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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
KOFAX IMAGE PRODUCTS, INC.
(NAME OF THE ISSUER)
IMAGING COMPONENTS CORPORATION
IMAGING ACQUISITION CORPORATION
DICOM GROUP PLC
DRESDNER KLEINWORT
BENSON EQUITY PARTNERS LP
DAVID S. SILVER
DEAN A. HOUGH
RONALD J. FIKERT
RICHARD M. MURPHY
KEVIN DRUM
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLES OF CLASSES OF SECURITIES)
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50020010
(CUSIP NUMBER OF CLASSES OF SECURITIES)
ARNOLD VON BUREN
BUSINESS BUILDING FORREN WEST
GRUNDSTRASSE 14
CH-6343 ROTKREUZ, (ZUG) SWITZERLAND
011-41-41-798-3070
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
COPIES TO:
EUNU CHUN, ESQ.
M. GILBEY STRUB, ESQ.
KIRKLAND & ELLIS
153 EAST 53RD STREET, 39TH FLOOR
NEW YORK, NEW YORK 10022
(212) 446-4800
This statement is filed in connection with (check the appropriate box):
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(a) [ ] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or Rule
13e-3(c) under the Securities Exchange Act of 1934.
(b) [ ] The filing of a registration statement under the Securities
Act of 1933.
(c) [X] A tender offer
(d) [ ] None of the above
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Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ ]
CALCULATION OF FILING FEE
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Transaction Valuation* $71,008,684.10 Amount of Filing Fee $14,201.73
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* For purposes of calculating the fee only. This amount assumes the purchase
at a price per share of $12.75 in cash of all 5,243,956 shares of common stock,
par value $.001 per share ("Shares"), of the subject company, which number of
shares represents all the Shares outstanding as of July 27, 1999, as represented
by the subject company in the Agreement and Plan of Merger, dated as of July 27,
1999 (the "Merger Agreement") plus 614,555 Shares reserved for issuance under
the Company's option and stock purchase plans as represented by the subject
company in the Merger Agreement. The amount of the filing fee, calculated in
accordance with Section 14(g)(3) and Rule 0-11(d) under the Securities Exchange
Act of 1934, as amended, equals 1/50th of one percent of the aggregate of the
cash offered by the bidders.
[X] 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.
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Amount Previously Paid: $14,940.00
Form or Registration
No.: 14D-1
Imaging Components Corporation, Imaging Acquisition
Corporation, DICOM GROUP PLC and Dresdner Kleinwort Benson
Filing Party: Equity Partners LP
Date Filed: August 3, 1999
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This Rule 13E-3 Transaction Statement relates to a tender offer by Imaging
Components Corporation, a Delaware corporation (the "Purchaser"), to purchase
all of the outstanding shares of Common Stock, par value $0.001 per share (the
"Shares"), of Kofax Image Products, Inc., a Delaware corporation (the
"Company"), at a price of $12.75 per Share net to the seller in cash and without
interest thereon, on the terms and subject to the conditions set forth in the
Offer to Purchase dated August 3, 1999 (the "Offer to Purchase") and in the
related Letters of Transmittal (which, together with the Offer to Purchase,
constitute the "Offer"), copies of which are filed as Exhibits (d)(1) and (d)(2)
hereto.
The following cross reference sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") filed by the Purchaser with
the Securities and Exchange Commission on the date hereof of the information
required to be included in response to the items of this Statement. The
information in the Schedule 14D-1 which is attached hereto as Exhibit (g),
including all exhibits thereto, is hereby expressly incorporated herein by
reference and the responses to each item are qualified in their entirety by the
provisions of the Schedule 14D-1.
CROSS-REFERENCE SHEET
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WHERE LOCATED IN
ITEM IN SCHEDULE 13E-3 SCHEDULE 14D-1
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Item 1(a)................................................... Item 1(a)
Item 1(b)................................................... Item 1(b)
Item 1(c)................................................... Item 1(c)
Item 1(d)................................................... *
Item 1(e)................................................... *
Item 1(f)................................................... *
Item 2(a)................................................... Item 2(a)
Item 2(a)................................................... Item 2(a)
Item 2(a)................................................... Item 2(a)
Item 2(b)................................................... Item 2(b)
Item 2(c)................................................... Item 2(c)
Item 2(d)................................................... Item 2(d)
Item 2(e)................................................... Item 2(e)
Item 2(f)................................................... Item 2(f)
Item 2(g)................................................... Item 2(g)
Item 3(a)................................................... Item 3(a)
Item 3(b)................................................... Item 3(b)
Item 4...................................................... *
Item 5...................................................... Item 5
Item 6(a)................................................... Item 4(a)
Item 6(b)................................................... *
Item 6(c)................................................... Item 4(b)
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WHERE LOCATED IN
ITEM IN SCHEDULE 13E-3 SCHEDULE 14D-1
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Item 6(d)................................................... Item 4 (c)
Item 7(a)................................................... Item 5
Item 7(b)................................................... *
Item 7(c)................................................... *
Item 7(d)................................................... *
Item 8...................................................... *
Item 9...................................................... *
Item 10(a).................................................. Item 6 (a)
Item 10(b).................................................. Item 6 (b)
Item 11..................................................... *
Item 12(a).................................................. *
Item 12(b).................................................. *
Item 13..................................................... *
Item 14(a).................................................. *
Item 14(b).................................................. *
Item 15(a).................................................. *
Item 15(b).................................................. Item 8
Item 16..................................................... Item 10(f)
Item 17(a).................................................. Item 11(b)
Item 17(b).................................................. *
Item 17(c).................................................. Item 11(c)
Item 17(d).................................................. Item 11(a)
Item 17(e).................................................. *
Item 17(f).................................................. Item 11(f)
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* There is no applicable item contained in Schedule 14D-1.
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the issuer is Kofax Image Products, Inc., a Delaware
corporation (the "Company"), and the address of its principal executive offices
is 16245 Laguna Canyon Road, Irvine, California 92618. The answer to Item 1(a)
of the Schedule 14D-1 is incorporated herein by reference.
(b) The exact title of each class of equity securities to which this
statement relates is as follows: Common Stock, par value $0.001 per share, of
which 5,243,956 shares were outstanding and held by 186 holders of record, in
each case, as of July 27, 1999. The information set forth in the "Introduction"
and in "Special Factors -- Effect of the Offer on the Markets for the Shares;
Nasdaq Listing; Exchange Act Registration; Margin Regulations" of the Offer to
Purchase is incorporated herein by reference. The answer to Item 1(b) of the
Schedule 14D-1 is incorporated herein by reference.
(c) The information set forth in "The Tender Offer -- Section 5 ("Price
Range of Shares; Dividends"), "The Tender Offer -- Section 8 ("Dividends and
Distributions") and "Special Factors -- Source and Amount of Funds" of the Offer
to Purchase is incorporated herein by reference. The answer to Item 1(c) of the
Schedule 14D-1 is incorporated herein by reference.
(d) In 1997 and 1998, the Company did not pay dividends to any holders of
its shares. The information set forth in "The Tender Offer -- Section 5 ("Price
Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by
reference.
(e) The Company made an initial public offering on October 10, 1997 of
2,000,000 shares of common stock for $11.00 per share. The aggregate net
proceeds to the Company were $13,299,000.
(f) Since the Company's initial public offering on October 10, 1997, Dean
A. Hough purchased 130 shares of the Company's common stock for $11.38 per
share on October 10, 1997.
Under the Company's Stock Repurchase Plan, the Company repurchased
100,000 shares during the fourth fiscal quarter of 1998 for prices ranging from
$6.25 to $6.50 per share, for an average price per share of $6.3625.
During the first fiscal quarter of 1999, the Company repurchased 50,000
shares for $6.875 per share. During the second fiscal quarter of 1999, the
Company repurchased 100,000 shares for $6.3125 per share. During the fourth
fiscal quarter of 1999, the Company repurchased 124,000 shares for prices
ranging from $8.5625 to $9.00 per share, for an average price per share of
$8.8563.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by Purchaser, Imaging
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Purchaser ("Merger Sub"), DICOM GROUP plc, a public limited company formed under
the laws of England and Wales ("DICOM"), Dresdner Kleinwort Benson Equity
Partners LP, a Delaware limited partnership ("Private Equity Partners"), David
S. Silver, Dean A. Hough, Ronald J. Fikert, Richard M. Murphy and Kevin Drum
(collectively, the "Reporting Persons"). The information set forth in the Offer
to Purchase under "Introduction," in Section 7 ("The Tender Offer -- Certain
Information Concerning Purchaser, Merger Sub, DICOM and Private Equity
Partners"), in
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Schedule I and Schedule II to the Offer to Purchase is incorporated herein by
reference. The answer to Item 2 of Schedule 14D-1 is incorporated herein by
reference.
(e)-(f) During the last five years, none of the Reporting Persons nor, to
the best of their knowledge, any of the persons listed in Schedule I and
Schedule II to the Offer to Purchase (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) 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 further violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws. The answer to Item 2 of Schedule 14D-1 is incorporated herein by
reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)-(b) The information set forth in the Offer to Purchase in "Special
Factors -- Background of the Offer," in "Special Factors -- Purpose of the Offer
and the Merger; Plans for the Company," in "Special Factors -- Interests of
Certain Persons in the Offer and the Merger," and in "Special Factors -- The
Merger Agreement" is incorporated herein by reference. The answer to Item 3 of
Schedule 14D-1 is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the "Introduction," in "Special
Factors -- Purpose of the Offer and the Merger; Plans for the Company," in
"Special Factors -- Interests of Certain Persons in the Offer and the Merger,"
and in "Special Factors -- The Merger Agreement" of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in the "Introduction," in "Special
Factors -- Interests of Certain Persons in the Offer and the Merger" and in
"Special Factors -- The Merger Agreement" of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(e) The information set forth in the Offer to Purchase in "Special
Factors -- Purpose of the Offer; Plans for the Company," in "Special Factors --
The Merger Agreement" and in Section 7 ("The Tender Offer -- Certain Information
Concerning Purchaser, Parent, DICOM and Private Equity Partners") is
incorporated herein by reference. Except as set forth therein, there are no
plans or proposals required to be set forth in this Item. The answer to Item 5
of the Schedule 14D-1 is incorporated herein by reference.
(f)-(g) The information set forth in the Offer to Purchase in "Special
Factors -- Effect of the Offer on the Market for the Shares; Exchange Act
Registration; Margin Regulations" is incorporated herein by reference. The
answer to Item 5 of the Schedule 14D-1 is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a), (c) The information set forth in the "Introduction" and "Special
Factors -- Sources and Amount of Funds" of the Offer to Purchase is incorporated
herein by reference. The answer to Item 4 of the Schedule 14D-1 is incorporated
herein by reference.
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(b) The information set forth in "The Tender Offer -- Section 11" ("Fees
and Expenses") of the Offer to Purchase is incorporated herein by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The information set forth in the "Introduction," in "Special
Factors -- Background of the Offer and the Merger", "Special
Factors -- Recommendation of the Board of Directors; Fairness of the Offer and
the Merger," in "Special Factors -- Opinions of the Financial Advisor," in
"Special Factors -- The Merger Agreement," and in "Special Factors -- Purpose
of the Offer and the Merger; Plans for the Company" of the Offer to Purchase is
incorporated herein by reference. The answer to Item 5 of the Schedule 14D-1 is
incorporated herein by reference.
(b)-(d) The information set forth in the "Introduction," in "Special
Factors -- Background of the Offer and the Merger", "Special
Factors -- Recommendation of the Board of Directors; Fairness of the Offer and
the Merger," in "Special Factors -- Opinions of the Financial Advisor" in
"Special Factors -- The Merger Agreement," in "Special Factors -- Purpose of the
Offer and the Merger; Plans for the Company," in "Special Factors -- The Merger
Agreement," in "Special Factors -- Certain Effects of the Offer and the Merger,"
in "Special Factors -- Certain United States Income Tax Consequences" and
"Special Factors -- Effect of the Offer on the Markets for the Shares; Nasdaq
Listing; Exchange Act Registration; Margin Regulations" of the Offer to Purchase
is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(f) The information set forth in the "Introduction," in "Special
Factors -- Background of the Offer and the Merger," in "Special
Factors -- Recommendation of the Board of Directors; Fairness of the Offer and
the Merger," in "Special Factors -- Opinions of the Financial Advisor" and in
"Special Factors -- Purpose of the Offer and the Merger; Plans for the Company"
of the Offer to Purchase is incorporated herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the "Introduction," in "Special
Factors -- Background of the Offer and the Merger," in "Special
Factors -- Recommendation of the Board of Directors; Fairness of the Offer and
the Merger" in "Special Factors -- Opinions of the Financial Advisor" in
"Special Factors -- Purpose of the Offer and the Merger; Plans for the Company"
of the Offer to Purchase and in Exhibits (b)(1) and (2) of this Schedule 13E-3
is incorporated herein by reference. The reports, opinions or appraisals
mentioned in the foregoing information incorporated by reference hereto are
available for inspection and copying during normal business hours at Kofax Image
Products, Inc., 16245 Laguna Canyon Road, Irvine, California 92618. A copy of
any such material will also be transmitted by the Company to any interested
holder of Shares (or his representative designated in writing), upon written
request and at the expense of such stockholder.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in "Special Factors -- Purpose of the Offer and the Merger;
Plans for the Company," in "Special Factors -- Interests of Certain Persons in
the Offer and the Merger," and in Schedule I to the Offer to Purchase is
incorporated herein by reference of the Offer to Purchase and in Exhibits
(c)(1)-(3) of this Schedule 13E-3 is incorporated
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herein by reference. The answer to Item 6 of the Schedule 14D-1 is incorporated
herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information in the "Introduction," in "Special Factors -- The Merger
Agreement," in "Special Factors -- Purpose of the Offer and the Merger," in
"Special Factors -- Interests of Certain Persons in the Transactions," in
"Special Factors -- Sources and Amount of Funds" and in Section 7 ("Certain
Information Concerning Purchaser, Parent, DICOM and Private Equity Partners") of
the Offer to Purchase and in Exhibits (c)(2) and (c)(3) of this Schedule 13E-3
is incorporated herein by reference. The answer to Item 7 of the Schedule 14D-1
is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a)-(b) The information set forth in the "Introduction," in "Special
Factors -- Background of the Offer and the Merger," in "Special
Factors -- Recommendation of the Board of Directors; Fairness of the Offer and
the Merger" and in "Special Factors -- Interests of Certain Persons in the Offer
and the Merger" of the Offer to Purchase is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTIONS.
(a) The information set forth in the "Introduction," in "Special
Factors -- Purpose of the Offer and the Merger," in "Special Factors -- Future
Plans in Addition to the Merger" and Annex A of the Offer to Purchase is
incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a)-(b) The information set forth in Section 6 ("Certain Information
Concerning the Company") of and Schedule I to the Offer to Purchase is
incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in "Special Factors -- Background of the
Offer and the Merger," in "Special Factors -- Purpose of the Offer and the
Merger," in "Special Factors -- Interests of Certain Persons in the Offer and
the Merger," in "Special Factors -- Sources and Amount of Funds" and in Section
7 ("Certain Information Concerning Purchaser, Parent, DICOM and Private Equity
Partners") of the Offer to Purchase is incorporated herein by reference.
(b) The information set forth in Section 11 ("Fees and Expenses") of the
Offer to Purchase is incorporated herein by reference. The answer to Item 8 of
the Schedule 14D-1 is incorporated herein by reference.
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ITEM 16. ADDITIONAL INFORMATION.
The information set forth in the Offer to Purchase and the related Letter
of Transmittal, copies of which are filed as Exhibits(d)(1) and (d)(2) hereto,
respectively, is incorporated herein by reference in its entirety. The answer to
Item 10(f) of the Schedule 14D-1 is incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) Senior Facilities Commitment Letter, dated July 27, 1999 to
DICOM and Private Equity Partners from Dresdner Kleinwort
Benson North America LLC and Dresdner Bank AG, New York and
Grand Cayman Branches.
(a)(2) Senior Subordinated Notes Commitment Letter, dated July 27,
1999 to DICOM and Private Equity Partners from Dresdner
Kleinwort Benson North America LLC and Dresdner Bank AG, New
York and Grand Cayman Branches.
(b)(1) Fairness Opinion of C.E. Unterberg, Towbin, dated July 27,
1999.
(b)(2) Presentation to the Company's Board of Directors by C.E.
Unterberg, Towbin, dated July 21, 1999.
(c)(1) Agreement and Plan of Merger, dated as of July 27, 1999,
among Purchaser, Merger Sub and the Company.
(c)(2) Voting Agreement, dated as of July 27, 1999 by and among
Purchaser, Merger Sub, David S. Silver, Dean A. Hough,
Ronald J. Fikert, Richard M. Murphy, Kevin Drum, William
Drobish, Alexander P. Cilento, B. Allen Lay and Southern
California Ventures.
(c)(3) Management Commitment Letter, dated as of July 27, 1999 from David S.
Silver, Dean A. Hough, Ronald J. Fikert, Richard M. Murphy and Kevin
Drum to Purchaser.
(c)(4) Letter Agreement, dated as of August 2, 1999 assigning to Purchaser
rights of Merger Sub in connection with the Offer.
(d)(1) Offer to Purchase dated August 3, 1999.
(d)(2) Letter of Transmittal.
(d)(3) Notice of Guaranteed Delivery.
(d)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(d)(5) Form of Letter to be used by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(d)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(d)(7) Company Press Release dated July 28, 1999
(d)(8) Text of Press Release issued by the Equity Investors on behalf
of Purchaser, dated July 28, 1999.
(d)(9) Form of Summary Advertisement dated August 3, 1999.
(e) Section 262 of the Delaware General Corporation Law
(included as Annex A to Exhibit (d)(1)).
(f) Not applicable.
(g) Tender Offer Statement on Schedule 14D-1 filed by Purchaser
on August 3, 1999.
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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.
IMAGING COMPONENTS CORPORATION
By: /s/ ARNOLD VON BUREN
------------------------------------
Name: Arnold von Buren
Title: Secretary
IMAGING ACQUISITION CORPORATION
By: /s/ ARNOLD VON BUREN
------------------------------------
Name: Arnold von Buren
Title: Secretary
DICOM GROUP PLC
By: /s/ ARNOLD VON BUREN
------------------------------------
Name: Arnold von Buren
Title: Secretary
DRESDNER KLEIN BENSON PRIVATE EQUITY
PARTNERS LP
By: DRESDNER KLEIN BENSON PRIVATE
EQUITY LLC, its General Partner
By: /s/ Alexander P. Coleman
------------------------------------
Alexander P. Coleman
Authorized Person
DAVID S. SILVER
------------------------------------
David S. Silver
DEAN A. HOUGH
/s/ DEAN A. HOUGH
------------------------------------
Dean A. Hough
RONALD J. FIKERT
/s/ RONALD J. FIKERT
------------------------------------
Ronald J. Fikert
RICHARD M. MURPHY
------------------------------------
Richard M. Murphy
KEVIN DRUM
------------------------------------
Kevin Drum
August 3, 1999
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EXHIBIT INDEX
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(a)(1) Senior Facilities Commitment Letter, dated July 27, 1999 to
DICOM and Private Equity Partners from Dresdner Kleinwort
Benson North America LLC and Dresdner Bank AG, New York and
Grand Cayman Branches.
(a)(2) Senior Subordinated Notes Commitment Letter, dated July 27,
1999 to DICOM and Private Equity Partners from Dresdner
Kleinwort Benson North America LLC and Dresdner Bank AG, New
York and Grand Cayman Branches.
(b)(1) Fairness Opinion of C.E. Unterberg, Towbin, dated July 27,
1999.
(b)(2) Presentation to the Company's Board of Directors by C.E.
Unterberg, Towbin, dated July 21, 1999.
(c)(1) Agreement and Plan of Merger, dated as of July 27, 1999,
among Purchaser, Merger Sub and the Company.
(c)(2) Voting Agreement, dated as of July 27, 1999 by and among
Purchaser, Merger Sub, David S. Silver, Dean A. Hough,
Ronald J. Fikert, Richard M. Murphy, Kevin Drum, William
Drobish, Alexander P. Cilento, B. Allen Lay and Southern
California Ventures.
(c)(3) Management Commitment Letter, dated as of July 27, 1999 from David S.
Silver, Dean A. Hough, Ronald J. Fikert, Richard M. Murphy and Kevin
Drum to Purchaser.
(c)(4) Letter Agreement, dated as of August 2, 1999 assigning to Purchaser
rights of Merger Sub in connection with the Offer.
(d)(1) Offer to Purchase dated August 3, 1999.
(d)(2) Letter of Transmittal.
(d)(3) Notice of Guaranteed Delivery.
(d)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(d)(5) Form of Letter to be used by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(d)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(d)(7) Company Press Release dated July 28, 1999.
(d)(8) Text of Press Release issued by the Equity Investors on behalf
of Purchaser, dated July 28, 1999.
(d)(9) Form of Summary Advertisement dated August 3, 1999.
(e) Section 262 of the Delaware General Corporation Law
(included as Annex to Exhibit (d)(1)).
(f) Not applicable.
(g) Tender Offer Statement on Schedule 14D-1 filed by Merger Sub
and Purchaser on August 3, 1999.
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Exhibit (a)(1)
DRESDNER KLEINWORT BENSON NORTH AMERICA LLC
75 Wall Street
New York, New York 10005
DRESDNER BANK AG,
NEW YORK AND GRAND CAYMAN BRANCHES
75 Wall Street
New York, New York 10005
July 27, 1999
$50,000,000 Senior Facilities Commitment Letter
Dicom Group Plc
Business Building Forren West
Grundstrasse 14
CH-6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid, President & Chief Executive Officer
Dresdner Kleinwort Benson Private Equity Partners LP
75 Wall Street, 24th Floor
New York, New York 10005
Attention: Alex Coleman
Ladies and Gentlemen:
Dicom Group Plc ("Dicom") and Dresdner Kleinwort Benson Private Equity
Partners LP ("PEIF", together with Dicom, the "Investors") have advised Dresdner
Bank AG, New York and Grand Cayman Branches ("Dresdner") and Dresdner Kleinwort
Benson North America LLC ("DKB") that Imaging Acquisition Corporation, a newly
formed Delaware corporation ("Merger Sub" and, prior to the consummation of the
Merger, the "Borrower") wholly owned by Imaging Components Corporation, a newly
formed Delaware corporation (the "Parent") which in turn is to be approximately
75% owned by PEIF, approximately 19% owned by Dicom and approximately 6% owned
by certain members of management (the "Management Investors") of the Company (as
defined below), intends (i) to effect a tender offer (the "Tender Offer") to
acquire (the "Acquisition") up to 100% (but not less than 50% plus one share) of
the issued and outstanding shares of common stock of Kofax Image Products, Inc.,
a Delaware corporation (the "Company" and, upon consummation of the Merger, as
the surviving corporation in the Merger, the "Borrower"), and (ii) as soon as
practicable after the consummation of the Acquisition, to be merged (the
"Merger") with and into the Company, pursuant to the Agreement and Plan of
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2
Merger, dated as of July 27, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Merger Agreement"), by and among the Company,
the Parent and Merger Sub, with the shares of the Company outstanding
immediately prior to the Acquisition to be converted into and representing the
right to receive approximately $12.75 per share as such amount is adjusted
pursuant to the Merger Agreement (the "Merger Consideration") and each share of
common stock of Merger Sub to be converted into one share of the surviving
corporation's common stock (the "Transaction"), as more specifically described
in the Sources and Uses Table (the "Table") attached hereto as Schedule I, with
the respective amounts expended in connection therewith being set forth in the
Table. References herein to the "Transaction" shall include the financings
described herein and all other transactions related to the Transaction.
You have also advised us that you propose to finance the Transaction
and the related fees and expenses from the following sources: (a) approximately
$21,000,000 in common equity (the "Parent Equity") on terms reasonably
satisfactory in all material respects to us (it being agreed that such terms set
forth in the July 26, 1999 draft of the documents relating to the Parent Equity
are reasonably satisfactory in all material respects to us), (b) approximately
$45,000,000 from senior secured credit facilities (such credit facilities, along
with the Revolving Facility (defined below) the "Senior Facilities") of the
Borrower comprised of a bridge loan facility in the aggregate amount of
$23,000,000 (the "Bridge Facility") and a term loan facility in the aggregate
amount of $22,000,000 (the "Term Facility") and (c) $10,000,000 in cash proceeds
from the issuance by the Borrower of senior subordinated secured notes (the
"Senior Subordinated Notes") in a private placement arranged by DKB.
Additionally, a $5,000,000 revolving credit facility (the "Revolving Facility")
will be available to finance the continuing operations of the Borrower and its
subsidiaries after the Transaction.
Dresdner is pleased to advise you that it is willing to act as Sole
Lead Arranger for the Senior Facilities and of its commitment to provide the
entire amount of the Senior Facilities. The Statement of Terms and Conditions
attached as Exhibit A hereto (the "Senior Facilities Term Sheet") sets forth the
principal terms and conditions on and subject to which Dresdner is willing to
make available the Senior Facilities.
It is agreed that Dresdner will act as the sole and exclusive
Administrative Agent and Syndication Agent in respect of the Senior Facilities
and as the Sole Lead Arranger in respect of the Senior Facilities, and DKB will
act as the sole and exclusive advisor in respect of the Senior Facilities and
each will, in such capacities, perform the duties and exercise the authority
customarily performed and exercised by it in such roles. You agree that no other
agents, coagents or arrangers will be appointed, no other titles will be awarded
and no compensation (other than that expressly contemplated by the Senior
Facilities Term Sheet and Fee Letter referred to below) will be paid in
connection with the Senior Facilities unless you and we shall so agree.
We intend to syndicate the Senior Facilities to a group of financial
institutions (together with Dresdner, the "Lenders") identified by us in
consultation with you. Dresdner intends to commence syndication efforts
promptly, and you agree actively to assist Dresdner in completing a syndication
satisfactory to it. Such assistance shall include (a) your using commercially
reasonable efforts to ensure that the syndication efforts benefit materially
from the existing lending relationships of the Investors and the Company, (b)
direct contact between senior
<PAGE> 3
3
management and advisors of the Investors, the Parent, Merger Sub, and the
Company and the proposed Lenders, (c) assistance in the preparation of a
Confidential Information Memorandum and other marketing materials to be used in
connection with the syndication, (d) the hosting, with Dresdner and DKB, of one
or more meetings of prospective Lenders and (e) your ensuring that prior to and
during the syndication of the Senior Facilities there shall be no competing
offering, placement or arrangement of any debt securities (other than the Senior
Subordinated Notes) or bank financing by or on behalf of the Borrower or any of
its affiliates.
Dresdner will manage all aspects of the syndication, including
decisions as to the selection of institutions to be approached and when they
will be approached, when their commitments will be accepted, which institutions
will participate, the allocations of the commitments among the Lenders and the
amount and distribution of fees among the Lenders. To assist Dresdner in its
syndication efforts, you agree promptly to prepare and provide to Dresdner and
DKB all information with respect to the Parent, Merger Sub, the Company and
their respective subsidiaries, the Transaction and the other transactions
contemplated hereby, including all financial information and projections (the
"Projections") as we may reasonably request in connection with the arrangement
and syndication of the Senior Facilities. You hereby represent and covenant that
(a) all information other than the Projections (the "Information") that has been
or will be made available to Dresdner or DKB by you or any of your
representatives is or will be, when furnished, complete and correct in all
material respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which such statements are made and (b) the Projections
that have been or will be made available to Dresdner or DKB by you or any of
your representatives have been or will be prepared in good faith based upon
reasonable assumptions. You understand that in arranging and syndicating the
Senior Facilities we may use and rely on the Information and Projections without
independent verification thereof.
As consideration for Dresdner's commitment hereunder and Dresdner's and
DKB's agreement to perform the services described herein, you agree to pay, or
to cause the Borrower to pay, to Dresdner the nonrefundable fees set forth in
the Senior Facilities Term Sheet and in the fee letter dated the date hereof and
delivered herewith (the "Fee Letter").
Dresdner shall be entitled, after consultation with you, to change the
pricing, terms and structure of the Senior Facilities after the date occurring
67 days after the date hereof if the syndication has not been completed in a
manner satisfactory to Dresdner and if Dresdner determines that such changes are
advisable to insure a successful syndication of the Senior Facilities; provided
that the total amount of the Senior Facilities remains unchanged, the pricing on
the Senior Facilities will not increase by more than 1.00% per annum and the
terms of the Revolving Facility and the Term Facility will not be less than six
years. Dresdner's commitment hereunder is subject to the agreements in this
paragraph.
Dresdner's commitment hereunder and Dresdner and DKB's agreement to
perform the services described herein are subject to (a) there not occurring any
change, occurrence or development since March 31, 1999 that could reasonably be
expected to have a material adverse effect on the business, operations,
property, condition (financial or otherwise) or prospects of the
<PAGE> 4
4
Parent, Merger Sub, the Company and their respective subsidiaries, taken as a
whole, (b) our not becoming aware after the date hereof of any material
information or other matter relating to the Company or the Transaction
(including any matter relating to financial models and underlying assumptions
relating to the Projections) that in our reasonable judgment is inconsistent in
a material and adverse manner with such information or other matter disclosed to
us prior to the date hereof, (c) there not having occurred after the date hereof
a material disruption of or material adverse change in conditions in the
financial, banking or capital markets (including, without limitation, the
high-yield market), (d) the negotiation, execution and delivery on or before the
Closing Date (as defined in the Senior Facilities Term Sheet), of definitive
documentation with respect to the Senior Facilities reasonably satisfactory to
Dresdner and its counsel and (e) the other conditions set forth or referred to
in the Senior Facilities Term Sheet. Such definitive documentation with respect
to the Senior Facilities shall contain terms and provisions in addition to those
set forth herein and in the Senior Facilities Term Sheet. Those matters in such
definitive documentation that are not covered by the provisions set forth herein
and in the Senior Facilities Term Sheet shall be reasonably satisfactory to
Dresdner and its counsel and the Borrower, provided that any such additional
terms and provisions will not conflict in any material respect with the terms
and provisions set forth herein and in the Senior Facilities Term Sheet.
You agree (a) to indemnify and hold harmless Dresdner, DKB, their
affiliates and their respective officers, directors, employees, advisors and
agents (each, an "indemnified person") from and against any and all losses,
claims, damages and liabilities to which any such indemnified person may become
subject arising out of or in connection with this Commitment Letter, the Senior
Facilities, the use of the proceeds thereof, the Transaction or any related
transaction or any claim, litigation, investigation or proceeding relating to
any of the foregoing, regardless of whether any indemnified person is a party
thereto, and to reimburse each indemnified person upon demand for any legal or
other expenses incurred in connection with investigating or defending any of the
foregoing, provided that the foregoing indemnity will not, as to any indemnified
person, apply to losses, claims, damages, liabilities or related expenses to the
extent they are found by a final, non-appealable judgment of a court to arise
from the willful misconduct or gross negligence of such indemnified person, and
(b) to reimburse Dresdner, DKB and their affiliates on demand for all
out-of-pocket expenses (including due diligence expenses, syndication expenses,
consultant's fees and expenses, travel expenses, and reasonable fees, charges
and disbursements of counsel) incurred in connection with the Senior Facilities
and any related documentation (including this Commitment Letter and the
definitive financing documentation) or the administration, amendment,
modification or waiver thereof. No indemnified person shall be liable for any
damages arising from the use by others of Information or other materials
obtained through electronic, telecommunications or other information
transmission systems or for any special, indirect, consequential or punitive
damages in connection with the Senior Facilities.
You acknowledge that Dresdner and its affiliates (the term "Dresdner"
as used below in this paragraph being understood to include such affiliates) may
be providing debt financing, equity capital or other services (including
financial advisory services) to other companies in respect of which you may have
conflicting interests regarding the transactions described herein and otherwise.
Dresdner will not use confidential information obtained from you by virtue of
the transactions contemplated by this Commitment Letter or its other
relationships with you in
<PAGE> 5
5
connection with the performance by Dresdner of services for other companies, and
Dresdner will not furnish any such information to other companies. You also
acknowledge that Dresdner has no obligation to use in connection with the
transactions contemplated by this Commitment Letter, or to furnish to you,
confidential information obtained from other companies.
This Commitment Letter shall not be assignable by you without the prior
written consent of Dresdner and DKB (and any purported assignment without such
consent shall be null and void), is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. This Commitment
Letter may not be amended or waived except by an instrument in writing signed by
you, Dresdner and DKB. This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof. This Commitment Letter and
the Fee Letter are the only agreements that have been entered into among us with
respect to the Senior Facilities and set forth the entire understanding of the
parties with respect thereto. This Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of New York.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Senior Facilities Term Sheet or the Fee
Letter nor any of their terms or substance shall be disclosed, directly or
indirectly, to any other person except (a) to the officers, agents and advisors
of the Investors and, on a confidential basis, the Company, who are directly
involved in the consideration of this matter or (b) as may be compelled in a
judicial or administrative proceeding or as otherwise required by law (in which
case you agree to inform us promptly thereof), provided, that the foregoing
restrictions shall cease to apply (except in respect of the Fee Letter and its
terms and substance) after this Commitment Letter has been accepted by you.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or Dresdner's commitment hereunder; provided, that your obligations under
this Commitment Letter (other than (i) provisions relating to titles awarded in
connection with the Senior Facilities and assistance to be provided by you in
connection with the syndication thereof and (ii) the confidentiality provisions
set forth above) shall automatically terminate and be superseded by the
provisions of the definitive documentation relating to the Senior Facilities
upon the initial funding thereunder, and you shall automatically be released
from all liability in connection therewith at such time.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms hereof and of the Senior Facilities Term Sheet and
the Fee Letter by returning to us executed counterparts hereof and of the Fee
Letter along with a deposit by Dicom in the amount of $100,000 in U.S. dollars
and freely available funds payable to and on the instructions of Dresdner Bank
AG to be applied first to expenses incurred in connection with the Transaction
and then to fees due under the Fee Letter. Any portion of the deposit remaining
after reimbursing
<PAGE> 6
6
Dresdner's fees and expenses payable by you under this Commitment Letter and the
Fee Letter will be returned to Dicom. This offer will automatically expire at
5:00 p.m., New York City time, on July 30, 1999 in the event we have not
received such executed counterparts and deposit in accordance with the second
preceding sentence prior to such time.
<PAGE> 7
7
We are pleased to have been given the opportunity to assist you in
connection with this important financing.
Very truly yours,
DRESDNER KLEINWORT BENSON NORTH
AMERICA LLC
By: /s/ Beverly G. Carson
------------------------------
Name: Beverly G. Carson
Title: Vice President
By: /s/ John R. Morrison
------------------------------
Name: John R. Morrison
Title: Vice President
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ Beverly G. Carson
-------------------------------
Name: Beverly G. Carson
Title: Vice President
By: /s/ John R. Morrison
--------------------------------
Name: John R. Morrison
Title: Vice President
<PAGE> 8
8
Accepted and agreed to as of
the date first above written:
DICOM GROUP PLC
By: /s/ Arnold von Buren
-------------------------------
Name: Arnold von Buren
Title: Executive Director
DRESDNER KLEINWORT BENSON PRIVATE
EQUITY PARTNERS LP
By: DRESDNER KLEINWORT BENSON PRIVATE
EQUITY LLC, its General Partner
By: /s/ Alexander P. Coleman
-------------------------------
Name: Alexander P. Coleman
Title: Investment Partner
<PAGE> 9
SCHEDULE I
SOURCES AND USES TABLE ($MM'S)
<TABLE>
<S> <C>
Sources:
Term Loans $22.0
Revolving Loans $ 0.0
Senior Subordinated Notes $10.0
Bridge Loan 1/ $22.8
Common Equity:
Company Roll-Over Equity 2/ $ 1.2
DKB Equity $16.0
Dicom Equity $ 4.0
Other Equity $ 0.1
-----
Total Sources: $76.1
=====
Uses:
Purchase of Common Stock $70.5
Payment of Fees and Expenses $ 4.8
RAF Technology Acquisition $ 0.1
Company Employee Bonuses $ 0.7
-----
Total Uses $76.1
=====
</TABLE>
- --------
1/ To be refinanced with Company cash.
2/ Roll-Over effective upon the consummation of the Merger.
<PAGE> 10
Exhibit A
KOFAX IMAGE PRODUCTS, INC.
$50,000,000 Senior Facilities
Statement of Terms and Conditions
BORROWER: Initially, Imaging Acquisition Corporation, a Delaware
corporation, and, upon consummation of the Merger, Kofax
Image Products, Inc., a Delaware corporation.
PARENT: Imaging Components Corporation, a Delaware corporation.
GUARANTORS: The Parent and all material operating subsidiaries of the
Parent, direct or indirect.
SOLE LEAD
ARRANGER &
ADMINISTRATIVE
AGENT: Dresdner Bank AG, New York and Grand Cayman Branches
("Dresdner"), in its role as Administrative Agent and
Sole Lead Arranger for the Facilities (the "Agent").
SYNDICATION
AGENT: Dresdner.
COLLATERAL
AGENT: Dresdner.
PURPOSE: To provide financing for working capital and general
corporate purposes, as well as to finance the Acquisition.
FACILITIES AND
AMOUNTS: (a) Secured revolving line of credit (the "Revolver") in
the amount of $5,000,000, (b) secured term loan in the
amount of $22,000,000 (the "Term Loan"), and (c) a cash
secured $23,000,000 bridge loan (such amount subject to
reduction if the total amount of cash and marketable
securities available to secure such loan is less than
$23,000,000) (the "Bridge Loan"; together with the Revolver
and the Term Loan, the "Facilities").
CLOSING DATE: The date which is within 60 calendar days of the
commencement of the Tender Offer and on which the initial
borrowings under the Facilities are made.
<PAGE> 11
REVOLVER
PURPOSE: The Revolver will be used: (i) to fund the working capital
requirements of the Borrower and its subsidiaries; (ii) to
pay fees and expenses associated with the Acquisition and
the closing of the Facilities; and (iii) for general
corporate purposes of the Borrower and its subsidiaries.
AVAILABILITY: Availability under the Revolver will be governed by a
borrowing base comprised of an 80% advance rate against
eligible receivables and a 50% advance rate against eligible
inventory. Eligibility criteria to be defined in the
definitive loan documentation.
TERM: The Revolver will have a term of no longer than six years
from the Closing Date.
FACILITY
AMORTIZATION: None.
INTEREST RATE: Initially, reserve-adjusted LIBOR plus 3.25% p.a. or Base Rate
+ 1.75%. If the ratio of funded Senior Debt (to be defined) to
EBITDA (earnings before interest, taxes, depreciation, and
amortization) is less than or equal to 2:1, the interest rate
will be LIBOR + 2.75% or Base Rate + 1.25%.
COMMITMENT FEE: 0.50% per annum on the unused portion of the Revolver,
payable quarterly in arrears.
COLLATERAL: See "Collateral" under "General Terms and Conditions".
TERM LOAN
PURPOSE: The Term Loan will be used to finance the Acquisition.
TERM: The Term Loan will have a term of no longer than six years
from the Closing Date.
AMORTIZATION: The Term Loan will amortize completely over a period not to
exceed six years from the Closing Date as follows:
Year 1: $1,000,000
Years 2-3: $3,000,000
Years 4-5: $4,000,000
Year 6: $7,000,000
INTEREST RATE: Initially, reserve-adjusted LIBOR plus 3.25% p.a. or Base Rate
+ 1.75%. If the ratio of funded Senior Debt to EBITDA is less
than or equal to 2:1, the interest rate will be LIBOR + 2.75%
or Base Rate + 1.25%.
<PAGE> 12
HEDGING: Dresdner may require the Borrower to purchase an interest
rate hedge instrument for a percentage of the Term Loan to
be determined.
SECURITY: "Collateral" under "General Terms and Conditions".
BRIDGE LOAN
PURPOSE: The Bridge Loan will be used to finance the Tender Offer
and the Merger.
TERM: The Bridge Loan will have a term of no longer than 120 days
from the Closing Date.
AMORTIZATION: The Bridge Loan will be repaid in full from the cash and
proceeds of sale of the marketable securities securing such
facility upon the earlier of (i) the effective date of the
Merger and (ii) the date 120 days after the Closing Date.
INTEREST RATE: Reserve-adjusted LIBOR plus 3.25% p.a. or Base Rate +
1.75% (not subject to reduction).
SECURITY: "Collateral" under "General Terms and Conditions".
GENERAL TERMS AND CONDITIONS
MANDATORY AND
OPTIONAL
PREPAYMENTS: 60% excess cash flow recapture (excess cash flow to be
defined in the definitive loan documentation); other
mandatory prepayments from asset sale proceeds and proceeds
of equity offerings and other mandatory prepayments
customary and appropriate for facilities similar to the
Facilities. Such amounts will be applied first to prepay
the Bridge Loan to the extent outstanding, next to prepay
the Term Loan (in the inverse order of maturity) and then
to reduce the amount available under the Revolver. Optional
prepayments may be made by the Borrower at any time without
premium or penalty.
COLLATERAL: The Facilities will be secured by a valid and perfected
first priority security interest in substantially all
assets of the Parent and its subsidiaries, including
without limitation, all receivables, accounts, inventories,
patents, trademarks, copyrights, other intangibles,
equipment and real property (including leasehold
interests), whether now owned or acquired in the future.
The Facilities will also be secured by pledges of (i) 100%
of the capital stock of all subsidiaries of the Borrower
and (ii) 100% of the capital stock of the Borrower. In
addition, the Bridge Loan will be secured by all of the
cash and marketable securities held by the Company on the
Closing Date (the amount of the Bridge Loan being limited
<PAGE> 13
to the amount of such cash and securities and which
securities shall be reasonably acceptable to Dresdner).
INTEREST PAYMENTS: Monthly for Base Rate Loans; on the last day of
selected interest periods (which shall be one, two, or three
months) for LIBOR Loans, computed on the basis of actual days
elapsed and a 360 day year.
DEFAULT
INTEREST: 2.00% per annum above the applicable Interest Rate in
effect at the time.
REPORTING
REQUIREMENTS: Customary and appropriate for facilities of this nature, to
include, without limitation, the following:
1) Annual consolidating and consolidated financial
statements of the Borrower and its subsidiaries audited
by an independent certified third party accountant
acceptable to Dresdner bearing an unqualified opinion.
2) Quarterly consolidating and consolidated financial
statements of the Borrower and its subsidiaries,
together with appropriate calculations demonstrating
compliance with the financial covenants.
3) Monthly consolidated financial statements of the
Borrower and its subsidiaries.
4) Annual financial projections through the maturities of
the Facilities with respect to the Borrower and its
subsidiaries.
5) Monthly certification of no default from a senior
officer of the Borrower with respect to the Facilities.
LOAN
DOCUMENTATION: The Facilities will be subject to the terms and conditions set
forth in a definitive credit agreement, related security
agreements, guarantees, pledge agreements, and mortgages
(including leasehold mortgages) if requested, and other
documents as deemed necessary by Agent.
COVENANTS: Customary and appropriate covenants to include, without
limitation: (i) minimum net worth; (ii) minimum fixed
charge coverage ratio; (iii) maximum funded Senior
Debt/EBITDA; (iv) maximum annual capital expenditures; (v)
limitation on acquisitions (amount to be determined); (vi)
limitations on dividends and redemptions; (vii) "year 2000"
compliance; (viii) negative pledge; (ix) limitation on
other indebtedness, investments, contingent obligations,
mergers, sale of assets and transactions with affiliates.
The Borrower will also covenant that it will reduce the
ratio of funded Senior Debt to EBITDA to 2:1 or less upon
the acquisition by Dicom of the outstanding equity
securities of the Parent owned by PEIF and Dicom's
successful completion of an offering of its common stock
on the Neuer Markt or another securities exchange. In
addition, the Borrower will agree to cause the Merger to
become effective at the earliest practicable date and in
any event not later than 120 days after the Closing Date.
<PAGE> 14
EVENTS OF
DEFAULT: Customary and appropriate Events of Default to include,
without limitation, change of control and cross default.
CONDITIONS
PRECEDENT: Conditions precedent to closing to include, without
limitation:
1) Equity capital in an aggregate amount equal to not less
than $21.2 million and on terms reasonably satisfactory
in all material respects to the Agent (it being agreed
that such terms set forth in the July 26, 1999 draft
documents relating to the Parent Equity are reasonably
satisfactory in all material respects to the Agent)
shall have been contributed to or committed to be
contributed to the Borrower, directly or indirectly, by
the Investors.
2) The Parent, Merger Sub and the Company shall have
entered into the Merger Agreement, which shall be
reasonably satisfactory in all material respects to the
Agent (it being agreed that the July 26, 1999 draft
thereof (the "Draft Merger Agreement") is reasonably
satisfactory in all material respects to the Agent).
3) The Tender Offer and the Merger shall have been approved
by all necessary corporate action of the Parent, Merger
Sub and the Company (other than approval by the
Company's shareholders), and the Merger Agreement shall
not have been amended, waived or modified in any
material respect without the approval of the Agent.
4) There shall not have occurred or exist any breach or
default under the Merger Agreement (including without
limitation, the failure of any representation and
warranty of the Company to be true and correct) that
would cause a condition to the Tender Offer or to the
obligation of any party thereto to effect the Merger not
to be satisfied. The representations and warranties
contained in the definitive loan documentation shall be
true and correct in all material respects.
5) All conditions precedent to the consummation of the
Tender Offer (other than the condition set forth in
paragraph (k) of Annex A to the Draft Merger Agreement)
shall have been satisfied or waived with the approval of
the Agent, including without limitation, the condition
that a number of shares of common stock of the Company
which, together with shares then owned directly or
indirectly by the Parent, Dicom and/or Merger Sub, would
constitute more than 50% of the common stock of the
Company then outstanding on a fully diluted basis shall
have been validly tendered and not withdrawn prior to
the expiration date of the Tender Offer.
6) Execution and delivery of definitive loan documentation
and customary closing documents (including, without
limitation, resolutions, certificates and opinions)
reasonably acceptable to the Agent.
7) Absence of any pending or threatened action,
investigation or proceeding which would reasonably be
expected to have a material adverse effect on the
assets, properties, business, results of operations,
condition (financial or otherwise) or prospects of the
Company and its subsidiaries taken as a whole, or which
seeks to restrain, prevent or impose material adverse
<PAGE> 15
conditions upon the Acquisition, the operations or
business of the Company or its subsidiaries or the
Facilities.
8) The Agent shall be reasonably satisfied with (i) the
capital and ownership structure and the shareholder
arrangements (including such arrangements with certain
members of management of the Company) of the Company,
Merger Sub and each of the Guarantors, including without
limitation, the charter and bylaws of the Company,
Merger Sub and each such Guarantor and each agreement or
instrument relating thereto and (ii) the amount, tenor
and other terms and conditions of all other equity and
debt financings required in connection with the
Acquisition (including without limitation, the
subordination terms relating to the Senior Subordinated
Notes) (it being agreed that the Agent is reasonably
satisfied in all material respects with the draft equity
documents and documentation relating to the Subordinated
Notes prepared in connection with the Transaction and
delivered to the Agent on or prior to the date hereof).
9) The fees and expenses of the Agent (including the fees
described in the Fee Letter and the fees and expenses of
counsel for the Agent) shall have been paid in full.
10) All loans made under the Facilities shall be in full
compliance with the Federal Reserve Board's Margin
Regulations.
REQUIRED
LENDERS: Required Lenders to be defined as Lenders holding interests
equal to 51% of the total commitments or exposure under the
Facilities.
AGENT'S COUNSEL: Jones, Day, Reavis & Pogue, with local counsel as necessary
depending on the location of any real property collateral.
INDEMNITIES: Customary and appropriate for transactions of this nature
and otherwise acceptable to the Agent.
REPRESENTATION
& WARRANTIES: Customary and appropriate for transactions of this nature and
otherwise acceptable to the Agent, including without
limitation, compliance with Regulation T, U, and X and absence
of any existing or potential "Year 2000" computer and software
problems and similar problems.
YEAR 2000: Documentation provisions satisfactory to Dresdner on any
Year 2000 (Y2K) computer and software issues.
EXPENSES: The Borrower shall pay all reasonable out of pocket costs,
fees and expenses incurred by Dresdner in connection with
the transactions contemplated hereby, including without
limitation, all due diligence, audit, collateral
evaluation, appraisal, investigation, insurance, search and
filing, syndication, travel and other cost and fees and
expenses, and all stamp, excise or similar taxes, incurred
by or on behalf of Dresdner in connection therewith
(including reasonable fees
<PAGE> 16
and expenses of counsel in connection with the negotiation and
preparation of the loan documentation and related due
diligence), whether or not any of the transactions
contemplated hereby are consummated. The Borrower will pay the
cost and expenses of the Agent and Lenders and their counsel
in connection with the administration of the Facilities and
the loan documentation, including amendments thereto and any
waivers or consents thereunder, and costs and expenses of
Dresdner and the Lenders and their counsel in connection with
the enforcement of the loan documentation. The Borrower shall
indemnify and hold harmless Dresdner and other Lenders and
their affiliates and in each case, such parties' respective
directors, officers, employees, agents, representatives and
controlling persons (each being an "Indemnified Party") from
and against any and all claims, damages, liabilities and
expenses (including without limitation, fees and expenses of
counsel) that may be incurred by, or asserted against, such
Indemnified Party in connection with the investigation of,
preparation for, or defense of any pending or threatened
claim, or any action or proceeding arising out of or relating
to the transactions described in this letter, whether or not
any of the transactions contemplated in whole or in part are
consummated, and whether or not such Indemnified Party is a
party thereto, provided that the Borrower shall not be liable
to any Indemnified Party for any such claims, damages,
liabilities or expenses resulting from such Indemnified
Party's own gross negligence or willful misconduct. The
obligations of the Borrower hereunder and under any
documentation which may ultimately be entered into in
connection with the transactions contemplated herein shall be
payable by the Borrower upon demand.
ASSIGNMENTS AND
PARTICIPANTS: The Lenders may assign all or, in an amount of not less than
$5,000,000, any part of their commitments and outstanding
Loans under the Facilities to affiliates or to one or more
banks, financial institutions or other entities that are
eligible assignees (to be described in the loan documentation)
and which are acceptable to the Agent and (unless an Event of
Default has occurred) the Borrower, such consent not to be
unreasonably delayed or withheld, and upon such assignment,
such affiliate, bank, financial institution or entity shall
become a Lender for all purposes of the loan documentation;
provided that assignments made to affiliates and other
existing Lenders shall not be subject to the $5,000,000
minimum assignment requirement. The Lenders will have the
right to sell participations, subject only to customary
limitations on voting rights, in their commitments and
outstanding Loans under the Facilities.
TAXES, RESERVE
REQUIREMENTS AND
INDEMNITIES: All payments are to be made free and clear of any taxes (other
than franchise taxes and taxes on overall net income),
imposts, assessments, withholdings or other deductions
whatsoever. Lenders not organized under the laws of the United
States or a state thereof shall furnish to Agent appropriate
certificates or other evidence of exemption from U.S. federal
tax withholding.
7
<PAGE> 17
The Borrower will indemnify the Lenders against all increased
costs of capital resulting from reserve requirements or
otherwise imposed, in each case subject to customary increased
costs, capital adequacy and similar provisions to the extent
not taken into account in the calculation of the Base Rate or
the LIBOR Rate. The loan documents will also include standard
yield protection provisions.
GOVERNING LAW: State of New York.
8
<PAGE> 1
Exhibit (a)(2)
DRESDNER KLEINWORT BENSON NORTH AMERICA LLC
75 Wall Street
New York, New York 10005
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
75 Wall Street
New York, New York 10005
DRESDNER BANK AG, HAMBURG BRANCH
Jungfernstieg 22
20349 Hamburg
July 27, 1999
$10,000,000 Senior Subordinated Notes Commitment Letter
Dicom Group Plc
Business Building Forren West
Grundstrasse 14
CH-6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid, President & Chief Executive Officer
Dresdner Kleinwort Benson Private Equity Partners LP
75 Wall Street, 24th Floor
New York, New York 10005
Attention: Alex Coleman
Ladies and Gentlemen:
Dicom Group Plc ("Dicom") and Dresdner Kleinwort Benson Private Equity
Partners LP ("PEIF", together with Dicom, the "Investors") have advised Dresdner
Bank AG, Hamburg, New York and Grand Cayman Branches (collectively, "Dresdner")
and Dresdner Kleinwort Benson North America LLC ("DKB") that Imaging Acquisition
Corporation, a newly formed Delaware corporation ("Merger Sub" and, prior to the
consummation of the Merger, the "Issuer") wholly owned by Imaging Components
Corporation, a newly formed Delaware corporation (the "Parent") which in turn is
to be approximately 75% owned by PEIF, approximately 19% owned by Dicom and
approximately 6% owned by certain members of management (the "Management
<PAGE> 2
2
Investors") of the Company (as defined below), intends (i) to effect a tender
offer (the "Tender Offer") to acquire (the "Acquisition") up to 100% (but not
less than 50% plus one share) of the issued and outstanding shares of common
stock of Kofax Image Products, Inc., a Delaware corporation (the "Company" and,
upon consummation of the Merger, as the surviving corporation in the Merger, the
"Issuer"), and (ii) as soon as practicable after the consummation of the
Acquisition, to be merged (the "Merger") with and into the Company, pursuant to
the Agreement and Plan of Merger, dated as of July 27, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Merger Agreement"),
by and among the Company, the Parent and Merger Sub, with the shares of the
Company outstanding immediately prior to the Acquisition to be converted into
and representing the right to receive approximately $12.75 per share as such
amount is adjusted pursuant to the Merger Agreement (the "Merger Consideration")
and each share of common stock of Merger Sub to be converted into one share of
the surviving corporation's common stock (the "Transaction"), as more
specifically described in the Sources and Uses Table (the "Table") attached
hereto as Schedule I, with the respective amounts expended in connection
therewith being set forth in the Table. References herein to the "Transaction"
shall include the financings described herein and all other transactions related
to the Transaction.
You have also advised us that you propose to finance the Transaction
and the related fees and expenses from the following sources: (a) approximately
$21,000,000 in common equity (the "Parent Equity") on terms reasonably
satisfactory in all material respects to us (it being agreed that such terms set
forth in the July 26, 1999 draft documents relating to the Parent Equity are
reasonably satisfactory in all material respects to us, (b) approximately
$45,000,000 from senior secured credit facilities (such credit facilities, along
with the Revolving Facility (defined below) the "Senior Facilities") of the
Issuer comprised of a bridge loan facility in the aggregate amount of
$23,000,000 (the "Bridge Facility") and a term loan facility in the aggregate
amount of $22,000,000 (the "Term Facility") and (c) $10,000,000 in cash proceeds
from the issuance by the Issuer of senior subordinated secured notes (the
"Senior Subordinated Notes") in a private placement. Additionally, a $5,000,000
revolving credit facility (the "Revolving Facility") will be available to
finance the continuing operations of the Issuer and its subsidiaries after the
Transaction.
DKB is pleased to advise you that it is willing to act as the placement
agent for the Senior Subordinated Notes and Dresdner is pleased to advise you of
its commitment to purchase the entire amount of the Senior Subordinated Notes.
The Statement of Terms and Conditions attached as Exhibit A hereto (the
"Subordinated Notes Term Sheet") sets forth the principal terms and conditions
on and subject to which Dresdner is willing to purchase the Senior Subordinated
Notes.
It is agreed that DKB will act as the sole and exclusive placement
agent in respect of the Senior Subordinated Notes and will, in such capacity,
perform the duties and exercise the authority customarily performed and
exercised by it in such role. You agree that no other agents, co-agents,
arrangers or underwriters will be appointed, no other titles will be awarded and
no compensation (other than that expressly contemplated by the Subordinated
Notes Term Sheet and Fee Letter referred to below) will be paid in connection
with the Senior Subordinated Notes unless you and we shall so agree. You agree
actively to assist DKB in the placement of the
<PAGE> 3
3
Senior Subordinated Notes. Such assistance shall include your ensuring that
prior to issuance of the Senior Subordinated Notes there shall be no competing
offering, placement or arrangement of any debt securities (other than the Senior
Facilities) or bank financing by or on behalf of the Issuer or any of its
affiliates.
You hereby represent and covenant that (a) all information other than
projections (the "Information") that has been or will be made available to
Dresdner or DKB by you or any of your representatives in connection with the
Transaction and this Commitment Letter is or will be, when furnished, complete
and correct in all material respects and does not or will not, when furnished,
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made
and (b) any projections that have been or will be made available to Dresdner or
DKB by you or any of your representatives have been or will be prepared in good
faith based upon reasonable assumptions. You understand that in arranging the
Senior Subordinated Notes we may use and rely on the Information and such
projections without independent verification thereof.
As consideration for Dresdner's commitment hereunder and Dresdner and
DKB's agreement to perform the services described herein, you agree to pay, or
to cause the Issuer to pay, to Dresdner the nonrefundable fees set forth in the
Subordinated Notes Term Sheet and in the fee letter dated the date hereof and
delivered herewith (the "Fee Letter").
Dresdner's commitment hereunder and DKB's agreement to perform the
services described herein are subject to (a) there not occurring any change,
occurrence or development since March 31, 1999 that could reasonably be expected
to have a material adverse effect on the business, operations, property,
condition (financial or otherwise) or prospects of the Parent, Merger Sub, the
Company and their respective subsidiaries, taken as a whole, (b) our not
becoming aware after the date hereof of any material information or other matter
relating to the Company or the Transaction (including any matter relating to
financial models and underlying assumptions relating to any projections) that in
our reasonable judgment is inconsistent in a material and adverse manner with
such information or other matter disclosed to us prior to the date hereof, (c)
there not having occurred after the date hereof a material disruption of or
material adverse change in conditions in the financial, banking or capital
markets (including, without limitation, the high-yield market), (d) the
negotiation, execution and delivery on or before the Closing Date (as defined in
the Subordinated Notes Term Sheet) of definitive documentation with respect to
the Senior Subordinated Notes reasonably satisfactory to Dresdner and its
counsel, (e) the Issuer obtaining the Senior Facilities from Dresdner and (f)
the other conditions set forth or referred to in the Subordinated Notes Term
Sheet. Such definitive documentation with respect to the Senior Subordinated
Notes shall contain terms and provisions in addition to those set forth herein
and in the Subordinated Notes Term Sheet. Those matters in such definitive
documentation that are not covered by the provisions set forth herein and in the
Subordinated Notes Term Sheet shall be reasonably satisfactory to Dresdner and
its counsel and the Borrower, provided that any such additional terms and
provisions will not conflict in any material respect with the terms and
provisions set forth herein and in the Senior Facilities Term Sheet.
<PAGE> 4
4
You agree (a) to indemnify and hold harmless Dresdner, DKB, their
affiliates and their respective officers, directors, employees, advisors and
agents (each, an "indemnified person") from and against any and all losses,
claims, damages and liabilities to which any such indemnified person may become
subject arising out of or in connection with this Commitment Letter, the Senior
Subordinated Notes, the use of the proceeds thereof, the Transaction or any
related transaction or any claim, litigation, investigation or proceeding
relating to any of the foregoing, regardless of whether any indemnified person
is a party thereto, and to reimburse each indemnified person upon demand for any
legal or other expenses incurred in connection with investigating or defending
any of the foregoing, provided that the foregoing indemnity will not, as to any
indemnified person, apply to losses, claims, damages, liabilities or related
expenses to the extent they are found by a final, non-appealable judgment of a
court to arise from the willful misconduct or gross negligence of such
indemnified person, and (b) to reimburse Dresdner, DKB and their affiliates on
demand for all out-of-pocket expenses (including due diligence expenses,
consultant's fees and expenses, travel expenses, and reasonable fees, charges
and disbursements of counsel) incurred in connection with the Senior
Subordinated Notes and any related documentation (including this Commitment
Letter and the definitive financing documentation) or the administration,
amendment, modification or waiver thereof. No indemnified person shall be liable
for any damages arising from the use by others of the Information or other
materials obtained through electronic, telecommunications or other information
transmission systems or for any special, indirect, consequential or punitive
damages in connection with the Senior Subordinated Notes.
You acknowledge that Dresdner and its affiliates (the term "Dresdner"
as used below in this paragraph being understood to include such affiliates) may
be providing debt financing, equity capital or other services (including
financial advisory services) to other companies in respect of which you may have
conflicting interests regarding the transactions described herein and otherwise.
Dresdner will not use confidential information obtained from you by virtue of
the transactions contemplated by this Commitment Letter or its other
relationships with you in connection with the performance by Dresdner of
services for other companies, and Dresdner will not furnish any such information
to other companies. You also acknowledge that Dresdner has no obligation to use
in connection with the transactions contemplated by this Commitment Letter, or
to furnish to you, confidential information obtained from other companies.
This Commitment Letter shall not be assignable by you without the prior
written consent of Dresdner and DKB (and any purported assignment without such
consent shall be null and void), is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. This Commitment
Letter may not be amended or waived except by an instrument in writing signed by
you, Dresdner and DKB. This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof. This Commitment Letter and
the Fee Letter are the only agreements that have been entered into among us with
respect to the Senior Subordinated Notes and set forth the entire understanding
of the parties with respect thereto. This Commitment Letter shall be governed
by, and construed in accordance with, the laws of the State of New York.
<PAGE> 5
5
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except (a) to the officers, agents and
advisors of the Investors and, on a confidential basis, the Company, who are
directly involved in the consideration of this matter or (b) as may be compelled
in a judicial or administrative proceeding or as otherwise required by law (in
which case you agree to inform us promptly thereof), provided, that the
foregoing restrictions shall cease to apply (except in respect of the Fee Letter
and its terms and substance) after this Commitment Letter has been accepted by
you.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or Dresdner's commitment hereunder; provided, that your obligations under
this Commitment Letter (other than (i) provisions relating to titles awarded in
connection with the Senior Subordinated Notes and assistance to be provided by
you in connection with the syndication thereof and (ii) the confidentiality
provisions set forth above) shall automatically terminate and be superseded by
the provisions of the definitive documentation relating to the Senior
Subordinated Notes upon the initial funding thereunder, and you shall
automatically be released from all liability in connection therewith at such
time.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms hereof and of the Subordinated Notes Term Sheet and
the Fee Letter by returning to us executed counterparts hereof and of the Fee
Letter not later than 5:00 p.m., New York City time, on July 30, 1999. This
offer will automatically expire at such time in the event we have not received
such executed counterparts in accordance with the immediately preceding
sentence.
<PAGE> 6
6
We are pleased to have been given the opportunity to assist you in
connection with this important financing.
Very truly yours,
DRESDNER KLEINWORT BENSON NORTH
AMERICA LLC
By: /s/ Beverly G. Carson
------------------------------
Name: Beverly G. Carson
Title: Vice President
By: /s/ John R. Morrison
------------------------------
Name: John R. Morrison
Title: Vice President
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ Beverly G. Carson
------------------------------
Name: Beverly G. Carson
Title: Vice President
By: /s/ John R. Morrison
------------------------------
Name: John R. Morrison
Title: Vice President
DRESDNER BANK AG, HAMBURG BRANCH
By: /s/ Uwe Korella
------------------------------
Name: Uwe Korella
Title: Manager
By: /s/ Magnus Hoop
------------------------------
Name: Magnus Hoop
Title: Manager
<PAGE> 7
7
Accepted and agreed to as of
the date first above written:
DICOM GROUP PLC
By: /s/ Arnold von Buren
-------------------------------
Name: Arnold von Buren
Title: Executive Director
DRESDNER KLEINWORT BENSON PRIVATE
EQUITY PARTNERS LP
By: DRESDNER KLEINWORT BENSON PRIVATE
EQUITY LLC, its General Partner
By: /s/ Alexander P. Coleman
-------------------------------
Name: Alexander P. Coleman
Title: Investment Partner
<PAGE> 8
SCHEDULE I
SOURCES AND USES TABLE ($MM'S)
<TABLE>
<S> <C>
Sources:
Term Loans $22.0
Revolving Loans $ 0.0
Senior Subordinated Notes $10.0
Bridge Loan (1) $22.8
Common Equity:
Company Roll-Over Equity (2) $ 1.2
DKB Equity $16.0
Dicom Equity $ 4.0
Other Equity $ 0.1
-----
Total Sources: $76.1
=====
Uses:
Purchase of Common Stock $70.5
Payment of Fees and Expenses $ 4.8
RAF Technology Acquisition $ 0.1
Company Employee Bonuses $ 0.7
-----
Total Uses $76.1
=====
</TABLE>
- --------
(1) To be refinanced with Company cash.
(2) Roll-Over effective upon the consummation of the Merger.
<PAGE> 9
EXHIBIT A
KOFAX IMAGE PRODUCTS, INC.
$10,000,000 Senior Subordinated Notes
Statement of Terms and Conditions
ISSUER: Initially, Imaging Acquisition Corporation, a Delaware corporation,
and, upon consummation of the Merger, Kofax Image Products, Inc., a
Delaware corporation.
PARENT: Imaging Components Corporation, a Delaware corporation.
ISSUE: Senior Subordinated Notes (the "Notes").
INITIAL PURCHASER: Dresdner Bank AG.
SUBORDINATION: The Notes will be subordinated to the Senior Facilities on
terms similar to those in an indenture governing a high yield
senior subordinated note issue.
COLLATERAL: The Notes will be secured on a junior and subordinated basis by
the same collateral that secures the Senior Facilities as
described in the Statement of Terms and Conditions attached to
the Commitment Letter dated July 27, 1999 relating to the Senior
Facilities (the "Senior Facilities Term Sheet").
INTERCREDITOR
AGREEMENT: The Initial Purchaser and the Agent (as defined in the Senior
Facilities Term Sheet) will enter into an Intercreditor
Agreement. The Intercreditor Agreement will provide in part that
Dresdner Bank AG, New York will act as the collateral agent, and
that, so long as any Senior Facilities are outstanding, the
Initial Purchaser will not be permitted to take any action in
respect of the Collateral.
USE OF PROCEEDS: The proceeds of the Notes will be used to provide funds to
finance the Acquisition and for general corporate purposes
of the Issuer.
FUNDING: The issuance of the Notes will close on the date which is within 60
calendar days of the commencement of the Tender Offer and on which the
initial funding under the Senior Facilities occurs.
MATURITY: Seven (7) years from date of issuance.
INTEREST: 15% per annum. Interest at the rate of 10% per annum shall be paid in
full in cash on a semi-annual basis. Accrued interest not required to
be paid in cash as aforesaid may, at the option of the Issuer, be paid
by adding the
<PAGE> 10
amount thereof to the principal amount of the Notes on each
semi-annual interest payment date.
DEFAULT INTEREST: 2% above the applicable rate as described above (payable in
cash).
EQUITY RIGHTS: The Noteholders will be granted an option to participate in
the equity of Dicom upon the completion by Dicom of an
offering (the "Offering") of its common stock on the Neuer
Markt or another securities exchange and the purchase by
Dicom of the common stock of the Parent owned by PEIF. Such
equity participation will entitle the Noteholders to receive
an aggregate return or value equal to the product of (i)
63,000 times (ii) the difference between (A) the price per
share obtained in the Offering and (B) $3.95.
OPTIONAL
REDEMPTION: At any date on or before the 18-month anniversary of the
Closing Date, the Notes may be redeemed, in whole or in
part, at par plus accrued interest, but without premium or
penalty, at the option of the Issuer so long as the ratio of
Senior Debt to EBITDA (earnings before interest, taxes,
depreciation and amortization) is 2:1 or less. At any date
after the 18-month anniversary of the Closing Date, the
Notes may be redeemed, in whole or in part, at par plus
accrued interest, with a premium to be agreed upon, at the
option of the Issuer so long as the ratio of Senior Debt to
EBITDA (earnings before interest, taxes, depreciation and
amortization) is 2:1 or less, with the consent of the
Required Lenders (as defined in the documentation for the
Senior Facilities).
REPORTING
REQUIREMENTS: As described in the Senior Facilities Term Sheet.
DOCUMENTATION: Customary for private placements of subordinated debt as may
be specified by Dresdner (the "Subordinated Facility
Documentation").
REPRESENTATIONS
AND WARRANTIES: As described in the Senior Facilities Term Sheet.
COVENANTS: As described in the Senior Facilities Term Sheet, provided
that the financial covenants will be set at levels
appropriate for subordinated debt.
CONDITIONS
PRECEDENT: As described in the Senior Facilities Term Sheet, as
applicable. In addition, the Borrower shall have received
approximately $45,000,000 in gross proceeds from the Senior
Facilities as financed by Dresdner.
EVENTS OF DEFAULT: As described in the Senior Facilities Term Sheet.
TRANSFERABILITY: The Notes will be freely transferable; provided that, if the
transferee of such Notes is not an affiliate of Dresdner
such Notes shall be exchanged
-2-
<PAGE> 11
for exchange notes, which shall be unsecured but with all other terms and
conditions identical to those of the Notes.
VOTING: Amendments and waivers will require the approval of Noteholders holding
51% or more in principal amount of the outstanding Notes, except that (i)
the consent of each affected Noteholder will be required for (a) any
reduction of principal amounts or interest rates or (b) extensions of
maturity and (ii) the consent of 100% of the Noteholders shall be required
with respect to modifications to any of the voting percentages.
EXPENSES: The Issuer shall pay all reasonable out of pocket costs, fees and
expenses incurred by Dresdner in connection with the transactions
contemplated hereby, including without limitation, all due diligence,
audit, collateral evaluation, appraisal, investigation, insurance, search
and filing, placement, travel and other cost and fees and expenses, and all
stamp, excise or similar taxes, incurred by or on behalf of Dresdner in
connection therewith (including reasonable fees and expenses of counsel in
connection with the negotiation and preparation of the loan documentation
and related due diligence), whether or not any of the transactions
contemplated hereby are consummated. The Issuer will pay the cost and
expenses of the Noteholders and their counsel in connection with the
administration of the Notes, including amendments thereto, any reissuance
thereof and any waivers or consents thereunder, and costs and expenses of
Dresdner and the Noteholders and their counsel in connection with the
enforcement of the Notes. The Issuer shall indemnify and hold harmless
Dresdner and other Noteholders and their affiliates and in each case, such
parties' respective directors, officers, employees, agents, representatives
and controlling persons (each being an "Indemnified Party") from and
against any and all claims, damages, liabilities and expenses (including
without limitation, fees and expenses of counsel) that may be incurred by,
or asserted against, such Indemnified Party in connection with the
investigation of, preparation for, or defense of any pending or threatened
claim, or any action or proceeding arising out of or relating to the
transactions described in this letter, whether or not any of the
transactions contemplated in whole or in part are consummated, and whether
or not such Indemnified Party is a party thereto, provided that the Issuer
shall not be liable to any Indemnified Party for any such claims, damages,
liabilities or expenses resulting from such Indemnified Party's own gross
negligence or willful misconduct. The obligations of the Issuer hereunder
and under any documentation which may ultimately be entered into in
connection with the transactions contemplated herein shall be payable by
the Issuer upon demand.
GOVERNING LAW: State of New York.
-3-
<PAGE> 1
Exhibit (b)(1)
July 27, 1999
Board of Directors
Kofax Image Products Incorporated
16245 Laguna Canyon Road
Irvine, CA 92618
Dear Sirs:
We understand that Kofax Image Products, Inc. ("Kofax" or the
"Company"), and Imaging Components Corporation, ("Imaging"), have entered into
an Agreement, dated as of July 27, 1999 (the "Agreement") pursuant to which
Kofax will become a wholly owned subsidiary of Imaging (the "Acquisition"). In
connection with the Acquisition, and in accordance with the terms and conditions
of the Agreement, Imaging will issue $12.75 in cash for each share of Kofax's
Common Stock (the "Acquisition Consideration").
You have requested our opinion with respect to the fairness of the
Acquisition Consideration, from a financial point of view, to the shareholders
of Kofax.
In connection with our review, we have, among other things:
(i) reviewed the Agreement;
(ii) reviewed publicly available financial information with
respect to the business operations of the Company including, but not
limited to, audited financial statements for the fiscal years ended
June 30, 1996, 1997 and 1998, the first, second and third quarters of
fiscal 1999 and the unaudited financial statements for the fiscal year
ended June 30, 1999;
(iii) held discussions with Imaging to determine its ability
to secure financing necessary to affect the purchase price
(iv) reviewed certain internal financial and operating
information relating to Kofax (including financial projections)
prepared by the management of Kofax;
(v) held discussions with certain members of Kofax senior
management concerning their past and current operations, financial
condition and business prospects and the potential financial effect of
the Acquisition of Kofax by Imaging if the Acquisition were
consummated;
(vi) reviewed a comparison of operating results and other
financial information of Kofax with other companies that we deemed
appropriate;
(vii) reviewed the historical market prices and reported
trading activity of Kofax shares;
(viii) compared the financial terms of the Acquisition and the
premium paid over the Company's current, historical and average stock
price with the financial terms and premiums paid of certain other
merger, acquisition and business combination transactions which we
deemed appropriate; and
<PAGE> 2
Kofax Image Products, Inc.
July 21, 1999
Page 2
(ix) considered such other information, financial studies and
analyses as we deemed relevant and performed such analyses, studies and
investigations, as we deemed necessary.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us. With respect to any
financial projections, we assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performances of Kofax. We have also assumed that the
Acquisition will predominately be an all cash offer.
We have not conducted a physical inspection of the properties or
facilities of Kofax or Imaging or made any independent valuation or appraisal of
the assets, liabilities, patents or intellectual property of Kofax and Imaging,
nor have we been furnished with any such valuations or appraisals. Our opinion
is necessarily based upon economic, market and other conditions as in effect on,
and the information made available to us, as of the date of this letter.
We understand that in considering the Acquisition, the Board of
Directors of the Company has considered a wide range of financial and
non-financial factors, many of which are beyond the scope of this letter. This
letter is not intended to substitute for the Board's exercise of its own
business judgment in reviewing the Acquisition. Our opinion expressed herein was
prepared for the benefit and use of the Board of Directors of Kofax in its
consideration of the Acquisition and does not constitute a recommendation to
Kofax's shareholders as to how they should vote at the shareholder's meeting in
connection with the Acquisition.
It should be understood that, although subsequent developments may
affect this opinion, C.E. Unterberg, Towbin does not have any obligation to
update, revise or reaffirm this opinion. We are expressing no opinion herein as
to the prices at which the shares of the Company will actually trade at any
time.
Based upon and subject to the foregoing considerations, it is our
opinion as financial advisors that, as of the date hereof, the Acquisition
Consideration is fair from a financial point of view to the shareholders of
Kofax.
Very truly yours,
/s/ C.E. Unterberg, Towbin
------------------------------------
C.E. Unterberg, Towbin
<PAGE> 1
Exhibit (b)(2)
PRESENTATION TO THE BOARD OF DIRECTORS
OF
KOFAX IMAGING PRODUCTS INC.
C.E. UNTERBERG, TOWBIN
JULY 21, 1999
<PAGE> 2
C.E. UNTERBERG, TOWBIN
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION I TRANSACTION OVERVIEW
1. Summary of Proposed Transaction 1
2. Summary Valuation Analysis 2
4. Comparable Valuation Analysis 3
5. Discounted Cash Flow Analysis 4
4. Discounted Cash Flow Analysis - Sensitivity Matrix 5
6. Weighted Average Cost of Capital Analysis 6
SECTION II KOFAX FINANCIAL OVERVIEW
1. Historical Share Price Analysis 7
2. Historical Stock Price Performance (graph) 8
3. Price Index Comparison between NASDAQ, S&P and Industry Index (graph) 9
3. Stock Price and Volume Data since IPO (graph) 10
4. Volume Distribution by Price (graph) 11
5. Price Event Analysis (graph) 12
6. Summary of Recent Events 13-15
7. Ownership Analysis 16
8. Historical and Projected Income Statements 17-18
9. Projected Cash Flow Statement 19
10. Historical Balance Sheet Information 20
SECTION III SUMMARY AND RECOMMENDATIONS
1. Pros and Cons of Transaction for Kofax 21
2. CEUT Summary and Recommendations 22
APPENDICES 1. Comparable Company Analysis
-Summary of Selected Comparable Companies 23-24
-Summary of Relevant Comparable Company Multiples 25
-Full Form 26-31
2. Summary of Selected Comparable Company Merger and Acquisition Transactions 32-35
</TABLE>
<PAGE> 3
C.E. UNTERBERG, TOWBIN
SECTION I
TRANSACTION
OVERVIEW
<PAGE> 4
C.E. UNTERBERG, TOWBIN
SUMMARY OF PROPOSED TRANSACTION
SELECTED FINANCIAL TERMS
Transaction Kofax will be acquired by Imaging
Components Corporation ("Imaging")
and become a wholly owned subsidiary of
Imaging.
Structure The Transaction would be structured
predominately as a cash tender offer
sponsored by a newly formed entity of
Imaging for all of the shares of Kofax. If
necessary, a "second-step" cash merger would
be effected.
Effective Purchase Price 5,833,662 common shares outstanding at the
time of the tender offer, which at $12.75
per share gives Kofax a valuation of
$74,379,190.50 and an additional $3,924,060
in cash on their balance sheet due to the
exercise of the 574,855 employee stock
options outstanding, which if converted
would raise $3,700,000 in cash for the
Company, 16,299 common stock purchased by
employees in June at $6.80/share, which
raised $110,833.20 in cash for the Company,
16,651 common stock that will be purchased
by employees in July at $6.80/share, which
will raise $113,226.80 in cash.
Share Purchase Price $12.75
Other Terms - A minimum of $22,991,000 in cash to be on
Kofax's balance sheet at the time of close
as adjusted to relect the specified
allowances in Condition J of Annex A in the
Merger Agreement
- Fiscal year 1999 fourth quarter in line
with fiscal third quarter
- Imaging secures transaction financing
- Obtain all government and regulatory
approvals
RATIONALE
- Strengthen Distribution Channels
- Recognized Brand Name
- Strengthen International Presence
- Experienced Development Team / Strong Core Technology
- Liquidity for Kofax Shareholders
1
<PAGE> 5
C.E. UNTERBERG, TOWBIN
SUMMARY VALUATION ANALYSIS - OFFERING PRICE OF $12.75 FOR KOFAX
($ MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NET
OPERATING TRANSACTION
DATA MULTIPLES (a)
---- -------------
<S> <C> <C>
MULTIPLE OF NET REVENUES
Calendar 2001 Estimate $ 57,468.0 0.9x
Calendar 2000 Estimate $ 46,555.0 1.1
Last twelve months $ 38,318.0 1.3
Last quarter annualized $ 40,900.0 1.2
Fiscal 1999 Actual $ 38,318.0 1.3
MULTIPLE OF EARNINGS PER SHARE
Calendar 2001 Estimate $ 1.42 9.0x
Calendar 2000 Estimate $ 1.06 12.0
Last twelve months $ 0.87 14.7
Last quarter annualized $ 1.00 12.8
Fiscal 1999 Actual $ 0.87 14.7
</TABLE>
- ----------
Note: Net Transaction Value = market value of fully diluted Kofax shares
outstanding, less Kofax cash and investments.
2
<PAGE> 6
C.E. UNTERBERG, TOWBIN
COMPARABLE VALUATION ANALYSIS
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Trading Selected Comparable Companies (a)
Transaction Kofax -----------------------------------
Multiples Multiples High Median Low
--------- --------- ---- ------ ---
<S> <C> <C> <C> <C> <C>
Net Transaction Value /LTM Net Revenues 1.3 x 0.6 x 1.5 x 1.2 x 0.6 x
Net Transaction Value / CY 1999 Net Revenues 1.2 0.6 5.2 1.1 0.5
Transaction Value / LTM EPS 14.7 x 10.9 x 238.0 x 20.7 x 11.9 x
Transaction Value / CY 1999 EPS 13.9 10.3 34.1 20.7 11.0
Transaction Value / Book Value 2.4 x 1.6 x 4.4 x 2.6 x 1.2 x
</TABLE>
<TABLE>
<CAPTION>
Selected Comparable Merger and Acquisition
------------------------------------------
Transactions (b)
----------------
High Median Low
---- ------ ---
<S> <C> <C> <C> <C> <C>
Net Transaction Value /LTM Net Revenues 1.3 x 0.6 x 22.0 x 1.7 x 0.1 x
Transaction Value / Book Value 2.4 1.6 12 2 -12.3
</TABLE>
- ----------
Transaction Value = market value of fully diluted shares outstanding. Net
Transaction Value = market value of fully diluted shares outstanding plus
total debt less cash and cash equivalents.
(a) Excludes not meaningful multiples.
(b) Selected Company Comparable Cash Transactions - See Appendices for
detail.
3
<PAGE> 7
C.E. UNTERBERG, TOWBIN
DISCOUNTED CASH FLOW ANALYSIS
($ IN THOUSANDS)
DISCOUNTED CASH FLOW ANALYSIS
U.S. dollars in thousands
<TABLE>
<CAPTION>
Projected Year Ended June 30,
----------------------------------------------------------
2000 2001 2002 2003 2004
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Cash Flows Before Debt Service (a) $ 4,277 $ 7,156 $ 8,466 $11,101 $ 13,624
Interest Expense, Net of Tax 0 0 0 0 0
Debt-Free Cash Flows $ 4,277 $ 7,156 $ 8,466 $11,101 $ 13,624
-------- ------- ------- ------- --------
Terminal Value at 4.8x FY2004 Operating Income 114,096
Present Value of Terminal Value Discounted at 21.7% 42,738
Present Value of Interim Cash Flows Discounted at 21.7% (b) 25,601
--------
TOTAL PRESENT VALUE $ 68,339
========
ASSUMPTIONS
Terminal Operating Income Multiple (c) 4.8
Discount Rate (d) 21.7%
Terminal Value Data - Fiscal Year 2004
Operating Income $ 23,770
</TABLE>
- ----------
(a)Based on Company's projections
(b)Present Value of Interim Cash Flows is calculated based on half year
convention
(c)Based on Selected Comparable Transactions Analysis
(d)Discount rate is based on the Weighted Average Cost of Capital
calculation
4
<PAGE> 8
C.E. UNTERBERG, TOWBIN
DISCOUNTED CASH FLOW ANALYSIS - SENSITIVITY MATRIX
($ IN MILLIONS)
<TABLE>
<CAPTION>
Terminal Operating Income Multiple
-----------------------------------------------------------------------------------
Discount Rate 4.0x 4.4x 4.8x 5.2x 5.6x
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
30.0% $47,535 $49,756 $52,317 $54,878 $57,439
26.0% 53,097 56,312 59,306 62,300 65,294
21.7% 60,261 64,778 68,339 71,901 75,462
18.0% 67,645 73,522 77,678 81,834 85,990
15.0% 74,647 81,829 86,556 91,283 96,011
</TABLE>
5
<PAGE> 9
C.E. UNTERBERG, TOWBIN
WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS
<TABLE>
<CAPTION>
Market Information
----------------------------------------
<S> <C>
Risk Free Rate (a) 6.04%
As of: 7/13/99
Source: WSJ
Risk Premium (b) 6.66%
</TABLE>
<TABLE>
<CAPTION>
Other Risk Premiums (c)
------------------------------------------------
<S> <C>
Small Company Risk Premium (d) 2.5%
Projection Risk 5.0%
Product Diversification 5.0%
Management Depth 0.0%
Key Technical Personnel 0.0%
----
Total 12.5%
</TABLE>
KOFAX COST OF EQUITY CALCULATION
<TABLE>
<CAPTION>
Risk Equity Small Co. Other
Free Risk Risk Risk Cost of
Rate Beta (e) Premium Premium Premium Equity (f)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kofax 6.0% 0.48 6.7% 2.5% 10.0% 21.7%
----
</TABLE>
- ----------
(a) Risk Free Rate based on the 30 year Treasury Bond rate.
(b)Equity Risk Premium based on the Ibbotson's Equity Risk Premium Study.
(c)Other Risk Premiums based on other risks inherent in the Kofax's business,
not reflected in market risk studies.
(d)Small Company Risk Premium based on Ibbotson's Size Premium Study.
(e)Selected Beta as calculated by Bloomberg.
(f)Cost of Equity: (Ke) = Risk Free Rate+(Beta*Equity Risk Premium)+Small
Co. Risk Premium+Other Risk Premium.
Since Kofax has no debt, Ke = WACC.
6
<PAGE> 10
C.E. UNTERBERG, TOWBIN
SECTION II
KOFAX FINANCIAL
OVERVIEW
<PAGE> 11
C.E. UNTERBERG, TOWBIN
HISTORICAL SHARE PRICE ANALYSIS
<TABLE>
<S> <C>
Kofax Closing Price on July 20, 1999 $ 9.50
Actual Offer Per Share $12.75
</TABLE>
<TABLE>
<CAPTION>
PREMIUM
KOFAX BASED ON
PRICE OFFER PRICE
----- -----------
<S> <C> <C>
Last Closing Price
July 20,1999 (one day prior to board meeting) $9.50 34.2%
July 14,1999 (one week prior to board meeting) $9.63 32.5%
June 8, 1999 (30 trading days prior to board meeting) $9.25 37.8%
March 12, 1999 (90 trading days prior to board meeting) $9.56 33.3%
July 21, 1998 (1 year prior to board meeting) $7.38 72.9%
Average Price Over (As of July 20, 1999)
Last 30 Trading Days $9.46 34.8%
Last 90 Trading Days $9.15 39.3%
Last year $8.09 57.6%
</TABLE>
7
<PAGE> 12
C.E. UNTERBERG, TOWBIN
KOFAX: HISTORICAL STOCK PRICE PERFORMANCE - SINCE IPO
[LINE GRAPH]
Line graph demonstrates that the $12.75 per share as merger consideration
represented a 34.2% premium over the closing sales prices of the shares on
NASDAQ on July 20, 1999, the last trading day prior to the Board's July 21,
1999 meeting, a premium of 37.8% over the closing sales price of the shares on
NASDAQ 30 trading days prior to July 21, 1999, a premium of 33.3% over the
closing sales price of the shares on NASDAQ 90 trading days prior to July 21,
1999, and a premium of 72.9% over the closing sales price of the shares on
NASDAQ one year prior to July 21, 1999.
8
<PAGE> 13
C.E. UNTERBERG, TOWBIN
PRICE INDEX COMPARISON BETWEEN NASDAQ, S&P AND INDUSTRY INDEX SINCE KOFAX IPO(a)
[LINE GRAPH]
Line graph represents the relative price performance of Kofax's stock from
October 13, 1997, the date of its initial public offering, to July 20, 1999,
the day before delivery of the fairness opinion to the Board, compared to the
average daily value of the NASDAQ Composite Index, the Standard & Poor's 500
Industrial Index and an imaging industry index during the same period.
(a) Industry Index is composed of Kofax and all its 9 comparables
9
<PAGE> 14
C.E. UNTERBERG, TOWBIN
KOFAX: STOCK PRICE AND VOLUME DATA - SINCE IPO
[LINE GRAPH]
Line graph depicts Kofax's stock performance and associated trading volume
during the period from the day of its initial public offering, October 13,
1997, to the day before delivery of the fairness opinion to the Board, July 20,
1999.
10
<PAGE> 15
C.E. UNTERBERG, TOWBIN
KOFAX: VOLUME DISTRIBUTION BY PRICE
(DAILY CLOSING PRICE 10/13/97-07/20/99)
[BAR CHART]
Bar chart represents the volume of Kofax's shares traded in ranges between $5.00
and $11.99 during the period from the day of its initial public offering,
October 13, 1997, to the day before delivery of the fairness opinion to the
Board, July 20, 1999.
11
<PAGE> 16
C.E. UNTERBERG, TOWBIN
KOFAX: PRICE EVENT ANALYSIS
(DAILY CLOSING PRICE 10/13/97-07/20/99)
[LINE GRAPH]
Line graph demonstrates the fluctuation in price per share and describes the
underlying or associated events.
12
<PAGE> 17
C.E. UNTERBERG, TOWBIN
KOFAX - SUMMARY OF RECENT EVENTS
<TABLE>
<CAPTION>
DATE PRICE EVENT
---- ----- -----
<S> <C> <C>
June 21, 1999 $9.12 Kofax introduces a new version of its
revolutionary VirtualReScan production scanning
technology for Fujitsu M30997DE. (Source:
Business Wire)
May 7, 1999 $ 9.0 Kofax announced that the Ascent Capture product,
a high-volume document and data capture
application, is available for Eastman Software
Imaging for Windows NT. (Source: Business Wire)
April 21, 1999 $8.37 Kofax releases quarterly estimates. Revenues for
the quarter ended March 31, 1999 increased 15% to
$9,824,00 compared to $8,509,000 for the same
quarter last year. Net income increases 51% to a
record $1,259,000. Diluted net income per share
was $0.23 in the third quarter, compared with
$0.15 in the third quarter of fiscal 1998. The
increase was due to the excellent market response
of the upgrade of Ascent Capture. (Source:
Business Wire)
April 14, 1999 $8.12 Kofax announces that Bell & Howell Imaging
Components has agreed to purchase Kofax
VirtualReScan (VRS) document image processing
technology to enhance its line of high-speed
Copiscan 8000 series document scanners. Bell &
Howell will embed Kofax's VRS technology into its
products in a process that will take two to three
years. (Source: Bloomberg News)
</TABLE>
13
<PAGE> 18
C.E. UNTERBERG, TOWBIN
KOFAX - SUMMARY OF RECENT EVENTS (CONTINUATION)
<TABLE>
<S> <C> <C>
April 12, 1999 $8.69 NSM Jukebox Inc, a worldwide leader in archival
storage systems, announced a strategic alliance
with Kofax for offering imaging and document
management customers a viable storage solution
supporting DVD-RAM applications. (Source:
Business Wire)
February 17, 1999 $7.25 Kofax introduces the Ascent Capture 3, which is
the first software that combines production
document capture, data capture, and
internet-based distributed capture in a single
product. (Source: Business Wire)
January 22, 1999 $9.75 Kofax announced that it has entered into an
agreement with Fujitsu Computer Products to offer
the first production document scanner that embeds
Kofax's VirtualReScan image processing
technology. VRS allows users to scan any kind of
paper with perfect results. VRS will enhance
Fujitsu's product offerings and combine a top
technology with a strong brand name like
Fujitsu's in the production scanning marketplace.
(Source: Business Wire)
January 20, 1999 $7.62 Kofax reported that net income for the second
quarter ended December 31, rose to 23 cents a
share beating the 17 cent average estimate of
analysts. (Source: First Call)
</TABLE>
14
<PAGE> 19
C.E. UNTERBERG, TOWBIN
KOFAX - SUMMARY OF RECENT EVENTS (CONTINUATION)
<TABLE>
<S> <C> <C>
August 8, 1998 $ 7.0 Kofax and NovaSoft Systems announce a strategic
alliance. NovaSoft Systems is the leading
provider of next generation Enterprise Document
Management Systems (EDMS). The alliance is aimed
at providing tightly integrated image capture and
document management solutions for end users
worldwide. The agreement includes product
integration, marketing, training and customer
support for the Kofax Ascent line and NovaSoft's
Novation JavaBeans component. (Source: Business
Wire)
May 5, 1998 $ 6.87 Kofax and Kodak Business Imaging Systems
announced a co-development agreement for sharing
technical knowledge and collaborating on the
development of future hardware and software
production document scanning. The agreement calls
for transferring and leveraging selected existing
technologies and cooperation in future
development initiatives. (Source: Business Wire)
April 23, 1998 $ 7.37 C.E. Unterberg, Towbin rates Kofax a "Buy" after
Kofax reported 3Q98 EPS of $0.15 versus the
bank's estimate of $0.13. (Source: Bloomberg
News)
December 22, 1997 $ 7.12 Kofax announces that it expects net revenues for
its second fiscal quarter to be in the range of
$7.8 to $8.1 million and earnings to be in the
range of $0.12 to 0.14 per share compared to
analyst revenue estimates of $8.9 million and
$0.14 for earnings. (Source: Business Wire)
October 10, 1997 $11.00 Kofax IPO on Nasdaq. Company raises $22 million.
</TABLE>
15
<PAGE> 20
C.E. UNTERBERG, TOWBIN
KOFAX: OWNERSHIP ANALYSIS
<TABLE>
<CAPTION>
INSTITUTIONAL OWNERS (AS OF 7/7/1999) (a) SHARES/OPTIONS %OWNERSHIP
----------------------------------------- -------------- ----------
<S> <C> <C>
Aspen Venture 756,596 14.5%
Wellington Management 513,500 9.8%
ROI Capital Management 448,700 8.6%
Sigma Partners 355,086 6.8%
First Asset Management 149,500 2.8%
Kennedy Capital Management 88,300 1.7%
Pilgrim Baxter 55,000 1.0%
Regal Asset Management 40,000 0.8%
Royce & Associates 37,500 0.7%
Waswatch Advisors 15,000 0.3%
Mitch Hutch 11,000 0.2%
Wells Fargo Bank 10,000 0.2%
BZW Barclays 2,837 0.05%
TOTAL INSTITUTIONS 2,483,019 47.5%
--------- ------
Directors and Individuals
-------------------------
David Silver 350,000 6.7%
Dean Hough 345,000 6.7%
Alexander Cilento 328,178 6.2%
Ronald Fikert 35,000 0.7%
TOTAL OFFICERS AND DIRECTORS 1,058,178 20.3%
--------- ------
OTHER SHAREHOLDERS 1,684,660 32.2%
--------- ------
TOTAL SHARES OUTSTANDING 5,225,857 100.0%
--------- ------
</TABLE>
(a) Source: Bloomberg News.
16
<PAGE> 21
C.E. UNTERBERG, TOWBIN
KOFAX: HISTORICAL AND PROJECTED INCOME STATEMENTS
(ESTIMATES PROVIDED BY COMPANY MANAGEMENT)
($ IN THOUSANDS)
HISTORICAL & PROJECTED INCOME STATEMENTS-JUNE FISCAL (1999-2000)
<TABLE>
<CAPTION>
FY 1999A FY 1999A FY 2000E FY 2000E
------------------------------------- -------- ------------------------------------- --------
Revenues: Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total
------- ------- ------- ------- -------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KIPP $ 6,384 $ 6,788 $ 6,455 $ 6,534 $26,161 $ 6,527 $ 6,980 $ 6,676 $ 6,893 $27,076
VRS/OEM NM 0 299 200 499 402 591 926 1083 $ 3,002
Ascent Capture $ 1,871 2,127 2,532 2,875 9405 2491 3237 3681 4100 $13,509
Ascent Storage 390 701 538 616 2245 672 784 728 784 $ 2,968
NetScan 8 0 NM NM 8 NM N M NM NM $ 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Revenues $ 8,653 $ 9,616 $ 9,824 $10,225 $38,318 $10,092 $11,592 $12,011 $12,860 $46,555
Cost of revenues 1,956 2,256 2,173 2,296 8,681 2,354 2,657 2,800 2,983 $10,794
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross margin 6,697 7,360 7,651 7,929 29,637 7,738 8,935 9,211 9,877 35,761
Operating expenses:
Research & development 2,097 2,189 2,175 2,200 8,661 2,200 2,300 2,400 2,500 9,400
Sales 1,479 1,553 1,649 1,800 6,481 1,950 2,250 2,300 2,400 8,900
Marketing 1,253 1,258 1,380 1,300 5,191 1,250 1,300 1,350 1,400 5,300
General & administrative 749 779 786 795 3,109 850 900 950 1,000 3,700
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses 5,578 5,779 5,990 6,095 23,442 6,250 6,750 7,000 7,300 27,300
Operating income 1,119 1,581 1,661 1,834 6,195 1,488 2,185 2,211 2,577 8,461
Interest and other income, net 289 271 247 275 1082 295 310 325 340 1270
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Pre-tax earnings 1,408 1,852 1,908 2,109 7,277 1,783 2,495 2,536 2,917 9,731
Income taxes @ 38.5% 542 630 649 717 2,538 686 960 977 1123 3,746
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income $ 866 $ 1,222 $ 1,259 $ 1,392 $ 4,739 $ 1,097 $ 1,535 $ 1,559 $ 1,794 $ 5,985
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
RATIO ANALYSIS
<TABLE>
<CAPTION>
FY 1999A FY 1999A FY 2000E FY 2000E
---------------------------------- -------- ---------------------------------- --------
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total
---- ---- ---- ---- -------- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth rates:
Revenue growth (year-to-year) 10.2% 19.1% 15.5% 14.4% 14.8% 16.6% 20.5% 22.3% 25.8% 21.5%
Margins:
Gross margin 77.4% 76.5% 77.9% 77.5% 77.3% 76.7% 77.1% 76.7% 76.8% 76.8%
Research & development 24.2% 22.8% 22.1% 21.5% 22.6% 21.8% 19.8% 20.0% 19.4% 20.2%
Sales 17.1% 16.2% 16.8% 17.6% 16.9% 19.3% 19.4% 19.1% 18.7% 19.1%
Marketing 14.5% 13.1% 14.0% 12.7% 13.5% 12.4% 11.2% 11.2% 10.9% 11.4%
General & administrative 8.7% 8.1% 8.0% 7.8% 8.1% 8.4% 7.8% 7.9% 7.8% 7.9%
Operating income 12.9% 16.4% 16.9% 17.9% 16.2% 14.7% 18.8% 18.4% 20.0% 18.2%
Net income 10.0% 12.7% 12.8% 13.6% 12.4% 10.9% 13.2% 13.0% 14.0% 12.9%
</TABLE>
17
<PAGE> 22
C.E. UNTERBERG, TOWBIN
KOFAX: HISTORICAL AND PROJECTED INCOME STATEMENTS
(ESTIMATES PROVIDED BY COMPANY MANAGEMENT)
($ IN THOUSANDS)
HISTORICAL & PROJECTED INCOME STATEMENTS-JUNE FISCAL (2001-2004)
<TABLE>
<CAPTION>
FY2001E FY2002E FY2003E FY2004E
Revenues: Total Total Total Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
KIPP $ 29,755 $ 33,282 $ 37,832 $ 42,750
VRS/OEM 6040 7,644 $ 8,867 $ 10,197
Ascent Capture 21673 30,711 $ 41,077 $ 51,671
Ascent Storage 0 0 0 0
NetScan 0 0 0 0
-------- -------- -------- --------
Net Revenues $ 57,468 $ 71,637 $ 87,776 $104,618
Cost of revenues 14,161 17,525 20,988 24,398
-------- -------- -------- --------
Gross margin 43,307 54,112 66,788 80,219
Operating expenses:
Research & development 9,400 11,700 14,400 17,100
Sales 10,650 13,300 16,400 19,600
Marketing 6,575 8,150 9,800 11,600
General & administrative 4,550 5,750 6,775 8,150
-------- -------- -------- --------
Total operating expenses 31,175 38,900 47,375 56,450
Operating income 12,132 15,212 19,413 23,769
Interest and other income, net 1,510 1,800 2,120 2,440
-------- -------- -------- --------
Pre-tax earnings 13,642 17,012 21,533 26,209
Income taxes @ 38.5% 5,252 6,550 8,290 10,091
-------- -------- -------- --------
Net income $ 8,390 $ 10,462 $ 13,243 $ 26,199
======== ======== ======== ========
</TABLE>
RATIO ANALYSIS
<TABLE>
<CAPTION>
FY2001E FY2002E FY2003E FY2004E
Total Total Total Total
----- ----- ----- -----
<S> <C> <C> <C> <C>
Growth rates:
Revenue growth (year-to-year) 23.4% 24.7% 22.5% 19.2%
Margins:
Gross margin 75.4% 75.5% 76.1% 76.7%
Research & development 16.4% 16.3% 16.4% 16.3%
Sales 18.5% 18.6% 18.7% 18.7%
Marketing 11.4% 11.4% 11.2% 11.1%
General & administrative 7.9% 8.0% 7.7% 7.8%
Operating income 21.1% 21.2% 22.1% 22.7%
Net income 14.6% 14.6% 15.1% 25.0%
</TABLE>
18
<PAGE> 23
C.E. UNTERBERG, TOWBIN
KOFAX: PROJECTED CASH FLOW STATEMENT
(ESTIMATES PROVIDED BY COMPANY MANAGEMENT)
<TABLE>
<CAPTION>
Projected Year Ended June 30,
-------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,739 $ 5,985 $ 8,390 $ 10,462 $ 13,243 $ 16,119
Adjustments to Reconcile Net Income to
Net Cash From Operating Activities:
Depreciation and Amortization 1,300 1,200 1,300 1,400 1,500 1,600
(Increase)/Decrease in Accounts Receivable (39) (1,706) (1,573) (2,245) (2,260) (2,517)
(Increase)/Decrease in Inventories (35) (654) (772) (753) (815) (807)
(Increase)/Decrease in Prepaid Expenses 17 (100) (100) (100) (100) (100)
(Increase)/Decrease in Deferred Income Taxes 0 0 0 0 0 0
Increase/(Decrease) in Accounts Payable 143 327 386 377 408 404
and Accrued Expenses 1,078 425 925 925 925 925
-------- -------- -------- -------- -------- --------
NET CASH FROM OPERATIONS 7,203 5,477 8,556 10,066 12,901 15,624
-------- -------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (100) (100) (100) (100) (100) (100)
Acquisition of Property (1,946) (1,100) (1,300) (1,500) (1,700) (1,900)
-------- -------- -------- -------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,046) (1,200) (1,400) (1,600) (1,800) (2,000)
-------- -------- -------- -------- -------- --------
CASH FLOWS BEFORE FINANCING ACTIVITIES $ 5,157 $ 4,277 $ 7,156 $ 8,466 $ 11,101 $ 13,624
-------- -------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase/(Decrease) in Short-Term Borrowings $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Principal Payments on Long-Term Debt 0 0 0 0 0 0
Proceeds from Long-Term Debt 0 0 0 0 0 0
Purchase of Treasury Stock 0 0 0 0 0 0
Exercise/(Redemption) of Stock Options 0 0 0 0 0 0
Stock Compensation Tax Benefits 0 0 0 0 0 0
Proceeds from/(Payments to) Shareholders (705) 0 0 0 0 0
-------- -------- -------- -------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (705) 0 0 0 0 0
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 4,452 4,277 7,156 8,466 11,101 13,624
CASH & EQUIVALENTS AT BEGINNING OF YEAR 19,852 24,304 28,581 35,736 44,203 55,304
-------- -------- -------- -------- -------- --------
CASH & EQUIVALENTS AT END OF YEAR $ 24,304 $ 28,581 $ 35,736 $ 44,203 $ 55,304 $ 68,928
======== ======== ======== ======== ======== ========
</TABLE>
19
<PAGE> 24
C.E. UNTERBERG, TOWBIN
KOFAX: HISTORICAL BALANCE SHEET INFORMATION
(ESTIMATES PROVIDED BY COMPANY MANAGEMENT)
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED
30-SEP-98 31-DEC-98 31-MAR-99 30-JUN-99
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash & Short-term Investments $22,198 $23,487 $25,318 $25,317
Net Accounts Receivable 4,833 5,297 5,106 5,300
Net Inventory 1,471 1,510 1,769 1,600
Prepaid Expenses and Other Current Assets 1,021 1,070 913 325
Current Deferred Income taxes 0 0 606 606
------- ------- ------- -------
Total Current Assets 29,523 31,364 33,712 33,148
Net Property, Plant & Equipment 1,722 1,576 1,485 2,056
Noncurrent Deferred Income Taxes 1,343 1,343 1,343 1,343
Other Assets 323 136 104 165
------- ------- ------- -------
Total Assets $32,911 $34,419 $36,644 $36,712
======= ======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Short-Term Borrowings $ 0 $ 0 $ 0 $ 0
Accounts Payable 885 1,021 1,254 1,350
Net Deferred Revenue & Cost 610 706 880 750
Accrued Compensation 982 1,181 1,623 1,800
Other Accrued Liabilities 2,167 2,285 2,246 1,810
------- ------- ------- -------
Total Current Liabilities 4,644 5,193 6,003 5,710
Long-Term Liabilities 0 0 0 0
Stock Holders' Equity 28,267 29,226 30,641 31,002
------- ------- ------- -------
Total Liabilities & Stockholder's Equity $32,911 $34,419 $36,644 $36,712
======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
RATIO ANALYSIS
Current Ratio 7.09 6.63 6.10 6.43
Cash Ratio 4.78 4.52 4.22 4.43
Quick Ratio 5.82 5.54 5.07 5.36
</TABLE>
20
<PAGE> 25
C.E. UNTERBERG, TOWBIN
SUMMARY AND
RECOMMENDATIONS
<PAGE> 26
C.E. UNTERBERG, TOWBIN
PROS AND CONS OF TRANSACTION FOR KOFAX
Pro's
- Offer is at a premium to Kofax's historical stock price in every
period.
- Cash offer means liquidity to Kofax stockholders
- Cash offer removes the risk of Imaging's future stock performance
- Offer is in alignment with comparable company multiples, comparable
company transactions and discounted cash flow
Con's
- Kofax stockholders give up any potential upside above $12.75/share
- Taxable transaction
21
<PAGE> 27
C.E. UNTERBERG, TOWBIN
CEUT SUMMARY AND RECOMMENDATIONS
- In connection with our review, we have, among other things:
- reviewed the 6/29 letter of intent from Imaging;
- reviewed publicly available financial information with respect to
the business operations of Kofax;
- reviewed certain internal financial and operating information
relating to Kofax (including financial projections) prepared by
the management of Kofax;
- held discussions with certain members of Kofax senior management
concerning their past and current operations, financial condition
and business prospects and the potential financial effect of an
acquisition by Imaging;
- reviewed a comparison of operating results, other financial
information and valuation multiples of Kofax with other publicly
traded companies that we deemed appropriate;
- reviewed the historical market prices and reported trading
activity of Kofax shares;
- compared the financial terms of the acquisition and the premium
paid over the Company's current, historical and average stock
price with the financial terms and premiums paid of certain other
merger, acquisition and business combination transactions which
we deemed appropriate; and
- - BASED UPON THE FOREGOING CONSIDERATIONS, IT IS OUR OPINION AS FINANCIAL
ADVISORS THAT, THE ACQUISITION CONSIDERATION IS FAIR FROM A FINANCIAL POINT
OF VIEW TO THE SHAREHOLDERS OF KOFAX
22
<PAGE> 28
APPENDICES
C.E. UNTERBERG, TOWBIN
SUMMARY OF SELECTED COMPARABLE COMPANIES
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
(LTM=LATEST TWELVE MONTHS, LQA=LATEST QUARTER ANNUALIZED)
<TABLE>
<CAPTION>
Net Market Value/
Stock Market Net Market Revenue Revenue Mkt Value/
Price Value of Value of ---------------------------------- --------------------- Book Value
Ticker 20-Jul Equity Equity (a) LTM CY99E CY2000E LTM CY99E CY2000E of Equity
------ ------ ------ ---------- --- ----- ------- --- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Kofax(c) $ 9.50 $ 49,951.0 $ 30,101.0 $ 43,260.9 $ 41,733.0 $ 53,466.5 0.7 x 0.7 x 0.6 x 1.6
- -----------------------------------------------------------------------------------------------------------------------------------
FILENET(d) FILE $11.06 $353,435.8 $296,572.8 $323,783.0 $347,720.0 $414,089.0 0.9 x 0.9 x 0.7 x 2.6
DOCUMENTUM(e) DCTM 13.75 232,553.8 131,532.8 122,762.0 124,575.0 166,100.0 1.1 1.1 0.8 2.0
CAERE CORP CAER 10.25 123,758.5 84,959.5 67,879.0 71,200.0 92,400.0 1.3 1.2 0.9 2.1
SCANSOFT(f) SSFT 3.41 89,802.4 82,968.4 63,613.0 16,100.0 NA 1.3 5.2 NA 4.4
XIONICS DOCUMENT(g) XION 4.97 61,806.9 43,871.9 30,124.0 33,367.0 37,100.0 1.5 1.3 1.2 2.9
OPTIKA(h) OPTK 4.38 31,403.8 26,722.8 21,486.0 NA NA 1.2 NA NA 2.8
INPUT SOFTWARE INPT 5.13 23,672.4 11,042.4 19,282.0 24,500.0 32,900.0 0.6 0.5 0.3 1.2
DOCUMENT SCIENCES DOCX 2.00 21,820.0 20,089.0 21,491.0 NA NA 0.9 NA NA 1.2
LANVISION SYSTEMS(i) LANV 1.25 11,018.8 12,871.8 10,777.0 NA NA 1.2 NA NA 2.6
---------------------------------------------------------------------
MEDIAN: 1.2 x 1.1 x 0.8 x 2.6
MEAN: 1.1 1.7 0.8 2.4
HIGH: 1.5 5.2 1.2 4.4
LOW: 0.6 0.5 0.3 1.2
---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Earnings Per Share (b) Price / Earnings (b)
------------------------- ------------------------
Ticker LTM CY99E CY2000E LTM CY99E CY2000E
------ --- ----- ------- --- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Kofax(c) $ 1.12 $ 0.95 $1.34 8.5 x 10.0 x 7.1 x
- ---------------------------------------------------------------------------------------------
FILENET(d) FILE $ 0.05 $ 0.53 $0.92 238.0 x 20.7 x 12.1 x
DOCUMENTUM(e) DCTM 0.49 (0.49) 0.22 28.0 NM 62.5
CAERE CORP CAER 0.86 0.94 1.18 11.9 11.0 8.7
SCANSOFT(f) SSFT (0.37) 0.10 NA NM 34.1 NA
XIONICS DOCUMENT(g) XION (0.49) 0.17 0.32 NM 29.6 15.7
OPTIKA(h) OPTK (0.28) NA NA NM NA NA
INPUT SOFTWARE INPT 0.38 0.32 0.55 13.5 16.0 9.3
DOCUMENT SCIENCES DOCX (0.51) NA NA NM NA NA
LANVISION SYSTEMS(i) LANV (1.06) NA NA NM NA NA
---------------------------------------------------------------
MEDIAN: 20.7 x 20.7 x 12.1 x
MEAN: 72.9 22.3 21.7
HIGH: 238.0 34.1 62.5
LOW: 11.9 11.0 8.7
---------------------------------------------------------------
</TABLE>
- ----------
(a) Net Market Value is defined as market value of equity, plus total debt, less
cash and short-term investments.
(b) Earnings estimates from First Call Consensus. Data does not include one time
restructuring or merger costs. All data adjusted for stock splits.
(c) Revenues and EPS for CY00E have been calculated by applying the quarter over
quarter growth rate in the FY00.
(d) Calculations for Net income and EPS for FY, FY-1,FY-2 are adjusted to new
numbers as the restructuring and writeoff items have been taken out of the
income statement.
(e) Calculations for Net Income and EPS for FY, are adjusted to new numbers as
the one time $36,793,000 acquisition cost has been taken out of the income
statement.
(f) Calculations for Net Income and EPS for FY-2, are adjusted to new numbers as
the one time $675,000 non-recurring item has been taken out of the income
statement.
(g) Calculations for Net Income and EPS for FY and FY-1, are adjusted to new
numbers as the one time purchase and non recurring charges of $5,400,000 and
$6,690,000 have been taken off the income statement.
(h) Calculations for Net Income and EPS for FY and FY-1, are adjusted to new
numbers as the one time restructuring charges of $425,000 and $885,000
respectively have been taken off the income statement.
(i) Calculations for Net Income and EPS for FY are adjusted to new numbers as
the one time restructuring expense of $700,000 has been taken off the income
statement.
NM = Not meaningful, NA = Not available
23
<PAGE> 29
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
Summary of Selected Comparable Companies (continuation)
($ in thousands, except per share data)
(LTM=Latest Twelve Months, LQA=Latest Quarter Annualized)
<TABLE>
<CAPTION>
Revenue Growth
Stock Price LTM Percentage -------------- Book Total Debt/
Fiscal --------------- of 52-week LFY/ LQA/ Value of Total
Year High Low High LFY-1 LFY Equity Capital
------ ------ ----- ---------- ----- ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kofax Jun-99 $10.50 $5.88 90% 15% 7% $ 31,002.0 0%
Filenet Dec-98 $32.88 $3.69 34% 23% 11% $134,166.0 10%
Documentum Dec-98 54.50 9.38 25% 64% -22% 114,638.0 17%
Caere Corp Dec-98 18.75 7.50 55% 20% 8% 57,914.0 11%
ScanSoft Jan-99 4.13 0.69 83% 37% -77% 20,420.0 0%
Xionics Document Jun-98 5.25 2.13 95% -0% 10% 21,671.0 3%
Optika Dec-98 7.38 1.88 59% -14% 7% 11,246.0 21%
Input Software Dec-98 8.38 4.88 61% 42% 21% 20,320.0 0%
Document Sciences Dec-98 3.13 1.25 64% 2% 10% 18,647.0 0%
Lanvision Systems Jan-99 5.68 0.88 22% 38% -21% 4,288.0 58%
Median: 23% 8% 10%
Mean: 24% -6% 13%
High: 64% 21% 58%
Low: -14% -77% 0%
</TABLE>
<TABLE>
<CAPTION>
Margin Analysis
--------------------------------------------------------------
Fiscal Gross Profit SG&A R&D Operating Income
Year LTM LQ LTM LQ LTM LQ LTM LQ
------ ----- ----- --- --- --- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kofax Jun-99 78% 78% 37% 38% 22% 22% 19% 18%
Filenet Dec-98 65% 69% 50% 47% 16% 15% NM 6%
Documentum Dec-98 74% 64% 53% 70% 17% 26% 4% NM
Caere Corp Dec-98 79% 80% 42% 43% 19% 115% 18% 18%
ScanSoft Jan-99 27% 75% 27% 58% 13% 115% NM NM
Xionics Document Jun-98 60% 69% 23% 23% 48% 37% NM 8%
Optika Dec-98 80% 77% 68% 65% 26% 26% NM NM
Input Software Dec-98 89% 86% 62% 63% 23% 23% 4% 0%
Document Sciences Dec-98 27% 76% 76% 51% 22% 25% NM 0%
Lanvision Systems Jan-99 16% 24% 62% 53% 26% 23% NM NM
Median: 65% 75% 53% 53% 22% 26% NM NM
Mean: 58% 69% 51% 53% 23% 45% 3% 4%
High: 89% 86% 76% 70% 48% 115% 18% 18%
Low: 16% 24% 23% 23% 13% 15% NM NM
</TABLE>
NM=Not meaningful because these numbers are negative. NA=Not available
24
<PAGE> 30
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
Summary of Relevant Comparable Company Multiples
<TABLE>
<CAPTION>
Net Market Value/ Revenues Price / Earnings Per Share
------------------------------------------------------------ --------------------------
LTM LQA CY99E CY00E CY99E CY 2000E
Revenues Revenues Revenues Revenues Earnings Earnings
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Kofax 0.8x 0.8x 0.8x 0.6x 10.2x 7.2x
Filenet 0.9x 0.8x 0.8x 0.7x 20.1x 11.7x
Documentum 0.9 1.2 0.9 0.7 NM 58.2
Caere Corp 1.9 1.8 1.8 1.4 14.8 11.8
ScanSoft 1.2 4.3 4.8 NA 32.2 NA
Xionics Document 1.3 1.2 1.2 1.0 27.0 14.3
Optika 1.6 1.8 NA NA NA NA
Input Software 0.7 0.7 0.5 0.4 17.6 10.2
Document Sciences 0.9 1.0 NA NA NA NA
Lanvision Systems 1.1 0.6 NA NA NA NA
Median: 1.1x 1.2x 1.0x 0.7x 20.1x 11.8x
Mean: 1.2 1.5 1.7 0.8 22.3 21.3
High: 1.9 4.3 4.8 1.4 32.2 58.2
Low: 0.7 0.6 0.5 0.4 14.8 10.2
</TABLE>
25
<PAGE> 31
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
Market Data of Selected Comparables
($ in millions, except share data)
<TABLE>
<CAPTION>
Kofax Filenet Documentum Caere Corp ScanSoft
----------- ----------- ----------- ----------- -----------
Ticker FILE DCTM CAER SSFT
<S> <C> <C> <C> <C> <C> <C>
Latest Twelve Months Ending: 30-Jun-99 30-Jun-99 31-Mar-99 31-Mar-99 31-Mar-99
Fiscal Year Ending: 30-Jun-99 31-Dec-98 31-Dec-98 31-Dec-98 03-Jan-99
Price Per Share
Recent 20-Jul $ 9.50 $ 11.06 $ 13.75 $ 10.25 $ 3.41
LTM Range: High 10.50 32.88 54.50 18.75 4.13
Low 5.88 3.69 9.38 7.50 0.69
Revenues
Projected CY 2000 $ 53,466.5 $ 414,089.0 $ 166,100.0 $ 92,400.0 NA
Projected CY 1999 41,733.0 347,720.0 124,575.0 71,200.0 16,100.0
Latest Quarter Annualized 40,900.0 344,356.0 96,020.0 70,944.0 18,032.0
Latest 12 Months 43,260.9 323,783.0 122,762.0 67,879.0 63,613.0
Earnings Per Share
Projected CY 2000 1.3 $ 0.92 $ 0.22 $ 1.18 NA
Projected CY 1999 0.95 0.53 (0.49) 0.94 0.10
Latest Quarter Annualized 1.00 0.48 (1.04) 0.88 (0.72)
Latest 12 Months 1.12 0.05 0.49 0.86 (0.37)
Ratio of Market Value to:
Projected CY 2000 Revenues 0.60 0.7 0.8 0.9 NA
Projected CY 1999 Revenues 0.8 0.9 1.1 1.2 5.2
LQA Revenues 1.3 1.0 2.4 1.7 5.0
Latest 12 Months Revenues 1.2 1.1 1.9 1.8 1.4
Latest 12 Months Op. Inc. 6.4 NM 45.5 10.3 NM
Ratio of Current Price to:
Projected CY 2000 EPS 7.1 12.1 62.5 8.7 NA
Projected CY 1999 EPS 10.0 20.7 NM 11.0 34.1
Latest Quarter Annualized EPS 9.5 23.0 NM 11.6 NM
Latest 12 Months EPS 8.5 238.0 28.0 11.9 NM
Price-Earnings Ratio
LTM High / LTM EPS 9.4 707.4 110.9 21.8 NM
LTM Low / LTM EPS 5.2 79.3 19.1 8.7 NM
Shares Outstanding 5,450.0 31,949.0 16,913.0 12,074.0 26,364.0
Market Value of Equity $ 51,775.0 $ 353,435.8 $ 232,553.8 $ 123,758.5 $ 89,802.4
</TABLE>
26
<PAGE> 32
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
Market Data of Comparables (continuation)
($ in thousands, except share data)
<TABLE>
<CAPTION>
Xionics Document Optika Input Software Document Sciences Lanvision Systems
---------------- ---------- -------------- ----------------- -----------------
Ticker XION OPTK INPT DOCX LANV
<S> <C> <C> <C> <C> <C>
Latest Twelve Months Ending: 31-Mar-99 30-Jun-99 31-Mar-99 31-Mar-99 30-Apr-99
Fiscal Year Ending: 30-Jun-98 31-Dec-98 31-Dec-98 31-Dec-98 31-Jan-99
Price Per Share
Recent $ 4.97 $ 4.38 $ 5.13 $ 2.00 $ 1.25
LTM Range: 5.25 7.38 8.38 3.13 5.68
2.13 1.88 4.88 1.25 0.88
Revenues
Projected CY 2000 $ 37,100.0 NA $ 32,900.0 NA NA
Projected CY 1999 33,367.0 NA 24,500.0 NA NA
Latest Quarter Annualized 32,152.0 19,828.0 21,040.0 22,036.0 9,488.0
Latest 12 Months 30,124.0 21,486.0 19,282.0 21,491.0 10,777.0
Earnings Per Share
Projected CY 2000 $ 0.32 NA $ 0.55 NA NA
Projected CY 1999 0.17 NA 0.32 NA NA
Latest Quarter Annualized 0.28 (0.24) 0.12 0.08 (0.72)
Latest 12 Months (0.49) (0.28) 0.38 (0.51) (1.06)
Ratio of Market Value to:
Projected CY 2000 Revenues 1.2 NA 0.3 NA NA
Projected CY 1999 Revenues 1.3 NA 0.5 NA NA
LQA Revenues 1.9 1.6 1.1 NA 1.2
Latest 12 Months Revenues 2.1 1.5 1.2 1.0 1.0
Latest 12 Months Op. Inc. NM NM 25.2 NM NM
Ratio of Current Price to:
Projected CY 2000 EPS 15.7 NA 9.3 NA NA
Projected CY 1999 EPS 29.6 NA 16.0 NA NA
Latest Quarter Annualized EPS NM NM 42.7 25.0 NM
Latest 12 Months EPS NM NM 13.5 NM NM
Price-Earnings Ratio
LTM High / LTM EPS NM NM 22.0 NM NM
LTM Low / LTM EPS NM NM 12.8 NM NM
Shares Outstanding 12,441.0 7,178.0 4,619.0 10,910.0 8,815.0
Market Value of Equity $ 61,806.9 $ 31,403.8 $ 23,672.4 $ 21,820.0 $ 11,018.8
</TABLE>
27
<PAGE> 33
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
Operating Data of Selected Comparables
($ in thousands, except share data)
<TABLE>
<CAPTION>
Kofax (c) Filenet (d) Documentum (e)
------------------------------ -------------------------------- -------------------------------
Latest Twelve Months Ending: 30-Jun-99 30-Jun-99 31-Mar-99
Fiscal Year Ending: 30-Jun-99 31-Dec-98 31-Dec-98
<S> <C> <C> <C> <C> <C> <C>
Revenues: Growth (CAGR) (g) Growth (CAGR) Growth (CAGR)
LTM $43,260.9 13.8% $323,783.0 6.3% $122,762.0 17.3%
Latest Fiscal Year 38,318.0 310,233.0 123,829.0
Latest Fiscal Year - 1 33,375.1 251,425.0 75,635.0
Latest Fiscal Year - 2 29,265.7 268,913.0 45,302.0
Cost of Sales
LTM $ 9,543.3 $112,395.0 $ 32,367.0
Latest Fiscal Year 8,681.0 103,781.0 29,863.0
Latest Fiscal Year - 1 7,818.7 90,249.0 14,780.0
Latest Fiscal Year - 2 7,720.1 98,590.0 8,768.0
Gross Profit Margins Margins Margins
LTM $33,717.6 77.9% $211,388.0 65.3% $ 90,395.0 73.6%
Latest Fiscal Year 29,637.0 77.3% 206,452.0 66.5% 93,966.0 75.9%
Latest Fiscal Year - 1 25,556.4 76.6% 161,176.0 64.1% 60,855.0 80.5%
Latest Fiscal Year - 2 21,545.6 73.6% 170,323.0 63.3% 36,534.0 80.6%
Operating Expenses
LTM $25,680.1 59.4% $213,426.0 65.9% $ 85,284.0 69.5%
Latest Fiscal Year 23,442.0 61.2% 206,945.0 66.7% 78,861.0 63.7%
Latest Fiscal Year - 1 21,203.9 63.5% 166,049.0 66.0% 52,046.0 68.8%
Latest Fiscal Year - 2 18,153.7 62.0% 155,338.0 57.8% 31,903.0 70.4%
Operating Income
LTM $ 8,037.5 18.6% $ (2,038.0) NM $ 5,111.0 4.2%
Latest Fiscal Year 6,195.0 16.2% (493.0) NM 15,105.0 12.2%
Latest Fiscal Year - 1 4,352.5 13.0% (4,873.0) NM 8,809.0 11.6%
Latest Fiscal Year - 2 3,391.9 11.6% 14,985.0 5.6% 4,631.0 10.2%
Pretax Income
LTM $ 9,442.7 21.8% $ 1,752.0 0.5% $ 9,362.0 7.6%
Latest Fiscal Year 7,277.0 19.0% 3,347.0 1.1% 19,500.0 15.7%
Latest Fiscal Year - 1 5,111.3 15.3% (1,713.0) NM 11,142.0 14.7%
Latest Fiscal Year - 2 3,461.2 11.8% 17,823.0 6.6% 6,899.0 15.2%
Net Income(a)
LTM $ 6,334.4 14.6% $ 1,159.4 0.4% $ 5,585.0 4.5%
Latest Fiscal Year 4,739.0 12.4% 2,376.4 0.8% 12,675.0 10.2%
Latest Fiscal Year - 1 3,143.6 9.4% (1,216.2) NM 14,930.0 19.7%
Latest Fiscal Year - 2 2,135.3 7.3% (25,932.5) NM 9,314.0 20.6%
Earnings Per Share (b)
LTM $ 1.12 $ 0.05 $ 0.49
Latest Fiscal Year 0.87 0.08 0.78
Latest Fiscal Year - 1 0.62 (0.04) 0.51
Latest Fiscal Year - 2 0.52 (0.09) 0.33
</TABLE>
<TABLE>
<CAPTION>
Caere Corp ScanSoft(f)
------------------------------- --------------------------------
Latest Twelve Months Ending: 31-Mar-99 31-Mar-99
Fiscal Year Ending: 31-Dec-98 03-Jan-99
<S> <C> <C> <C> <C>
Revenues: Growth (CAGR) Growth (CAGR)
LTM $67,879.0 7.5% $ 63,613.0 4.2%
Latest Fiscal Year 65,802.0 79,070.0
Latest Fiscal Year - 1 55,018.0 57,623.0
Latest Fiscal Year - 2 54,528.0 56,081.0
Cost of Sales
LTM $14,177.0 $ 46,299.0
Latest Fiscal Year 14,144.0 59,370.0
Latest Fiscal Year - 1 14,320.0 50,725.0
Latest Fiscal Year - 2 16,473.0 45,467.0
Gross Profit Margins Margins
LTM $53,702.0 79.1% $ 17,314.0 27.2%
Latest Fiscal Year 51,658.0 78.5% 19,700.0 24.9%
Latest Fiscal Year - 1 40,698.0 74.0% 6,898.0 12.0%
Latest Fiscal Year - 2 38,055.0 69.8% 10,614.0 18.9%
Operating Expenses
LTM $41,648.0 61.4% $ 25,820.0 40.6%
Latest Fiscal Year 40,578.0 61.7% 23,558.0 29.8%
Latest Fiscal Year - 1 39,183.0 71.2% 30,543.0 53.0%
Latest Fiscal Year - 2 37,635.0 69.0% 37,280.0 66.5%
Operating Income
LTM $12,054.0 17.8% $ (8,506.0) NM
Latest Fiscal Year 11,080.0 16.8% (3,858.0) NM
Latest Fiscal Year - 1 1,515.0 2.8% (23,645.0) NM
Latest Fiscal Year - 2 420.0 0.8% (26,666.0) NM
Pretax Income
LTM $14,664.0 21.6% $ (8,674.0) NM
Latest Fiscal Year 13,701.0 20.8% (3,805.0) NM
Latest Fiscal Year - 1 4,017.0 7.3% (22,705.0) NM
Latest Fiscal Year - 2 496.0 0.9% (24,392.0) NM
Net Income(a)
LTM $10,675.0 15.7% $ (8,674.0) NM
Latest Fiscal Year 10,276.0 15.6% (3,805.0) NM
Latest Fiscal Year - 1 3,140.0 5.7% (22,705.0) NM
Latest Fiscal Year - 2 396.0 0.7% (24,392.0) NM
Earnings Per Share (b)
LTM $ 0.86 $ (0.37)
Latest Fiscal Year 0.81 (0.19)
Latest Fiscal Year - 1 0.24 (1.16)
Latest Fiscal Year - 2 0.03 (1.34)
</TABLE>
(a) Before discontinued operations and extraordinary items.
(b) Fully diluted before discontinued operations and extraordinary items.
(c) Revenues and EPS for CY00E have been calculated by applying the quarter
over quarter growth rate in the FY00.
(d) Calculations for Net income and EPS for FY, FY-1,FY-2 are adjusted to
new numbers as the restructuring and writeoff items have been taken out
of the income statement.
(e) Calculations for Net Income and EPS for FY, are adjusted to new numbers
as the one time $36,793,000 acquisition cost has been taken out of the
income statement.
(f) Calculations for Net Income and EPS for FY-2, are adjusted to new
numbers as the one time $675,000 non-recurring item has been taken out
of the income statement.
(g) Compounded annual growth rate between LTM and Latest Fiscal Year -2
28
<PAGE> 34
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
Operating Data of Comparables (continuation)
($ in thousands, except share data)
<TABLE>
<CAPTION>
Xionics Document (c) Optika (d) Input Software
--------------------------- -------------------------- --------------------------
Latest Twelve Months Ending: 31-Mar-99 30-Jun-99 31-Mar-99
Fiscal Year Ending: 30-Jun-98 31-Dec-98 31-Dec-98
<S> <C> <C> <C> <C> <C> <C>
Revenues: Growth(CAGR)(f) Growth(CAGR) Growth(CAGR)
LTM $ 30,124.0 31.4% $ 21,486.0 -0.3% $ 19,282.0 16.2%
Latest Fiscal Year 29,101.0 18,547.0 17,409.0
Latest Fiscal Year - 1 29,176.0 21,663.0 12,240.0
Latest Fiscal Year - 2 13,172.0 16,703.0 7,090.0
Cost of Sales
LTM $ 12,174.0 $ 4,232.0 $ 2,037.0
Latest Fiscal Year 11,255.0 3,708.0 1,748.0
Latest Fiscal Year - 1 3,646.0 3,582.0 881.0
Latest Fiscal Year - 2 1,289.0 2,515.0 322.0
Gross Profit Margins Margins Margins
LTM $ 17,950.0 59.6% $ 17,254.0 80.3% $ 17,245.0 89.4%
Latest Fiscal Year 17,846.0 61.3% 14,839.0 80.0% 15,661.0 90.0%
Latest Fiscal Year - 1 25,530.0 87.5% 18,081.0 83.5% 11,359.0 92.8%
Latest Fiscal Year - 2 11,883.0 90.2% 14,188.0 84.9% 6,768.0 95.5%
Operating Expenses
LTM $ 21,428.0 71.1% $ 20,269.0 94.3% $ 16,306.0 84.6%
Latest Fiscal Year 22,540.0 77.5% 21,018.0 113.3% 14,829.0 85.2%
Latest Fiscal Year - 1 20,572.0 70.5% 24,888.0 114.9% 11,450.0 93.5%
Latest Fiscal Year - 2 13,844.0 105.1% 20,179.0 120.8% 9,072.0 128.0%
Operating Income
LTM $ (3,478.0) NM $ (3,015.0) NM $ 939.0 4.9%
Latest Fiscal Year (4,694.0) NM (6,179.0) NM 832.0 4.8%
Latest Fiscal Year - 1 4,958.0 17.0% (6,807.0) NM (91.0) NM
Latest Fiscal Year - 2 (1,961.0) NM (5,991.0) NM (2,304.0) NM
Pretax Income
LTM $ (2,719.8) NM $ (3,179.0) NM $ 1,646.0 8.5%
Latest Fiscal Year (3,799.2) NM (6,397.0) NM 1,507.0 8.7%
Latest Fiscal Year - 1 5,810.9 19.9% (7,249.0) NM 597.0 4.9%
Latest Fiscal Year - 2 (2,079.8) NM (6,220.0) NM (2,050.0) NM
Net Income(a)
LTM $ (2,938.8) NM $ (2,467.0) NM $ 1,131.0 5.9%
Latest Fiscal Year (4,071.2) NM (5,205.0) NM 1,039.0 6.0%
Latest Fiscal Year - 1 3,305.9 11.3% (7,459.0) NM 394.0 3.2%
Latest Fiscal Year - 2 (2,079.8) NM (5,407.0) NM (1,449.0) NM
Earnings Per Share (b)
LTM $ (0.49) $ (0.28) $ 0.38
Latest Fiscal Year (0.91) (0.68) (0.06)
Latest Fiscal Year - 1 0.33 0.11 0.15
Latest Fiscal Year - 2 (1.01) 0.45 (0.15)
</TABLE>
<TABLE>
<CAPTION>
Document Sciences Lanvision Systems (e)
-------------------------- ---------------------------
Latest Twelve Months Ending: 31-Mar-99 30-Apr-99
Fiscal Year Ending: 31-Dec-98 31-Jan-99
<S> <C> <C> <C> <C>
Revenues: Growth(CAGR) Growth(CAGR)
LTM $ 21,491.0 2.8% $ 10,777.0 7.4%
Latest Fiscal Year 20,107.0 12,010.0
Latest Fiscal Year - 1 19,740.0 8,675.0
Latest Fiscal Year - 2 15,319.0 10,310.0
Cost of Sales
LTM $ 15,688.0 $ 9,034.0
Latest Fiscal Year 15,771.0 10,169.0
Latest Fiscal Year - 1 16,419.0 7,582.0
Latest Fiscal Year - 2 12,983.0 8,042.0
Gross Profit Margins Margins
LTM $ 5,803.0 27.0% $ 1,743.0 16.2%
Latest Fiscal Year 4,336.0 21.6% 1,841.0 15.3%
Latest Fiscal Year - 1 3,321.0 16.8% 1,093.0 12.6%
Latest Fiscal Year - 2 2,336.0 15.2% 2,268.0 22.0%
Operating Expenses
LTM $ 21,209.0 98.7% $ 9,490.8 88.1%
Latest Fiscal Year 21,903.0 108.9% 11,600.2 96.6%
Latest Fiscal Year - 1 15,273.0 77.4% 14,910.5 171.9%
Latest Fiscal Year - 2 11,368.0 74.2% 8,227.6 79.8%
Operating Income
LTM $(15,406.0) NM $ (7,747.8) NM
Latest Fiscal Year (17,567.0) NM (9,759.2) NM
Latest Fiscal Year - 1 (11,952.0) NM (13,817.5) NM
Latest Fiscal Year - 2 (9,032.0) NM (5,959.6) NM
Pretax Income
LTM $(14,538.2) NM $ (8,648.7) NM
Latest Fiscal Year (16,666.2) NM (10,225.0) NM
Latest Fiscal Year - 1 (10,825.0) NM (12,669.2) NM
Latest Fiscal Year - 2 (8,714.5) NM (4,667.2) NM
Net Income(a)
LTM $(14,732.2) NM $ (8,648.7) NM
Latest Fiscal Year (16,425.2) NM (10,225.0) NM
Latest Fiscal Year - 1 (11,056.2) NM (12,669.2) NM
Latest Fiscal Year - 2 (9,336.0) NM (4,667.2) NM
Earnings Per Share (b)
LTM $ (0.51) $ (1.06)
Latest Fiscal Year (0.67) (1.24)
Latest Fiscal Year - 1 0.08 (1.44)
Latest Fiscal Year - 2 0.16 (0.56)
</TABLE>
(a) Before discontinued operations and extraordinary items.
(b) Fully diluted before discontinued operations and extraordinary items.
(c) Calculations for Net Income and EPS for FY and FY-1, are adjusted to
new numbers as the one time purchase and non recurring charges of
$5,400,000 and $6,690,000 have been taken off the income statement.
(d) Calculations for Net Income and EPS for FY and FY-1, are adjusted to
new numbers as the one time restructuring charges of $425,000 and
$885,000 respectively have been taken off the income statement.
(e) Calculations for Net Income and EPS for FY are adjusted to new numbers
as the one time restructuring expense of $700,000 has been taken off
the income statement.
(f) Compounded annual growth rate between LTM and Latest Fiscal Year -2
29
<PAGE> 35
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
Capitalization Data for Comparables
($ in thousands)
<TABLE>
<CAPTION>
Kofax (b) Filenet Documentum
------------------- -------------------- --------------------
As of: 30-Jun-99 30-Jun-99 31-Mar-99
<S> <C> <C> <C>
NET ASSETS
Cash and Equivalents $19,850.00 $ 71,911.00 $124,407.00
Other Current Assets 13,298.00 78,358.00 8,474.00
---------- ----------- -----------
Total Current Assets 33,148.00 150,269.00 132,881.00
Other Current Liabilities 5,710.00 72,608.00 0.00
---------- ----------- -----------
Total Current Liabilities 5,710.00 72,608.00 0.00
Net Working Capital 27,438.00 77,661.00 132,881.00
Net Plant, Property and Equip. 2,056.00 42,302.00 14,604.00
Other Tangible Assets 165.00 23,771.00 6,018.00
---------- ----------- -----------
Total Tangible Assets 29,659.00 143,734.00 153,503.00
Intangibles 1,343.00 6,433.00 0.00
---------- ----------- -----------
Total Assets $31,002.00 $150,167.00 $153,503.00
---------- ----------- -----------
CAPITALIZATION
Short Term Debt (a) $ 0.00 0.0% $ 15,048.00 10.0% $ 23,386.00 15.2%
Long-Term Debt 0.00 0.0% 0.00 0.0% 0.00 0.0%
Other Liabilities & Deferred Items 0.00 0.0% 953.00 0.6% 15,479.00 10.1%
Preferred Stock 0.00 0.0% 0.00 0.0% 0.00 0.0%
Common Equity 31,002.00 100.0% 134,166.00 89.3% 114,638.00 74.7%
---------- ----- ----------- ----- ----------- -----
Total Capitalization $31,002.00 100.0% $150,167.00 100.0% $153,503.00 100.0%
</TABLE>
<TABLE>
<CAPTION>
Caere Corp ScanSoft
------------------- -------------------
As of: 31-Mar-99 31-Mar-99
<S> <C> <C>
NET ASSETS
Cash and Equivalents $46,303.00 $ 6,834.00
Other Current Assets 9,932.00 5,256.00
---------- ----------
Total Current Assets 56,235.00 12,090.00
Other Current Liabilities 0.00 3,599.00
---------- ----------
Total Current Liabilities 0.00 3,599.00
Net Working Capital 56,235.00 8,491.00
Net Plant, Property and Equip. 3,389.00 869.00
Other Tangible Assets 2,841.00 240.00
---------- ----------
Total Tangible Assets 62,465.00 9,600.00
Intangibles 2,953.00 10,938.00
---------- ----------
Total Assets $65,418.00 $20,538.00
---------- ----------
CAPITALIZATION
Short Term Debt (a) $ 7,504.00 11.5% $ 0.00 0.0%
Long-Term Debt 0.00 0.0% 0.00 0.0%
Other Liabilities & Deferred Items 0.00 0.0% 114.00 0.6%
Preferred Stock 0.00 0.0% 4.00 0.0%
Common Equity 57,914.00 88.5% 20,420.00 99.4%
---------- ----- ---------- -----
Total Capitalization $65,418.00 100.0% $20,538.00 100.0%
</TABLE>
(a) Short Term Debt includes current maturities of Long Term Debt.
(b) Kofax's deferred revenue falls under the current liabilities item.
30
<PAGE> 36
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
Capitalization Data for Comparables (continuation)
($ in thousands)
<TABLE>
<CAPTION>
Xionics Document Optika Input Software
------------------- ------------------- -------------------
As of: 31-Mar-99 30-Jun-99 31-Mar-99
<S> <C> <C> <C>
NET ASSETS
Cash and Equivalents $18,510.00 $ 7,620.00 $12,630.00
Other Current Assets 13,326.00 4,009.00 10,351.00
---------- ---------- ----------
Total Current Assets 31,836.00 11,629.00 22,981.00
Other Current Liabilities 13,515.00 3,486.00 4,728.00
---------- ---------- ----------
Total Current Liabilities 13,515.00 3,486.00 4,728.00
Net Working Capital 18,321.00 8,143.00 18,253.00
Net Plant, Property and Equip. 2,141.00 2,924.00 1,289.00
Other Tangible Assets 754.00 3,118.00 984.00
---------- ---------- ----------
Total Tangible Assets 21,216.00 14,185.00 20,526.00
Intangibles 1,030.00 0.00 (206.00)
---------- ---------- ----------
Total Assets $22,246.00 $14,185.00 $20,320.00
---------- ---------- ----------
CAPITALIZATION
Short Term Debt (a) $ 575.00 2.6% $ 2,939.00 20.7% $ 0.00 0.0%
Long-Term Debt 0.00 0.0% 0.00 0.0% 0.00 0.0%
Other Liabilities & Deferred Items 0.00 0.0% 0.00 0.0% 0.00 0.0%
Preferred Stock 0.00 0.0% 0.00 0.0% 0.00 0.0%
Common Equity 21,671.00 97.4% 11,246.00 79.3% 20,320.00 100.0%
---------- ----- ---------- ----- ---------- -----
Total Capitalization $22,246.00 100.0% $14,185.00 100.0% $20,320.00 100.0%
</TABLE>
<TABLE>
<CAPTION>
Document Sciences Lanvision Systems
------------------- -------------------
As of: 31-Mar-99 30-Apr-99
<S> <C> <C>
NET ASSETS
Cash and Equivalents $ 1,741.00 $ 4,147.00
Other Current Assets 23,846.00 6,909.00
---------- ----------
Total Current Assets 25,587.00 11,056.00
Other Current Liabilities 10,327.00 4,761.00
Total Current Liabilities 10,327.00 4,761.00
---------- ----------
Net Working Capital 15,260.00 6,295.00
Net Plant, Property and Equip. 1,609.00 7,500.00
Other Tangible Assets 1,251.00 0.00
---------- ----------
Total Tangible Assets 18,120.00 13,795.00
Intangibles 917.00 (2,883.00)
---------- ----------
Total Assets $19,037.00 $10,912.00
---------- ----------
CAPITALIZATION
Short Term Debt (a) $ 0.00 0.0% $ 0.00 0.0%
Long-Term Debt 10.00 0.1% 6,000.00 55.0%
Other Liabilities & Deferred Items 380.00 2.0% 624.00 5.7%
Preferred Stock 0.00 0.0% 0.00 0.0%
Common Equity 18,647.00 98.0% 4,288.00 39.3%
---------- ----- ---------- ------
Total Capitalization $19,037.00 100.0% $10,912.00 100.0%
</TABLE>
(a) Short Term Debt includes current maturities of Long Term Debt.
31
<PAGE> 37
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
SELECTED COMPARABLE COMPANY MERGER & ACQUISITION TRANSACTIONS
<TABLE>
<CAPTION>
Acquiror Name Transaction Value
-------------------
Date Target Name Form of Market Net Mkt.
Announced Target Business Description Consideration Value Value
- ------------ ---------------------------------------------------------------------------------- ------------- -------------------
<S> <C> <C> <C> <C>
06/30/99 (a) ScanSoft Stock/Cash $ 3.55 NA
METACREATIONS
Photo imaging
6/16/99 Hummingbird Cash 218.99 148.07
PC DOCS
Corporate intranet document systems
05/24/99 RadiSys Corp Stock 123.7 118.2
TEXAS MICRO INC
Pvd computer systems services
3/2/99 Visioneer Stock 22.7 NA
XEROX SCANSOFT
Digital imaging software
01/29/99 Legato Systems Stock/Cash 52.0 NA
INTELLIGUARD SOFTWARE
Allows companies to back up computer files rapidly
01/21/99 Parametric Technology Corp. Cash/Stock 46.0 NA
DIVISION GROUP PLC
Developer of product data visualization, simulation and integration tools
1/7/99 Primax Electronics Ltd. Cash 7.0 NA
SCANNER HARDWARE (SCANSOFT)
Manufacture scanner systems
11/19/98 Ardent Software Inc. Stock 42.0 36.2
PRISM SOLUTIONS INC.
Designs, develops, data warehouse management software
11/02/98 BMC Software Inc. Stock 900.00 907.00
BOOLE & BABBAGE INC.
Software helps companies manage networks that use different operating systems
11/1/98 HBOC & Co Stock 249.6 214.5
IMNET SYSTEMS
Electronic information and document management for healthcare
08/12/98 Mentor Graphics Corp. Stock 216.00 179.70
QUICKTURN DESIGN SYSTEMS
Develops design software
08/03/98 Ascend Communications Inc. Stock 822.0 690.3
STRATUS COMPUTER INC.
Supplies computer systems and services
07/28/98 Network Associates Inc. Cash 130.0 90.7
CYBERMEDIA INC.
Automated service & support tech. for personal computers
07/21/98 Sterling Commerce Inc. Stock/Cash 175.0 167.7
XCELLENET INC.
Software connects remote computer users to network
</TABLE>
<TABLE>
<CAPTION>
Price/Share to Target
Target LTM Financial Multiple of Multiple of Price/Share Prior to
Performance Market Value Net Mkt. Value Announcement
------------------------------------ --------------------- -------------------- -------------------------
Date Oper. Net Book Net Book Oper. 30 Trd. Days One Day
Announced Rev. Inc. Inc. Value Inc. Value Rev. Inc. Prior Prior
- ------------ ------------------------------------ --------------------- -------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/30/99 (a) NA NA NA NA NA x NA x NA x NA x NA NA
6/16/99 129.71 5.79 3.78 178.83 57.9 1.2 1.1 25.6 20.0% 9.3%
05/24/99 78.3 1.8 2.4 1.9 51.5 65.1 1.5 65.7 46.88% 48.75%
3/2/99 NM NM NM NM NM NM NM NM NM NM
01/29/99 NA NA NA NA NA NA NA NA NA NA
01/21/99 NA NA NA NA NA NA NA NA NA NA
1/7/99 NA NA NA NA NA NA NA NA NA NA
11/19/98 46.3 (14.2) (11.8) 12.9 NM 3.3 0.8 NM 123.0% -32.7%
11/02/98 212.30 32.20 33.66 141.70 26.7 6.4 4.3 28.2 40.7% 21.8%
11/1/98 54.6 (3.4) (1.9) 68.4 NM 3.6 3.9 NM 8.4% 2.4%
08/12/98 23.90 -9.60 -5.00 -85.90 NM (2.5) 7.5 NM 65.9% 51.6%
08/03/98 674.4 78.7 69.2 572.2 11.9 1.4 1.0 8.8 39.5% 21.6%
07/28/98 75.3 (11.1) (10.8) 41.6 NM NA 22.0 NA 61.7% 25.6%
07/21/98 62.2 4.5 3.3 46.3 53.7 3.8 2.7 37.4 -55.2% -57.6%
</TABLE>
32
<PAGE> 38
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
SELECTED COMPARABLE COMPANY MERGER & ACQUISITION TRANSACTIONS
<TABLE>
<CAPTION>
Acquiror Name Transaction Value
-------------------
Date Target Name Form of Market Net Mkt.
Announced Target Business Description Consideration Value Value
- ------------ ---------------------------------------------------------------------------------- ------------- -------------------
<S> <C> <C> <C> <C>
07/17/98 Documentum Inc. Cash/Stock $ 36.50 $ 34.40
RELEVANCE TECHNOLOGIES INC.
Dvlp s/w encoding text-based information
06/22/98 Sterling Software Inc. Stock 88.0 NA
SYNON CORP.
Provider of application development solutions
06/16/98 Scan-Optics, Inc. Cash 7.0 NA
SOUTHERN COMPUTER SERVICES
Prvd. data entry and document automation software
06/15/98 Netmanage Inc. Stock 77.4 55.4
FTP SOFTWARE INC.
Prov connectivity software with centralized management
05/26/98 Arbor Software Corp. Stock 642.0 641.9
HYPERION SOFTWARE CORP.
Makes management analysis software
04/17/98 Sterling Commerce Inc. Cash/Stock 214.3 196.3
XCELLENET INC.
Dvlp remote computing software
04/16/98 Phoenix Technologies Ltd. Stock 111.3 87.0
AWARD SOFTWARE INTERNATIONAL INC.
Develop enabling management software
03/16/98 PLATINUM Technology Inc. Stock 212.9 190.3
LOGIC WORKS INC.
Develop client/server software
03/05/98 Xerox Corp. Cash 67.0 63.5
XLCONNECT SOLUTIONS INC.
Links digital copiers to computer market
01/23/98 Imagemax Inc. Cash 1.2 0.4
INTEGRATED INFORMATION SERVICES, L.L.C.
Provides document management software & services
01/06/98 Titan Corp Stock 37.90 36.71
DBA SYSTEMS INC
Dvlp digital imaging systems
12/19/97 IBM Corp. Cash 200.0 188.7
SOFTWARE ARTISTRY, INC.
Enterprise support management software
11/18/97 Borland International Inc. Stock 103.0 85.0
VISIGENIC SOFTWARE INC.
Object connectivity software
10/17/97 Star Technologies, Inc. Cash $ 0.2 $ 1.2
CURRAN DATA TECHNOLOGIES
Data entry imaging services
</TABLE>
<TABLE>
<CAPTION>
Price/Share to Target
Target LTM Financial Multiple of Multiple of Price/Share Prior to
Performance Market Value Net Mkt. Value Announcement
------------------------------------ --------------------- -------------------- -------------------------
Date Oper. Net Book Net Book Oper. 30 Trd. Days One Day
Announced Rev. Inc. Inc. Value Inc. Value Rev. Inc. Prior Prior
- ------------ ------------------------------------ --------------------- -------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/17/98 0.0 $(1.80) $ (1.70) $ (3.00) NM x (12.3)x NA x NM x NA NA
06/22/98 NA NA NA NA NA NA NA NA NA NA
06/16/98 NA NA NA NA NA NA NA NA NA NA
06/15/98 79.5 (59.8) (61.8) 131.3 NM 0.6 0.7 NM 3.8% 13.5%
05/26/98 277.1 25.0 17.3 113.0 37.1 5.7 2.3 25.7 -8.1% 5.0%
04/17/98 51.3 12.9 6.7 34.4 32.0 6.2 3.8 15.2 5.4% 3.9%
04/16/98 23.4 5.6 4.7 4.3 23.7 25.9 3.7 15.5 -14.5% -37.0%
03/16/98 46.8 (1.4) (0.6) 3.1 NM 68.7 4.1 NM 57.1% 13.0%
03/05/98 134.4 7.4 3.9 56.2 17.3 1.2 0.5 8.5 27.5% -11.1%
01/23/98 5.7 0.1 (0.5) NA NM NA 0.1 4.8 NA NA
01/06/98 24.90 2.50 2.00 29.70 19.0 1.3 1.5 14.7 8.3% 22.4%
12/19/97 43.8 4.9 4.8 26.2 41.5 7.6 4.3 38.8 55.6% 38.0%
11/18/97 21.0 (9.7) (9.2) 27.9 NM 3.7 4.1 NM 23.0% 58.1%
10/17/97 NA NA NA NA NA NA NA NA NA NA
</TABLE>
33
<PAGE> 39
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
SELECTED COMPARABLE COMPANY MERGER & ACQUISITION TRANSACTIONS
<TABLE>
<CAPTION>
Acquiror Name Transaction Value
-------------------
Date Target Name Form of Market Net Mkt.
Announced Target Business Description Consideration Value Value
- ------------ ---------------------------------------------------------------------------------- ------------- -------------------
<S> <C> <C> <C> <C>
10/15/97 Synopsys Inc. Stock $497.00 $425.19
VIEWLOGIC SYSTEMS INC.
Electronic design automation software
09/08/97 Xionics Document Technologies Cash 2.2 NA
SEAPORT IMAGING
Image processing hardware and software
07/31/97 Star Technologies Cash & Stock 2.6 NA
INTRAFED INC.
Pvdr. software for document imaging and processing
07/16/97 Paxar Corp. Stock 200.0 216.8
INTERNATIONAL IMAGING MATERIALS, INC.
Mnfr. thermal transfer ribbons (imaging)
03/25/97 IDX Systems Corporation Stock 147.0 143.0
PHAMIS INC.
Design automation software
02/11/97 MetaTools, Inc. Stock 145.0 116.7
FRACTAL DESIGN CORP.
Prvd. software tools for computer graphic images
12/19/96 Autodesk Inc. Stock 90.0 76.7
SOFTDESK INC.
Mnfr. of drafting software
08/15/96 Fairey Group PLC Cash 121.0 119.8
FUSION UV SYSTEMS (FUSION SYSTEMS)
Mnfr of ultraviolet curing equipment
08/09/96 Adaptec Inc. Cash/Stock 44.0 NA
DATA KINESIS INC.
Develop file mgmt. software
07/22/96 Cisco Systems Inc. Cash 200.0 191.2
TELEBIT CORP.
Mnfr. data transmission equipments
06/17/96 Bay Networks Inc. Stock 120.0 119.4
PENRIL DATACOMM NETWORKS INC.
Mnfr. data communications equip.
06/03/96 Adaptec Inc. Stock 68.0 NA
COGENT DATA TECHNOLOGIES, INC.
Dvlp. data mgmt. software syst.
05/13/96 Borland International, Inc. Stock 64.0 47.8
OPEN ENVIRONMENT CORP.
Software programming Tools for network
04/22/96 Reynolds & Reynolds Co. Cash 90.1 72.6
DUPLEX PRODUCTS
Manufacture business forms & forms management
03/05/96 Symantec Corp. Stock 7.5 NA
FAST TRACK INC.
Provide open network design service
</TABLE>
<TABLE>
<CAPTION>
Price/Share to Target
Target LTM Financial Multiple of Multiple of Price/Share Prior to
Performance Market Value Net Mkt. Value Announcement
------------------------------------ --------------------- -------------------- -------------------------
Date Oper. Net Book Net Book Oper. 30 Trd. Days One Day
Announced Rev. Inc. Inc. Value Inc. Value Rev. Inc. Prior Prior
- ------------ ------------------------------------ --------------------- -------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97 $147.81 $18.10 $ 16.09 $ 92.96 30.9 x 5.3 x 2.9 x 23.5 x 49.3% 24.4%
09/08/97 NA NA NA NA NA NA NA NA NA NA
07/31/97 NA NA NA NA NA NA NA NA NA NA
07/16/97 108.7 16.8 6.3 83.5 32.0 2.4 2.0 12.9 41.2% 5.5%
03/25/97 51.8 2.9 2.5 32.7 58.3 4.5 2.8 49.0 28.8% 22.8%
02/11/97 29.5 6.3 4.6 34.9 31.5 4.2 4.0 18.5 9.7% 45.0%
12/19/96 31.8 1.9 1.5 32.3 59.6 2.8 2.4 40.4 140.0% 44.6%
08/15/96 51.1 9.7 6.1 25.0 19.7 4.8 2.3 12.4 60.8% 102.6%
08/09/96 NA NA NA NA NA NA NA NA NA NA
07/22/96 50.5 (12.3) (11.5) 16.7 NM 12.0 3.8 NM 5.7% 22.7%
06/17/96 46.5 (13.8) (20.1) 27.1 NM 4.4 2.6 NM 14.3% 0.0%
06/03/96 NA NA NA NA NA NA NA NA NA NA
05/13/96 29.2 (3.2) (2.9) 24.7 NM 2.6 1.6 NM -60.7% -68.5%
04/22/96 266.5 0.9 (2.2) 98.3 NM 0.9 0.3 79.1 24.7% 1.1%
03/05/96 NA NA NA NA NA NA NA NA -16.1% 0.1%
</TABLE>
34
<PAGE> 40
C.E. UNTERBERG, TOWBIN
- --------------------------------------------------------------------------------
SELECTED COMPARABLE COMPANY MERGER & ACQUISITION TRANSACTIONS
<TABLE>
<CAPTION>
Acquiror Name Transaction Value
-------------------
Date Target Name Form of Market Net Mkt.
Announced Target Business Description Consideration Value Value
- ------------ ---------------------------------------------------------------------------------- ------------- -------------------
<S> <C> <C> <C> <C>
01/22/96 FileNet Inc. Stock $128.77 $129.26
SAROS CORP.
Supplier of document management software
01/18/96 FileNet Inc. Cash 10.0 NA
INTERNATIONAL FINANCIAL SYSTEMS LTD.
Dvlps software (financial)
12/11/95 Continuum Company Stock 180.0 175.0
HOGAN SYSTEMS, INC.
Provides & supports computer software
11/06/95 Concurrent Computer Corporation Stock 28.8 21.2
HARRIS COMPUTER CORPORATION
Supplier computer solutions/software
08/31/95 Macromedia Inc. Stock 14.0 NA
FAUVE SOFTWARE
Develop image editing applications
07/18/95 FileNet Corp. Stock 61.0 59.1
WATERMARK SOFTWARE INC.
Dvlp document-imaging software
07/20/94 Input Software Inc. Stock 2.9 NA
PIXEL TRANSLATIONS INC.
Image Software
05/03/93 Sapiens International Corp. N.V. Stock 29.2 29.2
SMARTSTAR CORP.
Rapid application development software
12/01/92 Broadway & Seymour Cash 12.3 NA
ACCURA INNOVATIVE SERVICES
Software program that converts documents to computer images
04/24/91 Gandalf Technologies Inc. Stock 9.2 35.0
INFOTRON SYSTEMS CORPORATION
Data, voice, and image networks
4/18/91 Litton Industries Inc. Cash $ 203.0 $ 234.0
INTERMEC CORP.
Manufactures data collection, processing and output systems
</TABLE>
<TABLE>
<CAPTION>
Price/Share to Target
Target LTM Financial Multiple of Multiple of Price/Share Prior to
Performance Market Value Net Mkt. Value Announcement
------------------------------------ --------------------- -------------------- -------------------------
Date Oper. Net Book Net Book Oper. 30 Trd. Days One Day
Announced Rev. Inc. Inc. Value Inc. Value Rev. Inc. Prior Prior
- ------------ ------------------------------------ --------------------- -------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01/22/96 $ 16.53 $ 0.97 $ (2.17) $ (0.71) NM x NM x 7.8 x 133.1 x NA NA
01/18/96 NA NA NA NA NA NA NA NA NA NA
12/11/95 103.4 13.5 9.3 61.9 19.3 2.9 1.7 12.9 -55.5% -67.5%
11/06/95 45.1 (9.9) (11.1) NA NM NA 0.5 NM 14.7% -7.1%
08/31/95 NA NA NA NA NA NA NA NA NA NA
07/18/95 2.7 (2.5) (2.4) (5.2) NM (11.8) 21.8 NM NA NA
07/20/94 NA NA NA NA NA NA NA NA NA NA
05/03/93 10.7 NA (0.4) NA NM NA 2.7 NA NA NA
12/01/92 NA NA NA NA NA NA NA NA NA NA
04/24/91 83.6 NA (6.2) 18.0 NM 0.5 0.4 NA NA NA
4/18/91 $ 213.5 $ 19.3 $ 10.8 $ 103.0 18.8 2.0 1.1 12.1 NA NA
SELECTED COMPARABLE COMPANY CASH TRANSACTIONS
----------------------------------------------------------------------------------------
HIGH 57.9 X 12.0 X 22.0 X 133.1 X 61.7% 102.6%
MEDIAN 25.9 2.0 1.7 18.5 26.1% 16.0%
LOW 17.3 (12.3) 0.1 4.8 -55.2% -11.1%
----------------------------------------------------------------------------------------
SELECTED COMPARABLE COMPANY STOCK TRANSACTIONS
----------------------------------------------------------------------------------------
HIGH 59.6 X 68.7 X 21.8 X 133.1 X 140.0% 58.1%
MEDIAN 31.5 3.7 2.7 23.5 34.1% 13.0%
LOW 11.9 (12.3) 0.4 8.8 -60.7% -68.5%
----------------------------------------------------------------------------------------
ALL DEALS
----------------------------------------------------------------------------------------
HIGH 59.6 X 68.7 X 22.0 X 133.1 X 140.0% 102.6%
MEDIAN 31.4 2.7 2.3 21.0 27.5% 13.2%
LOW 11.9 (12.3) 0.1 4.8 -60.7% -68.5%
----------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(a) This transaction has only been announced and has not been executed yet.
35
<PAGE> 1
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
AMONG
KOFAX IMAGE PRODUCTS, INC.
IMAGING COMPONENTS CORPORATION
AND
IMAGING ACQUISITION CORPORATION
DATED AS OF JULY 27, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
THE OFFER.........................................................................................................2
Section 1.1 The Offer.......................................................................................2
Section 1.2 Company Action..................................................................................4
Section 1.3 Company Board and Committees; Section 14(f) of the Exchange Act.................................5
ARTICLE 2
THE MERGER........................................................................................................6
Section 2.1 Merger..........................................................................................6
Section 2.2 Effective Time..................................................................................6
Section 2.3 Closing of the Merger...........................................................................6
Section 2.4 Effects of the Merger...........................................................................6
Section 2.5 Certificate of Incorporation and Bylaws.........................................................6
Section 2.6 Directors.......................................................................................7
Section 2.7 Officers........................................................................................7
Section 2.8 Conversion of Shares............................................................................7
Section 2.9 Shares of Dissenting Holders....................................................................8
Section 2.10 Exchange of Certificates........................................................................8
Section 2.11 Stock Options; 1997 Stock Plan.................................................................10
Section 2.12 Additional Actions.............................................................................11
Section 2.13 Withholding Taxes..............................................................................11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................................11
Section 3.1 Organization and Qualification; Subsidiaries...................................................11
Section 3.2 Capitalization of the Company and its subsidiaries.............................................12
Section 3.3 Authority Relative to this Agreement; Consents and Approvals...................................13
Section 3.4 SEC Reports; Financial Statements..............................................................14
Section 3.5 Information Supplied...........................................................................14
Section 3.6 Consents and Approvals; No Violations..........................................................15
Section 3.7 Material Contracts.............................................................................15
Section 3.8 No Undisclosed Liabilities; Absence of Changes.................................................16
Section 3.9 Litigation.....................................................................................16
Section 3.10 Compliance with Applicable Law.................................................................16
Section 3.11 Employee Plans.................................................................................17
Section 3.12 Environmental Laws and Regulations.............................................................18
Section 3.13 Intellectual Property; Software................................................................20
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.14 Certain Business Practices.....................................................................21
Section 3.15 Labor Matters..................................................................................21
Section 3.16 Insurance......................................................................................21
Section 3.17 Tax Matters....................................................................................22
Section 3.18 Brokers........................................................................................23
Section 3.19 Real Estate....................................................................................23
Section 3.20 Opinion of Financial Advisor...................................................................24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB.........................................................................................24
Section 4.1 Organization...................................................................................24
Section 4.2 Authority Relative to this Agreement...........................................................25
Section 4.3 Information Supplied...........................................................................25
Section 4.4 Consents and Approvals; No Violations..........................................................25
Section 4.5 No Prior Activities............................................................................26
Section 4.6 Brokers........................................................................................26
Section 4.7 Financing......................................................................................26
ARTICLE 5
COVENANTS........................................................................................................27
Section 5.1 Conduct of Business of the Company.............................................................27
Section 5.2 No Solicitation................................................................................28
Section 5.3 Access to Information..........................................................................30
Section 5.4 Shareholders Meeting; Proxy Statement..........................................................30
Section 5.5 Additional Agreements; Reasonable Efforts......................................................30
Section 5.6 Consents.......................................................................................31
Section 5.7 Public Announcements...........................................................................31
Section 5.8 Indemnification; Directors' and Officers' Insurance............................................31
Section 5.9 Notification of Certain Matters................................................................32
Section 5.10 SEC Filings....................................................................................32
Section 5.11 Takeover Statutes..............................................................................32
Section 5.12 Transaction Litigation.........................................................................32
Section 5.13 Delisting......................................................................................33
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER.........................................................................33
Section 6.1 Stockholder Approval...........................................................................33
Section 6.2 No Order.......................................................................................33
Section 6.3 HSR Act........................................................................................33
Section 6.4 Offer..........................................................................................33
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER...................................................................................34
Section 7.1 Termination....................................................................................34
Section 7.2 Effect of Termination..........................................................................35
Section 7.3 Fees and Expenses..............................................................................35
Section 7.4 Amendment......................................................................................36
Section 7.5 Extension; Waiver..............................................................................37
ARTICLE 8
MISCELLANEOUS....................................................................................................37
Section 8.1 Nonsurvival of Representations and Warranties..................................................37
Section 8.2 Entire Agreement; Assignment...................................................................37
Section 8.3 Validity.......................................................................................37
Section 8.4 Notices........................................................................................37
Section 8.5 Governing Law..................................................................................38
Section 8.6 Construction; Interpretation...................................................................38
Section 8.7 Parties in Interest............................................................................39
Section 8.8 Severability...................................................................................39
Section 8.9 Specific Performance...........................................................................39
Section 8.10 Counterparts...................................................................................39
Section 8.11 Waiver of Jury Trial...........................................................................39
</TABLE>
iv
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July
27, 1999 is made by and among KOFAX IMAGE PRODUCTS, INC., a Delaware corporation
(the "Company"), IMAGING COMPONENTS CORPORATION, a Delaware corporation
("Parent"), and IMAGING ACQUISITION CORPORATION, a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub").
WHEREAS, the Board of Directors of the Company (the "Company Board"),
the Parent and Merger Sub has, in light of and subject to the terms and
conditions set forth herein, (i) determined that each of the Offer (as defined
in the recitals) and the Merger (as defined in Section 2.1) is fair to, and in
the best interests of, their respective shareholders and (ii) approved and
adopted this Agreement and the transactions contemplated hereby and resolved to
recommend acceptance of the Offer and approval and adoption of this Agreement by
their respective shareholders;
WHEREAS, in furtherance thereof, it is proposed that Parent and Merger
Sub shall commence a tender offer (as it may be amended from time to time as
permitted by this Agreement, the "Offer") to acquire all of the outstanding
shares of common stock of the Company, par value $0.001 per share (the "Common
Stock"), at a price equal to $12.75 per share (such amount, or any greater
amount per share paid pursuant to the Offer, being hereinafter referred to as
the "Per Share Amount"), net to the seller in cash, subject to reduction for any
applicable federal back-up withholding or stock transfer taxes payable by such
seller, in accordance with the terms and subject to the conditions provided
herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition to Parent's and Merger Sub's willingness to enter into this
Agreement, Merger Sub and certain holders of Shares (as defined in Section
2.8(a)) have entered into Voting Agreements (as amended, restated or modified
from time to time, collectively, the "Voting Agreements") in the form attached
as Exhibit A.
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, Parent
and Merger Sub hereby agree as follows:
<PAGE> 6
ARTICLE 1
THE OFFER
SECTION 1.1 THE OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 7.1 and none of the events or conditions
set forth in Annex A (the "Offer Conditions", and each an "Offer Condition")
shall have occurred and be existing, as promptly as practicable after, but in no
event later than five (5) Business Days after, the public announcement of the
execution of this Agreement by the parties hereto, Parent shall cause Merger Sub
to, and Merger Sub shall, commence (within the meaning of the Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act")) the Offer for all the
outstanding Shares (as defined in Section 2.8) at the Per Share Amount. The
obligation of Merger Sub to accept for payment, purchase and pay for Shares
tendered pursuant to the Offer shall be subject only to the Offer Conditions and
to the further condition that a number of Shares which, together with Shares
then owned directly or indirectly by Parent and Merger Sub, would, at the
minimum, be more than fifty percent (50%) of the Common Stock then outstanding
on a fully diluted basis (which, for purposes of this Agreement, assumes the
full exercise and/or conversion of all options, warrants or other securities
exchangeable for or convertible into Common Stock) shall have been validly
tendered and not withdrawn prior to the expiration date of the Offer (the
"Minimum Condition"). Parent and Merger Sub expressly reserve the right to
increase the price per Share payable in the Offer or to make any other changes
in the terms and conditions of the Offer; provided, that unless previously
approved by the Company in writing, no change may be made that (i) decreases the
Per Share Amount payable in the Offer, (ii) changes the form of consideration to
be paid in the Offer, (iii) reduces the maximum number of Shares to be purchased
in the Offer, (iv) imposes conditions to the Offer in addition to the Offer
Conditions, (v) amends any other term of the Offer (including the Offer
Conditions) in a manner adverse to the holders of the Common Stock, (vi) extends
the Offer except as provided in Section 1.1(b) (provided that the Offer may not,
without the Company's consent, be extended beyond 60 days after the commencement
of the Offer), or (vii) amends, or waives the satisfaction of, the Minimum
Condition. It is agreed that the Offer Conditions are for the sole benefit of
Parent and Merger Sub and may be asserted by Merger Sub or Parent regardless of
the circumstances giving rise to any such condition (other than any action or
inaction by Merger Sub or Parent which constitutes a breach of this Agreement)
or may be waived by Merger Sub or Parent (other than the Minimum Condition) in
whole or in part at any time and from time to time, in their respective sole
discretion. The failure by Merger Sub or Parent 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 Company agrees that no Shares held by the Company or
any of its subsidiaries will be tendered in the Offer. "Business Day" means each
Monday, Tuesday, Wednesday, Thursday, or Friday that banks located in New York,
New York are not required or permitted by law to be closed.
(b) So long as this Agreement has not been terminated in
accordance with the terms hereof, and subject to the terms and conditions
hereof, the Offer shall expire at midnight, Pacific Time, on the date that is
twenty (20) Business Days after the Offer is commenced; provided,
2
<PAGE> 7
that (subject to the proviso in clause (vi) of Section 1.1(a)) without the
consent of the Company or the Company Board, Merger Sub may (i) extend the
Offer, if at the scheduled expiration date of the Offer any of the Offer
Conditions shall not have been satisfied or waived, until such time as such
conditions are satisfied or waived, (ii) extend the Offer for any period
required for any rule, regulation, interpretation or position of the Securities
and Exchange Commission ("SEC") or the staff thereof applicable to the Offer,
(iii) extend the Offer for any reason on one or more occasions for an aggregate
period of not more than ten (10) Business Days beyond the latest expiration date
that would otherwise be permitted under clause (i) or (ii) of this sentence if
on such expiration date the Minimum Condition has been satisfied but the number
of Shares validly tendered, together with Shares then owned directly or
indirectly by Merger Sub, constitute at least seventy-five percent (75%) but
less than ninety percent (90%) of all outstanding Shares, or (iv) extend the
Offer for any reason on one or more occasions for an aggregate period of not
more than 10 Business Days beyond the initial expiration date or the latest
expiration date that would otherwise be permitted under clauses (i), (ii) or
(iii) of this sentence. Subject to the terms and conditions of the Offer and
this Agreement, Merger Sub shall and Parent shall cause Merger Sub to, accept
for payment, and pay for, all Shares validly tendered and not withdrawn pursuant
to the Offer that Merger Sub becomes obligated to accept for payment and pay for
pursuant to the Offer as promptly as practicable after the expiration of the
Offer.
(c) On the date of the commencement of the Offer, Parent and
Merger Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-l
with respect to the Offer which will reflect the existence of this Agreement
(together with any supplements or amendments thereto and any other related
documents, including an offer to purchase and a related letter of transmittal
and summary advertisement and, if required, a Rule 13e-3 Transaction Statement
on Schedule 13E-3 (collectively the "Offer Documents") and shall mail the Offer
Documents to the Company's stockholders. The Offer Documents will comply in all
material respects with the provisions of applicable federal securities laws. The
Offer Documents shall not, on the date filed with the SEC and on the date first
published or sent or given to the Company's shareholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Merger Sub and the Company each agrees to correct promptly
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 each of Parent and Merger Sub 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 holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Company and its counsel shall be given a
reasonable opportunity to review and comment on the Offer Documents and all
amendments and supplements thereto, in each case prior to their filing with the
SEC or dissemination to stockholders of the Company, and the Parent and Merger
Sub shall consider such comments in good faith. Parent and Merger Sub shall
provide the Company and its counsel with any comments Parent, Merger Sub or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments, including a copy of any
such comments that are made in writing.
3
<PAGE> 8
(d) The parties understand and agree that the Per Share Amount
has been calculated based upon the accuracy of the representation and warranty
set forth in Section 3.2(a) and that, in the event the number of outstanding
Shares, capital stock or capital stock equivalents of the Company issuable upon
the exercise of, or subject to, options or other agreements exceeds the amounts
specifically set forth in Section 3.2(a) by more than 20,000 Shares (including
without limitation as a result of any stock split, reverse stock split, stock
dividend, including any dividend or distribution of securities convertible into
capital stock or capital stock equivalent of the Company, recapitalization, or
other like change occurring after the date of this Agreement, but excluding any
Shares issued pursuant to the 1997 Stock Plan (as defined in Section 2.11(d)) in
accordance with, and subject to, Section 2.11(d)), the Per Share Amount shall be
appropriately adjusted downward. The provisions of this Section 1.1(d) shall
not, however, affect the representation set forth in Section 3.2(a).
SECTION 1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer
and represents and warrants that the Company Board, at a meeting duly called and
held, has, subject to the terms and conditions set forth herein, unanimously,
(i) determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are fair to, and in the best interests of,
the shareholders of the Company, (ii) approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, in all
respects and that such approval constitutes approval of the Offer, this
Agreement and the Merger for purposes of Section 251 of the Delaware General
Corporation Law (the "DGCL"), and similar provisions of any other similar state
statutes that might be deemed applicable to the transactions contemplated
hereby, and (iii) resolved to recommend that the shareholders of the Company
accept the Offer, tender their Shares thereunder to Merger Sub and approve and
adopt this Agreement and the Merger. The Company consents to the inclusion of
such recommendation and approval in the Offer Documents; provided, that such
recommendation may be withdrawn, modified or amended in accordance with the
provisions of Section 5.2. The Company further represents and warrants that C.E.
Unterberg, Towbin (the "Financial Advisor") has delivered to the Company Board
its written opinion that the cash consideration to be received by the
shareholders of the Company pursuant to the Offer and the Merger is fair to such
shareholders from a financial point of view. The Company has been authorized by
the Financial Advisor to permit, subject to the prior review and consent by the
Financial Advisor (such consent not to be unreasonably withheld), the inclusion
of the fairness opinion (or a reference thereto) in the Schedule 14D-9 (as
defined in Section 1.2(b)) and, if required, the Schedule 13E-3.
(b) Contemporaneously with the commencement of the Offer as
provided in Section 1.1, the Company hereby agrees to file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pertaining to the Offer
(together with any amendments or supplements thereto, the "Schedule 14D-9")
containing the recommendation described in Section 1.2(a) and to promptly mail
the Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 will
comply 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,
4
<PAGE> 9
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Company with
respect to information supplied by Parent or Merger Sub in writing for inclusion
in the Offer Documents or the Schedule 14D-9. The Company, Parent and Merger Sub
each agrees to correct promptly any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect, 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 disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Merger Sub and its counsel shall
be given a reasonable opportunity to review and comment on the Schedule 14D-9
before it is filed with the SEC, and the Company shall consider such comments in
good faith.
(c) In connection with the Offer, the Company will cause its
transfer agent to promptly furnish to Parent and Merger Sub mailing labels,
security position listings and any available listing or computer files
containing the names and addresses of the record holders of Shares as of a
recent date and shall furnish Merger Sub with such additional information and
assistance (including, without limitation, updated lists of shareholders,
mailing labels and lists of securities positions) as Merger Sub or its agents
may reasonably request in communicating the Offer to the record and beneficial
holders of Shares. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent, Merger Sub and their
affiliates, associates, agents and advisors shall hold in confidence the
information contained in any such labels, listings and files and use such
information only in connection with the Offer and the Merger, and, if this
Agreement shall be terminated, will deliver all copies of such information then
in their possession and control.
SECTION 1.3 COMPANY BOARD AND COMMITTEES; SECTION 14(F) OF THE
EXCHANGE ACT.
(a) Promptly upon the payment by Merger Sub for Shares
pursuant to the Offer and from time to time thereafter, Merger Sub shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as will give Merger Sub representation on the
Company Board equal to the product of the number of directors on the Board
(giving effect to any increase in the number of directors pursuant to this
Section 1.3) and the percentage that such number of Shares so purchased bears to
the total number of outstanding Shares on a fully diluted basis, and the Company
shall use its reasonable best efforts to, upon request by Merger Sub, promptly,
at the Company's election, either increase the size of the Board or secure the
resignation of such number of directors as is necessary to enable Merger Sub's
designees to be elected to the Company Board and to cause Merger Sub's designees
to be so elected.
(b) The Company's obligation to appoint designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly take all action
required pursuant to such Section and Rule in order to fulfill its obligations
under this Section 1.3 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
such Section and Rule in
5
<PAGE> 10
order to fulfill its obligations under this Section 1.3 (provided that Parent
and Merger Sub shall have provided to the Company on a timely basis all such
information with respect to Merger Sub's designees).
(c) Following the election of Merger Sub's designees pursuant
to this Section and until the Effective Time, any amendment of this Agreement or
the Certificate of Incorporation or Bylaws of the Company, any termination of
this Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of parent of Merger Sub, any
waiver of any of the Company's rights hereunder, or any transaction between
Parent (or any affiliate or associate thereof) and the Company shall require the
concurrence of a majority of the Company's directors (or the concurrence of the
sole remaining director, if there is only one remaining) then in office who are
directors of the Company on the date hereof, or are directors designated by such
persons or person (the "Continuing Directors"). The Continuing Directors shall
have the authority to retain such counsel and other advisors at the expense of
the Company as are reasonably appropriate to assist them in the exercise of
their duties in connection with this Agreement. In addition, the Continuing
Directors shall have the authority to institute any action on behalf of the
Company to enforce performance of this Agreement.
ARTICLE 2
THE MERGER
SECTION 2.1 MERGER. At the Effective Time (as defined below) and upon
the terms and subject to the conditions of this Agreement and in accordance with
the DGCL, Merger Sub shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation"), and the separate corporate existence
of Merger Sub shall cease.
SECTION 2.2 EFFECTIVE TIME. Subject to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 2.3) or as
soon thereafter as is practicable, the parties shall cause an agreement or
certificate of merger to be executed and filed with the Secretary of State of
the State of Delaware, in such form as required by, and in accordance with
applicable provisions of, the DGCL (including, if possible, the procedures
permitted by Section 253 thereof), at which time the Merger shall become
effective (the time the Merger becomes effective being referred to herein as the
"Effective Time").
SECTION 2.3 CLOSING OF THE MERGER. The closing of the Merger (the
"Closing") shall take place at a time and on a date to be specified by the
parties, which shall be no later than the second Business Day after satisfaction
(or waiver) of the latest to occur of the conditions precedent set forth in
Article 6 (the "Closing Date"), at the offices of Kirkland & Ellis, 153 East
53rd Street, New York, New York 10022, unless another time, date or place is
agreed to in writing by the parties.
SECTION 2.4 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 259 of the DGCL.
6
<PAGE> 11
SECTION 2.5 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of the Company in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The Bylaws of Merger Sub in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 2.6 DIRECTORS. The directors of Merger Sub at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
SECTION 2.7 OFFICERS. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
SECTION 2.8 CONVERSION OF SHARES.
(a) At the Effective Time, each share of Common Stock issued
and outstanding immediately prior to the Effective Time (individually a "Share"
and, collectively, the "Shares"), other than (i) Shares held by the Company or
any subsidiary of the Company, (ii) Shares held by Parent, Merger Sub, any other
subsidiary of Parent or Merger Sub, if any, (iii) the Shares held by persons and
entities as set forth on Schedule 2.8 hereto (collectively, the "Retained
Shares"), and (iv) Dissenting Shares (as defined in Section 2.9(a)), (the Shares
of subsection (i) through (iv), collectively the "Excluded Shares"), shall, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holder thereof, be canceled and extinguished and be converted
into and shall become the right to receive a cash payment per Share, without
interest, equal to the Per Share Amount (the "Merger Consideration") in
accordance with the terms hereof. From and after the Effective Time, the holders
of certificates evidencing ownership of Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided for herein or by applicable law.
(b) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, each issued and outstanding share
of the common stock, par value $0.001 per share, of Merger Sub shall be
converted into one share of common stock, par value $0.001 per share, of the
Surviving Corporation.
(c) At the Effective Time, each Share held by the Company as
treasury stock or held by Parent, Merger Sub or any subsidiary of Parent, Merger
Sub or the Company immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holder thereof, be canceled, retired and cease to exist, and no
consideration shall be delivered with respect thereto.
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(d) Each Retained Share issued and outstanding immediately
prior to the Effective Time shall be exchanged for (as provided in and subject
to the limitations set forth in this Article 2) and become (i) a number of fully
paid and nonassessable shares of Class B Common Stock, par value $0.001 per
share, of the Parent ("Parent Class B Common") equal to (x) 20% of the Per Share
Amount divided by (y) $10.00 and (ii) a number of fully paid and non-assessable
shares of Class A Common Stock par value $0.001 per share, of the Parent
("Parent Class A Common") equal to (x) 80% of the Per Share Amount divided by
(y) $10.00, upon the surrender of the certificate previously representing such
shares of Retained Shares.
SECTION 2.9 SHARES OF DISSENTING HOLDERS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any holder of Shares with respect to which appraisal rights, if any,
are granted by reason of the Merger under the DGCL and who does not vote in
favor of or consents in writing to the Merger and who otherwise complies with
the provisions of Section 262 of the DGCL ("Dissenting Shares") shall not be
entitled to receive any Merger Consideration pursuant to Section 2.8(a), unless
such holder fails to perfect, effectively withdraws or loses his or her
appraisal right under the provisions of Section 262 of the DGCL. If any such
holder so fails to perfect, effectively withdraws or loses his or her appraisal
rights under the DGCL, each Dissenting Share of such holder shall thereupon be
deemed to have been converted, as of the Effective Time, into the right to
receive the Per Share Amount pursuant to Section 2.8(a).
(b) Any payments relating to Dissenting Shares shall be made
solely by the Surviving Corporation, and no funds or other property have been or
will be provided by Merger Sub, Parent or any of Parent's other direct or
indirect subsidiaries for such payment, nor shall the Company make any payment
with respect to, or settle or offer to settle, any such demands.
(c) The Company shall give Merger Sub prompt notice of any
demands received by the Company for the payment of fair value for shares, and
Merger Sub shall have the right to direct all negotiations and proceedings with
respect to such demands.
SECTION 2.10 EXCHANGE OF CERTIFICATES.
(a) IBJ Whitehall Bank & Trust Company or another bank or
trust company designated by Parent and reasonably acceptable to the Company
shall act as the exchange agent (in such capacity, the "Exchange Agent") for the
benefit of the holders of Shares for the exchange of a certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates") that were converted into the right to receive the Per Share
Amount pursuant to Section 2.8(a), all in accordance with this Article 2. At the
Effective Time, Parent shall deposit, or shall cause to be deposited, with the
Exchange Agent, and shall otherwise take all action necessary to provide the
Exchange Agent on a timely basis, as and when needed after the Effective Time,
funds necessary to provide for the payment for the benefit of the holders of
Shares, cash in U.S. dollars in an amount equal to the Merger Consideration
multiplied by the aggregate outstanding Shares (other than the Excluded Shares)
to be paid pursuant to Section 2.8(a). The Exchange Agent shall, pursuant
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to irrevocable instructions, deliver the Merger Consideration out of the amount
so deposited by Parent to holders of Shares entitled thereto. The amount
deposited by Parent with the Exchange Agent shall not be used for any other
purpose. Any and all amounts earned on such funds paid over to the Surviving
Corporation.
(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of Certificates
formerly representing Shares converted into the right to receive the Merger
Consideration pursuant to Section 2.8(a): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify); and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for a cash payment of the proper
Merger Consideration pursuant to Section 2.8(a). Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent and Merger Sub, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor by check an amount equal to (A) the Per Share Amount,
multiplied by (B) the number of Shares represented by such Certificate, which
such holder has the right to receive pursuant to the provisions of this Article
2, and the Certificate so surrendered shall forthwith be canceled; provided,
that any Certificate (or portion thereof) representing Retained Share shall not
be entitled to such cash amount, but a number of shares of Parent Class A Common
and Parent Class B Common as set forth in Section 2.8(d). No interest shall be
paid or accrued on any Merger Consideration upon the surrender of any
Certificates. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, payment of the proper Merger
Consideration may be paid to a transferee if the Certificate representing such
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer or other taxes required as a result of such payment to a person other
than the registered holder of such shares have been paid. Until surrendered and
exchanged as contemplated by this Section 2.10, each Certificate (other than
Certificates representing Excluded Shares) shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender an
amount equal to (A) the Per Share Amount, multiplied by (B) the number of Shares
represented by such Certificate, as contemplated by this Section 2.10.
(c) In the event that any Certificate shall have been lost,
stolen or destroyed, the Exchange Agent shall pay, upon the making of an
affidavit of that fact by the holder thereof in form and substance reasonably
acceptable to Parent, the proper Merger Consideration as may be required
pursuant to Section 2.8; provided, that Parent may, in its discretion, require
the delivery of a suitable bond and/or indemnity.
(d) The Merger Consideration paid upon the surrender of
Certificates in accordance with the terms hereof shall be deemed to have been
paid in full satisfaction of all rights pertaining to Shares formerly
represented thereby. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to
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the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article 2.
(e) Any portion of the Merger Consideration which remains
undistributed to the shareholders of the Company for six months after the
Effective Time shall be delivered to the Surviving Corporation, upon demand, and
any shareholders of the Company who have not theretofore complied with this
Article 2 shall thereafter look only to the Surviving Corporation for payment of
their claim for any Merger Consideration.
(f) Notwithstanding Section 2.11(e), neither Parent nor the
Company shall be liable to any holder of a Certificate formerly representing
Shares for any Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
SECTION 2.11 STOCK OPTIONS; 1997 STOCK PLAN.
(a) At the Effective Time, each outstanding, vested and
exercisable option to purchase shares of Common Stock (including those options
that will become exercisable upon a change in control of the Company) (a "Stock
Option" or collectively "Stock Options") issued pursuant to the Amended and
Restated Incentive Stock Option, Nonqualified Stock Option and Restricted Stock
Purchase Plan, the 1996 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan, and the 1997 Stock Option Plan for Non-Employee
Directors (collectively the "Company Plans") or issued outside any Company Plan
via special grants by the Company's Stock Option Committee to certain employees
shall be converted into and shall become the right to receive a cash payment per
Stock Option, without interest, determined by multiplying (i) the excess, if
any, of the Per Share Amount over the applicable per share exercise price of
such Stock Option by (ii) the number of shares of Common Stock underlying the
Stock Options immediately prior to the Effective Time. At the Effective Time,
all outstanding options to purchase shares of Common Stock (including those
options that are not exercisable at the time of the Merger) shall be canceled
and be of no further force or effect except for the right to receive cash to the
extent provided in this Section 2.11. Prior to the Effective Time, the Company
shall take all actions (including, if appropriate, amending the terms of any
Company Plan) that are necessary to give effect to the transactions contemplated
by this Section 2.11.
(b) Prior to the Effective Time, Parent and the Company shall
establish a procedure to effect the surrender of Stock Options in exchange for
the cash payment to which the holder of a Stock Option shall be entitled under
Section 2.11(a), and, upon surrender of such Stock Option, Parent shall pay to
the holder thereof in cash the amount, if any, to which such holder shall be
entitled thereunder.
(c) The Parent, Merger Sub and the Company hereby acknowledge
and agree that the Surviving Corporation shall not assume or continue any Stock
Options, or substitute any additional options for such Stock Options. On or
before the Effective Time, the Company shall, consistently with the terms of the
Company Plans and other agreements and arrangements
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evidencing Stock Options, or to the extent permissible under applicable law,
accelerate the unvested portion of all outstanding Stock Options, conditioned
upon the consummation of the Merger.
(d) Unless terminated prior to the Effective Time in
accordance with its terms, the Company's 1997 Employee Stock Purchase Plan (the
"1997 Stock Plan") shall be terminated as of the Effective Time. Unless the 1997
Stock Plan is terminated prior to the Effective Time in accordance with its
terms, the Company shall take such actions as are necessary or appropriate to
cause the last day of the then current Offering Period (as such term is used in
the 1997 Stock Plan) to be the last trading day on which the Common Stock of the
Company is traded on the Nasdaq National Market immediately prior to the
Effective Time (the "Final Company Exercise Date"); provided, that such change
shall be conditioned upon the consummation of the Merger. On the Final Company
Exercise Date, and subject to the participants' rights to receive invested cash
as provided in the 1997 Stock Plan, the Company shall apply the funds credited
as of such date under the 1997 Stock Plan within each participant's account to
the purchase of whole shares of Common Stock in accordance with the terms of the
1997 Stock Plan, it being agreed that the number of shares of Common Stock so
purchased shall not exceed the number of shares issuable under the 1997 Stock
Plan, as represented in Section 3.2.
SECTION 2.12 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Merger Sub or the Company or otherwise to carry
out this Agreement, the officers and directors of the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of Merger
Sub or the Company, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of Merger Sub or the Company, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 2.13 WITHHOLDING TAXES. Parent and Merger Sub shall be entitled
to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from
the Merger Consideration payable to a holder of Shares or amounts payable to a
holder to the Stock Options pursuant to the Merger any withholding and stock
transfer Taxes and such amounts as are required under the Internal Revenue Code
of 1986, as amended (the "Code"), or any applicable provision of state, local or
foreign Tax law. To the extent that amounts are so withheld by Parent or Merger
Sub, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares or the Stock Options in respect
of which such deduction and withholding was made by Parent or Merger Sub and
Parent shall provide, or cause the Exchange Agent to provide, to the holders of
such Shares written notice of the amounts so deducted or withheld.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as presently
conducted.
(b) Except as set forth on Section 3.1(b) of the disclosure
schedule delivered by the Company to Parent concurrently herewith (the
"Disclosure Schedule") or as disclosed in filings with the SEC made prior to the
date hereof and since, and including, the filing of the Company's most recent
Annual Report on Form 10-K (the "Recent SEC Reports"), the Company has no equity
interests in any corporations, partnerships, limited liability companies, trusts
or similar business entities. The Company has no significant subsidiaries, as
that term is defined in Rule 1-02(w) of Regulation S-X.
(c) The Company is duly qualified or licensed to do business
and in good standing in each jurisdiction in which the property owned, leased or
operated by it, or the nature of the business conducted by it, makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not have,
individually or in the aggregate, a Company Material Adverse Effect. The term
"Company Material Adverse Effect" means any change, effect, event, occurrence,
condition or development that is or is reasonably likely to be materially
adverse to (i) the assets, liabilities, properties, results of operations, or
conditions (financial or otherwise) of the Company and its subsidiaries, taken
as a whole, or (ii) the ability of the Company to perform its obligations under
this Agreement.
(d) The Company has heretofore delivered to Merger Sub or
Parent accurate and complete copies of the Certificate of Incorporation and
Bylaws, each as amended to date and currently in effect, of the Company and each
of its subsidiaries.
SECTION 3.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of
(i) 40,000,000 shares of Common Stock, of which, as of the date hereof,
5,243,956 shares were issued and outstanding (excluding shares held as treasury
shares), and 194,884 shares of Common Stock are held as treasury shares and (ii)
5,000,000 shares of preferred stock, no shares of which are issued or
outstanding. All of the Shares have been validly issued, and are fully paid,
nonassessable and free of preemptive rights. As of the date hereof, (i) 580,555
shares of Common Stock were reserved for issuance and issuable upon, or
otherwise deliverable in connection with, the exercise of outstanding Stock
Options
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and (ii) 34,000 shares of Common Stock are issuable under the 1997 Stock Plan
pursuant to Section 2.11(d). Section 3.2(a) of the Disclosure Schedule sets
forth the outstanding Stock Options. Except as set forth above, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or its subsidiaries convertible into
or exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options or other rights to acquire from the Company or its
subsidiaries, and no obligations of the Company or its subsidiaries to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (e.g., phantom stock or stock appreciation
rights). Except for the Voting Agreements and agreements issued under the
Company Plans, there are no stockholder, voting, repurchase or similar
agreements or understandings to which the Company is a party or otherwise bound
relating to the transfer, voting or repurchase of any shares of capital stock of
the Company.
(b) Except as set forth on Schedule 3.2(b) of the Disclosure
Schedule, or as publicly disclosed by the Company, all of the issued and
outstanding shares of capital stock of each subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and are owned
by the Company, directly or indirectly, free and clear of any Lien (as
hereinafter defined) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). There are no securities of the Company or its subsidiaries
issued and outstanding that are convertible into or exchangeable for, no options
or other rights to acquire from the Company or its subsidiaries, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly, of any capital stock
or other ownership interests in, or any other securities of, any subsidiary.
There are no outstanding contractual obligations of the Company or its
subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares
of capital stock or other ownership interests in any subsidiary. For purposes of
this Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, claim, security
interest or encumbrance of any kind in respect of such asset.
(c) The affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve the Merger.
SECTION 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT; CONSENTS AND
APPROVALS.
(a) 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
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Company Board, and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the then outstanding Shares). This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid, legal and binding
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agreement of the Company, enforceable against the Company in accordance with its
terms, except (i) to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally and (ii) that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding thereof may be brought.
(b) The Company Board has duly and validly approved, and taken
all corporate actions required to be taken by the Company Board for the
consummation of, the transactions, including the Offer and the Merger,
contemplated hereby and resolved to recommend that the shareholders of the
Company approve and adopt this Agreement subject to Section 5.2.
SECTION 3.4 SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Company has filed all required forms, reports and
documents with the SEC since October 10, 1997 (the "SEC Reports"), each of which
has complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act,
each as in effect on the dates such forms, reports and documents were filed. The
Company has delivered to Merger Sub or Parent, in the form filed with the SEC
(including any amendments thereto), (i) its Annual Report on Form 10-K for the
fiscal year ended June 30, 1998, (ii) all definitive proxy statements relating
to the Company's meetings of shareholders (whether annual or special) held since
October 10, 1997, (iii) its Quarterly Reports on Form 10-Q for the quarters
ended September 30, 1998, December 31, 1998 and March 31, 1999, and (iv) all
other reports or registration statements filed by the Company with the SEC since
October 10, 1997. None of such forms, reports, registration statements or
documents, including, without limitation, any financial statements or schedules
included or incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company and its
subsidiaries included in the Annual Report on Form 10-K referred to in the
second sentence of this Section 3.4(a) and the unaudited consolidated interim
financial statements of the Company and its subsidiaries included in the
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1999 (A)
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (B) have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered thereby, except as may be indicated in the notes thereto and
except, in the case of unaudited statements, as may be permitted under the
Exchange Act, and (C) fairly present the consolidated financial position of the
Company and its subsidiaries as of the dates thereof and their consolidated
results of operations, financial condition, cash flow and changes in financial
position for the periods then ended (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments).
(b) The Company has heretofore made available to Merger Sub or
Parent a complete and correct copy of any amendments or modifications, which
have not yet been filed with
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the SEC, to agreements, documents or other instruments which previously had been
filed by the Company with the SEC pursuant to the Exchange Act.
SECTION 3.5 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
Offer Documents, the Proxy Statement or provided by the Company in the Schedule
14D-9 will, at the respective times that the Offer Documents, the Proxy
Statement, and the Schedule 14D-9 or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
SECTION 3.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming the truth
and accuracy of the representations and warranties of Parent and Merger Sub in
Section 4.4, except for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the Hart- Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the filing
and recordation of the Certificate of Merger with the Secretary of State of the
State of Delaware as required by the DGCL, no filing with or notice to, and no
permit, authorization, consent or approval of, or order of, any court or
tribunal or administrative, governmental or regulatory body, agency or authority
(a "Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Company Material Effect. Neither the execution, delivery
and performance of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (a) conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws (or
similar governing documents) of the Company or any of its subsidiaries, (b)
except as set forth on Schedule 3.6 of the Disclosure Schedule, result in a
violation or breach of, or cause acceleration, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under any of the terms,
conditions or provisions of any Material Contracts (as defined in Section
3.7(a)), or (c) violate any order, writ, injunction, decree, law, statute, rule
or regulation of any court, or any Governmental Entity having jurisdiction over
the Company or any of its subsidiaries or any of their respective properties or
assets, except in the case of (b) or (c) for violations, breaches or defaults
which would not have, individually or in the aggregate, a Company Material
Adverse Effect.
SECTION 3.7 MATERIAL CONTRACTS.
(a) Except as set forth in the SEC Reports filed prior to the
date of this Agreement or Section 3.7 of the Disclosure Schedule, neither the
Company nor any of the subsidiaries is a party to or bound by any (i) "material
contract" (as such term is defined in Item 601(b)(10) of Regulations S-K
promulgated by the SEC), (ii) non-competition agreement or any other agreement
or obligation which purports to limit in any material respect the manner in
which, or the localities in which, all
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or any material portion of the business of the Company and the subsidiaries,
taken as a whole, may be conducted, (iii) transaction, agreement, arrangement or
understanding with any affiliate of the Company or such subsidiary that would be
required to be disclosed under Item 404 of Regulation S-K promulgated by the
SEC, (iv) material acquisition, merger, asset purchase or sale agreement, (v)
agreement which provides for, or relates to, the incurrence by the Company or
any subsidiary of indebtedness for borrowed money in excess of $100,000
(including any interest rate or foreign currency swap, cap, collar, hedge or
insurance agreements, or options or forwards on such agreements, or other
similar agreements for the purpose of managing the interest rate or foreign
exchange risk associated with its financing), (vi) agreement with any executive
officer of the Company or any of the subsidiaries the benefits of which are
contingent or vest, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or any of the subsidiaries of
the nature contemplated by this Agreement, (vii) agreement with respect to any
executive officer of the Company or any of the subsidiaries providing any term
of employment or compensation guarantee, or (viii) contract or other agreement
which would prohibit or materially delay the consummation of the Merger or any
of the transactions contemplated by this Agreement (all contracts of the type
described in clauses (i) through (viii) being referred to herein as "Material
Contracts"). Each Material Contract is valid and binding on the Company (or, to
the extent a subsidiary of the Company is a party, such subsidiary) and is in
full force and effect, and the Company and each subsidiary have performed in all
material respects all material obligations required to be performed by them
under each Material Contract.
(b) Except as set forth on Schedule 3.7 of the Disclosure
Schedule or as disclosed in the Recent SEC Reports, none of the Company or its
subsidiaries is in default, in conflict with or violation (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation), in any material respect, of any term, condition or
provision of (i) its Certificate of Incorporation or Bylaws (or similar
governing documents), or (ii) any Material Contract, except in the case of (ii)
for violations, breaches or defaults that would not have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.8 NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES.
(a) Except (i) as set forth on Schedule 3.8 of the Disclosure
Schedule or as disclosed in the Recent SEC Reports, or (ii) liabilities incurred
in the ordinary course of business, none of the Company or its subsidiaries has
any material liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of the Company and its subsidiaries (including the
notes thereto).
(b) Except as set forth on Schedules 3.8 and 5.1 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, since March 31,
1999, the Company and its subsidiaries have conducted their business in the
ordinary course consistent with past practice and there has not been any event,
occurrence or development or state of circumstances or facts as described in
Sections 5.1(a) through 5.1(m).
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SECTION 3.9 LITIGATION. Except as disclosed in the Recent SEC Reports,
there is no suit, litigation, arbitration, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties,
assets or business before any Governmental Entity which would have, individually
or in the aggregate, a Company Material Adverse Effect or would prevent or
substantially delay the consummation of the transactions contemplated by this
Agreement. Except as disclosed in the Recent SEC Reports, none of the Company or
its subsidiaries is subject to any outstanding order, writ, injunction or decree
that would have, individually or in the aggregate, a Company Material Adverse
Effect or would prevent or delay the consummation of the transactions
contemplated hereby.
SECTION 3.10 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in the
Recent SEC Reports, the Company and its subsidiaries hold all permits, licenses,
consents, authorizations, certificates, variances, exemptions, orders and
approvals of and from all, and has made all declarations and filings with,
Governmental Entities necessary for the lawful conduct of their respective
businesses, as presently conducted, and to own, lease, license and use its
respective properties and assets (the "Company Permits"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals which
would not have, individually or in the aggregate, a Company Material Adverse
Effect. The Company and its subsidiaries are in compliance with the terms of the
Company Permits, except where the failure so to comply would not have a Company
Material Adverse Effect. Except as disclosed in the Recent SEC Reports, the
activities or businesses of the Company and its subsidiaries are not being
conducted in violation of or in conflict with, in any material respect, any law,
rule, order, judgment, decree, ordinance or regulation of the United States, any
state, county or locality, or of any Governmental Entity of the United States,
except where the violation or conflict would not result in a Company Material
Adverse Effect. Except as disclosed in the Recent SEC Reports, no investigation
or review by any Governmental Entity of the United States, any country, any
state, county or locality or of any foreign jurisdiction with respect to the
Company or its subsidiaries is pending or, to the knowledge of the Company and
any subsidiary, threatened, nor, to the knowledge of the Company and any
subsidiary, has any Governmental Entity of the United States, any country, any
state, county or locality or of any foreign jurisdiction indicated an intention
to conduct the same, other than, in each case, those which could not have a
Company Material Adverse Effect.
SECTION 3.11 EMPLOYEE PLANS. Except as set forth on Schedule 3.11 of
the Disclosure Schedule or as disclosed in the Recent SEC Reports, there are no
employee benefit plans (including without limitation, retirement, savings,
thrift, deferred compensation, severance, stock ownership, stock purchase, stock
option, performance, bonus, incentive, vacation or holiday pay, travel, fringe
benefit, hospitalization or other medical, disability, life or other insurance,
and any other employee benefit policy, trust, understanding or arrangement of
any kind) maintained or contributed to by the Company or its subsidiaries or
with respect to which the Company or its subsidiaries has any actual or
potential liability (the "Employee Plans") except for liability that would not
have, individually or in the aggregate, a Company Material Adverse Effect. The
Employee Plans are in compliance with applicable law, including without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code, except for instances of non-compliance that would not
have,
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individually or in the aggregate, a Company Material Adverse Effect. None of the
Employee Plans are subject to Title IV of ERISA nor provide for medical or life
insurance benefits to retired or former employees of the Company or any
subsidiary (other than as required under Code Section 4980B, or similar state
law). None of the Employee Plans have any material unfunded liabilities. Except
as set forth on Schedule 3.11 of the Disclosure Schedule or as disclosed in the
Recent SEC Reports, none of the Employee Plans obligates the Company to pay any
separation, severance, termination, bonus or similar benefit solely as a result
of any transaction contemplated by this Agreement or solely as a result of a
change in control or ownership of the Company. There are no pending or, to the
knowledge of the Company, threatened actions, suits, investigations or claims
with respect to any Employee Plan, and the Company has no knowledge of any facts
that could result in any actions, suits, investigations or claims that could
reasonably be expected to result in a Company Material Effect.
SECTION 3.12 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) Except as set forth on Schedule 3.12 of the Disclosure
Schedule or as disclosed in the Recent SEC Reports, (i) each of the Company and
its subsidiaries is in compliance with all applicable Environmental Laws (as
defined in Section 3.12(g)), except for non-compliance that would not have a
Company Material Adverse Effect, which compliance includes, but is not limited
to, the possession by the Company and its subsidiaries of all material permits
and other governmental authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof, (ii) since March 31,
1999, none of the Company or its subsidiaries has received written notice of,
or, to the best knowledge of the Company, is the subject of, any material
action, cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim"), and (iii) to the knowledge of the Company, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance, or give rise to material Environmental Claims, in the
future.
(b) Except as disclosed in the Recent SEC Reports, there are
no Environmental Claims which would have a Company Material Adverse Effect that
are pending or, to the knowledge of the Company, threatened against the Company
or its subsidiaries or, to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) (i) No site or facility now owned, operated or leased by
the Company or any of its subsidiaries or, to the knowledge of the Company,
previously owned, operated or leased, is listed or, to the knowledge of the
Company proposed for listing on the national priorities List or CERCLIS,
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and liability Act of 1980, as amended ("CERCLA"), and the rules and regulations
thereunder or on any similar state or local list of sites requiring
investigation or remediation.
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(ii) Neither the Company nor any of its subsidiaries
has received any written notice of any actual or alleged violation or
any Environmental law with respect to any of its facilities, except a
violation or violations that, individually, or in the aggregate, could
not reasonably be expected to have a Company Material Adverse Effect.
(iii) The Company and its subsidiaries are not
subject to any material outstanding agreements or orders with any
Governmental or Regulatory Authority or other person respecting (A)
Environmental Laws, (B) Remedial Action or (C) any Release of a
Hazardous Material.
(iv) Neither the Company nor any of its subsidiaries
has received any written notice or request for information pertaining
to a response action (as defined by CERCLA), with respect to any of its
sites or facilities now or previously owned, operated or leased by
them, except for notices or requests that individually or in the
aggregate could not reasonably be expected to have a Company Material
Adverse Effect.
(v) To the knowledge of the Company, no Hazardous
Material is present (except in quantities for retail sale to consumers,
for store maintenance or as otherwise permitted under any Environmental
Law (as defined below)) or has been Released (as defined below) at, on
or about, any of the Company or its subsidiaries' sites or facilities,
now owned, operated or leased by them, except in compliance with
Environmental Law, and except for the presence of Hazardous Material or
such Release(s) which individually or in the aggregate could not
reasonably be expected to have a Company Material Adverse Effect.
(d) No liens have arisen under or pursuant to any
Environmental Law on any site or facility currently owned, operated or leased by
the Company or any of its subsidiaries, other than Liens that individually or in
the aggregate could not reasonably be expected to have a Company Material
Adverse Effect.
(e) There have been no material environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, or which are in
the possession of, the Company or any of its subsidiaries in relation to any
site or facility owned, operated or leased by the Company or any of its
subsidiaries, except for those the reports of which have been made available to
Parent prior to the execution of this Agreement.
(f) No sites or facilities, now or previously owned, operated
or leased by the Company or any of its subsidiaries, have or had at the time of
ownership, operation, or leasing, to the knowledge of the Company, any (i)
underground storage tanks, (ii) friable asbestos, (iii) polychlorinated
byphenyls ("PCBs"), or (iv) chlorofluorocarbons ("CFCs"), except in
circumstances which could not reasonably be expected to have individually or in
the aggregate a Company Material Adverse Effect or adversely affect the ability
of the Company to perform its obligations hereunder or to consummate the Merger.
(g) As used herein:
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(i) "Environmental Law" means any Law or order relating to the
environment or to emissions, discharges or Releases of pollutants, contaminants,
or chemicals, or industrial, toxic or hazardous substances or wastes, into the
environment (including structures, ambient air, soil, surface water, ground
water, wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
(ii) "Hazardous Material" means (A) any chemicals or other
materials or substances that are defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"pollutants," "contaminants," or words of similar import under any Environmental
Law, including petroleum, friable asbestos, PCBs, and CFCs, and (B) any other
chemical, material or substance, the presence of or exposure to which is
prohibited, limited or regulated by any Governmental or Regulatory Authority
under any Environmental Law.
(iii) "Release" means any actual or threatened (as defined
under CERCLA) release, spill, effluent, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
environment or any structure.
(iv) "Remedial Action" means all actions, including any
capital expenditures, required by a Governmental or Regulatory Authority,
required under any Environmental Law or voluntarily undertaken to (A) clean up,
remediate, remove, treat, or in any other way ameliorate or address any
Hazardous Materials Released into the environment; (B) prevent the Release, or
minimize the further Release of any Hazardous Material so it does not endanger
or threaten to endanger public health or the environment; (C) perform
pre-remedial studies and investigations or post-remedial monitoring and care
relating to a Release; or (D) bring the applicable party into compliance with
any Environmental Law.
SECTION 3.13 INTELLECTUAL PROPERTY; SOFTWARE.
(a) Each of the Company and its subsidiaries owns, or
possesses valid and enforceable third party licenses to use, all existing United
States and foreign patents, trademarks, trade names, service marks, trade dress,
Internet domain names, together with all the goodwill associated therewith,
copyrights, computer software, data, databases and documentation thereof, trade
secrets, know-how and other proprietary information, including any applications
and registrations of any of the foregoing, necessary for the operation of the
business of the Company and its subsidiaries as now conducted (the "Company
Intellectual Property Rights"), except where the failure to own or possess valid
rights to use such Company Intellectual Property Rights would not have a Company
Material Adverse Effect. The patents, registrations and applications for
registration included among the Company Intellectual Property Rights are set
forth on Section 3.13(a) of the Company Disclosure Schedule.
(b) Except as set forth on Schedule 3.13(b) of the Disclosure
Schedule,
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(i) the validity, enforceability and use of the
Company Intellectual Property Rights and the title thereto of the
Company or any subsidiary as the case may be is not being questioned in
any litigation or other proceeding to which the Company or any
subsidiary is a party, nor has any claim of infringement or
misappropriation (including, without limitation, any demand or request
that the Company or any subsidiary license any intellectual property
rights from a third party) been alleged or, to the knowledge of the
Company, threatened against the Company or any subsidiary by any third
party in connection with such third party's intellectual property
rights,
(ii) to the knowledge of the Company and its
subsidiaries, no third party is infringing or misappropriating the
Company Intellectual Property Rights,
(iii) the consummation of the transactions
contemplated hereby will not result in the loss or impairment of any
Company Intellectual Property Rights,
(iv) subject only to customary source code escrow
agreements, the Company and its subsidiaries have ownership and
possession of all source code and use and system documentation for the
material software owned by the Company or any subsidiary, and
(v) all employees and independent contractors who
have participated in the creation or development of any portion of the
Company Intellectual Property Rights have executed an agreement with
the Company and/or a subsidiary assigning all right, title and interest
in such portion of the Company Intellectual Property Rights developed
for the benefit of the Company to the Company or the subsidiary, as the
case may be.
(c) The Company and each of its subsidiaries have conducted an
inventory and assessment of the software, hardware, databases and embedded
control systems (microprocessor controlled, robotic or other device)
(collectively "Systems") used or relied on by the Company and its subsidiaries
in connection with their business or in connection with the use, operation or
enjoyment of, any material tangible or intangible asset or real property of the
Company or its subsidiaries, in order to determine which parts of the Systems
are not Year 2000 Compliant (as defined below) and to estimate the cost of
rendering such Systems Year 2000 Compliant prior to December 31, 1999 or such
earlier date on which the Systems may shut down or may produce incorrect
calculations or otherwise malfunction without becoming totally inoperable. Year
2000 Compliant means that the Systems will operate to accurately process
(including but not limited to calculating, comparing and sequencing) date
information relating to dates before, on, or after January 1, 2000, including
leap- year calculations. To the knowledge of the Company, after due inquiry, and
except as disclosed in the Recent SEC Reports, neither the Company nor any of
its subsidiaries will incur material expenses arising from or relating to the
failure of any of its Systems as a result of the advent of the year 2000, or the
transition from the twentieth century through the year 2000.
SECTION 3.14 CERTAIN BUSINESS PRACTICES. To the knowledge of the
Company, none of the Company, any of its subsidiaries or any directors,
officers, agents or employees of the Company or
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any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
SECTION 3.15 LABOR MATTERS. Neither the Company nor any of its
subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the Company or any of its subsidiaries the subject of
any proceeding asserting that the Company or any of its subsidiaries has
committed an unfair labor practice or seeking to compel it to bargain with any
labor union or labor organization, nor is there pending or, to the knowledge of
the Company, threatened any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company or any of its subsidiaries.
SECTION 3.16 INSURANCE. The Company maintains insurance policies (the
"Insurance Policies") against all risks of a character and in such amounts as
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, and all premiums due thereon have been paid
in full. None of the Insurance Policies will terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. No insurer under any Insurance Policy has
canceled or generally disclaimed liability under any such policy or, to the
Company's knowledge, indicated any intent to do so or not to renew any such
policy.
SECTION 3.17 TAX MATTERS.
(a) The Company and its subsidiaries have accurately prepared
and duly filed with the appropriate domestic federal, state, local and foreign
taxing authorities all tax returns, information returns and reports required to
be filed with respect to the Company and its subsidiaries and have paid in full
or made adequate provision for the payment of (by way of reserves on the balance
sheet or otherwise) all Taxes (as defined below). Neither the Company nor any of
its subsidiaries is delinquent in the payment of any Taxes. As used herein, the
term "Taxes" means all federal, state, local and foreign taxes, including,
without limitation, income, profits, franchise, employment, transfer,
withholding, property, excise, sales and use taxes (including interest and
penalties thereon and additions thereto).
(b) Except as set forth on Section 3.17(b) of the Disclosure
Schedule, no employee responsible for tax matters of the Company or any
subsidiary has knowledge based on personal contact with any agent of any taxing
authority of any claim made by such an authority in a jurisdiction where the
Company or any subsidiary does not file tax returns that the entity so not
filing is or may be subject to taxation by that jurisdiction.
(c) There are no security interests on any of the assets of
the Company or any subsidiary that arose in connection with any failure (or
alleged failure) to pay any Tax.
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(d) There is no dispute or claim concerning any Tax liability
of the Company or any subsidiary either (i) claimed or raised by any authority
in writing or (ii) as to which any of the employees responsible for Tax matters
of the Company or any subsidiary has knowledge based upon personal contact with
any agent of such authority. Schedule 3.17(d) sets forth those tax returns that
currently are the subject of audit.
(e) None of the Company or any subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(f) None of the Company nor any subsidiary has filed a consent
under Code Section 341(f) concerning collapsible corporations. Except as set
forth on Section 3.17(f) of the Disclosure Schedule, none of the Company nor any
subsidiary has made any payments, is obligated to make payments, or is a party
to any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G or Code
Section 162(m). None of the Company nor any subsidiary has been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii).
(g) None of the Company nor any subsidiary has any liability
for the Taxes of any person other than the Company or any subsidiary (i) under
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law), or (ii) by contract, except pursuant to contracts for the lease,
purchase or sale of goods or services in the ordinary course of business
consistent with commercial practices.
(h) None of the Company nor any subsidiary owns an interest in
an entity either treated as a partnership or whose separate existence is ignored
for federal income tax purposes.
SECTION 3.18 BROKERS. No broker, finder or investment banker (other
than the Financial Advisor pursuant to an arrangement (that may not be amended
or modified without the prior written consent of Parent) that has been disclosed
to Parent and Merger Sub prior to the date hereof) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
the Company or any subsidiary.
SECTION 3.19 REAL ESTATE.
(a) Attached as Schedule 3.19(a) is the address and legal
description of each parcel of real property owned by the Company or any
subsidiary (the "Owned Real Property"). Except as described on such Schedule,
the Company or its applicable subsidiary has good and marketable title in and to
all of the Owned Real Property subject to no Liens or other defects in title,
except for such Liens, if any, as are reflected in the Company's financial
statements included in the Recent SEC Reports or such other Liens as do not
detract in any material respect from the value or marketability of the property
subject thereto and do not materially interfere with the use of such property.
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(b) Attached as Schedule 3.19(b) is a list of all material
leases, subleases and other occupancy agreements, including all amendments,
extensions and other modifications (the "Leases") for real property (the "Leased
Real Property", collectively with the Owned Real Property, the "Real Property")
to which the Company or any subsidiary is a party. The Company or its applicable
subsidiary has a good and valid leasehold interest in and to all of the Leased
Real Property, subject to no Liens except as described in such Schedule, except
for such Liens, if any, as are reflected in the Company's financial statements
included in the Recent SEC Reports or such other Liens as do not detract in any
material respect from the value or marketability of the property subject thereto
and do not materially interfere with the use of such property. Each Lease is in
full force and effect and is enforceable in accordance with its terms in all
material respects. Except as disclosed on Schedule 3.19(b), to the knowledge of
the Company, there exists no default or condition which, with the giving of
notice, the passage of time or both, could become a material default under any
Lease. The Company has previously delivered to Parent true, complete, and
correct copies of all the Leases.
(c) The Real Property constitutes all of the material real
property owned, leased, occupied or otherwise used in connection with the
business of the Company and its subsidiaries. The Real Property and all plants,
buildings and improvements located thereon conform to all applicable building,
zoning and other laws, ordinances, rules and regulations except for violations
which would not have a Company Material Adverse Effect. All permits, licenses
and other approvals necessary to the current occupancy and use of the Real
Property have been obtained, are in full force and effect and have not been
violated, except for violations that, individually or in the aggregate, would
not have a Company Material Adverse Effect. There exists no violation by the
Company or any subsidiary of any covenant, condition, restriction, easement,
agreement or order affecting any portion of the Real Property (except for
violations that, individually or in the aggregate, would not have a Company
Material Adverse Effect). There is no pending or, to the knowledge of the
Company and its subsidiaries, any threatened condemnations proceeding affecting
any portion of the Real Property. Except as disclosed on Schedule 3.19(c), there
are no outstanding options or rights of first refusal with respect to the
purchase or use of any or the Owned Property, any portion thereof or interest
therein. Except as disclosed on Schedule 3.19(c), neither the Company nor any
subsidiary is obligated to purchase any real property.
SECTION 3.20 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of the Financial Advisor to the effect that, as of the date of this
Agreement, the consideration to be received in the Offer and the Merger by the
Company's stockholder is fair to the Company's stockholders from a financial
point of view, and a complete and correct signed copy of such opinion has been,
or promptly upon receipt thereof will be, delivered to Parent. The Company has
been authorized by the Financial Advisor to permit the inclusion of such opinion
in its entirety in the Offer Documents, the Schedule 14D-9, and the Proxy
Statement, so long as such inclusion is in form and substance reasonably
satisfactory to the Financial Advisor and its counsel.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant, on a joint and
several basis, to the Company as follows:
SECTION 4.1 ORGANIZATION.
(a) Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its businesses as now being conducted. Except as set forth
in the Commitment Letters (as defined in Section 4.7), Parent and Merger Sub
have no obligations or liabilities, and none of such parties are parties to any
litigation, which in either case if paid or determined adversely, or with
respect to which an event of default occurs, would have a material effect on
their ability to consummate the transactions contemplated hereby.
(b) Parent has heretofore delivered to the Company accurate
and complete copies of the Certificate of Incorporation and Bylaws, as currently
in effect, of Parent and Merger Sub. Each of Parent and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Parent Material Adverse Effect. The term
"Parent Material Adverse Effect" means (i) a material adverse effect on the
financial condition, properties, business or results of operations of the Parent
and Merger Sub, individually or in the aggregate or (ii) the ability of the
Parent or Merger Sub to perform its obligations under this Agreement.
SECTION 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub 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 and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Merger Sub and by their respective
shareholders as required by applicable law or their respective charter
documents, and no other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub and constitutes a valid, legal and
binding agreement of each of Parent and Merger Sub, enforceable against each of
Parent and Merger Sub in accordance with its terms, except (i) to the extent
that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and (ii) that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding thereof may be brought.
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SECTION 4.3 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Parent or Merger Sub for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, or the Proxy Statement (as
defined in Section 5.4(a)) will, at the respective times that the Offer
Documents, the Schedule 14D-9, the Proxy Statement or any amendments or
supplements thereto are filed with the SEC and are first published or sent or
given to holders of Shares, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
SECTION 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming the truth
and accuracy of the Company's representations and warranties contained in
Section 3.6, except for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the HSR Act and the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware as required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Parent or Merger Sub of this Agreement or the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice would not have a Parent
Material Adverse Effect or have a material adverse affect on the ability of
Parent or Merger Sub to consummate the Offer or the Merger. Neither the
execution, delivery and performance of this Agreement by Parent or Merger Sub
nor the consummation by Parent or Merger Sub of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of the
respective certificate or articles of incorporation or Bylaws (or similar
governing documents) of Parent or Merger Sub, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or Merger Sub is a party or by which
any of them or any of their respective properties or assets may be bound or (c)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or Merger Sub or any of Parent's subsidiaries or any of
their respective properties or assets, except in the case of (b) or (c) for
violations, breaches or defaults which would not have a Parent Material Adverse
Effect or have a material adverse effect on the ability of Parent or Merger Sub
to consummate the Offer or the Merger.
SECTION 4.5 NO PRIOR ACTIVITIES. Except for obligations incurred in
connection with its incorporation or organization, the making of the Offer or
the negotiation and consummation of this Agreement and the transactions
contemplated hereby, Merger Sub has neither incurred any obligation or liability
or engaged in any business or activity of any type or kind whatsoever or entered
into any agreement or arrangement with any person or entity.
SECTION 4.6 BROKERS. Except for Dresdner Kleinwort Benson North America
LLC, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission
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in connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Merger Sub.
SECTION 4.7 FINANCING. Attached hereto as Exhibit 4.7 are (i) a Senior
Facilities Commitment Letter from Dresdner Kleinwort Benson North America LLC
("DKBNA") and Dresdner Bank AG, New York and Grand Caymans Branch ("Dresdner"),
dated as of the date hereof, which provides for a commitment for senior debt
financing in an aggregate principal amount of up to $50,000,000, (ii) a Senior
Subordinated Notes Commitment Letter from DKBNA, Dresdner and Dresdner AG,
Hamburg Branch, dated as of the date hereof, which provides for a commitment for
subordinated debt financing in an aggregate principal amount of $10,000,000,
(iii) a letter from Dicom Group plc, dated as of the date hereof, which provides
for a commitment of equity financing of $4,000,000, (iv) a letter from Dresdner
Kleinwort Benson Private Equity Partners LP, dated as of the date hereof, which
provides for a commitment of equity financing of $16,000,000 (collectively, the
"Commitment Letters"). Assuming the financings contemplated by the Commitment
Letters are consummated in accordance with the terms thereof, the amounts
received thereunder by Parent and Merger Sub will provide Parent and Merger Sub
with sufficient funds to pay the aggregate amount payable in respect of the
Shares and the Stock Options upon the consummation of the Offer and the Merger
in accordance with the terms hereof. Neither Parent nor Merger Sub is presently
aware of any facts or circumstances which create a reasonable basis for Parent
or Merger Sub to believe that the conditions precedent set forth in the
Commitment Letters will not be satisfied.
ARTICLE 5
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated
by this Agreement, during the period from the date hereof to the Effective Time,
the Company will conduct its operations in the ordinary course of business
consistent with past practice, and the Company shall, and shall cause its
subsidiaries to, use its or their reasonable efforts to preserve substantially
intact its business organization, to keep available the services of its present
officers and employees and to preserve the present commercial relationships of
the Company and its subsidiaries with persons with whom the Company or its
subsidiaries do business. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, prior to the Effective
Time, the Company will not and will not permit any of its subsidiaries, without
the prior written consent of Parent or Merger Sub, or as set forth in Section
5.1 of the Disclosure Schedule, to:
(a) amend its Certificate of Incorporation or Bylaws (or other
similar governing instrument);
(b) amend or modify (except as required hereby) the terms of
the Company Plans or authorize for issuance, issue, sell, deliver or agree or
commit to issue (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
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limitation, any phantom stock or stock appreciation rights), except for the
issuance or sale of shares of common stock pursuant to the exercise of Stock
Options or under its 1997 Stock Plan;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem or otherwise acquire any capital stock of its subsidiaries;
(d) (i) incur or assume any indebtedness for borrowed money
except for indebtedness not exceeding $100,000 in the aggregate, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except for
obligations not exceeding $100,000 in the aggregate, (iii) except for
investments not exceeding $100,000 in the aggregate, make any loans, advances or
capital contributions to, or investments in, any other person (other than to
subsidiaries of the Company or customary loans or advances to employees in the
ordinary course of business consistent with past practice), (iv) pledge or
otherwise encumber shares of capital stock of the Company's subsidiaries, or (v)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material Lien thereupon except for Liens securing
indebtedness for borrowed money not exceeding $100,000 in the aggregate;
(e) except as may be required by law or as contemplated by
this Agreement, (i) enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock purchase
agreement, pension, retirement, deferred compensation, employment, severance or
other employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee in any material manner,
or (ii) except for normal salary increases and bonus payments in the ordinary
course of business consistent with past practice, increase in any material
manner the compensation of any director, officer or employee or agent, or (iii)
pay any material benefit not required by any plan and arrangement as in effect
as of the date hereof (including, without limitation, the granting of stock
appreciation rights or performance units), or (iv) create, issue or increase any
severance agreement or stay bonus with any officer, director or employee;
(f) acquire, sell, lease or dispose of any assets outside the
ordinary course of business which have a value in the aggregate in excess of
$100,000;
(g) except as may be required as a result of a change in law
or in GAAP, change any of the accounting principles or cash management practices
used by it;
(h) authorize or make any new capital expenditure or
expenditures which, individually, is in excess of $100,000 or, in the aggregate,
are in excess of $500,000;
(i) make any tax election or settle or compromise any income
tax liability material to the Company and its subsidiaries taken as a whole;
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(j) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company and its subsidiaries in the Recent SEC Reports or
incurred in the ordinary course of business consistent with past practice;
(k) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary or the Company; or
(l) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through 5.1(k) or any action which would
cause or constitute a breach of any of the representations or warranties of the
Company contained in this Agreement.
SECTION 5.2 NO SOLICITATION.
(a) The Company shall not, nor shall it permit any of the
subsidiaries to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of the subsidiaries to (i) solicit or
initiate, encourage, or facilitate, directly or indirectly, any inquiries
relating to, or the submission of, any proposal or offer, whether in writing or
otherwise, from any person other than Parent, Merger Sub or any affiliates
thereof (a "Third Party") to acquire beneficial ownership (as defined under Rule
13(d) of the Exchange Act) of all or a material portion of the assets of the
Company or any of its subsidiaries or 20% or more of any class of equity
securities of the Company or any of its subsidiaries pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock,
sale of assets, tender offer, exchange offer or similar transaction with respect
to either the Company or any of its subsidiaries, including any single
transaction or series of related transactions, which is structured to permit
such third Party to acquire beneficial ownership of any material portion of the
assets of or 20% or more of the equity interest in either the Company or any of
its subsidiaries (a "Takeover Proposal"), (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information or data with
respect to or access to the properties of, or take any other action to knowingly
facilitate the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal or (iii) enter into any agreement
with respect to any Takeover Proposal, approve or recommend or resolve to
approve or recommend any Takeover Proposal or enter into any agreement or
understanding requiring it to abandon, terminate or fail to consummate the
Offer, the Merger and the other transactions contemplated by this Agreement.
Notwithstanding the foregoing sentence, prior to the expiration of the Offer, if
the Company Board receives a bona fide Takeover Proposal by a Third Party that
was not solicited or initiated, or encouraged or facilitated, directly or
indirectly, by the Company, any of the subsidiaries or any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of the subsidiaries, the terms of which
the Company Board determines in good faith (after consulting and receiving
advice from the Company's independent financial advisor and independent legal
counsel) are more favorable from a financial point of view to the holders of
Shares than the Offer, the Merger and other transactions contemplated by this
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Agreement (taking into account any adjustments to the terms and conditions
proposed in writing by Merger Sub within three (3) Business Days after Parent
and Merger Sub receive notice of such Takeover Proposal) and taking into account
any differences in the conditions set forth in the Superior Proposal, in the
aggregate, from the conditions set forth herein (a "Superior Proposal"), then
the Company may, in response to an unsolicited request therefor and subject to
compliance with Section 5.2(b) furnish information with respect to the Company
and the subsidiaries to, and participate in discussions and negotiations
directly or through its representatives with, such Third Party, subject to a
confidentiality agreement; provided, that the Company Board first determines in
good faith, after receiving the advice of independent legal counsel, that such
action is required in order for the Company Board to comply with its fiduciary
duties to the Company's stockholder under applicable law, and the Company shall
not have violated any of the restrictions set forth in this Section 5.2;
provided, however, that any such Takeover Proposal shall not be deemed to be a
Superior Proposal if any financing required to consummate the transaction
contemplated thereby is not committed on terms substantially similar to those
obtained by or for the benefit of Parent and Merger Sub in connection with the
Offer and the Merger and such commitment is not likely, in the reasonable
judgment of the Company's Board (after consultation with its independent
financial advisor), to be obtained by such third party within a reasonable
period of time.
(b) The Company shall advise Parent orally and in writing of
(i) any Takeover Proposal or any inquiry with respect to or which could
reasonably be expected to lead to any Takeover Proposal received by any officer
or director of the Company or, to the knowledge of the Company, any financial
advisor, attorney or other advisor or representative of the Company, (ii) the
material terms of such Takeover Proposal (including a copy of any written
proposal), and (iii) the identity of the person making any such Takeover
Proposal or inquiry promptly following receipt of such Takeover Proposal or
inquiry. The Company will keep Parent duly informed of the status and details of
any such Takeover Proposal or inquiry in a timely manner.
SECTION 5.3 ACCESS TO INFORMATION. Between the date hereof and the
Effective Time, the Company will provide to Parent and Merger Sub and their
authorized representatives reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the Company and
its subsidiaries, will permit Parent and Merger Sub to make such inspections as
Parent and Merger Sub may reasonably require and will cause the officers of the
Company and its subsidiaries to furnish Parent and Merger Sub with such
financial and operating data and other information with respect to the business
and properties of the Company and its subsidiaries as Parent or Merger Sub may
from time to time reasonably request. All of such information shall be treated
as Confidential Information pursuant to the terms of the Confidentiality
Agreement, dated June 29, 1999, between the Company and Dicom Group plc, the
provisions of which are by this reference incorporated herein.
SECTION 5.4 SHAREHOLDERS MEETING; PROXY STATEMENT.
(a) The Company will, as promptly as practicable following the
acceptance for payment of Shares by Merger Sub pursuant to the Offer, take, in
accordance with applicable law and its Certificate of Incorporation and By-laws,
all action necessary to convene a special meeting of
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holders of Shares (the "Shareholders Meeting") to consider and vote upon the
approval of the Merger, if such approval is required. The Company shall, as
promptly as practicable, prepare and file with the SEC a preliminary proxy
statement for the solicitation of a vote of holders of Shares approving the
Merger (the "Proxy Statement"), which shall (subject to Section 5.4(c)) include
the unanimous recommendation of the Company Board that shareholders of the
Company vote in favor of the approval and adoption of this Agreement and the
written opinion of the Financial Advisor that the cash consideration to be
received by the shareholders of the Company pursuant to the Merger is fair to
such shareholders from a financial point of view. The Company shall use all
reasonable efforts to respond to any comments of the SEC and its staff and as
promptly as practicable after responding to such comments to the satisfaction of
the staff cause the Proxy Statement to be mailed to the shareholders of the
Company. Notwithstanding the foregoing, if Parent, Merger Sub and/or any other
subsidiary of Parent shall acquire at least ninety percent (90%) of the
outstanding Shares, the parties shall take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Shareholders Meeting in accordance with
Section 253 of the DGCL.
(b) Parent and Merger Sub agree to cause all Shares purchased
pursuant to the Offer and all other Shares owned by Parent, Merger Sub or any
subsidiary of Parent to be voted in favor of the Merger.
SECTION 5.5 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the
terms and conditions herein provided, each party agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable laws
and regulations to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including, without limitation, (a)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Proxy Statement, any filings that may be required under the HSR Act
and any amendments thereto, (b) the taking of all action reasonably necessary,
proper or advisable to secure any necessary consents under Material Contracts,
(c) contesting any legal proceeding relating to the Offer or the Merger and (d)
the execution of any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Merger Sub agree to use (i) all reasonable efforts to
cause the Effective Time to occur as soon as practicable after the shareholder
vote with respect to the Merger and (ii) their respective best efforts to
satisfy the conditions precedent set forth in the Commitment Letters (provided
that nothing herein shall be deemed to be an obligation of Parent or Merger Sub
to increase the Per Share Amount). In addition, Parent and Merger Sub will not
consent or agree to any amendment, waiver, modification or early termination of
the Commitment Letter in any manner adverse to Parent or Merger Sub without the
Company's prior written consent, which shall not be unreasonably withheld.
SECTION 5.6 CONSENTS. Parent, Merger Sub and the Company each will use
all commercially reasonable efforts to obtain consents of all third parties to
Material Contracts and Governmental Entities necessary, proper or advisable for
the consummation of the transactions contemplated by this Agreement.
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SECTION 5.7 PUBLIC ANNOUNCEMENTS. Parent, Merger Sub and the Company,
as the case may be, will consult with one another and seek one another's
approval 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 or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation
and approval, except as may be required by applicable law or by obligations
pursuant to any listing agreement with the Nasdaq Stock Market, as determined by
Parent, Merger Sub or the Company, as the case may be.
SECTION 5.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) Parent and Merger Sub agree that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its subsidiaries, as provided in
indemnification agreements or their respective charters or bylaws (or other
similar governing instruments) 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 DGCL, such indemnification shall be mandatory rather than
permissive, and the Surviving Corporation shall advance expenses in connection
with such indemnification as provided in such indemnification agreements. From
and after the Effective Time, Parent will fulfill and honor, and will cause the
Surviving Corporation to fulfill and honor, in all respects the indemnification
obligations described above, which shall be joint and several obligations of
Parent and the Surviving Corporation. The indemnification and liability
limitation or exculpation provisions of the Company's Certificate of
Incorporation and bylaws shall not be amended, repealed or otherwise modified
after the Effective Time in any manner that would materially adversely affect
the rights thereunder of individuals who, as of the date hereof and prior to the
Effective Time, were directors, officers, employees or agents of the Company or
its subsidiaries, unless such modification is required by applicable law.
(b) Parent shall cause the Surviving Corporation to maintain
in effect for not less than six (6) years from the Effective Time, if available,
the coverage provided by the policies of the directors' and officers' liability
and fiduciary insurance most recently maintained by the Company; provided, that
the Surviving Corporation may substitute therefor 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
and provided further that the Surviving Corporation shall not be obligated to
pay annual premiums in excess of 150% of the annual aggregate premium for
existing insurance with respect to such insurance for the next renewal of such
insurance (the "Current Premium"). If such annual premium for such insurance
would at any time exceed 150% of the Current Premium, then the Parent and the
Surviving Corporation shall cause to be maintained policies of insurance which,
in the Surviving Corporation's good faith determination, provide the maximum
coverage reasonably available at an annual premium equal to 150% of the Current
Premium.
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(c) The directors, officers, employees and agents of the
Company and its subsidiaries entitled to the indemnification, liability
limitation, exculpation and insurance set forth in this Section 5.8. are
intended to be third party beneficiaries of this Section 5.8.
SECTION 5.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall give
prompt notice to the Company, of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty of the notifying party contained in this Agreement to
be untrue or inaccurate in any material respect as if made at the Effective Time
and (b) any material failure of the notifying party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, that the delivery of any notice pursuant to this Section
5.9 shall not cure such breach or non-compliance or limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 5.10 SEC FILINGS. Each of Parent and the Company shall promptly
provide the other party (or its counsel) with copies of all filings made by the
other party or any of its subsidiaries with the SEC or any other state or
federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
SECTION 5.11 TAKEOVER STATUTES. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States (each a "Takeover
Statute") is or may become applicable to the Offer or the Merger, the Company
will use reasonable best efforts to grant such approvals and take such actions
as are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act so as to eliminate or minimize the effects of any Takeover Statute
on any of the transactions contemplated hereby.
SECTION 5.12 TRANSACTION LITIGATION. The Company shall give Parent and
Merger Sub the opportunity to participate in the defense or settlement of any
litigation against the Company and its directors directly relating to any of the
transactions contemplated by this Agreement; provided, that no such settlement
shall be agreed to without Parent's consent, which consent shall not be
unreasonably withheld.
SECTION 5.13 DELISTING. Each of the parties hereto shall cooperate with
each other in taking or causing to be taken, all actions necessary to delist all
of the Company's securities from the Nasdaq National Market System and to
terminate registration under the Exchange Act; provided, that such delisting and
termination shall not be effective until after the Effective Date.
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ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
SECTION 6.1 STOCKHOLDER APPROVAL. This Agreement, including the Merger,
shall have been approved and adopted by the affirmative vote of the shareholders
of the Company (unless the vote of the shareholders is not required by the DGCL)
as required under the Company's Certificate of incorporation or Bylaws or the
DGCL.
SECTION 6.2 NO ORDER. No federal, state or foreign Governmental Entity
or federal, state or foreign court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect (which order or other action the parties
hereto shall use their reasonable efforts to vacate or lift) and has the effect
of making the consummation of the Merger illegal under applicable law.
SECTION 6.3 HSR ACT. Any waiting period (and any extension thereof)
applicable to the Merger and the other transactions described in the recitals to
this Agreement under the HSR Act shall have terminated or expired, and any other
governmental or regulatory notices or approvals required with respect to the
transactions contemplated hereby (the absence of which would reasonably be
expected to have a Company Material Adverse Effect) shall have been either filed
or received.
SECTION 6.4 OFFER. Merger Sub shall have accepted for payment and
purchased all Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated and the Offer
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval of this Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent, Merger Sub and the
Company;
(b) by Parent and Merger Sub or by the Company
(i) if (x), the Offer shall have terminated or
expired in accordance with its terms without Merger Sub's having
accepted for payment any Shares pursuant to the Offer or (y) the Offer
shall not have been consummated prior to October 15, 1999; provided,
that the right to terminate this Agreement pursuant to this Section
7.1(b)(i) shall not be available
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to any party if it is in material breach of its obligation hereunder
and such breach is the principal cause of, or resulted in, the failure
of the Offer to have been consummated on or before such date; or
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the Offer and such
order, decree or ruling or other action shall have become final and
nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this clause (ii) shall have used all commercially
reasonable efforts to remove such order, decree, ruling, judgment or
injunction.
(c) by Parent or Merger Sub prior to the purchase of Shares
pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of the Offer Condition set
forth in paragraph (b) of Annex A to this Agreement and (ii) cannot be or has
not been cured within 10 Business Days after the giving of written notice
thereof to the Company by Parent or Merger Sub;
(d) by Parent or Merger Sub prior to the purchase of Shares
pursuant to the Offer if either Parent or Merger Sub is entitled to terminate
the Offer as a result of the occurrence of any event set forth in paragraphs (e)
or (j) of Annex A to this Agreement.
(e) by the Company if the Company Board has received a
Superior Proposal and the Company furnishes information with respect to the
Company and the subsidiaries to, and participates in discussions and
negotiations directly or through its representatives with a Third Party, subject
to a confidentiality agreement, after the Company Board determined in good
faith, after receiving the advice of independent legal counsel, that such action
is required in order for the Company Board to comply with its fiduciary duties
to the Company's stockholder under applicable law; provided, that (i) the
Company has complied with all provisions of Section 5.2, (ii) the Company may
not terminate this Agreement pursuant to this Section 7.1(e) unless and until
three (3) Business Days have elapsed following delivery to Parent of a written
notice of such determination by the Company Board (which notice shall include
the identity of the Third Party making such Superior Proposal and a copy of all
documentation relating to such Superior Proposal), and (iii) the Company
delivers payment to the Parent of the Termination Fee and the Expenses (each as
defined in Section 7.3(b)) contemporaneously with such termination.
(f) by the Company prior to the purchase of Shares pursuant to
the Offer if (i) any of the representations or warranties of Parent or Merger
Sub set forth in this Agreement that are qualified as to materiality shall not
be true and correct in any respect or any such representations or warranties
that are not so qualified shall not be true and correct in any material respect,
or (ii) Parent or Merger Sub shall have failed to perform in any material
respect any material obligation or to comply in any material respect with any
material agreement or covenant of Parent or Merger Sub to be performed or
complied with by it under this Agreement and such untruth, incorrectness or
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failure cannot be or has not been cured within 10 Business Days after the
Company's giving of written notice to Parent or Merger Sub, as applicable.
SECTION 7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void (except for the provisions of this Section 7.2, the last sentence of
Section 5.3, Sections 5.7, 7.3 and Article 8), and there shall be no liability
or obligation on the part of any party or its affiliates, directors, officers or
shareholders, other than (a) the provisions of this Section 7.2 , the last
sentence of Section 5.3, Sections 5.7, 7.3 and Article 8, and (b) any liability
of any party for any breach of this Agreement prior to such termination.
SECTION 7.3 FEES AND EXPENSES.
(a) Except as provided in this Section 7.3, whether or not the
Merger is consummated, all costs and expense incurred in connection with this
Agreement and the transactions contemplated by this Agreement, including the
fees and disbursements of counsel, financial advisors and accountants, shall be
paid by the party incurring such costs and expenses.
(b) The Company shall pay, or cause to be paid, by wire
transfer of immediately available funds to Parent (i) the documented reasonable
out-of-pocket fees and expenses incurred by or paid by or on behalf of Parent
and its affiliates (including, but not limited to, Dicom Group plc and Dresdner
Kleinwort Benson Private Equity Partners L.P.) in connection with the Offer, the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all reasonable fees and expenses of law firms, commercial
banks, investment banking firms, accountants, experts and consultants to Parent
and its affiliates ("Purchaser Expenses") not to exceed $1,750,000 and, if
applicable, (ii) $1,500,000 (the "Termination Fee") under the circumstances and
at the times set forth as follows:
(i) if the Company terminates this Agreement under
Section 7.1(e), the Company shall pay the Purchaser Expenses and the
Termination Fee concurrently with such termination in accordance with
Section 7.1(e);
(ii) if Parent or Merger Sub terminates this
Agreement under Sections 7.1(c) or 7.1 (d), (x) the Company shall pay
the Purchaser Expenses upon demand, and (y) if concurrently with such
termination or within 270 days thereafter (A) the Company enters into a
merger agreement, acquisition agreement or similar agreement with
respect to a Takeover Proposal, or a Takeover Proposal is consummated,
involving any party other than Parent or any of its affiliates (1) with
whom the Company had any discussions with respect to a Takeover
Proposal, (2) to whom the Company furnished information with respect to
or with a view to a Takeover Proposal or (3) who had submitted a
proposal or expressed any interest publicly in a Takeover Proposal, in
the case of each of clauses (1), (2) and (3), after the date hereof and
prior to such termination, or (B) the Company enters into a merger
agreement, acquisition agreement or similar agreement with respect to a
Superior Proposal, or a Superior Proposal is consummated, then, in the
case of either (A) or (B) above, the
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Company shall pay the Termination Fee upon consummation of such
Takeover Proposal or Superior Proposal; and
(iii) notwithstanding clause (ii) above, if the
Parent or Merger Sub terminates this Agreement under Section 7.1(c) as
a result of the Company's material breach of Section 5.2, the Company
shall pay the Purchaser Expenses and the Termination Fee upon demand.
In no event shall the Purchaser Expenses and the Termination Fee be payable by
the Company more than once. Any such payments shall be made to the Parent by
wire transfer of immediately available funds.
(c) In the event that the Company terminates this Agreement
under Section 7.1(f) or the Parent or Merger Sub terminates this Agreement
solely as a result of the failure of the condition set forth in paragraph (k) of
Annex A, Parent shall pay, or shall cause to be paid by wire transfer of
immediately available funds to the Company the documented reasonable
out-of-pocket fees and expenses incurred by or paid on behalf of the Company in
connection with the offer, the Merger or the consummation of any of the
transactions contemplated by this Agreement, including all reasonable fees and
expenses of law firms, investment banking firms, accountants, experts and
consultants to the Company (the "Company Expenses") not to exceed $400,000.
(d) Each of the parties hereto acknowledge that all amounts
payable under this Section 7.3 shall constitute liquidated damages in lieu of
any actual damages for termination of this Agreement.
SECTION 7.4 AMENDMENT. Subject to applicable law, this Agreement may be
amended by the parties hereto, by action taken by or on behalf of the respective
board of directors of the Company, Parent and Merger Sub at any time prior to
the Effective Time; provided, that after the approval and adoption of this
Agreement and the transactions contemplated thereby by the shareholders of the
Company (if required by applicable law) no amendment shall be made which would
reduce the amount or change the type of consideration into which each Share
shall be converted upon the consummation of the Merger. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties.
SECTION 7.5 EXTENSION; WAIVER. At any time prior to the Effective Time
subject to Section 1.1(a) and Section 1.3(c), each party may (a) extend the time
for the performance of any of the obligations or other acts of the other party
or parties, (b) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document, certificate or writing
delivered pursuant hereto or (c) waive compliance by the other parties with any
of the agreements or conditions contained herein, which may be legally waived.
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. The failure of any party to assert any of its rights hereunder shall not
constitute a waiver of such rights.
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ARTICLE 8
MISCELLANEOUS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement pursuant to Section 7.1, as
the case may be, except for representations and warranties set forth in Sections
3.19 and 4.6.
SECTION 8.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise; provided, that
Merger Sub may assign any or all of its rights and obligations under this
Agreement to Parent or any wholly owned subsidiary of Parent.
SECTION 8.3 VALIDITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 8.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the other party as follows:
To Parent or Merger Sub:
c/o DICOM Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
38
<PAGE> 43
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to
Parent or Merger Sub) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
To the Company:
Kofax Image Products, Inc.
16245 Laguna Canyon Road
Irvine, CA 92618
Attention: Chief Executive Officer
Facsimile: (949) 727-3511
with a copy (which shall not constitute notice to the
Company) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Suite 1600
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
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.
SECTION 8.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
SECTION 8.6 CONSTRUCTION; INTERPRETATION. The headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this
39
<PAGE> 44
Agreement. Article, section, exhibit, schedule, annex, party, preamble and
recital references are to this Agreement unless otherwise stated. No party, nor
its respective counsel, shall be deemed the drafter of this Agreement for
purposes of construing the provisions hereof, and all provisions of this
Agreement shall be construed according to their fair meaning and not strictly
for or against any party.
SECTION 8.7 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party and its successors and permitted
assigns and, except as provided in Section 5.8 and Section 8.2, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.8 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 8.9 SPECIFIC PERFORMANCE. The parties acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies, including arbitration,
which any party may have under this Agreement or otherwise.
SECTION 8.10 COUNTERPARTS. This Agreement may be executed in one 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 8.11 WAIVER OF JURY TRIAL. The parties to this Agreement each
hereby waives, to the fullest extent permitted by law, any right to trial by
jury of any claim, demand, action, or cause of action (i) arising under this
Agreement or (ii) in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the
transactions related hereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity, or otherwise. The parties to
this Agreement each hereby agrees and consents that any such claim, demand,
action, or cause of action shall be decided by court trial without a jury and
that the parties to this Agreement may file an original counterpart of a copy of
this Agreement with any court as written evidence of the consent of the parties
hereto to the waiver of their right to trial by jury.
* * * * *
40
<PAGE> 45
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
KOFAX IMAGE PRODUCTS, INC.
By: /s/ David S. Silver
-----------------------------
Name: David S. Silver
Title: President
IMAGING COMPONENTS CORPORATION
By: /s/ Alexander P. Coleman
-----------------------------
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By: /s/ Alexander P. Coleman
-----------------------------
Name: Alexander P. Coleman
Title: Vice President
40
<PAGE> 46
ANNEX A
The capitalized terms used herein have the meanings set forth in the
Agreement and Plan of Merger to which this Annex A is attached.
Notwithstanding any other provisions of the Offer, Merger Sub shall not
be required to accept for payment purchase or pay for any validly tendered
Shares (subject to any applicable rules and regulations of the SEC, including
Rule 14e-1(c) under the Exchange Act), and may delay in accordance with Section
1.1(b) the acceptance for payment of, or the payment for, any validly tendered
Shares (subject to the restrictions referred to above), may amend the Offer
consistent with the terms of the Agreement, or may terminate the Offer if (i)
immediately prior to the expiration of the Offer (as extended in accordance with
the Offer), the Minimum Condition shall not have been satisfied, (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated (the "HSR Condition") or (iii) prior to the acceptance for payment of
Shares, any of the following conditions exist:
(a) There shall be threatened in writing or pending any suit, action or
proceeding by a federal, state or foreign Governmental Entity (but only if such
suit, action or proceeding is deemed by Parent to have a reasonable likelihood
of success) (i) seeking to prohibit or impose any material limitations on the
ownership or operation by the Company, Merger Sub, Parent or any of their
respective subsidiaries of a material portion of the businesses or assets of the
Company, Merger Sub, Parent or any of their respective subsidiaries which could
reasonably be expected to have a Company Material Adverse Effect as a result of
the Offer or any other transactions contemplated by this Agreement, (ii) seeking
to compel the Company, Merger Sub, or Parent to dispose of or hold separate any
material portion of their respective business or assets as a result of the Offer
or any other transactions contemplated by this Agreement, (iii) seeking to
restrain or prohibit the making or consummation of the Offer or the Merger or
the consummation of any of the other transactions contemplated by the Agreement
or the Voting Agreements, (iv) seeking to impose material limitations on the
ability of Merger Sub or Parent, or rendering Merger Sub unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the Offer or
the Merger, or (v) seeking to impose material limitations on the ability of
Merger Sub effectively to exercise full rights of ownership of the Shares
accepted for payment pursuant to the Offer, including the right to vote such
Shares on all matters properly presented to the Company's shareholders. There
shall be any statute, rule regulation, judgment, order or injunction enacted,
entered, enforced, promulgated or applicable to the Offer or the Merger, or any
other action shall be taken by any Governmental Entity, other than the
application to the Offer or the Merger of applicable waiting periods under the
HSR Act, that is reasonably likely to result, directly or indirectly, in any of
the consequences referred to in clauses (i) through (v) above.
(b) Any of the representations and warranties of the Company set forth
in the Agreement, without, for purposes of this paragraph (b) only, giving
effect to any qualifications as to materiality, shall not be true and correct in
any material respect as of the date of the Agreement and as of consummation of
the Offer as though made on or as of such date (except for those representations
and warranties that address matters only as of a particular date, which need to
be true and correct as
Annex A - 1
<PAGE> 47
of such particular date), or the Company shall have breached or failed to comply
with, in any material respect, any obligation, agreement or covenant required by
the Agreement to be performed or complied with by it, which in either case could
reasonably be expected to have a Company Material Adverse Effect.
(c) It shall have been publicly disclosed that any person (which
includes a "person" as such term is defined in Section 13(d)(3) of the Exchange
Act) other than Parent, Merger Sub or any of their affiliates and stockholders
of the Company listed on Schedule 2.8, and (i) shall have acquired or announced
its intention to acquire beneficial ownership of more than 20% of the
outstanding Shares or (ii) shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer or
exchange offer for any Shares or a merger, consolidation or other business
combination with or involving the Company, any of its subsidiaries or any of
their material assets; provided, that clause (i) hereof shall not continue after
the date on which the Minimum Condition is satisfied.
(d) The Agreement shall have been terminated in accordance with its
terms.
(e) Prior to the purchase of Shares pursuant to the Offer, the Company
Board (i) shall have withdrawn or modified (including by amendment of the
Schedule 14D-9) in a manner adverse to Parent or Merger Sub its approval or
recommendation of the Offer, this Agreement or the Merger (ii) shall have
recommended a Takeover Proposal, or (iii) shall have adopted any resolution to
effect any of the foregoing.
(f) There shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange, the
American Stock Exchange, or in Nasdaq National Market System, (ii) a declaration
of a banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), or (iii) any limitation by any United
States Governmental Entity that has a material adverse effect generally on the
extension of credit by banks or other financial institutions, in the case of any
of the situations in clauses (i) through (iii) inclusive, existing on the date
hereof, a material acceleration or worsening thereof.
(g) The Company shall commence a case under any chapter of Title XI of
the United States Code or any similar law or regulation; or a petition under any
chapter of Title XI of the United States Code or any similar law or regulation
is filed against the Company which is not dismissed within 30 Business Days.
(h) Any party identified with an asterisk on Exhibit A to any of the
Voting Agreements other than Parent or Merger Sub shall have breached or failed
to perform any of its agreements under such agreements or breach any of its
representations and warranties in such agreements or any such agreements shall
not be valid, binding and enforceable; provided, that this clause (h) shall be
deemed satisfied upon the satisfaction of the Minimum Condition.
Annex A - 2
<PAGE> 48
(i) There shall have occurred any events or changes which have had, or
could reasonably be expected to have or constitute, individually or in the
aggregate, a Company Material Adverse Effect.
(j) The Company shall have less than $22,991,000 of freely available
cash or cash equivalents ("Minimum Cash"); provided, that the following
adjustments may be made, without duplication, to Minimum Cash: (i) in the event
the Offer is not consummated before August 15, 1999, Minimum Cash shall be
reduced by $750,000 (representing employee bonuses), (ii) in the event the Offer
is not consummated before September 15, 1999, Minimum Cash shall be reduced by
$1,000,000 (representing payment of the Company's Federal income taxes), (iii)
in the event the Offer is not consummated before October 15, 1999, Minimum Cash
shall be reduced by $800,000 (representing payment of the Company's Federal
income taxes), (iv) Minimum Cash shall be determined without giving effect to
Company Expenses, and (v) Minimum Cash may be reduced by an amount not to exceed
$1,350,000 in the aggregate (such aggregate amount, the "Operating Cash
Shortfall") so long as the Company's consolidated non-cash, net working capital
(i.e., current assets (excluding cash and cash equivalents) less current
liabilities as determined in accordance with GAAP, applied on a basis consistent
with the preparation of the financial statements described in Section 3.4)
("Working Capital") exceeds $2,098,000 (the Company's Working Capital as of June
30, 1999) (less up to $500,000 for capital expenditures made by the Company in
accordance with Section 5.1(h)) by an amount equal to or greater than such
Operating Cash Shortfall. The condition set forth in this clause (j) shall be
satisfied upon the presentation of evidence, documentation and information by
the Company to the Parent that the Minimum Cash, and all adjustments thereto
(including with respect to the Operating Cash Shortfall and working capital) as
of the consummation of the Offer.
(k) Parent or Merger Sub shall have not received the cash proceeds of
equity and debt financing in an amount necessary to consummate the Offer, the
Merger and the other transactions contemplated by the Agreement and to pay all
fees and expenses in connection therewith and to provide adequate working
capital for the Surviving Corporation, all on terms and conditions satisfactory
to the Parent and Merger Sub.
Annex A - 3
<PAGE> 49
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of July 27, 1999 is
made by and among Imaging Components Corporation, a Delaware corporation (the
"Parent"), Imaging Acquisition Corporation, a Delaware corporation ("Merger
Sub"), and each of the persons named on Exhibit A hereto (each, a "Stockholder",
and collectively, the "Stockholders").
WHEREAS, Parent, Merger Sub and Kofax Image Products, Inc., a
Delaware corporation (the "Company") are concurrently herewith entering into an
Agreement and Plan of Merger dated as of the date hereof (as may be amended,
restated or modified from time to time, the "Merger Agreement") which provides
for, among other things, the merger of Merger Sub with and into the Company,
upon the terms and subject to the conditions set forth in the Merger Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in the Merger Agreement.
WHEREAS, as of the date hereof, each Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Exhibit A (the "Existing Shares" and, together with any shares of Common
Stock acquired by or issued to such Stockholder after the date hereof, the
"Subject Shares").
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent and Merger Sub have required that the Stockholders
agree, and the Stockholders have agreed, to enter into this Agreement.
WHEREAS, the Stockholders and Merger Sub desire to set forth their
agreement with respect to the voting of the Subject Shares in connection with
the Merger Agreement and the transactions contemplated thereby (the
"Transactions") upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. COVENANTS OF THE STOCKHOLDERS. Until the termination of this
Agreement in accordance with Section 5, the Stockholders agree as follows:
(a) Agreement to Vote in Favor. At any meeting of shareholders of
the Company called for purposes that include approval of the Merger Agreement
and the Transactions, or in connection with any written consent of the holders
of Shares or in any other circumstances in which the Stockholders are entitled
to vote, consent or give any other approval with respect to the Merger Agreement
and the Transactions, the Stockholders shall vote (or cause to be voted) the
Subject
<PAGE> 50
Shares in favor of adoption and approval of the Merger Agreement and the
Transactions and the approval of the terms thereof and each of the other actions
contemplated by this Agreement and the Merger Agreement and any amendments.
(b) Agreement to Tender. Within the first ten (10) Business Days
after the commencement of the Offer to tender all of their respective Subject
Shares, except, if applicable, their respective Retained Shares, into the Offer,
and not to withdraw any of their respective Shares so tendered from the Offer.
(c) Agreement to Vote Against. At any meeting of shareholders of the
Company, or in connection with any written consent of the holders of Shares or
in any other circumstances in which the Stockholders are entitled to vote,
consent or give any other approval, except as otherwise agreed to in writing in
advance by Merger Sub, the Stockholders shall vote (or cause to be voted) the
Subject Shares against the following actions:
(i) any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger
Agreement or of the Stockholders hereunder; or
(ii) any action or agreement that could reasonably be expected
to impede, interfere with, delay, postpone or attempt to discourage
the Merger and/or the Transactions, including, without limitation,
(x) the adoption by the Company of a proposal supporting a Takeover
Proposal or the repurchase by the Company or any of its Subsidiaries
of outstanding Shares for consideration in excess of the Per Share
Amount or (y) any amendment of the Company's Articles of
Incorporation or By-laws (including any amendment affecting the
voting rights of the Company's Capital Stock) or other proposal or
transaction involving the Company or any of its Subsidiaries
(including any changes in management or the directors of the
Company), which amendment or other proposal or transaction could in
any manner reasonably be expected to impede, in any material
respect, or prevent the Merger, the Merger Agreement or the
Transactions.
(d) Proxies. As security for the agreements of the Stockholders
provided for herein, the Stockholders hereby grant to Merger Sub a proxy to vote
the Subject Shares as indicated in Sections 1(a) and 1(b) above. The
Stockholders agree that this proxy shall be irrevocable during the term of this
Agreement and coupled with an interest and each of the Stockholders and Merger
Sub will take such further action or execute such other instruments as may be
necessary to effectuate the intent of this proxy and hereby revokes any proxy
previously granted by the Stockholders with respect to the Subject Shares.
(e) Transfer Restrictions. The Stockholders agree not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of or hypothecate
(including by gift or by contribution or distribution to any trust or similar
instrument or to any beneficiaries of the Stockholders) (collectively,
"Transfer"), or enter into any contract, option or other arrangement or
understanding
2
<PAGE> 51
(including any profit sharing arrangement) with respect to the Transfer of, any
of the Subject Shares other than pursuant to the terms hereof and the Merger
Agreement, or (ii) enter into any voting arrangement or understanding with
respect to the Subject Shares, whether by proxy, voting agreement or otherwise
other than this Agreement.
(f) Appraisal Rights. The Stockholders hereby irrevocably waive any
and all rights which it may have as to appraisal, dissent or any similar or
related matter with respect to the Merger including any such rights set forth in
the DGCL.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder hereby severally but not jointly represents and warrants to Merger
Sub as of the date hereof as follows:
(a) Authority; No Conflict. Such Stockholder has the requisite power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Stockholder, and this Agreement constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law), an implied
covenant of good faith and fair dealing and considerations of public policy. The
execution and delivery of this Agreement by such Stockholder does not, and the
consummation by such Stockholder of the transactions contemplated hereby will
not violate any law applicable to such Stockholder or result in a violation or
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under any contract or agreement to which
such Stockholder is a party.
(b) Shares. The Existing Shares are owned beneficially and of record
by the Stockholders. The Existing Shares constitute all of the shares of Common
Stock owned of record or beneficially by the Stockholders as at the date hereof.
All of the Existing Shares are issued and outstanding and except as set forth on
Schedule A attached hereto, the Stockholders do not own, of record or
beneficially, any warrants, options or other rights to acquire any shares of
Common Stock. Each Stockholder has sole voting power, sole power of disposition,
sole power to issue instructions with respect to the matters set forth in
Section 1 hereof, sole power to demand appraisal rights (to the extent such
rights are available) and sole power to agree to all of the matters set forth in
this Agreement, in each case with respect to all of the Existing Shares, and
will have sole voting power, sole power of disposition, sole power to issue
instructions with respect to the matters set forth in Section 1 hereof, sole
power to demand appraisal rights (to the extent such rights are available) and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Subject Shares held of record. Each Stockholder
has good and valid title to the Existing Shares and at all times during the term
hereof and on the Effective Time will have good and valid title to the Subject
Shares, free and clear of all Liens and free of any other limitation or
restriction other than restrictions under applicable securities laws.
3
<PAGE> 52
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub hereby represents and warrants to the Stockholders as of
the date hereof as follows:
(a) Authority. Each of Parent and Merger Sub has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by its respective board of directors and no other corporate action or
proceedings on the part of Parent or Merger Sub is necessary to authorize the
execution and delivery by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub,
and, assuming this Agreement constitutes a valid and binding obligation of the
Stockholders, constitutes valid and binding obligations of Parent and Merger
Sub, enforceable against them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing and
considerations of public policy.
(b) No Conflict. The execution and delivery of this Agreement by
Merger Sub does not, and the consummation by Merger Sub of the transactions
contemplated hereby will not (i) conflict with or violate the Articles of
Incorporation, By-laws or other organizational documents of Merger Sub, (ii)
conflict with or violate any law applicable to Merger Sub or by which any
property or asset of Merger Sub is bound or affected, except for such conflicts
or violations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect, or (iii) result in a violation or any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Merger Sub is a party or by which Merger Sub or any property or asset
of Merger Sub is bound or affected, except for any such breaches or defaults
which would not materially impair the ability of Merger Sub to consummate the
transactions contemplated hereby.
4. FURTHER ASSURANCES. From time to time prior to the Effective
Time, at any other party's request and without further consideration, each party
hereto shall execute and deliver such additional documents and take all such
further lawful action as may be reasonably necessary or desirable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
5. TERMINATION. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become null
and void and have no further effect upon the earliest to occur of (x) the
Effective Time or (y) termination of the Merger Agreement pursuant to Section
7.1 thereof. Nothing in this Section 5 shall relieve any party of liability for
breach of this Agreement; provided, that Merger Sub's sole remedy in the event
of a breach of this Agreement shall be as specified in Section 6(i) (provided
that injunctive relief shall
4
<PAGE> 53
also be available for any breach of Section 1(e)) and in no event shall Merger
Sub be entitled to any form of monetary damages.
6. GENERAL PROVISIONS.
(a) Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses;
provided, that Merger Sub shall pay the documented reasonable out-of-pocket fees
and expenses of the Shareholders, including the fees and disbursements of one
counsel for all Shareholders.
(b) Amendment. This Agreement may not be amended except by an
instrument in writing signed by the party to be charged therewith.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed by customary receipt of transmission) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other addresses for a party as shall be specified by like notice):
To Parent or Merger Sub:
c/o Dicom Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to Parent
or Merger Sub) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
5
<PAGE> 54
To the Stockholders:
Addresses on Exhibit A
with a copy (which shall not constitute notice to the
Stockholders) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(e) Entire Agreement; No Third Party Beneficiaries. This Agreement
and the Merger Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
(f) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Merger Sub may assign, in Merger Sub's
sole discretion, any or all of their respective rights, interests and
obligations hereunder to any affiliate of Merger Sub. 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, heirs, agents,
representatives, trust beneficiaries, attorneys, affiliates and associates and
6
<PAGE> 55
all of their respective predecessors, successors, permitted assigns, heirs,
executors and administrators.
(i) Specific Performance. The parties acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall be exclusive and in lieu of any
other remedies, including arbitration, which any party may have under this
Agreement or otherwise.
(j) Waiver of Jury Trial. The parties to this Agreement each hereby
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action, or cause of action (i) arising under this Agreement
or (ii) in any way connected with or related or incidental to the dealings of
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The parties to this Agreement
each hereby agrees and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
* * * * *
7
<PAGE> 56
IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholders have
caused this Agreement to be signed by their respective officers or other
authorized person thereunto duly authorized as of the date first written above.
IMAGING COMPONENTS CORPORATION
By: _____________________________
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By: _____________________________
Name: Alexander P. Coleman
Title: Vice President
____________________________________
DAVID S. SILVER
____________________________________
DEAN A. HOUGH
____________________________________
RONALD J. FIKERT
____________________________________
RICHARD M. MURPHY
____________________________________
KEVIN DRUM
<PAGE> 57
____________________________________
ALEXANDER P. CILENTO
____________________________________
WILLIAM E. DROBISH
____________________________________
B. ALLEN LAY
SOUTHERN CALIFORNIA VENTURES
By: _____________________________
Name:
Title:
<PAGE> 58
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF
EXISTING
STOCKHOLDERS' NAME AND ADDRESS SHARES
- ------------------------------ ------
<S> <C>
David S. Silver 342,500
16245 Laguna Canyon Road
Irvin, CA 92618
Dean A. Hough 345,000
16245 Laguna Canyon Road
Irvin, CA 92618
Ronald J. Fikert 37,500
16245 Laguna Canyon Road
Irvin, CA 92618
Richard M. Murphy 54,444
16245 Laguna Canyon Road
Irvin, CA 92618
Kevin Drum 32,500
16245 Laguna Canyon Road
Irvin, CA 92618
Alexander P. Cilento 2,615
[STREET]
[CITY]
William E. Drobish 120,000
[STREET]
[CITY]
B. Allen Lay 45,101
[STREET]
[CITY]
Southern California Ventures 42,806
[STREET]
[CITY]
</TABLE>
Exhibit A -- Page 1
<PAGE> 1
Exhibit (c)(2)
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of July 27, 1999 is
made by and among Imaging Components Corporation, a Delaware corporation (the
"Parent"), Imaging Acquisition Corporation, a Delaware corporation ("Merger
Sub"), and each of the persons named on Exhibit A hereto (each, a "Stockholder",
and collectively, the "Stockholders").
WHEREAS, Parent, Merger Sub and Kofax Image Products, Inc., a
Delaware corporation (the "Company") are concurrently herewith entering into an
Agreement and Plan of Merger dated as of the date hereof (as may be amended,
restated or modified from time to time, the "Merger Agreement") which provides
for, among other things, the merger of Merger Sub with and into the Company,
upon the terms and subject to the conditions set forth in the Merger Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in the Merger Agreement.
WHEREAS, as of the date hereof, each Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Exhibit A (the "Existing Shares" and, together with any shares of Common
Stock acquired by or issued to such Stockholder after the date hereof, the
"Subject Shares").
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent and Merger Sub have required that the Stockholders
agree, and the Stockholders have agreed, to enter into this Agreement.
WHEREAS, the Stockholders and Merger Sub desire to set forth their
agreement with respect to the voting of the Subject Shares in connection with
the Merger Agreement and the transactions contemplated thereby (the
"Transactions") upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. COVENANTS OF THE STOCKHOLDERS. Until the termination of this
Agreement in accordance with Section 5, the Stockholders agree as follows:
(a) Agreement to Vote in Favor. At any meeting of shareholders of
the Company called for purposes that include approval of the Merger Agreement
and the Transactions, or in connection with any written consent of the holders
of Shares or in any other circumstances in which the Stockholders are entitled
to vote, consent or give any other approval with respect to the Merger Agreement
and the Transactions, the Stockholders shall vote (or cause to be voted) the
Subject
<PAGE> 2
Shares in favor of adoption and approval of the Merger Agreement and the
Transactions and the approval of the terms thereof and each of the other actions
contemplated by this Agreement and the Merger Agreement and any amendments.
(b) Agreement to Tender. Within the first ten (10) Business Days
after the commencement of the Offer to tender all of their respective Subject
Shares, except, if applicable, their respective Retained Shares, into the Offer,
and not to withdraw any of their respective Shares so tendered from the Offer.
(c) Agreement to Vote Against. At any meeting of shareholders of the
Company, or in connection with any written consent of the holders of Shares or
in any other circumstances in which the Stockholders are entitled to vote,
consent or give any other approval, except as otherwise agreed to in writing in
advance by Merger Sub, the Stockholders shall vote (or cause to be voted) the
Subject Shares against the following actions:
(i) any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger
Agreement or of the Stockholders hereunder; or
(ii) any action or agreement that could reasonably be expected
to impede, interfere with, delay, postpone or attempt to discourage
the Merger and/or the Transactions, including, without limitation,
(x) the adoption by the Company of a proposal supporting a Takeover
Proposal or the repurchase by the Company or any of its Subsidiaries
of outstanding Shares for consideration in excess of the Per Share
Amount or (y) any amendment of the Company's Articles of
Incorporation or By-laws (including any amendment affecting the
voting rights of the Company's Capital Stock) or other proposal or
transaction involving the Company or any of its Subsidiaries
(including any changes in management or the directors of the
Company), which amendment or other proposal or transaction could in
any manner reasonably be expected to impede, in any material
respect, or prevent the Merger, the Merger Agreement or the
Transactions.
(d) Proxies. As security for the agreements of the Stockholders
provided for herein, the Stockholders hereby grant to Merger Sub a proxy to vote
the Subject Shares as indicated in Sections 1(a) and 1(b) above. The
Stockholders agree that this proxy shall be irrevocable during the term of this
Agreement and coupled with an interest and each of the Stockholders and Merger
Sub will take such further action or execute such other instruments as may be
necessary to effectuate the intent of this proxy and hereby revokes any proxy
previously granted by the Stockholders with respect to the Subject Shares.
(e) Transfer Restrictions. The Stockholders agree not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of or hypothecate
(including by gift or by contribution or distribution to any trust or similar
instrument or to any beneficiaries of the Stockholders) (collectively,
"Transfer"), or enter into any contract, option or other arrangement or
understanding
2
<PAGE> 3
(including any profit sharing arrangement) with respect to the Transfer of, any
of the Subject Shares other than pursuant to the terms hereof and the Merger
Agreement, or (ii) enter into any voting arrangement or understanding with
respect to the Subject Shares, whether by proxy, voting agreement or otherwise
other than this Agreement.
(f) Appraisal Rights. The Stockholders hereby irrevocably waive any
and all rights which it may have as to appraisal, dissent or any similar or
related matter with respect to the Merger including any such rights set forth in
the DGCL.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder hereby severally but not jointly represents and warrants to Merger
Sub as of the date hereof as follows:
(a) Authority; No Conflict. Such Stockholder has the requisite power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Stockholder, and this Agreement constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law), an implied
covenant of good faith and fair dealing and considerations of public policy. The
execution and delivery of this Agreement by such Stockholder does not, and the
consummation by such Stockholder of the transactions contemplated hereby will
not violate any law applicable to such Stockholder or result in a violation or
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under any contract or agreement to which
such Stockholder is a party.
(b) Shares. The Existing Shares are owned beneficially and of record
by the Stockholders. The Existing Shares constitute all of the shares of Common
Stock owned of record or beneficially by the Stockholders as at the date hereof.
All of the Existing Shares are issued and outstanding and except as set forth on
Schedule A attached hereto, the Stockholders do not own, of record or
beneficially, any warrants, options or other rights to acquire any shares of
Common Stock. Each Stockholder has sole voting power, sole power of disposition,
sole power to issue instructions with respect to the matters set forth in
Section 1 hereof, sole power to demand appraisal rights (to the extent such
rights are available) and sole power to agree to all of the matters set forth in
this Agreement, in each case with respect to all of the Existing Shares, and
will have sole voting power, sole power of disposition, sole power to issue
instructions with respect to the matters set forth in Section 1 hereof, sole
power to demand appraisal rights (to the extent such rights are available) and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Subject Shares held of record. Each Stockholder
has good and valid title to the Existing Shares and at all times during the term
hereof and on the Effective Time will have good and valid title to the Subject
Shares, free and clear of all Liens and free of any other limitation or
restriction other than restrictions under applicable securities laws.
3
<PAGE> 4
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub hereby represents and warrants to the Stockholders as of
the date hereof as follows:
(a) Authority. Each of Parent and Merger Sub has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by its respective board of directors and no other corporate action or
proceedings on the part of Parent or Merger Sub is necessary to authorize the
execution and delivery by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub,
and, assuming this Agreement constitutes a valid and binding obligation of the
Stockholders, constitutes valid and binding obligations of Parent and Merger
Sub, enforceable against them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing and
considerations of public policy.
(b) No Conflict. The execution and delivery of this Agreement by
Merger Sub does not, and the consummation by Merger Sub of the transactions
contemplated hereby will not (i) conflict with or violate the Articles of
Incorporation, By-laws or other organizational documents of Merger Sub, (ii)
conflict with or violate any law applicable to Merger Sub or by which any
property or asset of Merger Sub is bound or affected, except for such conflicts
or violations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect, or (iii) result in a violation or any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Merger Sub is a party or by which Merger Sub or any property or asset
of Merger Sub is bound or affected, except for any such breaches or defaults
which would not materially impair the ability of Merger Sub to consummate the
transactions contemplated hereby.
4. FURTHER ASSURANCES. From time to time prior to the Effective
Time, at any other party's request and without further consideration, each party
hereto shall execute and deliver such additional documents and take all such
further lawful action as may be reasonably necessary or desirable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
5. TERMINATION. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become null
and void and have no further effect upon the earliest to occur of (x) the
Effective Time or (y) termination of the Merger Agreement pursuant to Section
7.1 thereof. Nothing in this Section 5 shall relieve any party of liability for
breach of this Agreement; provided, that Merger Sub's sole remedy in the event
of a breach of this Agreement shall be as specified in Section 6(i) (provided
that injunctive relief shall
4
<PAGE> 5
also be available for any breach of Section 1(e)) and in no event shall Merger
Sub be entitled to any form of monetary damages.
6. GENERAL PROVISIONS.
(a) Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses;
provided, that Merger Sub shall pay the documented reasonable out-of-pocket fees
and expenses of the Shareholders, including the fees and disbursements of one
counsel for all Shareholders.
(b) Amendment. This Agreement may not be amended except by an
instrument in writing signed by the party to be charged therewith.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed by customary receipt of transmission) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other addresses for a party as shall be specified by like notice):
To Parent or Merger Sub:
c/o Dicom Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to Parent
or Merger Sub) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
5
<PAGE> 6
To the Stockholders:
Addresses on Exhibit A
with a copy (which shall not constitute notice to the
Stockholders) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(e) Entire Agreement; No Third Party Beneficiaries. This Agreement
and the Merger Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
(f) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Merger Sub may assign, in Merger Sub's
sole discretion, any or all of their respective rights, interests and
obligations hereunder to any affiliate of Merger Sub. 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, heirs, agents,
representatives, trust beneficiaries, attorneys, affiliates and associates and
6
<PAGE> 7
all of their respective predecessors, successors, permitted assigns, heirs,
executors and administrators.
(i) Specific Performance. The parties acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall be exclusive and in lieu of any
other remedies, including arbitration, which any party may have under this
Agreement or otherwise.
(j) Waiver of Jury Trial. The parties to this Agreement each hereby
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action, or cause of action (i) arising under this Agreement
or (ii) in any way connected with or related or incidental to the dealings of
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The parties to this Agreement
each hereby agrees and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
* * * * *
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholders have
caused this Agreement to be signed by their respective officers or other
authorized person thereunto duly authorized as of the date first written above.
IMAGING COMPONENTS CORPORATION
By:/s/ Alexander P. Coleman
-------------------------------
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By:/s/ Alexander P. Coleman
-------------------------------
Name: Alexander P. Coleman
Title: Vice President
/s/ David S. Silver
-------------------------------
DAVID S. SILVER
/s/ Dean A. Hough
-------------------------------
DEAN A. HOUGH
/s/ Ronald J. Fikert
-------------------------------
RONALD J. FIKERT
/s/ Richard M. Murphy
-------------------------------
RICHARD M. MURPHY
/s/ Kevin Drum
-------------------------------
KEVIN DRUM
<PAGE> 9
/s/ Alexander P. Cilento
---------------------------------
ALEXANDER P. CILENTO
/s/ William E. Drobish
---------------------------------
WILLIAM E. DROBISH
/s/ B. Allen Lay
---------------------------------
B. ALLEN LAY
SOUTHERN CALIFORNIA VENTURES
By:/s/ B. Allen Lay
---------------------------------
Name: B. Allen Lay
Title: General Partner
<PAGE> 10
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF
EXISTING
STOCKHOLDERS' NAME AND ADDRESS SHARES
- ------------------------------ ------
<S> <C>
David S. Silver 342,500
16245 Laguna Canyon Road
Irvin, CA 92618
Dean A. Hough 345,000
16245 Laguna Canyon Road
Irvin, CA 92618
Ronald J. Fikert 37,500
16245 Laguna Canyon Road
Irvin, CA 92618
Richard M. Murphy 54,444
16245 Laguna Canyon Road
Irvin, CA 92618
Kevin Drum 32,500
16245 Laguna Canyon Road
Irvin, CA 92618
Alexander P. Cilento 2,615
[STREET]
[CITY]
William E. Drobish 120,000
[STREET]
[CITY]
B. Allen Lay 45,101
[STREET]
[CITY]
Southern California Ventures 42,806
[STREET]
[CITY]
</TABLE>
Exhibit A -- Page 1
<PAGE> 1
Exhibit (c)(3)
July 26, 1999
Imaging Components Corporation
temporary address:
75 Wall Street
New York, New York 10005
Gentlemen:
Reference is made to the Agreement and Plan of Merger (as amended from time to
time, the "Merger Agreement"), dated on or about July 26, 1999, by and among
Imaging Components Corporation, a Delaware corporation, (the "Company"), Kofax
Image Products, Inc., a Delaware corporation and Imaging Acquisition Corp., a
Delaware corporation. Capitalized terms used but not otherwise defined herein
shall have the meaning set forth in the Merger Agreement.
1. Commitment. This letter (the "Letter Agreement") will
confirm the commitment of each of David S. Silver, Dean A. Hough, Ronald F.
Fikert, Richard M. Murphy, and Kevin Drum (the "Management"):
(i) to exchange their respective Retained Shares (as
set forth on Schedule 2.8) for shares of Parent Class A Common and
Parent Class B Common in accordance with Section 2.8 of the Merger
Agreement, and
(ii) to execute and deliver the Stockholders
Agreement, the Registration Rights Agreement and the Executive Stock
Agreement, substantially (A) in the form of, and (B) on the terms and
conditions as set forth on, Exhibit A, Exhibit B, and Exhibit C
attached hereto and other terms and conditions reasonably satisfactory
to the parties thereto.
2. Conditions. Management's commitment is subject to the
consummation of the Merger.
3. Termination. This commitment will be effective upon the
Company's acceptance of the terms and conditions of this letter and will expire
on the first to occur of (a) the Closing (as defined in the Merger Agreement) or
(b) the termination of the Merger Agreement.
4. GOVERNING LAW. THIS LETTER AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
(EXCLUDING THE PROVISIONS OF SUCH LAWS REGARDING CONFLICTS OF LAW).
5. Assignment. Neither this Letter Agreement nor any of the
rights, interests or obligations hereunder may be assigned by the Company
without our prior written consent.
6. Complete Agreement. This Letter Agreement contains the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
<PAGE> 2
7. No Third Party Beneficiary. Nothing in this Letter
Agreement is intended, nor shall anything herein contained be construed, to
confer any rights, legal or equitable, in any person other than the parties
hereto and their respective legal representatives, heirs, successors and
permitted assigns.
8. Headings. The headings contained in this Letter Agreement
are for reference only and shall not affect in any way the meaning or
interpretation of this Letter Agreement.
Very truly yours,
/s/ David S. Silver
-----------------------------------
DAVID S. SILVER
/s/ Dean A. Hough
-----------------------------------
DEAN A. HOUGH
/s/ Ronald J. Fikert
-----------------------------------
RONALD J. FIKERT
/s/ Richard M. Murphy
-----------------------------------
RICHARD M. MURPHY
/s/ Kevin Drum
-----------------------------------
KEVIN DRUM
Accepted as of the date first above written:
IMAGING COMPONENTS CORPORATION
By /s/ Alexander P. Coleman
-------------------------------
Name: ALEXANDER P. COLEMAN
Title: Vice President
<PAGE> 3
EXHIBIT A
Stockholders Agreement
See attached
<PAGE> 4
EXHIBIT A
K&E DRAFT: 07/27/99
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of _________, 1999, is made
by and among Imaging Components Corporation, a Delaware corporation (the
"Company"), Dicom Group, plc, a company organized under the laws of England and
Wales ("Dicom"), Dresdner Kleinwort Benson Private Equity Partners LP, a
Delaware limited partnership ("DKB"), Green Shoots Ltd., a company incorporated
in the Republic of Mauritius ("GSL"), and each of the executives of the Company
or its subsidiaries as set forth on Schedule A (each an "Executive," and
together the "Executives"). DKB, Dicom, each of the Executives, GSL and their
respective Permitted Transferees (as defined below) are each referred to herein
as a "Stockholder" and together the "Stockholders". Capitalized terms used but
not otherwise defined herein shall have the meaning set forth in Section 1
hereof.
WHEREAS, each of the Executives has acquired shares of Common
Stock pursuant to an Executive Stock Agreement, dated as of the date hereof, by
and among the Company, and each such Executive (each such Executive Stock
Agreement, as amended, restated or modified from time to time, an "Executive
Agreement");
WHEREAS, DKB, Dicom and GSL have acquired shares of Common
Stock, pursuant to a Securities Purchase Agreement, dated as of the date hereof,
(as amended, restated or modified from time to time, the "Purchase Agreement");
WHEREAS, Imaging Acquisition Corporation, a newly formed
Delaware corporation ("Merger Sub"), is merging (the "Merger") with and into
Kofax Image Products, Inc., a Delaware corporation ("Kofax"), pursuant to the
Agreement and Plan of Merger dated as of July 27, 1999 by and among Kofax,
Merger Sub, and the Company (as amended, restated or modified from time to time,
the "Merger Agreement");
WHEREAS, the Company and the Stockholders desire to enter into
this Agreement for the purposes, among others, of (i) establishing the
composition of the board of directors of the Company (the "Board") and the board
of directors of each of its Subsidiaries, (ii) assuring the continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which the Stockholder Shares may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
"Affiliate" means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this
<PAGE> 5
definition, "control" (including, with its correlative meanings, "controlled by"
and "under common control with") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise).
"Approved Sale" means a Sale of the Company approved by the
Board (subject to the applicable provisions of Section 9) and the holders of a
majority of the shares of Class B Common and Class C Common, as a single class,
then outstanding, pursuant to which all holders of Stockholder Shares receive
with respect thereto (whether in such transaction or, with respect to an asset
sale, upon a subsequent liquidation) the same form and amount of consideration
per share of each class of Common Stock or, if any holders are given an option
as to the form and amount of consideration to be received, all holders are given
the same option; provided, that in connection with a Sale of the Company to
Dicom pursuant to Section 5(c), (i) approval by the Board and holders of a
majority of the shares of Class B Common and Class C Common shall not be
required, and(ii) the holders of Class A-1 Common Stock shall receive the
consideration set forth in Section 5(c)(ii)(A), and the holders of Class A-2
Common Stock shall receive the consideration set forth in Section 5(c)(ii)(B).
"Call Option Period" means the period commencing on the date
hereof and ending on the earlier to occur of (x) ________, 2001 [18 MONTH
ANNIVERSARY OF FUNDING], and (y) the date on which DKB gives written notice of
its election to terminate the Call Option Period due to the occurrence and
continuance of any of the following: (i) the Dicom Shares are not Publicly
Listed for a period of 10 consecutive days, or (ii) the occurrence of a Dicom
Change of Control.
"Class A Common" means the Company's Class A Common Stock, par
value $.001 per share, which is designated as Class A-1 Common Stock and Class
A-2 Common Stock, and any other securities issuable with respect thereto by way
of stock split, stock dividend or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Class B Common" means the Company's Class B Voting Common
Stock, par value $.001 per share, and any other securities issuable with respect
thereto by way of stock split, stock dividend or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Class C Common" means the Company's Class C Non-Voting Common
Stock, par value $.001 per share, and any other securities issuable with respect
thereto by way of stock split, stock dividend or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Common Stock" means, collectively, (i) the Class A Common,
the Class B Common, and the Class C Common, (ii) any other class of common stock
of the Company, and (iii) any capital stock of the Company issued or issuable
with respect to the securities referred to in clauses (i) and (ii) above whether
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
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"Common Stock Deemed Outstanding" means the aggregate number
of shares of Class B Common and Class C Common outstanding, determined without
duplication on a fully diluted basis giving effect to all outstanding securities
convertible into or exchangeable for such classes of Common Stock (collectively,
"Common Stock Equivalents") or any options, warrants, convertible securities or
other rights to acquire such classes of Common Stock or Common Stock
Equivalents.
"Dicom Change of Control" means the acquisition by a Person,
or group of related Persons (other than the current officers, directors, and
founding shareholders of Dicom) of (i) Dicom Shares representing a majority of
the Dicom Shares outstanding or (ii) all or substantially all of the
consolidated assets of Dicom and the Subsidiaries.
"Dicom Convertible Securities" means [PREFERRED SHARES AND/OR
NOTES ISSUED BY DICOM AND/OR THE COMPANY] pursuant to and in accordance with
Section 5(c) which are exercisable into, or exchangeable for, Dicom Shares, and
having such other terms and conditions as set forth on Exhibit A attached
hereto.
"Dicom Shares" mean the ordinary shares of 10 pence each of
Dicom, and any other equity securities issued with respect thereto in a share
consolidation, reclassification or other recapitalization.
"Family Group" means, with respect to any natural person, such
person's spouse, ancestors and descendants (whether natural or adopted) and any
trust or other entity (including a partnership or limited liability company)
solely for the benefit of such person and/or such person's spouse, their
respective ancestors and/or descendants.
"Independent Third Party" means any Person who, immediately
prior to the contemplated transaction, (i) does not own in excess of 5% of the
Common Stock Deemed Outstanding, (ii) is not an Affiliate of any such 5% owner
of the Common Stock Deemed Outstanding, or (iii) is not a member of the Family
Group of any such 5% owner of the Common Stock Deemed Outstanding.
"Invested Capital" means, with respect to any Stockholder
Share, the price paid by a Stockholder for such Stockholder Share, it being
acknowledged that Invested Capital for each Stockholder Share held as of the
date hereof is $1,000.
"Investors" means, collectively, Dicom, DKB and GSL.
"Ownership Ratio" means, as to any Stockholder at the time of
determination, the percentage obtained by dividing (i) the amount of shares of
Class B Common and Class C Common held by such Stockholder on a fully diluted
basis at such time by (ii) the Common Stock Deemed Outstanding at such time.
"Permitted Issuances" means an issuance of shares of Common
Stock (i) to any debt financing sources of the Company or its Subsidiaries in
connection with a so-called "equity kicker",
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<PAGE> 7
(ii) in connection with the transactions contemplated by the Transaction
Documents as of the Closing Date, (iii) upon the conversion or exchange of any
shares of any class of Common Stock available to all holders of the applicable
class of Common Stock, or in connection with any stock split, reverse stock
split, recapitalization, reclassification, share combination or similar
reorganization available to all holders of the applicable class of Common Stock,
(iv) in connection with a registered public offering of Common Stock by the
Company, and (v) to the management employees or directors of the Company
pursuant to any compensatory or incentive arrangement established by the Board.
"Permitted Transferees" has the meaning set forth in Section
4(c).
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" has the meaning set forth in Section 5(b).
"Publicly Listed" means, the listing of the Dicom Shares, on
at least one internationally recognized stock exchange, in the United States of
America (including the NASDAQ National Market, or the New York or American Stock
Exchange) or in Europe (including the London Stock Exchange or the Neuer Markt).
"Public Sale" means any sale of Stockholder Shares to the
public pursuant to an offering registered under the Securities Act or, after a
Public Offering, to the public effected through a broker, dealer or market maker
pursuant to the provisions of Rule 144 or Rule 144A (if such rule is available)
under the Securities Act (or any similar rule or rules then in effect).
"Qualified Public Offering" means the sale, in an underwritten
public offering registered under the Securities Act, of shares of the Company's
Common Stock, resulting in aggregate net proceeds to the Company of at least
$30.0 million.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company, the parties
hereto and certain other parties hereto, as amended, restated or modified from
time to time.
"Regulatory Problem" means, with respect to any holder of the
Company's securities, any set of facts or circumstances wherein it has been
asserted by any governmental regulatory agency to which such holder is subject
(or such holder of the Company's securities reasonably believes that there is a
substantial risk of such assertion) that such holder is not entitled to hold, or
exercise any significant right with respect to such securities.
"Sale of the Company" means the sale of the Company and its
Subsidiaries, including in one or more series of related transactions, to Dicom
pursuant to Section 5(c) or to an Independent Third Party or group of
Independent Third Parties pursuant to which such party or parties acquire (i)
equity securities of the Company constituting a majority of the Class B Common
and Class C Common (whether by merger, consolidation, sale or transfer of any or
all of the Company's
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<PAGE> 8
outstanding capital stock) or (ii) all or substantially all of the Company's
assets determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Stockholder Shares" means (i) any Common Stock issued to or
acquired by the Stockholders on or after the date hereof, and (ii) any equity
securities issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular shares constituting
Stockholder Shares, such shares will cease to be Stockholder Shares when they
have been sold in a Public Sale. For purposes of this Agreement, a Person will
be deemed to be a holder of Stockholder Shares whenever such Person has the
right to acquire directly or indirectly such Stockholder Shares (upon conversion
or exercise (without duplication) in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise of
such right), whether or not such acquisition has actually been effected.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a partnership, association
or other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses or shall be or
control the managing director or a general partner of such partnership,
association or other business entity.
"Transaction Documents" means the following agreements, all of
which are dated as of the date hereof, as amended from time to time: this
Agreement, the Registration Rights Agreement, the Executive Agreements, the
Purchase Agreement and the Merger Agreement.
"Transfer" means any sale, transfer, assignment, pledge,
hypothecation or other disposal.
2. BOARD OF DIRECTORS.
(a) Until the provisions of this Section 2 cease to be
effective pursuant to Section 2(d), each Stockholder shall vote all voting
securities of the Company over which such Stockholder has voting control, and
shall take all other necessary or desirable actions within such Stockholder's
control (whether in such Stockholder's capacity as a stockholder, director,
member of a board committee or officer of the Company or otherwise, and
including, without limitation, attendance at meetings in Person or by proxy for
purposes of obtaining a quorum and execution of written
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<PAGE> 9
consents in lieu of meetings), and the Company shall take all necessary and
desirable actions within its control (including, without limitation, calling
special board and stockholder meetings), so that:
(i) the Board shall be comprised of five (5) directors;
(ii) the following persons will be elected to the Board:
(A) the then duly elected and acting chief
executive officer of the Company;
(B) two representatives [(OR ONE REPRESENTATIVE
FOLLOWING THE EXPIRATION OF THE CALL OPTION
PERIOD)] designated by the holders of the
majority of Stockholder Shares held by Dicom
(such representative(s), the "Dicom
Directors").
(C) two representatives designated by the
holders of the majority of the Stockholder
Shares held by DKB (such representatives,
the "DKB Directors"); and
(D) [AFTER THE EXPIRATION OF THE CALL OPTION
PERIOD) ONE REPRESENTATIVE OF THE HOLDERS OF
THE CLASS B COMMON, SELECTED BY DKB AND
APPROVED BY THE HOLDERS OF A MAJORITY OF THE
CLASS B COMMON, WHICH REPRESENTATIVE SHALL
NOT BE AN AFFILIATE OF THE DKB, DICOM OR THE
EXECUTIVES (SUCH REPRESENTATIVE(S), THE
"INDEPENDENT DIRECTORS")];
(iii) at all times, the composition of the board of directors
of each of the Company's Subsidiaries (a "Sub Board") shall be the same as that
of the Board;
(iv) subject to the applicable provisions of Section 9, any
committees of the Board or a Sub Board may be created only upon approval of a
majority of the members of the Board;
(v) any director shall be removed from the Board, a Sub Board
or any committee thereof (with or without cause) at the written request of the
Stockholder or Stockholders which have the right to designate such a director
hereunder, but only upon such written request and under no other circumstances
(in each case, determined on the basis of a vote or consent of the relevant
Stockholder(s)); provided, that the holders of a majority of the Stockholder
Shares may remove any director for Cause but a replacement director may only be
designated by the Stockholders which have the right to designate such director
hereunder;
(vi) in the event that any representative designated
hereunder for any reason ceases to serve as a member of the Board or a Sub Board
or any committee thereof during such representative's term of office, the
resulting vacancy on the Board or such Sub Board or committee shall be filled by
a representative designated by the Stockholders which have the right to
designate the director who ceases to serve; and
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<PAGE> 10
(vii) the Company's Certificate of Incorporation and/or
bylaws will require the Board approval specified in Sections 9(a) and 9(b) in
order to approve the actions specified therein.
(b) The Company shall pay the reasonable out-of-pocket
expenses incurred by each director in connection with attending the meetings of
the Board or any Sub Board and any committee thereof.
(c) In the event that any provision of the Company's bylaws or
certificate of incorporation is inconsistent with any provision of this Section
2, the Stockholders shall take such action as may be necessary to amend any such
provision in the Company's bylaws or certificate of incorporation to remedy such
inconsistency.
(d) The parties hereto acknowledge that any action of the
Board or the Company are subject to the covenants set forth in Section 9.
(e) The provisions of this Section 2 shall terminate
automatically and be of no further force and effect upon the occurrence of a
Qualified Public Offering.
3. REPRESENTATIONS AND WARRANTIES. Each Stockholder represents
and warrants that (a) effective as of the date hereof such Stockholder is the
record owner of the number of Stockholder Shares and shares of Preferred Stock,
as the case may be, set forth opposite its name on Schedule B attached hereto
(assuming all such shares and options therefor have become fully vested), (b)
this Agreement has been duly authorized, executed and delivered by such
Stockholder and constitutes the valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, and (c) such Stockholder
has not granted and is not a party to any proxy, voting trust or other agreement
which is inconsistent with, conflicts with or violates any provision of this
Agreement. No holder of Stockholder Shares or Preferred Stock shall grant any
such proxy or become party to any such voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
4. RESTRICTIONS ON TRANSFER. No Stockholder may Transfer any
Stockholder Shares except in accordance with Sections 4 and 5.
(a) Tag Along Rights. Subject to Sections 4(c) and 4(d), at
least 30 days prior to any Transfer by any Investor of any Stockholder Shares
held by such Investor, such Investor shall deliver a written notice (the "Sale
Notice") to the Company and the other Stockholders ("Other Stockholders"),
specifying in reasonable detail the identity of the prospective Transferee(s),
the number and class of Stockholder Shares to be so Transferred and the terms
and conditions of the Transfer; provided, that this Section 4(a) shall not apply
to any Transfer made pursuant to Section 5 or a Public Sale. The Other
Stockholders may elect to participate in the contemplated Transfer by delivering
written notice to such Investor within 15 days after delivery of the Sale
Notice. If any Other Stockholders have elected to participate in such Transfer,
each of such Investor and such Other Stockholders shall be entitled to sell in
the contemplated Transfer, at the same price and on the same terms, a number of
Stockholder Shares determined as follows: (x) with respect to such Stockholders
Shares that are Class A Common, a number of shares of Class A Common equal to
the product of
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<PAGE> 11
(i) the quotient determined by dividing (A) the number of shares of Class A
Common owned by such Stockholder by (B) the aggregate number of shares of Class
A Common owned by such Investor and the Other Stockholders participating in such
Transfer, and (ii) the aggregate number of shares of Class A Common to be sold
in the contemplated Transfer and (y), with respect to such Stockholder Shares
that are Class B Common or Class C Common, a number of such Stockholder Shares
equal to the product of (i) the quotient determined by dividing (A) the
aggregate number of shares of Class B Common and Class C Common owned by such
Stockholder by (B) the aggregate number of shares of Class B Common and Class C
Common owned by such Investor and the Other Stockholders participating in such
Transfer and (ii) the aggregate number of shares of Class B Common and Class C
Common to be sold in the contemplated Transfer; provided, that if the Sale
Notice includes a Transfer of Class A Common, on the one hand, and Class B
Common and/or Class C Common, on the other hand, and any Other Stockholder
elects to participate in such Transfer, such Other Stockholder must sell the
number of shares of Class A Common calculated in accordance with clause (x) (or
if such Shareholder holds a lesser number of shares of Class A Common, all
shares of Class A Common held by such Stockholder). Each Stockholder
transferring Stockholder Shares pursuant to this Section 4(a) shall pay its pro
rata share (based on the relative amounts of proceeds received as a result of
such Transfer) of the expenses incurred by the Stockholders in connection with
such Transfer.
(b) First Offer Rights. Subject to Sections 4(c) and 4(d), at
least 30 days prior to any Transfer of Stockholder Shares by any Stockholder,
the Stockholder making such Transfer (the "Transferring Stockholder") shall
deliver a written notice (the "Transfer Notice") to the Company and the Other
Stockholders specifying in reasonable detail the number of Stockholder Shares
proposed to be Transferred, the identity of the prospective Transferee(s), the
proposed purchase price (which shall be payable solely in cash) and the other
terms and conditions of the Transfer; provided, that this Section 4(b) shall not
apply to any Transfer made pursuant to Section 5 or a Public Sale. The Company
may elect to purchase all (but not less than all) of the Stockholder Shares to
be Transferred, upon the same terms and conditions as those set forth in the
Transfer Notice, by delivering a written notice of such election to the
Transferring Stockholder within 15 days after the Transfer Notice has been
delivered to the Company. If the Company has not elected to purchase all of the
Stockholder Shares to be transferred, each Other Stockholder (or designees) may
elect to purchase all (but not less than all) of the Stockholder Shares to be
Transferred, upon the same terms and conditions as those set forth in the
Transfer Notice, by giving written notice of such election to the Transferring
Stockholder within 15 days after the Transfer Notice has been given to the Other
Stockholders. If more than one Other Stockholder elects to purchase the
Stockholder Shares to be so Transferred, the Stockholder Shares to be purchased
by each so electing Other Stockholder shall be allocated among each of them
based upon the relative number of Shareholder Shares then held by them unless
otherwise agreed upon by such electing Other Stockholders. If neither the
Company nor any Other Stockholder nor the Other Stockholders elects to purchase
all of the Stockholder Shares specified in the Transfer Notice, then the
Transferring Stockholder may, subject to Section 4(a), Transfer the Stockholder
Shares specified in the Transfer Notice to the Transferee(s) identified in the
Transfer Notice at a price and on terms no more favorable to such Transferee(s)
than specified in the Transfer Notice during the 60-day period immediately
following the date on which the Transfer Notice has been given to the Company
and the Other Stockholders.
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<PAGE> 12
Any Stockholder Shares not transferred within such 60-day period will be subject
to the provisions of this Section 4(b) upon subsequent Transfer.
(c) Permitted Transfers. The restrictions contained in this
Section 4 shall not apply with respect to any Transfer of Stockholder Shares by
any Stockholder (i) in the case of an individual Stockholder and its Permitted
Transferees, pursuant to applicable laws of descent and distribution or to any
member of such Stockholder's Family Group, (ii) in the case of DKB and its
Permitted Transferees, (A) among their Affiliates and employees, (B) to any
Person in order to resolve a Regulatory Problem, (C) as a distribution in kind
to its general partner or its limited partners pro rata in accordance with their
respective partnership interests, [OR (D) ANY PERSON SO LONG AS DKB OR ITS
PERMITTED TRANSFEREES DESCRIBED IN CLAUSES (A) THROUGH (C) ABOVE HOLD AT LEAST
51% OF THE STOCKHOLDER SHARES IT HOLDS AS OF THE DATE HEREOF AND SO LONG AS SUCH
PERSON IS REASONABLY ACCEPTABLE TO DICOM], (iii) in the case of Dicom, GSL and
its Permitted Transferees, among their Affiliates and (iv) in the case of an
Executive, pursuant to Section 3 of such Executive's Executive Agreement;
provided, that the restrictions contained in this Section 4 shall continue to be
applicable to such Stockholder Shares after any such Transfer; provided further,
that (x) the transferees of such Stockholder Shares shall have agreed in writing
to be bound by the provisions of this Agreement which affect the Stockholder
Shares so transferred by executing a joinder in substantially the form attached
hereto as Exhibit B and (y) with respect to any such transferee of any
Executive, a joinder to such Executive's Executive Agreement in form and
substance satisfactory to the Company; provided, that any such transferee shall
not be bound by Sections 6 or 7 of the Executive Agreement. All direct and
indirect transferees permitted under this Section 4(c) are collectively referred
to herein as "Permitted Transferees."
(d) Termination of Restrictions. The restrictions set forth in
this Section 4 shall continue with respect to each Stockholder Share until the
earlier of (i) the Transfer of such Stockholder Share in a Public Sale, or an
Approved Sale, or (ii) the consummation of a Qualified Public Offering.
5. SALE OF THE COMPANY; PUBLIC OFFERING; CALL OPTION.
(a) Sale of the Company.
(i) Following the approval of an Approved Sale in
accordance with the terms hereof, each Stockholder will (x) consent to
and raise no objections against the Approved Sale or the process
pursuant to which the Approved Sale was arranged, (y) waive any
dissenter's rights and other similar rights, and (z) if the Approved
Sale is structured as a sale of stock, each Stockholder will agree to
sell its Stockholder Shares on the terms and conditions of the Approved
Sale. Each Stockholder will take all necessary and desirable actions,
in its, his or her capacity as a stockholder of the Company, as
directed by the Board and the holders of a majority of the Company's
Common Stock in connection with the consummation of any Approved Sale,
including without limitation executing the applicable purchase
agreement and granting identical indemnification rights (whether
directly to the buyer of the Stockholder Shares or pursuant to the
provisions of a contribution agreement); provided, that each
Stockholder's indemnification obligation thereunder shall be limited to
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<PAGE> 13
the net cash proceeds received by such Stockholder in the Approved
Sale, and if such indemnification is joint and several among the
Stockholders, a contribution agreement or arrangement shall be made
which effectuates such limitation.
(ii) If the Company or the holders of the Company's
securities enter into any negotiation or transaction for which Rule 506
(or any similar rule then in effect) under the Securities Act may be
available with respect to such negotiation or transaction (including a
merger, consolidation or other reorganization), the Stockholders will,
at the request of the Company, appoint a purchaser representative (as
such term is defined in Rule 501) reasonably acceptable to the Company.
If any Stockholder appoints a purchaser representative designated by
the Company, the Company will pay the fees of such purchaser
representative.
(iii) All Stockholders will bear their pro rata share
(based upon the relative amounts of proceeds received in such Approved
Sale) of the reasonable costs of any sale of Stockholder Shares
pursuant to an Approved Sale to the extent such costs are incurred for
the benefit of all selling Stockholders and are not otherwise paid by
the Company or the acquiring party; provided, that the foregoing shall
not apply to the Executive's in the event that the form of
consideration received in such Approved Sale is less than 50% in cash
or cash equivalents. Costs incurred by any Stockholder on its own
behalf will not be considered costs of the transaction hereunder.
(iv) In connection with an Approved Sale pursuant to
Section 5(c), DKB will cooperate in good faith with Dicom to implement
the provisions of this Section 5(a), and Dicom shall be obligated to
acquire the Stockholder Shares held by Stockholders at the prices set
forth in Section 5(c)(ii).
(v) This Section 5(a) shall automatically terminate
upon a Qualified Public Offering.
(b) Public Offering. In the event that the Company consummates
an initial public offering of shares of Common Stock registered under the
Securities Act (a "Public Offering"), the Stockholders will take all necessary
and desirable actions in consummation of any such Public Offering. In the event
that such Public Offering is an underwritten offering and the managing
underwriters advise the Company that in their opinion the structure of the
Common Stock may adversely affect the marketability of the offering, the
Stockholders will vote for a recapitalization and/or exchange of the Stockholder
Shares into securities (the "Reclassified Securities") that the managing
underwriters and the Board finds acceptable; provided, that (i) the Reclassified
Securities provide each Stockholder with the same relative economic and voting
interest as such Stockholder had prior to such recapitalization and/or exchange
and is consistent with the rights and preferences set forth in the Certificate
of Incorporation as in effect immediately prior to such Public Offering, and
(ii) in the event that DKB determines in its reasonable good faith judgment
that, as a result of receiving the Reclassified Securities, a Regulatory Problem
exists, then DKB may elect not to accept only the portion of such Reclassified
Securities which would cause such Regulatory Problem; provided, at DKB's
request, the Company shall issue to DKB, in lieu of Reclassified Securities,
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<PAGE> 14
nonvoting securities which shall otherwise be identical in all respects to such
securities constituting Reclassified Securities, except that they (A) shall be
nonvoting, (B) shall be convertible into a voting security (including the
securities constituting Reclassified Securities) on such terms as are requested
by DKB in light of the applicable regulatory considerations then prevailing, and
(C) shall not, at DKB's request, be a common equity security (but may be a
convertible security). All reasonable expenses incurred by the Stockholders in
connection with the actions set forth in this Section 5(b) shall be borne by the
Company.
(c) Call Option.
(i) Subject to the terms and conditions set forth in
this Section 5(c), at any time prior to the expiration of the Call
Option Period, Dicom shall have the option (the "Call Option") to
acquire all (but not less than all) outstanding Stockholder Shares held
by DKB, GSL and their respective Permitted Transferees free and clear
of all liens, pledges, charges, encumbrances or security interests of
any kind by providing 10 days prior written notice to DKB and GSL and
the Company (the "Call Notice"). The Call Notice shall set forth the
purchase price for each Stockholder Share, by class (in accordance with
clause (ii) below) and the time and place of closing of the Call
Option, which shall occur not later than 30 days (and not earlier than
10 days) after delivery of the Call Notice. Notwithstanding anything in
this Section 5(c) to the contrary, at the time of the closing of the
Call Option, the Dicom Shares (i) must be Publicly Listed, (ii) Dicom
shall have consummated on or prior to such date a public offering of
its equity securities, with such securities being listed on a
recognized European stock exchange (an "Exchange") resulting in
aggregate proceeds to Dicom of at least $20 million (a "Dicom
Offering"), (iii) the Dicom Shares must be trading on the Exchange at a
price equal to or greater than $4.94 per share, and (iv) no event of
default shall have occurred and be continuing with respect to any of
Dicom's debt obligations which have an outstanding principal amount in
excess $500,000.
(ii) The consideration to be paid to DKB, GSL and
their respective Permitted Transferees (or their respective designees)
pursuant to the Call Option duly exercised hereunder shall be as
follows:
(A) each share of Class A-1 Common shall be
acquired for cash in an amount equal to the Invested
Capital for such share of Class A-1 Common Stock
multiplied by (x) 125% if the Call Notice is
delivered prior to _________, 2000 [SIX MONTHS] (the
"First Call Period"), (y) 137.5% if the Call Notice
is delivered after _________, 2000 [SIX MONTHS], but
prior to ________, 2001 (the "Second Call Period")
[ONE YEAR], or (z) 150% if the Call Notice is
delivered after _______, 2001 (the "Third Call
Period"); and
(B) each Stockholder Share (other than Class
A-1 Common) shall be acquired for Dicom Convertible
Securities exercisable for a number of Dicom Shares
equal to the quotient obtained by dividing (x) the
Invested Capital for such Stockholder Share
multiplied by 125% if the Call Notice is delivered
during the First Call Period, 137.5% if the Call
Notice is delivered
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<PAGE> 15
during the Second Call Period, or 150% if the Call
Notice is delivered during the Third Call Period, and
by (y) $4.94 if the Call Notice is delivered during
the First Call Period, $5.43 if the Call Notice is
delivered during the Second Call Period, or $5.93 if
the Call Notice is delivered during the Third Call
Period, in each case as adjusted for any share
consolidation, reclassification or other
reorganization affecting Dicom Shares or any new
issuance of Dicom Shares after the date hereof which
would cause the number of issued and outstanding
Dicom Shares to exceed 13,361,157 (excluding such
issuances upon exercise of options for Dicom Shares
issued and outstanding on the date hereof [AND SHARES
ISSUED IN CONNECTION WITH A DICOM OFFERING]).
(iii) At the closing of the Call Option, DKB, GSL and
their respective Permitted Transferees shall deliver all certificates
for Stockholder Shares held by them to Dicom, and Dicom shall deliver
to DKB and GSL (or their respective designees) (A) the cash portion of
the applicable purchase price with immediately available funds and (B)
the portion of the applicable purchase price payable in Dicom
Convertible Securities in duly executed certificates for the applicable
amount of Dicom Convertible Securities.
6. PREEMPTIVE RIGHTS. If the Company issues any equity
securities or any securities containing options or rights to acquire any equity
securities or any securities convertible or exchangeable for equity securities,
in each case after the date hereof (other than a Permitted Issuance) to any
Person (the "Offeree"), the Company will offer to sell to each Stockholder a
number of such securities ("Offered Shares") so that the Ownership Ratio
immediately after the issuance of such securities for each Stockholder would be
equal to the Ownership Ratio for such Stockholder immediately prior to such
issuance of securities. The Company shall give each Stockholder at least 30 days
prior written notice of any proposed issuance, which notice shall disclose in
reasonable detail the proposed terms and conditions of such issuance (the
"Issuance Notice"). Each Stockholder will be entitled to purchase such
securities at the same price, on the same terms, and at the same time as the
securities are issued to the Offeree by delivery of written notice to the
Company of such election within 15 days after delivery of the Issuance Notice
(the "Election Notice"); provided, that if more than one type of security was
issued, each Stockholder shall, if it exercises its rights pursuant to this
Section 6, purchase such securities in the same ratio as issued. If any of the
Stockholders have elected to purchase any Offered Shares, the sale of such
shares shall be consummated as soon as practical (but in any event within 10
days) after the delivery of the Election Notice. In the event any Stockholder
elects not to exercise its rights pursuant to this Section 6, no other
Stockholder shall have the right to purchase the securities offered to such
Stockholder. This Section 6 will terminate automatically, and be of no further
force and effect, upon the consummation of a Qualified Public Offering.
7. LEGEND. In addition to any legend required by any other
document, each certificate evidencing Stockholder Shares and each certificate
issued in exchange for or upon the transfer of any Stockholder Shares (if such
shares remain Stockholder Shares as defined herein after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
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<PAGE> 16
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON [DATE OF ISSUANCE], HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF
_______________ __, 1999 BY AND AMONG THE ISSUER OF SUCH
SECURITIES (THE "COMPANY") AND THE COMPANY'S STOCKHOLDERS AS
SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME. A COPY OF
SUCH STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE
BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares.
8. TRANSFER OF STOCKHOLDER SHARES.
(a) Stockholder Shares are transferable only (i) in a Public
Sale or (ii) subject to the provisions of Section 8(b) below, by any other
legally available means of Transfer; provided, that any Transfer must also
comply with, or otherwise be permitted by, the terms of Sections 4 or 5 and the
other provisions of this Agreement.
(b) In connection with the Transfer of any Stockholder Shares
other than a Transfer described in clause (i) of Section 8(a) above, the holder
thereof shall deliver written notice to the Company describing in reasonable
detail the Transfer or proposed Transfer, together with an opinion of counsel
reasonably acceptable to the Company to the effect that such Transfer of
Stockholder Shares may be effected without registration of such Stockholder
Shares under the Securities Act. In addition, if the holder of the Stockholder
Shares delivers to the Company an opinion of counsel that no subsequent Transfer
of such Stockholder Shares shall require registration under the Securities Act,
the Company shall promptly upon such contemplated Transfer deliver new
certificates for such Stockholder Shares which do not bear the legend set forth
in Section 7 above. If the Company is not required to deliver new certificates
for such Stockholder Shares not bearing such legend, the holder thereof shall
not Transfer the same until the prospective transferee has confirmed to the
Company in writing its agreement to be bound by the conditions contained herein,
as provided in Section 4(c) above.
(c) Upon the request of a holder of Stockholder Shares, the
Company shall promptly supply to such Person or its prospective transferees all
information regarding the Company required to be delivered in connection with a
Transfer pursuant to Rule 144A (or any similar rule or rules then in effect) of
the Securities and Exchange Commission.
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<PAGE> 17
(d) Upon the request of any holder of Stockholder Shares, the
Company shall remove the legend set forth in Section 7 above from the
certificates for such holder's Stockholder Shares; provided, that such
Stockholder Shares are eligible for sale pursuant to Rule 144 (or any similar
rule or rules then in effect) of the Securities and Exchange Commission.
(e) Any Transfer or attempted Transfer of any Stockholder
Shares in violation of any provision of this Agreement shall be null and void,
and the Company shall not record such Transfer on its books or treat any
purported transferee of such Stockholder Shares as the owner of such shares for
any purpose.
9. COVENANTS.
(a) DKB Covenants. Until the consummation of a Qualified
Public Offering, without the approval of a majority of the Board (which must
include at least one DKB Director):
(i) The Company will not, and will not permit any of
its Subsidiaries, to enter into any transaction or series of
transactions for the benefit of any Affiliate or any director or
officer (including members of such Person's Family Group) which is out
of the ordinary course of business or on terms and conditions that are
not arm's-length; provided, that the foregoing shall not apply to (A)
the declaration and payment of dividends approved by the Board and
otherwise permitted by the Company's material debt agreements and
Certificate of Incorporation, (B) employment arrangements with any
Executive or employees of the Company entered into in the ordinary
course of business, (C) any transactions expressly permitted or
contemplated by the Transaction Documents or (D) any transaction
between Dicom and its affiliates and Kofax on terms and conditions
consistent with past custom and practices.
(ii) The Company will not, and will not permit its
Subsidiaries to, enter into an agreement for an Approved Sale (except
as provided in Section5(c)), or acquire any business or property from
or capital stock of, or be a party to any acquisition for which the
consideration for such acquisition consists of shares of Common Stock
or any other equity securities of the Company.
(iii) The Company and its Subsidiaries shall not
engage to any substantial extent in any line or lines of business
activity other than the types of businesses engaged in by the Company
and its Subsidiaries as of the date hereof and businesses directly
related thereto.
(b) Call Period Covenants. Until the expiration of the Call
Period, without the approval of a majority of the Board (which must include at
least one Dicom Director and one DKB Director):
(i) The Company will not, and will not permit its
Subsidiaries to, enter into an agreement for an Approved Sale (except
as provided in Section5(c)), or sell, lease or dispose of (x) any asset
or group of related assets outside the ordinary course of business in
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<PAGE> 18
one or a series of related transactions which have a value in the
aggregate in excess of $1,000,000 or (y) any capital stock of any
Subsidiary to any Person other than the Company or a wholly owned
Subsidiary of the Company.
(ii) The Company will not declare, set aside or pay
any dividend or other distribution (whether in cash, stock or property
or any combination thereof) in respect of its capital stock, or except
as permitted hereunder or pursuant to any Executive Agreement, redeem
or otherwise acquire any of its capital stock, including any
Stockholder Shares.
(iii) The Company will not consummate a Public
Offering.
(iv) Except for indebtedness incurred pursuant to the
Company's debt agreement, in effect as of the date hereof, the Company
will not, and will not permit any of its Subsidiaries to, incur or
assume any indebtedness for borrowed money in excess of $1,000,000 in
principal amount.
(v) The Company will not, and will not permit any of
its Subsidiaries to, affect any voluntary liquidation, dissolution or
winding up.
(vi) The Company will not terminate any member of
senior management of the Company and its Subsidiaries.
(vii) The Company will not, and will not permit any
of its Subsidiaries to, take any of the actions described in clauses
(i) and (iii) of Section 9(a) above.
(viii) The Company will not, and will not permit any
of its Subsidiaries to, make any investment in any Person, acquire (by
merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division
thereof or any equity interest therein or make any capital expenditure
(except for transactions having an aggregate value not exceeding
$1,000,000).
(c) Financial Statements. The Company will deliver to each of
DKB, GSL, Dicom [AND EACH EXECUTIVE] (so long as each such party holds
Stockholder Shares):
(i) as soon as practicable and in any event within
ninety (90) days after the end of each fiscal year of the Company,
consolidated balance sheets of the Company and its Subsidiaries as of
the end of such year and the related consolidated statements of income,
stockholders' equity and cash flow of the Company and its Subsidiaries
for such fiscal year, all in reasonable detail accompanied by a report
thereon of independent certified public accountants;
(ii) as soon as available and in any event within
thirty (30) days after the end of each month, internally prepared
financial statements consisting of consolidated balance sheets for the
Company and its Subsidiaries as of the end of such month, and the
related consolidated statements of income and cash flow of the Company
and its Subsidiaries
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<PAGE> 19
for such month and for the period from the beginning of the current
fiscal year to the end of such month; and
(iii) as soon as available and in any event within
thirty (30) days prior the beginning of the fiscal year of the Company,
statements of forecasted consolidated income for the Company and its
Subsidiaries for each fiscal month in such fiscal year and a forecasted
consolidated balance sheet of the Company and its Subsidiaries,
together with supporting assumptions which were reasonable when made,
as at the end of each fiscal month in such fiscal year, all prepared in
good faith in reasonable detail and consistent with the Company's past
practices in preparing projections.
10. FEES AND EXPENSES. The Company shall reimburse the
Stockholders for fees and expenses incurred in connection with the preparation
and negotiation of the Transaction Documents and the consummation of the
transactions contemplated thereby, including, without limitation, the financing
of the Merger and the Offer (as defined in the Merger Agreement); provided, that
in the event the Company or Merger Sub receive a Termination Fee (as defined in
the Merger Agreement), DKB and Dicom shall each receive 50% of any amount of
such Termination Fee remaining after giving effect to the reimbursement of all
fees and expenses described above.
11. AMENDMENT AND WAIVER. No modification, amendment or waiver
of any provision of this Agreement shall be effective against the Company or the
Stockholders unless such modification, amendment or waiver is approved in
writing by the Company and the holders of 66 2/3% of the Stockholder Shares;
provided, that any such modification, amendment or waiver which adversely
affects any Stockholder and is prejudicial to such Stockholder relative to all
of the other Stockholders cannot be effected without the consent of such
Stockholder. Notwithstanding the foregoing, no amendment, modification or waiver
to Sections 2(a)(ii), 4(a), 4(c)(iii), 5(c), 9(b), 9(c) or, 10 or 11 may be made
without the prior written consent of Dicom. The failure of any party to enforce
any of the provisions of this Agreement shall in no way be construed as a waiver
of such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
12. SEVERABILITY; ENTIRE AGREEMENT. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein. Except as otherwise expressly set forth herein, this
document and the other Transaction Documents embodies the complete agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
13. SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Company and its
-16-
<PAGE> 20
successors and assigns and the Stockholders and any subsequent holders of
Stockholder Shares and the respective successors and assigns of each of them, so
long as they hold Stockholder Shares (and hold or have received Stockholder
Shares in accordance with the terms hereof).
14. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
15. REMEDIES. The parties hereto shall be entitled to enforce
their rights under this Agreement specifically to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company or any Stockholder may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
16. NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will only be deemed to have been given when delivered
personally, sent via a nationally recognized overnight courier, or sent via
facsimile to the recipient. Such notices, demands and other communications will
be sent to the address indicated below:
To the Company:
Imaging Components Corporation
16245 Laguna Canyon Road
Irvine, CA 92618
Attention: Chief Executive Officer
Facsimile: (949) 727-3511
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<PAGE> 21
with copies (which shall not constitute notice to the Company) to:
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
Dicom Group plc
Business Building Forren West
Grundstrasse 14
CH-6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022-4675
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
To DKB:
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to DKB) to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Geraldine A. Sinatra, Esq.
Facsimile: (215) 994-2222
To Dicom:
Dicom Group plc
Business Building Forren West
Grundstrasse 14
CH-6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
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<PAGE> 22
with a copy (which shall not constitute notice to Dicom) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
To GSL:
c/o Deloitte & Touche Offshore Services Ltd.
3rd Floor, Cerne House
Chausee
Port Louis
Republic of Mauritius
Attention : Simon Littlewood
Facsimile:
To any Executive:
To Executive's address as indicated on Schedule A hereto
or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
18. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
19. TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the
essence for each and every provision of this Agreement. Whenever the last day
for the exercise of any privilege or the discharge or any duty hereunder shall
fall upon a Saturday, Sunday, or any date on which banks in New York City, New
York are authorized to be closed, the party having such privilege or duty may
exercise such privilege or discharge such duty on the next succeeding day which
is a regular business day.
20. WAIVER OF JURY TRIAL. The parties to this Agreement each
hereby waives, to the fullest extent permitted by law, any right to trial by
jury of any claim, demand, action, or cause of action (i) arising under this
Agreement or (ii) in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the
transactions related
-19-
<PAGE> 23
hereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity, or otherwise. The parties to this Agreement each hereby
agrees and consents that any such claim, demand, action, or cause of action
shall be decided by court trial without a jury and that the parties to this
Agreement may file an original counterpart of a copy of this Agreement with any
court as written evidence of the consent of the parties hereto to the waiver of
their right to trial by jury.
* * * * *
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date first above written.
IMAGING COMPONENTS CORPORATION
By: ___________________________________
Name:
Title:
Dicom GROUP PLC
By:________________________________
Name:
Title:
DRESDNER KLEINWORT BENSON PRIVATE
EQUITY PARTNERS LP
By: Dresdner Kleinwort Benson Private Equity LLC
Its: General Partner
By:________________________________
Name:
Title:
GREEN SHOOTS LTD.
By:________________________________
Name:
Title:
[EXECUTIVES]
<PAGE> 25
SCHEDULE A
LIST OF EXECUTIVES AND ADDRESSES
17
<PAGE> 26
SCHEDULE B
CAPITALIZATION
<PAGE> 27
EXHIBIT A
Form of Dicom Convertible Securities
[TO BE NEGOTIATED]
<PAGE> 28
EXHIBIT B
FORM OF JOINDER TO
STOCKHOLDERS AGREEMENT
THIS JOINDER to the Stockholders Agreement, dated as of
________,____ and among Imaging Components Corporation, a Delaware corporation
(the "Company"), and certain stockholders of the Company (the "Agreement"), is
made and entered into as of _____________ by and between the Company and
______________ ("Holder"). Capitalized terms used but not otherwise defined
herein shall have the meanings set forth in the Agreement.
WHEREAS, Holder has acquired certain shares of Common Stock
("Holder Stock"), and the Agreement and the Company requires Holder, as a holder
of Common Stock, to become a party to the Agreement, and Holder agrees to do so
in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Joinder hereby
agree as follows:
1. Agreement to be Bound. Holder hereby agrees that upon
execution of this Joinder, it shall become a party to the Agreement and shall be
fully bound by, and subject to, all of the covenants, terms and conditions of
the Agreement as though an original party thereto and shall be deemed a
Stockholder for all purposes thereof. In addition, Holder hereby agrees that all
Holder Stock shall be deemed Stockholder Shares for all purposes of the
Agreement.
2. Successors and Assigns. Except as otherwise provided
herein, this Joinder shall bind and inure to the benefit of and be enforceable
by the Company and its successors and assigns and Holder and any subsequent
holders of Holder Stock and the respective successors and assigns of each of
them, so long as they hold any shares of Holder Stock.
3. Counterparts. This Joinder may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
4. Notices. For purposes of Section 16 of the Agreement, all
notices, demands or other communications to the Holder shall be directed to:
[NAME]
[ADDRESS]
[FACSIMILE NUMBER]
<PAGE> 29
5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
6. DESCRIPTIVE HEADINGS. The descriptive headings of this Joinder are
inserted for convenience only and do not constitute a part of this Joinder.
*****
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this
Joinder as of the date first above written.
IMAGING COMPONENTS CORPORATION
By:_________________________________
Name:
Title:
[HOLDER]
By:_________________________________
<PAGE> 31
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
[______], 1999, is made by and among IMAGING COMPONENTS CORPORATION, a Delaware
corporation (the "Company"), Dicom Group plc, a company organized under the laws
of England and Wales ("Dicom"), Green Shoots Ltd. ("GSL"), Dresdner Kleinwort
Benson Private Equity Partners LP, a Delaware limited partnership ("DKB"), and
each of the executives of the Company or its Subsidiaries as set forth on
Schedule A attached hereto (each, an "Executive", and collectively, the
"Executives"). Capitalized terms used herein but not otherwise defined herein
shall have the meaning set forth in Section 1 hereof.
WHEREAS, each of the Investors holds shares of Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings.
"Affiliate" means, when used with reference to a specified
Person, any Person that directly or indirectly controls or is controlled by or
is under common control with the specified Person. As used in this definition,
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise).
"Class A Common" means the Company's Class A Common Stock, par
value $.001 per share (which is designated as either Class A-1 Common Stock or
Class A-2 Common Stock), and any other securities issuable with respect thereto
by way of stock split, stock dividend or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"Class B Common" means the Company's Class B Voting Common
Stock, par value $.001 per share, and any other securities issuable with respect
thereto by way of stock split, stock dividend or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Class C Common" means the Company's Class C Nonvoting Common
Stock, par value $.001 per share, and any other securities issuable with respect
thereto by way of stock split, stock dividend or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
<PAGE> 32
"Common Stock" means, collectively, (i) the Class A Common,
the Class B Common and the Class C Common, (ii) any other class of common stock
of the Company, and (iii) any capital stock of the Company issued or issuable
with respect to the securities referred to in clauses (i) or (ii) above whether
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Holder" means, at any applicable time, the holders of
Registrable Securities.
"Initial Public Offering" means the initial, underwritten
public offering of the Company's Common Stock registered under the Securities
Act.
"Investors" means, collectively, Dicom, GSL, DKB and the
Executives.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a bank, a trust company, a land
trust, a business trust, a governmental entity or any department, agency or
political subdivision thereof or any other entity or organization, whether or
not it is a legal entity.
"Piggyback Registration" has the meaning set forth in Section
3(a).
"Registrable Securities" means (i) any shares of Common Stock
acquired by, or issued or issuable to, the Investors or any of their respective
Affiliates on or after the date hereof and (ii) all equity securities issued or
issuable directly or indirectly with respect to any shares of Common Stock
described in clause (i) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public in compliance with Rule 144. For purposes
of this Agreement, a Person will be deemed to be a holder of Registrable
Securities whenever such Person has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing and distributing expenses, messenger
and delivery expenses, fees and expenses of custodians, internal expenses
(including all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses and fees for listing the securities to
be registered on any securities exchange or the NASD automated quotation system,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company.
-2-
<PAGE> 33
"Rule 144" means Rule 144 under the Securities Act (or any
similar rule then in force).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (ii) if a
partnership, limited liability company, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by that Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
partnership, limited liability company, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, limited
liability company, association or other business entity gains or losses or shall
be or control the managing director, managing member, manager or a general
partner of such partnership, limited liability company, association or other
business entity.
2. DEMAND REGISTRATIONS.
(a) Requests for Registration. At any time following the date
which is one hundred twenty days after the consummation of an Initial Public
Offering, the holder(s) of at least 25% of the Registrable Securities in the
aggregate may request registration under the Securities Act of all or any
portion of their Registrable Securities on Form S-1 or any similar long-form
registration (a "Long-Form Registration"), or on Form S-2 or S-3 or any similar
short-form registration (a "Short-Form Registration"), if such a short form is
available. All registrations requested pursuant to this Section 2(a) are
referred to herein as "Demand Registrations". Each request for a Demand
Registration (a "Demand Request") shall specify the approximate number of
Registrable Securities requested to be registered, the anticipated method or
methods of distribution, and the anticipated per share price range for such
offering, and each such Demand Request must include at least a number of
Registrable Securities that, if sold at the mid-point of such per share price
range, would result in proceeds of at least $1,000,000 to the holders thereof.
Within ten days after receipt of any such Demand Request, the Company will give
written notice of such requested registration (which shall specify the intended
method of disposition of such Registrable Securities) to all other Holders (a
"Company Notice") and the Company will include (subject to the provisions of
this Agreement) in such registration, all Registrable Securities with respect to
which the Company has received written requests for inclusion therein within 20
days after the delivery of such Company Notice; provided, that any such other
holder may withdraw its request for inclusion at any time prior to executing the
underwriting agreement or, if none, prior to the applicable registration
statement becoming effective.
(b) Long-Form Registrations. The Holders will be entitled to
two (2) Long-Form Registration in the aggregate. A registration will not count
as the permitted Long-Form Registration for purposes of the preceding sentence
unless and until it has become effective and no
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<PAGE> 34
Long-Form Registration will count as a Long-Form Registration for purposes of
the preceding sentence unless the applicable Holders sell at least 90% of the
Registrable Securities requested to be included by them in such registration.
(c) Short-Form Registrations. The Holders will be entitled to
(i) in the event a permitted Long-Form Registration has been consummated, one
Short-Form Registration, or (ii) otherwise four (4) Short-Form Registrations.
Demand Registrations by Holders will be Short-Form Registrations whenever the
Company is permitted to use any applicable short form. After the Company has
become subject to the reporting requirements of the Exchange Act, the Company
will use its best efforts to make Short-Form Registrations on Form S-3 available
for the sale of Registrable Securities.
(d) Priority on Demand Registrations. The Company will not
include in any Demand Registration any securities which are not Registrable
Securities unless the holder(s) of at least 66 2/3% of the Registrable
Securities included in such Demand Registration otherwise consent. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities, requested to be
included in such offering exceeds the number of Registrable Securities and other
securities, if any, which can be sold in an orderly manner in such offering
within a price range specified in the Demand Request pursuant to Section 2(a)
and without adversely affecting the marketability of the offering, then the
Company will include in such Demand Registration (A) first, the number of
Registrable Securities requested to be included in such Demand Registration, pro
rata among the Holders of such Registrable Securities based on the number of
Registrable Securities requested by each such Holder to be so included, and (B)
second, any other securities of the Company requested to be included in such
registration, in such manner as the Company may determine.
(e) Restrictions on Demand Registrations. The Company will not
be obligated to file any registration statement with respect to any Demand
Registration within 180 days after the effective date of a previous Demand
Registration or a previous Piggyback Registration.
(f) Selection of Underwriters. In the case of a Demand
Registration for an underwritten offering initiated by Holders, then holders of
66 2/3% of the Registrable Securities to be included in such Demand Registration
will have the right to select the investment banker(s) and manager(s) to
administer the offering (which investment banker(s) and manager(s) will be
nationally recognized) subject to the Company's approval, which will not be
unreasonably withheld.
(g) Other Registration Rights. Except as provided in this
Agreement, after the date hereof, the Company will not grant to any Persons the
right to request the Company to register any equity or similar securities of the
Company, or any securities convertible or exchangeable into or exercisable for
such securities, without the prior written consent of the holders of at least
66 2/3% of the Registrable Securities.
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3. PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. Whenever the Company proposes to
register any of its Common Stock under the Securities Act for its own account or
for the account of any holder of the Company Stock (other than pursuant to a
Demand Registration, and other than pursuant to a registration statement on Form
S-8 or S-4 or any successor form or form for similar registration purposes or in
connection with a registration the primary purpose of which is to register debt
securities i.e., in connection with a so-called "equity kicker.") (a "Piggyback
Registration"), the Company will give prompt written notice to all Holders of
its intention to effect such a registration and of such Holders' rights under
this Section 3(a). Upon the written request of any Holder, the Company shall
include in such registration (subject to the provisions of this Agreement) all
Registrable Securities requested to be registered pursuant to this Section 3(a),
subject to Section 3(b) or 3(c), below, as applicable, with respect to which the
Company has received written requests for inclusion therein within 20 days after
the receipt of the Company's notice; provided, that any such other Holder may
withdraw its request for inclusion at any time prior to executing the
underwriting agreement or, if none, prior to the applicable registration
statement becoming effective. Notwithstanding the foregoing, no Registrable
Securities shall be included in the Initial Public Offering without the prior
written consent of the holders of a 66 2/3% of Registrable Securities. In the
event the holders of 66 2/3% of Registrable Securities consent to the inclusion
of Registrable Securities in the Initial Public Offering, then the holders of
Registrable Securities shall be entitled to include securities in such
registration as provided in this Section 3.
(b) Priority on Primary Registrations. If a Piggyback
Registration is in part an underwritten primary registration on behalf of the
Company and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the Company and without adversely
affecting the marketability of the offering, then the Company will include in
such registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such
registration, pro rata among the Holders based on the number of Registrable
Securities requested by each such Holder to be so included, and (iii) third, any
other securities requested to be included in such registration, in such manner
as the Company may determine.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the holders initially
requesting such registration and without adversely affecting the marketability
of the offering, then the Company will include in such registration (i) first,
the securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Securities requested to be included
in such registration, pro rata among such Holders based on the number of
Registrable Securities requested by each such Holder to be so included, and
(iii) third, any other securities requested to be included in such registration,
in such manner as the Company may determine.
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<PAGE> 36
(d) Selecting Underwriters. If any Piggyback Registration is
an underwritten offering, the investment banker(s) and manager(s) for the
offering will be selected by the Company.
(e) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to this
Section 3, and if such previous registration has not been withdrawn or
abandoned, then the Company will not file or cause to be effected any other
registration of any of its equity or similar securities or securities
convertible or exchangeable into or exercisable for its equity or similar
securities under the Securities Act (except on Forms S-4 or S-8, or any
successor form or form for similar registration purposes, or in connection with
a Demand Registration or in connection with a registration the primary purpose
of which is to register debt securities i.e., in connection with a so-called
"equity kicker."), whether on its own behalf or at the request of any Holder or
holders of such securities, until a period of at least 180 days has elapsed from
the effective date of such previous registration.
4. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities hereby agrees not to
effect any sale or distribution of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 180-day period beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration (except as part of such underwritten registration), unless the
underwriters managing such underwritten registration otherwise agree.
(b) The Company (i) will not effect any sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Forms S-4 or S-8 or
any successor form or form for similar registration purposes), unless the
underwriters managing such underwritten registration otherwise agree, and (ii)
will use its reasonable best efforts to cause each holder of the Common Stock or
any securities convertible into or exchangeable or exercisable for the Common
Stock, purchased from the Company at any time after the date of this Agreement
(other than in a registered public offering) to agree not to effect any sale or
distribution of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the underwriters
managing such underwritten registration otherwise agree.
5. REGISTRATION PROCEDURES. Whenever the Holders have requested that
any Registrable Securities be registered pursuant to this Agreement, the Company
will use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected pursuant to Section 6(b) below
copies of all such documents proposed to be filed, which documents will be
subject to the prompt review and
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reasonable comment of such counsel), and upon filing such documents, the Company
shall promptly notify in writing such counsel of the receipt by the Company of
any written comments by the SEC with respect to such registration statement or
prospectus or any amendment or supplement thereto or any written request by the
SEC for the amending or supplementing thereof or for additional information with
respect thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 180 days and comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement and cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection, (ii) subject itself to
taxation in any such jurisdiction in any jurisdiction where it is not so
subject, or (iii) consent to general service of process (i.e., service of
process which is not limited solely to securities law violations) in any such
jurisdiction where it is not so subject);
(e) promptly notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon the discovery
of the happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made, and, at the request of any such
seller, the Company will, as soon as reasonably practicable, file and furnish to
all sellers a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the Nasdaq National Market System
("Nasdaq Market") and, if listed on the Nasdaq Market, use its best efforts to
secure designation of all such Registrable Securities covered by such
registration
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<PAGE> 38
statement as a Nasdaq "National Market System security" within the meaning of
Rule 11Aa2-1 under the Exchange Act or, failing that, to secure Nasdaq Market
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the National
Association of Securities Dealers;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation,
effecting a split or a combination of stock or units); provided, that no holder
of Registrable Securities shall have any indemnification or contribution
obligations inconsistent with Section 7 hereof;
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information and participate in due diligence sessions reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection with
such registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first day of the Company's
first full calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 promulgated thereunder;
(k) use reasonable best efforts to prevent the issuance of any
stop order ("Stop Order") suspending the effectiveness of a registration
statement, or of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any securities included in such
registration statement for sale in any jurisdiction, and, in the event of such
issuance, the Company shall immediately notify the holders of Registrable
Securities included in such registration statement of the receipt by the Company
of such notification and shall use its best efforts promptly to obtain the
withdrawal of such order;
(l) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such Registrable Securities,
and cooperate and assist with any filings to be made with the NASD;
(m) obtain one or more "cold comfort" letters, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the
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<PAGE> 39
date of the closing under the underwriting agreement), signed by the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as the holders of a
majority of the Registrable Securities being sold reasonably request; and
(n) provide a legal opinion of the Company's outside counsel,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), with respect to the registration
statement, each amendment and supplement thereto, the prospectus included
therein (including the preliminary prospectus) and such other documents relating
thereto in customary form and covering such matters of the type customarily
covered by legal opinions of such nature.
If any such registration or comparable statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company and if in such Holder's
sole and exclusive judgment, such Holder is or might be deemed to be an
underwriter or a controlling person of the Company, such Holder shall have the
right to require (i) the insertion therein of language, in form and substance
satisfactory to such Holder and presented to the Company in writing, to the
effect that the holding by such Holder of such securities is not to be construed
as a recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force, the
deletion of the reference to such Holder; provided, that with respect to this
clause (ii), if requested by the Company, such holder shall furnish to the
Company an opinion of counsel to such effect, which opinion and counsel shall be
reasonably satisfactory to the Company.
6. REGISTRATION EXPENSES. The Company will bear all Registration
Expenses whether or not the Demand Registration or Piggyback Registration
pursuant to which such Registration Expenses are incurred have become effective.
In addition, in connection with each Demand Registration, the Company will
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees and disbursements of one counsel chosen by the holders
of a majority of the Registrable Securities requesting inclusion in such
registration (which counsel shall be retained to represent all such Holders).
7. INDEMNIFICATION.
(a) By the Company. The Company agrees to, and will cause each
of its Subsidiaries to agree to, indemnify, to the fullest extent permitted by
law, each Holder, its officers, directors, members, employees, agents,
stockholders and general and limited partners and each Person who controls
(within the meaning of the Securities Act and Exchange Act) such Holder against
any and all losses, claims, damages, liabilities and expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof), joint or
several, arising out of or based upon any untrue or alleged untrue statement of
material fact contained in any registration statement, reports required and
other documents filed under the Exchange Act, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, together with any
documents incorporated therein by reference, or any omission or alleged omission
of a material fact required to
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<PAGE> 40
be stated therein or necessary to make the statements therein not misleading, or
any violation or alleged violation by the Company or any of its Subsidiaries of
any federal, state, foreign or common law rule or regulation and relating to
action or inaction in connection with any such registration, disclosure document
or other document and shall reimburse such holder, officer, director, member,
employee, agent, stockholder, partner or controlling Person for any legal or
other expenses, including any amounts paid in any settlement effected with the
consent of the Company, which consent will not be unreasonably withheld or
delayed, incurred by such holder, officer, director, member, employee, agent,
stockholder, partner or controlling Person in connection with the investigation
or defense of such loss, claim, damage, liability or expense, except insofar as
the same are caused by or contained in any information furnished in writing to
the Company by such holder expressly for use therein. In connection with an
underwritten offering, the Company will indemnify such underwriters, their
officers, directors, agents and employees and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.
(b) By the Holders. In connection with any registration
statement in which a Holder is participating, each such Holder will furnish to
the Company in writing such information and affidavits about such Holder as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify the
Company, its directors and officers and each Person who controls (within the
meaning of the Securities Act) the Company and the other holders of Registrable
Securities against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in writing by
such holder which authorizes its use in the applicable document; provided, that
the obligation to indemnify will be individual, not joint and several, for each
Holder and will be limited to the net amount of proceeds received by such Holder
from the sale of Registrable Securities pursuant to such registration statement.
(c) Claim Procedures. Any Person entitled to indemnification
hereunder will (i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification (provided that the failure
to give prompt notice will not impair any Person's right to indemnification
hereunder to the extent such failure has not prejudiced the indemnifying party)
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit the indemnifying party to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent it may wish, with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed, the indemnifying party will not be subject to
any liability for any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably withheld or delayed) and the
indemnifying party shall not, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, a release from all liability in
respect of such claim or litigation provided by the claimant or plaintiff to
such indemnified party. An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay (i) the fees
and expenses of more than one
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<PAGE> 41
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim or (ii) any settlement made
by any indemnified party without such indemnifying party's consent (but such
consent will not be unreasonably withheld).
(d) Survival; Contribution. The indemnification provided for
under this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
agent or employee and each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls (within the meaning of the Securities Act) such indemnified party, and
will survive the transfer of securities. The Company also agrees to make such
provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event the Company's indemnification is
unavailable for any reason.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements (including, without limitation, pursuant to the
terms of any over-allotment or "green shoe" option requested by the managing
underwriter(s), provided that no Holder will be required to sell more than the
number of Registrable Securities that such Holder has requested the Company to
include in any registration) and (b) completes and executes all customary
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements;
provided, that no Holder included in any underwritten registration shall be
required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification or contribution obligations to the Company or the underwriters
with respect thereto, except as otherwise provided in Section 7.
9. RULE 144 REPORTING. With a view to making available to the holders
of Registrable Securities the benefits of certain rules and regulations of the
SEC which may permit the sale of the Registrable Securities to the public
without registration, the Company agrees at its expense to use its best efforts
to:
(a) make and keep current public information available, within
the meaning of Rule 144 or any similar or analogous rule promulgated
under the Securities Act, at all times after it has become subject to
the reporting requirements of the Exchange Act;
(b) file with the SEC, in a timely manner, all reports and
other documents required of the Company under the Securities Act and
Exchange Act (after it has become subject to such reporting
requirements); and
(c) so long as any party hereto owns any Registrable
Securities, furnish to such Person forthwith upon request, a written
statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time commencing 90 days after the
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<PAGE> 42
effective date of the first registration filed by the Company for an
offering of its securities to the general public), the Securities Act
and the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as such
Person may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
10. NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered if delivered
personally, sent via a nationally recognized overnight courier, or sent via
facsimile to the recipient, or if sent by certified or registered mail, return
receipt requested, will be deemed to have been given two business days
thereafter. Such notices, demands and other communications will be sent to the
address indicated below:
To the Company:
Imaging Components Corporation
16245 Laguna Canyon Road
Irvine, CA 92618
Attention: Chief Executive Officer
Facsimile: (949) 727-3511
with copies (which shall not constitute
notice to the Company) to:
Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
DICOM Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmidt
Facsimile: 011-41-41-798-30-88
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4800
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<PAGE> 43
To Dicom:
DICOM Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmidt
Facsimile: 011-41-41-798-30-88
with a copy (which shall not constitute
notice to Dicom) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4800
To DKB:
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to DKB) to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Geraldine A. Sinatra, Esq.
Facsimile: (215) 994-2222
To GSL:
c/o Deloitte & Touche Offshore Services, Ltd.
3rd Floor, Cerne House
Chaussee
Port Louis
Republic of Mauritius
Attention: Simon Littlewood
Facsimile: ( )
To the Executives:
At the address indicated on Schedule A hereto
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<PAGE> 44
or such other address, telecopy number or to the attention of such other Person
as the recipient party shall have specified by prior written notice to the
sending party.
11. MISCELLANEOUS.
(a) Remedies. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(b) Amendments and Waivers. The provisions of this Agreement
may be amended or waived only upon the prior written consent of the Company and
holders of at least 66 2/3% of the Registrable Securities; provided, that no
amendment shall be effective without the consent of a Holder to the extent that
such amendment would adversely affect the rights or obligations of such Holder
hereunder in any material respect, and any amendment to which such written
consent is obtained will be binding upon the Company and all Holders.
(c) Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or Holders are also for the benefit of, and enforceable by, any
subsequent Holder.
(d) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(e) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
(f) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW
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<PAGE> 45
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(h) Time of the Essence; Computation of Time. Time is of the
essence for each and every provision of this Agreement. Whenever the last day
for the exercise of any privilege or the discharge or any duty hereunder shall
fall upon a Saturday, Sunday, or any date on which banks in New York City, New
York are authorized to be closed, the party having such privilege or duty may
exercise such privilege or discharge such duty on the next succeeding day which
is a regular business day.
(i) Waiver of Jury Trial. The parties to this Agreement each
hereby waives, to the fullest extent permitted by law, any right to trial by
jury of any claim, demand, action, or cause of action (i) arising under this
Agreement or (ii) in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the
transactions related hereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity, or otherwise. The parties to
this Agreement each hereby agrees and consents that any such claim, demand,
action, or cause of action shall be decided by court trial without a jury and
that the parties to this Agreement may file an original counterpart of a copy of
this Agreement with any court as written evidence of the consent of the parties
hereto to the waiver of their right to trial by jury.
* * * * *
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<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first above written.
IMAGING COMPONENTS CORPORATION
By: ______________________________________
Name:
Title:
DICOM GROUP PLC
By: ______________________________________
Name:
Title:
DRESDNER KLEINWORT BENSON
PRIVATE EQUITY PARTNERS LP
By: Dresdner Kleinwort Benson Private Equity LLC
Its: General Partner
By:____________________________________
Name:
Title:
GREEN SHOOTS, LTD.
By: ______________________________________
Name:
Title:
[EXECUTIVES]
<PAGE> 47
SCHEDULE A
LIST OF EXECUTIVES AND ADDRESSES
<PAGE> 48
EXHIBIT C
DRAFT: 07/27/99
FORM OF EXECUTIVE STOCK AGREEMENT
EXECUTIVE STOCK AGREEMENT, dated as of _____________, 1999, is made
by and among Imaging Components Corporation, a Delaware corporation (the
"Company"), _____________ (the "Executive"), Dicom Group plc, a company
organized under the laws of England and Wales ("Dicom"), and Dresdner Kleinwort
Benson Private Equity Partners LP, a Delaware limited partnership ("DKB").
Capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to such terms in Section 1.
WHEREAS, Imaging Acquisition Corporation, a newly formed Delaware
corporation ("Merger Sub"), is merging (the "Merger") with and into Kofax Image
Products, Inc., a Delaware corporation ("Kofax"), pursuant to the Agreement and
Plan of Merger, dated as of July 27, 1999, by and among Kofax, Merger Sub, and
the Company (as amended, restated or modified from time to time, the "Merger
Agreement");
WHEREAS, the Executive is currently a management employee of Kofax,
and pursuant to the terms of the Merger Agreement, the Executive will receive,
in exchange for ____ shares of Kofax's common stock (the "Retained Shares")
_____ shares of Class A-2 Common Stock and ____ shares of Class B Common
(collectively, the "New Shares");
WHEREAS, pursuant to a Voting Agreement, dated as of July 27, 1999,
by and among the Executive, the Company and Merger Sub (as amended, restated or
modified from time to time, the "Voting Agreement"), the Executive has agreed to
tender all shares of his Kofax common stock (except for the Retained Shares) in
the Offer (as defined in the Merger Agreement).
NOW, THEREFORE, in consideration of the mutual undertaking contained
herein, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings.
"Board" means the board of directors of the Company.
"Cause" means (i) a material breach of this Agreement by the
Executive which Executive fails to cure within 10 days following written notice
thereof specifying in reasonable detail the nature of such breach, (ii) a breach
of the Executive's duty of loyalty to the Company and its Subsidiaries, (iii)
Executive's conviction of a crime involving an act of moral turpitude or which
constitutes a felony in the jurisdiction in which Executive is employed,
regardless of whether the crime involves the Company or any of its Subsidiaries,
or (iv) Executive's continued failure to perform his material duties to the
Company and its Subsidiaries as directed by the Board and such failure has
continued for 15 days after Executive has received written notice specifically
advising Executive of such failure.
<PAGE> 49
"Class A Common" means the Company's Class A Common Stock, par value
$.001 per share (which is designated either Class A-1 Common Stock or Class A-2
Common Stock), and any other securities issuable with respect thereto by way of
stock split, stock dividend or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Class B Common" means the Company's Class B Voting Common Stock,
par value $.001 per share, and any other securities issuable with respect
thereto by way of stock split, stock dividend or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Class C Common" means the Company's Class C Non-Voting Common
Stock, par value $.001 per share, and any other securities issuable with respect
thereto by way of stock split, stock dividend or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Common Stock" means, collectively, (i) the Class A Common, the
Class B Common, and the Class C Common, (ii) any other class of common stock of
the Company, and (iii) any capital stock of the Company issued or issuable with
respect to the securities referred to in clauses (i) and (ii) above whether by
way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"Executive Stock" means all of such shares of Common Stock received
by the Executive hereunder, and all shares of Common Stock hereafter acquired by
the Executive. Executive Stock will continue to be Executive Stock in the hands
of any holder other than the Executive, including all transferees of the
Executive (except for the Company and the Investors (or their designees)), and
except as otherwise provided herein, each such other holder of Executive Stock
will succeed to all rights and obligations attributable to the Executive as a
holder of Executive Stock hereunder. Executive Stock will also include shares of
the Company's capital stock issued with respect to Executive Stock by way of a
stock split, stock dividend or other recapitalization. Executive Stock will
cease to be Executive Stock when transferred pursuant to a Public Sale (as
defined in the Stockholders Agreement).
"Fair Value" means for each share of Common Stock, the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ National Market System ("NASDAQ NMS") as
of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in
the NASDAQ NMS, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar
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<PAGE> 50
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which the Fair Value is being determined and the 20
consecutive business days prior to such day. If at any time the Common Stock is
not listed on any securities exchange or quoted in the NASDAQ NMS or the
over-the-counter market, the Fair Value of each share of Common Stock shall be
determined by the Board in its good faith judgment; provided, that if within 15
days of receiving notice of such determination of Fair Market Value and
Executive gives written notice to the Company of his objection to such
determination, Fair Market Value shall be determined by an independent
investment banking firm selected by the Company which shall submit to the
Company and the Executive a written report setting forth such determination,
which shall be binding upon all parties. The Company shall bear all expenses of
such independent banking firm, unless such firm's determination of Fair Market
Value is within 10% of the Board's initial determination, in which case such
expenses shall be borne by the Executive.
"Good Reason" means (i) a material reduction of Executive's duties
and responsibilities as an officer of the Company (as compared to Executive's
duties and responsibilities as of the date hereof) and (ii) any forced permanent
relocation of Executive to a geographic area outside of Orange County,
California.
"Investors" means Dicom and DKB.
"LIBOR" means a per annum interest rate equal to the offered
quotation to first class banks by Dresdner Bank for deposit in U.S. dollars in
the London Interbank Eurodollar market at 11:00 A.M. (London Time) as of the
date of determination.
"Original Cost" of each share of Common Stock will be equal to
$1,000.00 (as proportionately adjusted for all subsequent stock splits, stock
dividends and other recapitalizations).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Stockholders Agreement" means the Stockholders Agreement, dated as
of ________, 1999, by and among the Company, the Executive and other
stockholders of the Company, as may be amended, restated or modified from time
to time.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, a
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<PAGE> 51
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
partnership, limited liability company, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, limited
liability company, association or other business entity gains or losses or shall
be or control the managing director or general partner of such partnership,
limited liability company, association or other business entity.
2. EXCHANGE OF RETAINED SHARES; REPRESENTATIONS AND WARRANTIES
OF THE EXECUTIVE.
(a) Upon the execution of this Agreement, the Executive will
exchange the Retained Shares for, and the Company upon receipt of the Retained
Shares shall issue to the Executive, the New Shares. Upon tendering the Retained
Shares in accordance with the terms of the Voting Agreement, the Company will
deliver to the Executive certificate(s) representing such New Shares. Upon
execution of this Agreement, the Executive shall execute and deliver
Stockholders Agreement in the form attached hereto as Exhibit A.
(b) Within thirty (30) days after the date hereof, the
Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code and the regulations promulgated
thereunder in the form of Exhibit B attached hereto.
(c) In connection with the purchase and sale of the Executive
Stock hereunder, the Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by the Executive
pursuant to this Agreement will be acquired for the Executive's own
account and not with a view to, or any present intention of, distribution
thereof in violation of the Securities Act, or any applicable state
securities laws, and the Executive Stock will not be disposed of in
contravention of the Securities Act or any applicable state securities
laws.
(ii) No commission, fee or other remuneration is to be paid or
given, directly or indirectly, to any Person for soliciting the Executive
to purchase the Executive Stock.
(iii) The Executive is an officer or employee of the Company
or one of its Subsidiaries, is sufficiently sophisticated in financial
matters to analyze the investment in the Executive Stock, is able to
evaluate the risks and benefits of the investment in the Executive Stock,
and has determined that such investment in the Executive Stock is suitable
for the Executive, based upon the Executive's financial situation and
needs, as well as the Executive's other securities holdings.
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<PAGE> 52
(iv) The Executive:
(A) has not been convicted within the last five years of any
felony or misdemeanor in connection with the offer, purchase, or
sale of any security or any felony involving fraud or deceit,
including, but not limited to, forgery, embezzlement, obtaining
money under false pretenses, larceny, or conspiracy to defraud;
(B) is not currently subject to any state administrative
enforcement order or judgment entered by a state securities
administrator within the last five years or is subject to any
state's administrative enforcement order or judgment in which fraud
or deceit, including, but not limited to, making untrue statements
of material facts and omitting to state material facts, was found
and the order or judgment was entered within the last five years;
(C) is not subject to any state's administrative enforcement
order or judgment which prohibits, denies or revokes the use of any
exemption from registration in connection with the offer, purchase
or sale of securities; or
(D) is not currently subject to any order, judgment or decree
of any court of competent jurisdiction, entered within the last five
years, temporarily or preliminarily restraining or enjoining the
Executive from engaging in or continuing any conduct or practice in
connection with the purchase or sale of any security or involving
the making of any false filing with the state.
(v) The Executive is able to bear the economic risk of the
Executive's investment in the Executive Stock for an indefinite period of
time and the Executive understands that the Executive Stock has not been
registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration
is available.
(vi) The Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Stock and has had full access to such other information
concerning the Company as the Executive has requested. The Executive has
reviewed, or has had an opportunity to review, the following documents:
(A) the Company's Certificate of Incorporation and Bylaws; (B) the loan
agreements, notes and related documents with the Company's senior lenders;
and (C) all of the materials provided by the Company to any Person
providing financing to the Company.
(vii) This Agreement constitutes the legal, valid and binding
obligation of the Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by the Executive
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which the Executive is a party or any
judgment, order or decree to which the Executive is subject.
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<PAGE> 53
(d) As an inducement to the Company to issue the Executive
Stock to the Executive, and as a condition thereto, the Executive acknowledges
and agrees that neither the issuance of the Executive Stock to the Executive nor
any provision contained herein shall entitle the Executive to remain in the
employment of the Company and its Subsidiaries or affect the right of the
Company to terminate the Executive's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event the Executive's employment with the Company is
terminated (the "Termination") for any reason, the Executive Stock (whether held
by the Executive or one or more of the Executive's transferees) will be subject
to repurchase by the Company and the Investors (or their designees) pursuant to
the terms and conditions set forth in this Section 3 (the "Repurchase Option").
(b) The purchase price for each share of Executive Stock acquired
pursuant to the Repurchase Option shall be as follows:
(i) in the event the Termination is for any reason other than
for Cause, the purchase price shall be Fair Value for each such share;
(ii) in the event the Termination is for Cause, the purchase
price shall be the Original Cost for each such share;
(iii) in the event of a Termination as a result of Executive's
voluntary resignation without Good Reason, the purchase price for (x) a
number of shares of each class of Common Stock held by the Executive equal
to the product of (A) the number of six-month periods that have elapsed as
of the date of Termination since the date hereof ("Semi-Annual Periods")
and (B) 12.5% of such number of shares shall be Fair Value for each such
share, and (y) each remaining share of Executive Stock shall be Original
Cost for each such share plus an interest factor on such Original Cost
(calculated from the date hereof through the closing date of the
Repurchase Option) equal to LIBOR as of the date of Termination compounded
annually ("Interest Factor"); and
(iv) in the event of a Termination as a result of Executive's
voluntary resignation with Good Reason, the purchase price for (x) a
number of shares of each class of Common Stock held by the Executive equal
to the product of (A) the number of Semi-Annual Periods and (B) 25% of
such number of shares shall be Fair Value for each such share, and (y)
each remaining share of Executive Stock shall be Original Cost for each
such share plus the applicable Interest Factor.
The shares described in foregoing clauses (iii)(x)(A) and (iv)(x)(A) shall be
referred to herein as "Vested Shares".
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<PAGE> 54
(c) Upon Termination, the Board may elect to cause the Company to
purchase all or any portion of the Executive Stock by delivering written notice
(the "Repurchase Notice") to the holder or holders of the Executive Stock within
30 days after the Termination. The Repurchase Notice will set forth the number
of shares of Executive Stock to be acquired from each holder, the aggregate
consideration to be paid for such securities and the time and place for closing
the transaction. The number of shares to be repurchased by the Company shall
first be satisfied to the extent possible from the shares of Executive Stock
held by the Executive at the time of delivery of the Repurchase Notice. If the
number of shares of Executive Stock then held by the Executive is less than the
total number of shares of Executive Stock the Company has elected to purchase,
the Company shall purchase the remaining shares elected to be purchased from the
other holder(s) of Executive Stock under this Agreement, pro rata according to
the number of shares of Executive Stock held by such other holder(s) at the time
of delivery of such Repurchase Notice (determined as nearly as practicable to
the nearest share). The number of shares of Executive Stock to be repurchased
hereunder will be allocated among the Executive and the other holders of
Executive Stock (if any) pro rata according to the number of shares of Executive
Stock to be purchased from such Persons. Notwithstanding the foregoing, within
15 days after receiving the Repurchase Notice, Executive may by written notice
to the Company elect to delay the repurchase of all or any portion of Vested
Shares thereafter, the Executive, at his option, may notify the Company in
writing of his desire to have such Vested Shares repurchased, and if the
Company, within 30 days of receiving such notice (such notice to be deemed a
Repurchase Notice hereunder), elects in writing to repurchase such Vested
Shares, such Vested Shares shall be repurchased in accordance with this Section
3 at, notwithstanding anything to the contrary in Section 3(b), Original Cost
plus the applicable Interest Factor.
(d) If for any reason the Company does not elect to purchase all of
the Executive Stock pursuant to the Repurchase Option, then the Investors (or
their designees) shall be entitled to exercise the Repurchase Option for all or
any portion of the Executive Stock subject to the Repurchase Option that the
Company has not elected to purchase (the "Available Shares"). Each of the
Investors (or their designees) shall have the right to purchase a pro rata
portion of the Available Shares based on the total number of shares of Common
Stock held by each such Investor; provided, that if any Investor (or its
designee) elects not to purchase its pro rata portion of Available Shares, the
other Investors shall have the right to purchase any such remaining Available
Shares. As soon as practicable after the Company has determined that there will
be Available Shares, but in any event within 30 days after the Termination, the
Company shall give written notice (the "Option Notice") to the Investors setting
forth the number of any Available Shares and the purchase price for such
Available Shares. The Investors (or their designees) may elect to purchase all
or a portion of the Available Shares by giving written notice to the Company
within 30 days after the Option Notice has been given by the Company. As soon as
practicable, and in any event within ten days after the expiration of the 30-day
period set forth above, the Company shall notify each holder of Executive Stock
subject to the Repurchase Option as to the number of shares of Executive Stock
being purchased from such holder by the Investors (or their designees) (the
"Supplemental Repurchase Notice"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company
shall also deliver written notice to the Investors (or their
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<PAGE> 55
designees) setting forth the number of shares of Executive Stock which the
Investors (or their designees) are entitled to purchase, the aggregate purchase
price and the time and place of the closing of the transaction.
(e) The closing of the purchase of the Executive Stock pursuant to
the Repurchase Option shall take place on the date designated by the Company in
the Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
later than the 45th day after the delivery of the later of such notices to be
delivered nor earlier than the fifth day after such delivery. The Company and/or
the Investors (or their designees) will pay for the Executive Stock to be
purchased pursuant to the Repurchase Option by delivery of a certified or
cashier's check or wire transfer of funds. The purchasers of Executive Stock
hereunder will be entitled to receive customary representations and warranties
from the sellers as to title, authority and capacity to sell and to require all
sellers' signatures to be guaranteed.
(f) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law.
4. RESTRICTIONS ON TRANSFER.
(a) The certificates representing the Executive Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK AGREEMENT BETWEEN THE COMPANY
AND THE SIGNATORY THERETO DATED AS OF __________________, 1999 AND A
STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND CERTAIN OTHER PARTIES THERETO
DATED AS OF ________, 1999. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
(b) The Executive Stock is subject to the restrictions on transfer
set forth in the Stockholders Agreement.
5. CONFIDENTIAL INFORMATION. The Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
or any of its
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<PAGE> 56
Subsidiaries concerning the business or affairs of the Company or any Subsidiary
("Confidential Information") are the property of the Company or such Subsidiary.
Therefore, the Executive agrees that he shall not disclose to any unauthorized
person or use for his own account any Confidential Information without the prior
written consent of the Board, unless and to the extent that the aforementioned
matters become generally known to and available for use by the public other than
as a result of the Executive's acts or omissions to act. The Executive shall
deliver to the Company at the termination of the Executive's employment, or at
any other time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and copies
thereof) relating to the Confidential Information, Work Product (as defined
below) and the business of the Company or any Subsidiary which he may then
possess or have under his control.
6. INVENTIONS AND PATENTS. The Executive agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to the Company's
or any of its Subsidiaries' actual or anticipated business, research and
development or existing or future products or services and which are conceived,
developed or made by the Executive while employed by the Company or any of its
Subsidiaries ("Work Product") belong to the Company or such Subsidiary. The
Executive will promptly disclose such Work Product to the Board and perform all
actions reasonably requested by the Board (whether during or after the
Executive's employment period) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney and
other instruments). This Section 6 shall be subject to California Labor Law Code
2870, a copy of which is attached hereto as Exhibit C.
7. NONCOMPETE, NONSOLICITATION.
(a) The Executive acknowledges that in the course of his employment
with the Company and its Subsidiaries he has become familiar, and he will become
familiar, with the Company's and its Subsidiaries' trade secrets and with other
Confidential Information and that his services have been and will be of special,
unique and extraordinary value to the Company and its Subsidiaries. Therefore,
the Executive agrees that, during the time he is employed by the Company and its
Subsidiaries and for one year thereafter (the "Noncompete Period"), he shall not
directly or indirectly own, manage, control, participate in, consult with,
render services for, or in any manner engage in any business (including by
himself or through any other entity) competing with the businesses of the
Company or its Subsidiaries as such businesses exist or are in process on the
date of the termination of Executive's employment. Nothing herein shall prohibit
the Executive from being a passive owner of not more than 2% of the outstanding
stock of a corporation which is publicly traded, so long as the Executive has no
active participation in the business of such corporation.
(b) During the Noncompete Period, the Executive shall not directly
or indirectly through another entity (i) induce or attempt to induce any
employee of the Company or any Subsidiary of the Company to leave the employ of
the Company or such Subsidiary, or in any way
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<PAGE> 57
interfere with the relationship between the Company or any Subsidiary of the
Company and any employee thereof, or (ii) induce or attempt to induce any
customer, supplier, licensee or other business relation of the Company or any
Subsidiary of the Company to cease doing business with the Company or such
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company or any
Subsidiary of the Company.
(c) If, at the time of enforcement of this Section 7, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(d) In the event of a breach or a threatened breach by the Executive
of any of the provisions of this Section 7, the Company, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security).
8. NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally, mailed
by certified or registered mail, return receipt requested and postage prepaid,
or sent via a nationally recognized overnight courier, or sent via facsimile to
the recipient (followed by telephone confirmation to the receiving party). Such
notices, demands and other communications will be sent to the address indicated
below:
To the Company:
Imaging Components Corporation
16245 Laguna Canyon Road
Irvine, CA 92618
Attention: Chief Executive Officer
Facsimile: (949) 727-3511
with copies (which shall not constitute notice to the
Company) to:
Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
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Dicom Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmidt
Facsimile: 011-41-41-798-30-88
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4800
To Dicom:
Dicom Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmidt
Facsimile: 011-41-41-798-30-88
with a copy (which shall not constitute notice to Dicom) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4800
To DKB:
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
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<PAGE> 59
with a copy (which shall not constitute notice to DKB) to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Geraldine A. Sinatra, Esq.
Facsimile: (215) 994-2222
To the Executives:
The address for the Executive listed on the signature page
hereto.
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
9. MISCELLANEOUS.
(a) Transfers in Violation of Agreement. Any transfer or attempted
transfer of any Executive Stock in violation of any provision of this Agreement
shall be null and void, and the Company shall not record such transfer on its
books or treat any purported transferee of such Executive Stock as the owner of
such stock for any purpose.
(b) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Complete Agreement. This Agreement, the Stockholders Agreement,
the Voting Agreement and the Merger Agreement embodies the complete agreement
and understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
(d) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Executive, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Executive
-12-
<PAGE> 60
Stock); provided, that the rights and obligations of the Executive under this
Agreement shall not be assignable except in connection with a permitted transfer
of Executive Stock hereunder.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(g) Remedies. Each of the parties to this Agreement (including the
Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including reasonable attorneys'
fees) caused by any breach of any provision of this Agreement and to exercise
all other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company, the
Executive and the Investors.
(i) Waiver of Jury Trial. Each of the parties hereto waives any
right it may have to trial by jury in respect of any claim, demand, action or
cause of action based on, or arising out of, under or in connection with this
Agreement, or any course of conduct, course of dealing, verbal or written
statement or action of any party hereto.
* * * * *
-13-
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have executed this Executive
Stock Agreement as of the date first written above.
IMAGING COMPONENTS CORPORATION
By:______________________________________
Name:
Title:
Dicom GROUP PLC
By:______________________________________
Name:
Title:
DRESDNER KLEINWORT BENSON
PRIVATE EQUITY PARTNERS LP
By: Dresdner Kleinwort Benson Private
Equity LLC
Its: General Partner
By:____________________________________
Name:
Title:
EXECUTIVE
_______________________________________
Name:
Address:
-14-
<PAGE> 62
EXHIBIT B
Form 83(b)
See attached.
<PAGE> 63
----------, ----
ELECTION TO INCLUDE STOCK AND NOTES IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased shares of Common Stock, par value $.001
per share (the "Shares"), of Imaging Components Corporation (the "Company") on
____________. Under certain circumstances, the Company has the right to
repurchase the Shares at cost from the undersigned (or from the holder of the
Shares, if different from the undersigned) should the undersigned cease to be
employed by the Company and its subsidiaries. Hence, the Shares are subject to a
substantial risk of forfeiture and are nontransferable. The undersigned desires
to make an election to have the Shares taxed under the provision of Code
Section 83(b) at the time he purchased the Securities.
Therefore, pursuant to Code Section 83(b) and Treasury Regulation
Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election,
with respect to the Shares (described below), to report as taxable income for
calendar year _____ the excess (if any) of the Shares' fair market value on
_________ over the purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation Section 1.83-2(e):
1. The name, address and social security number of the
undersigned:
Name: _____________________
Address: _____________________
_____________________
SSN: _____________________
2. A description of the property with respect to which the election
is being made: _________ shares of the Company's Class A-2 Common Stock, par
value $.001 per share, and _____ shares of the Company's Class B Common Stock,
par value $.001 per share.
3. The date on which the property was transferred: ___________. The
taxable year for which such election is made: calendar__________.
4. The restrictions to which the property is subject: If the
undersigned ceases to be employed by the Company or any of its subsidiaries as a
result of a termination by the Company for cause or voluntary resignation other
than for good reason, the unvested portion of the Shares will be subject to
repurchase by the Company at cost, and if the undersigned ceases to be employed
by the Company or any of its subsidiaries for any other reason, the Shares will
be subject to repurchase by the Company at fair market value.
5. The fair market value on ____________ of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions: $______ per share of Common Stock.
<PAGE> 64
6. The amount paid for such property: $_____ per share of Common
Stock.
A copy of this election has been furnished to the Secretary of the
Company pursuant to Treasury Regulations Section 1.83-2(e)(7).
Dated: ________, ____
_____________________________
Executive
-2-
<PAGE> 1
Exhibit (c)(4)
IMAGING ACQUISITION CORPORATION
75 WALL STREET
NEW YORK, NY 10005
August 2, 1999
Imaging Components Corporation
temporary address:
75 Wall Street
New York, NY 10005
Gentlemen:
Reference is made to the Agreement and Plan of Merger (as amended from
time to time, the "Merger Agreement"), dated July 27, 1999, by and among Imaging
Components Corporation, a Delaware corporation, (the "Transferee"), Kofax Image
Products, Inc., a Delaware corporation ("Kofax") and Imaging Acquisition Corp.,
a Delaware corporation (the "Transferor"). Capitalized terms used but not
otherwise defined herein shall have the meaning set forth in the Merger
Agreement.
Section 1. Transfer of Rights. Effective immediately prior to the
Closing, upon the terms and subject to the conditions set forth in this letter
(the "Letter Agreement"), Transferor distributes, transfers, conveys, assigns
and delivers to Transferee, and Transferee receives, acquires and accepts from
Transferor, free and clear of all Liens other than Permitted Liens, all of
Transferor's right, title and interest in and to all of the rights granted to
Transferor pursuant to the Merger Agreement, with respect to the right to offer
to purchase, and the right to purchase, Kofax's shares in the Offer.
Section 2. Assumption of Liabilities. Effective immediately prior to
the Closing, upon the terms and subject to the conditions of this Agreement,
Transferee assumes and agrees to pay, discharge and satisfy the liabilities to
which Transferor is or may become subject related to the rights transferred
hereby (the "Liabilities").
Section 3. Satisfaction of Liabilities. Transferor agrees to pay,
discharge and satisfy any Liabilities to which Transferor is or may become
subject related to the rights transferred hereby.
Section 4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
Section 5. Complete Agreement. This Letter Agreement contains the
entire understanding of the parties with respect to the subject matter hereof
and supercedes all prior
<PAGE> 2
Page 2
agreements and understandings, both written or oral, between the parties with
respect to the subject matter hereof.
Section 6. No Third Party Beneficiary. Nothing in this Letter Agreement
is intended, nor shall anything herein contained be construed, to confer any
rights, legal or equitable, in any person other than the parties hereto and
their respective legal representatives, heirs, successors and permitted assigns.
Section 7. Headings. The headings used in this Letter Agreement are for
reference only and shall not affect in any way the meaning or interpretation of
this Letter Agreement.
Very truly yours,
IMAGING ACQUISITION CORPORATION
By: /s/ Alexander P. Coleman
--------------------------------
Name: Alexander P. Coleman
Title: Vice President
Accepted as of the date first above written
IMAGING COMPONENTS CORPORATION
By: /s/ Alexander P. Coleman
---------------------------------
Name: Alexander P. Coleman
Title: Vice President
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
AT
$12.75 NET PER SHARE
BY
IMAGING COMPONENTS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT
PACIFIC TIME, ON TUESDAY, AUGUST 31, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER (AS DEFINED HEREIN) IS CONDITIONED UPON, AMONG OTHER THINGS, (I)
THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER SUCH NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE (THE
"SHARES"), OF KOFAX IMAGE PRODUCTS, INC. (THE "COMPANY") WHICH, TOGETHER WITH
THE SHARES THEN OWNED DIRECTLY OR INDIRECTLY BY IMAGING COMPONENTS CORPORATION
(THE "PURCHASER") AND ITS WHOLLY OWNED SUBSIDIARY, IMAGING ACQUISITION
CORPORATION ("MERGER SUB"), WOULD CONSTITUTE MORE THAN FIFTY PERCENT (50%) OF
THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION")
AND (II) THE SATISFACTION OF THE OTHER CONDITIONS DESCRIBED IN "CERTAIN
CONDITIONS OF THE OFFER."
-------------------------
THE BOARD OF DIRECTORS OF THE COMPANY BY THE UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT (A) HAS DETERMINED THAT THE MERGER AGREEMENT (AS DEFINED
HEREIN) AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER (AS DEFINED HEREIN), ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY
AND THE SHAREHOLDERS OF THE COMPANY, (B) HAS APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, AND (C) RECOMMENDS ACCEPTANCE OF THE OFFER BY SHAREHOLDERS OF THE
COMPANY.
-------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (a) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions set forth therein, have
such shareholder's signature thereon guaranteed if required by Instruction 1
thereto, mail or deliver the Letter of Transmittal (or such facsimile thereof)
and any other required documents to IBJ Whitehall Bank & Trust Company, who is
acting as depositary in connection with the Offer (the "Depositary"), and either
deliver the Share Certificates (as defined herein) to the Depositary along with
the Letter of Transmittal (or a facsimile thereof) or deliver such Shares
pursuant to the procedures for book-entry transfer set forth in "The Tender
Offer -- Procedures for Tendering Shares" or (b) request such shareholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such shareholder. A shareholder having Shares 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 if
such shareholder desires to tender such Shares.
Any shareholder who desires to tender Shares and whose Share Certificates
are not immediately available, or who cannot comply with the procedures for
book-entry transfer described in this Offer to Purchase on a timely basis, may
tender such Shares by following the procedures for guaranteed delivery set forth
in "The Tender 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 related materials may be
directed to MacKenzie Partners, Inc. (the "Information Agent") or Dresdner
Kleinwort Benson North America LLC (the "Dealer Manager") at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
-------------------------
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. Logo]
The Dealer Manager for the Offer is:
[Dresdner Kleinwort Benson Logo]
August 3, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER AND MERGER............ 1
INTRODUCTION................................................ 5
SPECIAL FACTORS............................................. 8
Background of the Offer................................... 8
Recommendation of the Board of Directors; Fairness of the
Offer and the Merger................................... 11
Opinion of the Financial Advisor.......................... 11
Purpose of the Offer and the Merger; Plans for the
Company................................................ 11
Appraisal Rights.......................................... 13
Certain Effects of the Offer and the Merger............... 14
Interests of Certain Persons in the Offer and the
Merger................................................. 14
Source and Amount of Funds................................ 16
The Merger Agreement...................................... 17
Certain United States Federal Income Tax Consequences..... 28
Effect of the Offer on the Market for the Shares; Exchange
Act Registration;
Margin Regulations..................................... 28
THE TENDER OFFER............................................ 30
1. Terms of the Offer; Expiration Date.................. 30
2. Acceptance for Payment and Payment for Shares........ 32
3. Procedures for Tendering Shares...................... 33
4. Withdrawal Rights.................................... 35
5. Price Range of Shares; Dividends..................... 35
6. Certain Information Concerning the Company........... 36
7. Certain Information Concerning Purchaser, Merger Sub,
DICOM and Private Equity Partners.................... 39
8. Dividends and Distributions.......................... 40
9. Certain Conditions of the Offer...................... 40
10. Certain Legal Matters; Regulatory Approvals.......... 42
11. Fees and Expenses.................................... 43
12. Miscellaneous........................................ 44
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, MERGER SUB,
DICOM AND PRIVATE EQUITY PARTNERS...................... I-1
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY........... II-1
ANNEX A
TEXT OF SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW......................................... A-1
</TABLE>
i
<PAGE> 3
QUESTIONS AND ANSWERS ABOUT
THE OFFER AND MERGER
Q: WHAT IS THE OFFER?
A: Imaging Components Corporation, a Delaware corporation ("Purchaser"), is
offering to purchase all outstanding shares of common stock, par value $0.001
per share (the "Shares"), of Kofax Image Products, Inc., a Delaware corporation
(the "Company"), at a price of $12.75 per Share, net to the seller in cash,
without interest (the "Offer Price"). Certain members of the Company's
management (the "Management Group") will retain some of their Shares as set
forth on Schedule 2.8 to the Merger Agreement (as defined herein) (the "Retained
Shares"). The members of the Management Group and certain other of the Company's
shareholders, who beneficially own an aggregate of approximately 19.5% of the
current outstanding Shares (17.5% on a fully diluted basis) entitled to vote at
any meeting of the shareholders of the Company, have agreed to tender all of the
Shares owned by them other than the Retained Shares and to vote all Shares owned
by them in favor of the Merger Agreement and the transactions contemplated
thereby and against any competing offer, pursuant to a Voting Agreement dated
July 27, 1999, by and among Purchaser, Imaging Acquisition Corporation, a
Delaware corporation ("Merger Sub"), each member of the Management Group and
such other of the Company's shareholders signatory thereto (the "Voting
Agreement").
Q: WHAT ARE THE CONDITIONS TO THE OFFER?
A: The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer such
number of Shares which, together with the Shares then owned directly or
indirectly by Purchaser and Merger Sub, would constitute more than 50% of the
Shares then outstanding on a fully diluted basis (the "Minimum Condition") and
(ii) the satisfaction of the other conditions described in "The Tender
Offer -- Certain Conditions of the Offer."
Q: WHAT WILL HAPPEN IN THE MERGER?
A: After the purchase of Shares pursuant to the Offer, Merger Sub will be
merged with and into the Company with the Company continuing as the surviving
corporation and becoming a wholly owned subsidiary of Purchaser (the "Surviving
Corporation"). At the effective time of the Merger (the "Effective Time"), each
Share issued and outstanding immediately prior to the Effective Time other than
(i) Shares held by the Company or any subsidiary of the Company, (ii) Shares
held by Purchaser, Merger Sub, or any other subsidiary of Purchaser, if any,
(iii) the Retained Shares, and (iv) Shares held by shareholders who have
demanded and perfected, and have not withdrawn or otherwise lost, appraisal
rights, if any, under the Delaware General Corporations Law (the "DGCL"), will
be canceled and converted automatically into the right to receive $12.75 in
cash, or any higher price that may be paid per Share in the Offer, without
interest (the "Merger Consideration"). Each Share held by the Company as
treasury stock or held by Purchaser, Merger Sub or any subsidiary of Purchaser,
Merger Sub or the Company immediately prior to the Effective Time shall be
canceled, retired and cease to exist, and no consideration shall be delivered
with respect thereto. Each Retained Share issued and outstanding immediately
prior to the Effective Time shall be exchanged for (as provided in and subject
to the limitations set forth in the Merger Agreement) and become a number of
fully paid and nonassessable shares of Purchaser as determined pursuant to a
formula set forth in the Merger Agreement.
Q: WHO WILL OWN THE COMPANY AFTER THE MERGER?
A: After the Merger, the Company will become a privately held company owned
by Purchaser. Purchaser will be owned by DICOM GROUP plc ("DICOM"), Dresdner
Kleinwort Benson Private Equity Partners LP ("Private Equity Partners"), Green
Shoots Ltd. ("GSL") and the Management Group, whose members are:
David S. Silver
Dean A. Hough
1
<PAGE> 4
Ronald J. Fikert
Richard M. Murphy
Kevin Drum
Certain other employees of the Company may also become members of the
Management Group. DICOM, Private Equity Partners, GSL and the Management Group
are referred to herein as the "Equity Investors."
Q: WHY IS THE COMPANY BEING ACQUIRED?
A: The management of DICOM and the Company have had a long-standing
relationship and have considered a combination and other strategic possibilities
involving the two companies in the past. In March 1999, the Company and DICOM
began reexploring a possible combination. After extensive discussion with their
financial and legal advisors, DICOM and the Company decided to structure the
transaction as an acquisition of the Company by Purchaser. DICOM is to be given
a call option to acquire in the next 18 months the interests of Private Equity
Partners and GSL in Purchaser. Separately, DICOM intends to conduct a secondary
public offering on the Neuer Markt of the Frankfurt Stock Exchange, Germany's
market for emerging growth companies. If successful, DICOM intends to use the
proceeds from the offering to exercise its call option. Furthermore, the Board
of Directors of the Company and the Equity Investors each believes that the
acquisition is in the best interest of the shareholders of the Company. With its
existing product line, the Company is exposed to a number of market variables,
primarily through direct competition and original equipment manufacturer product
enhancements, which could significantly adversely effect its operating
performance. The inclusion of DICOM as an Equity Investor represents additional
product and market opportunities for the Company and its employees, and is
intended to decrease risk and improve operating performance. The markets for
document imaging and document management and forms processing are fragmented,
and this transaction is part of the current trend towards consolidation of the
industry. To review the background and reasons for the Offer and the Merger in
greater detail, please see "Special Factors -- Background of the Offer"
beginning on page 8.
Q: WHY HAS THE MANAGEMENT GROUP DECIDED TO RETAIN AN OWNERSHIP INTEREST IN THE
COMPANY FOLLOWING THE MERGER?
A: A significant number of Shares and options held by members of the
Management Group will be converted into the right to receive cash consideration
per Share at the same Offer Price as all other holders of Shares. However,
Messrs. Silver, Hough, Murphy, Fikert and Drum have decided to retain a portion
of their current ownership interest in the Company. As described in "Special
Factors -- Background of the Offer," the Management Group offered an expression
of interest in participating economically in the Purchaser. Furthermore, because
these individuals have been integral to the Company's success in the past, DICOM
and Private Equity Partners believe their involvement is integral to the
Company's success in the future and therefore reacted positively to the interest
of these individuals and encouraged their participation.
Q: WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE OFFER AND THE MERGER TO ME?
A: You will receive an immediate cash premium (36% higher than the per
Share closing price of $9.375 per Share on July 27, 1999, the last trading date
before the Merger Agreement was announced) for your Shares that you may not
otherwise receive in the future. You will not have the opportunity to
participate in the Company's future earnings and growth, but you will not bear
the risk of any decrease in the Company's value.
Q: WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE TRANSACTIONS TO THE EQUITY
INVESTORS?
A: Upon completion of the Offer and the Merger, DICOM, GSL and Private
Equity Partners will indirectly own through Purchaser approximately 94.4% of the
Company for a cash investment of $20.1 million. The Management Group will invest
$1.2 million and indirectly own through Purchaser approximately 5.6% of
2
<PAGE> 5
the Company. Like you, the Management Group will also receive an immediate cash
premium for their equity interests in the Company that are not otherwise
retained. The Equity Investors will have the opportunity to participate in the
Company's future earnings and growth, but they will bear the risk of any
decrease in the Company's value. As a result of the Offer and the Merger, the
Company will have significant amounts of indebtedness that may reduce the future
value of the Company. The Equity Investors expect that the Company will be able
to repay this indebtedness with cash generated from its operations, although it
may not be able to do so.
Q: WHAT WILL I RECEIVE PURSUANT TO THE OFFER?
A: You will receive $12.75 in cash, without interest, for each of your
Shares. For example: If you own 100 shares of the Company common stock, upon
completion of the Offer you will receive $1,275.00 in cash.
Q: HOW MANY VOTES ARE REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT?
A: Under the DGCL, if Purchaser acquires, pursuant to the Offer, at least
90% of the Shares then outstanding, Purchaser will be able to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the Company's shareholders. If, however, Purchaser acquires,
pursuant to the Offer, less than 90% of the Shares then outstanding, a vote of
the Company's shareholders will be required under the DGCL to approve the
Merger, and a significantly longer period of time will be required to effect the
Merger. If such a vote of the Company's shareholders is necessary, approval of
the Merger will require the affirmative vote of a majority of the Shares
outstanding as of the record date. Pursuant to the Voting Agreement, the
Management Group and certain other shareholders of the Company, who beneficially
own an aggregate of approximately 19.5% of the current outstanding Shares
entitled to vote at any meeting of the shareholders of the Company, have agreed
to vote all Shares owned by them in favor of the Merger Agreement and the
transactions contemplated thereby. Therefore, assuming the number of then
outstanding Shares remains the same as the number of current outstanding Shares
holders of only more than an additional 30.5% of outstanding Shares would need
to vote in favor of the Merger Agreement and the transactions contemplated
thereby for the Merger to be approved.
Q: CAN I WITHDRAW MY SHARES ONCE I HAVE TENDERED?
A: Yes. Your tendered Shares may be withdrawn at any time prior to the date
that the Offer expires, and, unless the Shares have been accepted for payment by
Purchaser pursuant to the Offer, they may also be withdrawn at any time after
the date that the Offer expires. If Purchaser (i) extends the Offer, (ii) is
delayed in its acceptance for payment of Shares or (iii) is unable to accept
Shares for payment pursuant to the Offer for any reason, then your tendered
Shares may be retained on behalf of Purchaser, and your tendered Shares may not
be withdrawn except under the circumstances described in "The Tender
Offer -- Withdrawal Rights." To withdraw your tendered Shares, you must follow
the instructions set forth therein.
Q: WHEN DO YOU EXPECT THE OFFER AND MERGER TO BE COMPLETED?
A: We are working to complete the Offer and Merger by the beginning of
September 1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER AND MERGER TO ME?
A: To review your potential tax consequences in greater detail, see page
28.
The tax consequences of the Merger will depend on your personal situation.
You should consult your tax advisor for a full understanding of the tax
consequences of the Offer and the Merger to you.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANY?
A: The Company files annual, quarterly and current reports, proxy
statements and other information with the Commission. You may read and copy
these reports, statements and other information at the Commission's public
reference room at (i) Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, (ii) Seven World Trade Center, Suite 1300, New York, New
York 10048 and (iii) the Citicorp Center,
3
<PAGE> 6
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call
the Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. You can also request copies of these documents, for a
copying fee, by writing to the Commission. The Company's filings can also be
reviewed by accessing the Commission's Internet site at http://www.sec.gov,
which contains reports, proxy and information statements and other information.
Q: WHAT DO I NEED TO DO NOW?
A: After you carefully read this document, if you would like to tender your
Shares, just follow the instructions set forth in this Offer to Purchase under
"The Tender Offer -- Procedures for Tendering Shares" and in the Letter of
Transmittal which has been sent to you with this Offer to Purchase. In all
cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (a) certificates representing such
Shares (the "Share Certificates") or timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Shares, if such procedure is
available, into the Depositary's account at a "Book-Entry Transfer Facility"
pursuant to the procedures set forth in this Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares," (b) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, or, in the case of a
book-entry transfer, an Agent's Message (as defined herein) and (c) any other
documents required by the Letter of Transmittal.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this document, or if you would like
to ask any additional questions about the Offer and/or Merger, you should
contact the Company's Information Agent or the Dealer Manager for the
transactions:
Information Agent:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll Free (800) 322-2885
Dealer Manager:
DRESDNER KLEINWORT BENSON NORTH AMERICA LLC
75 Wall Street
New York, New York 10005
(212) 429-2000 ext. 2958
or
Call Toll Free (800) 457-0245 ext. 2958
4
<PAGE> 7
To the Holders of Shares of Common Stock of Kofax Image Products, Inc.:
INTRODUCTION
Imaging Components Corporation, a Delaware corporation ("Purchaser"),
hereby offers to purchase all outstanding shares of common stock, par value
$0.001 per share (the "Shares"), of Kofax Image Products, Inc., a Delaware
corporation (the "Company"), at a price of $12.75 per Share, net to the seller
in cash, without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions, or, subject to Section 2.13 of the Merger Agreement (as defined
herein) and except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
IBJ Whitehall Bank & Trust Company, who is acting as depositary in connection
with the Offer (the "Depositary"), MacKenzie Partners, Inc., who is serving as
information agent in connection with the Offer (the "Information Agent") and
Dresdner Kleinwort Benson North America LLC, who will be the dealer manager in
connection with the Offer (the "Dealer Manager"), incurred in connection with
the Offer. See "The Tender Offer -- Fees and Expenses."
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") BY THE
UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, (A) HAS DETERMINED THAT THE MERGER
AGREEMENT (AS DEFINED HEREIN) AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER (AS DEFINED HEREIN), ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY AND THE SHAREHOLDERS OF THE COMPANY, (B) HAS
APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (C) RECOMMENDS ACCEPTANCE OF
THE OFFER BY SHAREHOLDERS OF THE COMPANY.
The Company's financial advisor, C.E. Unterberg, Towbin (the "Financial
Advisor"), has delivered to the Company Board a written opinion, dated July 27,
1999, to the effect that, as of such date and based upon and subject to certain
matters stated in such opinion, the $12.75 per Share cash consideration to be
received by the holders of Shares in the Offer and the Merger was fair from a
financial point of view to such holders. A copy of the opinion of the Financial
Advisor is filed as an exhibit to the statement on Schedule 13E-3 (together with
any exhibits, annexes, amendments or supplements thereto, the "Schedule 13E-3")
filed by Purchaser and Merger Sub with the United States Securities and Exchange
Commission (the "Commission") and is incorporated herein by reference and is
also filed as an exhibit to the Solicitation/Recommendation Statement on
Schedule 14D-9 filed by the Company with the Commission in connection with the
Offer (together with any exhibits, annexes, amendments or supplements thereto,
the "Schedule 14D-9"), which is being mailed to Company shareholders herewith
and should be read carefully in its entirety. The opinion of the Financial
Advisor is directed to the Company Board and relates only to the fairness of the
cash consideration to be received in the Offer and the Merger by holders of
Shares from a financial point of view, does not address any other aspect of the
Offer or the Merger or related transactions, and is not intended to constitute,
and does not constitute, a recommendation to any shareholder as to whether such
shareholder should tender Shares in the Offer or how such shareholder should
vote if a vote is held on the Merger.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES WHICH, TOGETHER WITH THE SHARES THEN OWNED DIRECTLY OR INDIRECTLY BY
PURCHASER, WOULD CONSTITUTE MORE THAN 50% OF THE SHARES THEN OUTSTANDING ON A
FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (ii) THE SATISFACTION OF THE
OTHER CONDITIONS DESCRIBED IN "THE TENDER OFFER -- CERTAIN CONDITIONS OF THE
OFFER."
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of July 27, 1999 (the "Merger Agreement") among Purchaser, Merger Sub and the
Company. The Merger Agreement provides, among other things, for the making of
the Offer and further provides that, following the purchase of Shares pursuant
to the Offer, upon the terms and subject to the conditions set forth in the
Merger Agreement, and in
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accordance with the Delaware General Corporation Law (the "DGCL"), Merger Sub
will be merged with and into the Company (the "Merger"). Following consummation
of the Merger, the separate corporate existence of Merger Sub will cease and the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will become a wholly-owned subsidiary of Purchaser. At the effective time of
the Merger (the "Effective Time"), each Share issued and outstanding immediately
prior to the Effective Time other than (a) Shares held by the Company or any
subsidiary of the Company, (b) Shares held by Purchaser, Merger Sub, any other
subsidiary of Purchaser, if any, (c) the Shares held by the Management Group as
set forth on Schedule 2.8 to the Merger Agreement (collectively, the "Retained
Shares"), and (d) Shares held by shareholders who have demanded and perfected,
and have not withdrawn or otherwise lost, appraisal rights, if any, under the
DGCL will be canceled and converted automatically into the right to receive
$12.75 in cash, or any higher price that may be paid per Share in the Offer,
without interest (the "Merger Consideration"). The Merger Agreement is more
fully described in "Special Factors -- Purpose of the Offer and the Merger;
Plans for the Company" and "Special Factors -- The Merger Agreement." The
consummation of the Merger is subject to the satisfaction or waiver of certain
conditions, including the approval of the Merger Agreement by the requisite
vote, if any, of the shareholders of the Company.
Each Share held by the Company as treasury stock or held by Purchaser,
Merger Sub or any subsidiary of Purchaser, Merger Sub or the Company immediately
prior to the Effective Time shall be canceled, retired and cease to exist, and
no consideration shall be delivered with respect thereto. Each Retained Share
issued and outstanding immediately prior to the Effective Time shall be
exchanged for (as provided in and subject to the limitations set forth in the
Merger Agreement) and become (i) a number of fully paid and nonassessable shares
of Class B Common Stock, par value $0.001 per share, of the Purchaser
("Purchaser Class B Common") equal to (x) 20% of the Offer Price divided by (y)
$10.00 and (ii) a number of fully paid and non-assessable shares of Class A
Common Stock par value $0.001 per share, of the Purchaser ("Purchaser Class A
Common") equal to (x) 80% of the Offer Price divided by (y) $10.00, upon the
surrender of the certificate previously representing such shares of Retained
Shares.
As described above, the members of the Management Group will not tender the
Retained Shares but have, along with certain other shareholders of the Company,
agreed to tender all Shares owned by them other than the Retained Shares,
pursuant to a Voting Agreement dated July 27, 1999 by and among Purchaser,
Merger Sub, each member of the Management Group and such other of the Company's
shareholders signatory thereto (the "Voting Agreement"), a copy of which is
filed as an exhibit to the Tender Offer Statement on Schedule 14D-1 and
Statement on Schedule 13D (together with any exhibits, annexes, amendments or
supplements thereto, the "Schedule 14D-1") filed by Purchaser with the
Commission, and is incorporated herein by reference. In addition, pursuant to
the Voting Agreement, the members of the Management Group and certain other
shareholders of the Company have agreed to vote all Shares owned by them in
favor of the Merger Agreement and the transactions contemplated thereby and
against any competing offer.
The Company has advised Purchaser that as of the close of business on July
27, 1999, 5,243,956 Shares of common stock were issued and outstanding, and
580,555 Shares were reserved for issuance and issuable pursuant to outstanding
stock options granted by the Company to employees and directors ("Existing Stock
Options") and 34,000 Shares were issuable pursuant to the Company's 1997
Employee Stock Purchase Plan. As of the close of business on July 27, 1999,
neither Purchaser nor Merger Sub owned any Shares. Purchaser believes that the
Minimum Condition would be satisfied if Purchaser acquired 2,929,256 Shares of
common stock. As described in "Special Factors -- Interests of Certain Persons
in the Offer and the Merger" and "Special Factors -- The Merger Agreement,"
shareholders owning approximately 1,022,466 Shares have agreed to tender such
Shares.
Under the DGCL, if Purchaser acquires, pursuant to the Offer, at least 90%
of the Shares then outstanding, Purchaser will be able to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the Company's shareholders. If, however, Purchaser acquires,
pursuant to the Offer, less than 90% of the Shares then outstanding, a vote of
the Company's shareholders will be required under the DGCL to approve the
Merger, and a significantly longer period of time will be required to effect the
Merger.
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The Merger Agreement provides that, promptly following the purchase of and
payment for Shares by Purchaser pursuant to the Offer, Purchaser shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as will give Purchaser representation on the
Company Board equal to the product of the number of directors on the Company
Board (giving effect to any increase in the number of directors pursuant to the
Merger Agreement) and the percentage that the number of Shares so purchased by
Purchaser bears to the total number of Shares then outstanding (on a fully
diluted basis). In the Merger Agreement, the Company has agreed to use its
reasonable best efforts to cause Purchaser's designees to be so elected to the
Company Board. The Company's obligation to appoint designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all action required
pursuant to such Section and Rule in order to fulfill its obligations under the
Merger Agreement and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under such
Section and Rule in order to fulfill its obligations under the Merger Agreement
(provided that Purchaser and Merger Sub shall have provided to the Company on a
timely basis all such information with respect to Purchaser's designees).
Following the election of Purchaser's designees and until the Effective Time,
any amendment of the Merger Agreement or the Certificate of Incorporation or
Bylaws of the Company, any termination of the Merger Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Purchaser or Merger Sub, any waiver of any of the
Company's rights hereunder, or any transaction between Purchaser (or any
affiliate or associate thereof) and the Company shall require the concurrence of
a majority of the Company's directors (or the concurrence of the sole remaining
director, if there is only one remaining) then in office who are directors of
the Company on the date hereof, or are directors designated by such persons or
person.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase and in the attached Schedules and
Annexes, including 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. Purchaser does not assume any
responsibility (i) for the accuracy or completeness of the information
concerning the Company furnished by the Company or 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 (ii) for information furnished by the
Financial Advisor.
The Offer to Purchase includes information required to be disclosed
pursuant to Rule 13e-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which Rule governs so-called "going private" transactions
by certain issuers or their affiliates. Purchaser does not concede as a result
of providing such information or otherwise complying with Rule 13e-3 that it (or
any of its affiliates) are affiliates of the Company or subject to the
requirements of such Rule.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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SPECIAL FACTORS
BACKGROUND OF THE OFFER.
In 1992, DICOM and the Company established a commercial relationship
involving DICOM'S distribution of the Company's products in Europe. DICOM has
since become the Company's second largest distributor in Europe and its largest
distributor in South East Asia.
In June 1998, Dr. Otto Schmid, Chairman and Chief Executive Officer of
DICOM, and Dominique Vinay, Chief Executive Officer of Quadratec SA
("Quadratec"), a French software manufacturer in which DICOM had a 6.4% equity
stake, met with David S. Silver, President and Chief Executive Officer of the
Company, Ronald J. Fikert, Vice President of Finance of the Company, Richard
Murphy, Vice President of Sales of the Company and Kevin Drum, Vice President of
Marketing of the Company, at the Company's headquarters in Irvine, California.
DICOM, the Company and Quadratec decided not to pursue a transaction involving
all three of the companies and no further discussions were held.
In March 1999, Dr. Schmid, Arnold von Buren, Deputy Chief Executive of
DICOM, and Christoph Loslein, Executive Director of DICOM, concluded that
DICOM's goal of developing the global market for data and document capture might
be served by a business combination involving DICOM and the Company.
In an e-mail message subsequently sent to Mr. Silver, Dr. Schmid requested
the opportunity to present DICOM's ideas with respect to a possible merger of
the two companies to the Company's management. The Company agreed to such a
presentation, and April 19, 1999 was fixed as the date that DICOM's presentation
should take place.
On April 19, 1999, at the Company's headquarters, Dr. Schmid and Mr. von
Buren met with Messrs. Silver, Fikert, Murphy and Drum and proposed a merger of
DICOM and the Company.
On May 1, 1999, at a hotel in Rome, Mr. Drum presented an overview of the
Company and its product lines at DICOM's annual country manager meeting. In a
separate meeting, Dr. Schmid and Mr. Drum discussed possible merits of the
proposed merger.
On May 6, 1999, at the offices of Dresdner Kleinwort Benson ("DrKB") in New
York City, Dr. Schmid and Mr. von Buren met Dresdner Kleinwort Benson Corporate
Finance ("DrKB Corporate Finance"), Adam Lichtenstein of Private Equity Partners
and Dresdner Bank AG - Global Finance ("DrKB Global Finance"), to discuss
structuring and financing alternatives to the proposed transaction.
Mr. Simon Littlewood, an independent financial consultant, was appointed by
DICOM to act as a project leader on behalf of DICOM.
On May 7 and May 8, 1999 at a hotel in New York City, Dr. Schmid, Mr. von
Buren and Olle Nilsson, a country manager of one of DICOM's subsidiaries, met
with Messrs. Silver, Murphy and Drum and to discuss the proposed merger. The
participants addressed the long-term goals, future growth and earnings
potential, core competencies, geographical coverage, management strengths and
weaknesses of the Company and DICOM. An outline for a business plan (an overall
mission and strategy statement with a description of possible acquisition and
divestiture candidates) for the merged companies was drafted. Both DICOM and the
Company believed the proposed combination had merit and decided to pursue a
transaction.
During the meetings on May 7 and May 8, DICOM suggested that it would be
willing to pay a price of around $12.00 per Share for the Company. The Company
proposed a price of $13.00 per Share. The participants agreed the Company would
consider the discussions over the next several days and the Company's management
would inform its board of directors about the results of the meetings that took
place on May 7 and May 8.
In an e-mail message dated May 15, 1999, Mr. Silver indicated that the
Company remained interested in a possible transaction. The Company and DICOM
agreed that meetings should take place on May 18 through May 20 to further
develop the strategic benefits of the proposed combination. On May 18-20, 1999,
at the
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offices of Stradling Yocca Carlson & Rauth, the Company's legal counsel, in
Newport Beach, California, Mr. von Buren and Mr. Loslein met with Messrs. Murphy
and Drum for such purposes.
On May 18, 1999, at the offices of Kirkland & Ellis in New York City, Mr.
Littlewood met with Private Equity Partners, DrKB Global Finance, DrKB Corporate
Finance and attorneys from Kirkland & Ellis to discuss structural alternatives
for the proposed transaction. One such structure included a private equity
investment from Private Equity Partners whereby DICOM would be given a call
option to acquire within 18 months Private Equity Partners' interest in the
Company.
On June 2, 1999, at DrKB's offices in Frankfurt, Germany, Dr. Schmid, Mr.
Loslein and John Incledon, a Non-Executive Director of DICOM, met with
representatives of DrKB Corporate Finance from New York and Frankfurt to discuss
structural alternatives for the transaction and a potential equity offering of
DICOM shares on the Neuer Markt of the Frankfurt Stock Exchange. If successful,
DICOM would use the proceeds from such an offering to exercise its call option,
among other things.
On June 2, 1999, Mr. Silver provided information to the Company's Board of
Directors relating to the merger opportunity and, during a conference call on
June 3, 1999, the Board approved moving forward with the proposed transactions.
On June 3, 1999, at DrKB's offices in Frankfurt, Germany, Dr. Schmid, Mr.
Loslein and Mr. Incledon met with Messrs. Silver, Drum and Murphy and
representatives of DrKB Corporate Finance from New York and Frankfurt to share
conclusions about structural alternatives for the transaction and a potential
equity offering of DICOM shares on the Neuer Markt of the Frankfurt Stock
Exchange. One of the transaction structures presented included the transaction
described herein. The Company's management offered an expression of interest in
participating with the Equity Investors on an economic basis in the post-merger
company.
On June 4, 1999, at DICOM's offices in Rotkreuz, Switzerland, the DICOM
Board agreed that a potential combination of the businesses of DICOM and the
Company presented possible synergies. The DICOM Board (i) decided that the most
efficient way to structure the proposed transaction would include a private
equity investment in the Company; (ii) determined that DICOM should partner with
DrKB and its affiliates to
(a) assist and advise DICOM on the transaction,
(b) provide, along side DICOM, equity financing for the Purchaser and
(c) provide debt financing for the Purchaser;
and (iii) authorized further discussion and negotiation with all parties
involved.
On June 17, 1999, at DrKB's offices in New York City, Messrs. von Buren and
Littlewood met with DrKB Corporate Finance and Alexander Coleman and Mr.
Lichtenstein of Private Equity Partners to finalize structure and financing for
the proposed transaction.
On June 18, 1999, at DrKB's offices in New York City, Messrs. Silver and
Fikert presented an overview of the Company and Mr. von Buren presented the
business plan of the combined companies to Mr. Littlewood, Private Equity
Partners, DrKB Global Finance and DrKB Corporate Finance.
On June 29, 1999 at the Company's headquarters in Irvine, California, Dr.
Schmid engaged in several individual discussions with members of the Company's
management team about their future role in a combined company. In addition, the
Company, DICOM and Private Equity Partners entered into a non-binding letter of
intent outlining the general terms and conditions of a proposed transaction and
confidentiality agreements. The letter of intent outlined the terms and
conditions on which DICOM, through a newly-formed entity, would consider
sponsoring the acquisition of all of the Shares at a purchase price of $12.75
per Share, the terms on which the new company would obtain financing for the
transaction and restrictions on the Company's ability to initiate or negotiate
any other acquisition proposal unless the failure to do so might cause the
members of the board to breach their fiduciary duties under applicable law. The
letter of intent and
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confidentiality agreements were presented to and, after discussion, approved by
the Company's Board at a special meeting held on June 29, 1999.
During the period from June 30, 1999 to July 27, 1999, DICOM, Private
Equity Partners and DrKB Global Finance, with assistance from DrKB Corporate
Finance, Kirkland & Ellis and Arthur Andersen LLP, performed customary due
diligence, including meetings and discussions with the Company.
On July 14, 1999, the Purchaser's legal counsel delivered a draft of the
Merger Agreement to the Company's counsel. During the period from July 14, 1999
to July 21, 1999, representatives for the Purchaser and the Company, and their
legal counsel, continued negotiations regarding the terms and conditions of the
Offer and the Merger. During such time, representatives of the Company also
discussed certain financial terms of the Offer and the Merger with the Financial
Advisor.
On July 19, Private Equity Partners met with its internal Commitment
Committee and received approval, subject to satisfactory resolution of the terms
and conditions of the Offer and Merger to commit equity financing in Purchaser
of up to $16 million.
At a meeting of the Company Board on July 21, 1999, the Company Board
reviewed the Merger Agreement and the terms and conditions of the Offer and the
Merger. During this meeting, the Company Board reviewed certain financial terms
of the Offer and the Merger with the Company's Financial Advisor and reviewed
the Merger Agreement and legal aspects of the proposed transactions with the
Company's counsel. During the meeting, the Company Board expressed its
satisfaction with the proposed transaction, subject to the resolution of certain
issues to the Company Board's satisfaction and, at the conclusion of the
meeting, the Company Board requested additional information from management
concerning the nature of financing commitments received by Purchaser and the
termination fee and expense provisions of the Merger Agreement. From the
afternoon of July 21, 1999 to July 26, 1999, legal counsel for the parties
continued negotiations concerning those issues and other provisions of the
Merger Agreement.
On July 22, 1999, after the Company Board reviewed the terms of the Merger
Agreement and outlined the remaining issues to be negotiated, legal counsel for
the Purchaser provided the Management Group with drafts of various documents
relating to their equity participation in the Purchaser. From July 23, 1999 to
July 26, 1999, the Management Group negotiated the terms of their agreements
with Purchaser.
On July 26, 1999, the Company Board met by conference call to discuss the
resolution of the final issues and the final forms of the Merger Agreement and
the Voting Agreement were presented to, and after discussion were approved by,
the Company Board. Separately, the DICOM Board met by conference call to discuss
the resolution of the final issues and final forms of the Merger Agreement and
the Voting Agreement and the DICOM Board approved such agreements and
transactions contemplated thereby. In addition, Private Equity Partners was
satisfied with the resolution of the final issues and final forms of the
agreements contemplated therein. Finally, the respective boards of directors of
Purchaser and Merger Sub met by conference call to discuss the final issues and
final forms of the Merger Agreement and the Voting Agreement and approved such
agreements and the transactions contemplated therein.
During the evening of July 26, 1999 and through late afternoon on July 27,
1999, the Management Group continued negotiations relating to the forms of their
management agreements with representatives of the Purchaser, after which the
Management Group entered into a commitment letter to exchange the Retained
Shares for shares of capital stock of the Purchaser and to enter into agreements
in substantially the forms negotiated with Purchaser.
The Merger Agreement was executed and delivered at approximately 8:30 p.m.,
Pacific Time on July 27, 1999. The Equity Investors issued a press release on
behalf of Purchaser before the opening of U.S. stock markets on July 28, 1999
announcing the Merger Agreement. The Company issued a press release on July 28,
1999 announcing the Merger Agreement. On August 3, 1999, Purchaser commenced the
Offer.
On August 2, 1999, the Purchaser and Merger Sub, after their respective
boards of directors approved and authorized such assignment and assumption,
agreed to assign to Purchaser all rights granted to Merger
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Sub under the Merger Agreement with respect to the right to offer to purchase
and the right to purchase the Company's Shares in the Offer.
RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE OFFER AND THE MERGER.
THE COMPANY. At a meeting held on July 26, 1999, the Company Board
unanimously (i) determined that the Offer and the Merger, taken together, are
fair to and in the best interests of the Company's shareholders, (ii) approved
the Merger Agreement and the transactions contemplated thereby, and (iii)
decided to recommend to the Company's shareholders that they accept the Offer
and tender their Shares pursuant to the Offer and adopt the Merger Agreement.
The Company Board did not consider it necessary to appoint a special
committee or to retain an unaffiliated representative to negotiate the terms of
the Merger Agreement on behalf of the unaffiliated holders of Shares for the
following reasons: (i) the Company Board is comprised of a majority
disinterested directors, (ii) the engagement of the Financial Advisor and (iii)
the disinterested members of the Company Board were aware of the interests of
the members of the Management Group in the proposed transactions when deciding
to approve the transactions.
A description of the factors upon which the Company Board has based its
conclusion that the Offer and the Merger, taken together, are fair and in the
best interests of the Company's shareholders is contained in the Schedule 14D-9
which is being mailed to the Company's shareholders herewith and should be read
carefully and in its entirety. Such description is incorporated herein by
reference.
PURCHASER, MERGER SUB, DICOM AND PRIVATE EQUITY PARTNERS. Each of
Purchaser, Merger Sub, DICOM and Private Equity Partners regards the acquisition
of the Company as an attractive investment opportunity because it believes that
the Company's future business prospects, with DICOM as an Equity Investor and
the Company's new capital structure, and the upside potential from the possible
exercise of the DICOM call option are favorable. Although the investment will
involve a substantial risk to holders of Purchaser's common stock, each of
Purchaser, Merger Sub, DICOM and Private Equity Partners believes that the
long-term value of the equity investment could appreciate significantly. Each of
Purchaser, Merger Sub, DICOM and Private Equity Partners believes that the price
per share offered hereby and the Merger Consideration is fair to the Company's
shareholders. In reaching this conclusion, it has taken into consideration the
recent and historical prices of the Shares, see "The Tender Offer -- Price Range
of Shares; Dividends", and its due diligence review of the Company. Its
conclusion as to the fairness of the Offer and the Merger also is supported by
the conclusions of the Company Board and by the fact that the terms of the
transactions were negotiated with the Company Board and its representatives at a
time when each of Purchaser, Merger Sub, DICOM and Private Equity Partners did
not beneficially own any Shares. Each of Purchaser, Merger Sub, DICOM and
Private Equity Partners did not assign a particular weight to any one factor.
OPINION OF THE FINANCIAL ADVISOR.
A copy of the opinion and analysis of the Financial Advisor with respect to
the Offer and the Merger are filed as exhibits to the Schedule 13E-3, and are
contained in the Schedule 14D-9 which is being mailed to the Company's
shareholders herewith and should be read carefully and in its entirety. Such
opinion and analysis are incorporated herein by reference.
PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
PURPOSE OF THE OFFER AND THE MERGER.
The purpose of the Offer and the Merger is for Purchaser to acquire control
of, and the entire equity interest in, the Company. The purpose of the Merger is
for Purchaser to acquire indirect ownership of all Shares not purchased pursuant
to the Offer. Upon consummation of the Merger, the Company will become a wholly
owned subsidiary of Purchaser. The Offer is being made pursuant to the Merger
Agreement. The acquisition of the entire equity interest in the Company has been
structured as a cash tender offer followed by
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a cash merger (except for certain Shares held by the Management Group which will
be exchanged for Purchaser's shares) in order to provide a prompt and orderly
transfer of ownership of the equity interest in the Company held by shareholders
of the Company from such shareholders to Purchaser and to provide the
shareholders of the Company with cash for all of their Shares (except for the
Retained Shares).
Under the DGCL and the Company's Certificate of Incorporation, the approval
of the Company Board and, unless the Merger is consummated pursuant to the
short-form merger provisions under the DGCL as described below, the affirmative
vote of the holders of a majority of the outstanding Shares is required to
approve the Merger Agreement. The Company Board has unanimously approved the
Merger Agreement.
As described above, the Company Board has approved the Merger and the
Merger Agreement in accordance with the DGCL and rendered inapplicable the
restrictions on mergers contained in Section 203 of the DGCL. Except in the case
described in the next sentence, the Company Board will be required to submit the
Merger Agreement to the Company's shareholders for adoption at a shareholders'
meeting convened for that purpose in accordance with the DGCL. However, if
Purchaser acquires more than 90% of the outstanding Shares, Purchaser intends to
cause Merger Sub to effect the Merger without a meeting of the Company's
shareholders under Section 253 of the DGCL. If Purchaser cannot cause the Merger
Sub to effect the Merger pursuant to Section 253 of the DGCL and shareholder
approval is required, under the DGCL and the Company's Certificate of
Incorporation, the Merger Agreement must be adopted by the affirmative vote of
holders of a majority of the outstanding Shares. If required, the Company has
agreed to convene a meeting of its shareholders as soon as practicable following
the consummation of the Offer for the purpose of adopting the Merger Agreement
and to include in any proxy or information statement required for such meeting
the unanimous recommendation of the Company Board that the Company's
shareholders vote in favor of the adoption of the Merger Agreement.
The Merger Agreement provides that, promptly following the purchase of and
payment for Shares by Purchaser pursuant to the Offer, Purchaser shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as will give Purchaser representation on the
Company Board equal to the product of the number of directors on the Company
Board (giving effect to any increase in the number of directors pursuant to the
Merger Agreement) and the percentage that number of Shares so purchased by
Purchaser bears to the total number of Shares then outstanding (on a fully
diluted basis). In the Merger Agreement, the Company has agreed to use its
reasonable best efforts to cause Purchaser's designees to be so appointed or
elected to the Company Board. The Company's obligation to appoint designees to
the Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly take all action
required pursuant to such Section and Rule in order to fulfill its obligations
under the Merger Agreement and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under such Section and Rule in order to fulfill its obligations under
the Merger Agreement (provided that Purchaser shall have provided to the Company
on a timely basis all such information with respect to Purchaser's designees).
Following the election of Purchaser's designees and until the Effective Time,
any amendment of the Merger Agreement or the Certificate of Incorporation or
Bylaws of the Company, any termination of the Merger Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Purchaser or Merger Sub, any waiver of any of the
Company's rights hereunder, or any transaction between Purchaser (or any
affiliate or associate thereof) and the Company shall require the concurrence of
a majority of the Company's directors (or the concurrence of the sole remaining
director, if there is only one remaining) then in office who are directors of
the Company on the date hereof, or are directors designated by such persons or
person.
PLANS FOR THE COMPANY.
It is expected that, initially following the Merger, the business and
operations of the Company will, except as set forth in this Offer to Purchase,
be continued by the Company substantially as they are currently being conducted.
Purchaser will continue to evaluate the business and operations of the Company
during the pendency of the Offer and after the consummation of the Offer and the
Merger, and will take such actions as it deems appropriate under the
circumstances then existing. Purchaser intends to seek additional information
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about the Company during this period. Thereafter, Purchaser intends to review
such information as part of a comprehensive review of the Company's business,
operations, capitalization and management with a view to optimizing exploitation
of the Company's potential in conjunction with Purchaser's businesses. It is
expected that the business and operations of the Company would form an important
part of Purchaser's future business plans.
It is anticipated that, upon the consummation of the Merger, the current
officers of the Company, except for Dean A. Hough who has resigned as an officer
of the Company effective August 31, 1999, will maintain their respective
positions as officers of the Surviving Corporation. The members of the
Management Group will become shareholders of Purchaser. It is also anticipated
that Mr. Silver will become an executive officer and a director of Purchaser and
that at the Effective Time, Mr. Silver and the other directors of Purchaser will
become the directors of the Surviving Corporation.
Except as indicated in this Offer to Purchase, Purchaser does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries or any
material change in the Company's capitalization or dividend policy or any other
material changes in the Company's corporate structure or business, or the
composition of the Company Board or the Company's management.
APPRAISAL RIGHTS.
Shareholders do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, shareholders of the Company at the time
of the Merger who do not vote in favor of the adoption of the Merger Agreement
will have the right under the DGCL to dissent and demand appraisal of, and
receive payment in cash of the fair value of, their Shares outstanding
immediately prior to the effective date of the Merger in accordance with Section
262 of the DGCL.
Under the DGCL, dissenting shareholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of such merger or similar business combination)
and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Shareholders should recognize that the value so determined
could be higher or lower than the per Share price to be paid pursuant to the
Offer or the Merger Consideration.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling shareholder of a corporation involved in a merger
has a fiduciary duty to other shareholders that requires that the merger be fair
to other shareholders. In determining whether a merger is fair to minority
shareholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the shareholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority shareholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
The foregoing summary of the rights of objecting shareholders does not
purport to state all of the procedures to be followed by shareholders desiring
to exercise any available appraisal rights. The preservation and exercise of
appraisal rights requires strict adherence to the applicable Provisions of the
DGCL. A copy of Section 262 of the DGCL is attached hereto as Annex A and the
foregoing summary is qualified in its entirety by reference to Annex A.
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CERTAIN EFFECTS OF THE OFFER AND THE MERGER.
As a result of the Offer, Purchaser will acquire an interest in the
Company's net book value and net earnings in proportion to the number of Shares
acquired in the Offer. If the Merger is consummated, Purchaser's direct and
indirect common equity interest in such items and in the Company generally will
increase to 100% and Purchaser will be entitled to all benefits resulting from
that interest, including all income generated by the Company's operations and
any future increase in the Company's value. Similarly, Purchaser will also bear
the risk of losses generated by the Company's operations and any decrease in the
value of the Company after the Merger. Subsequent to the Merger, current
shareholders of the Company will cease to have any equity interest in the
Company, will not have the opportunity to participate in the earnings and growth
of the Company after the Merger and will not have any right to vote on corporate
matters. Similarly, such shareholders will not face the risk of losses generated
by the Company's operations or decline in the value of the Company after the
Merger. As a result of the indebtedness to be incurred in connection with the
financing of the Offer and the Merger (the "Financing"), the consolidated
indebtedness (including guaranteed indebtedness) of the Company will be greater
than it was prior to the Financing, the equity of the Company may be lower than
its equity prior to the Financing, the interest rates on such debt may be higher
than the interest rates on the Company's current consolidated indebtedness, a
substantial portion of the Company's assets will be pledged to secure such
indebtedness and the new debt may contain more restrictions on the Company's
operations than the Company's existing consolidated debt, thereby possibly
reducing the Company's financial and operating flexibility. In addition,
substantial cash payments will be necessary to repay the Financing. See "Special
Factors -- Source and Amount of Funds."
The Shares are currently traded on the Nasdaq National Market. See "The
Tender Offer -- Price Range of Shares; Dividends." Following the consummation of
the Merger, the Shares will no longer be quoted on the Nasdaq National Market
and the registration of the Shares under the Exchange Act will be terminated.
Accordingly, after the Merger there will be no publicly traded equity securities
of the Company outstanding and the Company will no longer be required to file
periodic reports with the Commission. See "Special Factors -- Effect of the
Offer on the Market for the Shares; Exchange Act Registration; Margin
Regulations." It is expected that if Shares are not accepted for payment by
Purchaser pursuant to the Offer and the Merger is not consummated, the Company's
current management, under the general direction of the Company Board, will
continue to manage the Company as an ongoing business.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER.
The Company Board did not consider it necessary to appoint a special
committee or to retain an unaffiliated representative to negotiate the terms of
the Merger Agreement on behalf of the unaffiliated holders of Shares for the
following reasons: (i) the Company Board is comprised of a majority
disinterested directors, (ii) the engagement of the Financial Advisor and (iii)
the disinterested members of the Company Board were aware of the interests of
the members of the Management Group in the proposed transactions when deciding
to approve the transactions. See "Special Factors -- Background of the Offer and
the Merger", "Special Factors -- Recommendation of the Board of Directors;
Fairness of the Offer and the Merger" and "The Tender Offer -- Certain Legal
Matters and Regulatory Approvals".
VOTING AGREEMENT. Concurrently with the execution and delivery of the
Merger Agreement, Purchaser and Merger Sub entered into a Voting Agreement (the
"Voting Agreement") with each of Messrs. Silver, Hough, Fikert, Murphy and Drum
and William Drobish, Alexander P. Cilento, B. Allen Lay, and Southern California
Ventures (each, a "Stockholder", and collectively the "Stockholders"). The
following is a summary of the Voting Agreement, which summary is qualified in
its entirety by reference to the Voting Agreement, a copy of which is filed as
an exhibit to the Schedule 14D-1 and is incorporated herein by reference.
The Voting Agreement provides that each Stockholder will validly tender the
Shares set forth opposite such Stockholder's name on Exhibit A to the Voting
Agreement (the "Subject Shares") in the Offer and will not withdraw any Shares
so tendered. Each Stockholder also agrees to vote the Subject Shares (a) in
favor of the adoption and approval of the Merger Agreement and the transactions
contemplated thereby and
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(b) against any action or agreement that would result in a breach of any
covenant, representation or warranty contained in the Merger Agreement or could
reasonably be expected to impede, interfere with, delay or postpone or attempt
to discourage the consummation of the Merger or any of the transactions
contemplated by the Merger Agreement. Each Shareholder has agreed not to purport
to vote (or execute a consent with respect to) such Subject Shares (other than
in accordance with the requirements of the Voting Agreement) or grant any proxy
or power of attorney with respect to any Subject Shares, deposit any Subject
Shares into a voting trust or enter into any agreement, arrangement or
understanding with any person (other than the Voting Agreement), directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of such Subject Shares, or agree to do any of the foregoing. The Voting
Agreement also provides that no Shareholder shall sell, transfer, pledge,
encumber, assign or otherwise dispose of or hypothecate (including by gift or by
contribution or distribution to any trust or similar instrument or to any
beneficiaries of the Stockholders) (collectively, "Transfer"), or enter into any
contract, option or other arrangement or understanding (including any profit
sharing arrangement) with respect to the Transfer of, any of the Subject Shares
other than pursuant to the terms thereof and the Merger Agreement. The Voting
Agreement shall terminate, and no party to the Voting Agreement shall have any
rights or obligations thereunder and the Voting Agreement shall become null and
void and have no further effect upon the earliest to occur of (x) the Effective
Time or (y) termination of the Merger Agreement pursuant to Section 7.1 thereof.
MANAGEMENT COMMITMENT LETTER. Purchaser has obtained a commitment letter
from the Management Group dated as of July 27, 1999 (the "Management Commitment
Letter"). The following is a summary of the Management Commitment Letter, which
summary is qualified in its entirety by reference to the Management Commitment
Letter, a copy of which is filed as an exhibit to the Schedule 14D-1 and is
incorporated herein by reference. The Management Commitment Letter provides for
an equity contribution to Purchaser in the form of an exchange of the Retained
Shares for shares of Purchaser's capital stock (the "Purchaser Shares") as set
forth in the Merger Agreement. The Management Commitment Letter further provides
for the execution and delivery of a Stockholders Agreement, a Registration
Rights Agreement and an Executive Stock Agreement substantially (A) in the form
of, and (B) on the terms and conditions set forth on, Exhibit A, Exhibit B and
Exhibit C attached to the Management Commitment Letter and on other terms and
conditions reasonably satisfactory to the parties thereto. The Stockholders
Agreement in the form of Exhibit A to the Management Commitment Letter provides
for customary restrictions on transfer, "first-offer-rights", and preemptive
rights with respect to the Purchaser Shares. The Stockholder Agreement also
provides for a call option that grants DICOM the right to acquire all (but not
less than all) Purchaser Shares held by Private Equity Partners and GSL within
eighteen months after the Effective Time. The Registration Rights Agreement in
the form of Exhibit B to the Management Commitment Letter provides for certain
rights for the holders of Purchaser Shares to require Purchaser to register
Purchaser Shares held by them under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities Act"). In
addition, the holders of Purchaser Shares have certain rights to participate in
publicly registered offerings of Purchaser Shares initiated by Purchaser or
third parties. The Executive Stock Agreement in the form of Exhibit C to the
Management Commitment Letter provides that the Management Group will exchange
their Retained Shares in the Merger for Purchaser Shares as set forth in the
Merger Agreement. The Executive Stock Agreement also provides for customary
"buy-back" rights, restrictions on transfer and such other provisions customary
for key employees employed by information technology firms.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the
Merger Agreement, Purchaser and Merger Sub have agreed that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its subsidiaries as provided in their
respective charters or Bylaws (or other similar governing instruments) 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 DGCL, such
indemnification shall be mandatory rather than permissive, and the Surviving
Corporation shall advance expenses in connection with such indemnification
(subject to the Surviving Corporation's receipt of an undertaking by the
indemnified party to return such advanced expenses to the Surviving Corporation
if it is determined by a final, non-appealable order of a court of competent
jurisdiction that such indemnified party is not entitled to retain such advanced
expenses).
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The Merger Agreement further provides that Purchaser shall cause the
Surviving Corporation to maintain in effect for not less than six (6) 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 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; provided, however, that in satisfying its obligation, the Surviving
Corporation shall not be obligated to pay premiums in excess of 150% with
respect to such current insurance.
In the event the Surviving Corporation or its successor (i) is consolidated
with or merges into another person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any other person in a single
transaction or a series of related transactions, Purchaser has agreed that it
will make or cause to be made proper provision so that the successor or
transferee of the Surviving Corporation shall comply in all material respect
with these terms.
SHARE OWNERSHIP. As of the date hereof the members of the Management Group
owns or beneficially owns the following number of the Shares: Mr.
Silver--342,500; Mr. Hough--345,000; Mr. Fikert--37,500; Mr. Murphy--54,444; and
Mr. Drum--32,500.
COMPANY STOCK OPTIONS. The Merger Agreement provides that at the Effective
Time, each outstanding, vested and exercisable option to purchase Shares
(including those options that will become exercisable upon a change in control
of the Company) (a "Stock Option" or collectively "Stock Options") issued
pursuant to the Amended and Restated Incentive Stock Option, Nonqualified Stock
Option and Restricted Stock Purchase Plan, the 1996 Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan, and the 1997 Stock
Option Plan for Non-Employee Directors (collectively the "Company Plans") or
issued outside the Company Plan via special grants by the Company's Stock Option
Committee to certain employees, shall be converted into and shall become the
right to receive a cash payment per Stock Option, without interest, determined
by multiplying (i) the excess, if any, of the Offer Price over the applicable
per share exercise price of such Stock Option by (ii) the number of Shares
underlying the Stock Options immediately prior to the Effective Time. At the
Effective Time, all outstanding options to purchase Shares (including those
options that are not exercisable at the time of the Merger) shall be canceled
and be of no further force or effect except for the right to receive cash to the
extent provided in the Merger Agreement. Prior to the Effective Time, the
Company shall take all actions (including, if appropriate, amending the terms of
any Company Plan) that are necessary to give effect to the transactions
contemplated by the Merger Agreement. Based on Merger Consideration of $12.75,
the officers and directors of the Company will receive approximately $1,026,805
in the aggregate in respect of their Stock Options and, as of August 31, 1999,
approximately $10,430 in the aggregate in respect of their rights under the 1997
Stock Plan. Messrs. Silver, Hough, Fikert, Murphy and Drum will receive
$348,720, $116,240, $167,490, $116,240, and $141,865 respectively, and each of
Messrs. Cilento, Drobish, Lay and Mr. David Seigle will receive $34,063 in
respect of their Stock Options. Calculated as of August 31, 1999, Mr. Fikert and
Mr. Murphy will receive approximately $1,035, and $9,395 in respect of their
rights under the 1997 Stock Option Plan.
SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to consummate the Offer
and the Merger, including the net payment to holders of in-the-money options,
and to pay related fees and expenses, is estimated to be approximately $75
million. Purchaser plans to obtain all funds needed for the Offer and the
proposed Merger through (x) capital contributions by DICOM, Private Equity
Partners and GSL, and (y) borrowings with one or more commercial banks in
respect of which Purchaser has obtained two commitment letters from various
branches of Dresdner Bank AG - Global Finance (DrKB Global Finance) (the
"Commitment Letters") providing for (i) $50 million senior secured credit
facilities (the "Senior Facilities"), comprised of (A) a $23 million bridge loan
facility (the "Bridge Facility"), (B) a $22 million term loan facility (the
"Term Facility"), and (C) a $5 million revolving credit facility (the "Revolving
Facility"), and (ii) $10 million senior subordinated secured notes (the "Senior
Subordinated Notes", and together with the Senior Facilities,
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the "Credit Facilities"). The Commitment Letters indicate DrKB Global Finance's
willingness to provide funding on customary terms and conditions. Any debt
incurred to fund the purchase of Shares in the Offer under the Bridge Facility
is expected to be repaid at the Effective Time from cash and marketable
securities held by the Company.
Based upon the Commitment Letters and the related term sheets thereto, the
Credit Facilities will contain (i) restrictive covenants that limit the Borrower
with respect to, among other things, creating liens upon its assets, disposing
of material amounts of assets other than in the ordinary course of business,
capital expenditures and acquisitions exceeding a certain amount, and (ii) a
covenant that the Borrower will reduce its debt ratio below a certain threshold
if DICOM exercises its call option to acquire the interests of Private Equity
Partners and GSL in Purchaser. As used herein, "Borrower" refers to Purchaser
prior to the Effective Time and Company, as the Surviving Corporation in the
Merger, immediately after the Effective Time.
The Borrower will also be required to meet certain financial tests under
the Credit Facilities. Obligations under the Credit Facilities will be secured
by substantially all the assets of Purchaser and its subsidiaries and by pledges
of 100% of the capital stock of all subsidiaries of the Borrower and 100% of the
capital stock of the Borrower; provided that the Senior Subordinated Notes will
be secured on a junior and subordinated basis to the Senior Facilities.
Purchaser has obtained commitment letters from DICOM and Private Equity
Partners providing for the common equity financing of an amount, in the
aggregate, equal to $20.0 million.
Purchaser further has obtained the Management Commitment Letter, as
described under "Special Factors -- Interests of Certain Persons in the Offer
and the Merger" above, providing for an equity contribution, in the aggregate,
equal to $1.2 million. Such contribution shall come in the form of an exchange
of the Retained Shares for shares of Purchaser's capital stock as set forth in
the Merger Agreement.
THE MERGER AGREEMENT.
The following is a summary of the material terms of the Merger Agreement, a
copy of which is filed as an exhibit to the Schedule 14D-1 and is incorporated
herein by reference. Such summary is qualified in its entirety by reference to
the Merger Agreement and the Letter Agreement, dated as of August 2, 1999 (the
"Letter Agreement") pursuant to which Merger Sub assigned to Purchaser, and
Purchaser accepted all of Merger Sub's right, title and interest in and to all
of the rights granted to Merger Sub under the Merger Agreement, with respect to
the right to offer to purchase, and the right to purchase, the Company's shares
in the Offer. A copy of the Letter Agreement is also attached as an exhibit to
the Schedule 14D-1.
THE OFFER. The Merger Agreement provides that if none of the events or
conditions set forth in "The Tender Offer -- Certain Conditions to the Offer"
(the "Conditions") shall have occurred and be existing, as promptly as
practicable after, but in no event later then five (5) business days after, the
public announcement of the execution of the Merger Agreement by the parties
thereto, Purchaser is required to commence the Offer for all the outstanding
Shares, at the Offer Price. Purchaser shall accept for payment all Shares which
have been validly tendered and not withdrawn pursuant to the Offer as promptly
as practicable after the expiration of the Offer provided that all conditions to
the Offer shall have been satisfied or waived by Purchaser. The obligation of
Purchaser to accept for payment, purchase and pay for Shares tendered pursuant
to the Offer is subject only to the Conditions and to the Minimum Condition.
Purchaser has expressly reserved the right to increase the Offer Price or to
make any other changes in the terms and conditions of the Offer (provided that,
unless previously approved by the Company in writing, no change may be made
which decreases the Offer Price, which changes the form of consideration to be
paid in the Offer, which reduces the maximum number of Shares to be purchased in
the Offer, which imposes conditions to the Offer in addition to the Conditions,
which amends any other term of the Offer in a manner adverse to the holders of
Shares, which extends the Offer except as provided below (provided that the
Offer may not, without the Company's consent, be extended beyond sixty days (60)
after the Commencement of the Offer) or which amends or waives the Minimum
Condition).
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The Merger Agreement provides that the Offer Price is to be paid net to the
sellers of Shares in cash, less any required withholding of taxes, upon the
terms and subject to the Conditions of the Offer. No Shares held by the Company
or any of its subsidiaries will be tendered in the Offer.
The Merger Agreement provides that the Offer will expire at midnight,
Pacific Time, on the date that is twenty (20) business days (which means each
Monday, Tuesday, Wednesday, Thursday, or Friday that banks located in New York,
New York are not required or permitted by law to be closed) after the Offer is
commenced; provided, however, that without the consent of the Company or the
Company Board, Purchaser may (i) extend the Offer, if at the scheduled
expiration date of the Offer any of the conditions to the Offer shall not have
been satisfied or waived, until such time as such conditions are satisfied or
waived, (ii) extend the Offer for any period required for any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer, (iii) extend the Offer for any reason on one or more occasions for an
aggregate period of not more than ten (10) business days beyond the latest
expiration date that would otherwise be permitted under clause (i) or (ii) of
this sentence if on such expiration date the Minimum Condition has been
satisfied but the number of Shares validly tendered, together with shares then
owned directly or indirectly by Purchaser, constitute at least seventy five
percent (75%) but less than ninety percent (90%) of all outstanding Shares, or
(iv) extend the Offer for any reason on one or more occasions for an aggregate
period of not more than ten (10) business days beyond the initial expiration
date or the latest expiration date that would otherwise be permitted under
clauses (i), (ii), or (iii) of this sentence. Subject to the terms and
conditions of the Offer and the Merger Agreement, Purchaser has agreed to accept
for payment, and pay for, all Shares validly tendered and not withdrawn pursuant
to the Offer that Purchaser becomes obligated to accept for payment and pay for
pursuant to the Offer, as promptly as practicable after the expiration of the
Offer.
COMPANY ACTION. The Company has approved of and consented to the Offer.
The Company Board, at a meeting duly called and held, has, subject to the terms
and conditions set forth in the Merger Agreement, unanimously, (i) determined
that the Merger Agreement and the transactions contemplated thereby, including
the Offer and the Merger, are fair to, and in the best interests of, the
shareholders of the Company, (ii) approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, in all
respects, such approval constituting approval of the Offer, the Merger Agreement
and the Merger for purposes of Section 251 of the DGCL, and similar provisions
of any other similar state statutes that might be deemed applicable to the
transactions contemplated by the Merger Agreement, and (iii) resolved to
recommend that the shareholders of the Company accept the Offer, tender their
Shares to Purchaser and approve and adopt the Merger Agreement and the Merger.
The Company consents to the inclusion of such recommendation and approval in the
Offer to Purchase, Letter of Transmittal and related documents (the "Offer
Documents"); provided, however, that such recommendation may be withdrawn,
modified or amended in accordance with the Merger Agreement.
The Merger Agreement provides that the Company will file with the
Commission a Solicitation/ Recommendation Statement on Schedule 14D-9 containing
the recommendation described above, and promptly mail the Schedule 14D-9 to the
shareholders of the Company.
COMPANY BOARD AND COMMITTEES. The Merger Agreement provides that promptly
upon the payment by Purchaser for Shares pursuant to the Offer and from time to
time thereafter, subject to compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder, Purchaser shall be entitled to designate
up to such number of directors, rounded up to the next whole number, on the
Company Board as will give Purchaser representation on the Company Board equal
to the product of the number of directors on the Company Board (giving effect to
any increase in the number of directors as provided in the Merger Agreement) and
the percentage that such number of Shares so purchased bears to the total number
of outstanding Shares on a fully diluted basis, and the Company shall use its
reasonable best efforts to, upon request by Purchaser, promptly, at the
Company's election, either increase the size of the Company Board or secure the
resignation of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Company Board and to cause Purchaser's designees
to be so elected. Following the election of Purchaser's designees and until the
Effective Time, any amendment of the Merger Agreement or the Certificate of
Incorporation or Bylaws of the Company, any termination of the Merger Agreement
by the
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Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Purchaser or Merger Sub, any waiver of any of
the Company's rights hereunder, or any transaction between Purchaser (or any
affiliate or associate thereof) and the Company shall require the concurrence of
a majority of the Company's directors (or the concurrence of the sole remaining
director, if there is only one remaining) then in office who are directors of
the Company on the date hereof, or are directors designated by such persons or
person.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions set forth in the Merger Agreement, and in accordance with the
DGCL, at the Effective Time, Merger Sub will be merged with and into the
Company. The Merger Agreement provides that the Merger will become effective
upon the filing of the Merger Agreement and an agreement or certificate of
merger with the Secretary of State of the State of Delaware, in such form as
required by, and in accordance with applicable provisions of, the DGCL
(including, if possible, the procedures permitted by Section 253 thereof) (the
"Effective Time"). As a result of the Merger, the separate corporate existence
of Merger Sub will cease, and the Company will continue as the Surviving
Corporation.
Pursuant to the Merger Agreement, each Share issued and outstanding
immediately prior to the Effective Time other than (i) Shares held by the
Company or any subsidiary of the Company, (ii) Shares held by Purchaser, Merger
Sub or any other subsidiary of Purchaser, if any, (iii) the Retained Shares, and
(iv) Shares held by shareholders who have demanded and perfected, and have not
withdrawn or otherwise lost, appraisal rights, if any, under the DGCL, will be
canceled and converted automatically into the right to receive $12.75 in cash,
or any higher price that may be paid per Share in the Offer, without interest
(the "Merger Consideration"). Each Share held by the Company as treasury stock
or held by Purchaser, Merger Sub or any subsidiary of Purchaser, Merger Sub or
the Company immediately prior to the Effective Time shall be canceled, retired
and cease to exist, and no consideration shall be delivered with respect
thereto. Each Retained Share issued and outstanding immediately prior to the
Effective Time shall be exchanged for (as provided in and subject to the
limitations set forth in the Merger Agreement) and become (i) a number of fully
paid and nonassessable shares of Class B Common Stock, par value $0.001 per
share, of the Purchaser ("Purchaser Class B Common") equal to (x) 20% of the
Offer Price divided by (y) $10.00 and (ii) a number of fully paid and
non-assessable shares of Class A Common Stock par value $0.001 per share, of the
Purchaser ("Purchaser Class A Common") equal to (x) 80% of the Offer Price
divided by (y) $10.00, upon the surrender of the certificate previously
representing such shares of Retained Shares.
The Merger Agreement provides that the directors of Merger Sub at the
Effective Time will be the directors of the Surviving Corporation and that the
officers of Merger Sub at the Effective Time will be the officers of the
Surviving Corporation, in each case, until successors are duly elected or
appointed and qualified in accordance with applicable law. The Merger Agreement
also provides that the Certificate of Incorporation of the Company in effect at
the Effective Time will be the Certificate of Incorporation of the Surviving
Corporation, and that the Bylaws of the Company will be the Bylaws of the
Surviving Corporation, in each case, until amended in accordance with applicable
law.
SHARES OF DISSENTING HOLDERS. The Merger Agreement provides that
notwithstanding anything to the contrary contained in the Merger Agreement, any
holder of Shares with respect to which appraisal rights, if any, are granted by
reason of the Merger under the DGCL and who does not vote in favor or consents
in writing to the Merger and who otherwise complies with the provisions of
Section 262 of the DGCL ("Dissenting Shares") shall not be entitled to receive
any Merger Consideration pursuant to the terms of the Merger Agreement, unless
such holder fails to perfect, effectively withdraws or loses his or her right
appraisal right under the provisions of Section 262 of the DGCL. If any such
holder so fails to perfect, effectively withdraws or loses his or her
dissenters' rights under the DGCL, each Dissenting Share of such holder shall
thereupon be deemed to have been converted, as of the Effective Time, into the
right to receive the Offer Price.
Any payments relating to Dissenting Shares shall be made solely by the
Surviving Corporation and no funds or other property have been or will be
provided by Purchaser, Merger Sub or any of Purchaser's other
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direct or indirect subsidiaries for such payment, nor shall the Company make any
payment with respect to, or settle or offer to settle, any such demands.
EXCHANGE OF SHARE CERTIFICATES. The Merger Agreement provides that IBJ
Whitehall Bank & Trust Company or another bank or trust company designated by
Purchaser and reasonably acceptable to the Company, shall act as the exchange
agent (in such capacity, the "Exchange Agent"), and shall otherwise take all
action necessary to provide the Exchange Agent on a timely basis, as and when
needed after the Effective Time, funds necessary to provide for the payment for
the benefit of the holders of Shares, for the exchange of a certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Share Certificates") that were converted into the right to receive the
Offer Price. The Merger Agreement provides that Purchaser will deposit, or will
cause to be deposited, with the Exchange Agent, for the benefit of the holders
of Shares, the Merger Consideration to be paid in respect of the Shares. The
Depositary is acting as the Exchange Agent. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Merger Consideration out of the amount
so deposited by Purchaser to holders of Shares entitled thereto. The amount
deposited by Purchaser with the Exchange Agent shall not be used for any other
purpose. Any and all amounts earned on such funds paid over to the Surviving
Corporation.
Pursuant to the Merger Agreement, as soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of
Share Certificates formerly representing Shares converted into the right to
receive the Merger Consideration pursuant to the Merger Agreement: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Share Certificates shall pass, only upon delivery of the
Share Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Purchaser and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Share Certificates in
exchange for a cash payment of the proper Merger Consideration. Upon surrender
of a Share Certificate for cancellation to the Exchange Agent or to such other
agent or agents as may be appointed by Purchaser, together with such letter of
transmittal, duly executed, the holder of such Share Certificate shall be
entitled to receive in exchange therefor by check an amount equal to (A) the
Offer Price, multiplied by (B) the number of Shares represented by such Share
Certificate, which such holder has the right to receive, and the Share
Certificate so surrendered shall forthwith be canceled provided, that any Share
Certificate (or portion thereof) representing Retained Share shall not be
entitled to such cash amount, but a number of shares of Purchaser Class A Common
and Purchaser Class B Common as set forth in the Merger Agreement. No interest
shall be paid or accrued on any Merger Consideration upon the surrender of any
Share Certificates. In the event of a transfer of ownership of Shares which is
not registered in the transfer records of the Company, payment of the proper
Merger Consideration may be paid to a transferee if the Share Certificate
representing such Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer or other taxes required as a result of such payment to
a person other than the registered holder of such shares have been paid. Until
surrendered and exchanged, each Share Certificate (other than Share Certificates
representing Excluded Shares) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender an amount equal
to (A) the Offer Price, multiplied by (B) the number of Shares represented by
such Share Certificate. In the event that any Share Certificate shall have been
lost, stolen or destroyed, the Exchange Agent shall pay, upon the making of an
affidavit of that fact by the holder thereof, the proper Merger Consideration,
provided, however, that Purchaser may, in its discretion, require the delivery
of a suitable bond and/or indemnity.
The Merger Agreement further provides that the Merger Consideration paid
upon the surrender for exchange of Shares shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares, subject formerly
represented thereby. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Share Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged.
Pursuant to the Merger Agreement, any portion of the Merger Consideration
which remains undistributed to the shareholders of the Company for six months
after the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any shareholders of the Company who have not theretofore
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complied with the terms of the Merger Agreement shall thereafter look only to
the Surviving Corporation for payment of their claim for any Merger
Consideration.
COMPANY STOCK OPTIONS; 1997 STOCK PLAN. The Merger Agreement provides that
at the Effective Time, each outstanding, vested and exercisable option to
purchase Shares (including those options that will become exercisable upon a
change in control of the Company) (a "Stock Option" or collectively "Stock
Options") issued pursuant to the Amended and Restated Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan, the 1996 Incentive
Stock Option, Nonqualified Stock Option and Restricted Stock Purchase Plan, and
the 1997 Stock Option Plan for Non-Employee Directors (collectively the "Company
Plans") or issued outside the Company Plan via special grants by the Company's
Stock Option Committee to certain employees shall be converted into and shall
become the right to receive a cash payment per Stock Option, without interest,
determined by multiplying (i) the excess, if any, of the Offer Price over the
applicable per share exercise price of such Stock Option by (ii) the number of
Shares underlying the Stock Options immediately prior to the Effective Time. At
the Effective Time, all outstanding options to purchase Shares (including those
options that are not exercisable at the time of the Merger) shall be canceled
and be of no further force or effect except for the right to receive cash to the
extent provided in the Merger Agreement. Prior to the Effective Time, the
Company shall take all actions (including, if appropriate, amending the terms of
any Company Plan) that are necessary to give effect to the transactions
contemplated by the Merger Agreement.
The Merger Agreement further provides that, unless terminated prior to the
Effective Time in accordance with its terms, the Company's 1997 Employee Stock
Purchase Plan (the "1997 Stock Plan") shall be terminated as of the Effective
Time. Unless the 1997 Stock Plan is terminated prior to the Effective Time in
accordance with its terms, the Company shall take such actions as are necessary
or appropriate to cause the last day of the then current Offering Period (as
such term is used in the 1997 Stock Plan) to be the last trading day on which
the Shares are traded on the Nasdaq National Market immediately prior to the
Effective Time (the "Final Company Exercise Date"); provided, that such change
shall be conditioned upon the consummation of the Merger. On the Final Company
Exercise Date, and subject to the participants' right to receive invested cash
as provided in the 1997 Stock Plan, the Company shall apply the funds credited
as of such date under the 1997 Stock Plan within each participant's account to
the purchase of whole Shares in accordance with the terms of the 1997 Stock
Plan, it being agreed that the number of Shares so purchased shall not exceed
the number of Shares issuable under the 1997 Stock Plan, as represented in
Section 3.2 of the Merger Agreement.
CONDUCT OF BUSINESS PRIOR TO CONSUMMATION OF THE MERGER. Pursuant to the
Merger Agreement, the Company Board has agreed not to permit the Company or its
subsidiaries to conduct its business in any manner other than in the ordinary
course of business and in a manner consistent with past practice. The Company
has agreed that, among other things and subject to certain exceptions, between
the date of the Merger Agreement and the Effective Time, other than with
Purchaser's or Merger Sub's prior written consent or as set forth in Schedule
5.1 of the Disclosure Schedule to the Merger Agreement, the Company and its
subsidiaries shall not, voluntarily or involuntarily, take any of the following
actions:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend or modify (except as required hereby) the terms of the
Company Plans or authorize for issuance, issue, sell, deliver or agree or
commit to issue (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities or equity equivalents
(including, without limitation, any phantom stock or stock appreciation
rights), except for the issuance or sale of shares of common stock pursuant
to the exercise of Stock Options or under its 1997 Stock Plan;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any capital stock of its
subsidiaries;
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(d) (i) incur or assume any indebtedness for borrowed money except for
indebtedness not exceeding $100,000 in the aggregate, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person, except for obligations not exceeding $100,000 in the aggregate,
(iii) except for investments not exceeding $100,000 in the aggregate, make
any loans, advances or capital contributions to, or investments in, any
other person (other than to subsidiaries of the Company or customary loans
or advances to employees in the ordinary course of business consistent with
past practice), (iv) pledge or otherwise encumber shares of capital stock
of the Company's subsidiaries, or (v) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any
material lien thereupon except for liens securing indebtedness for borrowed
money not exceeding $100,000 in the aggregate;
(e) except as may be required by law or as contemplated by the Merger
Agreement, (i) enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan,
fund or other arrangement for the benefit or welfare of any director,
officer or employee in any material manner, or (ii) except for normal
salary increases and bonus payments in the ordinary course of business
consistent with past practice, increase in any material manner the
compensation of any director, officer or employee or agent, or (iii) pay
any material benefit not required by any plan and arrangement as in effect
as of the date hereof (including, without limitation, the granting of stock
appreciation rights or performance units), or (iv) create, issue or
increase any severance agreement or stay bonus with any officer, director
or employee;
(f) acquire, sell, lease or dispose of any assets outside the ordinary
course of business which have a value in the aggregate in excess of
$100,000;
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or cash management practices used by it;
(h) authorize or make any new capital expenditure or expenditures
which, individually, is in excess of $100,000 or, in the aggregate, are in
excess of $500,000;
(i) make any tax election or settle or compromise any income tax
liability material to the Company and its subsidiaries taken as a whole;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the notes
thereto) of the Company and its subsidiaries in the Company's most recent
Annual Report on Form 10-K (the "Recent SEC Reports") or incurred in the
ordinary course of business consistent with past practice;
(k) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any
subsidiary or the Company; or
(l) take, or agree in writing or otherwise to take, any of the actions
described in paragraphs (a) through (k) above or any action which would
cause or constitute a breach of any of the representations or warranties of
the Company contained in the Merger Agreement.
NO SOLICITATION. The Merger Agreement provides that the Company shall not,
nor shall it permit any of the subsidiaries to, nor shall it authorize or permit
any officer, director or employee of, or any investment banker, attorney or
other advisor or representative of, the Company or any of the subsidiaries to
(i) solicit or initiate, encourage, or facilitate, directly or indirectly, any
inquiries relating to, or the submission of, any proposal or offer, whether in
writing or otherwise, from any person other than Purchaser, Merger Sub or any
affiliates thereof (a "Third Party") to acquire beneficial ownership (as defined
under Rule 13(d) of the Exchange Act) of all or a material portion of the assets
of the Company or any of its subsidiaries or 20% or more of any class of equity
securities of the Company or any of its subsidiaries pursuant to a merger,
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consolidation or other business combination, sale of shares of capital stock,
sale of assets, tender offer, exchange offer or similar transaction with respect
to either the Company or any of its subsidiaries, including any single
transaction or series of related transactions, which is structured to permit
such Third Party to acquire beneficial ownership of any material portion of the
assets of or 20% or more of the equity interest in either the Company or any of
its subsidiaries (a "Takeover Proposal"), (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information or data with
respect to or access to the properties of, or take any other action to knowingly
facilitate the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal or (iii) enter into any agreement
with respect to any Takeover Proposal, approve or recommend or resolve to
approve or recommend any Takeover Proposal or enter into any agreement or
understanding requiring it to abandon, terminate or fail to consummate the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement. Notwithstanding the foregoing sentence, prior to the expiration of
the Offer, if the Company Board receives a bona fide Takeover Proposal by a
Third Party that was not solicited or initiated, or encouraged or facilitated,
directly or indirectly, by the Company, any of the subsidiaries or any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of the subsidiaries, the terms of which
the Company Board determines in good faith (after consulting and receiving
advice from the Company's independent financial advisor and independent legal
counsel) are more favorable from a financial point of view to the holders of
Shares than the Offer, the Merger and other transactions contemplated by this
Agreement (taking into account any adjustments to the terms and conditions
proposed in writing by Purchaser within three (3) business days after Purchaser
and Merger Sub receive notice of such Takeover Proposal) and taking into account
any differences in the conditions set forth in the Superior Proposal, in the
aggregate, from the conditions set forth herein (a "Superior Proposal"), then
the Company may, in response to an unsolicited request therefor and subject to
compliance with the Merger Agreement furnish information with respect to the
Company and the subsidiaries to, and participate in discussions and negotiations
directly or through its representatives with, such Third Party, subject to a
confidentiality agreement; provided, that the Company Board first determines in
good faith, after receiving the advice of independent legal counsel, that such
action is required in order for the Company Board to comply with its fiduciary
duties to the Company's stockholder under applicable law, and the Company shall
not have violated any of the restrictions set forth in Section 5.2 of the Merger
Agreement; provided, however, that any such Takeover Proposal shall not be
deemed to be a Superior Proposal if any financing required to consummate the
transaction contemplated thereby is not committed on terms substantially similar
to those obtained by or for the benefit of Purchaser or Merger Sub in connection
with the Offer and the Merger and such commitment is not likely, in the
reasonable judgment of the Company's Board (after consultation with its
independent financial advisor), to be obtained by such third party within a
reasonable period of time. The Company shall advise Purchaser orally and in
writing of (i) any Takeover Proposal or any inquiry with respect to or which
could reasonably be expected to lead to any Takeover Proposal received by any
officer or director of the Company or, to the knowledge of the Company, any
financial advisor, attorney or other advisor or representative of the Company,
(ii) the material terms of such Takeover Proposal (including a copy of any
written proposal), and (iii) the identity of the person making any such Takeover
Proposal or inquiry promptly following receipt of such Takeover Proposal or
inquiry. The Company will keep Purchaser duly informed of the status and details
of any such Takeover Proposal or inquiry in a timely manner.
ACCESS TO INFORMATION. The Merger Agreement provides that until the
Effective Time, the Company will provide to Purchaser and Merger Sub and their
authorized representatives reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the Company and
its subsidiaries, will permit Purchaser and Merger Sub to make such inspections
as Purchaser and Merger Sub may reasonably require and will cause the officers
of the Company and those of its subsidiaries to furnish Purchaser and Merger Sub
with such financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as Purchaser or
Merger Sub may from time to time reasonably request. All of such information
shall be treated as Confidential Information pursuant to the terms of the
Confidentiality Agreement, dated June 29, 1999, between the Company and DICOM,
the provisions of which are incorporated by reference into the Merger Agreement.
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SHAREHOLDERS MEETING; PROXY STATEMENT. The Merger Agreement provides that,
if a vote of the Company's shareholders is required by law, the Company will, as
promptly as practicable following the acceptance for payment of Shares by
Purchaser pursuant to the Offer, take, in accordance with applicable law and its
Certificate of Incorporation and Bylaws, all action necessary to convene a
special meeting of holders of Shares (the "Shareholders Meeting") to consider
and vote upon the approval of the Merger, if such approval is required. The
Company shall, as promptly as practicable, prepare and file with the Commission
a preliminary proxy statement for the solicitation of a vote of holders of
Shares approving the Merger (the "Proxy Statement"), which shall include the
unanimous recommendation of the Company Board that shareholders of the Company
vote in favor of the approval and adoption of this Agreement and the written
opinion of the Financial Advisor that the cash consideration to be received by
the shareholders of the Company pursuant to the Merger is fair to such
shareholders from a financial point of view. The Company shall use all
reasonable efforts to respond to any comments of the Commission and its staff
and as promptly as practicable after responding to such comments to the
satisfaction of the staff cause the Proxy Statement to be mailed to the
shareholders of the Company. Notwithstanding the foregoing, if Purchaser, Merger
Sub and/or any other subsidiary of Purchaser shall acquire at least ninety
percent (90%) of the outstanding Shares, the parties shall take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a Shareholders Meeting in
accordance with Section 253 of the DGCL. Purchaser and Merger Sub agree to cause
all Shares purchased pursuant to the Offer and all other Shares owned by
Purchaser and Merger Sub or any subsidiary of Purchaser to be voted in favor of
the Merger.
ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the terms and
conditions in the Merger Agreement, Purchaser, Merger Sub and the Company agree
to use all reasonable efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective as
promptly as practicable the transactions contemplated by the Merger Agreement,
including, without limitation, (a) cooperation in the preparation and filing of
the Schedule 14D-9, the Proxy Statement, any filings that may be required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and any
amendments thereto; (b) the taking of all action reasonably necessary, proper or
advisable to secure any necessary consents under material contracts; (c)
contesting any legal proceeding relating to the Offer or the Merger and (d) the
execution of any additional instruments necessary to consummate the transactions
contemplated thereby. Subject to the terms and conditions of the Merger
Agreement, Purchaser and Merger Sub agree to use (i) all reasonable efforts to
cause the Effective Time to occur as soon as practicable after the shareholder
vote, if any, with respect to the Merger and (ii) their respective best efforts
to satisfy the conditions precedent set forth in the Commitment Letters (as
defined in the Merger Agreement) (provided that nothing herein shall be deemed
to be an obligation of Purchaser or Merger Sub to increase the Offer Price). In
addition, Purchaser and Merger Sub will not consent or agree to any amendment,
waiver, modification or early termination of the Commitment Letters in any
manner adverse to Purchaser or Merger without the Company's prior written
consent, which shall not be unreasonably withheld.
CONSENTS. The Merger Agreement provides that Purchaser, Merger Sub and the
Company each will use all commercially reasonable efforts to obtain consents of
all third parties to material contracts and governmental entities necessary,
proper or advisable for the consummation of the transactions contemplated by the
Merger Agreement.
PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that Purchaser, Merger
Sub and the Company, as the case may be, will consult with one another and seek
one another's approval before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by the Merger
Agreement, including, without limitation, the Offer or the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation and approval, except as may be required by applicable law or by
obligations pursuant to any listing agreement with The Nasdaq Stock Market, as
determined by Purchaser, Merger Sub or the Company, as the case may be.
TRANSACTION LITIGATION. The Merger Agreement provides that the Company
shall give Purchaser and Merger Sub the opportunity to participate in the
defense or settlement of any litigation against the Company and its directors
directly relating to any of the transactions contemplated by Merger Agreement;
provided, that
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no such settlement shall be agreed to without Purchaser's consent, which consent
shall not be unreasonably withheld.
DELISTING. The Merger Agreement provides that each of the parties hereto
shall cooperate with each other in taking or causing to be taken, all actions
necessary to delist all of the Company's securities from the Nasdaq National
Market System and to terminate registration under the Exchange Act; provided,
that such delisting and termination shall not be effective until after the
Effective Date.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective
obligations of the parties to effect the Merger are subject to the satisfaction
or waiver of the following conditions prior to the Effective Time: (a) if
required by the DGCL, the Merger Agreement shall have been approved and adopted
by the affirmative vote of the shareholders of the Company; (b) no federal,
state or foreign court or tribunal or administrative, governmental or regulatory
body, agency or authority (a "Governmental Entity") or federal, state or foreign
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
then in effect (which order or other action the parties hereto shall use their
reasonable efforts to vacate or lift) and has the effect of making the
consummation of the Merger illegal under applicable law; (c) any waiting period
applicable to the Merger and other transactions described in the recitals to the
Merger Agreement under the HSR Act shall have terminated or expired, and any
other governmental or regulatory notices or approvals required with respect to
the transactions contemplated by the Merger Agreement (the absence of which
would reasonably be expected to have a Company Material Adverse Effect) shall
have been either filed or received; and (d) Purchaser shall have accepted for
payment and purchased all Shares validly tendered and not withdrawn pursuant to
the Offer.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations by the Company as to the Company's corporate
organization and qualification, the Company's subsidiaries, capitalization,
authority, filings with the Commission and other governmental authorities,
material contracts, financial statements, the absence of certain changes or
events concerning the Company's corporate organization and qualification, the
absence of undisclosed liabilities, the truth of information supplied by the
Company, litigation, labor matters, employee benefit matters and ERISA, taxes,
compliance with applicable laws, environmental matters, real property,
intellectual property, year 2000 compliance, insurance, suppliers and customers,
restrictions on business activities, brokers, conduct of business, expenses,
dividends, state takeover statutes, related party transactions and the opinion
of the Financial Advisor.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the
Merger Agreement, Purchaser and Merger Sub have agreed that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its subsidiaries as provided in their
respective charters or Bylaws (or other similar governing instruments) 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 DCGL, such
indemnification shall be mandatory rather than permissive, and the Surviving
Corporation shall advance expenses in connection with such indemnification
(subject to the Surviving Corporation's receipt of an undertaking by the
indemnified party to return such advanced expenses to the Surviving Corporation
if it is determined by a final, non-appealable order of a court of competent
jurisdiction that such indemnified party is not entitled to retain such advanced
expenses).
The Merger Agreement further provides that 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 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; provided, however, that in satisfying its obligation, the Surviving
Corporation shall not be obligated to pay premiums in excess of 150% with
respect to such current insurance.
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In the event the Surviving Corporation or its successor (i) is consolidated
with or merges into another person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any other person in a single
transaction or a series of related transactions, Purchaser has agreed that it
will make or cause to be made proper provision so that the successor or
transferee of the Surviving Corporation shall comply in all material respect
with these terms.
TERMINATION. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of this Agreement by the shareholders of the Company:
(a) by mutual written consent of Purchaser, Merger Sub and the
Company;
(b) by Purchaser, Merger Sub or by the Company
(i) if (x), the Offer shall have terminated or expired in
accordance with its terms without Purchaser's having accepted for
payment any Shares pursuant to the Offer or (y) the Offer shall not have
been consummated prior to October 15, 1999; provided, that the right to
terminate this Agreement pursuant to this clause (i) shall not be
available to any party if it is in material breach of its obligation
hereunder and such breach is the principal cause of, or resulted in, the
failure of the Offer to have been consummated on or before such date; or
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the acceptance for payment of, or payment for,
Shares pursuant to the Offer and such order, decree or ruling or other
action shall have become final and nonappealable; provided, that the
party seeking to terminate the Merger Agreement pursuant to this clause
(ii) shall have used all commercially reasonable efforts to remove such
order, decree, ruling, judgment or injunction;
(c) by Purchaser or Merger Sub prior to the purchase of Shares
pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in the
Merger Agreement which (i) would give rise to the failure of the Offer
Condition set forth in paragraph (b) of Annex A to the Merger Agreement and
(ii) cannot be or has not been cured within 10 business days after the
giving of written notice thereof to the Company by Purchaser or Merger Sub;
(d) by Purchaser or Merger Sub prior to the purchase of Shares
pursuant to the Offer if either Purchaser or Merger Sub is entitled to
terminate the Offer as a result of the occurrence of any event set forth in
paragraphs (e) or (j) of Annex A to the Merger Agreement;
(e) by the Company if the Company Board has received a Superior
Proposal and the Company furnishes information with respect to the Company
and the subsidiaries to, and participates in discussions and negotiations
directly or through its representatives with a Third Party, subject to a
confidentiality agreement, after the Company Board determined in good
faith, after receiving the advice of independent legal counsel, that such
action is required in order for the Company Board to comply with its
fiduciary duties to the Company's stockholder under applicable law;
provided, that (i) the Company has complied with all provisions of Section
5.2 of the Merger Agreement, (ii) the Company may not terminate this
Agreement pursuant to this clause (e) unless and until three (3) business
days have elapsed following delivery to Purchaser of a written notice of
such determination by the Company Board (which notice shall include the
identity of the Third Party making such Superior Proposal and a copy of all
documentation relating to such Superior Proposal), and (iii) the Company
delivers payment to the Purchaser of the Termination Fee and the Expenses
contemporaneously with such termination;
(f) by the Company prior to the purchase of Shares pursuant to the
Offer if (i) any of the representations or warranties of Purchaser or
Merger Sub set forth in this Agreement that are qualified as to materiality
shall not be true and correct in any respect or any such representations or
warranties that are not so qualified shall not be true and correct in any
material respect, or (ii) Purchaser or Merger Sub shall have failed to
perform in any material respect any material obligation or to comply in any
material
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respect with any material agreement or covenant of Purchaser or Merger Sub
to be performed or complied with by it under this Agreement and such
untruth, incorrectness or failure cannot be or has not been cured within 10
business days after the Company's giving of written notice to Purchaser or
Merger Sub, as applicable.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall become void and have no effect, without any liability on the
part of any party or its affiliates, directors, officers or shareholders, other
than the provisions concerning fees and expenses (discussed below), public
announcements, confidentiality the nonsurvival of most of the representations
and warranties made in the Merger Agreement, assignment, validity, notices,
governing law, construction and interpretation, parties in interest,
severability, specific performance, counterparts and waiver of jury trial.
Nothing shall relieve any party from liability for any breach of the Merger
Agreement prior to such termination.
FEES AND EXPENSES. As provided in the Merger Agreement, whether or not the
Merger is consummated, all costs and expense incurred in connection with the
Merger Agreement and the transactions contemplated by the Merger Agreement,
including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses.
The Company shall pay, or cause to be paid, by wire transfer of immediately
available funds to Purchaser (i) the documented reasonable out-of-pocket fees
and expenses incurred by or paid by or on behalf of Purchaser and its affiliates
(including, but not limited to, DICOM and Private Equity Partners) in connection
with the Offer, the Merger or the consummation of any of the transactions
contemplated by the Merger Agreement, including all reasonable fees and expenses
of law firms, commercial banks, investment banking firms, accountants, experts
and consultants to Purchaser and its affiliates ("Purchaser Expenses") not to
exceed $1,750,000 and, if applicable, (ii) $1,500,000 (the "Termination Fee")
under the circumstances and at the times set forth as follows:
(i) if the Company terminates this Agreement under paragraph (e)
above, the Company shall pay the Purchaser Expenses and the Termination Fee
concurrently with such termination in accordance with paragraph (e) above;
(ii) if Purchaser or Merger Sub terminates the Merger Agreement under
paragraph (c) above or paragraph (d) above, (x) the Company shall pay the
Purchaser Expenses upon demand, and (y) if concurrently with such
termination or within 270 days thereafter (A) the Company enters into a
merger agreement, acquisition agreement or similar agreement with respect
to a Takeover Proposal, or a Takeover Proposal is consummated, involving
any party other than Purchaser or any of its affiliates (1) with whom the
Company had any discussions with respect to a Takeover Proposal, (2) to
whom the Company furnished information with respect to or with a view to a
Takeover Proposal or (3) who had submitted a proposal or expressed any
interest publicly in a Takeover Proposal, in the case of each of clauses
(1), (2) and (3), after the date hereof and prior to such termination, or
(B) the Company enters into a merger agreement, acquisition agreement or
similar agreement with respect to a Superior Proposal, or a Superior
Proposal is consummated, then, in the case of either (A) or (B) above, the
Company shall pay the Termination Fee upon consummation of such Takeover
Proposal or Superior Proposal; and
(iii) notwithstanding clause (ii) above, if the Purchaser or Merger
Sub terminates this Agreement under paragraph (c) above as a result of the
Company's material breach of Section 5.2 of the Merger Agreement, the
Company shall pay the Purchaser Expenses and the Termination Fee upon
demand.
In no event shall the Purchaser Expenses and the Termination Fee be payable
by the Company more than once. Any such payments shall be made to the Purchaser
by wire transfer of immediately available funds.
In the event that the Company terminates this Agreement under paragraph (f)
above or the Purchaser or Merger Sub terminates the Merger Agreement solely as a
result of the failure of the condition set forth in paragraph (k) of Annex A to
the Merger Agreement, Purchaser shall pay, or shall cause to be paid by wire
transfer of immediately available funds to the Company the documented reasonable
out-of-pocket fees and expenses incurred by or paid on behalf of the Company in
connection with the offer, the Merger or the consummation of any of the
transactions contemplated by the Merger Agreement, including all reasonable
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fees and expenses of law firms, investment banking firms, accountants, experts
and consultants to the Company (the "Company Expenses") not to exceed $400,000.
The obligation of Purchaser to pay the Company Expenses pursuant to the Merger
Agreement has been guaranteed by DICOM in its commitment letter to Purchaser.
Each of the parties hereto acknowledge that all amounts payable under the
fees and expenses provisions of the Merger Agreement shall constitute liquidated
damages in lieu of any actual damages for termination of the Merger Agreement.
AMENDMENT. Subject to applicable law, the Merger Agreement may be amended
by the Company, Purchaser and Merger Sub by action taken by or on behalf of the
respective board of directors of the Company, Purchaser and Merger Sub at any
time prior to the Effective Time; provided, that after the approval and adoption
of the Merger Agreement and the transactions contemplated thereby by the
shareholders of the Company (if required by applicable law) no amendment shall
be made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon the consummation of the Merger. The
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of the parties.
EXTENSION; WAIVER. The Merger Agreement provides that at any time prior to
the Effective Time, each party may (a) extend the time for the performance of
any of the obligations or other acts of the other party or parties, (b) waive
any inaccuracies in the representations and warranties of the other parties
contained therein or in any document, certificate or writing delivered pursuant
thereto or (c) waive compliance by the other parties with any of the agreements
or conditions contained therein which may be legally waived. 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. The failure of
any party to assert any of its rights shall not constitute a waiver of such
rights.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes. In general,
a shareholder will recognize gain or loss for United States federal income tax
purposes equal to the difference between the amount of cash received in exchange
for the Shares sold and such shareholder's adjusted tax basis in such Shares.
Such gain or loss will be capital gain or loss if the Shares constitute capital
assets in the hands of the shareholder. In the case of an individual holder of
Shares, any such capital gain generally will be subject to a maximum United
States federal income tax rate of 20% if the holder's holding period in such
shares was more than one year at the Effective Time or at the time of
consummation of the Offer. Any resulting capital loss will be subject to certain
limitations on deductibility for United States federal income tax purposes.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
SHAREHOLDERS, SUCH AS FINANCIAL INSTITUTIONS, BROKER-DEALERS, SHAREHOLDERS WHO
ACQUIRED SHARES PURSUANT TO THE EXERCISE OF OPTIONS OR OTHERWISE AS
COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES, FOREIGN CORPORATIONS AND PERSONS WHO RECEIVED PAYMENTS IN RESPECT OF
OPTIONS OR WARRANTS TO ACQUIRE SHARES.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE
URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF THE UNITED STATES ALTERNATIVE MINIMUM TAX, STATE AND LOCAL, AND
FOREIGN TAX LAWS.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT REGISTRATION;
MARGIN REGULATIONS.
POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES. The purchase
of Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public. The purchase of Shares
pursuant to the Offer can also be expected to reduce the number of holders of
Shares. Purchaser cannot predict whether the reduction in the number of Shares
that might otherwise trade publicly would have an adverse or beneficial effect
on the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price therefor.
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STOCK QUOTATION. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the National
Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in
the Nasdaq National Market, which require that an issuer have at least 200,000
publicly held shares, held by at least 400 stockholders or 300 stockholders of
round lots, with a market value of at least $1,000,000, and have net tangible
assets of at least $1,000,000, $2,000,000 or $4,000,000, depending on
profitability levels during the issuer's four most recent fiscal years. If these
standards are not met, the Shares might nevertheless continue to be included in
The Nasdaq Stock Market, with quotations published in the NASD Automatic
Quotation System ("Nasdaq") "additional list" or in one of the "local lists."
However, if the number of holders of the Shares were to fall below 300, or if
the number of publicly held Shares were to fall below 100,000 or there were not
at least two registered and active market makers for the Shares, the NASD's
rules provide that the Shares would no longer be "qualified" for the Nasdaq
Stock Market reporting, and The Nasdaq Stock Market would cease to provide any
quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. As of July 27, 1999, there were approximately
186 holders of record or through nominee or street name accounts with brokers of
Shares and there were 5,243,956 Shares outstanding. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NASD for continued inclusion in the Nasdaq National
Market or in any other tier of The Nasdaq Stock Market and the Shares are no
longer included in the Nasdaq National Market or in any other tier of The Nasdaq
Stock Market, as the case may be, the market for Shares could be adversely
affected.
In the event that the Shares no longer meet the requirements of the NASD
for continued inclusion in any tier of The Nasdaq Stock Market, it is possible
that the Shares would continue to trade in the over-the-counter market and that
price quotations would be reported by other sources. The extent of the public
market for the Shares and the availability of such quotations would, however,
depend upon the number of holders of Shares remaining at such time, the
interests in maintaining a market in Shares on the part of securities firms, the
possible termination of registration of the Shares under the Exchange Act, as
described below, and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. The purchase of the Shares pursuant to the Offer may result in the
Shares becoming eligible for de-registration under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Shares. The termination of registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission, and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement in connection with meetings of
shareholders meetings pursuant to Section 14(a) of the Exchange Act, and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for reporting on The Nasdaq National Market.
MARGIN REGULATIONS. The Shares may currently be "margin securities" under
the regulations of the Company Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), which would have the effect, among other things,
of allowing brokers to extend credit on the collateral of such Shares for the
purpose of buying, carrying or trading in securities ("Purpose Loans").
Depending upon factors, such as the number of record holders of the Shares and
the number and market value of publicly held Shares, following the purchase of
Shares pursuant to the Offer, the Shares might no longer constitute "margin
securities" for purposes of the Federal Reserve Board's margin regulations and,
therefore, could no longer be used as collateral for Purpose Loans made by
brokers. In addition, and in any event, if registration of the Shares under the
Exchange Act were terminated, the Shares would no longer constitute "margin
securities."
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THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date (as defined herein) and not withdrawn, as
described under "Withdrawal Rights." The term "Expiration Date" means 12:00
Midnight, Pacific Time, on August 31, 1999, unless and until Purchaser, in its
reasonable judgment (but subject to the terms and conditions of the Merger
Agreement), shall have extended the period 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 Purchaser, shall expire. The Offer is subject
to the Minimum Condition and to certain other conditions. See "The Tender
Offer -- Certain Conditions of the Offer."
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period of time during which the Offer is
open, including the failure of any of the conditions specified in "The Tender
Offer -- Certain Conditions of the Offer" to be satisfied, by giving oral or
written notice of such extension to the Depositary. During any such extension,
all Shares previously tendered and not withdrawn will remain subject to the
Offer, subject to the rights of a tendering shareholder to withdraw his Shares.
See "The Tender Offer -- Withdrawal Rights."
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement), at any time and from time to time, (a)
to delay acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for, any Shares in order to comply
with any applicable laws, (b) to terminate the Offer and not accept for payment
any Shares upon the failure of any of the conditions specified in "The Tender
Offer -- Certain Conditions of the Offer" to be satisfied and (c) 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.
If Purchaser extends the Offer, if Purchaser (whether before or after its
acceptance for payment of the Shares) is delayed in its acceptance for payment
of or payment for any Shares validly tendered and not withdrawn in the Offer or
if Purchaser is unable to accept for payment or pay for such Shares pursuant to
the Offer for any reason, then, without prejudice to Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and
such Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in "The Tender Offer -- Withdrawal
Rights." Purchaser acknowledges that (a) Rule 14e-1(c) under the Exchange Act
requires Purchaser to pay the consideration offered or to return the Shares
tendered promptly after the termination or withdrawal of the Offer and (b)
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (a) above), any Shares upon the occurrence of any of the
conditions specified in "The Tender Offer -- Certain Conditions of the Offer"
without extending the period of time during which the Offer is open.
The Merger Agreement provides that Purchaser shall not, without the prior
written consent of the Company, make any change in the terms or conditions of
the Offer which would change the form of consideration to be paid, decrease the
Offer Price or the number of Shares sought in the Offer, impose additional or
broadened conditions to the Offer other than those set forth in the Merger
Agreement, amend any other term of the Offer (including the conditions of the
Offer) in a manner adverse to the holders of Shares, extend the Offer except as
set forth below, or amend, or waive the satisfaction of, the Minimum Condition.
The Merger Agreement provides that if on any scheduled expiration date of the
Offer all conditions to the Offer shall not have been satisfied or waived, the
Offer may be extended by Purchaser from time to time without the consent of the
Company (i) if at the scheduled expiration date of the Offer any of the
conditions to the Offer shall not have been satisfied or waived, until such time
as such conditions are satisfied or waived, (ii) for any period required by any
rule, regulation, interpretation or position of the Commission or the staff
thereof applicable to the Offer, (iii) for any other reason on one or more
occasions for not more than ten
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(10) business days beyond the latest expiration date applicable under the
preceding clauses (i) or (ii) if on such expiration date the Minimum Condition
has been satisfied but the number of Shares validly tendered, together with
Shares then owned directly or indirectly by Purchaser, constitute at least
seventy-five percent (75%) but less than ninety percent (90%) of all outstanding
Shares, or (iv) extend the Offer for any reason on one or more occasions for an
aggregate period of not more than ten business days beyond the initial
expiration date or the latest expiration date that would otherwise be permitted
under clauses (i), (ii) or (iii) of this sentence; provided, that the Offering
may not, without the Company's consent be extended by and 60 days after the
commencement of the Offer.
Any extension, delay, termination, material waiver or material amendment
will be followed as promptly as practicable by public announcement thereof, such
announcement, in the case of an extension to be made no later than 9:00 a.m.,
Pacific Time, on the next business day (as defined herein) after the previously
scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c)
and 14d-6(d) under the Exchange Act, which require that material changes be
promptly disseminated to shareholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which Purchaser may
choose to make any public announcement, Purchaser shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release to the Dow Jones News Service.
If (subject to the terms and conditions of the Merger Agreement) Purchaser
makes a material change in the terms of the Offer or the information concerning
the Offer, or if Purchaser waives a material condition of the Offer, Purchaser
will extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and
14e-1 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, including the
relative materiality of the changed terms or information. In the Commission's
view, an offer should generally remain open for a minimum of five(5) business
days from the date a material change is first published, sent or given to
shareholders. With respect to a change in price or a change in percentage of
securities sought (other than an increase in the number of Shares sought not in
excess of two percent (2%) of the outstanding Shares), a minimum ten (10)
business-day period is 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 under the Exchange Act.
Accordingly, if, prior to the Expiration Date, Purchaser decreases the number of
Shares being sought, or increases or decreases the consideration offered
pursuant to the Offer, and if the Offer is scheduled to expire at any time
earlier than the period ending on the 10th business day from the date that
notice of such increase or decrease is first published, sent or given to holders
of Shares, the Offer will be extended at least until the expiration of such ten
(10) business-day period.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to increase the Offer Price, such increase in the
Offer Price will be applicable to all shareholders whose Shares are accepted for
payment pursuant to the Offer, whether or not such Shares were tendered prior to
the date of such increase, and, if at the time notice of such increase in the
Offer Price is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the period ending on the
10th business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten (10) business-day period.
The Company has provided 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 and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
shareholder list, and will be furnished, for subsequent transmittal to
beneficial owners of Shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing.
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2. 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), Purchaser will purchase, by accepting for payment, and will pay
for, any and all Shares which are validly tendered prior to the Expiration Date
(and not properly withdrawn in accordance with "The Tender Offer -- Withdrawal
Rights") promptly after the later to occur of (a) the Expiration Date and (b)
subject to compliance with Rule 14e-1(c) under the Exchange Act, the
satisfaction or waiver of the conditions set forth in "The Tender
Offer -- Certain Conditions of the Offer." All conditions of the Offer must be
satisfied or waived prior to the Expiration Date, provided, however, the
Expiration Date may be extended in accordance with the terms of the Merger
Agreement. Purchaser expressly reserves the right, in its discretion, to delay
acceptance for payment of, or, subject to applicable rules of the Commission,
payment for, Shares in order to comply, in whole or in part, with any applicable
law.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see "The Tender
Offer -- Certain Legal Matters; Regulatory Approvals".
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (a) certificates
representing such Shares (the "Share Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such
procedure is available, into the Depositary's account at a "Book-Entry Transfer
Facility" pursuant to the procedures set forth in "The Tender
Offer -- Procedures for Tendering Shares," (b) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, or, in the case of a
book-entry transfer, an Agent's Message (as defined herein) and (c) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of 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 Purchaser
may enforce such agreement against the participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment. 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 Purchaser and
transmitting payments to such tendering shareholders. Under no circumstances
will interest on the purchase price for Shares be paid by Purchaser, regardless
of any delay in making such payment. Upon the deposit of funds with the
Depositary for the purpose of making payments to tendering shareholders,
Purchaser's obligation to make such payment shall be satisfied and tendering
shareholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares pursuant
to the Offer. Subject to Section 2.13 of the Merger Agreement and except as
otherwise provided in Instruction 6 of the Letter of Transmittal, Purchaser will
pay any stock transfer taxes incident to the transfer to it of validly tendered
Shares as well as any charges and expenses of the Depositary, the Information
Agent and the Dealer Manager.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in "The Tender Offer -- Procedures for Tendering Shares," such Shares
will be credited to an account maintained at such Book-Entry Transfer Facility),
as promptly as practicable following the expiration or termination of the Offer.
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3. PROCEDURES FOR TENDERING SHARES.
VALID TENDER OF SHARES. In order for Shares to be validly tendered
pursuant to the Offer, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message (in the case of any book-entry transfer) and
any other required documents, must be received by the Depositary at its address
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date, and either (a) the Share Certificates evidencing tendered Shares must be
received by the Depositary at such address or Shares must be tendered pursuant
to the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case, prior to the
Expiration Date, or (b) the tendering shareholder must comply with the
guaranteed delivery procedures described below. No alternative, conditional or
contingent tenders will be accepted.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. 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.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer 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
in connection with a book-entry delivery of Shares, and any other required
documents must, in any case, be transmitted to and received by the Depositary at
its address 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 DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
SIGNATURE GUARANTEE. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agent's Medallion Program (each, an "Eligible Institution"), unless the
Shares tendered thereby are tendered (a) by a registered holder of Shares who
has not completed either the box entitled "Special Delivery Instructions" or the
box entitled "Special Payment Instructions" on the Letter of Transmittal or (b)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(a) the tender is 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 herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
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<PAGE> 36
(c) in the case of a guaranteed delivery of Shares, the Share
Certificates for all tendered Shares, in proper form for transfer, or a
Book-Entry Confirmation, together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) with
any required signature guarantee (or, in the case of a book-entry transfer,
an Agent's Message) and any other documents required by such Letter of
Transmittal, are received by the Depositary within three Nasdaq Stock
Market trading days after the date of execution of the Notice of Guaranteed
Delivery.
Any 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.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (a) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, if available, (b) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) or, in the case of a book-entry transfer, an Agent's Message
and (c) any other documents required by the Letter of Transmittal.
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 Purchaser, in its sole discretion, whose determination will be
final and binding on all parties, and which discretion may be delegated to the
Depositary or other persons. In addition, Purchaser's or Purchaser's designees'
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
Purchaser, Merger Sub, DICOM, Private Equity Partners, the Company, the
Depositary, the Information Agent, the Dealer Manager 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.
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 Purchaser's counsel, be
unlawful. Purchaser also reserves the absolute right, in its sole discretion, to
waive any of the conditions of the Offer or any defect or irregularity in any
tender with respect to Shares of any particular shareholder, 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
and irregularities have been cured or waived.
APPOINTMENT AS PROXY. By executing a Letter of Transmittal, as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Purchaser (and any and all noncash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after July 27, 1999). All such proxies
shall be considered coupled with an interest in the tendered Shares. This
appointment will be effective if, when and only to the extent that Purchaser
accepts such Shares for payment pursuant to the Offer. Upon such acceptance for
payment, all prior proxies given by such shareholder with respect to such Shares
and other securities will, without further action, be revoked, and no subsequent
proxies may be given. The designees of Purchaser will, with respect to the
Shares and other securities for which the appointment is effective, be empowered
to exercise all voting and other rights of such shareholder as they, in their
sole discretion, may deem proper at any annual, special, adjourned or postponed
meeting of the Company's shareholders, by written consent or otherwise, and
Purchaser reserves the right to require that, in order for Shares or other
securities to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares.
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering shareholder and
Purchaser upon the terms and subject to the conditions of the Offer.
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<PAGE> 37
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date, and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after the Expiration Date. If Purchaser extends
the Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering shareholders are
entitled to withdrawal rights as described in the paragraph below. Any such
delay will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover page of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and
the name of the registered holder of such Shares if different from that of the
person who tendered such Shares. If Share Certificates evidencing Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such Share Certificates, the serial numbers
shown on such Share Certificates must be submitted to the Depositary and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in "The Tender Offer -- Procedures for
Tendering Shares," any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "The Tender Offer -- Procedures for Tendering Shares."
5. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Annual Report to its stockholders for the fiscal
year ended June 30, 1998 (the "Company's 10-K"), the Shares are listed and
principally traded on The Nasdaq Stock Market, Inc.'s National Market (the
"Nasdaq National Market") under the symbol "KOFX." The Company completed its
initial public offering on October 10, 1997 at an offering price of $11.00 per
Share. The following table sets forth, for the quarters indicated, the high and
low sales prices per Share on the Nasdaq National Market.
<TABLE>
<CAPTION>
DATE LOW HIGH
- ---- --- ----
<S> <C> <C>
FISCAL 1998:
Second Quarter (from October 10, 1997).................... 4 11 3/4
Third Quarter............................................. 5 8
Fourth Quarter............................................ 6 1/8 8 1/4
FISCAL 1999:
First Quarter............................................. 6 1/4 7 5/8
Second Quarter............................................ 5 7/8 8 3/4
Third Quarter............................................. 7 3/8 10 1/2
Fourth Quarter............................................ 7 7/8 10
FISCAL 2000:
First Quarter (through July 27, 1999)..................... 9 3/8 9 7/8
</TABLE>
On July 27, 1999, the last trading day prior to the public announcement of
the signing of the Merger Agreement, the closing price per Share as reported on
the Nasdaq National Market was $9.375. The Company has never declared or paid
any cash dividends on the Shares. See "Special Factors -- Purpose of the Offer
and the Merger." As of July 27, 1999, there were approximately 186 holders of
record of the Shares. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
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<PAGE> 38
6. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including without limitation
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. Neither Purchaser, Merger Sub, DICOM nor
Private Equity Partners assumes any responsibility for the accuracy or
completeness of the information concerning the Company furnished by the Company
or 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, Merger Sub,
DICOM or Private Equity Partners.
GENERAL. The Company's principal executive offices are located at 16245
Laguna Canyon Road, Irvine, California 92618 and its telephone number is (949)
727-1733. The Company is a leading supplier of both application software and
image processing products for the imaging, workflow and document management
market. The Company specializes in the document and data capture and document
storage product segments, of the market, which are essential to helping paper
intensive organizations economically and reliably capture and store critical
business information through a worldwide network of distributors, system
integrators and value-added resellers. The Company sells its products to a wide
variety of document imaging, workflow and document management solution providers
including value-added resellers, system integrators, independent software
vendors and computer companies.
FINANCIAL INFORMATION. Set forth below is certain selected summary
consolidated financial information relating to the Company and its subsidiaries
which has been excerpted or derived from the audited financial statements
contained in the Company's 10-K and the unaudited financial statements contained
in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 (the "Company's 10-Q"). More comprehensive financial information is
included in the Company's 10-K, the Company's 10-Q and other documents filed by
the Company with the Commission. The financial information that follows is
qualified in its entirety by reference to such reports and other documents,
including the financial statements and related notes contained therein. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission in the manner set forth below.
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<PAGE> 39
KOFAX IMAGE PRODUCTS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
--------------------------- -----------------
1998 1997 1996 1999 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales.................................... $33,375 $29,266 $24,964 $28,091 $24,434
Cost of sales................................ 7,819 7,720 7,926 6,384 5,781
------- ------- ------- ------- -------
Gross profit................................. 25,556 21,546 17,038 21,707 18,653
Operating expenses:
Sales and marketing........................ 10,706 9,565 7,456 8,572 7,785
Research and development................... 7,826 6,653 5,090 6,461 5,742
General and administrative................. 2,672 1,936 1,748 2,315 1,943
Acquired in-process research and
development costs....................... -- -- 4,177 -- --
------- ------- ------- ------- -------
Total operating expenses................ 21,204 18,154 18,471 17,348 15,470
------- ------- ------- ------- -------
Income (loss) from operations................ 4,352 3,392 (1,433) 4,359 3,183
Other income, net............................ 759 69 200 809 477
------- ------- ------- ------- -------
Income (loss) before provision (benefit)..... 5,111 3,461 (1,233) 5,168 3,660
Provision (benefit) for income taxes......... 1,968 1,326 (500) 1,821 1,409
------- ------- ------- ------- -------
Net income (loss)............................ $ 3,143 $ 2,135 $ (733) $ 3,347 $ 2,251
======= ======= ======= ======= =======
Basic net income (loss) per share............ $ .75 $ 1.37 $ (0.82) $ 0.63 $ 0.59
======= ======= ======= ======= =======
Diluted net income (loss) per share.......... $ .62 $ .52 $ (0.82) $ 0.62 $ 0.45
======= ======= ======= ======= =======
Basic weighted average common shares......... 4,197 1,319 1,305 5,282 3,830
======= ======= ======= ======= =======
Diluted weighted average common shares....... 5,073 4,126 1,305 5,412 4,957
======= ======= ======= ======= =======
Net income (loss) applicable to common
stockholders............................... $ 3,143 $ 1,801 $(1,067) $ 3,347 $ 2,251
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF MARCH 31,
--------------------------- -----------------
1998 1997 1996 1999 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $24,149 $ 8,676 $ 6,949 $27,709 $23,495
Total assets................................. 32,115 16,327 14,141 36,644 31,655
Long-term debt, net of current maturities.... -- 427 799 -- --
Redeemable convertible preferred stock....... -- 7,146 6,812 -- --
Stockholders' equity......................... 27,625 5,108 3,294 30,641 27,148
</TABLE>
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<PAGE> 40
CERTAIN PROJECTIONS AND OTHER INFORMATION. The Company does not as a
matter of course make public forecasts as to future sales or earnings. However,
during discussions regarding the Merger, the Company provided DICOM with
information which included projections of the Company's financial performance
from fiscal year 1999 to fiscal year 2004. A summary of the projections which
were provided is set forth below. The projections have not been updated to,
among other things, reflect actual 1999 results, and do not give effect to the
Offer or the Merger.
<TABLE>
<CAPTION>
FY99 FY00 FY01 FY02 FY03 FY04
------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
Total Revenue...................... $38,318 $46,555 $57,468 $71,637 $87,776 $104,618
Operating Income................... 6,195 8,461 12,132 15,212 19,413 23,769
Net Income......................... 4,739 5,984 8,390 10,463 13,243 16,119
Fully Diluted Earnings Per Share... $ 0.87 $ 1.06 $ 1.42 $ 1.70 $ 2.07 $ 2.42
</TABLE>
The following assumptions, among others, were used by management of the
Company and its subsidiaries in developing the foregoing projections:
1. Revenues will increase annually, with increases ranging from 19.2%
to 24.7%. Ascent Capture software revenues are projected to increase faster
than image processing hardware revenue. This is primarily because of the
company's entry into the data capture market with the release of Ascent
Capture version 4.0.
2. Cost of goods sold will remain relatively stable between 23.2% and
24.6%, depending on the mix of products between hardware and software.
3. Operating expenses are projected to decrease from approximately
61.2% in FY99 to 54.0% in FY04, as a percentage of revenues (not in
absolute dollars) primarily as a result of expense management, and a
reduction in engineering expenses.
4. Operating income will increase from approximately 16.2% in FY99 to
22.7% in FY04.
5. The Company's effective tax rate is expected to remain at
approximately 38.5% through FY04.
In addition to these specific assumptions, management assumed that it would
not lose any market share to competitors and that raw material costs will not
change substantially.
BECAUSE THE ESTIMATES AND ASSUMPTIONS UNDERLYING THE ABOVE PROJECTIONS ARE
INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES BEYOND
THE COMPANY'S CONTROL, THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS
COULD BE REALIZED, OR THAT ACTUAL RESULTS WOULD NOT BE HIGHER OR LOWER THAN
THOSE PROJECTED. MOREOVER, THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO
COMPLYING WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. UNDER NO
CIRCUMSTANCES SHOULD THE INCLUSION OF THE ABOVE PROJECTIONS BE REGARDED AS A
REPRESENTATION, WARRANTY OR PREDICTION THAT ANY PARTICULAR RESULT WILL BE
ACHIEVED OR THAT THE COMPANY, PURCHASER, MERGER SUB, DICOM OR PRIVATE EQUITY
PARTNERS CONSIDER IT AN ACCURATE PREDICTION OF FUTURE EVENTS OR THAT PURCHASER,
MERGER SUB, DICOM OR PRIVATE EQUITY PARTNERS AGREE WITH THE ASSUMPTIONS
UNDERLYING SUCH PROJECTIONS. THE PROJECTIONS ARE INCLUDED IN THIS OFFER TO
PURCHASE ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO DICOM.
ADDITIONAL INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act, and, in accordance therewith, is required to
file periodic 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, stock options granted
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<PAGE> 41
to them, the principal holders of the Company's securities and any material
interest 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. Such reports, proxy statements and other information
should be available for inspection at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and also should be available for inspection at the
Commission's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048 and the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such materials may also be
obtained by mail, upon payment of the Commission's prescribed rates, by writing
to its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
material may also be accessed electronically by means of the Commission's World
Wide Web site on the Internet at http://www.sec.gov.
7. CERTAIN INFORMATION CONCERNING PURCHASER, MERGER SUB, DICOM AND PRIVATE
EQUITY PARTNERS.
PURCHASER. Purchaser is a newly formed Delaware corporation with its
principal executive offices currently located at 75 Wall Street, New York, New
York 10005. Purchaser was organized in connection with the Offer and the Merger.
All interests in Purchaser are or will be owned by DICOM, Private Equity
Partners, GSL and/or an affiliate or affiliates thereof and the Management
Group. Pursuant to the terms and conditions of a Stockholders Agreement to be
entered into by and among the Stockholders of Purchaser concurrently with the
Merger, DICOM shall have the option to acquire all (but not less than all)
outstanding shares of Purchaser held by Private Equity Partners and GSL and
their permitted transferees.
Until immediately prior to the time that Purchaser purchases Shares
pursuant to the Offer, it is not anticipated that Purchaser will have
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger.
MERGER SUB. Merger Sub is a newly formed Delaware corporation organized in
connection with the Offer and the Merger and has not carried on any activities
other than in connection with the Offer and the Merger. The principal offices of
Merger Sub are currently located at 75 Wall Street, New York, New York 10005.
All interests in Merger Sub are or will be owned by Purchaser.
DICOM. DICOM is a holding company organized under the laws of England and
Wales. DICOM holds a group of businesses that distribute document imaging
processing equipment in Europe and certain computer peripherals in Switzerland.
DICOM is a publicly traded company and listed on the London Stock Exchange under
the ticker symbol "DCM." DICOM publicly discloses its financial statements and
is subject to periodic reporting requirements under the laws of England and
Wales and the regulations of the London Stock Exchange.
PRIVATE EQUITY PARTNERS. Private Equity Partners is a private investment
partnership formed in 1997 to acquire minority stakes in public or private
companies through equity or debt securities and is licensed by the US
government's Small Business Administration as a Small Business Investment
Company (SBIC). Private Equity Partners has $250 million of committed internal
capital and represents a commitment by Dresdner Bank AG to increase its direct
investing as part of the $2.0 billion of private equity investment it currently
manages worldwide, of which $550 million is invested throughout the United
States. Its general partner, Dresdner Kleinwort Benson Equity LLC, a Delaware
limited liability company ("Private Equity LLC"), with its principal offices
located at 75 Wall Street, 24th Floor, New York, New York 10005, is engaged in
the business of investment management. Its single limited partner, Dresdner Bank
AG a corporation organized under the laws of Germany, is one of Europe's largest
commercial banks with approximately $448 billion in assets and $225 billion in
funds under management as of March 31, 1999. Since neither Private Equity
Partners, nor Private Equity LLC are subject to the periodic reporting
requirements of the Exchange Act, Private Equity Partners and Private Equity LLC
do not publicly disclose their financial statements, however, Dresdner Bank AG
is a publicly traded company and listed on various European stock exchanges and,
thus, is subject to various periodic reporting requirements.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history for each of the directors and
executive officers of Purchaser, Merger Sub, DICOM and Private Equity Partners
are set forth in Schedule I hereto. The name, citizenship, business address,
principal occupation or
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<PAGE> 42
employment, and five-year employment history for each of the directors and
executive officers of the Company are set forth in Schedule II hereto.
Except for Christoph Lostein, Executive Director of DICOM, who owns 1,000
Shares which he purchased on October 10, 1997 at a price of $11.00 per Share and
except as set forth in this Offer to Purchase, (i) none of Purchaser, Merger
Sub, DICOM, Private Equity Partners, nor, to the best knowledge of Purchaser,
Merger Sub, DICOM and Private Equity Partners, any of the persons listed in
Schedule I hereto, or any associate or majority owned subsidiary of such
persons, beneficially own any equity security of the Company; (ii) none of
Purchaser, Merger Sub, DICOM, Private Equity Partners, nor to the best knowledge
of Purchaser, Merger Sub, DICOM and Private Equity Partners, any of the other
persons or entities referred to in clause (i) above, have effected any
transaction in any equity security of the Company during the past 60 days; (iii)
none of Purchaser, Merger Sub, DICOM, Private Equity Partners, nor, to the best
knowledge of Purchaser, Merger Sub, DICOM and Private Equity Partners, any of
the other persons or entities referred to in clause (i) above, have any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, without limitation, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any securities of the Company, joint venture, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss, or
the giving or withholding of proxies; (iv) none of Purchaser, Merger Sub, DICOM,
Private Equity Partners, nor, to the best knowledge of Purchaser, Merger Sub,
DICOM and Private Equity Partners, any of the other persons or entities referred
to in clause (i) above have had any transactions with the Company, or any of its
executive officers, directors or affiliates that would require reporting under
the rules of the Commission; (v) there have been no contacts, negotiations, or
transactions between Purchaser, Merger Sub, DICOM and Private Equity Partners,
or their respective subsidiaries, or, to the best knowledge of Purchaser, Merger
Sub, DICOM and Private Equity Partners, any of the other persons or entities
referred to in clause (i) above, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale of other transfer or a material
amount of assets.
8. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the Merger Agreement, the Company will not, prior to the
Merger, without the prior written consent of Purchaser or Merger Sub, split,
combine or reclassify any shares of its capital stock, declare, set aside or pay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, or redeem or otherwise
acquire any shares of capital stock of, securities convertible into or
exercisable for, or options to acquire equity securities of, the Company or any
securities of any of its subsidiaries.
Payment of dividends and distributions by the Company is subject to certain
restrictions contained in agreements in respect of the Company's credit
arrangements.
9. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, Purchaser shall not be
required to accept for payment purchase or pay for any validly tendered Shares
(subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act), and may delay in accordance with Section
1.1(b) of the Merger Agreement the acceptance for payment of, or the payment
for, any validly tendered Shares (subject to the restrictions referred to
above), may amend the Offer consistent with the terms of the Merger Agreement,
or may terminate the Offer if (i) immediately prior to the expiration of the
Offer (as extended in accordance with the Offer), the Minimum Condition shall
not have been satisfied, (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated (the "HSR Condition") or (iii) at any
time on or after the date of the Merger Agreement and prior to the Expiration
Date, any of the following events shall occur and be continuing:
(a) There shall be threatened in writing or pending any suit, action
or proceeding by a federal, state or foreign court or tribunal or
administrative, governmental or regulatory body, agency or authority (a
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<PAGE> 43
"Governmental Entity") (but only if such suit, action or proceeding is
deemed by Purchaser to have a reasonable likelihood of success) (i) seeking
to prohibit or impose any material limitations on the ownership or
operation by the Company, Purchaser, Merger Sub or any of their respective
subsidiaries of a material portion of the businesses or assets of the
Company, Purchaser, Merger Sub or any of their respective subsidiaries
which could reasonably be expected to result in a change, effect, event,
occurrence, condition or development that is or is reasonably likely to be
materially adverse to (A) the assets, liabilities, properties, results of
operations, or conditions (financial or otherwise) of the Company and its
subsidiaries, taken as a whole, or (B) the ability of the Company to
perform its obligations under the Merger Agreement (a "Company Material
Adverse Effect") as a result of the Offer or any other transactions
contemplated by this Agreement, (ii) seeking to compel the Company,
Purchaser, or Merger Sub to dispose of or hold separate any material
portion of their respective business or assets as a result of the Offer or
any other transactions contemplated by Merger Agreement, (iii) seeking to
restrain or prohibit the making or consummation of the Offer or the Merger
or the consummation of any of the other transactions contemplated by the
Agreement or the Voting Agreement, (iv) seeking to impose material
limitations on the ability of Purchaser or Merger Sub, or rendering
Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares pursuant to the Offer or the Merger, or (v) seeking to impose
material limitations on the ability of Purchaser effectively to exercise
full rights of ownership of the Shares accepted for payment pursuant to the
Offer, including the right to vote such Shares on all matters properly
presented to the Company's shareholders. There shall be any statute, rule
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated or applicable to the Offer or the Merger, or any other action
shall be taken by any Governmental Entity, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) above.
(b) Any of the representations and warranties of the Company set forth
in the Merger Agreement, without, for purposes of this paragraph (b) only,
giving effect to any qualifications as to materiality, shall not be true
and correct in any material respect as of the date of the Merger Agreement
and as of consummation of the Offer as though made on or as of such date
(except for those representations and warranties that address matters only
as of a particular date, which need to be true and correct as of such
particular date), or the Company shall have breached or failed to comply
with, in any material respect, any obligation, agreement or covenant
required by the Merger Agreement to be performed or complied with by it,
which in either case could reasonably be expected to have a Company
Material Adverse Effect.
(c) It shall have been publicly disclosed that any person (which
includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) other than Purchaser, Merger Sub or any of their affiliates
and stockholders of the Company listed on Schedule 2.8 of the Merger
Agreement, and (i) shall have acquired or announced its intention to
acquire beneficial ownership of more than 20% of the outstanding Shares or
(ii) shall have entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Shares or a merger, consolidation or other business combination
with or involving the Company, any of its subsidiaries or any of their
material assets; provided, that clause (i) hereof shall not continue after
the date on which the Minimum Condition is satisfied.
(d) The Merger Agreement shall have been terminated in accordance with
its terms.
(e) Prior to the purchase of Shares pursuant to the Offer, the Company
Board (i) shall have withdrawn or modified (including by amendment of the
Schedule 14D-9) in a manner adverse to Purchaser or Merger Sub its approval
or recommendation of the Offer, the Merger Agreement or the Merger (ii)
shall have recommended a Takeover Proposal (as defined in the Merger
Agreement), or (iii) shall have adopted any resolution to effect any of the
foregoing.
(f) There shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
the American Stock Exchange, or in Nasdaq National
41
<PAGE> 44
Market System, (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not
mandatory), or (iii) any limitation by any United States Governmental
Entity that has a material adverse effect generally on the extension of
credit by banks or other financial institutions, in the case of any of the
situations in clauses (i) through (iii) inclusive, existing on the date
hereof, a material acceleration or worsening thereof.
(g) The Company shall commence a case under any chapter of Title XI of
the United States Code or any similar law or regulation; or a petition
under any chapter of Title XI of the United States Code or any similar law
or regulation is filed against the Company which is not dismissed within 30
business days.
(h) Any party identified with an asterisk on Exhibit A to the Voting
Agreement other than Purchaser or Merger Sub shall have breached or failed
to perform any of its agreements under such agreement or breach any of its
representations and warranties in such agreement or any such agreement
shall not be valid, binding and enforceable; provided, that this clause (h)
shall be deemed satisfied upon the satisfaction of the Minimum Condition.
(i) There shall have occurred any events or changes which have had, or
could reasonably be expected to have or constitute, individually or in the
aggregate, a Company Material Adverse Effect.
(j) The Company shall have less than $22,991,000 of freely available
cash or cash equivalents ("Minimum Cash"); provided, that the following
adjustments may be made, without duplication, to Minimum Cash: (i) in the
event the Offer is not consummated before August 15, 1999, Minimum Cash
shall be reduced by $750,000 (representing employee bonuses), (ii) in the
event the Offer is not consummated before September 15, 1999, Minimum Cash
shall be reduced by $1,000,000 (representing payment of the Company's
Federal income taxes), (iii) in the event the Offer is not consummated
before October 15, 1999, Minimum Cash shall be reduced by $800,000
(representing payment of the Company's Federal income taxes), (iv) Minimum
Cash shall be determined without giving effect to Company Expenses, and (v)
Minimum Cash may be reduced by an amount not to exceed $1,350,000 in the
aggregate (such aggregate amount, the "Operating Cash Shortfall") so long
as the Company's consolidated non-cash, net working capital (i.e., current
assets (excluding cash and cash equivalents) less current liabilities as
determined in accordance with generally accepted accounting principles,
applied on a basis consistent with the preparation of the financial
statements described in the Merger Agreement) ("Working Capital") exceeds
$2,098,000 (the Company's Working Capital as of June 30, 1999) (less up to
$500,000 for capital expenditures made by the Company in accordance with
Section 5.1(h) of the Merger Agreement) by an amount equal to or greater
than such Operating Cash Shortfall. The condition set forth in this clause
(j) shall be satisfied upon the presentation of evidence, documentation and
information by the Company to Purchaser that the Minimum Cash, and all
adjustments thereto (including with respect to the Operating Cash Shortfall
and working capital) as of the consummation of the Offer.
(k) Purchaser or Merger Sub shall have not received the cash proceeds
of equity and debt financing in an amount necessary to consummate the
Offer, the Merger and the other transactions contemplated by the Agreement
and to pay all fees and expenses in connection therewith and to provide
adequate working capital for the Surviving Corporation, all on terms and
conditions satisfactory to the Purchaser and Merger Sub.
10. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
GENERAL. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to Purchaser and discussions of representatives of Purchaser with
representatives of the Company during Purchaser's investigation of the Company,
neither Purchaser nor Merger Sub is aware of any license or other regulatory
permit that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or, except as set forth
below, of any approval or other action by any domestic (federal or state) or
foreign governmental, administrative or regulatory authority or agency which
would be required prior to the acquisition of Shares by Purchaser pursuant to
the Offer. Should
42
<PAGE> 45
any such approval or other action be required, it is Purchaser's present
intention to seek such approval or action. Except as described under "The Tender
Offer -- Certain Conditions to the Offer," Purchaser does not currently intend
to delay the purchase of Shares tendered pursuant to the Offer pending the
outcome of any such action or the receipt of any such approval (subject to
Purchaser's right to decline to purchase Shares if any of the conditions
described under "The Tender Offer -- Certain Conditions to the Offer" shall have
occurred). There can be no assurance that any such approval or other action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to the business of the Company, Purchaser or
Merger Sub or that certain parts of the businesses of the Company, Purchaser or
Merger Sub might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or other
action or in the event that such approval was not obtained or such other action
was not taken. Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed herein.
STATE TAKEOVER LAWS. Purchaser has not attempted to comply with any state
takeover statutes in connection with the Offer. Purchaser reserves the right to
challenge the validity or applicability of any state law allegedly applicable to
the Offer and nothing in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of that right. In the event that any
state takeover statute is found applicable to the Offer, Purchaser might be
unable to accept for payment or purchase Shares tendered pursuant to the Offer
or be delayed in continuing or consummating the Offer. In such case, Purchaser
may not be obligated to accept for purchase or pay for, any Shares tendered. See
Section 9 ("The Tender Offer -- Certain Conditions of the Offer").
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by Purchaser pursuant to the Offer are not
subject to such requirements.
MARGIN CREDIT REGULATIONS. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
its current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
VISIONSHAPE, INC. ANTITRUST LITIGATION. According to the Company, the
Company was sued on September 26, 1997 in the Superior Court of Orange County,
California, by VisionShape, Inc. ("VisionShape") alleging antitrust and other
violations based upon an alleged tie between the Company's accelerator boards
and software. This case was dismissed by the Superior Court on July 15, 1998 but
VisionShape has appealed. According to the Company, the Company does not believe
the claim to have any merit.
11. FEES AND EXPENSES.
Except as set forth below, Purchaser will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will, upon
request, be reimbursed by Purchaser for customary mailing and handling expenses
incurred by them in forwarding offering materials to their customers.
The Merger Agreement provides, except in certain cases in which the Merger
is not consummated, that all fees, costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such fees, costs and expenses, whether or not the
transactions contemplated by the Merger Agreement are consummated.
43
<PAGE> 46
Purchaser has retained IBJ Whitehall Bank & Trust Company as the
Depositary, MacKenzie Partners, Inc. as the Information Agent, and Dresdner
Kleinwort Benson North America LLC as the financial adviser and the Dealer
Manager in connection with the Offer. The Information Agent may contact holders
of Shares by mail, telephone, telex, telecopy, telegraph and personal interview,
and may request banks, brokers, dealers and other nominee shareholders to
forward materials relating to the Offer to beneficial owners.
Purchaser will pay reasonable and customary fee to the Depositary and the
Information Agent and will also reimburse the Depositary, the Information Agent
and the Dealer Manager for certain out-of-pocket expenses. Purchaser and Merger
Sub have agreed to indemnify the Depositary and Information Agent against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the United States federal securities laws.
It is estimated that the expenses incurred by the Company, Purchaser and
Merger Sub in connection with the Offer and the Merger will be approximately as
set forth below:
<TABLE>
<S> <C>
Filing Fees................................................. $ 30,000
Financial Advisory Fees and Expenses........................ 1,425,000
Accounting Fees and Expenses................................ 200,000
Financing and Commitment Fees............................... 1,377,000
Legal Fees and Expenses..................................... 865,000
Printing and Mailing Costs.................................. 132,000
Miscellaneous............................................... 571,000
----------
Total:...................................................... $4,600,000
==========
</TABLE>
The Surviving Corporation will be responsible for all of the foregoing fees
and expenses if the Effective Time occurs. Under certain circumstances, the
Company is obligated to reimburse the Purchaser for its Expenses and to pay a
Termination Fee; and under certain other circumstances, Purchaser and Merger Sub
are obligated to reimburse the Company for its Expenses. See "Special
Factors -- The Merger Agreement."
12. MISCELLANEOUS.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid United
States state statute. If Purchaser becomes aware of any such valid United States
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such United States state statute. If, after such good faith effort, Purchaser
cannot comply with any such United States state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the 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 shall be deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER, MERGER SUB OR THE COMPANY NOT CONTAINED
IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
44
<PAGE> 47
Purchaser, Merger Sub, DICOM and Private Equity Partners have filed the
Schedule 14D-1, together with all exhibits thereto, and the Company has filed
the Schedule 14D-9, together with all exhibits thereto. Such statements, and any
amendments thereto, which furnish certain additional information with respect to
the Offer, may be examined and copies may be obtained at the same places and in
the same manner set forth in "The Tender Offer -- Certain Information Concerning
the Company" (except that they will not be available at regional offices of the
Commission).
Imaging Components Corporation
August 3, 1999
45
<PAGE> 48
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF PURCHASER, MERGER SUB, DICOM AND PRIVATE EQUITY PARTNERS
1. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments, and business addresses thereof for the past five years of each
person who is or who is currently expected to be a director or executive officer
of Purchaser. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Purchaser.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------- -------------------------------------------
<S> <C> <C>
1. Otto Schmid................................ Dr. Schmid is President of Purchaser and
c/o DICOM GROUP plc Merger Sub and a member of the Board of
Business Building Forren West Directors. In 1991, he co-founded DICOM and
Grundstrasse 14 has served as Chairman and Chief Executive
CH-6343 Rotkreuz (Zug) since its formation. Dr. Schmid, age 61, is
Switzerland a Swiss national with degrees in
mathematics and in economics from the
University of Zurich, where he completed a
doctoral thesis in business forecasting in
1970. In 1969 he co-founded and was
managing director at Wirtschafts Mathematik
AG, a Swiss service company for
mathematical statistics and applied
mathematics. In 1978, he joined ACU
Infomatik AG, a Swiss distribution company
for computer peripherals, and became a
director, with responsibility for corporate
development.
2. Arnold von Buren........................... Mr. von Buren is Secretary of Purchaser and
c/o DICOM GROUP plc Merger Sub and a member of the Board of
Business Building Forren West Directors. He has served as Deputy Chief
Grundstrasse 14 Executive of DICOM since November 1995. Mr.
CH-6343 Rotkreuz (Zug) von Buren, age 47, is, a Swiss citizen,
Switzerland with a degree in Economics and Business
Administration. He has worked in the
computer industry since 1978, including
three years in the USA. He joined ACU
Informatik AG in Switzerland in 1983,
working in sales and administration, and he
co-founded and became general manager of
Computerway in 1989.
3. Alexander P. Coleman....................... Mr. Coleman is Vice President of Purchaser
c/o Dresdner Kleinwort Benson and Merger Sub and a member of the Board of
Private Equity LLC Directors. He is an Investment Partner of
75 Wall Street, 24th Floor the SBIC and a Vice President of Dresdner
New York, New York 10005-2889 Kleinwort Benson North America LLC. He
joined Dresdner Kleinwort Benson in
January, 1996, and is an active board
member with a number of portfolio
companies. Mr. Coleman has been involved in
management buyouts, cross-border equities,
expansion financings and venture capital
since joining Citicorp originally in 1989.
Mr. Coleman, age 32, is a United States
citizen.
</TABLE>
I-1
<PAGE> 49
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------- -------------------------------------------
<S> <C> <C>
4. George N. Fugelsang........................ Mr. Fugelsang is expected to be a
c/o Dresdner Kleinwort Benson non-executive member of the Board of
Private Equity LLC Directors of Purchaser and Merger Sub. He
75 Wall Street, 24th Floor joined Dresdner Bank AG in February of
New York, New York 10005-2889 1994, at which time he was named President
of Dresdner Securities (USA) Inc. On April
1, 1994, he was named Senior General
Manager Dresdner Bank AG, and Chief
Executive, North America. Fugelsang is
currently President and CEO of Dresdner
Kleinwort Benson North America Inc. He is a
member of the Management Board of Dresdner
Kleinwort Benson, Dresdner Bank's Global
Investment Banking subsidiary. Mr.
Fugelsang, age 59, is a United States
citizen.
5. David S. Silver............................ Mr. Silver is expected to be Chief
c/o Kofax Image Products, Inc. Executive Officer and a Director of
16245 Laguna Canyon Road Purchaser. He co- founded Kofax Image
Irvine, California 92618 Products, Inc. (the "Company") in August
1985 and has served as President and Chief
Executive Officer and a director of the
Company since its inception. From 1982 to
1985, Mr. Silver was employed by FileNet
Corporation, a manufacturer of document
image processing systems, as a member of
the development team for the FileNet
imaging system. Prior to 1982, Mr. Silver
held various engineering positions with MAI
Basic Four Corporation, a manufacturer of
computer equipment and associated
application software programs. Mr. Silver,
age 41, is a United States citizen.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB. The following table
sets forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments, and business addresses thereof for the past five years of each
director and executive officer of Merger Sub. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Merger Sub.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Otto Schmid............................... See Part 1 of this Schedule I.
2. Arnold von Buren.......................... See Part 1 of this Schedule I.
3. Alexander P. Coleman...................... See Part 1 of this Schedule I.
4. George N. Fugelsang....................... See Part 1 of this Schedule I.
</TABLE>
I-2
<PAGE> 50
3. DIRECTORS AND EXECUTIVE OFFICERS OF DICOM. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments, and business addresses thereof for the past five years of each
person currently a director or executive officer of DICOM. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with DICOM.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Otto Schmid............................... Dr. Schmid is Chairman and Chief
DICOM GROUP plc Executive. In 1991, he co-founded DICOM
Business Building Forren West and has served as Chairman and Chief
Grundstrasse 14 Executive since its formation. Dr. Schmid,
CH-6343 Rotkreuz (Zug) age 61, is a Swiss national with degrees
Switzerland in mathematics and in economics from the
University of Zurich, where he completed a
doctoral thesis in business forecasting in
1970. In 1969 he co-founded and was
managing director at Wirtschafts
Mathematik AG, a Swiss service company for
mathematical statistics and applied
mathematics. In 1978, he joined ACU
Infomatik AG, a Swiss distribution company
for computer peripherals, and became a
director, with responsibility for
corporate development.
2. Arnold von Buren.......................... Mr. von Buren has served as Deputy Chief
DICOM GROUP plc Executive since November 1995. Mr. von
Business Building Forren West Buren, age 47, is, a Swiss citizen, with a
Grundstrasse 14 degree in Economics and Business
CH-6343 Rotkreuz (Zug) Administration. He has worked in the
Switzerland computer industry since 1978, including
three years in the USA. He joined ACU
Informatik AG in Switzerland in 1983,
working in sales and administration, and
he co-founded and became general manager
of Computerway in 1989.
3. Walter Greifeneder........................ Mr. Greifeneder, age 42, is Deputy Chief
DICOM GROUP plc Executive, with Board responsibility for
Business Building Forren West the General Distribution (Trade) business
Grundstrasse 14 units. An Austrian citizen, he is chairman
CH-6343 Rotkreuz (Zug) and chief executive of ELSAT. Following
Switzerland the acquisition of ELSAT in November 1996,
he was appointed Deputy Chief Executive of
the Group with responsibility for General
Distribution.
4. Christoph Loslein......................... Mr. Loslein, age 32, is Executive Director
DICOM GROUP plc with Board responsibility for the
Business Building Forren West Solutions and Applications business unit.
Grundstrasse 14 A German citizen, he worked for Pyramid
CH-6343 Rotkreuz (Zug) Computer GmbH, a computer systems company,
Switzerland in Germany from 1986 to 1993, initially as
purchasing manager, then as marketing
manager and latterly as sales manager and
an executive director. In 1993 he joined
the Old DICOM GROUP to start its German
operations and was also given Group
responsibility for Focused Distribution in
November 1996, roles he relinquished when
he assumed his current position in
September 1997.
</TABLE>
I-3
<PAGE> 51
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
5. Urs Niederberger.......................... Mr. Niederberger, age 33, is Finance
DICOM GROUP plc Director. A Swiss citizen, he obtained a
Business Building Forren West degree in Economics and Business
Grundstrasse 14 Administration at the Lucerne Business
CH-6343 Rotkreuz (Zug) School and is a Swiss qualified Financial
Switzerland Management Consultant ("Dipl.
Treuhandexperte"). He worked as an
accountant for a number of companies
between 1987 and 1990. Since then he has
worked for DICOM, from 1993 to 1996 as a
consultant with Visura Consulting, part of
BDO International. He became Chief
Financial Officer in October 1997.
6. Bruce Powell.............................. Mr. Powell, FCA, WA (Cantab), age 50, a
DICOM GROUP plc British citizen, is a non-executive
Business Building Forren West director. He has been involved in a group
Grundstrasse 14 executive role with the flotation on the
CH-6343 Rotkreuz (Zug) London Stock Exchange and subsequent
Switzerland operational management of Acal Group plc
and VideoLogic Group Plc. He is a
non-executive director of AIT Group plc
and non-executive chairman of Dataform
Group Ltd. and a director of ChemMedllCa
Pharmaceuticals Ltd.
7. Paul Gerny................................ Mr. Gerny, age 57, a Swiss citizen, is
DICOM GROUP plc Strategic Advisor of the European Managing
Business Building Forren West Board of SEI, a leading European
Grundstrasse 14 distributor of electronic components, and
CH-6343 Rotkreuz (Zug) a non-executive director of a major
Switzerland Australian document management company
among other interests. He was also elected
as Chairman and Chief Executive of Aspro
Technology Ltd., a leading Power Supply
company, based in Switzerland and Peoples
Republic of China.
8. John Incledon............................. Mr. Incledon, age 61, a British citizen,
DICOM GROUP plc is a non- executive director. After
Business Building Forren West National Service and five years working in
Grundstrasse 14 engineering, he obtained an MBA at Harvard
CH-6343 Rotkreuz (Zug) Business School. He then spent four years
Switzerland in the New York office of Ernst & Young
before joining NM Rothschild & Sons. For
the last 25 years he has worked in
corporate finance, mainly with technology
based international companies. He has
served as a director of listed and
privately held companies in the United
States and in Europe for over 20 years and
has extensive experience of distribution
businesses.
</TABLE>
I-4
<PAGE> 52
4. DIRECTORS AND EXECUTIVE OFFICERS OF PRIVATE EQUITY PARTNERS. The
following table sets forth the name, current business address, citizenship and
present principal occupation or employment, and material occupations, positions,
offices or employments, and business addresses thereof for the past five years
of each person currently a director or executive officer of Private Equity
Partners. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Private Equity Partners.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Christopher Wright........................ Mr. Wright is head of the Global Private
Dresdner Kleinwort Benson Equity businesses of Dresdner Kleinwort
Private Equity LLC Benson, and chairman of the Group Private
75 Wall Street, 24th Floor Equity Board, Mr. Wright, age 42, has
New York, New York 10005-2889 spent over 16 years financing and advising
private companies in the US, Canada, Asia
and Europe. Mr. Wright joined Kleinwort
Benson Limited in London in 1978. Mr.
Wright is a British citizen.
2. Iain D. Leigh............................. Mr. Leigh is a Managing Investment Partner
Dresdner Kleinwort Benson for Dresdner Kleinwort Benson Private
Private Equity LLC Equity Partners LLC, a Director of
75 Wall Street, 24th Floor Kleinwort Benson Limited, and President of
New York, New York 10005-2889 Kleinwort Benson (U.S.) Asset Managers
LLC. He has held a number of senior
operations financial positions in the
Group in Asia and Europe. He moved to New
York in 1990 and currently has
responsibilities for sourcing and
executing private equity transactions, Mr.
Leigh, age 43, is a British citizen.
3. Jonathan S. Walker........................ Mr. Walker, age 51, is a Senior Investment
Dresdner Kleinwort Benson partner of the SBIC, a Board member of
Private Equity LLC Kleinwort Benson Limited and a member of
75 Wall Street, 24th Floor the Investment Committee of KBMF I. Mr.
New York, New York 10005-2889 Walker is on the Board of a number of
investor companies. Mr. Walker is a
British citizen.
4. Alexander P. Coleman...................... Mr. Coleman is Vice President of Purchaser
Dresdner Kleinwort Benson and Merger Sub. He is an Investment
Private Equity LLC Partner of the SBIC and a Vice President
75 Wall Street, 24th Floor of Dresdner Kleinwort Benson North America
New York, New York 10005-2889 LLC. He joined Dresdner Kleinwort Benson
in January, 1996 and is an active board
member with a number of portfolio
companies. Mr. Coleman has been involved
in management buyouts, cross-border
equities, expansion financings and venture
capital since joining Citicorp originally
in 1989. Mr. Coleman, age 32, is a United
States citizen.
</TABLE>
I-5
<PAGE> 53
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
5. G. Volkert H. Doeksen..................... Mr. Doeksen is an Investment Partner of
Dresdner Kleinwort Benson the SBIC, a First Vice President of
Private Equity LLC Dresdner Kleinwort Benson North America
75 Wall Street, 24th Floor LLC and a Board member of Kleinwort Benson
New York, New York 10005-2889 Limited. He joined Kleinwort Benson's
London office in 1992, to set up the
bank's Dutch and Belgian corporate finance
activities. Mr. Doeksen moved to the New
York office in October 1994. Mr. Doeksen,
age 36, is a citizen of the Netherlands.
6. Richard H. Wolf........................... Mr. Wolf is an Investment Partner of the
Dresdner Kleinwort Benson SBIC and a portfolio manager with
Private Equity LLC Kleinwort Benson (U.S.) Asset Managers LLC
75 Wall Street, 24th Floor with substantial transactional experience
New York, New York 10005-2889 in structuring private equity and debt
investments. Mr. Wolf, age 39, currently
acts as a portfolio manager for an off-
shore closed end mezzanine and venture
capital fund and previously acted as
portfolio manager for a privately held
mezzanine and venture capital fund. Mr.
Wolf is a United States citizen.
</TABLE>
I-6
<PAGE> 54
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. The following table sets
forth the name, current business address and present principal occupation or
employment, and material occupations, positions, offices or employments, and
business addresses thereof for the past five years of each person currently a
director or executive officer of the Company. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with the
Company. Each individual listed below is a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C> <C>
1. David S. Silver........................ Mr. Silver co-founded the Company in August 1985 and has
Kofax Image Products, Inc. served as President and Chief Executive Officer and a
16245 Laguna Canyon Road director of the Company since its inception. From 1982
Irvine, California 92618 to 1985, Mr. Silver was employed by FileNet Corporation,
a manufacturer of document image processing systems, as
a member of the development team for the FileNet imaging
system. Prior to 1982, Mr. Silver held various
engineering positions with MAI Basic Four Corporation, a
manufacturer of computer equipment and associated
application software programs.
2. Dean A. Hough*......................... Mr. Hough co-founded the Company in August 1985 and has
Kofax Image Products, Inc. served as a Vice President and a Director of the Company
16245 Laguna Canyon Road since that time. From 1983 to 1985, Mr. Hough was
Irvine, California 92618 employed by FileNet Corporation, where he participated
in the development of a variety of the imaging
components of the FileNet imaging system. Prior to 1983,
Mr. Hough held various design and engineering positions
with MAI Basic Four Corporation and Scientific Atlanta,
a manufacturer of scientific instruments and equipment.
3. Richard M. Murphy...................... Richard M. Murphy joined the Company as a Vice
Kofax Image Products, Inc. President, Sales in November 1989. From 1984 to 1989,
16245 Laguna Canyon Road Mr. Murphy held various sales management positions with
Irvine, California 92618 Emulex Corporation, a manufacturer of computer storage,
communications, graphics and peripheral products, where
he served as Vice President, Domestic Sales from
September 1987 to January 1989 and as Vice President,
North American Sales from January 1989 to November 1989.
Prior to 1984, Mr. Murphy held various sales positions
with Hamilton-Avnet Electronics, Kierulff Electronics
and Telefile Computer Products.
4. Ronald J. Fikert....................... Mr. Fikert joined the Company as Vice President, Finance
Kofax Image Products, Inc. in February 1990. From March 1989 to February 1990, Mr.
16245 Laguna Canyon Road Fikert worked as an independent management consultant.
Irvine, California 92618 From 1984 to 1989, Mr. Fikert was employed by General
Monitors, a manufacturer of sensing, monitoring and
detection equipment, where he served as Controller. From
1979 to 1984, he was employed by Modular Command
Systems, a manufacturer of
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* Will no longer be an officer effective as of August 31, 1999.
</TABLE>
II-1
<PAGE> 55
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C> <C>
electronic communications hardware and software, as Vice
President, Finance and Secretary. Prior to joining
Modular Command Systems, Mr. Fikert was Director of
Finance for Esterline Electronics, a manufacturer of
electronic products, and was an accountant with Arthur
Andersen & Co. Mr. Fikert is a
5. Kevin Drum............................. Mr. Drum joined the Company in November 1992 and was
Kofax Image Products, Inc. promoted to Vice President, Marketing in July 1995.
16245 Laguna Canyon Road Prior to that time, his positions with the Company
Irvine, California 92618 included Director of Marketing and Senior Product
Manager. From 1984 to 1992, Mr. Drum was employed by
Emulex Corporation, where he served as a senior product
manager from 1988 to 1992.
6. Alexander P. Cilento................... Mr. Cilento has been a member of the Company's Board of
Kofax Image Products, Inc. Directors since 1986. Since 1991, Mr. Cilento has been a
16245 Laguna Canyon Road General Partner of Aspen Venture Partners, a private
Irvine, California 92618 venture capital investment partnership. From 1985
through 1991, Mr. Cilento was employed by 3i Securities
Corporation, a venture capital investment firm, where he
served as Vice President.
7. William E. Drobish..................... Mr. Drobish has been a member of the Company's Board of
Kofax Image Products, Inc. Directors since 1986. Since 1998, Dr. Drobish has been
16245 Laguna Canyon Road President of Ditrans, a developer of digital
Irvine, California 92618 transceivers for the wireless industry, and since 1984
an instructor at the University of California, Irvine's
Extension Program. Dr. Drobish was a founder, Vice
President, director and Secretary of Silicon Systems,
Inc., a manufacturer of integrated circuits. Dr. Drobish
is also a director of Technology Modeling Associates,
Inc., a provider of physical simulation software to
support integrated circuit design and manufacturing.
8. B. Allen Lay........................... Mr. Lay has been a member of the Company's Board of
Kofax Image Products, Inc. Directors since 1990. Since 1982, Mr. Lay has been a
16245 Laguna Canyon Road general partner of Southern California Ventures, a
Irvine, California 92618 private venture capital investment partnership. Mr. Lay
also serves as a director of the following public
companies: PairGain Technologies, Inc., a provider of
telecommunications products; ViaSat, Inc., a provider of
wireless telecommunications products; and Helisys, Inc.,
a provider of rapid prototyping systems.
9. David C. Seigle........................ Mr. Seigle has been a member of the Company's Board of
Kofax Image Products, Inc. Directors since 1992. From 1996 to 1998, Mr. Seigle was
16245 Laguna Canyon Road president of Technology's Edge, a franchisor of
Irvine, California 92618 technology integrators. From 1992 to 1996 Mr. Seigle was
a consultant and private investor. From 1982 to 1991,
Mr. Seigle was employed by FileNet Corporation in
various positions, including Senior Vice President of
International Operations from 1987 to 1991. Mr. Seigle
is currently a director of Interface Systems, Inc., a
manufacturer and distributor of computer peripherals and
software.
</TABLE>
II-2
<PAGE> 56
ANNEX A
The following is the text of Section 262 of the Delaware General
Corporation Law:
262 APPRAISAL RIGHTS -- (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger of consolidation nor consented thereto in writing
pursuant to sec. 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
A-1
<PAGE> 57
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of (1)such
stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of (1)such
stockholder's shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such
action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subscription and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall not
be more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record shall be such effective date. If no record date
is fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the
A-2
<PAGE> 58
value of the stock of all such stockholders. Notwithstanding the foregoing, at
any time within 60 days after the effective date of the merger or consolidation,
any stockholder shall have the right to withdraw (1)such stockholder's demand
for appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement will
be mailed to the stockholder within 10 days after (1)such stockholder's written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
(1)such stockholder's certificates of stock to the Register in Chancery, if such
is required, may participate fully in all proceedings until it is finally
determined that (2)such stockholder is not entitled to appraisal rights under
this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
A-3
<PAGE> 59
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded (1)appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of (1)such stockholder's demand for an
appraisal and an acceptance of the merger or consolidation, either within
60 days after the effective date of the merger or consolidation as provided
in subsection (e) of this section or thereafter with the written approval
of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms
as the Court deems just.
(i) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting
corporation. (Last amended by Ch. 339, L. '98, eff. 7-1-98.)
- ---------------
Ch. 339, L. '98, eff. 7-1-98, added matter in italic and deleted (1)"his" and
(2)"he".
A-4
<PAGE> 60
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each shareholder of the
Company or such shareholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Hand or By Overnight By Facsimile:
P.O. BOX 84 Courier: (212) 858-2611
BOWLING GREEN STATION IBJ WHITEHALL BANK & TRUST (FOR ELIGIBLE INSTITUTIONS ONLY)
NEW YORK, NEW YORK COMPANY
10274-0084 ONE STATE STREET Confirm by Telephone
ATTN: REORGANIZATION NEW YORK, NEW YORK 10004 (212) 858-2103
OPERATIONS DEPARTMENT ATTN: SECURITIES PROCESSING
WINDOW,
SUBCELLAR ONE, (SC-1)
</TABLE>
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at its telephone numbers and
location listed below. You may also contact your broker, dealer, bank, trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. Logo]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
[Dresdner Kleinwort Benson LOGO]
75 WALL STREET
NEW YORK, NEW YORK 10005
(212) 429-2000 EXT. 2958
OR
CALL TOLL FREE (800) 457-0245 EXT. 2958
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 3, 1999,
BY
IMAGING COMPONENTS CORPORATION
-------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
PACIFIC TIME, ON TUESDAY, AUGUST 31, 1999 UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Hand or By Overnight By Facsimile:
P.O. BOX 84 Courier: (212) 858-2611
BOWLING GREEN STATION IBJ WHITEHALL BANK & TRUST (FOR ELIGIBLE INSTITUTIONS ONLY)
NEW YORK, NEW YORK 10274-0084 COMPANY
ATTN: REORGANIZATION OPERATIONS ONE STATE STREET Confirm by Telephone
DEPARTMENT NEW YORK, NEW YORK 10004 (212) 858-2103
ATTN: SECURITIES PROCESSING
WINDOW,
SUBCELLAR ONE, (SC-1)
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER 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.
This Letter of Transmittal is to be completed by stockholders of Kofax
Image Products, Inc. either if certificates (as defined below) are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase, dated August 3, 1999 (the "Offer to Purchase")) is utilized, if
delivery of Shares is to be made by book-entry transfer to an account maintained
by the Depositary at the Book-Entry Transfer Facility (as defined in the Offer
to Purchase under "The Tender Offer -- Acceptance for Payment and Payment for
Shares") pursuant to the procedures set forth in the Offer to Purchase under
"The Tender Offer -- Procedures for Tendering Shares." Stockholders who deliver
Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders" and other Stockholders are referred to as "Certificate
Stockholders." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
This Letter of Transmittal must be accompanied by certificates for Shares
(the "Share Certificates") unless the holder complies with the procedures for
guaranteed delivery. Holders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary on or prior to the Expiration Date (as defined in
the Offer to Purchase under "The Tender Offer -- Terms of the Offer; Expiration
Date") or who cannot complete the procedures for book-entry transfer on a timely
basis, must tender their Shares according to the guaranteed delivery procedures
set forth in the Offer to Purchase under "The Tender Offer -- Procedures for
Tendering Shares." See Instruction 2.
<PAGE> 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF TENDERED SHARES
- --------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES TOTAL NUMBER
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY OF SHARES
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S) NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL SHARES
- --------------------------------------------------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Share Certificates delivered to the Depositary are being
tendered. See Instruction 4.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY AT 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 which Guaranteed Delivery:
IF DELIVERED BY BOOK-ENTRY TRANSFER CHECK BOX [ ]
Account Number: Transaction Code Number:
------------------------------- -------------------------------
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to IMAGING COMPONENTS CORPORATION, a
Delaware corporation (the "Purchaser"), the above described shares of common
stock, par value $0.001 per share (the "Shares"), of Kofax Image Products, Inc.,
a Delaware corporation (the "Company"), pursuant to Purchaser's offer to
purchase all Shares at $12.75 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated August 3, 1999 (the "Offer to Purchase"), and in this
Letter of Transmittal (which together with the Offer to Purchase constitute the
"Offer"), receipt of which is hereby acknowledged. The undersigned understands
that the Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its subsidiaries or affiliates the right
to purchase all or any portion of the Shares tendered pursuant to the Offer.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of and payment for the Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns, and transfers to, or
upon the order of, the Purchaser all right, title and interest in and to all of
the Shares that are being tendered hereby and any and all dividends,
distributions (including distributions of additional Shares) or rights declared,
paid or issued with respect to the tendered Shares on or after July 27, 1999 and
payable or distributable to the undersigned on a date prior to the transfer to
the name of the Purchaser or nominee or transferee of the Purchaser on the
Company's stock transfer records of the Shares tendered herewith, and
constitutes and irrevocably appoints IBJ Whitehall Bank & Trust Company (the
"Depositary") the true and lawful agent, attorney-in-fact and proxy 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 and proxy being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Share Certificates (and any such other Shares or securities or rights), or
transfer ownership of such Shares (and any such other Shares or securities or
rights) on the account books maintained by the Book-Entry Transfer Facility,
together in either such case with all accompanying evidences of transfer and
authenticity, to or upon the order of the Purchaser, upon receipt by the
Depositary, as the undersigned's agent, of the purchase price, (b) present such
Shares (and any such other Shares or securities or rights) for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any such other Shares or
securities or rights), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Purchaser
as the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper, and otherwise act
(including pursuant to written consent) with respect to all of the Shares
tendered hereby (and any and all other Shares or other securities or rights
issued or issuable in respect thereof on or after July 27, 1999) which have been
accepted for payment by the Purchaser prior to the time of such vote or action
which the undersigned is entitled to vote at any meeting of stockholders
(whether annual or special and whether or not an adjourned meeting) of the
Company, or by written consent in lieu of such meeting, or otherwise. This power
of attorney and proxy is coupled with an interest in the Company and in the
Shares and is irrevocable and is granted in consideration of, and is effective
upon, the acceptance for payment of such Shares by the Purchaser in accordance
with the terms of the Offer. Such acceptance for payment shall revoke, without
further action, any other power of attorney or proxy granted by the undersigned
at any time with respect to such Shares and no subsequent powers of attorney or
proxies will be given (and if given will be deemed not to be effective) with
respect thereto by the undersigned. The undersigned understands that 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 is able to exercise full voting rights with respect
to such Shares and other securities, including voting at any meeting of
stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities or rights
issued or issuable in respect thereof on or after July 27, 1999) and that, when
the same are accepted for payment by the Purchaser, the Purchaser will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered hereby (and any such other Shares or securities or rights).
3
<PAGE> 4
All authority herein conferred or herein agreed to be conferred shall not
be affected by, and shall survive, the death or incapacity of the undersigned
and any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares" and in the instructions hereto and
acceptance for payment of such Shares will constitute a binding agreement
between the undersigned and the Purchaser upon the terms and subject to the
conditions set forth in the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or issue or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and any accompanying
documents, as appropriate) to the undersigned at the address(es) shown below the
undersigned's signature. In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please issue
the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or return certificates to, the person or persons so indicated. Stockholders
tendering Shares by book-entry transfer may request that any Shares not accepted
for payment be returned by crediting such account maintained at such Book-Entry
Transfer Facility as such stockholder may designate by making an appropriate
entry under "Special Payment Instructions." The undersigned recognizes that the
Purchaser has no obligation pursuant to the "Special Payment Instructions" to
transfer any Shares from the name(s) of the registered holder(s) thereof if the
Purchaser does not accept for payment any of the Shares so tendered.
4
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7)
To be completed ONLY if certificates not tendered or not purchased and/or the
check for the purchase price of Shares purchased are to be issued in the name of
someone other than the undersigned, or if Shares tendered by book-entry transfer
which are not purchased are to be returned by credit to an account maintained at
a Book-Entry Transfer Facility other than that designated on the front cover.
Issue: [ ] check and/or [ ] certificates to:
Name
- -----------------------------------------------
(PLEASE PRINT)
Address
- ---------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(See Substitute Form W-9 on Back Cover)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7)
To be completed ONLY if Share Certificates are not tendered or not purchased
and/or the check for the purchase price of Shares purchased are to be sent to
someone other than the undersigned, or to the undersigned at an address other
than that shown on the front cover.
Mail: [ ] check and/or [ ] certificates to:
Name
- -----------------------------------------------
(PLEASE PRINT)
Address
- ---------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(See Substitute Form W-9 on Back Cover)
5
<PAGE> 6
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
- ----------------------, 1999
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
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 trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the necessary information.
See Instruction 5.)
Name(s):
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Tax Identification or Social Security No.:
- ---------------------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
- ------------------------------, 1999
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of the Shares tendered
herewith, unless such holder(s) has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
this Letter of Transmittal or (ii) if such Shares are tendered for the account
of a firm that is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agent's Medallion Program (each, an "Eligible Institution"). In all other cases,
all signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined below) is utilized, if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in the Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares." Share Certificates, or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at a Book-Entry Transfer Facility, as well
as this Letter of Transmittal (or a facsimile hereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's Message in
the case of a book-entry delivery, and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date. Stockholders whose
Share Certificates are not immediately available or who cannot deliver their
Share Certificates and all other required documents to the Depositary prior to
the Expiration Date or who cannot complete the procedures for delivery by
book-entry transfer on a timely basis may 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 to Purchase under "The
Tender Offer -- Procedures for Tendering Shares." Pursuant to such procedure:
(i) such tender must be made by or through an Eligible Institution; (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Purchaser, must be received by
the Depositary on or prior to the Expiration Date; and (iii) the Share
Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in
proper form for transfer, together with a Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed, with any
required signature guarantees (or, in the case of a book-entry delivery, an
Agent's Message) and any other documents required by this Letter of Transmittal,
must be received by the Depositary within three NASDAQ National Market System
("NASDAQ") trading days after the date of execution of such Notice of Guaranteed
Delivery, as provided in the Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares." If Share Certificates are forwarded
separately to the Depositary, a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) must accompany each such
delivery.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of 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 the participant.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE 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.
7
<PAGE> 8
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, 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 and/or 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 TENDERS. (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY) If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, new Share Certificate(s) for the
remainder of the Shares that were evidenced by the old Share Certificate(s) will
be sent to the registered holder, unless otherwise provided in the appropriate
box marked "Special Payment Instructions" and/or "Special Delivery Instructions"
on this Letter of Transmittal, as soon as practicable after the acceptance for
payment of, and payment for, the Shares tendered herewith. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered 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
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the Share Certificate(s) without alteration, enlargement
or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on Share
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Share
Certificates.
If this Letter of Transmittal or any Share Certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and should submit proper
evidence satisfactory to the Purchaser of their authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment is to be made to, or Share
Certificates for Shares not tendered or purchased are to be issued in, the name
of a person other than the registered owner(s). Signatures on such Share
Certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the Share Certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner(s) appear(s) on the Share
Certificates. Signatures on such Share Certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Subject to Section 2.13 of the Merger Agreement
and except as set forth in this Instruction 6, the Purchaser will pay or cause
to be paid any stock transfer taxes with respect to the transfer and sale of
purchased Shares to it or its order pursuant to the Offer. If, however, payment
of the purchase price is to be made to, or if Share Certificates not tendered or
purchased are to be registered in the name of, any person other than the
registered holder, or if tendered Share Certificates are registered in the name
of any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered holder or
such person) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
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.
8
<PAGE> 9
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares purchased is to be issued in the name of and/or Share
Certificates for unpurchased Shares are to be returned to a person other than
the person(s) signing this Letter of Transmittal or if a check is to be sent
and/or such Share Certificates are to be returned to someone other than the
signer of this Letter of Transmittal or to an address other than that shown on
the front cover hereof, the appropriate boxes on this Letter of Transmittal
should be completed. Stockholders tendering Shares by book-entry transfer may
request that Shares not purchased be credited to such account maintained at such
Book-Entry Transfer Facility as such stockholder may designate hereon. If no
such instructions are given, such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated above. See
Instruction 1.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its
sole discretion to waive any of the specified conditions of the Offer (except
the Minimum Condition), in whole or in part, in the case of any Shares tendered.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase and this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the MacKenzie Partners, Inc. at its address set forth below.
10. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the stockholder or other payee to a $50 penalty. In addition, payments
that are made to such stockholder or other payee with respect to Shares
purchased pursuant to the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons 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 from the IRS.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any Share
Certificate(s) has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the Share Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost or destroyed Share Certificates have been
followed.
9
<PAGE> 10
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF), TOGETHER
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 ON OR PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR
TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED
PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE
EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES
FOR GUARANTEED DELIVERY.
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR NAME, ADDRESS AND TIN Name: ----------------------------------
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW. Address:--------------------------------
------------------------------------------
Social Security or Employer
Identification Number
-------------------------------------------------------------------------------------------------
Department of the PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
Treasury Internal
Revenue Service (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
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or
NUMBER (TIN) (b) I have not been notified by the Internal Revenue Service (the "IRS") 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 UNDER-REPORTING 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).
-------------------------------------------------------------------------------------------------
PART 3 [ ] CHECK THIS BOX IF YOU HAVE NOT BEEN ISSUED A TIN AND HAVE APPLIED FOR ONE OR INTEND
TO APPLY FOR ONE IN THE NEAR FUTURE.
SIGN HERE [ARROW] Signature: ---------------------------------------------- Date: -------------------- , 1999
- -------------------------------------------------------------------------------------------------------------------------------
</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 OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
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: ---------------- , 1999
10
<PAGE> 11
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, Share Certificates and
any other required documents should be sent or delivered by each stockholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
<TABLE>
<S> <C> <C>
By Mail: By Hand or By Overnight Courier: By Facsimile:
P.O. BOX 84 IBJ WHITEHALL BANK & TRUST (212) 858-2611
BOWLING GREEN STATION COMPANY (FOR ELIGIBLE INSTITUTIONS ONLY)
NEW YORK, NEW YORK 10274-0084 ONE STATE STREET
ATTN: REORGANIZATION OPERATIONS NEW YORK, NEW YORK 10004 Confirm by Telephone
DEPARTMENT ATTN: SECURITIES PROCESSING
WINDOW, (212) 858-2103
SUBCELLAR ONE, (SC-1)
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below, and
will be furnished promptly at the Purchaser's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. Logo]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LOGO
75 WALL STREET
NEW YORK, NEW YORK 10005
(212) 429-2000 EXT. 2958
OR
CALL TOLL FREE (800) 457-0245 EXT. 2958
<PAGE> 1
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you
are in any doubt as to the action to be taken, you should seek your own
financial advice immediately from your own appropriately authorized independent
financial advisor.
If you have sold or transferred all of your registered holdings of Common
Stock of Kofax Image Products, Inc., please forward this document and all
accompanying documents to the stockbroker, bank or other agent through whom the
sale or transfer was effected, for submission to the purchaser or transferee.
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 3, 1999, BY
IMAGING COMPONENTS CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially equivalent hereto,
must be used to accept the Offer (as defined below) if certificates representing
shares of common stock, par value $.001 per share (the "Shares"), of Kofax Image
Products, Inc., a Delaware corporation (the "Company"), are not immediately
available or time will not permit all required documents to reach IBJ Whitehall
Bank & Trust Company (the "Depositary") on or prior to the Expiration Date (as
defined in the Offer to Purchase), or the procedures for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or sent by facsimile transmission or mail to
the Depositary. See the Offer to Purchase under "The Tender Offer -- Procedures
for Tendering Shares."
The Depositary for the Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Hand or By Overnight By Facsimile:
P.O. BOX 84 Courier: (212) 858-2611
BOWLING GREEN STATION IBJ WHITEHALL BANK (FOR ELIGIBLE INSTITUTIONS
NEW YORK, NEW YORK 10274-0084 & TRUST COMPANY ONLY)
ATTN: REORGANIZATION ONE STATE STREET
OPERATIONS NEW YORK, NEW YORK 10004 Confirm by Telephone
DEPARTMENT ATTN: SECURITIES (212) 856-2103
PROCESSING WINDOW,
SUBCELLAR ONE, (SC-1)
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the Instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in the Offer to Purchase under "The Tender
Offer -- Acceptance for Payment and Payment for Shares") and certificates
representing the Shares to the Depositary within the time period specified
herein. Failure to do so could result in a financial loss to the Eligible
Institution.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Imaging Components Corporation, a
Delaware corporation (the "Purchaser"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated August 3, 1999 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which, together with
any supplements or amendments thereto, collectively constitute the "Offer"),
receipt of each of which is hereby acknowledged, the number of Shares indicated
below pursuant to the guaranteed delivery procedures set forth in the Offer to
Purchase under "The Tender Offer -- Procedures for Tendering Shares."
Number of Shares:
- ------------------------------------
Certificates No(s), (if available):
- ---------------------------------------------------------
- ---------------------------------------------------------
[ ] Check box if Shares will be tendered by Book-Entry Transfer
Name of Tendering Institution:
- ---------------------------------------------------------
Account Number:
- -------------------------------------
Dated:
- ------------------------------------------, 1999
Name(s) of Record Holder(s):
- ---------------------------------------------------------
(Please type of Print)
Address(es):
- ---------------------------------------------------------
- ---------------------------------------------------------
Area Code and Telephone Number(s):
- ---------------------------------------------------------
Signature(s):
- ---------------------------------------------------------
- ---------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as defined in the Offer to
Purchase), hereby guarantees delivery to the Depositary, at one of its addresses
set forth above, certificates ("Share Certificates") evidencing the tendered
Shares hereby, in proper form for transfer, or confirmation of book-entry
transfer of such Shares into the Depositary's account at the Depositary Trust
Company with delivery of a Letter of Transmittal (or facsimile thereof) properly
completed and duly executed, or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery, and any other required
documents, all within three days on which the National Association of Securities
Dealers Automated Quotation System, Inc. is open for business after the date
hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal and Share
Certificates to the Depositary within the time period shown herein. Failure to
do so could result in a financial loss to such Eligible Institution.
- ---------------------------------------------------------
(Name of Firm)
- ---------------------------------------------------------
(Address)
- ---------------------------------------------------------
(Zip Code)
- ---------------------------------------------------------
(Area Code and Tel. No.)
- ---------------------------------------------------------
(Authorized signature)
- ---------------------------------------------------------
(Title)
- ---------------------------------------------------------
(Please Type of Print)
Date:
- ----------------------------------------------, 1999
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
AT
$12.75 NET PER SHARE IN CASH
BY
IMAGING COMPONENTS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
PACIFIC TIME, ON TUESDAY, AUGUST 31, 1999, UNLESS THE OFFER IS EXTENDED.
August 3, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Imaging Components Corporation, a Delaware
corporation (the "Purchaser"), to act as information agent in connection with
the Purchaser's offer to purchase all of the outstanding shares of common stock,
par value $.001 per share (the "Shares"), of Kofax Image Products, Inc., a
Delaware corporation (the "Company"), at a price of $12.75 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated August 3, 1999 (the "Offer
to Purchase"), and the related Letter of Transmittal (which, together with any
supplements or amendments thereto, collectively constitute the "Offer"), copies
of which are enclosed herewith. The Offer is being made pursuant to the
Agreement and Plan of Merger, dated as of July 27, 1999 (the "Merger
Agreement"), by and among the Purchaser, Imaging Acquisition Corporation, a
Delaware corporation ("Merger Sub"), and the Company pursuant to which,
following the consummation of the Offer and the satisfaction or waiver of
certain conditions, Purchaser will be merged with and into the Company, with the
Company surviving the merger as a wholly-owned subsidiary of Purchaser (the
"Merger").
Please furnish copies of the enclosed materials to those of your clients
for whom you hold Shares registered in your name or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES, WHICH WOULD CONSTITUTE MORE THAN FIFTY PERCENT (50%) OF THE SHARES THEN
OUTSTANDING ON A FULLY DILUTED BASIS, AND (II) THE SATISFACTION OR WAIVER OF
CERTAIN CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER AND THE COMPANY TO
CONSUMMATE THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
Enclosed herewith for your information and for forwarding to your clients
are copies of the following documents:
1. The Offer to Purchase;
2. The Letter of Transmittal to be used by stockholders of the Company
in accepting the Offer. Facsimile copies of the Letter of
Transmittal (with manual signatures) may be used to tender Shares;
3. The Letter to Stockholders of the Company from the President and
Chief Executive Officer of the Company, accompanied by the
Company's Solicitation/Recommendation Statement on Schedule 14D-9
filed by the Company with the Securities and Exchange Commission
and mailed to the stockholders of the Company;
<PAGE> 2
4. A printed form of letter which may be sent to your clients for
whose account you hold Shares registered in your name or in the
name of your nominee, with space provided for obtaining such
clients' instructions with regard to the Offer;
5. The Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available, or if such
certificates and all other required documents cannot be delivered
to IBJ Whitehall Bank & Trust Company (the "Depositary") by the
Expiration Date (as defined in the Offer to Purchase), or if the
procedure for book-entry transfer cannot be completed by the
Expiration Date;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
Please note the following:
1. The tender price is $12.75 per Share, net to you in cash, without
interest thereon, upon the terms and subject to the conditions set
forth in the Offer.
2. The Board of Directors of the Company has unanimously approved the
Offer and the Merger (as defined below) and determined that the
terms of the Offer and the Merger are fair to, and in the best
interests of, the stockholders of the Company and unanimously
recommends that the stockholders of the Company accept the Offer
and tender their Shares.
3. The Offer is being made for all outstanding Shares.
4. The Offer and withdrawal rights will expire at 12:00 midnight,
Pacific Time, on Tuesday, August 31, 1999, unless the Offer is
extended in accordance with the terms of the Merger Agreement.
5. The Offer is being made pursuant to the Merger Agreement. In the
Merger, each issued and outstanding Share (other than Shares owned
directly or indirectly by Purchaser or Merger Sub or any of their
subsidiaries or by the Company as treasury stock, or by
stockholders, if any, who are entitled to and who properly exercise
rights of appraisal (if any) under Delaware law) will be converted
into the right to receive $12.75 per Share, without interest, as
set forth in the Merger Agreement and described in the Offer to
Purchase.
6. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not properly withdrawn prior to the expiration
of the Offer such number of Shares which would constitute more than
fifty percent (50%) of the Shares then outstanding on a fully
diluted basis, and (2) the satisfaction or waiver of certain
conditions to the obligations of the Purchaser and the Company to
consummate the Offer and the transactions contemplated by the
Merger Agreement.
7. The Purchaser and the Merger Sub have entered into a Voting
Agreement, dated as of July 27, 1999, with members of the Company's
management and certain other of the Company's shareholders (the
"Stockholders"), pursuant to which each Stockholder has agreed to
tender into the Offer the Shares that such Stockholder owns, other
than Shares that members of management will retain and exchange for
shares of the Purchaser in the Merger, and has agreed to vote all
Shares owned by such Stockholder in favor of the Merger Agreement
and the transactions contemplated thereby and against any competing
offer, so long as the Board of Directors of the Company, the
Purchaser or Merger Sub has not terminated the Merger Agreement.
These Shares represent approximately 19.5% of the current
outstanding Shares.
8. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of
the Letter of Transmittal, stock transfer taxes on the purchase of
Shares by the Purchaser pursuant to the Offer. However, federal
income tax backup withholding at a rate of 31% may be required,
unless an exemption is provided or unless required taxpayer
identification information is provided. See Instruction 9 of the
Letter of Transmittal.
2
<PAGE> 3
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, PACIFIC TIME, ON TUESDAY, AUGUST 31, 1999, UNLESS THE
OFFER IS EXTENDED.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (a) certificates
representing Shares (or a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to such Shares) into the account maintained by
the Depositary at the Depository Trust Company, (the "Book-Entry Transfer
Facility"), pursuant to the procedures set forth in the Offer to Purchase under
"The Tender Offer -- Procedures for Tendering Shares", (b) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees or an Agent's Message (as defined in the Offer
to Purchase), in connection with a book-entry delivery, and (c) any other
documents required by the Letter of Transmittal. Accordingly, payment may not be
made to all tendering stockholders at the same time depending upon when
certificates for or Book Entry Confirmations into the Depositary's account at
the Book-Entry Transfer Facility are actually received by the Depositary. UNDER
NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
If holders of Shares wish to tender shares, but it is impracticable for
them to forward their Share certificates or other required documents on or prior
to the Expiration Date (as defined in the Offer to Purchase) or to comply with
the book-entry transfer procedures on a timely basis, a tender may be effected
by following the guaranteed delivery procedures specified in the Offer to
Purchase under "The Tender Offer -- Procedures for Tendering Shares."
Neither the Purchaser nor the Merger Sub will pay any commissions or fees
to any broker, dealer or other person (other than the Information Agent and the
Dealer Manager, as described in the Offer to Purchase) for soliciting tenders of
Shares pursuant to the Offer. The Purchaser will, however, upon request,
reimburse you for customary clerical and mailing expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Purchaser will pay
or cause to be paid any stock transfer taxes payable on the transfer of Shares
to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent, at its address and telephone number set forth on the back
cover of the Offer to Purchase.
Very truly yours,
MacKenzie Partners, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE COMPANY, THE DEPOSITARY, THE
INFORMATION AGENT, OR THE DEALER MANAGER, ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
AT
$12.75 NET PER SHARE IN CASH
BY
IMAGING COMPONENTS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
PACIFIC TIME, ON TUESDAY, AUGUST 31, 1999, UNLESS THE OFFER IS EXTENDED.
August 3, 1999
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated August 3,
1999 (the "Offer to Purchase"), and a related Letter of Transmittal (which,
together with any supplements or amendments thereto, collectively constitute the
"Offer") relating to the offer by Imaging Components Corporation, a Delaware
corporation (the "Purchaser"), to purchase all outstanding shares of common
stock, par value $.001 per share (the "Shares"), of Kofax Image Products, Inc.,
a Delaware corporation (the "Company"), at a price of $12.75 per Share, net to
the seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account, pursuant to
the terms and subject to the conditions set forth in the Offer.
Please note the following:
1. The tender price is $12.75 per Share, net to you in cash, without
interest thereon, upon the terms and subject to the conditions set
forth in the Offer.
2. The Board of Directors of the Company has unanimously approved the
Offer and the Merger (as defined below) and determined that the terms
of the Offer and the Merger are fair to, and in the best interests
of, the stockholders of the Company and recommends that the
stockholders of the Company accept the Offer and tender their Shares.
3. The Offer is being made for all outstanding Shares.
4. The Offer and withdrawal rights will expire at 12:00 midnight,
Pacific Time, on Tuesday, August 3, 1999, unless the Offer is
extended in accordance with the terms of the Merger Agreement.
5. The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of July 27, 1999 (the "Merger Agreement"), among the
Purchaser, Imaging Acquisition Corporation, a Delaware corporation
("Merger Sub") and the Company pursuant to which, following the
consummation of the Offer and the satisfaction or waiver of certain
conditions, the Merger Sub will be merged with and into the Company,
with the Company surviving the merger as a wholly owned subsidiary of
Purchaser (the "Merger"). In the Merger, each issued and outstanding
Share (other than Shares owned directly or indirectly by the
Purchaser, Merger Sub or any of their subsidiaries or
<PAGE> 2
by the Company as treasury stock, or by stockholders, if any, who are
entitled to and who properly exercise rights of appraisal (if any)
under Delaware law) will be converted into the right to receive
$12.75 per Share, without interest, as set forth in the Merger
Agreement and described in the Offer to Purchase.
6. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not properly withdrawn prior to the expiration
of the Offer such number of Shares which constitutes more than fifty
percent (50%) of the Shares then outstanding on a fully diluted
basis, and (2) the satisfaction or waiver of certain conditions to
the obligations of the Purchaser and the Company to consummate the
Offer and the transactions contemplated by the Merger Agreement.
7. The Purchaser and Merger Sub have entered into a Voting Agreement,
dated as of July 27, 1999, with members of the Company's management
and certain other of the Company's shareholders (the "Stockholders"),
pursuant to which each Stockholder has agreed to tender into the
Offer the Shares that such Stockholder owns, other than Shares that
members of management will retain and exchange for shares of
Purchaser in the Merger, and has agreed to vote all Shares owned by
such Stockholder in favor of the Merger Agreement and the
transactions contemplated thereby and against any competing offer, so
long as the Board of Directors of the Company, or Merger Sub
Purchaser has not terminated the Merger Agreement. These Shares
represent approximately 19.5% of the current outstanding Shares.
8. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Section 2.13 of the Merger Agreement and
except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer. However, federal income tax backup
withholding at a rate of 31% may be required, unless an exemption is
provided or unless required taxpayer identification information is
provided. See Instruction 9 of the Letter of Transmittal.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form contained in this letter. If you authorize the tender
of your Shares, all such Shares will be tendered unless otherwise specified in
such instruction form. An envelope to return your instructions to us is
enclosed. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US
AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION OF THE OFFER.
Holders of Shares whose Share Certificates (as defined in the Offer to
Purchase) are not immediately available or who cannot deliver their Certificates
and all other required documents to IBJ Whitehall Bank & Trust Company, as
depositary (the "Depositary"), or complete the procedures for book-entry
transfer prior to the expiration of the Offer must tender their Shares according
to the guaranteed delivery procedures set forth in the Offer to Purchase under
"The Tender Offer - Procedures for Tendering Shares."
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment, and thereby purchased, tendered Shares, if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares for payment. Upon the terms and subject to the
conditions of the Offer, payment for Shares purchased pursuant to the Offer will
in all cases be made only after timely receipt by the Depositary of (a) Share
Certificates (or a timely Book-Entry Confirmation (as defined in the Offer to
Purchase) with respect to such Shares) into the account maintained by the
Depositary at the Depository Trust Company (the "Book-Entry Transfer Facility"),
pursuant to the procedures set forth in the Offer to Purchase under "The Tender
Offer -- Procedures for Tending Shares", (b) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined in the Offer to
Purchase), in connection with a book-entry delivery, and (c) any other documents
required by the Letter of Transmittal. Accordingly, payment may not be made to
all tendering stockholders at the same time depending upon when Share
Certificates for or Book Entry Confirmations into the Depositary's account at
the Book-Entry Transfer Facility are actually received by the Depositary.
2
<PAGE> 3
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES
TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and any supplements or amendments thereto and is being
made to all holders of Shares. The Purchaser is not aware of any state where the
making of the Offer is prohibited by 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 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 such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares in such state. In any jurisdiction where
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by Dresdner Kleinwort Benson North America LLC, the Dealer Manager for
the Offer, or one or more registered brokers or dealers that are licensed under
the laws of such jurisdiction.
3
<PAGE> 4
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated August 3, 1999, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the offer by Imaging
Components Corporation, a Delaware corporation, (the "Purchaser") to purchase
all outstanding shares of common stock, par value $0.001 per share (the
"Shares"), of Kofax Image Products, Inc., a Delaware corporation, at a purchase
price of $12.75 per share net to seller in cash.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
- ------------------------------------------------------------
Number of Shares to be Tendered:
Shares*
- ------------------------------------------------------------
Dated: , 1999
- ------------------------------------------------------------
SIGN HERE
---------------------------------------------------------
---------------------------------------------------------
Signature(s)
---------------------------------------------------------
---------------------------------------------------------
Account Number
---------------------------------------------------------
---------------------------------------------------------
Please Type or Print Name(s)
---------------------------------------------------------
---------------------------------------------------------
Please Type or Print Address(es)
---------------------------------------------------------
---------------------------------------------------------
Area Code and Telephone Number(s)
---------------------------------------------------------
---------------------------------------------------------
Tax Identification or Social Security Number(s)
- ------------------------------------------------------------
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
4
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person person(3)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
9. A valid trust, estate or pension Legal entity (Do
trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501 (a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to back-up
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includable payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
Exhibit (d)(7)
INVESTMENT GROUP TO ACQUIRE
KOFAX FOR $12.75 PER SHARE IN CASH
IRVINE, Calif. (July 28, 1999) Kofax Image Products, Inc. (Nasdaq: KOFX)
announced today that it has entered into a definitive agreement pursuant to
which all of the outstanding shares of common stock of Kofax Image Products,
Inc. ("Kofax") will be acquired by an investment group formed by Dresdner
Kleinwort Benson Private Equity Partners, L.P. and DICOM GROUP plc. (LSE: DCM).
Under the agreement, which has been approved unanimously by Kofax's board of
directors, the investment group will commence a tender offer for all outstanding
shares of common stock of Kofax for $12.75 per share in cash.
The tender offer for Kofax's shares is expected to commence within five business
days and is subject to receiving more than 50% of fully diluted shares, among
other conditions. Certain of Kofax's directors and executive officers holding
shares representing approximately 19.5% of Kofax's outstanding shares (17.5% on
a fully diluted basis) have agreed to tender their shares and vote in favor of
the transaction. The tender offer is expected to close by the end of August
1999. C.E. Unterberg, Towbin provided a fairness opinion to Kofax's Board of
Directors.
Commenting on the transaction, David Silver, President and CEO of Kofax, said,
"Kofax has been working together with DICOM in Europe for nearly a decade, and
this partnership will allow us to combine Kofax's expertise in product
development and core image processing technology with DICOM's strong European
sales channels and their expertise in sales and services in international
markets. DICOM shares our vision of the future of the document technologies
market and we believe this transaction will help us grow Kofax faster and on a
more global scale. We are very pleased with the premium attached to this offer
and believe this offer represents a good value for Kofax shareholders and
employees."
Otto Schmid, Chairman and CEO of DICOM, added, "We have always been impressed
with Kofax technology and expertise in document capture and image processing, as
reflected by their impressive customer roster and strong brand name. In our
view, the proposed transaction will create a leading global partnership for
products and services to the document technologies market. Although we do not
seek to change the current Kofax entity, we believe that our investment and
expertise, particularly in the European arena, will help Kofax achieve broader
market penetration and extend its already formidable reputation and market
share. We've known and respected Kofax for many years and look forward
enthusiastically to our closer business relationship."
The investment group, including some members of Kofax management, has committed
to invest $21.3 million in the aggregate and has obtained a total underwritten
commitment from Dresdner Bank AG for $60.0 million in debt financing for the
transaction and for working capital. A portion of this debt is expected to be
repaid from Kofax's existing cash balances, which stood at over $25.3 million as
of March 31, 1999.
<PAGE> 2
Based in Irvine, California and founded in 1985, Kofax is a leading supplier of
both application software and image processing products for the imaging,
workflow and document management market. The Company specializes in the document
and data capture and document storage product segments, which are essential to
helping paper intensive organizations economically and reliably capture and
store critical business information. The company sells its products through a
worldwide network of distributors, system integrators and value-added resellers.
Kofax generated $37.0 million in net sales and $5.5 million in operating profit
for the twelve months ended March 31, 1999.
DICOM GROUP plc, headquartered in Aldermaston, Berkshire, UK, is a holding
company for a group of businesses which distribute document imaging processing
(DIP) equipment in Western and Central Europe and certain computer peripherals
in Switzerland and Austria. The company provides a range of value-added services
including support and maintenance for technically complex products in the DIP
market. DICOM works with its customers and partners in 16 European and four
Asian countries in developing solutions for data and document management,
independent of manufacturer. The company also provides components and associated
services for handling digital information. DICOM generated (pound)77.5 million
($123.3 million based on yesterday's closing exchange rate of $1.5904 =
(pound)1) in revenues for the twelve months ended December 31, 1998.
Statements herein concerning the growth and strategies of Kofax and DICOM
include forward-looking statements that involve risks and uncertainties. Kofax's
and DICOM's actual results may differ materially from those suggested as a
result of various factors, including Kofax's ability to release new versions of
its software on time, customer response, continued demand for Kofax's hardware
products, its ability to forecast and achieve product mix objectives and to
increase sales and profitability. Other factors include the companies' ability
to consummate the transaction.
Interested persons should refer to the disclosure under the heading "Factors
That May Affect Future Operating Results" included in Kofax's Annual Report on
Form 10-K for the year ended June 30, 1998 as well as Kofax's recent public
filings, for information regarding risks affecting Kofax's financial conditions
and results of operations.
Contact:
Kofax Image Products, Inc., Irvine
David Silver/Ron Fikert, 949/727-1733 ext. 719
<PAGE> 1
EXHIBIT (d)(8)
FOR IMMEDIATE RELEASE
MEDIA CONTACTS:
GRACE PROTOS (MACKENZIE PARTNERS): (212) 929-5500
JON HARTZELL (CORPORATE AND EXTERNAL AFFAIRS, DRESDNER
KLEINWORT BENSON NORTH AMERICA): (212) 429-2939
ALEXANDER COLEMAN (DRESDNER KLEINWORT BENSON PRIVATE
EQUITY PARTNERS): (212) 429-3120
INVESTMENT GROUP TO ACQUIRE KOFAX FOR $12.75 PER SHARE IN CASH.
New York, New York -- July 28, 1999 - An investment group formed by
Dresdner Kleinwort Benson Private Equity Partners, L.P. and DICOM GROUP plc
(LSE: DCM) announced a definitive agreement to acquire all the outstanding
shares of Kofax Image Products, Inc. (NASDAQ: KOFX) in an all cash transaction
valued at $70.5 million, or $12.75 per share.
A tender offer for Kofax's shares is expected to commence within five
business days and is subject to receiving acceptances for more than 50% of the
fully diluted shares, among other conditions. Certain of Kofax's directors and
executive officers holding shares representing 19.5% of Kofax's current
outstanding share capital (17.5% on a fully diluted basis) have agreed to tender
17.7% of the outstanding share capital (15.9% on a fully diluted basis) and to
vote for and exchange in the Merger their remaining shares. The transactions
contemplated by the Merger Agreement have been approved by the Board of
Directors of Kofax. The tender offer is expected to close by the end of August.
After the consummation of the Merger, Kofax's executive officers' stake in the
investment group will be approximately 5.6%.
The investment group, including some members of Kofax's management, has
committed to invest $21.3 million in the aggregate and has obtained a total
underwritten commitment from Dresdner Bank AG for $60.0 million in debt
instruments. A portion of this debt is expected to be repaid from Kofax's
existing cash balances, which stood at over $25.3 million as of March 31, 1999.
Dresdner Kleinwort Benson North America LLC, the North American
investment banking subsidiary of Dresdner Bank AG, is advising DICOM on the
transaction and will act as Dealer Manager for the tender offer with MacKenzie
Partners, Inc. serving as the information agent. C.E. Unterberg, Towbin has
provided a fairness opinion for Kofax.
Based in Irvine, California and founded in 1985, Kofax is a leading
supplier of both application software and image processing products for the
imaging, workflow and document management market. The Company specializes in the
document and data capture and document storage product segments, which are
essential to helping paper intensive organizations economically and reliably
capture and store critical business information. The company sells its products
through a worldwide network of distributors, system integrators and value-added
resellers. Kofax generated
<PAGE> 2
$37.0 million in net sales and $5.5 million in operating profit for the twelve
months ended March 31, 1999.
DICOM GROUP plc, headquartered in Aldermaston, Berkshire, UK, is a
holding company for a group of businesses which distribute document imaging
processing (DIP) equipment in Western and Central Europe and certain computer
peripherals in Switzerland and Austria. The company provides a range of
value-added services including support and maintenance for technically complex
products in the DIP market. DICOM works with its customers and partners in 16
European and four Asian countries in developing solutions for data and document
management, independent of manufacturer. The company also provides components
and associated services for handling digital information. DICOM generated pound
sterling 77.5 million ($123.3 million based on yesterday's closing exchange rate
of $1.5906 = pound sterling 1) in revenues for the twelve months ended December
31, 1998.
Dresdner Kleinwort Benson Private Equity Partners, L.P. is an affiliate
of Dresdner Bank AG, one of the world's largest banks with $448 billion in
assets and $225 billion in funds under management as of March 31, 1999. Dresdner
Bank's worldwide private equity business has over 70 professionals operating in
7 countries and manages over $2 billion in private equity investments. Dresdner
Kleinwort Benson Private Equity Partners L.P., based in New York, invests
primarily in private U.S. small and middle market companies in conjunction with
experienced management teams.
<PAGE> 1
Exhibit (d)(9)
This announcement is neither an offer to purchase nor a solicitation of
an offer to sell Shares. The Offer is made solely by the Offer to
Purchase, dated August 3, 1999, and the related Letter of Transmittal
and is being made to all holders of Shares. The Purchaser is not aware
of any state where the making of the Offer is prohibited by
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 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 such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such
state. In any jurisdiction where securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of the Purchaser by Dresdner
Kleinworl Benson North America LLC, the Dealer Manager for the Offer,
or one or more registered brokers or dealers that are licensed under
the laws of such jurisdiction
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
AT
$12.75 NET PER SHARE IN CASH
BY
IMAGING COMPONENTS CORPORATION
Imaging Components Corporation, a Delaware corporation ("Purchaser") is
offering to purchase all outstanding shares of common stock, par value $.001 per
share (the "Shares"), of Kofax Image Products, Inc., a Delaware corporation (the
"Company"), at $12.75 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated August 3,
1999, and in the related Letter of Transmittal (which together constitute the
"Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, PACIFIC TIME,
ON TUESDAY, AUGUST 31, 1999 UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer such
number of Shares which, together with the Shares then owned directly or
indirectly by Purchaser and Purchaser's wholly owned subsidiary Imaging
Acquisition
<PAGE> 2
Corporation, a Delaware corporation ("Merger Sub"), would constitute more than
fifty percent (50%) of the Shares then outstanding on a fully diluted basis.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of July 27, 1999 (the "Merger Agreement"), among Purchaser, Merger Sub
and the Company pursuant to which, following the consummation of the Offer and
the satisfaction or waiver of certain conditions, Merger Sub will be merged with
and into the Company (the "Merger"), with the Company surviving as a wholly
owned subsidiary of Purchaser. At the effective time of the Merger, each Share
issued and outstanding immediately prior to the effective time other than (i)
Shares held by the Company or any subsidiary of the Company, (ii) Shares held by
Purchaser, Merger Sub or any other subsidiary of Purchaser, if any, (iii)
certain Shares of directors and officers of the Company as set forth on Schedule
2.8 to the Merger Agreement (the "Retained Shares"), and (iv) Shares held by
shareholders who have demanded and perfected, and have not withdrawn or
otherwise lost, appraisal rights, if any, under the Delaware law will be
canceled and converted automatically into the right to receive $12.75 in cash,
or any higher price that may be paid per Share in the Offer, without interest
(the "Merger Consideration"). At the effective time of the Merger, each Retained
Share will be converted into shares of Purchaser.
Concurrently with the execution of the Merger Agreement, Purchaser and
Merger Sub entered into a Voting Agreement (the "Voting Agreement") with members
of the Company's management and certain other of the Company's shareholders, who
beneficially own an aggregate of approximately 19.5% (17.5% on a fully diluted
basis) of the outstanding Shares entitled to vote at any meeting of the
shareholders of the Company (the "Stockholders"). Pursuant to the terms and
conditions of the Voting Agreement, each Stockholder has agreed to tender such
Shares (except for the Retained Shares) and to vote all Shares owned by such
Stockholder in favor of the Merger Agreement and the transactions contemplated
thereby and against any competing offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OFFER, THE MERGER AGREEMENT AND THE MERGER, HAS DETERMINED THAT THE TERMS OF THE
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND
ITS STOCKHOLDERS, AND RECOMMENDS THAT ALL HOLDERS OF THE SHARES ACCEPT THE OFFER
AND TENDER ALL OF THEIR SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to Purchaser and
not properly withdrawn as, if and when Purchaser gives oral or written notice to
IBJ Whitehall Bank & Trust Company (the "Depositary") of Purchaser's acceptance
for payment of such Shares. Upon the terms and subject to the conditions of the
Offer, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting such payment to tendering stockholders. In all cases,
payment for Shares purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of (a) certificates for such Shares or timely
confirmation of book-entry transfer of such Shares into the Depositary's account
at the Book-Entry Transfer Facility (as defined in the Offer to Purchase)
pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (b)
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantees or, in the case
of a book-entry transfer, an Agent's Message (as defined in the Offer to
Purchase) and (c) any other documents required by the Letter of Transmittal.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE PURCHASE PRICE
OF THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT.
2
<PAGE> 3
The term "Expiration Date" means 12:00 Midnight, Pacific Time, on
Tuesday, August 31, 1999, unless and until Purchaser, in its sole discretion
(but subject to 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 to
extended by Purchaser, shall expire. Purchaser expressly reserves the right, in
its sole discretion (but subject to the terms of the Merger Agreement), at any
time or from time to time, and regardless of whether or not any of the events
set forth in the Offer to Purchase under "The Tender Offer -- Certain Conditions
of the Offer" shall have occurred or shall have been determined by Purchaser to
have occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary. Purchaser
shall not have any obligation to pay interest on the purchase price for tendered
Shares in the event Purchaser exercises its right to extend the period of time
during which the Offer is open. There can be no assurance that Purchaser will
exercise its right to extend the Offer. Any such extension will be followed by a
public announcement thereof no later than 9:00 A.M., Pacific Time, on the next
business day after the previously scheduled Expiration Date. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment and paid for by
Purchaser pursuant to the Offer, may also be withdrawn at any time on or after
the Expiration Date. For a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase and must specify the name of the person having tendered the Shares to
be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares to be withdrawn, if different from the name of
the person who tendered the Shares. If certificates for Shares have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such certificates, the serial numbers shown on such certificates must
be submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution (as defined in the Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares"), the signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
delivered pursuant to the procedures for book-entry transfer as set forth in the
Offer to Purchase, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares and otherwise comply with the Book-Entry Transfer
Facility's procedures. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not validly tendered
for purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in the Offer to Purchase under "The
Tender Offer -- Procedures for Tendering Shares" at any time prior to the
Expiration Date. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable who
are listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under
the Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
3
<PAGE> 4
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance, as well as requests for copies
of the Offer to Purchase and the Letter of Transmittal, may be directed to the
Information Agent or the Dealer Manager as set forth below, and copies will be
furnished promptly at Purchaser's expense. Neither the Purchaser nor Merger Sub
will pay any commissions or fees to any broker, dealer or other person (other
than the Information Agent, the Dealer Manager and Depositary) for soliciting
tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
DRESDNER KLEINWORT BENSON NORTH AMERICA LLC
75 Wall Street
New York, NY 10005
(212) 429-2000 ext. 2958
or
Call Toll-Free (800) 457-0245 ext. 2958
August 3, 1999
4
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
KOFAX IMAGE PRODUCTS, INC.
(NAME OF SUBJECT COMPANY)
IMAGING COMPONENTS CORPORATION
IMAGING ACQUISITION CORPORATION
DICOM GROUP PLC
DRESDNER KLEINWORT BENSON EQUITY PARTNERS LP
(BIDDERS)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
500200-10-0
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
ARNOLD VON BUREN
BUSINESS BUILDING FORREN WEST
GRUNDSTRASSE 14
CH-6343 ROTKREUZ, (ZUG), SWITZERLAND
011-41-41798-3070
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPIES TO:
EUNU CHUN, ESQ.
M. GILBEY STRUB, ESQ.
KIRKLAND & ELLIS
CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NY 10022
(212) 446-4800
AUGUST 3, 1999
(DATE OF EVENT WHICH REQUIRES FILING STATEMENT ON SCHEDULE 13D)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
<S> <C>
Transaction Valuation*: $71,008,684.10 Amount of Filing Fee: $14,201.73
================================================================================================
</TABLE>
* For purposes of calculating the fee only. This amount assumes the purchase at
a price per share of $12.75 in cash of all 5,243,956 shares of common stock,
par value $.001 per share ("Shares"), of Kofax Image Products, Inc. (the
"Company"), which number of shares represents all the Shares outstanding on
July 27, 1999, plus 614,555 Shares issuable under the Company's option plans.
The proposed maximum aggregate value of the transaction is $71,008,684.10
(the product of (x) the aggregate number of shares and options (5,858,511),
multiplied by (y) the per share price ($12.75) less the aggregate exercise
price ($3,687,330.90) with respect to the Shares issuable upon exercise of
stock options. The amount of the filing fee, calculated in accordance with
Section 14(g)(3) and Rule 0-11(d) under the Securities Exchange Act of 1934,
as amended, equals 1/50th of one percent of the transaction valuation.
[ ] 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>
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or registration no.: Not Applicable Date Filed: Not Applicable
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SCHEDULES 14D-1 AND 13D
<TABLE>
<S> <C> <C>
- ---------------------- ----------
CUSIP No. 50020010 Page 2
- ---------------------- ----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1. S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
IMAGING COMPONENTS CORPORATION
- ----------------------------------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
2. (b) [X]
- ----------------------------------------------------------------------------------------------------------
SEC USE ONLY
3.
- ----------------------------------------------------------------------------------------------------------
SOURCES OF FUNDS
4.
AF, BK
- ----------------------------------------------------------------------------------------------------------
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(e) or 2(f)
5. [ ]
- ----------------------------------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6.
DELAWARE
- ----------------------------------------------------------------------------------------------------------
SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7.
0
-----------------------------------------------------------------
SHARED VOTING POWER*
8.
1,207,466 SHARES
-----------------------------------------------------------------
SOLE DISPOSITIVE POWER
9.
0
-----------------------------------------------------------------
SHARED DISPOSITIVE POWER*
10.
1,207,466 SHARES
- ----------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT OF BENEFICIALLY OWNED BY EACH REPORTING
PERSON*
11.
1,207,466 SHARES
- ----------------------------------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES
12 CERTAIN SHARES [ ]
- ----------------------------------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
13.
22.24% (BASED ON 5,428,956 SHARES OUTSTANDING AFTER GIVING EFFECT
TO ISSUANCE OF SHARES UNDERLYING OPTIONS INCLUDED IN ROW (11)
- ----------------------------------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14.
CO
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Beneficial ownership is based on the provisions of the Voting Agreement
described in Item 7 herein, pursuant to which members of the Company's
management and certain other of the Company's stockholders have agreed with
the Reporting Persons (1) to vote all Shares set forth opposite such
Stockholder's name on Exhibit A to the Voting Agreement, together with any
Shares acquired by or issued to such Stockholder after the date of the Voting
Agreement (the "Subject Shares"), in favor of the adoption of the Merger
Agreement and against any action or agreement that would result in a breach of
any covenant, representation or warranty contained in the Merger Agreement or
could reasonably be expected to impede, interfere with, delay or postpone or
attempt to discourage the consummation of the Merger or any of the
transactions contemplated by the Merger Agreement and (2) to tender all
Subject Shares in the Offer (except for the Shares to be retained by the
members of the Company's management and exchanged for shares of Purchaser in
the Merger). Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Voting Agreement.
The number of Shares beneficially owned also includes Shares issuable upon the
exercise of options held by the stockholder parties to the Voting Agreement
which are exercisable within 60 days of the date hereof.
2
<PAGE> 3
SCHEDULES 14D-1 AND 13D
<TABLE>
<S> <C> <C>
- ---------------------- ----------
CUSIP No. 50020010 Page 3
- ---------------------- ----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1. S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
IMAGING ACQUISITION CORPORATION
- ----------------------------------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
2. (b) [X]
- ----------------------------------------------------------------------------------------------------------
SEC USE ONLY
3.
- ----------------------------------------------------------------------------------------------------------
SOURCES OF FUNDS
4.
AF, BK
- ----------------------------------------------------------------------------------------------------------
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(e) or 2(f)
5. [ ]
- ----------------------------------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6.
DELAWARE
- ----------------------------------------------------------------------------------------------------------
SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7.
0
-----------------------------------------------------------------
SHARED VOTING POWER*
8.
1,207,466 SHARES
-----------------------------------------------------------------
SOLE DISPOSITIVE POWER
9.
0
-----------------------------------------------------------------
SHARED DISPOSITIVE POWER*
10.
1,207,466 SHARES
- ----------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT OF BENEFICIALLY OWNED BY EACH REPORTING
PERSON
11.
1,207,466 SHARES
- ----------------------------------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES
12 CERTAIN SHARES [ ]
- ----------------------------------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
13.
22.24% (BASED ON 5,428,956 SHARES OUTSTANDING AFTER GIVING EFFECT
TO ISSUANCE OF SHARES UNDERLYING OPTIONS INCLUDED IN ROW (11)
- ----------------------------------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14.
CO
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Beneficial ownership is based on the provisions of the Voting Agreement
described in Item 7 herein, pursuant to which members of the Company's
management and certain other of the Company's stockholders have agreed with
the Reporting Persons (1) to vote all Shares set forth opposite such
Stockholder's name on Exhibit A to the Voting Agreement, together with any
Shares acquired by or issued to such Stockholder after the date of the Voting
Agreement (the "Subject Shares"), in favor of the adoption of the Merger
Agreement and against any action or agreement that would result in a breach of
any covenant, representation or warranty contained in the Merger Agreement or
could reasonably be expected to impede, interfere with, delay or postpone or
attempt to discourage the consummation of the Merger or any of the
transactions contemplated by the Merger Agreement and (2) to tender all
Subject Shares in the Offer (except for the Shares to be retained by the
members of the Company's management and exchanged for shares of Purchaser in
the Merger). Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Voting Agreement.
The number of Shares beneficially owned also includes Shares issuable upon the
exercise of options held by the stockholder parties to the Voting Agreement
which are exercisable within 60 days of the date hereof.
3
<PAGE> 4
SCHEDULES 14D-1 AND 13D
<TABLE>
<S> <C> <C>
- ---------------------- ----------
CUSIP No. 50020010 Page 4
- ---------------------- ----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1. S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
DICOM GROUP PLC
- ----------------------------------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
2. (b) [X]
- ----------------------------------------------------------------------------------------------------------
SEC USE ONLY
3.
- ----------------------------------------------------------------------------------------------------------
SOURCES OF FUNDS
4.
AF, BK
- ----------------------------------------------------------------------------------------------------------
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(e) or 2(f)
5. [ ]
- ----------------------------------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6.
ENGLAND AND WALES
- ----------------------------------------------------------------------------------------------------------
SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7.
0
-----------------------------------------------------------------
SHARED VOTING POWER*
8.
1,207,466 SHARES
-----------------------------------------------------------------
SOLE DISPOSITIVE POWER
9.
0
-----------------------------------------------------------------
SHARED DISPOSITIVE POWER*
10.
1,207,466 SHARES
- ----------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT OF BENEFICIALLY OWNED BY EACH REPORTING
PERSON
11.
1,207,466 SHARES
- ----------------------------------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES
12 CERTAIN SHARES [ ]
- ----------------------------------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
13.
22.24% (BASED ON 5,428,956 SHARES OUTSTANDING AFTER GIVING EFFECT
TO ISSUANCE OF SHARES UNDERLYING OPTIONS INCLUDED IN ROW (11)
- ----------------------------------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14.
CO
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Beneficial ownership is based on the provisions of the Voting Agreement
described in Item 7 herein, pursuant to which members of the Company's
management and certain other of the Company's stockholders have agreed with
the Reporting Persons (1) to vote all Shares set forth opposite such
Stockholder's name on Exhibit A to the Voting Agreement, together with any
Shares acquired by or issued to such Stockholder after the date of the Voting
Agreement (the "Subject Shares"), in favor of the adoption of the Merger
Agreement and against any action or agreement that would result in a breach of
any covenant, representation or warranty contained in the Merger Agreement or
could reasonably be expected to impede, interfere with, delay or postpone or
attempt to discourage the consummation of the Merger or any of the
transactions contemplated by the Merger Agreement and (2) to tender all
Subject Shares in the Offer (except for the Shares to be retained by the
members of the Company's management and exchanged for shares of Purchaser in
the Merger). Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Voting Agreement.
The number of Shares beneficially owned also includes Shares issuable upon the
exercise of options held by the stockholder parties to the Voting Agreement
which are exercisable within 60 days of the date hereof.
4
<PAGE> 5
SCHEDULES 14D-1 AND 13D
<TABLE>
<S> <C> <C>
- ---------------------- ----------
CUSIP NO. 50020010 Page 5
- ---------------------- ----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1. S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
DRESDNER KLEINWORT BENSON EQUITY PARTNERS LP
- ----------------------------------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
2. (b) [X]
- ----------------------------------------------------------------------------------------------------------
SEC USE ONLY
3.
- ----------------------------------------------------------------------------------------------------------
SOURCES OF FUNDS
4.
AF, BK
- ----------------------------------------------------------------------------------------------------------
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(e) or 2(f)
5. [ ]
- ----------------------------------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6.
DELAWARE
- ----------------------------------------------------------------------------------------------------------
SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7.
0
-----------------------------------------------------------------
SHARED VOTING POWER*
8.
1,207,466 SHARES
-----------------------------------------------------------------
SOLE DISPOSITIVE POWER
9.
0
-----------------------------------------------------------------
SHARED DISPOSITIVE POWER*
10.
1,207,466 SHARES
- ----------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT OF BENEFICIALLY OWNED BY EACH REPORTING
PERSON
11.
1,207,466 SHARES
- ----------------------------------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES
12 CERTAIN SHARES [ ]
- ----------------------------------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
13.
22.24% (BASED ON 5,428,956 SHARES OUTSTANDING AFTER GIVING EFFECT
TO ISSUANCE OF SHARES UNDERLYING OPTIONS INCLUDED IN ROW (11)
- ----------------------------------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14.
CO
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Beneficial ownership is based on the provisions of the Voting Agreement
described in Item 7 herein, pursuant to which members of the Company's
management and certain other of the Company's stockholders have agreed with
the Reporting Persons (1) to vote all Shares set forth opposite such
Stockholder's name on Exhibit A to the Voting Agreement, together with any
Shares acquired by or issued to such Stockholder after the date of the Voting
Agreement (the "Subject Shares"), in favor of the adoption of the Merger
Agreement and against any action or agreement that would result in a breach of
any covenant, representation or warranty contained in the Merger Agreement or
could reasonably be expected to impede, interfere with, delay or postpone or
attempt to discourage the consummation of the Merger or any of the
transactions contemplated by the Merger Agreement and (2) to tender all
Subject Shares in the Offer (except for the Shares to be retained by the
members of the Company's management and exchanged for shares of Purchaser in
the Merger). Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Voting Agreement.
5
<PAGE> 6
SCHEDULE 14D-1
The item numbers and responses thereto below are in accordance with the
requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Kofax Image Products, Inc., a
Delaware corporation (the "Company"). The address of the Company's principal
executive offices is 16245 Laguna Canyon Road, Irvine, California 92618.
(b) This Statement relates to the offer by Imaging Components Corporation,
a Delaware corporation (the "Purchaser"), to purchase all the outstanding shares
of common stock, par value $.001 per share (the "Shares") of the Company at a
purchase price of $12.75 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated August 3, 1999 (the "Offer to Purchase") and the related Letter
of Transmittal (which, together with any supplements or amendments, collectively
constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2)
hereto, respectively. The information set forth in the Offer to Purchase under
"Introduction" is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section 5 ("The
Tender Offer -- Price Range of Shares; Dividends") is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by Purchaser, Imaging
Acquisition Corporation ("Merger Sub"), a Delaware corporation and a
wholly-owned subsidiary of Purchaser, DICOM GROUP PLC, a public limited company
formed under the laws of England and Wales ("DICOM"), and Dresdner Kleinwort
Benson Equity Partners LP, a Delaware limited partnership ("Private Equity
Partners") (collectively, the "Reporting Persons"). The information set forth in
the Offer to Purchase under "Introduction," in Section 7 ("The Tender
Offer -- Certain Information Concerning Purchaser, Merger Sub, DICOM, Private
Equity Partners and GSL") and in Schedule I to the Offer to Purchase is
incorporated herein by reference.
(e)-(f) During the last five years, none of the Reporting Persons nor, to
the best of their knowledge, any of the persons listed in Schedule I to the
Offer to Purchase (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) 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 further violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase in "Special
Factors -- Background of the Offer," in "Special Factors -- Purpose of the Offer
and the Merger; Plans for the Company," in "Special Factors -- Interests of
Certain Persons in the Offer and the Merger," and in "Special Factors -- The
Merger Agreement" is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in the Offer to Purchase in "Special
Factors -- Source and Amount of Funds" is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Offer to Purchase in "Special
Factors -- Purpose of the Offer; Plans for the Company," in "Special
Factors -- The Merger Agreement" and in Section 7 ("The Tender
6
<PAGE> 7
Offer -- Certain Information Concerning Purchaser, Merger Sub, DICOM, and
Private Equity Partners") is incorporated herein by reference.
(f)-(g) The information set forth in the Offer to Purchase in "Special
Factors -- Effect of the Offer on the Market for the Shares; Exchange Act
Registration; Margin Regulations" is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in "Special Factors -- Purpose of the Offer and the Merger;
Plans for the Company, in "Special Factors -- Interests of Certain Persons in
the Offer and the Merger," and in Schedule I to the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase under "Introduction," in
"Special Factors -- Background of the Offer," in "Special Factors -- Purpose of
the Offer and the Merger; Plans for the Company" and in Section 7 ("The Tender
Offer -- Certain Information Concerning the Purchaser, Merger Sub, DICOM and
Private Equity Partners") is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under "Introduction" and
in Section 11 ("Fees and Expenses") is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase in Section 7 ("Certain
Information Concerning Purchaser, Merger Sub, DICOM and Private Equity
Partners") is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Offer to Purchase in "Special Factors
- -- Purpose of the Offer and the Merger; Plans for the Company," in "Special
Factors -- Interests of Certain Persons in the Offer and the Merger", and in
"Special Factors -- the Merger Agreement" is incorporated herein by reference.
(b)-(c) The information set forth in the Offer to Purchase in Section 10
("Certain Legal Matters; Regulatory Approvals") is incorporated herein by
reference.
(d) The information set forth in the Offer to Purchase in "Special
Factors -- Effect of the Offer on the Market for the Shares; Exchange Act
Registration; Margin Regulations" is incorporated herein by reference.
(e) The information set forth in the Offer to Purchase in Section 10
("Certain Legal Matters; Regulatory Approvals") is incorporated herein by
reference.
(f) The information set forth in the Offer to Purchase, the related Letter
of Transmittal, the Agreement and Plan of Merger, dated as of July 27, 1999,
among Purchaser, Merger Sub and the Company, the Voting Agreement, dated as of
July 27, 1999 among Purchaser, Merger Sub, David S. Silver, Dean A. Hough,
Ronald J. Fikert, Richard M. Murphy, Kevin Drum, William Drobish, Alexander P.
Cliento, B. Allen Lay and Southern California Ventures, and the Letter
Agreement, dated as of July 27, 1999 among Purchaser, David S. Silver, Dean A.
Hough, Ronald J. Fikert, Richard M. Murphy and Kevin Drum, the copies of which
are filed as Exhibits (a)(1), (a)(2), (c)(1), (c)(2) and (c)(3) hereto,
respectively, is incorporated herein by reference in its entirety.
7
<PAGE> 8
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase, dated August 3, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Form of letter, dated August 3, 1999, to brokers, dealers,
commercial banks, trust companies and other nominees.
(a)(5) Form of letter to be used by brokers, dealers, commercial
banks, trust companies and nominees to their clients.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Text of press release issued by the Company on July 28,
1999.
(a)(8) Text of press release issued by the Equity Investors on
behalf of Purchaser on July 28, 1999.
(a)(9) Form of summary advertisement, dated August 3, 1999.
(b)(1) Senior Facilities Commitment Letter, dated July 27, 1999 to
DICOM and Private Equity Partners from Dresdner Kleinwort
Benson North America LLC and Dresdner Bank AG, New York and
Grand Cayman Branches.
(b)(2) Senior Subordinated Notes Commitment Letter, dated July 27,
1999 to DICOM and Private Equity Partners from Dresdner
Kleinwort Benson North America LLC and Dresdner Bank AG, New
York and Grand Cayman Branches.
(c)(1) Agreement and Plan of Merger, dated as of July 27, 1999,
among the Company, Purchaser and Merger Sub.
(c)(2) Voting Agreement, dated as of July 27, 1999 among Purchaser,
Merger Sub, David S. Silver, Dean A. Hough, Ronald J.
Fikert, Richard M. Murphy, Kevin Drum, William Drobish,
Alexander P. Cilento, B. Allen Lay and Southern California
Ventures.
(c)(3) Management Commitment Letter, dated as of July 27, 1999 from
David S. Silver, Dean A. Hough, Ronald J. Fikert, Richard M.
Murphy and Kevin Drum to Purchaser.
(c)(4) Letter Agreement, dated as of August 2, 1999 assigning to
Purchaser rights of Merger Sub in connection with the Offer.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
8
<PAGE> 9
SIGNATURE
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.
Dated: August 3, 1999
IMAGING COMPONENTS CORPORATION
By: /s/ ARNOLD VON BUREN
------------------------------------
Name: Arnold von Buren
Title: Secretary
IMAGING ACQUISITION CORPORATION
By: /s/ ARNOLD VON BUREN
------------------------------------
Name: Arnold von Buren
Title: Secretary
DICOM GROUP PLC
By: /s/ ARNOLD VON BUREN
------------------------------------
Name: Arnold von Buren
Title: Secretary
DRESDNER KLEIN BENSON PRIVATE
EQUITY PARTNERS LP
By: DRESDNER KLEIN BENSON PRIVATE
EQUITY LLC, its General Partner
By: /s/ ALEXANDER P. COLEMAN
------------------------------------
Alexander P. Coleman
Authorized Person
9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(a)(1) Offer to Purchase, dated August 3, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Form of letter, dated August 3, 1999, to brokers, dealers,
commercial banks, trust companies and other nominees.
(a)(5) Form of letter to be used by brokers, dealers, commercial
banks, trust companies and nominees to their clients.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Text of press release issued by the Company on July 28,
1999.
(a)(8) Text of press release issued by the Equity Investors on
behalf of Purchaser on July 28, 1999.
(a)(9) Form of summary advertisement, dated August 3, 1999.
(b)(1) Senior Facilities Commitment Letter, dated July 27, 1999 to
DICOM and Private Equity Partners from Dresdner Kleinwort
Benson North America LLC and Dresdner Bank AG, New York and
Grand Cayman Branches.
(b)(2) Senior Subordinated Notes Commitment Letter, dated July 27,
1999 to DICOM and Private Equity Partners from Dresdner
Kleinwort Benson North America LLC and Dresdner Bank AG, New
York and Grand Cayman Branches.
(c)(1) Agreement and Plan of Merger, dated as of July 27, 1999,
among the Company, Purchaser and Merger Sub.
(c)(2) Voting Agreement, dated as of July 27, 1999 among Purchaser,
Merger Sub, David S. Silver, Dean A. Hough, Ronald J.
Fikert, Richard M. Murphy, Kevin Drum, William Drobish,
Alexander P. Cilento, B. Allen Lay and Southern California
Ventures.
(c)(3) Management Commitment Letter, dated as of July 27, 1999 from
David S. Silver, Dean A. Hough, Ronald J. Fikert, Richard M.
Murphy and Kevin Drum to Purchaser.
(c)(4) Letter Agreement, dated as of August 2, 1999 assigning to
Purchaser rights of Merger Sub in connection with the Offer.
</TABLE>
