverse effect on the Company's business, financial condition or results of operations. The Company is also working with suppliers to ensure their systems are Year 2000 compliant as well. All costs associated with supplier compliance will be borne by the suppliers. FACTORS THAT MAY AFFECT FUTURE RESULTS The Company operates in a changing environment that involves a number of risks, some of which are beyond the Company's control. The following discussion highlights some of these risks. DEPENDENCE ON ELECTRONICS INDUSTRY The Company's principal customers are electronics Original Equipment Manufacturers (OEMs) and contract manufacturers in the computing (mainly workstations, servers, mainframes, storage and notebooks), data communications/ telecommunications and industrial automation industries, including process controls, automotive, medical and instrumentation. These industry segments, and the electronics industry as a whole, are characterized by intense competition, relatively short product life-cycles and significant fluctuations in product demand. In addition, the electronics industry is generally subject to rapid technological change and 18 19 DEPENDENCE ON ELECTRONICS INDUSTRY (CONTINUED) product obsolescence. Discontinuance or modifications of products containing components manufactured by the Company could have a material adverse effect on the Company's business, financial condition and results of operations. Further, the electronics industry is subject to economic cycles and has in the past experienced, and is likely in the future to experience, recessionary periods. A recession or any other event leading to excess capacity or a downturn in the electronics industry would likely result in intensified price competition, reduced gross margins and a decrease in unit volume, all of which would have a material adverse effect on the Company's business, financial condition and results of operations. FLUCTUATIONS IN QUARTERLY OPERATING RESULTS The Company's quarterly operating results have varied and may continue to fluctuate significantly from period to period, including on a quarterly basis. At times in the past, the Company's net sales and net income have decreased from the prior quarter. Operating results are affected by a number of factors, including the timing and volume of orders from and shipments to customers relative to the Company's manufacturing capacity, product and price competition, product mix, number of working days in a particular quarter, manufacturing process yields, the timing of expenditures in anticipation of future sales, raw material and component availability, the length of sales cycles, trends in the electronics industry and general economic factors. In recent years, the Company's gross margins have varied primarily as a result of capacity utilization, product mix, lead times, volume levels and complexity of customer orders. There can be no assurance that the Company will be able to manage the utilization of manufacturing capacity or product mix in a manner that will maintain or improve gross margins. The timing and volume of orders placed by the Company's customers vary due to customer attempts to manage inventory, changes in customers' manufacturing strategies and variation in demand for customer products. The Company's expense levels are relatively fixed and are based, in part, on expectations of future revenues. Consequently, if revenue levels are below expectations, this occurrence is likely to materially adversely affect the Company's business, financial condition and results of operations. VARIABILITY OF ORDERS The level and timing of orders placed by the Company's customers vary due to a number of factors, including customer attempts to manage inventory, changes in the customers' manufacturing strategies and variation in demand for customer products due to, among other things, technological changes, new product introductions, product life-cycles, competitive conditions or general economic conditions. Since the Company generally does not obtain long-term purchase orders or commitments from its customers, it must anticipate the future volume of orders based on discussions with its customers. A substantial portion of sales in a given quarter may depend on obtaining orders for products to be manufactured and shipped in the same quarter in which those orders are received. The Company relies on its estimate of anticipated future volumes when making commitments regarding the level of business that it will seek and accept, the mix of products that it intends to manufacture, the timing of production schedules and the levels and utilization of personnel and other resources. A variety of conditions, both specific to the individual customer and generally affecting the customer's industry, may cause customers to cancel, reduce or delay orders that were previously made or anticipated. A significant portion of the Company's released backlog at any time may be subject to cancellation or postponement without penalty. The Company cannot assure the timely replacement of canceled, delayed or reduced orders. Significant or numerous cancellations, reductions or delays in orders by a customer or group of customers could materially adversely affect the Company's business, financial condition and results of operations. 19 20 ACQUISITIONS On March 20, 1998, the Company acquired (the "Continental Acquisition") all of the outstanding capital stock of Continental Circuits Corp. ("Continental"), for approximately $188 million (including acquisition costs). On January 10, 1997, the Company acquired (the "Zycon Acquisition", and together with the Continental Acquisition, the "Acquisitions") all of the outstanding capital stock of Zycon Corporation ("Zycon"), for approximately $212 million (including acquisition costs). The Company has limited experience in integrating acquired companies or technologies into its operations. Therefore, there can be no assurance that the Company will operate the acquired businesses profitably in the future. The gross profit margins for Continental and Zycon for their respective fiscal years ended July 31, 1997 and December 31, 1996 were 18.2% and 15.7%, respectively. The gross profit margins for Hadco (not including Continental or Zycon) for its fiscal years ended October 26, 1996 and October 25, 1997 were 25.8% and 21.8%, respectively. As a result of the Acquisitions, the Company expects its gross profit margin will be lower in future fiscal quarters than has historically been the case. Operating expenses associated with the acquired businesses may have a material adverse effect on the Company's business, financial condition and results of operations in the future. In addition, shortly after the Continental Acquisition, one senior member of Continental's management left the Company. There can be no assurance that the Company will be able to retain key personnel at Continental. The Company may from time to time pursue the acquisition of other companies, assets, products or technologies. The Company may incur additional indebtedness and additional charges against earnings in connection with future acquisitions, and such incurrences could have a material adverse effect on the Company's business, financial condition and results of operations. See "Leverage" below. The Acquisitions involve a number of operating risks that could materially adversely affect the Company's operating results, including the diversion of management's attention to assimilate the operations, products and personnel of the acquired companies, the amortization of acquired intangible assets, and the potential loss of key employees of the acquired companies. Furthermore, acquisitions may involve businesses in which the Company lacks experience. There can be no assurance that the Company will be able to manage one or more acquisitions successfully, or that the Company will be able to integrate the operations, products or personnel gained through any such acquisitions without a material adverse effect on the Company's business, financial condition and results of operations. MANAGEMENT OF GROWTH In fiscal 1997 and 1998, the Company has significantly expanded its operations, including geographically, which has placed, and will continue to place, significant demands on the Company's management, operational, technical and financial resources. The Acquisitions have intensified these demands. The Company expects that expansion will require additional management personnel and the development of further expertise by existing management personnel. The Company's ability to manage growth effectively, particularly given the increasing scope of its operations, will require it to continue to implement and improve its operational, financial and management information systems as well as to further develop the management skills of its managers and supervisors and to train, motivate and manage its employees. The Company's failure to effectively manage future growth could have a materiel adverse effect on the Company's business, financial condition and results of operations. Competition for personnel is intense, and there can be no assurance that the Company will be able to attract, assimilate or retain additional highly qualified employees in the future, especially engineering personnel. The failure to hire and retain such personnel could have a material adverse effect on the Company's business, financial condition and results of operations. 20 21 COMPETITION The electronic interconnect industry is highly fragmented and characterized by intense competition. The Company believes its major competitors are the large U.S. and international independent and captive producers that also manufacture multilayer printed circuits and provide backplane and other electronic assemblies. Some of these competitors have significantly greater financial, technical and marketing resources, greater name recognition and a larger installed customer base than the Company. In addition, these competitors may have the ability to respond more quickly to new or emerging technologies, may adapt more quickly to changes in customer requirements and may devote greater resources to the development, promotion and sale of their products than the Company. During periods of recession or economic slowdown in the electronics industry and other periods when excess capacity exists, electronics OEMs become more price sensitive, which could have a material adverse effect on interconnect pricing. In addition, the Company believes that price competition from printed circuit manufacturers in Asia and other locations with lower production costs may play an increasing role in the printed circuit markets in which the Company competes. This price competition from Asian printed circuit manufacturers may intensify as a result of economic turmoil, currency devaluations or financial market instability that many Asian countries are currently experiencing. Moreover, the Company's basic interconnect technology is generally not subject to significant proprietary protection, and companies with significant resources or international operations may enter the market. Increased competition could result in price reductions, reduced margins or loss of market share, any of which could materially adversely affect the Company's business, financial condition and results of operations. The demand for printed circuits has continued to be affected by the development of smaller, more powerful electronic components requiring less printed circuit area. Expansion of the Company's existing products or services could expose the Company to new competition. Moreover, new developments in the electronics industry could render existing technology obsolete or less competitive and could potentially introduce new competition into the industry. There can be no assurance that the Company will continue to compete successfully against present and future competitors or that competitive pressures faced by the Company will not have a material adverse effect on the Company's business, financial condition and results of operations. MALAYSIA FACILITY AND ASIAN ECONOMIC TURMOIL Hadco Santa Clara (formerly Zycon) completed construction of a volume manufacturing facility for printed circuits in Malaysia in fiscal 1997. Hadco's management has no experience in operating foreign manufacturing facilities, and there can be no assurance that the Company will operate the new facility on a profitable basis. The Company believes that the Malaysian facility could incur operating losses in the future as a result of various factors, including, without limitation, operating inefficiencies and price competition for the products which the Company intends to produce at the facility. International operations are also subject to a number of risks, including unforeseen changes in regulatory requirements, exchange rates, tariffs and other trade barriers, misappropriation of intellectual property, currency fluctuations, and political and economic instability. Malaysia and other Asian countries have recently experienced economic turmoil and a significant devaluation of their local currencies. There can be no assurance that this period of Asian economic turmoil will not result in increased price competition, reduced sales by the Company's customers in Asia with a concomitant reduction in such customers' orders for the Company's products, restrictions on the transfer of funds overseas, employee turnover, labor unrest, the reversal of current policies encouraging foreign investment and trade, or other domestic Asian economic problems that could materially adversely affect the Company's business, financial condition or results of operations. 21 22 TECHNOLOGICAL CHANGE, PROCESS DEVELOPMENT AND PROCESS DISRUPTION The market for the Company's products and services is characterized by rapidly changing technology and continuing process development. The future success of the Company's business will depend in large part upon its ability to maintain and enhance its technological capabilities, develop and market products and services that meet changing customer needs and successfully anticipate or respond to technological changes, on a cost-effective and timely basis. In addition, the electronic interconnect industry in the future could encounter competition from new technologies that render existing electronic interconnect technology less competitive or obsolete, including technologies that may reduce the number of printed circuits required in electronic components. There can be no assurance that the Company will effectively respond to the technological requirements of the changing market. To the extent the Company determines that new technologies and equipment are required to remain competitive, the development, acquisition and implementation of such technologies and equipment are likely to continue to require significant capital investment by the Company. There can be no assurance that capital will be available for this purpose in the future or that investments in new technologies will result in commercially viable technological processes or that there will be commercial applications for these technologies. Moreover, the Company's business involves highly complex manufacturing processes that have in the past and could in the future be subject to periodic failure or disruption. Process disruptions can result in delays in certain product shipments, and there can be no assurance that failures or disruptions will not occur in the future. In addition, the Company has a large manufacturing facility in Santa Clara, California, an area of the United States that is subject to significant natural disasters, including earthquakes, fires and flooding. The loss of revenue and earnings to the Company from such a technological change, process development or process disruption, as well as any disruption of the Company's operations resulting from a natural disaster such as an earthquake, fire, flood or drought in California or other locations where the Company has facilities, could have a material adverse effect on the Company's business, financial condition and results of operations. CUSTOMER CONCENTRATION During the past several years, the Company's sales to a small number of its customers have accounted for a significant percentage of the Company's annual net sales. During fiscal 1995, 1996 and 1997, the Company's ten largest customers accounted for approximately 46%, 48% and 47% of net sales, respectively. In fiscal 1997, Solectron accounted for approximately 15% of the net sales of the Company. The Company generally does not obtain long-term purchase orders or commitments from its customers, and the orders received by the Company generally require delivery within 90 days. Given the Company's strategy of developing long-term purchasing relationships with high growth companies, the Company's dependence on a number of its most significant customers may increase. There can be no assurance that the Company will be able to identify, attract and retain customers with high growth rates or that the customers that it does attract and retain will continue to grow. Although there can be no assurance that the Company's principal customers will continue to purchase products and services from the Company at current levels, the Company expects to continue to depend upon its principal customers for a significant portion of its net sales. The loss of or decrease in orders from one or more major customers could have a material adverse effect on the Company's business, financial condition and results of operations. MANUFACTURING CAPACITY The Company believes its long-term competitive position depends in part on its ability to increase manufacturing capacity. The Company may obtain such additional capacity through acquisitions or expansion of its current facilities. Either approach would require substantial additional capital, and there can be no assurance that such capital will be available from cash generated by current operations. Further, there can be no assurance that the Company will be able to acquire sufficient capacity or successfully integrate and 22 23 MANUFACTURING CAPACITY (CONTINUED) manage such additional facilities. Although the Company has historically needed to increase its manufacturing capacity, the Company believes that excess capacity may exist in the printed circuit and electronic assembly industries. In addition, growth rates in the electronics industry as a whole have fluctuated historically. These factors could have a material adverse effect on future orders and pricing. The Company's expansion of its manufacturing capacity has significantly increased and will continue to significantly increase its fixed costs, and the future profitability of the Company will depend on its ability to utilize its manufacturing capacity in an effective manner. The failure to obtain sufficient capacity when needed or to successfully integrate and manage additional manufacturing facilities could adversely impact the Company's relationships with its customers and materially adversely affect the Company's business, financial condition and results of operations. ENVIRONMENTAL MATTERS The Company is subject to a variety of local, state and federal environmental laws and regulations relating to the storage, use, discharge and disposal of chemicals, solid waste and other hazardous materials used during its manufacturing process, as well as air quality regulations and restrictions on water use. When violations of environmental laws occur, the Company can be held liable for damages and the costs of remedial actions and can also be subject to revocation of permits necessary to conduct its business. Any such revocations could require the Company to cease or limit production at one or more of its facilities, which could have a material adverse effect on the Company's business, financial condition and results of operations. Moreover, the Company's failure to comply with present and future regulations could restrict the Company's ability to expand its facilities or could require the Company to acquire costly equipment or to incur other significant expenses to comply with environmental regulations. Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violation. The Company operates in several environmentally sensitive locations and is subject to potentially conflicting and changing regulatory agendas of political, business and environmental groups. Changes or restrictions on discharge limits, emissions levels, or material storage or handling might require a high level of unplanned capital investment and/or relocation. There can be no assurance that compliance with new or existing regulations will not have a material adverse effect on the Company's business, financial condition and results of operations. AVAILABILITY OF RAW MATERIALS AND COMPONENTS Although the Company has not entered into any supply agreements and does not have any guaranteed sources of raw materials or components, it routinely purchases raw materials and components from several key material suppliers. Although alternative material suppliers are currently available, a significant unplanned event at a major supplier could have a material adverse effect on the Company's operations. Hadco Santa Clara has experienced shortages of certain types of raw materials in the past. The Company believes that the potential exists for shortages of materials in the printed circuit and electronic assembly industries, which could have a material adverse effect on the Company's manufacturing operations and future unit costs. Product changes and the overall demand for electronic interconnect products could increase the industry's use of new laminate materials, standard laminate materials, multilayer blanks, electronic components and other materials, and therefore such materials may not be readily available to the Company in the future. Electronic components used by the Company in producing backplane assemblies are purchased by the Company and, in certain circumstances, the Company may bear the risk of component price fluctuations. There can be no assurance that shortages of certain types of electronic components will 23 24 AVAILABILITY OF RAW MATERIALS AND COMPONENTS (CONTINUED) not occur in the future. Component shortages or price fluctuations could have a material adverse effect on the Company's backplane assembly business, thereby materially adversely affecting the Company's business, financial condition and results of operations. To the extent that the Company's backplane assembly business expands as a percentage of the Company's net sales, component shortages and price fluctuations could, to a greater extent, materially adversely affect the Company's business, financial condition and results of operations. DEPENDENCE ON KEY PERSONNEL The Company's future success depends to a large extent upon the continued services of key managerial and technical employees. The only executive officers of the Company bound by employment or non-compete agreements are the President and Chief Executive Officer and a Senior Vice President (formerly President and Chief Executive Officer of Continental). Hadco's President and Chief Executive Officer's non-compete agreement expires one year after the termination of his employment with the Company. Most other key employees of the Company do not have employment or non-compete agreements. The loss of the services of any of the Company's key employees could have a material adverse effect on the Company. The Company believes that its future success depends on its continuing ability to attract and retain highly qualified technical, managerial and marketing personnel. Competition for such personnel is intense, especially for engineering personnel, and there can be no assurance that the Company will be able to attract, assimilate or retain such personnel. If the Company is unable to hire and retain key personnel, the Company's business, financial condition and results of operations may be materially adversely affected. INTELLECTUAL PROPERTY The Company's success depends in part on its proprietary techniques and manufacturing expertise, particularly in the area of complex multilayer printed circuits. The Company has few patents and relies primarily on trade secret protection of its intellectual property. There can be no assurance that the Company will be able to protect its trade secrets or that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to the Company's trade secrets. In addition, litigation may be necessary to protect the Company's trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of patent infringement. If any infringement claim is asserted against the Company, the Company may seek to obtain a license of the other party's intellectual property rights. There is no assurance that a license would be available on reasonable terms or at all. Litigation with respect to patents or other intellectual property matters could result in substantial costs and diversion of management and other resources and could have a material adverse effect on the Company's business, financial condition and results of operations. VOLATILITY OF STOCK PRICE The Company's Common Stock has experienced significant price volatility historically, and such volatility may continue to occur in the future. Factors such as announcements of large customer orders, order cancellations, new product introductions by the Company or competitors or general conditions in the electronics industry, as well as quarterly variations in the Company's actual or anticipated results of operations, may cause the market price of the Company's Common Stock to fluctuate significantly. Furthermore, the stock market has experienced extreme price and volume fluctuations in recent years, which has had a substantial effect on the market price for securities issued by many technology companies, often for reasons unrelated to the operating performance of the specific companies. These broad market fluctuations may materially adversely affect the price of the Company's Common Stock. There can be no 24 25 VOLATILITY OF STOCK PRICE (CONTINUED) assurance that the market price of the Company's Common Stock will not experience significant fluctuations in the future, including fluctuations that are unrelated to the Company's performance. LEVERAGE The Acquisitions and related debt financings have significantly increased the Company's debt service obligations. Although the Company's cash flow from operations has been sufficient to meet its debt service obligations in the past, there can be no assurance that the Company's operating results will continue to be sufficient for the Company to meet such obligations in the future. FORWARD-LOOKING STATEMENTS A number of the matters and subject areas discussed in this Form 10-Q that are not historical or current facts deal with potential future circumstances and developments. The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may differ materially from the Company's actual future experience involving any one or more of such matters and subject areas. The Company has attempted to identify, in context, certain of the factors that it currently believes may cause actual future experience and results to differ from the Company's current expectations regarding the relevant matter or subject area. The operations and results of the Company's business also may be subject to the effect of other risks and uncertainties in addition to the relevant qualifying factors identified elsewhere in the foregoing "Factors That May Affect Future Results" section, including, but not limited to other risks and uncertainties described from time to time in the Company's reports filed with the Securities and Exchange Commission. 25 26 PART II - OTHER INFORMATION Item 1. Legal Proceedings See Note 9 of Notes to Consolidated Condensed Financial Statements above for a description of certain litigation in which the Company is currently involved. Item 2. Changes in Securities (a) An amendment to the Company's Restated Articles of Organization to increase the number of authorized shares of Common Stock from 25,000,000 shares to 50,000,000 shares was approved at the Annual Meeting of Stockholders on March 4, 1998. Articles of Amendment were filed with the Commonwealth of Massachusetts on March 4, 1998. (b) On May 18, 1998, the Company sold $200.0 million aggregate principal amount of its 9-1/2% Senior Subordinated Notes due 2008 (the "Notes") to certain purchasers. The purchasers subsequently resold the Notes to "qualified institutional buyers" in reliance upon Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and offshore purchasers pursuant to Rule 904 of Regulation S under the Securities Act. The Notes were so resold at a price equal to 99.66% of their principal amount. The Indenture under the which the Notes were issued imposes certain limitations on the ability of the Company, its subsidiaries and, in certain circumstances, the Guarantors, to, among other things, incur indebtedness, pay dividends, prepay subordinated indebtedness, repurchase capital stock, make investments, create liens, engage in transactions with stockholders and affiliates, sell assets and engage in mergers and consolidations. (c)(i) Under the Company's Outside Directors' Compensation Plan of 1998 (the "Outside Directors' Plan"), non-employee directors ("Non-Employee Directors") of the Company receive payment of an annual fee in the form of restricted Common Stock of the Company. Non-Employee Directors may elect to defer receipt of any such payment. On March 4, 1998, the Non-Employee Directors received an aggregate of 1,290 shares of Common Stock pursuant to the Outside Directors' Plan. Of such shares, receipt of 215 shares was deferred in accordance with the Outside Directors' Plan. The aggregate value of all such shares issued on March 4, 1998 to Non-Employee Directors was $59,985 (based on a fair market value on that date of $46.50 per share). (ii) On March 20, 1998, and as a condition to his employment as a Senior Vice President of the Company, Frederick G. McNamee, III, agreed to purchase 40,000 shares of Common Stock of the Company pursuant to a Stock Purchase Agreement dated as of March 20, 1998. The purchase price of $37.00 per share was based on the fair market value of such shares on March 20, 1998, the date of purchase. (iii) Each of the shares of Common Stock of the Company referenced in this Item 2, Subsection (c) was issued by the Company in reliance on the exemption from registration provided by Section 4(2) of the Securities Act for an offering to a small number of knowledgeable investors. Item 4. Submission of Matters to a Vote of Security Holders (a) The annual meeting of stockholders of Hadco Corporation was held on March 4, 1998. (b) No information provided due to inapplicability of item. 26 27 (c) A vote was proposed to (1) fix the number of directors at eight (8) and to elect a Board of Directors to serve for the ensuing year or until their respective successors are duly elected and qualified; (2) approve Hadco Corporation Employee Stock Purchase Plan of November 17, 1997; (3) approve the amendment of the Corporation's Restated Articles of Organization to increase the authorized shares of Common Stock from 25,000,000 to 50,000,000; (4) ratify the selection of Arthur Andersen LLP as auditors for the fiscal year ending October 31, 1998. The voting results are as follows:
Votes Votes Votes Votes Broker For Against Withheld Abstained Non-Votes (1)Horace H. Irvine II 11,807,602 N/A 39,923 N/A N/A Andrew E. Lietz 11,807,907 N/A 39,618 N/A N/A Patrick Sweeney 11,807,907 N/A 39,168 N/A N/A Oliver O. Ward 11,806,602 N/A 41,463 N/A N/A Lawrence Coolidge 11,806,862 N/A 40,663 N/A N/A John F. Smith 11,804,703 N/A 42,822 N/A N/A John E. Pomeroy 11,808,162 N/A 39,363 N/A N/A James C. Taylor 11,807,162 N/A 40,363 N/A N/A (2)Hadco Corporation 11,399,844 419,016 N/A 28,665 N/A Employee Stock Purchase Plan of November 17, 1997 (3)Amendment to Restated Articles of 10,377,873 1,454,606 N/A 15,046 N/A Organization (4)Arthur Andersen LLP 11,809,925 26,761 N/A 10,839 N/A Ratification
(d) No information provided due to inapplicability of item. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits *10.1 Non-Qualified Stock Option Plan dated November 29, 1995, as amended and restated April 7, 1998. *10.2 Form of Option Agreement to Non-Qualified Stock Option Plan dated November 29, 1995, as amended and restated April 7, 1998. *10.3 Stock Purchase Agreement dated as of March 20, 1998 between Registrant and Frederick G. McNamee, III. *10.4 Employment Agreement dated as of February 17, 1998 between Registrant and Frederick G. McNamee, III. 27 28 10.5 Second Amendment and Modification Agreement among Registrant and a group of Banks dated as of May 11, 1998. 27.1 Financial Data Schedule for the Period Ended May 2, 1998 (*) Indicates a management contract or any compensatory plan, contract or arrangement required to be filed as an exhibit. (b) Reports on Form 8-K A Current Report on Form 8-K dated February 17, 1998, filed by the Company on February 18, 1998, reported on (i) an announcement by the Company that it had agreed to acquire Continental Circuits Corp. for $23.90 per share and (ii) an announcement by the Company of its financial results for the first quarter ended January 31, 1998. A Current Report on Form 8-K dated February 20, 1998, filed by the Company on February 20, 1998, reported on an announcement by the Company that it had commenced a tender offer for all outstanding shares of Continental Circuits Corp. A Current Report on Form 8-K dated May 1, 1998, filed by the Company on May 1, 1998, reported on an announcement by the Company that on (i) March 27, 1998 it had received a notice from legal counsel to the Lemelson Medical, Education & Research Foundation Limited Partnership alleging that the Company is infringing certain patents held by said Foundation and offering to license said patents to the Company and (ii) January 12, 1998, Hadco Santa Clara, Inc. received a notice of a lawsuit against it relating to alleged injuries suffered as a result of alleged emissions of effluent from allegedly toxic and hazardous substances. A Current Report on Form 8-K dated March 20, 1998, filed by the Company on March 26, 1998, and amended by a Current Report on Form 8-K/A, filed by the Company on May 1, 1998, reported on an announcement by the Company that on March 20, 1998 it had, through an acquisition subsidiary, consummated the acquisition of all of the outstanding common stock of Continental Circuits Corp. The above Current Report on Form 8-K/A included the following financial statements of an acquired business, Continental Circuits Corp.: (i) Financial Statements of Business Acquired Report of Independent Auditors (Ernst & Young LLP) Consolidated Balance Sheets at July 31, 1996 and 1997 and January 31, 1998 (unaudited) Consolidated Statements of Income for the Years Ended July 31, 1995, 1996 and 1997 and for the Six Months Ended February 2, 1997 (unaudited) and January 31, 1998 (unaudited) Consolidated Statements of Cash Flow for the Years Ended July 31, 1995, 1996 and 1997 and for the Six Months Ended February 2, 1997 (unaudited) and January 31, 1998 (unaudited) Consolidated Statements of Shareholders' Equity for the Years Ended July 31, 1995, 1996 and 1997 and for the Six Months Ended January 31, 1998 (unaudited) Notes to Consolidated Financial Statements 28 29 (ii) Pro Forma Condensed Consolidated Financial Statements (unaudited) Pro Forma Condensed Consolidated Balance Sheet as of January 31, 1998 Pro Forma Condensed Consolidated Statement of Operations for the Year Ended October 25, 1997 Pro Forma Consolidated Statement of Operations for the Three Months Ended January 31, 1998 Note to Pro Forma Condensed Consolidated Financial Statements 29 30 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Hadco Corporation Date: June 11, 1998 By: /s/ ----------------------------------- Timothy P. Losik Senior Vice President and Chief Financial Officer (principal financial officer and principal accounting officer) 30 31 Exhibit Index Exhibits *10.1 Non-Qualified Stock Option Plan dated November 29, 1995, as amended and restated April 7, 1998. *10.2 Form of Option Agreement to Non-Qualified Stock Option Plan dated November 29, 1995, as amended and restated April 7, 1998. *10.3 Stock Purchase Agreement dated as of March 20, 1998 between Registrant and Frederick G. McNamee, III. *10.4 Employment Agreement dated as of February 17, 1998 between Registrant and Frederick G. McNamee, III. 10.5 Second Amendment and Modification Agreement among Registrant and a group of Banks dated as of May 11, 1998. 27.1 Financial Data Schedule for the Period Ended May 2, 1998 31 EX-10.1 2 NON QUALIFIED STOCK OPTION PLAN 1 Exhibit 10.1 HADCO CORPORATION NON-QUALIFIED STOCK OPTION PLAN NOVEMBER 29, 1995 AS AMENDED AND RESTATED APRIL 7, 1998 1. Purpose. This Non-Qualified Stock Option Plan (hereinafter, the "Plan") is intended to promote the interests of Hadco Corporation (hereinafter, the "Company") by providing an inducement for highly qualified personnel to enter the employ of the Company and an incentive for valued employees to remain with the Company and to use their best efforts to promote the Company's continued success, by means of the offer of an opportunity to acquire or increase their proprietary interest in the Company through the granting of options to purchase the Company's stock pursuant to the terms of this Plan. As used herein, the term "Company" includes any present or future subsidiary and any successor corporation. 2. Rights to be Granted. Under this Plan, options may be granted that give an optionee the right for a specified time period to purchase a specified number of shares of common stock, par value $0.05, of the Company. The option price shall be determined in each instance by the Stock Option Committee, in accordance with the terms of this Plan, including, without limitation, under Section 7 hereof. 3. Available Shares. The total number of shares of common stock, par value $0.05, of the Company, for which - 1 - 2 options may be granted shall be One Million (1,000,000) shares, subject to adjustment in accordance with Paragraph 11 of this Plan. Shares subject to the Plan may be either authorized but unissued shares or shares that were once issued and subsequently reacquired by the Company. If any options granted under this Plan are surrendered before exercise or lapse without exercise, in whole or in part, the shares reserved therefor shall revert to the option pool and shall continue to be available under the Plan. No one employee of the Company may be granted options to acquire, in the aggregate, more than 300,000 shares of Common Stock under this Plan. If any option granted under this Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part or shall be repurchased by the Company, the shares subject to such option shall be included in the determination of the aggregate number of shares of common stock deemed to have been granted to such employee under this Plan. 4. Administration. The Plan shall be administered by the Stock Option Committee (hereinafter, the "Committee"), which shall consist of two or more members appointed by the Board of Directors of the Company; provided, however that the Plan shall be administered: (I) to the extent required by applicable regulations under Section 162(m) of the Internal Revenue Code of 1986, by two or more "outside directors" (as defined in applicable regulations thereunder) and (ii) to the extent required by Rule 16b-3 promulgated under the Securities Exchange Act of 1934 or any successor provision ("Rule 16b-3"), by a - 2 - 3 disinterested administrator or administrators within the meaning of Rule 16b-3. The Board may at any time and from time to time thereafter appoint additional or substitute members of the Committee and may fill vacancies on the Committee, however caused. No person shall be a member of the Committee who is not a Director of the Company. In the event no Committee is appointed, the Board shall act as the Committee and all references in this Plan to the Committee shall mean the Board. If a Committee is appointed but under applicable law does not have authority to undertake any duty stated herein, the Board shall act as and for the Committee for the purpose of undertaking that particular duty. The Committee shall choose one of its members as Chair and shall hold meetings at such times and places as it deems advisable. A majority of the members of the Committee shall constitute a quorum, and any action may be taken by a majority of those present and voting at any meeting. Subject to the provisions of this Plan, the Committee shall have authority in its discretion to determine the employees of the Company to whom options shall be granted, the number of shares to be covered by each option, the time or times at which options shall be granted, the purchase price of the stock covered by each option, the time or times during the term of option (defined in Section 9) at which each such option shall become exercisable, the form of agreement to be used in granting the options, and shall further have the authority to interpret this Plan, and to prescribe, amend and rescind rules and - 3 - 4 regulations relating to it. All questions of interpretation and application of this Plan and of any options issued under it shall be determined by the Committee, and such determination shall be final and binding upon all persons. No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. 5. Grant of Options. The Committee may from time to time grant options to eligible persons pursuant to the provisions of this Plan. Each option so granted shall be evidenced by an Option Agreement, in such form as may be approved by the Committee, which Agreement shall be duly executed and delivered on behalf of the Company and by the optionee to whom such option is granted. The Agreement may contain such terms, provisions, and conditions not inconsistent with the Plan as may be determined by the Committee, including restrictions to be imposed on the shares acquired by a participant upon the exercise of an option granted to him. The grant of an option under this Plan shall be effective as of the date of the vote of the Stock Option Committee of the Board of Directors of the Company to issue such an option. The granting of options under this Plan shall be entirely discretionary and nothing in this Plan shall be deemed to give any employee any right to participate in this Plan or to receive options. The grant of an option under this Plan confers no right upon the optionee with respect to the continuation of his - 4 - 5 employment with the Company or a subsidiary of the Company. Nothing contained in this Plan or any option agreement issued hereunder shall be construed as interfering with or restricting the right of the Company or its subsidiary or the optionee to terminate his employment at any time. 6. Eligibility and Limitations. Options may be granted pursuant to this Plan only to employees of the Company or of any present or future subsidiary corporation; provided, however, that a person shall be considered to be an employee within the meaning of this Plan if the person has executed a written employment agreement with the Company which provides for the start of active employment within one (1) month of the date of grant of an option. In determining the eligibility of an individual to be granted an option, as well as in determining- the number of shares to be optioned to any individual, the Committee shall consider the responsibilities of the person being considered, the nature and value to the Company or its subsidiaries of his service and accomplishments, his present and potential contribution to the success of the Company or its subsidiaries, and such other factors as the Committee may deem relevant. No option may be granted under this Plan after December 31, 2005. 7. Option Price. The purchase price of the stock covered by an option granted pursuant to this Plan shall be the fair market value of the underlying shares of Common Stock on the date the option is granted. If the Company's common stock is actively traded in - 5 - 6 the established over-the-counter market, the fair market value of such common stock shall be the mean between the bid and asked prices quoted in such over-the-counter market at the close on the date nearest preceding the date of grant. If such common stock is listed on any national exchange, or traded in the Nasdaq National Market, the mean between the high and low sale prices quoted on such exchange or market on the trading day nearest preceding the date of the granting of the option may be taken as such fair market value. If the stock is not publicly traded, the fair market value shall be determined from time to time by the Board of Directors. The full purchase price per share (determined after any appropriate adjustment has been made under the terms of Section 11 of this Plan) shall be paid as provided in Section 8 below. 8. Exercise of Option. Subject to the terms and conditions of this Plan and the Option Agreement, an option granted hereunder shall be exercisable in whole or in part by giving written notice to the Company by mail or in person addressed to Treasurer, Hadco Corporation, 12A Manor Parkway, Salem, New Hampshire 03079, stating the number of shares with respect to which the option is being exercised, accompanied by payment in full for such shares, which payment may be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Committee, through delivery of shares of Common Stock having a fair market value equal as of the date of the exercise to the cash exercise price of the option, or (c) at the - 6 - 7 discretion of the Committee and consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the participant's direction at the time of exercise, or (d) at the discretion of the Committee, by any combination of (a), (b) and (c) above. There shall be no such exercise at any one time as to fewer than one hundred (100) shares or all of the shares then purchasable by the person or persons exercising the option, if fewer than one hundred (100) shares. A copy of such notice shall be provided to Berlin, Hamilton & Dahmen, 73 Tremont Street, Boston, Massachusetts 02108, or to such other counsel as the Company may hereafter designate, and to the Bank of Boston, Shareholder Services Division, Post Office Box 644, Boston, Massachusetts 02102, or to such other Stock Transfer Agent as the Company may hereafter designate. The Transfer Agent shall, on behalf of the Company, prepare a certificate or certificates representing such shares acquired pursuant to exercise of the option, shall register the optionee as the owner of such shares on the books of the Company and shall cause the fully executed certificate(s) representing such shares to be delivered to the optionee as soon as practicable after payment of the option price in full. The holder of an option shall not have any rights of a shareholder with respect to the shares covered by the option, except to the extent that one or more certificates for such shares shall be - 7 - 8 delivered to him upon the due exercise of the option. 9. Term and Transferability of Options. (a) Each option shall become exercisable as provided in each option granted by the Company to the participant and as provided in each respective Option Agreement, but in no event shall the option be exercisable during a period longer than the period beginning with the date of grant and ending not later than ten (10) years from such date of grant. (b) Any option granted pursuant to this Plan shall not be assignable or transferable except by will or by the laws of descent and distribution. During the lifetime of the optionee, any option shall be exercisable only by the optionee to whom the option is granted. Any option granted hereunder shall be null and void and without effect upon the bankruptcy of the optionee to whom the option is granted, or upon any attempted assignment or transfer, including without limitation, any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, trustee process or similar process, whether legal or equitable, upon such option. 10. Termination of Option Rights. (a) In the event an optionee ceases to be an employee of the Company for any reason other than death, retirement with the consent of the Company or disability, any unvested or unexercised options granted to such optionee shall terminate and become void at midnight on the thirtieth day after the date of termination, but in no event later than the specified expiration date of the option. - 8 - 9 (b) In the event that an optionee ceases to be an employee of the Company by reason of his or her disability or death, any option granted to such optionee shall be immediately and automatically accelerated and all previously unexercised options (to the extent that they have not previously been forfeited in accordance with the terms of the individual option agreement) shall vest and be exercisable (by the optionee's personal representative, heir or legatee, in the event of death) during the period ending one hundred eighty (180) days after the date of termination of employment, but in no event later than the specified expiration date of the option. (c) In the event an optionee ceases to be an employee of the Company by reason of his or her retirement with the consent of the Company, any option granted to such employee which had vested as of the date of retirement may be exercised during the period ending ninety (90) days after the date or retirement, but in no event later than the specified expiration date of the option. (d) For purposes of the Plan, a transfer of an employee between the parent Company and a subsidiary company, or between subsidiary companies, shall not be deemed a termination of employment. 11. Adjustments Upon Changes in Capitalization. (a) In the event that the outstanding shares of the Common Stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any reorganization, recapitalization, - 9 - 10 reclassification, stock split-up, combination of shares or dividends payable in capital stock, appropriate adjustments shall be made in the number and kind of shares as to which options may be granted under the Plan and as to which outstanding options or portions thereof then unexercised shall be exercisable, to the end that the proportionate interest of the option holder shall be maintained as before the occurrence of such event. Such adjustment in outstanding options shall be made without change in the total price applicable to the unexercised portion of such options and with a corresponding adjustment in the option price per share. (b) Upon any sale of all or substantially all of the assets of the Company, or upon any merger, consolidation or tender offer in respect of which the stockholders holding all of the Company's outstanding voting securities immediately prior to the consummation thereof hold less then 50% of all of the Company's outstanding voting securities immediately after such consummation (each of the foregoing sale, merger, consolidation or tender offer hereinafter called an "Acquisition"), then the date upon which all then outstanding options granted under this Plan become fully vested and exercisable shall be automatically accelerated to occur immediately prior to the consummation of such Acquisition; provided, however, that any such then outstanding options which are not thereupon exercised in full immediately prior to the consummation of such Acquisition shall thereupon terminate. (c) In the event of a recapitalization or reorganization - 10 - 11 of the Company (other than a transaction described in subsections 11(a) and (b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, an optionee upon exercising an option shall be entitled to receive for the purchase price paid upon such exercise securities he or she would have received if he or she had exercised such option prior to such recapitalization or reorganization. In the event of the proposed dissolution or liquidation of the Company, each option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company. No fractional shares shall be issued under the Plan and the optionee shall receive from the Company cash in lieu of such fractional shares. Upon the happening of any of the events described in this Section 11, the class and aggregate numbers of shares set forth in Section 3 hereof that are subject to options which previously have been or subsequently may be granted under this Plan, as well as the 300,000 figure in Section 3, shall also be appropriately adjusted to reflect the events described in such subparagraphs. The Committee or the Successor Board shall - 11 - 12 determine the specific adjustments to be made under this Section 11 and, subject to Section 2, its determination shall be conclusive. 12. Restrictions on Issuance of Shares. Notwithstanding the provisions of Section 8 of the Plan, the Company shall have no obligation to deliver any certificate or certificates upon exercise of an option until one of the following conditions shall be satisfied: (i) The shares with respect to which the option has been exercised are at the time of the issue of such shares effectively registered under applicable Federal and State securities acts as now in force or hereafter amended; or (ii) Counsel for the Company shall have given an opinion that such shares are exempt from registration under Federal and State securities acts as now in force or hereafter amended; and until the Company has complied with all applicable laws and regulations, including without limitation all regulations required by any stock exchange upon which the Company's outstanding common stock is then listed. The Company shall use its best efforts to bring about compliance with the above conditions within a reasonable time, except that the Company shall be under no obligation to cause a registration statement or a post-effective amendment to any registration statement to be prepared at its expense solely for the purpose of covering the issue of shares in respect of - 12 - 13 which any option may be exercised. Any stock purchased under the Plan prior to shareholder approval of the Plan may not be sold, assigned, transferred, pledged or encumbered in any way and will be held in escrow by the Company until shareholder approval for the Plan is obtained, and if such approval is not obtained by the earlier of (i) the next annual meeting of stockholders of the Company, or (ii) June 30, 1996, the purchase of such stock and any option granted hereunder and this Plan will be automatically rescinded and the purchase price returned to purchasing optionees without interest. 13. Representations of Optionee. The Company may require the optionee to deliver such written warranties and representations upon exercise of the option that the Company deems reasonable or necessary, including without limitation a representation that a purchase of shares under the option is made for investment and not with a view to their distribution (as that term is used in the Securities Act of 1933). 14. Modification of Outstanding Options. The Committee or the Board of Directors may accelerate the exercisability of any outstanding option and may authorize changes to any outstanding option with the consent of the participant (including, without limitation, to extend the term of an option upon termination of employment to a date not later than ten (10) years from the original grant date) when and subject to such conditions as are deemed to be in the best interests of the Company and in accordance with the purposes of the Plan. - 13 - 14 15. Approval of Stockholders. The Plan shall be subject to approval by the affirmative vote of stockholders holding at least a majority of the voting stock of the Company voting in person or by proxy at or by the earlier of (i) the next annual meeting of stockholders of the Company, or (ii) June 30, 1996, and the Plan shall take effect as of the date of adoption immediately upon such approval. 16. Termination and Amendment of Plan. The Plan shall expire at the end of the business day on December 31, 2005 (except as to options outstanding on that date). The Board may at any time terminate the Plan or make such modification or amendment thereof as it deems advisable; provided, however, that except as provided in Section 11 the Board may not, without approval of the stockholders of the Company obtained in the manner stated in Section 15 (without regard to clauses (i) and (ii) therein), increase the maximum number of shares for which options may be granted under the Plan. To the extent required by Rule 16b-3, any other amendments to this Plan shall be approved by the stockholders of the Company in the manner stated in Section 15 (without regard to clauses (i) and (ii) therein). Termination or any modification or amendment of the Plan shall not, without consent of a participant, affect his rights under an option previously granted to him. 17. Withholding of Additional Income Taxes. Upon any exercise of any option or the vesting or transfer of restricted stock or securities acquired on the exercise of an option hereunder, or the making of a distribution or other payment with - 14 - 15 respect to such stock or securities, the Company may withhold taxes in respect of amounts that constitute compensation includable in gross income. The Committee in its discretion may condition (i) the exercise of an option, or (ii) the vesting or transferability of restricted stock or securities acquired by exercising an option, on the optionee's making satisfactory arrangement for such withholding. Such arrangement may include payment by the optionee in cash or by check of the amount of the withholding taxes or, at the discretion of the Committee, by the optionee's delivery of previously held shares of Common Stock or the withholding of shares from the shares of Common Stock otherwise deliverable upon exercise of an option, with such shares in each case having an aggregate fair market value equal to the amount of such withholding taxes. -15- EX-10.2 3 FORM OF OPTION AGREEMENT 1 Exhibit 10.2 FORM OF OPTION AGREEMENT AGREEMENT made this day of , 19 , by and between Hadco Corporation, a Massachusetts corporation with a usual place of business in Salem, New Hampshire (hereinafter the "Company"), and , of (hereinafter the "Optionee"). This Agreement and the option granted hereunder are pursuant to and subject to the terms and conditions of the Company's November 29, 1995 Non-Qualified Stock Option Plan (the "Plan") as Amended and Restated on April 7, 1998 and as it may be amended from time to time, a copy of which has been made available to the Optionee. Unless the context otherwise requires, terms used herein shall have the same meaning as in the Plan. Section 1. Grant of Option. The Company grants to the Optionee an option to purchase, on the terms and conditions hereinafter set forth, ( ) shares (the "Option Shares") of the Company's Common Stock, $0.05 par value, at the option price of and /100 ($ ) Dollars per share. This option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code. Section 2. Period of Option. (a) Vesting. The 2 right to exercise this option and purchase the Option Shares shall vest in installments as set forth below, unless earlier terminated in accordance with the provisions of Section 2(c) hereof.
Cumulative Percent of Option Shares That May Be Purchased Date of Vesting 50 Two Year Anniversary of Date of Grant 75 Three Year Anniversary of Date of Grant 100 Four Year Anniversary of Date of Grant
(b) Expiration. The option granted hereunder shall expire on the ten year anniversary of the date of grant of the option. (c) Termination. (1) Any unvested or unexercised option granted hereunder shall terminate and become void at midnight on the thirtieth (30th) day after the Optionee's employment with the Company is terminated for any reason other than disability, death, or retirement with the consent of the Company, but in no event may the option be exercised later than the specified expiration date of the option. (2) In the event the employment of the Optionee terminates by reason of his disability or death, the option granted hereunder to such Optionee shall be immediately and automatically accelerated and to the extent such option is unexercised, it shall vest and be exercisable (by the 3 Optionee's personal representative, heir, or legatee, in the event of death) during the period ending one hundred eighty (180) days after the date of termination of employment, but in no event later than the specified expiration date of the option. For purposes of this Agreement, the Optionee's employment shall always be deemed to have been terminated due to disability if (a) the Optionee's employment is terminated by either the Company or the Optionee; (b) at the time of such termination, the Optionee is unable to work due to sickness or injury and is totally disabled, either physically or mentally; (c) the Optionee is unable to substantially perform any gainful employment for a period of five (5) consecutive months, including the time of termination; and (d) the Optionee applies for and is approved for disability payments by the Social Security Administration of the United States government. The date of any such disability shall be the first day of such consecutive period during which the Optionee was unable, due to his physical or mental condition, to substantially perform any gainful employment. (3) In the event the employment of the Optionee terminates by reason of his retirement with the consent of the Company, any option granted hereunder which had vested as of the date of retirement may be exercised during the period ending ninety (90) days after the date of retirement, but in no event later than the specified expiration date of 4 the option. (4) For purposes of this Agreement, a transfer of the Employee between the parent Company and a subsidiary company, or between subsidiary companies, shall not be deemed a termination of employment. Section 3. Limitations on Right to Exercise Option. Notwithstanding anything elsewhere in this Option Agreement to the contrary, except the provisions of Section 2(c), the right to exercise this option shall be subject to the following limitations: (a) This option may not be exercised unless the Optionee, at the time he exercises this option, is an employee of one or more of the Company, a parent corporation or a subsidiary of the Company and has been such an employee at all times since the date of this Agreement. If this option shall be assumed or a new option substituted therefor as a result of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation, then employment by such assuming or substituting corporation (hereinafter called the "Successor Corporation") or by a parent corporation or a subsidiary thereof shall be considered for purposes of this option to be employment by the Company. (b) This option must be exercised for a minimum of one hundred (100) shares, or for all of the shares then purchasable hereunder if less than one hundred (100) shares, and no fractional shares may be purchased under this option. 5 Section 4. Exercise of Option. (a) Method of Exercise of Option. This option may be exercised by giving written notice to the Company by mail or in person addressed to Treasurer, Hadco Corporation, 12A Manor Parkway, Salem, New Hampshire 03079, specifying the number of Option Shares being purchased, accompanied by payment of the full option price of the shares being purchased. A copy of such notice shall be provided to Berlin, Hamilton & Dahmen, 73 Tremont Street, Boston, Massachusetts 02108, or to such other counsel as the Company may hereafter designate, and to the Bank of Boston, Shareholder Services Division, Post Office Box 644, Boston, Massachusetts 02102, or to such other Stock Transfer Agent as the Company may hereafter designate. The price for the Option Shares shall be payable (a) in U.S. Dollars in cash, or (b) through delivery of shares of Common Stock having a fair market value equal as of the date of the exercise to the cash exercise price of the option, or (c) consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the participant's direction at the time of exercise, or (d) by any combination of (a), (b) and (c) above. The holder of an option shall not have any rights of a shareholder with respect to the shares covered by the option, except to the 6 extent that one or more certificates for such shares shall be delivered to him upon the due exercise of the option. (b) Delivery of Stock Certificates Upon Exercise. Upon each exercise of this option and the satisfaction of all conditions set forth in the option, the Transfer Agent shall, on behalf of the Company, mail or deliver to the Optionee, as promptly as practicable, a stock certificate or certificates representing the Option Shares then being purchased. The Company will pay all stamp taxes due or payable in connection with the issuance of the certificates. Such certificates may bear statements relating to the non-registration of such shares under the Securities Act of 1933, and the rights, privileges and limitations of Common Stock, par value $0.05, of the Company, as set forth in the Restated Articles of Organization, as amended. (c) Restrictions on Issuance of Shares. Notwithstanding the foregoing, the Company shall not be obligated to deliver any such certificate or certificates upon exercise of this option until one of the following conditions shall be satisfied: (i) The shares with respect to which the option has been exercised are at the time of the issue of such shares effectively registered under applicable Federal and State securities acts as now in force or hereafter amended; or (ii) Counsel for the Company shall have given an opinion that such shares are exempt from registration under applicable Federal and State securities acts as now in force or hereafter amended; and until the 7 Company is in compliance with all applicable laws and regulations, including without limitation all regulations required by any stock exchange upon which the Company's outstanding Common Stock is then listed. The Company shall use its best efforts to bring about compliance with the above conditions within a reasonable time, except that the Company shall be under no obligation to cause a registration statement or a post-effective amendment to any registration statement to be prepared at its expense solely for the purpose of covering the issue of shares in respect of which any option may be exercised. (d) Agreement to Purchase for Investment. By acceptance of this option, the Optionee agrees that a purchase of shares under this option will be made for investment and will not be made with a view to their distribution, as that term issued in the Securities Act of 1933, as amended, unless in the opinion of counsel for the Company such distribution is in compliance with or exempt from registration and prospectus requirements of the Act. The Optionee agrees, if necessary, to sign a certification to such effect at the time of exercising the option and agrees that the certificate for the shares so purchased may be inscribed with a legend to ensure compliance with the Securities Act of 1933 and with any other applicable securities laws. Section 5. Adjustments Upon Changes in Capitalization. (a) In the event that the outstanding shares of the 8 Common Stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any reorganization, recapitalization, reclassification, stock split-up, combination of shares or dividends payable in capital stock, appropriate adjustments shall be made in the number and kind of shares as to which outstanding options or portions thereof then unexercised shall be exercisable, to the end that the proportionate interest of the Optionee shall be maintained as before the occurrence of such event. Such adjustment in outstanding options shall be made without change in the total price applicable to the unexercised portion of such options and with a corresponding adjustment in the option price per share. (b) Upon any sale of all or substantially all of the assets of the Company, or upon any merger, consolidation or tender offer in respect of which the stockholders holding all of the Company's outstanding voting securities immediately prior to the consummation thereof hold less than 50% of all of the Company's outstanding voting securities immediately after such consummation (each of the foregoing sale, merger, consolidation or tender offer hereinafter called an "Acquisition"), then the date upon which all then outstanding options granted under the Plan become fully vested and exercisable shall be automatically accelerated to occur immediately prior to the consummation of such Acquisition; provided, however, that any such then 9 outstanding options which are not thereupon exercised in full immediately prior to the consummation of such Acquisition shall thereupon terminate. (c) In the event of a recapitalization or reorganization of the Company (other than a transaction described in subsections 5(a) and (b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, the Optionee upon exercising this option shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised such option prior to such recapitalization or reorganization. In the event of the proposed dissolution or liquidation of the Company, the option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to the option. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company. No fractional shares shall be issued and the Optionee shall receive from the Company cash in lieu of such fractional shares. The Committee or the Successor Board 10 shall determine the specific adjustments to be made under this Section 5 and, subject to the Plan, its determination shall be conclusive. Section 6. Effect Upon Employment. The grant of this option confers no right upon the Optionee with respect to the continuation of his employment with the Company or a subsidiary of the Company. Nothing contained herein shall be construed as interfering with or restricting the right of the Company or its subsidiary or of the Optionee to terminate his employment at any time. Section 7. Non-Transferability. This option shall not be assignable or transferable except by will or by the laws of descent and distribution. During the lifetime of the Optionee, this option shall be exercisable only by the Optionee. This option shall be null and void and without effect upon the bankruptcy of the Optionee, or upon any attempted assignment or transfer, including without limitation, any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, trustee process or similar process, whether legal or equitable, upon such option. Section 8. Notices. Any notice permitted or required under this Option Agreement shall be sufficient if made in writing and mailed, postage prepaid, or delivered in hand to the parties as follows: (a) as to the Company, to its Treasurer at the principal office of the Company; and (b) as to the Optionee, at the address listed for the Optionee on 11 the books of the Company or the books of the Stock Transfer Agent, or (c) as to either party, at such other address as shall be designated by the addressee in a written notice to the other complying as to delivery with the terms of this Section 8. Section 9. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of Massachusetts. Section 10. Modification of Outstanding Options. The Stock Option Committee of the Company's Board of Directors or the Company's Board of Directors may accelerate the exercisability of any outstanding option and may authorize changes to any outstanding option with the consent of the Optionee when and subject to such conditions as are deemed to be in the best interests of the Company and in accordance with the purposes of the Company's November 29, 1995 Non-Qualified Stock Option Plan. Section 11. Entire Agreement. This Agreement contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and may not be modified or amended, nor may any provisions hereof be waived, except by a further written agreement duly signed by each of the parties. Section 12. Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns; provided, however, 12 that as respects the Optionee, this Agreement is deemed to be personal in nature and may not be assigned or transferred. Section 13. Interpretation and Construction. Any interpretation or construction of this Option Agreement by the Company's Board of Directors, or a duly authorized committee appointed by the Board, shall be final and conclusive. The section headings are for convenience of reference only and shall not be deemed germane to the interpretation or construction of this Option Agreement. Section 14. Survival. All representations, warranties and acknowledgments made in this Agreement shall survive the delivery of the certificate or certificates representing the shares purchased pursuant to the exercise of the option granted herein. Section 15. Withholding Taxes. If the Company in its discretion determines that it is obligated to withhold any tax in connection with the exercise of this option, or in connection with the transfer of, or the lapse of restrictions on, any Common Stock or other property acquired pursuant to this option, the Optionee hereby agrees that the Company may withhold from the Optionee's wages or other remuneration the appropriate amount of tax. At the discretion of the Company, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from the Common Stock or other property otherwise deliverable to the Optionee on exercise 13 of this option. The Optionee further agrees that, if the Company does not withhold any amount from the Optionee's wages or other remuneration sufficient to satisfy the withholding obligation of the Company, the Optionee will make reimbursement on demand, in cash, for the amount withheld. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. Witnesses: Hadco Corporation - -------------------------- ----------------------------- - -------------------------- ------------------------------ Optionee Stock.OptionAgr.6.98 (B) EX-10.3 4 STOCK PURCHASE AGREEMENT 1 Exhibit 10.3 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (the "Agreement"), to be effective as of March 20, 1998, by and between Hadco Corporation ("Hadco") and Frederick G. McNamee, III, an individual ("Purchaser") . 1. Terms of Purchase. Subject to the other terms and conditions of this Agreement, the Purchaser hereby agrees to purchase from Hadco, and Hadco hereby agrees to sell to the Purchaser, forty thousand (40,000) shares of the common stock of Hadco, $0.05 par value (the "Shares"), for the sum of One Million Four Hundred Eighty Thousand Dollars ($1,480,000.00), or $37.00 per share, based on the fair market value of the Shares (measured as the average between the high and low trading prices of Hadco's common stock on the last business day immediately preceding the effective date set forth above). Payment for the Shares shall be in lawful money of the United States of America in the form of cash, check or similar negotiable instrument. Upon such payment and satisfaction of all conditions set forth in this Agreement, Hadco's transfer agent, BankBoston/Boston EquiServe Services, shall on behalf of Hadco, mail or deliver to the Purchaser, as promptly as practicable, a stock certificate or certificates representing the Shares being purchased. 2. Representations and Warranties of Purchaser. As an inducement to Hadco to sell the Shares to the Purchaser, the Purchaser represents and warrants to Hadco as follows, intending that such representations and warranties will survive the admission of the Purchaser as a stockholder of Hadco: (a) The Purchaser is over 21 years of age and is legally competent to execute this Agreement. (b) The Purchaser has carefully reviewed and understands the risks of an investment in Hadco, is able to bear the economic risks of an investment in Hadco, can withstand a complete loss of his investment in the Shares, can hold the Shares for an indefinite period of time and has the net worth to undertake these risks. (c) The Purchaser, either alone or together with the assistance of the Purchaser's own professional advisor or advisors, has the knowledge and experience in business and financial matters that make the Purchaser capable of reading and interpreting financial statements of and concerning Hadco and of evaluating the merits and risks of an investment in the Shares. The Purchaser is an "Accredited Investor" as such term is defined in Regulation D of the Securities Act of 1933, as amended (the "Securities Act"). (d) The Purchaser understands that an investment in the Shares is highly speculative, but believes that an investment in the Shares is suitable for the Purchaser based upon his investment objectives and financial needs, and the Purchaser has adequate 2 -2- means for providing for his current financial needs and personal contingencies and has no need for liquidity of investment with respect to the Shares. (e) The Purchaser is acquiring the Shares for purposes of long-term investment, for the personal account of the Purchaser, and with no present intention of reselling, distributing or otherwise transferring the Shares or any portion of the Shares, and the Purchaser has no contract, undertaking or arrangement with any person or entity to sell or transfer all or any portion of the Shares to that person or entity, or to have that person or entity sell for him all or any portion of the Shares, or to afford or allow any participation in the Shares by any other person or entity. (f) The Purchaser understands and acknowledges that the Shares will be lettered or restricted stock, that the Shares are being offered and sold under the exemption to registration provided in Section 3(b) of the Securities Act and Regulation D promulgated thereunder and/or Section 4(2) of the Securities Act, and that this transaction has not been reviewed or passed upon by any federal or state agency. The Purchaser further understands and acknowledges that each certificate of Shares issued in connection with this Agreement shall contain the following restrictive legends: 1. "The Shares represented by this certificate are subject to restrictions on transfer contained in the terms and conditions of the Stock Purchase Agreement by and between Hadco Corporation and Frederick G. McNamee, III, dated March __, 1998." 2. "The Shares represented by this certificate have not been registered under the Securities Act of 1933. These Shares have been acquired for investment and not with a view to distribution or resale, and may not be sold, mortgaged, pledged, hypothecated or otherwise transferred without an effective registration statement of such Shares under the Securities Act of 1933, or an opinion of counsel for Hadco Corporation that registration is not required under such Act." (g) The Purchaser realizes that (i) the purchase of the Shares is a long-term investment; (ii) the Purchaser must bear the economic risk of investment for an indefinite period of time because the Shares have not been registered and, therefore, cannot be sold unless they are subsequently registered or exemptions from registration are available; (iii) there presently is no public market for the Shares, and the Purchaser may not be able to liquidate his investment in the Shares in the event of an emergency or to pledge the Shares as collateral for loans; and (iv) the transferability of the Shares is restricted, and (A) requires the written consent of Hadco, (B) requires conformity with the restrictions contained in paragraph (f) above, (C) will be further restricted by legends placed on the certificate representing the Shares referring to the applicable restrictions on transferability, and (D) may be subject to a stop transfer order until such time as transfer 3 -3- of the Shares may be effected without violation of all applicable state and federal securities laws. (h) The Purchaser has been furnished materials relating to Hadco (or these materials have been made available to the Purchaser), including the annual report of Hadco for its most recent fiscal year, the proxy statement used in connection with the annual meeting of Hadco following its most recent fiscal year, the reports filed with the Securities and Exchange Commission for the periods covering the most recent completed fiscal year of Hadco, all reports filed since the end of that year and any other materials that the Purchaser has requested. (i) The Purchaser has been given access to full and complete information regarding Hadco and has utilized that access to his satisfaction for the purpose of obtaining information concerning Hadco, an investment in the Shares and the terms and conditions of the offering of the Shares for the purpose of asking questions of, and receiving answers from, Hadco representatives concerning Hadco, an investment in the Shares and the terms and conditions of the offering, and for the purpose of obtaining any additional information (to the extent reasonably available) that is necessary to verify the information provided. (j) The Purchaser has obtained, in his judgment, sufficient information to understand the business in which Hadco is engaged and to evaluate the merits and risks of an investment in Hadco. (k) The Purchaser confirms that he has been advised that he should rely on his own professional accounting, tax, legal and financial advisors with respect to an investment in Hadco and a purchase of the Shares, and obtained, to the extent he deems necessary, the Purchaser's own personal professional advice with respect to both the risks inherent in an investment in the Shares and the suitability of an investment in the Shares in light of the Purchaser's financial condition and investment needs. (l) The Purchaser certifies, under the penalties of perjury, that he is NOT subject to the backup withholdings provisions of Section 3406 (a) (1) (c) of the Internal Revenue Code of 1986. The Purchaser understands that he would be subject to backup withholding if (i) he failed to furnish his Social Security number or taxpayer identification number in this Agreement; (ii) the Internal Revenue Service notified Hadco that the Purchaser furnished an incorrect Social Security number or taxpayer identification number; (iii) the Purchaser was notified that he is subject to backup withholding; or (iv) the Purchaser failed to certify that he is not subject to backup withholding or failed to certify his Social Security number or taxpayer identification number. 4 -4- (m) The address set forth below is the Purchaser's true and correct residence, and he has no present intention of becoming a resident of any other state or jurisdiction. (n) All of the information that the Purchaser has furnished to Hadco, or that is set forth herein, or that is contained in any purchaser questionnaire that has been provided to Hadco in connection with this Agreement, is correct and complete as of the date hereof, and, if there should be any material change in the information prior to the admission of the Purchaser as a stockholder of Hadco, the Purchaser will immediately furnish the revised or corrected information to Hadco. 3. Indemnification. The Purchaser acknowledges that he understands the meaning and legal consequences of the representations and warranties contained herein and agrees to indemnify Hadco and hold it harmless from and against any and all loss, damage, expense, or liability due to, or arising out of, any breach of any representation or warranty of the Purchaser contained herein. 4. Assignment. The Purchaser acknowledges and agrees that he may not transfer or assign this Agreement, or any interest in this Agreement, and that any such purported assignment shall be null and void. 5. Survival of Agreement. The Purchaser understands and agrees that this Agreement will survive the death or disability of the Purchaser, except as provided in the following paragraph. 6. Termination of Agreement. If any one or more of the representations and warranties of the Purchaser contained herein are not true prior to the purchase of the Shares by the Purchaser, and written notice of that fact has been given to Hadco, then and in any of such events this Agreement shall be null and void and of no further force or effect, and neither party shall have any rights against the other party hereunder, this Agreement will be canceled, and the payment for the Shares will be returned to the Purchaser. 7. Notice. All notices or other communications given or made hereunder shall be in writing and delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the Purchaser at the address set forth below, and to Hadco at 12A Manor Parkway, Salem, NH 03079, with copies to James C. Hamilton, Clerk, Berlin, Hamilton & Dahmen, LLP, 73 Tremont Street, Boston, MA 02108. 8. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and may be amended only by a writing executed by all of the parties hereto. 5 -5- 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. Dated this 20th day of March, 1998. /s/ Rick McNamee ------------------------------------ Frederick G. McNamee, III SS# -------------------------------- Address: ---------------------------- ------------------------------------ HADCO CORPORATION By: /s/ Andrew E. Lietz --------------------------------- Andrew E. Lietz President, CEO EX-10.4 5 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.4 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement"), to be effective as of the Effective Time (as defined in an Agreement and Plan of Merger (the "Acquisition Agreement") dated as of the date hereof (as it may be amended) among Hadco Corporation, a Massachusetts corporation ("Hadco"), Hadco Acquisition Corp. II, a Delaware corporation ("Sub"), and Continental Circuits Corp., a Delaware corporation ("Continental")), by and between Hadco and Frederick G. McNamee, III, an individual ("Employee"). Whereas, Employee is currently the chief executive officer and president of Continental; and Whereas, the Acquisition Agreement contemplates the acquisition by Sub of all of the outstanding capital stock of Continental, with a subsequent merger of Sub into Continental, and the renaming of the Surviving Corporation (as defined in the Acquisition Agreement) to be Hadco Phoenix, Inc. ("Hadco Phoenix"); and Whereas, in connection with the acquisition, Employee has agreed to serve as an employee of Hadco upon the terms and conditions set forth herein. Now, therefore, in consideration of the premises and for good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT AND DUTIES. Hadco agrees to employ Employee on a full-time basis, subject to the terms and conditions provided herein, and Employee agrees to accept such full-time employment upon said terms and conditions. Employee's initial title shall be Senior Vice President, Hadco Phoenix, in which capacity Employee shall have general responsibility for the activities and operations of Hadco Phoenix and all of its direct wholly-owned subsidiaries, subject to the direction and control of Hadco's chief executive officer. Although Employee understands that his duties will include a substantial amount of business travel, during the entire term of employment, he shall be based in the Phoenix, Arizona, area, unless otherwise agreed between the parties in the future. Employee's employment shall be subject to the standard terms, conditions, and policies applicable to all Hadco employees, as such terms, conditions and policies may exist from time to time. 2. TERM. The term of employment under this Agreement (the "Term") shall commence on the Effective Time and shall continue for a period of two years, unless earlier terminated as set forth in Section 5 below. 3. COMPENSATION. a. BASE SALARY. Hadco agrees to pay Employee a base salary, before deducting all applicable withholdings, at the annual rate of $235,000 (the "Base Salary"), which shall be payable in accordance with Hadco's standard executive payroll policies as they may be revised from time to time. The Base Salary may be increased during the Term hereof at the discretion of the chief executive officer of Hadco. b. BONUS. Employee shall be eligible to participate in the bonus programs of Hadco applicable to senior executives, as such programs may exist from time to time. c. STOCK OPTIONS. Employee shall be granted non-qualified stock options to purchase 40,000 shares of Hadco common stock, pursuant to and subject to the terms and provisions of Hadco's Non-Qualified Stock Option Plan of November 29, 1995, at the fair market value of such stock as of the last business day immediately preceding the Effective Time. Such option shall be evidenced by a Stock Option Agreement in the form customarily utilized by Hadco for such grants. 2 -2- d. BENEFITS. Employee shall be accorded such benefits as are customarily enjoyed by senior executives of Hadco. 4. INVESTMENT. Employee agrees to purchase from Hadco, on the Effective Time, 40,000 shares of Hadco common stock at the fair market value of such stock (measured as the average between the high and low trading prices of Hadco's common stock on the last business day immediately preceding the Effective Time), which shares will not have been registered under the Securities Act of 1933, as amended. Employee understands and agrees that such shares will not be salable on the open market, and Employee represents and warrants that he is purchasing such shares for investment purposes and not with a view to distribution, and that he is an "Accredited Investor" (as such term is defined in Regulation D of the Securities Act of 1933, as amended). Employee agrees that certificates representing such shares shall bear appropriate restrictive legends, and further agrees that the shares may be subject to a stop transfer order until such time as transfer of the shares may be effected without violation of state or federal securities laws. 5. SEVERANCE. If, during the Term hereof, Employee's employment is terminated by Hadco without cause, or is terminated by Employee for Good Reason (as defined herein), Employee shall be paid his full Base Salary for the remainder of the Term. For purposes of this Agreement, the following definitions shall apply: (a) CAUSE. Hadco shall have "cause" to terminate Employee's employment in the event of (i) Employee's willful and continued failure to substantially perform his duties (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered by Hadco which demand specifically identifies the manner in which Employee has not substantially performed his duties, or (ii)(x) Employee shall have been guilty of any act or acts of dishonesty constituting a felony, or (y) Employee shall have violated any provision of any confidentiality, nondisclosure, assignment of invention, noncompetition or similar agreement entered into by him in connection with his employment by Hadco. For purposes of this subsection, no act or failure to act on the part of Employee shall be deemed "willful" unless done or omitted to be done by Employee not in good faith and without reasonable belief that his action or omission was in the best interest of Hadco. (b) GOOD REASON. "Good Reason" shall mean, without Employee's consent, the occurrence of the following: (i) any significant diminution in Employee's position, duties, responsibilities, power, title or office; (ii) any reduction in Employee's annual base salary; or (iii) any requirement by Hadco that the location at which Employee performs his principal duties be outside a radius of 30 miles from Phoenix. 6. NON-COMPETITION; NON-SOLICITATION. a. NON-COMPETE. Employee agrees that he will not, during the Term, directly or indirectly, engage in (whether as an officer, employee, consultant, director, proprietor, agent, partner or otherwise) or have any ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business that engages in competition with Hadco or any of its subsidiaries or affiliates in the business of manufacture or sale of printed circuit boards or of other electronic interconnect products, or in the development of technologies for such businesses. The territory to which this restriction shall apply shall be worldwide. It is agreed that ownership of no more than 1% of the outstanding voting stock of a publicly traded corporation shall not constitute a violation of this provision. b. CONFIDENTIAL INFORMATION. Employee acknowledges that Employee may receive, or contribute to the production of, Confidential Information. For purposes of this Agreement, Employee 3 -3- agrees that "Confidential Information" shall mean information or material proprietary to Hadco or any of its direct or indirect subsidiaries or designated as Confidential Information by Hadco and not generally known by non-Hadco personnel, which Employee develops or of or to which Employee may obtain knowledge or access through or as a result of Employee's relationship with Hadco or any of its direct or indirect subsidiaries (including information conceived, originated, discovered or developed in whole or in part by Employee). Confidential Information includes, but is not limited to, the following types of information and other information of a similar nature (whether or not reduced to writing) related to Hadco's business: discoveries, inventions, ideas, concepts, research, development, processes, procedures, "know-how", formulae, marketing techniques and materials, marketing and development plans, business plans, customer names and other information related to customers, price lists, pricing policies, methods of operation, financial information, employee compensation, and computer programs and systems. Confidential Information also includes any information described above which Hadco or any of its direct or indirect subsidiaries obtains from another party and which Hadco treats as proprietary or confidential, or designates as Confidential Information, whether or not owned by or developed by Hadco. Employee acknowledges that the Confidential Information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. Information publicly known without breach of this Agreement that is generally employed by the trade at or after the time Employee first learns of such information, or generic information or knowledge which Employee would have learned in the course of similar employment or work elsewhere in the trade, shall not be deemed part of the Confidential Information. Employee further agrees: (1) To furnish Hadco on demand, at any time during or after employment, a complete list of the names and addresses of all present, former and potential suppliers, customers and other contacts gained while an employee of Hadco in Employee's possession, whether or not in the possession or within the knowledge of Hadco. (2) That all notes, memoranda, electronic storage, documentation and records in any way incorporating or reflecting any Confidential Information shall belong exclusively to Hadco, and Employee agrees to turn over all copies of such materials in Employee's control to Hadco upon request or upon termination of Employee's employment with Hadco. (3) That while employed by Hadco and thereafter Employee will hold in confidence and not directly or indirectly reveal, report, publish, disclose or transfer any of the Confidential Information to any person or entity, or utilize any of the Confidential Information for any purpose, except in the course of Employee's work for Hadco. (4) That any idea in whole or in part conceived of or made by Employee during the term of his employment, consulting, or similar relationship with Hadco which relates directly or indirectly to Hadco's current or planned lines of business and is made through the use of any of the Confidential Information or any of Hadco equipment, facilities, trade secrets or time, or which results from any work performed by Employee for Hadco, shall belong exclusively to Hadco and shall be deemed a part of the Confidential Information for purposes of this Agreement. Employee hereby assigns and agrees to assign to Hadco all rights in and to such Confidential Information whether for purposes of obtaining patent or copyright protection or otherwise. Employee shall acknowledge and deliver to Hadco, without charge to Hadco (but at its expense) such written instruments and do such other acts, including giving testimony in support of Employee's authorship or inventorship, as the case may be, necessary in the opinion of Hadco to obtain patents or copyrights or to otherwise protect or vest in Hadco the entire right and title in and to the Confidential Information. c. NON-SOLICITATION. During the Term and for a period of one year thereafter, Employee agrees that he shall not (for the purpose of or which results in competition with Hadco or any of its affiliates or subsidiaries) either solicit any persons or companies who were customers, clients, suppliers or business patronage of Hadco during the Term or prior thereto or of any of its predecessors, affiliates or 4 -4- subsidiaries or use any Confidential Information; nor will he solicit for any purpose the employment of any employees of Hadco or any of its affiliates or subsidiaries during the Term or for a period of one year thereafter. d. INJUNCTIONS. It is agreed that the restrictions contained in this Section 6 are reasonable, but it is recognized that damages in the event of the breach of any of the restrictions will be difficult or impossible to ascertain; and, therefore, Employee agrees that, in addition to and without limiting any other right or remedy Hadco may have, Hadco shall have the right to an injunction against Employee issued by a court of competent jurisdiction enjoining any such breach without showing or proving any actual damage to Hadco. e. PART OF CONSIDERATION. Employee also agrees, acknowledges, covenants, represents and warrants that he is fully and completely aware that, and further understands that, the foregoing restrictive covenants are an essential part of the consideration for Hadco entering into this Agreement and that Hadco is entering into this Agreement in full reliance on these acknowledgments, covenants, representations and warranties. f. TIME AND TERRITORY REDUCTION. If the period of time and/or territory described above are held to be in any respect an unreasonable restriction, it is agreed that the court so holding may reduce the territory to which the restriction pertains or the period of time in which it operates or may reduce both such territory and such period, to the minimum extent necessary to render such provision enforceable. g. APPLICABILITY TO SUBSIDIARIES. As used in this Section, Hadco shall mean and include Hadco Corporation and all or its direct or indirect subsidiaries. h. SURVIVAL. The obligations described in this Section 6 shall survive any termination of this Agreement, except for a termination under Section 14 hereof, or any termination of the employment relationship created hereunder. 7. GOVERNING LAW AND VENUE. Arizona law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be in courts located in Maricopa County, Arizona. 8. CONSTRUCTION. The language in all parts of this Agreement shall in all cases be construed as a whole according to its fair meaning and not strictly for nor against any party. The Section headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. All terms used in one number or gender shall be construed to include any other number or gender as the context may require. The parties agree that each party has reviewed this Agreement and has had the opportunity to have counsel review the same and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Agreement or any amendment or any exhibits thereof. 9. NONDELEGABILITY OF EMPLOYEE'S RIGHTS AND HADCO ASSIGNMENT RIGHTS. The obligations, rights and benefits of Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. This Agreement shall be assigned automatically to any entity merging with or acquiring Hadco or its business. 10. SEVERABILITY. If any term or provision of this Agreement is declared by a court of competent jurisdiction to be invalid or unenforceable for any reason, this Agreement shall remain in full force and effect, and either (a) the invalid or unenforceable provision shall be modified to the minimum extent necessary to make it valid and enforceable or (b) if such a modification is not possible, this Agreement shall be interpreted as if such invalid or unenforceable provision were not a part hereof. 11. ATTORNEYS' FEES. Except as otherwise provided herein, if any party hereto institutes an action or other 5 -5- proceeding to enforce any rights arising out of this Agreement, the party prevailing in such action or other proceeding shall be paid all reasonable costs and attorneys' fees by the non-prevailing party, such fees to be set by the court and not by a jury and to be included in any judgment entered in such proceeding. 12. NOTICES. All notices required or permitted hereunder shall be in writing and shall be deemed duly given, upon receipt, if either personally delivered, sent by certified mail, return receipt requested, or sent by a nationally-recognized overnight courier service, addressed to the parties as follows:
IF TO HADCO: Hadco Corporation 12A Manor Parkway Salem, NH Attention: Chief Executive Officer With a copy to: Testa, Hurwitz &Thibeault, LLP Attention: Stephen A. Hurwitz 125 High Street Boston, MA 02110 IF TO EMPLOYEE: Frederick G. McNamee, III Hadco Phoenix Inc. 3502 East Roeser Road Phoenix, AZ 85040
or to such other address as either party may provide to the other in accordance with this Section. 13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof (i.e., Employee's employment by Hadco) and supersedes all prior or contemporaneous employment agreements and understandings or agreements in regard to Employee's employment. Employee hereby acknowledges and agrees that as of the Effective Time the Employment Agreement dated as of August 1, 1997 by and between Continental and Employee and the letter agreement dated May 8, 1997 by and between Continental and Employee and any all other agreements between Continental and Employee are hereby terminated and shall be of no further force or effect, except that all confidentiality obligations and non-disclosure obligations of Employee to Continental shall nonetheless survive. No modification or addition to this Agreement shall be valid unless in writing, specifically referring to this Agreement and signed by all parties hereto. No waiver of any rights under this Agreement shall be valid unless in writing and signed by the party to be charged with such waiver. No waiver of any term or condition contained in this Agreement shall be deemed or construed as a further or continuing waiver of such term or condition, unless the waiver specifically provides otherwise. 14. OTHER PROVISIONS. The parties agree that if the Acquisition Agreement terminated under Section 8.1 thereof, this Agreement shall be null and void with no liability by any party to any other party by reason of this Agreement becoming so null and void. IN WITNESS WHEREOF, the parties have executed this Agreement as of February 15, 1998. HADCO: EMPLOYEE: Hadco Corporation. a Massachusetts corporation By: ______________________________ _________________________________ Frederick G. McNamee, III Title: ____________________________ EX-10.5 6 SECOND AMENDMENT & MODIFICATION AGREEMENT 1 Exhibit 10.5 SECOND AMENDMENT AND MODIFICATION AGREEMENT SECOND AMENDMENT AND MODIFICATION AGREEMENT dated as of May 11, 1998 (this "Amendment") by and among HADCO CORPORATION, a Massachusetts corporation (the "Borrower"); the direct and indirect subsidiaries of the Borrower listed on the signature pages hereto (collectively, the "Hadco Subsidiaries"); BANKBOSTON, N.A., AS AGENT (the "Agent") and BANKBOSTON, N.A., individually and the other lending institutions (collectively, the "Banks") listed on Schedule 1 to the Amended and Restated Revolving Credit Agreement dated as of December 8, 1997 (as amended and in effect from time to time, the "Agreement") among the Borrower, the Banks and the Agent. Terms not otherwise defined herein which are defined in the Agreement shall have the respective meanings assigned to such terms in the Agreement. WHEREAS, the Borrower wishes to issue up to $200,000,000 of its ___% Senior Subordinated Notes due 2008 (the "Subordinated Notes"); WHEREAS, Section 9.1(k) of the Agreement sets forth certain requirements for any issuance by the Borrower of subordinated Indebtedness; WHEREAS, the Borrower has requested that the Agent and the Banks amend Section 9.1(k) of the Agreement in order to permit the issuance of the Subordinated Notes; WHEREAS, the Borrower has also requested that BankBoston, N.A. establish a $10,000,000 swing line facility; WHEREAS, in connection with the establishment of such $10,000,000 swing line facility, the Borrower has requested that the Agent and the Banks amend certain provisions of the Agreement; and WHEREAS, upon the terms and subject to the conditions contained herein, the Agent and the Banks are willing to amend such provisions of the Credit Agreement; NOW, THEREFORE, in consideration of the mutual agreements contained in the Agreement, the other Loan Documents and this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 2 -2- Section 1. AMENDMENT OF Section 1.1 OF THE AGREEMENT. Section 1.1 of the Agreement is hereby amended by: (a) inserting the following new definition in the order required by alphabetical order: "Applicable Swing Line Margin. For any portion of any fiscal quarter or portion thereof with respect to any Swing Line Loan, a percentage equal to the sum of (a) the Applicable Eurodollar Rate Margin which would then be applicable to Eurodollar Rate Loans plus (b) one-quarter of one percent (0.25%)." (b) amending the definition of "Distribution" by deleting the text "of any subordinated indebtedness permitted by Section 9.1(k)," and substituting in lieu thereof the text "of the Subordinated Notes or any of them,". (c) inserting the following new definitions in the order required by alphabetical order: "Fixed Rate Loan. A Swing Line Loan bearing interest at the Money Market Rate for a period of time agreed to by the Borrower and the Swing Line Lender pursuant to Section 2.5(c)." "Indenture. The Indenture to be entered into by the Borrower, Hadco Santa Clara, Hadco Phoenix, CCIR of Texas, CCIR of California, and State Street Bank and Trust Company, as Trustee, with respect to the Subordinated Notes, substantially in the form of the draft dated May 8, 1998 previously delivered to the Agent and each of the Banks, including such modifications thereto as have been delivered to the Agent and the Banks and as are appropriate or necessary to complete such form (including without limitation, changes to insert the specific maturity date in 2008 or thereafter and the interest rate (which rate shall not exceed 10.0% per annum)), and such other changes as are either non-substantive or as shall have been approved by the Agent on behalf of the Banks and with the consent of the Majority Banks, but otherwise excluding any amendments or modifications thereto. The Indenture is to be entered into by the parties thereto as of the closing of the issuance of the Subordinated Notes and the term "Indenture" shall refer to the Indenture as in effect on the date of such closing (assuming compliance with the requirements of the first sentence of this definition)." (d) amending the definition of "Interest Payment Date" by (i) deleting the word "and" at the end of clause (i) thereof and (ii) deleting the period at the end thereof and substituting in lieu thereof the text "; and (iii) as to any Swing Line Loan, on the first day of the calendar month immediately following the last day of the Interest Period applicable thereto." 3 -3- (e) amending the definition of "Interest Period" by (i) deleting the first paragraph thereof in its entirety and substituting in lieu thereof the following new paragraph: "Interest Period. With respect to each Loan, (i) initially the period commencing on the Drawdown Date of such Loan and ending on the last day of one of the periods set forth below, as selected by the Borrower in a Loan Request or a Swing Line Loan Request, (A) for any Base Rate Loan, the last day of the calendar quarter; (B) for any Fixed Rate Loan, the period (not to exceed 14 days) requested by the Borrower and agreed to by the Swing Line Lender pursuant to Section 2.5(c); and (C) for any Eurodollar Rate Loan, 1, 2, 3 or 6 months and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:". (ii) deleting the word "and" at the end of subSection (d) thereof. (iii) deleting the period at the end of subsection (e) thereof and substituting in lieu thereof the text "; and". (iv) inserting at the end thereof a new subsection (f) with the following text: "(f) if the Borrower fails to repay a Fixed Rate Loan as provided in Section 2.9, the Borrower shall be deemed to have requested a conversion of the affected Fixed Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto." (f) deleting the definition of "Loans" in its entirety and substituting in lieu thereof the following new definition: "Loans. Revolving credit loans (including the Swing Line Loans) made or to be made to the Borrower by the Banks or the Agent pursuant to Section 2." (g) deleting the definition of "Majority Banks" in its entirety and substituting in lieu thereof the following new definition: "Majority Banks. As of any date, the Banks holding at least fifty-one percent (51%) of the outstanding principal amount of the Loans on such date (provided that in the event that any Swing Line Loan is outstanding and has not been participated to the other Banks, for purposes of this definition, each Bank, including BKB, will be assumed to have fully funded its participation in such Swing Line Loan); and if no such principal is outstanding, the Banks 4 -4- whose aggregate Commitments (which shall include participating interests in the risk relating to Swing Line Loans) constitutes at least fifty-one percent (51%) of the Total Commitment." (h) inserting the following new definitions in the places required by alphabetical order: "Money Market Loans. Swing Line Loans bearing interest calculated by reference to the Money Market Rate." "Money Market Rate. With respect to any Swing Line Loan, the fixed rate of interest quoted by the Swing Line Lender on any date on which the Borrower requests a Swing Line Loan, which rate the Swing Line Lender is willing to charge with respect to a Swing Line Loan to be made by it." (i) deleting the definition of "Notes" in its entirety and inserting in lieu thereof the following new definition: "Notes. The Revolving Credit Notes and the Swing Line Note". (j) inserting the following new definitions in the places required by alphabetical order: "Revolving Credit Notes. See Section 2.4." "Subordinated Notes. The Borrower's ____% Senior Subordinated Notes due 2008 , in an aggregate principal amount of up to $200,000,000, issued or to be issued under and pursuant to the Indenture, including any Exchange Notes (as defined in the Indenture) issued pursuant to the Indenture." "Swing Line Lender. BKB." "Swing Line Loan Request. See Section 2.9.1." "Swing Line Loans. See Section 2.9.1." "Swing Line Note. See Section 2.9.1." "Swing Line Settlement Amount. See Section 2.9.2." "Swing Line Settling Bank. See Section 2.9.2." "Swing Line Settlement Date. (a) The Drawdown Date relating to any Loan Request, (b) Friday of every other week commencing May 22, 1998, or if such Friday is not a Business Day, the Business Day immediately following such Friday, (c) at the option of the Swing Line Lender, on any Business Day 5 -5- following a day on which the account officers of the Agent or the Swing Line Lender active upon the Borrower's account become aware of the existence of an Event of Default, (d) any Business Day on which the amount of Loans (including Swing Line Loans) outstanding from the Swing Line Lender plus the Swing Line Lender's Commitment Percentage of the sum of the Maximum Drawing Amount and any Unpaid Reimbursement Obligations is equal to or greater than the Swing Line Lender's Commitment Percentage of the Total Commitment, (e) the Business Day immediately following any Business Day on which the amount of Swing Line Loans exceeds $10,000,000, or (f) the Business Day immediately following any day on which the Swing Line Lender gives written notice to the Agent to effect a Swing Line Settlement." "Swing Line Settlement. The making or receiving of, payments in immediately available funds, by the Banks to or from the Agent for the account of the Swing Line Lender in accordance with Section 2.9 hereof to the extent necessary to cause each Bank's actual share of the outstanding amount of the Loans to be equal to such Bank's Commitment Percentage of the outstanding amount of such Loans, in any case when, prior to such action, the actual share is not so equal." (j) deleting the definition of "Type" in its entirety and substituting in lieu thereof the following text: "Type. As to any Loan which is not a Swing Line Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan." Section 2. AMENDMENT OF Section 2.1 OF THE AGREEMENT. Section 2.1 of the Agreement is hereby amended by: (a) deleting the following text "(after giving effect to all amounts requested)" from the first parenthetical thereof (set forth in the seventh line thereof) and substituting in lieu thereof the following text: "(after giving effect to all amounts requested, and including any Bank's participating interest in any Swing Line Loans outstanding)"; and (b) deleting the period (".") at the end of the first sentence thereof and inserting in lieu thereof the following text: "; provided further that at no time shall the sum of BKB's Commitment Percentage of the Loans outstanding (including Swing Line Loans made in its capacity as Swing Line Lender) plus BKB's Commitment Percentage of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceed BKB's Commitment." Section 3. AMENDMENT OF Section 2.2 OF THE AGREEMENT. Section 2.2 of the Agreement is hereby amended by inserting, immediately before the period (".") at the end of the 6 -6- first sentence thereof the text ", with the outstanding amount of any Swing Line Loans being excluded from such calculation". Section 4. AMENDMENT OF Section 2.3 OF THE AGREEMENT. Section 2.3 of the Agreement is hereby amended by deleting the first sentence thereof in its entirety. Section 5. AMENDMENT OF Section 2.4 OF THE AGREEMENT. Section 2.4 of the Agreement is hereby deleted in its entirety, and the following new Section 2.4 is hereby substituted in lieu theREof: "SECTION 2.4. THE REVOLVING CREDIT NOTES. The Loans (other than the Swing Line Loans) shall be evidenced by separate promissory notes of the Borrower in substantially the form of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the Closing Date and completed with appropriate insertions. One Revolving Credit Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Commitment or, if less, the outstanding amount of all Loans (other than Swing Line Loans) made by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the time of the Drawdown Date of any Loan (other than a Swing Line Loan) or at the time of receipt of any payment of principal on such Bank's Revolving Credit Note, an appropriate computer entry or other record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth in such computer entries or other records shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount in such computer entries or other records shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Revolving Credit Note to make payments of principal of or interest on any Revolving Credit Note when due." Section 6. AMENDMENT OF SECTION 2.5 OF THE AGREEMENT. Section 2.5 of the Agreement is hereby amended by: (a) changing the reference to subsection "(c)" to subsection "(d)"; and (b) inserting, between subsection (b) and subsection (d) (formerly subsection (c)) the following new subsection "(c)": "(c) Each Swing Line Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to, at the Borrower's option (i) the Base Rate and (ii) the Money Market Rate plus the Applicable Swing Line Margin, which interest shall be paid on each Interest 7 -7- Payment Date for Swing Line Loans for the account of the Swing Line Lender. Interest Periods for Swing Line Loans which are also Fixed Rate Loans shall be for a period of 14 days or less. The Borrower shall give the Swing Line Lender notice no later than 12:00 p.m. on the last day of the Interest Period that is a Fixed Rate Loan of its intention to repay such Swing Line Loan or to refund such Swing Line Loan with a Loan which is not a Swing Line Loan in accordance with the requirements of Section 2.9.2. In the event that the Borrower fails to give such notice, such Swing Line Loan shall, on the last day of such Interest Period, cease to be a Fixed Rate Loan." Section 7. AMENDMENT OF SECTION 2.7 OF THE AGREEMENT. Section 2.7 of the Agreement is hereby amended by inserting at the end thereof the following new Section 2.7.4: "2.7.4. APPLICABILITY OF CONVERSION AND CONTINUATION PROVISIONS. Notwithstanding anything to the contrary herein contained, the provisions of this Section 2.7 shall not apply to Swing Line Loans." Section 8. ADDITION OF Section 2.9 TO THE AGREEMENT. The Agreement is hereby amended by inserting the following new Section 2.9, immediately after Section 2.8 of the Agreement and immediately before Section 3 of the Agreement: 2.9. SWING LINE LOANS; SETTLEMENTS. 2.9.1. SWING LINE LOANS. (a) In accordance with the terms and conditions contained in this Credit Agreement (including but not limited to Section 12 hereof), the Swing Line Lender may, in its sole discretion and without conferring with the Banks, fund Loans made in accordance with the provisions of this Credit Agreement ("Swing Line Loans"); provided, however, that (i) at no time shall the sum of (A) the aggregate principal amount of all Swing Line Loans (after giving effect to all amounts requested and the application of the proceeds thereof) plus (B) the aggregate principal amount of all outstanding Loans which are not Swing Line Loans plus (C) the Maximum Drawing Amount plus all Unpaid Reimbursement Obligations exceed the Total Commitment, and (ii) at no time shall the sum of the Loans outstanding (other than Swing Line Loans) made by the Swing Line Lender in its capacity as a Bank plus the sum of the Swing Line Loans outstanding plus the Commitment Percentage of the Swing Line Lender (in its capacity as a Bank) of the Maximum Drawing Amount and the Unpaid Reimbursement Obligations exceed the Swing Line Lender's Commitment (as a Bank), and provided further that, notwithstanding anything to the contrary contained in Section 2.6 hereof, (x) the Borrower shall have until 12:00 p.m. (Boston time) on the proposed Drawdown Date of any Swing Line Loan to request such Swing Line Loan (a "Swing Line Loan Request") in writing, via facsimile or by telephonic notice, if thereafter promptly confirmed in writing, setting forth (A) the principal amount of the proposed Swing Line Loan and (B) the proposed Drawdown 8 -8- Date of such Swing Line Loan, and (y) each Swing Line Loan so requested shall be in a minimum amount of $100,000. (b) The Swing Line Loans shall be evidenced by a promissory note of the Borrower payable to the Swing Line Lender in substantially the form of Exhibit A-1 hereto (the "Swing Line Note"). The Borrower acknowledges and agrees that the making of such Swing Line Loans shall, in each case and except as otherwise expressly provided herein, be subject in all respects to the provisions of this Credit Agreement as if they were Loans covered by a Loan Request, including without limitation, the limitations set forth in Section 2.1 and the requirements that the applicable provisions of Section 12 be satisfied. All actions taken by the Swing Line Lender or the Agent pursuant to the provisions of this Section 2.9 shall be conclusive and binding on the Borrower and the Banks absent the Swing Line Lender's or the Agent's gross negligence or willful misconduct. Each Bank shall remain severally and unconditionally liable to fund its pro rata share (based upon each Bank's Commitment Percentage) of such Swing Line Loans on each Swing Line Settlement Date. Prior to each Swing Line Settlement, all payments or repayments of the principal and interest on Swing Line Loans shall be credited to the account of the Swing Line Lender. The Borrower shall have the right at its election, to repay the outstanding amount of the Swing Line Loans, as a whole or in part, at any time without penalty or premium, provided that any full or partial repayment of the outstanding amount of any Swing Line Loan that is a Fixed Rate Loan may be made only on the last day of the Interest Period relating thereto. The aggregate outstanding amount of Swing Line Loans advanced by the Swing Line Lender hereunder shall not exceed $10,000,000, and there shall not be more than four (4) Swing Line Loans outstanding at any one time. 2.9.2. SETTLEMENTS. (a) The Banks shall effect Swing Line Settlements on each Swing Line Settlement Date. One (1) Business Day prior to each such Swing Line Settlement Date, the Agent or the Swing Line Lender shall give telephonic or facsimile notice to the Banks of (i) the respective outstanding amount of Loans made by each Bank as at the close of business on the prior day, (ii) the amount that any Bank, as applicable (the "Swing Line Settling Bank"), shall pay to effect a Swing Line Settlement (the "Swing Line Settlement Amount") and (iii) the portion (if any) of the aggregate Swing Line Settlement Amount to be paid to each Bank. A statement of the Agent or the Swing Line Lender submitted to the Banks with respect to any amounts owing hereunder shall be prima facie evidence of the amount due and owing. Each Swing Line Settling Bank shall, not later than 1:00 p.m. (Boston time) on each Swing Line Settlement Date, effect a wire transfer of immediately available funds to the Agent at the Agent's Head Office in the amount of such Bank's Swing Line Settlement Amount. The Agent shall, as promptly as practicable during normal business hours on each Swing Line Settlement Date, effect a 9 -9- wire transfer of immediately available funds to the Swing Line Lender of the Swing Line Settlement Amount to be paid to the Swing Line Lender. (b) All funds advanced by any Bank as a Swing Line Settling Bank pursuant to this Section 2.9.2 shall for all purposes be treated as a Loan made by such Swing Line Settling Bank to the Borrower, and all funds received by any Bank pursuant to this Section 2.9.2 shall for all purposes be treated as repayment of amounts owed by the Borrower with respect to Loans made by such Bank. In the event that any bankruptcy, reorganization, liquidation, receivership or similar cases or proceedings, in which the Borrower is a debtor prevent a Settling Bank from making a Loan to effect a Settlement as contemplated hereby, such Settling Bank will make such dispositions and arrangements with the other Banks with respect to such Loans, either by way of purchase of participations, distributions, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank's share of the outstanding Loans (including the Swing Line Loans) being equal, as nearly as may be, to such Bank's Commitment Percentage of the outstanding amount of the Loans. Whenever, at any time after the Swing Line Lender has received from any Bank such Bank's participating interest in a Swing Line Loan pursuant to the terms hereof, the Swing Line Lender receives any payment on account thereof, the Swing Line Lender will distribute to such Bank its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded) in like funds as received; provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such Bank will return to the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender to it in like funds as such payment is required to be returned by the Swing Line Lender. 2.9.3. FUNDING PROCEDURES. (a) The Agent may (unless notified to the contrary by any Swing Line Settling Bank by 12:00 noon (Boston time) one (1) Business Day prior to the Settlement Date) assume that each Swing Line Settling Bank has made available (or will make available by the time specified in Section 2.9.2 to the Agent its Swing Line Settlement Amount, and the Agent may (but shall not be required to), in reliance upon such assumption, make available to the Swing Line Lender the aggregate Swing Line Settlement Amount. If the Swing Line Settlement Amount of such Swing Line Settling Bank is made available to the Agent by such Swing Line Settling Bank on a date after such Swing Line Settlement Date, such Swing Line Settling Bank shall pay the Agent on demand an amount equal to the product of (i) the average, computed for the period referred to in clause (iii) below, of the weighted average annual interest rate paid by the Agent for federal funds acquired by the Agent during each day included in such period times (ii) the Swing Line Settlement Amount times (iii) a fraction, the numerator of which is the number of days that elapse from and including such 10 -10- Swing Line Settlement Date to but not including the date on which the Swing Line Settlement Amount shall become immediately available to the Agent, and the denominator of which is 360, as the case may be. Upon payment of such amount, the Swing Line Settling Bank shall be deemed to have delivered its Swing Line Settlement Amount on the Swing Line Settlement Date and shall become entitled to interest payable by the Borrower with respect to such Bank's Swing Line Settlement Amount as if such share were delivered on the Swing Line Settlement Date. If the Swing Line Settlement Amount is not in fact made available to the Agent by the Swing Line Settling Bank within three (3) Business Days of such Swing Line Settlement Date, the Agent shall be entitled to recover such amount from the Borrower, with interest thereon at the Base Rate, provided that any such payment by the Borrower hereunder shall be without prejudice to any rights that the Borrower may have against the Swing Line Settling Bank which did not fund its required portion of the applicable Swing Line Loan. In the event that any Swing Line Settling Bank fails to make such Swing Line Settlement available to the Agent within one (1) Business Day following the Swing Line Settlement Date, the Agent will endeavor to provide to the Borrower notice of such failure, provided, a failure by the Agent to so provide such notice shall not affect the Agent's rights under this Section 2.9.3. (b) After any Swing Line Settlement Date, any payment by the Borrower of Swing Line Loans hereunder shall be allocated among the Banks, in amounts determined so as to provide that after such application and the related Swing Line Settlement, the outstanding amount of Loans of each Bank equals, as nearly as practicable, such Bank's Commitment Percentage of the aggregate amount of Loans. The Swing Line Lender will notify the Agent promptly following each advance of a Swing Line Loan or any repayment with respect thereto. The failure or refusal of any Settling Bank to make available to the Agent at the aforesaid time and place on any Settlement Date the amount of such Settling Bank's Settlement Amount shall not (i) relieve any other Settling Bank from its several obligations hereunder to make available to the Agent the amount of such other Settling Bank's Settlement Amount or (ii) impose upon any Bank, other than the Settling Bank so failing or refusing, any liability with respect to such failure or refusal or otherwise increase the Commitment of such other Bank. Each Bank severally agrees that its obligation to make available to the Swing Line Lender its refunding or participation amounts as described above shall (except to the extent expressly set forth in this Section 2.9) be absolute and unconditional and shall not be affected by any circumstance, including (v) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (w) the occurrence or continuance of any Default or Event of Default, the termination of the Commitments or any other condition precedent whatsoever, (x) any adverse change in the condition (financial or otherwise) of the Borrower or 11 -11- any of its Subsidiaries or any other Person, (y) any breach of any of the Loan Documents by the Borrower or any of its Subsidiaries or any other Bank, or (z) any other circumstance, happening or event, whether or not similar to any of the foregoing." Section 9. AMENDMENT OF Section 3.1 OF THE AGREEMENT. Section 3.1 of the Agreement is hereby amended by adding a new sentence at the end thereof with the following text: "Without limiting the foregoing, the Borrower promises to pay to the Agent for the account of the Swing Line Lender, and there shall become absolutely due and payable, the outstanding principal amount of each Swing Line Loan made to the Borrower on the earlier of the Swing Line Settlement Date with respect thereto and the Revolving Credit Loan Maturity Date." Section 10. AMENDMENT OF Section 3.2 OF THE AGREEMENT. Section 3.2 of the Agreement is hereby deleted in its entirety, and the following new Section 3.2 is hereby inserted in lieu theREOF: "3.2. MANDATORY REPAYMENTS OF LOANS. If at any time the sum of the outstanding amount of the Loans (including Swing Line Loans), the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the Total Commitment, then the Borrower shall immediately pay the amount of such excess to the Agent for the respective accounts of the Banks and, if applicable, the Swing Line Lender. Any amounts repaid in accordance with the immediately preceding sentence shall be applied: first, to the Swing Line Loans; second, to any Unpaid Reimbursement Obligations; third, to the Loans which are not Swing Line Loans; and fourth, to provide to the Agent cash collateral for Reimbursement Obligations as contemplated by Section 4.2(b) and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of Loans shall be allocated among the Banks, or, as the case may be, the Swing Line Lender, in proportion, as nearly as practicable, to each Reimbursement Obligation or, as the case may be, the respective unpaid principal amount of each Bank's Revolving Credit Note or, as the case may be, the Swing Line Lender's Swing Line Note, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion." Section 11. AMENDMENT OF Section 3.3 OF THE AGREEMENT. Section 3.3 of the Agreement is hereby deleted in its entirety, and the following new Section 3.3 is hereby substituted in lieu theREof: "3.3. OPTIONAL REPAYMENT OF LOANS. The Borrower shall have the right, at its election, to repay the outstanding amount of the Loans which are not Swing Line Loans and Swing Line Loans which are not Fixed Rate Loans as a whole or in part, at any time without penalty or premium, provided that any full or partial prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to this Section 3.3 may be made only on the last day of the Interest Period relating thereto. The Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at least one (1) 12 -12- Business Day prior written notice of any proposed prepayment pursuant to this Section 3.3 of Base Rate Loans and of Swing Line Loans which are not Fixed Rate Loans, and three (3) Eurodollar Business Days notice of any proposed prepayment pursuant to this Section 3.3 of Eurodollar Rate Loans, in each case specifying the proposed date of prepayment of Loans and the principal amount to be prepaid. Each such partial prepayment of the Loans (other than Swing Line Loans) shall be in an integral multiple of $5,000,000 and of Swing Line Loans which are not Fixed Rate Loans shall be in an integral multiple of $100,000 and shall be applied, in the absence of instruction by the Borrower and in the case of Loans which are not Swing Line Loans, first to the principal of Base Rate Loans and then to the principal of Eurodollar Rate Loans. Accrued interest on the principal prepaid in connection with each such partial prepayment shall be due and payable on the next Interest Payment Date, but accrued interest on the principal paid in connection with any full prepayment at a time when the Total Commitment is terminated shall be paid on the date of prepayment. Each prepayment shall be allocated among the Banks, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Bank's Note, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion." Section 12. AMENDMENT OF Section 5.9 OF THE AGREEMENT. Section 5.9 of the Agreement is hereby deleted in its entirety and the following new Section 5.9 is hereby substituted in lieu theREof: "5.9. Indemnity. The Borrower agrees to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or expense (including loss of anticipated profits) that such Bank may sustain or incur as a consequence of (i) default by the Borrower in payment of the principal amount of or any interest on any Eurodollar Rate Loans or Fixed Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans or Fixed Rate Loans, (ii) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request, Swing Line Loan Request or a Conversion Request relating thereto in accordance with Section 2.6, Section 2.7 or Section 2.9.1 or (iii) the making of any payment of a Eurodollar Rate Loan or a Fixed Rate Loan or the making of any conversion of any such Loan which is not a Swing Line Loan or any such Fixed Rate Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain any such Loans." Section 13. AMENDMENT OF Section 7.20 OF THE AGREEMENT. The Agreement is hereby amended by inserting, immediately after Section 7.19 thereof and immediately before Section 8 thereof, the following new Section 7.20, with the following text: 13 -13- "7.20. YEAR 2000 PROBLEM. The Borrower and its Subsidiaries have reviewed or are reviewing the areas within their businesses and operations which could be adversely affected by, and have developed or are developing, a program to address on a timely basis the "Year 2000 Problem" (i.e., the risk that computer applications used by the Borrower or any of its Subsidiaries may be unable to recognize and perform properly data-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based upon such review, the Borrower reasonably believes that the "Year 2000 Problem" will not have any materially adverse effect on the business or financial condition of the Borrower or any of its Subsidiaries." Section 14. AMENDMENT OF Section 9.1 OF THE AGREEMENT. Section 9.1 of the Agreement is hereby amended by deleting subsection (k) thereof in its entirety and substituting in lieu thereof the following new subsection (k): "(k) the Subordinated Notes and guaranties issued by the Guarantors of the Borrower's obligations thereunder;". Section 15. AMENDMENT OF Section 9.3 OF THE AGREEMENT. Section 9.3 of the Agreement is hereby amended by deleting subsection (f) thereof in its entirety and substituting in lieu thereof the following new subsection (f): "(f) Investments consisting of (i)(A) the Guaranties or (B) guaranties issued by the Guarantors of the Borrower's obligations under the Subordinated Notes and (ii) Investments by the Borrower in (A) any of the Guarantors, (B) Hadco FSC in an aggregate amount not to exceed $2,000,000 or (C) New Zycon or New Continental in an aggregate amount not to exceed $50,000;". Section 16. AMENDMENT OF Section 9.9 OF THE AGREEMENT. Section 9.9 of the Agreement is hereby amended by adding the following text at the end thereof: "The Borrower will not, and will not permit the other parties thereto to, amend, modify or supplement the Subordinated Notes or the Indenture in any way, unless in each case the form of any proposed amendment, modification, supplement or supplemental indenture shall have first been approved in writing by the Agent and the Majority Banks, and, in the absence of such approval, in addition to and without limitation of such other rights as the Agent and the Banks may have hereunder, no such amendment, modification, supplement or supplemental indenture shall be effective to modify the rights or interests of the Agent or any of the Banks as holders of "Senior Indebtedness" or "Designated Senior Indebtedness" under the Indenture. Without limiting the foregoing, the Borrower will not, and will not permit the other parties thereto, to amend in any respect Section 10 of the Indenture." 14 -14- Section 17. ADDITION OF Section 9.11 TO THE AGREEMENT. The Agreement is hereby amended by inserting the following new Section 9.11, immediately after Section 9.10 and immediately before Section 10 of the Agreement: "9.11. SUBORDINATED NOTES; DESIGNATION OF INDEBTEDNESS UNDER INDENTURE. The Borrower will not, and will not permit any of its Subsidiaries to, prepay, redeem, defease or repurchase any of the Subordinated Notes, whether following the occurrence of a Change of Control (as defined in the Indenture) or otherwise. The Borrower will not permit any of its Subsidiaries other than Subsidiaries which are also Guarantors (and have duly executed and delivered to the Agent a Guaranty in the form of Exhibit E, together with such evidence of corporate or organizational authority and legal opinions as the Agent shall have requested) to guaranty or otherwise become liable for any of the Borrower's obligations under or in respect of the Subordinated Notes. The Borrower will not designate, declare or identify any Indebtedness (other than the Obligations) as "Senior Indebtedness" or "Designated Senior Indebtedness" under the Indenture, unless the amount, terms and designation of such Senior Indebtedness or, as the case may be, Designated Senior Indebtedness, shall first have been approved by the Agent and the Majority Banks in writing. Without limiting the foregoing, the Borrower, the Agent and the Banks hereby designate the Obligations as "Designated Senior Indebtedness" under and pursuant to the Indenture." Section 18. AMENDMENT OF Section 10.1 OF THE AGREEMENT. Section 10.1 of the Agreement is hereby amended by inserting the following text at the end thereof: "The calculation of such ratio shall include, on a pro forma basis and if and to the extent approved by the Majority Banks (which approval shall require, inter alia, the Agent's and the Banks' receipt of audited financial statements for any Target acquired in accordance with Section 9.5.2(b), together with an unqualified audited opinion letter from Arthur Andersen LLP or another nationally recognized accounting firm satisfactory to the Agent and the Majority Banks, or which financial statements or opinion letter shall otherwise be satisfactory to the Agent and the Majority Banks), EBITDA for such period of any Target acquired in compliance with Section 9.5.2(b), regardless of whether such acquisition is by way of stock purchase, asset purchase or pooling of interests." Section 19. AMENDMENT OF Section 10.4 OF THE AGREEMENT. Section 10.4 of the Agreement is hereby amended by deleting the period (".") at the end thereof and substituting in lieu thereof the following text: ", regardless of whether such acquisition is by way of stock purchase, asset purchase or pooling of interests." Section 20. AMENDMENT OF Section 13.1 OF THE AGREEMENT. Section 13.1 is hereby amended by: (a) deleting the word "or" at the end of subsection (o) thereof. 15 -15- (b) inserting, at the end of subsection (p) thereof the text "or any "Change of Control", as defined in the Indenture, shall occur". (c) inserting a new subsection (q), immediately after subsection (p) thereof and immediately before the final unindented paragraph thereof, with the following text: (q) the holders of all or any part of the Subordinated Notes shall accelerate the maturity of all or any part of the Subordinated Notes, or any or all of the Subordinated Notes shall be prepaid, redeemed, defeased or repurchased in whole or in part;" (d) deleting the references to "Sections 13.1(g) or 13.1(h)" in the final sentence of Section 13.1 and substituting in lieu thereof the text "Sections 13.1(g), 13.1(h) or 13.1(q)". Section 21. AMENDMENT OF Section 13.2 OF THE AGREEMENT. Section 13.2 of the Agreement is hereby amended by deleting the text "Sections 13.1(g) or 13.1(h)" in the second line thereof and substituting in lieu thereof the text "Sections 13.1(g), 13.1(h) or 13.1(q)". Section 22. AMENDMENT OF Section 15.1(A) OF THE AGREEMENT. Section 15.1(a) of the Agreement is hereby amended by inserting the phrase "(including the approval by the Agent of the final form of the Indenture as contemplated by the definition of the term "Indenture") following the words "reasonably incident thereto" in line 4 thereof. Section 23. AMENDMENT OF SECTION 19.1 OF THE AGREEMENT. Section 19.1 of the Agreement is hereby amended by inserting in clause (i) thereof, immediately after the text "(i) each of the Agent" and immediately before the text "and, unless a Default or Event of Default shall have occurred and be continuing, the Borrower ...", the text ", the Swing Line Lender,". Section 24. AMENDMENT OF AMENDMENT OF Section 26 OF THE AGREEMENT. Section 26 of the Agreement is hereby amended by inserting, immediately after the text "the definition of Majority Banks and the terms of this Section 26 may not be amended and no collateral or guaranty may be released without the written consent of all of the Banks;", and immediately before the text "and the amount of the Agent's Fee or any Letter of Credit Fees payable for the Agent's account and Section 15 may not be amended without the written consent of the Agent.", the following text: "the definitions of Applicable Swing Line Margin, Swing Line Loans, Swing Line Note, Swing Line Settlement Amount, Swing Line Settling Bank, Swing Line Settlement Date and Swing Line Settlement and the terms of Section 2.5(c) and Section 2.9 may not be amended without the written consent of the Swing Line Lender;". 16 -16- Section 25. ADDITION OF EXHIBIT A-1. The Agreement is hereby amended by including as an additional Exhibit thereto, a new Exhibit A-1 in the form attached hereto. Section 26. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to be effective as of May 11, 1998 (the "Effective Date"), upon the Agent's receipt of the following, each in form and substance satisfactory to the Agent: (a) facsimile copies of original counterparts (to be followed promptly by original counterparts) or original counterparts of (i) this Amendment, duly executed by each of the Company, the Hadco Subsidiaries, the Agent and the Banks, and (ii) a Swing Line Note in the form of Exhibit A-1 hereto, duly executed by the Company; (b) payment to the Agent in cash, for the account of each Bank, a work fee of $5,000 ($75,000 in aggregate); (c) a duly executed Secretary's certificate of the Secretary or Assistant Secretary of the Borrower certifying (and where applicable, attaching copies of) the Borrower's (i) Articles of Organization; (ii) By-laws; (iii) resolutions of its Board of Directors authorizing the transactions contemplated hereby; (d) copies, duly certified by the Secretary of the Borrower, as to the final form of the Indenture and the Subordinated Notes, each of which final forms shall respectively comply with the definitions of Indenture and Subordinated Notes contained in the Agreement, as amended by this Amendment; and (e) such other documents, agreements and items as the Agent may require, including, without limitation, execution and delivery, together with performance of the agreements and delivery of the items specified therein, of a fee letter satisfactory in form and substance to the Agent, duly executed by the Agent and the Borrower. Section 27. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION. Each of the Company and the Hadco Subsidiaries hereby represents and warrants to each of the Agent and the Banks as follows: (a) Each of the representations and warranties of the Company and the Hadco Subsidiaries contained in the Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Agreement, the other Loan Documents or this Amendment was true as of the date as of which it was made, and no Default or Event of Default has occurred and is continuing as of the date of this 17 -17- Amendment or would occur after giving effect to the transactions contemplated by this Amendment; and (b) This Amendment has been duly authorized, executed and delivered by the Company and each of the Hadco Subsidiaries, and shall be in full force and effect upon the satisfaction of the conditions set forth in Section 26 hereof, and the agreements of the Company and each of the Hadco Subsidiaries contained herein, in the Agreement as herein amended, or in the other Loan Documents respectively, constitute the legal, valid and binding obligations of the Company and each of the Hadco Subsidiaries party hereto or thereto, enforceable against the Company or such Hadco Subsidiary, in accordance with their respective terms, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. Section 28. RATIFICATION, ETC. Except as expressly amended hereby, the Agreement, the other Loan Documents and all documents, instruments and agreements related thereto are hereby ratified and confirmed in all respects and shall continue in full force and effect. All references in the Agreement or such other Loan Documents or in any related agreement or instrument to the Agreement or such other Loan Documents shall hereafter refer to such agreements as amended hereby, pursuant to the provisions of the Agreement. Section 29. NO IMPLIED WAIVER, ETC. Except as expressly provided herein, nothing contained herein shall constitute a waiver of, impair or otherwise affect any of the Obligations, any other obligations of the Company or any of the Hadco Subsidiaries or any right of the Agent or the Banks consequent thereon. The waivers and consents provided herein are limited strictly to their terms. Neither the Agent nor any of the Banks shall have any obligation to issue any further waiver or consent with respect to the subject matter hereof or any other matter. Section 30. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. Section 31. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CHOICE OR CONFLICTS OF LAWS). 18 -18- IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a document under seal as of the date first above written. HADCO CORPORATION By: ---------------------------------------- Name: Title: BANKBOSTON, N.A., individually and as Agent By: ----------------------------------------- Name: Title: Vice President ABN AMRO BANK N.V. By: ---------------------------------------- Name: Title: THE BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: ---------------------------------------- Name: Title: THE FIRST NATIONAL BANK OF CHICAGO By: ---------------------------------------- Name: Title: 19 -19- KEYBANK NATIONAL ASSOCIATION. By: ---------------------------------------- Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: ---------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA By: ---------------------------------------- Name: Title: THE FUJI BANK, LIMITED By: ---------------------------------------- Name: Title: SUNTRUST BANK, ATLANTA By: ---------------------------------------- Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ---------------------------------------- Name: Title: 20 -20- CORESTATES BANK, N.A. By: ---------------------------------------- Name: Title: STATE STREET BANK AND TRUST COMPANY By: ---------------------------------------- Name: Title: MELLON BANK, N.A. By: ---------------------------------------- Name: Title: THE SANWA BANK, LIMITED By: ---------------------------------------- Name: Title: 21 -21- USTRUST By: ---------------------------------------- Name: Title: 22 -22- The undersigned hereby acknowledges the foregoing Amendment as of the Effective Date and agrees that its obligations under the Guaranty to which it is a party will extend to the Agreement, as so amended, and the other Loan Documents, as so amended. HADCO SANTA CLARA, INC. By: ---------------------------------------- Title: HADCO PHOENIX, INC. By: ---------------------------------------- Title: CCIR OF CALIFORNIA, CORP. By: ---------------------------------------- Title: CCIR OF TEXAS, CORP. By: ---------------------------------------- Title: 23 EXHIBIT A-1 SWING LINE NOTE $10,000,000 as of May 11, 1998 FOR VALUE RECEIVED, the undersigned HADCO CORPORATION, a Massachusetts corporation (the "Borrower"), hereby promises to pay to the order of BANKBOSTON, N.A., a national banking association (the "Bank") at the Agent's Head Office (as defined in the Credit Agreement referred to below): (a) on the Revolving Credit Loan Maturity Date, the principal amount of TEN MILLION DOLLARS ($10,000,000) or, if less, the aggregate unpaid principal amount of Swing Line Loans advanced by the Bank to the Borrower pursuant to the Amended and Restated Revolving Credit Agreement dated as of December 8, 1997 (as amended and in effect from time to time, the "Credit Agreement"), among the Borrower, the Bank, BankBoston, N.A., as Agent, and other parties thereto; (b) the principal outstanding hereunder from time to time at the times provided in the Credit Agreement; and (c) interest on the principal balance hereof from time to time outstanding from the date hereof through and including the Revolving Credit Maturity Date hereof at the times and at the rate provided in the Credit Agreement. This Note evidences borrowings under and has been issued by the Borrower in accordance with the terms of the Credit Agreement. The Bank and any holder hereof is entitled to the benefits of the Credit Agreement and the other Loan Documents, and may enforce the agreements of the Borrower contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement. The Borrower irrevocably authorizes the Bank to make or cause to be made, at or about the time of the Drawdown Date of any Swing Line Loan or at the time of receipt of any payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, reflecting the making of such Swing Line Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Swing Line Loans set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Bank with respect to any Swing Line Loans shall be prima facie evidence of the principal amount thereof owing and unpaid to the Bank, but the failure to record, or any error in so recording, any such amount on any such grid, 24 -2- continuation or other record shall not limit or otherwise affect the obligation of the Borrower hereunder or under the Credit Agreement to make payments of principal of and interest on this Note when due. The Borrower has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Credit Agreement. If any one or more of the Events of Default shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement. No delay or omission on the part of the Bank or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Bank or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any further occasion. The Borrower and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable. THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 21 OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. This Note shall be deemed to take effect as a sealed instrument under the laws of the Commonwealth of Massachusetts. IN WITNESS WHEREOF, the undersigned has caused this Amended and Restated Swing Line Note to be signed in its corporate name and its corporate seal to be impressed thereon by its duly authorized officer as of the day and year first above written. 25 -3- [Corporate Seal] HADCO CORPORATION By: ---------------------------------- Name: Title: 26 -4-
AMOUNT OF BALANCE OF AMOUNT PRINCIPAL PAID PRINCIPAL NOTATION DATE OF LOAN OR PREPAID UNPAID MADE BY: - ------------------ ----------------- ------------------- ----------------- ----------------
EX-27.1 7 FINANCIAL DATA SCHEDULE
5 1,000 US DOLLARS 3-MOS OCT-31-1998 FEB-01-1998 MAY-02-1998 1 4,997 0 114,352 2,589 75,095 222,608 599,656 281,321 739,441 123,975 359,037 0 0 662 194,907 739,441 209,587 209,587 172,857 194,387 68,997 0 4,195 (57,144) 2,595 (59,739) 0 0 0 59,739 (4.54) (4.54)
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