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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Lumisys Incorporated
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock.
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
$4.05 per share. In accordance with Section (c)(1) of Rule 0-11, the
filing fees calculated based on the proposed cash payment to be
transferred to the security holders in the transaction.
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(4) Proposed maximum aggregate value of transaction: $39,000,000
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(5) Total fee paid: $7,800
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[Lumisys Incorporated LOGO]
December , 2000
Dear Fellow Stockholders:
The Board of Directors of Lumisys Incorporated has called a special meeting
of stockholders for December 22, 2000. At this important meeting, you will be
asked to consider and vote upon a proposal to merge our company with a wholly-
owned subsidiary of Eastman Kodak Company.
The place, time and date of the special meeting are as follows:
225 Humboldt Court
Sunnyvale, CA 94089
10:30 a.m., local time, December 22, 2000
The accompanying notice of meeting and proxy statement explain the proposed
merger and provide specific information concerning the special meeting. Please
read these materials carefully. A copy of the merger agreement is attached to
the proxy statement as APPENDIX A. If the transaction is completed, Lumisys
stockholders will be entitled to receive $4.05 per share in cash for each of
their shares of Lumisys common stock. After the merger, Lumisys will be a
wholly-owned subsidiary of Kodak. Lumisys' subsidiary, AuntMinnie.com, will
remain a subsidiary of Lumisys.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AND HAS DETERMINED THAT IT
IS FAIR TO, AND IN THE BEST INTERESTS OF, LUMISYS STOCKHOLDERS. ACCORDINGLY,
YOUR BOARD RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND
THE MERGER.
YOUR VOTE IS VERY IMPORTANT. We cannot proceed with the merger unless the
stockholders of Lumisys adopt the merger agreement. You are cordially invited
to attend the special meeting. Whether or not you plan to attend, please
complete and mail the enclosed proxy card to us. If you do not return your
proxy card or instruct your broker how to vote your shares held in your
broker's name, the effect will be the same as a vote against the merger.
Sincerely,
/s/ Bala S. Manian
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Bala S. Manian, Ph.D.
Chairman of the Board and Acting
Chief Executive Officer
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LUMISYS
225 Humboldt Court
Sunnyvale, CA 94089
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Notice of Special Meeting of Stockholders
to be held on December 22, 2000
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TO THE STOCKHOLDERS OF LUMISYS INCORPORATED:
Lumisys Incorporated, a Delaware corporation ("Lumisys"), will hold a
Special Meeting of Stockholders on December 22, 2000 at 10:30 a.m., local
time, at Lumisys' offices at 225 Humboldt Court, Sunnyvale, California 94089,
to vote on:
. A proposal to approve and adopt the Agreement and Plan of Merger dated
as of November 9, 2000, by and among Lumisys, Eastman Kodak Company, a
New Jersey corporation ("Kodak"), and Sunfish Acquisition Corp., a newly
formed Delaware corporation and a wholly owned subsidiary of Kodak
("Sunfish"), a copy of which is attached as APPENDIX A to the
accompanying proxy statement, pursuant to which Sunfish will merge with
and into Lumisys. Each share of Lumisys common stock (other than those
shares held by the stockholders, if any, who properly exercise their
appraisal rights under Section 262 of the Delaware General Corporation
Law), will be converted into the right to receive $4.05 in cash for each
share of Lumisys common stock held as of the effective time of the
merger.
. Any other business that may properly come before the special meeting or
any adjournment, postponement, continuation or rescheduling of the
special meeting.
Only stockholders of record at the close of business on November 30, 2000
will receive notice of and be entitled to vote at the special meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN PERSON. HOWEVER,
TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED, POSTAGE-PREPAID ENVELOPE. ANY STOCKHOLDER ATTENDING THE MEETING MAY
VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY CARD.
Lumisys stockholders have the right to dissent from the merger and obtain
payment in cash of the fair value of their shares of common stock under
applicable provisions of Delaware law. In order to perfect appraisal rights,
stockholders must give written demand for appraisal of their shares before the
taking of the vote on the merger at the special meeting and must not vote in
favor of the merger. A copy of the applicable Delaware statutory provisions is
included as APPENDIX C to the accompanying proxy statement and a summary of
these provisions can be found under "Appraisal Rights in the Merger" in the
accompanying proxy statement.
Your Board of Directors recommends that you vote "FOR" approval and
adoption of the Agreement and Plan of Merger.
By Order of the Board of Directors
/s/ Dean MacIntosh
Dean MacIntosh
Executive Vice President
Sunnyvale, California
December , 2000
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER
AGREEMENT IS APPROVED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE
SURRENDER OF YOUR STOCK CERTIFICATES.
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LUMISYS
225 Humboldt Court
Sunnyvale, CA 94089
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PROXY STATEMENT
FOR A SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 22, 2000
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INTRODUCTION
We are furnishing this Proxy Statement to the stockholders of Lumisys
Incorporated ("Lumisys"), in connection with the solicitation by Lumisys'
Board of Directors of proxies to be used at a Special Meeting of Stockholders,
as it may be adjourned, postponed, continued or rescheduled from time to time,
to be held on December 22, 2000 at 10:30 a.m., local time, at 225 Humboldt
Court, Sunnyvale, California 94089. The purpose of the special meeting is for
Lumisys stockholders to vote upon a proposal to adopt and approve the
Agreement and Plan of Merger dated as of November 9, 2000, by and among
Lumisys, Eastman Kodak Company ("Kodak"), and Sunfish Acquisition Corp.
("Sunfish"), a newly-formed, wholly owned subsidiary of Kodak, and the
transactions contemplated thereby. The Merger Agreement provides, among other
things, that:
. Sunfish will merge with and into Lumisys;
. Lumisys will continue as the surviving corporation and will be a wholly
owned subsidiary of Kodak;
. each share of Lumisys common stock issued and outstanding at the
effective time of the merger (other than shares held by stockholders, if
any, who properly exercise their appraisal rights under Delaware law)
will convert into the right to receive $4.05 in cash; and
. each unexercised option to purchase Lumisys common stock outstanding at
the effective time of the merger with an exercise price of $4.05 or less
will be converted into the right to receive an amount equal to $4.05 per
share less the exercise price per share of such option.
We are first mailing this Proxy Statement and the accompanying notice,
proxy card and letter on or about December , 2000 to Lumisys stockholders
entitled to receive notice of, and to vote at, the special meeting.
Stockholders who do not vote in favor of the Merger Agreement and who
otherwise comply with the applicable procedures described in Section 262 of
the Delaware General Corporation Law will be entitled to appraisal rights. We
have summarized for you the provisions of Section 262 of the Delaware General
Corporation Law in the section of this Proxy Statement called "Appraisal
Rights in the Merger." That summary includes a description of the procedure
that dissenting stockholders must follow to assert appraisal rights. The
entire text of Section 262 of the Delaware General Corporation Law is attached
as APPENDIX C to this Proxy Statement.
THE LUMISYS BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Introduction.............................................................. i
Summary Term Sheet........................................................ 1
Questions and Answers About the Merger.................................... 2
Summary................................................................... 4
The Participants (page 12)............................................... 4
The Merger (page 12)..................................................... 4
The Special Meeting of Stockholders (page 29)............................ 7
Lumisys' Selected Historical Financial Data............................... 9
Market Price of Lumisys Common Stock...................................... 10
Cautionary Statement Concerning Forward-Looking Information............... 11
Special Factors........................................................... 12
Participants in the Merger............................................... 12
Structure of the Merger.................................................. 12
Merger Consideration..................................................... 12
Background of the Merger................................................. 12
Reasons for the Merger; Recommendation of the Board of Directors......... 14
Opinion of Lumisys' Financial Advisor.................................... 15
Source of Funds.......................................................... 19
Material Federal Income Tax Consequences of the Merger................... 19
Anticipated Accounting Treatment......................................... 20
Regulatory Matters....................................................... 20
Interests of Lumisys' Directors and Officers in the Merger that May
Differ From Your Interests.............................................. 20
Severance Arrangements................................................... 21
Executive Officers and Directors of the Surviving Corporation............ 21
Consequences of the Merger; Plans for Lumisys After the Merger........... 21
Conduct of Lumisys' Business if the Merger is Not Completed.............. 21
The Merger Agreement...................................................... 22
The Merger............................................................... 22
When the Merger Will Be Completed........................................ 22
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Certificate of Incorporation, By-Laws, Directors and Officers of the
Surviving Corporation................................................... 22
Conversion of Lumisys Shares............................................. 22
Stock Options and Warrants............................................... 23
Employee Stock Purchase Plan............................................. 23
Payment for Lumisys Shares............................................... 23
Procedures for Exchanging Your Stock Certificates........................ 23
Representations and Warranties........................................... 23
Conduct of Business Prior to Closing..................................... 25
No Solicitation Period................................................... 25
Additional Covenants of Kodak and Lumisys................................ 26
Additional Covenant of Lumisys........................................... 26
Indemnification of Lumisys Officers and Directors........................ 26
Conditions to Closing.................................................... 27
Termination.............................................................. 27
Fees and Expenses........................................................ 28
The Special Meeting....................................................... 29
Place, Date, Time and Purpose............................................ 29
Record Date and Outstanding Shares....................................... 29
Attending the Meeting.................................................... 29
Vote Required; Quorum.................................................... 29
Proxies; Revocation...................................................... 29
Expenses of Proxy Solicitation........................................... 30
Adjournments............................................................. 30
Appraisal Rights in the Merger............................................ 30
Beneficial Ownership of Management and Principal Stockholders............. 33
Where You Can Find More Information....................................... 34
Other Matters............................................................. 35
APPENDIX A--Agreement and Plan of Merger.................................. A-1
APPENDIX B--Opinion of UBS Warburg LLC.................................... B-1
APPENDIX C--Delaware General Corporation Law.............................. C-1
</TABLE>
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SUMMARY TERM SHEET
This summary term sheet highlights selected information contained in this
proxy statement and may not contain all of the information that is important
to you. We urge you to read this entire proxy statement carefully, including
the appendices. In this proxy statement, the terms "Lumisys," "we," "us" and
"our" refer to Lumisys Incorporated.
Stockholder Vote. You are being asked to approve the merger agreement and
the merger of Sunfish, a wholly owned subsidiary of Kodak, into Lumisys. The
merger agreement must be approved by the holders of a majority of the
outstanding shares of Lumisys common stock. See "The Special Meeting"
beginning on page 29. Certain officers of Lumisys and its subsidiary
AuntMinnie.com, Inc., who are also directors of Lumisys have entered into an
agreement with Kodak to vote their shares of Lumisys, aggregating
approximately 10.56% of the outstanding shares, in favor of the merger and
against any other acquisition proposed and have granted Kodak an irrevocable
proxy to vote such shares.
Payment. As a result of the merger, each share of Lumisys common stock will
be converted into the right to receive $4.05 in cash, without interest or
other payment. You will not own any Lumisys common stock or any other interest
in Lumisys after completion of the merger. See "The Merger Agreement"
beginning on page 22.
Sunfish. Sunfish is a newly formed Delaware corporation that is wholly-
owned by Kodak. See "Summary--The Participants" beginning on page 4.
Tax Consequences. Generally, the merger will be taxable for U.S. federal
income tax purposes. You will recognize taxable gain or loss in the amount of
the difference between $4.05 and your adjusted tax basis for each share of
Lumisys' common stock that you own. See "Material Federal Income Tax
Consequences of the Merger" beginning on page 19.
Conditions. Completion of the merger is subject to Lumisys stockholders'
approval as well as certain other conditions, including the expiration or
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. See "The Merger Agreement--Conditions to Closing"
beginning on page 27.
Appraisal Rights. If you do not wish to accept $4.05 per share of Lumisys
common stock, you may have the fair value of your shares determined by the
Delaware Chancery Court if you properly perfect your right to an appraisal
under Delaware law. Your appraisal right is subject to certain restrictions
and technical requirements which are described in the proxy statement. See
"Appraisal Rights in the Merger" beginning on page 30.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address briefly some
commonly asked questions regarding the merger. These questions and answers may
not address all questions that may be important to you as a Lumisys
stockholder. Please refer to the more detailed information contained elsewhere
in this proxy statement and its appendices.
Q: IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE FOR MY SHARES OF LUMISYS
COMMON STOCK?
A: You will receive cash. Kodak will pay cash for any Lumisys shares
outstanding as of the closing and Lumisys stock options outstanding as of
the Closing for a total purchase price of approximately $39 million. The
per share amount of cash will be $4.05. The amount paid for each
outstanding and unexercised option to purchase Lumisys common stock, will
be equal to $4.05 per share less the exercise price per share of such
option. Stock options and warrants with an exercise price greater than
$4.05 per share will be cancelled.
Q: WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A: The Special Meeting is scheduled to take place at 10:30 a.m. local time on
December 22, 2000, at Lumisys' principal office at 225 Humboldt Court,
Sunnyvale, California 94089.
Q: WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
A: Holders of record of Lumisys common stock as of the close of business on
November 30, 2000 are entitled to vote at the special meeting. Each
stockholder has one vote for each share of Lumisys common stock he, she or
it owns.
Q: WHAT VOTE IS REQUIRED FOR LUMISYS STOCKHOLDERS TO APPROVE THE MERGER?
A: In order for the merger to be approved, holders of a majority of the
outstanding Lumisys common stock must vote "FOR" the merger. If your shares
are not voted, it has the same effect as a vote "AGAINST" the merger. The
Lumisys Board of Directors recommends that you vote "FOR" approval and
adoption of the merger agreement.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
Proxy Statement, please vote your shares as soon as possible by filling
out, signing and returning the enclosed proxy card. Your voting materials
include detailed information on how to vote.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: No. Your broker can only vote your shares if you provide instructions on
how to vote. You should instruct your broker on how to vote your shares
using the instructions provided by your broker. If your shares are not
voted, it has the same effect as a vote "AGAINST" the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You may revoke your proxy by notifying Lumisys' Secretary
in writing or by submitting a new proxy dated after the date of the proxy
being revoked. In addition, your proxy will be revoked by you if you attend
the special meeting and vote in person. However, simply attending the
special meeting will not revoke your proxy. If you have instructed a broker
to vote your shares, you must follow the instructions received from your
broker to change your vote.
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Q: DO I NEED TO ATTEND LUMISYS' SPECIAL MEETING IN PERSON?
A: No. It is not necessary for you to attend the special meeting to vote your
shares if Lumisys has previously received your proxy, although you are
welcome to attend.
Q: WILL I HAVE APPRAISAL RIGHTS AS A RESULT OF THE MERGER?
A: Yes. If you wish to exercise your appraisal rights, you must follow the
requirements of Delaware law, you must not vote your shares in favor of the
merger. A summary of the requirements you must follow to exercise your
appraisal rights is included in "Appraisal Rights in the Merger" in this
proxy statement.
Q: WHEN WILL HOLDERS OF LUMISYS COMMON STOCK RECEIVE THE MERGER CONSIDERATION?
A: The merger is expected to be completed promptly following the special
meeting of Lumisys stockholders. However, it is possible that delays could
require that the merger be completed at a later time. Following the merger,
you will receive instructions on how to receive your cash payment in
exchange for each share of Lumisys common stock. You must return your
Lumisys stock certificates as described in the instructions, and you will
receive your cash payment as soon as practicable after EquiServe, the paying
agent, receives your Lumisys' stock certificate. If you hold shares through
a brokerage account, your broker will handle the surrender of stock
certificates to EquiServe. If you hold an option to purchase Lumisys common
stock you will receive instructions as to where to send your option papers
to receive your cash payment.
Q: WHO WILL OWN LUMISYS AFTER THE MERGER?
A: After the merger, Lumisys will be a wholly owned subsidiary of Eastman Kodak
Company, a New Jersey corporation.
Q: SHOULD I SEND IN MY LUMISYS STOCK CERTIFICATES NOW?
A: No. After the merger is completed, EquiServe, as paying agent, will send you
written instructions for exchanging your Lumisys stock certificates.
Q: WILL I OWE TAXES AS A RESULT OF THE MERGER?
A: The cash you receive in the merger in exchange for your shares of Lumisys
common stock and any cash you may receive from exercising your appraisal
rights will be subject to United States federal income tax and also may be
taxed under applicable state, local and foreign tax laws. In general, you
will recognize gain or loss equal to the difference between the amount of
cash you receive and your adjusted tax basis in your shares of Lumisys
common stock. We recommend that you read the section entitled "Special
Factors--Material Federal Income Tax Consequences of the Merger" in this
proxy statement for a more detailed explanation of the tax consequences of
the merger. You should consult your tax advisor regarding the specific tax
consequences of the merger applicable to you, including the tax consequences
of the receipt of cash in exchange for your stock options, if any.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have additional questions about the merger after reading this proxy
statement, you should contact:
Dean MacIntosh
Executive Vice President
Lumisys Incorporated
225 Humboldt Court
Sunnyvale, California 94089
(408) 733-6565 (telephone)
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SUMMARY
The following is a summary of material information contained in this Proxy
Statement. For more information, you should refer to the discussion in the
main body of this Proxy Statement along with the appendices. A copy of the
merger agreement is attached as APPENDIX A to this Proxy Statement and
incorporated by reference. You should refer to that agreement for a compete
statement of the merger terms.
THE PARTICIPANTS (page 12)
Lumisys Incorporated. Lumisys is a Delaware corporation that designs,
manufactures and markets computed radiography ("CR") systems that scan medical
or industrial images from a reusable phosphor plate and a family of precision
digitizers that convert medical images on film into digital format.
AuntMinnie.com, Inc., a subsidiary of Lumisys, operates an Internet portal,
intended to be the most comprehensive Internet site for radiologists and
professionals in the medical imaging industry, and develops and licenses
software that enables healthcare clinicians to assess medical images and
clinical information at any point of care.
Eastman Kodak Company. Kodak is a New Jersey corporation that is engaged
primarily in developing, manufacturing and marketing consumer, professional,
health and other imaging products and services. In its Consumer segment, Kodak
manufactures and sells films, photographic papers, processing services,
photofinishing equipment, photographic chemicals, cameras (including one-time-
use and digital) and projectors. In the Professional segment Kodak
manufactures and sells or distributes films, photographic papers, digital
cameras, printers and scanners, chemicals, and services targeted to
professional customers. In the Health Imaging segment, Kodak manufactures,
sells and distributes films and digital products which are used to capture,
store, process, print and display images and information in a variety of forms
for customers in the health care industry, for both primary and referral
diagnoses. Kodak also manufactures, sells and distributes other imaging
products which serve customers primarily in motion picture and television,
document imaging, and government markets.
Sunfish Acquisition Corp. Sunfish is a Delaware corporation and wholly
owned subsidiary of Kodak, formed solely for the purpose of engaging in the
merger. Pursuant to the terms of the merger agreement, at the effective time
of the merger, Sunfish will be merged with and into Lumisys, with Lumisys
being the surviving corporation.
THE MERGER (page 12)
Structure of the Merger (page 12)
The proposed transaction will be structured as a merger of Sunfish into
Lumisys, with Lumisys being the surviving corporation and becoming a wholly
owned subsidiary of Kodak.
What Lumisys Stockholders will Receive in the Merger (page 12)
Lumisys stockholders will receive $4.05 in cash for each share of Lumisys
common stock held by them. Each outstanding and unexercised option to purchase
Lumisys common stock outstanding at the effective time of the merger will be
converted into the right to receive an amount equal to $4.05 per share less
the exercise price per share of Lumisys common stock provided in such stock
option agreement. All unexercised options will be accelerated prior to the
merger. Outstanding options and warrants with an exercise price in excess of
$4.05 per share will be cancelled.
Reasons for the Merger (page 14)
The merger presents an opportunity for Lumisys' stockholders to realize a
significant premium over recent market prices for their shares. In addition,
the merger allows Lumisys an opportunity to better compete in the health
imaging market.
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Board Recommendation (page 14)
The Lumisys' Board of Directors has approved the merger and recommends that
the Lumisys stockholders vote to adopt the merger agreement and approve the
merger.
Opinion of Lumisys' Financial Advisor (page 15)
In connection with the merger, the Lumisys Board of Directors received a
written opinion from UBS Warburg LLC as to the fairness, from a financial
point of view, of the merger consideration to the holders of Lumisys common
stock. The full text of UBS Warburg's written opinion dated November 9, 2000
is attached to the back of this Proxy Statement as APPENDIX B. We encourage
you to read this opinion carefully in its entirety for a description of the
assumptions made, procedures followed, matters considered and limitations on
the review undertaken. UBS Warburg's opinion is addressed to the Lumisys Board
of Directors and does not constitute a recommendation to any stockholder with
respect to any matters relating to the proposed merger.
When the Merger will be Completed (page 22)
We are working to complete the merger as soon as possible. We anticipate
completing the merger as soon as practicable following the special meeting,
subject to receipt of stockholder approval and satisfaction of other
requirements, including the conditions described immediately below.
Regulatory Matters (page 20)
The merger is subject to the expiration or early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Conditions to Completing the Merger (page 27)
The completion of the merger depends on several conditions being satisfied
or waived, including, among others, the following:
. approval of the merger agreement and the merger by Lumisys'
stockholders;
. expiration or early termination of the waiting period applicable to
consummation of the merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and receipt of any other material governmental
consent required with respect to the merger;
. absence of any legal prohibition against the merger;
. the material accuracy of the representations and warranties of the
parties contained in the merger agreement and the material compliance
with the obligations of the parties to be performed under the merger
agreement; and
. obtaining necessary consents and approvals.
Termination of the Merger Agreement (page 27)
The parties to the merger agreement may agree to terminate the merger
agreement by mutual consent at any time before completing the merger, even
after Lumisys' stockholders have approved the merger agreement and the merger.
Either Kodak or Lumisys may terminate the merger if:
. the other party shall have made an uncured, material breach of the
merger agreement preventing Lumisys or Kodak from satisfying certain
conditions set forth in the merger agreement by January 31, 2001 or
February 28, 2001 under certain circumstances;
. any permanent injunction or action by any governmental entity preventing
the merger shall have become final and nonappealable;
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. the merger is not completed by January 31, 2001 or February 28, 2001
under certain circumstances, unless the party seeking to terminate has
caused the failure to complete the merger by failing to fulfill its
obligations under the merger agreement; or
. the Lumisys stockholders do not approve the merger and the merger
agreement at the special meeting.
In addition, Kodak may terminate the merger agreement if:
. after receipt by Lumisys of a superior proposal (as defined) if;
-- by the end of the seven calendar days following (but not including)
the day Kodak notifies Lumisys that it wishes the Lumisys Board of
Directors to publicly reaffirm its recommendation to the Lumisys
stockholders to vote for the merger, the Lumisys Board of Directors
fails to so publicly reaffirm; or
-- by the later of the end of the tenth business day following the
public announcement of an acquisition proposal or the seven calendar
days following (but not including) the day Kodak notifies Lumisys
that it wishes the Lumisys Board of Directors to publicly reject such
publicly announced acquisition proposal the Lumisys Board of
Directors fails to publicly reject such acquisition proposal or the
Lumisys Board of Directors shall have changed its recommendation to
the Lumisys stockholders to vote in favor of approval of the merger.
Further, Lumisys may terminate the agreement, after payment of the
termination fee described below, if:
. Lumisys receives a superior proposal, the Lumisys Board of Directors
determines that it would be in accordance with their fiduciary duties
after considering applicable state law provisions and the written advice
of legal counsel, to accept the superior proposal. Lumisys shall be
entitled to amend this proxy statement and delay the special meeting to
permit its stockholders to consider and vote on the transactions under
the merger agreement and such superior proposal.
Expenses and Termination Fee (page 28)
Generally, whether or not the merger is consummated, Lumisys and Kodak are
each responsible for their respective expenses incurred in connection with the
merger. The merger agreement provides that certain of Lumisys' expenses in
connection with the merger may not exceed $550,000 in the aggregate. Lumisys
is also required to pay a termination fee of 4% of aggregate merger
consideration if the merger agreement is terminated under certain
circumstances.
Material Federal Income Tax Consequences (page 19)
The merger will be a taxable transaction to you. For United States federal
income tax purposes, your receipt of cash in exchange for your shares of
Lumisys common stock generally will cause you to recognize a gain or loss
measured by the difference between the cash you receive in the merger and your
tax basis in your shares of Lumisys common stock. YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES THAT ARE
PARTICULAR TO YOU.
Appraisal Rights (page 30)
Any stockholder who does not wish to accept $4.05 per share cash
consideration in the merger has the right under Delaware law to have his, her
or its shares appraised by the Delaware Chancery Court. This right of
appraisal is subject to a number of restrictions and technical requirements.
Generally, in order to exercise appraisal rights, among other things:
. you must NOT vote in favor of the merger agreement and the merger; and
. you must make a written demand for appraisal in compliance with Delaware
law BEFORE the vote at the special meeting with respect to the merger
agreement and the merger.
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Merely voting against the merger agreement will not preserve your right of
appraisal under Delaware law. APPENDIX C to this Proxy Statement contains the
Delaware statutory provision relating to your right of appraisal. Failure to
follow all of the steps required by this statutory provision will result in
the loss of your right of appraisal.
Interests of Directors and Officers in the Merger that Differ From Your
Interests (page 20)
Some of Lumisys' directors and officers have interests in the merger that
are different from, or are in addition to, their interests as stockholders in
Lumisys. Lumisys' Board of Directors knew about these additional interests and
considered them when they approved the merger agreement. These interests
include the following:
. certain directors and officers have options that will accelerate as to
vesting together with all outstanding options;
. certain directors and officers have entered into an agreement with Kodak
pursuant to which they have agreed to vote their shares of Lumisys in
favor of the merger and against any other acquisition proposed and have
granted Kodak a proxy in connection therewith;
. certain officers, directors and employees will receive incentive
payments totaling $1,620,000 upon completion of the merger;
. Phillip Berman, M.D., a director and officer of Lumisys will enter into
an employment agreement with Kodak; and
. Kodak has agreed to continue the directors and officers indemnification
insurance for current and former directors and officers of Lumisys for
six years following the merger.
Procedure for Receiving Merger Consideration (page 23)
Kodak has appointed EquiServe, Lumisys' stock transfer agent, as paying
agent, to coordinate the payment of the cash merger consideration following
the merger. The paying agent will send you written instructions for
surrendering your certificates or option agreements and obtaining the cash
merger consideration after we have completed the merger.
THE SPECIAL MEETING OF STOCKHOLDERS (page 29)
Place, Date, Time and Purpose (page 29)
The special meeting will be held at Lumisys' offices at 225 Humboldt Court,
Sunnyvale, California 94089, at 10:30 a.m., local time, on December 22, 2000
where stockholders will be asked to approve and adopt the merger agreement and
merger.
Record Date and Outstanding Shares (page 29)
You can vote at the special meeting all of the shares of Lumisys common
stock you own of record as of November 30, 2000, which is the record date for
the special meeting. If you own shares which are registered in someone else's
name, for example, a broker, you need to direct that person to vote those
shares or obtain an authorization from them and vote the shares yourself at
the meeting. As of the close of business on November 30, 2000, there were
shares of Lumisys common stock outstanding.
Vote Required for Approval of the Merger (page 29)
The merger requires the approval of the holders of a majority of the
outstanding shares of Lumisys common stock. The failure to vote your shares
has the same effect as a vote against the merger. Holders of approximately
10.56% of the outstanding common stock have agreed with Kodak to vote in favor
of the merger and have granted Kodak a proxy in connection therewith. The
Lumisys Board of Directors recommends that you vote "FOR" approval and
adoption of the merger agreement.
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Quorum (page 29)
The required quorum for the transaction of business at the special meeting
is a majority of the shares of Lumisys common stock outstanding on the record
date.
Contact Information (page 34)
If you have any questions regarding the merger or any other matters
discussed in this proxy statement, please contact:
Dean MacIntosh
Executive Vice President
Lumisys Incorporated
225 Humboldt Court
Sunnyvale, California 94089
(408) 733-6565 (telephone)
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<PAGE>
LUMISYS' SELECTED HISTORICAL FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine months
ended Year ended December 31,
September 30, -------------------------------------------
Consolidated Statement of 2000 1999 1998 1997 1996 1995
Operations Data: ------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Sales.................... $14,755 $19,167 $19,163 $23,489 $23,226 $16,511
Cost of Sales............ 7,912 10,979 8,877 10,255 10,024 8,194
------- ------- ------- ------- ------- -------
Gross Profit........... 6,843 8,188 10,286 13,234 13,202 8,317
------- ------- ------- ------- ------- -------
Operating Expenses:
Sales and marketing.... 3,833 3,704 2,745 4,977 4,199 1,751
Research and
development........... 1,980 2,748 4,312 3,684 2,398 1,660
General and
administrative........ 2,066 2,651 2,690 3,864 2,937 1,811
Production, content and
other website costs... 1,015
Merger and related
cost.................. -- -- -- 4,159 -- --
Acquired in-process
research and
development........... -- -- -- -- -- 1,442
------- ------- ------- ------- ------- -------
Total operating
expenses............ 8,894 9,103 9,747 16,684 9,534 6,664
------- ------- ------- ------- ------- -------
Income (loss) from
operations.............. (2,051) (915) 539 ( 3,450) 3,668 1,653
Interest income, net..... 617 784 926 1,119 977 211
------- ------- ------- ------- ------- -------
Income (loss) from
continuing operations
before income taxes..... (1,434) (131) 1,465 (2,331) 4,645 1,864
Provision (benefit) for
income taxes............ -- -- 571 1,145 1,728 (440)
------- ------- ------- ------- ------- -------
Net income (loss) from
operations.............. (1,434) (131) 894 (3,476) 2,917 2,304
Discontinued operations,
net of income taxes..... -- (4,168) (212) 127 (102) (503)
------- ------- ------- ------- ------- -------
Net income (loss)........ $(1,434) $(4,299) $ 682 $(3,349) $ 2,815 $ 1,801
======= ======= ======= ======= ======= =======
Net income (loss) from
continuing operations
per share:
Basic.................. $ (0.16) $ (0.01) $ 0.09 $ (0.34) $ 0.30 $ 0.34
Diluted................ $ (0.16) $ (0.01) $ 0.09 $ (0.34) $ 0.30 $ 0.34
Net income (loss) per
share:
Basic.................. $ (0.16) $ (0.46) $ 0.07 $ (0.33) $ 0.29 $ 0.27
Diluted................ $ (0.16) $ (0.46) $ 0.07 $ (0.33) $ 0.29 $ 0.25
Shares used to compute
net income (loss) from
continuing operations
per share:
Basic.................. 9,258 9,427 9,913 10,080 9,598 6,714
Diluted................ 9,258 9,427 10,074 10,080 9,760 7,236
Shares used to compute
net income (loss) per
share:
Basic.................. 9,258 9,427 9,913 10,080 9,598 6,714
Diluted................ 9,258 9,427 10,074 10,080 9,760 7,236
</TABLE>
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MARKET PRICE OF LUMISYS COMMON STOCK
Lumisys common stock is quoted on the National Market System of the Nasdaq
Stock Market under the symbol "LUMI." The following table sets forth, for the
periods indicated, the high and low sales prices per share for Lumisys common
stock as reported on the Nasdaq National Market System.
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
1998:
First Quarter............................................... $5.75 $3.78
Second Quarter.............................................. 5.44 3.44
Third Quarter............................................... 4.19 2.88
Fourth Quarter.............................................. 4.81 2.91
1999:
First Quarter............................................... $4.38 $2.69
Second Quarter.............................................. 4.13 2.56
Third Quarter............................................... 3.75 2.25
Fourth Quarter.............................................. 3.88 2.31
2000:
First Quarter............................................... $5.28 $2.63
Second Quarter.............................................. 3.75 2.13
Third Quarter............................................... 3.00 2.16
Fourth Quarter (through November 1, 2000)................... 2.84 1.75
</TABLE>
The closing market price per share of Lumisys common stock on November 8,
2000, which was the last full trading day immediately preceding the public
announcement of the proposed merger, was $2.69. On November 17, 2000, which is
the latest practicable date prior to the printing of this proxy statement, the
closing price for Lumisys common stock was $3.88.
As of November 17, 2000, there were 9,275,089 shares of Lumisys common
stock outstanding, held by approximately stockholders of record of Lumisys
common stock. This number does not reflect the number of persons or entities
who may hold their stock in nominee or "street" name through brokerage firms.
Lumisys has never paid any cash dividends on its common stock, nor does it
have any intention of doing so in the near future.
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<PAGE>
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This Proxy Statement (and the documents to which we refer in this proxy
statement) contains forward-looking statements based on estimates and
assumptions. Forward-looking statements include information concerning
possible or assumed future results of operations of each of Kodak and Lumisys
as well as certain information relating to the merger. There are forward-
looking statements throughout this proxy statement, including under the
headings "Summary Term Sheet," "Questions and Answers About the Merger," "The
Merger" and "Opinion of Lumisys' Financial Advisor," and in statements
containing the words "believes," "expects," "anticipates," "intends,"
"estimates" or other similar expressions. For each of these statements,
Lumisys claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
You should be aware that forward-looking statements involve known and
unknown risks and uncertainties. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure
you that the actual results or developments we anticipate will be realized, or
even if realized, that they will have the expected effects on the business or
operations of each of Lumisys and Kodak. These forward-looking statements
speak only as of the date on which the statements were made, and we assume no
obligation to update any forward-looking statements to reflect future events
or developments occurring after the date on which any of those statements is
made.
In addition to other factors and matters contained or incorporated in this
document, we believe the following factors could cause actual results to
differ materially from those discussed in the forward-looking statements:
. financial performance of Lumisys through completion of the merger;
. changes in the economic conditions in the markets served by us;
. changes and/or delays in technology, product development plans and
schedules;
. customer acceptance of new products;
. the timing of, and regulatory and other conditions associated with, the
completion of the merger;
. intensified competitive pressures in the markets in which we compete;
. the loss of key employees;
. costs or difficulties related to the integration into Kodak of newly-
acquired businesses, and other businesses Kodak expects to acquire; and
. general economic conditions.
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SPECIAL FACTORS
PARTICIPANTS IN THE MERGER
Lumisys Incorporated. Lumisys is a Delaware corporation that designs,
manufactures and markets computed radiography ("CR") systems that scan medical
or industrial images from a reusable phosphor plate and a family of precision
digitizers that convert medical images on film into digital format.
AuntMinnie.com, Inc. a subsidiary of Lumisys, operates an Internet portal,
intended to be the most comprehensive Internet site for radiologist and
professionals in the medical imaging industry, and develops and licenses
software that enables healthcare clinicians to access medical images and
clinical information at any point of care. Lumisys common stock is quoted on
the Nasdaq National Market System under the symbol "LUMI." Lumisys' principal
executive offices are located at 225 Humboldt Court, Sunnyvale, California
94089, and its telephone number is (408) 733-6565.
Eastman Kodak Company. Kodak is a New Jersey corporation that is engaged
primarily in developing, manufacturing and marketing consumer, professional,
health and other imaging products and services. In its consumer segment, Kodak
manufactures and sells films, photographic papers, processing services,
photofinishing equipment, photographic chemicals, cameras (including one-time-
use and digital) and projectors. In the Professional segment Kodak
manufactures and sells or distributes films, photographic papers, digital
cameras, printers and scanners, chemicals, and services targeted to
professional customers. In the Health Imaging segment, Kodak manufactures,
sells and distributes films, and digital products which are used to capture,
store, process, print and display images and information in a variety of forms
for customers in the health care industry, for both primary and referral
diagnoses. Kodak also manufactures, sells and distributes other imaging
products which serve customers primarily in motion picture and television,
document imaging, and government markets. Kodak common stock is quoted on the
New York Stock Exchange under the symbol "EK." Kodak's principal offices are
located at 343 State Street, Rochester, New York 14650, and its telephone
number is (716) 724-4000.
Sunfish Acquisition Corp. Sunfish is a Delaware corporation and wholly
owned subsidiary of Kodak formed solely for the purpose of engaging in the
merger. Pursuant to the terms of the merger agreement, at the effective time
of the merger, Sunfish will be merged with and into Lumisys, with Lumisys
being the surviving corporation. Sunfish's principal office is located at
Eastman Kodak Company, 343 State Street, Rochester, New York 14650, and its
telephone number is (716) 724-4000.
STRUCTURE OF THE MERGER
The proposed transaction will be structured as a merger of Sunfish into
Lumisys. Lumisys will be the surviving corporation in the merger and, upon
completion of the merger, will be a wholly owned subsidiary of Kodak.
MERGER CONSIDERATION
At the completion of the merger, Lumisys stockholders will be entitled to
receive $4.05 in cash for each share of Lumisys common stock that they own.
Each outstanding and unexercised option to purchase Lumisys common stock
outstanding at the effective time of the merger will be converted into the
right to receive an amount equal to $4.05 per share less the exercise price
per share of Lumisys common stock provided in such stock option agreement.
All unexercised options will be accelerated prior to the merger.
Outstanding options and warrants with an exercise price in excess of $4.05 per
share will be cancelled.
BACKGROUND OF THE MERGER
As part of its ongoing business planning, Lumisys' Board of Directors and
senior management regularly have considered strategic alternatives in light of
existing conditions and developments in the medical imaging and internet
markets. In connection with this process, Lumisys' management concluded in
early 2000 that Lumisys should explore the feasibility of combining Lumisys
and/or its AuntMinnie.com subsidiary with another company engaged in the
medical imaging and/or Internet industries. The principal reasons for this
conclusion were
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<PAGE>
management's view that the combination of Lumisys and/or AuntMinnie.com with
another company would help Lumisys achieve broad distribution in its computed
radiography business and AuntMinnie.com achieve profitability in its Internet
business and provide opportunities for continued growth for both.
In January of 2000, the Lumisys Board of Directors authorized management to
interview various investment banking firms for the purpose of assisting
Lumisys in its exploration of strategic alternatives. In a press release on
April 12, 2000, Lumisys announced that it had engaged UBS Warburg for this
purpose.
Thereafter, approximately 34 potential acquirers (including Kodak), which
Lumisys' management believed would be interested in a possible transaction
with Lumisys based on their strategic fit, involvement in the imaging industry
and involvement in the recent consolidation in the imaging industry, were
identified and contacted. Of these parties, 24 expressed preliminary interest
in a transaction involving either Lumisys and its AuntMinnie.com subsidiary or
AuntMinnie.com on its own. Information packages containing publicly available
information concerning Lumisys were distributed to each of these parties.
Approximately 11 parties, including Kodak, requested and received additional
information packages containing non-public information with respect to
Lumisys, its businesses and operations. Of these parties, five potential
acquirers, including Kodak, expressed interest.
In early June 2000, Kodak expressed interest in a possible transaction with
Lumisys and an initial conference call between Phillip Berman of Lumisys and
Kodak's Director of Business Development, Randy Sessler, was conducted on June
27, 2000. Following this exchange, Kodak contacted Lumisys and expressed
continued interest, resulting in a conference call between Dr. Berman, Mr.
Sessler and the Vice President and Chief Marketing Officer of Kodak Health
Imaging, Richard Cimino, on July 24, 2000. Pursuant to that call and some
exchange of financial information, Kodak requested that Lumisys send one of
its ACR-2000i units to Kodak's manufacturing facility and experts in
Rochester, New York. Lumisys delivered an ACR-2000i to Kodak on August 31,
2000. Lumisys' Vice-President of Hardware Art Lim assisted Kodak personnel in
evaluating the unit and its components on August 31 and September 1, 2000.
During this time, Lumisys continued discussions with several potential
acquirers that continued to express interest in addition to Kodak.
Subsequently, Kodak management requested that representatives of the two
companies meet for the purpose of gaining more specific knowledge of Lumisys'
operations in both its hardware and Internet businesses. On September 11 and
12, 2000, representatives of management of Lumisys and AuntMinnie.com,
including Dr. Berman and John Sadler, Jeff Miller and Brian Casey, met with
representatives of Kodak including, Messrs. Sessler and Cimino and Chuck
Picarillo, Director of Equipment Development Health Imaging Division for Kodak
and Stuart Grossman, Director of eBusiness, Health Imaging, US & Canada for
Kodak, in Tucson, Arizona. Following that meeting, Dr. Berman met with the
President of Kodak Health Imaging on the evening of September 20, 2000 to
discuss in detail the potential strategic fit of Lumisys and AuntMinnie.com
within Kodak Health Imaging.
At a meeting on September 21, 2000, the Board of Directors was updated as
to then current market conditions and the ongoing discussions with, and
indications of interest received from, potential acquirers. The Board of
Directors was informed that three parties (other than Kodak) had submitted
indications of interest and that discussions were continuing with Kodak and
one other party. On October 10, 2000, the Board of Directors met with the
three potential acquirers which submitted indications of interest. Following
these meetings, the Board of Directors determined that one of the potential
acquirers and partners had not demonstrated sufficient capacity to consummate
a transaction with Lumisys or AuntMinnie.com and narrowed its consideration to
Kodak and three other parties. The Board of Directors authorized Lumisys'
management and financial advisor to continue discussions with each of these
parties.
On October 13, 2000, following an oral proposal by Kodak, representatives
of Kodak and Lumisys agreed to meet in Palo Alto, California with the
intention of negotiating mutually agreeable acquisition terms. Management of
Lumisys and Kodak, legal counsel for both companies and Lumisys' financial
advisor met in Palo Alto, California on October 19 and 20, 2000 and discussed
potential terms of a transaction. On October 19, 2000, the Board of Directors
of Lumisys met and authorized the signing of an exclusivity agreement with
Kodak until October 27, 2000 and continuation of negotiations based upon the
financial terms proposed by Kodak.
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<PAGE>
Diligence was conducted by Kodak in both Tucson, Arizona on October 23,
2000 and in Sunnyvale, California on the October 21 through 25, 2000. Lumisys
also conducted due diligence on Kodak during the same period.
During the period from October 20 through November 9, 2000, negotiations
continued between Lumisys, Kodak and their respective advisors, and the
parties commenced preparation of the draft merger agreement. The parties
discussed technical issues, conducted further due diligence and negotiated the
terms of the proposed merger agreement. Between October 20 and November 8,
2000, the Board of Directors of Lumisys met several times and agreed to extend
the exclusivity period to November 6, 2000 based on the progress of the
negotiations.
The Board of Directors of Lumisys met again in the evening of November 8,
2000, together with members of management. A majority of the Board of
Directors were present as well as representatives of UBS Warburg and the
representative of Pillsbury Madison & Sutro LLP, outside counsel to Lumisys.
The representative of Pillsbury Madison and Sutro LLP outlined for the
directors their duty in connection with the consideration of the proposed
transaction with Kodak. UBS Warburg reviewed for the Board its financial
analysis of the merger consideration and informed the Board that it would be
prepared, subject to review of the final merger agreement, to render an
opinion as to the fairness, from a financial point of view, of the merger
consideration. After full discussion of the proposed transaction, the Board of
Directors of Lumisys determined that it was in the best interests of Lumisys
and its stockholders to merge and become a subsidiary of Kodak and voted to
approve the execution of the merger agreement and the transactions
contemplated thereby. The Board approved submitting the merger agreement to a
special meeting of Lumisys' stockholders with its recommendation that the
merger agreement be approved.
Following the meeting of the Lumisys Board of Directors, representatives of
Lumisys and Kodak and their respective counsel concluded final negotiation of
the merger agreement and the agreement was signed by Lumisys and Kodak and
announced on November 9, 2000 by the issuance of a joint press release.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
Lumisys' Board of Directors has determined that the merger is in the best
interests of Lumisys' stockholders. ACCORDINGLY, LUMISYS' BOARD OF DIRECTORS
HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT LUMISYS' STOCKHOLDERS
VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
In reaching its determination to approve the merger agreement, the Board
considered a number of matters affecting the strategic alternatives available
to Lumisys, including the matters described above in "Background of the
Merger" and the following factors:
. the price being offered by Kodak which, when compared with the $2.52
average closing price of Lumisys common stock for the 20 trading days
immediately prior to the announcement of the merger, represented a
premium of 61% at a $4.05 per share purchase price;
. the results of an examination of strategic alternatives, including
remaining independent, growing through acquisition or growing by
combining with a larger company like Kodak, and the determination that a
merger with Kodak, a large company with an excellent reputation and
substantial resources, would better enable Lumisys to compete with the
small number of companies that, largely because of their size and market
power, continue to dominate Lumisys' industry and inhibit Lumisys'
opportunities for growth;
. the determination that the size and resources of its larger competitors
have made it increasingly difficult for Lumisys to compete in its
industry at its current size;
. the determination that Kodak would enable Lumisys to increase its
desired size and market presence because Kodak is a broader based
company, both on a products and geographic basis and would provide
access to large domestic and international distribution channels;
. Kodak's excellent business reputation and its ability to continue to
provide Lumisys' customers with premium quality products and service;
. the belief that Kodak provides an alternative to maintaining a
manufacturing operation in the Silicon Valley, California, where real
estate is expensive.
14
<PAGE>
. the determination that Kodak could provide resources and infrastructure
to expand AuntMinnie.com globally and gain scale for its commerce
offerings;
. the financial presentation of UBS Warburg, including its opinion to the
Lumisys Board, as to the fairness, from a financial point of view and as
of the date of the opinion, of the merger consideration, as more fully
described below under the caption "Opinion of Lumisys' Financial
Advisor;"
. the terms of the merger agreement, including the parties'
representations, warranties, covenants and conditions; and
. the potential impact of the merger on customers, employees and other
constituencies of Lumisys.
This discussion of the information and factors considered by the Lumisys
Board of Directors is not intended to be exhaustive, but identifies material
factors considered by the Board. In view of the wide variety of factors
considered in connection with the evaluation and determination to approve and
recommend the merger agreement with Kodak, the Lumisys Board of Directors
found it impracticable and did not quantify or otherwise attempt to assign any
relative or specified weights to the factors considered, and individual
directors may have weighted factors differently.
OPINION OF LUMISYS' FINANCIAL ADVISOR
On November 8, 2000, at a meeting of the Lumisys Board of Directors held to
evaluate the terms of the proposed merger, UBS Warburg informed the Lumisys
Board of Directors that it was prepared to render an opinion, subject to
review of the final merger agreement, to the effect that, as of the date of
the opinion and based on and subject to various assumptions, matters
considered and limitations described in the opinion, the merger consideration
was fair, from a financial point of view, to the holders of Lumisys common
stock. UBS Warburg delivered its written opinion on November 9, 2000.
The full text of UBS Warburg's opinion describes the assumptions made,
procedures followed, matters considered and limitations on the review
undertaken by UBS Warburg. This opinion is attached as APPENDIX B and is
incorporated into this document by reference. UBS Warburg's opinion is
directed only to the fairness, from a financial point of view, of the merger
consideration and does not address any other aspect of the merger or any
related transaction. The opinion does not address Lumisys' underlying business
decision to effect the merger or constitute a recommendation to any
stockholder as to how to vote with respect to any matters relating to the
proposed merger. Holders of Lumisys common stock are encouraged to read this
opinion carefully in its entirety. The summary of UBS Warburg's opinion
described below is qualified in its entirety by reference to the full text of
its opinion.
In arriving at its opinion, UBS Warburg:
. reviewed current and historical market prices and trading volumes of
Lumisys common stock;
. reviewed publicly available business and historical financial
information relating to Lumisys;
. reviewed internal financial information and other data relating to
Lumisys' business and financial prospects, including estimates and
financial forecasts prepared by Lumisys' management, that were provided
to or discussed with UBS Warburg by Lumisys and were not publicly
available;
. conducted discussions with members of Lumisys' senior management;
. reviewed publicly available financial and stock market data with respect
to other companies in lines of business that UBS Warburg believed to be
generally comparable to those of Lumisys;
. compared the financial terms of the merger with the publicly available
financial terms of other transactions which UBS Warburg believed to be
generally relevant;
. reviewed the merger agreement and other related documents; and
. conducted other financial studies, analyses and investigations, and
considered other information, as UBS Warburg deemed necessary or
appropriate.
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<PAGE>
In connection with its engagement, UBS Warburg was requested to contact,
and held discussions with, third parties to solicit indications of interest in
the possible acquisition of all or a part of Lumisys. In connection with its
review, at Lumisys' direction, UBS Warburg did not assume any responsibility
for independent verification of any of the information that UBS Warburg was
provided or reviewed for the purpose of its opinion and, with Lumisys'
consent, UBS Warburg relied on that information being complete and accurate in
all material respects. In addition, at Lumisys' direction, UBS Warburg did not
make any independent evaluation or appraisal of any of the assets or
liabilities, contingent or otherwise, of Lumisys, and was not furnished with
any evaluation or appraisal.
With respect to the financial forecasts and estimates that it reviewed, UBS
Warburg assumed, at Lumisys' direction, that they were reasonably prepared on
a basis reflecting the best currently available estimates and judgments of
Lumisys' management as to the future financial performance of Lumisys. UBS
Warburg's opinion is necessarily based on economic, monetary, market and other
conditions existing, and information available to UBS Warburg, on the date of
its opinion.
At Lumisys' direction, UBS Warburg was not asked to, and did not, offer any
opinion as to the material terms or obligations of the merger agreement or any
related documents, or the form of the merger. In rendering its opinion, UBS
Warburg assumed, at Lumisys' direction, that each of Lumisys, Kodak and
Sunfish would comply with all material covenants and agreements set forth in,
and other material terms of, the merger agreement and related documents and
that the merger would be validly consummated in accordance with its terms.
Except as described above, Lumisys imposed no other instructions or
limitations on UBS Warburg with respect to the investigations made or the
procedures followed by UBS Warburg in rendering its opinion.
In connection with rendering its opinion to Lumisys' Board of Directors,
UBS Warburg performed a variety of financial analyses which are summarized
below. The following summary is not a complete description of all of the
analyses performed and factors considered by UBS Warburg in connection with
its opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. With respect to the analysis of selected
publicly traded companies and the analysis of selected transactions summarized
below, no company or transaction used as a comparison is either identical or
directly comparable to Lumisys or the merger. These analyses necessarily
involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the public
trading or acquisition values of the companies concerned.
UBS Warburg believes that its analyses and the summary below must be
considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering
all analyses and factors or the narrative description of the analyses, could
create a misleading or incomplete view of the processes underlying UBS
Warburg's analyses and opinion. None of the analyses performed by UBS Warburg
was assigned greater significance by UBS Warburg than any other. UBS Warburg
arrived at its ultimate opinion based on the results of all analyses
undertaken by it and assessed as a whole. UBS Warburg did not draw, in
isolation, conclusions from or with regard to any one factor or method of
analysis.
The estimates of Lumisys' future performance provided by Lumisys'
management in or underlying UBS Warburg's analyses are not necessarily
indicative of future results of values, which may be significantly more or
less favorable than those estimates. In performing its analyses, UBS Warburg
considered industry performance, general business and economic conditions and
other matters, many of which are beyond Lumisys' control. Estimates of the
financial value of companies do not necessarily purport to be appraisals or
reflect the prices at which companies actually may be sold.
The merger consideration was determined through negotiation between Lumisys
and Kodak and the decision to enter into the merger was solely that of
Lumisys' Board of Directors. UBS Warburg's opinion and financial analyses were
only one of many factors considered by Lumisys' Board in its evaluation of the
merger and should not be viewed as determinative of the views of Lumisys'
Board or management with respect to the merger or the merger consideration.
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<PAGE>
The following is a brief summary of the material financial analyses
performed by UBS Warburg and reviewed with Lumisys' Board of Directors in
connection with its opinion. The financial analyses summarized below include
information presented in tabular format. In order to fully understand UBS
Warburg's financial analyses, the tables must be read together with the text
of each summary. The tables alone do not constitute a complete description of
the financial analyses. Considering the data in the tables below without
considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of UBS Warburg's financial analyses.
Analysis of Selected Public Companies.
UBS Warburg compared selected financial information and operating
statistics for Lumisys with corresponding financial information and operating
statistics of the following four selected publicly held companies in the
medical capital equipment industry:
. ADAC Laboratories
. Datascope Corp.
. SonoSite, Inc.
. Spacelabs Medical, Inc.
UBS Warburg reviewed enterprise values, calculated as equity value, plus debt,
less cash plus minority interests, as multiples of latest 12 months and
estimated calendar year 2000 sales, earnings before interest, taxes,
depreciation and amortization, commonly known as EBITDA, and earnings before
interest and taxes, commonly known as EBIT. UBS Warburg also reviewed equity
values as a multiple of latest 12 months, one year forward and two years
forward net income. UBS Warburg then compared the multiples derived from the
selected companies with corresponding multiples for Lumisys. Multiples for the
selected companies were based on closing stock prices on November 8, 2000.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates and estimated financial data for
Lumisys were based on internal estimates of Lumisys' management. This analysis
indicated the following implied low, mean, median and high enterprise and
equity value multiples for the selected companies, as compared to the
multiples implied for Lumisys based on the merger consideration. Financial
statistics that were not meaningful due to operating losses have been
reflected as "nm." For purposes of calculating the mean and median enterprise
and equity value multiples for the selected companies, SonoSite, Inc. was
excluded.
<TABLE>
<CAPTION>
Implied Multiples of Selected Medical Implied Multiples for Lumisys
Capital Equipment Companies Based on Merger Consideration
---------------------------------------- -----------------------------
Enterprise Values as
Multiples of: Low Mean Median High
-------------------- --------- --------- --------------------
<S> <C> <C> <C> <C> <C>
Sales
Latest 12 months 0.6x 1.1x 1.1x 3.9x 1.3x
Estimated year 2000 0.5x 0.8x 0.8x 3.2x 1.4x
EBITDA
Latest 12 months 4.6x 9.8x 8.4x 16.3x nm
Estimated year 2000 4.8x 6.5x 6.5x 8.2x nm
EBIT
Latest 12 months 6.3x 8.7x 8.7x 11.0x nm
Estimated year 2000 7.1x 10.1x 10.1x 13.0x nm
<CAPTION>
Equity Values as a
Multiple of:
------------------
<S> <C> <C> <C> <C> <C>
Net income
Latest 12 months 6.2x 11.5x 11.5x 16.7x nm
One year forward 15.7x 19.7x 19.7x 23.8x nm
Two years forward 13.7x 14.6x 14.6x 38.7x 88.1x
</TABLE>
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<PAGE>
Analysis of Selected Precedent Transactions.
UBS Warburg reviewed the implied enterprise and equity values in the
following eight selected transactions in the medical capital equipment
industry:
<TABLE>
<CAPTION>
Acquirer Target
-------- ------
<S> <C>
General Electric Company OEC Medical Systems, Inc.
General Electric Company Marquette Medical Systems, Inc.
General Electric Company Lunar Corporation
Philips Electronics North America ATL Ultrasound, Inc.
Corporation
Welch Allyn, Inc. Protocol Systems Inc.
Siemens Corporation Shared Medical Systems Corporation
Mallinckrodt Inc. Nellcor Puritan Bennett Incorporated
Siemens Corporation Acuson Corporation
</TABLE>
UBS Warburg reviewed enterprise values as multiples of latest 12 months
sales, EBITDA and EBIT, and equity values as a multiple of latest 12 months
net income. UBS Warburg then compared the implied multiples derived from the
selected transactions with corresponding multiples for Lumisys. All multiples
were based on publicly available information at the time of announcement of
the relevant transaction. Financial statistics that were not meaningful due to
operating losses have been reflected as "nm." This analysis indicated the
following implied low, mean, median and high enterprise and equity value
multiples for the selected transactions, as compared to the multiples implied
for Lumisys based on the merger consideration:
<TABLE>
<CAPTION>
Implied Multiples of Selected Medical Implied Multiples for Lumisys
Capital Equipment Companies Based on Merger Consideration
---------------------------------------- -----------------------------
Enterprise Values as
Multiples of: Low Mean Median High
-------------------- --------- --------- --------------------
<S> <C> <C> <C> <C> <C>
Latest 12 months Sales 1.6x 1.9x 1.8x 2.4x 1.3x
Latest 12 months EBITDA 13.3x 14.8x 14.7x 16.6x nm
Latest 12 months EBIT 17.7x 21.9x 19.6x 33.6x nm
<CAPTION>
Equity Values as a
Multiple of:
------------------
<S> <C> <C> <C> <C> <C>
Latest 12 months net
income 20.0x 29.7x 28.3x 46.9x nm
</TABLE>
UBS Warburg also analyzed the premiums paid in the selected transactions
based on the purchase prices paid in the selected transactions relative to the
target company's closing stock prices one day and 30 days, and the 52 week
high, prior to public announcement of the transaction. UBS Warburg then
compared the premiums implied in the selected transactions over these
specified periods with the premium implied in the merger based on the merger
consideration and the closing price of Lumisys' common stock for each of the
specified periods. Financial statistics that were not meaningful due to
operating losses have been reflected as "nm." This analysis indicated the
following implied premiums in the selected transactions, as compared to the
premium implied in the merger:
<TABLE>
<CAPTION>
Percentage Premium Premium Implied
Paid in Merger
----------------------- ---------------
Specified Period: Low Mean Median High
----------------- ---- ---- ------ ----
<S> <C> <C> <C> <C> <C>
One day prior.......................... 7.1% 41.8% 45.9% 76.2% 50.7%
30 days prior.......................... 13.8% 42.0% 42.2% 92.0% 62.0%
52 week high........................... 1.0% 15.6% 6.6% 45.2% nm
</TABLE>
Discounted Cash Flow Analysis.
UBS Warburg performed an analysis of the present value of the unlevered,
after-tax free cash flows that Lumisys' business excluding AuntMinnie.com,
referred to as the core business, and AuntMinnie.com could each generate on a
stand-alone basis over the three months of estimated calendar year 2000 and
estimated calendar years 2001 through 2004 based on internal estimates of
Lumisys' management. In the case of the core business, UBS Warburg applied
terminal value multiples ranging from 8.0x to 10.0x to Lumisys' estimated
calendar year
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<PAGE>
2004 EBITDA using discount rates ranging from 20% to 30%. In the case of
AuntMinnie.com, UBS Warburg applied terminal value multiples ranging from
0.75x to 1.25x to AuntMinne.com's estimated calendar year 2004 sales using
discount rates ranging from 30% to 40%. This analysis indicated an implied per
share equity reference range for the core business and AuntMinnie.com
collectively of approximately $2.89 to $4.21, as compared to the merger
consideration of $4.05.
Other Factors.
In rendering its opinion, UBS Warburg also reviewed and considered other
factors, including:
. the historical price performance for Lumisys common stock and the
relationship between movements in Lumisys common stock, movements in the
common stock of selected companies in the medical capital equipment
industry and movements in the NASDAQ; and
. the implied multiples for the core business in the merger assuming an
illustrative value of AuntMinnie.com ranging from $0 to $10.0 million;
and
. the trading multiples of selected companies in the E-content providers,
new media and connectivity industries as compared to multiples implied
for AuntMinnie.com assuming an illustrative value of AuntMinnie.com of
$5.0 million and $10.0 million.
Miscellaneous.
Lumisys has agreed to pay UBS Warburg for its financial advisory services
upon completion of the merger an aggregate fee of $1.0 million. In addition,
Lumisys has agreed to reimburse UBS Warburg for its reasonable expenses,
including fees and disbursements of its counsel, and to indemnify UBS Warburg
and related parties against liabilities, including liabilities under federal
securities laws, relating to, or arising out of, its engagement. UBS Warburg
and its affiliates in the past have provided services to Lumisys and Kodak
unrelated to the proposed merger and have received customary compensation for
the rendering of these services.
Lumisys selected UBS Warburg as its exclusive financial advisor in
connection with the merger because UBS Warburg is an internationally
recognized investment banking firm with substantial experience in similar
transactions. UBS Warburg is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities and private placements.
In the ordinary course of business, UBS Warburg, its successors and
affiliates may actively trade the securities of Lumisys and Kodak for their
own accounts and the accounts of their customers and, accordingly, may at any
time hold a long or short position in these securities.
SOURCE OF FUNDS
The total amount of funds required by Kodak to acquire all the outstanding
shares of Lumisys common stock and to pay its fees and expenses associated
with the merger is estimated to be approximately $39 million. At the closing
of trading on November 20, 2000, Kodak had a market capitalization of
approximately $13 billion, with cash and cash equivalents as of its September
30, 2000 consolidated balance sheet of $217 million.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses the material federal income tax
consequences of the merger. The summary is based upon the Internal Revenue
Code, applicable Treasury Department regulations thereunder and administrative
rulings and judicial authority as of the date of this proxy statement. All of
the foregoing are subject to change, possibly with retroactive effect, and any
change could affect the continuing validity of the discussion. The discussion
does not address the tax consequences that may be relevant to a particular
stockholder subject to special treatment
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<PAGE>
under certain federal income tax laws, such as dealers in securities, traders
in securities that elect to use a mark-to-market method of accounting, tax-
exempt organizations, foreign persons, persons that hold Lumisys common stock
as part of a straddle or conversion transaction and persons who acquired
shares of Lumisys common stock through the exercise of employee stock options
or rights or otherwise as compensation or through a tax-qualified retirement
plan. This discussion does not address any consequences arising under the laws
of any state, locality or foreign jurisdiction. The merger will be a taxable
transaction to you. For United States federal income tax purposes, your
receipt of cash in exchange for your shares of Lumisys common stock generally
will cause you to recognize a gain or loss measured by the difference between
the cash you receive in the merger and your tax basis in your shares of
Lumisys common stock. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL
UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES THAT ARE PARTICULAR TO YOU.
ANTICIPATED ACCOUNTING TREATMENT
Lumisys anticipates that the merger will be accounted for by Kodak using
the purchase method of accounting in accordance with generally accepted
accounting principles.
REGULATORY MATTERS
The United States Federal Trade Commission and the Antitrust Division of
the United States Department of Justice frequently scrutinize the legality
under the antitrust laws of transactions such as the proposed merger. At any
time before or after the merger, the Department of Justice or the Federal
Trade Commission could take such action under the antitrust laws as it deems
necessary seeking divestiture of substantial assets of Lumisys, Kodak or their
subsidiaries. Private parties and state attorney general may also bring an
action under the antitrust laws under certain circumstances. There can be no
assurance that a challenge to the merger on antitrust grounds will not be made
or, if such a challenge is made, of the result. On November 14, 2000, Lumisys
and Kodak filed Pre-Merger Notification and Report Forms with the Federal
Trade Commission and the Department of Justice under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and the rules and regulations of the FTC
provide that some merger transactions, including the proposed merger, may not
be consummated until required information and materials have been furnished to
the Department of Justice and the FTC and certain waiting periods (initially,
a 30-day waiting period) have expired or been terminated early.
INTERESTS OF LUMISYS' DIRECTORS AND OFFICERS IN THE MERGER THAT MAY DIFFER
FROM YOUR INTERESTS
When you consider the Lumisys Board of Directors' recommendation that you
vote in favor of the merger, you should be aware that Lumisys' directors and
officers may have interests in the merger that may be different from, or in
addition to, your interests. These interests include:
. Dr. Bala Manian and Phillip Berman, M.D., directors and officers of
Lumisys, have options that will accelerate as to vesting together with
all outstanding options;
. certain directors and officers have entered into an agreement with Kodak
pursuant to which they have agreed to vote their shares of Lumisys in
favor of the merger and against any other acquisition proposed and have
granted Kodak a proxy in connection therewith;
. certain officers, directors and employees will receive incentive
payments totaling $1,620,000 upon completion of the merger;
. Phillip Berman, M.D., a director and officer of Lumisys will enter into
an employment agreement with Kodak, which provides for continuation of
his current base salary, an opportunity for a bonus of up to 42% of his
base salary, and participation in Kodak's benefit plans, and will
continue to serve as President of AuntMinnie.com and as Vice President,
Kodak Health Imaging. Dr. Berman has agreed to enter into a non-
competition agreement with Kodak in connection with such employment
agreement; and
. Kodak has agreed to continue the directors and officers indemnification
insurance for current and former directors and officers of Lumisys for
six years following the merger.
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<PAGE>
SEVERANCE ARRANGEMENTS
In April and May, 2000, Lumisys entered into certain incentive arrangements
with each of Phillip Berman, John Burgess, Brian Casey, Art Lim, Dean
MacIntosh, Duncan Moffat and John Sadler, to provide for payments upon the
sale of Lumisys or AuntMinnie.com. Due to the structure of the proposed merger
with Kodak, it was difficult to determine the exact amount to be paid under
the incentive arrangements. Therefore, Lumisys and the foregoing individuals
entered into acknowledgements and agreements with Lumisys and Kodak whereby
they each agreed to a set payment in full satisfaction of all amounts due
under their respective incentive agreements. The total amount to be paid under
the incentive arrangements is $1,620,000. The payments are to be made upon the
closing of the merger.
EXECUTIVE OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
Directors: Kenneth K. Doolittle
Joyce P. Haag
Officers: President Kenneth K. Doolittle
Secretary Joyce P. Haag
Treasurer William G. Love
CONSEQUENCES OF THE MERGER; PLANS FOR LUMISYS AFTER THE MERGER
As a result of the completion of the merger, all of the capital stock of
Lumisys will be owned by Kodak; all current stockholders of Lumisys will not
participate in Lumisys' future earnings and growth; Kodak and its affiliates
will have the opportunity to benefit from any earnings and growth of Lumisys,
and will bear the risk of any decrease in Lumisys' value; and, Lumisys common
stock will no longer be traded on the Nasdaq National Market, price quotations
will no longer be available and the registration of Lumisys common stock under
the Securities Exchange Act will be terminated. Immediately following the
completion of the merger, Kodak and its affiliates expect that the business
and operations of Lumisys will be continued as a subsidiary. The board of
directors and management of the surviving corporation will, however, continue
to evaluate Lumisys' business, operations, corporate structure and
organization and will make changes as they deem appropriate.
CONDUCT OF LUMISYS' BUSINESS IF THE MERGER IS NOT COMPLETED
If the merger is not completed, we intend to continue to operate our
business substantially in the manner it is operated today. From time to time,
we will evaluate and review Lumisys' business operations, properties, dividend
policy and capitalization, and make such changes as are deemed appropriate,
and continue to seek to identify strategic and financial alternatives to
maximize stockholder value.
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<PAGE>
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement. Because this summary is not a complete description of the merger
agreement, we urge you to carefully read the merger agreement in its entirety
for a complete description of the terms and conditions of the merger. We
attach a copy of the merger agreement to this Proxy Statement as APPENDIX A
and incorporate it by reference in this Proxy Statement.
THE MERGER
The merger agreement provides for a business combination in which Lumisys
will merge with Sunfish, a wholly owned subsidiary of Kodak. Upon completion
of the merger, Sunfish will cease to exist and Lumisys, as the surviving
corporation, will become a wholly owned subsidiary of Kodak. The directors and
officers of Sunfish immediately prior to the merger will be the directors and
officers of Lumisys, as the surviving corporation. AuntMinnie.com will remain
as a subsidiary of Lumisys.
WHEN THE MERGER WILL BE COMPLETED
The closing of the merger is conditioned upon all material governmental
consents and approvals required in order to effect the merger with respect to
the transactions contemplated thereby having been received and that any
required governmental notices and filings have been made. No assurance can be
given, however, that the required consents and approvals will be obtained.
Lumisys and Kodak are not currently aware of any governmental approvals or
action that may be required to effect the merger, other than the Hart-Scott-
Rodino clearance described above.
We expect to complete the merger shortly after the stockholders meeting on
December 22, 2000. We cannot guarantee, however, when or if the required
regulatory approvals will be obtained. Further, either Kodak or Lumisys may
terminate the merger agreement if the merger is not consummated by January 31,
2001 or February 28, 2001 under certain circumstances, unless the terminating
party's material breach of its representations, warranties or obligations
under the merger agreement causes the failure to complete the merger.
The merger agreement provides that the closing of the merger will take
place as promptly as possible after all of the conditions set forth in the
merger agreement are satisfied or waived, unless Kodak, Lumisys and Sunfish
agree to another time or date. On the closing date, Sunfish and Lumisys will
file a certificate of merger with the Delaware Secretary of State. The merger
will become effective when the certificate of merger is duly filed or such
other time as is set forth in the certificate of merger.
CERTIFICATE OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION
When the merger is completed,
. the certificate of incorporation of Sunfish will become the certificate
of incorporation of the surviving corporation;
. the by-laws of Sunfish will become the by-laws of the surviving
corporation;
. the directors of Sunfish will become the directors of the surviving
corporation; and
. the officers of Sunfish will become the officers of the surviving
corporation.
CONVERSION OF LUMISYS SHARES
At the effective time of the merger, each issued and outstanding share of
Lumisys common stock (other than shares held by Kodak or Sunfish and any
shares of Lumisys common stock held by the stockholders, if any, who properly
exercise their appraisal rights under Delaware law and the merger agreement)
will be automatically converted into the right to receive cash in the amount
of $4.05 for each share of Lumisys common stock.
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<PAGE>
STOCK OPTIONS AND WARRANTS
All outstanding and unexercised Lumisys stock options shall be accelerated
and will be converted into the right to receive an amount equal to $4.05 per
share less the exercise price per share of Lumisys common stock provided in
the Stock Option Agreement for each holder. All outstanding Lumisys stock
options and all other options or warrants to purchase the Lumisys common stock
which are exercisable for a price per share of Lumisys common stock which is
greater than $4.05 per share will be cancelled and of no further force or
effect. Prior to the effective time of the merger, the exercise period for any
outstanding Lumisys options will not be extended, nor will the vesting period
be accelerated.
EMPLOYEE STOCK PURCHASE PLAN
All outstanding options to purchase the Lumisys common stock with
participants' accumulated payroll deductions, which were granted pursuant to
the Lumisys Incorporated Employee Stock Purchase Plan, were exercised on
November 15, 2000. Any payroll deductions that were not used to purchase the
Lumisys common stock shall be refunded to the participants, without interest.
The Lumisys Incorporated Employee Stock Purchase Plan, and all rights granted
to participants thereunder, terminated on November 16, 2000.
PAYMENT FOR LUMISYS SHARES
On the closing date of the merger, Kodak will instruct EquiServe in its
capacity as the paying agent to mail a transmittal letter to each former
Lumisys stockholder or optionholder of record immediately prior to the
effective time of the merger. The transmittal letter will contain instructions
on how to surrender your shares of Lumisys common stock or options in order to
receive the cash merger consideration. Lumisys stockholders should not send in
their stock certificates until they receive the transmittal materials from
EquiServe.
PROCEDURES FOR EXCHANGING YOUR STOCK CERTIFICATES
On the closing date of the merger, Kodak will instruct EquiServe, as paying
agent, to mail to each former holder of record of Lumisys common stock or
options a transmittal letter with instructions on how to exchange Lumisys
stock certificates or options for the cash merger consideration.
Please do not send in your Lumisys stock certificate until you receive the
transmittal letter and instructions from EquiServe. Do not return your stock
certificates with the enclosed proxy card. If your shares of Lumisys common
stock are held through a broker, your broker will surrender your shares for
cancellation.
After you mail the transmittal letter and your stock certificates or option
to EquiServe, your check will be mailed to you. The Lumisys stock certificate
or option you surrender will be cancelled.
After completion of the merger, there will be no further transfers of
Lumisys common stock. Lumisys stock certificates presented for transfer after
completion of the merger will be cancelled and exchanged for the cash merger
consideration.
If your Lumisys stock certificates have been lost, stolen or destroyed, you
will have to provide evidence of your ownership of those certificates and that
they were lost, stolen or destroyed before you receive any consideration for
you shares. EquiServe will send you instructions on how to provide such
evidence.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various customary representations and
warranties of Lumisys, relating to, among other matters:
. its organization, good standing and qualification;
. its capital structure;
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<PAGE>
. its subsidiary, AuntMinnie.com Inc., and other wholly owned
subsidiaries;
. its corporate authority to enter into the contemplated transactions;
. the accuracy of its SEC filings;
. absence of certain changes or events since December 31, 1999, the date
of its last audited balance sheet;
. non-violation of organization documents of Lumisys and AuntMinnie.com
and receipt of required filings and consents;
. non-violation of instruments or obligations of Lumisys or its
subsidiaries, except where such violation of a material agreement would
not have a material adverse effect;
. required governmental approvals of the merger;
. its and AuntMinnie.com's material contracts;
. absence of undisclosed litigation and liabilities of Lumisys and
AuntMinnie.com;
. its and AuntMinnie.com's intellectual property;
. its and AuntMinnie.com's affiliate transactions;
. its and AuntMinnie.com's owned properties;
. its employee benefits plans;
. tax matters;
. absence of restrictions on business activities of Lumisys or
AuntMinnie.com;
. insurance coverage of Lumisys and AuntMinnie.com;
. labor matters;
. absence of unlawful business practices of Lumisys or AuntMinnie.com;
. compliance with laws;
. regulatory compliance;
. environmental matters;
. absence of brokers or other persons entitled to compensation in
connection with the transactions contemplated by the merger agreement
other than Lumisys' Financial Advisor;
. board approval of the merger; and
. opinion of Lumisys' financial advisor.
The merger agreement also contains various representations and warranties
by Kodak and Sunfish relating to, among other matters:
. their organization, good standing, and qualification;
. their corporate authority to enter into the contemplated transactions;
. non-violation of their governing instruments and receipt of required
filings and consents;
. the veracity and completeness of information provided by Kodak and
Sunfish in connection with the preparation of this Proxy Statement; and
. non-ownership of Lumisys stock prior to execution of the merger
agreement.
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<PAGE>
CONDUCT OF BUSINESS PRIOR TO CLOSING
Lumisys and AuntMinnie.com are subject to restrictions on their business
conduct and operations until the merger is completed. Lumisys has agreed to
and agreed to cause AuntMinnie.com to conduct their business in the ordinary
course and to use reasonable efforts to conduct their business in a manner
consistent with the budgets and plans made available to Kodak prior to the
signing of the merger agreement, to use reasonable efforts to preserve intact
their present business organizations, to keep available the services of their
employees and consultants, to preserve their relationships and goodwill with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with Lumisys and/or AuntMinnie.com; and to protect their
technology to prevent impairments to goodwill or their on-going business.
Accordingly, Lumisys has agreed, with certain exceptions and unless Kodak
otherwise agrees in writing, that it and AuntMinnie.com will not:
. declare or pay any dividend or make any other distribution in respect of
any of its capital stock; issue or authorize the issuance of any other
securities (except for issuances upon the exercise of Lumisys options or
shares acquired under any other rights, warrants or options to acquire
Lumisys stock);
. grant, award or enter into any compensation or change of control
arrangement with any employee, including the repricing of any
outstanding stock options;
. issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock or amend the terms of any such securities,
rights, warrants or options except as described in the merger agreement
or take any action to accelerate the vesting thereof;
. amend its or AuntMinnie.com's organizational documents;
. acquire or agree to acquire by merging or consolidation with, or by
purchasing a substantial portion of the assets of, any business or any
corporation, partnership, joint venture, associate or other business
organization or division thereof, or any assets that are material,
individually or in the aggregate;
. subject to a lien or sell, lease, license or otherwise dispose of or
transfer any of its properties or assets or any technology used in the
business other than in connection with the sale of products in the
ordinary course of business and the sale of assets from inactive lines
of business;
. incur or modify any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities,
guarantee any debt securities or enter into any "keep well" or other
agreement to maintain any financial condition of another person, except
for borrowings or other transactions incurred in the ordinary course of
business under any existing credit facility;
. alter, amend or delay in any material respect the implementation of
plans for capital expenditures and completion/expansion of plant and
production facilities previously delivered to Kodak; and
. take any action or omit to take any action that would cause any of its
representations and warranties to become untrue in any material respect.
NO SOLICITATION PERIOD
Lumisys has agreed that it will not, and that it will not authorize or
permit any of its or its subsidiaries' officers, directors, employees, agents
or representatives, to:
. initiate or take any other action, directly or indirectly, with respect
to any inquiries or the making of any proposal or offer,
. engage in any negotiations concerning,
. provide any confidential information or data to, or
. have any discussions relating to
an acquisition proposal. The merger agreement defines acquisition proposal as
any proposal or offer relating to a merger, consolidation or similar
transaction involving, or any purchase of all or any significant portion of
the assets or any equity securities of, Lumisys or AuntMinnie.com.
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<PAGE>
Lumisys and its Board of Directors may, however, provide information in
response to a request by a person who has made an unsolicited bona fide
proposal if:
. such proposal is a superior proposal, defined by the merger agreement as
bona fide acquisition proposal made by a third party that the Board of
Directors determines in good faith has a good faith intention to proceed
with negotiations to consider and financial capability to consummate and
such proposal is to acquire at least 50% of Lumisys' consolidated assets
or outstanding voting power of Lumisys securities or all of the assets
or stock of AuntMinnie.com and is financial superior to the stockholders
to the transactions set forth in the merger agreement;
. Lumisys' Board of Directors, after taking into account advice of its
legal counsel, determines in good faith that to do otherwise would
result in a breach of the directors' fiduciary duties under applicable
law;
. Lumisys notifies Kodak in writing of the acquisition proposal; and
. Lumisys uses commercially reasonable efforts to keep Kodak informed with
respect to the acquisition proposal.
ADDITIONAL COVENANTS OF KODAK AND LUMISYS
Kodak and Lumisys have each agreed to use reasonable best efforts to:
. take, or cause to be taken, all appropriate action and do, or cause to
be done, all things necessary, proper or advisable under applicable law
or otherwise to consummate and make the merger and the transactions
contemplated thereby effective;
. obtain from governmental entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or
made by Kodak or Lumisys or any of their subsidiaries necessary to
consummate the merger and the transactions contemplated thereby;
. cooperate to make all filings and any other required submissions
required by federal and state securities laws, the Hart-Scott-Rodino Act
and any other applicable law with respect to the merger agreement, the
merger and the transactions contemplated thereby; and
. consult with the other regarding any public announcements it makes
concerning the merger.
ADDITIONAL COVENANT OF LUMISYS
Lumisys has agreed that prior to the effective time of the merger, that
Lumisys or AuntMinnie.com will have purchased or repurchased all outstanding
shares of AuntMinnie.com's capital stock.
INDEMNIFICATION OF LUMISYS OFFICERS AND DIRECTORS
The merger agreement provides for indemnification of individuals who,
immediately prior to the effective time of the merger, are or were directors
or officers of Lumisys or otherwise entitled to indemnification under Lumisys'
organizational documents, the indemnification agreements, and their respective
heirs, executors and personal representatives or under the Underwriting
Agreement, dated November 14, 1995, between the Company and the underwriters
named therein referred to as indemnified parties. Lumisys has agreed,
regardless of whether the merger becomes effective, and after the effective
time, Kodak has agreed to cause the surviving corporation, to the fullest
extent permitted by Delaware law, to indemnify, defend and hold harmless, the
indemnified parties against any and all lawsuits, demands, actions, costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit proceeding or investigation arising out of matters
existing or occurring prior to the effective time of the merger. In the event
of any such matter, the merger agreement requires Lumisys or the surviving
corporation to pay the reasonable fees and expenses of counsel selected by the
indemnified parties and to cooperate in the defense of any such matter.
Neither Lumisys nor the surviving corporation will be liable for any
settlement
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effected without its written consent. Further, neither Lumisys nor the
surviving entity will be obligated to pay the fees and disbursements of more
than one counsel for all indemnified parties, with certain exceptions. The
surviving corporation and its successors or assigns are obligated to maintain
the foregoing indemnification obligations, provided that Kodak will remain
liable to the indemnified parties.
CONDITIONS TO CLOSING
The respective obligations of each party to effect the merger are subject
to the fulfillment of the following conditions:
. approval of the merger agreement and the merger by Lumisys stockholders;
. expiration or early termination of the waiting period applicable to
consummation of the merger under the Hart-Scott-Rodino Act and receipt
of any other material governmental consent required with respect to the
merger; and
. absence of any legal prohibition against the merger.
The obligation of Lumisys to effect the merger is also subject to the
fulfillment or waiver of the additional conditions:
. material compliance by Kodak and Sunfish of their respective obligations
to be performed under the merger agreement; and
. material accuracy of the representations and warranties made by Kodak
and Sunfish contained in the merger agreement.
The obligations of Kodak and Sunfish to effect the merger are also subject
to the fulfillment of the following additional conditions:
. material compliance by Lumisys with its obligations to be performed
under the merger agreement, with certain exceptions;
. material accuracy of the representations and warranties made by Lumisys,
with certain exceptions;
. due authorization, execution and delivery, by parties other than Kodak
and Sunfish, and continued validity of the Stockholders' Agreement;
. absence of any material adverse change in Lumisys' business, operations
or prospects since September 30, 2000, with certain exceptions; and
. grant or receipt of certain consents, approvals or other requirements to
the consummation of the merger.
TERMINATION
Kodak and Lumisys may agree to terminate the merger agreement by mutual
written consent at any time before completing the merger, even after Lumisys'
stockholders have approved the merger agreement and the merger.
Either Kodak or Lumisys may terminate the merger if:
. an uncured, material breach of the merger agreement by the other
prevents Lumisys or Kodak from satisfying certain conditions set forth
in the merger agreement by January 31, 2001 or, in certain
circumstances, February 28, 2001;
. any court of competent jurisdiction issues, enacts, promulgates or
enforces any order, judgment, decree, injunction or ruling, after
reasonable efforts on the part of Kodak or Lumisys to resist, resolve or
lift, which permanently restrains, enjoins or otherwise prohibits the
merger and such order, judgment, decree, injunction or ruling is final
and nonappealable;
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. the merger is not completed by January 31, 2001 or, in certain
circumstances, February 28, 2001, unless the party seeking to terminate
has caused the failure to complete the merger by failing to fulfill its
obligations under the merger agreement; and
. the Lumisys Special Meeting of Stockholders has concluded without the
required stockholder approval of the merger agreement.
In addition, Kodak may terminate the merger agreement:
. after receipt by Lumisys of a superior proposal if, by the end of the
seven calendar days following (but not including) the day Kodak notifies
Lumisys that it wishes the Lumisys Board of Directors to publicly
reaffirm its recommendation to the Lumisys stockholders to vote for the
merger, the Lumisys Board of Directors fails to so publicly reaffirm; or
. by the later of the end of the tenth business day following the public
announcement of an acquisition proposal or the seven calendar days
following (but not including) the day Kodak notifies Lumisys that it
wishes the Lumisys Board of Directors to publicly reject such publicly
announced acquisition proposal, the Lumisys Board of Directors fails to
publicly reject such acquisition proposal or the Lumisys Board of
Directors shall have changed its recommendation to the Lumisys
stockholders to vote in favor of approval of the merger.
Further, Lumisys may terminate the agreement if:
. Lumisys receives a superior proposal, and the Lumisys Board of Directors
determines that it would be in accordance with their fiduciary duties
after considering applicable state law provisions and the advice of
legal counsel, to accept the superior proposal, Lumisys shall be
entitled to amend the proxy statement and delay the special meeting to
permit its stockholders to vote on the superior proposal. In such event,
Lumisys will be required to pay the termination fee to Kodak.
FEES AND EXPENSES
Except as discussed below, whether or not the merger is consummated,
Lumisys and Kodak are each responsible for their respective expenses incurred
in connection with the merger. The merger agreement provides that such
expenses incurred by Lumisys for transfer agent fees, paying agent fees, proxy
solicitors, accountants, attorneys and proxy printing costs may not exceed
$550,000 in the aggregate.
In the event that Lumisys terminates the merger agreement to accept a
superior proposal, the merger agreement requires Lumisys to pay Kodak a
termination fee of 4% of the aggregate merger consideration no later than the
third business day after the termination notice. In the event that Kodak
terminates the merger agreement due to (a) failure to consummate the merger by
January 31, 2001 or, in certain circumstances, February 28, 2001, provided
that Lumisys is in material breach of its representations, warranties or
obligations causing the conditions to closing not to be met, Kodak has voted
the proxy granted by Dr. Manian and Dr. Berman in favor of the merger and
regulatory approvals have been obtained; or (b) Lumisys' receipt of a superior
proposal, and at any time prior to the six month anniversary of such
termination, Lumisys enters into a transaction resulting from an acquisition
proposal, which transaction is ultimately consummated, the merger agreement
requires Lumisys to pay Kodak a termination fee of 4% of the aggregate merger
consideration.
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THE SPECIAL MEETING
PLACE, DATE, TIME AND PURPOSE
The special meeting will be held at Lumisys' offices at, 225 Humboldt
Court, Sunnyvale, California 94089, on December 22, 2000 at 10:30 a.m., local
time. The purpose of the special meeting is to consider and vote on the
proposal to approve and adopt the merger agreement and the merger.
RECORD DATE AND OUTSTANDING SHARES
The holders of record of Lumisys common stock as of the close of business
on November 30, 2000, which is the record date for the special meeting, are
entitled to receive notice of and to vote at the special meeting. On the
record date, there were shares of Lumisys common stock
outstanding held by approximately stockholders of record.
ATTENDING THE MEETING
If you are a beneficial owner of Lumisys common stock held by a broker,
bank or other nominee (i.e., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or
letter from a bank or broker are examples of proof of ownership. If you want
to vote your shares of Lumisys common stock held in street name in person at
the meeting, you will have to obtain a written proxy or authorization in your
name from the broker, bank or other nominee who holds your shares.
VOTE REQUIRED; QUORUM
The approval and adoption of the merger agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of Lumisys common
stock entitled to vote. Each share of common stock is entitled to one vote.
Failure to return a properly executed proxy card or to vote in person will
have the same effect as a vote "AGAINST" the merger. Abstentions and broker
non-votes also will have the same effect as a vote against the merger. Your
broker or nominee does not have the right to vote your shares of Lumisys
common stock without your instruction. It is important that you instruct your
broker or nominee on how to vote your shares of Lumisys common stock for your
shares to be represented at the special meeting. Certain directors and
officers have entered into an agreement with Kodak pursuant to which they have
agreed to vote their shares of Lumisys in favor of the merger and against any
other acquisition proposed and have granted Kodak a proxy in connection
therewith. The holders of a majority of the outstanding shares of Lumisys
common stock as of the record date, represented in person or by proxy, will
constitute a quorum for purposes of the special meeting. A quorum is necessary
to hold the special meeting. Once a share is represented at the special
meeting, it will be counted for the purpose of determining a quorum and any
adjournment of the special meeting, unless the holder is present solely to
object to the special meeting. However, if a new record date is set for an
adjourned meeting, then a new quorum will have to be established. THE LUMISYS
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
PROXIES; REVOCATION
PLEASE MARK, SIGN AND DATE YOUR PROXY CARD AND RETURN IT IN THE POSTAGE
PAID ENVELOPE PROVIDED.
If you vote your shares of Lumisys common stock by signing and returning a
proxy card, your shares will be voted at the special meeting as you indicate
on the card. If no instructions are indicated on your signed proxy card, your
shares of Lumisys common stock will be voted "FOR" the approval of the merger
agreement and the merger proposal.
If your shares are held in "street name" by your broker, do not follow the
above voting instructions. Rather, your broker will provide you with separate,
written instructions on voting your shares, and you should follow those
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instructions. You may revoke your proxy at any time before the proxy is voted
at the special meeting. A proxy may be revoked prior to the vote at the
special meeting by submitting a written revocation to the Secretary of Lumisys
at 225 Humboldt Court, Sunnyvale, California 94089 by submitting a new proxy,
in either case, dated after the date of the proxy that is being revoked.
However, simply attending the special meeting will not revoke a proxy.
EXPENSES OF PROXY SOLICITATION
All expenses incurred in connection with solicitation of the enclosed proxy
will be paid by Lumisys. Officers and employees of Lumisys may solicit proxies
by telephone or in person. However, they will not be paid amounts in excess of
their customary compensation for soliciting proxies. Lumisys also will request
that persons and entities holding shares in their names or in the names of
their nominees that are beneficially owned by others send proxy materials to
and obtain proxies from those beneficial owners, and will reimburse those
holders for their reasonable expenses in performing those services. Lumisys
has retained Corporate Investor Communications as solicitation agent and
information agent to assist in the solicitation of proxies, using the means
referred to above, at an anticipated cost of $6,000, plus reimbursement of
out-of-pocket expenses.
ADJOURNMENTS
Although it is not expected, the special meeting may be adjourned for the
purpose of soliciting additional proxies. Any adjournment of the special
meeting may be made without notice, other than by an announcement made at the
special meeting, by approval of the holders of a majority of the outstanding
shares of Lumisys common stock present in person or represented by proxy at
the special meeting, whether or not a quorum exists. Any proxies received by
Lumisys will be voted in favor of an adjournment of the special meeting if the
purpose of the adjournment is to provide additional time to solicit votes to
approve the merger agreement, unless the stockholder has voted against the
merger proposal. Thus, proxies voting against the merger will not be used to
vote for adjournment of the special meeting for the purpose of providing
additional time to solicit votes to approve the merger agreement and the
merger. Any adjournment or postponement of the special meeting for the purpose
of soliciting additional proxies will allow Lumisys stockholders who have
already sent in their proxies to revoke them at any time prior to their use.
APPRAISAL RIGHTS IN THE MERGER
Under Delaware law, if you do not wish to accept the cash payment provided
for in the merger agreement, you have the right to dissent from the merger and
to receive payment in cash for the fair value of your Lumisys common stock.
Lumisys stockholders electing to exercise appraisal rights must comply with
the provisions of Section 262 of the Delaware General Corporation Law in order
to perfect their rights. Lumisys will require strict compliance with the
statutory procedures. A copy of Section 262 is attached as APPENDIX C.
The following is intended as a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a stockholder in
order to dissent from the merger and perfect appraisal rights. This summary,
however, is not a complete statement of all applicable requirements and is
qualified in its entirety by reference to Section 262 of the Delaware General
Corporation Law, the full text of which appears in APPENDIX C of this proxy
statement.
Section 262 requires that stockholders be notified not fewer than 20 days
before the special meeting to vote on the merger that appraisal rights will be
available. A copy of Section 262 must be included with such notice. This Proxy
Statement constitutes Lumisys' notice to its stockholders of the availability
of appraisal rights in connection with the merger in compliance with the
requirements of Section 262. If you wish to consider exercising your appraisal
rights, you should carefully review the text of Section 262 contained in
APPENDIX C because failure to timely and properly comply with the requirements
of Section 262 will result in the loss of your appraisal rights under Delaware
law.
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If you elect to demand appraisal of your shares, you must satisfy each of
the following conditions:
. You must deliver to Lumisys a written demand for appraisal of your
shares before the vote with respect to the merger is taken. This written
demand for appraisal must be in addition to and separate from any proxy
or vote abstaining from or voting against the merger. Voting against or
failing to vote for the merger by itself does not constitute a demand
for appraisal within the meaning of Section 262.
. You must not vote in favor of the merger. A vote in favor of the merger,
by proxy or in person, will constitute a waiver of your appraisal rights
in respect of the shares so voted and will nullify any previously filed
written demands for appraisal.
If you fail to comply with either of these conditions and the merger is
completed, you will be entitled to receive the cash payment for your shares of
Lumisys common stock as provided for in the merger agreement, but you will
have no appraisal rights with respect to your shares of Lumisys common stock.
All demands for appraisal should be addressed to Dean MacIntosh, Executive
Vice President, 225 Humboldt Court, Sunnyvale, California 94089, before the
vote on the merger is taken at the special meeting and should be executed by,
or on behalf of, the record holder of the shares of Lumisys common stock. The
demand must reasonably inform Lumisys of the identity of the stockholder and
the intention of the stockholder to demand appraisal of his or her shares.
To be effective, a demand for appraisal by a holder of Lumisys common stock
must be made by, or in the name of, such registered stockholder, fully and
correctly, as the stockholder's name appears on his or her stock
certificate(s) and cannot be made by the beneficial owner if he or she does
not also hold the shares of record. The beneficial holder must, in such cases,
have the registered owner submit the required demand in respect of such
shares.
If you hold your shares of Lumisys common stock in a brokerage account or
in other nominee form and you wish to exercise appraisal rights, you should
consult with your broker or such other nominee to determine the appropriate
procedures for the making of a demand for appraisal by such nominee.
If shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of a demand for appraisal should be
made in such capacity; and if the shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand should be
executed by or for all joint owners. An authorized agent, including an
authorized agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he or she is acting as agent for the record owner. A record owner,
such as a broker, who holds shares as a nominee for others, may exercise his
or her right of appraisal with respect to the shares held for one or more
beneficial owners, while not exercising this right for other beneficial
owners. In such case, the written demand should state the number of shares as
to which appraisal is sought. Where no number of shares is expressly
mentioned, the demand will be presumed to cover all shares held in the name of
such record owner.
Within 10 days after the effective date of the merger, Kodak must give
written notice that the merger has become effective to each Lumisys
stockholder who has properly filed a written demand for appraisal and who did
not vote in favor of the merger. At any time within 60 days after the
effective date, any stockholder who has demanded an appraisal has the right to
withdraw the demand and to accept the cash payment specified by the merger
agreement for his or her shares of Lumisys common stock. Within 120 days after
the effective date, either Kodak or any stockholder who has complied with the
requirements of Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the shares held by all
stockholders entitled to appraisal. Kodak has no obligation to file such a
petition in the event there are dissenting stockholders. Accordingly, the
failure of a stockholder to file such a petition within the period specified
could nullify such stockholder's previously written demand for appraisal.
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If a petition for appraisal is duly filed by a stockholder and a copy of
the petition is delivered to Kodak, Kodak will then be obligated within 20
days after receiving service of a copy of the petition to provide the Chancery
Court with a duly verified list containing the names and addresses of all
stockholders who have demanded an appraisal of their shares. After notice to
dissenting stockholders, the Chancery Court is empowered to conduct a hearing
upon the petition, to determine those stockholders who have complied with
Section 262 and who have become entitled to the appraisal rights provided
thereby. The Chancery Court may require the stockholders who have demanded
payment for their shares to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Chancery Court
may dismiss the proceedings as to such stockholder.
After determination of the stockholders entitled to appraisal of their
shares of Lumisys common stock, the Chancery Court will appraise the shares,
determining their fair value exclusive of any element of value arising from
the accomplishment or expectation of the merger, together with a fair rate of
interest. When the value is determined, the Chancery Court will direct the
payment of such value, with interest thereon accrued during the pendency of
the proceeding, if the Chancery Court so determines, to the stockholders
entitled to receive the same, upon surrender by such holders of the
certificates representing such shares.
In determining fair value, the Chancery Court is required to take into
account all relevant factors. You should be aware that the fair value of your
shares as determined under Section 262 could be more, the same, or less than
the value that you are entitled to receive pursuant to the merger agreement.
Costs of the appraisal proceeding may be imposed upon Kodak and/or the
stockholders participating in the appraisal proceeding by the Chancery Court
as the Chancery Court deems equitable in the circumstances. Upon the
application of a stockholder, the Chancery Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares entitled to appraisal. Any stockholder who had demanded appraisal
rights will not, after the effective date, be entitled to vote shares subject
to such demand for any purpose or to receive payments of dividends or any
other distribution with respect to such shares (other than with respect to
payment as of a record date prior to the effective date); however, if no
petition for appraisal is filed within 120 days after the effective date of
the merger, or if such stockholder delivers a written withdrawal of his or her
demand for appraisal and an acceptance of the merger within 60 days after the
effective date of the merger, then the right of such stockholder to appraisal
will cease and such stockholder will be entitled to receive the cash payment
for shares of his or her Lumisys common stock pursuant to the merger
agreement. Any withdrawal of a demand for appraisal made more than 60 days
after the effective date of the merger may only be made with the written
approval of the surviving corporation and must, to be effective, be made
within 120 days after the effective date.
In view of the complexity of Section 262, Lumisys stockholders who may wish
to dissent from the merger and pursue appraisal rights should consult their
legal advisors.
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BENEFICIAL OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of the Lumisys common stock as of November 17, 2000 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all Lumisys executive officers and directors as a
group; and (iv) all those known by Lumisys to be beneficial owners of more than
five percent of its Common Stock.
<TABLE>
<CAPTION>
Beneficial
Ownership (1)
--------------------
Number of Percent of
Beneficial Owner Shares Total
---------------- --------- ----------
<S> <C> <C>
Eastman Kodak Company (2)............................ 1,076,636 10.56%
343 State Street
Rochester, NY 14650
Dimensional Fund Advisers............................ 673,900 6.61%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Bala S. Manian, Ph.D. (3)............................ 574,097 5.63%
Phillip Berman, M.D. (4)............................. 502,539 4.93%
Douglas G. DeVivo, Ph.D. (5)......................... 406,460 3.99%
John M. Burgess (6).................................. 158,750 1.56%
C. Richard Kramlich (7).............................. 109,326 1.07%
Craig L. Klosterman (8).............................. 117,342 1.15%
Dean MacIntosh (9)................................... 144,765 1.42%
Duncan Moffat (10)................................... 133,648 1.31%
Daniel Burstein (11)................................. 50,000 *
Robert J. Gallagher (11)............................. 50,000 *
Albert L. Greene (11)................................ 50,000 *
All directors and executive officers as a group
(11 persons) (12)................................... 2,296,927 22.55%
</TABLE>
--------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and filings with the Securities and Exchange
Commission (the "SEC"). Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable,
Lumisys believes that each of the stockholders named in this table has
sole voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages are based on 10,188,083 shares
outstanding on November 17, 2000, adjusted as required by rules
promulgated by the SEC.
(2) Represents shares beneficially owned by Eastman Kodak Company ("Kodak")
pursuant to that certain Stockholder Agreement among Kodak, Sunfish
Acquisition Corp., Lumisys and Bala Manian, Ph.D., individually and in his
capacity as trustee of the Manian Revocable Trust and as general partner
of Saraswati Partners ("Manian") and Phillip Berman, M.D., individually
and in his capacity as manager of the P. Berman Family LLC, the general
partner of Sequoia Investment Limited Partnership ("Berman"), dated
November 9, 2000, which grants Kodak the right, as proxy and attorney-in-
fact (with full power of substitution), for and in the name, place and
stead of each of Manian and Berman, to vote such stockholders' shares of
common stock or grant any consent or approval with respect to such
stockholders' shares of common stock in favor of the merger and the merger
agreement and against any proposed other acquisition.
(3) Includes 50,000 shares subject to accelerated vesting of stock options
exercisable prior to close of the merger. Dr. Manian has entered into a
Stockholder Agreement with Lumisys and Kodak pursuant to which Dr. Manian
has granted a proxy to Kodak as described in footnote 2 above.
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(4) Includes 375,240 shares beneficially owned by P. Berman Family, L.L.C., of
which Dr. Berman is a general partner. Dr. Berman shares voting and
investment power with respect to such shares and disclaims beneficial
ownership of such shares except to the extent of his proportionate
interest therein. Also includes 125,000 shares subject to accelerated
vesting of stock options exercisable prior to close of the merger.
Excludes 16,240 shares subject to currently exercisable stock options with
an exercise price greater than $4.05 per share which will be cancelled by
the merger. Dr. Berman has entered into a Stockholder Agreement with
Lumisys and Kodak pursuant to which Dr. Berman granted a proxy to Kodak as
described in footnote 2 above.
(5) Includes 132,460 shares held in trust. Dr. DeVivo holds sole voting and
investment power with respect to the shares held in trust. Also includes
200,000 shares subject to accelerated vesting of stock options in
connection with the merger, exercisable prior to close of the merger.
(6) Includes 87,500 shares subject to accelerated vesting of stock options in
connection with the merger, exercisable prior to close of the merger.
Excludes 25,000 shares subject to currently exercisable stock options with
an exercise price greater than $4.05 per share which will be cancelled by
the merger.
(7) Excludes 62,890 shares subject to currently exercisable stock options with
an exercise price greater than $4.05 per share which will be cancelled by
the merger.
(8) Includes 41,450 shares subject to accelerated vesting of stock options in
connection with the merger, exercisable prior to close of the merger.
Excludes 49,700 shares subject to currently exercisable stock options with
an exercise price greater than $4.05 per share which will be cancelled by
the merger.
(9) Includes 127,794 shares subject to accelerated vesting of stock options in
connection with the merger, exercisable prior to close of the merger.
Excludes 42,750 shares subject to currently exercisable stock options with
an exercise price greater than $4.05 per share which will be cancelled by
the merger.
(10) Includes 131,250 shares subject to accelerated vesting of stock options in
connection with the merger, exercisable prior to close of the merger.
(11) Includes 50,000 shares subject to accelerated vesting of stock options in
connection with the merger, exercisable prior to close of the merger.
(12) Includes 507,700 shares held by entities affiliated with certain directors
and includes 912,994 shares subject to accelerated vesting of stock
options in connection with the merger, exercisable prior to close of the
merger. Excludes 196,580 shares subject to currently exercisable stock
options with an exercise price greater than $4.05 per share which will be
cancelled by the merger. See footnotes (2)-(10) above.
WHERE YOU CAN FIND MORE INFORMATION
Lumisys and Kodak file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information Lumisys or Kodak files at the SEC's
public reference rooms in Washington, D.C., New York, New York, and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Lumisys' and Kodak's public filings are also available
to the public from document retrieval services and at the Internet website
maintained by the SEC at http://www.sec.gov.
If you would like to request documents from Lumisys, please do so at least
five business days before the date of the special meeting in order to receive
timely delivery of such documents prior to the special meeting. Lumisys will
send any document so requested to the requesting stockholder by first-class
mail or other equally prompt means within one day of receiving the request.
Please address your request for documents as follows:
LUMISYS INCORPORATED
225 Humboldt Court
Sunnyvale, California 94089
(408) 733-6565
Attention: Dean MacIntosh
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OTHER MATTERS
You should rely only on the information contained in this proxy statement to
vote your shares at the meeting. Lumisys has not authorized anyone to provide
you with information that is different from what is contained in this proxy
statement. This proxy statement is dated December , 2000. You should not
assume that the information contained in this proxy statement is accurate as of
any date other than that date, and the mailing of this document to stockholders
is not intended to create any implication to the contrary.
If the merger proposal is approved and the merger completed, you will no
longer own shares of Lumisys, and Lumisys will not solicit proxies for an
annual meeting in 2001. If the merger proposal is not approved, Lumisys intends
to conduct the next annual meeting in approximately June 2001. The deadline for
submitting a stockholder proposal for inclusion in the Company's proxy
statement and form of proxy for the Company's 2001 Annual Meeting of
Stockholders if held, is January 15, 2001. Stockholders wishing to submit
proposals or director nominations that are not to be included in such proxy
statement and proxy must do so after February 14, 2001, and before the close of
business on March 16, 2001. Stockholders are also advised to review the
Company's By-laws, which contain additional requirements with respect to
advance notice of stockholder proposals and director nominations. Lumisys
suggests that all such proposals be sent by certified mail, return receipt
requested.
The Board of Directors does not intend to bring before the meeting any
matters other than those set forth herein, and has no present knowledge that
any other matters will or may be brought before the meeting by others. If,
however, any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed form of proxy to vote the
proxies in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Dean MacIntosh
Executive Vice President
Sunnyvale, California
December , 2000
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Appendix A
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 9, 2000
AMONG
EASTMAN KODAK COMPANY
SUNFISH ACQUISITION CORP.
AND
LUMISYS INCORPORATED
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TABLE OF CONTENTS
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ARTICLE I THE MERGER
1.1 The Merger.................................................... 1
1.2 Closing....................................................... 1
1.3 Effective Time of the Merger.................................. 1
1.4 Effect of the Merger.......................................... 2
ARTICLE II THE SURVIVING CORPORATION
2.1 Certificate of Incorporation.................................. 2
2.2 By-Laws....................................................... 2
2.3 Board of Directors; Officers.................................. 2
ARTICLE III CONVERSION OF SHARES
3.1 Merger Consideration.......................................... 3
3.2 Dissenting Shares............................................. 4
3.3 Surrender and Exchange of Share Certificates and Payment
of Merger Consideration....................................... 4
3.4 No Further Rights............................................. 5
3.5 Closing of the Company's Transfer Books....................... 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization, Good Standing and Qualification................. 6
4.2 Capitalization................................................ 6
4.3 Subsidiaries.................................................. 6
4.4 Authorization................................................. 7
4.5 SEC Reports and Financial Statements.......................... 7
4.6 Proxy Statement............................................... 8
4.7 Absence of Certain Changes or Events.......................... 8
4.8 No Conflicts, Required Filings and Consents................... 10
4.9 Material Contracts............................................ 11
4.10 Litigation.................................................... 12
4.11 Intellectual Property......................................... 12
4.12 Compliance with other Instruments............................. 15
4.13 Affiliate Transactions........................................ 15
4.14 Corporate Documents........................................... 15
4.15 Title to Property and Assets.................................. 16
4.16 Employee Benefit Plans........................................ 18
4.17 Tax Returns and Payments...................................... 18
</TABLE>
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4.18 Restrictions on Business Activities.......................... 18
4.19 Insurance.................................................... 18
4.20 Labor Agreements and Actions................................. 18
4.21 Certain Business Practices................................... 19
4.22 Compliance with Applicable Laws.............................. 19
4.23 Regulatory Matters........................................... 19
4.24 Environmental and Safety Laws................................ 20
4.25 Brokers...................................................... 21
4.26 Board Approval............................................... 21
4.27 Opinion of the Company's Financial Advisor................... 21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
5.1 Organization and Qualification................................ 22
5.2 Authority Relative to this Agreement.......................... 22
5.3 No Conflicts, Required Filings and Consents................... 22
5.4 Company Information Statement................................. 23
5.5 Ownership of Company Stock.................................... 23
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of the Business Pending the Effective Time............ 23
6.2 Company Stockholder Vote...................................... 25
6.3 Acquisition Proposals......................................... 25
6.4 Financial Information......................................... 27
6.5 Inventory..................................................... 27
ARTICLE VII ADDITIONAL AGREEMENTS
7.1 Access to Information......................................... 27
7.2 Further Action, Consents, Filings............................. 28
7.3 Minority Interest in AuntMinnie.com........................... 28
7.4 Public Announcements.......................................... 28
7.5 Efforts, Consents............................................. 29
7.6 Agreement to Defend and Indemnify............................. 29
7.7 Notice of Breaches............................................ 30
SECTION VIII CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the Merger.... 31
8.2 Conditions to Obligation of the Company to Effect the Merger.. 31
8.3 Conditions to Obligations of Parent and Merger Subsidiary to
Effect the Merger............................................. 31
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SECTION IX TERMINATION, AMENDMENT AND WAIVER
9.1 Termination................................................... 32
9.2 Effect of Termination......................................... 34
9.3 Fees and Expenses............................................. 34
9.4 Amendment..................................................... 35
9.5 Waiver........................................................ 36
ARTICLE X GENERAL PROVISIONS
10.1 Notices....................................................... 36
10.2 Entire Agreement.............................................. 36
10.3 Assignments; Parties in Interest.............................. 36
10.4 Governing Law................................................. 36
10.5 Headings...................................................... 38
10.6 Certain Definitions and Rules of Construction................. 38
10.7 Counterparts.................................................. 42
10.8 Severability.................................................. 42
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), dated as of
November 9, 2000, by and among Eastman Kodak Company ("Parent" ), a New Jersey
corporation, Sunfish Acquisition Corp. ("Merger Subsidiary"), a Delaware
corporation and a wholly-owned subsidiary of Parent, and Lumisys Incorporated
(the "Company"), a Delaware corporation.
WHEREAS, the respective Boards of Directors of Merger Subsidiary and
the Company have approved the merger of the Merger Subsidiary with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
herein; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to Parent's and Merger Subsidiary's
willingness to enter into this Agreement, certain stockholders of the Company
are entering into an agreement with respect to voting and irrevocable proxy,
option and other matters (the "Stockholders' Agreement") pursuant to which,
among other things, such Stockholders will vote in favor of the transactions
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
ARTICLE I
The Merger
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.3), the Merger Subsidiary
shall be merged with and into the Company and the separate existence of the
Merger Subsidiary shall thereupon cease, and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation") under the laws
of the State of Delaware under the name "Lumisys Incorporated"
Section 1.2 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1, and subject to the satisfaction or waiver of the
conditions set forth in Article VIII, the closing of the Merger will take place
as promptly as practicable after satisfaction or waiver of the conditions set
forth in Article VIII, at the offices of Pillsbury Madison & Sutro LLP, Silicon
Valley Office 2550 Hanover Street, Palo Alto, California, unless another date,
time or place is agreed to in writing by the parties hereto (the "Closing
Date").
Section 1.3 Effective Time of the Merger. The Merger shall become
effective upon the filing of a certificate of merger ("Certificate of Merger")
with the Secretary of State of the State of Delaware in accordance with the
provisions of Section 251 of the Delaware General Corporation Law (the "DGCL").
When used in this Agreement, the term "Effective Time" shall
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mean the time at which the Certificate of Merger is accepted for filing by the
Secretary of State of Delaware.
Section 1.4 Effect of the Merger. The Merger shall, from and after
the Effective Time, have all the effects provided by the DGCL and other
applicable laws. If at any time after the Effective Time the Surviving
Corporation shall consider or be advised that any further deeds, conveyances,
assignments or assurances in law or any other acts are necessary, desirable or
proper to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, the title to any property or rights of Merger Subsidiary or the
Company (the "Constituent Corporations") to be vested in the Surviving
Corporation, by reason of, or as a result of, the Merger, or otherwise to carry
out the purposes of this Agreement, the Constituent Corporations agree that the
Surviving Corporation and its proper officers and directors shall approve,
execute and deliver all such deeds, conveyances, assignments and assurances in
law and do all things necessary, desirable or proper to vest, perfect or confirm
title to such property or rights in the Surviving Corporation and otherwise to
carry out the purposes of this Agreement, and that the proper officers and
directors of the Surviving Corporation are fully authorized in the name of each
of the Constituent Corporations or otherwise to take any and all such action.
The Surviving Corporation may be served with process in the State of Delaware in
any proceeding for enforcement of any obligation of Merger Subsidiary, as well
as for enforcement of any obligation of the Surviving Corporation arising from
the Merger, including any suit or other proceeding to enforce the right of any
stockholders as determined in appraisal proceedings pursuant to the provisions
of Section 262 of the DGCL and irrevocably appoints the Secretary of State of
the State of Delaware as its agent to accept service of process in any such suit
or proceedings. The address to which a copy of such process shall be mailed by
such Secretary of State is 343 State Street, Rochester, New York 14653, Attn.
General Counsel.
ARTICLE II
The Surviving Corporation
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of the Merger Subsidiary as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation after the Effective Time, except that the name shall be changed to
"Lumisys Incorporated", until thereafter changed or amended as provided therein
or by applicable law.
Section 2.2 By-laws. The By-laws of the Merger Subsidiary as in
effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation, until thereafter changed or amended as provided therein
or by applicable law.
Section 2.3 Board of Directors; Officers. The directors of Merger
Subsidiary immediately prior to the Effective Time shall be the directors of the
Surviving Corporation and the officers of the Merger Subsidiary immediately
prior to the Effective
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Time shall be the officers of the Surviving Corporation, in each case, until the
earlier of their respective resignations or the time that their respective
successors are duly elected or appointed and qualified.
ARTICLE III
Conversion of Shares
Section 3.1 Merger Consideration. As of the Effective Time, by
virtue of the Merger and without any action on the part of any stockholder of
the Company or Merger Subsidiary:
(a) All shares of common stock, $0.001 par value, of the Company ("Company
Common Stock") which are held by Parent, the Company or any wholly-owned
subsidiary of Parent (including Merger Subsidiary) or of the Company shall be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(b) Each issued and outstanding share of Company Common Stock, other than
those to which Section 3.1(a) applies and other than any Dissenting Shares (as
defined in Section 3.2), shall be converted into the right to receive $4.05 for
each share of Company Common Stock (the "Merger Consideration").
(c) Each issued and outstanding share of common stock of Merger Subsidiary
shall be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation which shall constitute all of the
issued and outstanding capital stock of the Surviving Corporation and shall be
owned by Parent.
(d) If at any time during the period between the date of this Agreement
and the Effective Time, the Company changes the number of shares of the Company
Common Stock outstanding, the Merger Consideration and any other items dependent
thereon shall be appropriately adjusted so that the Merger Consideration will be
equivalent to that which it would have been if the change had not occurred.
(e) The outstanding and unexercised Company Stock Options shall, for each
share of Company Common Stock subject to such Company Stock Option, become the
right to receive an amount equal to the Merger Consideration less the exercise
price per share of Company Common Stock provided in such Company Stock Option.
All outstanding Company Stock Options and all other options or warrants to
purchase the Company Common Stock which are exercisable for a price per share of
Company Common Stock which is greater than the Merger Consideration shall,
solely by virtue of the Merger and without any other consideration or action on
the part of Parent, the Company, Merger Subsidiary or the holders thereof, be
canceled and of no further force or effect.
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Section 3.2 Dissenting Shares. Each share of Company Common Stock:
(i) as to which a written notice of an intent to demand appraisal is given to
the Company in accordance with Section 262 of the DGCL prior to the vote of the
Company's Stockholders on the Merger taken at the Company Special Meeting (as
such term is defined in Section 4.6) and not withdrawn at or prior to the time
of such vote, (ii) which is not voted by the holder thereof in favor of the
Merger at the Company Special Meeting, and (iii) as to which a written demand
for appraisal shall have been timely filed (in accordance with Section 262 of
the DGCL) with the Company (a "Dissenting Share"), shall not be converted into
and represent the right to receive the Merger Consideration and such Share shall
be subject to the provisions of 262 of the DGCL; provided, however, that if any
such Stockholder shall withdraw his or her demand for payment or shall fail to
perfect his or her rights to such payment in accordance with the DGCL, then such
holder's Dissenting Shares shall cease to be Dissenting Shares and each such
Share shall, subject to the terms of this Agreement and the DGCL, be converted
into and represent the right to receive the Merger Consideration. Each holder
of a Dissenting Share who becomes entitled, pursuant to the DGCL, to receive an
appraisal of his or her Dissenting Share or the Surviving Company may file a
petition in the Chancery Court of the State of Delaware demanding a
determination of the value of the Company's Common Stock in accordance with
Section 262 of the DGCL.
Section 3.3 Surrender of Share Certificates and Payment of Merger
Consideration.
(a) At the Effective Time, Parent shall pay, by wire transfer of
immediately available funds to EquiServe (the "Paying Agent") the aggregate
amount of the Merger Consideration payable with respect to the Company Common
Stock other than the Dissenting Shares.
(b) On the Closing Date, Parent shall instruct the Paying Agent to
mail to each person who was a holder of record of shares of the Company Common
Stock immediately prior to the Effective Time: (i) a letter of transmittal, and
(ii) instructions for use in effecting the surrender of the certificates
representing the Company Common Stock held by such holder (the "Certificates")
nominally representing the Company Common Stock for a check in the aggregate
amount of the Merger Consideration for the number of shares of Company Common
Stock held by such holder immediately prior to the Effective Time.
(c) After the Effective Time, each holder of a Certificate shall
surrender and deliver such Certificate to the Paying Agent together with a duly
completed and executed transmittal letter. Upon such surrender and delivery, the
holder shall receive a check of Paying Agent for the Merger Consideration into
which such holder's shares of the Company Common Stock have been converted.
(d) Any amount of the Merger Consideration that remains undistributed
to the stockholders of the Company for a period of twelve months after the
Effective Time shall be delivered to Parent by the Paying Agent upon demand, and
any former stockholders of the
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Company who have not previously complied with this Section 3.3 shall thereafter
look only to Parent for payment of their claim for Merger Consideration.
(e) Neither the Paying Agent, nor any of the Company, Merger
Subsidiary or Parent shall be liable to any holder of shares of the Company
Common Stock with respect to any amount of the Merger Consideration delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law, rule, regulation, statute, order, judgment or decree.
(f) In the event any Certificates shall have been lost, stolen or
destroyed, the Paying Agent shall issue Merger Consideration to which such
holder is entitled in exchange for such lost, stolen or destroyed Certificates
upon the making of an affidavit of that fact by the holder thereof and the
delivery of such bond as the Paying Agent may reasonably require.
(g) Prior to the Effective Time, the Company shall cause all
outstanding Company Stock Options with an exercise price per share which is less
than the Merger Consideration to become fully vested and exercisable immediately
prior to the Merger (referred to herein as "Vested Company Stock Options"), and
shall take such action as may be necessary to amend outstanding Company Stock
Options, Company Stock Option Plans or Company Benefit Plans to permit such
vesting and exercisability, and to cause all other options or warrants to
purchase the Company Common Stock which are exercisable for a price per share of
Company Common Stock which is greater than the Merger Consideration to be
canceled and of no further force or effect at the Effective Time. On the
Closing Date, Parent shall instruct the Paying Agent to mail to each person who
is a holder of Vested Company Stock Options immediately prior to the Effective
Time: (i) an optionee letter of transmittal, and (ii) instructions for use in
surrendering the stock option agreements evidencing such Vested Company Stock
Options held by such holder for a check in the aggregate amount of the Merger
Consideration less the exercise price of such Vested Company Stock Options for
the number of shares of Company Common Stock subject to such Vested Company
Stock Options, less any taxes or other withholding required by law.
Section 3.4 No Further Rights. From and after the Effective Time,
holders of certificates theretofore evidencing shares of Company Common Stock,
or Company Stock Options or other options or warrants to acquire Company Common
Stock shall cease to have any rights as stockholders or holders of derivative
securities of the Company, except to receive the Merger Consideration and except
as provided by law with respect to the Dissenting Shares.
Section 3.5 Closing of the Company's Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of the Company's Common Stock shall be made thereafter. In
the event that, after the Effective Time, certificates for Shares are presented
to Parent or the Surviving Corporation, they shall be canceled and exchanged for
Merger Consideration for each Share represented as provided in Section 3.3,
subject to applicable law in the case of Dissenting Shares.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Subsidiary
that, except as set forth in the Company Disclosure Schedule (as defined in
Section 10.6) delivered to the Parent prior to the date of this Agreement:
Section 4.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction
where the character of its properties or the nature of its activities make such
qualification necessary except where the failure to be so qualified would not
have a material adverse effect on its business, properties, prospects or
financial condition. The Company has not used any other name, legal or
fictitious, in the conduct of its business except as set forth in the Disclosure
Schedule.
Section 4.2 Capitalization. The authorized capital of the Company
consists of 5,000,000 shares of preferred stock, none of which are issued or
outstanding, and 25,000,000 shares of Company Common Stock, of which 9,275,014
are issued and outstanding. In addition, 3,234,083 shares of Company Common
Stock have been reserved for issuance pursuant to the Company's Stock Option
Plans (as defined in Section 4.18), of which, options to purchase 2,142,727
shares of Company Common Stock are outstanding on the date of this Agreement and
1,091,356 shares of Company Common Stock are available for grant. The Company
has reserved 200,000 shares of Company Common Stock for issuance under its 1995
Employee Stock Purchase Plan ("Company ESSP") of which 129,578 shares of Company
Common Stock have been issued and up to an additional 12,000 shares of Company
Common Stock may be issued under the current offering under the Company ESPP.
The Company has issued warrants to purchase 92,800 shares of Company Common
Stock at a price of $7.20 per share which are exercisable at any time prior to
August 2001. There are no other classes of capital stock of the Company
authorized and no other rights to acquire, or exchange any other security for,
any class of capital stock of the Company. There are no other outstanding
contractual obligations of the Company or any subsidiary to sell, issue,
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries. All the outstanding shares of Company
Common Stock are validly issued, fully paid and nonassessable.
Section 4.3 Subsidiaries. The Company does not currently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity except that the Company owns all of the
issued and outstanding capital stock of AuntMinnie.com, Inc. ("AuntMinnie.com")
and the other wholly-owned subsidiaries ("Other Subsidiaries") and investments
listed in Section 4.3 of the Company Disclosure Schedule. The Company has no
obligation to purchase any interest in or make any capital contribution to or
otherwise to provide material funds to, or make any material investment (in the
form of a loan, capital contribution or otherwise) in, any person. The Company
is not a participant
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in any joint venture, partnership or similar arrangement. There are no
outstanding contractual obligations of AuntMinnie.com to sell, issue,
repurchase, redeem or otherwise acquire any shares of its capital stock. All the
outstanding shares of capital stock of AuntMinnie.com are validly issued, fully
paid and nonassessable and, except as set forth in Section 4.3 of the Company
Disclosure Schedule, owned beneficially and of record by the Company. The Other
Subsidiaries have been inactive and had no material assets or liabilities since
the dates set forth in Section 4.3 of the Company Disclosure Schedule.
Section 4.4 Authorization. All corporate action on the part of the
Company's board of directors necessary for the authorization, execution and
delivery of this Agreement and all exhibits hereto, the Stockholders' Agreement
and all other agreements described in or required pursuant to this Agreement
(collectively, the "Related Agreements") to which the Company is a party, and
the performance of all obligations of the Company hereunder and thereunder have
been duly and validly taken and the Company's board of directors has acted to
recommend the approval of this Agreement to its Stockholders. This Agreement
and the Related Agreements to which the Company is a party, when executed and
delivered by the Company, shall constitute valid and legally binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms. The affirmative vote of the holders of at least a majority of
the total number of votes entitled to be cast by the holders of the Company
Common Stock outstanding as of the record date for a special meeting of the
Company's Stockholders is the only vote of the holders of any class or series of
the Company's capital stock or other securities necessary to approve this
Agreement and the Related Agreements to which the Company is a party and the
transactions contemplated by this Agreement and such Related Agreements (the
"Transactions").
Section 4.5 SEC Reports and Financial Statements.
(a) The Company has filed with the SEC all forms, reports, schedules,
registration statements and proxy statements (the "Company SEC Reports")
required to be filed by it with the SEC since November 1, 1995. As of their
respective dates, the Company SEC Reports, as the same have been amended,
complied with the requirements of the Exchange Act or the Securities Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Reports in all material respects. As of their respective dates
and as of the date any information from such Company SEC Reports has been
incorporated by reference, the Company SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has filed
all contracts, agreements and other documents or instruments required to be
filed as exhibits to the Company SEC Reports.
(b) The consolidated balance sheets of the Company as of December 31,
1999 and 1998 and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1999 (including the related notes and schedules thereto) contained in the
Company's Form 10-K for the year
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ended December 31, 1999 present fairly, all material respects, the consolidated
financial position and the consolidated results of operations and cash flows of
the Company and its consolidated subsidiaries as of the dates or for the periods
presented therein in conformity with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
except as otherwise noted therein, including in the related notes.
(c) The consolidated balance sheets and the related statements of
earnings and cash flows (including, in each case, the related notes thereto) of
the Company contained in the Form 10-Q for the quarterly periods ended March 30
and June 30, 2000 and the balance sheets and the related statements of earnings
and cash flows as of September 30, 2000 contained in the Company's press release
dated October 17, 2000 (the "Quarterly Financial Statements") have been prepared
in accordance with the requirements for interim financial statements contained
in Regulation S-X. The Quarterly Financial Statements reflect all adjustments
necessary to present fairly in accordance with GAAP (except as indicated therein
and except for the absence of footnotes), in all material respects, the
consolidated financial position, results of operations and cash flows of the
Company for all periods presented therein.
(d) Except as set forth in the Company's Form 10-K, Form 10-Q or
Quarterly Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to September 30, 2000, and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
September 30, 2000 Quarterly Financial Statements. The Company maintains and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP and applicable Law.
Section 4.6 Proxy Statement. None of the information included or to
be included by the Company in its proxy statement (the "Company Proxy
Statement") for its special meeting of Stockholders to be duly called and held
to approve the merger agreement and the consummation of the Transactions (the
"Company Special Meeting") will, at the time of filing with the SEC, at the time
of the mailing of the Proxy Statement or any amendments or supplements thereto
to the Company's stockholders or at the time of the Company Special Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Company Proxy Statement will comply with the applicable
provisions of the Exchange Act and the rules and regulations thereunder in all
material respects.
Section 4.7 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Reports or in the Company Disclosure Schedule,
since December 31, 1999, the Company and AuntMinnie.com has each conducted its
business only in the ordinary course, and there has not been:
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(a) any change that would have a Company Material Adverse Effect, or
any change in the assets, available cash, liabilities, financial condition or
operating results of the Company and AuntMinnie.com on a consolidated basis from
that reflected in the Financial Statements, except changes in the ordinary
course of business that have not been, in the aggregate, materially adverse and
no incurrence of any indebtedness for borrowed money, leases, guarantees,
assumptions of the indebtedness or letters of comfort or similar instruments;
(b) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's or AuntMinnie.com's capital stock, or, any redemption, purchase or
other acquisition of any of its capital stock,
(c) any split, combination or reclassification of any of the
Company's capital stock or, except with respect to Company Stock Options granted
prior to the date of this Agreement as described in the Company SEC Reports or
identified in Section 4.2, any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
the Company's or AuntMinnie.com's capital stock,
(d) any granting by the Company or any of its subsidiaries to any
employee of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as required under employment
agreements in effect as of December 31, 1999,
(e) any granting by the Company or any of its subsidiaries to any
employee of any increase in severance or termination pay or other special, or
extraordinary compensation or benefits, except as required under employment,
severance or termination agreements or plans in effect as of December 31, 1999;
or any entry by the Company or any of its subsidiaries into any employment,
severance or termination agreement with any employee, or any increase in
benefits available under or establishment of any Company Benefit Plan (as
defined below) except in the ordinary course of business consistent with past
practice, or the adoption of any new Company Benefit Plan (as defined in Section
4.16);
(f) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Business, properties or
financial condition of the Company or AuntMinnie.com, or any changes in
insurance coverage reducing coverage or materially increasing the cost of
coverage or any notice of cancellation or nonrenewal of any insurance policy;
(g) any sale, assignment or transfer of any Technology except in
connection with the sale of Products in the ordinary course of business;
(h) any material change in accounting methods, principles or
practices by the Company, except insofar as may have been required by a change
in GAAP;
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(i) any waiver or compromise by the Company or AuntMinnie.com of any
material right with respect to the Technology or Material Contracts or any
material amendment, waiver, cancellation or other change in any Material
Contract;
(j) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of or supplier to the Company or
AuntMinnie.com;
(k) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company or AuntMinnie.com, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable or
which do not materially impair the value of such properties or assets;
(l) any loans or guarantees made by the Company or AuntMinnie.com to
or for the benefit of its employees, officers or directors, or any members of
their immediate families, other than travel advances and other advances made in
the ordinary course of its business;
(m) any arrangement or commitment by the Company or AuntMinnie.com to
do any of the things described in this Section 4.7.
4.8 No Conflicts, Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the Transactions or compliance by
the Company with any of the provisions hereof will (i) subject to approval by
the Company's stockholders referred to in Section 4.4 conflict with or violate
the Certificate of Incorporation or By-laws of the Company or the comparable
organizational documents of AuntMinnie.com, (ii) subject to receipt or filing of
the Consents (as defined in Section 10.6(a)) listed in Section 4.8 of the
Company Disclosure Schedule, result in a Default of any statute, ordinance,
rule, regulation, order, judgment or decree applicable to the Company or any of
the Company's subsidiaries, or by which any of them or any of their respective
properties or assets may be bound or affected, or (iii) subject to receipt or
filing of the required Consents listed in Section 4.8 of the Company Disclosure
Schedule, result in a Default pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of the Company's subsidiaries is a party
or by which the Company or any of the Company's subsidiaries or any of their
respective properties may be bound or affected, except in the case of the
foregoing clause (ii) or (iii) for any such Defaults which would not have a
Company Material Adverse Effect.
(b) None of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
or compliance by the Company with any of the provisions hereof will require any
Consent of any Governmental Entity, except for (i) compliance with any
applicable requirements of the Exchange Act, (ii) the filing of the Certificate
of Merger pursuant to DGCL, (iii) certain state takeover, securities, "blue sky"
and environmental statutes, and (iv) compliance with
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the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or (iii) any Consent with respect to any business or operating permit,
where the failure to obtain such Consent is not material to the Business.
4.9 Material Contracts. Set forth in Section 4.9 of the Company
Disclosure Schedule are lists of the following documents (the "Material
Contracts"), true and complete copies of which (and all amendments and
modifications thereof and consent and waivers thereunder) have been provided to
Parent by the Company or are filed as exhibits to the Company SEC Reports:
(a) All agreements with customers in existence on and not performed
as of September 30, 2000 and (i) involving a purchase price of more than
$100,000 in the aggregate for products shipped and not yet accepted and paid for
or to be shipped or requiring professional services to be performed; or (ii) for
which all or a portion of the purchase price has been paid; in each case, for
products that have not been shipped, delivered or installed or for professional
services which have not been fully performed by the Company or AuntMinnie.com.
(b) All written contracts with any employee (or former employee which
has not been fully performed by the Company or AuntMinnie.com or the employee)
and all consulting contracts relating to professional services or product
development for the Business' Products (as defined in Section 4.11(b)).
(c) Any contracts which are to be performed in any material respect
on or after the Effective Time which (i) involve payments to or from the Company
or AuntMinnie.com in amounts greater than $100,000 annually or by their terms
extend more than twelve months after the date of this Agreement (other than
pursuant to automatic renewal provisions which permit cancellation without
penalty upon 90 days or less notice); (ii) agreements with respect to the use,
occupancy or acquisition of real property; (iii) creating or evidencing any
indebtedness or obligation with respect to borrowed money of the Company or
AuntMinnie.com or assuming any direct or indirect responsibility for the
obligations of any other person; (iv) all Third Person Licenses (as defined in
Section 4.11(c)), or (iv) any contract, agreement or understanding which would
limit or restrict the conduct of the Business in the future in any material
respect, including any confidentiality, non-compete or other similar agreement.
(d) All forms of product or service warranty with respect to the
Company or AuntMinnie.com.
Except as set forth on Section 4.9 of the Company Disclosure Schedule there is
no event or occurrence with respect to any Material Contract, the occurrence of
which of itself or with the giving of notice or the passage of time or both
would constitute an event of default under or breach of such agreement,
contract, instrument or lease or would permit the other party thereto to cancel
or terminate performance or seek damages for breach ("Default") by the Business
or, to the Company's knowledge, any notice of any Default on the part of any
other
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party in the performance of any obligation to be performed or paid under any
Material Contract listed on Section 4.9 of the Company Disclosure Schedule.
4.10 Litigation. Except as set forth in the Company Disclosure
Schedule, there is no action, suit, proceeding or investigation involving the
Company or AuntMinnie.com currently pending or, to the knowledge of the Company,
threatened or which they currently intend to initiate. Neither the Company nor
AuntMinnie.com is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or Government Entity. There is no
action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against either the Company or AuntMinnie.com
that questions the validity of this Agreement or the Transactions, or the right
of the Company or AuntMinnie.com to enter into them, or to consummate the
transactions contemplated hereby or thereby, or that might reasonably be
expected to result, either individually or in the aggregate in a Company
Material Adverse Effect, or any change in the current equity ownership of the
Company or AuntMinnie.com, nor has the Company received any written notice that
there is any basis for the foregoing. The foregoing includes, to the Company's
knowledge, actions pending or threatened (or any basis therefor known to the
Company) involving any of the Company's or AuntMinnie.com's employees' use of
any information or techniques allegedly proprietary to any of their former
employers in connection with any of the Company's or AuntMinnie.com's employees'
obligations under any confidentiality, non-compete or assignment of invention
agreements with prior employers, and workers' compensation, employment
discrimination or other claims by in respect of employees or former employees.
4.11 Intellectual Property.
(a) The Company or AuntMinnie.com owns or is licensed or otherwise
has all rights in and to the following as required to conduct their Business,
except where the failure to own or have such rights would not have a Company
Material Adverse Effect: (i) all products, tools, computer programs,
specifications, source code, object code, graphics, devices, techniques,
algorithms, methods, processes, procedures, packaging, trade dress, formulae,
drawings, designs, improvements, discoveries, development and other tools,
inventions (whether or not patentable or copyrightable and whether or not
reduced to practice), designs, know-how and other technology that are now, have
been or are currently proposed to be developed, produced, used, marketed or sold
by the Company or AuntMinnie.com (collectively, the "Technology-Related
Assets"); and (ii) all intellectual property and other proprietary rights in the
Technology-Related Assets, including, without limitation, all trade secrets,
copyrights, and domestic and foreign letters patent, and the registrations,
applications, renewals, extensions and continuations (in whole or in part)
thereof, all goodwill associated therewith, and all rights and causes of action
for infringement, misappropriation, misuse, dilution or unfair trade practices
associated therewith.
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(b) All products developed, produced, used, marketed or sold by the
Company or AuntMinnie.com currently or as to which the Company or AuntMinnie.com
has any ongoing obligations, including warranty or support, are listed on
Schedule 4.11 to the Company Disclosure Schedule (collectively, the "Products").
Except for the Third Person Technologies (as defined in Section 4.11(c) below),
the Company or AuntMinnie.com owns all right, title and interest in and to the
following, free and clear of all liens and encumbrances: (i) the Products; (ii)
any and all updates, enhancements and corrections to the Products; (iii) any and
all technology and work in progress; and (iv) all inventions, discoveries,
processes, designs, trade secrets, know-how and other confidential or
proprietary information related thereto (collectively, the "Technology"). The
Technology, excluding the Third Person Technologies, is sometimes referred to
herein as the "Company Technology."
(c) All Technology used by the Company or AuntMinnie.com in the
Business for which the Company does not own all right, title and interest, other
than Technology which is in the public domain (collectively, the "Third Person
Technologies"), and all license agreements pursuant to which the Company or
AuntMinnie.com has the right to use the Third Person Technologies, other than
license agreements included in shrink-wrapped software packages for software
which is readily and generally commercially available to Parent (the "Third
Person Licenses") is listed in Schedule 4.11 to the Company Disclosure Schedule
and true and complete copies of all such Third Person Licenses have heretofore
been provided to Parent. The Company or AuntMinnie.com has the lawful right to
use under the terms of the applicable Third Person License, free of any material
restriction not expressly set forth in the Third Person Licenses and subject to
the other terms of such Third Person Licenses: (i) all Third Person Technology
that is incorporated in or used in the development or production of the Company
Technology, and (ii) all other Third Person Technology necessary for the conduct
of the Business.
(d) All patents, patent applications, copyright registrations and
applications and trademark registrations and applications (collectively, the "IP
Registrations") are listed on Section 4.11(d) to the Company Disclosure
Schedule. The Company has appropriate IP Registrations to protect its interest
and use of the Company Technology and trademarks, trade names, brand names,
service marks used in the Business (the "Marks"). The Company or AuntMinnie.com
owns all right, title and interest, free and clear of any liens, pledges,
licenses or other encumbrances, in and to the IP Registrations, together with
any other rights in or to any copyrights (registered or unregistered), rights in
the Marks (registered or unregistered), trade secret rights and other
intellectual property rights (including, without limitation, rights of
enforcement) contained or embodied in the Company Technology and the Marks
(collectively, the "IP Rights").
(e) Neither the Company nor AuntMinnie.com has conducted its
Business, or has used or enforced any IP Rights or taken any action (or, to its
knowledge, failed to use or enforce or take any action) with respect to IP
Rights, in a manner that would result in the abandonment, cancellation,
unenforceability or forfeiture or relinquishment of any material
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item of the IP Rights or the IP Registrations. Except as set forth in Section
4.11 of the Company Disclosure Schedule, neither the Company nor AuntMinnie.com
has granted to any third Person any rights or permissions to use any of the
Technology or the IP Rights and neither the Company nor AuntMinnie.com is under
any contractual or other obligation to disclose to any third Person any Company
Technology.
(f) (i) Neither the Company nor AuntMinnie.com has received any
written notice or claim challenging their ownership or rights in the Company
Technology or the IP Rights or claiming that any other person or entity has any
legal or beneficial ownership with respect thereto or claiming such rights with
respect to any IP Rights believed by the Company or AuntMinnie.com to be in the
public domain; (ii) to the Company's knowledge, all the IP Rights are legally
valid and enforceable without any material qualification, limitation or
restriction on their use which would have a Company Material Adverse Effect, and
neither the Company nor AuntMinnie.com has received any written notice or claim
challenging the validity or enforceability of any of the IP Rights; and (iii) to
the Company's knowledge, no other person or entity is infringing or
misappropriating any part of the IP Rights or otherwise making any unauthorized
use of the Company Technology.
(g) (i) To the Company's knowledge, the use, manufacture, provision,
sale, import or export to or from the U.S. of Products, services or processes,
including business methods, by the Company or AuntMinnie.com in or for the
Business does not and will not infringe, violate or interfere with or constitute
an appropriation of any right, title or interest (including, without limitation,
any patent, copyright, trademark or trade secret right) held by any other person
or entity, and there have been no claims made with respect thereto; (ii) to the
Company's knowledge, the use of any of the Marks and other IP Rights in the
Business will not infringe, violate or interfere with or constitute an
appropriation of any right, title or interest (including, without limitation,
any patent, copyright, trademark or trade secret right) held by any other person
or entity, and there have been no claims made with respect thereto; and (iii)
neither the Company nor AuntMinnie.com has received any written notice or claim
regarding any infringement, misappropriation, misuse, abuse or other
interference with any third Person intellectual property or proprietary rights
(including, without limitation, infringement of any patent, copyright, trademark
or trade secret right of any third Person) by the Company, the Technology or the
Marks or other IP Rights or claiming that any other entity has any claim of
infringement with respect thereto.
(i) The Technology is free from known material defects and
substantially conforms to the applicable specifications and documentation for
such Technology. Neither the Company nor AuntMinnie.com has received any written
claims that its Products do not so conform.
(j) Except as set forth in Section 4.11 of the Company Disclosure
Schedule, neither the Company nor AuntMinnie.com has entered into any agreement
or offered to indemnify any Person against any charge of infringement of third
person's IP Rights by the Company or AuntMinnie.com. Neither the Company nor
AuntMinnie.com has entered into
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any agreement granting any Person the right to bring any infringement action
with respect to, or otherwise to enforce, any of the Technology or IP Rights.
4.12 Compliance with Other Instruments. The Company is not in
violation or Default in any material respect of any provisions of its
Certificate of Incorporation, as amended or Bylaws or of any material
instrument, judgment, order, writ, decree, license or contract to which it is a
party or by which it is bound or, of any provision of federal or state statute,
rule or regulation applicable to the Company or AuntMinnie.com. The execution,
delivery and performance of this Agreement and the Related Agreements and the
consummation of the Transactions will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time and
giving of notice, either a Default under any such provision, instrument,
judgment, order, writ, decree or contract or an event which results in the
creation of any material lien, charge or encumbrance upon any assets of the
Company or AuntMinnie.com; except for such Defaults which do not, in the
aggregate, result in a Company Material Adverse Effect.
4.13 Affiliate Transactions. Neither the Company nor AuntMinnie.com
is indebted, directly or indirectly, to any of its officers or directors or to
their respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees. To the Company's knowledge,
other than as set forth on the Company Disclosure Schedule, none of the
Company's nor AuntMinnie.com's officers or directors, or any members of their
immediate families, are, directly or indirectly, indebted to the Company or
AuntMinnie.com or have any direct or indirect ownership interest in any firm or
corporation with which the Company or AuntMinnie.com is affiliated or with which
the Company or AuntMinnie.com has a business relationship, or any firm or
corporation which competes with the Company other than ownership of a less than
five percent interest in the outstanding capital stock of any publicly traded
company that may compete with the Company. To the knowledge of the Company,
none of the Company's or AuntMinnie.com's officers or directors or any members
of their immediate families are, directly or indirectly, interested in any
material contract with the Company or AuntMinnie.com. Neither the Company nor
AuntMinnie.com is a guarantor or indemnitor of any indebtedness of any other
Person.
4.14 Corporate Documents The Company has heretofore made available to
Parent a complete and correct copy of the Certificate of Incorporation and By-
laws or comparable organizational documents, each as amended to the date hereof,
of the Company and AuntMinnie.com. The Company has provided Parent with access
to true and complete copies of the records of proceedings of the board of
directors of the Company and AuntMinnie.com and their respective stockholders
since incorporation of the Company and AuntMinnie.com. Such records do not omit
any actions: (a) authorizing material transactions of the Company and
AuntMinnie.com, respectively, or (b) which are required by law or agreement to
be authorized by the board of directors or stockholders of the Company or
AuntMinnie.com.
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4.15 Title to Property and Assets. Other then as set forth in the
Company SEC Reports, each of the Company and AuntMinnie.com owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair their ownership or use of such property or
assets. With respect to the property and assets it leases, each of the Company
and AuntMinnie.com is in material compliance with such leases and holds a valid
leasehold interest free of any liens, claims or encumbrances.
4.16 Employee Benefit Plans.
(a) The Company Disclosure Schedule sets forth a complete and correct
list of all "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and any other
pension plans or employee benefit arrangements or payroll practices (including,
without limitation, severance pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus or other
incentive compensation, stock option or stock purchase arrangements or policies,
oral or written) maintained, or contributed to, by the Company or any trade or
business (whether or not incorporated) which is treated with the Company as a
single employer under Section 414(b), (c), (m) or (o) of the Code, ("ERISA
Affiliate") with respect to employees of the Company or their ERISA Affiliates
(each, a "Company Benefit Plan"). The Company has furnished Parent with a true
and complete copy of each Company Benefit Plan document, including, all
amendments thereto, and a true and complete copy of each material document
prepared in connection with each Company Benefit Plan, including, without
limitation, (i) a copy of each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, (iii) the three
most recently filed Form 5500's, including all attachments thereto, and (iv) the
most recently prepared actuarial report and financial statement, if any, in
connection with each Company Benefit Plan.
(b) AuntMinnie.com has no "employee benefit plans" as defined in
Section 3(3) of ERISA or any other benefit or compensation plans or arrangements
other than the Company Benefit Plans set forth on the Company Disclosure
Schedule.
(c) Except as set forth on the Company Disclosure Schedule, the
Company does not have any express or implied commitment (i) to create or incur
liability with respect to or cause to exist any other employee benefit plan,
program or arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual or (iii) to modify, change or
terminate any Company Benefit Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
(d) The Company's equity incentive plans are listed in Section 4.16(d)
of the Company Disclosure Schedule (the "Company Stock Option Plans"). The
Company also maintains a 1995 Employee Stock Purchase Plan which has been
operated in compliance with Section 423 of the Code and other applicable Law.
The Board of Directors of the Company has taken action to terminate the current
option period under the Employee Stock Purchase Plan on
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November 15, 2000 and employee participants have the option of purchasing up to
12,000 shares of Company Common Stock at a price equal to $2.71.
(e) The only Company Benefit Plan that is intended to qualify under
Section 401(a) of the Code is the Lumisys, Inc. 401(k) Profit Sharing Plan (the
"Plan"), and the Company has received a favorable determination letter from the
Internal Revenue Service ("IRS") indicating that the underlying nonstandardized
prototype plan documents for the Plan are so qualified as to form. To the
knowledge of the Company, there are no circumstances likely to jeopardize the
Plan's qualified status or result in the imposition of any material liability,
penalty or tax under ERISA or the Code.
(f) Except as set forth in the Company Disclosure Schedule, there has
been no prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) with respect to any Company Benefit Plan. The Company
is not currently liable and has not previously incurred any liability for any
tax or penalty arising under Sections 4972, 4975, 4979, 4980, or 4980B of the
Code or Section 502 of ERISA, and there are no circumstances which would subject
the Company to material liability.
(g) Each of the Company Benefit Plans has been maintained, in all
material respects, in accordance with its terms and all provisions of applicable
Laws. All amendments and actions required to bring each of the Company Benefit
Plans into conformity in all material respects with all of the applicable
provisions of ERISA and other applicable laws and regulations have been made or
taken except to the extent that such amendments or actions are not required by
law to be made or taken until a date after the Closing Date.
(h) Neither the Company nor AuntMinnie.com or any predecessor in
interest have maintained a welfare benefit plan providing continuing benefits
after the termination of employment (other than as required by Section 4980B of
the Code), and the Company, AuntMinnie.com and each of their ERISA Affiliates
have complied in all material respects with the notice and continuation
requirements of Section 4980B of the Code and the regulations thereunder.
(i) Except as set forth on the Company Disclosure Schedule, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any material payment
(including, without limitation, severance, "change of control" compensation or
golden parachute) becoming due to any director or employee of the Company or
AuntMinnie.com, (ii) materially increase any benefits otherwise payable under
any Company Benefit Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefits to any material extent.
(j) All unfunded liabilities with respect to current and former
employees have been disclosed.
(k) The Company has heretofore provided Parent with a complete and
correct list of, with respect to both the Company and AuntMinnie.com, all former
employees and current
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employees who are not actively at work, and who are entitled to benefits under
one or more Company Benefit Plans, and lists the benefits to which each such
employee or former employee is entitled.
4.17 Tax Returns and Payments. The Company and its subsidiaries have
duly filed all material foreign, federal, state and local income, franchise,
excise, real and personal property and other Tax (as defined in Section 10.6)
returns and reports (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by the
Company and its subsidiaries prior to the date hereof. All of the foregoing
returns and reports are true and correct in all material respects. The Company
has paid or made adequate provision in accordance with GAAP in the financial
statements of the Company for all Tax payable in respect of all periods ending
on or prior to the date of this Agreement and will have made or provided for all
Taxes payable in respect of all periods ending in or prior to the Closing Date.
As of the date hereof, all deficiencies proposed as a result of any audits have
been paid or settled. The Company has paid, collected or withheld, or caused to
be paid, collected or withheld, all amounts of Tax required to be paid,
collected or withheld, other than such Taxes for which adequate reserves in the
Company Financial Statements have been established or which are being contested
in good faith. There are no claims or assessments pending against the Company
for any alleged deficiency in any Tax, and the Company has not been notified in
writing of any proposed Tax claims or assessments against the Company.
4.18 Restrictions on Business Activities. There is no agreement
(written or oral) except those listed in Section 4.9 of the Company Disclosure
Schedule, judgment, injunction, order or decree binding upon the Company or
AuntMinnie.com or any of their properties which has had or could reasonably be
expected to have the effect of prohibiting or materially impairing the conduct
of the Business by the Company or AuntMinnie.com.
4.19 Insurance. Each of the Company and AuntMinnie.com has in full
force and effect the fire and casualty insurance, business interruption
insurance and directors and officers liability and all insurance required by Law
covering the Business and any outstanding claims against the Company are
described in the Company SEC Reports or the Company Disclosure Schedule. The
Company has provided to Parent copies of the policies for such insurance and its
insurance loss runs for the preceding three years.
4.20 Labor Agreements and Actions. Neither the Company nor
AuntMinnie.com is bound by or subject to (and none of its assets or properties
is bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the knowledge of the Company, has sought to represent any of the
employees, representatives or agents of the Company or AuntMinnie.com. There is
no strike or other labor dispute involving the Company or AuntMinnie.com
pending, or to the knowledge of the Company threatened, nor has the Company or
AuntMinnie.com received notice of any labor organization activity involving its
employees. The Company believes that the employment of each officer and
employee of the Company and AuntMinnie.com is terminable at the will of the
Company.
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To the best of its knowledge, the Company and AuntMinnie.com have
complied in all material respects with all applicable state and federal equal
employment opportunity laws and with other Laws related to employment,
immigration, employment taxes and related matters.
4.21 Certain Business Practices. Neither the Company nor
AuntMinnie.com nor, to the knowledge of the Company or AuntMinnie.com, any of
their directors, officers, employees or agents has, in connection with or
furtherance of the Business: (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful payments relating to political activity,
(ii) made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment or
other arrangement which could cause the Company or its affiliates to be
disqualified or debarred from serving as a contractor, directly or indirectly,
for any Government Entity.
4.22 Compliance with Applicable Laws. The Business has not been, and
is not currently being, conducted in material violation of any federal, state,
local or foreign law, statute, rule, regulation, judgment, order, injunction,
decree, arbitration award, requirement, license or permit of any Governmental
Entity (collectively, "Company Permits") and no Product has been exported in
violation of the applicable provisions of the U.S. export control laws. No
investigation or review by any Governmental Entity with respect to the Business
is pending or, to the Company's knowledge, threatened, nor has any Governmental
Entity indicated an intention to conduct the same. To the Company's knowledge,
no material change is required in the Business's processes, properties or
procedures in connection with any such Company Permits, and neither the Company
nor AuntMinnie.com has received any notice or communication of any material
noncompliance with any such Company Permits that has not been cured as of the
date hereof. The Company or AuntMinnie.com has all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct the Business except where the
failure to hold or obtain such would not have a Company Material Adverse Effect.
4.23 Regulatory Compliance. The conduct of the Business, and each of
the Products, is in material compliance with applicable provisions of the United
States Food, Drug and Cosmetic Act and applicable regulations promulgated by the
Food and Drug Administration ("FDA" and "FDA Act") and other applicable Law.
The Company and each of its facilities is registered with and licensed to
operate and manufacture the Products by the FDA and under the FDA Act to the
extent required by applicable Law and the Products have been manufactured in
accordance with the Laboratory Best Practices Act and the Quality System
Regulations promulgated by the FDA and all applicable regulations and approvals
under the Laws of the Jurisdictions in which the Products are sold outside the
U.S., including applicable CE marking provisions and other approvals. The
Products have not (i) been adulterated or misbranded within the meaning of the
FDA Act, or within the meaning of any applicable state or local law or
regulation, or (ii) been manufactured or sold in material violation of any
applicable Equal
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Employment Opportunity requirements, including those set forth in Section 202 of
Executive Order 11246, as amended. The Company has not received any written
notice from the FDA to the effect that, or otherwise been advised in writing
from the FDA that, it is not in material compliance with any law, rule or
regulation, carrier payment manual, intermediary manual, payor bulletin or
guidelines provision, including without limitation the federal Mail or Wire
Fraud Acts, the Stark Laws and regulations thereunder, and any parallel or
related provisions of federal, state or local Law.
4.24 Environmental and Safety Laws.
(a) Each of the Company and AuntMinnie.com (i) is in material
compliance with all, and is not subject to any asserted liability or, to the
Company's knowledge, any liability (including liability with respect to current
or former subsidiaries or operations), in each case with respect to any,
applicable Environmental Laws (as defined below) and Laws relating to the health
and safety of its employees, (ii) holds or has applied for all Environmental
Permits (as defined below) applicable to its business and properties and (iii)
is in material compliance with its Environmental Permits;
(b) neither the Company nor AuntMinnie.com has received any written
notice, demand, letter, claim or request for information alleging that it is or
may be in violation of, or liable under, any Environmental Law;
(c) neither the Company nor AuntMinnie.com: (i) has entered into or
agreed to any consent decree or order or is subject to any judgment, decree or
judicial order relating to compliance with Environmental Laws, Environmental
Permits or the investigation, sampling, monitoring, treatment, remediation,
removal or cleanup of Hazardous Materials (as defined below) and, no
investigation, litigation or other proceeding is pending or threatened in
writing with respect thereto, or (ii) is an indemnitor in connection with any
threatened or asserted claim by any third-Person indemnitee for any liability
under any Environmental Law or relating to any Hazardous Materials; and
(d) neither the Company nor AuntMinnie.com owns any real property and
none of the real property leased by the Company or AuntMinnie.com is listed or,
to the knowledge of the Company, proposed for listing on the "National
Priorities List" under CERCLA, as updated through the date hereof, or any
similar state or foreign list of sites requiring investigation or cleanup.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended as of the date hereof.
"Environmental Laws" means any applicable Law in existence as of the
Closing Date, relating to the pollution, protection, investigation or
restoration of the environment, health and safety or natural resources,
including those relating to the use, handling, presence,
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transportation, treatment, storage, disposal, release, threatened release or
discharge of Hazardous Materials or noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property or to the
siting, construction, operation, closure and post-closure care of waste
disposal, handling and transfer facilities.
"Environmental Permits" means any permit, approval, identification
number, license and other authorization required under any Environmental Law.
"Hazardous Materials" means (i) any petroleum, petroleum products, by-
products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or other
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any Environmental Law.
4.25 Brokers. Except for UBS Warburg LLC (the "Company's Financial
Advisor"), no agent, broker, finder, investment banker, lawyer or other firm or
person is or will be entitled to any broker's or finder's fee or other similar
commission or fee in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company and the
fees of the Company's Financial Advisor shall not exceed $1,000,000 and
reasonable out-of-pocket expenses not to exceed $85,000.
4.26 Board Approval. The Board of Directors of the Company by
resolutions duly adopted by the majority of the Board of Directors voting at a
meeting duly called and held and not subsequently rescinded or modified in any
way (the "Company Board Approval"), has duly (i) determined that this Agreement
and the Merger are in the best interests of the Company and its stockholders,
(ii) approved this Agreement and the Merger and (iii) recommended that the
stockholders of the Company adopt this Agreement and approve the Merger and
directed that this Agreement and the Transactions be submitted for consideration
by the Company's stockholders at the Company Special Meeting. The Company Board
Approval constitutes approval of this Agreement and the Merger for purposes of
Section 203 of the DGCL. Except for Section 203 of the DGCL, which has been
rendered inapplicable by the Company Board Approval, no state takeover statute
is applicable to the Merger or the other Transactions.
4.27 Opinion of the Company's Financial Advisor. The Board of
Directors of the Company has received the opinion of the Company's Financial
Advisor, dated the date of this Agreement, to the effect that, as of such date,
the Merger Consideration is fair, from a financial point of view, to the holders
of Company Common Stock and shall comply as to form with the requirements of Law
for inclusion in the Company Proxy Statement, a copy of which opinion will be
made available to Parent promptly after its receipt by the Company for
informational purposes only.
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ARTICLE V
Representations and Warranties of Parent and Merger Subsidiary
Parent and Merger Subsidiary jointly and severally represent and
warrant to the Company that:
Section 5.1 Organization and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey. Merger Subsidiary is a corporation duly formed, validly
existing and in good standing under the laws of the State of Delaware. Each of
Parent and Merger Subsidiary has the requisite corporate power and authority to
carry on its business as it is now being conducted and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification material to Parent.
Section 5.2 Authority Relative to this Agreement. Each of Parent and
Merger Subsidiary has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Merger and the other Transactions. The execution and delivery of this Agreement
by Parent and Merger Subsidiary and the consummation by Parent and Merger
Subsidiary of the Merger and the other Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Parent or Merger Subsidiary are necessary to authorize the
execution and delivery of this Agreement or to consummate the Merger and the
other Transactions other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by the DGCL. This
Agreement has been duly and validly executed and delivered by Parent and Merger
Subsidiary and, assuming the due authorization, execution and delivery by the
Company, this Agreement constitutes a legal, valid and binding obligation of
Parent and Merger Subsidiary, enforceable against Parent and Merger Subsidiary
in accordance with its terms.
Section 5.3 No Conflicts, Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger
Subsidiary does not, and the performance of this Agreement by Parent and Merger
Subsidiary will not: (i) conflict with or violate the certificate of
incorporation or by-laws of Parent and Merger Subsidiary, (ii) assuming the
consents, approvals, authorizations and waivers specified in Section 5.3(b) have
been received and the waiting periods referred to therein have expired, and any
condition precedent to such consent, approval, authorization, or waiver has been
satisfied, conflict with or violate any Laws applicable to Parent or Merger
Subsidiary or by which any property or asset of Parent or Merger Subsidiary is
bound, or (iii) result in any such conflicts, Default, breaches, defaults or
other occurrences of the type referred to above which would prevent or
materially delay the consummation of the Merger.
(b) The execution and delivery of this Agreement by Parent and Merger
Subsidiary does not, and the performance of this Agreement by Parent and Merger
Subsidiary
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will not, require any consent, approval, authorization, waiver or permit of, or
filing with or notification to, any Governmental Entity, except for applicable
requirements of the Exchange Act, the HSR Act, and filing and recordation of the
Certificate of Merger as required by DGCL and except where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not have a material adverse effect on the Parent or would
not prevent or materially delay the consummation of the Merger.
Section 5.4 Company Proxy Statement Information. No information
supplied by Parent or Merger Subsidiary in writing for inclusion by the Company
in the Company Proxy Statement, as amended or supplemented, will, at the date
the Proxy Statement is first mailed to the Company's stockholders or at the time
of the Company Special Meeting, contain any statement which, at such time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact or will omit to state any material fact necessary
in order to make the statements contained in such information no false or
misleading.
Section 5.5 Ownership of Company Stock. Immediately prior to the
execution of this Agreement and the Stockholders' Agreement by Parent and Merger
Subsidiary, none of Parent or any of its affiliates (which shall not include any
pension or benefit plan for employees of Parent or its affiliates): (a)
"beneficially owns" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, or (b) is a party to any agreement, arrangement or
understanding for the purposes of acquiring holding voting or disposing of, in
each case shares of the capital stock of the Company.
ARTICLE VI
Conduct of Business Pending the Merger
Section 6.1 Conduct of the Business Pending the Effective Time. From
and after the date hereof, prior to the Effective Time, except as contemplated
by this Agreement and set forth in Section 6.1 of the Company Disclosure
Schedule or required by Law or regulation, or unless Parent shall otherwise
agree in writing, the Company covenants and agrees that it shall, and shall
cause AuntMinnie.com to, carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and to
use reasonable efforts to conduct their Business in a manner consistent with the
budgets and plans heretofore made available to Parent, including all capital
expenditure and plant expansion plans, use all reasonable efforts to preserve
intact its present business organizations, keep available the services of its
employees and consultants and preserve its relationships and goodwill with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with the Company and to protect their Technology to the end
that their goodwill and on-going Business shall not be impaired in any material
respect at the Effective Time.
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(a) Unless Parent shall otherwise agree in writing, prior to the
Effective Time, the Company shall not, and shall not permit AuntMinnie.com, to:
(i) declare, set aside, or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, purchase, redeem or otherwise acquire, other
than pursuant to the exercise of Vested Company Stock Options outstanding
on the date of this Agreement, any shares of capital stock of the Company
or any other equity securities thereof or any rights, warrants, or options
to acquire any such shares or other securities other than purchases,
redemptions or acquisitions of equity securities of subsidiaries of the
Company as provided in Section 7.3 or rights, warrants or options to
acquire such securities;
(ii) grant, award or enter into any compensation or change of
control arrangement with any employee including the repricing of any
outstanding stock options;
(iii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock including any Company Options, any
other voting securities of the Company or any securities convertible into,
or any rights, warrants or options to acquire, any such shares or voting
securities (other than the issuance of Company Common Stock upon the
exercise of Company Stock Options outstanding on the date of this
Agreement) or amend the terms of any such securities, rights, warrants or
options or, except as described in Section 3.3(g) take any action to
accelerate the vesting thereof;
(iv) amend the certificate of incorporation or by-laws of the
Company or AuntMinnie.com;
(v) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof, or any
assets that are material, individually or in the aggregate;
(vi) subject to a Lien or sell, lease, license or otherwise
dispose of or transfer any of its properties or assets or any Technology
used in the Business other than in connection with: (y) the sale of
Products in the ordinary course of Business, and (z) the sale of tangible
personal property from inactive lines of business which are not currently
used in the Business pursuant to agreements in effect as of the date of
this Agreement and disclosed on Schedule 4.9 to the Company Disclosure
Schedule or for consideration which is not less than the greater of the
book value of the asset or its fair market value;
(vii) incur or modify any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities, guarantee any debt securities of another person, or enter into
any "keep well" or other agreement to maintain any financial condition of
another person, except, in any such
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case, for borrowings or other transactions incurred in the ordinary course
of business under any existing credit facility including to repay existing
indebtedness pursuant to the terms thereof, enter into any leases,
guarantees, assumptions of indebtedness or letters of comfort or similar
instruments or make any loans, advances or capital contributions to, or
investments in, any other person, or compromise any material claims or
litigation;
(viii) alter, amend or delay in any material respect the
implementation of its plans for capital expenditures and
completion/expansion of plant and production facilities previously
delivered to Parent;
(ix) take any action or omit to take any action that would
cause any of its representations and warranties herein to become untrue in
any material respect; and
(x) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Within 10 days after the end of each month following the date of
this Agreement, the Company shall deliver to Parent financial statements
presented on a basis consistent with the Quarterly Financial Statements and
copies of any Material Contracts entered into in accordance with this Agreement
during the preceding month. The Company shall promptly provide the Parent
copies of all filings made by the Company with any Governmental Entity,
including any Company SEC Reports.
(c) The Company and AuntMinnie.com shall, before settling or
compromising any material litigation, claim, income tax or other liability,
consult with Parent and its advisors as to the positions and elections that will
be taken or made with respect to such matter and shall not enter into any such
settlement or compromise without the consent of Parent, which will not be
unreasonably withheld or delayed. After the date of this Agreement, the Company
shall promptly provide copies to Parent of all pleadings made and any public
document filed in connection with all pending litigation or claim and copies of
all notices or correspondence relating to insurance coverage with respect to
such litigation or claims.
Section 6.2 Company Stockholder Vote. The Company shall file the
Company Proxy Statement within 10 days after the date of this Agreement, and as
soon as practicable, the Company shall take all other action reasonably
necessary, in accordance with applicable law and its certificate of
incorporation and by-laws, to convene the Company Special Meeting for the
purposes of obtaining stockholder approval of the Merger and this Agreement and
Transactions. To the extent Parent is required to by law to provide
information or can reasonably assist in the preparation of the Company Proxy
Statement or the Company Special Meeting, Parent shall cooperate with the
Company to do so.
Section 6.3 Acquisition Proposals. The Company agrees that the
Company shall not nor shall it authorize any of its officers, directors,
employees, agents or representatives of the Company or any subsidiary
(including, any investment banker,
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attorney or accountant retained by any of the foregoing) to, initiate, continue,
solicit or encourage, directly or indirectly, any inquiries or the making of any
proposal or offer to Stockholders of the Company, with respect to a merger,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, the Company or
AuntMinnie.com (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise knowingly facilitate any
effort or attempt to make or implement an Acquisition Proposal or enter into any
agreement or understanding with any other person or entity with the intent to
effect any Acquisition Proposal. The Company will notify Parent of any written
Acquisition Proposals or oral Acquisition Proposals made to any officer of the
Company which in either event shall include the value of the Acquisition
Proposal. Promptly after the execution of this Agreement and the announcement of
the Transactions, the Company will request each person which has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring the Company or any portion thereof to return or destroy all
confidential information heretofore furnished to such person by or on behalf of
the Company. Nothing contained in this Section shall prohibit Company and its
Board of Directors from (i) taking and disclosing positions with respect to a
tender offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated by
the SEC under the Exchange Act or making any disclosure required by Law to the
Company's stockholders as determined in good faith by the Board of Directors,
taking into account the advice of legal counsel to the Company, or (ii)
furnishing information, including without limitation nonpublic information, to
or entering into negotiations with, any person or entity that has indicated its
willingness to make an unsolicited bona fide proposal to acquire the Company
pursuant to a merger, consolidation, share exchange, purchase of a substantial
portion of the assets, business combination or other similar transaction, if,
and only to the extent that, (A) such unsolicited bona fide proposal relating to
a Company Acquisition Proposal is made by a third party that the Board of
Directors of the Company determines in good faith has a good faith intention to
proceed with negotiations to consider, and financial capability to consummate,
such Company Acquisition Proposal, such Company Acquisition Proposal is to
acquire at least (a) 50% of the consolidated assets or outstanding voting power
of the Company's securities, or (b) all of the outstanding securities or assets
of Aunt Minnie.com and is financially superior to the Transactions to the
shareholders of the Company, as determined in good faith in each case by the
Company's Board of Directors taking into account the advice of its financial
advisors and legal counsel (a "Superior Proposal"), (B) the Board of Directors
of Company, after duly considering the advice of legal counsel to Company,
determines in good faith that such action is required for the Board of Directors
of Company to comply with its fiduciary duties to stockholders imposed by
applicable law, (C) contemporaneous with furnishing such information to, or
entering into discussion or negotiations with, such person or entity Company
provides written notice to Parent to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such person
or entity and (D) Company uses all reasonable efforts to keep Parent informed in
all material respect of the status and terms of any such negotiations or
discussions (including without limitation the
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identity of the person or entity with whom such negotiations or discussions are
being held) and provides Parent copies of such written proposal and any
amendments or revisions thereto or correspondence related thereto; provided,
that Parent agrees to execute a confidentiality agreement, in form reasonably
acceptable to Parent, with respect to any such information delivered to Parent
pursuant to this clause (D), which confidentiality agreement shall be subject to
Parent's disclosure obligations arising under applicable law or securities
exchange regulations.
6.4 Financial Information. As soon as practicable after the date
hereof, the Company shall use its best efforts to cooperate and assist Parent
and Parent's independent public accountants in the compilation and preparation
of all financial statements and financial statement schedules of the Company
prepared in accordance with GAAP and reports and consents of the Company's
independent public accountants as may be necessary or deemed advisable by Parent
to comply with SEC reporting and disclosure requirements. The Company shall
deliver to Parent's independent public accountants and/or the Company's
independent public accountants all engagement letters and management
representation letters as may be reasonably requested by Parent or such
accountants. The Company shall use its best efforts to cause its independent
public accountants to cooperate with and assist Parent and its independent
public accountants in the preparation of the financial statements contemplated
by this Section 6.4.
6.5 Inventory. The Company shall produce finished goods inventory at
a rate which would cause there to be, as of February 28, 2001, six-weeks supply
of Products in inventory.
ARTICLE VII
Additional Agreements
Section 7.1 Access to Information. From the date hereof through the
Effective Time, the Company shall afford to Parent and Parent's accountants,
counsel and other representatives full and reasonable access during normal
business hours to its properties, books, contracts, commitments, records and
personnel and, during such period, shall furnish promptly to Parent (i) a copy
of each report, Schedules and other document filed or received by it pursuant to
the requirements of any law, and (ii) all other information concerning its
business, properties and personnel as Parent may reasonably request. Parent and
its accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 7.1, not unduly interfere with the operation of
the business of the Company or its subsidiaries.
Section 7.2 Further Action; Consents; Filings.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to (i) take, or cause to be
taken, all
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appropriate action and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate and make effective the
Merger and the other transactions contemplated by this Agreement, (ii) obtain
from Governmental Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement and (iii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement, the Merger and the other transactions contemplated by
this Agreement that are required under (A) the Exchange Act and the Securities
Act and the rules and regulations thereunder and any other applicable federal or
state securities laws, (B) the HSR Act, and (C) any other applicable Law. The
parties hereto shall cooperate with each other in connection with the making of
all such filings, including by providing copies of all such documents to the
nonfiling party and its advisors prior to filing and, if requested, by accepting
all reasonable additions, deletions or changes suggested in connection
therewith.
(b) Parent and the Company shall, and the Company shall cause its
Affiliates who are required to do so to, file as soon as practicable after the
date of this Agreement but in no event more than five business days after the
date of this Agreement, notifications under the HSR Act and any other
applications or notices required under other Law and shall respond as promptly
as practicable to all inquiries or requests that may be made pursuant to the HSR
Act or any other applicable Laws for additional information or documentation and
shall respond as promptly as practicable to all inquiries and requests received
from any Governmental Entity in connection with antitrust matters. The parties
shall cooperate with each other in connection with the making of all such
filings or responses, including providing copies of all such documents to the
other party and its advisors prior to filing or responding. Each of Parent,
Merger Subsidiary and the Company, to the extent applicable, further agrees to
file contemporaneously with the filing of the applications any requests for
waivers of applicable Governmental Entities as may be required to expeditiously
prosecute such waiver requests and to diligently submit any additional
information or amendments for which the Governmental Entity may ask with respect
to such waiver requests.
Section 7.3 Minority Ownership in AuntMinnie.com. Prior to the
Effective Time, the Company or AuntMinnie.com shall have purchased or
repurchased, as the case may be, from the holders thereof, all outstanding
shares or rights to acquire shares, of the capital stock of AuntMinnie.com on
terms no less favorable than set forth in Section 6.1 of the Company Disclosure
Schedule.
Section 7.4 Public Announcements. On or before the Closing Date,
Parent and the Company shall not (nor shall they permit any of their respective
Affiliates to), without prior consultation with the other party and such other
party's review of and consent to any public announcement concerning the
transactions contemplated by this Agreement, issue any press release or make any
public announcement with respect to such transactions
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during such period, and Parent and the Company shall, to the extent practicable,
allow the other party reasonable time to review and comment on such release or
announcement in advance of its issuance and use reasonable efforts in good faith
to reflect the reasonable and good faith comments of such other party, provided,
however, no party shall be prevented from making any disclosure required by law
at the time so required because of any delay on the part of the other party. The
parties intend that the initial announcement of the terms of the transactions
contemplated by this Agreement shall be made by joint press release of Parent
and the Company.
Section 7.5 Efforts; Consents. Prior to the Effective Date, the
Company shall use its reasonable best efforts to assist Parent in its
integration of the acquisition of the Company, including the prompt and orderly
transition of employees, customers and suppliers of the Company's business and
providing assistance to Parent in connection with the integration of the
Company's lines of business and services with those of Parent.
Section 7.6 Agreement to Defend and Indemnify.
(a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain indemnification provisions identical or superior (from
the point of view of the Indemnified Parties) to those contained in the
Certificate of Incorporation and By-Laws of the Company in existence on the date
of this Agreement and that were provided to Parent in accordance with this
Agreement and shall not be amended, repealed or otherwise modified for a period
of six years after the Effective Time in any manner that would adversely affect
the rights thereunder of individuals who immediately prior to the Effective
Time, are or were directors or officers of the Company or otherwise entitled to
indemnification under the Certificate of Incorporation or By-Laws or
Indemnification Agreements listed in Section 4.9 of the Company Disclosure
Schedule, and their respective heirs, executors and personal representatives or
under the Underwriting Agreement, dated November 14, 1995, between the Company
and the underwriters named therein (the "Indemnified Parties"). The Company
shall, to the fullest extent permitted under the DGCL and regardless of whether
the Merger becomes effective, indemnify, defend and hold harmless, and after the
Effective Time, Parent will cause the Surviving Corporation, to the fullest
extent permitted under DGCL, to indemnify, defend and hold harmless, each
Indemnified Party against any and all lawsuits, demands, actions, costs or
expenses (including reasonable attorneys' fees), judgments fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation, to the extent that it was
based in whole or in part on the fact that such Indemnified Party is or was a
director or officer of the Company and arising out of actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time, and in
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Company or the Surviving
Corporation, as applicable, shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, promptly as statements therefor are
received and (ii) the Company and the Surviving Corporation will cooperate in
the defense of any such matter; provided, however, that neither the Company nor
the Surviving Corporation will be liable for any settlement effected without its
written consent
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(which consent will not be unreasonably withheld); and provided, further, that
neither the Company nor the Surviving Corporation will be obliged pursuant to
this Section 7.6 to pay the fees and disbursements of more than one counsel for
all Indemnified Parties in any single action except to the extent that, in the
reasonable opinion of the Indemnified Parties, two or more of such Indemnified
Parties have conflicting interests in the outcome of such action.
Nothing in this Agreement will prohibit the Surviving Corporation from
complying with its obligations under the preceding sentence by obtaining
insurance coverage under any policy maintained by Parent or any of its
Subsidiaries. This Section 7.6 will survive the consummation of the Merger.
Parent shall cause Surviving Corporation to reimburse all expenses, including
reasonable attorney's fees and expenses, incurred by any person incurred in
connection with enforcing the obligations of Parent and the Surviving
Corporation under this Section 7.6. Notwithstanding anything else set forth in
the Agreement, this Section 7.6 is intended to be for the benefit of and to
grant third party rights to Indemnified Parties whether or not parties to this
Agreement, and each of the Indemnified Parties will be entitled to enforce the
covenants contained therein. For six years after the Effective Time, the
Surviving Corporation shall maintain or obtain officers' and directors'
liability insurance covering the Indemnified Parties who are currently covered
by the Company's officers and directors liability insurance policy on terms not
less favorable than those in effect on the date hereof in terms of coverage and
amounts.
(b) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation assume the obligations set
forth in this Section 7.6; provided, however, that Parent shall remain jointly
and severally liable to the Indemnified Parties hereunder.
Section 7.7 Notices of Breach.
(a) The Company shall give prompt notice to Parent of: (i) any
representation or warranty made by it contained in this Agreement which has
become untrue or inaccurate in any material respect, or (ii) the failure by it
to comply with or satisfy in any material respect any covenant, condition, or
agreement to be complied with or satisfied by it under this Agreement; provided,
however, that such notification shall not excuse or otherwise affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(b) Parent shall give prompt notice to the Company of: (i) any
representation or warranty made by Parent or Merger Subsidiary contained in this
Agreement which has become untrue or inaccurate in any material respect, or (ii)
the failure by it to comply with or satisfy in any material respect any
covenant, condition, or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that such notification shall not excuse or
otherwise
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affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
ARTICLE VIII
Conditions Precedent
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the holders of
the Company Common Stock;
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and any other
material Consents from Governmental Entities which in any case are
required to be received prior to the Effective Time with respect to
the Transactions shall have been received; and
(c) The consummation of the Merger shall not be restrained, enjoined
or prohibited by any order, judgment, decree, injunction or ruling of
a court of competent jurisdiction; provided, however, that the parties
shall comply with the provisions of Section 7.2 and shall further use
their best efforts to cause any such order, judgment, decree,
injunction or ruling to be vacated or lifted.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the additional conditions,
unless waived by the Company, that Parent and Merger Subsidiary shall have
performed in all material respects their respective agreements contained in this
Agreement required to be performed at or prior to the Effective Time and the
representations and warranties of Parent and Merger Subsidiary contained in this
Agreement shall be true when made and (except for representations and warranties
made as of a specified date, which need only be true as of such date) at and as
of the Effective Time as if made at and as of such time, except as contemplated
by this Agreement and except for inaccuracies that in the aggregate do not
constitute a Parent Material Adverse Effect; and the Company shall have received
a certificate of an officer to that effect.
Section 8.3 Conditions to Obligations of Parent and Merger Subsidiary
to Effect the Merger. The obligations of Parent and Merger Subsidiary to effect
the Merger shall be subject to the fulfillment at or prior to the Effective Time
of the additional following conditions, unless waived by Parent:
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(a) (i) The Company shall have performed in all respects its
agreements contained in this Agreement required to be performed at or
prior to the Effective Time, and (ii) the representations and
warranties of the Company contained in this Agreement shall be true
when made and (except for representations and warranties made as of a
specified date, which need only be true as of such date) at and as of
the Effective Time as if made at and as of such time, except with
respect to both (i) and (ii) above: (x) as contemplated by this
Agreement; (y) such changes as will not cause the condition of the
Company or AuntMinnie.com to materially adversely change from that
represented; and (z) such changes as do not result in a Company
Material Adverse Effect and (AA) such changes which are not directly
attributable to the announcement of this Agreement and the
Transactions (including the loss of employees or distributors) and
(BB) such changes which are not the result from the loss of employees
following the announcement of the Transactions; and Parent and Merger
Subsidiary shall have received a certificate of the Chief Executive
Officer of the Company to that effect.
(b) The Stockholders' Agreement shall have been duly authorized,
executed and delivered by the parties thereto other than the Parent
and the Merger Subsidiary and continue in full force and effect.
(c) There shall have been no Company Material Adverse Change since
September 30, 2000, other than changes which are directly attributable
to the announcement of this Agreement and the Transactions (including
the loss of employees or distributors) and which are the result from
the loss of employees following the announcement of the Transactions
not to any action or inaction by the Company or AuntMinnie.com
constituting a breach of any representation, warrant or covenant to be
performed by or on behalf of the Company or AuntMinnie.com, and Parent
shall have received a certificate of the President of the Company to
that effect.
(d) All consents, approvals or other requirements to the consummation
of the Transactions listed in Section 8.3 of the Company Disclosure
Schedule shall have been granted or received.
ARTICLE IX
Termination, Amendment and Waiver
Section 9.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
Stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
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(b) by the Company, upon a material breach of this
Agreement on the part of Parent or Merger Subsidiary which has not
been cured and which would cause the condition set forth in Section
8.2 to be incapable of being satisfied by the Upset Date;
(c) by Parent, upon a material breach of this Agreement on
the part of the Company set forth in this Agreement which has not been
cured and which would cause the conditions set forth in Section 8.3 to
be incapable of being satisfied by Upset Date;
(d) by Parent or the Company if any court of competent
jurisdiction shall have issued, enacted, entered, promulgated or
enforced any order, judgment, decree, injunction or ruling, after
reasonable efforts on the part of Parent and the Company to resist,
resolve or lift, which permanently restrains, enjoins or otherwise
prohibits the Merger and such order, judgment, decree, injunction or
ruling shall have become final and nonappealable;
(e) by either Parent or the Company if the Merger shall not
have been consummated on or before the Upset Date provided the
terminating party is not otherwise in material breach of its
representations, warranties or obligations under this Agreement which
would cause the conditions set forth in Section 8.1 and Section 8.2 or
8.3, as applicable, to be incapable of being satisfied prior to the
Upset Date;
(f) by either Parent or the Company if the Company Special
Meeting (including as it may be adjourned from time to time) shall
have concluded without the Company having obtained the required
stockholder approval of this Agreement and the transactions
contemplated hereby;
(g) by Parent, after receipt by the Company of a Superior
Proposal, if (x) by the end of the seventh calendar day following (but
not including) the day Parent notifies the Company that it wishes the
Board of Directors of the Company to publicly reaffirm its
recommendation to the Company's Stockholders to vote for the Merger,
the Board of Directors of the Company fails to so publicly reaffirm;
or (y) by the later of the end of (A) the tenth business day following
the public announcement of an Acquisition Proposal or (B) the seventh
calendar day following (but not including) the day Parent notifies the
Company that it wishes the Board of Directors of the Company to
publicly reject such publicly announced Acquisition Proposal, the
Board of Directors of the Company fails to publicly reject such
Acquisition Proposal; or (z) the Board of Directors of the Company
shall have changed its recommendation to the Company's Stockholders to
vote in favor of approval of the transactions contemplated hereby; or
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(h) by the Company if it receives a Superior Proposal and
the Company's Board of Directors determines that it would be in
accordance with their fiduciary duties after considering applicable
provisions of state law and taking into account the advice of legal
counsel, to accept the Superior Proposal; provided, however, that: (i)
the Company shall not be permitted to terminate this Agreement
pursuant to this Section 9.1(h) prior to the Special Meeting, provided
that the Company shall be entitled to amend the Company Proxy
Statement to permit its shareholders to consider both the Transactions
and the Superior Proposal and, if necessary to postpone the Company
Special Meeting for such time as may be required to permit the Company
stockholders to consider the amended Company Proxy Statement, and (ii)
the Company shall not be permitted to terminate this Agreement after
the Special Meeting, unless it has complied with the provisions of
Section 6.3 and Section 9.3(b).
Where action is taken to terminate this Agreement pursuant
to this Section 9.1, it shall be sufficient for such action to be
authorized by the Board of Directors of the party taking such action
and, to the extent required by Section 9.3 of this Agreement, shall
only be effective upon payment of the fee described therein.
Section 9.2 Effect of Termination. In the event of termination of
this Agreement by either Parent or the Company, as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of any of the Company, Parent or Merger Subsidiary or their
respective officers or directors except as expressly provided herein and
provided that Sections 9.2, 9.3 and Article X shall survive the termination.
Section 9.3 Fees and Expenses.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses provided,
however, the aggregate fees and expenses incurred in connection with this Merger
and paid or accrued by or due from the Company for transfer agent fees, paying
agent fees, proxy solicitors, accountants, attorneys and the cost of printing
the Company Proxy Statement shall not exceed $550,000 in the aggregate, assuming
that no material Acquisition Proposal is received by the Company between the
date of this Agreement and the date of the Company Special Meeting and that the
SEC does not review the Company Proxy Statement.
(b) In the event that the Company terminates this Agreement pursuant
to Section 9.1(h), the Company shall pay Parent a termination fee of 4% of the
aggregate Merger
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Consideration, in immediately available funds no later than the third business
day after notice of such termination.
In the event that
(i) the Parent shall have terminated this Agreement pursuant to
Section 9.1(e) and the Company is in material breach of its representations
warranties or obligations under this Agreement which has caused the
conditions set forth in Section 8.1 or Section 8.3 not to be satisfied and
(Y) if the Company Special Meeting has been held, Parent has not failed to
exercise its proxy granted under the Stockholders Agreement, and (Z) the
regulatory approvals or waiting periods set forth in Section 8.1(b) have
been received or such waiting period has terminated, as the case may be;
and
(ii) at any time prior to the six-month anniversary of such
termination, the Company enters into an agreement (in principle or
definitive) with respect to an Acquisition Proposal or, if a tender offer,
such Acquisition Proposal is announced, and in either case such transaction
is ultimately consummated.
the Company shall pay Parent a termination fee of 4% of the aggregate Merger
Consideration payable in immediately available funds on the date such agreement
is announced or entered into.
If the Company fails to pay when due the amount due pursuant to
this Section 9.3(b), and, in order to obtain such payment, Parent or Merger
Subsidiary commences a suit which results in a judgment against the Company
for the fee set forth in this Section 9.3(b), the Company shall pay to
Parent or Merger Subsidiary its reasonable costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate from the date such
payment was required to be made.
(c) Notwithstanding anything else set forth in this Agreement, the
parties hereto agree that the provisions of this Section 9.3 shall be the sole
and exclusive remedy for Parent and Merger Subsidiary for any and all claims,
damages, actions, suits, proceedings, demands, costs and expenses or other
liability sustained or incurred by Parent or Merger Subsidiary or their
successors and assigns in connection with this Agreement or the Transactions,
including those arising in contract, tort, breach of warranty or otherwise,
other than claims for fraud or intentional misrepresentation.
Section 9.4 Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval hereof by the Stockholders of the
Company, but, after such approval, no amendment shall be made which (i) changes
the form or decreases the amount of the Merger Consideration, (ii) in any other
way materially adversely affects the rights of the Company's Stockholders or
(iii) under applicable law would require approval of the Company's Stockholders,
in any such case referred to in clauses (i), (ii) and (iii), without the further
approval of such Stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto
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and, with respect to any amendments to Section 7.6 with the consent of a
majority of the Board of Directors of the Company as of the date of this
Agreement.
Section 9.5 Waiver. At any time prior to the Effective Time, the
parties hereto may, to the extent permitted by applicable law, (i) extend the
time for the performance of any of the obligations or other acts of any other
party hereto, (ii) waive any inaccuracies in the representations and warranties
by any other party contained herein or in any documents delivered by any other
party pursuant hereto and (iii) waive compliance with any of the agreements of
any other party or with any conditions to its own obligations contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE X
General Provisions
Section 10.1 Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telecopy (with
confirmation of receipt), or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to the Company:
Lumisys Incorporated
225 Humboldt Court
Sunnyvale, CA 94089
Attn: Chief Financial Officer
Telephone: 408-733-6565
Facsimile: 408-733-6567
With copies to:
Pillsbury Madison & Sutro LLP
2440 Hanover Street
Palo Alto, CA 94304
Attn: Allison Leopold Tilley, Esq.
Telephone: (650) 233-4518
Telecopy: (650) 233-4545
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If to the Parent, to:
Eastman Kodak Company
343 State Street
Rochester, NY 14650-0208
Attn: Kenneth K. Doolittle, Esq.
Telephone: 716-724-1932
Facsimile: 716-724-9448
With a copy to:
Nixon Peabody LLP
P.O. Box 31051
Clinton Square
Rochester, NY 14604-1051
Attn: Deborah McLean Quinn, Esq.
Telephone: 716-263-1307
Facsimile: 716-263-1600
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 10.2 Entire Agreement. This Agreement, the Company Disclosure
Schedule, and the Related Agreements constitute the entire agreement and
supersede all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
Section 10.3 Assignments; Parties in Interest. Neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any of the parties hereto, whether by operation of law or otherwise,
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement,
including to confer on any third Person beneficiary rights.
Section 10.4 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Delaware, without giving effect to the
provisions thereof relating to conflicts of law. Each of Parent and the Company
hereby waives personal service of any and all process and consents that all such
service of process be made by registered mail directed to the address stated in
Section 10.1 hereof and service so made shall be deemed to be completed upon
actual receipt thereof. Each of the Company, Parent and Merger Subsidiary hereby
consent to the personal jurisdiction of the courts of the State of Delaware and
agree that such courts shall have the exclusive jurisdiction over all such
matters. Each of the Company, Parent and Merger Subsidiary waive any right to a
trial by
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jury with respect to any matter arising under this Agreement and the
Transactions and shall not raise any claim of forum non conveniens or similar
matter in connection with the situs of such matter in the courts of the State of
Delaware.
Section 10.5 Heading. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
Section 10.6 Certain Definitions and Rules of Construction.
(a) As used in this Agreement:
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Acquisition Proposal" has the meaning set forth in Section 6.3.
"Affiliate" as applied to any person, shall mean any other person
directly or indirectly controlling, controlled by, or under common control with,
that person; for purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that person, whether through the ownership of voting securities, by
contract or otherwise.
"AuntMinnie.com" has the meaning set forth in Section 4.3.
"Business" means the business of the Company and AuntMinnie.com as
presently conducted, including the proposed development, sale and shipment of
the Daylight Desktop CR.
"CERCLA" has the meaning set forth in Section 4.24.
"Certificate of Merger" has the meaning set forth in Section 1.3.
"Certificates" has the meaning set forth in Section 3.3(b).
"Code" has the meaning set forth in Internal Revenue Code of 1986, as
amended and the regulations and interpretation issued thereunder.
"Closing Date" has the meaning set forth in Section 1.2.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company Benefit Plans" has the meaning set forth in Section 4.16(a).
"Company Common Stock" has the meaning set forth in Section 3.1(a).
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"Company Disclosure Schedule" means the schedules of disclosures and
exceptions to the Company's representations and warranties delivered to Parent
prior to the date of this Agreement, each of which is numbered to correspond to
the appropriate provisions of Article IV of this Agreement.
"Company Material Adverse Effect" means an event, change in
circumstances, or other matter which is reasonably likely to: (i) have a
material adverse effect on the business, results, financial condition, or
operations of the Company taken as a whole, or (ii) result in: (y) a decline in
the net number of registered users of the AuntMinnie.com website by more than
10% from the number registered on the date of this Agreement, or (z) an
interruption in the operation in the ordinary course of its business of the
AuntMinnie.com website on 30 days or more, either consecutively or cumulatively
in any three month period.
"Company Permits" has the meaning set forth in Section 4.22.
"Company Technology" has the meaning set forth in Section 4.11(b).
"Consents" means any consent by, approval of, or any notice or filing
with any Person required in order to effectuate the Transactions and preserve
the rights of Company in the Surviving Corporation.
"Company Board Approval" has the meaning in Section 4.26.
"Company Proxy Statement" has the meaning in Section 4.6.
"Company SEC Reports" has the meaning in Section 4.5(a).
"Company Special Meeting" has the meaning in Section 4.6.
"Company Stock Option Plans" has the meaning in Section 4.16(d).
"Constituent Corporations" has the meaning set forth in Section 1.4.
"Daylight DesktopCR" means the CR unit currently in the research and
development stage, consisting of (i) a self-contained computed radiography unit
(a phosphor plate reader or "digitizer" and a phosphor plate "eraser"), (ii) an
integrated mechanism to mechanically unload and re-load a single phosphor plate
from a specifically designed light-tight enclosure (i.e. "cassette"), and (iii)
a desktop personal computer with, specific application software for the
operation and control of the device.
"DGCL" has the meaning set forth in Section 1.3.
"Default" has the meaning set forth in Section 4.9.
"Dissenting Share" has the meaning set forth in Section 3.2.
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"ERISA" shall have the meaning set forth in Section 4.16(a).
"ERISA Affiliates" has the meaning set forth in Section 4.16(a).
"Effective Time" has the meaning set forth in Section 1.3.
"Environmental Laws" has the meaning set forth in Section 4.24(d).
"Environmental Permits" has the meaning set forth in Section 4.24(d).
"FDA" has the meaning set forth in Section 4.23.
"FDA Act" has the meaning set forth in Section 4.23.
"GAAP" has the meaning set forth in Section 4.5(b).
"Governmental Entity" means any federal, state or local government or
non-U.S. entity or quasi governmental authority, court or any agency or
instrumentality thereof.
"HSR Act" has the meaning set forth in Section 4.6.
"Hazardous Materials" has the meaning set forth in Section 4.26.
"IP Registrations" has the meaning set forth in Section 4.11(d).
"IP Rights" has the meaning set forth in Section 4.11(d).
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, treaty, writ or order and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree, judgment, stipulation, injunction, permit,
authorization, policy, opinion, or agency requirement, in each case having the
force and effect of law.
"Material Contracts" has the meaning set forth in Section 4.9.
"Merger" has the meaning set forth in the preamble to this Agreement.
"Merger Consideration" has the meaning set forth in Section 3.1.
"Merger Subsidiary" has the meaning set forth in the preamble to this
Agreement.
"Parent" has the meaning set forth in the preamble to this Agreement.
"Paying Agent" has the meaning set forth in Section 3.3(a).
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"Person" shall include individuals, corporations, partnerships,
limited liability companies, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act).
"Products" has the meaning set forth in Section 4.11(b).
"Quarterly Financial Statements" has the meaning set forth in Section
4.5(c).
"Related Agreements" has the meaning set forth in Section 4.4.
"Superior Proposal" has the meaning set forth in Section 6.3.
"Stockholders' Agreement" has the meaning set forth in the preamble in
this Agreement.
"Surviving Corporation" has the meaning set forth in Section 1.1.
"Tax" shall mean any federal, state, local, foreign or provincial
income, gross receipts, property, sales, service, use, license, lease, excise,
franchise, employment, payroll, withholding, unemployment insurance, workers'
compensation, social security, alternative or added minimum, ad valorem, value
added, stamp, business license, occupation, premium, environmental, windfall
profit, customs, duties, estimated, transfer or excise tax, or any other tax,
custom, duty, premium, governmental fee or other assessment or charge of any
kind whatsoever, together with any interest, penalty or additional tax imposed
by any Governmental Entity.
"Technology" has the meaning set forth in Section 4.11(b).
"Technology-Related Assets" has the meaning set forth in Section
4.11(a).
"Third Person Licenses" has the meaning set forth in Section 4.11(c).
"Third Person Technology" has the meaning set forth in Section
4.11(c).
"Transactions" has the meaning set forth in Section 4.4.
"Upset Date" means January 31, 2001, provided, however, that if
comments are received by the Company from the SEC on the Company Proxy Statement
such date shall be February 28, 2001.
(b) Other Rules of Construction.
(i) References in this Agreement to any gender shall include
references to all genders. Unless the context otherwise requires,
references in the singular include references in the plural and
vice versa. References to a party to this Agreement or to other
agreements described herein means those Persons executing such
agreements.
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(ii) The words "include", "including" or "includes" shall be
deemed to be followed by the phrase "without limitation" or the
phrase "but not limited to" in all places where such words appear
in this Agreement.
(iii) This Agreement is the joint drafting product of Parent and
the Company and each provision has been subject to negotiation
and agreement and shall not be construed for or against either
party as drafter thereof.
(iv) Each case in this Agreement where a contract or agreement
is represented or warranted to be enforceable will be deemed to
include as a limitation to the extent that enforceability may be
subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar Laws affecting the
enforcement of creditors' rights generally and to general
equitable principles, whether applied in equity or at law.
(v) All references in the Agreement to financial terms shall be
deemed to refer to such terms as they are defined under GAAP,
consistently applied.
Section 10.7 Counterparts. This Agreement may be executed in two or
more counterparts which together shall constitute a single agreement.
Section 10.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economics or legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon determination that any term or other
provision hereof is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Company have
caused this Agreement to be signed by their respective officers thereunder duly
authorized all as of the date first written above.
EASTMAN KODAK COMPANY
By /s/ J. Michael McQuade
____________________________
J. Michael McQuade
Senior Vice President
SUNFISH ACQUISITION CORP.
By /s/ Kenneth K. Doolittle
____________________________
Kenneth K. Doolittle
President
LUMISYS INCORPORATED
By /s/ Dean MacIntosh
____________________________
Dean MacIntosh
Executive Vice President
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APPENDIX B
OPINION OF UBS WARBURG LLC
[LETTERHEAD OF UBS WARBURG LLC]
November 9, 2000
The Board of Directors
Lumisys Incorporated
225 Humboldt Court
Sunnyvale, California 94089
Dear Members of the Board:
We understand that Lumisys Incorporated ("Lumisys") proposes to enter into
an Agreement and Plan of Merger, dated as of November 9, 2000 (the
"Agreement"), by and among Eastman Kodak Company ("Kodak"), Sunfish
Acquisition Corp., a wholly owned subsidiary of Kodak ("Merger Sub"), and
Lumisys pursuant to which (i) Merger Sub will merge with and into Lumisys (the
"Merger") and (ii) each outstanding share of the common stock, par value
$0.001 per share, of Lumisys ("Lumisys Common Stock") will be converted into
the right to receive $4.05 in cash (the "Merger Consideration"). The terms and
conditions of the Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point
of view, of the Merger Consideration to the holders of Lumisys Common Stock.
UBS Warburg LLC ("UBSW") has acted as financial advisor to Lumisys in
connection with the Merger and will receive a fee for its services, a
significant portion of which is contingent upon consummation of the Merger.
UBSW and its affiliates in the past have provided services to Lumisys and
Kodak unrelated to the proposed Merger and have received customary
compensation for the rendering of such services. In the ordinary course of
business, UBSW, its successors and affiliates may trade securities of Lumisys
and Kodak for their own accounts and accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
Our opinion does not address the underlying business decision of Lumisys to
effect the Merger or constitute a recommendation to any stockholder of Lumisys
as to how such stockholder should vote with respect to any matter relating to
the Merger. At your direction, we have not been asked to, nor do we, offer any
opinion as to the material terms of the Agreement or related documents or the
obligations thereunder, or the form of the Merger. In rendering this opinion,
we have assumed, at your direction, that Lumisys and Kodak will comply with
all material covenants and agreements set forth in, and other material terms
of, the Agreement and that the Merger will be validly consummated in
accordance with its terms.
In arriving at our opinion, we have, among other things: (i) reviewed
current and historical market prices and trading volumes of Lumisys Common
Stock; (ii) reviewed certain publicly available business and historical
financial information relating to Lumisys; (iii) reviewed certain internal
financial information and other data relating to the business and financial
prospects of Lumisys, including estimates and financial forecasts prepared by
the management of Lumisys, that were provided to or discussed with us by
Lumisys and are not publicly available; (iv) conducted discussions with
members of the senior management of Lumisys; (v) reviewed publicly available
financial and stock market data with respect to certain companies in lines of
business we believe to be generally comparable to those of Lumisys; (vi)
compared the financial terms of the Merger with the publicly available
financial terms of certain other transactions which we believe to be generally
relevant; (vii) reviewed the Agreement and certain related documents; and
(viii) conducted such other financial studies, analyses, and investigations,
and considered such other information as we deemed necessary or appropriate.
In connection with our engagement, we were requested to contact, and we held
discussions with, certain third parties to solicit indications of interest in
the possible acquisition of all or a part of Lumisys.
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The Board of Directors
Lumisys Incorporated
November 9, 2000
Page 2
In connection with our review, at your direction, we have not assumed any
responsibility for independent verification of any of the information provided
to or reviewed by us for the purpose of this opinion and have, with your
consent, relied on such information being complete and accurate in all
material respects. In addition, at your direction, we have not made any
independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of Lumisys, nor have we been furnished with any such
evaluation or appraisal. With respect to the financial forecasts and estimates
referred to above, we have assumed, at your direction, that they have been
reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of Lumisys as to the future
performance of Lumisys. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information
made available to us as of, the date of this letter.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view,
to the holders of Lumisys Common Stock.
Very truly yours,
/s/ UBS Warburg LLC
UBS WARBURG LLC
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APPENDIX C
DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS--(a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to sec. 228 of this title shall be
entitled to an appraisal by the Court of Chancery of the fair value of the
stockholder's shares of stock under the circumstances described in subsections
(b) and (c) of this section. As used in this section, the word "stockholder"
means a holder of record of stock in a stock corporation and also a member of
record of a nonstock corporation; the words "stock" and "share" mean and
include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263
or sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to sec.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
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date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the effective
date of the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such stockholder's
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as
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the Court may direct. Payment shall be so made to each such stockholder, in
the case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of such stockholder's demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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v FOLD AND DETACH HERE v
PROXY
Lumisys Incorporated
Proxy Solicited by the Board of Directors
for a Special Meeting of Stockholders, December 22, 2000
(see Proxy Statement for discussion of items)
The undersigned hereby appoints Bala Manian, Phillip Berman and Dean
MacIntosh as proxy, with power of substitution, to vote all shares of Lumisys
Incorporated Common Stock which the undersigned is entitled to vote on all
matters which may properly come before the Special Meeting of Stockholders of
Lumisys Incorporated, or any adjournment thereof.
-------------- --------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-------------- --------------
<PAGE>
--------------------------------------------------------------------------------
v FOLD AND DETACH HERE v
[X] Please mark
votes as in
this example.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1
--------------------------------------------------------------------------------
1. Proposal to approve the acquisition of Lumisys FOR AGAINST ABSTAIN
Incorporated, a Delaware corporation ("Lumisys"), [_] [_] [_]
by Eastman Kodak Company, a New Jersey Corporation
("Kodak"), and to adopt and approve the Agreement
and Plan of Merger dated November 9, 2000 (as it
may be amended from time to time, the "Merger
Agreement") by and among Lumisys, Kodak and Sunfish
Acquisition Corp., a newly formed Delaware
corporation and wholly owned subsidiary of Kodak
("Sunfish"), and the transactions contemplated
thereby pursuant to which, among other things:
(a) Sunfish will merge with and into Lumisys;
(b) Lumisys will continue as the surviving
corporation and will be a wholly
owned subsidiary of Kodak;
(c) each share of Lumisys common stock issued
and outstanding at the effective time of
the merger (other than shares held by
stockholders, if any, who properly exercise
their appraisal rights under Delaware law)
will convert into the right to receive $4.05
in cash; and
(d) each unexercised option to purchase Lumisys
common stock outstanding at the effective
time of the merger with an exercise price of
$4.05 or less will be converted into the
right to receive an amount equal to $4.05
per share less the exercise price per share
of such option.
The shares represented by this Proxy Card
will be voted as specified above, but if no
specification is made they will be voted FOR
Item 1, and at the discretion of the proxies
on any other matter that may properly come
before the meeting.
MARK HERE MARK HERE
FOR ADDRESS [_] IF YOU PLAN [_]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
NOTE: Please sign exactly as name appears
hereon. Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, give full name and title
as such.
Please sign, date and return promptly in the
accompanying envelope.
Signature: _______________ Date: ____________
1
