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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(Rule 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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SPLASH TECHNOLOGY HOLDINGS, INC.
(Name of Subject Company)
SPLASH TECHNOLOGY HOLDINGS, INC.
(Name of Person(s) Filing Statement)
Common Stock, par value $0.001 per share
(Title of Class of Securities)
848623104
(CUSIP Number of Common Stock)
Kevin K. Macgillivray
Chief Executive Officer
Splash Technology Holdings, Inc.
555 Del Rey Avenue
Sunnyvale, CA 94085
(408) 328-6300
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person(s) Filing Statement)
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With a copy to:
Kurt J. Berney, Esq.
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is Splash Technology Holdings, Inc., a
Delaware corporation ("Splash"). The address of Splash's principal executive
offices is 555 Del Rey Avenue, Sunnyvale, CA 94085. The telephone number of the
principal executive offices of Splash is (408) 328-6300. The title of the class
of equity securities to which this Schedule 14D-9 relates is the common stock,
par value $0.001 per share, of Splash, and the associated preferred share
purchase rights (the "Common Stock"). As of September 8, 2000, there were
14,611,430 shares of Common Stock issued and outstanding, and options
outstanding to purchase an aggregate of 2,144,296 shares of Common Stock under
Splash's 1996 Stock Option Plan, as amended (the "Option Plan").
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The name and business address of Splash, which is the person filing this
Statement, are set forth in Item 1 above.
This statement relates to the tender offer being made by Vancouver
Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of Electronics For Imaging, Inc. ("EFI"), a Delaware corporation,
disclosed in a Tender Offer Statement on Schedule TO (the "Schedule TO"), dated
September 14, 2000 and filed with the Securities and Exchange Commission (the
"Commission"), to purchase all the outstanding shares of Common Stock, at a
price of $10.00 per share, net to the sellers in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase for Cash, dated
September 14, 2000 (as it may be amended, the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with the Offer to Purchase and
any amendments or supplements thereto, constitute the "Offer") included in the
Schedule TO. A copy of the Offer to Purchase and the related Letter of
Transmittal have been filed as Exhibit 1 and Exhibit 2 hereto, respectively,
and each is incorporated herein by reference. Copies of the Offer to Purchase
and the Letter of Transmittal are being furnished to Splash's stockholders
concurrently with this Schedule 14D-9.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 30, 2000, by and among EFI, the Purchaser and Splash (the "Merger
Agreement"). The Merger Agreement provides, among other things, for the
commencement of the Offer by the Purchaser and further provides that, as soon
as practicable after consummation of the Offer and the satisfaction or waiver
of the other conditions set forth in the Merger Agreement, and in accordance
with the relevant provisions of the General Corporation Law of the State of
Delaware, the Purchaser will be merged with Splash (the "Merger"), with Splash
continuing as the surviving corporation and a subsidiary of EFI. A copy of the
Merger Agreement is filed as Exhibit 3 hereto.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
shares of Common Stock that, together with the shares then owned by the
Purchaser and EFI, would represent at least a majority of the total number of
outstanding shares of Common Stock on a fully diluted basis, excluding unvested
options (the "Minimum Condition") and (ii) the expiration or termination of any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended. The Offer also is subject to certain other conditions
set forth in Annex A to the Merger Agreement.
As set forth in the Schedule TO, the principal executive offices of the
Purchaser are located at 303 Velocity Way, Foster City, CA 94404. All
information in this Schedule 14D-9 or incorporated by reference herein
concerning the Purchaser or its affiliates, or actions or events in respect of
any of them, was provided by the Purchaser or EFI, and Splash assumes no
responsibility therefor.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
Certain contracts, agreements, arrangements or understandings between Splash
or its affiliates with certain of its directors and executive officers are,
except as noted below, described in the Information Statement pursuant to the
Schedule 14f-1 that is attached as Annex A hereto and is incorporated herein by
reference. Except as described or referred to herein and in Annex A, to the
knowledge of Splash, as of the date hereof,
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there are no material agreements, arrangements or understandings, or any actual
or potential conflicts of interest, between Splash or its affiliates and (i)
Splash, its executive officers, directors or affiliates; or (ii) EFI or the
Purchaser, their respective officers, directors or affiliates.
In considering the recommendation of the Board of Directors of Splash (the
"Board of Directors") set forth in Item 4 below, Splash's stockholders should
be aware that certain members of Splash's management and certain members of
Splash's Board of Directors have interests in the Offer and the Merger, which
are described herein and in Annex A hereto and which may present them with
certain conflicts of interest. The Board of Directors is aware of these
potential conflicts and considered them along with the other factors described
in Item 4 below.
The Merger Agreement. A summary of the material provisions of the Merger
Agreement is included in "The Offer--Background of the Offer; Contacts with
Splash; Merger Agreement; Tender and Voting Agreement; Exclusivity Agreement;
Confidentiality Agreement; Employment Offer Letters" of the Offer to Purchase,
which is incorporated herein by reference. Such summary is qualified in its
entirety by reference to the complete text of the Merger Agreement, a copy of
which is filed as Exhibit 3 hereto and is incorporated herein by reference.
Such summary may not contain all the information that is important to you.
Accordingly, you should read the Merger Agreement in its entirety for a more
complete description of the material summarized in the Offer to Purchase.
Employment and Other Agreements. David Emmett, Splash's Senior Vice
President of Engineering, is a party to an employment agreement with Splash,
which sets forth Mr. Emmett's compensation arrangements, including salary,
bonus, stock options and benefits. The agreement provides that, among other
things, in the event of Mr. Emmett's termination by Splash without cause or in
the event Mr. Emmett's employment is constructively terminated, Mr. Emmett will
generally be entitled to a pro rated bonus, three months healthcare and other
welfare benefits and accelerated vesting of all of Mr. Emmett's outstanding,
unvested stock options upon his termination.
In connection with the Merger, the unvested stock options held by Splash's
non-employee directors will be accelerated and fully vested. However, the
dollar value of the acceleration benefit will be limited to $35,000 for all of
the non-employee directors.
In connection with the Merger, EFI intends to offer employment to Kevin
Macgillivray, Splash's Chief Executive Officer, John Ritchie, Splash's Chief
Financial Officer and Sally Cabbell, Splash's Senior Vice President, Human
Resources. Additionally, EFI has offered to amend Mr. Emmett's employment
agreement. These employment arrangements are more fully described under the
caption "Employment Offer Letters" in the Offer to Purchase and that disclosure
is incorporated herein by reference. Once the offer letters are finalized, they
will be filed as exhibits to an amendment to this Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
The Board of Directors of Splash unanimously (1) determined that each of the
Merger Agreement, the Offer and the Merger is fair to, and in the best
interests of, Splash and its stockholders, (2) approved and adopted the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger, and (3) recommends that the stockholders of Splash accept the Offer
and tender their shares pursuant to the Offer.
A copy of the press release issued by Splash and EFI on August 31, 2000
announcing the Merger and the Offer is filed herewith as Exhibit 5 and is
incorporated herein by reference. A copy of a letter to Splash's stockholders
communicating the recommendation of the Board of Directors is filed herewith as
Exhibit 4 and is incorporated herein by reference.
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Background of the Transaction.
From time to time, the Board of Directors has evaluated Splash's strategic
options. In mid-1999, Splash initially retained Thomas Weisel Partners LLC, or
TWP, to assist in this effort. As part of this engagement, TWP and Splash's
management identified eight (including EFI) prospective strategic partners for
Splash based on strategic fit and their determination of which entities would
be most likely interested in engaging in a strategic combination or arrangement
with Splash. For various reasons, including a decision to operate the business
and complete certain product development efforts, Splash did not contact any
potential partner at that time.
In June 2000, the Board of Directors reengaged TWP to assist it in
evaluating its strategic options. Splash's management confirmed that the
previously identified parties continued to be the most likely interested
parties. During June, July and August, TWP contacted each of these parties (but
not EFI). Only one of these parties expressed an interest in a potential
transaction and was provided a limited amount of Splash's confidential
information after signing an appropriate confidentiality agreement.
Subsequently, however, this entity indicated that for its own strategic reasons
it was not interested in pursuing a transaction at this time.
In late July 2000, Mr. Joseph Cutts, EFI's Chief Financial Officer,
contacted Mr. Kevin Macgillivray, Splash's Chief Executive Officer, regarding a
possible combination or acquisition. Both Splash and EFI sell color server
products and each is very familiar with the other's business and technologies.
Messrs. Cutts and Macgillivray met each other for the first time in June at a
conference. In addition, in early 1999, representatives from EFI and Splash had
briefly met to discuss a potential transaction, but no meetings were held
subsequently until July 2000, when the parties began discussing this
transaction.
To facilitate discussions between the parties, on August 9, 2000, Splash and
EFI entered into a mutual confidentiality and standstill agreement.
On August 14, 2000, representatives of Splash and EFI and their respective
counsel met formally for the first time to explore whether there was a possible
transaction between the parties. At this time, both companies acknowledged
their familiarity with each other's business and management exchanged limited
financial and other information.
During the weeks of August 14 and August 21, there were numerous discussions
and meetings between Splash's and EFI's management regarding a possible
transaction. At these meetings Splash's management indicated an interest in
receiving EFI common stock in a potential transaction and EFI indicated its
preference to pay cash for Splash's Common Stock. Mr. Macgillivray informally
advised and consulted with each of the Splash directors during this period
regarding these discussions.
On August 18, Mr. Macgillivray advised Mr. Guy Gecht, EFI's Chief Executive
Officer, and Mr. Cutts of Splash's upcoming Board of Directors meeting at which
the Board of Directors would be reviewing with representatives of TWP and
Wilson Sonsini Goodrich & Rosati, P.C., Splash's outside counsel ("Wilson
Sonsini"), the status of its strategic options review. Among other things, Mr.
Macgillivray advised Mr. Gecht that he believed EFI should submit a term sheet
indicating the terms of any proposed transaction including a price range and
other material terms.
On August 22, 2000, EFI and its internal and outside legal counsel commenced
their due diligence of Splash.
On the afternoon of August 24, 2000, the Board of Directors met at the
offices of Wilson Sonsini to review the results of TWP's solicitation efforts.
At this meeting, the Board of Directors, was advised by Splash's management of
EFI's continued interest in a possible transaction. Mr. Macgillivray advised
the Board of Directors that Mr. Gecht had called him immediately prior to the
meeting indicating that, subject to consummation of its ongoing due diligence
and negotiation of other satisfactory terms, EFI was interested in a cash
acquisition at a price range of $9 to $10 per share of Splash Common Stock. In
addition to reviewing with the Board of Directors the results of its earlier
efforts, representatives of TWP also advised the Board of
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Directors that in anticipation of the August 24th meeting it had recontacted
several of the previously identified potential strategic partners or acquirers.
None of these parties expressed an interest in engaging in a potential
transaction at that time.
Following these reports, the Board of Directors discussed and considered,
among other things, the long term prospects for Splash's business and its
markets, Splash's dependence on a single large customer, including the past and
current issues associated with that customer's business, seasonality and
logistics Splash's past and anticipated difficulties in expanding its customer
base, the ongoing intellectual property litigation with EFI, the lack of
definitive proposed terms from EFI and the Board's fiduciary duties under
Delaware law in the context of a possible sale of Splash. At that time, the
Board of Directors made no determination regarding a possible transaction. The
Board of Directors did, however, instruct management and its representatives to
engage EFI to explore a more definitive proposal (including a higher potential
acquisition price payable in EFI stock) and to allow EFI to complete its due
diligence investigation. The Board of Directors also instructed Mr.
Macgillivray that they believed that, in order to obtain the highest possible
price and retain negotiating leverage with EFI, it was necessary for
negotiations to proceed through TWP in an accelerated time frame consistent
with their strategic options review.
Early in the morning of August 25, 2000, Mr. Macgillivray contacted Mr.
Gecht indicating that the Board of Directors was not prepared to proceed with
discussions unless EFI delivered a more definitive proposal at a higher
acquisition price. He also advised Mr. Gecht that the economic terms of any
possible transaction were to be negotiated on behalf of the Board of Directors
by representatives of TWP with the assistance of Wilson Sonsini.
Mr. Gecht later informed Mr. Macgillivray that Mr. Thomas Unterburg, an EFI
director, was to be the individual with whom TWP's representative was to speak
regarding the possible transaction.
On the evening of August 25, 2000, EFI provided Splash's management with a
non-binding proposal indicating a cash price of $10 per share of Common Stock.
The term sheet also provided for, among other things, a 5% "break-up fee"
(approximately $7,350,000) required to be paid by Splash if Splash entered into
an agreement with respect to an acquisition proposal superior to EFI's offer or
the Board of Directors changed its recommendation in favor of EFI's offer in
favor of a competing transaction; a Splash "lock-up option" in favor of EFI to
acquire 19.9% of the outstanding Common Stock at $10 per share; and an option
by Splash's officers and directors granting to EFI the right to acquire their
shares of Common Stock. The EFI proposal was conditioned on, among other
conditions, EFI's satisfactory completion of its due diligence and Splash's
agreement to negotiate any potential acquisition of Splash exclusively with EFI
until September 8, 2000, a roughly two-week period.
On the morning of August 26, 2000, Splash's management and a representative
of the Board of Directors reviewed with representatives of TWP and Wilson
Sonsini, EFI's proposed terms. It was determined that rather than a two-week
exclusivity period, Splash was only willing to provide EFI with an exclusivity
period that ended at midnight, August 30, 2000. Later that day, a
representative of TWP communicated to Mr. Unterburg, EFI's representative,
Splash's desire for a higher acquisition price comprised of EFI stock and
Splash's willingness to agree to an exclusivity period ending on August 30,
2000. The representative of TWP also indicated that the 5% break-up fee, the
19.9% lock-up option and certain other provisions in the term sheet were
unacceptable from Splash's perspective. In response, Mr. Unterburg indicated to
the representative of TWP that EFI was unwilling to pursue a stock transaction
and that $10 per share was the highest price that EFI was willing to pay.
Without agreeing to the terms of a possible acquisition, the parties agreed to
an exclusive negotiating period ending August 30, 2000.
During the night of August 26, 2000, the parties entered into the
exclusivity agreement.
On August 28, 2000, EFI's outside counsel, Brobeck, Phleger & Harrison LLP
("Brobeck"), delivered a draft Merger Agreement. The draft agreement provided
for a $10 per share cash purchase price, extensive representations and
warranties to be made by Splash; numerous conditions to EFI's offer; an
agreement by
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Splash not to solicit third-party proposals to acquire the company; a 5% break-
up fee; a 19.9% lock-up option; and an option by Splash's officers and
directors granting to EFI the right to acquire their Splash shares.
On August 28 and 29, 2000, Splash's and EFI's respective outside counsel
negotiated a number of the terms of the Merger Agreement making progress on the
scope of Splash's representations and warranties and the conditions to EFI's
proposed offer. The parties, however, did not progress on the break-up fee, the
19.9% lock-up option or the director/officer option.
On the afternoon of August 29, 2000, the Board of Directors met
telephonically with representatives of Splash's management and outside counsel.
The Board of Directors was advised of the progress of negotiations. Among other
provisions, the Board of Directors continued to object to the 5% break-up fee,
the 19.9% lock-up option and director/officer options on the grounds that these
provisions might inappropriately inhibit the ability of the Board of Directors
to consider an unsolicited superior proposal to acquire Splash.
During the day on August 30, 2000, Splash's and EFI's respective outside
counsel continued to negotiate the terms of the Merger Agreement. Early in the
evening on August 30th, representatives of Splash, EFI, TWP, Brobeck and Wilson
Sonsini met telephonically to negotiate and resolve outstanding issues on the
Merger Agreement and assist EFI in concluding its due diligence investigation
of Splash. During this meeting, the parties agreed to reduce the break-up fee
to $5,500,000, or approximately 3.75% of the transaction price, and EFI dropped
its requirements for the 19.9% lock-up and director/officer options.
On the evening of August 30, 2000, the Board of Directors met, reviewed and
discussed the proposed acquisition. At the meeting, Wilson Sonsini gave a
presentation to the Board of Directors on the terms of the Merger Agreement and
related documents, the structure of the Offer and the Merger and the Board's
fiduciary duties to stockholders. The Board of Directors received an oral
opinion from TWP at the meeting that, as of such date, the $10.00 cash per
share of Common Stock to be received by the holders of Common Stock (other than
EFI and the Purchaser) pursuant to the Offer and the Merger as contemplated in
the Merger Agreement was fair from a financial point of view to such holders.
This oral opinion was subsequently confirmed by delivery of the written opinion
of TWP, dated August 30, 2000, a copy of which is attached as Exhibit 6. The
members of the Board of Directors discussed the terms of the proposed
acquisition with management, TWP and among themselves. Following this
discussion, the Board of Directors unanimously:
. determined that the Merger Agreement and the transactions contemplated
thereby, including each of the Offer and the Merger, are fair to and in
the best interests of Splash and the holders of the Common Stock;
. approved and adopted the Merger Agreement and the transactions
contemplated thereby; and
. resolved to recommend that the stockholders of Splash accept the Offer
and approve and adopt the Merger Agreement and approve the transactions
contemplated thereby.
During the night of August 30, 2000, Splash, EFI and the Purchaser executed
the Merger Agreement and simultaneously, EFI, the Purchaser and the directors
and several officers of Splash executed the Tender and Voting Agreement.
Factors Considered by the Board of Directors.
In approving the Merger Agreement and the transactions contemplated thereby,
and recommending that all stockholders tender their Common Stock pursuant to
the Offer, the Board of Directors considered a number of factors, including:
. the financial and other terms of the Offer, the Merger Agreement and the
related transaction agreements;
. TWP's opinion to the effect that, as of the date of its opinion and based
upon and subject to certain matters stated therein, the $10.00 cash per
share of Common Stock consideration to be received by the holders of
Common Stock (other than EFI and the Purchaser) pursuant to the Offer and
the Merger was fair to the stockholders of Splash, from a financial point
of view (the "Fairness Opinion") and its presentation with respect to
that opinion;
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. that the $10.00 per share tender offer price represents a premium of
approximately 39.1% over the closing price of the Common Stock on the
Nasdaq National Market System ("Nasdaq") on August 30, 2000, the last
full trading day prior to the public announcement of the execution of the
Merger Agreement and a premium of approximately 38.2% to the average
closing price of the Common Stock on Nasdaq for the prior 20 trading
days;
. the history of the price of the Common Stock on Nasdaq over the last 12
months and management's anticipated trading activity for the Common Stock
for the next 12 months;
. Splash's historical dependence on a single large customer and related
difficulties in projecting sales levels made even more acute by current
customer conditions;
. the long-term prospects of Splash and its potential markets, particularly
in light of slowing growth in the overall market for color server
products;
. Splash's past and anticipated difficulties in expanding its customer base
and product lines;
. Splash's difficulties as an independent company to effectively compete
with manufacturers of embedded color server solutions, substantially all
of whom have significantly greater financial resources than Splash;
. the failure of any of the other potential bidders to submit a bona fide
proposal to enter into a strategic transaction with Splash or to acquire
Splash;
. the continued difficulties that Splash might have in attracting and
retaining qualified members of management as an independent company;
. the view of the Board of Directors, based in part upon the presentation
of management, regarding the likelihood of a superior offer arising;
. Splash's inability to distribute its cash balances to its stockholders on
a tax efficient basis;
. the experience, reputation and financial condition of EFI and EFI's
knowledge about Splash's industry;
. the provisions of the Merger Agreement, including the provisions allowing
Splash to respond to certain unsolicited inquiries concerning an
acquisition of Splash, and the provisions which permit Splash to
terminate the Merger Agreement upon payment of a break-up fee under
certain circumstances;
. the fact that EFI's and the Purchaser's obligations under the Offer were
not subject to any financing condition;
. EFI's financial condition and ability to cause the Purchaser to meet its
obligations under the Merger Agreement;
. the alternatives available to Splash in light of the consideration
proposed to be paid for the Common Stock pursuant to the Offer and the
Merger Agreement;
. legal matters relating to the Offer and the Merger Agreement, including
the review provided for under the Hart-Scott-Rodino Anti-Trust
Improvements Act with respect to the antitrust implications of the Offer
and the terms of the Offer and the Merger Agreement;
. the willingness of the directors and members of management of Splash to
enter into the Tender and Voting Agreements, pursuant to which, among
other things, such persons agreed to tender the Common Stock owned by
them for purchase by the Purchaser pursuant to the Offer;
. the continuing uncertainty caused by the intellectual property litigation
between Splash and EFI; and
. the familiarity of the Board of Directors with the business, results of
operations, properties and financial condition of Splash and the nature
of the industry in which it operates.
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The foregoing discussion of the information and factors considered and given
weight by the Board of Directors is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Merger Agreement and the Offer, the Board of Directors did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. In addition,
individual members of the Board of Directors may have given different weights
to different factors. Rather, the Board of Directors made its determination
that the Merger Agreement, the Offer and the Merger are fair to, and in the
best interests of, the stockholders of Splash based on the totality of the
information presented to and considered by the Board of Directors.
The full text of TWP's written opinion discussed in the second bullet point
above, which sets forth, among other things, the assumptions made, matters
considered and limitations in the review undertaken by TWP in connection with
the opinion, is attached hereto as Annex B and is incorporated herein by
reference. TWP's opinion is directed only to the Board of Directors, addresses
only the fairness of the $10.00 per share of Common Stock, from a financial
point of view, to be received in the Offer and the Merger by holders of Common
Stock and does not constitute a recommendation to any stockholder to adopt the
Merger Agreement, or to tender shares pursuant to the Offer. Holders of shares
are urged to read the opinion carefully and in its entirety. The summary of the
opinion of TWP in this Schedule 14D-9 is qualified in its entirety by reference
to the full text of such opinion.
To Splash's knowledge, all its executive officers, directors, affiliates or
subsidiaries currently intend to tender all shares of Common Stock that are
held of record or are beneficially owned by them pursuant to the Offer, other
than the Common Stock, if any, held by such persons that, if tendered, could
cause them to incur liability under Section 16(b) of the Securities Exchange
Act of 1934.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to a letter agreement entered into in August 1999 and reaffirmed on
June 13, 2000, Splash retained TWP as Splash's exclusive financial advisor to
provide financial advisory and investment banking services in connection with a
potential business combination involving Splash. Pursuant to the terms of the
letter agreement, Splash agreed to pay TWP (i) a cash fee of $50,000 payable at
the time of the execution of the letter agreement and (ii) a transaction fee
(calculated as set forth below and against which the $50,000 fee would be
credited) if any business combination involving Splash was consummated during
the term of the letter agreement with a TWP prospect or within 12 months
thereafter. The transaction fee with respect to the Offer and the Merger is to
be calculated as 1% of the total consideration, which would result in a fee of
approximately $1,460,000. In addition, Splash agreed to reimburse TWP for its
reasonable travel and other out-of-pocket expenses, including reasonable fees
and disbursements of counsel, and to indemnify TWP against liabilities and
expenses arising out of the engagement and the transactions in connection
therewith.
Neither Splash nor any person acting on its behalf has or currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to stockholders of Splash on its behalf with respect to the
Offer and the Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
No transactions in the Common Stock have been effected in the past 60 days
by Splash or any subsidiary of Splash, or, to the knowledge of Splash, any
affiliate or any executive officer or director of Splash.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by Splash in response to the Offer that relates to:
(i) a tender offer for or other acquisition of Splash's securities by Splash,
any subsidiary of Splash or any other person; (ii) any extraordinary
transaction, such as a merger,
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reorganization or liquidation, involving Splash or any subsidiary of Splash;
(iii) any purchase, sale or transfer of a material amount of assets of Splash
or any subsidiary of Splash; or (iv) any material change in the present
dividend rate or policy, or indebtedness or capitalization, of Splash.
(b) Except as set forth in this Schedule 14D-9, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the events referred
to in the first paragraph of this Item 7.
ITEM 8. ADDITIONAL INFORMATION
During the course of discussions between EFI and Splash, Splash provided EFI
with certain financial projections for Splash for the third quarter of 2000 and
year 2000 results. Splash disclosed to EFI that, due to increased focus on
inventory levels at one of its key channel partners, as well as a slip in the
launch schedule of a new product line, the expected sales level for the third
quarter of 2000 is in the range of $7-11 million, and that Splash's revised
revenue growth outlook for the full 2000 year is expected to be flat.
These projections were publicly disclosed on August 31, 2000 in connection
with the announcement of the execution of the Merger Agreement. Neither EFI nor
Splash assumes any responsibility for the accuracy of these projections. These
projections may not be realized and are subject to significant uncertainties
and contingencies, many of which are beyond the control of Splash. There can be
no assurance that the projections will be realized, and actual results may vary
materially from those shown.
On August 31, 2000, a class action complaint was filed in the Superior Court
of the State of California, in and for the County of Santa Clara, by Gerald W.
Burr against Splash and certain of its current and former directors. The
complaint alleges that defendants breached their fiduciary duties to Splash's
shareholders in connection with the negotiation and execution of the Merger
Agreement. The complaint seeks declaratory and injunctive relief, including
enjoining the Merger, rescinding the Merger Agreement and related documents,
directing the individual defendants to obtain a transaction in the best
interest of Splash's shareholders until the process for the sale or auction of
Splash is completed, and costs and attorneys' fees. A copy of the complaint is
attached hereto as Exhibit 7.
ITEM 9. EXHIBITS
Each of the following exhibits has been filed with the Commission and is
available for inspection at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or on the
Commission's Internet site (http://www.sec.gov).
Exhibit 1. Offer to Purchase, dated September 14, 2000 (incorporated by
reference to Exhibit (a)(1) to the Schedule TO).
Exhibit 2. Letter of Transmittal (incorporated by reference from Exhibit
(a)(2) to the Schedule TO).
Exhibit 3. Agreement and Plan of Merger dated as of August 30, 2000 among
EFI, the Purchaser and Splash (incorporated by reference from
Exhibit (d)(1) to the Schedule TO).
Exhibit 4. Letter to Stockholders dated September 14, 2000.
Exhibit 5. Press Release, dated August 31, 2000, of Splash and EFI
(incorporated by reference from Exhibit 99.1 to the Form 8-K
filed by Splash with the Commission on August 31, 2000).
Exhibit 6. Opinion of Thomas Weisel Partners LLC (attached to this
Statement as Annex B).
Exhibit 7. Complaint of Gerald W. Burr against Splash and certain of its
current and former directors, dated August 31, 2000.
8
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
SPLASH TECHNOLOGY HOLDINGS, INC.
/s/ Kevin K. Macgillivray
By: _________________________________
Name: Kevin K. Macgillivray
Title: Chief Executive Officer
Dated: September 14, 2000
9
<PAGE>
ANNEX A
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
NO VOTE OR OTHER ACTION OF SPLASH TECHNOLOGY HOLDINGS' STOCKHOLDERS IS
REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING
SOLICITED AND YOU ARE REQUESTED NOT TO SEND A PROXY TO SPLASH TECHNOLOGY
HOLDINGS, INC.
GENERAL
This Information Statement is being mailed on or about September 14, 2000 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Splash Technology Holdings, Inc., a Delaware corporation
("Splash"), to the holders of record of shares of common stock, par value
$0.001 per share, of Splash (the "Common Stock"). Capitalized terms used and
not otherwise defined herein shall have the meanings set forth in the Schedule
14D-9. You are receiving this Information Statement in connection with the
possible election of persons designated by the Purchaser (as defined below) to
the Board of Directors of Splash. Such designation is to be made pursuant to an
Agreement and Plan of Merger, dated August 30, 2000 (the "Merger Agreement"),
by and among Electronics For Imaging, Inc., a Delaware corporation (the
"Parent"), Vancouver Acquisition Corp., a Delaware corporation (the
"Purchaser"), and Splash.
The Merger Agreement provides that, after the purchase by the Purchaser
pursuant to the Offer, the Parent will be entitled to designate the number of
directors, rounded up to the next whole number, on Splash's Board of Directors
(the "Parent Designees") as will give the Parent representation on Splash's
Board of Directors proportionate to the percentage of the total number of
shares then outstanding that the Parent or any of its affiliates owns. Splash
has agreed in the Merger Agreement to take all action necessary to cause the
Parent Designees to be elected to Splash's Board of Directors, including
increasing the size of Splash's Board of Directors or securing the resignations
of incumbent directors or both. Notwithstanding the foregoing, until the
closing of the Merger, under the terms of the Merger Agreement, at least two
members of the Splash's Board of Directors must be independent.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with this Information
Statement.
The information contained in this Information Statement concerning the
Parent and the Purchaser has been furnished to Splash by the Parent. Splash
assumes no responsibility for the accuracy or completeness of such information.
VOTING SECURITIES OF SPLASH
The Common Stock is the only class of voting securities of Splash
outstanding. Each share of Common Stock has one vote. As of August 31, 2000,
there were 14,611,430 shares of Common Stock outstanding.
A-1
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of Splash currently consists of six members. The
Parent has informed Splash that the Parent Designees will be any of Guy Gecht,
Joesph Cutts, Fred Rosenzweig or James Etheridge or any other of the directors
and executive officers of the Parent or Purchaser described in the section
"Information Concerning Us and EFI" in the Offer to Purchase, dated September
14, 2000, of the Purchase and EFI, a copy of which is being mailed to Splash's
stockholders together with the Schedule 14D-9 and this Information Statement.
The information in such section is incorporated herein by reference. The
business address of each such person is c/o Electronics For Imaging, Inc., 303
Velocity Way, Foster City, CA 94404.
None of the directors or executive officers of Splash or the Parent
Designees, during the past five years, has (i) been convicted in a criminal
proceeding or (ii) been a party to any judicial or administrative proceeding
that resulted in a judgment, decree or final order enjoining the person from
future violations of, or prohibiting activities subject to, federal or state
securities laws, or a finding of any violation of federal or state securities
laws. Each director and executive officer of Splash and each Parent Designee is
a citizen of the United States.
The Parent and the Purchaser have advised Splash that none of the Parent
Designees (i) is currently a director of, or holds any position with, Splash,
(ii) has any familial relationship with any directors or executive officers of
Splash and (iii) to the knowledge of the Parent and the Purchaser, beneficially
owns any equity securities (or rights to acquire any such securities) of
Splash. Splash has been advised by the Parent and the Purchaser that, to the
Parent's and the Purchaser's knowledge, none of the Parent Designees has been
involved in any transaction with Splash or any of its directors, executive
officers or affiliates that are required to be disclosed pursuant to the rules
and regulations of the Securities and Exchange Commission, or SEC, except as
may be disclosed herein, in the Schedule 14D-9 or in the Schedule TO.
THE CURRENT MEMBERS OF THE BOARD OF DIRECTORS OF SPLASH
The current directors of Splash, their ages, and their principal occupation
and business experience are set forth below:
<TABLE>
<CAPTION>
Name Age Principal Occupation
---- --- --------------------
<C> <C> <S>
Kevin K. Macgillivray....... 41 Chairman and Chief Executive Officer, Splash
Mark Hill................... 39 Chief Executive Officer, Done.com
Peter Y. Chung.............. 32 General Partner, Summit Partners, L.P.
Charles W. Berger........... 46 Chairman and Chief Executive Officer,
AdForce, Inc.
Jan L. Gullett.............. 46 President and Chief Executive Officer,
WebSwap
Harold L. Covert............ 53 Executive Vice President and Chief Financial
Officer, Silicon Graphics, Inc.
</TABLE>
The Board of Directors is divided into three classes, serving staggered
three-year terms. The terms of Messrs. Hill and Chung expire at the 2003 Annual
Meeting. The terms of Messrs. Macgillivray and Covert expire at the 2002 Annual
Meeting. The terms of Messrs. Gullett and Berger expire at the 2001 Annual
Meeting.
Except as indicated below, each director has been engaged in the principal
occupation set forth above during the past five years. There are no family
relationships between any directors or executive officers of Splash.
Kevin K. Macgillivray has served as chairman, chief executive officer, and
director of Splash since January 1996. From April 1995 until January 1996, Mr.
Macgillivray was vice president and general manager of the Publishing Division
of Radius Inc., a manufacturer of computer video cards and display products.
From May 1993 to April 1995, Mr. Macgillivray held other managerial positions
within Radius Inc. and SuperMac Technology, Inc., which merged into Radius Inc.
in 1994. From May 1991 to May 1993, Mr. Macgillivray was vice president and
general manager of Oce Graphics USA, a computer peripherals manufacturer.
A-2
<PAGE>
Mark Hill has been a director of Splash since April 2000. Mr. Hill serves as
chief executive officer of Done.com. Mr. Hill served as a vice president and
general manager of Xerox Corporation from 1992 until 1999. From 1989 until 1992
he served as a consultant for Bain & Company. Mr. Hill holds an MBA from
Harvard Business School and a BA from Harvard College.
Peter Y. Chung has been a director of Splash since its formation in December
1995. Mr. Chung has served as a general partner at Summit Partners, L.P., a
venture capital partnership, since December 1997. From December 1996 to
December 1997, Mr. Chung served as a vice president at Summit Partners, L.P.
From August 1994 to December 1996, Mr. Chung served as a senior associate at
Summit Partners, L.P. From August 1989 to July 1992, Mr. Chung was employed by
Goldman, Sachs & Co., an investment banking firm.
Charles W. Berger has been a director of Splash since January 1996. Mr.
Berger has been chairman and chief executive officer of AdForce, Inc. since
July 1997. Mr. Berger has also been a director of Radius Inc. since March 1994
and was chief executive officer for Radius Inc. from March 1993 until July
1997. From April 1992 until he joined Radius Inc., Mr. Berger was senior vice
president, worldwide sales, operations and support for Claris Corporation, a
software subsidiary of Apple Computer, Inc., a personal computer manufacturer,
that develops and markets application software. From March 1989 to April 1992,
Mr. Berger held various executive positions at Sun Microsystems, Inc. and its
subsidiaries.
Jan Gullett has been a director of Splash since April 2000. Mr. Gullett
joined WebSwap in 1998 and serves as chief executive officer and president. Mr.
Gullett joined Procter & Gamble in 1977 in brand management. From 1982 to 1991
Mr. Gullett served in various capacities at Sara Lee Corporation, including
executive director of mergers and acquisitions, vice president of sales, and
division general manager. Mr. Gullett joined PepsiCo in 1991 where he served in
several posts, including vice president and general manager. Mr. Gullett joined
Broderbund Software in 1995 and served as senior vice president. He also served
as chief executive officer and president of PlanetWeb, a developer of Internet
software. Mr. Gullett holds an MBA from Harvard Business School and a BA from
Miami University.
Harold L. Covert has been a director of Splash since August 2000. Mr. Covert
joined Silicon Graphics Inc. as Executive Vice President and Chief Financial
Officer in July 2000. Mr. Covert previously served as the Chief Financial
Officer of Red Hat, Inc. from March 2000 until July 2000. From April 1998 to
March 2000, Mr. Covert was Executive Vice President and Chief Financial Officer
of Adobe Systems, Inc. From January 1991 to April 1998, Mr. Covert was a
Partner in the firm of DHJ & Associates, Inc. Consultants and Certified Public
Accountants. During the last three and a half years of this period, he acted in
a full time capacity as Chief Financial Officer for three companies.
A-3
<PAGE>
THE CURRENT EXECUTIVE OFFICERS OF SPLASH
The current executive officers of Splash, their ages, and their positions
with the Splash and business experience are set forth below:
<TABLE>
<CAPTION>
Name Age Principal Occupation And Business Experience
---- --- --------------------------------------------
<C> <C> <S>
Kevin K. Macgillivray....... 41 Kevin K. Macgillivray has served as
President, Chief Executive Officer and a
director of Splash since January 1996. From
April 1995 until January 1996, Mr.
Macgillivray was Vice President and General
Manager of the Publishing Division of
Radius, Inc., a manufacturer of computer
video cards and display products. From May
1993 to April 1995, Mr. Macgillivray held
other managerial positions within Radius,
Inc. and SuperMac Technology, Inc. which
merged into Radius, Inc. in 1994. From 1991
to May 1993, Mr. Macgillivray was Vice
President and General Manager of Oce
Graphics USA, a computer peripherals
manufacturer. Mr. Macgillivray received a
B.S. in Mechanical Engineering from Stanford
University.
John Ritchie................ 34 John Ritchie was promoted to Chief Financial
Officer effective January 2000. Prior to
that he served as Vice President, Finance
for Splash. Mr. Ritchie joined Splash in
early 1996 and served as the Corporate
Controller until July 1999. From 1993 to
1996, Mr. Ritchie was a Divisional
Controller for Western Waste Industries, an
environmental services firm. From 1989 to
1993, Mr. Ritchie held various financial
positions at Oce Graphics USA, a computer
peripherals manufacturer. Mr. Ritchie
received a B.S. in Business Administration
with a concentration in accounting from San
Jose State University.
David Emmett................ 58 David Emmett joined Splash in February 2000
as Senior Vice President, Engineering after
spending 2 years as Senior Vice President,
Engineering at Peerless Systems Corporation
in El Segundo, California. Mr. Emmett's
previous four years were spent at Adobe
Systems, where he managed the Acrobat
business unit, and subsequently transferred
to the Printing and Systems Division where
he was Vice President, Engineering. Mr.
Emmett studied Physics and Pure Mathematics
at Exeter University in England, and has an
MBA from Pepperdine University.
</TABLE>
A-4
<PAGE>
BOARD COMMITTEES AND MEETINGS
The Board of Directors of Splash held a total of seven (7) meetings from
January 1, 1999 through December 31, 1999. During Fiscal 1999, no director
attended fewer than seventy-five percent (75%) of the meetings of the Board of
Directors with the exception of Greg Avis, who attended seventy-one percent
(71%) of the meetings. Effective upon the addition of Harold Covert to the
Board of Directors in July 2000, Mr. Avis resigned from the Board of Directors.
The Board of Directors established an Audit Committee and a Compensation
Committee in connection with Splash's initial public offering in October 1996.
The Board of Directors has no nominating committee or any committee performing
similar functions.
The Audit Committee currently consists of Messrs. Chung and Berger. The
Audit Committee aids management in the establishment and supervision of
Splash's financial controls, evaluates the scope of the annual audit, reviews
audit results, consults with management and Splash's independent auditors prior
to the presentation of financial statements to stockholders and, as
appropriate, initiates inquiries into aspects of Splash's financial affairs.
The Audit Committee held 4 meetings in 1999.
The Compensation Committee currently consists of Messrs. Covert and Berger.
During 1999, Mr. Avis served on the Compensation Committee. The Compensation
Committee makes recommendations to the Board concerning salaries and incentive
compensation for Splash's officers and employees and administers Splash's 1996
Stock Option Plan and 1996 Employee Stock Purchase Plan. The Compensation
Committee held 3 meetings in 1999.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to Splash with
respect to beneficial ownership of the Common Stock as of August 31, 2000 by
(i) each beneficial owner of more than 5% of the Common Stock, (ii) each
director, (iii) each Named Executive Officer and (iv) all directors and
executive officers as a group. Except as otherwise indicated, each person has
sole voting and investment power with respect to all shares shown as
beneficially owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Number of Percent of
Name and Address of Beneficial Owner Shares Total(1)(2)
------------------------------------ --------- -----------
<S> <C> <C>
State of Wisconsin Investment Board(16)................. 1,399,000 9.6%
Wellington Management Co. LLP(17)....................... 1,394,300 9.5%
Greenlight Capital, L.L.C.(18).......................... 1,340,500 9.2%
Charles W. Berger(3)(10)(11)............................ 11,250 *
Harold Covert (13)(10).................................. 5,000 *
Jan Gullett(5)(9)(10)................................... 7,500 *
Peter Y. Chung(4)....................................... -- *
Mark Hill(6)(9)(10)..................................... 7,500 *
Kevin K. Macgillivray(7)(8)............................. 344,865 2.4%
Douglas Bender(12)...................................... 22,500 *
Michael Orr(12)......................................... -- *
Joan P. Platt(12)....................................... -- *
David Emmett(8)(14)..................................... 124,000 *
John Ritchie (8)(15).................................... 105,302 *
All directors and executive officers as a group(19)
(11 persons)........................................... 627,917 4.3%
</TABLE>
--------
* Percentage of shares beneficially owned is less than one percent of total.
(1) Beneficial ownership is determined in accordance with the rules of
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are currently
A-5
<PAGE>
exercisable or exercisable within 60 days of August 31, 2000 are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person. Except
as indicated in the footnotes to this table and pursuant to applicable
community property laws, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name.
(2) Percentage of ownership is based on 14,611,430 shares of Common Stock
outstanding on August 31, 2000.
(3) Such person's address is: c/o AdForce, Inc., 10590 North Tantau Avenue,
Cupertino, CA 95014.
(4) Such person's address is: c/o Summit Partners L.P., 499 Hamilton Avenue
Suite 200, Palo Alto, CA 94301.
(5) Such person's address is: c/o WebSwap, 2585 East Bayshore Road, Palo Alto,
CA 94303.
(6) Such person's address is: c/o Done.com, 1301 Shoreway Road, Belmont, CA
94002.
(7) Includes 172,000 shares issuable upon the exercise of options which vest
over four years; such options may be exercised immediately as to all
shares, provided that the unvested shares shall be subject to a right of
repurchase in favor of Splash.
(8) Such person's address is: c/o Splash Technology Holdings, Inc., 555 Del
Rey Avenue, Sunnyvale, CA 94085.
(9) Includes 2,500 shares issuable upon the exercise of options which vested
immediately.
(10) Includes 5,000 shares issuable upon the exercise of options which vest
over three years; such options may be exercised immediately as to all
shares, provided that unvested shares shall be subject to a right of
repurchase in favor of Splash.
(11) Includes 5,000 shares issuable upon the exercise of options which vested
immediately.
(12) Left Splash in 1999.
(13) Such person's address is: c/o Silicon Graphics, Inc., 1600 Ampitheatre
Pkwy., ms 003, Mountain View, CA 94043.
(14) Mr. Emmett joined Splash in January 2000. Includes 124,000 shares issuable
upon the exercise of options which vest over four years; such options may
be exercised immediately as to all shares, provided that the unvested
shares shall be subject to a right of repurchase in favor of Splash.
(15) Mr. Ritchie was promoted to Chief Financial Officer in January 2000.
Includes 99,100 shares issuable upon the exercise of options which vest
over four years; such options may be exercised immediately as to all
shares, provided that the unvested shares shall be subject to a right of
repurchase in favor of Splash.
(16) Such person's address is: 121 East Wilson Street, Madison, WI 53707.
(17) Such person's address is: 75 State Street, Boston, MA 02109.
(18) Such person's address is: Greenlight Capital, L.L.C., 420 Lexington
Avenue, Suite 1740, New York, NY, 10170. Greenlight Capital, L.L.C. and
principals David Einhorn and Jeffrey Keswin are the beneficial owners of
1,135,800 shares. Includes 266,000 shares held by Greenlight Capital,
L.P., 424,500 shares held by Greenlight Capital Qualified L.P. and 445,300
shares held by Greenlight Capital Offshore Ltd. Greenlight Capital, L.L.C.
has the sole power to vote and dispose of the shares beneficially owned by
it. As the principals of Greenlight Capital, L.L.C., Messrs. Einhorn and
Keswin may direct the vote and disposition of the shares beneficially
owned by Greenlight Capital, L.L.C.
(19) Includes 10,000 shares issuable upon the exercise of options which vested
immediately. Also included are 395,100, and 20,000 shares issuable upon
the exercise of options which vest over four years and three years,
respectively; such options may be exercised immediately as to all shares,
provided that the unvested shares shall be subject to a right of
repurchase in favor of Splash.
A-6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by Splash
for the years ended December 31, 1997, 1998, and 1999, to Splash's Chief
Executive Officer and Splash's three other most highly compensated executive
officers (collectively, the "Named Executive Officers") for services rendered
in all capacities to Splash.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------- ------------
Other Securities
Name and Principal Incentive Annual Underlying All Other
Position Year Salary(1) Bonus Compensation Options(2) Compensation
------------------ ---- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Kevin K. Macgillivray... 1999 $270,000 -- -- -- $ 3,191(3)
Chairman and Chief 1998 257,537 $ 81,400 -- 72,000(6) 4,389(3)
Executive Officer 1997 180,577 176,940 -- 90,000 1,483(3)
88,373(4)
Joan P. Platt(5)........ 1999 66,205 10,000 -- -- 1,033(3)
Vice President, Finance 1998 174,017 29,700 -- 44,000(6) 3,529(3)
and Admin and Chief 1997 143,462 66,849 -- 55,000 1,268(3)
Financial Officer 18,133(4)
Michael Orr(5).......... 1999 147,957 40,000 -- -- 834(3)
Vice President, Sales 1998 123,720 105,000 -- 90,000 803(3)
and Marketing 72,000(6)
Douglas Bender(5)....... 1999 132,904 32,760 -- 90,000 --
</TABLE>
--------
(1) Includes compensation deferred by the employee under Splash's retirement
plans.
(2) Consists of options to purchase shares of Common Stock under Splash's 1996
Stock Option Plan.
(3) Consists of the vesting of contributions made by Splash under its qualified
401(k) retirement plan.
(4) Consists of reimbursement for underwriting fees paid by the Named Executive
Officer (including taxes payable in respect thereof) in connection with the
follow-on offering of Common Stock on August 25, 1997.
(5) Left Splash in 1999.
(6) Represents options issued in October, 1998 in a four for five exchange for
options previously granted (pursuant to an option repricing).
OPTION GRANTS AND EXERCISES
The following table sets forth certain information with respect to stock
option grants during Fiscal 1999 to the Named Executive Officers. In accordance
with the rules of the SEC, also shown below is the potential realizable value
over the term of the option (the period from the grant date to the expiration
date) based on assumed rates of stock appreciation from the option exercise
price of 5% and 10%, compounded annually. These amounts are based on certain
assumed rates of appreciation and do not represent Splash's estimate of future
stock price. Actual gains, if any, on stock option exercises will be dependent
on the future performance of the Common Stock.
In October 1998, partially in response to the repricing of Splash's stock
options, Splash's Board of Director froze executive salaries and incentive plan
bases for 1999 and eliminated certain executive option grants.
A-7
<PAGE>
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------- Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to Exercise for Option Term
Options Employees in or Base Expiration ----------------------------
Name Granted Fiscal Year Price Date 5% 10%
---- ---------- ------------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kevin K. Macgillivray... -- -- -- -- -- --
Joan P. Platt........... -- -- -- -- -- --
Michael Orr............. -- -- -- -- -- --
Douglas Bender(1)....... 90,000 21% 6.969 2/8/08 394,449 999,611
</TABLE>
--------
(1) Mr. Bender left Splash in October of 1999. As a result, only 22,500 of his
options were vested.
The following table sets forth information with respect to options exercised
during Fiscal 1999 by the Named Executive Officers and the value of unexercised
options at December 31, 1999.
AGGREGATE OPTION EXERCISES IN 1999 AND YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options at
Shares Options at December 31, 1999 December 31, 1999(1)
Acquired on Value ---------------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- --------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin K. Macgillivray... -- -- 72,000 -- $36,000 --
Joan Platt.............. -- -- -- -- -- --
Michael Orr............. -- -- -- -- -- --
Douglas Bender.......... -- -- 22,500 -- $41,400 --
</TABLE>
--------
(1) Based on December 31, 1999 closing price of $8.81.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of Splash's Board of Directors is responsible for
reviewing and approving Splash's compensation policies and the compensation
paid to executive officers. The Committee is comprised of Messrs. Hill and
Berger, neither of whom is an employee of Splash.
COMPENSATION PHILOSOPHY
The general philosophy of Splash's compensation program is to offer
executive officers competitive compensation based both on Splash's performance
and on the individual's contribution and performance. Splash's compensation
policies are intended to motivate, reward and retain highly qualified
executives for long-term strategic management and the enhancement of
stockholder value, to support a performance-oriented environment that rewards
achievement of specific internal Company goals and to attract and retain
executives whose abilities are critical to the long-term success and
competitiveness of Splash.
There are four main components in Splash's executive compensation program:
. Base Salary
. Incentive Bonus
. Stock Incentives
. Deferred Compensation
A-8
<PAGE>
BASE SALARY
The salaries of the executive officers, including the Chief Executive
Officer, are determined annually by the Compensation Committee with reference
to surveys of salaries paid to executives with similar responsibilities at
comparable companies, generally in the high technology industry. The peer group
for each executive officer is composed of executives whose responsibilities are
similar in scope and content. Splash seeks to set executive compensation levels
that are competitive with the average levels of peer group compensation.
INCENTIVE BONUS
Annual incentive bonuses for executive officers are intended to reflect the
Compensation Committee's belief that a significant portion of the annual
compensation of each executive officer should be contingent upon the
performance of Splash, as well as the individual contribution of each officer.
STOCK INCENTIVES
Splash utilizes stock options as long term incentives to reward and retain
executive officers. The Compensation Committee believes that this practice
links management interests with stockholder interests and motivates executive
officers to make long-term decisions that are in the best interests of Splash.
The Committee also believes that executive officers and other key employees
should own a significant percentage of Common Stock. Generally, stock options
vest over four years after the grant date and optionees must be employed by
Splash at the time of vesting in order to exercise the options.
The Compensation Committee believes that stock option grants provide an
incentive which focuses the executives' attention on Splash from the
perspective of an owner with an equity stake in the business. Because options
are typically granted with an exercise price equal to the fair market value of
the Common Stock on the date of grant, Splash's stock options are tied to the
future performance of the Common Stock and will provide value to the recipient
only when the price of Splash's stock increases above the exercise price, that
is, only to the extent that stockholders as a whole have benefited.
DEFERRED COMPENSATION
In June 1998, Splash established a deferred compensation plan for its
executives. Each executive may voluntarily contribute a portion of their salary
and bonus to the plan. Splash at its discretion may make contributions to the
plan on behalf of its executives. Splash to date has made no contributions to
the plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Kevin K. Macgillivray has been Splash's Chairman and Chief Executive Officer
since January 1996. Mr. Macgillivray received no bonus or stock option grants
for 1999.
A-9
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return
for Common Stock with the Nasdaq U.S. Index and the Hambrecht & Quist
Technology Index (the "Peer Group") for the period commencing October 9, 1996
and ending December 31, 1999. The graph assumes that $100 was invested on the
date of Splash's initial public offering, October 9, 1996, and that all
dividends are reinvested. In accordance with the guidelines of the SEC, the
stockholder return for each entity in the Peer Group has been weighted on the
basis of market capitalization as of each measurement date set forth in the
graph. Historic stock price performance should not be considered indicative of
future stock price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG SPLASH, NASDAQ U.S. INDEX
AND HAMBRECHT & QUIST TECHNOLOGY INDEX
[Performance Graph of Splash's Common Stock]
<TABLE>
<CAPTION>
SPLASH H & Q NASDAQ
------ ----- ------
<S> <C> <C> <C>
10/9/96 100.00% 100.00% 100.00%
12/31/96 195.45% 107.18% 104.28%
3/31/97 227.27% 102.11% 98.68%
6/30/97 328.41% 122.84% 116.49%
9/30/97 355.68% 143.01% 136.16%
12/31/97 204.55% 125.38% 126.85%
3/31/98 152.27% 151.78% 148.22%
6/30/98 156.25% 155.33% 152.99%
9/30/98 129.55% 138.00% 136.75%
12/31/98 67.62% 194.73% 177.06%
3/31/99 55.12% 212.16% 198.79%
6/30/99 63.92% 251.13% 216.96%
9/30/99 55.68% 265.45% 221.81%
12/31/99 80.12% 434.34% 328.68%
</TABLE>
TRANSACTIONS WITH MANAGEMENT
No reportable transactions occurred during 1999 between Splash and its
officers and directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Fiscal 1999 the Compensation Committee of the Board of Directors
consisted of Messrs. Avis and Berger. Neither of these individuals were at any
time since the formation of Splash an officer or employee of Splash. No
executive officer of Splash serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of Splash's Board of Directors or Compensation Committee.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Splash's executive officers and directors and persons
who own more than ten percent of a registered class of Splash's equity
securities to file an initial report of ownership on Form 3 and changes in
ownership on Form 4 or 5 with the SEC and the National Association of
Securities Dealers, Inc. Executive officers, directors and greater than ten
percent stockholders are also required by SEC rules to furnish Splash with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons, Splash believes that, with respect to 1999, except for the
late filing of a Form 5 by Joan P. Platt in February, all filing requirements
applicable to its officers, directors and ten percent stockholders were
complied with.
A-10
<PAGE>
ANNEX B
[LETTERHEAD OF THOMAS WEISEL PARTNERS]
August 30, 2000
Board of Directors
Splash Technology Holdings, Inc.
[LOGO OF THOMAS WEISEL PARTNERS]
555 Del Rey Avenue
Sunnyvale, California 94086
Gentlemen:
We understand that Splash Technology Holdings, Inc., a Delaware corporation
("Seller"), Electronics For Imaging, Inc., a Delaware corporation ("Buyer"),
and Vancouver Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Buyer ("Purchaser"), have entered into an Agreement and Plan of
Merger dated August 30, 2000 (the "Merger Agreement"), providing for a tender
offer (the "Tender Offer") for all of the outstanding shares (the "Shares") of
Common Stock, par value $0.001 per share (the "Seller Common Stock"), of Seller
pursuant to which the Purchaser will pay $10.00 per Share in cash for each
Share accepted. The Merger Agreement further provides that following completion
of the Tender Offer, the Purchaser will be merged with and into Seller (the
"Merger") and each outstanding Share (other than Shares already owned by Buyer
or any of its subsidiaries, Shares held in the treasury of Seller and any
Dissenting Shares (as defined in the Merger Agreement)) will be converted into
the right to receive $10.00 in cash. The terms and conditions of the Tender
Offer and the Merger are set forth in more detail in the Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
$10.00 in cash to be received by the holders of Shares in the Tender Offer and
the Merger (other than Buyer or any of its subsidiaries) is fair to such
shareholders from a financial point of view, as of the date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Seller,
including the consolidated financial statements for recent years and interim
periods to June 30, 2000 and certain other relevant financial and operating
data relating to Seller made available to us from published sources and from
the internal records of Seller; (ii) reviewed the financial terms and
conditions of the Merger Agreement; (iii) reviewed certain publicly available
information concerning the trading of, and the trading market for, Seller
Common Stock; (iv) compared Seller and Buyer from a financial point of view
with certain other companies in the printer-server industry which we deemed to
be relevant; (v) considered the financial terms, to the extent publicly
available, of selected recent business combinations of companies in the
hardware and software industries specifically and in the technology industry
generally which we deemed to be comparable, in whole or in part, to the
business combination contemplated by the Merger Agreement; (vi) reviewed and
discussed with representatives of the management of Seller certain information
of a business and financial nature regarding Seller, furnished to us by them;
(vii) made inquiries regarding and discussed the Tender Offer, the Merger and
the Merger Agreement and other matters related thereto with Seller's counsel;
and (viii) performed such other analyses and examinations as we have deemed
appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. We have assumed that there have
been no material changes in Seller's assets, financial condition, results of
operations, business or prospects since the date of its last financial
statements made available to us. We have relied on advice of counsel to Seller
as to all legal matters with respect to Seller, the Tender Offer, the Merger
and the Merger Agreement. We have assumed that the Tender Offer and the Merger
will be consummated in a manner that complies in all respects with the
applicable provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934 and all other applicable
federal and state statutes, rules and regulations. In
B-1
<PAGE>
Board of Directors
Splash Technology Holdings, Inc.
August 30, 2000
[LOGO OF THOMAS WEISEL PARTNERS]
Page 2
addition, we have not assumed responsibility for making an independent
evaluation, appraisal or physical inspection of any of the assets or
liabilities (contingent or otherwise) of Seller, nor have we been furnished
with any such appraisals. You have informed us, and we have assumed, that the
Merger will be recorded as a purchase under generally accepted accounting
principles. Finally, our opinion is based on economic, monetary and market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Accordingly, although subsequent developments may affect
this opinion, we have not assumed any obligation to update, revise or reaffirm
this opinion.
We have further assumed with your consent that the Tender Offer and the
Merger will be consummated in accordance with the terms described in the Merger
Agreement, without any further amendments thereto, and without waiver by Seller
of any of the conditions to its obligations thereunder.
We have acted as financial advisor to Seller in connection with the Tender
Offer and the Merger and will receive a fee for our services, including
rendering this opinion, a significant portion of which is contingent upon the
consummation of the Merger. In the ordinary course of our business, we actively
trade the equity securities of Seller and Buyer for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the $10.00 in cash to be received by the shareholders
of Seller (other than Buyer and any of its subsidiaries) pursuant to the Tender
Offer and the Merger is fair to such shareholders from a financial point of
view, as of the date hereof.
This opinion is directed to the Board of Directors of Seller in its
consideration of the Tender Offer and the Merger and is not a recommendation to
any shareholder as to whether or not such shareholder should tender such
shareholder's Shares in connection with the Tender Offer. Further, this opinion
addresses only the financial fairness of the $10.00 in cash to be received by
the shareholders of Seller in the Tender Offer and the Merger and does not
address the relative merits of the Tender Offer or the Merger and any
alternatives to the Tender Offer and the Merger, Seller's underlying decision
to proceed with or effect the Tender Offer and the Merger, or any other aspect
of the Tender Offer and the Merger. This opinion may not be used or referred to
by Seller, or quoted or disclosed to any person in any manner, without our
prior written consent, which consent is hereby given to the inclusion of this
opinion in the Schedule 14D-9 to be filed with the Securities and Exchange
Commission in connection with the Tender Offer.
Very truly yours,
/S/ THOMAS WEISEL PARTNERS LLC
THOMAS WEISEL PARTNERS LLC
B-2
