-----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, Uc3sYg5kKhGZKqCYuA6V2HtIyQNankzI2T3SUMB5kvw0GJWwSKospYtqbCDMyXqO XV2coe4OZft1rJ+nHalXwQ== 0000950135-99-000115.txt : 19990114 0000950135-99-000115.hdr.sgml : 19990114 ACCESSION NUMBER: 0000950135-99-000115 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990113 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-K405 SEC ACT: SEC FILE NUMBER: 000-12102 FILM NUMBER: 99505540 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-K405 1 HADCO CORPORATION 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 0-12102 ------------------------ HADCO CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2393279 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 12A MANOR PARKWAY, SALEM, NEW HAMPSHIRE 03079 (Address of principal executive offices) (Zip Code) (603) 898-8000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.05 par value ------------------------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 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 __. The aggregate market value of voting Common Stock held by non-affiliates of the registrant was $478,172,398 based on the price of the last reported sale on the over-the-counter National Market System on January 6, 1999 as reported by NASDAQ. As of January 6, 1999, there were 13,469,645 shares of Common Stock, $.05 per value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE The Company intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended October 31, 1998. Portions of such proxy statement are incorporated by reference into Part III of this Report. ================================================================================ 2 Except for the historical information contained herein, the matters discussed in this Annual Report on Form 10-K are forward-looking statements that involve risks and uncertainties. Hadco Corporation makes such forward-looking statements under the provision 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 in Item 7 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 Annual Report on Form 10-K, the words "anticipates," "believes," "expects," "intends," "future," "could," and similar words or expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements. As used herein, the terms "Company" and "Hadco," unless otherwise indicated or the context otherwise requires, refer to Hadco Corporation and its subsidiaries, including Hadco Phoenix, Inc. ("Hadco Phoenix") (formerly Continental Circuits Corp. ("Continental")) and Hadco Santa Clara, Inc. ("Hadco Santa Clara") (formerly Zycon Corporation ("Zycon")). Hadco Santa Clara holds the assets formerly held by Zycon, and Hadco Phoenix holds the assets formerly held by Continental. Zycon Corporation and Continental Circuits Corp. are currently wholly owned subsidiaries of the Company and are merely name holding entities. References herein to a fiscal year end relate to a year ending on the last Saturday in October (for example, fiscal 1998 refers to the Company's fiscal year ended October 31, 1998). On March 20, 1998, the Company acquired all of the outstanding capital stock of Continental (the "Continental Acquisition"), and on January 10, 1997, the Company acquired all of the outstanding capital stock of Zycon (the "Zycon Acquisition"). The Continental Acquisition and the Zycon Acquisition are collectively referred to herein as the "Acquisitions." Unless otherwise indicated or the context otherwise requires, the results of Zycon's operations and other financial information relating to Zycon since January 10, 1997 are included in the Company's historical consolidated financial information presented herein. Similarly, unless otherwise indicated or the context otherwise requires, the results of Continental's operations and other financial information relating to Continental since March 20, 1998 are included in the Company's historical consolidated financial information presented herein. PART I ITEM 1. BUSINESS GENERAL Hadco is the largest manufacturer of advanced electronic interconnect products in North America. The Company offers a wide array of sophisticated manufacturing, engineering and systems integration services to meet its customers' electronic interconnect needs. The Company's principal products are multilayer rigid printed circuits, backplane assemblies and systems assemblies. Printed circuits are the basic platforms used to interconnect microprocessors, integrated circuits and other components essential to the functioning of electronic systems. Backplane assemblies are generally larger and thicker printed circuits on which connectors are mounted to receive and interconnect printed circuits, integrated circuits and other electronic components. Systems assemblies include the backplane, power supply, fan card, cabling and system chassis. Hadco's advanced manufacturing and assembly facilities are designed to meet the accelerated time-to-market and time-to-volume requirements of its customers whose markets are characterized by high growth rates, rapid technological advances and short product life cycles. The Company has created development groups at various facilities that work closely with customers during the early stages of the product life-cycle in an effort to develop process changes and refinements required for volume production. The types of projects managed by the development groups include increased printed circuit density, advanced electronic packaging, advanced materials, and new product offerings. Hadco acquired Zycon on January 10, 1997. This acquisition increased Hadco's net sales significantly, added approximately 600,000 square feet of manufacturing space (approximately a 100% increase at the time) 1 3 and substantially expanded the Company's manufacturing capabilities and geographic reach. These acquired manufacturing capabilities include state-of-the-art West Coast facilities for volume production of complex printed circuits and backplane and system assemblies, a quick-turn prototype and design facility on the East Coast, and a newly constructed facility for volume production in Malaysia. Hadco acquired Continental Circuits on March 20, 1998. This acquisition also increased Hadco's net sales significantly, added approximately 305,000 square feet of manufacturing space, and further expanded the Company's manufacturing capabilities and geographic reach. These acquired manufacturing capabilities include a facility in Phoenix, Arizona for the volume production of complex printed circuits, a quick-turn prototype facility in Austin, Texas, a flexible printed circuit facility in California, and printed circuit engineering and design sites in Texas, California, and Colorado. On January 7, 1999, the Company preliminarily agreed to enter into a joint venture with Parlex Corporation to market and manufacture flexible printed circuits. In connection with such proposed joint venture, Parlex Corporation would initially acquire a 55% interest in the Company's flexible printed circuit facility in California. The Acquisitions have broadened the Company's customer base, expanded its involvement in various industry sectors, added new proprietary technologies and increased its sales force. The Company was incorporated in Massachusetts in 1966. The Company's principal executive offices are located at 12A Manor Parkway, Salem, New Hampshire 03079, and its telephone number is (603) 898-8000. PRODUCTS AND SERVICES The Company's products and services are designed to meet its customers' interconnect needs for dense multilayer printed circuits and backplane and system assemblies. Hadco offers complementary processes and capabilities that span the product life-cycle. The Company's offering includes the following products and services: Development. Through development groups located at various facilities, Hadco identifies, develops and markets new technologies that benefit its customers. These development groups work closely with customers during all stages of product life-cycles. For instance, process design changes and refinements required for volume production are identified and implemented prior to production. The development groups also focus on the special requirements of the Company's customers, including increasing printed circuit densities, electronic packaging and advanced materials and products. Design. The Company provides design and engineering assistance in the early stages of product development which assures both mechanical and electrical considerations are integrated to achieve a high quality and cost effective product. The Company also evaluates customer designs for manufacturability and, when appropriate, recommends design changes to reduce manufacturing costs or lead times or to increase manufacturing yields or the quality of finished printed circuits. The Company believes that this long-term view of manufacturing and customer relationships distinguishes the Company from many manufacturers which compete primarily in the quick-turn market. By working closely with its customers, the Company also gains a better understanding of the future requirements of OEMs. This cooperative process shortens the time in transition from the development of the prototype design to volume manufacturing and facilitates the delivery of high quality products to customer premises in a timely fashion. Quick-Turn Prototype. Prototypes typically require lead times of three to seven days, and as short as 24 hours. The Company provides quick-turn prototype services to the product development groups of customers that require small test quantities. Hadco offers these services through facilities in Massachusetts, Texas and California. Prototype development at these facilities has included multilayer printed circuits of up to 48 layers, embedded discrete components, Multichip Modules (MCM), Single Chip Carriers (SCC), planar magnetics, advanced surface finishes, and various high performance substrates for the high frequency microwave market. These facilities also support advanced attachment technologies such as Tape Automated Bonding (TAB), Direct Chip Attach (DCA) and High Density Interposers (HDI). In combining the design of a printed circuit with the manufacture of the prototype, Hadco can reduce the length of the design/manufacture cycle. By working closely with customers at the design and prototype stage, the Company believes it strengthens 2 4 long-term relationships with its customers and gains an advantage in securing a preferred vendor status when customers begin volume production. Pre-Production. Pre-production is the manufacture of limited quantities of electronic interconnects during the transition period from prototype to volume production. Pre-production generally requires quick-turn delivery to accommodate time-to-volume pressures or as a temporary solution for unforeseen customer demands. Pre-production is done both in the quick-turn prototype and volume production facilities. Volume Production. Volume production is characterized by longer lead times and increased emphasis on lower cost as the product moves to full-scale commercial production. As customers increasingly demand a quick transition from prototype to volume production, few independent manufacturers can provide complex printed circuits of 20 or more layers in the volume provided by Hadco's larger facilities. The Company operates six facilities located in California, New York, New Hampshire, Arizona and Malaysia for medium and high-volume printed circuit production. Backplane and System Assembly. Backplanes are generally larger and thicker printed circuits on which connectors are mounted to interconnect printed circuits, integrated circuits and other electronic components. System assemblies include the backplane, power supply, fan card, cabling and system chassis. Hadco incorporates its own printed circuits in backplane and system assemblies to provide customers with a high level of printed circuit technology on a quick-turn and volume basis. Net sales of backplane and system assemblies accounted for 17%, 11%, and 16% of total Company net sales during fiscal 1996, 1997 and 1998, respectively, and for 15% on a pro forma basis including Continental during fiscal 1998. With its backplane and system assembly operations, Hadco is one of a few companies that provides its customers with the advantage of an integrated offering to meet their needs from development and design through volume production to backplane and system assembly. The Company's advanced process capabilities enhance each of the above services and include: Manufacture of High Performance Printed Circuits. At its quick-turn prototype and volume production facilities, the Company produces technologically advanced printed circuits primarily for the high performance market. These printed circuits, used principally in the data communications and telecommunications industries, are designed to function in high temperature environments and at higher frequencies. Materials used by the Company for these products include Teflon(R), cyanate ester, GETEK(R), liquid crystal polymers, polymides, and bismaleimide triazine epoxies. Development of Emerging Technologies. The Company undertakes projects to develop advanced or improved processes, materials and product lines. Buried Capacitance(TM) is an advanced material developed by the Company to provide improved electrical performance and greater interconnect densities. The Company receives revenue from sales of products containing this technology, as well as net royalty income from licensing its use. In addition, the Company is developing the microPath(TM) family of microvia processes, which include liquid imaging, dry film imaging, plasma etching, and laser drilling. Microvias provide a significant increase in printed circuit density. The Continental Acquisition added PCA Design's microvia design methodology. The Company also produces rigid flex printed circuit products utilizing licensed HVRFlex(TM) technology. These products enable customers to fold a printed circuit and reduce the need for cable connectors in the portable computer and telecommunications markets. See Item 2, "Manufacturing and Facilities." 3 5 MARKETS AND CUSTOMERS Hadco's customers are a diverse group of 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. The following table shows, for the periods indicated, the Company's net sales and percentage of its net sales to the principal end-user markets it serves. The information reflected in the table includes the combined operations of Zycon and the Company since January 10, 1997 and of Continental and the Company since March 20, 1998.
FISCAL YEAR ENDED, -------------------------------------------- OCTOBER 26, OCTOBER 25, OCTOBER 31, MARKETS 1996 1997 1998 - ------- ------------ ------------ ------------ (DOLLARS IN MILLIONS) Computing......................................... $119.2 34% $205.0 32% $278.3 34% Contract Assembly................................. 112.2 32 289.2 44 341.8 41 Data Communications/Telecommunications............ 94.7 27 119.1 18 146.7 18 Industrial Automation............................. 17.5 5 24.8 4 40.1 5 Other............................................. 7.1 2 10.6 2 19.5 2 ------ --- ------ --- ------ --- Total Net Sales................................... $350.7 100% $648.7 100% $826.4 100% ====== === ====== === ====== ===
The Company supplied its products and services to a diverse base of approximately 740 customers in fiscal 1998, including 93 customers with purchases in excess of $1 million. The Company attempts to market its products to customers who currently have, or have the potential to achieve, significant market share in their respective industries. The following were the Company's largest customers in fiscal 1998: *Cabletron Systems *RSP Manufacturing *Celestica *Nortel Networks *Cisco Systems *SCI Systems *Compaq Computer *Solectron *Lucent Technologies *Storage Technology During fiscal 1996, 1997 and 1998, no customer accounted for more than approximately 15%, 15% and 17%, respectively, of Hadco's net sales. In fiscal 1998, one customer, Solectron, accounted for approximately 17% of the net sales of the Company. The Company's ten largest customers together accounted for approximately 48%, 47% and 51%, respectively, during the same periods. 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. However, many of the Company's customers have maintained long-term purchasing relationships with the Company. See Item 7, "Factors That May Affect Future Results -- Risks Relating to Variability of Orders from Customers; Backlog." During fiscal 1998, approximately 21% of the Company's net sales were attributable to sales outside of the United States, principally in Canada and Europe. The Company currently intends to expand its sales efforts outside of the United States. SALES AND MARKETING The Company markets its products through its own sales and marketing organization and independent manufacturers' representatives. The Company is represented by independent manufacturers' representatives located in North America, South America, Europe, Mexico, South Africa, Asia, Australia, New Zealand and the Middle East. Regional direct sales offices are located throughout North America, and in Ireland and Singapore. The Company's sales organization also has a support staff of sales engineers and technical service personnel responsible for technical liaison and problem solving, development of product and market opportunities, market research and marketing communications. 4 6 The Company focuses on developing close relationships with customers beginning at the earliest development and design phases and continuing throughout all stages of product production. The Company identifies, develops and markets new technologies that benefit its customers and is intended to position the Company as an important source for these solutions. The Company hosts Regional Technology Symposiums at which the Company's technical capabilities are presented to, and industry technical trends are discussed with, customers of the Company. SUPPLIER RELATIONSHIPS Historically, the majority of raw materials used in the Company's manufacture of printed circuits and components used in backplane and system assemblies have been readily available. However, 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. The Company 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 the Company's manufacturing operations and future unit costs. In response to such concerns, the Company engages in the normal industry practice of maintaining primary and secondary vendors. There can be no assurances that shortages of certain types of raw materials or components or price fluctuations will not occur in the future. See Item 7, "Factors That May Affect Future Results -- Risks of Inability to Obtain Raw Materials and Components." The Company works with its suppliers to develop just-in-time supply systems which reduce inventory carrying costs. The Company also maintains a Supplier Certification Program which evaluates potential vendors on the basis of such factors as quality, on-time delivery, cost, technical capability, and potential technical advancement. Certification is based on both actual performance and audits of vendors' manufacturing sites. Key suppliers are reviewed quarterly to preserve strong relationships with these suppliers and maintain regular dialogue on quality, cost and technical advancement issues. COMPETITION The electronic interconnect industry is highly fragmented and characterized by intense competition. The Company believes that 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. Hadco competes on the basis of product quality, timeliness of delivery, price, customer technical support and its integrated offering, from development and design through volume production to backplane and system assembly. During periods of recession or economic slowdown in the electronics industry and other periods when excess capacity exists, electronic OEMs are able to negotiate lower prices, which could have a material adverse effect on the Company's business, financial condition and results of operations. 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. 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 5 7 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. PRODUCT PROTECTION The Company has obtained eleven United States patents and 25 foreign patents directed to printed circuit boards and methods of manufacturing printed circuit boards which expire between the years 2009 through 2014. Although Hadco seeks to protect certain proprietary technology and other intangible assets through patents and trademark filings, it has relatively few patents and relies primarily on trade secret protection. 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. The future success of the Company will depend on the continued development of processes and capabilities. The Company believes that its accumulated experience with respect to materials and process technology is also important to its operations. See Item 3, "Legal Proceedings and Claims." RELEASED BACKLOG The Company's released backlog as of October 31, 1998 was $140.1 million, compared with $122.3 million as of October 25, 1997. The Company anticipates delivering approximately 89% of its released backlog during its first quarter of fiscal 1999. Released backlog consists of orders for which artwork has been received, a delivery date has been scheduled and the Company anticipates it will manufacture and deliver the order. Cancellation and postponement charges, to the extent they exist with respect to released backlog, generally vary depending upon the time of cancellation or postponement, and a significant portion of the Company's released backlog at any time may be subject to cancellation or postponement without penalty. Variations in the size, timing and delivery schedules of purchase orders received by the Company, as well as changes in customers' delivery requirements, may result in substantial fluctuations in released backlog from period to period. Accordingly, the Company believes that released backlog is not a meaningful indicator of future quarterly or annual financial results. EMPLOYEES As of October 31, 1998, the Company had 7,673 employees, compared to 6,142 employees as of October 25, 1997. The employees are not represented by a union, and the Company has never experienced any labor problems resulting in a work stoppage. 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), 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 6 8 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. In the summer of 1998, NYSDEC took additional samples from a wetland area near the Company's Owego facility. Analytical reports of earlier sediment samples indicated the presence of certain inorganics. The new samples showed elevated levels of certain metals, but NYSDEC has not made a determination as to the potential source of such metals, the remedial action to be taken, or the persons to undertake and/or pay for any remediation. 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 fourth paragraph of this "--Environmental Matters" section. See Item 3, "Legal Proceedings and Claims" for a discussion of certain environmental matters relating to a printed circuit manufacturing facility formerly operated by the Company in Florida. The Company 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 fourth paragraph of this "--Environmental Matters" section. 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" section 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. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 9 of Notes to the Company's Consolidated Financial Statements. The Company plans additional capital expenditures during fiscal 1999 to further reduce air emissions and reduce waste generation. See discussion under Item 2, "Manufacturing and Facilities" concerning the Company's capital expenditures relating to environmental control facilities and equipment, and under Item 3, "Legal Proceedings and Claims" relating to lawsuits regarding environmental matters. ITEM 2. MANUFACTURING AND FACILITIES The need for high volume production of dense multilayer printed circuits requires complex manufacturing processes and necessitates high levels of investment in facilities, advanced materials, production processes and product design capabilities. The Company employs numerous advanced manufacturing techniques and systems, including Computer Aided Manufacturing (CAM) systems, Computer Integrated Manufacturing (CIM) systems, computer controlled drilling and routing, laser drilling, dry-film imaging, multi-purpose metals plating, high volume surface coating, dual-access electrical testing, automated optical inspection, high- 7 9 volume photoimageable solder mask processing, and computer controlled high-volume lamination systems. These techniques enable Hadco to manufacture multilayer printed circuits of consistent quality, in high volume and on a timely basis. All of the Company's production facilities are ISO9002 certified. See Item 1, "Business -- Products and Services." Hadco has pursued a strategy of expanding the capacity and geographic scope of its manufacturing facilities to better serve high growth segments of the electronics industry in key geographic markets. The Company added approximately 600,000 square feet of manufacturing space through the Zycon Acquisition in January 1997. In addition, with the Continental Acquisition in March 1998, the Company added a volume manufacturing facility totaling 229,000 square feet in Arizona, a 60,000 square foot quick-turn prototype facility in Texas, and a 16,000 square foot flexible printed circuit manufacturing facility in California. In total, the Company leases or owns approximately 1.6 million square feet of manufacturing space. The Company's significant facilities are as follows:
FUNCTION LOCATION SQUARE FEET -------- ---------------------------------- ----------- Volume Production.................. Santa Clara and San Jose, CA 365,000* Owego, NY 292,000 Phoenix, AZ 229,000 Derry, NH 200,000 Kuching, Malaysia 180,000 Hudson, NH 67,000 Quick-Turn Prototype............... Haverhill, MA 71,000 Watsonville, CA 46,000 Austin, TX 60,000 Backplane and System Assembly...... Salem, NH 60,000 Santa Clara, CA 37,000 Administrative..................... Salem, NH 53,000 Santa Clara, CA 30,000 Phoenix, AZ 21,000 Warehouse.......................... San Jose, CA 25,000
- --------------- * Does not include the 16,000 square foot flexible printed circuit facility in San Jose, CA. The Company owns its volume production facilities in Owego, New York, Derry, New Hampshire, Hudson, New Hampshire and Phoenix, Arizona. The Company leases its volume production and backplane and system assembly facilities in Santa Clara and San Jose, California, which are located in four adjacent buildings; the leases for these four buildings expire in March 2009, and contain options to extend for up to two additional periods of five years each. The Company leases the land on which the volume production facility in Kuching, Malaysia is located for a period of 60 years, expiring in November 2055. The Hudson, New Hampshire operations are located in two separate buildings, one of which, containing 41,300 square feet, is owned by the Company, and the second of which, containing 25,400 square feet, is leased with the lease expiring in December 2000, with options to extend through December 2009. Leases for the Company's quick-turn prototype facility in Haverhill, Massachusetts expire in December 2003, with options on two of the leases to extend for an additional five years and options on the third lease to extend for an additional ten years. The lease for the Watsonville, California quick-turn prototype facility expires in December 1999, with options to extend until December 2011. The lease for the quick-turn prototype facility in Austin, Texas expires in March 2004, with options to extend until March 2014. The lease for the backplane and system assembly facility in Salem, New Hampshire expires in May 2005, with options to extend until May 2011. The leases for the Santa Clara, California buildings include the 37,000 square feet of backplane and system assembly operations. 8 10 As a result of the Continental Acquisition, the Company also leases a flexible printed circuit manufacturing facility in San Jose, California. The San Jose lease expires in December 2000. The administrative and corporate offices in Salem, New Hampshire are located in three separate buildings, one of which is covered by a lease expiring in May 2003 with options to extend until May 2008, the second of which is covered by a lease expiring in May 2008, and the third of which is a lease expiring in July 2003, with options to extend until July 2009. The leases for the Santa Clara, California buildings include the 30,000 square feet of administrative space. The Phoenix, Arizona facilities include 21,000 square feet of administrative and office space. The lease for the warehouse space in San Jose, California extends for ten years from commencement of the lease term for the entire area subject to the lease, and commencement of the lease term has not yet occurred. The Company is currently in early occupancy of 25,000 square feet of warehouse space. The lease includes one option to extend for an additional five year term. Additionally, the Company owns approximately six acres of land in Salem, New Hampshire, approximately five acres of land in Derry, New Hampshire, approximately 29 acres of land in Owego, New York and approximately four acres of land in Phoenix, Arizona. The Company believes its facilities are currently adequate for its operating needs. In fiscal 1998, the Company's capital expenditures relating to its environmental control facilities and equipment totaled approximately $4.6 million. The Company estimates that it will make capital expenditures with respect to its environmental control facilities and equipment of approximately $5.1 million and $3.5 million in fiscal 1999 and 2000, respectively. ITEM 3. 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. From 1974 to 1980, the Company operated a printed circuit manufacturing facility in Florida as a lessee. This property is the subject of a pending lawsuit in the circuit court for Broward County, Florida (the "Florida Lawsuit") and an investigation by the Florida Department of Environmental Protection ("FDEP"). In connection with the investigation, Hadco and others have participated in alternative dispute resolution regarding the site with an independent mediator. In connection with the 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 to $9.7 million. Mediation sessions were suspended during ongoing assessment and feasibility activities at the site. In 1998, mediation sessions resumed. 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 and Gould, Inc., another prior lessee of the site, were each served with a third-party complaint 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. Hadco's costs relating to the resolution of the Florida Lawsuit and the clean up of such site are currently unknown. 9 11 In March 1993, the EPA notified Hadco Santa Clara 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 of 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 sites. 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 Consent Decree provides a mechanism for ensuring that an appropriate federal, state or local agency will assume regulatory responsibility for long-term maintenance. On January 12, 1998, Hadco Santa Clara 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 the Hadco Santa Clara 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. The future costs in connection with the lawsuits described in the preceding paragraphs, which arise under state and federal laws that impose legal liability that may be joint and several, 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. See Note 9 of Notes to the Company's Consolidated Financial Statements. On March 27, 1998, the Company received written notice from legal counsel for the Lemelson Medical, Education & Research Foundation Limited Partnership (the "Lemelson Partnership"), alleging that the Company was infringing certain patents held by the Lemelson Partnership and offering to license such patents to the Company. The Company denied infringement, but entered into license negotiations. A patent license agreement was entered into by the Company and the Lemelson Partnership in October 1998. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year ended October 31, 1998. 10 12 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the Nasdaq National Market under the symbol "HDCO." The following table sets forth, for the periods indicated, the range of high and low sale prices for the Company's Common Stock on the Nasdaq National Market.
HIGH LOW ---- ---- Fiscal 1997 First Quarter............................................. 59 1/8 27 3/8 Second Quarter............................................ 57 1/8 33 1/8 Third Quarter............................................. 75 5/8 41 Fourth Quarter............................................ 73 47 1/2 Fiscal 1998 First Quarter............................................. 65 1/4 37 1/2 Second Quarter............................................ 54 35 1/2 Third Quarter............................................. 40 17 1/2 Fourth Quarter............................................ 33 3/4 19 1/4
The Company has never declared or paid a cash dividend on its Common Stock, and it is anticipated that the Company will continue to retain its earnings for use in its business and not pay cash dividends. Declaration of dividends is within the discretion of the Company's Board of Directors, which will review such dividend policy from time to time. The Company's credit facility with various banks (the "Credit Facility") currently contains a covenant prohibiting the Company from paying a cash dividend. See Note 7 of Notes to the Company's Consolidated Financial Statements. As of January 6, 1999, there were approximately 340 holders of record of the Common Stock. On January 6, 1999, the last sale price reported on the Nasdaq National Market for the Company's Common Stock was $35.50 per share. Under the Company's Outside Directors Compensation Plan of 1998 (the "Outside Directors Plan"), the 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. Shares issued and deferred under this plan during fiscal 1998 were as follows:
FAIR MARKET FAIR MARKET NUMBER NUMBER NET VALUE PER VALUE OF ISSUE OF SHARES OF SHARES SHARES SHARE AT SHARES DATE ISSUED DEFERRED RECEIVED ISSUE DATE ISSUED ----- --------- --------- -------- ----------- ----------- March 1998........................ 1,290 215 1,075 $46.50 $ 59,985 June 1998......................... 157 -- 157 31.78 4,989 September 1998.................... 2,989 427 2,562 23.41 69,972 ----- --- ----- -------- 4,436 642 3,794 $134,946 ===== === ===== ========
Each of the shares of Common Stock of the Company referenced above 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 persons. 11 13 ITEM 6. SELECTED FINANCIAL DATA The following table presents selected consolidated financial data for Hadco and subsidiaries. The selected consolidated financial data for each of the years ended October 29, 1994, October 28, 1995, October 26, 1996, October 25, 1997 and October 31, 1998 have been derived from the Company's audited Consolidated Financial Statements. The selected consolidated financial data should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto appearing elsewhere in this Annual Report on Form 10-K and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
FISCAL YEAR ENDED -------------------------------------------------------- OCT. 29, OCT. 28, OCT. 26, OCT. 25, OCT. 31, 1994 1995 1996 1997(1) 1998(2) -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED STATEMENTS OF OPERATIONS: Net sales............................. $221,570 $265,168 $350,685 $648,705 $826,359 Gross profit.......................... 45,518 67,440 90,455 141,392 123,690 Restructuring and other non-recurring charges............... -- -- -- -- 7,053 Write-off of acquired in-process research and development............ -- -- -- 78,000 63,050 Income (loss) from operations......... 16,482 33,906 51,532 (1,194) (28,040) Net income (loss)..................... $ 9,943 $ 21,374 $ 32,014 $(36,493) $(54,110) Net income (loss) per share: Basic............................ $ 1.01 $ 2.18 $ 3.12 $ (3.18) $ (4.09) Diluted.......................... $ 0.93 $ 1.98 $ 2.89 $ (3.18) $ (4.09) Weighted average shares outstanding: Basic............................ 9,861 9,805 10,245 11,458 13,216 Diluted.......................... 10,720 10,806 11,084 11,458 13,216 CONSOLIDATED BALANCE SHEET DATA: Working capital....................... $ 31,829 $ 41,043 $ 43,561 $ 53,693 $ 91,830 Total assets.......................... 126,326 162,991 219,501 502,517 743,825 Long-term debt and capital lease obligations, net of current portion............................. 4,526 2,387 1,515 109,716 354,291 Stockholders' investment.............. 77,440 100,774 138,841 239,912 191,549
- --------------- (1) Net loss for the year ended October 25, 1997 includes a non-recurring write-off relating to the Zycon Acquisition for acquired in-process research and development. Excluding the non-recurring write-off, income from operations was $76.8 million, net income was $41.5 million and diluted net income per share was $3.48 (based on weighted average shares outstanding of approximately 11,942,000). (2) Net loss for the year ended October 31, 1998 includes restructuring and other non-recurring charges amounting to $7.1 million pre-tax, and $4.2 million after tax, and a non-recurring write-off of $63 million, pre-tax and after tax, relating to the Continental Acquisition for acquired in-process research and development. Excluding the non-recurring write-offs, income from operations was $42.1 million, net income was $13.2 million and diluted net income per share was $0.97 (based on weighted average shares outstanding of approximately 13,537,000). 12 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains forward-looking statements which involve risks and uncertainties. Hadco makes such forward-looking statements under the provision 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 in this Item 7 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 Item 7, the words "anticipates," "believes," "expects," "intends," "future," "could," and similar words or expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements. ZYCON ACQUISITION On January 10, 1997, the Company acquired all of the outstanding capital stock of Zycon. The acquisition added facilities for volume production of multilayer printed circuits and backplane and system assemblies in the Silicon Valley area, a quick-turn prototype and design facility in Massachusetts, and a newly constructed facility for volume production of printed circuits in Malaysia. Hadco acquired Zycon for approximately $212 million (including acquisition costs) and recorded the acquisition under the purchase method of accounting. As a result, a purchase price premium of approximately $182 million was recorded on the transaction. A significant portion of the purchase price was identified in an independent appraisal, using proven valuation procedures and techniques, as intangible assets. These intangible assets included approximately $78 million for acquired in-process research and development ("in-process R&D") for projects that did not have future alternative uses. This allocation represents the estimated fair market value based on risk-adjusted cash flows related to the in-process R&D projects. At the date of acquisition, the development of these projects had not yet reached technological feasibility, and the in-process R&D had no alternative future uses. Accordingly, these costs were written off in the fiscal quarter ended January 25, 1997. The remaining premium of approximately $104 million was allocated to identifiable intangibles and goodwill, and is being written off over 12 to 30 years, with an average amortization period of 17 years. The acquisition was financed with borrowings under a $250 million senior revolving credit facility, plus existing cash and equivalents. On the date of its acquisition, Zycon's in-process R&D value was comprised of six primary R&D programs that were expected to reach completion between late 1997 and 2001. These projects included the introduction of new technology aimed at enabling the miniaturization and specialization of Zycon's printed circuit product line. At the acquisition date, Zycon's R&D programs ranged in completion from 15% to 75%, and total continuing R&D commitments to complete the projects were expected to be approximately $9.8 million. On the acquisition date, expenditures to complete the Zycon projects were expected to be approximately $4.0 million, $2.7 million, $2.2 million, $0.55 million and $0.3 million in 1997 through 2001, respectively. These estimates are subject to change, given the uncertainties of the development process, and no assurance can be given that deviations from these estimates will not occur. Additionally, these projects will require maintenance expenditures when and if they reach a state of technological and commercial feasibility. Management believes the Company is positioned to complete each of the major R&D programs. However, there is risk associated with the completion of the projects, and there is no assurance that any project will meet with either technological or commercial success. The substantial delay or outright failure of the Zycon R&D could adversely impact the Company's financial condition. See Note 2 of Notes to the Company's Consolidated Financial Statements. CONTINENTAL ACQUISITION On March 20, 1998, the Company acquired all of the outstanding capital stock of Continental, further broadening Hadco's product and service capabilities. The acquisition added a facility for volume production of multilayer printed circuits in Phoenix, Arizona, a quick-turn prototype facility in Austin, Texas, a flexible printed circuit facility in California and printed circuit engineering and design sites in California, Texas and Colorado. Hadco acquired Continental for approximately $190 million (including acquisition costs) and recorded the acquisition under the purchase method of accounting. As a result, a purchase price premium of $165 million was recorded on the transaction. A significant portion of the purchase price was identified in an 13 15 independent appraisal, using proven valuation procedures and techniques, as intangible assets. These intangible assets included approximately $63 million for in-process R&D for projects that did not have future alternative uses. This allocation represents the estimated fair market value based on risk-adjusted cash flows related to the in-process R&D projects. At the date of acquisition, the development of these projects had not yet reached technological feasibility, and the in-process R&D had no alternative future uses. Accordingly, these costs were written off in the fiscal quarter ended May 2, 1998. The remaining premium of $101.9 million was allocated to identifiable intangibles and goodwill, and is being written off over 12 to 20 years, with an average amortization period of 16 years. The acquisition was financed from borrowings under the Credit Facility. Continental's in-process R&D value is comprised of eight primary R&D programs that are currently expected to reach completion during periods ranging from 1999 through 2003. These projects are expected to include the introduction of new technology that could, if successful, enable the miniaturization and specialization of Continental's printed circuit product line. At the acquisition date, Continental's R&D programs ranged in completion from approximately 10% to 80%, and total continuing R&D commitments to complete the projects are currently expected to be approximately $12 million. Remaining development efforts for the Continental programs are complex and aimed at the development and advancement of advanced chemical, electrical, and engineering solutions. On the acquisition date, certain projects within the Continental R&D programs were expected, if successful, to begin to bear results in late 1998 and 1999. Expenditures to complete the Continental projects are currently expected to be approximately $4.0 million, $2.5 million and $2.5 million in 1999 through 2001, respectively. These estimates are subject to change, given the uncertainties of the development process, and no assurance can be given that deviations from these estimates will not occur. Additionally, these projects will require maintenance expenditures when and if they reach a state of technological and commercial feasibility. Management believes the Company is positioned to complete each of the major R&D programs. However, there is risk associated with the completion of the projects, and there is no assurance that any project will meet with either technological or commercial success. The substantial delay or outright failure of the Continental R&D could adversely impact the Company's financial condition. See Note 2 of Notes to the Company's Consolidated Financial Statements. VALUE ASSIGNED TO PURCHASED IN-PROCESS R&D The value assigned to purchased in-process R&D was determined by estimating the costs to develop Continental's and Zycon's purchased in-process R&D into commercially viable products, estimating the resulting net cash flows from the projects and discounting the net cash flows to their present value. The revenue estimates used to value the in-process R&D were based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by the Company and its competitors. The rates utilized to discount the net cash flows to their present value are based on Continental's and Zycon's weighted average cost of capital. Given the nature of the risks associated with the estimated growth, profitability and developmental projects, Continental's and Zycon's weighted average cost of capital was adjusted. A discount rate of 14.0% was deemed appropriate for Continental's business enterprise, while a discount rate of 15.0% was deemed appropriate for Zycon's business enterprise. These discount rates are intended to be commensurate with each company's corporate maturity and the uncertainties in the economic estimates described above. The estimates used by the Company in valuing in-process R&D were based upon assumptions the Company believes to be reasonable but which are inherently uncertain and unpredictable. The Company's assumptions may be incomplete or inaccurate, and no assurance can be given that unanticipated events and circumstances will not occur. Accordingly, actual results may vary from the projected results. Any such variance may result in a material adverse effect on the financial condition and results of operations of the Company. 14 16 RESULTS OF OPERATIONS The following table sets forth certain Consolidated Statements of Operations data and other data as a percentage of net sales. The table and the discussion below should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto that appear elsewhere in this Annual Report on Form 10-K.
FISCAL YEAR ENDED -------------------------------- OCT. 26, OCT. 25, OCT. 31, 1996 1997(1) 1998(2) -------- -------- -------- CONSOLIDATED STATEMENTS OF OPERATIONS: Net sales................................................... 100.0% 100.0% 100.0% Cost of sales............................................... 74.2 78.2 85.0 ----- ----- ----- Gross profit................................................ 25.8 21.8 15.0 ----- ----- ----- Operating expenses.......................................... 11.1 9.2 8.7 Amortization of acquired intangible assets.................. -- 0.8 1.2 Write-off of acquired in-process research and development... -- 12.0 7.6 Restructuring and other non-recurring charges............... -- -- 0.9 ----- ----- ----- Income (loss) from operations............................... 14.7 (0.2) (3.4) Interest income (expense) and other, net.................... 0.3 (1.2) (2.4) ----- ----- ----- Income (loss) before provision for income taxes............. 15.0 (1.4) (5.8) Provision for income taxes.................................. 5.9 4.2 0.7 ----- ----- ----- Net income (loss)........................................... 9.1% (5.6)% (6.5)% ===== ===== =====
- --------------- (1) Net loss for the year ended October 25, 1997 includes a non-recurring write-off relating to the Zycon Acquisition for acquired in-process research and development. As a percentage of net sales, income from operations was 11.8%, income before provision for income taxes was 10.7%, and net income was 6.4%, all before deducting the non-recurring write-off. (2) Net loss for the year ended October 31, 1998 includes a non-recurring write-off relating to the Continental Acquisition for acquired in-process research and development and for restructuring and other non-recurring expenses. As a percentage of net sales for the year ended October 31, 1998, income from operations was 5.1%, income before provision for income taxes was 2.6%, and net income was 1.6%, all before deducting the non-recurring write-off and restructuring charges. Fiscal Years Ended October 31, 1998 and October 25, 1997 Net sales for 1998 increased 27.4%, or $177.7 million over net sales for 1997. The increase resulted from several factors including the Continental Acquisition, which added $80.4 million to printed circuit net sales, an increase in printed circuit net sales (excluding the acquisition of Continental) of $36.6 million, and an increase in backplane and system assembly net sales of $60.7 million. Printed circuit net sales increased due to higher production volume and shipments as well as the shift towards printed circuits with more layers and greater densities. This increase in printed circuit net sales was partially offset by a 10.3% decrease in average pricing for fiscal 1998 over fiscal 1997. Backplane and system assembly net sales increased due to higher production volume and shipments. The gross profit margin decreased to 15.0% in 1998 from 21.8% in 1997. Lower pricing on printed circuits caused margins to decrease by 5.8 percentage points. Lower capacity utilization from printed circuit operations caused margins to decrease by 1.7 percentage points. The effect of lower overall gross margins from Hadco Santa Clara and Hadco Phoenix operations caused margins to decrease by 2.0 percentage points. All of these decreases were partially offset by lower unit costs achieved through improved production efficiencies resulting in an overall decrease in the gross margin of 6.8 percentage points. As a result of the Acquisitions and the 15 17 increase in backplane and system assembly, the Company expects its gross profit margin will be lower in future fiscal quarters than has historically been the case for Hadco. Operating expenses, as a percent of net sales, decreased slightly to 9.9% in fiscal 1998 from 10.0% in fiscal 1997. This decrease was partially offset by goodwill and purchased intangibles amortization of $9,750 in fiscal 1998 as compared to $5,215 in 1997. For additional information regarding the factors affecting gross and operating margins, please see "Factors That May Affect Future Results -- Risks Relating to Fluctuations in Quarterly Operating Results," "Factors That May Affect Future Results -- Dependence on Electronics Industry" and "Factors That May Affect Future Results -- Risks Relating to the Acquisitions and the Company's Acquisition Strategy." Income from operations for 1998 and 1997 was reduced by $63 million and $78 million, respectively, due to non-recurring write-offs of acquired in-process R&D recorded in connection with the Acquisitions. The remaining goodwill and purchased intangibles are being amortized over 12 to 30 years, with an average amortization period of 17 years, which will reduce income from operations by approximately $12.1 million per fiscal year. In addition, income from operations for 1998 was reduced by approximately $7.1 million for restructuring and other non-recurring charges related to the consolidation of the Company's East Coast quick-turn prototype operations and limited restructuring of the Company's workforce. The limited restructuring in the third fiscal quarter temporarily reduced the Company's workforce by approximately 3%. 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. See Note 15 of Notes to the Company's Consolidated Financial Statements. Additionally, the general economic slowdown in the broad electronics industry, the economic situation in Asia, inventory levels in the end user market, customer inventory adjustments and customer product transitions negatively affected net income for fiscal 1998. Interest income decreased in 1998 as compared to 1997, due to lower average daily cash balances available for investing. Interest expense increased in 1998 as compared to 1997, due to an increase in outstanding debt as a result of the Acquisitions. 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 known environmental matters. See Item 1, "Business -- Environmental Matters" and Item 3, "Legal Proceedings and Claims." The provision for income taxes is calculated on income before provision for taxes without taking into account the write-off of acquired in-process R&D. This write-off was $63.0 million and $78.0 million for 1998 and 1997, respectively. Income before the provision for income taxes excluding the write-off would have been $14.8 million and $69.2 million for 1998 and 1997, respectively. The Company's effective annual income tax rate for 1998 and 1997 was 39.75% and 40.0%, respectively. The effective rate for both years is approximately equal to 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. Fiscal Years Ended October 25, 1997 and October 26, 1996 Net sales during 1997 increased approximately 85% over 1996. The increase resulted from several factors including the Zycon Acquisition, which added $216.1 million in printed circuit net sales after January 10, 1997, and an increase in both backplane and system assembly and non-Zycon printed circuit net sales. Backplane and system assembly net sales increased due to higher product 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 0.6% for 1997 over 1996. Net sales from backplane and system assemblies decreased to 16.2% of total net sales excluding Zycon, from 16.9% in 1996. 16 18 The gross profit margin decreased to 21.8% in 1997 from 25.8% for 1996. The decrease resulted from increased investment in new capacity and technologies at certain facilities and lower overall gross margins from the Zycon operations (including ongoing start-up expenses associated with the volume production facility in Malaysia). Operating expenses, as a percent of net sales, decreased to 10.0% in 1997 from 11.1% in 1996, 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 of $5.2 million. Income from operations for 1997 was reduced by approximately $78 million due to a non-recurring write-off relating to acquired in-process R&D recorded in connection with the Zycon Acquisition. The remaining goodwill and purchased intangibles will be amortized over 12 to 30 years, with an average amortization period of 17 years. Excluding the non-recurring write-off of approximately $78 million for acquired in-process R&D, operating margins decreased to 11.8% for 1997 from 14.7% in 1996, primarily as a result of the same factors affecting gross profit margins and from the goodwill amortization related to the Zycon Acquisition. Interest income decreased in 1997 as compared to 1996 due to lower daily average cash balances available for investing. Interest expense increased in 1997 as compared to 1996 due to an increase in outstanding debt as a result of the Zycon Acquisition. LIQUIDITY AND CAPITAL RESOURCES In fiscal 1998, the Company's financing requirements were met principally from net cash flows from operations of $62.9 million, the sale of the Company's 9 1/2% Senior Subordinated Notes (the "Notes"), the proceeds of which amounted to $199.3 million and net bank borrowings of $8.5 million. These funds were used to meet increased working and fixed capital needs and to acquire Continental. In fiscal 1996, cash from operating activities increased primarily due to increases in net income and depreciation. In fiscal 1997 and 1998, cash from operating activities was affected primarily by the amount of net loss recognized and the offsetting effects of the write-off of acquired in-process R&D. Additionally, in fiscal 1997 and 1998, cash provided by operating activities included the effects of increases in accounts receivable and inventories, both of which were affected by the Acquisitions. In fiscal 1996, investing activities consisted primarily of capital expenditures. In fiscal 1997 and 1998, investing activities consisted primarily of the $209.7 million and $192.5 million purchases (each net of cash acquired) of Zycon and Continental, respectively, and additional capital expenditures. In fiscal 1996, cash provided by financing activities was affected by a tax benefit from the exercise of options, partially offset by payments of capital leases. In fiscal 1997, cash provided by financing activities consisted primarily of borrowings under the Company's revolving Credit Facility which was used for the Zycon Acquisition and the cash proceeds from the sale of Common Stock. In fiscal 1998, cash provided by financing activities consisted primarily of borrowings under the Company's revolving Credit Facility which was used for the Continental Acquisition and the cash proceeds from the sale of Notes. At October 31, 1998, the Company had working capital of $91.8 million and a current ratio of 1.71, compared to working capital of $53.7 million and a current ratio of 1.48 at October 25, 1997. Cash, cash equivalents and short-term investments at October 31, 1998 were approximately $7.2 million, a decrease of $6.5 million from approximately $13.7 million at October 25, 1997. The Company currently anticipates that its capital expenditures for fiscal 1999 will be in excess of $70 million, of which $20.1 million represents commitments to purchase manufacturing equipment and leasehold improvements. The amount of these anticipated capital expenditures may change based on future changes in business plans and conditions of the Company and changes in economic conditions. In December 1997, the Company negotiated its Credit Facility with various banks, which amended and restated an existing credit facility. Interest on loans outstanding under the Credit Facility is, at the Company's 17 19 option, payable at either (1) the Base Rate (as defined in the Credit Facility), or (2) the Eurodollar Rate, plus the Applicable Eurodollar Rate Margin (both as defined in the Credit Facility). On September 15, 1998, the Company amended its Credit Facility with the Third Amendment and Modification Agreement dated as of September 14, 1998. This most recent amendment to the Credit Facility, among other things, amended and added certain covenants, changed the available borrowing capacity under the Credit Facility from $400 million to the lesser of $300 million or the Borrowing Base and granted the banks a first priority mortgage and security interest in substantially all of the assets of the Company and each of the subsidiaries which are guarantors of the Credit Facility. The Borrowing Base is an amount, determined monthly (or more frequently in certain circumstances) by the Agent, equal to the sum of specified percentages of Eligible Accounts Receivable (domestic and foreign), domestic Eligible Inventory, Eligible Fixed Assets and a percentage, determined in the Agent's sole discretion, of Eligible Foreign Inventory, less certain Reserves (all as defined in the Credit Facility). As of October 31, 1998, the Borrowing Base was approximately $225 million, approximately $150 million was outstanding under the Credit Facility and approximately $75 million was available to the Company under the Credit Facility. Under this most recent amendment to the Credit Facility, the Company is also required to pay a quarterly usage fee based on an Applicable Base Rate Usage Fee Margin and an Applicable Eurodollar Rate Usage Fee Margin. As of October 31, 1998, the weighted average interest rate on loans outstanding under the Credit Facility was 6.58%. The Credit Facility expires and all outstanding loans thereunder mature on January 8, 2002. See Note 7 of Notes to the Company's Consolidated Financial Statements. On May 18, 1998, the Company sold $200 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 sold 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 $193.8 million, was used to repay outstanding indebtedness under the Credit Facility previously incurred to, among other things, finance the Acquisitions. On November 12, 1998, the Company consummated an exchange offer pursuant to which the Notes were exchanged for notes (with terms identical in all material respects) that were registered with the Securities and Exchange Commission under a registration statement on Form S-4. Interest on the Notes is payable semi-annually on each June 15 and December 15 and commenced 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 Indenture under 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 8 of Notes to the Company's Consolidated Financial Statements. The Company believes its current 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 calendar year 1999. 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, including the holders of the Notes. 18 20 YEAR 2000 READINESS DISCLOSURE STATEMENT The Company has undertaken an internal assessment of its operations in order to determine the extent to which the Company may be adversely affected by Year 2000 issues. This internal assessment has included both Information Technology (IT) systems and non-IT systems. By the end of fiscal year 1998, the Company's assessment of its IT systems had been completed. The critical software systems used by the Company to run its business include MFG/PRO, Peoplesoft, Oracle, and Corsair. The Company believes that all of these programs are currently Year 2000 compliant. However, the Company has experienced and may continue to experience interfacing problems when upgrades are received from the vendors of these software programs. The Company has completed some limited testing of its various IT systems, running programs with dates including and after the year 2000. During these tests the Company has not yet experienced any problems with processing of data and effecting transactions. The Company intends to perform further testing of its IT systems during early calendar 1999. There can be no assurance, however, that additional testing of its IT systems will not uncover Year 2000 issues, which could have a material adverse effect on the Company's business, results of operations and financial condition. The Company's internal assessment of its manufacturing equipment for Year 2000 compliance is being done on a plant-by-plant basis. The Company anticipates that all of its internal assessment of manufacturing equipment will be completed by January 31, 1999. To date, the Company has identified three operating systems which are important to the Company's operations, each of which will need software upgrades in order to be Year 2000 compliant. Two of these operating systems are utilized in multiple departments and locations including the tooling/engineering phase of the fabrication business. The Company believes that Year 2000 compliant software upgrades for each of the two engineering systems have already been developed and tested, and the Company plans to install such upgrades on or before July 1, 1999. There can be no assurance that such upgrades will be Year 2000 compliant or that such upgrades will be installed on a timely basis. The Company has also determined that software in certain of its manufacturing systems is not currently Year 2000 compliant. The Company believes that no upgrade currently exists to address the Year 2000 issue in this software. However, the vendor is aware of the need to upgrade its software program so that it will interface properly with the other operating system used in the equipment. The vendor has told the Company that it will complete the software upgrade, and will deliver and install it at the Company not later than June 30, 1999. There can be no assurance, however, that such vendor will be able to develop a Year 2000 compliant software upgrade or that it will be installed at the Company prior to January 1, 2000. No testing has yet been undertaken of the Company's manufacturing systems for Year 2000 compliance. The Company intends to develop a plan for testing all critical systems not later than January 31, 1999, and to complete testing by June 30, 1999. The Company has also undertaken a survey of its suppliers' Year 2000 compliance status and, to date, has received responses from more than 80% of those surveyed, a majority of whom have certified they are compliant. Corporate purchasing will be responsible for obtaining data from those suppliers who have not yet responded to the Company's inquiries, and for obtaining updated information from the Company's more critical suppliers and those who indicated they were not Year 2000 compliant. The Company intends to conduct detailed exchanges with its key suppliers in order to assess the Company's need for contingency plans and in order to develop contingency plans, if required, on a supplier-by-supplier basis. During the first fiscal quarter of 1999, the Company retained the services of a consulting company and has two full-time outside Year 2000 compliance consultants to assist it in guiding its assessment, testing, remediation, and related efforts. To date, approximately 3,000 hours of employee time have been devoted to Year 2000 issues and approximately $1.5 million has been expended in systems upgrades directly relating to Year 2000 issues. The source of such funds has been the working capital of the Company. Present estimates for further expenditures of both employee time and expenses to address Year 2000 issues are between 16,000 and 20,000 employee hours and between $3 million and $6 million, respectively. To date, no non-Year 2000 related IT projects have been delayed as a result of the Company's Year 2000 compliance efforts. The Company has not yet determined whether it has the internal resources to expend the necessary employee hours to address and resolve the Year 2000 issues at each of its manufacturing facilities; the Company may choose to retain outside consultants or otherwise outsource certain work, which would increase the expenses 19 21 for Year 2000 issues and decrease the employee time commitment. The Company anticipates making an initial decision regarding the availability of Company resources for Year 2000 issues sometime in the first fiscal quarter of 1999, but will continually review this issue in light of the completion of its internal assessment and the results of additional testing and remediation efforts. There can be no assurance that the Company's costs relating to its Year 2000 compliance will not be greater than that currently expected. A software or systems Year 2000 compliance failure with respect to the Company's internal systems and software, or that of third party service providers or major customers, could prevent the Company from being able to fulfill orders of its customers. Any such failure, if not quickly remedied, would have a material adverse affect on the Company's business, results of operations and financial condition. The lost revenues that would result from the Company's inability to operate even one of its major volume manufacturing plants for any significant period of time would have a material adverse effect on the Company. The Company could face an even greater risk of significant damages for which the Company could be liable if it is found responsible for the shutdown of one of its customers' facilities. This could occur if the Company were unable to supply parts integral to the end products manufactured by the Company's customers. In such circumstances, the legal liability of the Company could have a material adverse effect on the Company's business, results of operations and financial condition. At present, the Company has not developed any contingency plans for addressing any Year 2000 difficulties it may experience. The Company intends to develop such plans, both with respect to its suppliers and with respect to its own internal operations, on or before April 1, 1999. NEW ACCOUNTING STANDARDS In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. This Statement established standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This Statement is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. This Statement, requiring only additional informational disclosures, is effective for the Company's fiscal year ending October 30, 1999. In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. This Statement established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that enterprises report selected information about operating segments in interim financial reports issued to stockholders. This Statement is effective for fiscal years beginning after December 15, 1997. In the initial year of application, comparative information for earlier years will be provided unless deemed impractical. This Statement, requiring only additional informational disclosures, is effective for the Company's fiscal year ending October 30, 1999. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company does not anticipate the adoption of this Statement will have a material impact on its financial position or results of operations. FACTORS THAT MAY AFFECT FUTURE RESULTS This Annual Report on Form 10-K contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, without limitation, those set forth in the following risk factors and elsewhere in this Annual Report on Form 10-K. In addition to the other information included or incorporated by reference in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating the Company and its business. 20 22 Dependence on Electronics Industry The Company's principal customers are electronics 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 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. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Item 1, "Business -- Markets and Customers." Risks Relating to 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 and shipments 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 pricing, 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 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. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Risks Relating to Variability of Orders from Customers; Backlog 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 variations 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 21 23 and results of operations. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 1, "Business -- Released Backlog." 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 are able to negotiate lower prices, which could have a material adverse effect on the Company. 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. See Item 1, "Business -- Competition." Risks Relating to the Acquisitions and the Company's Acquisition Strategy 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 its acquired businesses profitably in the future. The Company expects its gross profit margin will be lower in future fiscal quarters than has historically been the case due, in part, to the Acquisitions. 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. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 1, "Business -- General." 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. 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. 22 24 Risks of Inability to Manage Significant Growth In fiscal 1997 and 1998, the Company significantly expanded its operations, including geographically, which 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 and supervisory personnel, in order to train, motivate and manage its employees. 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. The Company's failure to effectively manage future growth could have a material adverse effect on the Company's business, financial condition and results of operations. See "Factors That May Affect Future Results -- Risks Relating to the Acquisitions and the Company's Acquisition Strategy" and "Factors That May Affect Future Results -- Dependence on Key Personnel." Risks Relating to Operation of Malaysian Facility and Asian Economic Turmoil Hadco Santa Clara completed construction of a volume manufacturing facility for printed circuits in Malaysia in fiscal 1997. Hadco's management has limited experience in operating foreign manufacturing facilities, and there can be no assurance that the Company will operate the 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. Rapid Technological Change, Continuing Process Development and Potential 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 23 25 resulting from a natural disaster 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. See Item 1, "Business - -- Products and Services" and Item 2, "Manufacturing and Facilities." 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 1996, 1997 and 1998, the Company's ten largest customers accounted for approximately 48%, 47% and 51% of net sales, respectively. In fiscal 1998, Solectron accounted for approximately 17% of the net sales of the Company. The Company has one customer that accounted for 16% and 13% of consolidated accounts receivable at October 25, 1997 and October 31, 1998, respectively. 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 or the inability or refusal of such customer to pay for such orders could have a material adverse effect on the Company's business, financial condition and results of operations. See Item 1, "Business -- Markets and Customers" and "Factors That May Affect Future Results -- Risks Relating to Variability of Orders from Customers; Backlog." 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 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. See "Factors That May Affect Future Results - -- Rapid Technological Change, Continuing Process Development and Potential Process Disruption" and Item 2, "Manufacturing and Facilities." 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 24 26 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. See Item 1, "Business -- Environmental Matters," Item 3, "Legal Proceedings and Claims" and Note 9 of Notes to the Company's Consolidated Financial Statements. Risks of Inability to Obtain Raw Materials and Components Although the Company does not have guaranteed sources of raw materials and components utilized in its operations, it does have supply agreements with a limited number of key suppliers, and it routinely purchases raw materials and components from several 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. 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 and system 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 not occur in the future. Component shortages or price fluctuations could have a material adverse effect on the Company's backplane and system assembly business, thereby materially adversely affecting the Company's business, financial condition and results of operations. See Item 1, "Business -- Supplier Relationships." Dependence on Key Personnel The Company's future success depends to a large extent upon the continued services of key managerial and technical employees. Most of the executive officers of the Company are bound by employment or non-compete agreements. The non-compete restrictions expire one year or, under certain circumstances, up to two years, after the termination of the executive officer's employment with the Company. Certain other key employees of the Company also 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. Investments in Intellectual Property; Intellectual Property Protection The Company's success depends in part on its proprietary techniques and manufacturing expertise, particularly in the area of dense multilayer printed circuits. As of October 31, 1998, the Company had capitalized approximately $191 million of acquired intangible assets, consisting primarily of developed technology, customer relationships and goodwill. These intangible assets are being amortized over lives ranging from 12 to 30 years. The Company assesses the realizability and valuation of intangible assets based on the estimated cash flows to be generated by such assets. Based on its most recent analyses, the Company believes that no material impairment of intangible assets exists as of October 31, 1998. Impairment occurs 25 27 when actual cash flows generated do not equal or exceed estimated cash flows. The estimated cash flows are based on assumptions the Company believes to be reasonable, but which are inherently uncertain and unpredictable. The Company's assumptions may be incomplete or inaccurate, and no assurance can be given that unanticipated events and circumstances will not occur. Accordingly, actual cash flows may vary from the projected cash flows. In such event, the Company may be required to write-off or write-down the value of assets which are impaired. Any such write-off or write-down may result in a material adverse effect on the financial condition and results of operations of the Company. See Notes 2 and 5 of Notes to the Company's Consolidated Financial Statements. 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. See Item 1, "Business - -- Product Protection." Anti-Takeover Provisions The Company's Stockholder Rights Plan and certain provisions of the Company's Restated Articles of Organization and By-Laws and of Massachusetts Law, including Massachusetts General Laws Chapter 110D, entitled "Regulation of Control Share Acquisitions" and Chapter 110F, the so-called Business Combination Statute, could discourage potential acquisition proposals and could delay or prevent a change in control or sale of the Company. Each and all of the above provisions and statutes could diminish the opportunities for a stockholder to participate in tender offers, including tender offers at a price above the then current market value of Common Stock and may render more difficult or discourage a merger, consolidation or tender offer (even if such transaction is supported by the Company's Board of Directors or is favorable to the stockholders), the assumption of control by a holder of a large block of the Company's shares, and the removal of incumbent management. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Derivative Financial Instruments, Other Financial Instruments, and Derivative Commodity Instruments. At October 31, 1998, the Company did not participate in any derivative financial instruments, or other financial and commodity instruments for which fair value disclosure would be required under SFAS No. 107. The Company holds no investment securities which would require disclosure of market risk. Primary Market Risk Exposures. The Company's primary market risk exposures are in the areas of interest rate risk and foreign currency exchange rate risk. The Company incurs interest expense on loans made under the Credit Facility at interest rates which are fixed for a maximum of six months. At October 31, 1998, the Company's outstanding borrowings on the Credit Facility were $150 million, at a weighted average interest rate of 6.58%. This interest rate is a combination of two Eurodollar rate loans of $50 million and $100 million at rates of 6.625% and 6.5625%, respectively. The Eurodollar rates are fixed until November 25, 1998 and January 25, 1999, respectively, at which time the Company can again fix these rates for periods of one, two, three or six months. The Eurodollar Rate is subject to market risks and will fluctuate. Substantially all of the Company's business outside the United States is conducted in U.S. dollar denominated transactions. The Company does operate a volume manufacturing facility in Malaysia. Some of the expenses of this facility are denominated in Malaysian ringgits. Expenses denominated in ringgits include local salaries and wages, utilities and some operating supplies. However, the Company believes that the operating expenses currently incurred in foreign currency are immaterial, and therefore any associated market 26 28 risk is unlikely to have a material adverse effect on the Company's business, results of operations or financial condition. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's Consolidated Financial Statements and the Report of Independent Public Accountants thereon are presented in the following pages. The Consolidated Financial Statements filed in Item 8 are as follows: PAGE ---- Report of Independent Public Accountants.................................. 28 Consolidated Balance Sheets as of October 25, 1997 and October 31, 1998........................................................ 29 Consolidated Statements of Operations for the years ended October 26, 1996, October 25, 1997 and October 31, 1998................. 30 Consolidated Statements of Stockholders' Investment for the years ended October 26, 1996, October 25, 1997 and October 31, 1998................................................................ 31 Consolidated Statements of Cash Flows for the years ended October 26, 1996, October 25, 1997 and October 31, 1998................. 32 Notes to Consolidated Financial Statements................................ 33 27 29 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Hadco Corporation: We have audited the accompanying consolidated balance sheets of Hadco Corporation (a Massachusetts corporation) and subsidiaries as of October 25, 1997 and October 31, 1998, and the related consolidated statements of operations, stockholders' investment and cash flows for each of the three years in the period ended October 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hadco Corporation and subsidiaries as of October 25, 1997 and October 31, 1998, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1998, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in item 14(a)(2) is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein, in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Boston, Massachusetts November 20, 1998 28 30 HADCO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
OCTOBER 25, OCTOBER 31, 1997 1998 ----------- ----------- ASSETS Current Assets: Cash and cash equivalents.............................. $ 12,171 $ 7,169 Short-term investments................................. 1,562 -- Accounts receivable, net of allowance of $1,700 in 1997 and $2,129 in 1998.................................... 92,222 111,094 Inventories............................................ 46,000 67,017 Deferred tax asset..................................... 10,483 17,156 Prepaid expenses and other current assets.............. 4,245 18,666 -------- -------- Total current assets.............................. 166,683 221,102 Property, Plant and Equipment, net.......................... 231,490 322,887 Acquired Intangible Assets, net............................. 101,131 191,421 Other Assets................................................ 3,213 8,415 -------- -------- $502,517 $743,825 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Current portion of long-term debt...................... $ 5,064 $ 4,377 Accounts payable....................................... 68,594 79,350 Accrued payroll and other employee benefits............ 28,279 26,529 Accrued taxes.......................................... 1,775 -- Other accrued expenses................................. 9,278 19,016 -------- -------- Total current liabilities......................... 112,990 129,272 -------- -------- Long-term Debt, net of current portion...................... 109,716 354,291 -------- -------- Deferred Tax Liability...................................... 30,685 59,521 -------- -------- Other Long-term Liabilities................................. 9,214 9,192 -------- -------- Commitments and Contingencies (Note 9) Stockholders' Investment: Common stock, $.05 par value; Authorized -- 25,000 shares in 1997 and 50,000 shares in 1998 Issued and outstanding -- 13,086 shares in 1997 and 13,366 shares in 1998................................. 655 669 Paid-in Capital............................................. 168,246 173,906 Deferred Compensation....................................... (117) (44) Retained Earnings........................................... 71,128 17,018 -------- -------- Total stockholders' investment.................... 239,912 191,549 -------- -------- $502,517 $743,825 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 29 31 HADCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED ----------------------------------------- OCTOBER 26, OCTOBER 25, OCTOBER 31, 1996 1997 1998 ----------- ----------- ----------- Net Sales................................................. $350,685 $648,705 $826,359 Cost of Sales............................................. 260,230 507,313 702,669 -------- -------- -------- Gross Profit.............................................. 90,455 141,392 123,690 Operating Expenses........................................ 38,923 64,586 81,627 Restructuring and Other Non-recurring Charges............. -- -- 7,053 Write-off of Acquired In-Process Research and Development............................................. -- 78,000 63,050 -------- -------- -------- Income (Loss) From Operations............................. 51,532 (1,194) (28,040) Interest and Other Income................................. 1,287 3,296 2,295 Interest Expense.......................................... (338) (10,923) (22,468) -------- -------- -------- Income (Loss) Before Provision for Income Taxes........... 52,481 (8,821) (48,213) Provision for Income Taxes................................ 20,467 27,672 5,897 -------- -------- -------- Net Income (Loss)......................................... $ 32,014 $(36,493) $(54,110) ======== ======== ======== Net Income (Loss) Per Share: Basic................................................ $ 3.12 $ (3.18) $ (4.09) ======== ======== ======== Diluted.............................................. $ 2.89 $ (3.18) $ (4.09) ======== ======== ======== Weighted Average Shares Outstanding: Basic................................................ 10,245 11,458 13,216 ======== ======== ======== Diluted.............................................. 11,084 11,458 13,216 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 30 32 HADCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT (IN THOUSANDS)
COMMON STOCK -------------------- NUMBER $.05 PAR PAID-IN DEFERRED RETAINED OF SHARES VALUE CAPITAL COMPENSATION EARNINGS --------- -------- -------- ------------ -------- Balance, October 28, 1995..................... 9,939 $497 $ 25,077 $(407) $75,607 Terminated stock options................. -- -- (13) 13 -- Exercise of stock options................ 443 24 1,714 -- -- Tax benefit of exercise of nonqualified stock options.......................... -- -- 4,161 -- -- Compensation expense associated with granting nonqualified stock options.... -- -- -- 154 -- Net income............................... -- -- -- -- 32,014 ------ ---- -------- ----- ------- Balance, October 26, 1996..................... 10,382 521 30,939 (240) 107,621 Terminated stock options................. -- -- (2) 2 -- Exercise of stock options................ 263 12 1,291 -- -- Tax benefit of exercise of nonqualified stock options.......................... -- -- 5,052 -- -- Compensation expense associated with granting nonqualified stock options.... -- -- -- 121 -- Sale of common stock, net of offering costs of $1,033........................ 2,441 122 130,966 -- -- Net loss................................. -- -- -- -- (36,493) ------ ---- -------- ----- ------- Balance, October 25, 1997..................... 13,086 655 168,246 (117) 71,128 Exercise of stock options................ 179 9 1,073 -- -- Sale of common stock..................... 101 5 2,588 -- -- Compensation expense associated with granting nonqualified stock options.... -- -- -- 73 -- Tax benefit of exercise of nonqualified stock options.......................... -- -- 1,999 -- -- Net loss................................. -- -- -- -- (54,110) ------ ---- -------- ----- ------- Balance, October 31, 1998..................... 13,366 $669 $173,906 $ (44) $17,018 ====== ==== ======== ===== =======
The accompanying notes are an integral part of these consolidated financial statements. 31 33 HADCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE YEARS ENDED ----------------------------------------- OCTOBER 26, OCTOBER 25, OCTOBER 31, 1996 1997 1998 ----------- ----------- ----------- Cash Flows from Operating Activities: Net income (loss)......................................... $ 32,014 $ (36,493) $ (54,110) Adjustments to reconcile net income (loss) to net cash provided by operating activities -- Write-off of acquired in-process research and development........................................... -- 78,000 63,050 Depreciation, amortization, deferred compensation and deferred taxes........................................ 17,330 40,972 65,209 (Gain) loss on disposal of fixed assets................. (205) (1,862) 1,840 Changes in assets and liabilities, net of acquisition of Zycon Corporation and Continental Circuits Corp. in 1997 and 1998, respectively: Increase in accounts receivable....................... (4,825) (26,762) (2,406) Increase in inventories............................... (8,482) (12,824) (9,488) Decrease in prepaid expenses and other current assets............................................. 213 308 1,836 Decrease in other assets.............................. 33 385 2,811 Increase (Decrease) in accounts payable and accrued expenses........................................... 17,720 8,873 (5,783) Increase (Decrease) in long-term liabilities.......... 1,831 70 (22) -------- --------- --------- Net cash provided by operating activities.......... 55,629 50,667 62,937 -------- --------- --------- Cash Flows from Investing Activities: Purchases of short-term investments....................... (8,402) (19,862) (2,020) Maturities of short-term investments...................... 14,168 27,701 3,582 Purchases of property, plant and equipment................ (53,966) (69,851) (83,508) Proceeds from sale of property, plant and equipment....... 290 2,760 -- Acquisition of Zycon Corporation in 1997 and Continental Circuits Corp. in 1998, net of cash acquired............ -- (209,661) (192,532) -------- --------- --------- Net cash used in investing activities.............. (47,910) (268,913) (274,478) -------- --------- --------- Cash Flows from Financing Activities: Principal payments of long-term debt and capital lease obligations............................................. (2,139) (164,766) (258,424) Proceeds from issuance of long-term debt.................. -- 224,954 459,289 Proceeds from exercise of stock options................... 1,738 1,303 1,082 Sale of common stock, net of issuance costs............... -- 131,088 2,593 Tax benefit from exercise of nonqualified stock options... 4,161 5,052 1,999 -------- --------- --------- Net cash provided by financing activities.......... 3,760 197,631 206,539 -------- --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents........ 11,479 (20,615) (5,002) Cash and Cash Equivalents, Beginning of Period.............. 21,307 32,786 12,171 -------- --------- --------- Cash and Cash Equivalents, End of Period.................... $ 32,786 $ 12,171 $ 7,169 ======== ========= ========= Supplemental Schedule of Noncash Investing and Financing Activities: Machinery and equipment acquired under capital lease obligations............................................. $ 1,032 $ -- $ -- ======== ========= ========= Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest................................................ $ 279 $ 10,270 $ 11,520 ======== ========= ========= Income taxes (net of refunds)........................... $ 16,794 $ 21,099 $ 11,786 ======== ========= ========= Acquisition of Zycon Corporation in 1997 and Continental Circuits Corp. in 1998: Fair value of assets acquired............................. $ -- $ 206,009 $ 137,623 Liabilities assumed....................................... -- (110,503) (66,381) Cash paid................................................. -- (204,885) (186,083) Acquisition costs incurred................................ -- (7,600) (3,949) Write-off of acquired in-process research and development............................................. -- 78,000 63,050 -------- --------- --------- Goodwill.................................................. $ -- $ (38,979) $ (55,740) ======== ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 32 34 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Hadco Corporation's (the "Company" or "Hadco") principal products are dense multilayer rigid printed circuits and backplane and system assemblies. The Company was incorporated in Massachusetts in 1966. The consolidated financial statements reflect the application of certain accounting policies as described in this Note and elsewhere in the accompanying notes to consolidated financial statements. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Management Estimates and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company is subject to a number of risks and uncertainties similar to those of other companies of the same size within the electronics industry, including, without limitation, dependence on the electronics industry, variability of customer orders, competition, rapid technological changes, environmental matters and dependence on key individuals. Cash Equivalents and Short-Term Investments The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents consist primarily of investments in money market funds and were approximately $9,850,000 and $5,850,000 as of October 25, 1997 and October 31, 1998, respectively. The Company classifies its short-term investments as held-to-maturity given the Company's intent and ability to hold the securities to maturity. In accordance with the SFAS No. 115, held-to-maturity securities are carried at amortized cost. For the year ended October 25, 1997, the Company's short-term investments were comprised of Certificates of Deposit which had a cost of $1,562,000 which approximated fair market value and had a maturity of less than one year. The Company did not have any short-term investments as of October 31, 1998. The Company has no financial instruments requiring disclosure under Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 119, Disclosure About Derivative Financial Instruments and Fair Value of the Financial Instruments. Concentration of Credit Risk SFAS No. 105, Disclosure of Information About Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, requires disclosure of any significant off-balance-sheet and credit risk concentrations. As of October 31, 1998, the Company has no significant off-balance-sheet concentrations of credit risk such as foreign currency exchange contracts or other hedging arrangements. Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, short-term investments and trade accounts receivable. The Company maintains the majority of its cash and short-term 33 35 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) investment balances with financial institutions. The Company has not experienced any losses on these investments to date. Substantially all of the Company's accounts receivable are concentrated in the high technology and electronics industry. The Company has not experienced significant recurring losses related to receivables from individual customers or groups of customers in the high technology and electronics industry or by geographic region, although the Company has and may in the future incur a significant loss in a particular reporting period. Due to these factors, no additional credit risk beyond amounts provided for is believed by management to be inherent in the Company's accounts receivable. Depreciation and Amortization of Property, Plant and Equipment The Company provides for depreciation and amortization on a straight-line basis over the following estimated useful lives:
ESTIMATED ASSET CLASSIFICATION USEFUL LIFE -------------------- ----------- Land betterments...................................... 10-18 Years Buildings and improvements............................ 10-40 Years Machinery and equipment............................... 3-10 Years Furniture and fixtures................................ 5-7 Years Computer software..................................... 3 Years Vehicles.............................................. 3-5 Years Capital leases........................................ Lease term
Net Income (Loss) per Share The Company adopted SFAS No. 128, Earnings per Share, effective for the quarter ended January 31, 1998, which replaces 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 net income (loss) available to common stockholders and the weighted average number of common shares outstanding during the period. The diluted 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 common shares had been issued. A reconciliation of basic and diluted shares outstanding, is as follows:
OCTOBER 26, OCTOBER 25, OCTOBER 31, 1996 1997 1998 ----------- ----------- ----------- (IN THOUSANDS) Basic weighted average shares outstanding... 10,245 11,458 13,216 Weighted average common equivalent shares... 839 -- -- ------ ------ ------ Diluted weighted average shares outstanding............................... 11,084 11,458 13,216 ====== ====== ======
Diluted weighted average shares outstanding does not include 1,070,000, and 1,308,000 common equivalent shares at October 25, 1997 and October 31, 1998, respectively, as their effect would be anti-dilutive. There were no anti-dilutive shares at October 26, 1996. Revenue Recognition The Company recognizes revenue at the time products are shipped. 34 36 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Research and Development Expenses The Company charges research and development expenses to operations as incurred. For the fiscal years ended October 1996, 1997 and 1998, research and development expenses were approximately $4,307,000, $6,929,000 and $6,111,000, respectively, and are included in operating expenses. Stock-Based Compensation The Company adopted SFAS No. 123, Accounting for Stock-Based Compensation, in fiscal 1997. SFAS No. 123 defines a fair-value-based method of accounting for employee stock options and other stock-based compensation. The compensation expense arising from this method of accounting can be reflected in the financial statements or, alternatively, the pro forma net income (loss) and per share amounts effect of the fair-value-based accounting can be disclosed in the financial footnotes. The Company has adopted the disclosure-only alternative. (See Note 10, "Stockholders' Investment.") Foreign Currency Translation The financial statements of the Company's Malaysia subsidiary are translated in accordance with SFAS No. 52, Foreign Currency Translation. The functional currency of the Company's Malaysia subsidiary is the U.S. dollar, accordingly, all assets and liabilities of the foreign subsidiary are translated using the exchange rate at the balance sheet date, except for prepaid expenses, equipment and improvements and stockholders' equity (deficit), which are translated at historical rates. Revenues and expenses are translated at historical rates. Translation gains and losses arising from the translations are included in the consolidated statements of operations, since the functional currency is the U.S. dollar for all operations. Reclassification The Company has reclassified certain prior year information to conform with the current year's presentation. New Accounting Standards In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. This Statement established standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This Statement is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. This Statement, requiring only additional informational disclosures, is effective for the Company's fiscal year ending October 30, 1999. In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. This Statement established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that enterprises report selected information about operating segments in interim financial reports issued to stockholders. This Statement is effective for fiscal years beginning after December 15, 1997. In the initial year of application, comparative information for earlier years will be provided unless deemed impractical. This Statement, requiring only additional informational disclosures, is effective for the Company's fiscal year ending October 30, 1999. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This Statement is effective for all fiscal quarters of fiscal years beginning after 35 37 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) June 15, 1999. The Company does not anticipate the adoption of this Statement to have a material impact on its financial position or results of operations. (2) ACQUISITIONS On January 10, 1997 the Company acquired all of the outstanding common stock of Zycon Corporation ("Zycon") (the "Zycon Acquisition"), and on March 20, 1998, the Company acquired all of the outstanding common stock of Continental Circuits Corp. ("Continental") (the "Continental Acquisition", and together with the Zycon Acquisition, the "Acquisitions"). These Acquisitions were financed by the Company's unsecured senior revolving credit facility with a group of banks. The Company borrowed approximately $215,000,000 upon consummation of the Zycon Acquisition and approximately $220,000,000 upon consummation of the Continental Acquisition. The 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 financial statements. In accordance with APB Opinion No. 16, the Company allocated the purchase price of the Acquisitions based on the fair value of the assets acquired and liabilities assumed. Significant portions of the purchase price of both were identified in independent appraisals, using proven valuation procedures and techniques, as intangible assets. 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 future alternative uses. This allocation represents the estimated fair value based on risk-adjusted cash flows related to the in-process R&D projects. At the date of each acquisition, the development of these projects had not yet reached technological feasibility, and the R&D in progress had no alternative future uses. Accordingly, these costs were expensed as of the respective acquisition date. Continental's in-process R&D value is comprised of eight primary R&D programs. These programs include the introduction of certain new technologies. At the acquisition date, Continental's R&D programs ranged in completion from 10% to 80%, and total continuing R&D commitments to complete the projects are currently expected to be significant. Remaining development efforts for the Continental programs are complex and include the development and advancement of advanced chemical, electrical and engineering solutions. Expenditures to complete the Continental projects are subject to change, given the uncertainties of the development process, and no assurance can be given that deviations from these estimates will not occur. Additionally, these projects will require maintenance R&D after they have reached a state of technological and commercial feasibility. In addition to usage of the acquired companies' internal cash flows, Hadco currently believes it will provide a substantial amount of funding to complete each acquired company's programs. There is risk associated with the completion of the projects, and there is no assurance that each will meet with either technological or commercial success. The substantial delay or outright failure of the Zycon and Continental acquired in-process R&D would impact the Company's financial condition. The value assigned to purchased in-process R&D was determined by estimating the costs to develop the purchased in-process technology into commercially viable products, estimating the resulting net cash flows from the projects and discounting the net cash flows to their present value. The revenue projection used to value the in-process R&D is based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by the Company and its competitors. The rates utilized to discount the net cash flows to their present value are based on the cost of Continental's and Zycon's weighted average cost of capital. These discount rates are commensurate with 36 38 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Continental's and Zycon's corporate maturity and the uncertainties in the economic estimates described above. The forecasts used by the Company in valuing in-process R&D were based upon assumptions the Company believes to be reasonable but which are inherently uncertain and unpredictable. The Company's assumptions may be incomplete or inaccurate, and unanticipated events and circumstances are likely to occur. For these reasons, actual results may vary from the projected results. Acquired intangibles included 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. The aggregate purchase prices of $212,485,000 and $190,032,000, including acquisition costs, for the Zycon and Continental Acquisitions, respectively, were allocated as follows:
ZYCON CONTINENTAL ----- ----------- (IN THOUSANDS) Current assets.......................................... $ 41,790 $ 24,056 Property, plant and equipment........................... 95,193 67,144 Acquired intangibles.................................... 65,500 46,190 In-process R&D.......................................... 78,000 63,050 Other assets............................................ 3,526 233 Goodwill................................................ 38,979 55,740 Liabilities assumed..................................... (110,503) (66,381) --------- -------- $ 212,485 $190,032 ========= ========
Unaudited pro forma operating results for the Company, assuming the acquisition of Zycon occurred on October 28, 1995 and Continental occurred on October 26, 1996 are as follows:
YEAR ENDED ----------------------------------------- OCTOBER 26, OCTOBER 25, OCTOBER 31, 1996 1997 1998 ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales................................... $570,345 $837,650 $878,311 Net income.................................. 27,222 37,544 1,519 Basic Net Income per Share.................. 2.66 3.28 0.11 Diluted Net Income per Share................ 2.46 3.14 0.11
For purposes of these pro forma operating results, the in-process R&D for Zycon and Continental was assumed to have been written off prior to October 29, 1995 and October 26, 1996, respectively, so that the operating results presented include only recurring costs. (3) INVENTORIES Inventories are stated at the lower of cost or market on a first-in, first-out (FIFO) basis, and consist of the following:
1997 1998 ------- ------- (IN THOUSANDS) Raw materials.............................................. $16,728 $25,856 Work-in-process............................................ 29,272 41,161 ------- ------- $46,000 $67,017 ======= =======
The work-in-process consists of materials, labor and manufacturing overhead. 37 39 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (4) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following:
1997 1998 --------- --------- (IN THOUSANDS) Land betterments....................................... $ 2,174 $ 5,562 Buildings and improvements............................. 74,172 139,164 Machinery and equipment................................ 307,267 447,340 Furniture and fixtures................................. 18,611 12,439 Computer software...................................... 3,152 7,012 Vehicles............................................... 626 668 Construction-in-progress............................... 38,716 21,985 --------- --------- 444,718 634,170 Accumulated depreciation and amortization.............. (213,228) (311,283) --------- --------- $ 231,490 $ 322,887 ========= =========
(5) INTANGIBLE ASSETS The Company assesses the realizability of 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. Based on its most recent analysis, the Company believes that no material impairment of intangible assets exists as of October 31, 1998. Intangible assets are amortized on a straight-line basis, based on their estimated lives, as follows:
ESTIMATED LIFE OCTOBER 25, 1997 OCTOBER 31, 1998 -------------- ---------------- ---------------- (IN THOUSANDS) Developed technology................... 12 years $ 30,000 $ 52,190 Customer relationships................. 20-25 years 19,000 37,000 Assembled workforce.................... 12-15 years 10,000 16,000 Trade names/trademarks................. 30 years 6,500 6,500 Goodwill............................... 20 years 40,869 94,719 -------- -------- 106,369 206,409 Less -- Accumulated amortization....... (5,238) (14,988) -------- -------- $101,131 $191,421 ======== ========
(6) INCOME TAXES The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. 38 40 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The provision for income taxes shown in the accompanying consolidated statements of operations is comprised of the following:
YEAR ENDED OCTOBER ---------------------------- 1996 1997 1998 ------- ------- ------ (IN THOUSANDS) Federal Current......................................... $18,341 $24,072 $6,617 Deferred........................................ (1,206) 1,369 (1,681) ------- ------- ------ 17,135 25,441 4,936 ------- ------- ------ State Current......................................... 3,611 2,273 1,307 Deferred........................................ (279) (42) (346) ------- ------- ------ 3,332 2,231 961 ------- ------- ------ $20,467 $27,672 $5,897 ======= ======= ======
The deferred provision for income taxes results from the following:
1996 1997 1998 ------- ------ ------- (IN THOUSANDS) Difference between book and tax depreciation...... $ (46) $1,939 $ 2,559 Deferred compensation............................. 266 146 66 Amortization of acquired intangible assets........ -- (1,210) (2,198) Reserves and expenses recognized in different periods for book and tax purposes............... (1,658) 480 (2,383) Other, net........................................ (47) (28) (71) ------- ------ ------- $(1,485) $1,327 $(2,027) ======= ====== =======
The tax rate used in the computation of the provision for federal and state income taxes differs from the statutory federal and state rates due to the following:
1996 1997 1998 ----- ----- ----- Provision for statutory rate....................... 34.00% 35.00% 35.00% Increase in tax resulting from -- state income taxes, net of federal tax benefit................ 4.40 4.30 4.26 Tax-exempt interest income......................... (0.40) (0.30) (.02) Amortization of Goodwill........................... -- 0.89 8.71 Foreign Sales Corporation.......................... (0.05) (0.69) (5.97) Other, net......................................... 1.05 0.80 (2.23) ----- ----- ----- Provision for income taxes......................... 39.00% 40.00% 39.75% ===== ===== =====
The provision for income taxes is calculated on income before provision for taxes without taking into account the write-off of acquired in-process R&D. This write-off was $63.0 million and $78.0 million for 1998 and 1997, respectively. Income before the provision for income taxes excluding the write-off would have been $14.8 million and $69.2 million for 1998 and 1997, respectively. The Company's effective annual income tax rate for 1998 and 1997 was 39.75% and 40.0%, respectively. The effective rate for both years 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. 39 41 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The tax effects of temporary differences that give rise to significant portions of the current and long-term deferred tax asset and liability at October 25, 1997 and October 31, 1998 are as follows:
1997 1998 -------- -------- (IN THOUSANDS) Deferred Tax Asset -- Not currently deductible reserves...................... $ 11,592 $ 11,480 Not currently deductible environmental accruals........ 4,127 4,125 Deferred compensation plans............................ 1,140 1,551 -------- -------- Total gross deferred tax asset................. 16,859 17,156 Less -- valuation allowance.............................. (54) -- -------- -------- Net deferred tax asset......................... 16,805 17,156 -------- -------- Deferred Tax Liability -- Acquisition related intangibles........................ (24,096) (39,653) Property, plant and equipment, principally due to differences in depreciation......................... (12,911) (19,868) -------- -------- Total gross deferred tax liability............. (37,007) (59,521) -------- -------- Net deferred liability................................... $(20,202) $(42,365) ======== ========
(7) LINES OF CREDIT The Company's revolving line of credit with various banks is pursuant to an Amended and Restated Revolving Credit Agreement, as amended (the "Credit Facility"). The Credit Facility provides, among other things, for direct borrowings for up to the lesser of $300 million or the Borrowing Base, as defined in the Credit Facility, and expires January 8, 2002. Interest on loans outstanding under the Credit Facility is payable at the Company's option at either (i) the Base Rate (as defined in the Credit Facility) or (ii) the Eurodollar Rate, plus the Applicable Eurodollar Rate Margin (both as defined in the Credit Facility). 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 Credit Facility. The Company is also required to pay a quarterly usage fee based on an Applicable Base Rate Usage Fee Margin and an Applicable Eurodollar Rate Usage Fee Margin (both as defined in the Credit Facility). At October 25, 1997 and October 31, 1998, borrowings of $100,000,000 and $150,000,000, respectively, were outstanding under the Credit Facility at weighted average interest rates of 6.26% and 6.58%, respectively. Borrowing availability under the Credit Facility was $74,500,000 at October 31, 1998. The Credit Facility contains customary representations and warranties. The Credit Facility also contains extensive affirmative and negative covenants, including, among others, certain limits on the ability of the Company and its subsidiaries to incur indebtedness, create liens, make investments, pay dividends or other distributions, engage in mergers, consolidations, acquisitions or dispositions, enter into sale and lease-back transactions, enter into guarantees, prepay subordinated indebtedness, make capital expenditures or create any new series of capital stock or amend the terms of existing capital stock. The Credit Facility also requires the Company to maintain certain financial covenants, including maximum ratio of Consolidated Funded Debt to EBITDA, minimum interest coverage, minimum consolidated net worth and minimum fixed charge coverage. Certain financial covenants were modified and others added under the most recent amendment to the Credit Facility, including an additional covenant with respect to a minimum ratio of EBITDA to Consolidated Total Interest Expense, which covenant terminates at the end of the Company's fiscal first quarter 1999, and a covenant limiting the amount of Capital Expenditures the Company and its subsidiaries may make, which covenant terminates at the end of the Company's fiscal fourth quarter 1999. At October 31, 1998, the Company was in compliance with all loan covenants. 40 42 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company has a line of credit arrangement with a Malaysian bank denominated in Malaysian ringgits and U.S. dollars for aggregate borrowings of approximately $3.4 million for the purpose of acquiring land, facilities and equipment for the Company's Malaysian subsidiary. The arrangement is renewable annually. At October 31, 1998, there were no amounts outstanding under this arrangement. (8) LONG-TERM DEBT Long-term debt consists of the following:
OCTOBER ------------------- 1997 1998 -------- -------- (IN THOUSANDS) Variable Rate Mortgages.................................... $ 820 $ 732 Revolving credit agreement (Note 7)........................ 100,000 150,000 9 1/2% Senior Subordinated Notes due 2008.................. -- 199,354 Obligations under capital leases with interest rates ranging from 7% to 7.75%................................. 13,960 8,582 -------- -------- 114,780 358,668 Less -- Current portion.................................... 5,064 4,377 -------- -------- $109,716 $354,291 ======== ========
On May 18, 1998, the Company sold $200 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 sold at a price equal to 99.66% of their principal amount. On November 12, 1998, the Company consummated an exchange offer pursuant to which the Notes were exchanged for notes (with terms identical in all material respects) that were registered with the Securities and Exchange Commission under a registration statement on Form S-4. Interest on the Notes is payable semi-annually on each June 15 and December 15 and commenced 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 $193.8 million, was used to repay outstanding indebtedness under the Credit Facility previously incurred to, among other things, finance the Acquisitions. The Indenture under 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. 41 43 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Maturities of long-term debt and capital lease obligations are as follows as of October 31, 1998:
YEAR ENDING OCTOBER AMOUNT ------------------- ---------- (IN THOUSANDS) 1999...................................................... $ 4,377 2000...................................................... 2,208 2001...................................................... 1,628 2002...................................................... 150,092 2003...................................................... 92 Thereafter................................................ 200,271 -------- $358,668 ========
(9) COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases manufacturing equipment and space under noncancelable operating leases with terms expiring through 2009. Future minimum lease payments under these leases as of October 31, 1998 are as follows:
REAL EQUIPMENT ESTATE TOTAL --------- ------- ------- (IN THOUSANDS) Year Ending October -- 1999.......................................... $ 82 $ 6,615 $ 6,697 2000.......................................... 69 6,804 6,873 2001.......................................... -- 5,847 5,847 2002.......................................... -- 5,587 5,587 2003.......................................... -- 4,876 4,876 Thereafter.................................... -- 22,644 22,644 ---- ------- ------- Future minimum lease payments.............. $151 $52,373 $52,524 ==== ======= =======
Total rental expense of approximately $1,434,000, $6,628,000 and $9,805,000 was incurred for the fiscal years ended October 1996, 1997 and 1998, respectively. These operating leases include office and manufacturing space formerly leased from a partnership in which the Chairman of the Board had an interest. One of the leases is for a term of ten years, and expires in May 2008. A second lease is for a term of seven years, and expires in May 2005, with options to extend until May 2011. The remaining lease expires in May 2003, with options to extend until May 2008. On June 10, 1998, the partnership sold its interest in the property. The related rental expense for the fiscal years ended October 1996, 1997 and for the portion of fiscal 1998 during which the partnership owned the properties was approximately $529,000, $533,000 and $394,000, respectively. Environmental Matters During March 1995, the Company received a Record of Decision ("ROD") from the New York State Department of Environmental Conservation ("NYSDEC"), 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 42 44 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. In the summer of 1998, NYSDEC took additional samples from a wetland area near the Company's Owego facility. Analytical reports of earlier sediment samples indicated the presence of certain inorganics. The new samples showed elevated levels of certain metals, but NYSDEC has not made a determination as to the potential source of such metals, the remedial action to be taken, or the persons to undertake and/or pay for any remediation. 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. The Company has commenced the operation of a groundwater extraction system at its Derry, New Hampshire facility to address certain groundwater contamination and migration control issues. 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. 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. The total reserve for environmental matters currently identified by the Company amounted to $10.6 million at October 25, 1997 and October 31, 1998. The current portion of these costs amounted to approximately $1.4 million as of October 25, 1997 and October 31, 1998, and is included in other accrued expenses. The long-term portion of these costs amounted to approximately $9.2 million as of October 25, 1997 and October 31, 1998, and is reported under the caption Other Long-Term Liabilities. Based on its assessment at the current time, management estimates the cost of ultimate disposition of the known environmental matters to range from approximately $7.0 million to $12.0 million, and is expected to be spread over a number of years. Management believes the ultimate disposition of the above known environmental matters will not have a material adverse effect on 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. Included in operating expenses are charges for actual expenditures and accruals, based on estimates, for environmental matters. During fiscal 1996, 1997 and 1998, the Company made, and charged to operating expenses, actual payments of approximately $680,000, $296,000, and $92,000, respectively, for environmental matters. In 1996, the Company also accrued and charged to operating expenses approximately $1,825,000, as cost estimates for environmental matters. Litigation 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 remedy the Auburn Road site. In December 1996, following publication and comment period, the U.S. Environmental Protection Agency (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. 43 45 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) From 1974 to 1980, the Company operated a printed circuit manufacturing facility in Florida as a lessee. This property is the subject of a pending lawsuit (the "Florida Lawsuit") and an 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. 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 connection with the Florida Lawsuit, Hadco and Gould, Inc., was each 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. In March 1993, the EPA notified Hadco Santa Clara 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. 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. On January 12, 1998, Hadco Santa Clara 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 the Hadco Santa Clara 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. The future costs in connection with the lawsuits described in the above 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. Management currently believes, based on the facts currently known to it, that it is probable that the ultimate dispositions of the above lawsuits will not have a material adverse effect on the Company's business and financial condition; however, there can be no assurance that this will be the case. Purchase Commitments The Company had commitments to purchase approximately $17,640,000 of manufacturing equipment and approximately $2,508,000 of leasehold improvements as of October 31, 1998. The majority of these commitments is expected to be completed by the end of fiscal 1999. 44 46 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (10) STOCKHOLDERS' INVESTMENT Employee Stock Options The Company has several stock option plans that provide for the granting of stock options to employees. The plans are administered by the Compensation Committee of the Board of Directors and generally provide for the granting of options at fair market value at the date of grant. The options vest over various periods not to exceed 10 years, and expire at various times not exceeding 10 years plus 90 days from the date of grant. Substantially all employee stock options granted are nonqualified stock options. The discussion below does not include the plans pursuant to which the Board of Directors have determined not to make future grants of options. December 1991 Director Plan This plan provides for the granting of options to purchase up to 300,000 shares of common stock at a price equal to the fair market value at the date of grant. Initial options granted under this plan are exercisable ratably over a four year period and expire no later than seven years from the date of grant. This plan also provides for an annual grant of a vested option for 3,000 shares to each non-employee director who has served as a director for five years or more. November 1995 Plan This plan provides for the granting of options to purchase up to 1,000,000 shares of common stock at a price equal to fair market value at the date of grant. The options vest according to each option agreement and they expire no later than 10 years from the date of grant. The 1998 Stock Plan This plan provides for the granting of stock rights including options, awards, and purchases up to 1,000,000 shares of common stock at a minimum price equal to the fair market value at the date of grant. Stock rights may be granted to employees, directors, and other associated parties. Stock rights will expire as specified by the Compensation Committee, but in no case longer than 10 years from the date of grant. The plan was approved by the Board of Directors on September 15, 1998 and is currently subject to shareholder approval. There have been no awards under this plan as of October 31, 1998. Outside Directors Compensation Plan of 1998 The Company adopted the Outside Directors Compensation Plan of 1998 (the "Directors Plan") in December 1997. The Directors Plan provides that the annual fee for the outside directors shall be paid in restricted stock, and that additional meeting fees may, at the option of the director, be paid in restricted stock. A total of 12,000 shares of common stock have been reserved for grant under the Directors Plan (as reduced by the Board of Directors from 24,000 shares). During fiscal 1998, the Company issued 4,436 shares under the Directors Plan. Employee Stock Purchase Plan The Employee Stock Purchase Plan (the ESP Plan) was approved by the Stockholders in March, 1998 to allow eligible employees, as defined in the ESP Plan, to purchase shares of common stock during one or more six-month periods through payroll deductions. Shares are purchased at 85% of fair value, as defined. A total of 500,000 shares of common stock have been reserved for purchase under the ESP Plan. During fiscal 1998, the Company issued 57,226 shares under the ESP Plan. At October 31, 1998, the Company has 442,774 shares available for purchase under the ESP Plan. 45 47 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Stockholder Rights Plan The Company adopted a Stockholder Rights Plan in August 1995 pursuant to which the Company declared the distribution of one Common Stock Purchase Right ("Right") for each share of outstanding common stock. Under certain conditions, each Right may be exercised for one share of common stock at an exercise price of $130, subject to adjustment. Under circumstances defined in the Stockholder Rights Plan, the Rights entitle holders to purchase stock having a value of twice the exercise price of the Rights. Until they become exercisable, the Rights are not transferable apart from the common stock. The Rights may be redeemed by the Company at any time prior to the occurrence of certain events at $.01 per Right. The Stockholder Rights Plan will expire on September 11, 2005, unless the Rights are earlier redeemed by the Company. The following table summarizes stock option activity with respect to all stock options:
WEIGHTED AVERAGE NUMBER EXERCISE EXERCISE OF SHARES PRICE RANGE PRICE --------- --------------- -------- (IN THOUSANDS) Outstanding, October 28, 1995............ 1,446 $ 2.00 -- $25.69 $ 5.44 Options granted........................ 150 27.00 -- 31.50 30.98 Options exercised...................... (443) 2.00 -- 11.06 3.92 Options canceled....................... (45) 2.00 -- 31.50 6.75 ----- --------------- ------ Outstanding, October 26, 1996............ 1,108 2.00 -- 31.50 9.45 Options granted........................ 267 45.31 -- 67.00 48.52 Options exercised...................... (263) 2.00 -- 31.50 4.98 Options canceled....................... (42) 2.00 -- 51.88 19.68 ----- --------------- ------ Outstanding, October 25, 1997............ 1,070 2.10 -- 67.00 19.87 Options granted........................ 533 31.78 -- 63.50 48.47 Options exercised...................... (179) 2.10 -- 11.06 6.04 Options canceled....................... (116) 2.10 -- 67.00 38.60 ----- --------------- ------ Outstanding, October 31, 1998............ 1,308 $ 2.10 --$67.00 $31.72 ===== =============== ======
The following table summarizes information about stock options outstanding and exercisable at October 31, 1998:
WEIGHTED WEIGHTED AVERAGE AVERAGE WEIGHTED EXERCISE REMAINING AVERAGE PRICE OF RANGE OF OPTIONS CONTRACTUAL LIFE EXERCISE OPTIONS EXERCISABLE EXERCISE PRICES OUTSTANDING (YEARS) PRICE EXERCISABLE OPTIONS --------------- ----------- ---------------- -------- ----------- ----------- $2.10 -- $2.78............. 38,860 0.58 $ 2.37 38,860 $ 2.37 3.38 -- 4.94............. 112,545 2.46 4.20 102,555 4.13 6.69 -- 8.00............. 49,875 5.03 7.93 17,475 7.89 8.50 -- 12.00............. 268,500 5.46 8.81 119,025 8.79 27.00 -- 38.13............. 381,475 5.92 34.33 42,165 30.49 44.25 -- 67.00............. 456,630 6.47 54.90 41,288 47.98 --------- ------ ------- ------ 1,307,885 $31.72 ========= ====== Exercisable October 31, 1998 361,368 $13.74 ======= ====== Exercisable October 25, 1997 379,000 $ 7.65 ======= ====== Exercisable October 26, 1996 506,885 $ 4.52 ======= ======
46 48 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company has reserved as of October 31, 1998, a total of 2,258,235 shares of common stock for issuance under stock option plans. During fiscal 1996, 1997 and 1998, approximately $154,000, $121,000, and $73,000, respectively, were charged against income as compensation expense associated with the granting of these options. The Company has computed the pro forma disclosures required under SFAS No. 123 using the Black-Scholes option pricing model for all stock options and stock issuances under the Employee Stock Purchase Plan. The assumptions used, weighted average information and the pro forma effect of applying SFAS No. 123 for the years ended October 26, 1996, October 25, 1997 and October 31, 1998 are as follows:
1996 1997 1998 ------------- ------------- ------------- Risk-free interest rates.................. 6.20% -- 6.73% 6.20% -- 6.66% 5.75% -- 6.08% Expected dividend yield................... -- -- -- Expected lives............................ 6.53 years 6.77 years 6.24 years Expected volatility....................... 43.6% 43.6% 47.0% Weighted average grant-date fair value of options granted during the period, net of an estimated termination rate of 32.70%.................................. $ 24.54 $ 26.51 $ 24.17 Weighted average exercise price of options granted during the period, net of an estimated termination rate of 32.70%.... $ 45.26 $ 48.15 $ 43.76 Weighted average remaining contractual life of options outstanding............. 8.92 years 8.66 years 8.03 years Weighted average exercise price of 506,885, 379,000 and 361,368 options exercisable at October 26, 1996, October 25, 1997 and October 31, 1998, respectively............................ $ 4.52 $ 7.50 $ 13.74 Pro forma net income (loss) (in thousands).............................. $ 31,802 $ (37,088) $ (55,755) Pro forma diluted net income (loss) per share................................... $ 2.87 $ (3.18) $ (4.09)
(11) RETIREMENT PLAN The Hadco Corporation Retirement Plan (the "Plan"), as amended, covers all employees with at least six months of continuous service, as defined. Annual profit sharing contributions are made at the discretion of the Board of Directors but cannot exceed the amount allowable for federal income tax purposes. The Company provided for profit sharing contributions of $3,335,000, $4,016,000 and $1,040,000 to the Plan for the years ended October 1996, 1997 and 1998, respectively. The Plan permits participants to elect to have contributions made to the Plan in the form of reductions in salary under Section 401(k) of the Internal Revenue Code subject to limitations set out in the Plan. Under the Plan, the Company will match employee contributions up to 50% of the first six percent contributed. Employee contributions become vested when made, and Company contributions become vested at the rate of 33 1/3 for each year of service with the Company. The Company matched employee contributions in the amount of approximately $736,000, $834,000 and $3,798,000 during fiscal 1996, 1997 and 1998, respectively. (12) QUARTERLY RESULTS (UNAUDITED) The following summarized unaudited results of operations for the fiscal quarters in the years ended October 1997 and 1998 have been accounted for using generally accepted principles for interim reporting purposes and include adjustments (consisting of normal recurring adjustments) that the Company considers necessary for the fair presentation of results for these interim periods. 47 49 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1997 1998 --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) First Fiscal Quarter -- Net sales................................................. $111,536 $198,276 Gross profit.............................................. 26,377 39,068 Net income (loss)......................................... (69,161) 12,127 Diluted net income (loss) per share....................... (6.64) .90 Diluted weighted average shares outstanding............... 10,413 13,505 Second Fiscal Quarter -- Net sales................................................. $180,662 $209,587 Gross profit.............................................. 38,463 36,730 Net income (loss)......................................... 9,953 (59,739) Diluted net income (loss) per share....................... .91 (4.54) Diluted weighted average shares outstanding............... 10,956 13,161 Third Fiscal Quarter -- Net sales................................................. $183,274 $201,392 Gross profit.............................................. 39,254 18,580 Net income (loss)......................................... 11,369 (6,880) Diluted net income (loss) per share....................... .93 (.52) Diluted weighted average shares outstanding............... 12,254 13,255 Fourth Fiscal Quarter -- Net sales................................................. $173,233 $217,104 Gross profit.............................................. 37,298 29,312 Net income................................................ 11,346 382 Diluted net income per share.............................. .84 0.03 Diluted weighted average shares outstanding............... 13,528 13,560
(13) CUSTOMERS During fiscal years 1996, 1997 and 1998, one customer accounted for approximately 15%, 15% and 17% of consolidated net sales, respectively. The Company's five largest customers accounted for 34%, 34% and 37% of consolidated net sales during fiscal 1996, 1997 and 1998, respectively. The Company has one customer that accounted for 16% and 13% of consolidated accounts receivable at October 25, 1997 and October 31, 1998, respectively. (14) GEOGRAPHIC SALES INFORMATION Export sales to unaffiliated customers outside of the United States totaled approximately $177 million for the year ended October 31, 1998, representing approximately 21% of net sales. Export sales as a percentage of total net sales for the year ended October 31, 1998 were primarily to the following regions: Canada...................................................... 10.5% Europe...................................................... 6.0 Asia........................................................ 4.0 Other....................................................... .5 ---- 21.0% ====
(15) 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 48 50 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) totaling $5.9 million. Non-recurring costs include costs associated with the abandonment of assets at one of the facilities. On July 31, 1998, the Company announced a limited restructuring, which temporarily reduced the Company's workforce by approximately 3%. This restructuring was in addition to the consolidation of the East Coast quick-turn prototype facilities. The cost of this limited restructuring is comprised of severance and related benefits for the terminated employees. As of October 31, 1998 the Company has recorded a liability for both restructurings totaling $897,000, which relates to severance and other payroll related costs, as well as lease termination costs. The component of the charges 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 components of the restructuring and other non-recurring costs during the year ended October 31, 1998 are as follows:
EAST COAST FACILITY COMPANY-WIDE CONSOLIDATION RESTRUCTURING TOTAL ------------- ------------- ----- (IN THOUSANDS) Loss on abandonment of assets.................. $1,965 $ -- $1,965 Severance benefits and associated costs........ 130 1,105 1,235 Lease termination loss......................... 1,336 -- 1,336 ------ ------ ------ Total Restructuring Charges.......... 3,431 1,105 4,536 Other Non-recurring Charges.................... 2,517 -- 2,517 ------ ------ ------ Total Restructuring and Other Charges............................ $5,948 $1,105 $7,053 ====== ====== ======
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. (16) SUPPLEMENTAL GUARANTORS CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Basis of presentation. In connection with the Continental Acquisition, which was financed with approximately $184 million of borrowings from the Credit Facility, the Company on May 18, 1998 sold $200 million aggregate principal amount of 9 1/2% Senior Subordinated Notes due in 2008 (the "Notes"). The Notes are fully and unconditionally guaranteed on a senior subordinated basis, jointly and severally, by certain of the Company's wholly-owned domestic subsidiaries (the "Guarantors"). The Guarantors are Hadco Santa Clara, Inc., Hadco Phoenix, Inc., CCIR of Texas Corp. and CCIR of California Corp. The condensed consolidating financial statements of the Guarantors are presented below and should be read in connection with the Consolidated Financial Statements of the Company. Separate financial statements of the Guarantors are not presented because (i) the Guarantors are wholly-owned and have fully and unconditionally guaranteed the Notes on a joint and several basis and (ii) the Company's management has determined such separate financial statements are not material to investors and believes the condensed consolidating financial statements presented are more meaningful in understanding the financial position of the Guarantors. There are no significant restrictions on the ability of the Guarantors to make distributions to the Company. Condensed consolidating financial information has not been presented for 1996 because the Guarantors were not subsidiaries of the Company in its 1996 fiscal year. 49 51 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET
AS OF OCTOBER 25, 1997 ----------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL ------------ ------------- ----------- ----------- ------------ (IN THOUSANDS) ASSETS Current Assets: Cash and cash equivalents.... $ (1,603) $ 2,249 $ 11,525 $ -- $ 12,171 Short-term investments....... -- -- 1,562 -- 1,562 Accounts receivable, net..... 145 56 92,021 -- 92,222 Inventories.................. 11,229 5,116 29,655 -- 46,000 Deferred tax asset........... -- -- 10,483 -- 10,483 Prepaid expenses and other current assets............. 2,271 113 1,861 -- 4,245 -------- ------- -------- --------- -------- Total current assets.... 12,042 7,534 147,107 -- 166,683 Property, Plant and Equipment, net............................. 67,525 33,462 130,503 -- 231,490 Intercompany Receivable........... 12,184 -- 863 (13,047) -- Investments in Subsidiaries....... 23,435 -- 142,560 (165,995) -- Acquired Intangible Assets, net... 101,131 -- -- -- 101,131 Other Assets...................... 619 1,852 742 -- 3,213 -------- ------- -------- --------- -------- $216,936 $42,848 $421,775 $(179,042) $502,517 ======== ======= ======== ========= ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Current portion of long-term debt....................... $ 4,215 $ 104 $ 745 $ -- $ 5,064 Accounts payable............. 21,608 4,745 42,241 -- 68,594 Intercompany payable......... -- 13,047 -- (13,047) -- Accrued payroll and other employee benefits.......... 5,693 225 22,361 -- 28,279 Accrued taxes................ 3,880 269 (2,374) -- 1,775 Other accrued expenses....... 1,514 56 7,708 -- 9,278 -------- ------- -------- --------- -------- Total current liabilities........... 36,910 18,446 70,681 (13,047) 112,990 -------- ------- -------- --------- -------- Long-term Debt, net of current portion......................... 8,278 353 101,085 --........ 109,716 -------- ------- -------- --------- -------- Deferred Tax Liability............ 29,802 -- 883 -- 30,685 -------- ------- -------- --------- -------- Other Long-term Liabilities....... -- -- 9,214 --........ 9,214 -------- ------- -------- --------- -------- Stockholders' Investment: Common stock, $.05 par value; Authorized -- 25,000 shares Issued and outstanding -- 13,086 shares in 1997...... 11 29,654 655 (29,665) 655 Paid-in Capital................... 212,474 -- 168,246 (212,474) 168,246 Deferred Compensation............. -- -- (117) -- (117) Retained Earnings................. (70,539) (5,605) 71,128 76,144 71,128 -------- ------- -------- --------- -------- Total stockholders' investment............ 141,946 24,049 239,912 (165,995) 239,912 -------- ------- -------- --------- -------- $216,936 $42,848 $421,775 $(179,042) $502,517 ======== ======= ======== ========= ========
50 52 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET
AS OF OCTOBER 31, 1998 ----------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL ------------ ------------- ----------- ----------- ------------ (IN THOUSANDS) ASSETS Current Assets: Cash and cash equivalents.... $ 836 $ 2 $ 6,331 $ -- $ 7,169 Accounts receivable, net..... 54,092 6,382 50,620 -- 111,094 Inventories.................. 24,984 5,560 36,473 -- 67,017 Deferred tax asset........... -- -- 17,156 -- 17,156 Prepaid expenses and other current assets............. 999 227 17,440 -- 18,666 -------- ------- -------- --------- -------- Total current assets.... 80,911 12,171 128,020 -- 221,102 Property, Plant and Equipment, net............................. 138,912 49,029 134,946 -- 322,887 Intercompany Receivable........... -- 160 91,463 (91,623) -- Investments in Subsidiaries....... 17,895 -- 267,882 (285,777) -- Acquired Intangible Assets, net... 191,421 -- -- -- 191,421 Other Assets...................... 686 -- 7,729 -- 8,415 -------- ------- -------- --------- -------- $429,825 $61,360 $630,040 $(377,400) $743,825 ======== ======= ======== ========= ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Current portion of long-term debt....................... $ 3,417 $ 158 $ 802 $ -- $ 4,377 Accounts payable............. 34,249 4,941 40,160 -- 79,350 Intercompany payable......... 54,523 37,100 -- (91,623) -- Accrued payroll and other employee benefits.......... 3,465 160 22,904 -- 26,529 Accrued taxes................ 17,099 160 (17,259) -- -- Other accrued expenses....... 1,328 105 17,583 -- 19,016 -------- ------- -------- --------- -------- Total current liabilities........... 114,081 42,624 64,190 (91,623) 129,272 -------- ------- -------- --------- -------- Long-Term Debt, net of current portion......................... 3,796 230 350,265 -- 354,291 -------- ------- -------- --------- -------- Deferred Tax Liability............ 44,677 -- 14,844 -- 59,521 -------- ------- -------- --------- -------- Other Long-Term Liabilities....... -- -- 9,192 -- 9,192 -------- ------- -------- --------- -------- Stockholders' Investment: Common stock, $0.05 par value; Authorized -- 50,000 shares Issued and outstanding -- 13,366 in 1998....................... 11 29,654 669 (29,665) 669 Paid-in Capital................... 400,616 -- 173,906 (400,616) 173,906 Deferred Compensation............. -- -- (44) -- (44) Retained Earnings................. (133,356) (11,148) 17,018 144,504 17,018 -------- ------- -------- --------- -------- Total stockholders' investment............ 267,271 18,506 191,549 (285,777) 191,549 -------- ------- -------- --------- -------- $429,825 $61,360 $630,040 $(377,400) $743,825 ======== ======= ======== ========= ========
51 53 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 25, 1997 -------------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL ------------ ------------- ----------- ----------- ------------ (IN THOUSANDS) Net Sales........................ $195,411 $26,411 $426,883 $ -- $648,705 Cost of Sales.................... 164,069 18,773 324,471 -- 507,313 -------- ------- -------- ------- -------- Gross Profit................ 31,342 7,638 102,412 -- 141,392 Operating Expenses............... 12,821 7,696 44,069 -- 64,586 Write-off of Acquired In-Process Research and Development....... 78,000 -- -- -- 78,000 -------- ------- -------- ------- -------- Income (Loss) From Operations.... (59,479) (58) 58,343 -- (1,194) Interest and Other Income........ 655 -- 2,641 -- 3,296 Interest Expense................. (2,003) (557) (8,363) -- (10,923) -------- ------- -------- ------- -------- Income (Loss) Before Provision for Income Taxes..................... (60,827) (615) 52,621 -- (8,821) Provision for Income Taxes....... 6,860 275 20,537 -- 27,672 Equity in loss of subsidiary..... (2,852) -- (68,577) 71,429 -- -------- ------- -------- ------- -------- Net Loss.................... $(70,539) $ (890) $(36,493) $71,429 $(36,493) ======== ======= ======== ======= ======== CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1998 -------------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL ------------ ------------- ----------- ----------- ------------ (IN THOUSANDS) Net Sales........................ $341,974 $35,378 $449,007 $ -- $826,359 Cost of Sales.................... 306,752 35,776 360,141 -- 702,669 -------- ------- -------- ------- -------- Gross Profit................ 35,222 (398) 88,866 -- 123,690 Operating Expenses............... 17,939 3,828 59,860 -- 81,627 Restructuring and Other Non- Recurring Charges.............. -- -- 7,053 -- 7,053 Write-off of Acquired In-Process Research and Development....... 63,050 -- -- -- 63,050 -------- ------- -------- ------- -------- Income (Loss) From Operations................ (45,767) (4,226) 21,953 -- (28,040) Interest and Other Income........ (419) 2,752 (3,250) 3,212 2,295 Interest Expense................. (852) (404) (21,212) -- (22,468) -------- ------- -------- ------- -------- Loss Before Provision for Income Taxes.............. (47,038) (1,878) (2,509) 3,212 (48,213) Provision for Income Taxes....... 10,240 450 (4,793) -- 5,897 Equity in loss of subsidiary..... (5,540) -- (59,606) 65,146 -- -------- ------- -------- ------- -------- Net Loss.................... $(62,818) $(2,328) $(57,322) $68,358 $(54,110) ======== ======= ======== ======= ========
52 54 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 25, 1997 ----------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT ENTITIES CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION ELIMINATION TOTAL ------------ ------------- ----------- ----------- ------------ (IN THOUSANDS) Net cash provided by (used in) operating activities............ $44,591 $9,978 $ (3,902) $-- $ 50,667 ------- ------ --------- --- --------- Cash Flows from Investing Activities: Purchases of short-term investments................ -- -- (19,862) -- (19,862) Maturities of short-term investments................ -- -- 27,701 -- 27,701 Investments in subsidiaries............... 9,496 726 (10,222) -- -- Purchases of property, plant and equipment.............. (19,976) (4,092) (45,783) -- (69,851) Proceeds from sale of property, plant and equipment.................. -- -- 2,760 -- 2,760 Foreign Sales Corp. dividend................... -- (1,962) 1,962 -- -- Acquisition of Zycon Corporation, net of cash acquired................... -- -- (209,661) -- (209,661) ------- ------ --------- --- --------- Net cash used in investing activities............ (10,480) (5,328) (253,105) -- (268,913) ------- ------ --------- --- --------- Cash Flows from Financing Activities: Principal payments of long-term debt and capital lease obligations.......... (35,714) (2,505) (126,547) -- (164,766) Proceeds from issuance of long-term debt............. -- -- 224,954 -- 224,954 Proceeds from exercise of stock options.............. -- -- 1,303 -- 1,303 Sale of common stock, net of issuance costs............. -- -- 131,088 -- 131,088 Tax benefit from exercise of non-qualified stock options.................... -- -- 5,052 -- 5,052 ------- ------ --------- --- --------- Net cash (used in) provided by financing activities............ (35,714) (2,505) 235,850 -- 197,631 ------- ------ --------- --- --------- Net Increase (Decrease) in Cash and Cash Equivalents............ (1,603) 2,145 (21,157) -- (20,615) Cash and Cash Equivalents, Beginning of Period............. -- 104 32,682 -- 32,786 ------- ------ --------- --- --------- Cash and Cash Equivalents, End of Period.......................... $(1,603) $2,249 $ 11,525 $-- $ 12,171 ======= ====== ========= === =========
53 55 HADCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1998 ----------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION ENTITIES TOTAL ------------ ------------- ----------- ----------- ------------ (IN THOUSANDS) Net cash provided by (used in) operating activities............ $ 65,020 $ 17,586 $ (22,881) $3,212 $ 62,937 -------- -------- --------- ------ --------- Cash Flows from Investing Activities: Purchases of short-term investments................ -- -- (2,020) -- (2,020) Maturities of short-term investments................ -- -- 3,582 -- 3,582 Foreign Sales Corp. dividend................... -- (3,212) 3,212 -- -- Purchases of property, plant and equipment.............. (21,867) (19,764) (41,877) -- (83,508) Investments in subsidiaries............... -- 3,212 -- (3,212) -- Acquisition of Continental Circuits Corp., net of cash acquired................... -- -- (192,532) -- (192,532) -------- -------- --------- ------ --------- Net cash used in investing activities............ (21,867) (19,764) (229,635) (3,212) (274,478) -------- -------- --------- ------ --------- Cash Flows from Financing Activities: Principal payments of long-term debt and capital lease obligations.......... (40,714) (69) (217,641) -- (258,424) Proceeds from issuance of long-term debt............. -- -- 459,289 -- 459,289 Proceeds from exercise of stock options.............. -- -- 1,082 -- 1,082 Sale of common stock, net of issuance costs............. -- -- 2,593 -- 2,593 Tax benefit from exercise of non-qualified stock options.................... -- -- 1,999 -- 1,999 -------- -------- --------- ------ --------- Net cash provided by financing activities............ (40,714) (69) 247,322 -- 206,539 -------- -------- --------- ------ --------- Net Increase (Decrease) in Cash and Cash Equivalents............ 2,439 (2,247) (5,194) -- (5,002) Cash and Cash Equivalents, Beginning of Period............. (1,603) 2,249 11,525 -- 12,171 -------- -------- --------- ------ --------- Cash and Cash Equivalents, End of Period.......................... $ 836 $ 2 $ 6,331 $ -- $ 7,169 ======== ======== ========= ====== =========
54 56 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not applicable PART III Anything herein to the contrary notwithstanding, in no event whatsoever are the sections entitled "Stock Performance Graph" and "Compensation Committee Report on Executive Compensation" to be incorporated by reference herein from the Company's definitive proxy statement in connection with its Annual Meeting of Stockholders to be held on March 3, 1999. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Certain information relating to directors and executive officers of the Company is incorporated by reference herein from the Company's definitive proxy statement in connection with its Annual Meeting of Stockholders to be held on March 3, 1999, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company's fiscal year ended October 31, 1998. ITEM 11. EXECUTIVE COMPENSATION Certain information relating to remuneration of directors and executive officers and other transactions involving management is incorporated by reference herein from the Company's definitive proxy statement in connection with its Annual Meeting of Stockholders to be held on March 3, 1999, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company's fiscal year ended October 31, 1998. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Certain information relating to security ownership of certain beneficial owners and management is incorporated by reference herein from the Company's definitive proxy statement in connection with its Annual Meeting of Stockholders to be held on March 3, 1999, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company's fiscal year ended October 31, 1998. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Certain information relating to certain relationships and related transactions is incorporated by reference herein from the Company's definitive proxy statement in connection with its Annual Meeting of Stockholders to be held on March 3, 1999, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company's fiscal year ended October 31, 1998. 55 57 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS: The following consolidated financial statements are included in Item 8: Report of Independent Public Accountants. Consolidated Statements of Operations for the years ended October 31, 1998, October 25, 1997 and October 26, 1996. Consolidated Balance Sheets as of October 31, 1998 and October 25, 1997. Consolidated Statements of Stockholders' Investment for the years ended October 31, 1998, October 25, 1997 and October 26, 1996. Consolidated Statements of Cash Flows for the years ended October 31, 1998, October 25, 1997 and October 26, 1996. Notes to Consolidated Financial Statements. (A) 2. FINANCIAL STATEMENT SCHEDULES: The following consolidated financial statement schedules are included in Item 14(d): II -- Valuation and Qualifying Accounts. Schedules other than those listed above have been omitted since they are either not required or the information is otherwise included. (A) 3. LISTING OF EXHIBITS:
EXHIBIT ------- 3.1 -- Restated Articles of Organization of Registrant (filed as Exhibit 3.1 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 3.2 -- By-laws of Registrant, as amended (filed as Exhibit 3.2 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 3.3 -- Amendment to Restated Articles of Organization of Registrant dated March 4, 1998 (filed as Exhibit 3.1 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended January 31, 1998 and incorporated herein by reference). 4 -- Description of Capital Stock, contained in Article 4 of Registrant's Restated Articles of Organization (filed as Exhibit 3.1 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). *10.1 -- Registrant's December 5, 1986 Non-Qualified Stock Option Plan (filed as Exhibit 10.7 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1986 and incorporated herein by reference). *10.2 -- Profit Sharing Plan and Trust of Registrant, as amended through December 9, 1988 and restated effective January 1, 1988 (filed as Exhibit 10.22 to Annual Report on Form10-K, File No. 0-12102, for the year ended October 29, 1988 and incorporated herein by reference). *10.3 -- Registrant's December 6, 1985 Non-Qualified Stock Option Plan (filed as Exhibit 10.56 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 26, 1985 and incorporated herein by reference). *10.4 -- Form of Stock Option Agreement under Registrant's December 6, 1985 Non-Qualified Stock Option Plan (filed as Exhibit 10.42 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 31, 1987 and incorporated herein by reference). 10.5 -- Amendment dated as of January 9, 1986 to Lease between Registrant and Lupe Burgstrom dated April 30, 1984 (filed as Exhibit 10.79 to Annual Report on Form 10-K, File No. 0- 12102, for the year ended October 25, 1986 and incorporated herein by reference).
56 58 EXHIBIT - ------- 10.6 -- Amendment dated as of January 9, 1986 to Lease between Registrant and Freedom Associates dated May 17, 1985 (filed as Exhibit 10.80 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1986 and incorporated herein by reference). 10.7 -- Amendment dated as of March 7, 1986 to Lease between Registrant and Freedom Associates dated December 23, 1980 (filed as Exhibit 10.81 to Annual Report on Form10-K, File No. 0-12102, for the year ended October 25, 1986 and incorporated herein by reference). 10.8 -- Lease dated July 15, 1988 between Registrant and C&M Associates I (filed as Exhibit 10.67 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 29, 1988 and incorporated herein by reference). *10.9 -- Form of Stock Option Agreement under Registrant's Non-Qualified Stock Option Plan of September 7, 1990 (filed as Exhibit 10.68 to Annual Report on Form 10-K, File No. 0- 12102, for the year ended October 27, 1990 and incorporated herein by reference). *10.10 -- Amendment to Profit Sharing Plan and Trust of Registrant dated June 19, 1990 (filed as Exhibit 10.75 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 27, 1990 and incorporated herein by reference). 10.11 -- Loan Agreement by and between Registrant and New York State Urban Development Corporation ("NYSUDC"); Mortgage between Registrant and Tioga, Note between Registrant and NYSUDC; all dated as of April 10, 1991 (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1991 and incorporated herein by reference). *10.12 -- Form of Stock Option Agreement under Registrant's 1991 Non-Employee Director Stock Option Plan (filed as Exhibit 10.82 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 26, 1991 and incorporated herein by reference). 10.13 -- Lease dated March 1, 1992 between Registrant and Equity Property Associates I (filed as Exhibit 10.65 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 31, 1992 and incorporated herein by reference). *10.14 -- Amendment to Retirement Plan of Registrant dated March 10, 1993 (filed as Exhibit 10.48 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 30, 1993 and incorporated herein by reference). *10.15 -- Amendment to Retirement Plan of Registrant dated September 10, 1993 (filed as Exhibit 10.49 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 30, 1993 and incorporated herein by reference). 10.16 -- Lease dated January 13, 1995 between Registrant and Nash Family Investment Properties and Ballinger Properties d/b/a Sagamore Industrial Properties (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended January 28, 1995 and incorporated herein by reference). 10.17 -- Rights Agreement dated as of August 22, 1995 between the Registrant and the First National Bank of Boston (filed as Exhibit 4.1 to Current Report on Form 8-K, File No. 0- 12102, dated August 22, 1995 and incorporated herein by reference). *10.18 -- Agreement dated as of August 14, 1995 between the Registrant and Patrick Sweeney (filed as Exhibit 10.49 to Annual Report on Form 10-K, File No. 0-12102, for year ended October 28, 1995 and incorporated herein by reference). 10.19 -- Amendment dated May 1 1995 to lease dated March 1, 1992 between Registrant and Equity Property Associates I (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1996 and incorporated herein by reference). 10.20 -- Lease dated November 1, 1995 between Registrant and Equity Property Associates I (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1996 and incorporated herein by reference). 10.21 -- Lease dated November 1, 1995 between Registrant and Equity Property Associates I (filed as Exhibit 10.3 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1996 and incorporated herein by reference). 10.22 -- Amendment dated April 1, 1996 to lease dated March 1, 1992 between Registrant and Equity Property Associates I (filed as Exhibit 10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1996 and incorporated herein by reference). 10.23 -- Agreement and Plan of Merger dated as of December 4, 1996 among the Registrant Hadco Acquisition Corp. and Zycon Corporation (filed as Exhibit (c) (1) to the Schedule 14D-1 filed by the Registrant on December 11, 1996 and incorporated herein by reference). 10.24 -- Stockholders Agreement dated December 4, 1996 among Registrant and the parties named therein filed as Exhibit (c) (2) to the Schedule 14D-1 (filed by the Registrant on December 11, 1996 and incorporated herein by reference). 57 59 EXHIBIT - ------- 10.25 -- Revolving Credit Agreement dated as of January 8, 1997 between the Registrant and the First National Bank of Boston ("the Revolving Credit Agreement") (filed as Exhibit 10.40 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 26, 1996 and incorporated herein by reference). *10.26 -- Amended and Restated 1991 Non-Employee Director Stock Option Plan of Registrant as of December 3, 1996 (filed as Exhibit 10.43 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1997 and incorporated herein by reference). *10.27 -- Amendments to Retirement Plan of Registrant dated September 15, 1997 (filed as Exhibit 10.44 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1997 and incorporated herein by reference). 10.28 -- Amended and Restated Revolving Credit Agreement dated as of December 8, 1997 between the Registrant and BankBoston, N.A (filed as Exhibit 10.45 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1997 and incorporated herein by reference). 10.29 -- Leases for premises located at 435-445 El Camino Real, Santa Clara, California, by and between Zycon Corporation and University Research Center and addenda thereto dated March 1, 1988; July 8, 1988; February 27, 1989; August 30, 1989; May 19, 1993; and August 9, 1993 (filed as Exhibit 10.1 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.30 -- Provisional Lease dated November 14, 1995 for the premises located at the Muara Tebas Land of Kuching East Malaysia by and between Sudarsono Osman and Zycon Corporation Sendirian Berhad (filed as Exhibit 10.2 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.31 -- Construction Agreement dated August 3, 1995 by and between Zycon Corporation and Hiti Engineering Sdn.Bhd. (filed as Exhibit 10.3 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.32 -- Facilities Agreement dated February 9, 1996 by and among Zycon Corporation Sdn.Bhd.,Bank Bumiputra Malaysia Berhad and BBMB Kewangan Berhad (filed as Exhibit 10.4 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.33 -- Corporate Guarantee dated February 9, 1996 issued by Zycon Corporation in favor of Bank Bumiputra Malaysia Berhad and BBMB Kewangan Berhad (filed as Exhibit 10.5 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.34 -- Lease for the three acre premises located in Santa Clara, California by and between Zycon Corporation and Sobrato Interests III, dated January 4, 1996 (filed as Exhibit 10.6 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). *10.35 -- Profit Sharing Plan and Trust of Registrant, as amended and restated effective January 1, 1988 and as amended June 20, 1990 (filed as Exhibit 10.7 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.36 -- First Amendment and Modification Agreement by and among the Registrant and The First National Bank of Boston (the "Bank of Boston") dated as of February 21, 1997 amending the Revolving Credit Agreement (filed as Exhibit 10.8 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.37 -- Form of Assignment and Acceptance to Revolving Credit Agreement (filed as Exhibit 10.9 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). *10.38 -- Outside Directors Compensation Plan of 1998 (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q, File No, 0-12102, for the quarter ended January 31, 1998 and incorporated herein by reference). *10.39 -- Employee Stock Purchase Plan of November 17, 1997 (filed as Exhibit 10.1 to the Registration Statement No. 333-47589 on Form S-8 and incorporated herein by reference). 10.40 -- First Amendment and Modification Agreement by and among the Registrant and BankBoston, N.A. dated as of March 19, 1998 amending the Amended and Restated Revolving Credit Agreement (filed as Exhibit (b) (2) to the Amendment No. 2 to the Schedule 14D-1 filed by the Registrant on February 20, 1998 and incorporated herein by reference). 10.41 -- Guaranty dated as of March 19, 1998 by Hadco Acquisition Corp. II in favor of BankBoston, N.A. (filed as Exhibit (b) (3) to the Amendment No. 2 to the Schedule 14D-1 filed by the Registrant 0n February 20, 1998 and incorporated herein by reference). 58 60 EXHIBIT - ------- 10.42 -- Stock Pledge Agreement dated as of March 19, 1998 by Hadco Acquisition Corp. II in favor of BankBoston, N.A. (filed as Exhibit (b) (4) to the Amendment No. 2 to the Schedule 14D-1 filed by the Registrant on February 20, 1998 and incorporated herein by reference). *10.43 -- Form of Option Agreement under Registrant's Non-Qualified Stock Option Plan dated November 29, 1995, as amended and restated April 7, 1998 (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q, File No. 0-12101, for the quarter ended May 2, 1998 and incorporated herein by reference). *10.44 -- Stock Purchase Agreement dated as of March 20, 1998 between Registrant and Frederick G. McNamee, III (filed as Exhibit 10.3 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended May 2, 1998 and incorporated herein by reference). *10.45 -- Employment Agreement dated as of February 17, 1998 between Registrant and Frederick G. McNamee, III (filed as Exhibit 10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended May 2, 1998 and incorporated herein by reference). 10.46 -- Second Amendment and Modification Agreement among Registrant and a group of Banks dated as of May 11, 1998 (filed as Exhibit 10.5 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended May 2, 1998 and incorporated herein by reference). *10.47 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Andrew E. Lietz (filed as Exhibit 10.2 to Quarterly Report Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.48 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and John D. Caruso (filed as Exhibit 10.3 to Quarterly Report on From 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.49 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Timothy P. Losik (filed as Exhibit 10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.50 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Michael K. Sheehy (filed as Exhibit 10.5 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.51 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Frederick G. McNamee, III (filed as Exhibit 10.6 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.52 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Robert E. Snyder (filed as Exhibit 10.7 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). 10.53 -- Indenture (including Form of Exchange Note) dated as of May 18, 1998 by and among the Company, the Guarantors and State Street Bank and Trust, as Trustee (filed as Exhibit 4.1 to Form S-4, Registration No. 333-57467, and incorporated herein by reference). 10.54 -- Registration Rights Agreement dated May 13, 1998 among the Company, the Guarantors, Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancAmerica Robertson Stephens, and BT Alex Brown Incorporated, as initial purchasers (filed as Exhibit 4.2 to Form S-4, Registration No. 333-57467, and incorporated herein by reference). 10.55 -- Placement Agreement dated May 13, 1998 by and among the Company, the Guarantors, Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancAmerica Robertson Stephens, and BT Alex. Brown Incorporated, as initial purchasers (filed as Exhibit 10.1 to Form S-4, Registration No. 333-57467, and incorporated herein by reference). 10.56 -- Third Amendment and Modification Agreement dated as of September 14, 1998 among Registrant and a group of Banks. (filed as Exhibit 10.5 to Form S-4, Registration No. 323- 57467, and incorporated herein by reference). *10.57 -- Form of Executive Agreement dated as of November 2, 1998 by and between the Company and F. Gordon Bitter. *10.58 -- Amended and Restated Non-Qualified Stock Option Plan dated September 7, 1990, dated as of April 7, 1998. *10.59 -- Amended and Restated Non-Qualified Stock Option Plan dated November 29, 1995, dated as of July 1, 1998. *10.60 -- Amendment dated as of July 1, 1998 to Option Agreement of Andrew E. Lietz dated April 8, 1998. *10.61 -- Amendment dated as of July 1, 1998 to Option Agreement of Andrew E. Lietz dated February 26, 1997. *10.62 -- Amendment to Retirement Plan dated September 15, 1998. 59 61
EXHIBIT ------- 10.63 -- Amendment dated May 29, 1998 to Lease between Registrant and Equity Property Associates I dated March 1, 1992. 10.64 -- Amendment dated May 29, 1998 to Lease between Registrant and Equity Property Associates I dated November 1, 1995, for 12A Manor Parkway, Salem, New Hampshire. 10.65 -- Amendment No. 2 dated October 29, 1998, for 12A Manor Parkway, Salem, New Hampshire to Lease between Registrant and Manor Parkway LLC dated November 1, 1995. 10.66 -- Amendment dated May 29, 1998 to Lease between Registrant and Equity Property Associates I dated November 1, 1995, for 12B Manor Parkway, Salem, New Hampshire. *10.67 -- Hadco Corporation Executive Incentive Compensation Deferred Bonus Plan, as amended and restated July 1, 1998. *10.68 -- Amendment to Outside Directors Compensation Plan of 1998, dated as of November 12, 1998. *10.69 -- Agreement dated as of November 12, 1998 by and between the Company and Andrew E. Lietz. *10.70 -- Form of Agreement dated as of November 12, 1998 by and between the Company and various employees of the Company. 21 -- Subsidiaries of the Registrant. 23 -- Consent of Arthur Andersen LLP. 27 -- Financial Data Schedule.
(*) Indicates a management contract or any compensatory plan, contract or arrangement required to be filed as an exhibit pursuant to Item 14(c). (B) REPORTS ON FORM 8-K None (C) EXHIBITS The Company hereby files as part of this Form 10-K the exhibits listed in Item 14(a)(3) above. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the Commission, 450 Fifth Street, NW, Room 1024, Washington, D.C., and at the Commission's regional offices at 219 South Dearborn Street, Room 1204, Chicago, Illinois; 26 Federal Plaza, Room 1102, New York, New York and 5757 Wilshire Boulevard, Suite 1710, Los Angeles, California. Copies of such material can also be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. (D) FINANCIAL STATEMENT SCHEDULES The Company hereby files as part of this Form 10-K in Item 14(b) attached hereto the consolidated financial statement schedules listed in Item 14(a)(2) above. 60 62 SIGNATURES Pursuant to the requirement of section 13 or 15(d) 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 By: /s/ ANDREW E. LIETZ ----------------------------- Andrew E. Lietz, President Chief Executive Officer and Director Dated: January 6, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ HORACE H. IRVINE II Chairman of the Board January 6, 1999 - --------------------------- and Director (Horace H. Irvine II) /s/ ANDREW E. LIETZ President, Chief Executive January 6, 1999 - --------------------------- Officer and Director (Andrew E. Lietz) (Principal Executive Officer) /s/ F. GORDON BITTER Senior Vice President, Treasurer January 6, 1999 - --------------------------- and Chief Financial Officer (F. Gordon Bitter) (Principal Financial Officer and Principal Accounting Officer) /s/ OLIVER O. WARD Director January 6, 1999 - --------------------------- (Oliver O. Ward) /s/ PATRICK SWEENEY Director January 6, 1999 - --------------------------- (Patrick Sweeney) /s/ LAWRENCE COOLIDGE Director January 6, 1999 - --------------------------- (Lawrence Coolidge) /s/ JOHN F. SMITH Director January 6, 1999 - --------------------------- (John F. Smith) /s/ JOHN E. POMEROY Director January 6, 1999 - --------------------------- (John E. Pomeroy) /s/ JAMES C. TAYLOR Director January 6, 1999 - --------------------------- (James C. Taylor) /s/ MAURO J. WALKER Director January 6, 1999 - --------------------------- (Mauro J. Walker) 61 63 SCHEDULE II HADCO CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
BALANCE ADDITIONS AT CHARGED TO DEDUCTIONS BALANCE AT BEGINNING COSTS AND FROM END OF OF PERIOD EXPENSES RESERVES(1) PERIOD --------- ---------- ----------- ---------- (IN THOUSANDS) ALLOWANCE FOR DOUBTFUL ACCOUNTS October 26, 1996.............................. $ 850 329 (79) $1,100 October 25, 1997.............................. $1,100 922 (322) $1,700 October 31, 1998.............................. $1,700 828 (399) $2,129 - --------------- (1) Amounts deemed uncollectible. RESTRUCTURING ACCRUAL October 31, 1998.............................. $ -- 4,536 (3,639) $ 897
S-1 64 EXHIBIT INDEX EXHIBIT - ------- 3.1 -- Restated Articles of Organization of Registrant (filed as Exhibit 3.1 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 3.2 -- By-laws of Registrant, as amended (filed as Exhibit 3.2 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 3.3 -- Amendment to Restated Articles of Organization of Registrant dated March 4, 1998 (filed as Exhibit 3.1 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended January 31, 1998 and incorporated herein by reference). 4 -- Description of Capital Stock, contained in Article 4 of Registrant's Restated Articles of Organization (filed as Exhibit 3.1 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). *10.1 -- Registrant's December 5, 1986 Non-Qualified Stock Option Plan (filed as Exhibit 10.7 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1986 and incorporated herein by reference). *10.2 -- Profit Sharing Plan and Trust of Registrant, as amended through December 9, 1988 and restated effective January 1, 1988 (filed as Exhibit 10.22 to Annual Report on Form10-K, File No. 0-12102, for the year ended October 29, 1988 and incorporated herein by reference). *10.3 -- Registrant's December 6, 1985 Non-Qualified Stock Option Plan (filed as Exhibit 10.56 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 26, 1985 and incorporated herein by reference). *10.4 -- Form of Stock Option Agreement under Registrant's December 6, 1985 Non-Qualified Stock Option Plan (filed as Exhibit 10.42 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 31, 1987 and incorporated herein by reference). 10.5 -- Amendment dated as of January 9, 1986 to Lease between Registrant and Lupe Burgstrom dated April 30, 1984 (filed as Exhibit 10.79 to Annual Report on Form 10-K, File No. 0- 12102, for the year ended October 25, 1986 and incorporated herein by reference). 10.6 -- Amendment dated as of January 9, 1986 to Lease between Registrant and Freedom Associates dated May 17, 1985 (filed as Exhibit 10.80 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1986 and incorporated herein by reference). 10.7 -- Amendment dated as of March 7, 1986 to Lease between Registrant and Freedom Associates dated December 23, 1980 (filed as Exhibit 10.81 to Annual Report on Form10-K, File No. 0-12102, for the year ended October 25, 1986 and incorporated herein by reference). 10.8 -- Lease dated July 15, 1988 between Registrant and C&M Associates I (filed as Exhibit 10.67 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 29, 1988 and incorporated herein by reference). *10.9 -- Form of Stock Option Agreement under Registrant's Non-Qualified Stock Option Plan of September 7, 1990 (filed as Exhibit 10.68 to Annual Report on Form 10-K, File No. 0- 12102, for the year ended October 27, 1990 and incorporated herein by reference). *10.10 -- Amendment to Profit Sharing Plan and Trust of Registrant dated June 19, 1990 (filed as Exhibit 10.75 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 27, 1990 and incorporated herein by reference). 10.11 -- Loan Agreement by and between Registrant and New York State Urban Development Corporation ("NYSUDC"); Mortgage between Registrant and Tioga, Note between Registrant and NYSUDC; all dated as of April 10, 1991 (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1991 and incorporated herein by reference). *10.12 -- Form of Stock Option Agreement under Registrant's 1991 Non-Employee Director Stock Option Plan (filed as Exhibit 10.82 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 26, 1991 and incorporated herein by reference). 10.13 -- Lease dated March 1, 1992 between Registrant and Equity Property Associates I (filed as Exhibit 10.65 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 31, 1992 and incorporated herein by reference). *10.14 -- Amendment to Retirement Plan of Registrant dated March 10, 1993 (filed as Exhibit 10.48 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 30, 1993 and incorporated herein by reference). *10.15 -- Amendment to Retirement Plan of Registrant dated September 10, 1993 (filed as Exhibit 10.49 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 30, 1993 and incorporated herein by reference). 65 EXHIBIT - ------- 10.16 -- Lease dated January 13, 1995 between Registrant and Nash Family Investment Properties and Ballinger Properties d/b/a Sagamore Industrial Properties (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended January 28, 1995 and incorporated herein by reference). 10.17 -- Rights Agreement dated as of August 22, 1995 between the Registrant and the First National Bank of Boston (filed as Exhibit 4.1 to Current Report on Form 8-K, File No. 0- 12102, dated August 22, 1995 and incorporated herein by reference). *10.18 -- Agreement dated as of August 14, 1995 between the Registrant and Patrick Sweeney (filed as Exhibit 10.49 to Annual Report on Form 10-K, File No. 0-12102, for year ended October 28, 1995 and incorporated herein by reference). 10.19 -- Amendment dated May 1 1995 to lease dated March 1, 1992 between Registrant and Equity Property Associates I (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1996 and incorporated herein by reference). 10.20 -- Lease dated November 1, 1995 between Registrant and Equity Property Associates I (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1996 and incorporated herein by reference). 10.21 -- Lease dated November 1, 1995 between Registrant and Equity Property Associates I (filed as Exhibit 10.3 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1996 and incorporated herein by reference). 10.22 -- Amendment dated April 1, 1996 to lease dated March 1, 1992 between Registrant and Equity Property Associates I (filed as Exhibit 10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended April 27, 1996 and incorporated herein by reference). 10.23 -- Agreement and Plan of Merger dated as of December 4, 1996 among the Registrant Hadco Acquisition Corp. and Zycon Corporation (filed as Exhibit (c) (1) to the Schedule 14D-1 filed by the Registrant on December 11, 1996 and incorporated herein by reference). 10.24 -- Stockholders Agreement dated December 4, 1996 among Registrant and the parties named therein filed as Exhibit (c) (2) to the Schedule 14D-1 (filed by the Registrant on December 11, 1996 and incorporated herein by reference). 10.25 -- Revolving Credit Agreement dated as of January 8, 1997 between the Registrant and the First National Bank of Boston ("the Revolving Credit Agreement") (filed as Exhibit 10.40 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 26, 1996 and incorporated herein by reference). *10.26 -- Amended and Restated 1991 Non-Employee Director Stock Option Plan of Registrant as of December 3, 1996 (filed as Exhibit 10.43 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1997 and incorporated herein by reference). *10.27 -- Amendments to Retirement Plan of Registrant dated September 15, 1997 (filed as Exhibit 10.44 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1997 and incorporated herein by reference). 10.28 -- Amended and Restated Revolving Credit Agreement dated as of December 8, 1997 between the Registrant and BankBoston, N.A (filed as Exhibit 10.45 to Annual Report on Form 10-K, File No. 0-12102, for the year ended October 25, 1997 and incorporated herein by reference). 10.29 -- Leases for premises located at 435-445 El Camino Real, Santa Clara, California, by and between Zycon Corporation and University Research Center and addenda thereto dated March 1, 1988; July 8, 1988; February 27, 1989; August 30, 1989; May 19, 1993; and August 9, 1993 (filed as Exhibit 10.1 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.30 -- Provisional Lease dated November 14, 1995 for the premises located at the Muara Tebas Land of Kuching East Malaysia by and between Sudarsono Osman and Zycon Corporation Sendirian Berhad (filed as Exhibit 10.2 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.31 -- Construction Agreement dated August 3, 1995 by and between Zycon Corporation and Hiti Engineering Sdn.Bhd. (filed as Exhibit 10.3 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.32 -- Facilities Agreement dated February 9, 1996 by and among Zycon Corporation Sdn.Bhd.,Bank Bumiputra Malaysia Berhad and BBMB Kewangan Berhad (filed as Exhibit 10.4 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.33 -- Corporate Guarantee dated February 9, 1996 issued by Zycon Corporation in favor of Bank Bumiputra Malaysia Berhad and BBMB Kewangan Berhad (filed as Exhibit 10.5 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 66 EXHIBIT - ------- 10.34 -- Lease for the three acre premises located in Santa Clara, California by and between Zycon Corporation and Sobrato Interests III, dated January 4, 1996 (filed as Exhibit 10.6 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). *10.35 -- Profit Sharing Plan and Trust of Registrant, as amended and restated effective January 1, 1988 and as amended June 20, 1990 (filed as Exhibit 10.7 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.36 -- First Amendment and Modification Agreement by and among the Registrant and The First National Bank of Boston (the "Bank of Boston") dated as of February 21, 1997 amending the Revolving Credit Agreement (filed as Exhibit 10.8 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). 10.37 -- Form of Assignment and Acceptance to Revolving Credit Agreement (filed as Exhibit 10.9 to the Registration Statement No. 333-21977 on Form S-3 and incorporated herein by reference). *10.38 -- Outside Directors Compensation Plan of 1998 (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q, File No, 0-12102, for the quarter ended January 31, 1998 and incorporated herein by reference). *10.39 -- Employee Stock Purchase Plan of November 17, 1997 (filed as Exhibit 10.1 to the Registration Statement No. 333-47589 on Form S-8 and incorporated herein by reference). 10.40 -- First Amendment and Modification Agreement by and among the Registrant and BankBoston, N.A. dated as of March 19, 1998 amending the Amended and Restated Revolving Credit Agreement (filed as Exhibit (b) (2) to the Amendment No. 2 to the Schedule 14D-1 filed by the Registrant on February 20, 1998 and incorporated herein by reference). 10.41 -- Guaranty dated as of March 19, 1998 by Hadco Acquisition Corp. II in favor of BankBoston, N.A. (filed as Exhibit (b) (3) to the Amendment No. 2 to the Schedule 14D-1 filed by the Registrant 0n February 20, 1998 and incorporated herein by reference). 10.42 -- Stock Pledge Agreement dated as of March 19, 1998 by Hadco Acquisition Corp. II in favor of BankBoston, N.A. (filed as Exhibit (b) (4) to the Amendment No. 2 to the Schedule 14D-1 filed by the Registrant on February 20, 1998 and incorporated herein by reference). *10.43 -- Form of Option Agreement under Registrant's Non-Qualified Stock Option Plan dated November 29, 1995, as amended and restated April 7, 1998 (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q, File No. 0-12101, for the quarter ended May 2, 1998 and incorporated herein by reference). *10.44 -- Stock Purchase Agreement dated as of March 20, 1998 between Registrant and Frederick G. McNamee, III (filed as Exhibit 10.3 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended May 2, 1998 and incorporated herein by reference). *10.45 -- Employment Agreement dated as of February 17, 1998 between Registrant and Frederick G. McNamee, III (filed as Exhibit 10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended May 2, 1998 and incorporated herein by reference). 10.46 -- Second Amendment and Modification Agreement among Registrant and a group of Banks dated as of May 11, 1998 (filed as Exhibit 10.5 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended May 2, 1998 and incorporated herein by reference). *10.47 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Andrew E. Lietz (filed as Exhibit 10.2 to Quarterly Report Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.48 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and John D. Caruso (filed as Exhibit 10.3 to Quarterly Report on From 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.49 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Timothy P. Losik (filed as Exhibit 10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.50 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Michael K. Sheehy (filed as Exhibit 10.5 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.51 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Frederick G. McNamee, III (filed as Exhibit 10.6 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). *10.52 -- Form of Executive Agreement dated as of July 1, 1998 by and between the Company and Robert E. Snyder (filed as Exhibit 10.7 to Quarterly Report on Form 10-Q, File No. 0-12102, for the quarter ended August 1, 1998 and incorporated herein by reference). 67
EXHIBIT ------- 10.53 -- Indenture (including Form of Exchange Note) dated as of May 18, 1998 by and among the Company, the Guarantors and State Street Bank and Trust, as Trustee (filed as Exhibit 4.1 to Form S-4, Registration No. 333-57467, and incorporated herein by reference). 10.54 -- Registration Rights Agreement dated May 13, 1998 among the Company, the Guarantors, Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancAmerica Robertson Stephens, and BT Alex Brown Incorporated, as initial purchasers (filed as Exhibit 4.2 to Form S-4, Registration No. 333-57467, and incorporated herein by reference). 10.55 -- Placement Agreement dated May 13, 1998 by and among the Company, the Guarantors, Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancAmerica Robertson Stephens, and BT Alex. Brown Incorporated, as initial purchasers (filed as Exhibit 10.1 to Form S-4, Registration No. 333-57467, and incorporated herein by reference). 10.56 -- Third Amendment and Modification Agreement dated as of September 14, 1998 among Registrant and a group of Banks. (filed as Exhibit 10.5 to Form S-4, Registration No. 323- 57467, and incorporated herein by reference). *10.57 -- Form of Executive Agreement dated as of November 2, 1998 by and between the Company and F. Gordon Bitter. *10.58 -- Amended and Restated Non-Qualified Stock Option Plan dated September 7, 1990, dated as of April 7, 1998. *10.59 -- Amended and Restated Non-Qualified Stock Option Plan dated November 29, 1995, dated as of July 1, 1998. *10.60 -- Amendment dated as of July 1, 1998 to Option Agreement of Andrew E. Lietz dated April 8, 1998. *10.61 -- Amendment dated as of July 1, 1998 to Option Agreement of Andrew E. Lietz dated February 26, 1997. *10.62 -- Amendment to Retirement Plan dated September 15, 1998. 10.63 -- Amendment dated May 29, 1998 to Lease between Registrant and Equity Property Associates I dated March 1, 1992. 10.64 -- Amendment dated May 29, 1998 to Lease between Registrant and Equity Property Associates I dated November 1, 1995, for 12A Manor Parkway, Salem, New Hampshire. 10.65 -- Amendment No. 2 dated October 29, 1998, for 12A Manor Parkway, Salem, New Hampshire to Lease between Registrant and Manor Parkway LLC dated November 1, 1995. 10.66 -- Amendment dated May 29, 1998 to Lease between Registrant and Equity Property Associates I dated November 1, 1995, for 12B Manor Parkway, Salem, New Hampshire. *10.67 -- Hadco Corporation Executive Incentive Compensation Deferred Bonus Plan, as amended and restated July 1, 1998. *10.68 -- Amendment to Outside Directors Compensation Plan of 1998, dated as of November 12, 1998. *10.69 -- Agreement dated as of November 12, 1998 by and between the Company and Andrew E. Lietz. *10.70 -- Form of Agreement dated as of November 12, 1998 by and between the Company and various employees of the Company. 21 -- Subsidiaries of the Registrant. 23 -- Consent of Arthur Andersen LLP. 27 -- Financial Data Schedule.
(*) Indicates a management contract or any compensatory plan, contract or arrangement required to be filed as an exhibit pursuant to Item 14(c). EX-10.57 2 AGREEMENT WITH GORDON BITTER 1 Exhibit 10.57 EXECUTIVE AGREEMENT Executive Agreement made as of this 2nd day of November 1998, by and between Hadco Corporation, a Massachusetts corporation with a principal place of business at 12A Manor Parkway, Salem, New Hampshire 03079 (the "Company") and F. GORDON BITTER, an individual residing at 14249 W. HUME ROAD, HUME, VA 22639 (the "Executive"). WHEREAS, the Company desires to employ the Executive upon the terms and conditions hereinafter set forth; and WHEREAS, the Executive desires to be employed upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT. The Company agrees to employ the Executive on a full-time basis, subject to the terms and conditions set forth herein, and the Executive agrees to accept such full time employment upon said terms and conditions. The Executive's employment shall be subject to the standard terms and conditions and policies applicable to all employees of the Company, as such terms and policies may exist from time to time. 2. TERM. The term of employment under this Agreement ("the Term") shall commence on the date hereof and shall continue for an indefinite term, subject to mutual agreement between the Executive and the Company. 3. DUTIES. The Executive shall serve the Company in such senior executive capacity or capacities, and with such duties, as shall be designated by the Company from time to time, subject to and under the supervision of the Company's Board of Directors. 4. COMPENSATION. The Company shall pay the Executive a Base Salary at the same rate as currently paid such Executive, provided that such rate may be increased from time to time by the Company in its discretion. The Executive shall be accorded such benefits as are customarily enjoyed by executives of the Company, and shall be entitled to participate in any executive incentive compensation or bonus plan approved by the Board of Directors or the Compensation Committee thereof. The Company may, from time to time, in its discretion, grant stock options or other equity compensation to the Executive. 5. NON-COMPETITION; NON-SOLICITATION. a. NON-COMPETE. The Executive acknowledges that he/she has gained or will gain extensive and valuable experience and knowledge in the business conducted by the Company and has had or will have extensive contacts with the customers, suppliers, investors, and/or 1 2 consultants of the Company. The Executive recognizes that it is critical to the ongoing success of the Company that it preserve its goodwill and protect its proprietary rights and its other important business interests. Accordingly, the Executive agrees that he/she will not, while employed by the Company during the Term hereof and for a period of one year thereafter (or, in the event of the Company's termination of the Executive without cause or if the Executive's employment is terminated by him/her for Good Reason (as defined herein) or by the Company within six months before or within twenty-four (24) months after a Change of Control (as defined herein), for such longer period during which the Executive is receiving compensation pursuant to the provisions of Section 8 hereof), directly or indirectly, engage in (whether as an officer, employee, consultant, director, proprietor, agent, partner or otherwise) or have an ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business engaged in competition with the Company, any of its affiliates, its parent or subsidiaries in the business of manufacture or sale of printed circuit boards, backpanels, backplanes and/or box build assembly products, or in the development of technology for such businesses; provided, however, that these restrictions shall only apply to the Executive's activities post-termination of employment with persons, firms, corporations or businesses with annual gross revenues in a competing business, as defined herein, (in the aggregate with its affiliated entities) in excess of one hundred million United States dollars. It is agreed that ownership of no more than 4.9% of the outstanding voting stock of a publicly traded corporation shall not constitute a violation of this provision. In recognition of the fact that the Company's business is global, the territory to which the restrictions contained in this Section 5(a) shall apply shall be worldwide. The Company may waive the foregoing restrictions or their application in any particular circumstance and may condition any such waiver upon receipt of assurances satisfactory to the Company, from the Executive and/or others, that the Executive's proposed activity will not adversely affect the Company's goodwill, proprietary rights or other important business interests. b. NON-SOLICITATION. While actively employed by the Company during the Term hereof and for a period of one year thereafter (or, in the event of the Company's termination of the Executive without cause or if the Executive's employment is terminated by him/her for Good Reason (as defined herein) or by the Company within six (6) months before or within twenty-four (24) months after a Change of Control (as defined herein), for such longer period during which the Executive is receiving compensation pursuant to the provisions of Section 8 hereof), the Executive agrees that he/she shall not solicit any persons or companies who were customers, suppliers or business patronage of the Company or its affiliates, parent or subsidiaries during the Term or prior thereto, if such solicitation is for the purpose of, or results in, competition with the Company, any of its affiliates, its parent or subsidiaries; nor will he/she solicit for any purpose the employment of any employees of the Company, any of its affiliates, its parent or subsidiaries while actively employed by the Company during the Term hereof and for a period of one year thereafter. 2 3 c. CONFIDENTIAL INFORMATION. The Executive acknowledges that he/she may receive, or contribute to the production of, Confidential Information. For purposes of this Agreement, the Executive agrees that "Confidential Information" shall mean information or material proprietary to the Company, its affiliates, its parent, or any of its direct or indirect subsidiaries, or designated as Confidential Information by such entities and not generally known by personnel not employed by or affiliated with one or more of such entities, which the Executive develops or of or to which the Executive may obtain knowledge or access through or as a result of the relationship with the Company, its affiliates, its parent or any of its direct or indirect subsidiaries (including information conceived, originated, discovered or developed in whole or in part by the Executive). Confidential Information also 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 the Company's business, or that of its affiliates, its parent or any of its direct or indirect subsidiaries: discoveries, inventions, ideas, concepts, research, development, processes, procedures, "know-how", formulae, marketing techniques and materials, marketing and development plans, business methods of operation, financial information, employee compensation, and computer programs and systems. Confidential Information also includes any information described above which the Company, its affiliates, its parent, or any of its direct or indirect subsidiaries obtained from another party and which the Company, its affiliates, its parent, or any of its direct and indirect subsidiaries treats as proprietary or confidential, or designates as Confidential Information, whether or not owned by or developed by the Company, its affiliates, its parent, or any of its direct or indirect subsidiaries. The Executive acknowledges that the Confidential Information derives independent economic value, actual or potential, from not being generally known to, and not being readily accessible 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 the Executive first learns of such information, or generic information or knowledge which the Executive would have learned in the course of similar employment or work elsewhere in the trade, shall not be deemed part of the Confidential Information. The Executive further agrees: (1) To furnish the Company on demand, and at any time during or within one year after termination of employment, a complete list of the names and addresses of all present, former and potential suppliers, customers and other contacts gained while an Executive of the Company in the Executive's possession, whether or not in the possession or within the knowledge of the Company. (2) That all notes, memoranda, electronic storage, documentation and records in any way incorporating or reflecting any Confidential Information shall belong exclusively to the Company, and the Executive agrees to turn over all copies of such materials in the Executive's control to the Company upon request and upon termination of the Executive's employment with the Company. (3) That while employed by the Company and indefinitely after termination of employment for any reason, the Executive 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 the Executive's work for the Company. 3 4 (4) That any idea in whole or in part conceived of or made by the Executive during the Term of his/her employment with the Company which relates directly or indirectly to the Company's current or planned line of business and is made through the use of any of the Confidential Information or any of the Company's equipment, facilities, trade secrets or time, or which results from any work performed by the Executive for the Company, shall belong exclusively to the Company and shall be deemed a part of the Confidential Information for purposes of this Agreement. The Executive hereby assigns and agrees to assign to the Company all rights in and to such Confidential Information whether for purposes of obtaining patent or copyright protection or otherwise. The Executive shall acknowledge and deliver to the Company, without charge to the Company (but at its expense) such written instruments and do such other acts, including giving testimony in support of the Executive's authorship or inventorship, as the case may be, necessary in the opinion of the Company to obtain patents or copyrights or to otherwise protect or vest in the Company the entire right and title in and to the Confidential Information. If disclosure of any Confidential Information is requested or required by judicial or governmental order, the Executive shall promptly notify the Company of receipt of the judicial or governmental order and shall take reasonable steps to assist the Company in contesting such order and/or in protecting the Company's rights prior to disclosure. d. INJUNCTIONS. It is agreed that the restrictions contained in this Section 5 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, the Executive agrees that, in addition to, and without limiting any other right or remedy the Company may have, the Company shall have the right to an injunction against the Executive issued by a court of competent jurisdiction enjoining any such breach. e. PART OF CONSIDERATION. The Executive also agrees, acknowledges, covenants, represents and warrants that he/she is fully and completely aware that, and further understands that, the foregoing restrictive covenants are an essential part of the consideration for the Company entering into this Agreement and that the Company 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 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. SURVIVAL. The obligations described in this Section 5 shall survive any termination of this Agreement, or any termination of the employment relationship created hereunder. 6. TERMINATION. Notwithstanding any other provision of this Agreement, the Company shall have the right to terminate the Executive's employment, with or without cause, at any time. For purposes of this Agreement, the Company shall have "cause" to terminate the Executive in the event of: (a) the willful and continued failure by the Executive to substantially perform 4 5 his/her duties, after demand for substantial performance is delivered by the Company to the Executive identifying with specificity the grounds for the Company's belief that the Executive has not substantially performed his/her duties; (b) the permanent physical or mental incapacity of the Executive; (c) the commission by the Executive of any act of fraud or embezzlement relating to the property of the Company and/or the services to be provided by the Executive; or (d) the Executive's unauthorized disclosure or use of proprietary confidential information of the Company or the Executive's engaging in competition with the Company. 7. CHANGE OF CONTROL. In the event the Executive's employment with the Company is terminated by the Company within six (6) months prior to or within twenty-four (24) months after a Change of Control (as defined herein) or in the event the Executive terminates his/her employment for Good Reason (as defined herein) within twenty-four (24) months after a Change of Control (as defined herein), the Executive shall be treated as if his/her employment were terminated by the Company without cause. Without limiting the generality of the foregoing, in such circumstances, the Executive shall receive from the Company all compensation described in Section 8 hereof, for the period of time and subject to the limitations provided in such Section. Once the Executive becomes entitled to receive benefits under this Section 7, then such benefits shall continue until paid in full, subject to the terms and conditions stated herein, notwithstanding the Executive's subsequent death, in which case payments shall be made to the Executive's estate. A Change of Control, as used herein, shall mean any sale of all or substantially all of the assets of the Company, or 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. The Executive shall have Good Reason to terminate his/her employment with the Company within twenty-four (24) months after a Change of Control if, without his/her prior written consent, he/she suffers (a) any significant diminution in position, duties, responsibilities, authority, title or office as in effect immediately prior to the Change of Control; (b) any reduction in his/her Base Salary as in effect on the date hereof or as the same may be increased prior to the Change of Control; (c) the failure by the Company to continue in effect, at a coverage or benefit level of at least 90% of that in effect immediately prior to the Change of Control of the Company, any benefit or compensation plan; (d) any requirement by the Company that the Executive perform his/her principal duties for the Company at a location more than 30 miles radius from the location at which the Executive performed such duties immediately prior to the Change in Control; or (e) any requirement by the Company that the Executive engage in business travel to a significantly greater extent than immediately prior to the Change of Control; provided, however, that the Executive shall not be entitled to benefits under this provision unless he/she gives notice to the Company within 180 days of when the Executive first becomes aware of such diminution, reduction, failure, or requirement, as the case may be. 8. THE COMPANY'S OBLIGATIONS AFTER TERMINATION. In the event of the Company's termination of the Executive's employment without cause, or in the event of the Executive's termination of his/her employment for Good Reason (as defined herein) or by the Company within six months before or within twenty-four (24) months after a Change of Control (as defined herein), and so long as the Executive has not breached any obligation of the Executive 5 6 under Section 5 hereof, the Company shall continue to pay to the Executive and provide for the benefit of the Executive certain items of compensation, as set forth below, for a period equal to one (1) year plus one (1) month for each full year of consecutive service completed by the Executive prior to the date of termination (including service prior to the date of execution of this Agreement); provided, however, that the Executive shall be entitled to a maximum of twenty-four (24) months of compensation. Once the Executive becomes entitled to receive benefits under this Section 8, then such benefits shall continue until paid in full, subject to the terms and conditions stated herein, notwithstanding the Executive's subsequent death, in which case payments shall be made to the Executive's estate. For purposes of this Agreement, the Executive's starting date of service to the Company is November 2, 1998. The compensation to be provided to the Executive pursuant to the terms of this Section are as follows: (a) Base salary at the rate in effect as of the date of termination; (b) Health insurance, life insurance, disability insurance and reimbursement of the cost of tax or financial planning assistance up to a maximum of $1200 per year; and (c) Outplacement services. In addition, the Executive shall be paid (i) a pro-rated incentive amount based on the portion of the then current fiscal year completed at the time of termination compared to the Executive's expected incentive compensation for such year at the target level of such incentive compensation program for the Executive, and (ii) all deferred compensation then maintained in the Executive's account, including without limitation all restricted stock, all in accordance with the options for payment which may then be available for payment of such deferred compensation to eligible employees. The payments described in clauses (i) and (ii) of this Section 8 shall be paid promptly after termination of employment. The payments to be made by the Company to the Executive pursuant to the provisions of paragraph (a) of this Section 8 shall be made on whatever the then customary payment schedule is for compensation of executive employees of the Company (i.e. monthly, bi-weekly, or the like). However, the payments under paragraphs (a) and (b) shall be not be considered employee compensation or be subject to tax withholding by the Company; rather they shall be made in exchange for the Executive's covenant not to compete, as set forth in Section 5(a) hereof. If, at any time, the payments made under paragraphs (a) and (b) are determined by any state or federal taxing authority to be employee compensation, then the Company agrees to pay its share of FICA and Medicare tax on such payments, plus any interest or penalty that may be due as a result of the taxing authority's determination and that relates to the Company's unpaid tax. In the event the Executive secures a new employment position during the period of the Company's continuing payment of compensation to him/her, the Executive shall promptly notify the Company of the commencement of the new employment position and shall inform the Company of the extent to which benefits to be provided by the Company hereunder are duplicative of benefits then available to the Executive through his/her new employment position. To the extent that the benefits to be provided by the Company hereunder are duplicative, the Company shall be entitled to cease provision of such benefits. 6 7 Nothing contained herein shall, however, be construed as reducing the obligation of the Company to continue to make Base Salary payments or to pay the incentive compensation and deferred compensation amounts due to the Executive as provided herein. If the payments provided for in this Agreement, together with any other payments or benefits which the Executive has the right to receive from the Company (or its affiliates, its parent or subsidiaries), would constitute an "excess parachute payment" (as defined in Section 280G of the Internal Revenue Code), the Executive shall receive either: (x) all compensation and benefits provided for him or her under this Agreement, or (y) the maximum of compensation and benefits that will avoid an excess parachute payment under Section 280G; whichever would provide the greater after-tax benefit to the Executive. In the event that clause (y) provides the greater after-tax benefit, the Executive shall be entitled to select the items to be abated. If the Executive is to receive the clause (y) benefits and through error or otherwise the Executive receives payments, together with other payments the Executive has the right to receive from the Company (or its affiliates, its parents or subsidiaries) in excess of 2.99 times the Executive's base amount, the Executive agrees to immediately repay the excess to the Company upon notification that an overpayment has been made. If the Company has previously issued a W-2 statement to the Executive and the taxing authorities with respect to these payments and/or withheld taxes from the Executive based on these payments, then the Company agrees to promptly issue a corrected W-2 to the Executive and the taxing authorities and/or to refund the excess withheld taxes to the Executive, as the case may be. 9. FUNDING OF COMPANY'S OBLIGATIONS. In the event of a Change of Control, the Company agrees, prior to consummation of the transaction constituting the Change of Control, to create a so-called Rabbi Trust and to fund said Rabbi Trust with an amount equal to all amounts which may become due to the Executive under this Agreement as a result of the Change of Control. Without limiting the generality of the foregoing, the funding shall include all amounts which may become due to the Executive in the event of his/her subsequent termination of employment within twenty-four (24) months of the Change of Control, including without limitation, all deferred compensation amounts then deferred for the Executive. 10. GOVERNING LAW AND VENUE. This Agreement shall be construed and enforced in accordance with the substantive law of the Commonwealth of Massachusetts, without giving effect to its conflicts of law principles. The parties agree that any litigation pertaining to this Agreement shall be maintained exclusively in the courts of general jurisdiction located in Massachusetts, and each party agrees to submit to the jurisdiction and venue of any such court. Notwithstanding the foregoing, the Company shall be entitled to file litigation against the Executive in any jurisdiction where the Company deems it necessary or advisable to do so in order to enforce the provisions of Section 5 hereof. 11. CONSTRUCTION. The language in all parts of the Agreement shall in all cases be construed as a whole according to its fair meaning and not strictly for or against either 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 7 8 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 to the interpretation of this Agreement or any amendment thereof. 12. NONDELEGABILITY OF THE EXECUTIVE'S RIGHTS AND ASSIGNMENT RIGHTS OF THE COMPANY. The obligations, rights and benefits of the Executive 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 may be assigned by the Company to its parent or any subsidiary or affiliate, and shall be assigned automatically to any entity merging with or acquiring the Company or its parent or business of the Company. Without limiting the generality of the foregoing, the Company agrees to require any purchaser of all or substantially all its assets to agree to perform the Company's obligations under this Agreement. Any successor to the Company, whether by assignment or otherwise, shall be considered the Company for purposes of this Agreement. 13. 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 the parties will request the court to (a) modify the invalid or unenforceable provision to the minimum extent necessary to make it valid and enforceable, or (b) if the court determines that such a modification is not possible, interpret this Agreement as if such invalid or unenforceable provisions were not a part hereof. 14. 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 the Company: Hadco Corporation 12A Manor Parkway Salem, NH 03079 Attn: General Counsel With a copy to: Hamilton & Dahmen, LLP 73 Tremont Street Boston, MA 02108 If to the Executive: F. Gordon Bitter 14249 W. Hume Road Hume, VA 22639 or to such other addresses either party may provide to the other in accordance with this Section. 8 9 15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof (i.e. the Executive's employment by the Company) and supercedes all prior or contemporaneous employment agreements and understandings or agreements in regard to the Executive's employment except for relocation benefits as described in the Offer Letter dated October 26, 1998. No modification or addition to this Agreement shall be valid unless in writing, specifically referring to this Agreement and signed by both 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. IN WITNESS WHEREOF, the parties have set their hands as the day and year first above written. HADCO Corporation /s/ Patricia Randall /s/ Andrew E. Lietz - ---------------------------- ----------------------------------- Witness Its Duly Authorized Executive /s/ Patricia Randall /s/ F. Gordon Bitter - ----------------------------- ----------------------------------- Witness F. Gordon Bitter 9 EX-10.58 3 AGREEMENT TO STOCK OPTION PLAN DATED 7-SEPT-1990 1 Exhibit 10.58 HADCO CORPORATION NON-QUALIFIED STOCK OPTION PLAN SEPTEMBER 7, 1990 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. 3. AVAILABLE SHARES. The total number of shares of common stock, par value $0.05, of the Company, for which options may be granted shall be One Million (1,000,000) shares, -1- 2 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. 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. 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 member of the Committee shall be eligible to participate in the Plan, and no person shall be appointed to the Committee who has within one (1) year of his appointment been eligible to selection as a person to whom stock may be allocated or to whom stock options or stock appreciation rights may be granted pursuant to this Plan or any other plan of the Company or any of its affiliates entitling the participants therein to acquire stock, stock options or stock appreciation rights of the Company or any of its affiliates. 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 -2- 3 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 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 provi- -3- 4 sions 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 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 -4- 5 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, 2000. 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 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 -5- 6 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 in whole or in part in shares of the common stock of the Company already owned by the person or persons exercising the option, valued at fair market value; provided, however, that 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 Hamilton & Dahmen, LLP, 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 -6- 7 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 delivered to him upon the due exercise of the option. Notwithstanding the foregoing provisions, an option granted hereunder may, to the extent in compliance with applicable law, be exercised by payment in accordance with a cashless exercise program under which, if so instructed by the holder of the option, shares of Common Stock may be issued directly to the broker or dealer of the holder of the option upon receipt by the Company of the purchase price of the Common Stock covered by such option in cash or check from the broker or dealer, and except to the extent modified by this sentence, the exercise will comply with, and be subject to, all the other provisions of this Section 8. 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 -7- 8 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. (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 -8- 9 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, 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 -9- 10 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 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. 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 -10- 11 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 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. -11- 12 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. 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, 1991, and the Plan shall take effect as of the date of adoption immediately upon such approval. 16. TERMINATION AND AMENDMENT OF PLAN. 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 -12- 13 approval of the stockholders of the Company obtained in the manner stated in Section 15, increase the maximum number of shares for which options may be granted under the Plan. 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. -13- EX-10.59 4 AGREEMENT TO STOCK OPTION PLAN DATED 7-APR-1998 1 Exhibit 10.59 HADCO CORPORATION NON-QUALIFIED STOCK OPTION PLAN NOVEMBER 29, 1995 AS AMENDED AND RESTATED JULY 1, 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 options -1- 2 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. -5- 6 If the Company's common stock is actively traded in 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 -6- 7 exercise to the cash exercise price of the option, or (c) at the 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 Hamilton & Dahmen, LLP, 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 -7- 8 more certificates for such shares shall be 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 from the Company on or after normal retirement age as described in the Hadco Corporation Retirement Plan, as it may be amended from time to time, or any successor Plan (or retirement on or after such other earlier age as may be permitted in the individual option -8- 9 agreement between the optionee and the Company) or disability, any unvested or unexercised options granted to such optionee shall terminate and become void at midnight on the thirtieth (30) day after the date of termination, but in no event later than the specified expiration date of the option. (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 on or after normal retirement age as described in the Hadco Corporation Retirement Plan, as it may be amended from time to time, or any successor Plan (or retirement on or after such other earlier age as may be permitted in the individual option agreement between the optionee and 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 of retirement; provided, however, that an individual option agreement may provide different rights to a retiring optionee than those -9- 10 contained in this section 10(c); and provided further that in no event may any option be exercisable 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, 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 -10- 11 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 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 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 -11- 12 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 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 -12- 13 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 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 -13- 14 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. 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, with- out approval of the stockholders of the Company obtained in the manner stated in Section 15 (without regard to clauses (i) and -14- 15 (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 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-10.60 5 AMENDMENT TO OPTION AGREEMENT-A.E. LIETZ 1 Exhibit 10.60 AMENDMENT TO OPTION AGREEMENT AMENDMENT made this 1st day of July, 1998, by and between Hadco Corporation, a Massachusetts corporation with a usual place of business in Salem, New Hampshire (hereinafter the "Company"), and Andrew E. Lietz, of Rye, New Hampshire (hereinafter the "Optionee"), to the Option Agreement between the parties dated April 8, 1998 in which the Optionee was granted options for Fifty Thousand (50,000) shares of Hadco Corporation Common Stock. WHEREAS, both parties consider the Optionee's stock option arrangements with the Company to be an integral part of his compensation package; and WHEREAS, the Company has recently reviewed compensation arrangements with its top management; and WHEREAS, the Company and the Optionee have agreed upon a revised provision with respect to the retirement of the Optionee. NOW, THEREFORE, in consideration of the premises and other mutual covenants contained herein, it is agreed between the parties as follows: 1. To strike Section 2(c)(1) and substitute therefor new Section 2(c)(1) as follows: "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 after age 61, but in no event may the option be exercised later than the specified expiration date of the option." 2 2. To strike Section 2(c)(3) and substitute therefor new Section 2(c)(3) as follows: "In the event the employment of the Optionee terminates by reason of retirement from the Company after Optionee has reached age 61, any option granted hereunder shall continue to vest and become exercisable on the same schedule as set forth in Section 2(a) and shall expire on the same date as provided in Section 2(b) hereof." 3. Except as specifically set forth herein, the original terms and provisions of the Option Agreement of April 8, 1998 (unless otherwise changed or amended by operation of amendment of the November 29, 1995 Hadco Stock Option Plan) between the parties are hereby ratified and confirmed. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. Hadco Corporation /s/ Patricia Randall By: /s/ Horace H. Irvine II - -------------------------------- ------------------------------------ Witness /s/ James C. Hamilton By: /s/ Andrew E. Lietz - -------------------------------- ------------------------------------ Witness Andrew E. Lietz 2 EX-10.61 6 AMENDMENT TO OPTION AGREEMENT-A.E. LEITZ 1 Exhibit 10.61 AMENDMENT TO OPTION AGREEMENT AMENDMENT made this 1st day of July, 1998, by and between Hadco Corporation, a Massachusetts corporation with a usual place of business in Salem, New Hampshire (hereinafter the "Company"), and Andrew E. Lietz, of Rye, New Hampshire (hereinafter the "Optionee"), to the Option Agreement between the parties dated February 26, 1997 in which the Optionee was granted options for Forty Thousand (40,000) shares of Hadco Corporation Common Stock. WHEREAS, both parties consider the Optionee's stock option arrangements with the Company to be an integral part of his compensation package; and WHEREAS, the Company has recently reviewed compensation arrangements with its top management; and WHEREAS, the Company and the Optionee have agreed upon a revised provision with respect to the retirement of the Optionee. NOW, THEREFORE, in consideration of the premises and other mutual covenants contained herein, it is agreed between the parties as follows: 1. To strike Section 2(c)(1) and substitute therefor new Section 2(c)(1) as follows: "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 after age 61, but in no event may the option be exercised later than the specified expiration date of the option." 2 2. To strike Section 2(c)(3) and substitute therefor new Section 2(c)(3) as follows: "In the event the employment of the Optionee terminates by reason of retirement from the Company after Optionee has reached age 61, any option granted hereunder shall continue to vest and become exercisable on the same schedule as set forth in Section 2(a) and shall expire on the same date as provided in Section 2(b) hereof." 3. Except as specifically set forth herein, the original terms and provisions of the Option Agreement of February 26, 1997 (unless otherwise changed or amended by operation of amendment of the November 29, 1995 Hadco Stock Option Plan) between the parties are hereby ratified and confirmed. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. Hadco Corporation /s/ Patricia Randall By: /s/ Horace H. Irvine - -------------------------------- ------------------------------------ Witness /s/ James C. Hamilton By: /s/ Andrew E. Lietz - -------------------------------- ------------------------------------ Witness Andrew E. Lietz 2 EX-10.62 7 AMENDMENTS TO HADCO CORP RETIREMENT PLAN 1 Exhibit 10.62 EXHIBIT A PROPOSED AMENDMENTS TO HADCO CORPORATION RETIREMENT PLAN RELATING TO MERGER WITH CONTINENTAL CIRCUITS CORP. PLAN 10/1/98 1. The last paragraph of Section 3.01 is amended by adding the following sentence thereto: "For individuals who have become Participants during the 1998 Fiscal Year as a result of an asset or stock acquisition, merger or other similar transaction, the 401(k) Compensation to be taken into account hereunder for said Fiscal Year shall be 401(k) Compensation received during the period from April 1, 1998 through October 31, 1998 from the Employer or from the individual's prior employer who was a party to the transaction." 2. Effective October 1, 1998, a new Article VIII-A shall be added to the Plan, to read as follows: ARTICLE VIII-A PROVISIONS FOR RADIAN SOURCE ACCOUNTS 8A.01 PROTECTED BENEFITS, RIGHTS AND FEATURES Any accounts transferred to this Plan from the Continental Circuits Corp. 401(k) Retirement Plan (the "Continental Circuits Plan") for the benefit of former employees of Radian International LLC or an affiliate of Radian International LLC who become employees of the Employer or any Affiliated Employer ("Radian Participants") shall be segregated and maintained as separate sub-accounts as provided in Section 9.03 below for purposes of continuing to provide the benefits, rights and features which were provided under the Continental Circuits Plan and which are protected benefits under Section 411(d)(6) of the Code. Radian Participants will be provided the following protected benefits, rights, and features solely as to the Radian Source Accounts (as defined in Section 9.03). 8A.02 IN-SERVICE WITHDRAWALS (a) IN GENERAL. A Participant or former Participant may request cash withdrawals from Radian Source Accounts not more than twice during any twelve-month period commencing with any withdrawal, subject to the 2 sequence and conditions for withdrawal set forth in paragraph (b) below. The minimum amount of withdrawal shall be set by the Plan Administrator. The withdrawals are not subject to the spousal and Participant consent requirements contained in Code Sections 401(a)(11) and 417. (b) SEQUENCE AND CONDITIONS FOR WITHDRAWAL. A Participant shall request the Plan Administrator to effect a cash withdrawal and such amount shall be debited form his Radian Source Accounts. The Administrator shall withdraw amounts in the following sequence and upon the following conditions: (i) First, a Participant may withdraw all or part of the value of his After-Tax Frozen Account (as defined in Section 9.03 below). (ii) Second, a Participant may withdraw all or part of the value of his Prior Plan Employee Frozen Account (as defined in Section 9.03 below) if the Participant is age 59 1/2 or older. If the Participant is less than age 59 1/2, a Participant may withdraw upon written request to the Plan Administrator all or part of the Deferral Contributions (and earnings thereon accrued as of December 31, 1988) in his Prior Plan Employee Frozen Account due to financial hardship as determined in accordance with the provisions of this Plan. 8A.03 PARTICIPANT LOANS Participants may borrow from their Radian Source Accounts in accordance with the terms of this Plan, without the necessity of obtaining spousal consent. 8A.04 DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT, DISABILITY, RETIREMENT OR DEATH A distribution option other than a one-sum cash distribution shall be available under the following described circumstances only if the total balance of a Participant's Radian Source Accounts at the time of a distribution exceeds $3,500 for Plan Years beginning prior to January 1, 1998 or exceeds $5,000 for Plan Years beginning on or after January 1,1998. (a) RETIREMENT BENEFITS (i) NORMAL FORM OF RETIREMENT BENEFIT. The Normal Form of benefit shall be a one-sum cash distribution. 2 3 (ii) OPTIONAL FORMS OF RETIREMENT BENEFIT. A Participant who terminates employment after reaching age 55, who terminates employment and commences distribution after reaching age 55, or who terminates employment on account of disability (as determined under the terms of this Plan), may elect an installment or annuity form of distribution as described below instead of the Normal Form described in paragraph (a)(i) above. Any such election shall not be subject to the spousal and Participant consent requirements contained in Code Sections 401(a)(11) and 417. (A) Annuity payments may be made over one of the following periods: (1) the life of the Participant; (2) the life of the Participant, with a one-sum payment upon the death of the Participant for the excess of the annuity's net purchase price over the sum of payments made prior to the death of the Participant; (3) the lives of the Participant and a designated Beneficiary, or (4) a period certain and continuous not extending beyond 10 years. Any annuity contract distributed herefrom must be nontransferable. Any contract for the lives of the Participant and a designated Beneficiary shall be a 50%, 66 2/3% or 100% joint and survivor annuity. (B) The installment payment options provide for periodic payments to the Participant as hereinafter described. Installment payments shall be made over a period not to exceed the Participant's (or the Participant's and spouse's) life expectancy, subject to the terms set forth herein. The Participant may elect either: 3 4 (1) payment in equal amounts, except that the last payment which exhausts the Participant's Radian Source Accounts may be greater or smaller; (2) a specific number of payments. The amount of each payment will equal the then value of the Participant's Radian Source Accounts divided by the number of remaining payments to be made; or (3) payments over the Participant's life expectancy re-determined each year. The amount of each payment will equal the then value of the Participant's Radian Source Accounts divided by the Participant's life expectancy. An amount may be deducted from a Participant's Radian Source Account to cover the expenses applicable to such installment payment options. Installment payments will terminate with the earlier of (a) the payment which completely exhausts the Participant's Radian Source Accounts or (b) the last payment due preceding the death of the Participant. At the death of the Participant, any amount remaining in the Participant's Radian Source Accounts will be paid in a lump-sum to the Participant's Beneficiary or Beneficiaries. In no event will the installment period exceed that permitted by law. (b) Termination Of Employment (i) NOTICE OF TERMINATION OF EMPLOYMENT. If the termination of employment of a Participant occurs, the Employer shall give written notice to the Plan Administrator of the date of termination of employment of such Participant. (ii) AMOUNT OF PARTICIPANT'S BENEFIT. The amount of a Participant's Plan benefit upon termination of employment which is subject to the terms of this Article VIII-A shall equal the total balance of his Radian Source Accounts at the time of determination. (iii) PARTICIPANT'S ELECTION OF A FORM OF BENEFIT. If termination of employment occurs, the Participant shall receive his Radian Source 4 5 Accounts in a form of benefit elected by him. The Participant's election shall occur within 60 days after the forms of benefit first become available to him. Written notice shall be made on a form provided by the Committee. The election once made shall be irrevocable. The forms of benefit are: (A) OPTION A. The Participant may elect to continue his Radian Source Accounts until age 70 1/2 or until age 55, at which time he may elect Option B, Option C or Option D. (B) OPTION B. The Participant may elect to receive an annuity in accordance with paragraph (a)(ii)(A) above to commence at age 55; provided that if a Participant dies before the first payment is made under a deferred annuity, a death benefit will be paid to the Beneficiary under the deferred annuity in an amount equal to the net cost to provide the annuity plus interest compounded annually at a rate of at least five percent (5%) per annum from the date the annuity was purchased to the date of the Participant's death. (C) OPTION C. The Participant may elect a one-sum cash payment. (D) OPTION D. The Participant may elect installment payments, in accordance with paragraph (a)(ii)(B) above, to commence upon separation from service. If the value of the Participant's Radian Source Accounts exceeds (or at the time of any prior distribution exceeded) $3,500 for Plan Years commencing prior to January 1, 1998, or $5,000 for Plan Years commencing on or after January 1, 1998, and the Accounts are immediately distributable, the Participant and the Participant's spouse (or where either the Participant or the spouse has died, the survivor), must consent to any distributions of such Radian Source Accounts. Consent is not valid unless the Administrator notifies the Participant and the Participant's spouse of the right to defer any distribution until the Participant's Radian Source Accounts are no longer immediately distributable. The notice shall acknowledge the right, if any, to defer distributions and must describe the investment features. One-sum cash payments shall be made during the Plan Year in which the event which gives rise to the distribution occurs or as soon thereafter as is reasonably practical. 5 6 (c) Death Benefits (i) PRERETIREMENT DEATH OF A PARTICIPANT. If the Participant dies before distribution of his interest in the Radian Source Accounts begins, the Account shall be paid to the Participant's surviving spouse. The spouse may elect whether to receive the Participant's account balance in the form of one of the single life annuities provided in paragraph (a)(ii)(A) above, annuity, installments in accordance with paragraph (a)(ii)(B) above, or a one-sum cash payment. If there is no surviving spouse, or if the surviving spouse has already consented to distribution to another Beneficiary in a manner which complies with the terms of this Plan, the Radian Source Accounts shall be paid to the Participant's designated Beneficiary. Unless otherwise elected by the Participant, any portion of the Participant's interest payable to a designated Beneficiary other than the Participant's surviving spouse shall be paid in the form of one of the single life annuities provided in paragraph (a)(ii)(A) above, annuity, installments in accordance with paragraph (a)(ii)(B) above, or a one-sum cash payment. Distribution of Participant's entire interest in the Radian Source Accounts shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death except to the extent that an election is made to receive distributions in accordance with (A) or (B) below: (A) If any portion of the Participant's interest in payable to a designated Beneficiary, distributions may be made over the life or over a period certain not greater than the life expectancy of the designated Beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the Participant died. (B) If the designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin in accordance with (A) above shall not be earlier than the later of (1) December 31 of the calendar year immediately following the calendar year in which the Participant died and 6 7 (2) December 31 of the calendar year in which the Participant would have attained age 70 1/2. If the Participant has not made an election pursuant to this paragraph by the time of his death, the Participant's designated Beneficiary must elect the method of distribution no later than the earlier of (1) December 31 of the calendar year in which distributions would be required to begin under this Paragraph, or (2) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant. If the Participant has no designated beneficiary, or if the designated Beneficiary does not elect a method of distribution, distribution of the Participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. For purposes of this Paragraph, if the surviving spouse dies after the Participant, but before payments to such spouse begin, the provisions of this Paragraph with the exception of paragraph (B) therein, shall be applied as if the surviving spouse were the Participant. For the purposes of this Paragraph, distribution of a Participant's interest is considered to begin on the Participant's required beginning date (or, if the spouse dies after the Participant, the date distribution is required to begin to the surviving spouse). If distribution in the form of an annuity irrevocably commences to the Participant before the required beginning date, the date distribution is considered to begin is the date distribution actually commences. (ii) POST-RETIREMENT DEATH OF A PARTICIPANT. If the Participant dies after distribution of his interest in the Radian Source Accounts has begun, the remaining portion of such interest shall continue to be distributed at least as rapidly as under the method of distribution begin used prior to the Participant's death. In the case of an installment payment option, installment payments remaining at the Participant's death shall be distributed to the Participant's designated Beneficiary as a one-sum cash payment. 7 8 3. Effective October 1, 1998, Section 9.03(a) of the Plan is amended by adding the following subparagraph thereto: "The Plan Administrator shall maintain separate sub-accounts for any accounts transferred from the Continental Circuits Corp. 401(k) Retirement Plan to this Plan for the benefit of Radian Participants (as defined in Section 8A.01), for purposes of continuing to provide the benefits, rights and features which were provided under the Radian Plan and which are protected benefits under Section 411(d)(6) of the Internal Revenue Code of 1986 and the regulations thereunder. The following sub-accounts shall be maintained: Deferred Salary Account (referred to as `Prior Plan Employee Frozen Account'); Participant Voluntary Account (referred to as `After Tax Frozen Account'); and Discretionary Company Contributions and Company Matching (referred to as `Prior Plan Employer Frozen Account'). Such sub-accounts are sometimes referred to in this Plan collectively as the `Radian Source Accounts.' " 8 EX-10.63 8 AMENDMENT TO LEASE-10 MANOR PARKWAY 1 Exhibit 10.63 AMENDMENT TO LEASE The Lease by and between Equity Property Associates I (Landlord) and HADCO Corporation (Tenant) dated March 1, 1992, as amended May 1, 1995 and April 1, 1996 for the Lease area in 10 Manor Parkway, Salem, NH is hereby amended as follows: Amendment No. 1 -- Article I, Section 1.4, Tenant's Floor Space. Confirming that the entire 60,000 square feet is currently leased by Tenant including the remaining 6,303 square feet of space, described in the Amendment to Lease dated April 1, 1996. Amendment No. 2 -- Article I, Section 1.5 Term, replace with the following; 1.5 Term: Seven (7) years 1.5.l Scheduled Term Commencement Date: June l, 1998 Amendment No. 3 -- Article I, Section 1.6 Annual Fixed Rent, replace with the following; 1.6 Annual Fixed Rent: $431,290.00 Included Operating Expense Share: $48,490.00 Included Tax Expense Share: $85,800.00 1.6.1 Expense Share Adjustments: The initial Annual Fixed Rent for the Term is based, in part, on the Operating Expense Share and Tax Expense Share. In the event that either the actual Operating Expense Share or actual Tax Expense Share is less than the amounts paid in any year during the term of the Lease (e.g., if real estate taxes applicable to the property decrease below the Tax Expense Share paid), then the difference will be abated to Tenant for that year and the Operating Expense Share or the Tax Expense Share, as the case may be, will be reduced for the next year. The amount of any reduction due Tenant shall be determined at the end of each semi-annual or annual adjustment period, and Landlord shall promptly thereafter either: (i) refund the excess Annual Fixed Rent paid by Tenant for the immediately preceding adjustment period, or (ii) credit to Tenant the excess already paid and apply it to the next installment of Annual Fixed Rent due from Tenant. 1.6.2 Annual Base Rent Adjustment: At the end of year five (5), effective June 1, 2003, the Annual Base Rental (Annual Fixed Rent less Included Operating Expense Share and Tax Expense Share) of $297,000.00 will be adjusted by the increase in the Consumer Price Index (CPIU), For All Urban Consumers, Boston- 2 Lawrence-Salem, MA - NH. The denominator for the calculation will be the Index figure for May, 1998 and the numerator will be the Index figure for May, 2003). The fraction resulting therefrom will be multiplied by the existing Annual Base Rental to determine the new Annual Base Rental. In no event will the rental amount decrease from the existing Annual Base Rental amount. Amendment No. 4-- Article V, Tenant's Covenants, Article 5.1 Utilities Payment. Delete the first word "Landlord" in the paragraph and insert the word "Tenant" Amendment No. 5 -- Exhibit D, Renewal Option A new Exhibit D, Renewal Option is attached hereto and any prior Renewal Options are hereby deleted. This Amendment is subject to the receipt of $850,000.00 from the Landlord which represents reimbursement for Tenant finish work done at 12A Manor Parkway, Salem, NH. Receipt of which will be done in writing and attached hereto. All other provisions of the Lease are hereby ratified and confirmed. In Witness Whereof, the parties have executed this Amendment To Lease this 29th day of May, 1998. WITNESS: LANDLORD: Equity Property Associates I /s/ Marie Doherty /s/ John W. Merchant - ------------------------------ -------------------------------------- WITNESS: TENANT: HADCO Corporation /s/ Marie Doherty /s/ Patricia Randall - ------------------------------ -------------------------------------- 3 Lease by and Between Equity Property Associates I (Landlord) And HADCO Corporation (Tenant) Exhibit D-Renewal Option Reference a Lease by and between Equity Property Associates I (Landlord) and HADCO Corporation (Tenant) dated May 1, 1995 and April 1, 1996 for the Lease area in 10 Manor Parkway, Salem, NH. At the end of the amended term ( May 31, 2005) the Tenant may elect to extend the Lease for an additional three (3) years. The existing Annual Base Rental (Annual Fixed Rent less the Included Operating Expense Share and Tax Expense Share) will be adjusted by the increase in the Consumer Price Index (CPI-U), For All Urban Consumers, Boston-Lawrence-Salem, MA-NH. The denominator for the calculation will be the Index figure for May, 2003 and the numerator will be the Index figure for May, 2005. The fraction resulting therefrom will be multiplied by the existing Annual Base Rental to determine the new Annual Base Rental. In no event will the new Annual Base Rental be less than the existing Annual Base Rental amount. At the end of the first option period (May 31, 2008) the Tenant may elect to extend the Lease for an additional three (3) years. The existing Annual Base Rental will be adjusted by the increase in the Consumer Price Index (CPI-U), For All Urban Consumers, Boston-Lawrence-Salem, MA-NH. The denominator for the calculation will be the Index figure for May, 2005 and the numerator will be the Index figure for May, 2008. The fraction resulting therefrom will be multiplied by the existing Annual Base Rental to determine the new Annual Base Rental. In no event will the new Annual Base Rental be less than the existing Annual Base Rental amount. Tenant must give Landlord 60 days notice, in writing, of its intent to exercise an option and not then be in default of any portion of the Lease. EX-10.64 9 AMENDMENT TO LEASE-12A MANOR PARKWAY 1 Exhibit 10.64 AMENDMENT TO LEASE The Lease by and between Equity Property Associates I (Landlord) and HADCO Corporation (Tenant) dated November 1, 1995, as amended May 1, 1995 for the Lease area in 12A Manor Parkway, Salem, NH, is hereby amended as follows: Amendment No. 1 -- Article I, Section 1.5 Term, insert the following; 1.5 Term: Ten (10) years 1.5.1 Scheduled Term Commencement Date: June 1, 1998 Amendment No. 2 -- Article I, Section 1.6 Annual Fixed Rent, insert the following; 1.6 Annual Fixed Rent: $328,405.00 Included Operating Expense Share: $27,865.00 Included Tax Expense Share: $44,640.00 1.6.1 Expense Share Adjustments: The initial Annual Fixed Rent for the Term is based, in part, on the Operating Expense Share and Tax Expense Share. In the event that either the actual Operating Expense Share or actual Tax Expense Share is less than the amounts paid in any year during the term of the Lease (e.g., if real estate taxes applicable to the property decrease below the Tax Expense Share paid), then the difference will be abated to Tenant for that year and the Operating Expense Share or the Tax Expense Share, as the case may be, will be reduced for the next year. The amount of any reduction due Tenant shall be determined at the end of each semi-annual or annual adjustment period, and Landlord shall promptly thereafter either: (i) refund the excess Annual Fixed Rent paid by Tenant for the immediately preceding adjustment period, or (ii) credit to Tenant the excess already paid and apply it to the next installment of Annual Fixed Rent due from Tenant. 1.6.2 Annual Base Rent Adjustment: At the end of year five (5), effective June 1, 2003, the Annual Base Rental (Annual Fixed Rent less the Included Operating Expense Share and Tax Expense Share) of $255,900.00 will be adjusted by the rise in the Consumer Price Index (CP-IU), For All Urban Consumers, Boston-Lawrence-Salem, MA-NH. The denominator for the calculation will be the Index figure for May, 1998 and the numerator will be the Index figure for May, 2003. The fraction resulting therefrom will be multiplied by the existing Annual Base Rental to determine the New Annual Base Rental. In no event will the rental amount decrease from the existing Annual Base Rental amount. 2 -2- Amendment No. 3 -- Exhibit C (Original Lease) Delete this Exhibit C in its entirety. This Amendment is subject to the receipt of $850,000.00 from the Landlord which represents reimbursement for Tenant finish work done at 12A Manor Parkway, Salem, NH. Receipt of which will be given in writing and attached hereto. All other provisions of the Lease are hereby ratified and confirmed. In Witness Whereof, the parties have executed this Amendment To Lease this 29th day of May, 1998. WITNESS: LANDLORD: Equity Property Associates I /s/ Marie Doherty /s/ John W. Merchant - ------------------------------ --------------------------------------- WITNESS: TENANT: HADCO Corporation /s/ Marie Doherty /s/ Patricia Randall - ------------------------------ --------------------------------------- EX-10.65 10 AMENDMENT NO 2 TO LEASE WITH MANOR PARKWAY LLC 1 Exhibit 10.65 AMENDMENT NO. 2 TO LEASE THIS AMENDMENT NO. 2 TO LEASE ("AMENDMENT NO. 2") is made as of October 29, 1998 between MANOR PARKWAY LLC, a Minnesota limited liability company ("LANDLORD") and HADCO CORPORATION, a Massachusetts corporation ("TENANT"). RECITALS: A. Tenant occupies those certain premises (the "PREMISES") which consist of approximately 30,000 rentable square feet of space in the building located at 12A Manor Parkway, Salem, New Hampshire under that certain Lease dated November 1, 1995 (the "ORIGINAL LEASE") between Equity Property Associates I, a New Hampshire limited partnership ("PRIOR LANDLORD"). The Original Lease has been amended by that certain Amendment to Lease dated May 29, 1998 ("AMENDMENT NO. 1") between Prior Landlord and Tenant. The Original Lease, as amended by Amendment No. 1, is the "PRIOR LEASE." B. Landlord has succeeded to all right, title and interest of Prior Landlord, in, to and under the Prior Lease. C. Tenant desires to expand the parking lot serving the Building and build an expansion into the Building containing approximately 1,500 square feet of space, all according to the terms of this Amendment No. 2. NOW THEREFORE, the parties agree as follows: 1. INTERPRETATION. The Prior Lease is hereby modified and supplemented by this Amendment No. 2, and remains in full force and effect as modified and supplemented by this Amendment No. 2. In the event of a conflict between the Prior Lease and this Amendment No. 2, the provisions of this Amendment No. 2 shall control. All capitalized terms not otherwise defined in this Amendment No. 2 shall have the meanings specified in the Prior Lease. The Prior Lease, as amended by this Amendment No. 2, is the "Lease." Landlord and Tenant hereby acknowledge and agree that, notwithstanding the reference in Amendment No. 1 to a prior Amendment to Lease dated May 1, 1995, no such amendment exists and the Prior Lease consists exclusively of the Original Lease as amended by Amendment No. 1. 2. PLANS. Prior to commencing any work at the Building or in the Premises, Tenant shall provide to Landlord, for Landlord's approval in its sole discretion, architectural plans and specifications of the parking lot and Building expansions that Tenant proposes. The plans and specifications, if any, which Landlord approves in a written notice delivered to Tenant shall be the "APPROVED PLANS"; Landlord shall be entitled to withhold its approval of any or all such plans proposed by Tenant in Landlord's sole discretion. The work to be performed in accordance with the Approved Plans shall be the "WORK". Landlord hereby disclaims, and Landlord's approval of the Approved Plans shall in no way be deemed to be either: (i) an acceptance or approval of any element in the Approved Plans which is in violation of any applicable laws, 2 -2- ordinances, regulations, permits or other governmental requirements or of any private restrictions affecting the Building; or (ii) an assurance that any work done pursuant to the Approved Plans will comply with any applicable laws or private restrictions or satisfy Tenant's objectives and needs. Tenant shall not make any material changes in the Approved Plans or the Work without obtaining Landlord's prior written consent. 3. APPROVALS AND PERMITS. Tenant shall be solely responsible for obtaining all approvals and permits necessary for the performance of the Work, including but not limited to, the approval of the Town of Salem Planning Board, and Tenant shall provide copies of all such approvals and permits to Landlord's property manager prior to commencing any of the Work. 4. PERFORMANCE OF WORK. Tenant and its contractors shall construct the Work strictly in compliance with: (i) the Approved Plans; (ii) all necessary approvals and permits; (iii) all applicable governmental laws, codes, ordinances, rules, and regulations; (iv) all applicable private covenants and restrictions affecting the Building; and (v) all reasonable rules and regulations which Landlord may promulgate, from time to time. The Work shall be performed only by contractors and subcontractors approved in writing by Landlord. Tenant and Tenant's contractors shall make all efforts and take all steps reasonably appropriate to assure that their construction activities do not unreasonably interfere with the operation of the Building and the buildings at 10 Manor Parkway or 12B Manor Parkway (collectively, the "BUILDINGS") or the ability of other occupants of the Buildings to conduct business in a routine manner. Tenant shall require all contractors and subcontractors to contact Landlord's property manager and schedule time periods during which they may use Building facilities in connection with the Work. The Work shall be substantially completed by December 31, 1998 (the "COMPLETION DATE"). Tenant shall notify Landlord' property manager when Work has been substantially completed, and shall thereafter permit Landlord's property manager to inspect the Work. In the event Landlord determines that any items of the Work have not been fully or satisfactorily completed, Landlord may submit to Tenant a "punchlist" of such items, and Tenant shall cause all such punchlist items to be completed within thirty days after receiving the punchlist. In the event the Work has been commenced but is not completed on or before the Completion Date, or Tenant fails to timely complete any punchlist item, Landlord shall be entitled, but not obligated, to perform such uncompleted Work or punchlist item, provided that Tenant shall remain solely liable for the entire cost of such work performed by Landlord. In addition to the terms of this Amendment No. 2, Tenant shall perform the work in accordance with the terms of Article III of the Original Lease governing alterations, provided that Tenant shall not be required to remove the Work at the end of the Term. 5. ASSIGNMENT OF PLANS, CONSTRUCTION CONTRACTS, AND WARRANTIES. As security for its obligation to complete the Work, Tenant hereby assigns to Landlord all of its rights in the Approved Plans and under all construction contracts. In the event Landlord elects to perform any work pursuant to the preceding sentence, Landlord shall be entitled, but not obligated, to use the Approved Plans and/or to enforce the terms of Tenant's construction contract or contracts against the contractor or contractors. In addition, Tenant hereby assigns to Landlord, to the extent assignable, all warranties and guarantees related to the performance of the Work and the materials incorporated into the Work. To the extent such warranties or guarantees are not 3 -3- assignable to or enforceable by Landlord, Tenant shall enforce such warranties or guarantees at Landlord's request for the benefit of Landlord. 6. INSURANCE. While the Work (or any improvement or alteration by Tenant) is being performed, Tenant shall procure and maintain and/or require its contractors and subcontractors to procure and maintain: a. builder's risk insurance written on a completed value basis in an amount equal to the full replacement cost of the Work (or such other improvement or alteration) at the date of completion, with coverage on the so-called non-reporting "all risk" form of policy, including coverage against collapse and water damage, a replacement cost endorsement, stipulated value/agreed amount endorsement, collapse and earthquake coverage, demolition and increased costs of construction coverage, in-transit coverage and vandalism and malicious mischief coverage, such insurance to be in such amounts approved by Landlord; b. comprehensive general liability insurance (including premises and operations, contractor's protective, contractual, and completed operations coverage) with the exclusion for explosion, collapse and underground property removed, in amounts and coverage of at least $2,000,000 bodily injury/$2,000,000 property damage and with $5,000,000 excess liability umbrella coverage; and c. worker's compensation coverage in the amounts required by applicable federal, state or local law. All insurance policies described above shall be written by companies having a current Best's Insurance Guide rating of at least A-IX, shall be authorized to do business in New Hampshire, and shall otherwise be approved by Landlord. The builder's risk insurance policy required by this Section 6 shall: (i) provide that any losses payable thereunder shall be payable to Landlord; (ii) include effective waivers by the insurer of all claims for insurance premiums against Landlord; (iii) provide that any losses shall be payable notwithstanding (a) any act of negligence by Landlord or Tenant, (b) any waiver of subrogation rights by the insured, or (c) any change in the title to or ownership of any of the Premises, and (iv) be written in amounts sufficient to prevent Landlord from becoming a coinsurer under said policy. 7. COST AND RISK OF TENANT. Landlord has agreed to enter into this Amendment No. 2 and to permit Tenant to perform the Work pursuant to this Amendment No. 2 on the condition that Tenant will be solely responsible for all costs and risks of every nature related to the work which Tenant proposes to perform, with the same effect as if Tenant had never proposed or performed any such work. Accordingly, Tenant shall be solely responsible for all costs associated with Tenant's proposed expansions of the parking lot and the Building, the preparation of all plans and specifications, and the performance of the Work, including, but not limited to, all costs of the following: (i) obtaining all approvals and permits; (ii) designing the Work and preparing all plans; (iii) labor and materials; (iv) additional electrical usage and other utilities and services attributable to the construction of the Work; (v) improvements in or 4 -4- modifications to any utility services or any Building heating, ventilation, air conditioning, plumbing, electrical, mechanical or other systems required in connection with the performance of the Work; (vi) signage required in connection with the Work; (vii) and insurance. In addition to the foregoing, and regardless of whether Landlord approves any plans and regardless of whether the Work is performed, Tenant shall reimburse Landlord, within thirty days after demand, for all costs Landlord reasonably incurs with respect to Tenant's proposed expansions of the parking lot and the Building, the review of plans and specifications, and the performance of the Work, including, but not limited to, all costs of the following: (a) attorney fees, including but not limited to fees for drafting and negotiating this Amendment No. 2, obtaining the approval of Landlord's mortgagee, reviewing the status of approvals and permits, monitoring the Work, and enforcing any of Landlord's rights in connection with the Work; (b) architects' and other consultants' fees; (c) governmental fees and charges of any sort; and (d) fees and charges imposed by Landlord's mortgagee. Landlord shall have no obligation whatsoever to pay Tenant, provide any allowance, rebate any rent, or furnish any other economic benefit to Tenant in connection with the Work. 8. DEFENSE AND INDEMNITY. Tenant shall defend Landlord from, and indemnify Landlord against, any and all loss, cost and expense, including attorney fees, based on or arising out of any claims, demands, damages, liens, lawsuits, or proceedings of any nature whatsoever related in any manner to Tenant's proposed expansions of the parking lot and the Building, the preparation of any plans or specifications, or the performance of any work at the Building by or on behalf of Tenant. 9. PREMISES. Upon substantial completion, all of the Work shall become the property of Landlord, the addition to the Building shall become part of the Premises, and Tenant shall have the rentable square feet of the new area measured and determined by an architect satisfactory to Landlord. 10. RENT. Annual Fixed Rent shall not increase as a result of the performance of the Work or the increase in the area of the Premises, but Tenant shall pay the full amount of all increases in Operating Expenses and Tax Expenses which result from the performance of the Work and/or the increase in the area of the Premises. 11. MORTGAGEE CONTINGENCY. This Amendment No. 2 shall be entirely contingent upon the written approval of Landlord's mortgagee, and Tenant shall have no right to commence any Work until it has received written confirmation from Landlord of such approval. 12. DEFAULT. All amounts owed by Tenant to Landlord under this Amendment No. 2 shall constitute rent payable with respect to the Premises, and any breach of any provision of this Amendment No. 2 shall be a breach of the Lease entitled to pursue all rights and remedies available to Landlord under Article VII of the Original Lease or otherwise available at law or in equity. 5 THIS AMENDMENT No. 2 is executed as of the date recited above. MANOR PARKWAY LLC, a Minnesota limited liability company By: ERP Manor Parkway LLC, a Minnesota limited liability company, its Chief Manager By: /s/ Brint Davis ---------------------------------- Its: Senior Vice President/Manager ---------------------------------- HADCO CORPORATION, a Massachusetts corporation By: /s/ Patricia Randall -------------------------------------- Its: Vice President -------------------------------------- \ EX-10.66 11 AMENDMENT TO LEASE-12B MANOR PARKWAY 1 Exhibit 10.66 AMENDMENT TO LEASE The Lease by and between Equity Property Associates I (Landlord) and HADCO Corporation (Tenant) dated November 1, 1995 for the Lease area in 12B Manor Parkway, Salem, NH, is hereby amended as follows: Amendment No. 1 -- Article I, Section 1.4, Tenant Floor Space, replace with the following; 1.4 Tenant's Floor Space: 6,457 sq. ft. Amendment No. 2 -- Article I, Section 1.5 Term, replace with the following, 1.5 Term: Five (5) years 1.5.1 Scheduled Term Commencement Date: June 1, 1998 Amendment No. 3 -- Article I, Section 1.6 Annual Fixed Rent, replace with the following; 1.6 Annual Fixed Rent: $51,223.00 Included Operating Expense Share: $6,477.00 Included Tax Expense Share: $9,556.00 1.6.1 Expense Share Adjustments: The initial Annual Fixed Rent for the Term is based, in part, on the Operating Expense Share and Tax Expense Share. In the event that either the actual Operating Expense Share or actual Tax Expense Share is less than the amounts paid in any year during the term of the Lease (e.g., if real estate taxes applicable to the property decrease below the Tax Expense Share paid), then the difference will be abated to Tenant for that year and the Operating Expense Share or the Tax Expense Share, as the case may be, will be reduced for the next year. The amount of any reduction due Tenant shall be determined at the end of each semiannual or annual adjustment period, and the Landlord shall promptly thereafter either: (i) refund the excess Annual Fixed Rent paid by Tenant for the immediately preceding adjustment period, or (ii) credit to Tenant the excess already paid and apply it to the next installment of Annual Fixed Rent due from Tenant. Amendment No. 4 -- Exhibit D, Renewal Option A new Exhibit D, Renewal Option is attached hereto and any prior Renewal Options are hereby deleted. 2 -2- This Amendment is subject to the receipt of $850,000.00 from the Landlord which represents reimbursement for Tenant finish work done at 12A Manor Parkway, Salem, NH. Receipt of which will be done in writing and attached hereto. All other provisions of the Lease are hereby ratified and confirmed. In Witness Whereof, the parties have executed this Amendment To Lease this 29th day of May, 1998. WITNESS: LANDLORD: Equity Property Associates I /s/ Marie Doherty /s/ John W. Merchant - ----------------------- -------------------------------------- WITNESS: TENANT: HADCO Corporation /s/ Marie Doherty /s/ Patricia Randall - ----------------------- -------------------------------------- 3 -3- Lease by and Between Equity Property Associates I (Landlord) And HADCO Corporation (Tenant) Exhibit D-Renewal Option Reference a Lease by and between Equity Property Associates I (Landlord) and HADCO Corporation (Tenant) dated November 1, 1995 for the Lease area in 12B Manor Parkway, Salem, NH. At the end of the amended term (May 1, 2003) the Tenant may elect to extend the Lease for an additional two (2) years. The existing Annual Base Rental (Annual Fixed Rent less the Included Operating Expense Share and Tax Expense Share) of $35,190.00 will be adjusted by the increase in the Consumer Price Index (CPIU), For All Urban Consumers, Boston-Lawrence-Salem, MANH. The denominator for the calculation will be the Index figure for May, 1998 and the numerator will be the Index figure for May, 2003. The fraction resulting therefrom will be multiplied by the existing Annual Base Rental to determine the new Annual Base Rental. In no event will the new Annual Base Rental be less than the existing Annual Base Rental amount. At the end of the first option period (May 31, 2005) the Tenant may elect to extend the Lease for an additional three (3) years. The existing Annual Base Rental will be adjusted by the increase in the Consumer Price Index (CPIU), For All Urban Consumers, Boston-Lawrence-Salem, MANH. The denominator for the calculation will be the Index figure for May, 2003 and the numerator will be the Index figure for CPI as of May, 2005. The fraction resulting therefrom will be multiplied by the existing Annual Base Rental to determine the new Annual Base Rental. In no event will the new Annual Base Rental be less than the existing Annual Base Rental amount. Tenant must give Landlord 60 days notice, in writing, of its intent to exercise an option and not then be in default of any portion of the Lease. EX-10.67 12 HADCO CORP EXECUTIVE INCENTIVE COMPENSATION 1 Exhibit 10.67 HADCO CORPORATION EXECUTIVE INCENTIVE COMPENSATION DEFERRED BONUS PLAN AS AMENDED AND RESTATED JULY 1, 1998 This Executive Incentive Compensation Deferred Bonus Plan (the "Plan") is established by HADCO Corporation to provide incentive to key executives who contribute to the profits of the corporation by their ability, industry, loyalty or exceptional service, through making them participants in its success. SECTION 1: ELIGIBILITY TO PARTICIPATE. Participants in this Plan shall be active employees of HADCO Corporation (the "Corporation") or its subsidiaries or affiliates who are employed in an executive or managerial capacity and who are designated to receive incentive compensation awards under the Corporation's executive incentive compensation program, as determined by the Compensation Committee of the Board of Directors of the Corporation (the "Committee"). SECTION 2: DETERMINATION AND PARTIAL DEFERRAL OF INCENTIVE COMPENSATION. The Committee shall determine for each fiscal year of the Corporation the amount of incentive compensation to be awarded to each of the Corporation's designated key executives, in accordance with criteria established by the Committee and approved by the Board of Directors as part of the Corporation's executive incentive compensation program. Payment of sixty percent (60%) of the amount of incentive compensation awarded to each designated key executive for each year shall be made in a lump sum in cash (subject to applicable tax withholdings and deductions) as soon as practicable after the date the award is declared. Payment of the remaining forty percent (40%) of such incentive compensation award (referred to herein as the "deferred bonus amount") shall be made (a) in the case of awards made through calendar year 1997, in cash (subject to applicable tax withholdings and deductions) in three equal installments over a period of three years commencing on the one year anniversary date of the award, subject to and in accordance with the provisions of this Plan, and (b) in the case of awards made in calendar year 1998 or thereafter, in shares of restricted stock (as further described in Section 6 hereof) of the Corporation valued at the then fair market value of the Corporation's common stock, as soon as practicable after the date the award is declared. SECTION 3: NOTIFICATION AND DESIGNATION OF BENEFICIARIES. Each designated key executive who is awarded incentive compensation under HADCO Corporation's executive incentive compensation program for any year shall be notified by the Corporation of such award and of his participation in this Plan for such year. Each participant shall file with the Corporation a written designation of beneficiary or beneficiaries to receive any amounts payable with respect to the participant in the event of his death, which designation may be changed from time to time by the filing of a written designation naming a new beneficiary or beneficiaries. If a participant dies without designating a beneficiary, or if the designated beneficiary is not then in existence, any amounts payable with respect to the participant shall be paid to the participant's estate. SECTION 4: ACCOUNTS FOR DEFERRED BONUSES TO BE PAID IN CASH. 4.1 For all deferred bonuses which are to be paid to the participant in cash, as provided in Section 2 hereof, the Corporation shall maintain an account (the "Cash Account") for each participant in this Plan, which shall be credited with the participant's cash deferred bonus amount and the amount of any deemed interest pursuant to subsection 4.2 and debited for any distributions to the participant pursuant to Section 5. No money shall actually be allocated to any account, as such accounts shall be of a memorandum nature maintained by the Corporation for accounting purposes and shall not be representative of any identifiable assets. 4.2 The undistributed portion of each Cash Account shall be deemed to earn interest in arrears annually at in interest rate one point above the prime rate as published in the WALL STREET JOURNAL for the last business day of the previous fiscal year. Interest shall be determined from the last day of the fiscal year for which the incentive compensation award was made to the close of the next fiscal year of the Corporation or, if earlier, to the close of the fiscal year immediately preceding 2 the date of distribution of all or part of a participant's Cash Account (except as provided in subsection 5.3 in the event of a distribution on account of involuntary termination of employment or retirement or in the event of distribution in connection with a Change of Control as provided in subsection 5.4 hereof). Interest shall be credited to each participant's Cash Account annually. 4.3 The Corporation shall furnish to each participant a statement of amounts credited to or debited from his Cash Account during each fiscal year, within ninety (90) days after the end of the calendar year in which such fiscal year ends. SECTION 5: DISTRIBUTIONS FROM CASH ACCOUNTS. 5.1 Each installment of a cash deferred bonus amount to be paid to a participant shall be made on or about the anniversary date of the original declaration of the award, commencing on the first such anniversary; provided, however, that the participant remains employed by the Corporation or any subsidiary or affiliate as of the date payment is due. Each installment payment shall include interest on that portion of the bonus to be then distributed, calculated in accordance with subsection 4.2. 5.2 If a participant voluntarily terminates his employment with the Corporation without the prior consent of the chief executive officer of the Corporation, other than by reason of his retirement at or after the normal retirement date as described in the HADCO Corporation Retirement Plan or if a participant's employment is terminated by the Corporation for cause as defined herein, he shall forfeit any remaining unpaid installments of his deferred bonus amount and all deemed interest, if any, credited to his account. If the participant is the chief executive officer of the Corporation, such forfeiture shall occur if he voluntarily terminates his employment with the Corporation without the prior consent of the Board of Directors of the Corporation, other than by reason of his retirement at or after the normal retirement date as described in the HADCO Corporation Retirement Plan. For purposes of this Plan, employment shall not be deemed terminated if the participant remains employed by the Corporation or any subsidiary or affiliate thereof. For purposes of this Agreement, the Company shall have "cause" to terminate the Executive in the event of: (a) the willful and continued failure by the Executive to substantially perform his/her duties, after demand for substantial performance is delivered by the Company to the Executive identifying with specificity the grounds for the Company's' belief that the Executive has not substantially performed his/her duties; (b) the permanent physical or mental incapacity of the Executive; (c) the commission by the Executive of any act of fraud or embezzlement relating to the property of the Company and/or the services to be provided by the Executive; or (d) the Executive's unauthorized disclosure of proprietary confidential information of the Company or the Executive's engaging in competition with the Company. 5.3 If a participant is involuntarily terminated from employment without cause, including by reason of his death or disability or if termination of employment of a participant is due to retirement at or after the normal retirement date as described in the HADCO Corporation Retirement Plan, the balance of the participant's cash deferred bonus amount plus interest determined to the date of such involuntary termination or retirement, as the case may be, shall be paid to the participant or his designated beneficiary or beneficiaries as soon as practicable after the event giving rise to the termination. For purposes hereof, the definition of "disability" as set forth in the HADCO Corporation Retirement Plan shall apply. 5.4 Upon any sale of all or substantially all of the assets of the Corporation, or upon a merger, consolidation or tender offer in respect of which the stockholders holding all of the Corporation's outstanding voting securities immediately prior to the consummation thereof hold less than 50% of all of the Corporation'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 the full balance of the participant's cash deferred bonus amount under this Plan will be fully vested and due and payable shall be automatically accelerated to occur immediately prior to the consummation of such Acquisition. SECTION 6: RESTRICTED STOCK 6.1 To the extent that the deferred bonus amount is to be paid to a participant in restricted stock ("Restricted Stock"), as provided in Section 2 hereof, the number of shares of stock to be awarded to the participant shall be determined by dividing the dollar equivalent of the deferred bonus amount by the fair market value of the Corporation's common stock 2 3 on the day the incentive compensation award is declared. For purposes of this Plan, fair market value shall mean the following: (a) if the Corporation's common stock is actively traded in an established over-the-counter market, the mean between the bid and ask prices quoted in such over-the-counter market at the close on the trading day nearest preceding the date of the award; (b) 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 award; and (c) if the stock is not then publicly traded, the value as determined from time to time by the Board of Directors. If any fractional share of stock is calculated to be due a participant, then the number of shares of Restricted Stock shall be rounded up to the nearest whole share and the participant's incentive compensation award shall be deemed adjusted accordingly. 6.2 All Restricted Stock to be issued to a participant under this Plan shall be issued (i) under the Corporation's 1998 Stock Plan, if such a plan is hereafter adopted by the Corporation's Board of Directors and approved by the Corporation's stockholders, or (ii) if no such Plan is so adopted and approved, then from available authorized but unissued shares or shares that were once issued and subsequently reacquired by the Corporation. Notwithstanding the provisions of this Section 6, the Corporation shall have no obligation to deliver any certificate or certificates representing the Restricted Stock until the Corporation has complied with all applicable laws and regulations, including without limitation all regulations of any stock exchange upon which the Corporation's outstanding common stock is then listed. The Corporation shall use reasonable efforts to bring about compliance with the above condition within a reasonable time. Any shares of Restricted Stock due to a participant under this Plan in connection with an incentive compensation award made after the adoption of a new stock plan by the Corporation's Board of Directors but prior to approval of such new stock plan by the Corporation's stockholders shall be held in escrow by the Corporation until stockholder approval of the new stock plan is obtained, and if such approval is not obtained within six (6) months after the issuance of such shares, then the shares will be automatically treated as having been issued from the Corporation's available pool of authorized but unissued shares (or shares that were once issued and subsequently reacquired by the Corporation). 6.3 Each participant shall be issued a stock certificate reflecting his ownership of the number of shares of common stock, $.05 par value, of the Corporation awarded to him as his deferred bonus amount. Each such stock certificate issued to a participant shall bear the following legends: 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. The shares represented by this certificate are subject to risks of forfeiture as described in the Corporation's Executive Incentive Compensation Deferred Bonus Plan, as amended and restated July 1, 1998. 6.4 Each participant agrees to sign an investment letter in such form as may be reasonably requested by the Corporation at the time of each incentive compensation award which results in the issuance of Restricted Stock to the participant. 6.5 All shares of Restricted Stock issued under this Plan shall be subject to forfeiture by the participant in the event of termination of his employment with the Corporation within three years of the date of declaration of the incentive compensation award of which the shares of Restricted Stock constitute the deferred bonus amount. No shares of Restricted Stock issued under this Plan may be sold, mortgaged, pledged, hypothecated or otherwise transferred by a participant until on or after the three year anniversary of the date of declaration of the incentive compensation award of which the shares of Restricted Stock constitute the deferred bonus amount. Notwithstanding the foregoing, the shares of Restricted Stock may be relieved of these risks of forfeiture and restrictions on transfer described above pursuant to the provisions of Sections 6.7, 6.8 or 7.4 hereof. Prior to such three year anniversary and after issuance of a certificate representing the shares of Restricted Stock, the participant shall have all rights as a stockholder except as specifically set forth herein. 3 4 6.6 If a participant voluntarily terminates his employment with the Corporation other than by reason of his retirement at or after the normal retirement date as described in the HADCO Corporation Retirement Plan or if a participant's employment is terminated by the Corporation for cause as defined herein, he shall forfeit any shares of Restricted Stock which have not been held for at least three years after the date of declaration of the incentive compensation award. If the participant is the chief executive officer of the Corporation, such forfeiture shall occur if he voluntarily terminates his employment with the Corporation other than by reason of his retirement at or after the normal retirement date as described in the HADCO Corporation Retirement Plan. For purposes of this Plan, employment shall not be deemed terminated if the participant remains employed by the Corporation or any subsidiary or affiliate thereof. For purposes of this Agreement, the Company shall have "cause" to terminate the Executive in the event of: (a) the willful and continued failure by the Executive to substantially perform his/her duties, after demand for substantial performance is delivered by the Company to the Executive identifying with specificity the grounds for the Company's' belief that the Executive has not substantially performed his/her duties; (b) the permanent physical or mental incapacity of the Executive; (c) the commission by the Executive of any act of fraud or embezzlement relating to the property of the Company and/or the services to be provided by the Executive; or (d) the Executive's unauthorized disclosure of proprietary confidential information of the Company or the Executive's engaging in competition with the Company. 6.7 If a participant is involuntarily terminated from employment without cause, including by reason of his death or disability or if termination of employment of a participant is due to retirement at or after the normal retirement date as described in the HADCO Corporation Retirement Plan, the shares of Restricted Stock held by the participant at the time of termination shall be relieved of the restrictions contained in Section 6.5 hereof (but not of any securities law restrictions which may apply to the shares or their disposition). For purposes hereof, the definition of "disability" as set forth in the HADCO Corporation Retirement Plan shall apply. 6.8 Upon any sale of all or substantially all of the assets of the Corporation, or upon a merger, consolidation or tender offer in respect of which the stockholders holding all of the Corporation's outstanding voting securities immediately prior to the consummation thereof hold less than 50% of all of the Corporation'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 the shares of Restricted Stock shall be relieved of the restrictions contained in Section 6.5 shall be automatically accelerated to occur immediately prior to the consummation of such Acquisition. 6.9 Any shares of Restricted Stock which are forfeited by a participant in connection with his termination of employment from the Corporation within three years of the date of declaration of the incentive compensation award of which the shares of Restricted Stock constitute the deferred bonus amount shall (i) if issued under the 1998 Stock Plan and if such Plan still exists, be restored to the pool of shares reserved for issuance under such Plan, or (ii) if not issued under the 1998 Stock Plan, be restored to the status of authorized but unissued shares of the Corporation's common stock. 6.10 If, for any reason, including without limitation restrictions imposed by the securities laws or any stock exchange, the Corporation deems it impractical or imprudent, in its sole judgment, to issue shares of Restricted Stock to a participant, then the deferred bonus amount due the participant in Restricted Stock shall be replaced by a cash deferred bonus amount with all of the attributes of, and the same distribution schedule as, the cash deferred bonus amount described elsewhere in this Plan. SECTION 7: MISCELLANEOUS PROVISIONS RELATING TO PAYMENTS. 7.1 No participant shall have any option or right to choose the amounts or dates of payment of distributions payable to him under this Plan. 7.2 All payments under this Plan shall be made from the general assets of the Corporation and no assets shall be segregated or placed in trust for the purpose of funding such payments. Participants under this plan shall have the status of general unsecured creditors of the Corporation. 7.3 No participant or beneficiary shall have the right to alienate, anticipate, pledge, encumber or assign any of the payments which he may expect to receive, contingently or otherwise, under this Plan, and no payments or rights of any 4 5 participant or beneficiary shall be subject to attachment, garnishment or their legal or equitable process available to any creditor. 7.4 The Corporation shall have the right to accelerate the payment of any cash distribution payable under this Plan or to accelerate the lapse of restrictions on the Restricted Stock distribution payable under this Plan. 7.5 The Corporation shall have the right to withhold from any distribution under this Plan the amount of any federal, state or local withholding taxes due with respect to such distribution, as well as the employee's share of any payroll taxes relating thereto. Without limiting the generality of the foregoing, the Corporation may condition the release of cash deferred bonus amounts and the removal of legends from stock certificates representing the Restricted Stock upon the participant's making arrangements satisfactory to the Corporation for payment of withholding taxes due in connection with the payment of the cash deferred bonus amount or the release of restrictions from the Restricted Stock, as the case may be. SECTION 8: ADMINISTRATION OF PLAN. All determinations, decisions and directions made or given by the Board of Directors or the Committee under or with respect to this Plan shall be final and conclusive. The determination of the Board of Directors or the Committee on any question concerning or involving the interpretation and administration of this Plan shall be final and conclusive, and nothing in the Plan shall be deemed to give any officer or employee of the Corporation, his legal representatives or assigns, any right to participate in the Corporation's executive incentive compensation program or this Plan except to the extent, if any, that the Committee may have determined or approved. The Board of Directors, in passing on the matters which it is required to approve, may in its discretion rely upon the recommendations made by the Committee with respect thereto. SECTION 9: AMENDMENT OR TERMINATION. The Board of Directors may, from time to time, amend, suspend, or terminate, in whole or in part, any or all of the provisions of the Plan; provided, however, that no amendment, suspension or termination shall reduce the right of any participant to receive distributions of amounts awarded to him prior to the effective date of such amendment, suspension or termination. Notice of any amendment, suspension or termination of the Plan shall be given to each participant who is affected thereby. This Plan may also be terminated in the event of the bankruptcy, insolvency, reorganization or winding up of the affairs of the Corporation. SECTION 10: GENERAL. 10.1 This Plan shall be governed by and interpreted under the laws of the Commonwealth of Massachusetts. 10.2 This Plan shall not be interpreted to constitute a contract of employment and nothing herein shall give any participant or employee the right to remain in the employ of the Corporation or its subsidiaries or affiliates, or interfere with the Corporation's right to terminate his employment at any time. 10.3 The Committee shall have the authority to interpret this Plan and to prescribe and rescind rules and regulations relating to it. The interpretation and construction by the Committee of any provisions of this Plan or of any right related to an incentive compensation award granted under this Plan shall be final unless otherwise determined by the Board of Directors of the Corporation. No member of the Board of Directors or of the Committee shall be liable, in respect to this Plan, for any act, whether of commission or omission, taken by any other member or by any officer, agent or employee of the Corporation or its subsidiaries or affiliates nor, except in circumstances involving his own bad faith, for anything done or omitted to be done by him. 10.4 It is intended that cash distributions under this Plan will be taxable income to the participants in the calendar year in which they are made, and the Restricted Stock distributions under this Plan will be taxable income to the participant in the calendar in which the substantial risk of forfeiture with respect to the stock lapses (or in such earlier calendar year during which the participant files an effective election under section 83(b) of the Internal Revenue Code). However, neither the Corporation, the Committee nor any employee, officer or agent thereof guarantees that any particular federal, state or local tax consequences will occur as a result of participation in this Plan and each participant shall be responsible for the tax consequences to him of participating in this Plan. Notwithstanding the preceding sentence, if the Internal Revenue Service shall at any time interpret this Plan to be ineffective with regard to the deferral of a participant's income, and that interpretation becomes final and unappealable, then the Corporation shall distribute to the participant from 5 6 the unpaid portion of his cash deferred bonus amount an amount equal to such income tax liability (but not more than the remaining unpaid portion of his cash deferred bonus amount) or, in the case of a Restricted Stock deferred bonus amount, the Corporation shall distribute to the participant, free of the forfeiture provisions hereof (but not of any securities law restrictions which may apply to the shares or their disposition), a portion of the Restricted Stock equal in value to such income tax liability (but not more than the remaining unpaid portion of his Restricted Stock deferred bonus amount). Any remaining portion of the cash or Restricted Stock deferred bonus amount shall continue to be subject to the remaining provisions of this Plan. SECTION 11: EFFECTIVE DATE. This Plan shall be effective commencing with incentive compensation awards made with respect to the Corporation's fiscal year ending October 26, 1996 and shall continue for each fiscal year thereafter until terminated as provided herein. 6 7 IN WITNESS WHEREOF, this Plan was adopted by the Board of Directors of HADCO Corporation the 17th day of May 1996, and has been amended and restated this 1st day of July, 1998. Attest: HADCO Corporation, a Massachusetts corporation By - ------------------------------------- -------------------------------- James C. Hamilton, Clerk ITS DULY AUTHORIZED PRESIDENT 7 EX-10.68 13 AMENDMENT TO OUTSIDE DIRECTORS' COMPENSATION PLAN 1 Exhibit 10.68 AMENDMENT TO OUTSIDE DIRECTORS' COMPENSATION PLAN OF 1998 This Amendment (the "Amendment") to the Hadco Corporation Outside Directors' Compensation Plan of 1998 (the "Plan") is effective as of November 12, 1998. The Plan shall be amended as follows: Section 4.1 of the Plan shall be changed to reduce the number of shares authorized for issuance under the Plan from 24,000 shares to 12,000 shares of Common Stock of Hadco Corporation. Except as specifically amended hereby, each of the terms and conditions of the Plan is hereby ratified and confirmed and shall remain in full force and effect. EX-10.69 14 AGREEMENT WITH A.E. LEITZ 1 Exhibit 10.69 AGREEMENT AGREEMENT made as of this 12th day of November, 1998, by and between Hadco Corporation, a Massachusetts corporation with a usual place of business in Salem, New Hampshire (hereinafter the "Company"), and Andrew E. Lietz, of Rye, New Hampshire (hereinafter the "Executive"). If the Hadco Corporation 1998 Stock Plan (the "1998 Stock Plan") is approved by the stockholders of the Company on or before June 12, 1999, this Agreement and the restricted stock granted hereunder shall be pursuant to and subject to the terms and conditions of the 1998 Stock Plan, as it may be amended from time to time (in which case the terms and conditions of the 1998 Stock Plan are incorporated herein by reference, made a part hereof and shall control in the event of any conflict with any other terms of this Agreement). If the 1998 Stock Plan is not so approved by the stockholders of the Company on or before June 12, 1998, this Agreement and the restricted stock granted hereunder shall be pursuant to and subject to the terms and conditions of the Hadco Corporation Executive Incentive Compensation Deferred Bonus Plan, as Amended and Restated July 1, 1998, and as it may be amended from time to time, (the "Bonus Plan")(in which case the terms and conditions of the Bonus Plan are incorporated herein by reference, made a part hereof and shall control in the event of any conflict with any other terms of this Agreement). Copies of both the 1998 Stock Plan and the Bonus Plan have been made available to the Executive. Section 1. GRANT OF RESTRICTED STOCK. The Company grants to the Executive as an incentive compensation award, on the terms and conditions hereinafter set forth, two thousand four hundred thirty-nine (2,439) shares of the Company's Common Stock, $0.05 par value (the "Restricted Stock"), at the current fair market value of Thirty and 31/100 ($30.31) Dollars per share. Section 2. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE; RESTRICTIONS ON RESTRICTED STOCK. A. The Executive understands and acknowledges that the Restricted Stock will be lettered or restricted stock, that the Restricted Stock has not been registered under the Securities Act or any state securities laws and is being granted 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 Executive further understands and acknowledges that each certificate for the Restricted Stock issued in connection with this Agreement shall contain the following restrictive legends: "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. The shares represented by this certificate are subject to risks of forfeiture as described in a certain Agreement dated as of November 12, 1998, a copy of which the Company will furnish to the holder of this certificate upon request and without charge." B. The Executive represents and warrants that he is acquiring the Restricted Stock for purposes of long-term investment, for the personal account of the Executive, and with no present intention of reselling, distributing or otherwise transferring the Restricted Stock or any portion of the Restricted Stock, and that the Executive has no contract, undertaking or arrangement with any person or entity to sell or transfer all or any portion of the Restricted Stock to that person or entity, or to have that person or entity sell for him all or any portion of the Restricted Stock, or to afford or allow any participation in the Restricted Stock by any other person or entity. C. The Executive realizes that (i) the acquisition of the Restricted Stock is a long-term investment; (ii) the Executive must bear the economic risk of investment for an indefinite period of time because the Restricted Stock has not been registered under applicable state and federal securities laws and, therefore, cannot be sold or otherwise transferred unless it is subsequently registered or exemptions from registration are available; and (iii) the transferability of the Restricted Stock is restricted, and (a) requires conformity with the restrictions contained in 2 paragraphs 2.A, 2.D and 3.A of this Agreement, (b) will be further restricted by legends placed on the certificate representing the Restricted Stock referring to the applicable restrictions on transferability, and (c) may be subject to a stop transfer order until such time as transfer of the Restricted Stock may be effected without violation of all applicable state and federal securities laws. D. The Executive agrees and understands that the Restricted Stock is subject to forfeiture by the Executive in the event of termination of his employment with the Company within three years of the date of declaration of the incentive compensation award of which the Restricted Stock constitutes a deferred bonus amount, all as more fully set forth in this Agreement. The Executive further agrees and understands that the Restricted Stock may not be sold, mortgaged, pledged, hypothecated or otherwise transferred by the Executive until on or after the three year anniversary of the date of declaration of the incentive compensation award of which the Restricted Stock constitutes a deferred bonus amount. Notwithstanding the foregoing, the Restricted Stock may be relieved of these risks of forfeiture and restrictions on transfer described above pursuant to the provisions of Sections 3.B or 3.C of this Agreement. Moreover, the Company shall have the right to accelerate the lapse of these risks of forfeiture and restrictions on transfer on the Restricted Stock at any time. E. The Executive understands and agrees that the Restricted Stock is to be issued from the pool of shares of Common Stock reserved for the 1998 Stock Plan which has at the date of this Agreement been approved by the Board of Directors of the Company, but is subject to the approval of the stockholders of the Company. Pending stockholder approval of the 1998 Stock Plan, all Restricted Stock shall be held in escrow by the Company. If such stockholder approval is not obtained within six (6) months after the issuance of the Restricted Stock, then the Restricted Stock shall be treated as having been issued from the Company's available pool of authorized but unissued shares (or shares that were once issued and have subsequently been reacquired by the Company). Upon the earlier of (i) such stockholder approval of the 1998 Stock Plan or (ii) the date which is six (6) months after the issuance of the Restricted Stock, the Restricted Stock will be released from escrow to the Executive and the Restricted Stock shall be non-transferable as provided in this Agreement. Notwithstanding anything to the contrary herein, if, for any reason, including without limitation restrictions imposed by the securities laws or any stock exchange, the Company deems it impractical or imprudent, in its sole judgment, to issue such shares of Restricted Stock to the Executive, the value of the Restricted Stock (calculated by multiplying the number of shares of Restricted Stock to be awarded hereunder by $30.31) shall be replaced by a cash deferred bonus amount with all of the attributes of, and the same distribution schedule as, the cash deferred bonus amount described in the Bonus Plan. F. The Executive understands and agrees that neither the Company, the Board of Directors, any committee of the Board of Directors nor any employee, officer or agent thereof guarantees that any particular federal, state or local tax consequences will occur as a result of this Agreement and/or the issuance of the Restricted Stock. The Executive hereby agrees that he alone shall be responsible for the tax consequences of this Agreement and the issuance of the Restricted Stock. Section 3. TERMINATION. A. If the Executive voluntarily terminates his employment with the Company other than by reason of his retirement at or after the normal retirement date as described in the Hadco Corporation Retirement Plan or if the Executive's employment is terminated by the Company for cause as defined herein, he shall forfeit the Restricted Stock if the Restricted Stock has not been held for at least three years after the date of declaration of the incentive compensation award of which the Restricted Stock was a part. For purposes hereof, employment shall not be deemed terminated if the Executive remains employed by the Company or any subsidiary or affiliate thereof. For purposes of this Agreement, the Company shall have "cause" to terminate the Executive in the event of: (a) the willful and continued failure by the Executive to substantially perform his duties, after demand for substantial performance is delivered by the Company to the Executive identifying with specificity the grounds for the Company's belief that the Executive has not substantially performed his duties; (b) the permanent physical or mental incapacity of the Executive; (c) the commission by the Executive of any act of fraud or embezzlement relating to the property of the Company and/or the services to be provided by the Executive; or (d) the Executive's unauthorized disclosure of proprietary confidential information of the Company or the Executive's engaging in competition with the Company. 2 3 B. If the Executive is involuntarily terminated from employment without cause as defined herein, including by reason of his death or disability or if termination of employment of the Executive is due to retirement after age 61, the Restricted Stock held by the Executive at the time of termination shall be relieved of the restrictions contained in Sections 2.D and 3.A of this Agreement (but not of any securities law restrictions which may apply to the Restricted Stock or its disposition). For purposes hereof, the definition of "disability" as set forth in the Hadco Corporation Retirement Plan shall apply. C. Upon any sale of all or substantially all of the assets of the Company, or upon a 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 the Restricted Stock shall be relieved of the restrictions contained in Sections 2.D and 3.A of this Agreement (but not of any securities law restrictions which may apply to the Restricted Stock or its disposition) shall be automatically accelerated to occur immediately prior to the consummation of such Acquisition. Section 4. EFFECT UPON EMPLOYMENT. None of the 1998 Stock Plan, the Bonus Plan, this Agreement or the grant of the Restricted Stock confers any right upon the Executive with respect to the continuation of his employment or business relationship with the Company or any of its subsidiaries or affiliates. Nothing contained herein shall be construed as interfering with or restricting the right of the Company or any of its subsidiaries or affiliates to terminate the Executive's employment or business relationship at any time free from any liability or claim under the 1998 Stock Plan, the Bonus Plan or this Agreement. Section 5. STATUS AS A STOCKHOLDER. Prior to the three (3) year anniversary of the date of declaration of the incentive compensation award of which the Restricted Stock was a part and after issuance of a certificate representing the Restricted Stock, the Executive shall have all rights as a stockholder except as specifically set forth herein. Section 6. NOTICES. Any notice permitted or required under this 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 Executive, at the address listed for the Executive on 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 6. Section 7. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of Massachusetts without giving effect to the principles of the conflicts of laws thereof. Section 8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements and understandings, written or oral, relating to the subject matter hereof. No modification or addition to this Agreement shall be valid unless in writing, specifically referring to this Agreement and signed by both 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. Section 9. 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, subject to the limitations set forth herein; provided, however, that as respects the Executive, this Agreement is deemed to be personal in nature and may not be assigned or transferred. Section 10. INTERPRETATION AND CONSTRUCTION. Any interpretation or construction of this Agreement 3 4 by the Company's Board of Directors, or a duly authorized committee appointed by the Board, shall be final, conclusive and binding on all interested parties. The section headings are for convenience of reference only and shall not be deemed germane to the interpretation or construction of this Agreement. Section 11. SURVIVAL. All representations, warranties and acknowledgments made in this Agreement shall survive the issuance and delivery of the certificate or certificates representing the Restricted Stock. Section 12. WITHHOLDING TAXES. If the Company or any of its subsidiaries or affiliates in its discretion determines that it is obligated to withhold any tax in connection with the grant of the Restricted Stock, or in connection with the transfer of, or the lapse of restrictions on, any Restricted Stock or other property acquired pursuant hereto, the Executive hereby agrees that he will pay any such withholding taxes and if the Executive does not pay such withholding taxes, the Company or any of its subsidiaries or affiliates may withhold from the Executive's wages or other remuneration the appropriate amount of tax. At the discretion of the Company or any of its subsidiaries or affiliates, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from the Restricted Stock or other property otherwise deliverable to the Executive. Section 13. SEVERABILITY. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision. Section 14. PROVISION OF DOCUMENTATION TO EXECUTIVE. By signing this Agreement the Executive acknowledges receipt of a copy of this Agreement and a copy of each of the 1998 Stock Plan and the Bonus Plan. 4 5 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. Hadco Corporation By: /s/ F. Gordon B. Bitter ------------------------------- /s/ Andrew E. Lietz ----------------------------------- Executive 5 EX-10.70 15 AGREEMENT WITH VARIOUS EMPLOYEES 1 Exhibit 10.70 AGREEMENT AGREEMENT made as of this 12th day of November, 1998, 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 "Executive"). If the Hadco Corporation 1998 Stock Plan (the "1998 Stock Plan") is approved by the stockholders of the Company on or before June 12, 1999, this Agreement and the restricted stock granted hereunder shall be pursuant to and subject to the terms and conditions of the 1998 Stock Plan, as it may be amended from time to time (in which case the terms and conditions of the 1998 Stock Plan are incorporated herein by reference, made a part hereof and shall control in the event of any conflict with any other terms of this Agreement). If the 1998 Stock Plan is not so approved by the stockholders of the Company on or before June 12, 1998, this Agreement and the restricted stock granted hereunder shall be pursuant to and subject to the terms and conditions of the Hadco Corporation Executive Incentive Compensation Deferred Bonus Plan, as Amended and Restated July 1, 1998, and as it may be amended from time to time, (the "Bonus Plan")(in which case the terms and conditions of the Bonus Plan are incorporated herein by reference, made a part hereof and shall control in the event of any conflict with any other terms of this Agreement). Copies of both the 1998 Stock Plan and the Bonus Plan have been made available to the Executive. Section 1. GRANT OF RESTRICTED STOCK. The Company grants to the Executive as an incentive compensation award, on the terms and conditions hereinafter set forth, _____________ (_______) shares of the Company's Common Stock, $0.05 par value (the "Restricted Stock"), at the current fair market value of Thirty and 31/100 ($30.31) Dollars per share. Section 2. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE; RESTRICTIONS ON RESTRICTED STOCK. A. The Executive understands and acknowledges that the Restricted Stock will be lettered or restricted stock, that the Restricted Stock has not been registered under the Securities Act or any state securities laws and is being granted 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 Executive further understands and acknowledges that each certificate for the Restricted Stock issued in connection with this Agreement shall contain the following restrictive legends: "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. The shares represented by this certificate are subject to risks of forfeiture as described in a certain Agreement dated as of November 12, 1998, a copy of which the Company will furnish to the holder of this certificate upon request and without charge." B. The Executive represents and warrants that he is acquiring the Restricted Stock for purposes of long-term investment, for the personal account of the Executive, and with no present intention of reselling, distributing or otherwise transferring the Restricted Stock or any portion of the Restricted Stock, and that the Executive has no contract, undertaking or arrangement with any person or entity to sell or transfer all or any portion of the Restricted Stock to that person or entity, or to have that person or entity sell for him all or any portion of the Restricted Stock, or to afford or allow any participation in the Restricted Stock by any other person or entity. C. The Executive realizes that (i) the acquisition of the Restricted Stock is a long-term investment; (ii) the Executive must bear the economic risk of investment for an indefinite period of time because the Restricted Stock has not been registered under applicable state and federal securities laws and, therefore, cannot be sold or otherwise transferred unless it is subsequently registered or exemptions from registration are available; and (iii) the transferability of the Restricted Stock is restricted, and (a) requires conformity with the restrictions contained in 2 paragraphs 2.A, 2.D and 3.A of this Agreement, (b) will be further restricted by legends placed on the certificate representing the Restricted Stock referring to the applicable restrictions on transferability, and (c) may be subject to a stop transfer order until such time as transfer of the Restricted Stock may be effected without violation of all applicable state and federal securities laws. D. The Executive agrees and understands that the Restricted Stock is subject to forfeiture by the Executive in the event of termination of his employment with the Company within three years of the date of declaration of the incentive compensation award of which the Restricted Stock constitutes a deferred bonus amount, all as more fully set forth in this Agreement. The Executive further agrees and understands that the Restricted Stock may not be sold, mortgaged, pledged, hypothecated or otherwise transferred by the Executive until on or after the three year anniversary of the date of declaration of the incentive compensation award of which the Restricted Stock constitutes a deferred bonus amount. Notwithstanding the foregoing, the Restricted Stock may be relieved of these risks of forfeiture and restrictions on transfer described above pursuant to the provisions of Sections 3.B or 3.C of this Agreement. Moreover, the Company shall have the right to accelerate the lapse of these risks of forfeiture and restrictions on transfer on the Restricted Stock at any time. E. The Executive understands and agrees that the Restricted Stock is to be issued from the pool of shares of Common Stock reserved for the 1998 Stock Plan which has at the date of this Agreement been approved by the Board of Directors of the Company, but is subject to the approval of the stockholders of the Company. Pending stockholder approval of the 1998 Stock Plan, all Restricted Stock shall be held in escrow by the Company. If such stockholder approval is not obtained within six (6) months after the issuance of the Restricted Stock, then the Restricted Stock shall be treated as having been issued from the Company's available pool of authorized but unissued shares (or shares that were once issued and have subsequently been reacquired by the Company). Upon the earlier of (i) such stockholder approval of the 1998 Stock Plan or (ii) the date which is six (6) months after the issuance of the Restricted Stock, the Restricted Stock will be released from escrow to the Executive and the Restricted Stock shall be non-transferable as provided in this Agreement. Notwithstanding anything to the contrary herein, if, for any reason, including without limitation restrictions imposed by the securities laws or any stock exchange, the Company deems it impractical or imprudent, in its sole judgment, to issue such shares of Restricted Stock to the Executive, the value of the Restricted Stock (calculated by multiplying the number of shares of Restricted Stock to be awarded hereunder by $30.31) shall be replaced by a cash deferred bonus amount with all of the attributes of, and the same distribution schedule as, the cash deferred bonus amount described in the Bonus Plan. F. The Executive understands and agrees that neither the Company, the Board of Directors, any committee of the Board of Directors nor any employee, officer or agent thereof guarantees that any particular federal, state or local tax consequences will occur as a result of this Agreement and/or the issuance of the Restricted Stock. The Executive hereby agrees that he alone shall be responsible for the tax consequences of this Agreement and the issuance of the Restricted Stock. Section 3. TERMINATION. A. If the Executive voluntarily terminates his employment with the Company other than by reason of his retirement at or after the normal retirement date as described in the Hadco Corporation Retirement Plan or if the Executive's employment is terminated by the Company for cause as defined herein, he shall forfeit the Restricted Stock if the Restricted Stock has not been held for at least three years after the date of declaration of the incentive compensation award of which the Restricted Stock was a part. For purposes hereof, employment shall not be deemed terminated if the Executive remains employed by the Company or any subsidiary or affiliate thereof. For purposes of this Agreement, the Company shall have "cause" to terminate the Executive in the event of: (a) the willful and continued failure by the Executive to substantially perform his duties, after demand for substantial performance is delivered by the Company to the Executive identifying with specificity the grounds for the Company's belief that the Executive has not substantially performed his duties; (b) the permanent physical or mental incapacity of the Executive; (c) the commission by the Executive of any act of fraud or embezzlement relating to the property of the Company and/or the services to be provided by the Executive; or (d) the Executive's unauthorized disclosure of proprietary confidential information of the Company or the Executive's engaging in competition with the Company. 2 3 B. If the Executive is involuntarily terminated from employment without cause as defined herein, including by reason of his death or disability or if termination of employment of the Executive is due to retirement after age 61, the Restricted Stock held by the Executive at the time of termination shall be relieved of the restrictions contained in Sections 2.D and 3.A of this Agreement (but not of any securities law restrictions which may apply to the Restricted Stock or its disposition). For purposes hereof, the definition of "disability" as set forth in the Hadco Corporation Retirement Plan shall apply. C. Upon any sale of all or substantially all of the assets of the Company, or upon a 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 the Restricted Stock shall be relieved of the restrictions contained in Sections 2.D and 3.A of this Agreement (but not of any securities law restrictions which may apply to the Restricted Stock or its disposition) shall be automatically accelerated to occur immediately prior to the consummation of such Acquisition. Section 4. EFFECT UPON EMPLOYMENT. None of the 1998 Stock Plan, the Bonus Plan, this Agreement or the grant of the Restricted Stock confers any right upon the Executive with respect to the continuation of his employment or business relationship with the Company or any of its subsidiaries or affiliates. Nothing contained herein shall be construed as interfering with or restricting the right of the Company or any of its subsidiaries or affiliates to terminate the Executive's employment or business relationship at any time free from any liability or claim under the 1998 Stock Plan, the Bonus Plan or this Agreement. Section 5. STATUS AS A STOCKHOLDER. Prior to the three (3) year anniversary of the date of declaration of the incentive compensation award of which the Restricted Stock was a part and after issuance of a certificate representing the Restricted Stock, the Executive shall have all rights as a stockholder except as specifically set forth herein. Section 6. NOTICES. Any notice permitted or required under this 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 Executive, at the address listed for the Executive on 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 6. Section 7. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of Massachusetts without giving effect to the principles of the conflicts of laws thereof. Section 8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements and understandings, written or oral, relating to the subject matter hereof. No modification or addition to this Agreement shall be valid unless in writing, specifically referring to this Agreement and signed by both 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. Section 9. 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, subject to the limitations set forth herein; provided, however, that as respects the Executive, this Agreement is deemed to be personal in nature and may not be assigned or transferred. Section 10. INTERPRETATION AND CONSTRUCTION. Any interpretation or construction of this Agreement 3 4 by the Company's Board of Directors, or a duly authorized committee appointed by the Board, shall be final, conclusive and binding on all interested parties. The section headings are for convenience of reference only and shall not be deemed germane to the interpretation or construction of this Agreement. Section 11. SURVIVAL. All representations, warranties and acknowledgments made in this Agreement shall survive the issuance and delivery of the certificate or certificates representing the Restricted Stock. Section 12. WITHHOLDING TAXES. If the Company or any of its subsidiaries or affiliates in its discretion determines that it is obligated to withhold any tax in connection with the grant of the Restricted Stock, or in connection with the transfer of, or the lapse of restrictions on, any Restricted Stock or other property acquired pursuant hereto, the Executive hereby agrees that he will pay any such withholding taxes and if the Executive does not pay such withholding taxes, the Company or any of its subsidiaries or affiliates may withhold from the Executive's wages or other remuneration the appropriate amount of tax. At the discretion of the Company or any of its subsidiaries or affiliates, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from the Restricted Stock or other property otherwise deliverable to the Executive. Section 13. SEVERABILITY. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision. Section 14. PROVISION OF DOCUMENTATION TO EXECUTIVE. By signing this Agreement the Executive acknowledges receipt of a copy of this Agreement and a copy of each of the 1998 Stock Plan and the Bonus Plan. 4 5 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. Hadco Corporation By: ------------------------------------ ---------------------------------------- Executive 5 EX-21 16 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 21 SUBSIDIARIES OF THE REGISTRANT
NAME JURISDICTION OF INCORPORATION ---- ----------------------------- Hadco Foreign Sales Corporation U.S. Virgin Islands Hadco Santa Clara, Inc. Delaware Hadco Corporation (Malaysia) SDN. BHD. Malaysia Zycon Corporation Delaware Hadco Phoenix, Inc. Delaware CCIR of California Corp. California CCIR of Texas Corp. Texas Continental Circuits International, Inc. Barbados Continental Circuits Corp. Delaware Hadco Scotland Limited Scotland Hadco Ireland Limited Ireland
EX-23 17 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this form 10-K into Hadco Corporation's previously filed Registration Statements on Form S-8, File No. 33-2915, File No. 33-12555, File No. 33-24975, File No. 33-24976, File No. 33-40616, File No. 33-48288, File No. 333-11485, File No. 333-22377 and File No. 333-47589. /s/ Arthur Andersen LLP Boston, Massachusetts January 11, 1999 EX-27 18 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS YEAR OCT-31-1998 OCT-26-1997 OCT-31-1998 1 7,169 0 113,223 2,129 67,017 221,102 634,170 311,283 743,825 129,272 354,291 0 0 669 190,880 743,825 826,359 826,359 702,669 784,296 70,103 0 (20,173) (48,213) 5,897 (54,110) 0 0 0 (54,110) (4.09) (4.09)
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