<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE TO
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
SPANLINK COMMUNICATIONS, INC.
(NAME OF SUBJECT COMPANY)
SPANLINK ACQUISITION CORP.
(BIDDER)
------------------------
COMMON SHARES, NO PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
------------------------
846492 10 6
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
BRETT SHOCKLEY
CHIEF EXECUTIVE OFFICER
SPANLINK COMMUNICATIONS, INC.
7125 NORTHLAND TERRACE
MINNEAPOLIS, MN 55428
TELEPHONE: (612) 971-2114
FACSIMILE: (612) 971-2314
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSON)
------------------------
COPY TO:
ROBERT RANUM
FREDRIKSON & BYRON, P.A.
1100 INTERNATIONAL CENTRE
900 SECOND AVENUE SOUTH
MINNEAPOLIS, MN 55402
------------------------
CALCULATION OF FILING FEE*
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<TABLE>
<S> <C>
TRANSACTION VALUATION AMOUNT OF FILING FEE
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$39,370,000 $7,875
</TABLE>
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* ESTIMATED FOR PURPOSES OF CALCULATING THE AMOUNT OF THE FILING FEE ONLY. THIS
AMOUNT ASSUMES THE PURCHASE OF 3,750,000 SHARES OF COMMON STOCK, NO PAR VALUE
(THE "COMMON SHARES"), OF SPANLINK COMMUNICATIONS, INC., AT A PRICE OF $10.50
PER COMMON SHARE IN CASH. THE AMOUNT OF THE FILING FEE CALCULATED IN
ACCORDANCE WITH REGULATION 240.0-11 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, EQUALS 1/50TH OF ONE PERCENT OF THE VALUE OF THE TRANSACTION.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11 (A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
<TABLE>
<S> <C> <C> <C>
AMOUNT PREVIOUSLY PAID....... NOT APPLICABLE. FILING PARTY................. NOT APPLICABLE.
FORM OR REGISTRATION NO. .... NOT APPLICABLE. DATE FILED................... NOT APPLICABLE.
</TABLE>
[ ] CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER.
CHECK THE APPROPRIATE BOXES BELOW TO DESIGNATE ANY TRANSACTIONS TO WHICH THE
STATEMENT RELATES:
<TABLE>
<S> <C>
[X] THIRD PARTY TENDER OFFER SUBJECT TO RULE [X] GOING PRIVATE TRANSACTION SUBJECT TO RULE
14d-1. 13e-3.
[ ] ISSUER TENDER OFFER SUBJECT TO RULE 13e-4. [ ] AMENDMENT TO SCHEDULE 13D UNDER RULE 13d-2.
</TABLE>
CHECK THE FOLLOWING BOX IF THE FILING IS A FINAL AMENDMENT REPORTING THE RESULTS
OF THE TENDER OFFER: [ ]
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<PAGE> 2
This Tender Offer Statement on Schedule TO relates to the offer by Spanlink
Acquisition Corp., a Minnesota corporation ("Purchaser"), to purchase all of the
outstanding common shares, no par value per share (each a "Common Share"), of
Spanlink Communications, Inc., a Minnesota corporation (the "Company"), not
already owned by the Purchaser at $10.50 per Common Share, net to the seller in
cash, without interest (the "Per Share Amount"), upon the terms and subject to
the conditions set forth in the Offer to Purchase dated February 29, 2000 (the
"Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and
in the related Letter of Transmittal, a copy of which is attached hereto as
Exhibit (a)(1) (the "Letter of Transmittal").
The information in the Offer to Purchase and the related Letter of
Transmittal is incorporated herein by reference in answer to items 1 through 11
and item 13 of Schedule TO, including, without limitation, all of the
information required by Schedule 13E-3 that is not included or covered by the
items in Schedule TO.
In response to Item 13 of Schedule 13E-3, the Company's audited financial
statements as of and for the years ended December 31, 1997 and 1998 are
incorporated herein by reference to Exhibit 13.1 to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1998 filed with the Securities
and Exchange Commission (the "Commission") on March 30, 1999. Also in response
to Item 13 of Schedule 13E-3, the Company's unaudited financial statements as of
and for the quarter and nine months ended September 30, 1999 are incorporated
herein by reference to Part I, Item 1 of the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1999 filed with the Commission on
November 16, 1999.
ITEM 12. MATERIALS TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase dated February 29, 2000, and Forms of
Letter of Transmittal and instructions.
(a)(5)(i) Press Release issued by Purchaser, dated February 25, 2000.
(a)(5)(ii) Press Release regarding financial results for fourth quarter
and year ended December 31, 1999, dated February 23, 2000.
(b) None.
(c)(1) Written Fairness Opinion of Dougherty & Company LLC, dated
February 25, 2000 (incorporated by reference to Annex A of
the Offer to Purchase attached hereto as Exhibit (a)(1)).
(d) None.
(e) Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (incorporated by reference to Annex D of the
Offer to Purchase attached hereto as Exhibit (a)(1)).
(f) None.
(g) None.
(h) None.
</TABLE>
<PAGE> 3
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: February 29, 2000
SPANLINK ACQUISITION CORP.
By: /s/ Brett Shockley
------------------------------------
Name: Brett Shockley
Title: Chief Executive Officer
SPANLINK COMMUNICATIONS, INC.
By: /s/ Brett Shockley
------------------------------------
Name: Brett Shockley
Title: Chief Executive Officer
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<S> <C>
(a)(1) Offer to Purchase dated February 29, 2000, and Forms of
Letter of Transmittal and instructions.
(a)(5)(i) Press Release issued by Purchaser, dated February 25, 2000.
(a)(5)(ii) Press Release regarding financial results for fourth quarter
and year ended December 31, 1999, dated February 23, 2000.
(b) None.
(c)(1) Written Fairness Opinion of Dougherty & Company LLC, dated
February 25, 2000 (incorporated by reference to Annex A of
the Offer to Purchase attached hereto as Exhibit (a)(1)).
(d) None.
(e) Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (incorporated by reference to Annex D of the
Offer to Purchase attached hereto as Exhibit (a)(1)).
(f) None.
(g) None.
(h) None.
</TABLE>
<PAGE> 1
EXHIBIT (A)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SPANLINK COMMUNICATIONS, INC.
AT
$10.50 NET PER SHARE
BY
SPANLINK ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, MINNESOTA
TIME, ON MARCH 30, 2000, UNLESS THE OFFER IS EXTENDED. THIS OFFER IS BEING MADE
PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED AS OF FEBRUARY 25, 2000,
BETWEEN SPANLINK COMMUNICATIONS, INC. (THE "COMPANY"), SPANLINK ACQUISITION
CORP. (THE "PURCHASER") AND CISCO SYSTEMS, INC. ("CISCO"). THE OFFER IS
CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES OF COMMON
STOCK OF THE COMPANY WHICH WHEN COMBINED WITH THE SHARES OWNED BY THE PURCHASER
WOULD RESULT IN THE PURCHASER OWNING AT LEAST 67% OF THE SHARES OF COMMON STOCK
OF THE COMPANY OUTSTANDING ON THE DATE OF PURCHASE, (II) THE COMPANY NOT
BREACHING ANY OF ITS MATERIAL COVENANTS, OBLIGATIONS OR AGREEMENTS AND (III) THE
COMPANY NOT BREACHING ANY OF ITS REPRESENTATIONS OR WARRANTIES WHICH IF NOT
CURED WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY. THE OFFER IS ALSO
SUBJECT TO OTHER TERMS AND CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER RECEIVING THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD COMPRISED ENTIRELY OF
INDEPENDENT DIRECTORS, (I) HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, (II) HAS
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, ARE ADVISABLE, FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S SHAREHOLDERS (OTHER THAN BRETT A. SHOCKLEY, LOREN A.
SINGER AND TODD A. PARENTEAU (THE "FOUNDING SHAREHOLDERS") AND THE PURCHASER)
AND (III) RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
shares of common stock, no par value per share, of the Company (the "Shares")
should either (i) complete and sign the enclosed Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such shareholder's signature thereon guaranteed (if required
by Instruction 1 to the Letter of Transmittal), mail or deliver the Letter of
Transmittal (or a facsimile thereof) and any other required documents to the
Depositary (as defined herein) and either deliver the certificates for such
Shares along with the Letter of Transmittal to the Depositary or tender such
Shares pursuant to the procedures for book-entry transfer set forth in "THE
OFFER -- Procedures for Tendering Shares" or (ii) request such shareholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such shareholder. Any shareholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee to tender such shares.
ANY SHAREHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, WHO CANNOT COMPLY WITH THE
PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED IN THIS OFFER TO PURCHASE ON A
TIMELY BASIS, OR WHO CANNOT DELIVER ALL REQUIRED DOCUMENTS TO THE DEPOSITARY
PRIOR TO THE EXPIRATION OF THE OFFER MAY TENDER SUCH SHARES BY FOLLOWING THE
PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN "THE OFFER -- PROCEDURES FOR
TENDERING SHARES."
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to Corporate Investor Communications, Inc. (the "Information Agent") at
its addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. Shareholders may also contact brokers, dealers, commercial banks or
trust companies for assistance concerning the Offer.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE INFORMATION AGENT FOR THE OFFER IS:
CORPORATE INVESTOR COMMUNICATIONS, INC.
THE DEPOSITARY FOR THE OFFER IS:
NORWEST BANK, N.A.
February 29, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY TERM SHEET.......................................... 1
INTRODUCTION................................................ 4
SPECIAL FACTORS............................................. 6
Background of the Offer................................... 6
Recommendation of the Special Committee and Board of
Directors; Fairness of the Offer....................... 11
Opinion of Financial Advisor.............................. 15
Purpose and Structure of the Transactions................. 18
Plans for the Company After the Transactions.............. 18
Interests of Certain Persons in the Transactions.......... 19
The Merger Agreement...................................... 21
Rights of Dissenting Shareholders......................... 27
Certain Federal Income Tax Consequences................... 29
Security Ownership of Certain Beneficial Owners and
Management............................................. 31
THE OFFER................................................... 32
Terms of the Offer........................................ 32
Acceptance for Payment and Payment for Shares............. 33
Procedures for Tendering Shares........................... 34
Withdrawal Rights......................................... 37
Price Range of the Shares; Dividends...................... 37
Effect of the Offer on the Market for the Shares; Stock
Exchange Listing; Exchange Act Registration............ 38
Certain Information Concerning the Company................ 38
Certain Information Concerning Purchaser.................. 42
Conditions to the Offer................................... 43
Certain Legal Matters..................................... 44
Fees and Expenses......................................... 46
Miscellaneous............................................. 46
</TABLE>
<TABLE>
<S> <C>
Schedule I Information Concerning Directors and Executive Officers of
the Company
Schedule II Information Concerning Directors and Executive Officers of
Purchaser
Annex A Opinion of Dougherty & Company LLC
Annex B Agreement and Plan of Merger, dated as of February 25, 2000,
among the Company, Purchaser and Cisco Systems, Inc.
Annex C Stock Purchase Agreement, dated as of February 25, 2000,
between Purchaser and Cisco Systems, Inc.
Annex D Sections 302A.471 and 473 of the Minnesota Business
Corporations Act
</TABLE>
i
<PAGE> 3
SUMMARY TERM SHEET
The Purchaser is offering to purchase all of the outstanding Shares of the
Company for $10.50 per share in cash. The following are some of the questions
that you, as a shareholder of the Company, may have and answers to those
questions. The information in this summary is not complete and we urge you to
carefully read the remainder of this Offer to Purchase and the accompanying
Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
The offer to purchase all of the outstanding Shares is being made by the
Purchaser. If the offer is consummated, the Purchaser will purchase all of the
Shares tendered.
The Company designs, develops and markets computer telephony software and
services that help automate the customer interaction process in call centers
using technologies which link business computer systems, telecommunications
systems and the Internet. The Company's product lines include EXTRAAGENT and
FASTCALL product families as well as SELECTSOLUTIONS which provides custom
interactive computer telecommunications software applications utilizing the
Company's core software modules. The Company is headquartered in Minneapolis,
Minnesota.
The Purchaser was formed by Brett Shockley, the Company's Chief Executive
Officer and Chairman of the Board; Loren A. Singer, Jr., the Company's secretary
and a director; and Todd A. Parenteau, a significant shareholder of the Company
(the "Founding Shareholders"), for the purpose of making a tender offer for all
of the Company's common stock. The Purchaser is not a subsidiary of the Company.
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay $10.50 per share, net to you in cash. If you tender
your Shares to us in the Offer, you will not have to pay brokerage fees or
similar expenses.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
Cisco Systems, Inc., has agreed to purchase 450,000 shares of our preferred
stock for an aggregate purchase price of $45,000,000. The proceeds from the sale
of our preferred stock to Cisco are sufficient to pay for the Shares tendered in
the Offer.
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
Because tendering your Shares in the Offer will end your ownership interest
in the Company, including the chance to receive any possible future dividends or
other payments in respect of the Company's common stock, the Company's financial
condition may be relevant to your decision whether to tender in the Offer. As
such, we have provided certain historical financial information concerning the
Company in "THE OFFER -- Certain Information Concerning the Company" of this
Offer to Purchase.
Because the form of payment consists solely of cash and all of the funding
which will be needed has already been arranged, and also because of the lack of
any relevant historical financial information concerning Purchaser, we do not
think the financial condition of Purchaser is relevant to your decision to
tender in the Offer.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, Minnesota time, on March 30,
2000 to decide whether to tender your Shares in the Offer. If you cannot deliver
everything that is required in order to make a valid tender by that time, you
may be able to use a guaranteed delivery procedure, which is described later in
this Offer to Purchase.
1
<PAGE> 4
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Subject to the terms of the Merger Agreement, we can extend the Offer. We
have agreed in the Merger Agreement that we may extend the offer from time to
time if certain conditions to the Offer have not been satisfied.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will inform Corporate Investor Communications,
Inc. (which is the Information Agent for the Offer) of that fact, and will make
a public announcement of the extension, not later than 9:00 a.m., Minnesota
time, on that day after the day on which the Offer was scheduled to expire.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
We are not obligated to purchase any Shares which are validly tendered
unless that number of Shares, when added to the Shares we then own, represents
at least 67% of the Shares outstanding. However, you should be aware that the
Founding Shareholders have agreed to contribute 2,430,000 Shares to the
Purchaser and intend to tender an aggregate of 270,000 Shares in response to the
Offer, representing 52% of the Shares outstanding. Furthermore, we are not
obligated to purchase any Shares which are validly tendered if, among other
things, the Company has materially breached its obligations, covenants or
agreements under the Merger Agreement, or if there has occurred a breach of any
representation or warranty contained in the Merger Agreement that, if not cured,
would have a material adverse effect on the Company.
HOW DO I TENDER MY SHARES?
To tender your Shares, you must deliver the certificates representing your
Shares, together with a completed Letter of Transmittal, to Norwest Bank, N.A.
not later than the time the Offer expires. If your Shares are held in street
name (that is, through a broker, dealer or other nominee), the shares can be
tendered by your nominee through The Depositary Trust Company. If you cannot get
something that is required to the Depositary by the expiration of the Offer, you
may get a little extra time to do so by having a broker, bank or other fiduciary
who is a member of the Securities Transfer Agent Medallion Program or other
eligible institution guarantee that the missing items will be received by the
Depositary within three Nasdaq SmallCap Market trading days. However, the
Depositary must receive the missing items within that three day trading period.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw previously tendered Shares at any time until the Offer has
expired and, if we have not agreed to accept your Shares for payment by March
30, 2000, you can withdraw them at any time after such time until we do accept
your Shares for payment.
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw Shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the Depositary while you
still have the right to withdraw the shares.
WHAT DOES THE COMPANY'S BOARD OF DIRECTORS THINK OF THE OFFER?
As previously stated, the Purchaser was formed for the purpose of making
the Offer by a group including the Company's Chief Executive Officer and
Chairman of the Board, as well as another director of the Company. In order to
avoid any actual or potential conflicts of interest relating to such
individuals, the Board appointed a Special Committee consisting of independent
directors who do not have any such relations with the Purchaser to review,
evaluate and negotiate the terms of the Merger Agreement and to make a
recommendation regarding the Merger Agreement to the full Board of Directors.
The Board of Directors of the Company, after receiving the unanimous
recommendation of the Special Committee, (i) has approved the Merger Agreement
and the transactions contemplated thereby, including
2
<PAGE> 5
the Offer and the proposed Merger of the Purchaser with and into the Company,
with the Company as the surviving corporation (the "Merger"), (ii) has
determined that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, are advisable, fair to and in the best
interests of the Company's shareholders (other than the Founding Shareholders
and the Purchaser) (the "Non-Affiliated Shareholders") and (iii) recommends that
you tender your Shares in the Offer.
WILL THE COMPANY CONTINUE AS A PUBLIC COMPANY?
No. If the Offer is consummated, the Company will no longer be publicly
owned. The Offer is the first step in a going private transaction. The Purchaser
will seek to delist the common shares of the Company from the Nasdaq SmallCap
Market and terminate registration of the Company's common stock under the
Securities Exchange Act of 1934 (the "Exchange Act") as soon after the
completion of the tender offer as the requirements for such delisting and
termination are met.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
Shareholders not tendering in the Offer will receive in the Merger the same
amount of cash per share which they would have received had they tendered their
shares in the Offer. Therefore, if the Merger takes place, the difference to you
between tendering your Shares and not tendering your Shares is that you will be
paid earlier if you tender your Shares in the Offer. If the Purchaser acquires
90% or more of the Company's Shares in the Offer, Purchaser will immediately
commence a merger of the Purchaser with and into the Company under Minnesota law
without soliciting approval of the Company's shareholders. If the Purchaser
acquires at least 67% of the Company's shares in the Offer, but less than 90% of
the Company's Shares, the Purchaser will immediately commence the process of
soliciting approval of the Company's shareholders for the merger of Purchaser
with and into the Company. If the number of Shares tendered in the Offer, when
combined with the number of Shares of the Company owned by the Purchaser,
represents less than 67% of the Company's outstanding common stock, the
Purchaser will not be obligated to purchase the tendered Shares or proceed with
the Merger.
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On February 24, 2000, the last trading day before we announced the proposed
Offer and the possible subsequent Merger, the last sale price of the Company's
common stock reported on the Nasdaq SmallCap Market was $10.75 per share. We
advise you to obtain a recent quotation for the Shares in deciding whether to
tender your Shares.
WHOM CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call Corporate Investor Communications, Inc. at (877) 977-6194.
Corporate Investor Communications, Inc. is acting as the Information Agent for
the Offer.
3
<PAGE> 6
To the Holders of Common Stock of
Spanlink Communications, Inc.:
INTRODUCTION
Spanlink Acquisition Corp. (the "Purchaser") hereby offers to purchase all
of the outstanding shares of Spanlink Communications, Inc. (the "Company")
common stock (the "Shares"), at a price of $10.50 per Share, net to the seller
in cash, without interest thereon (the "Per Share Amount"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, as amended from time to time, together constitute
the "Offer").
Tendering Shareholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Norwest Bank, N.A., which is acting
as the Depositary (the "Depositary") and Corporate Investor Communications,
Inc., which is acting as the information agent (the "Information Agent"),
incurred in connection with the Offer. See "THE OFFER -- Fees and Expenses."
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 25, 2000 (the "Merger Agreement"), among the Company, Purchaser
and Cisco Systems, Inc. Pursuant to the Merger Agreement, following the
completion of the Offer and the satisfaction or waiver of certain conditions set
forth in the Merger Agreement, Purchaser will be merged with and into the
Company (the "Merger"), with the Company as the surviving corporation in the
Merger (the "Surviving Corporation"). In the Merger, each outstanding Share
(other than Shares owned by Purchaser or its affiliates), and other than Shares
held by shareholders who properly exercise dissenters' rights under the
Minnesota Business Corporation Act (the "MBCA") ("Dissenting Shares") will be
converted into the right to receive the Per Share Amount.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES OF COMMON STOCK OF THE COMPANY WHICH WHEN COMBINED WITH THE SHARES OWNED
BY THE PURCHASER WOULD RESULT IN THE PURCHASER OWNING AT LEAST 67% OF THE SHARES
OF COMMON STOCK OF THE COMPANY OUTSTANDING ON THE DATE OF PURCHASE, (II) THE
COMPANY NOT BREACHING ANY OF ITS MATERIAL COVENANTS, OBLIGATIONS OR AGREEMENTS
AND (III) THE COMPANY NOT BREACHING ANY OF ITS REPRESENTATIONS OR WARRANTIES
WHICH IF NOT CURED WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY. The
Offer is also subject to the other conditions set forth in this Offer to
Purchase. See "THE OFFER -- Conditions to the Offer" which sets forth in full
the conditions of the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER RECEIVING THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD COMPRISED ENTIRELY OF
INDEPENDENT DIRECTORS (THE "SPECIAL COMMITTEE"), (I) HAS APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, (II) HAS DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE ADVISABLE, FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS (OTHER THAN FOUNDING
SHAREHOLDERS AND PURCHASER) AND (III) RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
As of February 28, 2000, there were 5,233,770 shares of Common Stock issued
and outstanding and 1,731,810 shares subject to outstanding stock options and
warrants. As of February 28, 2000, there were approximately 57 holders of record
of the issued and outstanding Shares.
4
<PAGE> 7
Dougherty & Company LLC ("Dougherty & Company"), financial advisor to the
Special Committee, has delivered to the Special Committee its opinion, dated as
of February 25, 2000 (the "Financial Advisor Opinion"), to the effect that, as
of such date and based upon and subject to certain assumptions and matters
stated therein, the Per Share Amount is fair, from a financial point of view, to
the shareholders of the Company (other than the Founding Shareholders and the
Purchaser)(the "Non-Affiliated Shareholders"). See "SPECIAL FACTORS -- Opinion
of Financial Advisor." A copy of the Financial Advisor Opinion is attached
hereto as Annex A.
The Purchaser and Cisco Systems, Inc., have entered into a stock purchase
agreement dated February 25, 2000 (the "Stock Purchase Agreement") pursuant to
which Cisco has committed, subject to the terms and conditions set forth in the
Stock Purchase Agreement, to purchase 450,000 shares of non-voting preferred
stock of the Purchaser for an aggregate purchase price of $45 million. The
Founding Shareholders have agreed to contribute an aggregate of 2,430,000 shares
of the Company's common stock in exchange for an equal number of shares of
voting common stock of the Purchaser. Following the Merger, the Founding
Shareholders will own all of the outstanding shares of voting common stock of
the Purchaser. Each of the Founding Shareholders also intends to tender 90,000
shares of their common stock in the Company in response to the Offer. See
"SPECIAL FACTORS -- Financing of the Transactions."
Consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
and the Merger by the requisite vote of shareholders of the Company. See
"SPECIAL FACTORS -- The Merger Agreement." The affirmative vote of the holders
of a majority of the outstanding Shares is required to approve and adopt the
Merger Agreement and the Merger. The Founding Shareholders hold an aggregate of
52% of the Company's outstanding shares. ACCORDINGLY, IF THE PURCHASER ACQUIRES
52% OF THE SHARES FROM THE FOUNDING SHAREHOLDERS AND AN ADDITIONAL 15% OF THE
SHARES ARE TENDERED AND PURCHASED PURSUANT TO THE OFFER, THE PURCHASER WILL
SATISFY THE 67% MINIMUM CONDITION AND THE FAVORABLE VOTE TO APPROVE THE MERGER
WILL BE ASSURED. HOWEVER, THE PURCHASER'S OBLIGATION TO CONSUMMATE THIS MERGER
IS CONDITIONED ON THE HOLDERS OF NOT MORE THAN 5% OF THE COMPANY'S OUTSTANDING
SHARES EXERCISING DISSENTERS' RIGHTS UNDER SECTIONS 302A.471 AND 302A.473 OF THE
MBCA.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION AND SHOULD BE READ CAREFULLY IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
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SPECIAL FACTORS
BACKGROUND OF THE OFFER
The Company was formed by Brett Shockley, Todd Parenteau and Loren Singer
in 1988. The Company's initial public offering of Shares was completed in April
1996.
On August 11, 1998, at a regular meeting of the Company's board of
directors, there was a discussion regarding the challenges facing the Company
and its performance as an independent public company. Competition in the market
for the Company's products had intensified, while at the same time, the Company
had been unsuccessful at increasing sales at the rate analysts expected. As a
result, the Company's stock had under-performed relative to analyst expectations
since the initial public offering and, without substantial additional
investments in sales and marketing, the Company expected difficulty meeting the
market's expectations. In view of the Company's market position, it was
determined that additional access to the capital markets was not probable.
Joseph Mooney, an outside member of the board of directors, recommended that the
Company consider seeking a strategic investment by a third party or sale of the
Company to a third party as a way to maximize shareholder value. Brett Shockley,
the Chief Executive Officer and President of the Company, agreed to approach the
corporate finance department of its primary market maker and the underwriter of
its initial public offering, Dougherty & Company, to discuss the possibility of
third party investment or acquisition.
On September 29, 1998, a special meeting of the board of directors was
convened to discuss a proposal by Dougherty & Company to seek a strategic
investor or acquiror for the Company. At this meeting, the board listened to a
presentation by Dougherty & Company regarding the alternatives the Company had
available to raise additional funds. Dougherty & Company recommended that the
Company seek a strategic investor or acquiror and presented a proposal for
Dougherty & Company to act as investment banker for the Company in such a
search. Following extensive discussion by the board, including a review of other
alternatives to maximize the shareholder value, Mr. Shockley recommended that
Dougherty & Company be retained to do a preliminary valuation and explore the
possibility of finding an acceptable investor or acquiror. The board unanimously
voted to retain Dougherty & Company to begin such an analysis.
On February 23, 1999, Dougherty & Company presented the results of its
analysis to the board of directors. A preliminary list of potential acquiring
companies was presented along with a valuation analysis that included a
comparison of trading multiples for comparable publicly traded companies and a
review of recently completed comparable merger or acquisition transactions. The
reference range for these valuation methods was $8 to $10 per share. The board
discussed Dougherty & Company's presentation and approved Mr. Shockley's
recommendation that they be retained as Spanlink's investment banking
representative to seek a third party strategic investor or acquiror. Upon
notification of the board's decision, Dougherty & Company agreed to begin
developing a formal offer document and begin its search.
On June 4, 1999, Dougherty & Company began sending an introductory letter
to their likely buyer list.
On August 10, 1999, the board of directors met to discuss the progress
Dougherty & Company had made and to review the Company's financial performance.
Dougherty & Company indicated to the directors that preliminary results of its
inquiries into potential buyers were disappointing. Dougherty & Company stated
it would pursue additional potential candidates to participate in a transaction
with the Company. Mr. Timothy Briggs, the Company's Chief Financial Officer,
then reviewed the financial performance of the Company year to date and the
prospects for the third quarter. He explained that Company sales for the third
quarter were likely to be flat relative to a year ago. Mr. Shockley expressed
concern about the Company's ability to increase its performance without
significant investments in sales and marketing.
On August 12, 1999, Mr. Shockley met with Kevin Kennedy, Senior Vice
President for Cisco's Service Provider Line of Business, to discuss potential
areas where the two companies could work together based on the offering of
complementary products and services to common customers and markets. Mr. Kennedy
expressed an interest in this possibility and agreed to review the information
Mr. Shockley provided with relevant managers at Cisco. At the time, Spanlink had
no material business relationship with Cisco.
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On September 14, 1999, Mr. Shockley had a telephone conversation with Mr.
Kennedy regarding Cisco's review of Spanlink's material. Mr. Kennedy said that
he had reviewed the information with Don Listwin, Cisco's Executive Vice
President of Service Provider and Consumer Lines of Business and other Cisco
representatives. Based on this meeting, Messrs. Shockley and Kennedy agreed to
continue discussions regarding some form of partnership whereby Spanlink would
offer its complementary products and services to the market segments where Cisco
provided its equipment. Subsequent to this conversation, a number of discussions
were held between the engineering and marketing personnel of the organizations
to discuss where Spanlink's products and services might be synergistic with
Cisco's.
On November 3, 1999, Mr. Shockley met with Mr. Listwin to discuss the
possibility of a strategic relationship with Cisco. The potential benefits of
designing Spanlink's products and services to better operate with Cisco's were
discussed. During the meeting Messrs. Listwin and Shockley indicated their
respective interest in having Spanlink offer products and services as a systems
integrator for customers who purchase Cisco equipment.
On November 4, 1999, Mr. Shockley met with a number of executives from
Cisco's business development, customer advocacy, and professional services
organizations. During the meetings, Mr. Shockley presented an overview of
Spanlink's products and services and participated in discussions regarding how
they might work with Cisco's existing products and services to provide customers
with superior overall systems.
On November 8, 1999, Mr. Shockley held a teleconference with the board of
directors to discuss his meetings with Cisco and potential opportunity for a
technology partnership and some form of financial investment by Cisco. The board
agreed to Mr. Shockley's recommendation that he continue discussions with Cisco.
On November 9, 1999, Mr. Shockley met in separate meetings with executives
with Cisco's customer advocacy organization and ATG division. Mr. Shockley
discussed the fit between Spanlink's systems integration capability and gave a
presentation of Spanlink's call center products. Mr. Shockley reviewed the
progress of his Cisco discussions with Mr. Listwin and discussed alternatives
for working together to serve common customers and market segments. In this
meeting, Messrs. Listwin and Shockley agreed that they would be interested in
exploring the possibility of making some form of financial investment in
Spanlink.
On November 11, 1999, Mr. Shockley met with the head of Cisco's business
development department to discuss possible investment alternatives.
On November 13, 1999, Dougherty & Company's engagement agreement with the
Company expired. Since Dougherty & Company's efforts had not resulted in an
offer, the board of directors decided to not renew their engagement.
On November 18, 1999, Mr. Shockley met with Mr. Listwin to explore whether
Cisco was interested in making an investment in Spanlink and the form the
investment might take.
On November 19, 1999, the board of directors held a teleconference and Mr.
Shockley reviewed the status of the discussions with Cisco and recommended that
the board seek investment banking representation to assist in the discussions
with Cisco. Mr. Shockley recommended that the Company consider Dain Rauscher
Wessels (DRW) since they had represented a number of companies involved in
transactions with Cisco in the past. The board agreed to request a proposal from
DRW.
On November 23, 1999, Mr. Shockley and Mr. Briggs met with a representative
of DRW. Following the meeting with DRW, Mr. Shockley held a teleconference with
the board of directors and recommended that the board retain DRW as their
representative in discussions with Cisco.
On December 9, 1999, Mr. Shockley met with Mr. Listwin and representatives
of Cisco's business development department. At this meeting, Mr. Listwin
indicated that he had instructed a business development representative to
negotiate an investment in Spanlink that would allow Spanlink to grow its
resources significantly in anticipation of future Cisco demand for its products
and services. Mr. Shockley raised the point that this approach could create a
problem for Spanlink's other significant customers and that the losses would be
a problem for the Company's shareholders. Mr. Listwin indicated that he would
ask a
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<PAGE> 10
business development representative to look at different approaches that might
mitigate this problem. It was agreed that while the business development
representative was looking at the form of the transaction, the companies should
continue to explore how best to integrate their products and services.
On December 15, 1999, the board of directors met to discuss the progress of
the Cisco discussions and review Company performance. A representative of DRW
attended the meeting via teleconference and reviewed the progress of the
negotiations. The DRW representative explained that Cisco was interested in some
form of minority investment in Spanlink. The board reviewed with the DRW
representative the difficulties associated with Cisco making an investment in
the Company, and management discussed with the board the possibility of a
going-private-transaction. Due to the difficulties associated with an investment
by Cisco, the board asked the DRW representative to propose to Cisco that they
complete a full acquisition of Spanlink. Next, Mr. Briggs and Mr. Shockley
reviewed the forecast for fourth quarter and advised the board that it was
unlikely that the Company would meet analyst forecasts, and in fact, a
substantial loss was expected.
On January 5, 2000, Mr. Shockley had a telephone conversation with a
representative of Cisco's business development department regarding the status
of Cisco's interest in making an investment in Spanlink. The representative
indicated that Cisco was not interested in acquiring all of Spanlink at this
time. Mr. Shockley and the representative then discussed the possibility of a
founder and management led buyout of the public shareholders so that the Company
could be repositioned to make substantial investments in the development of IP
Telephony solutions. Both parties agreed to go back to their organizations and
discuss the viability of such a transaction and Cisco's potential role as a
financial partner.
On January 12, 2000, Mr. Shockley held a teleconference with
representatives of Cisco and DRW. Cisco stated that it would be willing to
pursue the funding of the Spanlink founders and managers in a management led
buyout of public shareholders. Cisco was prepared to provide funding through the
purchase of non-voting convertible preferred securities in the private company.
On January 16, 2000, Mr. Shockley and representatives of Cisco's business
development department had a telephone call to discuss the progress of the
negotiations. It was agreed to meet in San Jose on January 20, 2000.
On January 21, 2000, Mr. Shockley met with representatives of Cisco's
business development department to review the structure of a potential
going-private transaction.
On February 1, 2000, Spanlink's founders and officers met with Cisco
management in San Jose to discuss the proposed business relationship between the
Company and Cisco following a going-private transaction. Present from Spanlink
were: Loren Singer, founder and director, Todd Parenteau, founder, Jon
Silverman, Vice President of Engineering and CTO, Bryan Willborg, Vice President
of Customer Solutions, Briggs, Vice President of Finance and CFO and Steve
Bostwick, Vice President of Sales. Following discussions throughout the day, the
parties agreed to proceed with the "going-private-transaction" negotiations.
At a special meeting of the Company's board of directors held on the
morning of February 7, 2000, Mr. Shockley informed the board that the
negotiations with Cisco had developed to the point that the parties had agreed
to proceed with a proposed going-private transaction and reviewed the proposed
terms of the transaction with the board. Representatives of Fredrikson & Byron,
P.A., the company's legal counsel, then discussed with the board the need for an
independent committee of directors to determine the fairness of the proposed
transaction, given the role of Messrs. Shockley and Singer in the transaction,
both for purposes of fulfilling its fiduciary duties and meeting certain
requirements of Minnesota corporate law. The board unanimously decided to create
a special committee of independent directors (the "Special Committee") with the
power and authority to review, evaluate and determine the fairness to the
Company's Non-Affiliated Shareholders of the proposed transaction, to negotiate
on behalf of the Company and its Non-Affiliated Shareholders with the Founding
Shareholders and Cisco, and to recommend to the Board of Directors whether to
enter into the transaction. Messrs. Thomas F. Madison, Mooney and Bruce E.
Humphrey were appointed as members of the Special Committee. In its resolutions
creating the Special Committee, the board of directors also authorized the
Special Committee to retain its own independent legal and financial advisors.
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<PAGE> 11
Later in the morning on February 7, 2000, a Special Committee meeting was
held by telephone conference call. All of the Special Committee members
participated. At the meeting, the Special Committee voted unanimously to appoint
Mr. Madison to act as its chairman. The Special Committee discussed its need for
independent legal counsel and financial advisors, and contacted representatives
of Oppenheimer Wolff & Donnelly LLP ("OWD") and Dougherty & Company to discuss
the possibility of such firms acting as legal counsel and financial advisors,
respectively, to the Special Committee. After discussing the qualifications and
independence of such firms, the Special Committee unanimously appointed Mr.
Madison to act on its behalf in negotiating with and retaining OWD and Dougherty
& Company to represent and assist the Special Committee in connection with the
proposed transaction.
On February 11, 2000, another Special Committee meeting was held by
telephone conference in which all of the members participated. Representatives
of OWD and Dougherty & Company also participated by invitation, as did Messrs.
Shockley and Briggs, for a portion of the meeting. Mr. Madison reviewed his
discussions with each firm regarding their representation of the Special
Committee and the representatives of each discussed the qualifications of their
respective firms. A representative of Dougherty & Company also discussed his
firm's independence with the Special Committee in light of its prior engagement
by the Company, and reviewed the scope and outcome of that prior engagement. The
representative reviewed with the Special Committee the services that Dougherty &
Company could provide in assisting in the Special Committee's negotiations with
the Founding Shareholders and Cisco. After these discussions, the Special
Committee unanimously ratified the engagement of OWD as legal counsel and
appointed and instructed Mr. Madison to further negotiate with Dougherty &
Company regarding the scope of its services to the Special Committee. During a
portion of the meeting, the Special Committee received an update from Messrs.
Shockley and Briggs as to the status and expected timing of the acquisition
proposal, and had the opportunity to ask questions and receive information
regarding the proposal. At the meeting, representatives of OWD additionally
advised the Special Committee members at length as to their legal duties and
responsibilities in evaluating and responding to the acquisition proposal.
On February 15, 2000, the Founding Shareholders distributed to the Special
Committee, OWD and Dougherty & Company a non-binding term sheet setting forth
their proposal for taking the Company private. The term sheet proposed that the
Founding Shareholders would form a new corporation and contribute all of their
shares of the Company's common stock to the new corporation in exchange for all
of the voting equity of the new corporation. Cisco would provide financing to
the new corporation by purchasing non-voting preferred stock. The new
corporation would make a tender offer for all of the outstanding shares of the
Company's common stock at a price of $10 per share. The term sheet stated that
it would be a condition to closing of the tender that the new corporation would
own at least 90 percent of the Company's outstanding shares after the tender,
including the shares acquired from the Founding Shareholders. Following the
tender offer, the new corporation would merge with and into the Company and
thereby convert to cash, also at a price of $10 per share, any shares not
acquired in the tender offer. The term sheet also provided for a breakup fee in
the event of termination of the transaction.
The Special Committee again met on February 16, 2000, following receipt of
the term sheet. All of the Special Committee members, as well as representatives
from OWD and Dougherty & Company, participated. Mr. Madison and representatives
of OWD and Dougherty & Company were present in person and Messrs. Humphrey and
Mooney participated by telephone. During the meeting, Mr. Madison reviewed his
discussions with Dougherty & Company for the Special Committee and it was
unanimously agreed that Dougherty & Company should be engaged as the financial
advisor to the Special Committee on the terms negotiated by Mr. Madison.
Representatives of OWD then summarized for the Special Committee the non-
binding term sheet received during the evening of February 15, 2000. The Special
Committee discussed these terms and the possibility of making a counteroffer at
the time of the meeting. Representatives of Dougherty & Company also summarized
their preliminary work in seeking to establish a basis for determining the
fairness, from a financial point of view, of the proposed going-private
transaction or any other offer received by the Company. After further
discussion, it was determined that more information was needed by the Special
Committee before considering any counteroffer. In order to gather relevant
information, it was decided that Mr. Mooney would contact Mr. Shockley following
the meeting in order to discuss in detail any hidden
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<PAGE> 12
technology or other unrealized value in the Company not known to the Special
Committee members. Dougherty & Company was asked to contact DRW to seek
additional information regarding the negotiations between Cisco and the Founding
Shareholders.
On February 17, 2000 the Special Committee met to receive updates from Mr.
Mooney and Dougherty & Company as to the information they had been instructed to
obtain and to discuss the Committee's position regarding a counteroffer to the
proposed terms. Representatives of Dougherty & Company reviewed for the Special
Committee their discussions with DRW as to the status of draft documents for the
proposed transaction, the Special Committee's need for further information
regarding the arrangements between the Founding Shareholders and Cisco, and
Dougherty & Company's preliminary valuation analysis regarding the Company. The
Special Committee was informed of a meeting to be held between representatives
of Dougherty & Company and DRW in order to seek to gain more information from
DRW regarding its valuation and to share Dougherty & Company's preliminary views
potentially justifying a higher price than that proposed, and instructed
Dougherty & Company to proceed with the meeting. The Special Committee also
received a report form Mr. Mooney as to his discussions with Mr. Shockley. In
light of these updates, the Special Committee again discussed the possibility of
proposing a counteroffer to the Founding Shareholders, and reached the
conclusion that it would not be advisable at that time due to the unknown
information regarding the Founding Shareholders's ongoing negotiations with
Cisco and the potential information or benefits that might be gained from the
scheduled discussion between representatives of Dougherty & Company and DRW.
During the evening of February 18 and on February 19, representatives of
Dougherty & Company and DRW engaged in discussions regarding the $10 price, the
amount of the breakup fee and the 90% minimum condition for the tender offer,
among other matters. These representatives exchanged information on the
valuation data analyzed by their respective firms, with Dougherty & Company
seeking to focus the discussion on those portions of the data potentially
supporting a price higher than the $10 that was initially offered.
On February 19, 2000, the Special Committee met by telephone conference to
receive updates from Dougherty & Company and OWD as to their negotiations with
the Founding Shareholders. All of the Special Committee members participated. A
representative of Dougherty & Company reported on his conversations with DRW
regarding the material terms of the proposed offer. Following a discussion of
the potential significance of the high minimum condition to the Company's
Non-Affiliated Shareholders, its interplay with the $3 million breakup fee, and
the Special Committee's discomfort with these terms, it was unanimously agreed
that representatives at OWD and Dougherty & Company should contact Company
counsel as soon as possible to seek to negotiate more favorable minimum
condition and breakup fee provisions, among other matters. At the meeting,
representatives from OWD also reviewed for the Special Committee the material
terms of the draft transaction documents, including the agreements between the
Founding Shareholders and Cisco.
During the morning of February 20, 2000, the Special Committee again met
with its financial and legal advisors by telephone conference. Messrs. Madison
and Mooney participated. Representatives of OWD and Dougherty & Company provided
an update on their negotiations with Company counsel regarding the proposed
price, breakup fee and minimum conditions, among other terms, and indicated that
such negotiations were ongoing with the Founding Shareholders and Cisco.
Representatives of Dougherty & Company then reviewed in detail their fairness
and valuation analyses and the opinion that their firm would be able to give
based upon the proposed price of $10 per share. In light of the data reviewed
and analyzed, the assumptions used and the procedures performed, the Dougherty &
Company representatives shared their firm's opinion that the $10 per share price
offered and the proposed transaction were fair, from a financial point of view,
to the Company's Non-Affiliated Shareholders, and delivered to the Committee a
proposed form of fairness opinion to such effect. Following this presentation,
it was agreed that representatives from OWD and Dougherty & Company should
continue their negotiations with Company counsel and Cisco regarding the minimum
condition, price and other issues. Representatives of Dougherty & Company were
also instructed to contact Mr. Humphrey and review for him the detailed
valuation and fairness analysis presented during the meeting.
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During the day on February 20, 2000, representatives of OWD and Dougherty &
Company continued discussions with Company counsel regarding the material terms
of the proposed tender offer.
On the evening of February 20, 2000, the Special Committee met again by
telephone conference in which all of the Special Committee members as well as
representatives of OWD and Dougherty & Company participated. The Dougherty &
Company representative and Mr. Humphrey confirmed for the Special Committee that
they had discussed in detail the fairness and valuation analysis presented by
Dougherty & Company at the meeting held earlier in the day. Representatives of
OWD and Dougherty & Company reported that they had spoken with Company counsel
and that, in response to the Special Committee's request, counsel for Cisco had
proposed changing the minimum condition to 67%, adding a limit on dissenters
rights of 5% with respect to the Merger, and keeping the breakup fee at a flat
$3 million. The Special Committee members discussed these proposed changes and
the fairness analysis and opinion of Dougherty & Company and unanimously
determined that the revised terms of the proposed tender offer were generally
fair to and in the best interests of the Company's Non-Affiliated Shareholders,
subject, however, to a final attempt by Mr. Madison to negotiate more favorable
terms with regard to the break-up fee and the proposed price.
Immediately following the Special Committee meeting, Mr. Madison contacted
DRW by telephone to discuss the Special Committee's views on the $10 per share
price and the proposed breakup fee. Following extensive negotiations between Mr.
Madison and a representative of DRW, it was agreed that the breakup fee would
remain at $3 million, but that the per share price would be increased to $10.50.
Mr. Madison contacted each of the other members of the Special Committee
individually and obtained their approval of the increased price, and contacted
OWD and Dougherty & Company to inform them as to the outcome of the final
negotiations. After doing so, Mr. Madison then contacted Mr. Shockley to inform
him of the Special Committee's recommendation regarding the final terms,
including the increased price of $10.50 per share.
On February 22, 2000, a meeting of the full Board of Directors was held, at
which Mr. Madison summarized the work of the Special Committee and delivered its
unanimous recommendation of the Offer and the Merger. Based upon the Special
Committee's recommendation, the Board of Directors (i) approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
proposed Merger; (ii) determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are advisable, fair to
and in the best interests of the Company's Non-Affiliated Shareholders and (iii)
determined to recommend the Offer to the Company's shareholders.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND BOARD OF DIRECTORS; FAIRNESS OF THE
OFFER
Special Committee.
The Special Committee considered each of the following factors in reaching
its decision that the transaction is fair and in the best interests of the
Company's Non-Affiliated Shareholders and to approve and recommend the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger.
In the view of the Special Committee, each of these factors supported its
decision.
Market Price and Premium; Factors Affecting Stock Price. The Special
Committee considered the historical market prices and recent trading
activity of the Common Stock with a particular emphasis on the relationship
between the $10.50 per Share cash price offered and the trading history of
the Common Stock. In particular, the Special Committee noted that the
$10.50 per Share cash price offered represents a premium of (x)
approximately 9.1% over the $9.625 per Share closing price on the Nasdaq
SmallCap Market on February 18, 2000, one week before the Merger Agreement
was publicly announced, and (y) approximately 30.8% over the $8.03 per
Share closing price on the Nasdaq SmallCap Market on January 25, 2000, one
month prior to the announcement. The Special Committee also considered
certain factors that, in the analysis presented by Dougherty & Company,
were believed to be causing the Common Stock to trade at prices higher than
the Company's minority interest trading value at such times.
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Arm's-Length Negotiations Between the Founding Shareholders and the
Independent Special Committee. The Special Committee considered the fact
that the Merger Agreement and the transactions contemplated thereby were
the product of arm's-length negotiations between the Founding Shareholders
and the Special Committee, none of whose members were employed by or
affiliated with the Company (except in their capacities as directors) or
would have any equity interest in the Company following the transactions.
Availability of Alternative Transactions. In reviewing the terms of
the Offer and the Merger, the Special Committee took into account the
Company's relatively recent exploration of its strategic alternatives. In
particular, the Special Committee considered the extent of the Company's
efforts (with the assistance of outside financial advisors) to identify
suitable acquirors, and the lack of any offers for the Company as a result.
Per Share Amount. The Special Committee believed, based on
negotiations with the Founding Shareholders, that the Per Share Amount
represented the best available price that the Founding Shareholders and
Cisco would be willing to pay in acquiring the Shares. This determination
was the result of negotiations between the Founding Shareholders and the
Special Committee (and their respective advisors) in an attempt to obtain
the best available price and the fact that the Per Share Amount was
ultimately increased to a price in excess of the price initially proposed.
Dougherty & Company Fairness Opinion and Valuation Data. The Special
Committee also considered the financial presentation of Dougherty & Company
and their oral opinion delivered at the Special Committee meeting held on
the morning of February 20, 2000 (and subsequently confirmed in writing) to
the effect that, as of the date of such opinion and based upon and subject
to the assumptions, factors and limitations set forth therein, the $10.50
per Share in cash being offered in the Offer and to be received in the
Merger is fair, from a financial point of view, to the Company's
Non-Affiliated Shareholders. A copy of Dougherty & Company's written
opinion setting forth the assumptions made, matters considered and
limitations on the review undertaken by Dougherty & Company is attached as
Annex A to this Offer to Purchase and is incorporated herein by reference.
Shareholders are urged to, and should, read the opinion of Dougherty &
Company carefully and in its entirety (see "Annex A -- Opinion of the
Special Committee's Financial Advisor"). In considering this information,
the Special Committee took into account the presentation of Dougherty &
Company regarding their analysis of the Company's value based upon
comparable public company, comparable merger and acquisition transaction,
and discounted cash flow data. The Special Committee did not consider the
Company's value from a liquidation or net book value standpoint as such
analysis was not deemed relevant.
Transaction Structure; Opportunity for Interested Third Party
Offers. The Special Committee also evaluated the benefits of the
transaction being structured as an immediate cash tender offer for all of
the outstanding Shares, thereby enabling the Non-Affiliated Shareholders of
the Company the opportunity to obtain cash for all of their Shares at the
earliest possible time, and the fact that the Per Share Amount to be paid
in the Offer and the Merger is the same. The Special Committee also
concluded that the 34-day period of time between the public announcement of
the transaction and the initial expiration date of the Offer would provide
a sufficient period of time for any interested third party to prepare and
present an acquisition proposal for the Company.
Minimum Condition. The Special Committee considered the fact that the
Minimum Condition in the Offer represented approximately 32% of the Shares
held by Non-Affiliated Shareholders.
Terms of the Merger Agreement. The Special Committee also considered
the terms of the Merger Agreement including:
-- the provision providing that in response to a Superior Proposal
(as defined below under "The Merger") the Special Committee may, in good
faith, after consultation with and receipt of advice from outside
counsel to the effect that such action is necessary in order to act in a
manner consistent with its fiduciary duties, furnish or provide access
to information concerning the Company to, and
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engage in discussions and negotiate with, any third party making an
acquisition proposal meeting certain criteria;
-- the ability of the Board to terminate the Merger Agreement in
the event that a third party makes a bona fide offer meeting certain
criteria that the Special Committee determines in good faith in the
exercise of its fiduciary duties to be more favorable to the Company's
shareholders than the Offer and the Merger, and
-- the Company's obligation to pay a $3.0 million termination (or
"break up") fee in the event the Merger Agreement is terminated because
of such a determination by the Special Committee.
After reviewing these terms, the Special Committee believed that the
Merger Agreement would not unduly deter a third party from making, or
inhibit the Special Committee in evaluating, negotiating and, if
appropriate, approving, an appropriate alternative transaction.
Terms of Stock Purchase Agreement and Related Documents. The Special
Committee considered the fact that Cisco would enter into the Stock
Purchase Agreement with the Purchaser to provide the necessary financing
for the Offer and the Merger. The Special Committee reviewed the terms of
the Stock Purchase Agreement and related documents with its advisors and
inquired of the Founding Shareholders and their advisors to determine that
such documents contained customary terms and conditions and that the
documents and the arrangements with Cisco did not provide for any special
benefit to the Founding Shareholders.
Historical and Projected Financial Performance and Related Risk and
Uncertainties. The Special Committee also considered the Company's recent
financial performance. The Special Committee noted that quarterly sales and
earnings results throughout 1999 were significantly below those forecasted
by management. The Special Committee further noted that in the fourth
quarter of 1999, sales decreased 50.0 percent from the year earlier period
and the Company reported a net loss of $874,164 in the fourth quarter of
1999 compared to a net profit of $166,344 for the fourth quarter of 1998.
The Special Committee also considered other risks facing the Company
including its significant reliance on a single customer, its low level of,
and immediate need for, working capital, and the Company's ability to
obtain additional capital in the near term.
The Company's Recent Earnings Results and Industry Position. The
Special Committee also considered the Company's business, financial
condition, results of operations and prospects and the nature of the
industry in which the Company operates, including the prospects of the
Company if it were to remain independent. The Special Committee noted that
a number of the Company's competitors entered into business combinations
with other companies during 1999. Due to the substantial revenue, earnings
and other factors of the acquiring companies, these transactions generally
served to significantly increase their marketing and financial resources of
the Company's competitors.
Value of Potential Technology or Opportunities. The Special Committee
investigated and considered the Company's technology and opportunities to
determine whether there was additional value not known by the members or
reflected in the Company's stock price.
Lack Of Liquidity Of Common Stock. The Special Committee also
considered the relatively thin trading market and the lack of liquidity of
the Common Stock. In doing so, the Special Committee noted that, primarily
due to the Company's lack of revenue growth and relatively small market
capitalization, the Company had been unsuccessful in attracting
institutional investors or research analysts to invest in or report on the
Company. The Special Committee believes that the Offer and the Merger will
permit the Non-Affiliated Shareholders to sell all of their Shares at a
fair price.
Possible Decline in Market Price of Common Stock. The Special
Committee also considered the possibility that if a merger transaction with
the Founding Shareholders and Cisco were not negotiated and the Company
remained as a publicly owned corporation, a decline in the market price of
the shares of the Common Stock or the stock market in general could occur
and the price ultimately received by the
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<PAGE> 16
Shareholders in the open market or in a future transaction might be less
than the $10.50 per Share price offered.
Treatment of Certain Shares Owned by The Founding Shareholders. The
Special Committee considered that under the terms of the Subscription
Agreement dated February 25, 2000, between the Purchaser and the Founding
Shareholders, the Founding Shareholders each could receive the Per Share
Amount with respect to up to 10% of their Shares and that their interests
were therefore aligned to some extent with the interests of the Company's
Non-Affiliated Shareholders.
Availability of Dissenters' Rights. The Special Committee also
considered the fact that dissenters' rights of appraisal will be available
to the holders of Shares under Minnesota law in connection with the Merger.
As part of its analysis, the Special Committee also considered the
alternative of causing the Company to remain as a public company. The Special
Committee considered the Company's limitations as a public company as discussed
above, including its recent financial performance, limited financial resources
and reliance on a single significant customer. The Special Committee believed
that an improvement in certain of these factors affecting the Company's
prospects was not likely in the foreseeable future. Although the Merger will not
allow the Company's Non-Affiliated Shareholders to participate in the Company's
future growth, if any, the Special Committee concluded that this potential
benefit of remaining public was outweighed by the risks and uncertainties
associated with the Company's future prospects. The Special Committee also
concluded that obtaining a cash premium for the Common Stock now was preferable
to enabling the Non-Affiliated Shareholders of such stock to have a speculative
potential future return.
Board of Directors of the Company.
In reaching its determination referred to above, the Company's Board of
Directors considered and relied upon the conclusions and unanimous
recommendation of the Special Committee that the full Board approve the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, and the considerations referred to above as having been taken into
account by the Special Committee, as well as the Board's own familiarity with
the Company's business, financial condition, results of operations and prospects
and the nature of the industry in which the Company operates.
In light of the number and variety of factors that the Special Committee
and the Board considered in connection with their evaluation of the Offer and
the Merger, neither the Special Committee nor the Board found it practicable to
quantify or otherwise assign relative weights to the foregoing factors, and,
accordingly, neither the Special Committee nor the Board did so. In addition,
individual members of the Special Committee and the Board may have given
different weights to different factors. Rather, the Special Committee and the
Board viewed their positions and recommendations as being based on the totality
of the information presented to and considered by it.
The Board believes that the Offer and the Merger are procedurally fair
because, among other things:
-- the Special Committee consisted of independent directors appointed
by the Board to represent solely the interests of the Company's
Non-Affiliated Shareholders;
-- the Special Committee retained and was advised by its own
independent legal counsel and financial advisors who negotiated on behalf
of the Special Committee;
-- the Special Committee's financial advisor, Dougherty & Company,
assisted it in evaluating the proposed transaction and provided other
financial advice;
-- the Special Committee evaluated and deliberated the terms of the
Offer and the Merger; and
-- the $10.50 per Share cash purchase price and the other terms and
conditions of the Merger Agreement resulted from active arm's-length
bargaining between the Special Committee and the Founding Shareholders and
their respective advisors.
14
<PAGE> 17
The Board believes that sufficient procedural safeguards to ensure fairness
of the transaction and to permit the Special Committee to effectively represent
the interests of the Non-Affiliated Shareholders were present, and therefore
there was no need to retain any additional unaffiliated representative to act on
behalf of the holders of the Shares in view of:
-- the unaffiliated status of the members of the Special Committee
whose sole purpose was to represent the interests of the Non-Affiliated
Shareholders, and retention by the Special Committee of its own independent
legal counsel and financial advisor, and
-- the fact that the Special Committee, even though consisting of
directors of the Company and therefore not completely unaffiliated with the
Company, is a mechanism well recognized under established corporate law to
ensure fairness in transactions of this type.
The Board, after receiving the unanimous recommendation of the Offer and
the Merger by the Special Committee, (i) has unanimously approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, (ii) has unanimously determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, are
advisable, fair to and in the best interests of the Company's Non-Affiliated
Shareholders, and (iii) unanimously recommends that the Company's shareholders
accept the Offer and tender their shares in the Offer.
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated February 16, 2000, the Special
Committee of the Board of Directors of the Company retained Dougherty & Company
to assist in negotiations and to render an opinion to the Special Committee as
to the fairness, from a financial point of view, of the consideration to be
received by the Company's Non-Affiliated Shareholders pursuant to the Offer and
the Merger, and to assist the Special Committee in its negotiations with the
Founding Shareholders and Cisco. Dougherty & Company, as part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings, private
placements, and valuations for estate, corporate and other purposes. Dougherty &
Company is a recognized investment banking firm experienced in providing advice
in connection with mergers and acquisitions and related transactions.
Dougherty & Company delivered its oral opinion to the Special Committee on
February 20, 2000, and confirmed its opinion in writing as of February 25, 2000,
to the effect that the Per Share Amount to be received by the Non-Affiliated
Shareholders of the Common Stock pursuant to the Offer and the Merger is fair to
the Non-Affiliated Shareholders from a financial point of view. The full text of
Dougherty & Company's opinion is attached hereto as Annex A and is incorporated
by reference herein. Shareholders are urged to read the opinion carefully and in
its entirety. Dougherty & Company's opinion is directed to the Special Committee
of the Board only, related solely to the consideration payable pursuant to the
Offer and the Merger and does not constitute a recommendation to any shareholder
of the Company. The summary of Dougherty & Company's opinion set forth in this
Offer to Purchase is qualified in its entirety by reference to the full text of
Dougherty & Company's opinion.
In connection with its opinion, Dougherty & Company (i) reviewed certain
publicly available financial statements and other information of the Company,
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the Company's management,
(iii) analyzed certain financial projections prepared by the Company's
management, (iv) discussed the past and current operations and financial
condition and the prospects of the Company with the Company's management, (v)
reviewed the reported prices and trading activity of the Company's Common Stock,
(vi) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other comparable
publicly-traded companies and their securities, (vii) reviewed the financial
terms, to the extent publicly available, of certain comparable acquisition
transactions, (viii) on behalf of the Special Committee, participated in
discussions and negotiations among representatives of the Founding Shareholders,
and their legal and financial advisors, (ix) reviewed the Merger Agreement and
(x) performed such other analyses as it deemed appropriate. No limitations were
imposed by the Special Committee upon
15
<PAGE> 18
Dougherty & Company with respect to the investigations made or procedures
followed by it in rendering its opinion.
In arriving at its opinion, Dougherty & Company performed certain
procedures, including each of the analyses described below, and reviewed with
the Special Committee the assumptions on which such analyses were based as well
as other factors.
Comparable Public Company Analysis.
Using publicly available information, Dougherty & Company analyzed and
compared certain operating, financial and market trading information of the
Company with that of six publicly traded companies operating in the computer
telephony/call center software industry deemed by Dougherty & Company to be
generally comparable to the Company. The selected comparable companies were
Aspect Communications, Inc., Davox Corporation, eShare Technologies, Inc.,
Intervoice-Brite, Inc., Remedy Corporation and Syntellect, Inc. (collectively,
the "Comparable Public Companies").
Dougherty & Company reviewed, among other things, the equity market values
plus net debt (the "Enterprise Value") as multiples of latest twelve month
("LTM") revenues, LTM earnings before interest, taxes, depreciation and
amortization ("EBITDA") and LTM earnings before interest and taxes ("EBIT") for
the Comparable Public Companies. Dougherty & Company also reviewed the
Comparable Public Companies' multiples of equity market value to LTM, and
estimated 1999 and estimated 2000 earnings per share ("EPS"). All multiples were
based on closing stock prices as of February 18, 2000. Due to the Company's
current results and projected losses, multiples based on EBITDA, EBIT and EPS
did not yield meaningful results. Applying a range of Enterprise Value to LTM
revenue multiples for the Comparable Public Companies of 2.8x to 3.8x,
respectively, to the corresponding financial data for the Company resulted in an
equity reference range for the Company of $5.98 to $8.19 per share (without
giving effect to a change in control premium) as compared to the Per Share
Amount of $10.50 per share.
Comparable Merger and Acquisition Transactions.
Using publicly available information, Dougherty & Company analyzed, among
other things, the Enterprise Value paid in selected transactions of public
companies operating in the computer telephony/call center software industry
deemed by Dougherty & Company to be generally comparable to the Company
(collectively, the "Comparable Merger and Acquisition Transactions"). The
Acquirers/Acquirees were as follows:
<TABLE>
<CAPTION>
ACQUIRER ACQUIREE
-------- --------
<S> <C>
SER Systems AG EIS International, Inc.
Nortel Networks LTD Clarify, Inc.
PeopleSoft, Inc. Vantive Corp.
Alcatel SA Genesys Telecommunications
Laboratories, Inc.
Nortel Networks LTD Periphonics Corp.
Security First Technologies, Inc. Edify Corporation
The Baan Company NV Aurum Software, Inc.
Intervoice, Inc. Brite Voice Systems, Inc.
Cisco Systems, Inc. GeoTel Communications Corp.
Lucent Technologies, Inc. Mosaix, Inc.
Davox Corp. AnswerSoft, Inc.
Seibel Systems, Inc. Scopus Technology, Inc.
International Business Machines, Inc. Software Artistry, Inc.
</TABLE>
Dougherty & Company analyzed and compared, among other things, the
Enterprise Value in each transaction as a multiple of LTM revenues, EBITDA and
EBIT. Applying a range of Enterprise Value to
16
<PAGE> 19
LTM revenue multiples for the Comparable Merger and Acquisition Transactions
(those transactions under $500 million in Enterprise Value) of 4.2x to 4.7x,
respectively, to the corresponding financial data for the Company, resulted in
an equity reference range for the Company of $9.07 to $10.18 per share, as
compared to the Per Share Amount of $10.50 per share.
All multiples for the Comparable Merger and Acquisition Transactions were
based on public information available at the time of the announcement, and
without taking into account differing market and other conditions during the
period in which the Comparable Merger and Acquisition Transactions occurred.
Dougherty & Company noted that its Comparable Merger and Acquisition Transaction
analysis gave effect to a change in control premium.
No company, transaction or business used in the Comparable Public Companies
or Comparable Merger and Acquisition Transactions analysis as a comparison is
identical to the Company or the Merger. Accordingly, an analysis of the results
of the foregoing is not entirely mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading and other values of the Comparable Public Companies or Comparable Merger
and Acquisition Transactions to which they are being compared.
Discounted Cash Flow Analysis.
Dougherty & Company performed a discounted cash flow analysis of the
Company based upon estimates of projected financial performance prepared by the
management of the Company. Dougherty & Company calculated a range of implied
equity values of the Company based upon the discounted present value of the sum
of (i) the projected five-year stream of unleveraged free cash flow and (ii) the
projected terminal value at the year 2004. In conducting this analysis,
Dougherty & Company applied discount rates ranging from 22.0% to 26.0% and
multiples of 2004 EBITDA of between 9.0 and 13.0. The range of discount rates
and terminal multiples of EBITDA used in the analysis described above were
chosen to reflect the growth prospects and risks of the Company including an
assessment of, among other things, the Company's weighted average cost of
capital, competitive position and industry conditions.
Based on this analysis, Dougherty & Company derived an implied equity value
per share of between $4.96 and $8.30 per share as compared to the Per Share
amount of $10.50 per share. Dougherty & Company noted that its discounted cash
flow analysis did not give effect to any change in control premium.
Acquisition Premium Analysis.
Dougherty & Company reviewed publicly available information to determine
the premiums paid in the Comparable Merger and Acquisition Transactions.
Dougherty & Company reviewed the percentage premium in each transaction
represented by the offer price over the trading price one week and one month
prior to the announcement date of each respective transaction. The median
percentage amount by which the offer prices exceeded the closing stock prices
one week and one month prior to the announcement date for the nine Comparable
Merger and Acquisition Transactions (those transactions under $500 million in
Enterprise Value) were 59.4% and 78.4%, respectively. The percentage amount by
which the Per Share Amount exceeded the closing stock price of the Spanlink
Common Stock one week and one month prior to the announcement date of the Merger
was 9.1% and 30.8%, respectively.
Stock Trading History.
Dougherty & Company reviewed the historical market prices and trading
volumes of the Company's Common Stock from February 18, 1999 to February 18,
2000. Dougherty & Company also compared the Company's closing stock price with
an index composed of the Comparable Public Companies. This information was
presented solely to provide the Special Committee of the Board with background
information regarding the price of the Common Stock over the period indicated.
Dougherty & Company noted that over the indicated periods, the high and low bid
prices for shares of Common Stock were $9.63 per share and $2.00 per share,
respectively, and that the average daily trading volume of the market price of
the Common Stock was approximately 32,364 shares. Dougherty & Company also
observed that the market price of the Common
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<PAGE> 20
Stock increased 133.3%, but had underperformed the market value weighted index
of the Comparable Public Companies, over the one-year period analyzed.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying Dougherty & Company's opinion. In arriving at its opinion, Dougherty
& Company considered the results of all such analyses. The analyses were
prepared solely for purposes of providing its opinion to the Special Committee
that the Per Share Amount to be received by the Non-Affiliated Shareholders
pursuant to the Offer and the Merger was fair to such holders from a financial
point of view.
Pursuant to the engagement letter dated February 16, 2000 between the
Company and Dougherty & Company, the Company has agreed to pay Dougherty &
Company a fee for its evaluation of the fairness of the transaction of $100,000.
In addition, Dougherty & Company will receive an additional fee of $40,000 for
acting as financial advisor to the Special Committee and assisting in
negotiations. Neither of these fees is conditioned upon the closing of the
Merger. In addition, the Company has agreed to reimburse Dougherty & Company for
its reasonable out-of-pocket expenses incurred in connection with its activities
under the letter agreement, regardless of whether the Merger is consummated. The
Company has also agreed to indemnify Dougherty & Company and certain related
persons against certain liabilities arising out of or in conjunction with its
engagement, including certain liabilities under federal securities laws.
PURPOSE AND STRUCTURE OF THE OFFER
The purpose of the Offer is for the Founding Shareholders to acquire
control of the Company in a transaction in which the Non-Affiliated Shareholders
would be entitled to receive cash in the amount of $10.50 per Share in exchange
for their equity interest in the Company. Such acquisition is structured as a
tender offer by Purchaser to purchase at the Per Share Amount all Shares validly
tendered and not withdrawn pursuant to the Offer.
As described above, the Board has approved the Merger and the Merger
Agreement in accordance with the MBCA. If Purchaser acquires 90% or more of the
Company's shares in the Offer, Purchaser will immediately commence a merger of
Purchaser with and into the Company under Minnesota law without soliciting
approval of the Company's shareholders. If Purchaser acquires at least 67% of
the Company's shares in the Offer, but less than 90% of the Company's shares,
Purchaser will immediately commence the process of soliciting approval of the
Company's shareholders for the merger of Purchaser with and into the Company.
Under the Company's articles of incorporation, the Merger Agreement must be
adopted by the affirmative vote of holders of a majority of the outstanding
shares of Common Stock. If the number of Shares tendered in the Offer, when
combined with the number of Shares of the Company owned by the Purchaser,
represents less than 67% of the Company's outstanding Common Stock, the
Purchaser will not be obligated to purchase the tendered Shares or proceed with
the Merger. IF THE NUMBER OF SHARES TENDERED IN THE OFFER, WHEN COMBINED WITH
THE NUMBER OF SHARES OWNED BY PURCHASER, REPRESENTS AT LEAST 67% OF THE SHARES,
AND THE SHARES ARE PURCHASED IN THE OFFER, THE FAVORABLE VOTE TO APPROVE THE
MERGER IS ASSURED. HOWEVER, THE PURCHASER'S OBLIGATION TO CONSUMMATE THE MERGER
IS CONDITIONED ON THE HOLDERS OF NOT MORE THAN 5% OF THE COMPANY'S OUTSTANDING
SHARES EXERCISING DISSENTERS' RIGHTS UNDER SECTIONS 302A.471 AND 302A.473 OF THE
MBCA.
PLANS FOR THE COMPANY AFTER THE OFFER
Following the effectiveness of the Merger (the "Effective Time"), the
directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation and the officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation. It is currently expected that the business and operations of the
Surviving Corporation will be continued substantially as they are currently
being conducted by the Company and its subsidiaries. Except as otherwise
indicated in this Offer to Purchase, none of Purchaser, Purchaser's affiliates
or Cisco has any present plans or
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proposals involving the Company or its subsidiaries which relate to or would
result in an extraordinary corporate transaction such as a merger,
reorganization or liquidation, or a sale or transfer of a material amount of
assets, or any material change in the Company's present dividend policy,
indebtedness or capitalization, or any other material change in the Company's
corporate structure or business. However, the Surviving Corporation's management
will review proposals or may propose the acquisition or disposition of assets or
other changes in the Surviving Corporation's business, corporate structure,
capitalization, management or dividend policy that it considers to be in the
best interests of the Surviving Corporation and its shareholders. Management
may, from time to time, evaluate and review the Company's businesses, operations
and properties and make such changes as are deemed appropriate.
Upon consummation of the Merger, the Company will become a privately held
corporation. Accordingly, Non-Affiliated Shareholders will not have the
opportunity to participate in the earnings and growth of the Surviving
Corporation after the consummation of the Merger and will not have any right to
vote on corporate matters. Similarly, such Non-Affiliated Shareholders will not
face the risk of losses generated by the Surviving Corporation's operations or
any decrease in the value of the Surviving Corporation after the consummation of
the Merger.
Following the consummation of the Merger, the Shares will no longer be
quoted on the Nasdaq SmallCap Market ("Nasdaq"). In addition, the registration
of the Shares under the Exchange Act will be terminated. Accordingly, following
the consummation of the Merger, there will be no publicly-traded Shares
outstanding. See "THE OFFER -- Effect of the Transactions on the Market for the
Shares; Exchange Act Registration." It is expected that if Shares are not
accepted for payment by the Purchaser pursuant to the Offer and the Merger is
not consummated, the Company's current management will continue to manage the
Company as an ongoing business under the general direction of the Board.
As of the commencement of the Offer, the Company's Board of Directors
consists of five directors: Brett Shockley, Thomas Madison, Bruce Humphrey,
Joseph Mooney and Loren Singer, Jr. As of the commencement of the Offer, the
Purchaser's Board of Directors consists of three directors: Brett Shockley,
Loren Singer, Jr. and Todd Parenteau. The Purchaser has agreed to add a
representative of Cisco to its Board upon Cisco's purchase of preferred stock
immediately prior to the closing of the Offer. Concurrently with the election of
the Cisco representative, the Purchaser has agreed to add an additional three
directors in order to increase the size of the Board to seven members. As of the
commencement of the Offer, the three additional directors had not yet been
selected. In connection with the Merger, the Board of Directors of the Purchaser
will become the Board of Directors of the Surviving Corporation. The Purchaser
has agreed with Cisco that the Board of Directors will not be increased to more
than seven directors nor decreased to less than seven directors without the
approval of the holders of the preferred stock to be issued by the Purchaser.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering whether to tender Shares pursuant to the Offer, shareholders
should be aware that the Founding Shareholders and Board have certain interests
which are discussed below and which present them with actual or potential
conflicts of interest in connection with the Offer and the Merger.
Purchaser has entered into a Subscription Agreement with the Founding
Shareholders, pursuant to which each of these individuals has agreed to exchange
810,000 shares of Common Stock of the Company for 810,000 shares of common stock
of the Purchaser, immediately before the purchase of Shares pursuant to the
Offer. After the exchange, the three individuals would each own 33.3 % of the
outstanding voting common stock of the Purchaser and, collectively, the three
individuals would own 100% of the outstanding voting common stock of the
Purchaser. Each of the Founding Shareholders will also tender 90,000 shares of
Common Stock of the Company in the Offer. Cisco has entered into a Stock
Purchase Agreement with the Purchaser pursuant to which Cisco has agreed to
purchase, immediately before the purchase of Shares pursuant to the Offer,
450,000 shares of the Purchaser's nonvoting Series A Preferred Stock. Cisco will
pay $45 million for the nonvoting preferred stock to be issued by Purchaser and
Purchaser will use the proceeds of the sale to finance the Offer and Merger, and
for working capital. After Cisco's purchase of nonvoting
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<PAGE> 22
preferred stock, the Founding Shareholders will continue to control 100% of the
voting common stock of Purchaser.
As of the date of this Offer, each of the Founding Shareholders owns
900,000 shares of the Company's Common Stock directly as well as options to
purchase Company Common Stock as set forth below. In the Merger, certain options
to purchase Common Stock of the Company will be converted to options to purchase
common stock of the Surviving Corporation. See "MERGER AGREEMENT -- Options."
The following table demonstrates for each of the Founding Shareholders the
number of options to be cancelled in exchange for cash payments and the number
of options to be converted to Surviving Corporation options as a result of the
Merger. The amount of cash payable in exchange for cancellation of outstanding
options is equal to the product of (i) the difference between the exercise price
and the Per Share Amount, and (ii) the number of shares subject to the option.
<TABLE>
<CAPTION>
EXERCISE
OPTIONS OPTIONS PRICE PER
NAME CANCELLED CONVERTED SHARE
- ---- --------- --------- ---------
<S> <C> <C> <C>
Loren A. Singer, Jr. ....................................... 6,000 $3.63
4,000 $3.25
10,000 $2.94
Brett Shockley.............................................. 150,000 $2.75
30,000 $2.00
Todd A. Parenteau........................................... 45,000 $2.75
5,000 $2.00
</TABLE>
Stock options of the Company which are converted will be converted into
options to purchase shares of the Surviving Corporation's common stock under a
stock option plan to be adopted by the Surviving Corporation. These options
shall become exercisable on the same vesting schedule to which they are
currently subject as options to purchase Company Stock.
POSITION OF THE PURCHASER REGARDING FAIRNESS OF THE OFFER
The Purchaser believes that the consideration to be received by the
Company's Non-Affiliated Shareholders pursuant to the Offer and the Merger is
fair to such Shareholders. The Purchaser bases its belief on the following
facts: (i) the fact that the Special Committee concluded that the Offer and the
Merger are fair to, advisable and in the best interests of, the Company's
Non-Affiliated Shareholders, (ii) notwithstanding the fact that Dougherty &
Company's opinion was addressed to the Special Committee and that neither the
Company nor Purchaser is entitled to rely on such opinion, the fact that the
Special Committee received an opinion from Dougherty & Company that, as of the
date of such opinion and based on and subject to certain matters stated in such
opinion, the consideration to be paid in the Offer and the Merger is fair to the
Non-Affiliated Shareholders from a financial point of view, (iii) the fact that
the per Share price to be paid in the Offer and the Merger represents a large
premium over the closing price of the Shares in calendar year 1999, (iv) the
fact that the same consideration will be paid in both the Offer and the Merger,
(v) the Offer and the Merger will each provide consideration to the Company's
Shareholders entirely in cash and (vi) the other factors enumerated by the
Special Committee as supporting their recommendation of the Offer and the
Merger. The Purchaser did not find it practicable to assign, nor did it assign,
relative weights to the individual factors considered in reaching its conclusion
as to fairness.
THE PURCHASER'S REASONS FOR THE OFFER
The Purchaser decided to pursue the Offer and the Merger at this time for
several reasons. Management of the Company has increasingly found it difficult
to make the long term investment and resource allocation necessary for the
Company to pursue the long-term opportunities available to the Company.
Management believes the Company must make significant investments in research
and development and sales and marketing to achieve a significant position in the
markets its products serve. The lack of consistent quarterly results has created
a difficult environment for the Company to raise adequate capital to make the
required
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<PAGE> 23
investments in research and development and sales and marketing. As a privately
held company, the Company's management would be able to eliminate management
time spent on matters related to the Company being a public company and could
better focus its efforts exclusively on the operation of the Company's business.
Cisco's proposed investment in the Purchaser allows the Founding Shareholders
and the Purchaser to pay fair value to the Non-Affiliated Shareholders and
obtain sufficient working capital to operate as a private company with
opportunity for growth and increased value.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
MERGER AGREEMENT, WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH
IS ATTACHED HERETO AS ANNEX B. CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THE
FOLLOWING SUMMARY SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER AGREEMENT.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer as promptly as practicable, but in no event later than March 1, 2000,
and that, upon the terms and subject to the prior satisfaction of the conditions
to the Purchaser's obligation to consummate the Offer, the Purchaser will
purchase all Shares validly tendered pursuant to the Offer. The Merger Agreement
provides that the Purchaser will not (i) decrease the Per Share Amount or change
the form of consideration payable in the Offer; (ii) decrease the number of
Shares sought to be purchased by it; (iii) change the conditions of its
obligation to consummate the Offer; (iii) waive the Minimum Condition or impose
any additional conditions on its obligation to consummate the Offer; or (iv)
amend any other term of the Offer in any manner adverse to the holders of the
Shares. Notwithstanding the foregoing, the Purchaser will extend the Offer from
time to time for the shortest time periods which it reasonably believes are
necessary if, and to the extent that, at the initial Expiration Date (as defined
herein), or any subsequently scheduled expiration date, any of the conditions to
the obligations of the Purchaser to consummate the Offer have not been satisfied
or waived.
The Merger Agreement also provides that subject to the terms and conditions
of the Merger Agreement and to applicable legal requirements, each of the
Company, the Purchaser and Cisco agrees to use its reasonable best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, in the
case of the Company, consistent with the fiduciary duties of the Company's Board
of Directors, and to assist and cooperate with the other parties in doing, as
promptly as practicable, all things necessary, proper or advisable under
applicable laws and regulations to ensure that the conditions to the Offer are
satisfied and to consummate and make effective the transactions contemplated by
the Offer and the Merger Agreement.
The Merger. The Merger Agreement provides that at the Effective Time, the
Purchaser will be merged with and into the Company in accordance with the MBCA.
As a result of the Merger, the separate corporate existence of the Purchaser
will cease, and the Company will be the Surviving Corporation.
The Merger Agreement provides that at the Effective Time, each issued and
outstanding share of Common Stock other than (i) Shares held directly or
indirectly by the Company, the Purchaser or Cisco and (ii) Dissenting Shares,
will be converted into the right to receive, upon the surrender of the
certificate formerly representing such Share, the Per Share Amount. The Merger
Agreement also provides that each Share held directly or indirectly by the
Company, the Purchaser or Cisco will be cancelled without any conversion thereof
and no payment shall be made with respect thereto. Each share of capital stock
of the Purchaser issued and outstanding immediately prior to the Effective Time
will be converted into one share of capital stock of the Surviving Corporation,
with the same designation as to class or series and the same rights and
preferences as applied to the capital stock of the Purchaser immediately prior
to the Effective Time.
Options. The Merger Agreement provides that the Purchaser and the Company
shall take all actions necessary and appropriate to provide that immediately
prior to the acceptance for payment and purchase of Shares by the Purchaser
pursuant to the Offer, each outstanding option and warrant to purchase shares of
Common Stock (collectively, the "Options"), whether or not granted under the
Company's 1996 Omnibus Stock Plan, shall be either converted to cash or
converted to Surviving Company Options as described below.
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The Merger Agreement defines "converted to cash" to mean that such Options shall
be cancelled and in consideration of such cancellation, immediately following
consummation of the Offer, the Company shall pay to such holders of Options an
amount in respect thereof equal to the product of (1) the excess of the Per
Share Amount over the exercise price thereof and (2) the number of Shares
subject thereto (such payment to be net of taxes required by law to be withheld
with respect thereto); provided that the foregoing shall be subject to the
obtaining of any necessary consent of holders of Options, it being agreed that
the Company and Purchaser will use their reasonable best efforts to obtain any
such consents. The Merger Agreement defines "converted to Surviving Company
Options" to mean that such Options shall be converted as of the Effective Time
without any action on the part of the holder thereof into an Option to purchase
shares of the Surviving Corporation's Common Stock under a stock option plan to
be adopted by the Surviving Corporation. The converted Option shall entitle the
holder to purchase from Surviving Corporation an equivalent number of shares of
Surviving Corporation's common stock at an equivalent exercise price, all as
determined in accordance with Internal Revenue Code Section 424 and the
negotiations thereunder so as to provide to the option holder approximately the
same economic benefit they would have had as options to purchase Company Common
Stock at the Effective Time. At the Effective Time, all Options converted to
Surviving Company Options shall become exercisable on the same vesting schedule
to which they are currently subject as Options to purchase Company Stock.
The Merger Agreement defines three groups of Option holders, "Designated
Founding Employees," "Designated Employees" and "Other Employees," and provides
that Options held by each group will be treated differently. Options held by
Designated Founding Employees, including Brett Shockley and Todd Parenteau, will
be converted to Surviving Company Options. The vested and exercisable portion of
Options held by Designated Employees will be converted to cash while that
portion of any Options held by Designated Employees which is not vested and
exercisable will be converted to Surviving Company Options. With respect to
Options held by Other Employees, the vested and exercisable portion of such
Options as well as 30% of the non-vested portion of such Options, will be
converted to cash. The remaining 70% of the non-vested portion of such Options
will be converted to Surviving Company Options. Any Options held by
non-employees of the Company will be converted to cash. Any Options approved by
the Company's Board of Directors after January 1, 2000 shall be converted to
Surviving Company Options.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Cisco and the Purchaser with
respect to, among other things, corporate organization, capitalization,
authority to enter into the Merger Agreement, non-contravention, filings with
the Securities and Exchange Commission (the "Commission"), financial statements,
the absence of undisclosed liabilities, material agreements, the accuracy of
disclosures to be included in the proxy statement and tender offer documents,
litigation, compliance with applicable laws, employee benefit plans,
intellectual property, employment agreements and labor relations, taxes,
property and leases, inventories, insurance, environmental matters, the absence
of certain changes or events, the applicability of state takeover statutes,
receipt of the Financial Advisor Opinion, the adequacy of the disclosures to
Purchaser and brokers' fees.
The Purchaser has made customary representations and warranties to the
Company with respect to, among other things, corporate organization, authority
to enter into the Merger Agreement and the transactions contemplated thereby,
non-contravention, the accuracy of disclosures to be included in the proxy
statement and tender offer documents, sufficient funds and brokers' fees.
Certain representations and warranties in the Merger Agreement are
qualified as to "materiality" or "Material Adverse Effect." For purposes of the
Merger Agreement and this Offer to Purchase, when used in connection with the
Company, a "Material Adverse Effect" means any material adverse change in or
effect on the business, operations or financial condition of the Company taken
as a whole except for (i) any change or effect resulting from general economic,
financial or market conditions, (ii) any change or effect resulting from
conditions or circumstances generally affecting the telecommunications industry,
(iii) changes in laws of general applicability or applicable generally to the
telecommunications industry.
Conditions to The Merger. The respective obligations of the Purchaser, on
the one hand, and the Company, on the other hand, to effect the Merger are
subject to the satisfaction at or prior to the Effective
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<PAGE> 25
Time of each of the following conditions: (i) the shareholders of the Company
shall have approved the transactions contemplated by the Merger Agreement,
pursuant to the requirements of the Company's articles of incorporation and
applicable law, or the Purchaser shall have acquired sufficient Company shares
prior to the Effective Time to effect a merger pursuant to Section 302A.621 of
the MBCA; (ii) the Purchaser shall have accepted for payment and paid for all
Shares pursuant to the Offer in accordance with its terms; provided, that the
Purchaser may not invoke this condition if the Purchaser fails to accept for
payment or pay for Shares pursuant to the Offer in violation of the terms of the
Offer; (iii) 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 or, any governmental authority and there shall not have
been any statute, rule or regulation enacted, promulgated or deemed applicable
to the Merger by any governmental authority which prevents the consummation of
the Merger.
The obligations of the Purchaser to effect the Merger are also subject to
the satisfaction at or prior to the effective time of the following conditions:
(i) the representations and warranties of the Company shall be true and correct
subject to applicable materiality qualifications and the Company shall have
performed or complied in all material respects with all covenants, conditions
and agreements required to be performed or complied with by the Company prior to
the Effective Time; (ii) No Material Adverse Effect on the Company shall have
occurred since the expiration date of the Offer; provided, that the obligations
of the Purchaser shall not be subject to this condition if Purchaser acquires
sufficient Shares in the Offer to effect a Merger pursuant to Section 302A.621
of the MBCA; and (iii) The holders of not more than five (5) percent of the
Company's outstanding Shares shall have exercised dissenters' rights under
Sections 302A.471 and 302A.473 of the MBCA, which are attached hereto as Annex
D.
The obligations of the Company to effect the Merger are also subject, prior
to consummation of the Offer (but not subsequent thereto), to the satisfaction
at or prior to the Effective Time of the further condition that the
representations and warranties of the Purchaser shall be true and correct
subject to applicable materiality qualifications and the Purchaser shall have
performed or complied in all material respects with all covenants, conditions
and agreements required to be performed or complied with by the Purchaser prior
to the Effective Time.
Interim Operations. The Merger Agreement provides that after the date of
the Merger Agreement and prior to the Effective Time, the Company will conduct
its operations only in the ordinary course of business consistent with past
practice and will use its reasonable efforts to preserve intact the business
organization of the Company, to keep available the services of its present
officers and key employees, and to preserve the good will of those having
business relationships with it. Subject to certain exceptions, the Company will
not, prior to the Effective Time, without the prior written consent of Cisco and
the Purchaser which shall not be unreasonably withheld or delayed:
(a) amend its articles of incorporation, by-laws (or similar documents);
(b) issue, reissue or sell, or authorize the issuance, reissuance or sale
of additional shares of capital stock or other securities, other than
the issuance of common stock pursuant to the exercise of Options or
pursuant to the Company's Employee Stock Purchase Plan.
(c) declare, set aside or pay any dividend or other distribution in respect
of any class or series of its capital stock;
(d) split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
(e) except for (i) increases in salary, wages and benefits of officers or
employees of the Company in accordance with past practice, (ii)
increases in salary, wages and benefits granted to officers and
employees of the Company in conjunction with new hires, promotions or
other changes in job status, increase the compensation or fringe
benefits payable or to become payable to its directors, officers or key
employees, or pay any benefit not required by any existing plan or
arrangement or grant any severance or termination pay to (except
pursuant to existing agreements, plans or policies), or enter into any
employment or severance agreement with, any director, officer or other
key employee of the
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Company or establish, adopt, enter into, or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, savings, welfare, deferred
compensation, employment termination, severance or other employee
benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former
employees, except in each case to the extent required by applicable law
or regulation;
(f) acquire, sell, lease or dispose of any assets (other than inventory) or
securities which are material to the Company, or enter into any
commitment to do any of the foregoing or enter into any material
commitment or transaction outside the ordinary course of business which
are in excess of $50,000;
(g) (i) incur, assume or prepay any long-term debt or incur or assume any
short-term debt, except that the Company may incur, assume or prepay
debt in the ordinary course of business consistent with past practice
under existing lines of credit, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person except in the
ordinary course of business, or (iii) make any loans, advances or
capital contributions to, or investments in, any other person except in
the ordinary course of business and not in excess of $50,000; or
(h) agree in writing or otherwise to take any of the foregoing actions.
Shareholders' Meeting. If required by the Company's articles of
incorporation and/or applicable law to consummate the Merger, the Company,
acting through the Board, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its shareholders (the "Special Meeting") as soon as practicable following
the acceptance for payment of and payment for Shares by the Purchaser
pursuant to the Offer for the purpose of considering and taking action upon
this Agreement;
(ii) prepare and file (as soon as practicable, and in any event within
10 business days after the execution of the Merger Agreement) with the
Commission a preliminary proxy statement relating to the Merger and the
Merger Agreement and use its best efforts (x) to obtain and furnish the
information required by the Commission to be included in the Proxy
Statement (as hereinafter defined) and, after consultation with Cisco and
Purchaser, to respond promptly to any comments made by the Commission with
respect to the preliminary proxy statement and cause a definitive proxy
statement (the "Proxy Statement") to be mailed to its shareholders and (y)
to obtain the necessary approvals of the Merger and the Merger Agreement by
its shareholders; and
(iii) subject to the fiduciary obligations of the Board under
applicable law as advised by outside counsel, include in the Proxy
Statement the recommendation of the Board that shareholders of the Company
vote in favor of the approval of the Merger and the adoption of the Merger
Agreement.
Each of Cisco and the Purchaser agree that it will vote, or cause to be
voted, all of the Shares then owned by it, or any of Cisco's subsidiaries in
favor of the approval of the Merger and the adoption of the Merger Agreement.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that, from the date of the Merger Agreement until the earlier of the Effective
Time or the termination of the Merger Agreement by the Company to pursue a third
party offer, the Company shall not, and shall use its reasonable best efforts to
cause its directors, officers or employees or any representative retained by it
(including the Company's financial advisor) not to, directly or indirectly
through another person, (i) solicit, initiate, entertain or encourage (including
by way of furnishing non-public information) any inquiries or the making of an
Acquisition Proposal (as defined below), or (ii) participate in any discussions
or negotiations regarding any Acquisition Proposal; provided, however, that if,
at any time after receiving a Superior Proposal (as defined below), the Special
Committee of the Company determines in good faith, after consultation with and
receipt of advice from outside counsel, that it is necessary to do so in order
to act in a manner consistent with its fiduciary duties to the Company's
shareholders under applicable law, the Company may, in response to a Superior
Proposal and subject to delivering a notice to Cisco, (x) furnish information
with respect to the Company to any Person making such Superior Proposal pursuant
to a confidentiality agreement entered into between such Person and
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<PAGE> 27
the Company with terms no less favorable to the Company than those contained in
the Confidentiality Agreement and (y) participate in discussions or negotiations
regarding such Superior Proposal. For purposes of the Merger Agreement, an
"Acquisition Proposal" means any inquiry, proposal or offer from any Person (i)
relating to any direct or indirect acquisition or purchase of (A) a business
that constitutes 15% or more of the net revenues, net income or the assets of
the Company, or (B) 20% or more of any class of equity securities of the
Company, (ii) relating to any tender offer or exchange offer that if consummated
would result in any Person beneficially owning 20% or more of any class of
equity securities of the Company, or (iii) relating to any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company, in each case, other than the
transactions contemplated by the Merger Agreement. Immediately following the
execution and delivery of the Merger Agreement, the Company agreed to cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted with respect to the foregoing. Promptly following the
execution of the Merger Agreement, the Company agreed to request each Person
that has, prior to the date of this Agreement executed a confidentiality
agreement in connection with its consideration of an Acquisition Proposal to
return or destroy all confidential information heretofore furnished to such
Person by or on behalf of the Company.
Pursuant to the Merger Agreement, the Special Committee of the Company
agreed that it would not (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Cisco, the approval or recommendation by such
Special Committee of the Merger, the Offer or the Merger Agreement, (ii) approve
or recommend, or propose publicly to approve or recommend, any Acquisition
Proposal, or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
a "Company Acquisition Agreement") related to any Acquisition Proposal, other
than any such agreement entered into concurrently with a termination pursuant to
the next sentence to facilitate such action. Notwithstanding the foregoing, if
at any time the Special Committee of the Company determines in good faith, after
consultation with and receipt of advice from outside counsel, that it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to the Company's shareholders under applicable law, subject to providing
required notice to Cisco, the Special Committee of the Company may, in response
to a Superior Proposal which was not solicited by the Company and which did not
otherwise result from a breach of the Merger Agreement, terminate the Merger
Agreement (and concurrently with or after such termination, if it so chooses,
cause the Company to enter into any Company Acquisition Agreement with respect
to any Superior Proposal) but only at a time that is at least 24 hours after
delivery of notice to Cisco. In the event the Company terminates the Merger
Agreement in order to enter into a Company Acquisition Agreement with respect to
a Superior Proposal, the Company will be obligated to pay to Cisco a fee of
$3,000,000 as reimbursement of expenses and liquidated damages.
For purposes of the Merger Agreement, a "Superior Proposal" means any
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities or other property, more
than 67% of the combined voting power of the shares of Company Common Stock then
outstanding or all or substantially all the assets of the Company which (i) the
Special Committee determines in good faith is reasonably likely to be
consummated, taking into account the Person making the proposal and all legal,
financial and regulatory aspects of the proposal, including any break-up fees,
expense reimbursement provisions and conditions to consummation, and (ii) the
Special Committee determines in good faith (after consultation with and based
upon the advice of its outside financial advisors) would, if consummated,
provide greater value to Company's shareholders than the transactions
contemplated by the Merger Agreement.
The Merger Agreement requires that the Company advise Cisco orally and in
writing of any request for non-public information, any Acquisition Proposal,
including all of the material proposed terms of such Acquisition Proposal, the
identity of the third party, or any decision by the Company to furnish
information to or participate in discussions with such third party. Any such
notice must be delivered promptly after (and in no event later than 24 hours
after) receipt of any request for non-public information or of any Acquisition
Proposal and prior to the Company furnishing information or participating in
discussions with any third party. In addition, in the event the Company intends
to enter into a Company Acquisition Agreement relating to a
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Superior Proposal, the Company is obligated to deliver a notice to Cisco at
least 24 hours prior to entering into such Company Acquisition Agreement, which
notice must identify the third party and the material proposal terms of such
Superior Proposal. The Company is required to keep Cisco reasonably informed of
the status of any such request or Acquisition Proposal and to update the
information required to be provided in each Company Notice upon the request of
Cisco.
Indemnification and Insurance. The Merger Agreement provides that all
rights to indemnification or exculpation now existing in favor of the directors,
officers, employees and agents of the Company as provided in its articles of
incorporation or bylaws or otherwise in effect as of the date of the Merger
Agreement with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect. To the maximum
extent permitted by the MBCA, such indemnification shall be mandatory rather
than permissive and the Surviving Corporation shall advance expenses in
connection with such indemnification. The Purchaser shall cause the Surviving
Corporation to maintain in effect for not less than six years from the Effective
Time the policies of the directors and officers' liability and fiduciary
insurance most recently maintained by the Company (provided, that the Surviving
Corporation may substitute therefore policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the Effective
Time to the extent available, provided, further, that in no event shall the
Surviving Corporation be required to expend more than an amount per year equal
to 200% of the current annual premiums paid by the Company (the "Premium
Amount") to maintain or procure insurance coverage pursuant hereto and provided,
further, that if the Surviving Corporation is unable to obtain the insurance
called for by the Merger Agreement, the Surviving Corporation will obtain as
much comparable insurance as is available for the Premium Amount per year.
The Merger Agreement's provisions relating to indemnification and insurance
will survive the Merger, and each Indemnified Party is a third-party beneficiary
of the covenants and agreements of the parties relating to indemnification and
insurance.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding approval
thereof by the shareholders of the Company:
(a) By mutual written consent of Cisco, the Purchaser and the Company;
(b) By the Company if (i) the Purchaser fails to commence the Offer, (ii)
the Purchaser shall not have accepted for payment and paid for Shares
pursuant to the Offer in accordance with the terms thereof on or before
June 30, 2000 or (iii) the Purchaser fails to purchase validly tendered
Shares in violation of the terms of the Offer or this Agreement;
(c) by Cisco, the Purchaser or the Company if the Offer is terminated or
withdrawn pursuant to its terms without any Shares being purchased
thereunder; provided, however, that Cisco and the Purchaser may
terminate pursuant to this provision only if Cisco's or the Purchaser's
termination or withdrawal of the Offer is not in violation of the terms
of the Merger Agreement or the Offer;
(d) by Cisco, the Purchaser or the Company if any court or other
governmental authority shall have issued, enacted, entered, promulgated
or enforced any order, judgment, decree, injunction, or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
Merger and such order, judgment, decree, injunction, ruling or other
action shall have become final and nonappealable;
(e) by the Company if, prior to the purchase of Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement, there shall
have occurred, on the part of Cisco or Purchaser, a breach of any
material representation or warranty, covenant or agreement contained in
the Merger Agreement which is not curable or, if curable, is not cured
within 30 calendar days after written notice of such breach is given by
the Company to the party committing the breach.
(f) by the Company if, prior to the purchase of Shares pursuant to the
Offer, a Third Party shall have made a bona fide offer, constituting a
Superior Proposal, that the Special Committee by majority vote
determines in its good faith judgment in the exercise of its fiduciary
duties, after consulting legal
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counsel, is more favorable to the Company's shareholders than the Offer
and the Merger, provided, that such termination shall not be effective
until payment of a $3,000,000 break-up fee to Cisco as described below
under "Fees and Expenses."
(g) by Cisco if, prior to the purchase of Shares pursuant to the Offer in
accordance with the terms of the Merger Agreement, (i) there shall have
occurred, on the part of the Company, a breach of any representation,
warranty, covenant or agreement contained in the Merger Agreement which
if not cured would have a Material Adverse Effect on the Company and
which is not curable or, if curable, is not cured within the later of
(x) 30 calendar days after written notice of such breach is given by
Cisco to the Company and (y) the satisfaction of all conditions to the
offer not related to such breach; or (ii) if the Company shall have
entered into a Company Acquisition Agreement with a person other than
Cisco, the Purchaser or an Affiliate of either; or
(h) by Cisco if it shall not have breached any of its obligations under the
Merger Agreement or under the Series A Agreement or Offer and no Shares
shall have been purchased pursuant to the Offer on or before May 31,
2000;
Fees and Expenses. Pursuant to the Merger Agreement, upon a termination of
the Merger Agreement by the Company pursuant to paragraph (f) under
"Termination" or by Cisco pursuant to paragraph (g)(ii) under "Termination," the
Company shall pay to Cisco, within three business days following such
termination, the amount of $3,000,000 as reimbursement of Cisco's expenses and
as liquidated damages.
RIGHTS OF DISSENTING SHAREHOLDERS
Sections 302A.471 and 302A.473 of the MBCA, attached hereto as Annex D,
provide to each shareholder the right to dissent from the Merger, and obtain
payment in cash for the "fair value" of such shareholder's shares following the
consummation of the Merger.
The following summary of the applicable provisions of Sections 302A.471 and
302A.473 of the MBCA is not intended to be a complete statement of such
provisions and is qualified in its entirety by reference to such sections, the
full texts of which are attached as Appendix C to this proxy statement. These
sections should be reviewed carefully by any shareholder who wishes to exercise
dissenters' rights or who wishes to preserve the right to do so, since failure
to comply fully with the procedures set forth herein or therein will result in
the loss of dissenters' rights.
Under the MBCA, holders of common stock will have the right, by fully
complying with the applicable provisions of Sections 302A.471 and 302A.473, to
dissent with respect to the merger and to receive from the Surviving Corporation
payment in cash of the "fair value" of their shares of common stock after the
merger is completed. The term "fair value" means the value of the shares of
common stock immediately before the Effective Time.
All references in Sections 302A.471 and 302A.473 and in this summary to a
"shareholder" are to a record holder of the shares of common stock as to which
dissenters' rights are asserted. A person having beneficial ownership of shares
of common stock that are held of record in the name of another person, such as a
broker, nominee, trustee or custodian, must act promptly to cause the record
holder to follow the steps summarized below properly and in a timely manner in
order to perfect whatever dissenters' rights such beneficial owner may have.
Shareholders of record who desire to exercise their dissenters' rights must
satisfy all of the following conditions. A written notice of intent to demand
fair value for shares must be delivered to the executive offices of the Company
before the taking of the shareholder vote on the merger. This written demand
must be in addition to and separate from any proxy or vote against the merger.
Voting against, abstaining from voting or failing to vote on the merger does not
by itself constitute a notice of intent to demand fair value within the meaning
of the MBCA.
Shareholders electing to exercise their dissenters' rights under the MBCA
must not vote for approval of the merger agreement. A shareholder's failure to
vote against the merger agreement will not constitute a
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waiver of dissenters' rights. However, if a shareholder returns a signed proxy
but does not specify a vote against adoption of the merger agreement or
direction to abstain, the proxy will be voted for approval of the merger
agreement, which will have the effect of waiving that shareholder's dissenters'
rights.
A Company shareholder may not assert dissenters' rights as to less than all
of the shares registered in such holder's name except where certain shares are
beneficially owned by another person but registered in such holder's name. If a
record owner, such as a broker, nominee, trustee or custodian, wishes to dissent
with respect to shares beneficially owned by another person, such shareholder
must dissent with respect to all of such shares and must disclose the name and
address of the beneficial owner on whose behalf the dissent is made. A
beneficial owner of shares of common stock who is not the record owner of such
shares may assert dissenters' rights as to shares held on such person's behalf,
provided that such beneficial owner submits a written consent of the record
owner to Company at or before the time such rights are asserted.
A shareholder who elects to exercise dissenters' rights must send his or
her written demand, before the taking of the vote on the merger agreement, to
Spanlink Communications, Inc., 7125 Northland Terrace, Brooklyn Park, Minnesota
55428; Attention: Brett Shockley. The written demand should specify the
shareholder's name and mailing address, the number of shares owned and that the
shareholder intends to demand the fair value of his or her shares.
If the merger agreement is approved by the shareholders of the Company at
the special meeting, the Surviving Corporation will send a written notice to
each shareholder who filed a written demand for dissenters' rights and did not
vote for approval of the merger agreement. The notice will contain the address
to which the shareholder shall send a demand for payment and the stock
certificates representing the dissenting shares in order to obtain payment and
the date by which they must be received, a form to be used in connection
therewith and other related information.
In order to receive fair value, a dissenting shareholder must, within 30
days after the date such notice was given (for which purpose notice by the
Surviving Corporation is deemed to have been given under Minnesota law when
deposited in the U.S. mail), demand the payment of fair value for his or her
shares, and deposit his or her stock certificates with the Surviving Corporation
at the address specified in such notice. A dissenting shareholder will retain
all rights as a shareholder until the Effective Time. After a valid demand for
payment and the related stock certificates are received, or after the Effective
Time, whichever is later, the Surviving Corporation will remit to each
dissenting shareholder who has complied with statutory requirements the amount
that the Surviving Corporation estimates to be the fair value of such
shareholder's shares, with interest commencing five days after the Effective
Time at a rate prescribed by statute (currently 4%). Remittance will be
accompanied by the Surviving Corporation's closing balance sheet and statement
of income for a fiscal year ending not more than 16 months before the Effective
Time, together with the Surviving Corporation's latest available interim
financial data, an estimate of the fair value of the shareholder's shares and a
brief description of the method used to reach the estimate, a brief description
of the procedure to be followed if such holder is demanding supplemental payment
and copies of Sections 302A.471 and 302A.473 of the MBCA.
If the dissenting shareholder believes that the amount remitted by the
Surviving Corporation is less than the fair value of such holder's shares, plus
interest, the shareholder may give written notice to the Surviving Corporation
of such holder's own estimate of the fair value of the shares, plus interest,
within 30 days after the mailing date of the remittance and demand payment of
the difference. Such notice must be given at the executive offices of the
Company at the address set forth above. A shareholder who fails to give such
written notice within this time period is entitled only to the amount remitted
by the Surviving Corporation.
Within 60 days after receipt of a demand for supplemental payment, the
Surviving Corporation must either pay the shareholder the amount demanded or
agreed to by such shareholder after discussion with the Surviving Corporation or
petition a court in Hennepin County, Minnesota for the determination of the fair
value of the shares, plus interest. The petition shall name as parties all
shareholders who have demanded supplemental payment and have not reached an
agreement with the Surviving Corporation. The court, after determining that the
shareholder or shareholders in question have complied with all statutory
requirements, may use any valuation method or combination of methods it deems
appropriate to use, whether or not used by the Surviving Corporation or the
dissenting shareholder, and may appoint appraisers to recommend the
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amount of the fair value of the shares. The court's determination will be
binding on all of the Company's shareholders who properly exercised dissenters'
rights and did not agree with the Surviving Corporation as to the fair value of
the shares. Dissenting shareholders are entitled to judgment in cash for the
amount by which the court-determined fair value per share, plus interest,
exceeds the amount per share, plus interest, remitted to the shareholders by the
Surviving Corporation. The shareholders shall not be liable to the Surviving
Corporation for any amounts paid by the Surviving Corporation which exceed the
fair value of the shares as determined by the court, plus interest. The costs
and expenses of such a proceeding, including the expenses and compensation of
any appraisers, will be determined by the court and assessed against the
Surviving Corporation, except that the court may, in its discretion, assess part
or all of those costs and expenses against any shareholder whose action in
demanding supplemental payment is found to be arbitrary, vexatious or not in
good faith. The court may award fees and expenses to an attorney for the
dissenting shareholders out of the amount, if any, awarded to such shareholders.
If the court finds that the Surviving Corporation has failed to comply
substantially with Section 302A.473, the court may assess against the Surviving
Corporation such fees or expenses of experts or attorneys as the court deems
equitable. Fees and expenses of experts or attorneys may also be assessed
against any person who acted arbitrarily, vexatiously or not in good faith in
bringing the proceeding.
The Surviving Corporation may withhold the remittance of the estimated fair
value, plus interest, for any shares owned by any person who was not a
shareholder, or who is dissenting on behalf of a person who was not a beneficial
owner, on February 25, 2000, the date on which the proposed merger was first
announced to the public (the "Public Announcement Date"). The Surviving
Corporation will forward to any such dissenting shareholder who has complied
with all requirements in exercising dissenters' rights the notice and all other
materials sent after shareholder approval of the merger to all shareholders who
have properly exercised dissenters' rights, together with a statement of the
reason for withholding the remittance and an offer to pay the dissenting
shareholder the amount listed in the materials if the shareholder agrees to
accept that amount in full satisfaction. The shareholder may decline this offer
and demand payment by following the same procedure as that described for demand
of supplemental payment by shareholders who owned their shares as of the Public
Announcement Date. Any shareholder who did not own shares on the Public
Announcement Date and who fails properly to demand payment will be entitled only
to the amount offered by the Surviving Corporation. Upon proper demand by any
such shareholder, rules and procedures applicable in connection with receipt by
the Surviving Corporation of the demand for supplemental payment given by a
dissenting shareholder who owned shares on the Public Announcement Date will
also apply to any shareholder properly giving a demand but who did not own
shares of record or beneficially on the Public Announcement Date, except that
any such shareholder is not entitled to receive any remittance from the
Surviving Corporation until the fair value of the shares, plus interest, has
been determined pursuant to such rules and procedures.
Shareholders considering exercising dissenters' rights should bear in mind
that the fair value of their shares determined under Sections 302A.471 and
302A.473 of the MBCA could be more than, the same as or, in certain
circumstances, less than the consideration they would have received pursuant to
the merger agreement if they have not exercised dissenters' rights with respect
to their shares, and that the opinion of any investment banking firm as to
fairness, from a financial point of view, is not an opinion as to fair value
under Sections 302A.471 and 302A.473. Under Section 302A.471 of the MBCA, a
shareholder has no right at law or equity to set aside the adoption of the
merger agreement or the consummation of the merger, except if such adoption or
consummation is fraudulent with respect to such shareholder or the Company. Cash
received pursuant to the exercise of dissenters' rights would be subject to
federal or state income tax. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
IF YOU FAIL TO COMPLY FULLY WITH THE STATUTORY PROCEDURE SUMMARIZED ABOVE
YOU WILL FORFEIT YOUR RIGHT OF DISSENT AND WILL RECEIVE THE PER SHARE AMOUNT FOR
YOUR SHARES. SEE ANNEX D.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the Offer and the Merger relevant to a beneficial holder of
Shares whose Shares are tendered and accepted for payment
29
<PAGE> 32
pursuant to the Offer or whose Shares are converted to cash in the Merger (a
"Holder"). This discussion is for general information only and does not purport
to consider all aspects of federal income taxation that may be relevant to
Holders. The discussion is based on the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder,
judicial decisions and administrative rulings, all as in effect as of the date
hereof and all of which are subject to change, possibly with retroactive effect.
The following does not address the federal income tax consequences to all
categories of Holders that may be subject to special rules (e.g., Holders who
acquired their Shares pursuant to the exercise of employee stock options or
other compensation, insurance companies, partnerships, tax-exempt organizations,
Holders which are neither citizens nor residents of the United States, or which
are foreign corporations or foreign estates or trusts as to the United States,
dealers in securities and Holders which have acquired the Shares as part of a
straddle, hedge, conversion transaction or other integrated investment), nor
does it address the federal income tax consequences to Holders which do not hold
the Shares as "capital assets" within the meaning of Section 1221 of the Code
(generally, property held for investment).
EACH HOLDER SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF THE RECEIPT OF CASH FOR ITS SHARES PURSUANT TO THE OFFER
OR THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS AND POSSIBLE CHANGES IN TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local and foreign income and other tax laws.
For federal income tax purposes, a Holder which sells Shares pursuant to the
Offer or receives cash in exchange for Shares pursuant to the Merger will
generally recognize capital gain or loss equal to the difference, if any,
between the amount of cash received and the Holder's adjusted tax basis in the
Shares sold pursuant to the Offer or surrendered for cash pursuant to the
Merger. Gain or loss will be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) tendered
pursuant to the Offer or surrendered for cash pursuant to the Merger. Such
capital gain or loss will be long-term capital gain or loss if the Holder has
held the Shares for more than one year at the time of the consummation of the
Offer or the Merger, as the case may be. For federal income tax purposes, net
capital gain recognized by an individual Holder (or an estate or certain trusts)
upon a disposition of a Share that has been held for more than one year
generally will be subject to a maximum tax rate of 20% or, in the case of a
Share that has been held for one year or less, will be subject to tax at
ordinary income rates. Certain limitations apply to the use of capital losses.
Notwithstanding the foregoing, all or a portion of the cash received in
exchange for Shares pursuant to the Offer or the Merger by a Holder which is
deemed to own common stock of the Company pursuant to the constructive ownership
rules of Section 318 of the Code as a result of having certain relationships
with any of the Shareholders of the Surviving Corporation following consummation
of the Merger may be taxable to such Holder as a dividend. Holders should
consult their tax advisors regarding the possible application to them of the
constructive ownership rules.
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<PAGE> 33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, based on reports filed by such
persons with the Commission, with respect to ownership of the shares of Common
Stock held by the directors and executive officers of the Company, and with
respect to ownership by persons believed by the Company to be the beneficial
owners of more than 5% of its outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
----------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ----------- ---------
<S> <C> <C>
Brett A. Shockley(2)........................................ 950,000(4) 18.0%
Loren A. Singer, Jr.(2)..................................... 920,000(5) 17.5
Todd A. Parenteau(2)........................................ 915,000(6) 17.4
Patrick P. Irestone(3)...................................... 318,500(3) 5.8
Timothy E. Briggs........................................... 64,065(7) 1.2
Jonathan M. Silverman....................................... 57,300(8) 1.1
Stephen H. Bostwick......................................... 35,800(9) *
Bryan Willborg.............................................. 21,250(10) *
Bruce E. Humphrey........................................... 34,500(11) *
Thomas F. Madison........................................... 33,000(11) *
Joseph D. Mooney............................................ 33,000(11) *
All Current Executive Officers and Directors as a group (9
persons).................................................. 2,148,915(12) 38.7%
</TABLE>
- ---------------
* Less than 1%.
(1) Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days are deemed to be outstanding for purposes of
computing the percentage of shares beneficially owned by the person holding
such options, but are not deemed to be outstanding for purposes of
computing such percentage for any other person. Each person or group
identified has sole voting and investment powers with respect to all shares
of Common Stock shown as beneficially owned by them.
(2) The address of Messrs. Shockley, Singer and Parenteau is 7125 Northland
Terrace, Minneapolis, Minnesota 55428.
(3) Includes currently exercisable options to purchase 250,000 shares of Common
Stock and 1,000 shares held by Mr. Irestone's spouse for the benefit of
their child. The address of Mr. Irestone is 268 Meadowood Lane, Vadnais
Heights, Minnesota 55127.
(4) Includes options to purchase 50,000 shares of Common Stock which are
currently exercisable and 10,425 shares held by Mr. Shockley's spouse for
the benefit of their children.
(5) Includes options to purchase 20,000 shares of Common Stock which are
currently exercisable.
(6) Includes options to purchase 15,000 shares of Common Stock which are
currently exercisable.
(7) Includes options to purchase 48,300 shares of Common Stock which are
currently exercisable.
(8) Includes options to purchase 57,300 shares of Common Stock which are
currently exercisable.
(9) Includes options to purchase 33,300 shares of Common Stock which are
currently exercisable and 2,500 shares owned indirectly by Mr. Bostwick's
spouse.
(10) Includes options to purchase 21,250 shares of Common Stock which will
become exercisable within 60 days.
(11) Includes options to purchase 32,000 shares of Common Stock which are
currently exercisable.
(12) Includes options to purchase 326,150 shares of Common Stock which are
either currently exercisable or will become exercisable within 60 days.
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<PAGE> 34
THE OFFER
TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the Purchaser will purchase Shares validly
tendered prior to the Expiration Date (as defined below) and not properly
withdrawn in accordance with "THE OFFER -- Withdrawal Rights." The term
"Expiration Date" shall mean 12:00 midnight, Minneapolis time, on March 30,
2000, unless and until the Purchaser, in its sole discretion, in accordance with
the terms of the Merger Agreement, shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by the Purchaser in
its sole discretion, shall expire. Pursuant to the Merger Agreement, if any
conditions to the Purchaser's obligations to accept for payment and pay for
Shares pursuant to the Offer are not satisfied on the scheduled Expiration Date,
the Purchaser may, in its sole discretion, extend the Offer from time to time
for the shortest time periods which it reasonably believes are necessary until
the consummation of the Offer.
The Purchaser's obligation to consummate the Offer is conditioned upon,
among other things, satisfaction of the Minimum Condition. If any such condition
is not satisfied or if any or all of the other events set forth in "THE
OFFER -- Conditions of the Offer" shall have occurred or shall be determined by
the Purchaser to have occurred prior to the Expiration Date, the Purchaser
expressly reserves the right, subject to the terms of the Merger Agreement and
compliance with the rules and regulations of the Exchange Act, to (i) decline to
purchase any Shares tendered in the Offer and terminate the Offer and return all
tendered Shares to the tendering shareholders, (ii) waive any or all conditions
to the Offer and, to the extent permitted by applicable law, purchase all Shares
validly tendered, (iii) extend the Offer and, subject to the right of
shareholders to withdraw Shares until the Expiration Date, retain all Shares
which have been tendered during the period or periods for which the Offer is
extended, or (iv) subject to the next paragraph, amend the Offer.
The Merger Agreement provides that the Purchaser will not (i) decrease the
Per Share Amount or change the form of consideration payable in the Offer; (ii)
decrease the number of Shares sought to be purchased by it; (iii) change the
conditions of its obligation to consummate the Offer; (iii) waive the Minimum
Condition or impose any additional conditions on its obligation to consummate
the Offer; or (iv) amend any other term of the Offer in any manner adverse to
the holders of the Shares. Notwithstanding the foregoing, the Purchaser will
extend the Offer from time to time for the shortest time periods which it
reasonably believes are necessary if, and to the extent that, at the initial
Expiration Date (as defined herein), or any subsequently scheduled expiration
date, any of the conditions to the obligations of the Purchaser to consummate
the Offer have not been satisfied or waived.
Subject to the applicable regulations of the Commission, the Purchaser
expressly reserves the right, subject to the terms of the Merger Agreement, in
its sole discretion, at any time and from time to time, (i) to delay acceptance
for payment of, or, regardless of whether such Shares were theretofore accepted
for payment, payment for, any Shares pending receipt of any regulatory approval
specified in "THE OFFER -- Conditions to the Offer" or in order to comply in
whole or in part with any other applicable law, (ii) to terminate the Offer and
not accept for payment any Shares if any of the conditions to the Offer have not
been satisfied or upon the occurrence of any of the events specified in "THE
OFFER -- Conditions to the Offer" and (iii) to waive any condition or otherwise
amend the Offer in any respect by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and by making a public
announcement thereof.
The Merger Agreement requires the Purchaser to accept for payment and pay
for all Shares validly tendered and not withdrawn pursuant to the Offer if all
conditions to the Offer are satisfied or waived on the Expiration Date.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, with such announcement
in the case of an extension to be issued no later than 9:00 a.m., Minneapolis
time, on the next business day after the previously scheduled Expiration Date in
accordance with Rules 13e-4(e), 14d-4(c), 14d-6(d) and 14e-1(d) under the
Exchange Act. Without limiting the obligation of the Purchaser under such Rules
or the manner in which the Purchaser may choose to
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<PAGE> 35
make any public announcement, the Purchaser currently intends to make
announcements by issuing a press release to the Dow Jones News Service.
If the Purchaser is delayed in its payment for the Shares or is unable to
pay for Shares pursuant to the Offer for any reason, then, without prejudice to
the Purchaser's rights under the Offer, the Depositary may retain tendered
Shares on behalf of the Purchaser, and such Shares may not be withdrawn except
to the extent tendering shareholders are entitled to withdrawal rights as
described in "THE OFFER -- Withdrawal Rights." However, the ability of the
Purchaser to delay the payment for Shares which the Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that
a bidder pay the consideration offered or return the securities deposited by, or
on behalf of, holders of securities promptly after the termination or withdrawal
of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including a waiver of the Minimum Condition), the Purchaser will disseminate
additional tender offer materials and extend the Offer to the extent required by
Rules 13e-3(e), 13e-4(e), 14d-4(c), 14d-6(d) and 14e-1 promulgated under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. In a public
release, the Commission has stated its view that an offer must remain open for a
minimum period of time following a material change in the terms of the Offer and
that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the Offer. The release states that an offer
should remain open for a minimum of five business days from the date a material
change is first published or sent or given to security holders and that, if
material changes are made with respect to information not materially less
significant than the offer price and the number of shares being sought, a
minimum of 10 business days may be required to allow for adequate dissemination
to shareholders and investor response. As used in this Offer to Purchase,
"business day" has the meaning set forth in Rule 14d-1 promulgated under the
Exchange Act. The requirement to extend the Offer will not apply to the extent
that the number of business days remaining between the occurrence of the change
and the then-scheduled Expiration Date equals or exceeds the minimum extension
period that would be required because of such amendment. If, prior to the
Expiration Date, the Purchaser increases the consideration offered to holders of
Shares pursuant to the Offer, such increased consideration will be paid to all
holders whose Shares are purchased in the Offer whether or not such Shares were
tendered prior to such increase.
If requested by the Purchaser, the Company will promptly provide the
Purchaser with the Company's shareholder list and security position listings for
the purpose of disseminating the Offer to holders of Shares. This Offer to
Purchase, the related Letter of Transmittal and other relevant materials will be
mailed to record holders of Shares whose names appear on the Company's
shareholder list and will be furnished to brokers, dealers, commercial banks,
trust companies or similar persons whose names, or the names of whose nominees,
appear on the Company's shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, as soon as practicable after the Expiration Date, all Shares validly
tendered prior to the Expiration Date and not properly withdrawn in accordance
with "THE OFFER -- Withdrawal Rights." Subject to applicable rules of the
Commission and the Merger Agreement, the Purchaser expressly reserves the right,
in the Purchaser's sole discretion, to delay acceptance for payment of, or
payment for, Shares in order to comply in whole or in part with any applicable
law. See "THE OFFER -- Conditions to the Offer."
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares or a timely Book Entry Confirmation (as defined below)
with respect thereto, (ii) a Letter of Transmittal (or facsimile thereof),
33
<PAGE> 36
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined below),
and (iii) any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment and thereby purchased Shares properly tendered to the Purchaser and
not withdrawn, if, as and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of such Shares for payment pursuant to
the Offer. In all cases, payment for Shares accepted pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering shareholders for the purpose of receiving
payments from the Purchaser and transmitting payments to tendering shareholders.
If any tendered Shares are not accepted for payment pursuant to the Offer
for any reason, or if certificates submitted represent more Shares than are
tendered, certificates for Shares not purchased or tendered will be returned to
the tendering shareholder without expense to the tendering shareholder, or such
other person as the tendering shareholder shall specify in the Letter of
Transmittal, as promptly as practicable following the expiration, termination or
withdrawal of the Offer. In the case of Shares tendered by book-entry transfer
into the Depositary's account at the Book-Entry Transfer Facility (as defined
below) pursuant to the procedures set forth in "THE OFFER -- Procedures for
Tendering Shares," such Shares will be credited to such account maintained at
the Book-Entry Transfer Facility as the tendering shareholder shall specify in
the Letter of Transmittal, as promptly as practicable following the expiration,
termination or withdrawal of the Offer. If no such instructions are given with
respect to Shares delivered by book-entry transfer, any such Shares not tendered
or not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated in the Letter of Transmittal as the account from
which such Shares were delivered.
If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid per Share pursuant to the Offer, the Purchaser will pay such
increased consideration for all such Shares purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in
consideration.
The Purchaser reserves the right to transfer or assign, in whole at any
time or in part from time to time, to one or more of its affiliates, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
shareholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
PROCEDURES FOR TENDERING SHARES
Valid Tender. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal or facsimile thereof,
properly completed and duly executed, with any required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date. In
addition, either (i) the certificates evidencing tendered Shares along with the
Letter of Transmittal must be received by the Depositary or Shares must be
tendered pursuant to the procedures for book-entry transfer set forth below and
a Book-Entry Confirmation (as defined below) must be received by the Depositary,
in each case prior to the Expiration Date, or (ii) the tendering shareholder
must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE
CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
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<PAGE> 37
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depositary Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Shares may be effected
through book-entry transfer into the Depositary's account at the Book-Entry
Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (as defined below), and any other required documents must, in
any case, be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering shareholder must comply with the guaranteed
delivery procedures described below. DELIVERY OF THE LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
confirmation of a book-entry transfer of Shares into the Depositary's account at
the Book-Entry Transfer Facility (a "Book-Entry Confirmation"), which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the Shares
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that the Purchaser may enforce such agreement against
such participant.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the United States
(each, an "Eligible Institution"), unless the Shares tendered thereby are
tendered (i) by a registered holder who has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of an Eligible Institution.
If the certificates for Shares are registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or
certificates for Shares not tendered or not accepted for payment or not tendered
are to be returned to a person other than the registered holder of the
certificates surrendered, then the tendered certificates for such Shares must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
as described above. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such Shares may nevertheless be
tendered if all of the following conditions are met:
(i) the tender is made by or through an Eligible Institution;
(ii) prior to the Expiration Date, the Depositary receives a properly
completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchasers herewith; and
(iii) in the case of a guarantee of Shares, the certificates for (or a
Book-Entry Confirmation with respect to) such Shares, in proper form
for transfer, together with a properly completed and duly executed
Letter of Transmittal or facsimile thereof, with any required
signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message, and any other required documents, are received by
the Depositary within three Nasdaq trading days after the date of
execution of the Notice of Guaranteed Delivery.
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<PAGE> 38
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Binding Agreement. The Purchaser's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering shareholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, which determination will be
final and binding. The Purchaser reserves the absolute right to reject any or
all tenders of any Shares determined by it not to be in proper form or if the
acceptance for payment of, or payment for, such Shares may, in the opinion of
counsel for the Purchaser, be unlawful. The Purchaser also reserves the absolute
right, in its sole discretion, subject to the provisions of the Merger
Agreement, to waive any conditions of the Offer or any defect or irregularity in
any tender of Shares, whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of Shares will be deemed to
have been validly made until all defects or irregularities relating thereto have
been cured or waived.
Subject to the terms of the Merger Agreement, the Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding. None of the
Purchaser, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in tenders
or will incur any liability for failure to give any such notification.
Appointment. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent's Message), the tendering shareholder
irrevocably appoints, with respect to the Shares purchased by the Purchaser,
designees of the Purchaser as such shareholder's attorneys-in-fact and proxies
in the manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of such shareholder's rights with respect to
the Shares tendered thereby and accepted for payment by the Purchaser and with
respect to any and all non-cash dividends, distributions, rights, other Shares
or other securities issued or issuable in respect of such purchased Shares
(collectively, "Distributions"). All such proxies will be considered coupled
with an interest in the tendered Shares. Such appointment will be effective if,
when, and only to the extent that the Purchaser accepts such Shares for payment
pursuant to the Offer. All such powers of attorney and proxies will be
irrevocable and will be deemed granted in consideration of the acceptance for
payment by the Purchaser of Shares tendered in accordance with the terms of the
Offer. Upon such acceptance for payment, all prior powers of attorney, proxies
and consents given by such shareholder with respect to such Shares (and any and
all Distributions) will, without further action, be revoked and no subsequent
powers of attorney, proxies, consents or revocations may be given by such
shareholder (and, if given, will not be deemed effective). The designees of the
Purchaser will, with respect to the Shares purchased by the Purchaser, thereby
be empowered to exercise all voting and other rights of such shareholder as they
in their sole discretion deem proper at any annual, special adjourned or
postponed meeting of the Company's shareholders, by written consent or otherwise
and the Purchaser reserves the right to require that, in order for Shares to be
deemed validly tendered, immediately upon the Purchaser's acceptance for payment
of such Shares, the Purchaser must be able to exercise full voting, consent and
other rights with respect to such Shares (and any and all Distributions).
Backup Withholding. To prevent backup federal income tax withholding with
respect to payment of the purchase price of Shares purchased pursuant to the
Offer, a tendering shareholder, or its assignee (in either case, the "Payee"),
must provide the Depositary with such shareholder's correct taxpayer
identification number and certify that such shareholder is not subject to backup
federal income tax withholding by completing and signing the Substitute Form W-9
provided in the Letter of Transmittal. If backup withholding applies with
respect to a shareholder, the Depositary is required to withhold and deposit
with the Internal
36
<PAGE> 39
Revenue Service 31% of any payments made to such shareholder. Certain
shareholders (including all corporations and certain foreign individuals) are
exempt from backup withholding. In order for a foreign shareholder to qualify as
an exempt recipient, the shareholder must submit an IRS Form W-8, signed under
penalties of perjury, attesting to the shareholder's exempt status. See
Instruction 10 to the Letter of Transmittal.
WITHDRAWAL RIGHTS
Shareholders may withdraw tendered shares at any time before the expiration
date. For a withdrawal to be effective, the Depositary must receive a written
notice of withdrawal at the address set forth on the back cover of this Offer
before the Expiration Date. The Depositary will not accept oral notices of
withdrawal. Any notice of withdrawal must:
- specify the name of the person or persons who tendered the shares to be
withdrawn and the account number from which the shares were tendered,
- specify the number, and designated receipt numbers (if applicable), of
shares to be withdrawn, and
- contain the signature or signatures of the person or persons who tendered
the shares to be withdrawn.
Purchaser will determine all questions as to the form and validity,
including time of receipt, of notices of withdrawal. Purchaser's determination
will be final and binding. Neither the Depositary or any other person will be
obligated to give Shareholders any notice of any defects or irregularities in
any notice of withdrawal, and neither Purchaser nor any other person will incur
any liability for failure to give any such notice. Any shares properly withdrawn
will be deemed not tendered for purposes of the Offer. Shareholders may
re-tender withdrawn shares on or before the expiration date by again following
the procedures described in this Offer to Purchase.
If Purchaser extends the Offer, or if Purchaser is delayed in its purchase
of shares or unable to purchase shares in the Offer for any reason, the
Depositary, subject to applicable law, may retain all tendered shares on
Purchaser's behalf, and the shares may not be withdrawn except to the extent
tendering shareholders are entitled to withdrawal rights as described in this
Offer. If Purchaser has not accepted tendered shares for payment as provided in
this Offer to purchase by 12:00 midnight, Minneapolis time, on Thursday, March
30, 2000, shareholders may withdraw their tendered shares.
PRICE RANGE OF THE SHARES; DIVIDENDS
The Shares are listed and traded on the Nasdaq SmallCap Market under the
symbol "SPLK." The following table sets forth, for the quarters indicated, the
high and low closing sales prices per Share as reported
37
<PAGE> 40
on the Nasdaq. The Company has never paid any dividends on the Common Stock, and
expects for the foreseeable future to retain all of its earnings from operations
for use in expanding and developing its business.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1998:
First Quarter ended March 31, 1998........................ $ 3 $2
Second Quarter ended June 30, 1998........................ 4 2 3/4
Third Quarter ended September 30, 1998.................... 4 3/4 2 3/8
Fourth Quarter ended December 31, 1998.................... 4 9/16 2 7/8
1999:
First Quarter ended March 31, 1999........................ 4 5/8 3 1/8
Second Quarter ended June 30, 1999........................ 3 1/2 2 1/4
Third Quarter ended September 30, 1999.................... 3 3/8 2 1/2
Fourth Quarter ended December 31, 1999.................... 8 2
2000:
First Quarter ended March 31, 2000 (through February 22,
2000).................................................. 10 3/4 5 3/4
</TABLE>
On February 24, 2000, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the reported closing
price on the Nasdaq was $10.75 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE SHARES.
Under the terms of the Merger Agreement, the Company is not permitted to
declare or pay dividends with respect to the Shares without the prior written
consent of the Purchaser, and the Purchaser does not intend to consent to any
such declaration or payment.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE LISTING;
EXCHANGE ACT REGISTRATION
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of Shares,
could adversely affect the liquidity and market value of the remaining Shares
held by the public and have other consequences with respect to Nasdaq listing,
Exchange Act registration and availability of margin credit. See "SPECIAL
FACTORS -- Certain Effects of the Transactions."
CERTAIN INFORMATION CONCERNING THE COMPANY
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Historical
Financial Information," has been furnished by the Company or has been taken from
or based upon publicly available documents and records on file with the
Commission and other public sources. None of Purchaser, the Information Agent or
the Depositary assumes responsibility for the accuracy or completeness of the
information concerning the Company contained in such documents and records or
for any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to Purchaser or the Information Agent.
The Company is a Minnesota corporation with its principal executive offices
located at 7125 Northland Terrace, Minneapolis, MN 55428. The Company designs,
develops and markets computer telephony software and services that help automate
the customer interaction process in call centers using technologies which link
business computer systems, telecommunications systems and the Internet. The
Company's product lines include EXTRAAGENT and FASTCALL product families as well
as SELECTSOLUTIONS which provides custom interactive computer telecommunications
software applications utilizing the Company's core software modules.
During the last five years, neither the Company nor, to the best knowledge
of the Company, any of the persons listed on Schedule I hereto, have been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent
38
<PAGE> 41
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
Certain information concerning the directors and executive officers of the
Company is set forth in Schedule I hereto.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and is required to file reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interests of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's Shareholders
and filed with the Commission. These reports, proxy statements and other
information should be available for inspection at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of this material may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains a website on the Internet at http://www.sec.gov
that contains reports, proxy statements and other information relating to the
Company which have been filed via the Commission's EDGAR System.
Selected Historical Financial Information. Set forth below is certain
summary consolidated financial information with respect to the Company excerpted
or derived from the audited financial statements contained in the Company's
Annual Report on Form 10-K for the years ended 1998 and 1997, and the unaudited
financial statements included in the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, each as filed with the Commission pursuant
to the Exchange Act.
More comprehensive financial information and other information is included
in such reports and in other documents filed by the Company with the Commission,
the following summary is qualified in its entirety by reference to such reports
and other documents and all of the financial information and related notes
contained therein. Such reports, documents and financial information may be
inspected and copies may be obtained from the Commission in the manner set forth
above.
39
<PAGE> 42
SPANLINK COMMUNICATIONS, INC
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------
1999 1998 1997
------------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Revenue................................................ $7,911,345 $11,083,239 $ 6,637,018
Cost of revenue........................................ 3,373,991 5,047,616 2,842,424
---------- ----------- -----------
Gross profit........................................... 4,537,354 6,035,623 3,794,594
Gross profit as a percentage of revenue................ 57.4% 54.5% 57.2%
Operating expenses:
Sales, general and administrative...................... 3,739,739 4,440,679 4,562,239
Research and product development....................... 1,199,951 1,282,549 1,463,905
---------- ----------- -----------
4,939,689 5,723,228 6,026,144
---------- ----------- -----------
Income (loss) from operations.......................... (402,336) 312,395 (2,231,550)
Interest income (expense).............................. (93,439) (48,442) 86,020
---------- ----------- -----------
Income (loss) before income taxes...................... (495,775) 263,953 (2,145,530)
Provision for income taxes............................. 0 0 0
---------- ----------- -----------
Net income (loss)...................................... $ (495,775) $ 263,953 $(2,145,530)
========== =========== ===========
Basic and diluted net income (loss) per share.......... $ (0.10) $ 0.05 $ (0.42)
Shares used in computing diluted net income (loss) per
share................................................ 5,107,739 5,230,018 5,080,500
</TABLE>
40
<PAGE> 43
SPANLINK COMMUNICATIONS, INC
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS YEARS ENDED
ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------
1999 1998 1997
------------- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss).................................... $(495,775) $ 263,952 $(2,145,530)
Reconciliation of net loss to net cash used by
operating activities:
Depreciation and amortization..................... 432,318 467,257 181,250
Provision for doubtful accounts................... 0 50,000 215,000
Deferred income taxes............................. 0 0 0
Common stock grant recognized as compensation
expense......................................... 0
Changes in current assets and current liabilities:
Restricted Cash................................. (150,200)
Accounts receivable............................. 137,930 (807,837) (334,604)
Costs and estimated earnings in excess of
billings..................................... 389,804 (1,148,614) (535,915)
Other current assets............................ (133,606) (174,771) (242,948)
Accounts payable................................ (517,476) 628,549 (293,327)
Accrued expenses................................ (42,428) (266,765) (241,488)
Other current liabilities....................... (2,859) 6,035 197,603
--------- ----------- -----------
Net cash used by operating activities........ (232,092) (982,194) (3,350,159)
--------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities................... 0 0 0
Maturities of marketable securities.................. 0 0 2,092,553
Purchase of product line............................. 0 0 (116,819)
Additions to property and equipment.................. (147,525) (309,582) (302,322)
--------- ----------- -----------
Net cash provided (used) by investing
activities................................. (147,525) (309,582) 1,673,412
--------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Other assets......................................... 0 (25,000) 0
Principal payments on capital lease.................. (43,063) (50,892) (54,747)
Principal payments on other long-term obligations.... (6,293) (221,117) 0
Proceeds from issuance of loan payable............... 340,000 985,000 0
Proceeds from sale of common stock................... 11,015 61,685 0
--------- ----------- -----------
Net cash provided (used) by financing
activities................................. 301,659 749,676 (54,747)
--------- ----------- -----------
Net increase (decrease) in cash and cash equivalents... (77,958) (542,100) (1,731,494)
Cash and cash equivalents at beginning of year......... 11,358 553,458 2,284,952
--------- ----------- -----------
Cash and cash equivalents at end of year............... $ (66,600) $ 11,358 $ 553,458
========= =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest............. $ 93,439 $ 72,725 $ 32,887
========= =========== ===========
NONCASH OPERATING AND FINANCING ACTIVITIES:
Capital lease obligations incurred................... $ 0 $ 0 $ 300,400
========= =========== ===========
</TABLE>
41
<PAGE> 44
SPANLINK COMMUNICATIONS, INC
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 83,600 $ 161,558 $ 703,658
Accounts receivable, net of allowances............... 2,733,178 2,871,108 2,113,271
Inventory............................................ 566,569 505,787 345,775
Costs and estimated earnings in excess of billings... 1,313,382 1,703,186 554,572
Other current assets................................. 235,655 162,831 148,072
----------- ----------- ----------
Total current assets......................... 4,932,385 5,404,470 3,865,348
Property and equipment, net............................ 1,034,819 1,227,089 1,264,160
Purchased intangibles.................................. 398,492 491,015 611,619
Other assets........................................... 138,500 138,500 113,500
----------- ----------- ----------
Total assets................................. $ 6,504,195 $ 7,261,074 $5,854,627
=========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loan payable......................................... $ 1,325,000 $ 985,000 $ 0
Accounts payable..................................... 742,336 1,259,812 631,263
Accrued expenses..................................... 251,739 294,167 560,933
Current portion of long term liabilities............. 113,805 107,755 300,570
Deferred maintenance revenue......................... 524,065 439,697 432,809
Other current liabilities............................ 364,385 451,613 452,466
----------- ----------- ----------
Total current liabilities.................... 3,321,331 3,538,044 2,378,041
Capital lease obligation............................... 87,893 137,006 195,083
Royalties payable...................................... 222,590 228,883 250,000
----------- ----------- ----------
Total Liabilities............................ 3,631,814 3,903,932 2,823,124
Shareholders' equity:
Common stock......................................... 8,266,363 8,255,348 8,193,663
Accumulated deficit.................................. (5,393,982) (4,898,207) (5,162,160)
----------- ----------- ----------
Total shareholders' equity................... 2,872,382 3,357,141 3,031,503
----------- ----------- ----------
Total liabilities and shareholders' equity... $10,136,009 $11,165,006 $8,677,751
=========== =========== ==========
</TABLE>
On February 23, 2000, the Company announced its financial results for the
year and fourth quarter ending December 31, 1999. The Company has not yet
completed its financial statements for fiscal 1999 but has attached a copy of
the press release announcing the financial results for the year as Exhibit
(a)(5)(ii).
CERTAIN INFORMATION CONCERNING PURCHASER
Purchaser is a Minnesota corporation organized in connection with the Offer
and the Merger and has not carried on any significant activities other than in
connection with the Offer and the Merger. Until immediately prior to the time
Purchaser purchases Shares pursuant to the Offer, it is not anticipated that
Purchaser will have any significant assets or liabilities or engage in any
significant activities other than those incident to its formation and
capitalization and the transactions contemplated by the Offer and the Merger.
The principal offices of Purchaser are located at 7125 Northland Terrace,
Minneapolis, MN 55428. The telephone number of Purchaser at such location is
(612) 971-2000.
Except as set forth in this Offer to Purchase, neither Purchaser nor, to
the best knowledge of Purchaser, any of the persons listed on Schedule II, or
any associate or majority owned subsidiary of any of the foregoing,
42
<PAGE> 45
beneficially owns or has a right to acquire any Shares, and neither Purchaser
nor, to the best of knowledge of Purchaser, any of the persons or entities
referred to above, or any of the respective executive officers, directors or
subsidiaries of any of the foregoing, has effected any transaction in the Shares
during the past 60 days.
Except as set forth in this Offer to Purchase, Purchaser has no contracts,
arrangements, understandings or relationships with any other person with respect
to any securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any securities of the Company, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies.
Except as set forth in this Offer to Purchase, none of Purchaser, any of
its affiliates, or, to the best knowledge of Purchaser, any of the persons
listed on Schedule II, has had, since the second fiscal year preceding the date
of this Offer to Purchase, any business relationships or transactions with the
Company or any of its executive officers, directors or affiliates that would be
required to be reported under the rules of the Commission. Except as set forth
in this Offer to Purchase, there have been no contacts, negotiations or
transactions between Purchaser, any of its affiliates or, to the best knowledge
of Purchaser, any of the persons listed on Schedule II, and the Company or its
affiliates concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets.
During the last five years, neither Purchaser nor, to the best knowledge of
Purchaser, any of the persons listed on Schedule II hereto, have been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
Certain information concerning the directors and executive officers of the
Company is set forth in Schedule II hereto.
Available Information. Purchaser is a privately-held company and is
generally not subject to the informational filing requirements of the Exchange
Act, and is generally not required to file reports, proxy statements and other
information with the Commission relating to its businesses, financial condition
and other matters. However, pursuant to Rule 14d-3 under the Exchange Act,
Purchaser filed with the Commission the Schedule TO, together with exhibits,
including this Offer to Purchase and the Merger Agreement, which provides
certain additional information with respect to the Offer. The Schedule TO and
any amendments thereto, including exhibits, should be available for inspection
and copies should be obtainable at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
information should also be obtainable (i) by mail, upon payment of the
Commission's customary charges, by writing to the Commission's principal office
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at Seven World Trade Center, Suite 1300, New York, NY
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661 and (ii) by accessing the Commission's website on the Internet at
http://www.sec.gov.
CONDITIONS TO THE OFFER
Conditions to the Purchaser's Obligation to Consummate the
Offer. Notwithstanding any other provisions of the Offer, the Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the obligation of the Purchaser to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer) pay for any
tendered Shares, unless there are validly tendered and not withdrawn prior to
the expiration date for the Offer that number of Shares which when combined with
the Shares owned by the Purchaser represent at least Sixty Seven (67) percent of
the outstanding Shares on the date of purchase (the "Minimum Condition").
Furthermore, notwithstanding any other provisions of the Offer, the Purchaser
may, subject to the terms of the Merger Agreement, amend the Offer or postpone
the acceptance for payment of or
43
<PAGE> 46
payment for tendered Shares if at any time on or after the date of the Merger
Agreement and before the expiration of the Offer, any of the following events
shall occur:
(a) any order or preliminary or permanent injunction shall be entered
in any action or proceeding before any court of competent jurisdiction or
any statute, rule, regulation, legislation, or order shall be enacted,
entered, enforced, promulgated, amended or issued by any United States
legislative body, court, government or governmental, administrative or
regulatory authority or agency which shall remain in effect and which shall
have the effect of making illegal or restraining or prohibiting the making
of the Offer, the acceptance for payment of, or payment for, the Shares by
Cisco or the Purchaser, or the consummation of the Offer or the Merger; or
(b) the Company shall have entered into a Company Acquisition
Agreement with a person other than Cisco, the Purchaser or an affiliate of
either; or
(c) the Company and the Purchaser and Cisco shall have reached an
agreement that the Offer or the Merger Agreement be terminated, or the
Merger Agreement shall have been terminated in accordance with its terms;
or
(d) (i) the Company shall have breached or failed to perform in any
material respect any of its material obligations, covenants or agreements
under the Merger Agreement or (ii) there shall have occurred, on the part
of the Company, a breach of any representation or warranty contained in the
Merger Agreement which, in either case, if not cured would have a Material
Adverse Effect on the Company and which is not curable or, if curable, is
not cured within the later of (x) 30 calendar days after written notice of
such breach is given by Cisco to the Company of such breach and (y) the
time of satisfaction of all conditions to the Offer not related to such
breach; or
(e) there shall have occurred, and continued to exist, (i) any general
suspension of, or limitation on prices for, trading in securities on the
New York Stock Exchange, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) a
commencement of a war, armed hostilities or other national or international
crisis directly involving the United States (other than an action involving
United Nations' personnel or support of United Nations' personnel) or (iv)
in the case of any of the foregoing clauses (i) through (iii) existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof.
The foregoing conditions are for the benefit of Cisco and the Purchaser and
may be asserted by Cisco or the Purchaser and may be waived by Cisco or the
Purchaser in whole or in part at any time and from time to time in their
reasonable discretion, in each case, subject to the terms of the Merger
Agreement. The failure by Cisco or the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
CERTAIN LEGAL MATTERS
General. Except as described in this section, the Purchasers are not aware
of any license or regulatory permit that appears to be material to the business
of the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by the Purchasers pursuant to the Offer,
the Merger or otherwise or any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required prior to the acquisition of Shares by the Purchasers pursuant
to the Offer, the Merger or otherwise. Should any such approval or other action
be required, the Purchaser presently contemplates that such approval or other
action will be sought, except as described below under "State Antitakeover
Statutes." While, except as otherwise described in this Offer to Purchase, the
Purchaser does not presently intend to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that failure to obtain any such approval or other action might not result in
consequences adverse to the Purchaser's businesses or that certain parts of the
Purchaser's businesses might not have to be disposed of, or
44
<PAGE> 47
other substantial conditions complied with, in the event that such approvals
were not obtained or such other actions were not taken or in order to obtain any
such approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchasers could decline to accept
for payment, or pay for, any Shares tendered. See "THE OFFER -- Conditions to
the Offer" for certain conditions to the Offer, including conditions with
respect to governmental actions.
State Antitakeover Statutes. Section 302A.673 of the MBCA, in general,
prohibits a Minnesota corporation, such as the Company, from engaging in a
"Business Combination" (defined as a variety of transactions, including mergers)
with an "Interested Shareholder" (defined generally as a person that is the
beneficial owner of 10% or more of the outstanding voting stock of the subject
corporation) for a period of four years following the date that such person
became an Interested Shareholder unless, prior to the date such person became an
Interested Shareholder, a special committee of the board of directors of the
corporation approved either the Business Combination or the transaction that
resulted in the Shareholder becoming an Interested Shareholder. The provisions
of Section 302A.673 of the MBCA are not applicable to any of the transactions
contemplated by the Merger Agreement, since the Merger Agreement and the
transactions contemplated thereby were approved by the Special Committee prior
to the execution thereof.
Antitrust. Under HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the FTC and the
Antitrust Department of the Department of Justice (the "DOJ") and certain
waiting period requirements have been satisfied. The Merger and the related
transactions are not subject to the filing and waiting requirements under the
HSR Act.
In the event that a filing is required to be made under the HSR Act and the
rules promulgated thereunder by the FTC, the Purchasers expect to promptly file
a Notification and Report Form with respect to the Offer under the HSR Act. The
waiting period under the HSR Act with respect to the Offer will expire at 11:59
p.m., New York City time, on the fifteenth day after the date on which the
Purchaser's forms are filed, unless early termination of the waiting period is
granted. However, the DOJ or the FTC may extend the waiting period by requesting
additional information or documentary material from the Purchasers. If such a
request is made, such waiting period will expire at 11:59 p.m., New York City
time, on the tenth day after substantial compliance by the Purchaser with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Purchaser. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the DOJ or the FTC raises
substantive issues in connection with a proposed transaction, the parties
frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. If a filing
under the HSR Act is required, the Purchaser will not accept for payment Shares
tendered pursuant to the Offer unless and until the waiting period requirements
imposed by the HSR Act with respect to the Offer have been satisfied.
The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws (as defined below) of transactions such as Purchaser's acquisition of
Shares pursuant to the Offer and the Merger. At any time before or after
Purchaser's acquisition of Shares, the DOJ or the FTC could take such action
under the Antitrust Laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or otherwise seeking divestiture of Shares acquired by Purchaser or
divestiture of substantial assets of Purchaser or its subsidiaries. Private
parties, as well as state governments, may also bring legal action under the
Antitrust Laws under certain circumstances.
Although the Purchaser believes that the acquisition of the Shares pursuant
to the Offer would not violate the Antitrust Laws, there can be no assurance
that a challenge to the Offer on antitrust grounds will not be made or, if such
a challenge is made, what the outcome will be. See "THE OFFER -- Conditions to
the Offer" for certain conditions to Offer, including conditions with respect to
litigation and certain government actions.
As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and
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<PAGE> 48
all other Federal and state statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
FEES AND EXPENSES
Except as otherwise provided herein, all fees and expenses incurred in
connection with the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby will be paid by the party incurring such fees
and expenses, except that the Company will pay for all fees and expenses
relating to the filing, printing and mailing of the documents in connection with
the Offer, the Schedule 14D-9 and the proxy statement.
The Purchaser has retained Corporate Investors Communications, Inc. to act
as the Information Agent and Proxy Solicitor in connection with the Offer. The
Information Agent may contact holders of Shares by mail, telephone, facsimile,
telegraph and personal interviews and may request brokers, dealers and other
nominee Shareholders to forward materials to the beneficial owners of shares.
The Information Agent will receive reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
The Purchaser has retained Norwest Bank as the Depositary. The Depositary
has not been retained to make solicitations or recommendations in its role as
Depositary. The Depositary will receive reasonable and customary compensation
for its services, will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
Estimated fees and expenses to be incurred by the Purchasers in connection
with the Transactions are as follows:
<TABLE>
<S> <C>
Special Committee's Financial Advisor's Fees................ $ 140,000
Legal, Accounting and Other Professional Fees............... $1,650,000
Printing, Proxy Solicitation and Mailing Costs.............. $ 75,000
Filing Fees................................................. $ 8,000
Miscellaneous............................................... $ 10,000
Total............................................. $1,883,000
</TABLE>
Except as set forth above, the Purchaser will not pay any fees or
commissions to any broker or dealer or any other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will, upon request only, be reimbursed by the Purchaser for customary
mailing and handling expenses incurred by them in forwarding material to their
customers.
MISCELLANEOUS
The Purchaser is not aware of any jurisdiction in which the making of the
Offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with any such
state statute or seek to have such statute declared inapplicable to the Offer.
If, after such good faith effort, the Purchaser cannot comply with any such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser
by one or more registered brokers or dealers which are licensed under the laws
of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASERS NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
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<PAGE> 49
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule TO and the Company has filed with the Commission a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits
in each case, pursuant to Regulation M-A and Rule 14d-9, respectively, under the
Exchange Act, furnishing certain additional information with respect to the
Offer. Such Schedules and any amendments thereto, including exhibits, should be
available for inspection and copies should be obtainable in the same manner set
forth in "THE OFFER -- Certain Information Concerning the Company" and "THE
OFFER -- Certain Information Concerning Purchaser" of this Offer to Purchase
(except that such material will not be available at the regional offices of the
Commission).
SPANLINK COMMUNICATIONS, INC.
SPANLINK ACQUISITION CORP.
February 29, 2000
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<PAGE> 50
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS IN THE COMPANY
1. Directors and Executive Officers of the Company. The following table
sets forth the name and present principal occupation or employment, material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of the Company. Unless otherwise indicated, each
such person is a citizen of the United States and the business address of each
such person is c/o Spanlink Communications, Inc., 7125 Northland Terrace,
Minneapolis, MN 55428. None of the directors or executive officers of the
Company were a party to any judicial or administrative proceeding within the
last five years.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD
NAME DURING THE PAST FIVE YEARS
- ---- ----------------------------------------------------------
<S> <C>
Bruce E. Humphrey...................... Has been a director of the Company since 1996. Mr.
Humphrey has been the President and Chief Executive
Officer of CSC Insurance Center, Inc. since he founded it
in December 1982. Mr. Humphrey is also a director of
K-Sun, Inc.
Thomas F. Madison...................... Has been a director of the Company since 1996. Mr. Madison
has been the President and Chief Executive Officer of MLM
Partners, a consulting and small business investment
company, since January 1993. Since December 1996, he has
been Chairman of Communications Holdings, Inc. From
February 1994 to September 1994, he served as Vice
Chairman and Office of Chief Executive Officer at
Minnesota Mutual Life Insurance Company. From June 1987 to
December 1992, Mr. Madison was President of US West
Communications Markets, a division of US West Inc. Mr.
Madison was President and Chief Executive Officer of
Northwestern Bell Telephone Company from April 1985 to
June 1987. Mr. Madison also serves on the board of
directors of Valmont Industries, Inc., Eltrax Systems,
Inc., Minnegasco Division of Arkla, ACI Telecentrics,
Incorporated and Delaware Group of Funds. He also serves
on the Advisory Board of Aon Risk Services.
Joseph D. Mooney....................... Has been a director of the Company since 1996. Mr. Mooney
has been President and CEO of 21northmain.com since
February of 1999. Prior to that he was Chairman and CEO of
Greentree Software, Inc. from August 1996 to February
1999. Prior to that he was the President of Benchmark
Computer Systems, Inc. from January 1973, when he founded
the company, to August 1996. In addition, he was a founder
of Benchmark Network Systems, Inc. and served as its
President from 1984 to 1995. He was also President of
Benchmark Nursing Home Systems, Inc., a software company,
from 1973 to 1994. Mr. Mooney also has served as a
director for both Paradata International, Inc. and Cado
Systems, Inc.
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD
NAME DURING THE PAST FIVE YEARS
- ---- ----------------------------------------------------------
<S> <C>
Brett A. Shockley...................... Has been the Chief Executive Officer and Chairman of the
Board since 1988 and is a founder of the Company. Mr.
Shockley also served as President from 1988 to September
1994 and since July 1997. Prior to founding the Company in
1988, Mr. Shockley was a marketing and product management
executive at Onan Corporation, a subsidiary of Cummins
Engine Company Inc. From 1982 to 1987, Mr. Shockley was in
marketing and product management at ADC
Telecommunications, Inc., a manufacturer of
telecommunications equipment.
Loren A. Singer, Jr.................... Has been Secretary and a director since 1988 and is a
founder of the Company. Mr. Singer also served as a lead
software engineer from 1988 to June 1997. He currently
provides consulting services to the Company. He has been
sole proprietor of Beagle Software since June 1997. Prior
to founding the Company in 1988, Mr. Singer was an
Engineering Development Manager at ADC Telecommunications,
Inc. from 1983 to 1987. Mr. Singer was a design engineer
at Porta Systems, Inc. from 1980 to 1983.
Timothy E. Briggs...................... Mr. Briggs Joined the Company as Vice President of Finance
and Chief Financial Officer in October of 1997. From 1985
to 1997, Mr. Briggs held a variety of positions with Empi,
Inc., most recently as Executive Vice President and Chief
Financial Officer. Prior to joining Empi, he served as
Treasurer of Conwed Corporation.
Stephen H. Bostwick.................... Mr. Bostwick joined the Company as Vice President of Sales
and Marketing in December of 1996, and became Vice
President of Sales in June 1998. From 1995 to 1996, Mr.
Bostwick was Vice President of Sales at Answersoft in
Dallas. From 1993 to 1995, he was in various sales
positions for Intervoice Inc., most recently as Vice
President of Direct Sales. Prior to that time he held
various executive sales and marketing positions at other
telecommunication companies, including Vice President of
Sales at Teknekron Infoswitch.
Jonathan M. Silverman.................. Mr. Silverman joined the Company in September of 1992. Mr.
Silverman has held several positions with the Company and
is currently serving as Vice President of Research and
Development. From 1989 to 1992, Mr. Silverman was Director
of Software Development at Racotek, prior to which he was
Section Manager for distributed systems in Honeywell's
Corporate Research Center. Mr. Silverman has published
numerous papers in professional journals and holds patents
on software architecture.
Bryan Willborg......................... Mr. Willborg joined the Company in March 1998. From
February 1997 through February 1999, he was the Vice
President of ReEngineering for Jostens Corporation. Prior
to that, he held the position of Director of Corporate
Quality at Pella Corporation from September 1993 through
February 1997. For twelve years prior to September 1993,
Mr. Willborg held a variety of positions, including
software development manager and site quality manager (for
ISO 9000 certification), at IBM's Rochester, Minnesota
location.
</TABLE>
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<PAGE> 52
SCHEDULE II
INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS IN THE PURCHASER
1. Directors and Executive Officers of the Purchaser. The following table
sets forth the name and present principal occupation or employment, material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of the Purchaser. Unless otherwise indicated,
each such person is a citizen of the United States and the business address of
each such person is c/o Spanlink Acquisition Corp., 7125 Northland Terrace,
Minneapolis, MN 55428. None of the directors or executive officers of the
Purchaser were a party to any judicial or administrative proceeding within the
last five years.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- ----------------------------------------------------------
<S> <C>
Brett A. Shockley...................... Chief Executive Officer and Chairman of the Board of
Purchaser. Mr. Shockley also serves as Chief Executive
Officer and Chairman of the Board of the Company. Mr.
Shockley has been the Chief Executive Officer and Chairman
of the Board of the Board of the Company since 1988 and is
a founder of the Company. Mr. Shockley also served as
President from 1988 to September 1994 and since July 1997.
Loren A. Singer, Jr.................... Director of Purchaser. Mr. Singer has been Secretary and a
director of the Company since 1988 and is a founder of the
Company. Mr. Singer also served as a lead software
engineer of the Company from 1988 to June 1997. He
currently provides consulting services to the Company and
is the sole proprietor of Beagle Software since June 1997.
Todd A. Parenteau...................... Director of Purchaser. Mr. Parenteau is a New Technology
Engineer and a founder of the Company. Prior to founding
the Company in 1988, Mr. Parenteau was in various
technical sales positions at ADC Telecommunications, Inc.
from 1983 to 1988.
</TABLE>
50
<PAGE> 53
ANNEX A
February 25, 2000
Special Committee of the Board of Directors
Spanlink Communications, Inc.
7125 Northland Terrace
Minneapolis, MN 55428
Members of the Special Committee:
We understand that Spanlink Communications, Inc. ("Spanlink" or the
"Company"), the management group of Spanlink (the "Management Group") and Cisco
Systems, Inc. ("Cisco") propose to enter into an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which Spanlink Acquisition Corp. (the
"Buyer") will offer to purchase (the "Offer") all of the outstanding common
stock of Spanlink held by persons other than the members of the Management
Group, representing approximately 49% of the outstanding common stock of
Spanlink (the "Non-Affiliated Shareholders") and up to 10% of the shares held by
each member of the Management Group for $10.50 cash per share and subsequently
merge with and into Spanlink (the "Merger"). Pursuant to the Merger, each issued
and outstanding share of Spanlink common stock not acquired in the Offer will be
converted into the right to receive an amount of cash equal to $10.50 per share.
You have requested our opinion as to whether the consideration to be
received by the Non-Affiliated Shareholders of Spanlink and the Merger are fair,
from a financial point of view, to such shareholders.
Dougherty & Company LLC ("Dougherty"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, initial and secondary
underwritings, private placements and valuations for estate, corporate and other
purposes.
In developing our opinion, we have, among other things:
1. Reviewed Spanlink's unaudited financial statements for the year ended
December 31, 1999 and annual reports on Form 10-K for the three years
ended December 31, 1998;
2. Reviewed certain internal financial statements and other financial and
operating data concerning Spanlink prepared by the management of
Spanlink;
3. Reviewed financial projections and certain operating data with respect
to the future business prospects of Spanlink prepared by the management
of the Company;
4. Discussed the past and current operations and financial condition and
the prospects of Spanlink with management of Spanlink;
5. Reviewed the reported prices and trading activity for Spanlink common
stock;
6. Compared the financial performance of Spanlink and the prices and
trading activity of the common stock with that of certain other
publicly-traded companies that we deemed relevant;
7. Reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions that we deemed relevant;
8. On behalf of the Special Committee, participated in certain discussions
and negotiations among representatives of the Company and the
Management Group;
9. Reviewed the Merger Agreement as of February 25, 2000; and
10. Performed such other analysis, inquiries and investigations as we
deemed appropriate.
In our review and analyses, and in arriving at our opinion, we have relied
upon without independent verification and assumed the completeness and accuracy
of all the factual, historical, financial and other
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<PAGE> 54
information and data publicly available or furnished to us and oral statements
made to us by Spanlink, including statements of the Management Group.
Furthermore, we have relied on the assurances of management of the Company that
the financial projections provided to us were reasonably prepared on bases
reflecting the best currently available estimates and judgements of the senior
management of Spanlink. In addition, we have not made nor been provided with an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of Spanlink. Furthermore, our opinion is based on economic, stock
market and other conditions as they exist and can be evaluated as of the date
hereof.
This opinion has been prepared for the use of the Special Committee of the
Board of Directors of Spanlink in their evaluation of the Offer and the Merger
and does not constitute a recommendation to the Special Committee of the Board
of Directors or to any stockholder with respect to whether to tender their stock
or vote in favor of the Merger. We hereby consent, however, to the inclusion of
this opinion as an exhibit to Spanlink's solicitation/recommendation statement
distributed in connection with the Offer and the Merger.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the per share consideration to be received by the
Non-Affiliated Shareholders pursuant to the Offer and the Merger are fair, from
a financial point of view, to such shareholders.
Very truly yours,
DOUGHERTY & COMPANY LLC
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<PAGE> 55
ANNEX B
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 25, 2000, by and among
Spanlink Acquisition Corp., a Minnesota corporation (the "Purchaser"), Cisco
Systems, Inc., a California corporation and a subscriber for capital stock of
the Purchaser ("Cisco") and Spanlink Communications, Inc., a Minnesota
corporation (the "Company"). Certain capitalized terms used herein are defined
or cross-referenced in Section 9.10.
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have approved the acquisition of the Company by the Purchaser on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Cisco has entered into a Stock
Purchase Agreement dated the date hereof with the Purchaser (the "Series A
Agreement") pursuant to which Cisco has agreed to purchase preferred stock of
the Purchaser and thereby finance the acquisition of the Company by Purchaser;
WHEREAS, the Purchaser proposes to make a tender offer (as it may be
amended from time to time as permitted under this Agreement, the "Offer") to
purchase all of the shares of Common Stock, no par value, of the Company (the
"Shares") at a price per Share of $10.50 net to the seller in cash (such price,
as it may hereafter be modified, the "Offer Price");
WHEREAS, The Board of Directors of the Company (the "Board") and a
disinterested Committee of the Board (as contemplated by Sections 302A.673 and
302A.675 of the Minnesota Business Corporation Act (the "MBCA")) (the
"Disinterested Committee") have each unanimously approved the Offer and the
Merger (as hereinafter defined) and are each unanimously recommending that the
Company's shareholders accept the Offer;
WHEREAS, the Board, the Disinterested Committee and the Board of Directors
of Cisco and the Purchaser have approved the merger of the Purchaser with and
into the Company, as set forth below (the "Merger"), and have agreed accordingly
to effect the Merger upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, The Purchaser, Cisco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
Purchaser, Cisco and the Company agree as follows:
ARTICLE I.
THE OFFER
Section 1.1. The Offer.
(a) So long as none of the events set forth in clauses (a) through (e) of
Annex I hereto (as hereinafter provided) shall have occurred or exist, the
Purchaser shall commence (within the meaning of Rule 14d-2(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as promptly as
practicable after the execution hereof, but in any event not later than March 1,
2000, the Offer for all outstanding Shares at the Offer Price. The initial
expiration date for the Offer shall be the thirtieth business day from and after
the date the Offer is commenced, including the date of commencement as the first
business day in accordance with Rule 14d-2 under the Exchange Act (the "Initial
Expiration Date").
(b) As promptly as practicable, the Purchaser shall file with the
Securities and Exchange Commission (the "SEC") the Purchaser's Tender Offer
Statement on Schedule TO (such Schedule TO and the documents included therein
pursuant to which the Tender Offer Shall be made, together with any
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<PAGE> 56
supplements or amendments thereto, are referred to collectively herein as the
"Offer Documents"), which shall contain (as an exhibit thereto) the Purchaser's
Offer to Purchase and related instructions(the "Offer to Purchase") which shall
be mailed to the holders of Shares with respect to the Offer. The obligation of
the Purchaser to accept for payment or pay for any Shares tendered pursuant to
the Offer will be subject only to the satisfaction or waiver (to the extent
permitted by this Agreement) of the conditions set forth in Annex I hereto.
Without the prior written consent of the Company, the Purchaser shall not
decrease the price per Share or change the form of consideration payable in the
Offer, decrease the number of Shares sought to be purchased in the Offer, change
the conditions set forth in Annex I, waive the Minimum Condition (as defined in
Annex I), impose additional conditions to the Offer or amend any other term of
the offer in any manner adverse to the holders of Shares. Subject to the terms
of the Offer and this Agreement and the satisfaction or waiver (to the extent
permitted by this Agreement) of all the conditions of the Offer set forth in
Annex I hereto as of any expiration date, the Purchaser will accept for payment
and pay for all Shares validly tendered and not withdrawn pursuant to the Offer
as soon as practicable after such expiration date of the Offer. Subject to
Section 8.1, if the conditions set forth in Annex I hereto are not satisfied or,
to the extent permitted by this Agreement, waived by the Purchaser, as of the
Initial Expiration Date (or any subsequently scheduled expiration date), the
Purchaser will extend the Offer from time to time for the shortest time periods
which it reasonably believes are necessary until the consummation of the Offer.
The Purchaser shall use its reasonable best efforts to avoid the occurrence of
any event specified in Annex I or to cure any such event that shall have
occurred.
(c) The Purchaser and the Company shall ensure that Offer Documents will
comply as to form in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's shareholders, shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be made therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Cisco or the Purchaser with
respect to information supplied by the Company in writing for inclusion in the
Offer Documents and no representation is made by Cisco as to the Offer Documents
except to the extent statements made therein conform to information supplied by
Cisco in writing specifically for inclusion therein. Each of Cisco and the
Purchaser, on the one hand, and the Company, on the other hand, agrees promptly
to correct any information provided by it for use in the Offer Documents if and
to the extent that it shall have become false or misleading in any material
respect and the Purchaser further agrees to take all steps necessary to cause
the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to shareholders of the Company, in each case as and to the extent
required by applicable federal securities laws. Each of the Disinterested
Committee and Cisco and their respective counsel shall be given the opportunity
to the extent practicable to review and comment upon the Offer Documents and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to the shareholders of the Company.
Section 1.2. Company Actions.
(a) The Disinterested Committee shall promptly file with the SEC and mail
to the holders of Shares a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (together with any amendments or supplements
thereto, the "Schedule 14D-9"). The Schedule 14D-9 will set forth, and the
Company hereby represents, that the Board and the Disinterested Committee at
meetings duly called and held, have (i) determined that the Offer and the Merger
are fair to and in the best interests of the Company in accordance with Sections
302A.613 and 302A.673 of the MBCA, and (ii) resolved to recommend acceptance of
the Offer and approval and adoption of the Merger and this Agreement by the
Company's shareholders (in accordance with the requirements of the Company's
articles of incorporation and of applicable law); provided, however, that such
recommendation and approval may be withdrawn, modified or amended to the extent
that the Board and the Disinterested Committee deem it necessary to do so in the
exercise of their fiduciary obligations after being advised with respect thereto
by outside counsel.
(b) Cisco and its counsel and Purchaser and its counsel shall be given the
opportunity to the extent practicable to review and comment upon the Schedule
14D-9 and all amendments and supplements thereto prior to their filing with the
SEC or dissemination to the shareholders of the Company. Each of the Company,
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<PAGE> 57
on the one hand, and Cisco and the Purchaser, on the other hand, agree promptly
to correct any information provided by either of them for use in the Schedule
14D-9 if and to the extent that it shall have become false or misleading, and
the Company further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to the
shareholders of the Company, in each case as and to the extent required by
applicable federal securities law.
(c) In connection with the Offer, the Company will furnish the Purchaser
and Cisco with such information and assistance as the Purchaser, Cisco or their
agents or representatives may reasonably request in connection with
communicating the Offer to the record and beneficial holders of the Shares.
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<PAGE> 58
ARTICLE II.
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the satisfaction
or waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the MBCA at the Effective Time (as defined in
Section 2.2) the Purchaser shall be merged with and into the Company. Following
the Merger, the separate corporate existence of the Purchaser shall cease and
the Company shall continue as the surviving corporation (the "Surviving
Corporation").
Section 2.2. Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Section 7.1(a) and (b),
but subject to Section 7.1(c), the Company shall execute in the manner required
by the MBCA and deliver to the Secretary of State of the State of Minnesota, a
duly executed and verified articles of Merger, and the parties shall take such
other and further actions as may be required by law to make the Merger
effective. The time the Merger becomes effective in accordance with applicable
law is referred to as the "Effective Time."
Section 2.3. Effects of the Merger. The Merger shall have the effects set
forth in Section 302A.641 of the MBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the properties,
rights, privileges, powers and franchises of the Company and Purchaser shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 2.4. Articles of Incorporation and Bylaws of the Surviving
Corporation.
(a) The articles of incorporation of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the articles of incorporation
of the Surviving Corporation, until thereafter amended in accordance with the
provisions thereof and hereof and applicable law.
(b) Subject to the provisions of Section 6.6 of this Agreement, the bylaws
of the Purchaser in effect at the Effective Time shall be the by-laws of the
Surviving Corporation, until thereafter amended in accordance with the
provisions thereof and hereof and applicable law.
Section 2.5. Directors. Subject to applicable law, the directors of the
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
Section 2.6. Officers. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
Section 2.7. Conversion of Shares. The officers of the Company
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, shall take such action on behalf of
the Company such that each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares held by Cisco, the Purchaser, any
wholly-owned subsidiary of Cisco or the Purchaser, or by any wholly-owned
subsidiary of the Company, which Shares, by virtue of the Merger and without any
action on the part of the holder thereof, shall be canceled and retired and
shall cease to exist with no payment being made with respect thereto, and other
than Dissenting Shares (as defined in Section 3.1)) shall be converted into the
right to receive in cash the Offer Price applicable thereto (the "Merger
Price").
Section 2.8. Conversion of Purchaser Common Stock. At the Effective Time,
each share of capital stock of the Purchaser issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and become one
validly issued, fully paid and nonassessable share of capital stock of the
Surviving Corporation, with the same designation as to class or series and the
same rights and preferences as applied to the capital stock of the Purchaser
immediately prior to the Effective Time.
Section 2.9. Stock Options. The Purchaser and the Company shall take all
actions necessary so that, immediately prior to the acceptance for payment and
purchase of Shares by the Purchaser pursuant to the
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Offer, each outstanding option or warrant to purchase Shares (an "Option")
whether or not granted under the Company's 1996 Omnibus Stock Plan (referred to
as the "Option Plan") shall be either "converted to cash" or "converted to
Surviving Company Options" as described below. For purposes of this section 2.9,
"converted to cash" means that such Options shall be cancelled and in
consideration of such cancellation, immediately following consummation of the
Offer, the Company shall pay to such holders of Options an amount in respect
thereof equal to the product of (1) the excess of the Merger Price over the
exercise price thereof and (2) the number of Shares subject thereto (such
payment to be net of taxes required by law to be withheld with respect thereto);
provided that the foregoing shall be subject to the obtaining of any necessary
consent of holders of Options, it being agreed that the Company and Purchaser
will use their reasonable best efforts to obtain any such consents. For purposes
of this Section 2.9, "converted to Surviving Company Options" shall mean that
such Options shall be converted as of the Effective Time without any action on
the part of the holder thereof into an option to purchase shares of the
Surviving Corporation's Common Stock under a stock option plan to be adopted by
the Surviving Corporation. The converted Option shall entitle the holder to
purchase from Surviving Corporation an equivalent number of shares of Surviving
Corporation's Common Stock at an equivalent exercise price, all as determined in
accordance with Code Section 424 and the regulations issued thereunder so as to
provide to the option holder approximately the same economic benefit they would
have had with respect to the Option to purchase Company Stock, or portion
thereof, at the Effective Time. At the Effective Time, all Options converted to
Surviving Company Options shall become exercisable on the same vesting schedule
to which they are currently subject as Options to purchase Company Stock The
Company's Options shall be converted as follows:
(a) Designated Founding Employees. Options held by Designated
Founding Employee named on Annex II shall be converted to Surviving Company
Options.
(b) Designated Employees.
(i) Vested Options. Each Option, or any portion thereof, which is
vested and exercisable on the date on which Shares are purchased
pursuant to the Offer, and which is held by a Designated Employee named
on Annex II, shall be converted to cash.
(ii) Non-Vested Options. Each Option, or any portion thereof,
which is not vested on the date on which Shares are purchased pursuant
to the Offer and which is held by a Designated Employee shall be
converted to Surviving Company Options.
(c) Other Employees
(i) Vested Options. Each Option, or any portion thereof, which is
vested and exercisable on the date on which Shares are purchased
pursuant to the Offer, and which is held by an employee other than a
Designated Founding Employee or a Designated Employee, shall be
converted to cash.
(ii) Non-Vested Options. Each Option, or any portion thereof,
which is not vested on the date on which Shares are purchased pursuant
to the Offer (a "Non-Vested Option") and which is held by an employee
other than a Designated Founding Employee or a Designated Employee,
shall be converted to cash to the extent of thirty (30) percent of the
number of shares subject to such Non-Vested Option.
(iii) Non-Vested Options. Each Non-Vested Option held by an
employee other than a Designated Founding Employee or a Designated
Employee, shall be converted to Surviving Company Options to the extent
of seventy (70) percent of the number of shares subject to such
Non-Vested Option.
(d) Non-Employees. Each Option held by a person who is not an
employee of the Company shall be converted to cash.
(e) Recent Grants. All options approved by the Company's Board of
Directors after January 1, 2000 shall be converted to Surviving Company
Options.
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The Purchaser agrees that in addition to the Company options which will be
converted to Surviving Company options as described above, the Surviving
Corporation shall also reserve shares of Surviving Corporation's Common Stock
for future exercise of Surviving Corporation options, granted pursuant to an
Employee Stock Plan, in an amount equal to fifteen percent (15%) of the shares
of Surviving Corporation Common Stock and Preferred Stock outstanding
immediately after the Effective Time.
Section 2.10. Shareholders' Meeting.
(a) If required by the Company's articles of incorporation and/or
applicable law in order to consummate the Merger, the Company, acting through
the Board, shall, in accordance with applicable law;
(i) duly call, give notice of, convene and hold a special meeting of
its shareholders (the "Special Meeting") as soon as practicable following
the acceptance for payment of and payment for Shares by the Purchaser
pursuant to the Offer for the purpose of considering and taking action upon
this Agreement;
(ii) prepare and file (as soon as practicable, and in any event within
10 business days after the execution hereof) with the SEC a preliminary
proxy statement relating to the Merger and this Agreement and use its best
efforts (x) to obtain and furnish the information required by the SEC to be
included in the Proxy Statement (as hereinafter defined) and, after
consultation with Cisco and Purchaser, to respond promptly to any comments
made by the SEC with respect to the preliminary proxy statement and cause a
definitive proxy statement (the "Proxy Statement") to be mailed to its
shareholders and (y) to obtain the necessary approvals of the Merger and
this Agreement by its shareholders; and
(iii) subject to the fiduciary obligations of the Board under
applicable law as advised by outside counsel, include in the Proxy
Statement the recommendation of the Board that shareholders of the Company
vote in favor of the approval of the Merger and the adoption of this
Agreement.
(b) Each of Cisco and the Purchaser agree that it will vote, or cause to be
voted, all of the Shares then owned by it, or any of Cisco's subsidiaries in
favor of the approval of the Merger and the adoption of this Agreement.
Section 2.11. Merger Without Meeting of Shareholders. Notwithstanding
Section 2.10, in the event that Purchaser shall acquire at least 90% of the
outstanding Shares pursuant to the Offer, the parties hereto agree to take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the acceptance for payment of and payment for Shares by the
Purchaser pursuant to the Offer without a meeting of shareholders of the
Company, in accordance with Section 302A.621 of the MBCA.
ARTICLE III.
DISSENTING SHARES; PAYMENT FOR SHARES
Section 3.1. Dissenting Shares. Notwithstanding anything in Section 3.2
to the contrary, Shares outstanding immediately prior to the Effective Time and
held of record by a holder who shall not have voted in favor of the Merger or
consented thereto in writing and who shall have properly exercised and shall not
have withdrawn or lost rights to demand payment of the fair value of such Shares
in accordance with Sections 302A.471 and 302A.473 of the MBCA ("Dissenting
Shares"), shall not be converted into a right to receive the Merger Price
specified in Section 3.2, but the holders thereof instead shall be entitled to
payment of the fair value of such Shares in accordance with the provisions of
Section 302A.473 of the MBCA (the "Dissenting Price"); provided, however, that
(i) if such holder fails to file a notice of election to dissent in accordance
with Section 302A.473 of the MBCA or, after filing such notice of election,
subsequently delivers an effective withdrawal of such notice or fails to
establish such holder's entitlement to dissenters' rights as provided in Section
302A.473 of the MBCA, if such holder be so required or (ii) if a court shall
determine that such holder is not entitled to receive payment for such Shares or
such holder shall otherwise lose such holder's dissenters' rights, each Share
held of record by such holder or holders shall be treated as if it had been
converted as of the Effective Time into a right to receive the Merger Price
specified in Section 3.2, without interest thereon. Each holder who becomes
entitled, pursuant to the MBCA, to payment of the Dissenting
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Price will receive payment thereof in accordance with the MBCA. The Company
shall give Cisco and the Purchaser prompt notice of any demands received by the
Company for payment of the Dissenting Price, and, prior to the Effective Time,
Cisco and the Purchaser shall have the right to direct all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of Cisco or the
Purchaser, make any payment with respect to, or settle or offer to settle, any
such demands.
Section 3.2. Payment for Shares.
(a) From and after the Effective Time, a bank or trust company designated
by Cisco and the Purchaser and reasonably acceptable to the Company shall act as
paying agent (the "Paying Agent") pursuant to an Exchange Agency Agreement in
effecting the payment of the Merger Price in respect of certificates (the
"Certificates") that, prior to the Effective Time, represented Shares entitled
to payment of the Merger Price pursuant to Section 2.7. At the Effective Time,
the Purchaser shall deposit, or cause to be deposited, in trust with the Paying
Agent the aggregate Merger Price to which holders of Shares shall be entitled at
the Effective Time pursuant to Section 2.7.
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of Certificates that immediately prior to the Effective Time
represented Shares (other than Certificates representing Dissenting Shares and
Certificates representing Shares held by Cisco or the Purchaser or by any
wholly-owned subsidiary of Cisco or the Purchaser) a form of letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent and instructions for use in surrendering such
Certificates and receiving the aggregate Merger Price in respect thereof. Upon
the surrender of each such Certificate, the Paying Agent shall pay the holder of
such Certificate the Merger Price multiplied by the number of Shares formerly
represented by such Certificate in consideration therefor, and such Certificate
shall forthwith be canceled. Until so surrendered, each such Certificate (other
than Certificates representing Dissenting Shares and Certificates representing
Shares held by Cisco or the Purchaser or by any wholly-owned subsidiary of Cisco
or the Purchaser) shall represent solely the right to receive the aggregate
Merger Price relating thereto. No interest or dividends shall be paid or accrued
on the Merger Price. If the Merger Price (or any portion thereof) is to be
delivered to any person other than the person in whose name the Certificate
formerly representing Shares surrendered therefor is registered, it shall be a
condition to such right to receive such Merger Price, that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person surrendering such Certificates shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment of
the Merger Price to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
(c) Promptly following the date which is 180 days after the Effective Time,
the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate. Any
shareholders of the Company who have not theretofore complied with this Article
3 shall thereafter look only to the Surviving Corporation for payment of their
claims for the consideration set forth in Section 2.7 hereof for each Share such
shareholder holds, without any interest thereon.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates formerly representing Shares are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and canceled in
return for the payment of the aggregate Merger Price relating thereto, as
provided in this Article III, subject to applicable law in the case of
Dissenting Shares.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In this Agreement, any reference to a party's "knowledge" means (i) with
respect to any natural person, the actual knowledge, after reasonable inquiry,
of such person or (ii) with respect to any corporation or other
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entity, the actual knowledge of such party's officers and directors provided
that such persons shall have made reasonable inquiry of those employees of such
party whom such officers and directors reasonably believe would have actual
knowledge of the matters represented.
The Company represents and warrants to Cisco and the Purchaser that except
as set forth in the SEC Reports (as defined below) filed with the SEC on or
prior to the date hereof and except as set forth in the Company Disclosure
Statement delivered to Cisco and Purchaser prior to the execution of this
Agreement (the "Company Disclosure Statement"):
Section 4.1. Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota. The Company has no subsidiaries. The Company has the
requisite corporate power and authority to own, operate or lease its properties
and 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 in
which the nature of its business or the properties owned operated or leased by
it makes such qualification, licensing or good standing necessary, except where
the failure to have such power or authority, or the failure to be so qualified,
licensed or in good standing, would not have a Material Adverse Effect on the
Company. The term "Material Adverse Effect on the Company", as used in this
Agreement, means any material adverse change in or effect on the business,
operations or financial condition of the Company taken as a whole except for (i)
any change or effect resulting from general economic, financial or market
conditions, (ii) any change or effect resulting from conditions or circumstances
generally affecting the telecommunications industry, (iii) changes in laws of
general applicability or applicable generally to the telecommunications
industry.
Section 4.2. Articles of Incorporation and Bylaws. The Company has
heretofore made available to Cisco and the Purchaser a complete and correct copy
of the articles of incorporation and the by-laws, each as amended to the date
hereof, of the Company.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, no par value (the "Common
Shares"), and 5,000,000 shares of undesignated preferred stock. As of the close
of business on November 5, 1999 there were 5,124,472 Common Shares issued and
outstanding and no shares of preferred stock issued and outstanding. The Company
has no shares of capital stock reserved for issuance, except that, as of
February 21, 2000, there were 1,759,010 Common Shares reserved for issuance upon
exercise of Options and the Company estimates that it will be obligated to issue
up to 70,000 Common Shares in connection with the Company's Employee Stock
Purchase Plan. Since November 5, 1999, the Company has not issued any shares of
capital stock except pursuant to the exercise of Options outstanding as of such
date. All the outstanding Common Shares are, and all Common Shares which may be
issued pursuant to the exercise of outstanding Options will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and nonassessable. There are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities having
such rights) ("Voting Debt") of the Company or any of its subsidiaries issued
and outstanding. Except as set forth above or pursuant to the Option Plan and
the Company's Employee Stock Purchase Plan, and except for the transactions
contemplated by this Agreement, there are no existing options, warrants, calls,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company,
obligating the Company to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or securities convertible into or exchangeable
for such shares or equity interests or obligations of the Company to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment. Except as contemplated by this
Agreement and the Company's obligations under the Option Plan, there are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any Shares or the capital stock of the Company.
Section 4.4. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized and
approved by the
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Board and the Disinterested Committee and no other corporate proceedings on the
part of the Company are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
merger, the approval and adoption of the Merger and this Agreement by holders of
the Shares to the extent required by the Company's articles of incorporation and
by applicable law). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due and valid authorization,
execution and delivery of this Agreement by Cisco and the Purchaser, constitutes
a valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
Section 4.5. No Conflict; 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 contemplated hereby or
compliance by the Company with any of the provisions hereof will (i) conflict
with or violate the articles of incorporation or by-laws of the Company, (ii)
conflict with or violate any statute, ordinance, rule, regulation, order,
judgment or decree applicable to the Company, or by which the Company or any of
its properties or assets may be bound or affected, or (iii) result in a
violation or breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
any loss of any material benefit, or the creation of any lien, claim, option,
charge, security interest, limitation, encumbrance or restriction of any kind
(any of the foregoing being a "Lien") on any of the property or assets of the
Company (any of the foregoing referred to in clause (ii) or this clause (iii)
being a "Violation") pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company is a party or by which the Company or any of its respective
properties may be bound or affected, except in the case of the foregoing clauses
(ii) or (iii) for any such violations which would not have a Material Adverse
Effect on the Company.
(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, waiver, approval, authorization or permit of, or registration or filing
with or notification to (any of the foregoing being a "Consent"), any government
or regulatory authority, agency, commission, tribunal or body, domestic, foreign
or supranational (a "Governmental Entity"), except for (i) compliance with any
applicable requirements of the Exchange Act, (ii) the filing of articles of
merger pursuant to the MBCA, (iii) applicable state takeover and environmental
statutes and (iv) Consents, the failure of which to obtain or make would not
have a Material Adverse Effect on the Company or materially adversely affect the
ability of the Company to consummate the transactions contemplated hereby.
Section 4.6. SEC Reports and Financial Statements.
(a) The Company has filed with the SEC all forms, reports, schedules,
registration statements and definitive proxy statements (the "SEC Reports")
required to be filed by the Company with the SEC since December 31, 1998. As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Exchange Act or the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder applicable, as
the case may be, to such SEC Reports, and none of the SEC Reports contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(b) The consolidated balance sheets as of December 31, 1998 and 1997 and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the two years in the period ended December 31, 1998 (including
the related notes and schedules thereto) of the Company contained in the
Company's Form 10-KSB for the year ended December 31, 1998 and the consolidated
balance sheet as of September 30, 1999 and the related consolidated statement of
income and cash flows for the nine months ended September 30, 1999 (including
the related notes and schedules thereto) of the Company contained in the
Company's Form 10-QSB for the quarter ended September 30, 1999, represent
fairly, in all material
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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 the
related notes.
Section 4.7. No Undisclosed Liabilities. Except for liabilities and
obligations incurred since September 30, 1999 in the ordinary course of
business, incurred in connection with this Agreement or identified in Section
4.7 of the Company Disclosure Statement, the Company has no liabilities or
obligations of any nature whatsoever (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise), required by generally
accepted accounting principles to be recognized or disclosed on a balance sheet
of Company or in the notes thereto, other than those recognized or disclosed in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1998
or Quarterly Report on Form 10-QSB for the quarter ended September 30, 1999
other than those that do not have a Material Adverse Effect on the Company.
Section 4.8. Material Agreements. Except as set forth in the Company's
Form 10-KSB for the year ended December 31, 1998 and except for this Agreement
and the Agreements specifically referred to herein, Company is not a party to or
bound by any of the following agreements (with the following agreements, and the
agreements included as exhibits to the SEC Reports, collectively referred to as
the "Material Agreements"):
(a) any contract or agreement or amendment thereto that would be
required to be filed as an exhibit to a registration statement on Form S-1
filed by Company as of the date hereof;
(b) any confidentiality agreement, non-competition agreement or other
contract or agreement that contains covenants limiting Company's freed to
compete in any line of business or in any location or with any Person; and
(c) any loan agreement, indenture, note, bond debenture or any other
documents or agreement evidencing a capitalized lease obligation or other
Indebtedness (as defined in Article 9.10) to any Person, other than any
Indebtedness in a principal amount less than $25,000 individually or
$100,000 in the aggregate.
The Company has delivered to Cisco a correct and complete copy of each
Material Agreement and a written summary setting forth the terms and conditions
of each oral agreement, of any, referred to in the Company Disclosure Statement.
Each such Material Agreement constitutes the legal, valid and binding obligation
of the Company, and to the knowledge of the Company, the other party thereto,
enforceable against such parties in accordance with the terms thereof (except as
enforcement may be limited by general principles of equity whether applied in a
court of law or equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally). The Company is not in default under,
or with the giving of notice or the lapse of time, or both, would be in default
under, any of the material terms or conditions of any Material Agreement. To the
knowledge of the Company, there has occurred no default or event which, with the
giving of notice or the lapse of time, or both, would constitute a material
default by any other party to any Material Agreement, other than those which
would not have a Material Adverse Effect on the Company.
Section 4.9. Information. None of the information supplied by the Company
in writing specifically for inclusion or incorporation by reference in (i) the
Offer Documents, (ii) the Schedule 14D-9 (iii) the Proxy Statement or (iv) any
other document to be filed with the SEC or any other Governmental Entity in
connection with the transactions contemplated by this Agreement (the "Other
Filings") will, at the respective times filed with the SEC or other Governmental
Entity and, in addition, in the case of the Proxy Statement, at the date it or
any amendment or supplement is mailed to shareholders, at the time of the
Special Meeting and at the Effective Time, 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 made therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder, except that no representation is made by
the Company with respect to statements made therein based on information
supplied by Cisco or the Purchaser in writing specifically for inclusion in the
Proxy Statement.
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Section 4.10. Litigation. As of the date hereof, there is no suit, action
or proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company that, individually or in the aggregate, would have a
Material Adverse Effect on the Company, nor is there any judgment, decree,
injunction or order of any Governmental Entity or arbitrator outstanding against
the Company that would have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 4.11. Compliance with Applicable Laws. The Company is in
substantial compliance with all laws, regulations and orders (except with
respect to environmental matters) of any Governmental Entity applicable to it,
except for such failures so to comply which would not have a Material Adverse
Effect on the Company. The business operations of the Company are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations which, individually or in the aggregate,
would not have a Material Adverse Effect on the Company.
Section 4.12. Employee Benefit Plans.
(a) Section 4.12 of the Company Disclosure Statement includes a complete
list of all material employee benefit plans and programs providing benefits to
any employee or former employee of the Company sponsored or maintained by the
Company or to which the Company contributes or is obligated to contribute
(collectively, the "Plans"). Without limiting the generality of the foregoing,
the term "Plans" includes all employee welfare benefit plans within the meaning
of Section 3(l) of the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder ("ERISA") and all employee pension
benefit plans within the meaning of Section 3(2) of ERISA.
(b) With respect to each Plan, the Company has made available to Cisco a
true, correct and complete copy of: (i) all plan documents, benefit schedules,
trust agreements, and insurance contracts and other funding vehicles; (ii) the
most recent Annual Report (Form 5500 Series) and accompanying schedule, if any;
(iii) the current summary plan description, if any; (iv) the most recent annual
financial report, if any; (v) the most recent actuarial report, if any; and (vi)
the most recent determination letter from the Internal Revenue Service (the
"IRS"), if any.
(c) The Company has complied, and is in compliance, in all respects with
all provisions of ERISA, the Code and all laws and regulations applicable to the
Plans, other than any failure to comply which would not have a Material Adverse
Effect on the Company. With respect to each Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code ("Qualified
Plans"), the IRS has issued a favorable determination letter.
(d) All contributions required to be made to any Plan by applicable law or
regulation or by any plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Plan, for
any period through the date hereof have been timely made or paid in full or, to
the extent not required to be made or paid on or before the date hereof, have
been fully reflected in the financial statements of the Company included in the
SEC Reports to the extent required under generally accepted accounting
principles.
(e) No Plan is subject to Title IV or Section 302 of ERISA or Section 412
or 4971 of the Internal Revenue Code (the "Code"). There does not now exist,
nor, to the knowledge of the Company, do any circumstances exist that could
reasonably be expected to result in, any liability under (i) Title IV of ERISA,
(ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code or (iv) the
continuation coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code, other than (x) a liability that arises solely out of, or
relates solely to, the Plans, that would be a liability of the Company following
the Merger or (y) a liability which would not have a Material Adverse Effect on
the Company.
Section 4.13. Intellectual Property.
(a) Section 4.13 of the Company Disclosure Statement contains a correct and
complete list of all patents, trademarks, trade names, copyright registrations
and applications therefore now or heretofore used or presently proposed to be
used in the conduct of the businesses of the Company. Except as set forth in
Section 4.12 of the Company Disclosure Statement, (i) the Company owns or
possesses adequate licenses or
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other valid rights to use (without the making of any payment to others or the
obligation to grant rights to others in exchange) all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyright
registrations, know-how and other proprietary information ("Rights") necessary
to the conduct of its business as presently being conducted, except where the
failure to have such licenses or rights would not, singly or in the aggregate
have a Material Adverse Effect on the Company; (ii) the Company has not licensed
any Rights to any third party; (iii) the validity of such items and the title
thereto of the Company has not been questioned in any litigation to which the
Company is a party, nor, to the Company's knowledge, is any such litigation
threatened; (iv) the conduct of the business of the Company as now conducted
does not and will not conflict with Rights of others in any way which has or may
have a Material Adverse Effect on the Company; and (v) no proceedings are
pending against the Company nor, to the Company's knowledge, are any proceedings
threatened against the Company alleging any violation of Rights of any third
party. The Company does not know of (x) any use that has heretofore been or is
now being made of any Rights owned by the Company, except by the Company or by
an entity duly licensed by it to use the same under an agreement described in
Section 4.12 or (y) any material infringement of any Right owned by or licensed
by or to the Company. All Rights heretofore owned or held by any employee or
officer of the Company and used in the business of the Company in any manner
have been duly and effectively transferred to the Company. Except as set forth
in Section 4.12 of the Company Disclosure Statement, the consummation of the
Merger and the transactions contemplated hereby will not alter or impair the
rights and interests of the Company in any of the items listed in Section 4.12
of the Company Disclosure Statement, and the Surviving Corporation will have the
same rights and interests in such items as the Company will have immediately
prior to the Effective Time.
Section 4.14. Employment Agreements; Labor Relations. Except as disclosed
in Section 4.14 of the Company Disclosure Statement, to the Company's knowledge
there exist no employment, consulting, severance or indemnification agreements
between the Company and any current or former director, officer or employee of
the Company pursuant to which the Company has, or may have, obligations as of
the date hereof and no such person is entitled to any severance benefits from
the Company or any of its subsidiaries.
Section 4.15. Taxes. Except as set forth in Section 4.15 of the Company
Disclosure Statement, the Company has duly filed all U.S. federal tax returns
and has duly filed all other tax returns, made all other tax filings required to
be filed by it including, but not limited to, all foreign and state tax returns
and filings (all such returns being complete and correct in all material
respects), has duly paid or made provision for the payment of all taxes
(including any interest or penalties) which are due and payable (whether or not
shown on any such tax returns) and has paid all payments of estimated tax due
and all taxes it is required to withhold and collect, other than those which
would not have a Material Adverse Effect on the Company. Except as disclosed in
Section 4.15 of the Company Disclosure Statement, the liability for taxes
reflected in the Company's balance sheet at September 30, 1999 is sufficient for
the payment of all unpaid taxes (including interest and penalties), whether or
not disputed, accrued or applicable for the period then ended and for all years
and periods ended prior thereto, other than those which would not have a
Material Adverse Effect on the Company. The federal income tax returns of the
Company have not been audited by the IRS. The Company has not made any payments,
is not obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Code. The Company has not been a United
States real property holding corporation, within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. The Company is not a party to any tax allocation
or sharing agreement. The Company is not and has never been (nor does the
Company have any liability for unpaid taxes because it once was) a member of an
affiliated group.
Section 4.16. Property and Leases. The Company has good title to all
material assets reflected on the financial statements of the Company for the
quarter ended September 30, 1999 except for (i) liens for current taxes and
assessments not yet past due; (ii) inchoate mechanics' and materialmen's liens
for construction in progress; (iii) workmen's, repairmen's, warehousemen's and
carriers' liens arising in the ordinary course of business; and (iv) all matters
of record, liens and other imperfections of title and encumbrances which
matters, liens and imperfections, in the aggregate, would not have a Material
Adverse Effect on the Company. The real property, equipment and other tangible
property owned, operated, or leased by the Company are in all
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material respects in good condition and repair (ordinary wear and tear which are
not such as to affect the operation of the Company's business excepted ) and are
suitable to meet the existing operating requirements of the Company's business.
Section 4.17. Inventories. The inventories set forth on the Company's
balance sheet dated September 30, 1999 (included in the Company's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1999) are and all
inventories held at the Effective Time will be properly valued at, the lower of
cost (first-in, first out for inventories) or market in accordance with
generally accepted accounting principles consistently applied and, except for
obsolete items which have been fully written off or reserved for, consist of
items of a quality and quantity currently usable and saleable in the ordinary
course of business without markdown or discount. Except as set forth in Section
4.17 of the Company Disclosure Statement, the Company does not hold any
materials on consignment and does not have title to any materials in the
possession of others.
Section 4.18. Insurance. The Company has been and is insured by
financially sound and reputable insurers unaffiliated with the Company with
respect to its property and the conduct of its business in such amounts and
against such risks as are reasonably adequate to protect its properties and
business, including, without limitation, liability and products liability
insurance. Section 4.18 of the Company's Disclosure Statement contains a list of
all insurance policies of the Company, together with a brief description of the
coverages. The insurance coverage provided by such policies of insurance will be
continued through the Effective Time and will not terminate or lapse by reason
of the transactions contemplated by this Agreement. The Company has not been
denied insurance coverage by any carrier in the last three years.
Section 4.19. Environmental Matters. Except for the matters described in
the reports set forth on Section 4.19 of the Company Disclosure Statement or
except as would not reasonably be expected to have a Material Adverse Effect on
the Company, (i) to the knowledge of the Company, no real property currently or
formerly owned or operated by the Company or any current subsidiary thereof is
contaminated with any Hazardous Substances to an extent or in a manner or
condition now requiring remediation under any Environmental Law, (ii) no
judicial or administrative proceeding is pending or to the knowledge of the
Company threatened relating to liability for any off-site disposal or
contamination and (iii) the Company has not received in writing any claims or
notices alleging liability under any Environmental Law, and the Company has no
knowledge of any circumstances that would reasonably be expected to result in
such claims. "Environmental Law" means any applicable federal, state or local
law, regulation, order, decree or judicial opinion or other agency requirement
having the force and effect of law and relating to noise, odor, Hazardous
Substances or the protection of the environment. "Hazardous Substance" means any
toxic or hazardous substance that is regulated by or under authority of any
Environmental Law, including any petroleum products, asbestos or polychlorinated
biphenyls.
Section 4.20. Material Adverse Change. Except as disclosed in the SEC
Reports or in Section 4.20 of the Company Disclosure Statement, since September
30, 1999, (i) the business of the Company has been conducted only in the
ordinary course consistent with past practices; (ii) there have been no
occurrences of the type set forth in Section 6.1; and (ii) there has not been
any change in the business, operations or financial condition of the Company
that is materially adverse to the Company, except for (x) any change resulting
from general economic, financial or market conditions, (y) any change resulting
from conditions or circumstances generally affecting the telecommunications
industry, (z) changes in laws of general applicability or applicable generally
to the telecommunications industry.
Section 4.21. Certain Approvals. The Board has taken appropriate action
such that, assuming the accuracy of Cisco's representation in Section 5.6 of
this Agreement, the provisions of Section 302A.673 of the MBCA will not apply to
any of the transactions contemplated by this Agreement.
Section 4.22. Opinion of Financial Advisor. The Disinterested Committee
has received the written opinion of Dougherty & Company, LLC ("Dougherty") to
the effect that the Offer Price is fair to the holders of the applicable Shares
from a financial point of view.
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Section 4.23 Disclosure. To Company's knowledge, as of the date of this
Agreement, no representation or warranty by the Company in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not false or
misleading.
Section 4.24. Brokers. Except for the engagement of Dougherty by the
Disinterested Committee and the engagement of Dain Rauscher Wessels by the
Purchaser, none of the Company, or any of its officers, directors or employees
has employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
Section 5.1. Organization and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Minnesota. The Purchaser has the requisite corporate power and
authority to own, operate or lease its properties and 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 in which the nature of its
business or the properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary, except where the failure to
have such power or authority, or the failure to be so qualified, licensed or in
good standing, would not have a Material Adverse Effect on the Purchaser. The
term "Material Adverse Effect on the Purchaser", as used in this Agreement,
means any change in or effect on the business, operations or financial condition
of the Purchaser or any of its subsidiaries that would be materially adverse to
the Purchaser and its subsidiaries taken as a whole.
Section 5.2. Authority Relative to this Agreement. The Purchaser has all
necessary corporate power and authority to execute and deliver this Agreement
and the Series A Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the Series
A Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by the Board of Directors of the Purchaser and no other
corporate proceedings on the part of Cisco or the Purchaser are necessary to
authorize or approve this Agreement or the Series A Agreement or to consummate
the transactions contemplated hereby and thereby. This Agreement and the Series
A Agreement have been duly executed and delivered by each of Cisco and the
Purchaser and, assuming the due and valid authorization, execution and delivery
of this Agreement by the Company and Cisco, each of this Agreement and the
Series A Agreement constitutes a valid and binding obligation of each of Cisco
and the Purchaser enforceable against it in accordance with its terms, except
that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
Section 5.3. No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement or the Series A
Agreement by the Purchaser, the consummation by the Purchaser of the
transactions contemplated hereby or thereby or compliance by the Purchaser with
any of the provisions hereof or thereof will (i) conflict with or violate the
organizational documents of the Purchaser, (ii) conflict with or violate any
statute, ordinance, rule, regulation, order, judgment or decree applicable to
the Purchaser, or any of their subsidiaries, or by which any of them or any of
their respective properties or assets may be bound or affected, or (iii) result
in a Violation pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Purchaser, or any of their respective subsidiaries, is a party or
by which any of their respective properties or assets may be bound or affected,
except in the case of the foregoing clauses (ii) and (iii) for any such
Violations which would not have a Material Adverse Effect on the Purchaser or
materially adversely affect the ability of the Purchaser to consummate the
transactions contemplated hereby and thereby.
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(b) None of the execution and delivery of this Agreement or the Series A
Agreement by the Purchaser, the consummation by the Purchaser of the
transactions contemplated hereby or thereby or compliance by the Purchaser with
any of the provisions hereof or thereof will require any Consent of any
Governmental Entity, except for (i) compliance with any applicable requirements
of the Exchange Act, (ii) the filing of articles of merger pursuant to the MBCA,
(iii) applicable state takeover and environmental statutes and (iv) Consents the
failure of which to obtain or make would not have a Material Adverse Effect on
the Purchaser or materially adversely affect the ability of the Purchaser to
consummate the transactions contemplated hereby.
Section 5.4. Information. None of the information supplied or to be
supplied by the Purchaser in writing specifically for inclusion in (i) the Offer
Documents, (ii) the Schedule 14D-9, (iii) the Proxy Statement or (iv) the Other
Filings will, at the respective times filed with the SEC or such other
Governmental Entity and, in addition, in the case of the Proxy Statement, at the
date it or any amendment or supplement is mailed to shareholders, at the time of
the Special Meeting and at the Effective Time, 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 made therein, in light of the
circumstances under which they were made, not misleading.
Section 5.5. Financing. The Purchaser has or at the consummation thereof
will have the funds necessary to consummate the Offer and the Merger and the
transactions contemplated hereby on a timely basis.
Section 5.6 Brokers. Except for the engagement of Dain Rauscher Wessels
as advisor to the Purchaser, none of Cisco, Purchaser, or any of their
respective subsidiaries, officers, directors or employees, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated by this
Agreement for or with respect to which the company is or might be liable.
ARTICLE VI.
COVENANTS
Section 6.1. Conduct of Business of the Company. Except as contemplated
by this Agreement or with the prior written consent of Cisco, during the period
from the date of this Agreement to the Effective Time, the Company will conduct
its operations only in the ordinary course of business consistent with past
practice and will use its reasonable efforts to preserve intact the business
organization of the Company, to keep available the services of its present
officers and key employees, and to preserve the good will of those having
business relationships with it. Without limiting the generality of the
foregoing, and except as otherwise contemplated by this Agreement or pursuant to
existing agreements or arrangements or as disclosed in the Company Disclosure
Statement, the Company will not, prior to the Effective Time, without the prior
written consent of Cisco and the Purchaser which shall not be unreasonably
withheld or delayed:
(a) adopt any amendment to its articles of incorporation or by-laws or
comparable organizational documents;
(b) issue, reissue or sell, or authorize the issuance, reissuance or
sale of (i) additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or
options to acquire any convertible securities or capital stock, other than
the issuance of Common Stock pursuant to the exercise of Options or
pursuant to the Company's Employee Stock Purchase Plan.
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in
respect of any class or series of its capital stock;
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem, purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
(e) except for (i) increases in salary, wages and benefits of officers
or employees of the Company in accordance with past practice, (ii)
increases in salary, wages and benefits granted to officers and
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employees of the Company in conjunction with new hires, promotions or other
changes in job status, increase the compensation or fringe benefits payable
or to become payable to its directors, officers or key employees, or pay
any benefit not required by any existing plan or arrangement (including,
without limitation, the granting of stock options, stock appreciation
rights, shares of restricted stock or performance units) or grant any
severance or termination pay to (except pursuant to existing agreements,
plans or policies), or enter into any employment or severance agreement
with, any director, officer or other key employee of the Company or
establish, adopt, enter into, or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, savings, welfare, deferred compensation, employment
termination, severance or other employee benefit plan, agreement, trust,
fund, policy or arrangement for the benefit or welfare of any directors,
officers or current or former employees (any of the foregoing being an
"Employee Benefit Arrangement"), except in each case to the extent required
by applicable law or regulation; provided, however, that nothing herein
will be deemed to prohibit the payment of benefits as they become payable;
(f) acquire, sell, lease or dispose of any assets (other than
inventory) or securities which are material to the Company, or enter into
any commitment to do any of the foregoing or enter into any material
commitment or transaction outside the ordinary course of business which are
in excess of $50,000;
(g) (i) incur, assume or prepay any long-term debt or incur or assume
any short-term debt, except that the Company may incur, assume or prepay
debt in the ordinary course of business consistent with past practice under
existing lines of credit, (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person except in the ordinary course of
business, or (iii) make any loans, advances or capital contributions to, or
investments in, any other person except in the ordinary course of business
and not in excess of $50,000; or
(h) agree in writing or otherwise to take any of the foregoing
actions.
Section 6.2. Reasonable Best Efforts. Subject to the terms and conditions
herein provided and to applicable legal requirements, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, in the case of the Company, consistent
with the fiduciary duties of the Company's Board of Directors, and to assist and
cooperate with the other parties hereto in doing, as promptly as practicable,
all things necessary, proper or advisable under applicable laws and regulations
to ensure that the conditions set forth in Annex I and Article VII are satisfied
and to consummate and make effective the transactions contemplated by the Offer
and this Agreement.
In addition, if at any time prior to the Effective Time any event or
circumstance relating to either the Company or Cisco or the Purchaser or any of
their respective subsidiaries, should be discovered by the Company or Cisco, as
the case may be, and which should be set forth in an amendment to the Offer
Documents or Schedule 14D-9, the discovering party will promptly inform the
other party of such event or circumstance. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
Section 6.3. Consents.
Each of the parties will use its reasonable best efforts to obtain as
promptly as practicable all Consents of any Governmental Entity or any other
person required in connection with, and waivers of any Violations that may be
caused by, the consummation of the transactions contemplated by the Offer and
this Agreement.
Section 6.4. Public Announcements. Cisco, the Purchaser and the Company,
as the case may be, will consult with one another before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including, without limitation, the
Offer and the Merger, and shall not issue any such press release or make any
such public statement prior to such consultations, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange, as determined by Cisco, the Purchaser or the
Company, as the case may be.
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Section 6.5. Indemnification.
(a) The parties agree that all rights to indemnification or exculpation now
existing in favor of the directors, officers, employees and agents of the
Company as provided in its articles of incorporation or bylaws or otherwise in
effect as of the date hereof with respect to matters occurring prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect. To the maximum extent permitted by the MBCA, such indemnification shall
be mandatory rather than permissive and the Surviving Corporation shall advance
expenses in connection with such indemnification.
(b) Cisco shall cause the Surviving Corporation to maintain in effect for
not less than six years from the Effective Time the policies of the directors
and officers' liability and fiduciary insurance most recently maintained by the
Company (provided, that the Surviving Corporation may substitute therefore
policies of at least the same coverage containing terms and conditions which are
no less advantageous to the beneficiaries thereof so long as such substitution
does not result in gaps or lapses in coverage) with respect to matters occurring
prior to the Effective Time to the extent available, provided, further, that in
no event shall the Surviving Corporation be required to expend more than an
amount per year equal to 200% of the current annual premiums paid by the Company
(the "Premium Amount") to maintain or procure insurance coverage pursuant hereto
and provided, further, that if the Surviving Corporation is unable to obtain the
insurance called for by this Section 6.5(b), the Surviving Corporation will
obtain as much comparable insurance as is available for the Premium Amount per
year.
(c) The provisions of this Section 6.5 shall survive the Merger, and each
Indemnified Party shall, for all purposes, be a third-party beneficiary of the
covenants and agreements of the parties under this Section 6.5 and, accordingly,
shall be treated as a party to this Agreement for purposes of the rights and
remedies relating to enforcement of such covenants and agreements and shall be
entitled to enforce any such rights and exercise any such remedies directly.
Section 6.6. Access to Information; Employees.
(a) Between the date hereof and the Effective Time, the Company will give
Cisco and Purchaser and their authorized representatives reasonable access to
all employees, agents, distributors, offices, stores, warehouses and other
facilities and to all books and records, including accountants' working papers,
of the Company, will permit Cisco and Purchaser to make such inspections as
Cisco and Purchaser may reasonably require and will cause the Company's officers
to furnish Cisco and Purchaser with such financial and operating data and other
information with respect to the business and properties of the Company as Cisco
and Purchaser may from time to time reasonably request.
(b) Each of Cisco and Purchaser will hold and will cause its consultants
and advisors to hold in confidence, unless compelled to disclose by judicial or
administrative process or, in the written opinion of its legal counsel, by other
requirements of law, all documents and information concerning the Company
furnished to Cisco or Purchaser in connection with the transactions contemplated
by this Agreement (except to the extent that such information can be shown to
have been (i) previously known by Cisco or Purchaser from sources other than the
Company, or its directors, officers, representatives or affiliates, (ii) in the
public domain through no fault of Cisco or Purchaser or (iii) later lawfully
acquired by Cisco or Purchaser on a non-confidential basis from other sources
who are not known by Cisco or Purchaser to be bound by a confidentiality
agreement or otherwise prohibited from transmitting the information to Cisco or
Purchaser by a contractual, legal or fiduciary obligation) and will not release
or disclose such information to any person, except its auditors, attorneys,
financial advisors and other consultants and advisors in connection with this
Agreement who need to know such information. If the transactions contemplated by
this Agreement are not consummated, such confidence shall be maintained and, if
requested by or on behalf of the Company, Cisco and Purchaser will, and will use
all reasonable efforts to cause their auditors, attorneys, financial advisors
and other consultants, agents and representatives to, return to the Company or
destroy all copies of written information furnished by the Company to Cisco and
Purchaser or their agents, representatives or advisors. It is understood that
Cisco and Purchaser shall be deemed to have satisfied their obligation to hold
such information confidential if they exercise the same care as they take to
preserve confidentiality for their own similar information.
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(c) Cisco agrees that, without the consent of the Company prior to the
Effective Time and the Surviving Corporation following the Effective Time, it
will not solicit or cause to be solicited for employment any employee of the
Company or, following the Effective Time, of the Surviving Corporation or hire
any employee of the Surviving Corporation with whom Cisco has contact in the
course of its business relationship with the Surviving Corporation. For purposes
of this paragraph, solicitation shall not include solicitation of employees (i)
who first solicit employment from Cisco, or (ii) who are solicited (A) by
advertising in periodicals of general circulation, or (B) by an employee search
firm on Cisco's behalf, so long as Cisco did not direct or encourage such firm
to solicit such employee or any other employees of the Surviving Corporation.
Section 6.7. No Solicitation By Company.
(a) Except as provided in Section 6.7(b), the Company agrees that, from the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement pursuant to Section 8.1(f), the Company shall not,
and shall use its reasonable best efforts to cause its directors, officer or
employees or any representative retained by it (including the Company's
financial advisor) not to, directly or indirectly through another Person, (i)
solicit, initiate, entertain or encourage (including by way of furnishing
non-public information) any inquiries or the making of an Acquisition Proposal
(as defined below), or (ii) participate in any discussions or negotiations
regarding any Acquisition Proposal; provided, however, that if, at any time
after receiving a Superior Proposal, the Disinterested Committee of the Company
determines in good faith, after consultation with and receipt of advice from
outside counsel, that it is necessary to do so in order to act in a manner
consistent with its fiduciary duties to the Company's shareholders under
applicable law, the Company may, in response to such Superior Proposal (as
defined below) and subject to delivering a Company Notice (as defined in
paragraph (c) below) and compliance with the other provisions of paragraph (c)
below, following delivery of Company Notice (x) furnish information with respect
to the Company to any Person making such Superior Proposal pursuant to a
confidentiality agreement entered into between such Person and the Company with
terms no less favorable to the Company than those contained in the
Confidentiality Agreement and (y) participate in discussions or negotiations
regarding such Superior Proposal. For purposes of this Agreement, an
"Acquisition Proposal" means any inquiry, proposal or offer from any Person (i)
relating to any direct or indirect acquisition or purchase of (A) a business
that constitutes 15% or more of the net revenues, net income or the assets of
the Company, or (B) 20% or more of any class of equity securities of the
Company, (ii) relating to any tender offer or exchange offer that if consummated
would result in any Person beneficially owning 20% or more of any class of
equity securities of the Company, or (iii) relating to any merger,
consolidation, business combination recapitalization, liquidation, dissolution
or similar transaction involving the Company, in each case, other than the
transactions contemplated by this Agreement. Immediately following the execution
and delivery of this Agreement by the parties hereto, the Company will cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted with respect to the foregoing. Promptly following the
execution of this Agreement by the parties hereto, the Company will request each
Person that has, prior to the date of this Agreement executed a confidentiality
agreement in connection with its consideration of an Acquisition Proposal to
return or destroy all confidential information heretofore furnished to such
Person by or on behalf of the Company.
(b) Except as expressly permitted by this Section 6.7, the Disinterested
Committee of the Company shall not (i) withdraw or modify, or propose publicly
to withdraw or modify, in a manner adverse to Cisco, the approval or
recommendation by such Disinterested Committee of the Merger, the Offer or this
Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal, or (iii) cause the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, a "Company Acquisition Agreement") related to any
Acquisition Proposal, other than any such agreement entered into concurrently
with a termination pursuant to the next sentence to facilitate such action.
Notwithstanding the foregoing, if at any time the Disinterested Committee of the
Company determines in good faith, after consultation with and receipt of advice
from outside counsel, that it is necessary to do so in order to act in a manner
consistent with its fiduciary duties to the Company's shareholders under
applicable law, subject to compliance with paragraph (c) below, the
Disinterested Committee of the Company may, in response to a Superior Proposal
which was not solicited by the Company and which did not otherwise result from a
breach of this Section 6.7 (subject to this and the following
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sentences to this Section 6.7), terminate this Agreement in accordance with
Section 8.1(f) (and concurrently with or after such termination, if it so
chooses, cause the Company to enter into any Company Acquisition Agreement with
respect to any Superior Proposal) but only at a time that is at least 24 hours
after delivery of a Company Notice. For purposes of this Agreement, a "Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, for consideration consisting of cash and/or securities
or other property, more than 67% of the combined voting power of the shares of
Company Common Stock then outstanding or all or substantially all the assets of
the Company which (i) the Disinterested Committee determines in good faith is
reasonably likely to be consummated, taking into account the Person making the
proposal and all legal, financial and regulatory aspects of the proposal,
including any break-up fees, expense reimbursement provisions and conditions to
consummation, and (ii) the Disinterested Committee determines in good faith
(after consultation with and based upon the advice of its outside financial
advisors) would, if consummated, provide greater value to Company's shareholders
than the transactions contemplated by this Agreement.
(c) In addition to the obligations of the Company as set forth in
paragraphs (a) and (b) of this Section 6.7, the Company shall advise the Cisco
orally and in writing of any request for non-public information, any Acquisition
Proposal, including all of the material proposed terms of such Acquisition
Proposal, the identity of the third party, or any decision by the Company to
take any of the actions permitted in clauses (x) or (y) of paragraph (a) above
(with any such notice referred to as a "Company Notice"). Any such Company
Notice will be delivered promptly after (and in no event later than 24 hours
after) receipt of any request for non-public information or of any Acquisition
Proposal and prior to the Company taking any of the actions permitted in clauses
(x) or (y) of paragraph (a) above. In addition, in the event the Company intends
to enter into a Company Acquisition Agreement relating to a Superior Proposal,
the Company will deliver a Company Notice at least 24 hours prior to entering
into such Company Acquisition Agreement, which Company Notice will identify the
third party and the material proposal terms of such Superior Proposal, the
Company will keep Cisco reasonably informed of the status of any such request or
Acquisition Proposal and will update the information required to be provided in
each Company Notice upon the request of Cisco.
Section 6.8. Notification of Certain Matters. Cisco, the Purchaser and
the Company shall promptly notify each other of (a) the occurrence or
non-occurrence of any fact or event which would be reasonably likely (i) to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (ii) to cause any material covenant, condition or agreement
hereunder not to be complied with or satisfied in all material respects and (b)
any failure of the Company or Cisco or Purchaser, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder in any material respect; provided, however, that no
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder.
Section 6.9. State Takeover Laws. The Company shall, upon the request of
the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated by
this Agreement, including the Offer and the Merger, of any state takeover law.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1. Conditions. The respective obligations of the Purchaser and
the Company to consummate the Merger are subject to the satisfaction, at or
before the Effective Time, of each of the following conditions:
(a) Shareholder Approval. The shareholders of the Company shall have
duly approved the transactions contemplated by this Agreement, pursuant to
the requirements of the Company's articles of
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incorporation and applicable law, or the Purchaser shall have acquired
sufficient Company shares prior to the Effective Time to effect a merger
pursuant to Section 302A.621 of the MBCA.
(b) Purchase of Securities. The Purchaser shall have accepted for
payment and paid for Shares pursuant to the Offer in accordance with the
terms hereof; provided, that this condition shall be deemed to have been
satisfied with respect to the Purchaser if the Purchaser fails to accept
for payment or pay for Shares pursuant to the Offer in violation of the
terms of the Offer.
(c) Injunctions; Illegality. 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 or, any
Governmental Entity and there shall not have been any statute, rule or
regulation enacted, promulgated or deemed applicable to the merger by any
Governmental Entity which prevents the consummation of the Merger.
Section 7.2. Conditions to the Obligations of the Purchaser to Effect the
Merger. The obligations of the Purchaser to effect the Merger are also subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, unless any such condition is waived in writing by Cisco and the
Purchaser:
(a) Representations,Warranties and Covenants: The representations and
warranties of the Company contained in this Agreement which are qualified
as to materiality shall be true and correct in all respects, and those not
so qualified shall be true and correct in all material respects, as of the
date of this Agreement and as of the Effective Time with the same force and
effect as though made on and as of the Effective Time, except that any such
representations and warranties which are made as of and relate solely to a
specified earlier date (other than the date hereof) shall be so true and
correct as of such earlier date. The Company shall have performed and
complied in all material respects with all covenants, conditions and
agreements required to be performed or complied with by the Company
hereunder on or prior to the Effective Time.
(b) No Material Adverse Effect. No Material Adverse Effect on the
Company shall have occurred since the expiration date of the Offer;
provided, that the obligations of the Purchaser shall not be subject to
this condition if Purchaser acquires sufficient Shares in the Offer to
effect a Merger pursuant to Section 302A.621 of the MBCA.
(c) Limit on Dissenting Shareholders. The holders of not more than
five (5) percent of the Company's outstanding Shares shall have exercised
dissenters' rights under Sections 302A.471 and 302A.473 of the MBCA.
Section 7.3. Conditions to the Obligations of the Company to Effect the
Merger. The obligation of the Company to effect the Merger is also subject,
prior to consummation of the Offer (but not subsequent thereto), to the
satisfaction at or prior to the Effective Time of the further condition that (i)
the representations and warranties of the Purchaser contained in this Agreement
which are qualified as to materiality shall be true and correct in all respects,
and those not so qualified shall be true and correct in all material respects,
as of the date of this Agreement and as of the Effective Time with the same
force and effect as though made on and as of the Effective Time, except that any
such representations and warranties which are made as of and relate solely to a
specified earlier date (other than the date hereof) shall be so true and correct
as of such earlier date, and (ii) Cisco and the Purchaser shall have performed
and complied in all material respects with all covenants, conditions and
agreements required to be performed or complied with by Cisco and the Purchaser
hereunder on or prior to the Effective Time.
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ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the shareholders of the Company:
(a) by the mutual written consent of Cisco, the Purchaser and the
Company;
(b) by the Company if (i) the Purchaser fails to commence the Offer as
provided in Section 1.1 hereof, (ii) the Purchaser shall not have accepted
for payment and paid for Shares pursuant to the Offer in accordance with
the terms thereof on or before June 30, 2000 or (iii) the Purchaser fails
to purchase validly tendered Shares in violation of the terms of the Offer
or this Agreement;
(c) by Cisco, the Purchaser or the Company if the Offer is terminated
or withdrawn pursuant to its terms without any Shares being purchased
thereunder; provided, however, that Cisco and the Purchaser may terminate
this Agreement pursuant to this Section 8.1(c) only if Cisco's or the
Purchaser's termination or withdrawal of the Offer is not in violation of
the terms of this Agreement or the Offer;
(d) by Cisco, the Purchaser or the Company if any court or other
Governmental Entity shall have issued, enacted, entered, promulgated or
enforced any order, judgment, decree, injunction, or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and
such order, judgment, decree, injunction, ruling or other action shall have
become final and nonappealable;
(e) by the Company if, prior to the purchase of Shares pursuant to the
Offer in accordance with the terms of this Agreement, there shall have
occurred, on the part of Cisco or Purchaser, a breach of any material
representation or warranty, covenant or agreement contained in this
Agreement which is not curable or, if curable, is not cured within 30
calendar days after written notice of such breach is given by the Company
to the party committing the breach.
(f) by the Company if, prior to the purchase of Shares pursuant to the
Offer, a Third Party shall have made a bona fide offer, constituting a
Superior Proposal, that the Disinterested Committee by majority vote
determines in its good faith judgment in the exercise of its fiduciary
duties, after consulting legal counsel, is more favorable to the Company's
shareholders than the Offer and the Merger, provided, that such termination
shall not be effective until payment of the fee required by Section 8.3(b)
hereof; or
(g) by Cisco if, prior to the purchase of Shares pursuant to the Offer
in accordance with the terms of this Agreement, (i) there shall have
occurred, on the part of the Company, a breach of any representation,
warranty, covenant or agreement contained in this Agreement which if not
cured would have a Material Adverse Effect on the Company and which is not
curable or, if curable, is not cured within the later of (x) 30 calendar
days after written notice of such breach is given by Cisco to the Company
and (y) the satisfaction of all conditions to the offer not related to such
breach; or (ii) if the Company shall have entered into a Company
Acquisition Agreement with a person other than Cisco, the Purchaser or an
Affiliate of either; or
(h) by Cisco if it shall not have breached any of its obligations
hereunder or under the Series A Agreement or Offer and no Shares shall have
been purchased pursuant to the Offer on or before May 31, 2000;
Section 8.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers or shareholders, other than the provisions of this Section
8.2, Section 8.3, the last two sentences of Section 6.6(b) and Section 6.6(c),
which shall survive any such termination. Nothing contained in this Section 8.2
shall relieve any party from liability for any breach of this Agreement or the
Confidentiality Agreement.
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Section 8.3. Fees and Expenses.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Offer, this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
(b) In the event that Cisco or the Purchaser terminates this Agreement
pursuant to Section 8.1(g)(ii) or the Company terminates this Agreement pursuant
to Section 8.1(f), the Company shall pay to Cisco the amount of $3,000,000 as
reimbursement of Cisco's expenses and as liquidated damages (the "Company
Break-up Fee"). Any such payment shall be made within three (3) business days
after termination.
Section 8.4. Amendment. This Agreement may be amended by the Company,
Cisco and the Purchaser at any time before or after any approval of this
Agreement by the shareholders of the Company but, after any such approval, no
amendment shall be made which decreases the Merger Price or which adversely
affects the rights of the Company's shareholders hereunder without the approval
of such shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of all the parties.
Section 8.5. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may (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 contained herein by any other party or in
any document, certificate or writing delivered pursuant thereto by any other
party or (iii) waive compliance with any of the agreements of any other party or
with any conditions to its own obligations. Any agreement on the part of any
party 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 IX.
MISCELLANEOUS
Section 9.1. Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 2.12, Section 3.2, the last sentence of Section 6.2, Section 6.5 and
Section 6.6(c) shall survive the Effective Time indefinitely (except to the
extent a shorter period of time is explicitly specified therein).
Section 9.2. Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments referred to
herein) and the letter agreement, by and between Purchaser and the Company,
dated August 11, 1999 (the "Confidentiality Agreement"), constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof.
(b) Neither this Agreement nor any of the rights, interests or obligations
hereunder will be assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other party. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
Section 9.3. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
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Section 9.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to Cisco:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Attention: Larry Carter
Telecopy No.: (408) 526-4545
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303-0913
Attention: Curtis L. Mo, Esq.
Telecopy No.: (650) 496-2736
If to the Purchaser:
Spanlink Acquisition Corp.
7125 Northland Terrace
Minneapolis, MN 55428
Attention: Brett Shockley
Telecopy No.: (612) 971-2314
with a copy to:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402
Attention: Robert K. Ranum
Telecopy No.: (612) 347-7077
If to the Company:
Spanlink Communications, Inc.
7125 Northland Terrace
Minneapolis, MN 55428
Attention: Brett Shockley
Telecopy No.: (612) 971-2314
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section 9.5. Governing Law; Jurisdiction.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
(b) In addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any federal court located in the State of
Minnesota or any Minnesota state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court
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and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a federal or
state court sitting in the state of Minnesota.
Section 9.6. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 9.6.
Section 9.7. Descriptive Headings. 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 9.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 9.9. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except with respect
to Sections 2.12, 2.9 and 6.5, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 9.10. Certain Definitions. As used in this Agreement:
"Acquisition Proposal" shall have the meaning set forth in Section
6.7(a).
"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 the 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;
"Board" shall have the meaning set forth in the Granting Clauses.
"Certificates" shall have the meaning set forth in Section 3.2(a).
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Company Acquisition Agreement" shall have the meaning set forth in
Section 6.7(b).
"Company Break-Up Fee" shall have the meaning set forth in Section
8.3(b)
"Company Disclosure Statement" shall have the meaning set forth in the
first paragraph of Article 4.
"Company Notice" shall have the meaning set forth in Section 6.7(b).
"Confidentiality Agreement" shall have the meaning set forth in
section 9.2(a).
"Consent" shall have the meaning set forth in Section 4.5(b).
"Control" shall have the meaning set forth in section 9.10.
"Designated Employees" shall have the meaning set forth in Section
2.9.
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"Disinterested Committee" shall have the meaning set forth in the
Granting Clauses.
"Dissenting Shares" shall have the meaning set forth in Section 3.1.
"Dissenting Price" shall have the meaning set forth in Section 3.1.
"Dougherty" shall have the meaning set forth in Section 4.21.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Employee Benefit Arrangement" shall have the meaning set forth in
Section 6.1(e).
"Environmental Law" shall have the meaning set forth in Section 4.18.
"ERISA" hall have the meaning set forth in Section 4.11(a).
"Exchange Act" shall have the meaning set forth in Section 1.1(a).
"GAAP" shall have the meaning set forth in Section 4.6(b).
"Governmental Entity" shall have the meaning set forth in Section
4.5(b).
"Hazardous Substance" shall have the meaning set forth in Section
4.18.
"IRS" shall have the meaning set forth in Section 4.11(b).
"Indebtedness" as applied to the Company, means (i) all indebtedness
of Company for borrowed money, whether current or funded, or secured or
unsecured, (ii) all indebtedness of Company for the deferred purchase price
of property or services represented by a note or other security, (iii) all
indebtedness of Company created or arising under any conditional sale or
other title retention agreement with respect to property acquired by
Company (even though the rights and remedies of the Company or lender under
such agreement in the event of default are limited to repossession or sale
of such property), (iv) all indebtedness of Company secured by a purchase
money mortgage or other lien to secure all or part of the purchase price of
property subject to such mortgage or lien, (v) all obligations under leases
which shall have been or must be, in accordance with generally accepted
accounting principles, recorded as capital leases in respect of which
Company is liable as lessee, (vi) any liability of Company in respect of
banker's acceptances or letters of credit, (vii) all interest, fees and
other expenses owed with respect to the indebtedness referred to in clause
(i), (ii), (iii), (iv), (v) or (vi) above, and (viii) all indebtedness
referred to in clause (i), (ii), (iii), (iv), (v), (vi) or (vii) above
which is directly or indirectly guaranteed by Company or which Company has
agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured a creditor against loss.
"Initial Expiration Date" shall have the meaning set forth in Section
1.1(a).
"Lien" shall have the meaning set forth in Section 4.5.
"Material Agreements" shall have the meaning set forth in Section 4.7.
"MBCA" shall have the meaning set forth in the Granting Clauses.
"Material Adverse Effect on the Company" shall have the meaning set
forth in Section 4.1.
"Material Adverse Effect on the Purchaser" shall have the meaning set
forth in Section 5.1.
"Merger" shall have the meaning set forth in the Granting Clauses.
"Merger Price" shall have the meaning set forth in Section 2.7.
"Non-Vested Options" shall have the meaning set forth in Section 2.9.
"Offer" shall have the meaning set forth in the Granting Clauses.
"Offer Documents" shall have the meaning set forth in Section 1.1(b).
"Offer Price" shall have the meaning set forth in the Granting
Clauses.
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<PAGE> 80
"Offer to Purchase" shall have the meaning set forth in Section
1.1(b).
"Option" shall have the meaning set forth in Section 2.9.
"Option Plan" shall have the meaning set forth in Section 2.9.
"Other Filings" shall have the meaning set forth in Section 4.8.
"Cisco" shall have the meaning set forth in the Granting Clauses.
"Paying Agent" shall have the meaning set forth in Section 3.2(a).
"Person" shall include individuals, corporations, partnerships,
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).
"Plans" shall have the meaning set forth in Section 4.11(a).
"Preferred Stock" shall have the meaning set forth in Section 4.3.
"Proxy Statement" shall have the meaning set forth in Section 2.10(a).
"Purchaser" shall have the meaning set forth in the Granting Clauses.
"Qualified Plans" shall have the meaning set forth in Section 4.11(c).
"Released Claim" shall have the meaning set forth in Section 2.12(a).
"Released Party" shall have the meaning set forth in Section 2.12(a).
"Rights" shall have the meaning set forth in Section 4.12.
"Schedule 14D-9" shall have the meaning set forth in section 1.2(a).
"SEC" shall have the meaning set forth in Section 1.1(b).
"SEC Reports" shall have the meaning set forth in Section 4.6(a).
"Shares" shall have the meaning set forth in the Granting Clauses.
"Special Meeting" shall have the meaning set forth in Section 2.10(a).
"subsidiary" or "subsidiaries" means, with respect to Cisco, the
Company or any other person, any corporation, partnership, joint venture or
other legal entity of which Cisco, the Company or such other person, as the
case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests
the holders of which are generally entitled to more than 50% of the vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
"Series A Agreement" has the meaning set forth in the Granting
Clauses.
"Superior Proposal" shall have the meaning set forth in Section
6.7(b).
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Violation" shall have the meaning set forth in Section 4.5(a).
"Voting Debt" shall have the meaning set forth in Section 4.3.
Section 9.11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. it is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
CISCO SYSTEMS, INC
By: /s/ LARRY CARTER
------------------------------------
Name: Larry Carter
Title: Chief Financial Officer
SPANLINK ACQUISITION CORP.
By: /s/ BRETT A. SHOCKLEY
------------------------------------
Name: Brett A. Shockley
Title: CEO
SPANLINK COMMUNICATIONS, INC.
By: /s/ TIMOTHY E. BRIGGS
------------------------------------
Name: Timothy E. Briggs
Title: Vice President and CFO
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ANNEX I
Conditions to the Offer. Notwithstanding any other provisions of the
Offer, the Purchaser shall not be required to accept for payment or pay for any
tendered Shares, unless there are validly tendered and not withdrawn prior to
the expiration date for the Offer (the "Expiration Date") that number of Shares
which when combined with the Shares owned by the Purchaser represent at least
Sixty Seven (67) percent of the outstanding Shares on the date of purchase (the
"Minimum Condition"). Furthermore, notwithstanding any other provisions of the
Offer, the Purchaser may, subject to the terms of the Merger Agreement, amend
the Offer or postpone the acceptance for payment of or payment for tendered
Shares if at any time on or after the date of the Merger Agreement and before
the expiration of the Offer, any of the following events (each, an "Event")
shall occur:
(a) any order or preliminary or permanent injunction shall be entered
in any action or proceeding before any court of competent jurisdiction or
any statute, rule, regulation, legislation, or order shall be enacted,
entered, enforced, promulgated, amended or issued by any United States
legislative body, court, government or governmental, administrative or
regulatory authority or agency which shall remain in effect and which shall
have the effect of making illegal or restraining or prohibiting the making
of the Offer, the acceptance for payment of, or payment for, the Shares by
Cisco or the Purchaser, or the consummation of the Offer or the Merger; or
(b) the Company shall have entered into a Company Acquisition
Agreement with a person other than Cisco, the Purchaser or an affiliate of
either; or
(c) the Company and the Purchaser and Cisco shall have reached an
agreement that the Offer or the Merger Agreement be terminated, or the
Merger Agreement shall have been terminated in accordance with its terms;
or
(d) (i) the Company shall have breached or failed to perform in any
material respect any of its material obligations, covenants or agreements
under the Agreement or (ii) there shall have occurred, on the part of the
Company, a breach of any representation or warranty contained in the
Agreement which, in either case, if not cured would have a Material Adverse
Effect on the Company and which is not curable or, if curable, is not cured
within the later of (x) 30 calendar days after written notice of such
breach is given by Cisco to the Company of such breach and (y) the time of
satisfaction of all conditions to the Offer not related to such breach; or
(e) there shall have occurred, and continued to exist, (i) any general
suspension of, or limitation on prices for, trading in securities on the
New York Stock Exchange, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) a
commencement of a war, armed hostilities or other national or international
crisis directly involving the United States (other than an action involving
United Nations' personnel or support of United Nations' personnel) or (iv)
in the case of any of the foregoing clauses (i) through (iii) existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof.
The foregoing conditions are for the benefit of Cisco and the Purchaser and
may be asserted by Cisco or the Purchaser and may be waived by Cisco or the
Purchaser in whole or in part at any time and from time to time in their
reasonable discretion, in each case, subject to the terms of the Merger
Agreement. The failure by Cisco or the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed, except that the term "Merger
Agreement" shall be deemed to refer to the Agreement to which this Annex I is
appended.
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ANNEX II
DESIGNATED FOUNDING EMPLOYEES
Brett Shockley
Todd Parenteau
Tom Bose
Mark Langanki
Kevin Avery
DESIGNATED EMPLOYEES
Stephen Bostwick
Timothy Briggs
Jonathan Silverman
Bryan Willborg
August Baecker
Denise Cefalu-Lange
Orian Gloer
Kathy Kelso
Dennis Laufenburger
Amy Merrill
Karin Poole
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ANNEX C
EXECUTION VERSION
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CISCO SYSTEMS, INC.
AND
SPANLINK ACQUISITION CORP.
DATED AS OF FEBRUARY 25, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I PURCHASE AND SALE OF THE SECURITIES....................... C-6
1.1 Purchase and Sale of the Securities......................... C-6
1.2 The Closing................................................. C-6
1.3 Deliveries at the Closing................................... C-6
ARTICLE II........................................................... C-7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ C-7
2.1 Organization of the Company................................. C-7
2.2 Authorization, Validity and Enforceability.................. C-7
2.3 No Conflicts................................................ C-8
2.4 Consents and Approvals...................................... C-8
2.5 Capitalization.............................................. C-8
2.6 Title to Securities......................................... C-9
2.7 Subsidiaries................................................ C-9
2.8 Corporate Matters........................................... C-10
2.9 Legal Proceedings........................................... C-10
2.10 Compliance with Laws........................................ C-10
2.11 Exemption from Registration................................. C-10
2.12 Transaction Document Representations........................ C-11
2.13 Use of Proceeds............................................. C-11
2.14 No Brokers.................................................. C-11
2.15 Full Disclosure............................................. C-11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.......... C-12
3.1 Organization of the Investor................................ C-12
3.2 Authorization, Validity and Enforceability.................. C-12
3.3 No Conflicts................................................ C-12
3.4 Consents and Approvals...................................... C-12
3.5 Legal Proceedings........................................... C-13
3.6 Investment Intent........................................... C-13
3.7 Financing................................................... C-13
3.8 No Brokers.................................................. C-13
ARTICLE IV........................................................... C-13
4.1 Transaction Documents....................................... C-13
4.2 Access to Information; Consultation; Confidentiality........ C-14
4.3 Cooperation and Reasonable Efforts.......................... C-14
4.4 Consents and Approvals...................................... C-15
4.5 Notification of Certain Matters............................. C-15
4.6 Public Announcements........................................ C-15
</TABLE>
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<TABLE>
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4.7 No Solicitation............................................. C-15
4.8 Interim Financial Statements and Investment Reports......... C-16
4.9 Securities Legends.......................................... C-16
ARTICLE V CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO CLOSE..... C-17
5.1 Representations Warranties and Covenants.................... C-17
5.2 Consents.................................................... C-17
5.3 No Injunction or Illegality................................. C-17
5.4 HSR Act..................................................... C-17
5.5 Opinion of Counsel to the Company........................... C-17
5.6 Certificates................................................ C-18
5.7 Restated Certificate........................................ C-18
5.8 Election of Directors....................................... C-18
5.9 Investor Rights Agreement................................... C-18
5.10 Offer and Subscription...................................... C-18
5.11 Transfer Taxes.............................................. C-18
ARTICLE VI........................................................... C-18
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE................. C-18
6.1 Representations, Warranties and Covenants................... C-18
6.2 Consents.................................................... C-19
6.3 No Injunction or Illegality................................. C-19
6.4 HSR Act..................................................... C-19
6.5 Certificates................................................ C-19
6.6 Restated Certificate........................................ C-19
ARTICLE VII INDEMNIFICATION......................................... C-19
7.1 Survival.................................................... C-19
7.2 Indemnification............................................. C-19
ARTICLE VIII TERMINATION............................................ C-21
8.1 Termination of Agreement.................................... C-21
8.2 Effect of Termination....................................... C-21
ARTICLE IX MISCELLANEOUS............................................ C-21
9.1 Notices..................................................... C-21
9.2 Fees and Expenses........................................... C-22
9.3 Specific Performance........................................ C-22
9.4 Entire Agreement; Waivers and Amendments.................... C-23
9.5 Assignment; Binding Effect.................................. C-23
9.6 Severability................................................ C-23
9.7 No Third Party Beneficiaries................................ C-23
</TABLE>
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<TABLE>
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9.8 Governing Law............................................... C-23
9.9 Interpretation.............................................. C-23
9.10 Captions.................................................... C-23
9.11 Counterparts................................................ C-23
ARTICLE X DEFINITIONS............................................... C-23
10.1 Definitions................................................. C-23
</TABLE>
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<TABLE>
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EXHIBITS
Exhibit A Form of Restated Certificate
Exhibit B Form of Investor's Rights Agreement
Exhibit C Opinion of Counsel to the Company
SCHEDULES
2.4 Consents of the Company and Affiliates
2.5 Capitalization
2.7 Subsidiaries
2.12 Transaction Documents
2.14 Brokers and Finders Fees
3.4 Consents of the Investor
3.5 Legal Proceedings of the Investor
</TABLE>
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of February 25, 2000, by and among CISCO SYSTEMS, INC., a California
corporation (the "Investor") , and SPANLINK ACQUISITION CORP., a Minnesota
corporation (the "Company"). Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Merger Agreement referred
to below.
RECITALS
WHEREAS, the Company has entered into (a) an Agreement and Plan of Merger
dated as of the date hereof (the "Merger Agreement") with the Investor and
Spanlink Communications, Inc., a Minnesota corporation ("Spanlink"), pursuant to
which the Company has agreed to make the Offer to purchase the Shares and
acquire Spanlink pursuant to the Merger, and (b) a Subscription Agreement dated
as of the date hereof (the "Subscription Agreement") with certain shareholders
of Spanlink, pursuant to which such shareholders have agreed to purchase common
stock of the Company; and
WHEREAS, the Investor wishes to purchase from the Company, and the Company
wishes to issue and sell to the Investor, 450,000 shares (the "Series A Shares")
of Series A Convertible Preferred Stock, no par value, of the Company ("Series A
Preferred Stock"), having the rights, preferences and terms set forth in the
form of Articles of Incorporation, attached as Exhibit A (the "Amended
Articles"), all upon the terms and subject to the conditions set forth herein;
and
WHEREAS, the Company will use the net proceeds from its issuance and sale
of the Series A shares hereunder, in part, (i) to consummate the Offer and the
Merger, and (ii) for general corporate purposes, including increasing staff and
training to increase its revenues in the business of systems integration,
particularly for customers who use and purchase Cisco equipment; and
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.1 Purchase and Sale of the Securities. Upon the terms and subject to
the conditions set forth in this Agreement, the Investor agrees to purchase from
the Company, and the Company agrees to issue and sell to the Investor, the
Series A Shares, free and clear of all Liens or Encumbrances, for an aggregate
cash purchase price of $45,000,000 (the "Purchase Price").
1.2 The Closing. Subject to the satisfaction or waiver of all of the
conditions to closing set forth in Articles V and VI, the closing (the
"Closing") of the purchase and sale of the Securities hereunder shall take place
at the offices of Brobeck, Phleger & Harrison LLP in Palo Alto, California 94303
at 10:00 a.m., Pacific Standard Time, on the date of consummation of the Offer,
or at such other time, date or place as may be mutually agreed upon by the
parties. The date on which the Closing occurs is referred to herein as the
"Closing Date."
1.3 Deliveries at the Closing. At the Closing, (a) the Company shall
issue and deliver to the Investor certificates, in definitive form, representing
the Series A Shares registered in the name of the Investor or in the name of a
wholly owned Subsidiary of the Investor designated in writing to the Company at
least two (2) Business Days prior to the Closing Date, together with all other
documents required hereunder to be delivered by the Company to the Investor at
the Closing, against (b) the payment by the Investor to the Company of the
Purchase Price, by wire transfer of immediately available funds to an account or
accounts designated by the Company in a written notice delivered to the Investor
not later than two (2) Business Days
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prior to the Closing Date, and the delivery to the Company of all documents
required hereunder to be delivered by the Investor to the Company at the
Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In this Agreement, any reference to any event, change, condition or effect
being "Material" with respect to any entity or group of entities means any
event, change, condition or effect which (i) is material to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations, or results of operations of such entity and
its subsidiaries (including, in the case of the Company, Spanlink and its
subsidiaries), taken as a whole or (ii) would prevent or materially alter or
delay any of the transactions contemplated by this Agreement, the Merger
Agreement or the Subscription Agreement. In this Agreement, any reference to a
"Material Adverse Effect" with respect to any entity or group of entities means
any event, change or effect that (x) is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations,
or results of operations of such entity and its subsidiaries (including, in the
case of the Company, Spanlink and its subsidiaries), taken as a whole or (y)
would prevent or materially alter or delay any of the transactions contemplated
by this Agreement, the Merger Agreement or the Subscription Agreement.
In this Agreement, any reference to a party's "Knowledge" means (i) with
respect to any natural person, the actual knowledge, after reasonable inquiry,
of such person or (ii) with respect to any corporation or other entity, the
actual knowledge of such party's officers and directors provided that such
persons shall have made reasonable inquiry of those employees of such party whom
such officers and directors reasonably believe would have actual knowledge of
the matters represented.
Except as disclosed in that section of the document of even date herewith
and delivered by the Company to the Investor prior to the execution and delivery
of this Agreement (the "Disclosure Schedule") corresponding to the Section of
this Agreement to which any of the following representations or warranties
pertain, the Company hereby represents and warrants to the Investor as follows:
2.1 Organization of the Company. Each of the Company and Spanlink is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has full corporate power and
authority to own, lease and operate its assets and Properties and to conduct its
business as currently being conducted. Each of the Company and Spanlink is duly
qualified and in good standing as a foreign corporation in all jurisdictions in
which the nature of its business or the ownership of its Properties makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate together with all other
such failures, have a Material Adverse Effect.
2.2 Authorization, Validity and Enforceability. The execution, delivery
and performance by each of the Company and Spanlink of this Agreement and each
other Transaction Document to which it is a party and the consummation of the
transactions contemplated hereby and thereby by the Investor have been duly and
validly authorized by all necessary corporate action on the part of each of the
Company and Spanlink and no other corporate proceeding on the part of the
Company or Spanlink is necessary to authorize the execution, delivery and
performance of this Agreement or any other Transaction Document to which the
Company or Spanlink is a party or the consummation of any of the transactions
contemplated hereby or thereby, except that approval of Spanlink's shareholders
may be required to approve the Merger. This Agreement has been duly executed and
delivered by the Company and (assuming the due authorization, execution and
delivery thereof by the Investor) constitutes the legal, valid and binding
obligation of the Company, and each other Transaction Document to which the
Company or Spanlink is a party will, upon due execution and delivery thereof
(and assuming the due authorization, execution and delivery thereof by the
Company or Spanlink), constitute the legal, valid and binding obligation of the
Company or Spanlink, in each case enforceable against the Company or Spanlink,
as the case may be, in accordance with its respective terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights
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generally and subject, as to enforceability, to the effect of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
2.3 No Conflicts. Assuming all Consents described in Sections 2.4(a)
through Section 2.4(c) are obtained, made or given (as the case may be), the
execution and delivery by the Company of this Agreement, the Restated
Certificate and each other Transaction Document to which the Company or Spanlink
is a party, the performance by the Company or Spanlink of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby, do not and will not conflict with, result in any breach or
violation of, constitute a default under (or an event which with the giving of
notice or the lapse of time or both would constitute a default under), give rise
to any right of termination or acceleration of any right or obligation of any of
the Company, Spanlink or their respective Subsidiaries under, or result in the
creation or imposition of any Lien or Encumbrance upon any assets or Properties
of the Company or any of its subsidiaries by reason of the terms of, (a) the
certificate of incorporation, by-laws or other charter or organization documents
of the Company, Spanlink or any of their respective Subsidiaries, (b) any
Contract to which the Company, Spanlink or any of their respective Subsidiaries
is a party or by or to which any of them or their assets or Properties may be
bound or subject, (c) any applicable order, writ, judgment, injunction, award,
decree, law, statute, ordinance, rule or regulation or (d) any other Permit of
any of them, other than any conflict, breach, violation, default, termination,
acceleration or Lien or Encumbrance which (i) in the case of clauses (b), (c)
and (d) only, would not, individually or in the aggregate together with all such
other conflicts, breaches, violations, defaults, terminations, accelerations,
Liens or Encumbrances have a Material Adverse Effect, and (ii) may result from
any facts or circumstances relating solely to the Investor.
2.4 Consents and Approvals. Except (a) as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"),
(b) as may be required by state and U.S. federal securities laws, (c) for the
filing of articles or certificates of merger with the appropriate state
agencies, (d) as set forth in Schedule 2.4, and (e) where the failure to obtain,
make or give such Consent would not, individually or in the aggregate, have a
Material Adverse Effect, no consent, approval, authorization, license or order
of, registration or filing with, or notice to, any federal, state, local,
foreign or other Governmental Entity or any other Person (collectively,
"Consents") is necessary to be obtained, made or given by the Company, Spanlink
or any of their respective Subsidiaries in connection with the execution and
delivery by the Company of this Agreement, the Restated Certificate or any other
Transaction Document to which the Company or Spanlink is a party, the
performance by the Company or Spanlink of their respective obligations hereunder
and thereunder, and the consummation of the transactions contemplated hereby and
thereby.
2.5 Capitalization.
(a) On the date hereof, the authorized capital stock of the Company
consists solely of (i) 20,000,000 shares of Common Stock, no par value, none of
which shares are issued and outstanding, and (ii) 5,000,000 undesignated shares.
As of the date hereof, the Company's Board of Directors has adopted a resolution
designating 450,000 of the Company's undesignated shares as Series A Preferred
Stock but has not yet filed the Certificate of Designation relating to the
Series A Preferred Stock with the Minnesota Secretary of State. Upon
consummation of the Closing, the authorized capital stock of the Company will
consist solely of (i) 20,000,000 shares of Common Stock, 2,430,000 of which will
be issued and outstanding, and (ii) 450,000 shares of Series A Preferred Stock,
all of which will then be issued and outstanding. Upon the conversion of the
outstanding shares of Series A Preferred Stock as provided herein, no such
shares shall be reissuable, and all such shares shall be cancelled, retired and
eliminated from the shares which the Company is authorized to issue. Except as
set forth above in this paragraph, no common stock, preferred stock, equity
interest or other equity or equity derivative securities of any kind of the
Company are (or at the Closing will be) authorized, issued, or outstanding.
(b) The Company has not issued any securities in violation of any
preemptive or similar rights. Except as provided in (i) this Agreement
(including the conversion of Series A Preferred Stock as contemplated herein),
(ii) the Restated Certificate and (iii) each other Transaction Document to which
the Company or Spanlink is a party, there are no subscriptions, options,
warrants, calls, commitments, preemptive rights or other rights of any kind
(absolute, contingent or otherwise) to purchase or otherwise receive, nor any
securities
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or instruments of any kind convertible into or exchangeable for, any capital
stock (including, without limitation, outstanding, authorized but unissued,
unauthorized, treasury or other shares thereof) or other equity interest, equity
security or equity derivative security of the Company.
2.6 Title to Securities.
(a) The Series A Shares, when issued in accordance with this Agreement,
will be duly authorized, validly issued, non-assessable and free and clear of
any Liens or Encumbrances (except for (i) the restrictions on transferability
expressly set forth in the Restated Certificate, Section 4.8 of this Agreement,
and applicable U.S. federal and state securities laws and regulations, and (ii)
any Liens or Encumbrances created by any act, omission or agreement of the
Investor or any of its Affiliates other than the Company and Spanlink). Assuming
the filing of the Restated Certificate, the issuance, sale and delivery of the
Series A Shares as contemplated by this Agreement are not subject to any
preemptive right or right of first refusal, other than any right of first
refusal granted by the Investor to any third party. Upon such issuance, the
Investor will acquire good and marketable title to each of the Series A Shares,
free and clear of any Lien or Encumbrance, and will be entitled to all the
rights and benefits of a holder of such securities, subject to the exceptions
set forth in clauses (i) and (ii) above in this paragraph. The Series A Shares,
taken together as a whole, will on the Closing Date represent not more than
19.9% of the voting power of all outstanding capital stock or other securities
of the Company entitled to vote generally for the election of directors or on
any matters on which the holders of Common Stock are entitled to vote, whether
under ordinary circumstances, contingently or otherwise (such capital stock or
securities of the Company entitled to so vote, as are outstanding from time to
time, being referred to herein as "Voting Securities").
(b) The Company covenants, represents and warrants to the Investor that, at
all times from and after the Closing, the Company will have authorized and will
reserve and keep available (i) solely for issuance and delivery upon conversion
of shares of Series A Preferred Stock (including, without limitation, the Series
A Shares) into shares of Common Stock, at least the number of shares of Common
Stock issuable upon such conversion of all then outstanding shares of Series A
Preferred Stock (the "Conversion Shares"). All of the Conversion Shares, when
issued in accordance with the Restated Certificate, will be duly authorized,
validly issued, fully paid, non-assessable and free and clear of any Liens or
Encumbrances, subject (A) in the case of the Conversion Shares, to the
restrictions on transferability expressly set forth in the Restated Certificate
and (B) to the restrictions on transferability expressly set forth in applicable
Federal and state securities laws and regulations and any Liens or Encumbrances
created by any act, omission or agreement of the Investor or any of its
Affiliates (other than the Company, Spanlink and their respective Subsidiaries).
Assuming the filing of the Restated Certificate and the issuance and delivery of
the Conversion Shares, as contemplated by this Agreement, the Conversion Shares
are not subject to any preemptive right or right of first refusal (including,
without limitation, pursuant to any of the other Transaction Documents to which
the Company or Spanlink is a party to), other than any right of first refusal
granted by the Investor to any third party.
2.7 Subsidiaries.
(a) Except as listed in Schedule 2.7 of the Disclosure Schedule, neither
the Company nor Spanlink has any Subsidiaries.
(b) Each of the Subsidiaries of the Company and Spanlink is duly qualified
and in good standing as a foreign corporation in all jurisdictions in which the
nature of its business or the ownership of its Properties makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect. All such jurisdictions in which any of the Subsidiaries of the Company
or Spanlink is qualified as a foreign corporation are listed with respect to
each such Subsidiary in Schedule 2.7. Except for the Subsidiaries listed in
Schedule 2.7 of the Disclosure Schedule, neither the Company nor Spanlink,
directly or indirectly, owns any interest in any other Person (other than
non-controlling equity interests included in the investment portfolios of the
Company, Spanlink and their respective Subsidiaries).
(c) Schedule 2.7 sets forth the designation, par value and the number of
authorized, issued and outstanding shares of each class or series of capital
stock of each Subsidiary of the Company and Spanlink.
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Except as set forth in Schedule 2.7, no common stock, preferred stock, equity
interest or other equity or equity derivative securities of any kind, of any
Subsidiary of the Company or Spanlink are authorized, issued or outstanding. All
of the outstanding capital stock of each Subsidiary of either the Company or
Spanlink is duly authorized, validly issued, fully paid and non-assessable.
(d) No Subsidiary of the Company or Spanlink has issued any securities in
violation of any preemptive or similar rights, and there are no subscriptions,
options, warrants, calls, commitments, preemptive rights or other rights of any
kind (absolute, contingent or otherwise) in favor of any Person other than the
Company, Spanlink or any of their respective Subsidiaries to purchase or
otherwise receive, nor any securities or instruments of any kind convertible
into or exchangeable for, any capital stock (including, without limitation,
outstanding, authorized but unissued, unauthorized, treasury or other shares
thereof) or other equity interest, equity security or equity derivative security
of any Subsidiary of the Company.
2.8 Corporate Matters. The Company has heretofore delivered to the
Investor true and complete copies of the certificate or articles of
incorporation, including all amendments thereto, and by-laws, as currently in
effect, and all other charter or organization documents, of the Company,
Spanlink and each of their Subsidiaries. The Company has heretofore made
available to the Investor true and complete copies of the minute books of the
Company and (to the extent available) each of its Subsidiaries. The minute books
of the Company, Spanlink and their respective Subsidiaries accurately reflect
all material corporate actions taken at meetings, or by written consent in lieu
of meetings, of the shareholders, boards of directors and (to the extent minutes
exist) all committees of such boards of directors of the Company, Spanlink and
their respective Subsidiaries, respectively, since January 1, 1997. Since such
date, all material corporate actions taken by the Company, Spanlink and their
respective Subsidiaries have been duly authorized, and no such corporate actions
have been taken in breach or violation of the certificate or articles of
incorporation, by-laws or other charter or organization documents of the
Company, Spanlink or any such Subsidiary. Since its incorporation, the Company
has engaged in no business or activities, and has incurred no liabilities, other
than in connection with the transactions contemplated hereby.
2.9 Legal Proceedings. There is no action, suit, claim, proceeding or
investigation pending or, to the Knowledge of the Company, threatened against
the Company, Spanlink or any of their respective Subsidiaries, or any of their
directors, officers, assets or Properties, by or before any court, other
Governmental Entity or arbitrator which, if adversely determined, individually
or in the aggregate, would have a Material Adverse Effect. Except as set forth
in Schedule 2.9, there is no outstanding order, writ, judgment, injunction,
award or decree of any court, other Governmental Entity or arbitrator against
the Company, Spanlink, or any of their respective Subsidiaries, or any of their
directors, officers, assets or Properties, which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect.
2.10 Compliance with Laws. Except as set forth on Schedule 2.13, each of
the Company, Spanlink and their respective Subsidiaries is in compliance with
(a) the terms of its certificate or articles of incorporation, by-laws or other
charter or organization documents, (b) all applicable laws, statutes,
ordinances, rules, regulations or other legal requirements, whether federal,
state, local or foreign, (c) all applicable orders, writs, judgments,
injunctions, awards and decrees of any court, other Governmental Entity or
arbitrator of which the Company has Knowledge, and (d) its other Permits, except
(i) in the case of clauses (b), (c) and (d), where the failure to comply would
not, individually or in the aggregate, have a Material Adverse Effect. Neither
the Company, Spanlink nor any of their respective Subsidiaries has received any
written or, to the Knowledge of the Company, oral notice of any violation by the
Company, Spanlink or any such Subsidiary of, or default by the Company, Spanlink
or any such Subsidiary under, its certificate or articles of incorporation,
by-laws or other charter or organization document, any law, statute, ordinance,
rule, regulation or other legal requirement, any order, writ, injunction, award
or decree of any court, other Governmental Entity or arbitrator, or any of its
Permits, except for such violations or defaults which would not, individually or
in the aggregate, have a Material Adverse Effect.
2.11 Exemption from Registration. Assuming the representations and
warranties of the Investor set forth in Section 3 are true and correct in all
material respects, the offer and sale of the Series A Shares made pursuant to
this Agreement will be exempt from the registration requirements of the
Securities Act. Assuming
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the representations and warranties of the Investor set forth in Section 3 are
true and correct in all material respects on the date of issuance thereof, any
issuance and delivery of the Conversion Shares, to the Investor or a wholly
owned Subsidiary of the Investor (or to a transferee who has obtained such
securities in compliance with federal and state securities laws) will be exempt
from the registration requirements of the Securities Act. Neither the Company
nor any Person acting on its behalf has, in connection with the offering of the
Series A Preferred Stock or the Conversion Shares, engaged in (a) any form of
general solicitation or general advertising (as those terms are used within the
meaning of Rule 502(c) under the Securities Act), (b) any action involving a
public offering within the meaning of section 4(2) of the Securities Act, (c)
any action which would require the registration of the offering and sale of the
Series A Preferred Stock (or any issuance or delivery of the Conversion Shares
under the Securities Act, except pursuant to the Investor's Rights Agreement (a
form of which is attached hereto as Exhibit B), or (d) any action which would
violate any applicable state securities or "blue sky" laws. The Company has not
made and will not make, directly or indirectly, any offer or sale of capital
stock or other equity or debt security if, as a result, the offer and sale of
the Series A Preferred Stock contemplated hereby would fail to be entitled to
exemption from the registration requirements of the Securities Act. As used
herein, the terms "offer" and "sale" have the respective meanings specified in
section 2(3) of the Securities Act.
2.12 Transaction Document Representations.
(a) Schedule 2.12 contains a true and complete list of all of the
Transaction Documents. The Company has heretofore delivered to the Investor true
and complete copies of each of the Transaction Documents (including all written
notices of the parties pursuant thereto), including the Investor Rights
Agreement, the Merger Agreement, and the Subscription Agreement. Each
Transaction Document is valid and binding in accordance with its terms, and is
in full force and effect. Except as set forth in Schedule 2.12, neither the
Company nor Spanlink nor, to the Knowledge of the Company, any other party to
any Transaction Document (other than the Investor) is in breach or default in
any respect in respect of any Transaction Document. Except as set forth in
Schedule 2.12, none of the Transaction Documents contains any provision
providing that any party thereto may terminate or cancel the same by reason of
the transactions contemplated by this Agreement or any other Transaction
Document, or any other provision which would be altered or otherwise become
applicable by reason of such transactions, and no party has given notice of
termination or cancellation of any Transaction Document or that it intends to
terminate or cancel any Transaction Document.
(b) All of the representations and warranties of the Company and Spanlink
contained in the Transaction Documents were true and correct in all material
respects as of the time such representations and warranties were made and are
true and correct in all material respects as of the date hereof.
2.13 Use of Proceeds. From the sale of the Series A Preferred Stock
hereunder, approximately [$39,000,000] of the net proceeds to the Company shall
be used to consummate the Offer and the Merger, and the remaining net proceeds
shall be used by the Company for general working capital purposes, including
increasing the number of staff trained to perform systems integration work for
customers who are using, purchasing, or deploying Cisco equipment.
2.14 No Brokers. Other than as disclosed in Schedule 2.14 of the
Disclosure Schedule, no broker, finder or investment banker has been retained or
engaged on behalf of the Company, Spanlink or any of their respective
Subsidiaries or is entitled to any brokerage, finder's or other fee,
compensation or commission from any such Person in connection with the
transactions contemplated by this Agreement or the Transaction Documents.
2.15 Full Disclosure. To the Knowledge of the Company, the Company,
Spanlink and their respective Subsidiaries have complied in good faith with all
requests of the Investor and its representatives for documents, papers and
information relating to the Company, Spanlink and their respective Subsidiaries
in connection with the transactions contemplated hereby, and have not knowingly
withheld any document, paper or other information requested by the Investor or
any of its representatives in connection therewith. No representation or
warranty made by the Company in this Agreement (including the Disclosure
Schedule) or any other Transaction Document or in any certificate delivered to
the Investor pursuant to Article V contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact required to
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be stated therein or necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. Except for the representations and warranties of the Company and
Spanlink contained in this Agreement (including the Schedules hereto) or any
other Transaction Document or in any certificate delivered to the Investor
pursuant to Article V hereof, neither the Company nor any Subsidiary of the
Company makes any representation or warranty to the Investor, express or
implied, with respect to the matters contained in this Agreement, in connection
with this Agreement or the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE INVESTOR
The Investor hereby represents and warrants to the Company as follows:
3.1 Organization of the Investor. The Investor is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction and has full corporate power and authority to execute and deliver
this Agreement and each other Transaction Document to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.
3.2 Authorization, Validity and Enforceability. The execution, delivery
and performance by the Investor of this Agreement and each other Transaction
Document to which it is a party and the consummation of the transactions
contemplated hereby and thereby by the Investor have been duly and validly
authorized by all necessary corporate action on the part of the Investor and no
other corporate proceeding on the part of the Investor is necessary to authorize
the execution, delivery and performance of this Agreement or any other
Transaction Document to which the Investor is a party or the consummation of any
of the transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by the Investor and (assuming the due authorization,
execution and delivery thereof by the Company and the other parties thereto
other than the Investor) constitutes the legal, valid and binding obligation of
the Investor, and each other Transaction Document to which the Investor is a
party will, upon due execution and delivery thereof (and assuming the due
authorization, execution and delivery thereof by the Company and the other
parties thereto other than the Investor), constitute the legal, valid and
binding obligation of the Investor, in each case enforceable against the
Investor in accordance with its respective terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.3 No Conflicts. Assuming all Consents described in clauses (a) through
(c) of Section 3.4 are obtained, made or given (as the case may be), the
execution and delivery by the Investor of this Agreement and each other
Transaction Document to which it is a party, the performance by the Investor of
its obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby, do not and will not conflict with,
result in any breach or violation of, constitute a default under (or an event
which with the giving of notice or the lapse of time or both would constitute a
default under), (a) the articles of incorporation, by-laws or other charter or
organization documents of the Investor, (b) any Contract to which the Investor
is a party or by or to which it or its assets or Properties may be bound or
subject, (c) any applicable order, writ, judgment, injunction, award, decree,
law, statute, ordinance, rule or regulation or (d) any Permit of the Investor,
other than any conflict, breach, violation or default which (i) in the case of
clauses (b), (c) and (d) only, would not, individually or in the aggregate
together with all such other conflicts, breaches, violations or defaults, have a
material adverse effect on, or a material adverse change in, the ability of the
Investor to execute and deliver this Agreement or any other Transaction Document
to which it is a party, perform its obligations hereunder and thereunder, or
consummate the transactions contemplated hereby or thereby and (ii) may result
from any facts or circumstances relating solely to the Company.
3.4 Consents and Approvals. Except (a) as required under the HSR Act, (b)
as may be required by state and U.S. federal securities laws, (c) for the filing
of articles or certificates of merger with the appropriate
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state agencies, (d) as set forth in Schedule 2.4, and (e) where the failure to
obtain, make or give such Consent would not, individually or in the aggregate,
have a material adverse effect on, or a material adverse change in, the ability
of the Investor to execute and deliver this Agreement or any other Transaction
Document to which it is a party, perform its obligations hereunder and
thereunder, or consummate the transactions contemplated hereby or thereby, no
Consent of any Governmental Entity or other Person is necessary to be obtained,
made or given by the Investor in connection with the execution and delivery by
the Investor of this Agreement or any other Transaction Document to which it is
a party, the performance by the Investor of its obligations hereunder and
thereunder, and the consummation of the transactions contemplated hereby and
thereby.
3.5 Legal Proceedings. Except for proceedings relating to this Agreement
and filings under the HSR Act with respect to this Agreement and as set forth in
Schedule 3.5, there is no action, suit, claim, proceeding or investigation
pending or, to the Knowledge of the Investor, threatened against the Investor by
or before any court, other Governmental Entity or arbitrator which, if adversely
determined, individually or in the aggregate, would have a material adverse
effect on, or a material adverse change in, the ability of the Investor to
execute and deliver this Agreement or any other Transaction Document to which it
is a party, perform its obligations hereunder or thereunder, or consummate the
transactions contemplated hereby or thereby. Except as set forth in Schedule
3.5, there is no outstanding order, writ, judgment, injunction, award or decree
of any court, other Governmental Entity or arbitrator against the Investor
which, individually or in the aggregate, is reasonably likely to have a material
adverse effect on, or a material adverse change in, the ability of the Investor
to execute and deliver this Agreement or any other Transaction Document to which
it is a party, perform its obligations hereunder or thereunder, or consummate
the transactions contemplated hereby or thereby.
3.6 Investment Intent. The Investor understands that the Series A shares
and the Conversion Shares (collectively, the "Transaction Securities") have not
been registered under the Securities Act or the securities laws of any state,
and may only be sold or disposed of by the Investor (i) pursuant to an effective
registration statement under the Securities Act or an applicable exemption from
registration thereunder and (ii) in compliance with any applicable state
securities laws. The Investor further understands that the sale or transfer of
the Transaction Securities are subject to the other restrictions referred to in
the certificate legends applicable thereto provided in Section 4. The
Transaction Securities will be acquired by the Investor (or its wholly owned
Subsidiary designee) pursuant to this Agreement for its own account without a
view to a distribution or resale thereof, it being understood that the Investor
or such designee shall have the right to sell or otherwise dispose of any of the
Transaction Securities pursuant to an effective registration statement or an
exemption therefrom under the Securities Act and in compliance with any
applicable state securities laws. The Investor is an "accredited investor" as
that term is defined in Rule 501 of Regulation D under the Securities Act, and
either alone or with its advisors has such knowledge, skill and experience in
business, financial and investment matters that it is capable of evaluating the
merits and risks of an investment in the Transaction Securities as provided in
this Agreement.
3.7 Financing. The Investor has available sufficient funds to pay the
Purchase Price in full at the Closing.
3.8 No Brokers. No broker, finder or investment banker has been retained
or engaged on behalf of the Investor or is entitled to any brokerage, finder's
or other fee, compensation or commission from the Investor in connection with
the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS
4.1 Transaction Documents. The Company will not, directly or indirectly,
engage in any business or activities, or directly or indirectly incur any
liabilities or obligations, other than in connection with the transactions
contemplated hereby or by the Transaction Documents. The Company will not form
any Subsidiaries prior to the consummation of the Merger. The Company will
perform all its obligations under the Transaction Documents and shall not amend,
modify, terminate or waive any right under any Transaction Document without the
prior written consent of the Investor. The Company will not make any filing with
the
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SEC or other Governmental Entity relating to the Offer, the Merger, or the
transactions contemplated by the Transaction Documents without the prior written
consent of the Investor and shall promptly furnish to the Investor copies of all
filings and notices to, from or with the SEC or other Governmental Entities in
connection with the same. The Company will promptly forward to the Investor and
its counsel any notice received by the Company under the Transaction Documents
(if not received by the Investor) and shall consult with the Investor prior to
exercising any right under the Transaction Documents.
4.2 Access to Information; Consultation; Confidentiality.
(a) From the date hereof until the Closing, the Company will and will use
its best efforts to cause Spanlink and each of their respective Subsidiaries to,
(i) allow the Investor and its officers, employees, counsel, accountants,
consultants and other authorized representatives ("Representatives") to have
reasonable access during normal business hours to the books, records, Contracts,
facilities, management and personnel of the Company, Spanlink and each of their
respective Subsidiaries, (ii) furnish as promptly as practicable to the Investor
and its Representatives all information and documents concerning the Company,
Spanlink and their respective Subsidiaries that are in the possession of the
Company, as the Investor or its Representatives may reasonably request, and
(iii) cause the respective officers, employees and Representatives of the
Company, Spanlink and their respective Subsidiaries to reasonably cooperate in
good faith with the Investor and its Representatives in connection with all such
access. In addition, to the extent that the representatives of the Company or
any of its respective Subsidiaries consults with the board of directors or
shareholders thereof concerning any Material transaction, arrangement or action,
the Company will, and the Company will cause each of its Subsidiaries to use
reasonable efforts to consult with the Investor a reasonable period of time
prior to entering into such Material transaction or arrangement or taking such
Material action, in a manner which will allow the Investor a reasonable
opportunity to evaluate and present its views to the Company regarding such
Material transaction, arrangement or action.
(b) All information and documents provided under this Section 4.2 shall be
kept confidential by the Investor and its Representatives, unless any such
information or documents (i) is or becomes generally available to the public
(other than as a result of a disclosure by the Investor or any of its
Representatives), (ii) was already known by or available on a non-confidential
basis to the Investor or its Representatives prior to being furnished by or on
behalf of the Company and its Subsidiaries hereunder, or (iii) is or becomes
available to the Investor or its Representatives from a third party not bound by
any contractual obligation to the Company and its Subsidiaries to keep such
information confidential. In the event of the termination of this Agreement in
accordance with the terms hereof, the Investor will, upon the request of the
Company, promptly deliver to the Company all written information and documents
provided above under this Section, and any copies thereof, in the possession of
the Investor or any of its personnel.
(c) Notwithstanding the foregoing, no investigation or review by the
Investor or any of its Representatives shall affect or be deemed to modify any
of the representations, warranties, covenants or agreements of the Company under
this Agreement or otherwise; it being understood that, notwithstanding any right
of the Investor fully to investigate the affairs of the Company, Spanlink and
their respective Subsidiaries, and notwithstanding any knowledge of facts
determined or determinable by the Investor pursuant to any such investigation or
right of investigation, the Investor has the right to rely fully upon the
representations, warranties, covenants and agreements of the Company contained
in this Agreement.
4.3 Cooperation and Reasonable Efforts. Subject to the terms and
conditions hereof, (a) each of the parties hereto shall reasonably cooperate
with the other, and the Company will cause each of its Subsidiaries to
reasonably cooperate with the Investor, in connection with consummating the
transactions contemplated by this Agreement and the other Transaction Documents,
and (b) each of the parties hereto agrees to, and the Company will cause each of
its Subsidiaries to, use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement or any other Transaction Document.
For purposes of this Section 4.3, the covenant of the parties to use their
"reasonable efforts" shall not require any party to (i) incur any unreasonable
expenses, (ii) agree to materially limit or adversely affect
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in any material respect the conduct of its business or (iii) divest itself of
any material assets or Properties, in each case except as otherwise contemplated
hereunder.
4.4 Consents and Approvals. As soon as practicable after the execution of
this Agreement, subject to the last sentence of Section 4.3, each of the parties
hereto shall, and the Company shall cause each of its Subsidiaries to, use all
reasonable efforts to obtain any necessary Consents of, and make any filing with
or give any notice to, any Governmental Entities and other Persons (including,
without limitation, (i) pursuant to the HSR Act as are required to be obtained,
made or given by such party to consummate the transactions contemplated by this
Agreement and the other Transaction Documents. The parties hereto shall
cooperate with one another in exchanging such information and reasonable
assistance as may be required by any such Governmental Entity or as any other
party may reasonably request in connection with the foregoing.
4.5 Notification of Certain Matters. Promptly after becoming aware
thereof, each of the parties hereto shall give notice to the other of (a) the
occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of
which would cause, or have a reasonable prospect of causing, any representation
or warranty of the Company or the Investor, respectively, contained in this
Agreement to be untrue or inaccurate in any material respect (or, in the case of
any representation or warranty which is qualified as to materiality, untrue or
inaccurate in any respect) at or prior to the Closing and (b) any material
failure of the Company or the Investor, respectively, to comply with or satisfy
any covenant or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 4.5
shall not cure such failure or limit or otherwise affect the remedies available
hereunder to the parties receiving such notice. Without limiting the generality
of the foregoing, from the date hereof through the Closing Date, each of the
parties hereto shall promptly notify the other of any action, suit, claim,
litigation, proceeding or investigation of the type required to be described in
any Schedule hereto that, to its Knowledge, is commenced or threatened, and of
any request for additional information or documentary materials by any
Governmental Entity in connection with the transactions contemplated hereby or
by the Transaction Documents. The Company shall, as promptly as practicable,
furnish to the Investor any and all further filings and submissions made in
connection with the Transaction Documents and any and all written notices
pursuant to the Transaction Documents.
4.6 Public Announcements. Each party hereto shall notify the other prior
to issuing any press release or making any public statement pertaining to this
Agreement or the transactions contemplated hereby, and shall not issue any such
press release or make any such public statement without obtaining the reasonable
approval of the other parties prior thereto, except that each party will in any
event have the right to issue any such release or statement upon advice of its
counsel that such issuance is required in order to comply with any applicable
law or any listing agreement with, or rules of, a national securities exchange
to which such party is a party or subject.
4.7 No Solicitation. Until the earlier of the consummation of the
transactions contemplated hereby or the termination of this Agreement in
accordance with the terms hereof, the Company, its officers, employees,
Representatives and agents shall immediately cease any existing discussions,
communications or negotiations, if any, with any Persons ("Prior Bidders") other
than the Investor and its Representatives, conducted heretofore with respect to
any direct or indirect acquisition or offering of all or any material portion of
the assets or Properties of, or any capital stock (including, without
limitation, Common Stock or Preferred Stock) or other equity interest in or
voting securities of the Company or any of its Subsidiaries or any business
combination with the Company or any of its Subsidiaries (whether by merger,
consolidation, or otherwise) or any other transaction inconsistent with
consummation of, or similar in whole or in part to, the transactions
contemplated herein (any of the foregoing, an "Alternative Transaction"), and
will not, directly or indirectly, solicit, encourage, participate in or initiate
discussions or negotiations with, or provide any information or documents to, or
otherwise cooperate in any way with, any Person (other than the Investor and its
Representatives) concerning any Alternative Transaction, provided, however, that
those officers of the Company who are also officers of Spanlink may perform
their ministerial duties to "furnish information with respect to" Spanlink at
the explicit direction of the Disinterested Committee (as such term is defined
in the Merger Agreement) as provided in, and consistent with, Section 6.7(a) of
the Merger Agreement, so long as such ministerial actions do not constitute a
breach of the Merger Agreement. The Company shall notify the
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Investor orally and in writing if any proposal relating to an Alternative
Transaction (an "Alternative Transaction Proposal") is received by the Company,
any of its Subsidiaries or (to the Knowledge of the Company) its Affiliates or
Representatives, or if any inquiry is received by, any information is requested
from, or any discussions or negotiations are sought to be initiated or continued
with, any of the foregoing Persons in connection with an Alternative Transaction
or Alternative Transaction Proposal, immediately after receipt of such
Alternative Transaction Proposal, inquiry, request or other communication. Such
written notification shall include the identity of the Person making such
Alternative Transaction Proposal, inquiry, request or other communication and
such other information with respect thereto as is reasonably necessary to
apprise the Investor of the precise nature of such inquiry, request or other
communication, or the material terms of such Alternative Transaction Proposal,
and all other material information relating thereto. The Company shall use all
reasonable efforts to cause all confidential or proprietary materials relating
to the Company, Spanlink and their respective Subsidiaries previously furnished
to Prior Bidders or other Persons in connection with an Alternative Transaction
to be promptly returned to the Company.
4.8 Interim Financial Statements and Investment Reports.
(a) From the date hereof until the Closing Date, as soon as practicable
(and in any event within five (5) Business Days) after they become available,
the Company shall use its best efforts to deliver to the Investor true and
complete copies of (A) the consolidated balance sheets of the Company, Spanlink,
and their respective Subsidiaries as at the end of each quarterly or annual
period ending after the date hereof, and the related consolidated statements of
income, changes in shareholders, equity and cash flows of the Company, Spanlink
and their respective Subsidiaries for such interim year-to-date or annual period
and the portion of the fiscal year through the end of such interim period, and
(B) to the extent prepared, all monthly financial statements of the Company
and/or any of its Subsidiaries (collectively, the "Interim Financial
Statements"). In addition, during such period, if and when available, the
Company shall deliver to the Investor true and complete copies of any budgets,
business plans and financial projections, or modifications thereof, relating to
the Company, Spanlink, or any of their respective Subsidiaries.
(b) The Interim Financial Statements will each be prepared in accordance
with GAAP consistently applied throughout the periods involved (and on a basis
consistent with the Financial Statements) and in accordance with the books and
records of the Company, Spanlink and their respective Subsidiaries, and will
present fairly the financial position of the Company, Spanlink and their
respective Subsidiaries as at the respective dates thereof and the results of
operations of the Company, Spanlink and their respective Subsidiaries for the
respective periods then ended, except that quarterly and monthly Interim
Financial Statements will not be required to contain full footnote disclosures
in accordance with GAAP and may be subject to normal year-end audit adjustments.
4.9 Securities Legends.
(a) Each certificate evidencing ownership of shares of Series A Preferred
Stock shall be stamped or otherwise have endorsed or imprinted thereon a legend
in substantially the following form, so long as applicable:
"THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OF COMMON STOCK
OF THE CORPORATION ISSUABLE UPON CONVERSION HEREOF MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION OF THE CORPORATION DATED FEBRUARY 25, 2000. ANY SHARES OF
COMMON STOCK OF THE CORPORATION ISSUABLE UPON CONVERSION HEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN APPLICABLE EXEMPTION
FROM REGISTRATION THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS. THE SALE OR TRANSFER OF THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION HEREOF IS FURTHER SUBJECT TO RESTRICTIONS
CONTAINED IN A STOCK PURCHASE AGREEMENT DATED AS OF FEBRUARY 25, 2000 BY
AND BETWEEN THE
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COMPANY AND CISCO SYSTEMS, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT
THE OFFICES OF THE COMPANY."
(b) Each certificate evidencing ownership of shares of Common Stock shall
be stamped or otherwise have endorsed or imprinted thereon a legend in
substantially the following form, so long as applicable:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS FURTHER
SUBJECT TO RESTRICTIONS CONTAINED IN A STOCK PURCHASE AGREEMENT DATED AS OF
FEBRUARY 25, 2000 BY AND BETWEEN THE COMPANY AND CISCO SYSTEMS, INC., A
COPY OF WHICH AGREEMENT IS ON FILE AT THE OFFICES OF THE COMPANY."
(c) Notwithstanding the foregoing, upon receipt by the Company of evidence
reasonably satisfactory to it of the termination of the requirement that all or
any part of any of the foregoing legends be placed upon a certificate and upon
the written request of the holders of the securities represented thereby, the
Company shall issue certificates for such securities that do not bear such
legend.
ARTICLE V
CONDITIONS TO THE OBLIGATION
OF THE INVESTOR TO CLOSE
The obligation of the Investor to purchase the Series A Shares at the
Closing shall be subject to the satisfaction of the following conditions at or
prior to the Closing:
5.1 Representations Warranties and Covenants. The representations and
warranties of the Company contained in this Agreement which are qualified as to
materiality shall be true and correct in all respects, and those not so
qualified shall be true and correct in all material respects, as of the date of
this Agreement and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, except that any such representations
and warranties which are made as of and relate solely to a specified earlier
date (other than the date hereof) shall be so true and correct as of such
earlier date. The Company shall have performed and complied in all material
respects with all covenants, conditions and agreements required to be performed
or complied with by the Company hereunder on or prior to the Closing Date.
5.2 Consents. All Consents required in connection with the purchase and
sale of the Series A Shares and the consummation of the Closing (other than
non-material Consents from third parties which are not Governmental Entities)
shall have been duly obtained, made or given and shall be in full force and
effect, without the imposition upon the Investor, the Company, Spanlink or any
of their respective Subsidiaries of any material condition, restriction or
required undertaking not expressly set forth in applicable statutes and
regulations or any limitation on the ability of the Company to pay dividends on
any of the Transaction Securities (other than Common Stock).
5.3 No Injunction or Illegality. No injunction, order, decree or judgment
shall have been issued by any court or other Governmental Entity of competent
jurisdiction and be in effect, and no statute, rule or regulation shall have
been enacted or promulgated by any Governmental Entity and be in effect, which
in each case restrains or prohibits the consummation of the purchase and sale of
the securities.
5.4 HSR Act. The required waiting period applicable to the purchase and
sale of the Series A Shares under the HSR Act shall have expired or been earlier
terminated.
5.5 Opinion of Counsel to the Company. The Investor shall have received
the opinion of Fredrikson & Byron, P.A., special counsel to the Company, as to
the matters set forth in Exhibit C.
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5.6 Certificates. Each of the Company, Spanlink and their respective
Subsidiaries shall have delivered to the Investor (a) copies of the resolutions
adopted by its respective Board of Directors and shareholders, certified as of
the Closing Date by the corporate secretary or assistant secretary of the
Company, authorizing and approving this Agreement and the Transaction Documents
and the transactions contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Series A Shares), and (b) a certificate
dated the Closing Date, signed by an executive officer of the Company,
certifying as to the fulfillment of the conditions set forth in this Article. In
addition, the Company shall have furnished the Investor with such other
certificates and closing documents as the Investor may reasonably request.
5.7 Restated Certificate. The Restated Certificate shall have been filed
by the Secretary of the State of Delaware, and shall have become effective.
5.8 Election of Directors. At least one person designated by the Investor
shall have been duly elected or appointed as a member of the Board of Directors
of the Company, and at least one such person as selected by the Investor shall
have been duly appointed as a member of each committee of such Board, in each
case effective at or prior to the Closing.
5.9 Investor Rights Agreement. The Company and each of its shareholders
shall have duly executed and delivered an Investor Rights Agreement,
substantially in the form attached as Exhibit B (the "Investor Rights
Agreement").
5.10 Offer and Subscription. All conditions to the Offer shall have been
satisfied in full to the satisfaction of the Investor in its sole discretion.
All conditions to the Subscription shall have been satisfied in full to the
satisfaction of the Investor in its sole discretion. Concurrently with the
Closing, the Offer shall have been consummated substantially in accordance with
the Merger Agreement and all applicable laws. Concurrently with the Closing, the
Subscription shall have been consummated substantially in accordance with the
Subscription Agreement and all applicable laws. The representations and
warranties of each party to the Transaction Documents shall be true and correct
in all material respects as of the Closing Date with the same force and effect
as though made on and as of the Closing Date. Each such party shall have
delivered to the Investor a certificate dated the Closing Date, signed by an
executive officer thereof, certifying as to the fulfillment of the conditions
set forth in this Section.
5.11 Transfer Taxes. The Company shall have caused all appropriate stock
transfer Tax stamps to be affixed to the certificate or certificates
representing the Series A Shares so sold and delivered.
5.12 Tender Offer. The Company shall have caused all documents necessary
and appropriate to commence the Offer to be prepared and, as necessary, filed
with the Securities and Exchange Commission on or before February 29, 2000.
ARTICLE VI
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligation of the Company to issue and sell the Series A Shares at the
Closing shall be subject to the satisfaction of the following conditions at or
prior to the Closing:
6.1 Representations, Warranties and Covenants. The representations and
warranties of the Investor contained in this Agreement which are qualified as to
materiality shall be true and correct in all respects, and those not so
qualified shall be true and correct in all material respects, as of the date of
this Agreement and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, except that any such representations
and warranties which are made as of and relate solely to a specified earlier
date (other than the date hereof) shall be so true and correct as of such
earlier date. The Investor shall have performed and complied in all material
respects with all covenants and agreements required to be performed or complied
with by the Investor hereunder on or prior to the Closing Date.
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6.2 Consents. All Consents required in connection with the purchase and
sale of the Series A Shares and the consummation of the Closing (other than
non-material Consents from third parties which are not Governmental Entities)
shall have been duly obtained, made or given and shall be in full force and
effect, without the imposition upon the Company or any of their respective
Subsidiaries of any material condition, restriction or required undertaking not
expressly set forth in applicable statutes and regulations.
6.3 No Injunction or Illegality. No injunction, order, decree or judgment
shall have been issued by any court or other Governmental Entity of competent
jurisdiction and be in effect, and no statute, rule or regulation shall have
been enacted or promulgated by any Governmental Entity and be in effect, which
in each case restrains or prohibits the consummation of the purchase and sale of
the Series A Shares.
6.4 HSR Act. The required waiting period applicable to the purchase and
sale of the Securities under the HSR Act shall have expired or been earlier
terminated.
6.5 Certificates. The Investor shall have delivered to the Company (a) a
copy of the resolutions adopted by its Board of Directors (and shareholders if
required for the consummation of the transactions contemplated by this
Agreement), certified as of the Closing Date by the corporate secretary or
assistant secretary of the Investor, authorizing and approving this Agreement
and the other Transaction Documents to which it is a party and the transactions
contemplated hereby and thereby (including, without limitation, the purchase of
the Series A Shares), and (b) a certificate dated the Closing Date, signed by an
executive officer thereof, certifying as to the fulfillment of the conditions
set forth in Section 6.1.
6.6 Restated Certificate. The Restated Certificate shall have been filed
with the Secretary of State of the State of Delaware, and shall have become
effective.
ARTICLE VII
INDEMNIFICATION
7.1 Survival. The representations and warranties of the parties contained
in this Agreement, any Transaction Document, or in any Schedule hereto or
thereto or any certificate delivered pursuant to Section 5.6 or Section 6.5
hereof, shall survive until the later of April 31, 2001 or ninety (90) days
after the delivery to the Investor of the audited consolidated financial
statements of the Company and its Subsidiaries for the year ending December 31,
2001; provided, however, that (a) the representations and warranties set forth
in Section 2.11 (Exemption from Registration) shall expire upon expiration of
all applicable statute of limitations periods, (b) the representations and
warranties set forth in Section 2.12 (Transaction Document Representations)
shall survive so long as, and to the same extent as, the representations,
warranties, covenants and agreements referred to therein survive under the
Transaction Documents, (c) the representations and warranties set forth in
Sections 2.2 (Authorization, Validity and Enforceability) and 2.3 (No
Conflicts), insofar as they relate to the Investor Rights Agreement or other
Transaction Documents, shall survive for the period in which such agreements are
in effect, and (d) the representations and warranties set forth in Sections 2.5
(Capitalization), 2.6 (Title to Securities) and 2.7 (Subsidiaries) shall survive
forever.
7.2 Indemnification.
(a) The Company hereby agrees to indemnify, defend and hold harmless the
Investor (and its directors, officers, Affiliates, successors and assigns) from
and against any losses, Liabilities, damages, costs or expenses, including,
without limitation, interest, penalties and reasonable fees and expenses of
counsel (collectively, "Losses"), or other diminution in the value of the Series
A shares, based upon, arising out of or otherwise resulting from (i) any
inaccuracy in any representation or breach of any warranty of the Company
contained in this Agreement or any other Transaction Document or in any Schedule
hereto or thereto or certificate delivered pursuant to Section 5.6 or (ii) the
breach or nonfulfillment of any covenant, agreement or other obligation of the
Company under this Agreement or any other Transaction Document. In the event
that the parties are unable to agree upon the extent, if any, to which any such
diminution in value of the Series A Shares is indemnifiable hereunder or the
amount of any such diminution in value, the parties hereto shall jointly select
and retain a nationally recognized investment banking firm, which shall make
such determination
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or determinations as soon as reasonably practicable; the decision of such
investment banking firm shall be final and binding upon the parties hereto,
which shall equally share the costs and expenses of such investment banking
firm.
(b) The Investor hereby agrees to indemnify, defend and hold harmless the
Company (and its directors, officers, Affiliates, successors and assigns) from
and against any Losses based upon, arising out of or otherwise resulting from
(i) subject to Section 4.9 hereof, any inaccuracy in any representation or
breach of any warranty of the Investor contained in this Agreement or any
Transaction Document or in any Schedule hereto or thereto or certificate
delivered pursuant to Section 6.5 hereof or (ii) the breach or nonfulfillment of
any covenant, agreement or other obligation of the Investor under this Agreement
or any Transaction Document.
(c) Promptly after the receipt by any party hereto of notice of any third
party claim or the commencement of any third party action, suit or proceeding
subject to indemnification hereunder (a "Third Party Claim"), such party (the
"Indemnified Party") will, if a claim in respect thereto is to be made against
any party obligated to provide indemnification hereunder (the "Indemnifying
Party"), give such Indemnifying Party written notice of such Third Party Claim;
provided, however, that the failure to provide such notice will not relieve the
Indemnifying Party of any of its obligations, or impair the right of the
Indemnified Party to indemnification, pursuant to this Section 8.2 unless, and
only to the extent that, such failure materially prejudices the Indemnifying
Party's opportunity to defend or compromise the Third Party Claim or such
failure directly increases the amount of indemnification payments hereunder over
and above the amount thereof which would otherwise have been payable had such
notice been provided as aforesaid. If the Indemnified Party is not a litigant,
participant or real party in interest in the Third Party Claim, such Third Party
Claim shall be the sole responsibility of the Indemnifying Party which shall
defend the same at its own expense and by its own counsel and shall have sole
authority to compromise or settle the same. If the Indemnified Party is a
litigant, participant or real party in interest in the Third Party Claim (an
"Interested Third Party Claim"), the Indemnifying Party shall have the right, at
its option, to defend at its own expense and by its own counsel such Interested
Third Party Claim, provided that (i) such counsel is reasonably satisfactory to
the Indemnified Party, (ii) the Indemnified Party is kept reasonably informed of
all developments, and is furnished with copies of all documents and papers,
related thereto and is given the right to participate in the defense and
investigation thereof as provided below, and (iii) such counsel proceeds with
diligence and in good faith with respect thereto. If any Indemnifying Party
shall undertake to defend any Interested Third Party Claim, it shall notify the
Indemnified Party of its intention to do so promptly (and in any event no later
than thirty (30) days) after receipt of notice of the Interested Third Party
Claim, and the Indemnified Party agrees to cooperate in good faith with the
Indemnifying Party and its counsel in the defense of such Interested Third Party
Claim. Notwithstanding the foregoing, the Indemnified Party shall have the right
to participate in the defense and investigation of any such Interested Third
Party Claim with its own counsel at its own expense, except that the
Indemnifying Party shall bear the expense of one such separate counsel if (A) in
the written opinion of counsel to the Indemnified Party reasonably acceptable to
the Indemnifying Party, use of counsel of the Indemnifying Party's choice would
be expected to give rise to a conflict of interest, (B) there are or may be
legal defenses available to the Indemnified Party that are different from or
additional to those available to the Indemnifying Party, (C) the Indemnifying
Party shall not have employed counsel to represent the Indemnified Party within
a reasonable time after notice of such Interested Third Party Claim is given to
the Indemnifying Party or notice that the Indemnifying Party intends to assume
the defense of the Interested Third Party Claim is given to the Indemnified
Party or (D) the Indemnifying Party shall authorize the Indemnified Party in
writing to employ separate counsel at the expense of the Indemnifying Party. The
Indemnifying Party shall not settle any Interested Third Party Claim without the
prior written consent of the Indemnified Party, which shall not be unreasonably
withheld (except that no such consent shall be required if such settlement
complies with the last sentence of this paragraph); provided, however, that an
Indemnified Part y shall not be required to consent to any settlement involving
the imposition of equitable remedies with respect to such Indemnified Party or
its Affiliates. If, under the foregoing provisions, the Indemnified Party
assumes control of the defense of any Interested Third Party Claim, the
Indemnified Party shall not settle such Interested Third Party Claim without the
prior written consent of the Indemnifying Party, which shall not be unreasonably
withheld; provided, however, that if an Indemnifying Party fails to consent to
any such settlement proposed by such Indemnified Party, and the Indemnifying
Party
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does not assume or reassume the defense of such Interested Third Party Claim and
post a letter of credit in the amount of the proposed settlement within ten (10)
Business Days or such earlier time that such offer to settle expires, then the
Indemnified Party shall be entitled to settle such claim in good faith without
the consent of the Indemnifying Party. Any settlement of an Interested Third
Party Claim shall include as an unconditional and irrevocable term thereof a
complete general release of the Indemnified Party from all liability in respect
of such Interested Third Party Claim.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. This Agreement may be terminated prior to
the Closing:
(a) by either party hereto, upon written notice to the other if,
without fault of the terminating party, the Closing shall not have occurred
on or before May 31, 2000; or
(b) by either party hereto, upon written notice to the other, if the
Merger Agreement or the Subscription Agreement is terminated or any party
thereto becomes unable to consummate the Offer, the Merger or the
transactions contemplated by the Subscription Agreement in accordance with
the terms thereof (in each case without any breach or default by the party
so terminating this Agreement); or
(c) by either party hereto, upon written notice to the other, if there
has been a material breach or default of any covenant or agreement
hereunder or under any Transaction Document on the part of such other party
or, in the case of any Transaction Document, any other party thereto, which
breach or default is not curable or, if curable, is not cured within
fifteen (15) Business Days after such party becomes aware of the breach or
default; or
(d) at any time by mutual agreement in writing of the parties hereto.
8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall thereafter become void
and have no effect, and no party hereto shall have any liability or obligation
to any other party hereto in respect of this Agreement, except that the
provisions of Section 4.2(c) (Confidentiality), Section 4.6 (Public
Announcements), Article IX (Miscellaneous), this Section 8.2 and Section 7.2
(Indemnification) shall survive any such termination. Nothing herein shall
relieve any party from liability for any breach of any of its representations,
warranties, covenants or agreements contained in this Agreement prior to
termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. Any notices and other communications required to be given
pursuant to this Agreement shall be in writing and shall be effective upon
delivery by hand (against written receipt) or upon receipt if sent by certified
or registered mail (postage prepaid and return receipt requested) or by a
nationally recognized overnight courier service (appropriately marked for
overnight delivery) or upon transmission if sent by telex or facsimile (with
request for immediate confirmation of receipt in a manner customary for
communications of such respective type and with physical delivery of the
communication being made by one of the other means specified in this Section 9.1
as promptly as practicable thereafter) Notices are to be addressed as follows:
(a) If to the Company to:
Spanlink Acquisition Corp.
7125 Northland Terrace
Minneapolis, MN 55428
Attention: Brett Shockley
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with a copy to:
Fredrikson & Byron, P.A.
1100 Internation Centre
900 Second Avenue South
Minneapolis, MN 55402
Attention: Robert K. Ranum
Telecopy No.: (612) 347-7077
(b) If to the Investor to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Attention: Larry Carter
Telecopy No.: (408) 526-4545
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303-0913
Attention: Curtis L. Mo, Esq.
Telecopy No.: (650) 424-0160
or to such other respective addresses as any of the parties hereto shall
designate to the others by like notice, provided that notice of a change of
address shall be effective only upon receipt thereof.
9.2 Fees and Expenses. Except as provided herein, each of the parties to
this Agreement shall pay its own respective fees and expenses (including the
fees and disbursements of any attorneys, accountants, investment bankers,
consultants, or other Representatives) incurred in connection with this
Agreement and the transactions contemplated hereby, whether or not such
transactions are consummated. At or prior to the Closing, the Company shall pay
the reasonable fees and expenses of Brobeck, Phleger & Harrison LLP, special
counsel to the Investor, incurred in connection with the transactions
contemplated by the Transaction Documents.
In the event that this Agreement is terminated pursuant to Section 8.1 or
the Closing shall not have occurred (other than due to the breach or default of
the Investor of any of its representations, warranties, covenants, or agreements
hereunder), the Company shall immediately assign to the Investor all funds or
rights to receive funds that the Company may receive relating to the Company
Break-up Fee, as such term is defined in the Merger Agreement, or relating to
the reimbursement of the Investor for all of the Investor's actual out-
of-pocket costs and expenses (including, without limitation, all fees and
disbursements of attorneys, accountants, investment bankers, consultants, and
other Representatives) incurred in connection with this Agreement and the
transactions contemplated hereby, such right to be the sole and exclusive remedy
of the Investor with respect thereto, in lieu of whatever other remedies at law
or in equity or otherwise the Investor may have.
9.3 Specific Performance. Each party hereto acknowledges and agrees that
in the event of any breach or default by the other party under this Agreement,
the other party hereto would be irreparably and immediately harmed and could not
be made whole by monetary damages. It is accordingly agreed that in such case
(i) each defaulting party hereto will waive, in any action, suit or proceeding
for specific performance or other relief referred to in this paragraph, the
defense of adequacy of money damages or a remedy at law, and (ii) subject to
Section 7.2(f), the other non-defaulting party shall be entitled, in addition to
any other remedy to which it may be entitled at law or in equity or otherwise,
to compel specific performance of this Agreement
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or to obtain a temporary restraining order, preliminary and permanent injunction
or other equitable relief or remedy, in any action, suit or proceeding
instituted in any state or federal court.
9.4 Entire Agreement; Waivers and Amendments. This Agreement (including
the Exhibits and Schedules hereto and the documents and instruments referred to
herein) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto. This Agreement may only be
amended or modified, and the terms hereof may only be waived, by a writing
signed by both parties hereto or, in the case of a waiver, by the party entitled
to the benefit of the terms being waived.
9.5 Assignment; Binding Effect. This Agreement may not be assigned or
delegated, in whole or in part, by either party hereto without the prior written
consent of the other party hereto, except that the Investor shall have the right
at any time, without such consent, to assign its right hereunder to purchase any
or all of the Series A Shares to any wholly owned Subsidiary of the Investor (in
which event, the Investor shall irrevocably and unconditionally guarantee the
performance by such Subsidiary of the Investor's obligation hereunder to
purchase such Series A Shares, and such Subsidiary shall become a party to the
provisions of Article IV of this Agreement and the Investor shall so guarantee
the performance by such Subsidiary of its obligations under Article IV). Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
9.6 Severability. In the event that any provision of this Agreement shall
be declared invalid or unenforceable by a court of competent jurisdiction in any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective to
the extent declared invalid or unenforceable without affecting the validity or
enforceability of the other provisions of this Agreement, and the remainder of
this Agreement shall remain binding on the parties hereto (so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party). Upon such determination, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.
9.7 No Third Party Beneficiaries. This Agreement is for the benefit of
the parties hereto and is not intended to confer upon any other Person any
rights or remedies hereunder.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Minnesota, without giving
effect to its principles of conflicts of law.
9.9 Interpretation. This Agreement is the result of arms-length
negotiations between the parties hereto and has been prepared jointly by the
parties. In applying and interpreting the provisions of this Agreement, there
shall be no presumption that the Agreement was prepared by any one party or that
the Agreement shall be construed in favor of or against any one party.
9.10 Captions. The Article and Section Headings in this Agreement are
inserted for convenience of reference only and shall not affect the
interpretation of this Agreement.
9.11 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall be
considered one and the same agreement.
ARTICLE X
DEFINITIONS
10.1 Definitions. The following terms when used in this Agreement
(including the Schedules and Exhibits) shall have the following respective
meanings:
"Affiliate" of a Person means any other Person that directly or
indirectly through one or more intermediaries controls, is controlled by or
is under common control with such Person. For purposes of this definition
and the definition of "Subsidiary" below, "control" (or "controlled," as
the context may require) shall have the meaning set forth in Rule 12b-2
under the Exchange Act.
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"Alternative Transaction" and "Alternative Transaction Proposal, have
the respective meanings set forth in Section 4.7.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in California are required or authorized by
law to be closed.
"Closing" has the meaning set forth in Section 1.2.
"Closing Date" has the meaning set forth in Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
"Common Stock" has the meaning set forth in the recitals of this
Agreement.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Break-up Fee" has the meaning set forth in Section 9.2 of
this Agreement.
"Consents" has the meaning set forth in Section 2.4.
"Contracts" means all written or oral contracts, agreements,
undertakings, indentures, notes, debentures, bonds, loans, instruments,
leases, mortgages, commitments or other binding arrangements.
"Conversion Shares" has the meaning set forth in Section 2.6.
"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" means any federal, state, local or foreign
government, political subdivision, legislature, court, agency, department,
bureau, commission or other governmental or regulatory authority, body or
instrumentality, including any insurance or securities regulatory authority
and any industry or other non-governmental self-regulatory organizations.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" and "Indemnifying Party" have the respective
meanings set forth in Section 7.2.
"Interested Third Party Claim" has the meaning set forth in Section
7.2(c).
"Interim Financial Statements" has the meaning set forth in Section
4.8.
"Investor" has the meaning set forth in the first paragraph of this
Agreement.
"Investor Rights Agreement" has the meaning set forth in Section 5.9.
"Knowledge" has the meaning set forth in Article II.
"Lien or Encumbrance" means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right, easement, servitude,
transfer limit, restriction, title defect or other encumbrance.
"Losses" has the meaning set forth in Section 7.2.
"Material" means material to the business, operations, assets,
condition (financial or otherwise), liabilities, results of operations or
Permits of the Company, Spanlink and their respective Subsidiaries, either
taken individually or in the aggregate.
"Material Adverse Effect" has the meaning set forth in Article II.
"Merger Agreement" has the meaning set forth in the recitals of this
Agreement.
"Permits" means all licenses, certificates of authority, permits,
orders, consents, approvals, registrations, authorizations, qualifications
and filings under any federal, state, local or foreign laws or with any
Governmental Entities.
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"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint stock company,
trust, unincorporated organization, Governmental Entity or other entity or
organization.
"Preferred Stock" has the meaning set forth in Section 2.5.
"Prior Bidders" has the meaning set forth in Section 4.7.
"Property" means any real, personal or mixed property, whether
tangible or intangible.
"Purchase Price" has the meaning set forth in Section 1.1.
"Representatives" has the meaning set forth in Section 4.2.
"Restated Certificate" has the meaning set forth in the recitals of
this Agreement.
"Securities" has the meaning set forth in the recitals of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Series A Preferred Stock" and "Series A Shares" have the respective
meanings set forth in the recitals of this Agreement.
"Subscription" means the share exchange as described in the
Subscription Agreement dated as of February , 2000, by and among Spanlink
Acquisition Corp., a Minnesota Corporation, Brett Schockley, Loren Singer,
Jr., and Todd A. Parenteau.
"Subsidiary" means, with respect to any Person, any entity controlled
(as such term is defined in the definition of "Affiliate" above) by such
Person and, in the case of Company, Spanlink and its Subsidiaries.
"Tax" and "Taxes" mean all income, profits, gains, gross receipts, net
worth, premium, value added, ad valorem, sales, use, excise, stamp,
transfer, franchise, withholding, payroll, employment, occupation,
severance, unemployment insurance, social security and property taxes, and
all other taxes of any kind whatsoever, together with any interest,
penalties and additions thereto imposed by any federal, state, local or
foreign government or any agency or political subdivision of any such
government, including all amounts imposed as a result of being a member of
an affiliated or combined group.
"Third Party Claim" has the meaning set forth in Section 7.2.
"Transaction Documents" means, collectively, this Agreement, the
Restated Certificate, the Investor Rights Agreement, the Merger Agreement,
the Subscription Agreement and each other Contract entered into or
delivered pursuant to or in connection with any of the same or the
transactions contemplated hereby or thereby.
"Transaction Securities" has the meaning set forth in Section 3.6.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first written above.
CISCO SYSTEMS, INC.
By: /s/ LARRY CARTER
------------------------------------
Name: Larry Carter
Title: Chief Financial Officer
SPANLINK ACQUISITION CORP.
By: /s/ BRETT SHOCKLEY
------------------------------------
Name: Brett Shockley
Title: Chief Executive Officer
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ANNEX D
MINNESOTA BUSINESS CORPORATION ACT
302A.471. RIGHTS OF DISSENTING SHAREHOLDERS
SUBDIVISION 1. Actions creating rights. A shareholder of a corporation
may dissent from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption
of the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares
to acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter,
or to cumulate votes, except as the right may be excluded or limited
through the authorization or issuance of securities of an existing or new
class or series with similar or different voting rights; except that an
amendment to the articles of an issuing public corporation that provides
that section 302A.671 does not apply to a control share acquisition does
not give rise to the right to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to vote on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
SUBD. 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
SUBD. 3. Rights not to apply. (a) Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
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(b) If a date is fixed according to section 302A.445, subdivision 1, for
the determination of shareholders entitled to receive notice of and to vote on
an action described in subdivision 1, only shareholders as of the date fixed,
and beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
SUBD. 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS
SUBDIVISION 1. Definitions. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
SUBD. 2. Notice of action. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
SUBD. 3. Notice of dissent. If the proposed action must be approved by
the shareholders, a shareholder who wishes to exercise dissenters' rights must
file with the corporation before the vote on the proposed action a written
notice of intent to demand the fair value of the shares owned by the shareholder
and must not vote the shares in favor of the proposed action.
SUBD. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
SUBD. 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each
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dissenting shareholder who has complied with subdivisions 3 and 4 the amount the
corporation estimates to be the fair value of the shares, plus interest,
accompanied by:
(1) The corporation's closing balance sheet and statement of income
for a fiscal year ending not more than 16 months before the effective date
of the corporate action, together with the latest available interim
financial statements;
(2) An estimate by the corporation of the fair value of the shares and
a brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision 4
and require deposit or restrict transfer at a later time.
SUBD. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
SUBD. 7. Petition; determination. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
D-3
<PAGE> 113
SUBD. 8. Costs; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
D-4
<PAGE> 114
The Depositary for the Tender Offer is:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Telephone Number:
(651) 450-4064
(800) 468-9716
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
P.O. Box 64854 161 North Concord Exchange
St. Paul, MN 55164 South St. Paul, MN 55075
Attn: Shareowner Services Attn: Shareowner Services
</TABLE>
-------------------------
The Information Agent for the Tender Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
Questions and requests for assistance may be directed to Corporate Investor
Communications, Inc. at (877) 977-6194. Corporate Investor Communications, Inc.
is acting as the Information Agent for the Offer. Additional copies of this
Letter of Transmittal may be obtained from the Company as set forth below, and
will be furnished promptly at the Company's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the tender offer.
<PAGE> 115
LETTER OF TRANSMITTAL
TO TENDER SHARES
OF
COMMON STOCK
OF
SPANLINK COMMUNICATIONS, INC.
AT $10.50 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 29, 2000
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT MINNESOTA TIME,
ON MARCH 30, 2000, UNLESS THE OFFER IS EXTENDED.
TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, AS DEPOSITARY
Telephone Number: (651) 450-4064
(800) 468-9716
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
P.O. Box 64854 161 North Concord Exchange
St. Paul, MN 55164 South St. Paul, MN 55075
Attn: Shareowner Services Attn: Shareowner Services
</TABLE>
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
CERTIFICATE(S) TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF (ATTACH ADDITIONAL LIST IF NECESSARY)
BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S)) (SEE INSTRUCTION 3 AND 4)
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
CERTIFICATE REPRESENTED BY
NUMBER(S)* CERTIFICATE(S)*
<S> <C> <C>
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Total Shares
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------- ----------------------
CERTIFICATE(S) TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF (ATTACH ADDITIONAL LIST IF NECESSARY)
BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S)) (SEE INSTRUCTION 3 AND 4)
- ------------------------------------------------------------------- ----------------------
NUMBER OF SHARES
TENDERED*
<S> <C>
--------------------------------------------- ------------------
- ----
--------------------------------------------- ----------------
- ------
--------------------------------------------- ----------------
- ------
--------------------------------------------- ----------------
- ------
- ----------------------------------------------------------------------------------------------------------------- ----------------
- ------
</TABLE>
* Need not be completed by Book-Entry Shareholders
** Unless otherwise indicated it is assumed that all Shares described above
are being tendered. See Instruction 4.
- --------------------------------------------------------------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 116
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) of Spanlink Communications, Inc. (the "Shareholders"), if
certificates evidencing Shares ("Certificates") are to be forwarded with this
Letter of Transmittal or if delivery of Shares is to be made by book-entry
transfer to an account maintained by Norwest Bank Minnesota, National
Association (the "Depositary") at The Depositary Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Procedures for
Tendering Shares of the Offer to Purchase (as defined below).
Shareholders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as defined
in "THE OFFER -- Procedures for Tendering Shares") with respect to, their Shares
and all other required documents to the Depositary prior to the Expiration Date
(as defined in "THE OFFER -- Terms of the Offer" of the Offer to Purchase) must
tender their Shares according to the guaranteed delivery procedure set forth in
the Procedures for Tendering Shares section of the Offer to Purchase. See
Instruction 2 hereof. Delivery of documents to the Book-Entry Transfer Facility
does not constitute delivery to the Depositary.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
Window Ticket Number (if any):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
- --------------------------------------------------------------------
Name of Institution That Guaranteed Delivery:
- ---------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
2
<PAGE> 117
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
In connection with the tender offer by Spanlink Acquisition Corp. (the
"Purchaser"), of all of the outstanding shares of common stock ("Common Stock"),
no par value per share, of Spanlink Communications, Inc. (the "Company"), the
undersigned encloses herewith and hereby surrenders to Norwest Bank Minnesota,
National Association, as Depositary (the "Depositary"), certificates (the "Share
Certificates") which evidence the above-described shares (the "Shares") of
Common Stock of the Company, in exchange for $10.50 per share of Common Stock,
net to the seller in cash, without interest thereon (the "Per Share Amount").
The tender offer has been effected pursuant to the Offer to Purchase dated
February 29, 2000 (the "Offer to Purchase").
The undersigned hereby sells, assigns and transfers to, or upon the order
of, the Purchaser all right, title and interest in and to all the Shares that
are being delivered herewith and irrevocably appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned to the full extent of
the undersigned's rights with respect to such Shares, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to deliver Share Certificates for such Shares,
together with all accompanying evidences of transfer and authenticity, to the
Purchaser or its stock transfer agent for cancellation upon receipt by the
Depositary, as the undersigned's agent, of the Per Share Amount therefor.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to sell, assign and transfer the Shares surrendered
herewith, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Depositary or the
Company to be necessary or desirable to complete the sale, assignment and
transfer of the Shares surrendered herewith.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Per Share Amount and return any Share Certificates not
surrendered in the name(s) of the registered holder(s) appearing under
"Description of Shares." Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the Per Share Amount and
return any Share Certificates not surrendered (and accompanying documents, as
appropriate) to the registered holder(s) appearing under "Description of Shares"
at the address shown below the undersigned's signature(s). In the event that
both "Special Delivery Instructions" and "Special Payment Instructions" are
completed, please issue the check for the Per Share Amount and return any Share
Certificates not surrendered in the name(s) of, and deliver said check and
return any certificates to, the person(s) so indicated.
3
<PAGE> 118
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the Per Share Amount or Share
Certificates not surrendered are to be issued in the name of someone other than
the undersigned.
Issue [ ] check
[ ] certificate(s) to:
Name
- -------------------------------------------------
(PLEASE PRINT)
Address
- -----------------------------------------------
- ---------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------
(TAXPAYER IDENTIFICATION NO. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 BELOW)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the Per Share Amount or Share
Certificates not surrendered are to be mailed to someone other than the
undersigned or to the undersigned at an address other than that shown below the
undersigned's signature(s).
Mail [ ] check
[ ] certificate(s) to:
Name
- -------------------------------------------------
(PLEASE PRINT)
Address
- -----------------------------------------------
- ---------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------
(TAXPAYER IDENTIFICATION NO. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 BELOW)
4
<PAGE> 119
IMPORTANT
SHAREHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
--------------------------------------------------------------------------
Dated:
--------------------------------------------- , 2000
Name(s)
--------------------------------------------------------------------------
(PLEASE PRINT)
--------------------------------------------------------------------------
Capacity (full title)
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.
- --------------------------------------------------------------------------------
Tax Identification or Social Security No.
---------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
(Must be signed by the registered holder(s) exactly as name(s) appear(s)
on Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity please set
forth full title and see Instruction 5.)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Name of Firm
--------------------------------------------------------------------------
Authorized Signature
--------------------------------------------------------------------------
Name
--------------------------------------------------------------------------
(PLEASE PRINT)
Title
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
---------------------------------------------------------------------------
Dated:
--------------------------------------------- , 2000
5
<PAGE> 120
TO BE COMPLETED BY ALL SHAREHOLDERS
(SEE INSTRUCTION 8)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYER'S NAME: SPANLINK ACQUISITION CORP.
- ---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT THE Social Security Number
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. or
DEPARTMENT OF THE TREASURY -------------------------------
INTERNAL REVENUE SERVICE Employer Identification Number
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
PAYER'S REQUEST FOR TAXPAYER PART II -- CERTIFICATION -- Under penalties of perjury, I certify that:
IDENTIFICATION NUMBER (TIN) (1) The number shown on this form is my correct taxpayer identification number (or I
am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do not
cross out such item (2).
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SIGNATURE _____________________ DATE_______, 2000 PART III -- Awaiting TIN [ ]
NAME (Please Print)
_______________________________
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE TENDER OFFER.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within sixty
(60) days.
Signature
_______________________
Date
Name (Please Print)
_______________________
6
<PAGE> 121
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm which is a
member of a registered national securities exchange or the National Association
of Securities Dealers, Inc., or by a commercial bank, trust company or other
entity that has an office or correspondent in the United States and is a member
of a recognized Medallion Program approved by the Securities Transfer
Association, Inc. (each an "Eligible Institution"). Signatures on this Letter of
Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed
by the registered holder(s) of the Shares surrendered herewith and such
holder(s) have not completed the box entitled "Special Payment Instructions" on
this Letter of Transmittal or (b) if such Shares are tendered for the account of
an Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates or Book Entry
Confirmation. This Letter of Transmittal is to be used either if certificates
are to be forwarded herewith or, unless an Agent's Message is utilized, if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in "THE OFFER -- Procedures for Tendering Shares" of the
Offer to Purchase. Certificates for all physically tendered Shares ("Share
Certificates"), or confirmation of any book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility of Shares tendered by book-entry
transfer ("Book Entry Confirmation"), as well as this Letter of Transmittal
properly completed and duly executed with any required signature guarantees,
unless an Agent's Message is utilized in the case of a book-entry transfer, and
any other documents required by this Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth herein on or prior to the
Expiration Date (as defined in "THE OFFER -- Terms of the Offer" of the Offer to
Purchase).
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver all other required documents to the Depositary on or prior to
the Expiration Date or who cannot comply with the procedures for book-entry
transfer on a timely basis, may nevertheless tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "THE OFFER -- Procedures for
Tendering Shares" of the Offer to Purchase. Pursuant to such procedure: (a) such
tender must be made by or through an Eligible Institution; (b) a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form provided by Purchaser must be received by the Depositary prior to the
Expiration Date; and (c) Share Certificates for all tendered Shares, in proper
form for transfer (or a Book Entry Confirmation with respect to such Shares), as
well as a Letter of Transmittal (or facsimile thereof), properly completed and
duly executed with any required signature guarantees (unless, in the case of a
book-entry transfer, an Agent's Message is utilized), and all other documents
required by this Letter of Transmittal, must be received by the Depositary
within three New York Stock Exchange Inc. trading days after the date of
execution of such Notice of Guaranteed Delivery.
A properly completed and duly executed Letter of Transmittal (or facsimile
thereof) must accompany each such delivery of Share Certificates to the
Depositary.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. DELIVERY OF ALL SUCH
DOCUMENTS WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT ALL SUCH DOCUMENTS BE SENT
BY PROPERLY INSURED REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering Shareholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers, the number of Shares and any other required information
should be listed on a separate schedule attached hereto and separately signed on
each page thereof in the same manner as this Letter of Transmittal is signed.
4. Partial Surrenders. A shareholder who wishes to surrender Shares for
exchange pursuant to the tender offer must surrender all of the Shares
registered in the name of such shareholder unless the beneficial owner of a
portion of the
7
<PAGE> 122
Shares registered in the name of such shareholder will exercise the right to
dissent with respect to the tender offer. In such case, the registered
shareholder must indicate the name of each beneficial owner on whose behalf such
shareholder will dissent and the number of Shares held by each such beneficial
owner. If fewer than all the Shares represented by any certificate delivered to
the Depositary are to be surrendered, fill in the number of Shares which are to
be surrendered in the box entitled "Number of Shares Surrendered." In such case,
a new certificate for the remainder of the Shares represented by the old
certificate will be sent to the person(s) signing this Letter of Transmittal,
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as promptly as practicable. All Shares represented by certificates delivered to
the Depositary will be deemed to have been surrendered unless otherwise
indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
surrendered herewith, the signature(s) must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares surrendered herewith are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares surrendered herewith are registered in different names
on different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares surrendered herewith, no endorsements of certificates or separate stock
powers are required unless payment of the Per Share Amount is to be made, or
Shares not surrendered are to be returned, in the name of any person other than
the registered holder(s). Signatures on any such certificates or stock powers
must be guaranteed by an Eligible Institution unless the signature is that of an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares surrendered herewith, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution unless the signature is that of an
Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
Purchaser of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. If payment of the Per Share Amount is to be made
to, or Shares not surrendered are to be returned in the name of, any person
other than the registered holder(s), or if a transfer tax is imposed for any
other reason, then the amount of any stock transfer taxes (whether imposed on
the registered holder(s), such other person or otherwise) will be deducted from
the Per Share Amount unless satisfactory evidence of the payment of such taxes,
or exemption therefrom, is submitted herewith.
Except as provided in this Instruction 6, it will not be necessary for
Transfer Tax Stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. Special Payment and Delivery Instructions. If the check for the Per
Share Amount is to be issued, or any Shares not surrendered are to be returned,
in the name of a person other than the person(s) signing this Letter of
Transmittal or if the check or any certificates for Shares not surrendered are
to be mailed to someone other than the person(s) signing this Letter of
Transmittal or to the person(s) signing this Letter of Transmittal at an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed.
8. Substitute Form W-9. Under the federal income tax laws, the Depositary
may be required to withhold 31% of the amount of any payments made to certain
shareholders pursuant to the tender offer. In order to avoid such backup
withholding, each shareholder, and, if applicable, each other payee, must
provide the Depositary with such shareholder's or payee's correct taxpayer
identification number and certify that such shareholder or payee is not subject
to such backup withholding by completing the Substitute Form W-9 set forth above
or by filing a properly completed Form W-9. In general, if a shareholder or
payee is an individual, the taxpayer identification number is the Social
Security number of such individual. If the Depositary is not provided with the
correct taxpayer identification number, the shareholder or
8
<PAGE> 123
payee may be subject to a penalty imposed by the Internal Revenue Service.
Certain shareholders or payees (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order to satisfy the Depositary that a foreign
individual qualifies as an exempt recipient, such shareholder or payee must
submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status. Such statements can be obtained from the Depositary.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Shares to be deemed invalidly surrendered, but may require the Depositary to
withhold 31% of the amount of any payments made pursuant to the tender offer.
Backup withholding is not an additional federal income tax. Rather, the federal
income tax liability of a person subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained provided that the required information is
furnished to the Internal Revenue Service.
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE TENDER
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
9. Requests for Assistance or Additional Copies. Requests for assistance
or additional copies of this Letter of Transmittal may be obtained from
Corporate Investor Communications, Inc. at (877) 977-6194. Corporate Investor
Communications, Inc. is acting as the Information Agent for the Offer.
10. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary. Instructions will then be given as to what steps
must be taken to obtain a replacement certificate(s). This Letter of Transmittal
and related documents cannot be processed until the procedures for replacing
such missing certificate(s) have been followed.
11. Defective Surrenders. The Company reserves the absolute right to
reject any or all surrenders that are defective or irregular and has authorized
the Depositary to request from persons making such surrenders such additional
documents as the Depositary deems appropriate to correct such defects or
irregularities. However, the Company reserves full discretion to waive any
defect or irregularity in any surrender as provided for herein and upon such
waiver it may treat and receive any such defective or irregular surrender as if
no such defect or irregularity had been present. Surrenders will not be deemed
to have been made until all defects or irregularities, which have not been
waived, have been cured. The Company's interpretation of the terms and
conditions of the Agreement and of this Letter of Transmittal (including these
instructions) with respect to such defects or irregularities shall be final and
binding.
This Letter of Transmittal, Share Certificates and any other required
documents should be sent or delivered by each shareholder of the Company or his
or her broker, dealer, commercial bank, trust company or other nominee to the
Depositary at one of its addresses set forth below:
The Depositary for the Tender Offer is:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Telephone Number:
(651) 450-4064
(800) 468-9716
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
P.O. Box 64854 161 North Concord Exchange
St. Paul, MN 55164 South St. Paul, MN 55075
Attn: Shareowner Services Attn: Shareowner Services
</TABLE>
Questions and requests for assistance may be directed to Corporate Investor
Communications, Inc. at (877) 977-6194. Corporate Investor Communications, Inc.
is acting as the Information Agent for the Offer. Additional copies of this
Letter of Transmittal may be obtained from the Company as set forth below, and
will be furnished promptly at the Company's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the tender offer.
9
<PAGE> 124
This Letter of Transmittal, Share Certificates and any other required
documents should be sent or delivered by each shareholder of the Company or his
or her broker, dealer, commercial bank, trust company or other nominee to the
Depositary at one of its addresses set forth below:
The Depositary for the Tender Offer is:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Telephone Number:
(651) 450-4064
(800) 468-9716
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
P.O. Box 64854 161 North Concord Exchange
St. Paul, MN 55164 South St. Paul, MN 55075
Attn: Shareowner Services Attn: Shareowner Services
</TABLE>
-------------------------
The Information Agent for the Tender Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
Questions and requests for assistance may be directed to Corporate Investor
Communications, Inc. at (877) 977-6194. Corporate Investor Communications, Inc.
is acting as the Information Agent for the Offer. Additional copies of this
Letter of Transmittal may be obtained from the Company as set forth below, and
will be furnished promptly at the Company's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the tender offer.
10
<PAGE> 1
FOR IMMEDIATE RELEASE Contact: Brett Shockley, CEO
Spanlink Communications
(612) 971-2114
[email protected]
Tim Briggs, CFO
Spanlink Communications
(612) 971-2135
[email protected]
SPANLINK ANNOUNCES PLAN TO TAKE COMPANY PRIVATE
MINNEAPOLIS, February 25, 2000 -- Spanlink Communications, Inc. (Nasdaq
SmallCap Market: SPLK) announced today its intent to take the company private
and cash out public shareholders. The company also announced that Cisco Systems,
Inc. will be investing in the newly private company through the purchase of
convertible preferred shares.
The transaction will involve the creation of a holding company,
Spanlink Acquisition Corp., and a merger of the two entities. Spanlink
Acquisition Corp. (SA Corp.) was formed by founders and management who currently
own more that 50 percent of Spanlink Communications. Under the terms of the
definitive merger agreement, SA Corp. will commence a tender offer for all
outstanding shares of the Spanlink Communications common stock not owned by SA
Corp. for $10.50 per share in cash.
The tender offer will start not later than March 1, 2000 and will be
scheduled to expire in 30 days. The merger and the tender offer are subject to
certain conditions, including a minimum condition in the tender offer that SA
Corp. own an aggregate of 67 percent of the outstanding stock following the
tender offer.
The merger agreement has been reviewed and approved by a special
committee of the board of directors. The special committee, which is composed of
directors not affiliated with SA Corp., has also received a fairness opinion
from their financial advisor, Dougherty & Co. LLC of Minneapolis. Dain Rauscher
Wessels is acting as financial advisor to SA Corp.
Holders of the common shares of Spanlink Communications, Inc. should
read the Offer to Purchase that will be disseminated by SA Corp. upon the
commencement of the cash tender offer. SA Corp. will file the Offer to Purchase
with the Securities and Exchange Commission at that time. The Offer to Purchase
and other filed documents relating to the tender offer will be available from
the Public Reference Room of the Commission, subject to a copying fee. The
Commission's address is 450 5th Street N.W., Washington, D.C. 20549. The
telephone number of the Public Reference Room is (202) 942-8090. Copies of the
materials will also be available directly from the information agent, Corporate
Investor Communications, Inc., by calling (877) 977-6194.
-1-
<PAGE> 2
Spanlink Communications is a leading provider of computer telephony
software solutions and integration services that help call centers rapidly
automate and manage the customer interaction process - via the telephone or the
Internet. Founded in 1988, Spanlink has more than 90 employees and more than
2,000 customers using its call center products and services. Spanlink offers its
products and services in the U.S. and internationally through a direct sales
force, channel partners and OEMs. Visit the company online at
http://www.spanlink.com .
-2-
<PAGE> 1
[SPANLINK COMMUNICATIONS LOGO]
FOR IMMEDIATE RELEASE Contact: Brett Shockley
Spanlink Communications
(612) 971-2114
[email protected]
Tim Briggs
Spanlink Communications
(612) 971-2135
[email protected]
SPANLINK COMMUNICATIONS ANNOUNCES
FINANCIAL RESULTS FOR YEAR AND QUARTER
MINNEAPOLIS, February 23, 2000 - Spanlink Communications, Inc., a developer of
computer telephony software solutions for call centers, (Nasdaq SmallCap Market:
SPLK) announced today financial results for the fourth quarter and year ended
December 31, 1999. Fourth quarter revenue decreased 50.0 percent to $1,691,537,
from $3,381,406 for the fourth quarter of 1998. The company reported a net loss
for the quarter of $874,164, or $0.17 per share, compared with net income of
$166,344, or $0.03 per share, for the 1998 fourth quarter.
Revenue for the year ended December 31, 1999 decreased 13.4 percent to
$9,602,882 from $11,083,239 for 1998. The company reported a net loss for the
year of $1,369,938, or $0.27 per share, compared with net income of $263,953, or
$0.05 per share, for 1998.
The decrease in revenue was primarily due to a decline in hardware revenue. In
1998, hardware revenue was positively impacted by a large customer order in the
fourth quarter and the increased number of upgrades sold to customers preparing
for year 2000.
Earlier today, the company announced its intent to take the company private
through a tender offer for the publicly held shares of the company's common
stock at a price of $10.50 per share in cash. The company also announced that
Cisco Systems, Inc. will be a minority investor in the newly private company.
Spanlink Communications is a leading provider of computer telephony software
solutions and integration services that help call centers rapidly automate and
manage the customer interaction process - via the telephone or the Internet.
Founded in 1988, Spanlink has more than 90 employees
<PAGE> 2
and more than 2,000 customers using its call center products and services.
Spanlink offers its products and services in the U.S. and internationally
through a direct sales force, channel partners and OEMs. Visit the company
online at http://www.spanlink.com .
-more-
<PAGE> 3
.
SPANLINK COMMUNICATIONS, INC
STATEMENT OF OPERATIONS
For the three months and twelve months ended December 31,
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Twelve Months
------------ -------------
% %
1999 1998 Change 1999 1998 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Revenue
$1,691,537 $3,380,406 (50.0) $9,602,882 $11,083,239 (13.4)
Cost of revenue 910,166 1,589,222 (42.7) 4,284,158 5,047,616 (15.1)
-------------- ------------- ----------- -------------- ------------- -----------
Gross profit 781,371 1,791,184 (56.4) 5,318,724 6,035,623 (11.9)
Gross profit as a percentage of revenue 46.2% 53.0% 55.4% 54.5%
Operating expenses:
Sales, general and administrative 1,237,525 1,270,677 (2.6) 4,977,262 4,440,679 12.1
Research and product development 382,225 338,763 12.8 1,582,176 1,282,549 23.4
-------------- ------------- ----------- -------------- ------------- -----------
1,619,750 1,609,440 0.6 6,559,438 5,723,228 14.6
-------------- ------------- ----------- -------------- ------------- -----------
Income (loss) from operations (838,379) 181,744 (561.3) (1,240,714) 312,395 (497.2)
Interest income (expense) (35,785) (15,400) (129,224) (48,442)
-------------- ------------- -------------- -------------
Income (loss) before income taxes (874,164) 166,344 (625.5) (1,369,938) 263,953 (619.0)
Provision for income taxes 0 0 0 0
-------------- ------------- -------------- -------------
Net income (loss)
$(874,164) $166,344 (625.5) $(1,369,938) $ 263,953 (619.0)
============== ============= =========== ============== ============= ===========
Basic and diluted net income (loss)
per share $(0.17) $0.03 $(0.27) $0.05
Shares used in computing diluted
net income (loss) per share 5,121,957 5,373,858 5,111,594 5,230,018
</TABLE>
<PAGE> 4
SPANLINK COMMUNICATIONS, INC
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
(unaudited) (audited)
----------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 248,564 $ 161,558
Accounts receivable, net of allowances 2,526,460 2,871,108
Inventory 518,278 505,787
Costs and estimated earnings in excess of billings 632,379 1,703,186
Other current assets 118,215 162,831
----------------------------------------
Total current assets 4,043,896 5,404,470
Property and equipment, net 974,449 1,227,089
Purchased intangibles 367,651 491,015
Other assets 138,500 138,500
----------------------------------------
Total assets $ 5,524,496 $ 7,261,074
========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loan payable $ 1,250,000 $ 985,000
Accounts payable 647,960 1,259,812
Accrued expenses 221,590 294,167
Current portion of long term liabilities 116,694 107,755
Deferred maintenance revenue 622,380 439,697
Other current liabilities 333,312 451,613
---------------------------------------
Total current liabilities 3,191,936 3,538,044
Capital lease obligation 69,669 137,006
Royalties payable 222,590 228,883
Shareholders' equity:
Common stock 8,308,446 8,255,348
Accumulated deficit (6,268,145) (4,898,207)
---------------------------------------
Total shareholders' equity 2,040,301 3,357,141
---------------------------------------
Total liabilities and shareholders' $ 5,524,496 $ 7,261,074
equity
=======================================
</TABLE>
