defc14a
SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
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þ Definitive
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o Soliciting Material
Under
Rule 14a-12
Inter-Tel (Delaware), Incorporated
(Name of Registrant as Specified In
Its Charter)
N/A
(Name of Person(s) Filing Proxy
Statement if other than the Registrant)
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(Set forth the amount on which the filing fee is calculated and
state how it was determined:
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Form, Schedule or Registration Statement No:
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September 19,
2006
Dear Stockholders:
You are invited to attend a Special Meeting of our stockholders
to be held on Tuesday, October 24, 2006, at
10:00 A.M., local time, at the offices of Snell &
Wilmer, One Arizona Center, 400 E. Van Buren Street,
19th Floor
Conference Room, Phoenix, Arizona 85004. This Special Meeting
has been demanded by Steven G. Mihaylo for the sole purpose of
voting on a resolution proposed by Mr. Mihaylo, the former
Chief Executive Officer of the Company, a member of the Board of
Directors, and a stockholder, that would “urge the Board to
arrange for the prompt sale of the Company” (the
“Mihaylo Resolution”). The Mihaylo Resolution is a
non-binding stockholder proposal and will serve solely as a
means for stockholders to express their sentiments regarding
whether this is an appropriate time for the sale of the Company.
You are likely aware that on July 28, 2006,
Mr. Mihaylo and certain other parties (the “Mihaylo
Group”) submitted an unsolicited offer to acquire all of
the outstanding shares of the Company for $22.50 per share
(the “July 28 Offer”). The July 28 Offer was
unanimously rejected as inadequate by the Special Committee of
the Company’s Board of Directors (the “Special
Committee”). Prior to the July 28 Offer, pursuant to a
Settlement Agreement between the Company and Mr. Mihaylo
dated May 5, 2006, Mr. Mihaylo and two of his
designees were appointed to the Company’s Board of
Directors. Concurrently therewith, the Special Committee was
formed in order to avoid any conflicts of interest in connection
with Mr. Mihaylo’s expressed interest in acquiring the
Company. All of the members of the Special Committee are
independent directors, except that Norman Stout is the
Company’s Chief Executive Officer. On August 21, 2006,
the Mihaylo Group submitted a revised offer to acquire all of
the outstanding shares of the Company for $23.25 per share
(the “August 21 Offer”). Although the August 21 Offer
increased the offer price by approximately 3%, it was
conditioned on a commitment by the Special Committee to
implement and conclude a sale process with respect to the
Company within 30 days. The August 21 Offer was also
rejected by the Special Committee.
The Special Committee unanimously rejected both proposals
because we determined that such proposals did not reflect the
intrinsic value of the Company and were not in the best
interests of the Company’s stockholders. The Board of
Directors has recently approved a new strategic plan for the
Company, and the Special Committee has complete confidence in
management and management’s ability to create greater
stockholder value by continuing to execute the Company’s
long term strategic plan. The Special Committee believes that
Mr. Mihaylo’s decision to force the Company to call
this Special Meeting and submit the Mihaylo Resolution for
stockholder approval is intended to short circuit the Special
Committee’s recently announced strategic review of the
Company and to facilitate the Mihaylo Group’s acquisition
of the Company on terms that the Special Committee has now twice
rejected.
The Special Committee has unanimously recommended that our
stockholders vote “AGAINST” the Mihaylo
Resolution. We urge you to read carefully the information in the
attached proxy statement before deciding how to vote with
respect to the Mihaylo Resolution.
We thank all of you for your continued support and invite you to
attend the Special Meeting. However, whether or not you plan to
attend, please vote “AGAINST” the Mihaylo
Resolution as soon as possible by telephone, by Internet, or by
signing, dating and returning the enclosed WHITE Proxy Card.
Sincerely,
ALEXANDER L. CAPPELLO
Chairman
INTER-TEL
(DELAWARE), INCORPORATED
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To
Be Held on October 24, 2006
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Inter-Tel (Delaware), Incorporated, a Delaware corporation, will
be held on October 24, 2006, at 10:00 A.M., local
time, at the offices of Snell & Wilmer, One Arizona
Center, 400 E. Van Buren Street,
19th Floor
Conference Room, Phoenix, Arizona 85004, for the following
purpose:
To vote upon a resolution put forward by Mr. Steven G.
Mihaylo that states as follows (the “Mihaylo
Resolution”): “RESOLVED, that the stockholders of
Inter-Tel (Delaware), Incorporated (“Inter-Tel”) urge
the Inter-Tel Board of Directors to arrange for the prompt sale
of Inter-Tel to the highest bidder.”
The Mihaylo Resolution is a precatory resolution and is
non-binding on the Board of Directors. The Mihaylo Resolution is
more fully described in the Proxy Statement accompanying this
Notice and will be discussed at the Special Meeting with
adequate time allotted for stockholder questions.
Only stockholders of record at the close of business on
August 28, 2006 are entitled to notice of and to vote at
the Special Meeting.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW
SHARES YOU OWN. PLEASE SIGN AND DATE THE ENCLOSED WHITE
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE PROMPTLY.
PROPERLY VOTING AND RETURNING THE ENCLOSED WHITE PROXY CARD
AUTOMATICALLY REVOKES ANY PROXY PREVIOUSLY SIGNED OR RETURNED BY
YOU.
DO NOT RETURN ANY BLUE PROXY CARD SENT TO YOU BY MR. MIHAYLO
AND VECTOR CAPITAL CORPORATION. Even if you have previously
voted on Mr. Mihaylo’s and Vector Capital
Corporation’s blue proxy card, you have every legal right
to change your vote by executing the WHITE Proxy Card by
telephone, by Internet or by signing, dating and returning the
enclosed WHITE Proxy Card. ONLY YOUR LATEST DATED PROXY WILL
COUNT AT THE MEETING.
All stockholders are invited to attend the meeting in person.
However, to assure your representation at the meeting, you are
urged to vote the WHITE Proxy Card as promptly as possible by
telephone, by Internet, or by signing, dating and returning the
enclosed WHITE Proxy Card in the enclosed postage-prepaid
envelope. Any stockholder attending the Special Meeting may vote
in person even if he or she has previously returned a proxy. If
you hold your shares through a bank, broker or other custodian,
they can only vote your shares upon your instruction. If you
wish to vote at the Special Meeting, you must obtain and present
a legal proxy from the record holder of your shares.
Sincerely,
KURT R. KNEIP
Secretary
Tempe, Arizona
September 19, 2006
If you have questions or need assistance voting your shares,
please call our proxy solicitor:
INNISFREE M&A INCORPORATED
Stockholders Call Toll Free:
(888) 750-5834
Banks and Brokers Call Collect:
(212) 750-5833
TABLE
OF CONTENTS
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A-1
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PROXY
STATEMENT OF
INTER-TEL (DELAWARE), INCORPORATED
1615 S. 52nd Street,
Tempe, Arizona 85281
(480) 449-8900
Special Meeting of Stockholders
to be Held on October 24, 2006.
General
This Proxy Statement and the enclosed WHITE Proxy Card are being
furnished by Inter-Tel (Delaware), Incorporated, a Delaware
corporation (the “Company”), at the direction of the
Special Committee of our Board of Directors (the “Special
Committee”), to holders of the Company’s common stock
in connection with its solicitation of proxies for use at the
special meeting of stockholders of the Company to be held on
October 24, 2006 at 10:00 A.M., local time, at the
offices of Snell & Wilmer, One Arizona Center,
400 E. Van Buren Street,
19th Floor
Conference Room, Phoenix, Arizona 85004, and at any adjournment
or postponement thereof (the “Special Meeting”). The
record date for determining stockholders entitled to notice of
and to vote at the Special Meeting is the close of business on
August 28, 2006 (the “Record Date”). The Special
Meeting is called by the Company solely to comply with its
contractual obligation to do so upon the demand of
Mr. Mihaylo pursuant to a Settlement Agreement with
Mr. Mihaylo, described in more detail below.
Pursuant to a Settlement Agreement with Mr. Mihaylo, dated
May 5, 2006, Mr. Mihaylo and Dr. Anil K. Puri and
Kenneth L. Urish, Mr. Mihaylo’s two designees to the
Board (such three directors, collectively, the “Mihaylo
Directors”), were appointed to the Company’s Board of
Directors. Concurrently therewith, the Special Committee was
formed in order to avoid any conflicts of interest in connection
with Mr. Mihaylo’s expressed interest in acquiring the
Company. All of the members of the Special Committee are
independent directors, except that Norman Stout is the
Company’s Chief Executive Officer. (See
“Background — D. The Special Committee” on
page 9 below.)
This Proxy Statement and the WHITE Proxy Card are first being
mailed or furnished to the stockholders of the Company on or
about September 21, 2006.
The
Mihaylo Resolution
The meeting will be held for the sole purpose of voting on the
resolution (the “Mihaylo Resolution”) put forward by
Steven G. Mihaylo, to wit:
“RESOLVED, that the stockholders of Inter-Tel (Delaware),
Incorporated (“Inter-Tel”) urge the Inter-Tel Board of
Directors to arrange for the prompt sale of Inter-Tel to the
highest bidder.”
The Mihaylo Resolution is a precatory resolution and is
non-binding on the Board.
Mr. Mihaylo is joined in supporting the Mihaylo Resolution
by Summit Capital Management LLC (“Summit”), an entity
of which Mr. Mihaylo is the sole member and managing
member, The Steven G. Mihaylo Trust, Vector Capital Corporation
(“Vector”), Christopher G. Nicholson (who is
affiliated with Vector), and INTL Acquisition Corp. (an entity
controlled by Mr. Mihaylo and Vector) (collectively, the
“Mihaylo Group”).
The
Special Committee Unanimously Recommends That You
Vote AGAINST the Mihaylo Resolution
The Special Committee is committed to maximizing value for
ALL of the Company’s stockholders. The Board
appointed Mr. Stout as the Company’s Chief Executive
Officer on February 22, 2006, and, under
Mr. Stout’s leadership, the Company’s management
has presented to the Board of Directors a long term strategic
plan that was approved by the Board in June 2006. The Special
Committee has complete confidence in management’s ability
to execute the strategic plan, which is in its early stages of
implementation.
The Special Committee does not believe this is the appropriate
time to sell the Company. The Special Committee believes that
through the Mihaylo Resolution and the Mihaylo Group’s
offers to acquire the
Company, the Mihaylo Group intends to reap for themselves the
benefits resulting from the more than $50 million the
Company has spent on research and development since 2003
attributable to the Inter-Tel 5000 and 7000 series
communications systems and applications, to the detriment of the
Company’s other stockholders.
In addition, the Special Committee announced on August 11,
2006 that it has committed to conduct a serious and thorough
review of the Company’s strategic options. The Special
Committee recognizes that a possible sale of the Company is one
of the potential outcomes of its strategic review, and would, in
accordance with its fiduciary duties, consider such a sale if
the Special Committee were to determine that such a sale would
result in greater value creation for stockholders than
continuing to pursue the Company’s strategic business plan
or pursuing another alternative. However, the Special Committee
does not believe that the best interests of the Company’s
stockholders would be served by the adoption of the Mihaylo
Resolution, for the reasons stated above and the following
reasons, among others:
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A sale process designed only to deliver the highest immediately
available price, without consideration of other means of
delivering potential greater long-term value, could force the
Company to accept an offer that, like the Mihaylo Group’s
various proposals, does not reflect the intrinsic value of the
Company and its advanced technology and consequently fails to
provide appropriate value to all of the Company’s
stockholders. While the strategic review is underway, the
Special Committee believes that the continued execution of
management’s current strategy, including the rollout of the
recently released Inter-Tel 5600 and version 2.0 software for
the Inter-Tel 5000 family, the forthcoming introduction of the
7000 communications systems, and enhancements to the
Company’s portfolio of advanced software applications, is
the best course to enhance stockholder value.
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The Mihaylo Resolution would forestall the members of the
Special Committee from considering alternatives to maximize
stockholder value, other than a prompt sale of the Company.
Requiring the Special Committee to pursue a prompt sale of the
Company to the exclusion of other potential strategic
alternatives would inappropriately restrict the Board’s
ability to discharge its fiduciary duties and use its best
business judgment to select what it in good faith believes is
the best alternative for the maximization of stockholder value.
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If the Mihaylo Resolution were adopted, it would undoubtedly
create a “fire sale” atmosphere, thereby requiring the
Company to negotiate with potential bidders from a position of
weakness, and almost certainly result in a reduction of the
value that stockholders could obtain in a sale.
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Although Mr. Mihaylo claims the Mihaylo Resolution would
cause the Company’s Board to “establish a process that
creates a level playing field for all interested bidders to
submit offers for the Company,” a sale process conducted
with undue and arbitrary haste, such as the
30-day sale
process demanded by the Mihaylo Group as a condition to its
August 21, 2006 acquisition proposal, would unfairly and
inappropriately favor the Mihaylo Group, which has already been
afforded the opportunity for extensive due diligence over a
nearly 90 day period, and also has the advantage of
Mr. Mihaylo’s knowledge of the Company and its
business arising from his more than 36 years of service as
the Company’s Chief Executive Officer and current position
on the Board.
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The Mihaylo Resolution is unnecessary since the Special
Committee already has in place a strategic review process
designed to maximize stockholder value, which should be
permitted to run its course under the supervision of the Special
Committee’s experienced members, all of whom are
independent except for Mr. Stout.
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If adopted, the Mihaylo Resolution could be further disruptive
of and harmful to the Company’s
day-to-day
operations and would cause uncertainty among the Company’s
customers, employees, vendors, and other stakeholders, resulting
in potential disruption of the Company’s business to the
detriment of the Company’s stockholders.
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Finally, the Special Committee believes that the Mihaylo
Resolution is simply another step in Mr. Mihaylo’s
continuing efforts to gain control of the Company without paying
stockholders a premium that reflects the inherent value of the
Company. To that end, the Mihaylo proxy statement specifically
notes that if
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“the Mihaylo Resolution is receiving significant support
from the stockholders of the Company, Mr. Mihaylo and
Vector may consider calling an additional special meeting of
stockholders to remove the entire Inter-Tel Board and elect a
slate of new directors.” The Special Committee believes
that the interests of all stockholders are best served by the
continued execution of the Company’s strategic plan,
coupled with the strategic review that it has committed to
conduct, and that Mr. Mihaylo’s objective in electing
a new slate of directors would be either to facilitate his
acquisition of the Company at the lowest possible price or to
facilitate the sale of stock he holds in the Company.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW
SHARES YOU OWN. PLEASE SIGN AND DATE THE ENCLOSED WHITE
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE PROMPTLY.
PROPERLY VOTING AND RETURNING THE ENCLOSED WHITE PROXY
CARD AUTOMATICALLY REVOKES ANY PROXY PREVIOUSLY SIGNED OR
RETURNED BY YOU.
DO NOT RETURN ANY BLUE PROXY CARD SENT TO YOU BY STEVEN
G. MIHAYLO AND VECTOR CAPITAL CORPORATION. Even if you
previously have voted on the Mihaylo and Vector blue proxy card,
you have every legal right to change your vote by executing the
WHITE Proxy Card — by telephone, by Internet, or by
signing, dating and returning the enclosed WHITE Proxy Card in
the postage-paid envelope provided. ONLY YOUR LATEST DATED PROXY
WILL COUNT AT THE MEETING.
IMPORTANT
NOTE
IF YOUR SHARES OF COMMON STOCK ARE REGISTERED IN YOUR OWN
NAME, PLEASE VOTE TODAY BY TELEPHONE, BY INTERNET OR BY SIGNING,
DATING AND RETURNING THE ENCLOSED WHITE PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A
BROKERAGE FIRM, BANK, NOMINEE OR OTHER INSTITUTION, ONLY IT CAN
SIGN A WHITE PROXY CARD WITH RESPECT TO YOUR SHARES OF
COMMON STOCK AND ONLY UPON RECEIPT OF SPECIFIC
INSTRUCTIONS FROM YOU. ACCORDINGLY, YOU SHOULD CONTACT THE
PERSON RESPONSIBLE FOR YOUR ACCOUNT AND GIVE
INSTRUCTIONS FOR A WHITE PROXY CARD TO BE SIGNED
REPRESENTING YOUR SHARES OF COMMON STOCK. THE SPECIAL
COMMITTEE URGES YOU TO CONFIRM IN WRITING YOUR
INSTRUCTIONS TO THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND
TO PROVIDE A COPY OF SUCH INSTRUCTIONS TO THE COMPANY TO
THE ATTENTION OF THE CORPORATE SECRETARY AT
1615 S. 52ND STREET, TEMPE, ARIZONA 85281.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR PROXY OR
REQUIRE ASSISTANCE, PLEASE CONTACT:
INNISFREE M&A INCORPORATED
Stockholders Call Toll Free:
(888) 750-5834
Banks and Brokers Call Collect:
(212) 750-5833
Background
Mr. Mihaylo’s demand for the Special Meeting was made
on August 25, 2006, immediately after the Special Committee
rejected the Mihaylo Group’s August 21, 2006, offer to
acquire the Company, at $23.25 per share. The Mihaylo Group
had made a previous offer of $22.50 per share on
July 28, 2006, which was also rejected by the Special
Committee. Each of these offers is discussed in more detail
below.
Mr. Mihaylo founded the Company in 1969 and served as its
Chief Executive Officer until February 22, 2006. However,
during 2005 the Board raised questions with respect to the
strategic direction of the Company under Mr. Mihaylo’s
leadership. On July 22, 2005, Mr. Mihaylo resigned as
Chairman of the Board and the Board elected Mr. Alexander
L. Cappello, who had been elected to the Board at the
Company’s 2005 Annual Meeting, to replace Mr. Mihaylo
as Chairman. On February 22, 2006, Mr. Mihaylo
resigned as Chief
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Executive Officer, and the Board appointed Mr. Stout to
replace him. Mr. Mihaylo resigned from the Board on
March 6, 2006, and was reappointed to the Board, along with
the other Mihaylo Directors, on May 6, 2006.
A. The
July 28 Offer
On July 28, 2006, Mr. Mihaylo and Vector submitted to
the Board a proposal to acquire all of the outstanding shares of
the Company, other than those held by Mr. Mihaylo, for a
cash price of $22.50 per share (the “July 28
Offer”).
At a meeting held on August 11, 2006, the Special
Committee, with the assistance of its financial and legal
advisors, determined that the July 28 Offer was inadequate, and
subsequently issued the following press release announcing its
rejection:
INTER-TEL REJECTS MIHAYLO GROUP’S UNSOLICITED
ACQUISITION PROPOSAL
TEMPE, Ariz., August 11, 2006 — Inter-Tel
(Delaware), Incorporated (Nasdaq: INTL), today announced that a
Special Committee of its Board of Directors, with the assistance
of its financial and legal advisors, has rejected as inadequate
an unsolicited acquisition proposal from Steven G. Mihaylo and
Vector Capital (the “Mihaylo Group”) to purchase all
shares of Inter-Tel, other than those held by Mr. Mihaylo,
for cash at a price of $22.50 per share.
The Special Committee concluded that the Mihaylo Group’s
proposal does not reflect the intrinsic value of Inter-Tel and
its advanced technology and consequently fails to provide
appropriate value to all Inter-Tel shareholders. The Special
Committee believes that the continued execution of
management’s current long-term strategy, including the
rollout of the exciting new Inter-Tel 5600 and version 2.0
software for the Inter-Tel 5000 family, the forthcoming
introduction of the 7000 communications systems, and
enhancements to Inter-Tel’s portfolio of advanced software
applications represents a superior alternative for enhancing
shareholder value. The Special Committee also believes that
accepting the Mihaylo Group’s submitted offer, before the
company has had the opportunity to fully implement its strategy,
would deprive shareholders other than Mr. Mihaylo from
realizing Inter-Tel’s intrinsic value, particularly in
light of the Company’s significant recent investment in
research and development (“R&D”) on these new
products, software applications, and solutions.
While the Special Committee has complete confidence in
management’s current long-term strategy, the Special
Committee is committed to enhancing value for all Inter-Tel
shareholders. Consistent with this commitment, Inter-Tel
announced that the Special Committee has authorized UBS
Investment Bank, the Company’s financial advisor, to review
and explore various strategic options for the Company. The
Company noted that there can be no assurance that any
transaction will result from this effort or as to the terms
thereof. The Company does not anticipate disclosure of
developments with respect to the strategic review until the
review has been completed.
The Special Committee, with the assistance of its financial
and legal advisors, carefully considered the proposal from the
Mihaylo Group. In making its unanimous decision to reject the
proposal, the Committee considered, among other things:
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The opinion provided by Houlihan Lokey Howard &
Zukin financial advisor to the Special Committee;
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That this is not the appropriate time to sell the company in
light of the significant shareholder value expected to be
delivered by the Company’s current long-term strategy,
including the rollout of version 2.0 software for the Inter-Tel
5000 family of communication systems, the continued rollout of
the Inter-Tel 5600 communications system, and the forthcoming
introduction of the Inter-Tel 7000 standards-based multimedia
business communications platform;
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The Company’s significant recent investment in R&D
to develop and enhance its products;
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The recent enhancement of Inter-Tel’s call center
applications to include multi-media contact center
functionality;
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Enhancements to the company’s presence management and
multi-media collaboration applications;
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The early indications of success with the new Lake products
designed for the small office / home office (SOHO) market;
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The Company’s favorable market position in light of the
convergence and consolidation in its industry; and
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Management’s ability to successfully execute the
Company’s current long-term strategy and adapt to changes
taking place in the industry.
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The Special Committee is comprised of all members of
Inter-Tel’s Board of Directors other than Mr. Mihaylo
and his two designees on the Board. The Special Committee’s
letter to Mr. Mihaylo regarding its determination will be
filed with the Securities and Exchange Commission on
Form 8-K.
Houlihan Lokey Howard & Zukin is acting as financial
advisor to the Special Committee, UBS Investment Bank is acting
as financial advisor to Inter-Tel, and Bingham McCutchen LLP is
acting as legal advisor to the Special Committee.
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At the August 11, 2006 meeting of the Special Committee at
which the July 28 Offer was considered, Houlihan Lokey
Howard & Zukin, financial advisor to the Special
Committee, provided its oral opinion (which was confirmed later
that day in writing) that the July 28 Offer was inadequate to
the Company’s common stockholders from a financial point of
view. The opinion letter provided by Houlihan Lokey
Howard & Zukin is attached hereto as Appendix A.
Houlihan Lokey Howard & Zukin has consented to the use
of its opinion and the references to Holihan Lokey
Howard & Zukin in this Proxy Statement.
###
Following the August 11, 2006 meeting of the Special
Committee, Mr. Cappello, the Chairman of the Special
Committee, sent the following letter to the Mihaylo Group on
behalf of the Special Committee, conveying the Special
Committee’s rejection of the July 28 Offer:
[Letterhead of Inter-Tel, Incorporated]
August 11,
2006
Steven G. Mihaylo
Christopher Nicholson
INTL Acquisition Corp.
P.O. Box 19790
Reno, Nevada 89511
Gentlemen:
The Special Committee of the Board of Directors of Inter-Tel
(Delaware), Incorporated (the “Company”) has carefully
considered, along with our outside advisors, the proposal you
have made to acquire the Company for $22.50 per share in
cash. As a result of that deliberation, the Special Committee
has rejected your proposal and concluded that your proposal is
inadequate and is not in the best interests of the
Company’s shareholders, other than the Mihaylo Group. As
set forth in the attached press release, we believe that
Inter-Tel and its shareholders will be best served by the
Committee, with the help of its financial advisor and other
experts, reviewing and exploring various strategic options for
the Company. With all of the access we provided to both you and
your advisors and consultants, we were disappointed that the
price per share in your proposal remained unchanged from your
original proposal.
Over the course of the past few months, the Company has
incurred significant costs in responding to your proposals.
Moreover, significant management time and attention has been
diverted in connection with your proposals, including countless
hours providing you with detailed diligence material.
5
It is time that the Company return its focus to operations
and continued implementation of its strategic plan. To that end,
we urge you to carefully consider the continuing harm to the
Company that could result should you carry forward with your
threat to call a Special Meeting to consider a nonbinding
precatory resolution to sell the Company in light of, as noted
above, the Committee’s decision to explore all options.
Continuing to pursue your own personal agenda at significant
cost to the Company and distraction of senior management is not
in the best interests of the Company.
The Special Committee remains committed to serving the best
interests of the Company and all of its shareholders.
Very truly yours,
Alexander L. Cappello
On behalf of the Special Committee
###
Ten days later, on August 21, 2006, the Mihaylo Group
submitted a letter to the Special Committee proposing to
purchase all outstanding shares of the Company, other than those
held directly or indirectly by Mr. Mihaylo, with the
purchase price for such revised offer increased by 75 cents per
share, or approximately 3% (the “August 21 Offer”).
The August 21 Offer also had a new requirement — that
the Special Committee publicly commit to “commence
immediately a sales process designed to result in the prompt
sale of the Company” with such sale process to be completed
within 30 days. This 30 day requirement was imposed by
the Mihaylo Group despite the fact that the Mihaylo Group had
originally taken nearly 90 days to complete its due
diligence of the Company, and even though it has the advantage
of Mr. Mihaylo’s knowledge of the Company and its
business arising from his more than 36 years of service as
the Company’s Chief Executive Officer and current position
on the Board.
At a meeting held on August 25, 2006, the Special
Committee, with the assistance of its financial and legal
advisors, considered and rejected the August 21 Offer, and
subsequently issued the following press release:
INTER-TEL REJECTS REVISED CONDITIONAL PROPOSAL FROM
MIHAYLO GROUP
Company to Continue Review of Strategic Options
TEMPE, Ariz., August 25, 2006 — Inter-Tel
(Delaware), Incorporated (Nasdaq: INTL), today announced that
the Special Committee of its Board of Directors, with the
assistance of its financial and legal advisors, has rejected the
revised unsolicited acquisition proposal from Steven G. Mihaylo
and Vector Capital (the “Mihaylo Group”) to purchase
all outstanding shares of Inter-Tel, other than those held by
Mr. Mihaylo, for cash at a price of $23.25 per share, which
is conditioned on the Special Committee publicly committing to
sell the Company to the highest bidder within the next
30 days.
The Committee does not believe the Mihaylo Group’s
conditional offer to increase its proposal by 75¢ per
share, or approximately 3 percent, is sufficiently
attractive to warrant departing from a thorough review of the
Company’s strategic options. In addition, the Special
Committee rejected the Mihaylo Group’s demand that the
Company announce a
30-day sale
process because the Committee believes this would unfairly and
inappropriately favor the Mihaylo Group, which has already been
afforded the opportunity for extensive due diligence.
The Committee noted that, contrary to the Mihaylo
Group’s assertion, it is in fact conducting a serious and
thorough review of the Company’s strategic options. The
Mihaylo Group’s willingness to increase its offer will be
further considered as a part of that review process and the
Committee or its advisors may wish to have (as they have had in
the past) conversations with the Mihaylo Group as part of this
review.
The Special Committee believes that the Mihaylo Group’s
latest proposal still does not reflect the intrinsic value of
Inter-Tel and its advanced technology and consequently fails to
provide appropriate value to all Inter-
6
Tel shareholders. The Special Committee believes that the
continued execution of management’s current long-term
strategy, including the rollout of the recently released
Inter-Tel 5600 and version 2.0 software for the Inter-Tel 5000
family, the forthcoming introduction of the 7000 communications
systems, and enhancements to Inter-Tel’s portfolio of
advanced software applications, represents a superior
alternative for enhancing shareholder value.
The Special Committee also believes that accepting the
Mihaylo Group’s revised proposal before the company has had
the opportunity to fully implement its strategy would deprive
shareholders other than Mr. Mihaylo from realizing
Inter-Tel’s intrinsic value, particularly in light of the
Company’s significant recent investment in research and
development (“R&D”) on these new products,
software applications, and solutions.
Working with its outside advisors, the Committee is
continuing to proceed with its review of the Company’s
strategic options, as previously announced on August 11,
2006. There can be no assurance that any transaction will result
from this effort or as to the terms thereof. The Company does
not anticipate disclosure of developments with respect to the
strategic review until the Committee deems necessary and
appropriate.
The Special Committee is comprised of all members of
Inter-Tel’s Board of Directors other than Mr. Mihaylo
and his two designees on the Board. The Special Committee’s
letter to Mr. Mihaylo regarding its determination will be
filed with the Securities and Exchange Commission on
Form 8-K.
Houlihan Lokey Howard & Zukin is acting as financial
advisor to the Special Committee, UBS Investment Bank is acting
as financial advisor to Inter-Tel, and Bingham McCutchen LLP is
acting as legal advisor to the Special Committee.
###
Following the August 25, 2006 meeting of the Special
Committee, Mr. Cappello, the Chairman of the Special
Committee, sent the following letter to the Mihaylo Group on
behalf of the Special Committee, conveying the Special
Committee’s rejection of the August 21 Offer:
August 25,
2006
Steven G. Mihaylo
Christopher Nicholson
INTL Acquisition Corp.
P.O. Box 19790
Reno, Nevada 89511
Gentlemen:
The Special Committee of the Board of Directors of Inter-Tel
(Delaware), Incorporated (the “Company”), along with
its outside advisors, has carefully considered your unsolicited
revised proposal, dated August 21, 2006, which proposed to
increase your offer to acquire the Company by 75¢ per share
to $23.25 per share in cash conditioned on the Special
Committee publicly committing to sell the Company to the highest
bidder within the next 30 days. We are disappointed that
with all the access we provided to you and your advisors and
consultants and all the effort and expense incurred by the
Company in reviewing and considering your July 28, 2006
proposal, it did not represent your best offer.
The Committee does not believe your conditional
“offer” to increase your proposal by approximately
3 percent is sufficiently attractive to warrant departing
from a thorough review of its strategic options by announcing a
30 day sale process that would unfairly and inappropriately
favor you given the extensive due diligence you have already
been afforded. In our view our shareholders’ best interests
would best be served by continuing to pursue our current plan,
rather than by having the Company be sold at a price that does
not reflect the inherent value of Inter-Tel, or by having you
dictate a sale process that will only favor you at their
expense.
7
We arrived at our decision to execute the current strategic
plan while exploring options to increase shareholder value after
extensive review and discussion. For the reasons set forth in
our August 11, 2006 press release, we continue to believe
that it is a proper and prudent course of action. Contrary to
your assertion, the Committee is in fact conducting a serious
and thorough review of the Company’s strategic options.
Your willingness to increase your offer by approximately
3 percent will be further considered as a part of that
review process. Indeed, the Committee or its advisors may wish
to have (as we have had in the past) conversations with you or
your advisors as part of this review. Let me emphasize that,
while that process is underway, the Company and management will
continue to implement the Company’s strategic plan so all
shareholders can receive the benefits of the Company’s
investment in its new products and technologies.
One point on which we appear to be in agreement is that the
expense and disruption of your threatened proxy contest would
not be beneficial to the Company or its shareholders. If you
believe that the Committee members have not made the right
decision in deciding to consider its strategic options as
opposed to committing to a process that only favors you at the
expense of other shareholders, you are free to raise that issue
at the next annual meeting.
The Special Committee remains committed to serving the best
interests of the Company and all of its shareholders.
Very truly yours,
Alexander L. Cappello,
On behalf of the Special Committee
###
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C.
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The
2006 Proxy Contest, Settlement Agreement and Prior
Events
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Activities
Prior to 2006 Proxy Contest
Mr. Mihaylo founded the Company in 1969. However, during
2005 the Board raised questions with respect to the strategic
direction of the Company under Mr. Mihaylo’s
leadership. On July 22, 2005, Mr. Mihaylo resigned as
Chairman of the Board and the Board elected Mr. Cappello to
replace Mr. Mihaylo as Chairman. On February 22, 2006,
Mr. Mihaylo resigned as Chief Executive Officer, and the
Board appointed Mr. Stout to replace him. Mr. Mihaylo
resigned as a director of the Company on March 6, 2006.
2006
Proxy Contest
Less than five weeks after Mr. Mihaylo resigned as a
director of the Company, on April 7, 2006, Mr. Mihaylo
submitted to the Board advance notices of director nominations
and stockholder business to be brought before the 2006 annual
meeting of stockholders (the “2006 Annual Meeting”)
stating that he intended to appear at the 2006 Annual Meeting in
person or by proxy to, among other things, (i) nominate a
slate of three directors for election at the 2006 Annual
Meeting, and (ii) introduce at the 2006 Annual Meeting
several resolutions to be submitted to the vote of the
stockholders, including a resolution urging the Board to arrange
for the prompt sale of the Company to the highest bidder and
resolutions to repeal recently adopted amendments to the Amended
and Restated Bylaws of the Company with respect to
stockholders’ ability to call a special meeting and the
advance notice provisions. Just three days later, on
April 10, 2006, Mr. Mihaylo sent a letter to the Board
indicating his interest in meeting with the Board or its
advisors to discuss a possible all cash acquisition of the
Company. Mr. Mihaylo engaged a proxy solicitation firm and,
on April 21, 2006, filed a preliminary proxy statement with
the SEC as preparation to engage in a proxy contest with respect
to the election of directors of the Company at the 2006 Annual
Meeting.
8
Settlement
Agreement
On May 5, 2006, the Company, Mr. Mihaylo and Summit
entered into a settlement agreement (the “Settlement
Agreement”) to settle the potential proxy contest in
connection with the 2006 Annual Meeting. In addition to other
provisions, the Settlement Agreement stipulated that the Company
would appoint the Mihaylo Directors to the Board, effective
May 6, 2006, and the Board would be increased from eight to
11 directors, all of which the Company would nominate and
recommend for re-election to the Board at the 2006 Annual
Meeting. Mr. Mihaylo would withdraw his proxy solicitation
for the 2006 Annual Meeting, including his stockholder
proposals, and would vote in favor of the slate of
11 directors nominated by the Company and the other
proposals presented by the Company. Mr. Mihaylo and Summit
also agreed that, prior to December 31, 2006, other than by
evaluating and making a Mihaylo Proposal (as defined below),
they will not acquire, offer or propose to acquire, or agree to
acquire, any common stock, provided that activities in
connection with evaluating and making a Mihaylo Proposal are not
subject to this restriction.
The Company agreed to provide promptly to Mr. Mihaylo and
his advisors and financing sources, upon reasonable notice,
access to the reasonable due diligence information requested in
good faith, in order to facilitate the making of an all cash
acquisition proposal for all outstanding shares of Common Stock
(other than shares beneficially owned by Mr. Mihaylo)
accompanied by commitment letters (subject only to customary
conditions) of financial institutions of national reputation
demonstrating a reasonable certainty of his ability to finance
the transaction in its entirety (a “Mihaylo Proposal”).
The Agreement also stipulated that, if the Board determined that
the initially submitted Mihaylo Proposal was not in the best
interests of the Company’s stockholders (or did not make
such determination within 10 business days of submission of the
Mihaylo Proposal), then, subject to certain time limitations,
upon the request of Mr. Mihaylo (a “Mihaylo Meeting
Request”), the Company would promptly call a special
meeting of stockholders to vote on the proposals set forth in
the Mihaylo Meeting Request, including, without limitation, any
proposal urging the Board to arrange for the prompt sale of the
Company to the highest bidder (the “Mihaylo
Resolution”), and the Company would not contest the calling
of the special meeting as to the Mihaylo Resolution but could
oppose the Mihaylo Resolution and any other proposals that were
included in the Mihaylo Meeting Request.
The Company considered Mr. Mihaylo’s notices and
letter and determined to enter into the Settlement Agreement for
several reasons, including to avoid a costly and distracting
proxy contest, to help ensure stockholder approval for the
reincorporation in Delaware, to establish an orderly process to
allow Mr. Mihaylo to submit an all cash proposal to acquire
the Company that he indicated he intended to submit, and,
finally, since the Company has cumulative voting in the election
of directors, Mr. Mihaylo, voting alone in a contested
election, would have been able to elect at least two of his
director nominees.
On June 14, 2006, Mr. Mihaylo and Vector submitted a
proposal to the Board to acquire all of the outstanding shares
of Common Stock (other than shares beneficially owned by
Mr. Mihaylo) for $22.50 per share in cash, which,
despite the fact that Mr. Mihaylo had been the Chief
Executive Officer of the Company from 1969 until
February 22, 2006, was conditioned upon Mr. Mihaylo
and Vector conducting additional due diligence on the Company
(the “June 14 Offer”).
Counsel to the Special Committee advised the Special Committee
that the June 14 Offer did not conform with the requirements
provided in the Settlement Agreement because of the requirement
in the June 14 Offer for “confirmatory due diligence”.
However, on June 28, 2006, Mr. Mihaylo, Summit and the
Company entered into the Amendment to Settlement Agreement,
pursuant to which the time for Mr. Mihaylo to provide a
proposal that qualified as a “Mihaylo Proposal” was
extended until July 28, 2006 and Mr. Mihaylo and his
advisors and consultants were given additional access to due
diligence information regarding the Company, and it was agreed
that the Special Committee would not respond to the June 14
Offer.
The Special Committee was formed in May 2006 concurrently with
Mr. Mihaylo’s and the other Mihaylo Directors’
appointment to the Board, in order to avoid any conflicts of
interest in connection with
9
Mr. Mihaylo’s expressed interest in acquiring the
Company. The names of the members of the Special Committee and
their biographical information are set forth below. As noted
elsewhere, all of the members of the Special Committee are
independent, except Mr. Stout.
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Position(s) with
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Name
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Age
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Company
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Director Since
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J. Robert Anderson
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69
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Director
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1997
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Alexander L. Cappello
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50
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Chairman of the Board
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2005
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Jerry W. Chapman
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65
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Director
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1999
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Gary D. Edens
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64
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Director
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1994
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Steven E. Karol
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51
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Director
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2006
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Robert Rodin
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52
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Director
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2006
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Norman Stout
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48
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Director and CEO
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2006
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Agnieszka Winkler
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60
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Director
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2005
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MR. J. ROBERT ANDERSON has served as one of our directors
since February 1997 and currently serves as the Chairman of our
Compensation Committee. Mr. Anderson held various positions
at Ford Motor Company from 1963 to 1983, serving as President of
the Ford Motor Land Development Corporation from 1978 to 1983.
He served as Senior Vice President, Chief Financial Officer and
as a member of the board of directors of The Firestone Tire and
Rubber Company from 1983 to 1989, and as Vice Chairman of
Bridgestone/Firestone, Inc. from 1989 through 1991. He most
recently served as Vice Chairman, Chief Financial Officer and as
a member of the board of directors of the Grumman Corporation
from 1991 to 1994. He currently serves on the boards of GenCorp,
Inc. and B-G Corp. Mr. Anderson is currently semi-retired,
and he is an active leader in various business, civic and
philanthropic organizations.
MR. ALEXANDER L. CAPPELLO was elected as one of our
directors in the April 2005 annual meeting of shareholders, and
to Chairman at the July 2005 Board meeting. Since March 1996,
Mr. Cappello has served as the Chairman and Chief Executive
Officer of the Cappello Group, Inc., a global boutique merchant
bank, which includes Cappello Capital Corp. (member SIPC-NASD).
He has over thirty years experience in corporate
management & finance, investment banking, merchant
banking both in the U.S. and overseas. He is currently or has
been a member of the board of directors of several companies and
institutions including: University of Southern California (USC)
Board of Trustees/ President of the Board of
Governors & Alumni Association, RAND Corporation-Center
for Middle East Public Policy, Genius Products, Inc.
(NASDAQ:GNPI), CytRx Pharmaceuticals, Inc. (NASDAQ: CYTR), and
Swiss American Financial & Euro American Financial
(Chairman). Mr. Cappello is a member of the Young
Presidents’ Organization, where he has served as Chairman
of the International Board from
2003-2005.
He received a Bachelor of Science degree from the Marshall
School of Business at USC in 1977 with honors. He has been a
guest lecturer at the USC, UCLA, and Harvard Business Schools
and is a contributing author of “The New Investor
Relations,” being published by Bloomberg PRESS.
MR. JERRY W. CHAPMAN was elected as one of our directors in
December 1999 and previously served as one of our directors from
1989 to 1992. He currently serves as the Chairman of our Audit
Committee. As a Certified Public Accountant, he served with a
local accounting firm from 1963 through 1969, at which time he
joined Ernst & Ernst, a predecessor entity of
Ernst & Young LLP. He became a partner of
Ernst & Young in 1977 and, until retiring from the firm
in 1989, served as engagement partner on a wide variety of
audit, assurance and consulting engagements. Additionally, he
managed Ernst & Young’s practices in Arizona as
well as various offices in the adjoining southwest states from
1980 through 1989. He then operated his own consulting firm
through 1992 and joined Arthur Andersen in 1993 as a partner
specializing in providing business consulting services. He
retired from Arthur Andersen in 1999. Mr. Chapman currently
serves on the board of directors of CoBiz Inc., a public company
headquartered in Denver, Colorado. Additionally, he provides
services for a small number of clients requiring strategic and
market-driven services.
MR. GARY D. EDENS has served as one of our directors since
October 1994 and currently serves as the Chairman of our
Corporate Governance and Nominating Committee. He was an
executive with Southern Broadcasting Company
1968-1982,
Harte-Hanks
Radio, Inc, chief executive officer,
1982-1984,
and Edens
10
Broadcasting, Inc., chairman and chief executive officer
1984-1994.
Mr. Edens has served on a number of corporate boards, such
as Great Western Bank and Citibank (Arizona), as well as holding
leadership positions on the Radio Advertising Board, National
Radio Broadcasters Association and Young Presidents’
Organization. In 1998 he was chairman of the annual
international financial seminar for Chief Executives
Organization and World Presidents’ Organization. Since
1994, he has been president of The Hanover Companies, Inc., a
private investment firm. He holds a B.S. Degree in Business
Administration from the University of North Carolina at Chapel
Hill. In 2005 he participated in continuing education for
directors at Harvard Business School.
MR. STEVEN E. KAROL was elected as one of our directors in
February 2006. Mr. Karol is founder, Managing Partner, and
Chairman of HMK Enterprises, Inc. and Watermill Group, which
consists of Watermill Ventures and Watermill Advisors. He has
been an investor, operator, and advisor for almost thirty years.
Through HMK and Watermill, he has owned and operated close to
50 companies and has built both into enterprises with over
$1 billion in revenue on several occasions. Mr. Karol
serves on several corporate boards including: Mooney Aircraft
Company (OTC:MNYG.OB) (Chairman), StockerYale (NASDAQ: STKR),
and J. Walter Company. He is also on several
not-for-profit
boards, including the Tufts University Board of Overseers for
the School of Engineering (Chairman), the Vermont Academy Board
of Trustees (Chairman), and The Brain Tumor Society (Chairman of
Strategic Planning). He is a former International President of
the Young Presidents’ Organization where he held many
positions throughout his twenty-six year relationship with the
organization. He is a former trustee of the Boston Ballet and a
former overseer of the Boston Symphony Orchestra. Mr. Karol
received his Bachelor of Science degree from Tufts University in
1976. He completed the President’s Program of Leadership at
the Graduate School of Business Administration at Harvard
University in 1997.
MR. ROBERT RODIN who was elected as one of our directors in
February 2006, is currently the Chairman and CEO of RDN Group;
strategic advisors focused on corporate transitions, customer
interface, sales and marketing, and supply chain management.
Previously, Mr. Rodin was Chairman and CEO of eConnections,
a provider of extended supply chain intelligence solutions,
which he founded in 1999. From 1991 to 1999, he served as the
CEO of Marshall Industries (NYSE:MI), a $1.8 billion
industrial electronics distributor and supply chain management
company. Marshall Industries was recognized as the
“World’s Number One Business to Business
Website”, by Advertising Age Magazine and Information
Week Magazine highlighted Marshall Industries as the
“World’s Number One Company in the Use of
Technology”, Additionally, CIO Magazine recognized
Mr. Rodin as one of the “Top 100 Leaders for the New
Millennium”. Following the sale of Marshall to Avnet
(NYSE:AVT) in 1999, Mr. Rodin served as president of global
supply chain management and electronic commerce solutions and as
a member of the Avnet Global Managing Board. Mr. Rodin
currently serves as director of Napster (NASDAQ: NAPS), director
and Vice Chairman of CommerceNet and director of SM&A
(NASDAQ: WINS). Mr. Rodin’s best selling book,
“Free, Perfect and Now: Connecting to the Three Insatiable
Customer Demands”, chronicles the radical transformation of
Marshall Industries. The changes he led have been taught as case
studies at Harvard Business School, Columbia, USC, MIT, and
Stanford University.
MR. NORMAN STOUT was appointed Chief Executive Officer and
a member of Inter-Tel’s Board of Directors on
February 22, 2006. He began his tenure at Inter-Tel in 1994
as a director. Four years later, he resigned from the board and
joined Inter-Tel as executive vice president, chief
administrative officer and president of Inter-Tel Software and
Services. Prior to joining Inter-Tel, Mr. Stout was Chief
Operating Officer of Oldcastle Architectural Products and since
1996, Mr. Stout also had served as President of Oldcastle
Architectural West. Mr. Stout held previous positions as
President of Superlite Block; Chief Financial Officer and Chief
Executive Officer (successively) of Boorhem-Fields, Inc. of
Dallas, Texas; and as a Certified Public Accountant with
Coopers & Lybrand. He currently serves on the board of
directors of Hypercom Corporation, a public company
headquartered in Phoenix, Arizona. Mr. Stout holds a
Bachelor of Business Administration degree in Accounting from
Texas A&M and an MBA from the University of Texas.
MS. AGNIESZKA WINKLER was elected as one of our directors
in the April 2005 annual meeting of shareholders.
Ms. Winkler was the founder, Chairman and CEO of two
companies, Winkler Advertising, founded in 1984, and TeamToolz,
Inc., founded in 1999, both of which were acquired. She is
currently founder and Chairman of The Winkler Group, a
management consultancy specializing in marketing efficiency and
11
effectiveness for Fortune 1000 companies. She has served on
the board of directors of two NASDAQ companies, SuperCuts and
RenoAir, and currently serves on the board of directors of IP
Locks, Inc. and the Board of Trustees of Santa Clara
University. In addition, she has served on the boards of
numerous professional and civic institutions throughout her
career and currently sits on the boards of the Committee of 200
Foundation and the Western Folklife Center. Winkler has a BA and
an MA and received an MBA from Santa Clara University in
1981. A frequent keynote speaker on the subjects of marketing
and branding at industry meetings globally, she is also the
author of Warp Speed Branding: The Impact of Technology on
Marketing, published by Wiley in the US, China and Turkey.
Voting of
Proxies
The only class of the Company’s capital stock currently
outstanding is its common stock. Shares of the common stock
represented by all properly executed proxies received in time
for the scheduled meeting will be voted in accordance with the
choices specified in the proxies. If multiple proxies are
received with respect to the same shares, the latest dated proxy
will be voted with respect to those shares. See
“Revocability of Proxy” below.
In the event that a quorum is not present at the time the
Special Meeting is convened, the stockholders entitled to vote
at the meeting, present in person or represented by proxy, will
have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting. If the Company
proposes to adjourn the meeting by a vote of stockholders, the
persons named in the enclosed form of proxy will vote all shares
of stock for which they have voting authority in favor of such
adjournment. If a quorum is not present, in person or by proxy,
the Company may elect to terminate the meeting and the Mihaylo
Resolution will be deemed to have not been approved. The Company
has not been notified of any other matter subject to stockholder
vote to be proposed and voted upon at the Special Meeting, and,
consequently, no matters other than the Mihaylo Resolution will
be brought to a vote at the Special Meeting.
Voting
Rights
Holders of shares of the Company’s common stock at the
close of business on August 28, 2006, the Record Date, are
entitled to notice of, and to vote at, the Special Meeting,
provided that only shares that remain issued and outstanding as
of the date of the Special Meeting will be entitled to vote, in
person or by proxy, at the meeting. As of August 28, 2006,
26,686,491 shares of the Company’s common stock were
outstanding. Each share of common stock outstanding on the
Record Date is entitled to one vote on the Mihaylo Resolution.
The presence, in person or by proxy, of stockholders
representing at least a majority of the issued and outstanding
stock entitled to vote constitutes a quorum for the transaction
of business at the meeting. The Mihaylo Resolution is a
precatory resolution and is non-binding on the Board.
Under Delaware law and our bylaws, the vote of the majority of
the stock having voting power present in person or represented
by proxy at the Special Meeting shall be the act of the
stockholders. As a result, the fact that you abstain and do not
vote in favor of the Mihaylo Resolution will have the same
effect as if you had voted against the Mihaylo Resolution.
Solicitation
of Proxies
The costs of this solicitation by the Special Committee will be
borne by the Company. Proxy solicitations will be made by mail.
They also may be made by personal interview, telephone,
facsimile transmission, and telegram or the Internet. We expect
the total cost of this solicitation to be approximately
$600,000. The Special Committee has engaged Innisfree M&A
Incorporated, a proxy solicitation firm, to solicit votes for a
solicitation fee of $250,000, plus reasonable
out-of-pocket
expenses. Innisfree expects it will employ approximately 50
persons in the solicitation. Total expenditures by the Company
in connection with this solicitation prior to the date of this
Proxy Statement have been approximately $200,000.
12
Multiple
Stockholders Sharing One Address
In some instances, we may deliver to multiple stockholders
sharing a common address only one copy of this proxy statement
and its attachments. If requested by phone or in writing, we
will promptly provide a separate copy of the proxy statement and
its attachments to a stockholder sharing an address with another
stockholder. Requests by phone should be directed to our
Corporate Secretary at
(480) 449-8900,
or to Innisfree M&A Incorporated at
(888) 750-5834
(Stockholders call toll free) or
(212) 750-5833
(Banks and Brokers call collect), and requests in writing should
be sent to Inter-Tel (Delaware), Incorporated, Attention:
Corporate Secretary, 1615 S. 52nd Street, Tempe,
Arizona 85281. Stockholders sharing an address who currently
receive multiple copies and wish to receive only a single copy
should contact their broker or send a signed, written request to
us at the address above.
Deadline
for Receipt of Stockholder Proposals
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the annual meeting of the
Company for the fiscal year ending December 31, 2006 must
be received by the Company no later than January 10, 2007,
in order to be included in the proxy statement and form of proxy
relating to such meeting.
SEC rules also establish a different deadline for submission of
stockholder proposals that are not intended to be included in
the Company’s proxy statement with respect to discretionary
voting. If a stockholder gives notice of such a proposal after
the discretionary vote deadline, the Company’s proxy
holders will be allowed to use their discretionary voting
authority to vote against the stockholder proposal when and if
the proposal is raised at the Company’s year 2007 Annual
Meeting. The discretionary vote deadline for the 2007 Annual
Meeting is April 1, 2007, 45 calendar days prior to the
anniversary of the mailing date of the Company’s annual
meeting proxy statement.
Revocability
of Proxy
The giving of the enclosed proxy does not preclude the right to
vote in person should the stockholder giving the proxy so
desire. A proxy may be revoked at any time prior to its exercise
by delivering a written statement to the Company’s
Secretary that the proxy is revoked, by presenting a later-dated
proxy, or by attending the Special Meeting and voting in person.
Additional
Materials
A form of proxy is included with the mailing of this proxy
statement. A copy of the Company’s Annual Report to
Stockholders on
Form 10-K,
as amended on
Form 10-K/A,
each as filed with the Securities and Exchange Commission, which
includes the Company’s audited financial statements for the
year ended December 31, 2005, as well as the Company’s
most recent
Form 10-Q
dated August 9, 2006, will be furnished without charge to
beneficial owners of shares or stockholders of record as of the
Record Date upon request to our Corporate Secretary at
(480) 449-8900,
or to Innisfree M&A Incorporated at
(888) 750-5834
(Shareholders call toll free) or
(212) 750-5833
(Banks and Brokers call collect), and requests in writing should
be sent to Inter-Tel (Delaware), Incorporated, Attention:
Corporate Secretary, 1615 S. 52nd Street, Tempe,
Arizona 85281.
Other
Matters To Be Considered At The Meeting
Pursuant to Sections 2.3 and 2.5 of the Company’s
By-laws, the business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the
notice of the meeting. The Special Committee is not aware at the
present time of any other matter which is scheduled to be voted
upon by stockholders at the Special Meeting. However, if any
other matter properly comes before the Special Meeting, the
proxies will vote all proxies held by them in accordance with
their best judgment with respect to each such matter.
Stockholders will have no appraisal or similar rights with
respect to the Mihaylo Resolution.
13
Beneficial
Ownership of Capital Stock by Directors and Management
As of August 28, 2006, the Company had 26,686,491 issued
and outstanding shares. The following table presents information
regarding the beneficial ownership of the Company’s capital
stock as of August 28, 2006: (a) each director and
nominee for director of the Company who owned shares as of such
date, (b) each of the Named Executive Officers (defined
below), (c) all directors and executive officers of the
Company as a group and (d) each person known by the Company
to be the beneficial owner of more than 5% of the outstanding
shares of common stock. The beneficial owners named have, to our
knowledge, sole voting and investment power with respect to the
shares beneficially owned, subject to community property laws
where applicable.
Shares
of Common Stock Beneficially Owned
| |
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|
|
|
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|
|
|
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Owned
|
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|
|
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|
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|
|
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Excluding
|
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Right to
|
|
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Total Number
|
|
|
Percent
|
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|
Name
|
|
Stock Options
|
|
|
Acquire(2)
|
|
|
of Shares(1)
|
|
|
of Total(3)
|
|
|
|
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J. Robert Anderson
|
|
|
20,000
|
|
|
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35,000
|
|
|
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55,000
|
|
|
|
*
|
|
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Alexander L. Cappello
|
|
|
—
|
|
|
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15,000
|
|
|
|
15,000
|
|
|
|
*
|
|
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Jerry W. Chapman
|
|
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4,069
|
|
|
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35,000
|
|
|
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39,069
|
(4)
|
|
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*
|
|
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Gary D. Edens
|
|
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19,792
|
|
|
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35,000
|
|
|
|
54,792
|
|
|
|
*
|
|
|
Steven E. Karol
|
|
|
—
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
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*
|
|
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Dr. Anil K. Puri
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
*
|
|
|
Robert Rodin
|
|
|
—
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
*
|
|
|
Kenneth L. Urish
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
*
|
|
|
Agnieszka Winkler
|
|
|
—
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
*
|
|
|
Norman Stout
|
|
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18,861
|
|
|
|
380,333
|
|
|
|
399,194
|
(5)
|
|
|
1.4
|
|
|
Craig W. Rauchle
|
|
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5,898
|
|
|
|
289,395
|
|
|
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295,293
|
|
|
|
1.1
|
|
|
Jeffrey T. Ford
|
|
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63,672
|
|
|
|
134,000
|
|
|
|
197,672
|
(6)
|
|
|
*
|
|
|
Kurt R. Kneip
|
|
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25,078
|
|
|
|
41,500
|
|
|
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66,578
|
(7)
|
|
|
*
|
|
|
Steven G. Mihaylo
|
|
|
5,179,498
|
|
|
|
—
|
|
|
|
5,179,498
|
|
|
|
18.7
|
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P.O Box 19790,
|
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Reno, NV 89511
|
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|
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|
|
|
|
|
|
All directors and executive
officers
as a group (14 persons)
|
|
|
5,336,868
|
|
|
|
995,228
|
|
|
|
6,332,096
|
|
|
|
22.9
|
|
|
|
|
|
|
|
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(1) |
|
Determined in accordance with
Rule 13d-3
under the Securities Exchange Act of 1934, as amended. Under
this rule, a person is deemed to be the beneficial owner of
securities that can be acquired by such person within
60 days from the Record Date (August 28,
2006) upon the exercise of options. Each beneficial
owner’s percentage ownership is determined by assuming that
all options held by such person (but not those held by any other
person) that are exercisable within 60 days from the Record
Date have been exercised. All persons named in the table have
sole voting and investment power with respect to all shares
issuable pursuant to stock options. Unless otherwise noted in
subsequent footnotes to this table, the Company believes that
all persons named in the table have sole voting and investment
power with respect to all shares of common stock beneficially
owned by them. |
|
|
|
|
(2) |
|
Shares that can be acquired through stock options vested through
August 28, 2006, or within 60 days of that date. |
|
|
|
|
(3) |
|
Determined by dividing total number of shares by the sum of the
total consolidated outstanding shares on the Record Date of
26,686,491 plus 995,228 shares that can be acquired through
stock options as identified in note (2) above. |
|
|
|
|
(4) |
|
With respect to 4,069 of these shares, Mr. Chapman shares
voting and investment power with his spouse. |
| |
|
(5) |
|
With respect to 18,861 of these shares, Mr. Stout shares
voting and investment power with his spouse. |
| |
|
(6) |
|
With respect to 62,417 of these shares, Mr. Ford shares
voting and investment power with his spouse. |
| |
|
(7) |
|
With respect to 20,000 of these shares, Mr. Kneip shares
voting and investment power with his spouse. |
14
Forward-Looking
Statements
This proxy solicitation and accompanying materials contain
forward-looking statements. All statements other than statements
of historical fact may be forward-looking statements. These
include statements concerning the anticipated impact on
stockholder value of the Company’s long term strategy; the
timing and impact on stockholder value of new product
announcements, releases and enhancements; the results of prior
and continued investment in research and development; the effect
on the Company of convergence and consolidation trends in the
industry; and the ability of management to execute the
Company’s strategy and adapt to changes in the industry.
Such statements are based on current assumptions that involve
risks and uncertainties which could cause the actual results,
performance, or achievements of the Company to be materially
different from those described in such statements, including,
market acceptance of new and existing products, software and
services; dependence on continued new product development;
product defects; timely and successful hiring and retention of
employees; retention of existing dealers and customers;
industry, competitive and technological changes; general market
and economic conditions; the composition, product and channel
mixes, timing and size of orders from and shipments to major
customers; price and product competition; and availability of
inventory from vendors and suppliers. For a further list and
description of such risks and uncertainties, please see the risk
factors contained in the Company’s
Form 10-K,
as amended on
Form 10-K/A,
each as filed with the SEC, other subsequently filed current and
periodic reports, and the Company’s most recent
Form 10-Q
dated August 9, 2006. Inter-Tel disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Forward-looking statements may be identified by the use of words
such as “may,” “will,” “should,”
“expect,” “plan,” anticipate,”
“believe,” “estimate,” “predict,”
“intend,” and “continue,” or the negative of
these terms, and include the assumptions that underlie such
statements. The Company’s actual results could differ
materially from those expressed or implied in these
forward-looking statements as a result of various risks and
uncertainties.
There can be no assurance that any transaction will result from
the Special Committee’s strategic review or as to the terms
thereof. As has already been publicly stated, the Special
Committee or its advisors may wish to have additional
conversations with the Mihaylo Group or its advisors as part of
this review. The Company does not anticipate disclosure of
developments with respect to the strategic review until the
Special Committee deems necessary and appropriate.
THE COMPANY STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO
READ THIS PROXY STATEMENT AND OTHER PROXY MATERIALS THAT ARE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH
PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SECURITIES
AND EXCHANGE COMMISSION’S WEB SITE AT HTTP://WWW.SEC.GOV.
IN ADDITION, THE COMPANY WILL PROVIDE COPIES OF THIS DEFINITIVE
PROXY STATEMENT, AS WELL AS COPIES OF ANY DOCUMENTS INCORPORATED
HEREIN BY REFERENCE, WITHOUT CHARGE, UPON REQUEST. REQUESTS FOR
COPIES OF PROXY MATERIALS OR DOCUMENTS INCORPORATED BY REFERENCE
SHOULD BE DIRECTED TO OUR CORPORATE SECRETARY AT
(480) 449-8900,
OR TO INNISFREE M&A INCORPORATED AT
(888) 750-5834
(STOCKHOLDERS CALL TOLL FREE) OR
(212) 750-5833
(BANKS AND BROKERS CALL COLLECT), AND REQUESTS IN WRITING SHOULD
BE SENT TO INTER-TEL (DELAWARE), INCORPORATED, ATTENTION:
CORPORATE SECRETARY, 1615 S. 52ND STREET, TEMPE,
ARIZONA 85281.
September 19,
2006 INTER-TEL
(DELAWARE), INCORPORATED
IF YOU HAVE ANY QUESTIONS OR REQUIRE ASSISTANCE,
PLEASE CONTACT:
INNISFREE M&A INCORPORATED
Stockholders Call Toll Free:
(888) 750-5834
Banks and Brokers Call Collect:
(212) 750-5833
15
APPENDIX A
[LETTERHEAD
OF HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS,
INC]
August 11,
2006
The Special Committee of the Board of Directors of Inter-Tel,
Incorporated
1615 5. 52nd Street
Tempe, Arizona 85281
Dear Members of the Special Committee:
We understand that an affiliate of Steven G. Mihaylo
(“Mihaylo”), the former Chairman and Chief Executive
Officer and largest shareholder of Inter-Tel, Incorporated (the
“Company”), together with Vector Capital Corporation
(“Vector”) have formed INTL Acquisition Corp.
(“IAC”) and IAC has presented to the Board of
Directors of the Company a written offer (the “Offer”)
to acquire all of the outstanding common stock of the Company
(other than the shares beneficially owned by IAC) (the
“Proposed Acquisition”) pursuant to a merger agreement
to be negotiated whereby IAC or a direct or indirect
wholly-owned subsidiary of IAC would be merged with and into the
Company and all of outstanding common stock of the Company
(other than the shares beneficially owned by IAC) would be
converted into the right to receive $22.50 per share in
cash (the “Proposed Merger Consideration”). Such
proposed transaction is referred to herein as the “Proposed
Transaction”.
We understand that, in connection with the Proposed
Acquisition, IAC has received equity commitments from
(i) Mihaylo to contribute to IAC or a wholly-owned
subsidiary of IAC certain shares of Company common stock
beneficially owned by Mihaylo and (ii) Vector to provide to
IAC or a wholly-owned subsidiary of IAC $96,400,000 of equity
financing (collectively, the “Equity Commitments”).
We understand that, in connection with the Proposed
Acquisition, IAC has received debt- financing commitments from
Deutsche Bank Trust Company Americas, Deutsche Bank Securities,
Inc., Royal Bank of Canada and RBC Capital Markets to provide
certain credit facilities including (i) a first- lien term
loan facility in an aggregate principal amount of up to
$200,000,000, (ii) a $30,000,000 revolving credit facility
and (iii) a second-lien term loan facility in an aggregate
principal amount of up to $100,000,000 (collectively, the
“Financing Commitments”).
You have requested that Houlihan Lokey Howard &
Zukin Financial Advisors, Inc. (“Houlihan Lokey”)
provide an opinion (the “Opinion”) to the Special
Committee of the Board of Directors of the Company (the
“Special Committee”) as to fairness or inadequacy, as
appropriate, from a financial point of view, as of the date
hereof, of the Proposed Merger Consideration to be received by
the common stockholders of the Company (other than IAC and its
affiliates) in connection with the Proposed Transaction.
In connection with this Opinion, we have made such reviews,
analyses and inquiries as we have deemed necessary and
appropriate under the circumstances. Among other things, we:
1. reviewed the Company’s annual reports to
shareholders on
Form 10-K
for the fiscal years ended December 31, 2005, 2004 and
2003, quarterly reports on
Form 10-Q
for the quarters ended June 30 and March 31, 2006 and
September 30 and June 30, 2005 and Proxy Statement on
Form 14A, dated May 10, 2006;
2. spoke with certain members of the management of the
Company regarding the operations, financial condition, future
prospects and projected operations and performance of the
Company and regarding the Proposed Transaction, and spoken with
representatives of the Company’s financial advisors and
counsel and with the Special Committee’s counsel regarding
the Company, the Proposed Transaction, and related matters;
3. reviewed the following agreements and documents in
connection with the Proposed Transaction:
a. the Offer;
A-1
b. the Equity Commitments; and
c. the Financing Commitments.
4. reviewed forecasts and projections prepared by the
Company’s management with respect to the Company;
5. reviewed the historical market prices and trading
volume for the Company’s publicly traded securities for the
past one year;
6. reviewed certain other publicly available financial
data for certain companies that we deemed relevant and publicly
available transaction prices and premiums paid in other change
of control transactions that we deemed relevant for companies in
industries related to the Company; and
7. conducted such other financial studies, analyses and
inquiries as we have deemed appropriate.
We have relied upon and assumed, without independent
verification, the accuracy and completeness of all data,
material and other information (including, without limitation,
the financial forecasts and projections) furnished, or otherwise
made available, to us, discussed with or reviewed by us, or
publicly available, and do not assume any responsibility with
respect to such data, material and other information. In
addition, we have relied upon and assumed, without independent
verification, that the financial forecasts and projections have
been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial
results and condition of the Company, and we express no opinion
with respect to such forecasts and projections or the
assumptions on which they are based. We have relied upon and
assumed, without independent verification, that there has been
no material change in the assets, liabilities, financial
condition, results of operations, business or prospects of the
Company since the date of the most recent financial statements
provided to us, and that there is no information or facts that
would make the information reviewed by us incomplete or
misleading.
Furthermore, we have not been requested to make, and have not
made, any physical inspection or independent appraisal or
evaluation of any of the assets, properties or liabilities
(contingent or otherwise) of the Company, nor were we provided
with any such appraisal or evaluation. This Opinion is
necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. We have not undertaken, and are
under no obligation, to update, revise, reaffirm or withdraw
this Opinion, or otherwise comment on or consider events
occurring after the date hereof. Subsequent events that could
materially affect the conclusions set forth in this Opinion
include, without limitation, adverse changes in industry
performance or market conditions; changes to the business,
financial condition and results of operations of the Company;
and changes in the terns of the Proposed Transaction.
This Opinion is furnished for the use and benefit of the
Special Committee in connection with its consideration of the
Proposed Transaction and is not intended to, and does not,
confer any rights or remedies upon any other person, and is not
intended to be used, and may not be used, for any other purpose,
without our express, prior written consent. This Opinion is not
intended to be, and does not constitute, a recommendation to any
security holder as to how such security holder should vote with
respect to the Proposed Transaction. This Opinion may not be
disclosed, reproduced, disseminated, quoted, summarized or
referred to at any time, in any manner or for any purpose, nor
shall any references to Houlihan Lokey, HLHZ (as defined below)
or any of its affiliates be made by the Company or any of its
affiliates, or any other recipient of this Opinion, without the
prior written consent of Houlihan Lokey.
We advise you that Houlihan Lokey, was retained to act as
financial advisor and investment banker to the Special Committee
in connection with evaluating certain potential transactions by
the Company, including in connection with certain aspects of the
Proposed Transaction. The Company will pay Houlihan Lokey a fee
for providing this Opinion, which is not contingent upon the
consummation of the Proposed Transaction. The Company has agreed
to reimburse us for expenses and indemnify us against certain
liabilities and expenses.
We have not been requested to opine as to, and this Opinion
does not address: (i) the underlying business decision of
the Company, its security holders or any other party whether to
proceed with or effect the Proposed Transaction, (ii) the
fairness or inadequacy of any portion or aspect of the Proposed
Transaction not
A-2
expressly addressed in this Opinion, (iii) the fairness
or inadequacy of any portion or aspect of the Proposed
Transaction to the holders of any class of securities, creditors
or other constituencies of the Company, or any other party other
than those set forth in this Opinion, (iv) the relative
merits of the Proposed Transaction as compared to any
alternative business strategies that might exist for the Company
or the effect of any other transaction in which the Company
might engage, or (v) the tax or legal consequences of the
Proposed Transaction to either the Company or its security
holders, or any other party. Furthermore, no opinion, counsel or
interpretation is intended in matters that require legal,
regulatory, accounting, insurance, tax or other similar
professional advice. It is assumed that such opinions, counsel
or interpretations have been or will be obtained from the
appropriate professional sources.
Based upon and subject to the foregoing, and in reliance
thereon, it is our opinion that, as of the date hereof, the
Proposed Merger Consideration that would be received by the
common stockholders of the Company (other than IAC and its
affiliates) in connection with the Proposed Transaction is
inadequate to such common stockholders from a financial point of
view.
HOULIHAN
LOKEY HOWARD & ZUKIN FINANCIAL ADVISERS, INC.
A-3
PLEASE
VOTE TODAY!
SEE REVERSE SIDE
FOR THREE EASY WAYS TO VOTE.
▼
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE AND RETURN IN THE
ENVELOPE PROVIDED ▼
Inter-Tel (Delaware), Incorporated
REVOCABLE PROXY
For Special
Meeting of Stockholders on October 24, 2006
This Proxy is solicited on behalf of the Special Committee
of the Board of Directors (the “Special
Committee”) of Inter-Tel (Delaware), Incorporated (the
“Company”).
The undersigned appoints Alexander L. Cappello and Norman Stout
with full powers of substitution, to act as attorney and proxy
for the undersigned to vote, as designated on this proxy, all
shares of the Common Stock of the Company which the undersigned
is entitled to vote at the Company’s Special Meeting of
Stockholders to be held on October 24, 2006, at 10:00 A.M.
local time, at the offices of Snell & Wilmer, One Arizona
Center, 400 E. Van Buren Street,
19th
Floor Conference Room, Phoenix, Arizona 85004, and at any
adjournment or postponement thereof, in the manner indicated.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF YOU SIGN WITHOUT
OTHERWISE MARKING THE FORM, THIS PROXY WILL BE VOTED AS
RECOMMENDED BY THE SPECIAL COMMITTEE AND IN THE DISCRETION OF
THE APPOINTED PROXIES ON ANY OTHER MATTERS THAT MAY COME BEFORE
THE SPECIAL MEETING. AT THE PRESENT TIME, THE SPECIAL COMMITTEE
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE SPECIAL
MEETING.
INTER-TEL (DELAWARE), INCORPORATED
YOUR VOTE IS IMPORTANT
Please take a moment now to vote your shares of Inter-Tel (Delaware), Incorporated
common stock for the upcoming Special Meeting of Stockholders.
YOU CAN VOTE TODAY IN ONE OF THREE WAYS:
| 1. |
|
Vote by Telephone – Call toll-free from the U.S. or Canada at 1-866-849-9670, on a touch-tone
telephone. If outside the U.S. or Canada, call 1-215-521-1347. Please follow the simple
instructions provided. You will be required to provide the unique control number shown below. |
OR
| 2. |
|
Vote by Internet – Please access https://www.proxyvotenow.com/intl, and follow the simple
instructions provided. Please note you must type an “s” after http. You will be required to
provide the unique control number shown below. |
You may vote by telephone or Internet 24 hours a day, 7 days a week.
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner
as if you had executed a proxy card.
OR
| 3. |
|
Vote by Mail – If you do not have access to a touch-tone telephone or to the Internet, please
sign, date and return the proxy card in the envelope provided, or mail to: Inter-Tel
(Delaware), Incorporated, c/o Innisfree M&A Incorporated, FDR Station, P.O. Box 5155, New
York, NY 10150-5155. |
‚ TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE AND RETURN IN THE ENVELOPE PROVIDED ‚
THE SPECIAL COMMITTEE RECOMMENDS A VOTE AGAINST THE PROPOSAL
PROPOSAL 1: “RESOLVED, that the stockholders of Inter-Tel (Delaware), Incorporated (“Inter-Tel”)
urge the Inter-Tel Board of Directors to arrange for the prompt sale of Inter-Tel to the highest
bidder.”
o
AGAINST
o FOR
o ABSTAIN
Date: , 2006
Please sign exactly as your name appears hereon. Where stock is registered jointly, all owners must
sign. Corporate owners should sign full corporate name by an authorized person. Executors,
administrators, trustees or guardians should indicate their status when signing.
PLEASE DATE AND SIGN THIS PROXY BEFORE RETURNING IT IN THE ENVELOPE PROVIDED