<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 2
TO
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 PRIVATE
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, ZG, SWITZERLAND
CH-6343
Rotkreuz, ZG, Switzerland
011-41-41798-3070
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
EUNU CHUN, ESQ.
M.Gilbey Strub, Esq.
KIRKLAND & ELLIS
CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NY 10022
(212) 446-4800
This Amendment No. 2 amends and supplements the Tender Offer Statement
on Schedule 14D-1 and Statement on Schedule 13D filed on August 3, 1999, as
amended, relating 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").
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Amended Offer to Purchase*
- --------
* Supersedes Offer to Purchase, dated August 3, 1999.
<PAGE> 2
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 27, 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
--------------------------
Name: Alexander P. Coleman
Title: Authorized Person
2
<PAGE> 3
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
(a)(1) Offer to Purchase*
- --------
* Supersedes Offer to Purchase dated August 3, 1999.
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
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"),
(II) THE RECEIPT BY PURCHASER AND MERGER SUB OF THE CASH PROCEEDS OF ITS EQUITY
AND DEBT FINANCING IN AN AMOUNT NECESSARY TO CONSUMMATE THE OFFER AND (III) 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 AFFILIATED AND UNAFFILIATED 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................................... 10
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..................................... 29
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
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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 AFFILIATED AND UNAFFILIATED 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"), (II) THE RECEIPT BY PURCHASER AND
MERGER SUB OF THE CASH PROCEEDS OF ITS EQUITY AND DEBT FINANCING IN AN AMOUNT
NECESSARY TO CONSUMMATE THE OFFER AND (III) THE SATISFACTION OF THE OTHER
CONDITIONS DESCRIBED IN "THE TENDER OFFER -- CERTAIN CONDITIONS OF THE OFFER."
5
<PAGE> 8
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 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
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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.
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 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.
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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 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.
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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 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 affiliated and unaffiliated
shareholders, (ii) approved the Merger Agreement and the transactions
contemplated
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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 affiliated and unaffiliated 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
unaffiliated 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 to the
Company's unaffiliated shareholders 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. Purchaser, Merger Sub, DICOM and Private Equity Partners believe that
the Offer and the Merger are procedurally fair despite the absence of procedural
safeguards such as the appointment of a special committee or the retention of an
unaffiliated representative to negotiate the terms of the Merger Agreement
because of the engagement of the Financial Advisor, the fact that the Company
Board was comprised of a majority of persons not interested in the Offer and the
Merger, and the fact that the disinterested members of the Company Board were
aware of the interests of certain members of management in the proposed
transaction. Furthermore, Purchaser, Merger Sub, DICOM and Private Equity
Partners have considered the analyses and findings of the Company Board referred
to above under "Special Factors -- Recommendation of the Board of Directors;
Fairness of Offer and the Merger" with respect to the fairness of the Offer and
the Merger to the Company's unaffiliated shareholders. Each of Purchaser, Merger
Sub, DICOM and Private Equity Partners adopts the analysis and the findings of
the Company Board with respect to the fairness of the Offer and the Merger. 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
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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 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
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deems appropriate under the circumstances then existing. Purchaser intends to
seek additional information 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 (b) against any action or agreement that would result
in a breach of any covenant, representation or warranty
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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).
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
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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, 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
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held by the Company. Purchaser and Merger Sub currently anticipate that the
Company will repay the amounts due under the Senior Subordinated Notes from
cashflow. It is currently expected that the Credit Facilities will be executed
and delivered by the currently scheduled Expiration Date. It is also currently
expected that the condition that Purchaser and Merger Sub receive the financing
necessary to consummate the Offer will be satisfied by the currently scheduled
Expiration Date.
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 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.
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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 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.
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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;
(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
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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,
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
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<PAGE> 25
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.
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
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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 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
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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.
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.
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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 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,
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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 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
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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.
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
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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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(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 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,
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<PAGE> 41
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 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,
39
<PAGE> 42
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"), (iii) the
receipt by Purchaser and Merger Sub of the cash proceeds of its equity and debt
financing in an amount necessary to consummate the Offer or (iv) 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
"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
40
<PAGE> 43
the Merger Agreement 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. 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 the Merger
Agreement.
(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 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.
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<PAGE> 44
(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. 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
the Merger Agreement.
(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.
All conditions of the Offer must be satisfied or waived prior to the
Expiration Date, provided, however, that the Expiration Date may be extended in
accordance with the Merger Agreement. If an event occurs which requires a
determination of whether or not one or more of the conditions set forth above in
paragraphs (i), (j) and (k) have been satisfied, Purchaser will promptly make
such a determination. At such time, Purchaser will extend the Expiration Date if
Purchaser determines that it may do so under the Merger Agreement and that
satisfaction of the condition or conditions in question is forthcoming.
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
42
<PAGE> 45
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 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.
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
44
<PAGE> 47
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.
4. George N. Fugelsang........................ Mr. Fugelsang is expected to be a
c/o Dresdner Kleinwort Benson non-executive member of the Board of
Directors of Purchaser
</TABLE>
I-1
<PAGE> 48
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------- -------------------------------------------
<S> <C> <C>
Private Equity LLC and Merger Sub. He joined Dresdner Bank AG
75 Wall Street, 24th Floor in February of 1994, at which time he was
New York, New York 10005-2889 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> 49
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> 50
<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> 51
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> 52
<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> 53
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> 54
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
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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> 55
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
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(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
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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
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<PAGE> 57
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.
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<PAGE> 58
(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".
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<PAGE> 59
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
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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
