<PAGE> 1
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for the use of the Commission only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
KOFAX IMAGE PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (check the appropriate box)
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transactions applies:
Common Stock, par value $0.001 per share
------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
1,444,102*
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$12.75*
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$18,412,300.50*
------------------------------------------------------------------------
(5) Total fee paid:
$3,682.46*
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
$14,201.73
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
Schedule 14D-1
------------------------------------------------------------------------
(3) Filing party:
Imaging Components Corporation, Imaging Acquisition Corporation, DICOM
GROUP plc, Dresdner Kleinwort Benson Private Equity Partners LP
------------------------------------------------------------------------
(4) Date filed:
August 3, 1999
------------------------------------------------------------------------
- ---------------
* The sum of the number of Shares outstanding that would receive the cash
payment in the merger that is the subject of this Information Statement plus
the number of Shares reserved for issuance under the Company's option and
stock purchase plans. The unit price is based on the per share cash payment to
be made to the holders of Shares pursuant to the Merger. The aggregate value
of the transaction equals the $12.75 per share price multiplied by the
aggregate number of securities. Based upon such value, the fee due upon the
filing of the preliminary information statement is $3,682.46, which amount is
completely offset by the $14,201.73 fee previously paid in connection with the
filing of the Schedule 14D-1 by Imaging Components Corporation, Imaging
Acquisition Corporation, DICOM GROUP plc and Dresdner Kleinwort Benson Private
Equity Partners, LP. in connection with the first step of the transaction of
which the Merger is a part.
<PAGE> 2
[Kofax Logo] KOFAX IMAGE PRODUCTS
16245 LAGUNA CANYON RD.
IRVINE, CA 92618-3603
PHONE: 949-727-1733
FAX: 949-727-3144
HTTP://WWW.KOFAX.COM
September 24, 1999
Dear Stockholder:
The attached Notice of Special Meeting of Stockholders and Information
Statement are being furnished to you in connection with a special meeting of
shareholders of Kofax Image Products, Inc. (the "Company"), which will be held
on October 15, 1999, at the Company's headquarters at 16245 Laguna Canyon Road,
Irvine, California, commencing at 10:00 a.m. local time.
We are holding this meeting to obtain shareholder approval of a merger
agreement dated July 27, 1999, as amended, between the Company, Imaging
Components Corporation ("Purchaser") and Purchaser's wholly-owned Subsidiary,
Imaging Acquisition Corporation ("Merger Sub"). As a result of the merger, each
of your shares of the Company's common stock (the "Shares") will be exchanged
for $12.75 in cash, and the Company will become a wholly owned subsidiary of
Purchaser. The merger is the second and final step of the acquisition of the
Company by Purchaser. The first step was a tender offer for the Company's
outstanding Shares at $12.75 per Share in cash. Purchaser acquired 4,414,409
Shares pursuant to the tender offer, which expired at 12:00 midnight, New York
City time, on September 8, 1999.
Purchaser currently beneficially owns approximately 84% of the outstanding
Shares. Because Purchaser will vote all the Shares it beneficially owns in favor
of the merger agreement and the merger, approval is assured and we are not
soliciting your proxy.
After the merger is completed, you will receive instructions regarding the
surrender of your Share certificates in exchange for the merger consideration.
Sincerely,
/s/ David S. Silver
David S. Silver
Chief Executive Officer
<PAGE> 3
KOFAX IMAGE PRODUCTS, INC.
16245 LAGUNA CANYON ROAD
IRVINE, CA 92618-3603
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 15, 1999
To the Stockholders of
Kofax Image Products, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of Kofax
Image Products, Inc., a Delaware corporation (the "Company"), will be held on
October 15, 1999 at the Company's headquarters at 16245 Laguna Canyon Road,
Irvine, California, commencing at 10:00 a.m. local time, for the following
purpose:
(1) To consider and vote on a proposal to approve and adopt an Agreement
and Plan of Merger and the merger of the Company with a subsidiary of
Imaging Components Corporation; and
(2) To transact such other business as may properly come before the meeting
or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on September 23,
1999 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the meeting and at any adjournment(s) thereof.
By Order of the Board of Directors,
/s/ David S. Silver
David S. Silver
Chief Executive Officer
Dated: September 24, 1999
<PAGE> 4
KOFAX IMAGE PRODUCTS, INC.
16245 LAGUNA CANYON ROAD
IRVINE, CA 92618-3603
INFORMATION STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 15, 1999
------------------------
This Information Statement is being furnished to holders of shares of
common stock (the "Shares") of Kofax Image Products, Inc. (the "Company") in
connection with a Special Meeting of Stockholders to be held on October 15,
1999, at the Company's headquarters at 16245 Laguna Canyon Road, Irvine,
California, commencing at 10:00 a.m. local time. At the Special Meeting,
shareholders will consider and vote on a proposal to approve and adopt an
Agreement and Plan of Merger dated as of July 27, 1999 (the "Merger Agreement"),
as amended, between the Company, Imaging Components Corporation ("Purchaser")
and Purchaser's wholly owned subsidiary Imaging Acquisition Corporation ("Merger
Sub"), providing for, among other things, the merger (the "Merger") of Merger
Sub into the Company. As a result of the Merger, you will receive $12.75 in cash
for each Share you own, and the Company will become a wholly owned subsidiary of
Purchaser.
The Merger is the second and final step of the acquisition of the Company
by Purchaser pursuant to the Merger Agreement. The first step was a tender offer
(the "Offer") commenced by Purchaser on August 3, 1999 for all of the
outstanding Shares at a purchase price of $12.75 per Share, net to the seller in
cash. Pursuant to the Offer, which expired at 12:00 midnight, New York City
time, on September 8, 1999, Purchaser accepted for payment 4,414,409 Shares.
Purchaser currently beneficially owns approximately 84% of the outstanding
Shares. Because Purchaser will vote all Shares it beneficially owns in favor of
the Merger Agreement and the Merger, approval is assured, and the Company's
board of directors (the "Company Board") is not soliciting your proxy.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
This Information Statement is being first mailed to shareholders on September
24, 1999.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
INFORMATION STATEMENT SUMMARY............................... 1
The Parties............................................... 1
The Special Meeting....................................... 2
The Merger................................................ 2
Recommendation of the Company Board; Opinion of Financial
Advisor................................................ 3
Financial Information..................................... 3
Price Range of Shares; Dividends.......................... 4
THE SPECIAL MEETING......................................... 6
THE MERGER.................................................. 6
Background of the Merger.................................. 7
Recommendation of the Company Board....................... 10
Opinion of the Financial Advisor.......................... 11
Procedures for Exchange of Certificates................... 14
Appraisal Rights.......................................... 15
Interests of Certain Persons in the Offer and Merger...... 17
Accounting Treatment...................................... 19
United States Federal Income Tax Consequences............. 19
Regulatory Approvals...................................... 19
Certain Litigation........................................ 20
Source and Amount of Funds................................ 20
THE MERGER AGREEMENT........................................ 20
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANY............................................... 31
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 31
WHERE YOU CAN FIND MORE INFORMATION......................... 32
INCORPORATION OF DOCUMENTS BY REFERENCE..................... 32
FORWARD-LOOKING STATEMENTS AND INFORMATION.................. 33
</TABLE>
ANNEXES
<TABLE>
<S> <C> <C>
Annex A -- Agreement and Plan of Merger dated as of July 27, 1999
Annex B -- Amendment to Agreement and Plan of Merger dated September 9,
1999
Annex C -- Opinion of C.E. Unterberg, Towbin
Annex D -- Text of Section 262 of the Delaware General Corporation Law
Annex E -- Voting Agreement
</TABLE>
i
<PAGE> 6
INFORMATION STATEMENT SUMMARY
THE PARTIES.
KOFAX IMAGE PRODUCTS, INC. The Company is a leading supplier of both
application software and image processing products for the imaging, workflow and
document management 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 specializes in the document and data capture
and document storage product segments of the market. 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.
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 owned by DICOM GROUP plc ("DICOM"), Dresdner
Kleinwort Benson Private Equity Partners LP and its affiliates ("Private Equity
Partners"), Green Shoots Ltd. ("GSL") and/or affiliates thereof and David S.
Silver, Dean A. Hough, Ronald J. Fikert, Richard M. Murphy, Kevin Drum, Roland
Borrey, Donald M. Field, Anthony Macciola and Ray Couchman (the "Management
Group"). Pursuant to the terms and conditions of the Stockholders Agreement
dated as of September 10, 1999, by and among the Stockholders of Purchaser,
DICOM has the option to acquire all of the outstanding shares of Purchaser held
by Private Equity Partners and GSL for the period of 18 months from the closing
of the Offer.
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 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 U.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 Private Equity Partners LLC, a Delaware
limited liability company ("Private Equity LLC"), has its principal offices
located at 75 Wall Street, 24th Floor, New York, New York 10005. Its single
limited partner is an affiliate of Dresdner Bank AG, which is a corporation
organized under the laws of Germany and is one of Europe's largest universal
banks with approximately $467 billion in assets and $229 billion in funds under
management as of June 30, 1999. Neither Private Equity Partners nor Private
Equity LLC is subject to the periodic reporting requirements of the Exchange Act
and they 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.
SURVIVING CORPORATION. The Company will be the surviving corporation in
the Merger (the "Surviving Corporation"). Pursuant to the Merger Agreement, the
directors of Merger Sub will be the directors of the Surviving Corporation, and
the officers of Merger Sub will be the officers of the Surviving Corporation.
1
<PAGE> 7
THE SPECIAL MEETING.
PLACE, DATE AND TIME. The Special Meeting will be held on October 15, 1999
at the Company's headquarters at 16245 Laguna Canyon Rd., Irvine, California,
commencing at 10:00 a.m. local time.
PURPOSE OF THE SPECIAL MEETING. The purpose of the Special Meeting is to
consider and vote on:
- a proposal to approve and adopt the Merger Agreement and the Merger
- any other business that properly comes before the Special Meeting
RECORD DATE, SHARES ENTITLED TO VOTE. Holders of record of Shares at the
close of business on September 23, 1999 (the "Record Date") are entitled to
notice of and to vote at the Special Meeting. On the Record Date, there were
5,254,206 Shares outstanding, each of which will be entitled to one vote at the
Special Meeting.
QUORUM. A majority of the voting power of the outstanding Shares present
in person or by proxy will constitute a quorum at the Special Meeting.
VOTE REQUIRED. The approval and adoption of the Merger Agreement and the
Merger will require the affirmative vote of the holders of a majority of the
outstanding Shares. Accordingly, abstentions and broker "non-votes" will have
the effect of a vote against these proposals. The term broker "non-votes" refers
to shares held by brokers and other nominees or fiduciaries that are present at
the Special Meeting but are not voted on a particular matter because those
persons are precluded from exercising their voting authority because of the
matter's "non-routine" nature.
APPROVAL ASSURED. As of the Record Date, Purchaser, directly or
indirectly, owned approximately 84% of the Shares. Therefore, Purchaser has
sufficient voting power to constitute a quorum and to approve all matters to be
considered at the Special Meeting, regardless of the vote of any other
shareholder. Purchaser will vote all Shares it beneficially owns in favor of the
approval and adoption of the Merger Agreement and the Merger. As a result, the
Merger Agreement and the Merger will be approved and adopted at the Special
Meeting even if no shareholder other than Purchaser votes in favor of these
proposals.
THE MERGER.
EFFECT OF THE MERGER; EFFECTIVE TIME. The Merger will become effective at
the time the Merger Agreement and an agreement or certificate of merger are
filed with the Secretary of State of the State of Delaware (the "Effective
Time"). At the Effective Time, pursuant to the Merger Agreement, the Company
will become a wholly owned subsidiary of Purchaser and each issued and
outstanding Share (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 Shares retained by members of the
Management Group and certain of the Company's shareholders as set forth on
Schedule 2.8 to the Merger Agreement (the "Retained Shares"), and (iv) Shares
held by shareholders who have demanded and perfected, and have not withdrawn or
otherwise lost, appraisal rights, if any, under the Delaware General
Corporations Law (the "DGCL")) will be canceled and converted automatically into
the right to receive $12.75 in cash, without interest (the "Merger
Consideration"). Promptly after the Effective Time, Purchaser or IBJ Whitehall
Bank & Trust Company as the exchange agent (the "Exchange Agent") will send to
shareholders a letter of transmittal containing instructions for the surrender
of certificates previously representing Shares. In order to receive the payment
to which you are entitled, you must surrender your Share certificate(s) together
with a duly executed and properly completed letter of transmittal (and any other
documents that may be required) to the Exchange Agent. Do not send your Share
certificates at this time; wait for instructions from Purchaser or the Exchange
Agent following the Effective Time. Following the Effective Time, the holders of
Shares prior to the Effective Time will cease to have ownership interests in the
Company or rights as shareholders.
APPRAISAL RIGHTS. Stockholders of the Company 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. See "The Merger -- Appraisal
Rights."
2
<PAGE> 8
U.S. TAX TREATMENT. Your receipt of cash in exchange for your Shares
pursuant to the Merger will be a taxable transaction for United States federal
income tax purposes and may also be taxable under state, local or other tax
laws. You should consult with your tax advisor regarding the tax treatment of
any gain or loss on your Shares.
ACCOUNTING TREATMENT. The Merger will be treated as a purchase for
accounting purposes.
RECOMMENDATION OF THE COMPANY BOARD; OPINION OF FINANCIAL ADVISOR.
RECOMMENDATION OF THE COMPANY BOARD. The Company Board, after a full
discussion determined that the terms of the Offer and Merger are fair to and in
the best interests of the Company's affiliated and unaffiliated shareholders,
approved the Merger Agreement and determined to recommend that the shareholders
of the Company tender their Shares pursuant to the Offer and approve the Merger
Agreement and the transactions contemplated thereby at the Special Meeting.
OPINION OF FINANCIAL ADVISOR. C.E. Unterberg, Towbin (the "Financial
Advisor") was retained by the Company Board to deliver a fairness opinion. The
Financial Advisor delivered its written opinion dated July 27, 1999 to the
effect that, as of that date, the consideration to be received for the Shares in
the Offer and Merger is fair, from a financial point of view, to the holders of
the Shares. A copy of the Financial Advisor's opinion is attached to this
Information Statement as Annex C and should be read in its entirety.
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 Annual Report to its stockholders for the fiscal year ended June 30,
1998 (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. See "Where You Can Find More Information."
3
<PAGE> 9
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>
PRICE RANGE OF SHARES; DIVIDENDS.
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.
4
<PAGE> 10
<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 September 15, 1999)................ 9 3/8 12 3/4
</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. As of September 15, 1999, there were
approximately 55 holders of record of the Shares. Stockholders are urged to
obtain a current market quotation for the Shares.
------------------------
The preceding summary highlights some information from this Information
Statement but may not contain all the information that is important to you.
Please read the entire Information Statement and the annexes, as well as the
information we have incorporated by reference.
5
<PAGE> 11
THE SPECIAL MEETING
PLACE, DATE AND TIME. The Special Meeting will be held on October 15, 1999
at the Company's headquarters at 16245 Laguna Canyon Rd., Irvine, California,
commencing at 10:00 a.m. local time.
PURPOSE OF THE SPECIAL MEETING. The purpose of the Special Meeting is to
consider and vote on:
- a proposal to approve and adopt the Merger Agreement and the Merger
- any other business that properly comes before the Special Meeting
RECORD DATE, SHARES ENTITLED TO VOTE. Holders of record of Shares at the
close of business on September 23, 1999 (the "Record Date") are entitled to
notice of and to vote at the Special Meeting. On the Record Date, there were
5,254,206 Shares outstanding, each of which will be entitled to one vote at the
Special Meeting.
QUORUM. A majority of the voting power of the outstanding Shares present
in person or by proxy will constitute a quorum at the Special Meeting.
VOTE REQUIRED. The approval and adoption of the Merger Agreement and the
Merger will require the affirmative vote of the holders of a majority of the
outstanding Shares. Accordingly, abstentions and broker "non-votes" will have
the effect of a vote against these proposals. The term broker "non-votes" refers
to shares held by brokers and other nominees or fiduciaries that are present at
the Special Meeting but are not voted on a particular matter because those
persons are precluded from exercising their voting authority because of the
matter's "non-routine" nature.
APPROVAL ASSURED. As of the Record Date, Purchaser, directly or
indirectly, owned approximately 84% of the Shares. Therefore, Purchaser has
sufficient voting power to constitute a quorum and to approve all matters to be
considered at the Special Meeting, regardless of the vote of any other
shareholder. Purchaser will vote all Shares it beneficially owns in favor of the
approval and adoption of the Merger Agreement and the Merger. As a result, the
Merger Agreement and the Merger will be approved and adopted at the Special
Meeting even if no shareholder other than Purchaser votes in favor of these
proposals.
THE MERGER
On July 27, 1999, the Company, Purchaser and Merger Sub entered into the
Merger Agreement. Pursuant to the Merger Agreement, Purchaser commenced the
Offer to purchase all outstanding Shares at a price of $12.75 per Share, net to
the seller in cash (the "Offer Price"). The Offer expired at 12:00 midnight, New
York City time, on September 8, 1999, and Purchaser accepted for payment
4,414,409 Shares tendered in the Offer. The Merger Agreement provides that as
promptly as practicable after the purchase of Shares pursuant to the Offer and
the satisfaction (or waiver, to the extent permissible under the Merger
Agreement) of the conditions to the Merger, Merger Sub shall, in accordance with
the DGCL, be merged into the Company, whereupon the separate existence of the
Merger Sub shall cease, and the Company shall continue as the Surviving
Corporation. Pursuant to the Merger, each Share outstanding immediately prior to
the Effective Time of the Merger (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 Shares retained by members of
the Management Group and certain of the Company's shareholders as set forth on
Schedule 2.8 to the Merger Agreement (the "Retained Shares"), and (iv) Shares
held by shareholders who have demanded and perfected, and have not withdrawn or
otherwise lost, appraisal rights, if any, under the DGCL)) will be canceled and
converted automatically into the right to receive $12.75 in cash, without
interest (the "Merger Consideration")). The Merger Agreement is more fully
described in "The Merger Agreement." DICOM, Private Equity Partners, GSL and the
Management Group are referred to herein as the "Equity Investors."
6
<PAGE> 12
BACKGROUND OF THE MERGER.
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.
7
<PAGE> 13
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.
8
<PAGE> 14
During the period from June 30, 1999 to July 27, 1999, DICOM, Private
Equity Partners and DrKB Global Finance, with assistance from DrKB Corporate
Finance, Kirkland & Ellis and Arthur Andersen LLP, performed customary due
diligence, including meetings and discussions with the Company.
On July 14, 1999, the Purchaser's legal counsel delivered a draft of the
Merger Agreement to the Company's counsel. During the period from July 14, 1999
to July 21, 1999, representatives for the Purchaser and the Company, and their
legal counsel, continued negotiations regarding the terms and conditions of the
Offer and the Merger. During such time, representatives of the Company also
discussed certain financial terms of the Offer and the Merger with the Financial
Advisor.
On July 19, Private Equity Partners met with its internal Commitment
Committee and received approval, subject to satisfactory resolution of the terms
and conditions of the Offer and Merger to commit equity financing in Purchaser
of up to $16 million.
At a meeting of the Company Board on July 21, 1999, the Company Board
reviewed the Merger Agreement and the terms and conditions of the Offer and the
Merger. During this meeting, the Company Board reviewed certain financial terms
of the Offer and the Merger with the Company's Financial Advisor and reviewed
the Merger Agreement and legal aspects of the proposed transactions with the
Company's counsel. During the meeting, the Company Board expressed its
satisfaction with the proposed transaction, subject to the resolution of certain
issues to the Company Board's satisfaction and, at the conclusion of the
meeting, the Company Board requested additional information from management
concerning the nature of financing commitments received by Purchaser and the
termination fee and expense provisions of the Merger Agreement. From the
afternoon of July 21, 1999 to July 26, 1999, legal counsel for the parties
continued negotiations concerning those issues and other provisions of the
Merger Agreement.
On July 22, 1999, after the Company Board reviewed the terms of the Merger
Agreement and outlined the remaining issues to be negotiated, legal counsel for
the Purchaser provided the Management Group with drafts of various documents
relating to their equity participation in the Purchaser. From July 23, 1999 to
July 26, 1999, members of 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 (the "Board Meeting") 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, members of 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.
9
<PAGE> 15
On August 3, 1999, Purchaser commenced the Offer, which expired at 12:00
midnight, New York City time, on September 8, 1999. On September 9, 1999,
Purchaser announced that it had accepted for payment and would promptly pay for
all Shares validly tendered pursuant to the Offer. Purchaser has subsequently
paid for such Shares.
RECOMMENDATION OF THE COMPANY BOARD.
In reaching its determination referred to above the Company Board
considered a number of factors, including the following:
(i) the terms and conditions of the Offer and the proposed Merger
Agreement, including the amount and form of consideration being offered to
the Company's stockholders;
(ii) the $12.75 per Share tender offer price represents a premium of
approximately 31% over the closing sale price per share on the NASDAQ
National Market ("Nasdaq") on July 23, 1999, the last trading day prior to
the Board Meeting;
(iii) historical market prices and trading volume of the Shares,
including that the trading price of the Shares has not traded above the
$12.75 per Share tender offer price since the Shares have become publicly
traded, and historical and projected earnings;
(iv) market prices and financial data related to companies engaged in
similar businesses to the Company and prices and premiums paid in recent
acquisitions (both friendly and hostile) of other similar companies;
(v) the Company's historical and recent operating results, its
financial condition, its borrowing and financing capacity and the Company
Board's and management's evaluation of the Company's properties, assets and
prospects;
(vi) the absence of any term or condition which in the Company Board's
view was unduly onerous or could materially impair the consummation of the
Offer or the Merger;
(vii) the ability of the Purchaser to complete the Offer and the
Merger in a timely manner;
(viii) the fact that the Merger Agreement, if approved and executed,
would not preclude the Company from (A) providing information (subject to a
confidentiality agreement) to, or participating in discussions and
negotiating with, a person from whom the Company Board receives a bona fide
unsolicited takeover proposal if the Company Board determines in good faith
(after consulting and receiving advice from the Company's independent
financial advisor and independent legal counsel) that such proposal is more
favorable from a financial point of view to holders of Shares and the
Company Board 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
stockholders under applicable law (provided that no such proposal shall be
deemed superior if any financing required is not committed and such
commitment is not likely to be obtained within a reasonable period of time,
or (B) after providing information to and negotiating with such party,
terminating the Merger Agreement (subject to payment of a $1,500,000
termination fee and reimbursement of expenses of up to $1,750,000, to
Purchaser);
(ix) the Company Board's view of the number of possible third parties
who would be likely to have an interest in acquiring the Company and the
likelihood that such parties would approach the Company in the event they
were to have such interest;
(x) the provision of the Merger Agreement which provides that the
Company would be entitled to reimbursement from Purchaser or DICOM of the
Company's documented reasonable expenses of up to $400,000 if the Purchaser
terminates the Merger Agreement as a result of the failure of the financing
condition or if the Company terminates the Merger Agreement prior to the
purchase of Shares pursuant to the Offer upon a breach of the Merger
Agreement by Purchaser or Merger Sub;
10
<PAGE> 16
(xi) the provision of the Merger Agreement which provides that
Purchaser could under certain circumstances be entitled to a termination
fee of $1,500,000 and to reimbursement of certain expenses of up to
$1,750,000 in the event of any third party business combination occurring
within 270 days after the termination of the Merger Agreement;
(xii) the fact that the obligation of Purchaser to consummate the
Offer is subject to receipt of financing and to the tender of at least more
than 50% of the then outstanding Shares (on a fully-diluted basis) pursuant
to the Offer (which cannot be waived without the consent of the Company);
(xiii) the nature of the financing commitments received by or for
Purchaser and Merger Sub with respect to the Offer and the Merger,
including the institutions providing such commitments and the conditions to
the obligations of such institutions to fund such commitments;
(xiv) the possible conflict of interest of certain executive officers
of the Company, who are also directors of the Company, with respect to the
Offer and the Merger because of their expected participation (including
possibly as investors) in the Company following such transactions; and
(xv) the opinion of C.E. Unterberg, Towbin, after reviewing with the
Company Board many of the factors referred to above and other financial
criteria used to evaluate acquisition proposals, that the $12.75 per Share
to be paid for each Share in the Offer and the Merger is fair from a
financial point of view to the stockholders of the Company, which opinion
C. E. Unterberg, Towbin confirmed in a written opinion dated July 27, 1999.
The Company Board considered the factors listed in (i) through (x), (xiii)
and (xv) to be generally favorable, and the factors listed in (xi), (xii) and
(xiv) to be generally unfavorable to its determination to recommend that
stockholders tender their Shares pursuant to the Offer and approve and adopt the
Merger Agreement. In view of the variety and nature of the factors considered by
the Company Board, the Company Board did not find it practicable to assign
relative weights to the specific factors considered in reaching its
determination. Rather, the Company Board viewed its position and recommendations
as being based on the totality of the information presented to and considered by
it. In addition, it is possible that different members of the Company Board
assigned different weights to the various factors described above. Because of
the engagement of Unterberg, 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, the Company Board
believes that the Offer and the Merger are procedurally fair despite the absence
of procedural safeguards such as the appointment of a special committee or
retention of an unaffiliated representative to negotiate the terms of the Merger
Agreement on behalf of the public stockholders.
The purpose of the Offer and the Merger is for Purchaser to acquire
ownership of all of the outstanding shares of the Company in a transaction that
maximizes the long-term value of the Company's stock. Upon consummation of the
Merger, the Company will become a wholly owned subsidiary of the Purchaser.
Prior to reaching its decision to pursue a two-step acquisition of the Company,
consisting of the Offer first and the Merger second, the Company Board
considered a one-step merger transaction with the Purchaser. The primary benefit
of the two-step structure is the potential to consummate the acquisition of the
Company in a short time period at potentially less costs than a one-step merger
transaction. The Company Board also considered other strategic alternatives,
such as transactions with other acquisition candidates, restructuring the
Company and continuing existing operations and ownership structure, none of
which was more beneficial to the stockholders of the Company, in the Company
Board's determination, than the Offer and the Merger.
OPINION OF THE FINANCIAL ADVISOR.
On July 21, 1999, the Financial Advisor discussed and reviewed at a meeting
of the Company's Board of Directors its opinion to the effect that, based upon
and subject to the considerations described in such opinion, as of the date
thereof, the $12.75 cash per share consideration to be received by the holders
of the Company's Common Stock in the Offer and Merger is fair to such holders
from a financial point of view. This opinion was
11
<PAGE> 17
delivered orally at the July 21, 1999 meeting of the Company Board and confirmed
in writing on July 27, 1999. The Financial Advisor does not have any obligation
to confirm or update its opinion.
The Financial Advisor, as part of its investment banking activities, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Financial Advisor was selected
by the Company to deliver a fairness opinion on this transaction based on the
Financial Advisor's experience as a financial advisor in mergers and
acquisitions as well as the Financial Advisor's investment banking relationship
and familiarity with the Company. The Financial Advisor believes that its
analyses must be considered as a whole and that selecting portions of its
analyses, without considering all factors and analyses, could create an
incomplete view of the processes underlying its analyses and opinion. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analyses or summary description.
In rendering its opinion, the Financial Advisor did not make or seek to
obtain appraisals of the Company's assets in connection with its analyses of the
Offer. In addition, the Financial Advisor was not requested to and did not
solicit third parties who might be interested in acquiring all or any part of
the Company in connection with its investigation. In its analyses, the Financial
Advisor made some assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond the
Company's control. Any such estimate is not necessarily indicative of actual
values, which may be more or less favorable than as set forth therein. Estimates
of company values do not purport to be appraisals or necessarily reflect the
prices at which companies may actually be sold. Because such estimates are
inherently subject to uncertainty, neither the Company nor the Financial Advisor
assumes responsibility for their accuracy. In rendering its opinion, the
Financial Advisor, among other things: (a) reviewed a draft of the Merger
Agreement; (b) reviewed publicly available financial information with respect to
the business operations of the Company including, but not limited to, audited
financial statements of the Company for the fiscal years ended June 30, 1996,
1997 and 1998, unaudited interim financial statements of the Company for the
quarters ended September 30, 1998, December 31, 1998 and March 31, 1999, and
unaudited financial statements of the Company for the fiscal year ended June 30,
1999; (c) held discussions with representatives of Purchaser to determine its
ability to secure financing necessary to effect the Offer and the Merger; (d)
reviewed certain internal financial and operating information relating to the
Company (including financial projections) prepared by management of the Company;
(e) held discussions with certain members of the Company's senior management
concerning the Company's past and current operations, financial condition and
business prospects and the potential financial effect of the transactions
contemplated by the Merger Agreement if the Offer and the Merger were
consummated; (f) reviewed a comparison of operating results and other financial
information of the Company with other companies that the Financial Advisor
deemed appropriate; (g) reviewed the historical market prices and reported
trading activity of the Company's Common Stock; (h) compared the financial terms
of the Offer and the Merger and the premium paid over the Company's current,
historical and average stock price with the financial terms and premiums paid in
certain other merger, acquisition and business combination transactions which
the Financial Advisor deemed appropriate; (i) considered such other information,
financial studies and analyses as the Financial Advisor deemed relevant; and (j)
performed such analyses, studies and investigations as the Financial Advisor
deemed relevant. In arriving at its fairness opinion, the Financial Advisor did
not ascribe a specific range of value to the Company or the Shares, but made its
determination as to the fairness, from a financial point of view, of the
consideration to be received by the holders of the Company's Common Stock in the
Offer and the Merger on the basis of the financial and comparative analyses
described below.
In rendering its opinion to the Company Board, the Financial Advisor
performed and presented certain financial and comparative analyses, with such
other factors as it deemed relevant, including, among other things:
(i) Market Trading Analyses. The Financial Advisor summarized their
analysis of recent trends in the prices and trading volume of the Shares,
including data with respect to (a) relative price performance of the
Company's stock from October 13, 1997 (the date of the Company's initial
public offering) to July 20, 1999 (the day before delivery of the fairness
opinion to the Company Board), compared to the
12
<PAGE> 18
average daily value of the NASDAQ Composite Index, the Standard & Poor's
500 Industrial Index and an imaging industry index during the same period
and (b) the volume of Shares traded in ranges between $5.00 and $11.99
during the same period. The Financial Advisor concluded that (a) the Shares
had never traded above $11.75, (b) that, while the trading prices of the
Shares has outperformed the Company's industry group average, the trading
prices of the Shares since July 1998 have generally lagged behind the
average growth in the NASDAQ Composite Index and the Standard & Poor's 500
Industrial Index, and (c) $12.75 per Share represented a 34.2% premium over
the closing sales price of the Shares on NASDAQ on July 20, 1999, the last
trading day prior to the Company Board's July 21, 1999 meeting, a premium
of 32.5% over the closing sales price of the Shares on NASDAQ one week
prior to July 21, 1999, a premium of 37.8% over the closing sales price of
the Shares on NASDAQ 30 trading days prior to July 21, 1999, a premium of
33.3% over the closing sales price of the Shares on NASDAQ 90 trading days
prior to July 21, 1999, a premium of 72.9% over the closing sales price of
the Shares on NASDAQ one year prior to July 21, 1999, a premium of 34.8%
over the average closing sales price of the Shares on NASDAQ for the 30
trading days prior to July 21, 1999, a premium of 39.3% over the average
closing sales price of the Shares on NASDAQ for the 90 trading days prior
to July 21, 1999, and a premium of 57.6% over the average closing sales
price of the Shares on NASDAQ over year prior to July 21, 1999. The
Financial Advisor regarded these conclusions as favorable to its opinion as
to the fairness of the consideration to be received in the Offer and the
Merger.
(ii) Comparable Company Analysis. The Financial Advisor compared
certain Company selected historical and projected operating information,
stock market data and financial ratios to the selected historical and
projected operating information, stock market data and financial ratios for
a group of companies in the Company's industry group including Caere
Corporation, Document Sciences Corporation, Document Technologies, Inc.,
Documentum, FileNET Corporation, Inc., Input Software, Inc., LanVision
Systems, Inc., Optika Imaging Systems, Inc., ScanSoft, Inc. and Xionics.
The Financial Advisor performed this analysis to determine if the Company's
stock price and financial performance was consistent with the comparable
industry group. Such data and ratios include multiples of net market value
(defined as market value of equity adjusted by adding debt and subtracting
cash and short-term investments) to historical and projected revenues,
multiples of market value to historical and projected earnings per share
and multiples of market value to book value. An analysis of the multiples
of net market value to the last twelve months of revenue yielded a range of
multiples from 0.6 times to 1.5 times revenues with a median multiples of
1.2 times revenues, compared to a multiple of 1.3 times for the Company in
this transaction. An analysis of the multiples of net market value to the
projected calendar year 1999 revenues yielded a range of multiples from 0.5
times to 5.2 times revenues with a median multiple of 1.1 times revenues,
compared to a multiple of 1.2 times for the Company in this transaction. An
analysis of the multiples of current stock price to the last twelve months
of earnings per share yielded a range of multiples from 11.9 times to 238.0
times earnings with a median multiple of 20.7 times earnings, compared to a
multiple of 14.7 times for the Company in this transaction. An analysis of
the multiples of current stock price to projected calendar 1999 earnings
per share yielded a range of multiples from 11.0 times to 34.1 times
earnings with a median multiple of 20.7 times earnings, compared to a
multiple of 13.9 times for the Company in this transaction. An analysis of
the multiples of market value to book value yielded a ratio of multiples
from 1.2 times to 4.4 times book value with a median multiple of 2.6 times
book value, compared to a multiple of 2.4 times book value for the Company
in this transaction. The Financial Advisor indicated that the multiples
calculated for the Company based on the financial terms of the Merger were
higher than the median of comparable multiples for net market value to last
twelve months of revenues, higher than the median of comparable multiples
for net market value to projected calendar year 1999 revenues, within the
range of comparable multiples for market value to book value, within the
range of comparable multiples for stock price to last twelve months of
earnings per share and within the range of comparable multiples for stock
price to projected calendar 1999 earnings per share. The Financial Advisor
determined that the Company's stock performance was consistent with its
operating results. The Financial Advisor regarded the conclusions with
respect to the comparison of the Company with the companies in the
comparable group as favorable to its fairness opinion with respect the
financial consideration to be received in the Offer and the Merger.
13
<PAGE> 19
(iii) Comparable Transaction Analysis. The Financial Advisor reviewed
certain mergers and acquisitions involving technology companies. In
examining these transactions, the Financial Advisor analyzed certain income
statement and balance sheet parameters of the acquired companies relative
to the consideration paid. Multiples analyzed included net transaction
value (defined as transaction value adjusted by adding debt and subtracting
cash and short-term investments) to the last twelve months of revenue and
operating income as well as the multiples of transaction value to the last
twelve months of net income and book value. This analysis included 54
comparable transactions that occurred from March 18, 1991 to June 30, 1999
or were pending during such period. Such transactions included ScanSoft's
acquisition of a portion of MetaCreations, Hummingbird's acquisition of PC
DOCS, Documentum's acquisition of Relevance Technologies and Scan-Optics'
acquisition of Southern Computer Services. In certain cases, complete
financial data was not publicly available for these transactions and only
partial information was used in such instances. An analysis of the
multiples of net transaction value to the last twelve months of revenue
yielded a range of multiples from 0.1 times to 22.0 times revenues with a
median of multiple 1.7 times revenues for all cash transactions, compared
to a multiple of 1.3 times revenues for the Company in this transaction. An
analysis of the multiples of market value to book value yielded a range of
multiples from negative 12.3 times to 12.0 time book value with a median
multiple of 2.0 times book value for all cash transactions, compared to a
multiple of 2.4 times for the Company in this transaction. The Financial
Advisor indicated that the multiples calculated for the Company, based on
the financial terms of the Merger, were within the range for multiples for
revenues of comparable transactions analyzed and above the median for
multiples of book value.
(iv) Acquisition Premium Analysis. The Financial Advisor also
reviewed the premiums paid for certain merger and acquisition transactions
involving selected technology companies. The Financial Advisor's analysis
indicated that the percentage premium of offer prices to trading prices on
the date prior to the announcement date for all cash transactions ranged
from a discount of 11.1% to a premium of 102.6%, with a median of a premium
of 16.0%. The percentage premium of offer prices to trading prices 30 days
prior to the announcement from a discount of 55.2% to a premium of 61.7%,
with a median premium of 26.1%. The Offer represented a 34.2% premium to
the Company's closing stock price on the day prior to the presentation to
the Company Board, a higher premium than the median premium of comparable
transactions. In addition, the Financial Advisor indicated that the Offer
for the Company's Common Stock represented a 34.2% premium over the closing
stock price of Company's Common Stock one day prior to the date of the
Board Meeting and a 37.8% premium over the Company's Common Stock price 30
days prior to the date of the Board Meeting.
With respect to the financial projections supplied to it by the Company,
the Financial Advisor assumed that such projections were reasonably prepared and
that they reflected the most accurate currently available estimates and
judgments of the Company's management as to the future operating and financial
performance of the Company. In these analyses that are based on certain
financial projections prepared by the Company's management or in the
hypothetical scenarios incorporating such projections set forth therein,
including, without limitation, the analyses of certain Operating Data,
Performance Data and Selected Market Data, the Financial Advisor relied upon
such financial projections without independent verification.
A copy of the Financial Advisor's written presentation to the Company Board
was filed as an exhibit to the Rule 13E-3 Transaction Statement on Schedule
13E-3 filed by the Company and the Purchaser (the "Schedule 13E-3") with the
Commission. Copies thereof will be made available for inspection and copying at
the principal executive offices of the Company during regular business hours by
any interested stockholder of the Company, or such stockholder's representative
who has been so designated in writing, and may be inspected and copied, and
obtained by mail, in the manner specified in the Offer. The summary set forth
above does not purport to be a complete description of the Financial Advisor's
written analyses set forth as exhibits to the Schedule 13E-3 or the Financial
Advisor's oral presentation to the Company Board.
PROCEDURES FOR EXCHANGE OF CERTIFICATES.
Purchaser will make available to the Exchange Agent, as needed, the Merger
Consideration to be paid in respect of the Shares. Promptly after the Effective
Time, Purchaser will send, or will cause the Exchange
14
<PAGE> 20
Agent to send, to each holder of Shares (other than Purchaser and its
subsidiaries) at the Effective Time a letter of transmittal and related
instruments for use in such exchange. Stockholders should not return Share
certificates until they receive a letter of transmittal.
Each holder of Shares that have been converted into the right to receive
the Merger Consideration will be entitled to receive, upon surrender to the
Exchange Agent of a certificate representing such Shares, together with a
properly completed letter of transmittal, the Merger Consideration payable for
each Share represented by such certificate. Until so surrendered, each such
certificate will represent after the Effective Time for all purposes only the
right to receive such Merger Consideration, without interest thereon.
After the Effective Time, there will be no further registration of
transfers of Shares. If, after the Effective Time, certificates are presented to
the Surviving Corporation, they will be canceled and exchanged for the Merger
Consideration provided for, and in accordance with the procedures set forth, in
the Merger Agreement. If any portion of the Merger Consideration is to be paid
to a person other than the person in whose name the surrendered certificate is
registered, it will be a condition to such payment that the certificate so
surrendered is properly endorsed or otherwise in proper form for transfer and
that the person requesting such payment pays to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such certificate or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
Any portion of the Merger Consideration made available to the Exchange
Agent that remains unclaimed by the holders of Shares six months after the
Effective Time will be delivered to the Surviving Corporation, upon demand, and
any such holder who has not exchanged them for the Merger Consideration prior to
that time will thereafter look only to the Surviving Corporation for payment of
the Merger Consideration in respect of such Shares. Notwithstanding the
foregoing, neither Purchaser nor the Company will not be liable to any holder of
a certificate formerly representing Shares for Merger Consideration delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
If any certificate has been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond, in such reasonable amount as the Surviving Corporation
may direct, as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent will issue, in exchange for such
lost, stolen or destroyed certificate, the Merger Consideration to be paid in
respect of the Shares represented by such certificate, as contemplated by the
Merger Agreement.
APPRAISAL RIGHTS.
Stockholders of the Company 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.
The following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Annex D. This
discussion and Annex D should be reviewed carefully by any holder who wishes to
exercise statutory appraisal rights or who wishes to preserve the right to do
so, as failure to comply with the procedures set forth herein or therein will
result in the loss of appraisal rights.
A record holder of Shares who makes the demand described below with respect
to such Shares, who does not vote in favor of the Merger, and who otherwise
complies with the statutory requirements of Section 262, will be entitled to an
appraisal by the Delaware Court of Chancery of the fair value of his or her
shares of common stock.
Under Section 262, where a merger is submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, must
notify each stockholder entitled to appraisal rights of the Merger that
appraisal rights are available to such stockholders and include in each such
notice a copy of Section 262. This Information Statement constitutes such
notice.
15
<PAGE> 21
Holders of Shares who desire to exercise their appraisal rights must
deliver a written demand for appraisal to us before the taking of the vote on
the merger. A demand for appraisal must be executed by or on behalf of the
stockholder of record and must reasonably inform us of the identity of the
stockholder of record and that such stockholder intends thereby to demand
appraisal of the common stock.
A person having a beneficial interest in Shares that are held of record in
the name of another person, such as a broker, fiduciary, depositary or other
nominee, must act promptly to cause the record holder to follow the steps
summarized herein properly and in a timely manner to perfect appraisal rights.
If the Shares are owned of record by a person other than the beneficial owner,
including a broker, fiduciary (such as a trustee, guardian or custodian),
depositary or other nominee, such demand must be executed by or for the record
owner. If the Shares are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by or for all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a stockholder of record; however, the
agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, such person is acting as agent for the record owner. If a
stockholder holds shares through a central securities depository nominee such as
Cede & Co., a demand for appraisal of such Shares must be made by or on behalf
of the depository nominee and must identify the depository nominee as record
holder.
A record holder, such as a broker, fiduciary, depositary or other nominee,
who holds shares as a nominee for others, may exercise appraisal rights with
respect to the Shares held for all or less than all beneficial owners of shares
as to which such person is the record owner. In such case, the written demand
must set forth the number of Shares covered by such demand. Where the number of
shares is not expressly stated, the demand will be presumed to cover all Shares.
Within 120 days after the Effective Time, either we or any stockholder who
has complied with the required conditions of Section 262 may file a petition in
the Delaware Court, with a copy served on us in the case of a petition filed by
a stockholder, demanding a determination of the fair value of the shares of all
dissenting stockholders. We have no present intent to file an appraisal petition
and stockholders seeking to exercise appraisal rights should not assume that we
will file such a petition or that we will initiate any negotiations with respect
to the fair value of such shares. Accordingly, holders of Shares who desire to
have their Shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262. Within 120 days after the Effective Time, any
stockholder who has theretofore complied with the applicable provisions of
Section 262 will be entitled, upon written request, to receive from us a
statement setting forth the aggregate number of shares not voting in favor of
the Merger and with respect to which demands for appraisal were received by us
and the number of holders of such Shares. Such statement must be mailed within
10 days after we have received the written request therefor.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware 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 Delaware Court may dismiss
the proceedings as to such stockholder. Where proceedings are not dismissed, the
Delaware Court will appraise the Shares owned by such stockholders, determining
the fair value of such Shares exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
No representation is made as to the outcome of the appraisal of fair value
as determined by the Court. In determining "fair value", the Delaware Court is
required to take into account all relevant factors. In Weinberger v. UOP, Inc.,
the Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating 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 and
that "[f]air price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court has stated that in
making this determination of fair
16
<PAGE> 22
value the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which could be
ascertained as of the date of the merger which throw any light on future
prospects of the merged corporation. Section 262 provides that fair value is to
be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware
Supreme Court stated that such exclusion is a "narrow exclusion [that] does not
encompass known elements of value," but which rather applies only to the
speculative elements of value arising from such accomplishment or expectation.
In Weinberger, the Delaware Supreme Court construed Section 262 to mean that
"elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered." In addition, Delaware courts have decided
that the statutory appraisal remedy, depending on the factual circumstances, may
or may not be a stockholder's exclusive remedy in connection with transactions
such as the merger.
The cost of the appraisal proceeding may be determined by the Delaware
Court and taxed against the parties as the Delaware Court deems equitable in the
circumstances. However, costs do not include attorneys' and expert witness fees.
Each dissenting stockholder is responsible for his or her attorneys' and expert
witness expenses, although, upon application of a dissenting stockholder, the
Delaware Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all Shares entitled to
appraisal.
Any holder of Shares who has duly demanded appraisal in compliance with
Section 262 will not be entitled to vote for any purpose any Shares subject to
such demand or to receive payment of dividends or other distributions on such
Shares, except for dividends or distributions payable to stockholders of record
as of a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any stockholder will
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Merger (i.e., to retain their Shares); after this period, the
stockholder may withdraw such demand for appraisal only with our consent. If no
petition for appraisal is filed with the Delaware Court within 120 days after
the Effective Time, stockholders' rights to appraisal shall cease, and all
holders of Shares will be entitled to retain their Shares pursuant to the terms
of the merger agreement. Inasmuch as we have no obligation to file such a
petition, and we have no present intention to do so, any holder of Shares who
desires such a petition to be filed is advised to file it on a timely basis. Any
stockholder may withdraw such stockholder's demand for appraisal by delivering
to us a written withdrawal of his or her demand for appraisal, except (i) that
any such attempt to withdraw made more than 60 days after the Effective Time
will require our written approval and (ii) that no appraisal proceeding in the
Delaware Court shall be dismissed as to any stockholder without the approval of
the Delaware Court, and such approval may be conditioned upon such terms as the
Delaware Court deems just.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND 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.
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 attached
as Annex E.
17
<PAGE> 23
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 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 Stockholder 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 Stockholder 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.
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 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.
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
18
<PAGE> 24
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, $116,240, $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.
ACCOUNTING TREATMENT.
The acquisition of the public Shares in the Offer and the Merger will be
treated as a "purchase" under generally accepted accounting principles.
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. STOCKHOLDERS 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.
REGULATORY APPROVALS.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), certain acquisitions may not be consummated unless certain information
has been furnished to the Federal Trade Commission and the Antitrust Division of
the Department of Justice and certain waiting period requirements have been
satisfied. Because Purchaser already owns more than 50% of the equity of the
Company, the Company believes that the HSR Act is not applicable to the Merger.
The Company and its subsidiaries own property and conduct business in a
number of foreign countries. In connection with the Merger, the laws of certain
of these foreign countries may require the filing of information with, or the
obtaining of the approval of, governmental authorities therein. Parent and the
Company intend to take such action as such laws may require, but no assurance
can be given that such approvals will be obtained.
19
<PAGE> 25
If any action is taken prior to completion of the Merger by any such government
or governmental authority, Parent and the Company may not be obligated to
complete the Merger. See "The Merger Agreement -- Conditions to the Merger."
CERTAIN LITIGATION.
VISIONSHAPE, INC. ANTITRUST LITIGATION. 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.
The Company does not believe the claim to have any merit.
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.
The Purchaser obtained the funds required to purchase the tendered shares
(approximately $56.3 million for the 4,414,409 shares) through a combination of
capital contributions made to Purchaser and borrowings. Capital contributions
have been made, in cash, in the aggregate amount of $20.1 million from DICOM
Holdings AG, Private Equity Partners and Green Shoots, Ltd. in exchange for
shares of capital stock of the Purchaser. Purchaser obtained an additional $10.0
million from the issuance of $10.0 million aggregate principal amount of
Purchaser's Senior Secured Subordinated Notes due September 2006 (the "Notes").
The Notes were purchased by Dresdner Bank AG, Hamburg Branch and Dresdner Bank
AG, New York and Grand Cayman Branches (the "Note Purchasers") pursuant to a
Note Purchase Agreement, dated as of September 10, 1999, between the Purchaser
and the Note Purchasers.
The remaining $26.2 million required to purchase the tendered shares was
obtained by borrowings made pursuant to a Credit Agreement, dated as of
September 10, 1999 (the "Credit Agreement") by and among Purchaser, Merger Sub,
and Dresdner Bank AG, New York and Grand Cayman Branches, as Arranger,
Syndication Agent, Collateral Agent and Administrative Agent. The Credit
Agreement provides $50.0 million of senior secured credit facilities ("Senior
Credit Facilities"), comprised of (a) a $23.0 million bridge loan facility, (b)
a $22.0 million term loan facility and (c) a $5.0 million revolving credit
facility. As of the date hereof, Dresdner Bank AG is the sole Lender party to
the Credit Agreement and has committed to lend all $50.0 million of borrowings
available under the Senior Credit Facility, of which a term loan of $22.0
million and a bridge loan of $6.0 million were made to Purchaser on September
10, 1999 to purchase and pay for the tendered shares and to pay fees and
expenses relating to the Merger and related financings. The Company will use the
balance of funds under the bridge loan facility, and borrowings under the
revolving credit facility, if necessary, to pay the Merger Consideration and
fees and expenses relating to the transactions.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached as Annex A and the Amendment to the Merger Agreement,
a copy of which is attached as Annex B. 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.
THE OFFER. The Merger Agreement provided for the making of the Offer. The
Offer expired at 12:00 midnight, New York City time, on September 8, 1999, and
Purchaser subsequently purchased all of the 4,414,409 Shares tendered. As a
result, Purchaser beneficially owns approximately 84% of the Shares as of the
date of this Information Statement.
20
<PAGE> 26
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 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.
21
<PAGE> 27
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.
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
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 will be 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 a 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
22
<PAGE> 28
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.
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
23
<PAGE> 29
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
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;
24
<PAGE> 30
(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 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
25
<PAGE> 31
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.
STOCKHOLDERS 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 "Stockholders Meeting") to consider
and vote upon the approval of the Merger, if such approval is required. The
Company shall, as promptly as practicable, prepare and file with the Commission
a preliminary proxy statement for the solicitation of a vote of holders of
Shares approving the Merger (the "Proxy Statement"), which shall include the
unanimous recommendation of the Company Board that shareholders of the Company
vote in favor of the approval and adoption of this Agreement and the written
opinion of the Financial Advisor that the cash consideration to be received by
the shareholders of the Company pursuant to the Merger is fair to such
shareholders from a financial point of view. The Company shall use all
reasonable efforts to respond to any comments of the Commission and its staff
and as promptly as practicable after responding to such comments to the
satisfaction of the staff cause the Proxy Statement to be mailed to the
shareholders of the Company. Notwithstanding the foregoing, if Purchaser, Merger
Sub and/or any other subsidiary of Purchaser shall acquire at least ninety
percent (90%) of the outstanding Shares, the parties shall take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a Stockholders 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
26
<PAGE> 32
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 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
27
<PAGE> 33
(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.
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
28
<PAGE> 34
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, 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
29
<PAGE> 35
(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 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.
30
<PAGE> 36
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information as to beneficial ownership of
Shares of each director and executive officer of the Company as of September 15,
1999. Pursuant to the Offer, each of these directors and executive officers
tendered all of their Shares, other than the Retained Shares and those Shares
beneficially owned as a result of certain stock options or as described in the
notes to this table.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIAL OWNERSHIP OF CLASS
NAME AND ADDRESS OF SHARES(1) (%)
- ---------------- -------------------- ----------
<S> <C> <C>
David S. Silver(2).......................................... 99,216 1.9
16245 Laguna Canyon Road
Irvine, California 92618
Arnold von Buren............................................ 0 0.0
Business Building Forren West
Grundstrasse 14
CH-6343 Rotkreuz (Zug)
Switzerland
Alexander P. Coleman........................................ 0 0.0
75 Wall Street, 24th Floor
New York, New York 10005
Ronald J. Fikert(3)......................................... 30,000 *
16245 Laguna Canyon Road
Irvine, California 92618
Richard M. Murphy(4)........................................ 35,686 *
16245 Laguna Canyon Road
Irvine, California 92618
Kevin Drum(5)............................................... 30,343 *
16245 Laguna Canyon Road
Irvine, California 92618
Dean A. Hough(6)............................................ 43,530 *
16245 Laguna Canyon Road
Irvine, California 92618
All directors and executive officers as a group (7
persons).................................................. 238,775
</TABLE>
- ---------------
* Less than 1%
(1) Shares beneficially owned include all stock options (including those that
will become exercisable in connection with the Merger).
(2) Includes 60,000 Shares issuable upon the exercise of the stock options as
described in footnote(1).
(3) Includes 20,000 Shares issuable upon the exercise of the stock options as
described in footnote(1).
(4) Includes 20,000 Shares issuable upon the exercise of the stock options as
described in footnote(1).
(5) Includes 22,500 Shares issuable upon the exercise of the stock options as
described in footnote(1).
(6) Includes 20,000 Shares issuable upon the exercise of the stock options as
described in footnote (1).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table furnishes information concerning all persons known to
the Company to beneficially own 5% or more of any class of voting stock of the
Company as of September 15, 1999.
<TABLE>
<CAPTION>
PERCENT
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED OF CLASS
- -------------- ------------------------------------ ------------ --------
<S> <C> <C> <C>
Common Stock Imaging Components Corporation 4,414,409 84%
751 Wall Street
New York, New York 10005-2889
</TABLE>
31
<PAGE> 37
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials that we file with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549; the SEC's regional offices located at Seven World Trade
Center, New York, New York 10048, and at 500 West Madison Street, Chicago,
Illinois 60661. You can obtain information about the operation of the SEC's
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains information we file electronically with the
SEC, which you can access over the Internet at http://www.sec.gov. Copies of
these materials may also be obtained by mail from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you
without re-printing the information in this Information Statement by referring
you to prior and future filings with the Commission. The information we
incorporate by reference is an important part of this Information Statement, and
later information that we file with the Commission will automatically update and
supersede this information. We incorporate by reference our Annual Report on
Form 10-K for the fiscal year ended June 30, 1998, our Quarterly Report on Form
10-Q for the quarter ended March 31, 1999, and any future filings we make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
You may request a copy of these filings (other than an exhibit to any of
these filings unless we have specifically incorporated that exhibit by reference
into the filing), at no cost, by writing or telephoning us at the following
address:
Kofax Image Products, Inc.
16245 Laguna Canyon Road
Irvine, California 92618-3603
Attention: Corporate Secretary
Telephone: (949) 727-3144
You should rely only on the information we have provided or incorporated by
reference in this Information Statement or any supplement. We have not
authorized any person to provide information other than that provided here. We
have not authorized anyone to provide you with different information. You should
not assume that the information in this Information Statement or any supplement
is accurate as of any date other than the date on the front of the document.
32
<PAGE> 38
FORWARD-LOOKING STATEMENTS AND INFORMATION
This Information Statement, including the information we incorporate by
reference, includes forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act. You can
identify our forward-looking statements by the words "expects," "projects,"
"estimates," "believes," "anticipates," "intends," "plans," "budgets,"
"predicts," "estimates" and similar expressions.
We have based the forward-looking statements relating to our operations on
our current expectations, estimates and projections about the Company and the
imaging, workflow and document management industry in general. We caution you
that these statements are not guarantees of future performance and involve
risks, uncertainties and assumptions that we cannot predict. In addition, we
have based many of these forward-looking statements on assumptions about future
events that may prove to be inaccurate. Accordingly, our actual outcomes and
results may differ materially from what we have expressed or forecast in the
forward-looking statements.
By Order of the Board of Directors,
/s/ DAVID S. SILVER
--------------------------------------
David S. Silver
Chief Executive Officer
Dated: September 24, 1999
33
<PAGE> 39
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
KOFAX IMAGE PRODUCTS, INC.
IMAGING COMPONENTS CORPORATION
AND
IMAGING ACQUISITION CORPORATION
DATED AS OF JULY 27, 1999
<PAGE> 40
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
THE OFFER.................................................................. 1
Section 1.1 The Offer................................................... 1
Section 1.2 Company Action.............................................. 3
Section 1.3 Company Board and Committees; Section 14(f) of the Exchange 4
Act.........................................................
ARTICLE 2
THE MERGER................................................................. 5
Section 2.1 Merger...................................................... 5
Section 2.2 Effective Time.............................................. 5
Section 2.3 Closing of the Merger....................................... 5
Section 2.4 Effects of the Merger....................................... 5
Section 2.5 Certificate of Incorporation and Bylaws..................... 5
Section 2.6 Directors................................................... 5
Section 2.7 Officers.................................................... 5
Section 2.8 Conversion of Shares........................................ 5
Section 2.9 Shares of Dissenting Holders................................ 6
Section Exchange of Certificates.................................... 6
2.10
Section Stock Options; 1997 Stock Plan.............................. 7
2.11
Section Additional Actions.......................................... 8
2.12
Section Withholding Taxes........................................... 8
2.13
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 9
Section 3.1 Organization and Qualification; Subsidiaries................ 9
Section 3.2 Capitalization of the Company and its subsidiaries.......... 9
Section 3.3 Authority Relative to this Agreement; Consents and 10
Approvals...................................................
Section 3.4 SEC Reports; Financial Statements........................... 10
Section 3.5 Information Supplied........................................ 11
Section 3.6 Consents and Approvals; No Violations....................... 11
Section 3.7 Material Contracts.......................................... 11
Section 3.8 No Undisclosed Liabilities; Absence of Changes.............. 12
Section 3.9 Litigation.................................................. 12
Section Compliance with Applicable Law.............................. 12
3.10
Section Employee Plans.............................................. 13
3.11
Section Environmental Laws and Regulations.......................... 13
3.12
Section Intellectual Property; Software............................. 15
3.13
Section Certain Business Practices.................................. 16
3.14
Section Labor Matters............................................... 16
3.15
Section Insurance................................................... 16
3.16
Section Tax Matters................................................. 16
3.17
Section Brokers..................................................... 17
3.18
Section Real Estate................................................. 17
3.19
Section Opinion of Financial Advisor................................ 18
3.20
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................... 18
Section 4.1 Organization................................................ 18
Section 4.2 Authority Relative to this Agreement........................ 18
Section 4.3 Information Supplied........................................ 19
Section 4.4 Consents and Approvals; No Violations....................... 19
</TABLE>
ii
<PAGE> 41
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.5 No Prior Activities......................................... 19
Section 4.6 Brokers..................................................... 19
Section 4.7 Financing................................................... 20
ARTICLE 5
COVENANTS.................................................................. 20
Section 5.1 Conduct of Business of the Company.......................... 20
Section 5.2 No Solicitation............................................. 21
Section 5.3 Access to Information....................................... 22
Section 5.4 Shareholders Meeting; Proxy Statement....................... 22
Section 5.5 Additional Agreements; Reasonable Efforts................... 23
Section 5.6 Consents.................................................... 23
Section 5.7 Public Announcements........................................ 23
Section 5.8 Indemnification; Directors' and Officers' Insurance......... 23
Section 5.9 Notification of Certain Matters............................. 24
Section SEC Filings................................................. 24
5.10
Section Takeover Statutes........................................... 24
5.11
Section Transaction Litigation...................................... 24
5.12
Section Delisting................................................... 24
5.13
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER................................... 25
Section 6.1 Stockholder Approval........................................ 25
Section 6.2 No Order.................................................... 25
Section 6.3 HSR Act..................................................... 25
Section 6.4 Offer....................................................... 25
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER............................................. 25
Section 7.1 Termination................................................. 25
Section 7.2 Effect of Termination....................................... 26
Section 7.3 Fees and Expenses........................................... 26
Section 7.4 Amendment................................................... 27
Section 7.5 Extension; Waiver........................................... 27
ARTICLE 8
MISCELLANEOUS.............................................................. 28
Section 8.1 Nonsurvival of Representations and Warranties............... 28
Section 8.2 Entire Agreement; Assignment................................ 28
Section 8.3 Validity.................................................... 28
Section 8.4 Notices..................................................... 28
Section 8.5 Governing Law............................................... 29
Section 8.6 Construction; Interpretation................................ 29
Section 8.7 Parties in Interest......................................... 29
Section 8.8 Severability................................................ 29
Section 8.9 Specific Performance........................................ 29
Section Counterparts................................................ 29
8.10
Section Waiver of Jury Trial........................................ 29
8.11
</TABLE>
iii
<PAGE> 42
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 27,
1999 is made by and among KOFAX IMAGE PRODUCTS, INC., a Delaware corporation
(the "Company"), IMAGING COMPONENTS CORPORATION, a Delaware corporation
("Parent"), and IMAGING ACQUISITION CORPORATION, a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub").
WHEREAS, the Board of Directors of the Company (the "Company Board"), the
Parent and Merger Sub has, in light of and subject to the terms and conditions
set forth herein, (i) determined that each of the Offer (as defined in the
recitals) and the Merger (as defined in Section 2.1) is fair to, and in the best
interests of, their respective shareholders and (ii) approved and adopted this
Agreement and the transactions contemplated hereby and resolved to recommend
acceptance of the Offer and approval and adoption of this Agreement by their
respective shareholders;
WHEREAS, in furtherance thereof, it is proposed that Parent and Merger Sub
shall commence a tender offer (as it may be amended from time to time as
permitted by this Agreement, the "Offer") to acquire all of the outstanding
shares of common stock of the Company, par value $0.001 per share (the "Common
Stock"), at a price equal to $12.75 per share (such amount, or any greater
amount per share paid pursuant to the Offer, being hereinafter referred to as
the "Per Share Amount"), net to the seller in cash, subject to reduction for any
applicable federal back-up withholding or stock transfer taxes payable by such
seller, in accordance with the terms and subject to the conditions provided
herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition to Parent's and Merger Sub's willingness to enter into this
Agreement, Merger Sub and certain holders of Shares (as defined in Section
2.8(a)) have entered into Voting Agreements (as amended, restated or modified
from time to time, collectively, the "Voting Agreements") in the form attached
as Exhibit A.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, Parent and Merger Sub
hereby agree as follows:
ARTICLE 1
THE OFFER
SECTION 1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 7.1 and none of the events or conditions set forth in
Annex A (the "Offer Conditions", and each an "Offer Condition") shall have
occurred and be existing, as promptly as practicable after, but in no event
later than five (5) Business Days after, the public announcement of the
execution of this Agreement by the parties hereto, Parent shall cause Merger Sub
to, and Merger Sub shall, commence (within the meaning of the Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act")) the Offer for all the
outstanding Shares (as defined in Section 2.8) at the Per Share Amount. The
obligation of Merger Sub to accept for payment, purchase and pay for Shares
tendered pursuant to the Offer shall be subject only to the Offer Conditions and
to the further condition that a number of Shares which, together with Shares
then owned directly or indirectly by Parent and Merger Sub, would, at the
minimum, be more than fifty percent (50%) of the Common Stock then outstanding
on a fully diluted basis (which, for purposes of this Agreement, assumes the
full exercise and/or conversion of all options, warrants or other securities
exchangeable for or convertible into Common Stock) shall have been validly
tendered and not withdrawn prior to the expiration date of the Offer (the
"Minimum Condition"). Parent and Merger Sub expressly reserve the right to
increase the price per Share payable in the Offer or to make any other changes
in the terms and conditions of the Offer; provided, that unless previously
<PAGE> 43
approved by the Company in writing, no change may be made that (i) decreases the
Per Share Amount payable in the Offer, (ii) changes the form of consideration to
be paid in the Offer, (iii) reduces the maximum number of Shares to be purchased
in the Offer, (iv) imposes conditions to the Offer in addition to the Offer
Conditions, (v) amends any other term of the Offer (including the Offer
Conditions) in a manner adverse to the holders of the Common Stock, (vi) extends
the Offer except as provided in Section 1.1(b) (provided that the Offer may not,
without the Company's consent, be extended beyond 60 days after the commencement
of the Offer), or (vii) amends, or waives the satisfaction of, the Minimum
Condition. It is agreed that the Offer Conditions are for the sole benefit of
Parent and Merger Sub and may be asserted by Merger Sub or Parent regardless of
the circumstances giving rise to any such condition (other than any action or
inaction by Merger Sub or Parent which constitutes a breach of this Agreement)
or may be waived by Merger Sub or Parent (other than the Minimum Condition) in
whole or in part at any time and from time to time, in their respective sole
discretion. The failure by Merger Sub or Parent at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. The Company agrees that no Shares held by the Company or
any of its subsidiaries will be tendered in the Offer. "Business Day" means each
Monday, Tuesday, Wednesday, Thursday, or Friday that banks located in New York,
New York are not required or permitted by law to be closed.
(b) So long as this Agreement has not been terminated in accordance with
the terms hereof, and subject to the terms and conditions hereof, the Offer
shall expire at midnight, Pacific Time, on the date that is twenty (20) Business
Days after the Offer is commenced; provided, that (subject to the proviso in
clause (vi) of Section 1.1(a)) without the consent of the Company or the Company
Board, Merger Sub may (i) extend the Offer, if at the scheduled expiration date
of the Offer any of the Offer Conditions shall not have been satisfied or
waived, until such time as such conditions are satisfied or waived, (ii) extend
the Offer for any period required for any rule, regulation, interpretation or
position of the Securities and Exchange Commission ("SEC") or the staff thereof
applicable to the Offer, (iii) extend the Offer for any reason on one or more
occasions for an aggregate period of not more than ten (10) Business Days beyond
the latest expiration date that would otherwise be permitted under clause (i) or
(ii) of this sentence if on such expiration date the Minimum Condition has been
satisfied but the number of Shares validly tendered, together with Shares then
owned directly or indirectly by Merger Sub, constitute at least seventy-five
percent (75%) but less than ninety percent (90%) of all outstanding Shares, or
(iv) extend the Offer for any reason on one or more occasions for an aggregate
period of not more than 10 Business Days beyond the initial expiration date or
the latest expiration date that would otherwise be permitted under clauses (i),
(ii) or (iii) of this sentence. Subject to the terms and conditions of the Offer
and this Agreement, Merger Sub shall and Parent shall cause Merger Sub to,
accept for payment, and pay for, all Shares validly tendered and not withdrawn
pursuant to the Offer that Merger Sub becomes obligated to accept for payment
and pay for pursuant to the Offer as promptly as practicable after the
expiration of the Offer.
(c) On the date of the commencement of the Offer, Parent and Merger Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-l with respect
to the Offer which will reflect the existence of this Agreement (together with
any supplements or amendments thereto and any other related documents, including
an offer to purchase and a related letter of transmittal and summary
advertisement and, if required, a Rule 13e-3 Transaction Statement on Schedule
13E-3 (collectively the "Offer Documents") and shall mail the Offer Documents to
the Company's stockholders. The Offer Documents will comply in all material
respects with the provisions of applicable federal securities laws. The Offer
Documents shall not, on the date filed with the SEC and on the date first
published or sent or given to the Company's shareholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Merger Sub and the Company each agrees to correct promptly
any information provided by it for use in the Offer Documents if and to the
extent that it shall have become false or misleading in any material respect,
and each of Parent and Merger Sub further agrees to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The
2
<PAGE> 44
Company and its counsel shall be given a reasonable opportunity to review and
comment on the Offer Documents and all amendments and supplements thereto, in
each case prior to their filing with the SEC or dissemination to stockholders of
the Company, and the Parent and Merger Sub shall consider such comments in good
faith. Parent and Merger Sub shall provide the Company and its counsel with any
comments Parent, Merger Sub or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments, including a copy of any such comments that are made in writing.
(d) The parties understand and agree that the Per Share Amount has been
calculated based upon the accuracy of the representation and warranty set forth
in Section 3.2(a) and that, in the event the number of outstanding Shares,
capital stock or capital stock equivalents of the Company issuable upon the
exercise of, or subject to, options or other agreements exceeds the amounts
specifically set forth in Section 3.2(a) by more than 20,000 Shares (including
without limitation as a result of any stock split, reverse stock split, stock
dividend, including any dividend or distribution of securities convertible into
capital stock or capital stock equivalent of the Company, recapitalization, or
other like change occurring after the date of this Agreement, but excluding any
Shares issued pursuant to the 1997 Stock Plan (as defined in Section 2.11(d)) in
accordance with, and subject to, Section 2.11(d)), the Per Share Amount shall be
appropriately adjusted downward. The provisions of this Section 1.1(d) shall
not, however, affect the representation set forth in Section 3.2(a).
SECTION 1.2 Company Action.
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that the Company Board, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, unanimously, (i)
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are fair to, and in the best interests of,
the shareholders of the Company, (ii) approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, in all
respects and that such approval constitutes approval of the Offer, this
Agreement and the Merger for purposes of Section 251 of the Delaware General
Corporation Law (the "DGCL"), and similar provisions of any other similar state
statutes that might be deemed applicable to the transactions contemplated
hereby, and (iii) resolved to recommend that the shareholders of the Company
accept the Offer, tender their Shares thereunder to Merger Sub and approve and
adopt this Agreement and the Merger. The Company consents to the inclusion of
such recommendation and approval in the Offer Documents; provided, that such
recommendation may be withdrawn, modified or amended in accordance with the
provisions of Section 5.2. The Company further represents and warrants that C.E.
Unterberg, Towbin (the "Financial Advisor") has delivered to the Company Board
its written opinion that the cash consideration to be received by the
shareholders of the Company pursuant to the Offer and the Merger is fair to such
shareholders from a financial point of view. The Company has been authorized by
the Financial Advisor to permit, subject to the prior review and consent by the
Financial Advisor (such consent not to be unreasonably withheld), the inclusion
of the fairness opinion (or a reference thereto) in the Schedule 14D-9 (as
defined in Section 1.2(b)) and, if required, the Schedule 13E-3.
(b) Contemporaneously with the commencement of the Offer as provided in
Section 1.1, the Company hereby agrees to file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pertaining to the Offer
(together with any amendments or supplements thereto, the "Schedule 14D-9")
containing the recommendation described in Section 1.2(a) and to promptly mail
the Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to information
supplied by Parent or Merger Sub in writing for inclusion in the Offer Documents
or the Schedule 14D-9. The Company, Parent and Merger Sub each agrees to correct
promptly any information provided by it for use in the Schedule 14D-9 if and to
the extent that it shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to cause
3
<PAGE> 45
the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
the holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Merger Sub and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 before it is filed with
the SEC, and the Company shall consider such comments in good faith.
(c) In connection with the Offer, the Company will cause its transfer agent
to promptly furnish to Parent and Merger Sub mailing labels, security position
listings and any available listing or computer files containing the names and
addresses of the record holders of Shares as of a recent date and shall furnish
Merger Sub with such additional information and assistance (including, without
limitation, updated lists of shareholders, mailing labels and lists of
securities positions) as Merger Sub or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Merger Sub and their affiliates, associates,
agents and advisors shall hold in confidence the information contained in any
such labels, listings and files and use such information only in connection with
the Offer and the Merger, and, if this Agreement shall be terminated, will
deliver all copies of such information then in their possession and control.
SECTION 1.3 Company Board and Committees; Section 14(F) of the Exchange
Act.
(a) Promptly upon the payment by Merger Sub for Shares pursuant to the
Offer and from time to time thereafter, Merger Sub shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Company Board as will give Merger Sub representation on the Company Board
equal to the product of the number of directors on the Board (giving effect to
any increase in the number of directors pursuant to this Section 1.3) and the
percentage that such number of Shares so purchased bears to the total number of
outstanding Shares on a fully diluted basis, and the Company shall use its
reasonable best efforts to, upon request by Merger Sub, promptly, at the
Company's election, either increase the size of the Board or secure the
resignation of such number of directors as is necessary to enable Merger Sub's
designees to be elected to the Company Board and to cause Merger Sub's designees
to be so elected.
(b) The Company's obligation to appoint designees to the Company Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all action required pursuant to such
Section and Rule in order to fulfill its obligations under this Section 1.3 and
shall include in the Schedule 14D-9 such information with respect to the Company
and its officers and directors as is required under such Section and Rule in
order to fulfill its obligations under this Section 1.3 (provided that Parent
and Merger Sub shall have provided to the Company on a timely basis all such
information with respect to Merger Sub's designees).
(c) Following the election of Merger Sub's designees pursuant to this
Section and until the Effective Time, any amendment of this Agreement or the
Certificate of Incorporation or Bylaws of the Company, any termination of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of parent of Merger Sub, any
waiver of any of the Company's rights hereunder, or any transaction between
Parent (or any affiliate or associate thereof) and the Company shall require the
concurrence of a majority of the Company's directors (or the concurrence of the
sole remaining director, if there is only one remaining) then in office who are
directors of the Company on the date hereof, or are directors designated by such
persons or person (the "Continuing Directors"). The Continuing Directors shall
have the authority to retain such counsel and other advisors at the expense of
the Company as are reasonably appropriate to assist them in the exercise of
their duties in connection with this Agreement. In addition, the Continuing
Directors shall have the authority to institute any action on behalf of the
Company to enforce performance of this Agreement.
4
<PAGE> 46
ARTICLE 2
THE MERGER
SECTION 2.1 Merger. At the Effective Time (as defined below) and upon the
terms and subject to the conditions of this Agreement and in accordance with the
DGCL, Merger Sub shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation"), and the separate corporate existence
of Merger Sub shall cease.
SECTION 2.2 Effective Time. Subject to the terms and conditions set forth
in this Agreement, on the Closing Date (as defined in Section 2.3) or as soon
thereafter as is practicable, the parties shall cause an agreement or
certificate of merger to be executed and filed with the Secretary of State of
the State of Delaware, in such form as required by, and in accordance with
applicable provisions of, the DGCL (including, if possible, the procedures
permitted by Section 253 thereof), at which time the Merger shall become
effective (the time the Merger becomes effective being referred to herein as the
"Effective Time").
SECTION 2.3 Closing of the Merger. The closing of the Merger (the
"Closing") shall take place at a time and on a date to be specified by the
parties, which shall be no later than the second Business Day after satisfaction
(or waiver) of the latest to occur of the conditions precedent set forth in
Article 6 (the "Closing Date"), at the offices of Kirkland & Ellis, 153 East
53rd Street, New York, New York 10022, unless another time, date or place is
agreed to in writing by the parties.
SECTION 2.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 2.5 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of the Company in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The Bylaws of Merger Sub in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 2.6 Directors. The directors of Merger Sub at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
SECTION 2.7 Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
SECTION 2.8 Conversion of Shares.
(a) At the Effective Time, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (individually a "Share" and,
collectively, the "Shares"), other than (i) Shares held by the Company or any
subsidiary of the Company, (ii) Shares held by Parent, Merger Sub, any other
subsidiary of Parent or Merger Sub, if any, (iii) the Shares held by persons and
entities as set forth on Schedule 2.8 hereto (collectively, the "Retained
Shares"), and (iv) Dissenting Shares (as defined in Section 2.9(a)), (the Shares
of subsection (i) through (iv), collectively the "Excluded Shares"), shall, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holder thereof, be canceled and extinguished and be converted
into and shall become the right to receive a cash payment per Share, without
interest, equal to the Per Share Amount (the "Merger Consideration") in
accordance with the terms hereof. From and after the Effective Time, the holders
of certificates evidencing ownership of Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided for herein or by applicable law.
5
<PAGE> 47
(b) At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof, each issued and outstanding share of the
common stock, par value $0.001 per share, of Merger Sub shall be converted into
one share of common stock, par value $0.001 per share, of the Surviving
Corporation.
(c) At the Effective Time, each Share held by the Company as treasury stock
or held by Parent, Merger Sub or any subsidiary of Parent, Merger Sub or the
Company immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of Parent, Merger Sub, the Company or the
holder thereof, be canceled, retired and cease to exist, and no consideration
shall be delivered with respect thereto.
(d) Each Retained Share issued and outstanding immediately prior to the
Effective Time shall be exchanged for (as provided in and subject to the
limitations set forth in this Article 2) and become (i) a number of fully paid
and nonassessable shares of Class B Common Stock, par value $0.001 per share, of
the Parent ("Parent Class B Common") equal to (x) 20% of the Per Share Amount
divided by (y) $10.00 and (ii) a number of fully paid and non assessable shares
of Class A Common Stock par value $0.001 per share, of the Parent ("Parent Class
A Common") equal to (x) 80% of the Per Share Amount divided by (y) $10.00, upon
the surrender of the certificate previously representing such shares of Retained
Shares.
SECTION 2.9 Shares of Dissenting Holders.
(a) Notwithstanding anything to the contrary contained in this Agreement,
any holder of Shares with respect to which appraisal rights, if any, are granted
by reason of the Merger under the DGCL and who does not vote in favor of or
consents in writing to the Merger and who otherwise complies with the provisions
of Section 262 of the DGCL ("Dissenting Shares") shall not be entitled to
receive any Merger Consideration pursuant to Section 2.8(a), unless such holder
fails to perfect, effectively withdraws or loses his or her appraisal right
under the provisions of Section 262 of the DGCL. If any such holder so fails to
perfect, effectively withdraws or loses his or her appraisal rights under the
DGCL, each Dissenting Share of such holder shall thereupon be deemed to have
been converted, as of the Effective Time, into the right to receive the Per
Share Amount pursuant to Section 2.8(a).
(b) Any payments relating to Dissenting Shares shall be made solely by the
Surviving Corporation, and no funds or other property have been or will be
provided by Merger Sub, Parent or any of Parent's other direct or indirect
subsidiaries for such payment, nor shall the Company make any payment with
respect to, or settle or offer to settle, any such demands.
(c) The Company shall give Merger Sub prompt notice of any demands received
by the Company for the payment of fair value for shares, and Merger Sub shall
have the right to direct all negotiations and proceedings with respect to such
demands.
SECTION 2.10 Exchange of Certificates.
(a) IBJ Whitehall Bank & Trust Company or another bank or trust company
designated by Parent and reasonably acceptable to the Company shall act as the
exchange agent (in such capacity, the "Exchange Agent") for the benefit of the
holders of Shares for the exchange of a certificate or certificates which
immediately prior to the Effective Time represented Shares (the "Certificates")
that were converted into the right to receive the Per Share Amount pursuant to
Section 2.8(a), all in accordance with this Article 2. At the Effective Time,
Parent shall deposit, or shall cause to be deposited, with the Exchange Agent,
and shall otherwise take all action necessary to provide the Exchange Agent on a
timely basis, as and when needed after the Effective Time, funds necessary to
provide for the payment for the benefit of the holders of Shares, cash in U.S.
dollars in an amount equal to the Merger Consideration multiplied by the
aggregate outstanding Shares (other than the Excluded Shares) to be paid
pursuant to Section 2.8(a). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Merger Consideration out of the amount so deposited by
Parent to holders of Shares entitled thereto. The amount deposited by Parent
with the Exchange Agent shall not be used for any other purpose. Any and all
amounts earned on such funds paid over to the Surviving Corporation.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of Certificates formerly
representing Shares converted into the right to receive the Merger
6
<PAGE> 48
Consideration pursuant to Section 2.8(a): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify); and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for a cash payment of the proper
Merger Consideration pursuant to Section 2.8(a). Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent and Merger Sub, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor by check an amount equal to (A) the Per Share Amount,
multiplied by (B) the number of Shares represented by such Certificate, which
such holder has the right to receive pursuant to the provisions of this Article
2, and the Certificate so surrendered shall forthwith be canceled; provided,
that any Certificate (or portion thereof) representing Retained Share shall not
be entitled to such cash amount, but a number of shares of Parent Class A Common
and Parent Class B Common as set forth in Section 2.8(d). No interest shall be
paid or accrued on any Merger Consideration upon the surrender of any
Certificates. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, payment of the proper Merger
Consideration may be paid to a transferee if the Certificate representing such
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer or other taxes required as a result of such payment to a person other
than the registered holder of such shares have been paid. Until surrendered and
exchanged as contemplated by this Section 2.10, each Certificate (other than
Certificates representing Excluded Shares) shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender an
amount equal to (A) the Per Share Amount, multiplied by (B) the number of Shares
represented by such Certificate, as contemplated by this Section 2.10.
(c) In the event that any Certificate shall have been lost, stolen or
destroyed, the Exchange Agent shall pay, upon the making of an affidavit of that
fact by the holder thereof in form and substance reasonably acceptable to
Parent, the proper Merger Consideration as may be required pursuant to Section
2.8; provided, that Parent may, in its discretion, require the delivery of a
suitable bond and/or indemnity.
(d) The Merger Consideration paid upon the surrender of Certificates in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to Shares formerly represented thereby.
There shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the Shares which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 2.
(e) Any portion of the Merger Consideration which remains undistributed to
the shareholders of the Company for six months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any shareholders of the
Company who have not theretofore complied with this Article 2 shall thereafter
look only to the Surviving Corporation for payment of their claim for any Merger
Consideration.
(f) Notwithstanding Section 2.11(e), neither Parent nor the Company shall
be liable to any holder of a Certificate formerly representing Shares for any
Merger Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
SECTION 2.11 Stock Options; 1997 Stock Plan.
(a) At the Effective Time, each outstanding, vested and exercisable option
to purchase shares of Common Stock (including those options that will become
exercisable upon a change in control of the Company) (a "Stock Option" or
collectively "Stock Options") issued pursuant to the Amended and Restated
Incentive Stock Option, Nonqualified Stock Option and Restricted Stock Purchase
Plan, the 1996 Incentive Stock Option, Nonqualified Stock Option and Restricted
Stock Purchase Plan, and the 1997 Stock Option Plan for Non-Employee Directors
(collectively the "Company Plans") or issued outside any Company Plan via
special grants by the Company's Stock Option Committee to certain employees
shall be converted into and shall become the right to receive a cash payment per
Stock Option, without interest, determined by multiplying (i) the excess, if
any, of the Per Share Amount over the applicable per share exercise price of
such
7
<PAGE> 49
Stock Option by (ii) the number of shares of Common Stock underlying the Stock
Options immediately prior to the Effective Time. At the Effective Time, all
outstanding options to purchase shares of Common Stock (including those options
that are not exercisable at the time of the Merger) shall be canceled and be of
no further force or effect except for the right to receive cash to the extent
provided in this Section 2.11. Prior to the Effective Time, the Company shall
take all actions (including, if appropriate, amending the terms of any Company
Plan) that are necessary to give effect to the transactions contemplated by this
Section 2.11.
(b) Prior to the Effective Time, Parent and the Company shall establish a
procedure to effect the surrender of Stock Options in exchange for the cash
payment to which the holder of a Stock Option shall be entitled under Section
2.11(a), and, upon surrender of such Stock Option, Parent shall pay to the
holder thereof in cash the amount, if any, to which such holder shall be
entitled thereunder.
(c) The Parent, Merger Sub and the Company hereby acknowledge and agree
that the Surviving Corporation shall not assume or continue any Stock Options,
or substitute any additional options for such Stock Options. On or before the
Effective Time, the Company shall, consistently with the terms of the Company
Plans and other agreements and arrangements evidencing Stock Options, or to the
extent permissible under applicable law, accelerate the unvested portion of all
outstanding Stock Options, conditioned upon the consummation of the Merger.
(d) Unless terminated prior to the Effective Time in accordance with its
terms, the Company's 1997 Employee Stock Purchase Plan (the "1997 Stock Plan")
shall be terminated as of the Effective Time. Unless the 1997 Stock Plan is
terminated prior to the Effective Time in accordance with its terms, the Company
shall take such actions as are necessary or appropriate to cause the last day of
the then current Offering Period (as such term is used in the 1997 Stock Plan)
to be the last trading day on which the Common Stock of the Company is traded on
the Nasdaq National Market immediately prior to the Effective Time (the "Final
Company Exercise Date"); provided, that such change shall be conditioned upon
the consummation of the Merger. On the Final Company Exercise Date, and subject
to the participants' rights to receive invested cash as provided in the 1997
Stock Plan, the Company shall apply the funds credited as of such date under the
1997 Stock Plan within each participant's account to the purchase of whole
shares of Common Stock in accordance with the terms of the 1997 Stock Plan, it
being agreed that the number of shares of Common Stock so purchased shall not
exceed the number of shares issuable under the 1997 Stock Plan, as represented
in Section 3.2.
SECTION 2.12 Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Merger Sub or the Company or otherwise to carry
out this Agreement, the officers and directors of the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of Merger
Sub or the Company, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of Merger Sub or the Company, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 2.13 Withholding Taxes. Parent and Merger Sub shall be entitled
to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from
the Merger Consideration payable to a holder of Shares or amounts payable to a
holder to the Stock Options pursuant to the Merger any withholding and stock
transfer Taxes and such amounts as are required under the Internal Revenue Code
of 1986, as amended (the "Code"), or any applicable provision of state, local or
foreign Tax law. To the extent that amounts are so withheld by Parent or Merger
Sub, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares or the Stock Options in respect
of which such deduction and withholding was made by Parent or Merger Sub and
Parent shall provide, or cause the Exchange Agent to provide, to the holders of
such Shares written notice of the amounts so deducted or withheld.
8
<PAGE> 50
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
SECTION 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as presently conducted.
(b) Except as set forth on Section 3.1(b) of the disclosure schedule
delivered by the Company to Parent concurrently herewith (the "Disclosure
Schedule") or as disclosed in filings with the SEC made prior to the date hereof
and since, and including, the filing of the Company's most recent Annual Report
on Form 10-K (the "Recent SEC Reports"), the Company has no equity interests in
any corporations, partnerships, limited liability companies, trusts or similar
business entities. The Company has no significant subsidiaries, as that term is
defined in Rule 1-02(w) of Regulation S-X.
(c) The Company is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it, or the nature of the business conducted by it, makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not have, individually or
in the aggregate, a Company Material Adverse Effect. The term "Company Material
Adverse Effect" means any change, effect, event, occurrence, condition or
development that is or is reasonably likely to be materially adverse to (i) the
assets, liabilities, properties, results of operations, or conditions (financial
or otherwise) of the Company and its subsidiaries, taken as a whole, or (ii) the
ability of the Company to perform its obligations under this Agreement.
(d) The Company has heretofore delivered to Merger Sub or Parent accurate
and complete copies of the Certificate of Incorporation and Bylaws, each as
amended to date and currently in effect, of the Company and each of its
subsidiaries.
SECTION 3.2 Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of (i) 40,000,000
shares of Common Stock, of which, as of the date hereof, 5,243,956 shares were
issued and outstanding (excluding shares held as treasury shares), and 194,884
shares of Common Stock are held as treasury shares and (ii) 5,000,000 shares of
preferred stock, no shares of which are issued or outstanding. All of the Shares
have been validly issued, and are fully paid, nonassessable and free of
preemptive rights. As of the date hereof, (i) 580,555 shares of Common Stock
were reserved for issuance and issuable upon, or otherwise deliverable in
connection with, the exercise of outstanding Stock Options and (ii) 34,000
shares of Common Stock are issuable under the 1997 Stock Plan pursuant to
Section 2.11(d). Section 3.2(a) of the Disclosure Schedule sets forth the
outstanding Stock Options. Except as set forth above, there are outstanding (i)
no shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company or its subsidiaries convertible into or exchangeable
for shares of capital stock or voting securities of the Company, (iii) no
options or other rights to acquire from the Company or its subsidiaries, and no
obligations of the Company or its subsidiaries to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company, and (iv) no equity equivalents,
interests in the ownership or earnings of the Company or its subsidiaries or
other similar rights (e.g., phantom stock or stock appreciation rights). Except
for the Voting Agreements and agreements issued under the Company Plans, there
are no stockholder, voting, repurchase or similar agreements or understandings
to which the Company is a party or otherwise bound relating to the transfer,
voting or repurchase of any shares of capital stock of the Company.
(b) Except as set forth on Schedule 3.2(b) of the Disclosure Schedule, or
as publicly disclosed by the Company, all of the issued and outstanding shares
of capital stock of each subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and are owned by the Company,
directly or
9
<PAGE> 51
indirectly, free and clear of any Lien (as hereinafter defined) or any other
limitation or restriction (including any restriction on the right to vote or
sell the same, except as may be provided as a matter of law). There are no
securities of the Company or its subsidiaries issued and outstanding that are
convertible into or exchangeable for, no options or other rights to acquire from
the Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of any capital stock or other ownership
interests in, or any other securities of, any subsidiary. There are no
outstanding contractual obligations of the Company or its subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
or other ownership interests in any subsidiary. For purposes of this Agreement,
"Lien" means, with respect to any asset (including, without limitation, any
security) any mortgage, lien, pledge, charge, claim, security interest or
encumbrance of any kind in respect of such asset.
(c) The affirmative vote of the holders of a majority of the outstanding
Shares is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger.
SECTION 3.3 Authority Relative to this Agreement; Consents and Approvals.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Company Board, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the then outstanding
Shares). This Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid, legal and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) to the
extent that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and (ii) that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding thereof may be brought.
(b) The Company Board has duly and validly approved, and taken all
corporate actions required to be taken by the Company Board for the consummation
of, the transactions, including the Offer and the Merger, contemplated hereby
and resolved to recommend that the shareholders of the Company approve and adopt
this Agreement subject to Section 5.2.
SECTION 3.4 SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents with
the SEC since October 10, 1997 (the "SEC Reports"), each of which has complied
in all material respects with all applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the Exchange Act, each as in
effect on the dates such forms, reports and documents were filed. The Company
has delivered to Merger Sub or Parent, in the form filed with the SEC (including
any amendments thereto), (i) its Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, (ii) all definitive proxy statements relating to the
Company's meetings of shareholders (whether annual or special) held since
October 10, 1997, (iii) its Quarterly Reports on Form 10-Q for the quarters
ended September 30, 1998, December 31, 1998 and March 31, 1999, and (iv) all
other reports or registration statements filed by the Company with the SEC since
October 10, 1997. None of such forms, reports, registration statements or
documents, including, without limitation, any financial statements or schedules
included or incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company and its
subsidiaries included in the Annual Report on Form 10-K referred to in the
second sentence of this Section 3.4(a) and the unaudited consolidated interim
financial statements of the Company and its subsidiaries included in the
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1999 (A)
comply as to form in all material respects with applicable accounting
requirements and the published
10
<PAGE> 52
rules and regulations of the SEC with respect thereto, (B) have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered thereby, except as
may be indicated in the notes thereto and except, in the case of unaudited
statements, as may be permitted under the Exchange Act, and (C) fairly present
the consolidated financial position of the Company and its subsidiaries as of
the dates thereof and their consolidated results of operations, financial
condition, cash flow and changes in financial position for the periods then
ended (subject, in the case of the unaudited interim financial statements, to
normal year-end adjustments).
(b) The Company has heretofore made available to Merger Sub or Parent a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Exchange
Act.
SECTION 3.5 Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
Offer Documents, the Proxy Statement or provided by the Company in the Schedule
14D-9 will, at the respective times that the Offer Documents, the Proxy
Statement, and the Schedule 14D-9 or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
SECTION 3.6 Consents and Approvals; No Violations. Assuming the truth and
accuracy of the representations and warranties of Parent and Merger Sub in
Section 4.4, except for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the filing
and recordation of the Certificate of Merger with the Secretary of State of the
State of Delaware as required by the DGCL, no filing with or notice to, and no
permit, authorization, consent or approval of, or order of, any court or
tribunal or administrative, governmental or regulatory body, agency or authority
(a "Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Company Material Effect. Neither the execution, delivery
and performance of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (a) conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws (or
similar governing documents) of the Company or any of its subsidiaries, (b)
except as set forth on Schedule 3.6 of the Disclosure Schedule, result in a
violation or breach of, or cause acceleration, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under any of the terms,
conditions or provisions of any Material Contracts (as defined in Section
3.7(a)), or (c) violate any order, writ, injunction, decree, law, statute, rule
or regulation of any court, or any Governmental Entity having jurisdiction over
the Company or any of its subsidiaries or any of their respective properties or
assets, except in the case of (b) or (c) for violations, breaches or defaults
which would not have, individually or in the aggregate, a Company Material
Adverse Effect.
SECTION 3.7 Material Contracts.
(a) Except as set forth in the SEC Reports filed prior to the date of this
Agreement or Section 3.7 of the Disclosure Schedule, neither the Company nor any
of the subsidiaries is a party to or bound by any (i) "material contract" (as
such term is defined in Item 601(b)(10) of Regulations S-K promulgated by the
SEC), (ii) non-competition agreement or any other agreement or obligation which
purports to limit in any material respect the manner in which, or the localities
in which, all or any material portion of the business of the Company and the
subsidiaries, taken as a whole, may be conducted, (iii) transaction, agreement,
arrangement or understanding with any affiliate of the Company or such
subsidiary that would be required to be disclosed under Item 404 of Regulation
S-K promulgated by the SEC, (iv) material acquisition, merger,
11
<PAGE> 53
asset purchase or sale agreement, (v) agreement which provides for, or relates
to, the incurrence by the Company or any subsidiary of indebtedness for borrowed
money in excess of $100,000 (including any interest rate or foreign currency
swap, cap, collar, hedge or insurance agreements, or options or forwards on such
agreements, or other similar agreements for the purpose of managing the interest
rate or foreign exchange risk associated with its financing), (vi) agreement
with any executive officer of the Company or any of the subsidiaries the
benefits of which are contingent or vest, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company or any of
the subsidiaries of the nature contemplated by this Agreement, (vii) agreement
with respect to any executive officer of the Company or any of the subsidiaries
providing any term of employment or compensation guarantee, or (viii) contract
or other agreement which would prohibit or materially delay the consummation of
the Merger or any of the transactions contemplated by this Agreement (all
contracts of the type described in clauses (i) through (viii) being referred to
herein as "Material Contracts"). Each Material Contract is valid and binding on
the Company (or, to the extent a subsidiary of the Company is a party, such
subsidiary) and is in full force and effect, and the Company and each subsidiary
have performed in all material respects all material obligations required to be
performed by them under each Material Contract.
(b) Except as set forth on Schedule 3.7 of the Disclosure Schedule or as
disclosed in the Recent SEC Reports, none of the Company or its subsidiaries is
in default, in conflict with or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation),
in any material respect, of any term, condition or provision of (i) its
Certificate of Incorporation or Bylaws (or similar governing documents), or (ii)
any Material Contract, except in the case of (ii) for violations, breaches or
defaults that would not have, individually or in the aggregate, a Company
Material Adverse Effect.
SECTION 3.8 No Undisclosed Liabilities; Absence of Changes.
(a) Except (i) as set forth on Schedule 3.8 of the Disclosure Schedule or
as disclosed in the Recent SEC Reports, or (ii) liabilities incurred in the
ordinary course of business, none of the Company or its subsidiaries has any
material liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of the Company and its subsidiaries (including the
notes thereto).
(b) Except as set forth on Schedules 3.8 and 5.1 of the Disclosure Schedule
or as disclosed in the Recent SEC Reports, since March 31, 1999, the Company and
its subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been any event, occurrence or development
or state of circumstances or facts as described in Sections 5.1(a) through
5.1(m).
SECTION 3.9 Litigation. Except as disclosed in the Recent SEC Reports,
there is no suit, litigation, arbitration, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties,
assets or business before any Governmental Entity which would have, individually
or in the aggregate, a Company Material Adverse Effect or would prevent or
substantially delay the consummation of the transactions contemplated by this
Agreement. Except as disclosed in the Recent SEC Reports, none of the Company or
its subsidiaries is subject to any outstanding order, writ, injunction or decree
that would have, individually or in the aggregate, a Company Material Adverse
Effect or would prevent or delay the consummation of the transactions
contemplated hereby.
SECTION 3.10 Compliance with Applicable Law. Except as disclosed in the
Recent SEC Reports, the Company and its subsidiaries hold all permits, licenses,
consents, authorizations, certificates, variances, exemptions, orders and
approvals of and from all, and has made all declarations and filings with,
Governmental Entities necessary for the lawful conduct of their respective
businesses, as presently conducted, and to own, lease, license and use its
respective properties and assets (the "Company Permits"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals which
would not have, individually or in the aggregate, a Company Material Adverse
Effect. The Company and its subsidiaries are in compliance with the terms of the
Company Permits, except where the failure so to comply would not have a Company
Material Adverse Effect. Except as disclosed in the Recent SEC Reports, the
activities or businesses of the Company
12
<PAGE> 54
and its subsidiaries are not being conducted in violation of or in conflict
with, in any material respect, any law, rule, order, judgment, decree, ordinance
or regulation of the United States, any state, county or locality, or of any
Governmental Entity of the United States, except where the violation or conflict
would not result in a Company Material Adverse Effect. Except as disclosed in
the Recent SEC Reports, no investigation or review by any Governmental Entity of
the United States, any country, any state, county or locality or of any foreign
jurisdiction with respect to the Company or its subsidiaries is pending or, to
the knowledge of the Company and any subsidiary, threatened, nor, to the
knowledge of the Company and any subsidiary, has any Governmental Entity of the
United States, any country, any state, county or locality or of any foreign
jurisdiction indicated an intention to conduct the same, other than, in each
case, those which could not have a Company Material Adverse Effect.
SECTION 3.11 Employee Plans. Except as set forth on Schedule 3.11 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, there are no
employee benefit plans (including without limitation, retirement, savings,
thrift, deferred compensation, severance, stock ownership, stock purchase, stock
option, performance, bonus, incentive, vacation or holiday pay, travel, fringe
benefit, hospitalization or other medical, disability, life or other insurance,
and any other employee benefit policy, trust, understanding or arrangement of
any kind) maintained or contributed to by the Company or its subsidiaries or
with respect to which the Company or its subsidiaries has any actual or
potential liability (the "Employee Plans") except for liability that would not
have, individually or in the aggregate, a Company Material Adverse Effect. The
Employee Plans are in compliance with applicable law, including without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code, except for instances of non-compliance that would not
have, individually or in the aggregate, a Company Material Adverse Effect. None
of the Employee Plans are subject to Title IV of ERISA nor provide for medical
or life insurance benefits to retired or former employees of the Company or any
subsidiary (other than as required under Code Section 4980B, or similar state
law). None of the Employee Plans have any material unfunded liabilities. Except
as set forth on Schedule 3.11 of the Disclosure Schedule or as disclosed in the
Recent SEC Reports, none of the Employee Plans obligates the Company to pay any
separation, severance, termination, bonus or similar benefit solely as a result
of any transaction contemplated by this Agreement or solely as a result of a
change in control or ownership of the Company. There are no pending or, to the
knowledge of the Company, threatened actions, suits, investigations or claims
with respect to any Employee Plan, and the Company has no knowledge of any facts
that could result in any actions, suits, investigations or claims that could
reasonably be expected to result in a Company Material Effect.
SECTION 3.12 Environmental Laws and Regulations.
(a) Except as set forth on Schedule 3.12 of the Disclosure Schedule or as
disclosed in the Recent SEC Reports, (i) each of the Company and its
subsidiaries is in compliance with all applicable Environmental Laws (as defined
in Section 3.12(g)), except for non-compliance that would not have a Company
Material Adverse Effect, which compliance includes, but is not limited to, the
possession by the Company and its subsidiaries of all material permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof, (ii) since March 31, 1999,
none of the Company or its subsidiaries has received written notice of, or, to
the best knowledge of the Company, is the subject of, any material action, cause
of action, claim, investigation, demand or notice by any person or entity
alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim"), and (iii) to the knowledge of the Company, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance, or give rise to material Environmental Claims, in the
future.
(b) Except as disclosed in the Recent SEC Reports, there are no
Environmental Claims which would have a Company Material Adverse Effect that are
pending or, to the knowledge of the Company, threatened against the Company or
its subsidiaries or, to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
13
<PAGE> 55
(c) (i) No site or facility now owned, operated or leased by the Company or
any of its subsidiaries or, to the knowledge of the Company, previously owned,
operated or leased, is listed or, to the knowledge of the Company proposed for
listing on the national priorities List or CERCLIS, promulgated pursuant to the
Comprehensive Environmental Response, Compensation and liability Act of 1980, as
amended ("CERCLA"), and the rules and regulations thereunder or on any similar
state or local list of sites requiring investigation or remediation.
(ii) Neither the Company nor any of its subsidiaries has received any
written notice of any actual or alleged violation or any Environmental law with
respect to any of its facilities, except a violation or violations that,
individually, or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect.
(iii) The Company and its subsidiaries are not subject to any material
outstanding agreements or orders with any Governmental or Regulatory Authority
or other person respecting (A) Environmental Laws, (B) Remedial Action or (C)
any Release of a Hazardous Material.
(iv) Neither the Company nor any of its subsidiaries has received any
written notice or request for information pertaining to a response action (as
defined by CERCLA), with respect to any of its sites or facilities now or
previously owned, operated or leased by them, except for notices or requests
that individually or in the aggregate could not reasonably be expected to have a
Company Material Adverse Effect.
(v) To the knowledge of the Company, no Hazardous Material is present
(except in quantities for retail sale to consumers, for store maintenance or as
otherwise permitted under any Environmental Law (as defined below)) or has been
Released (as defined below) at, on or about, any of the Company or its
subsidiaries' sites or facilities, now owned, operated or leased by them, except
in compliance with Environmental Law, and except for the presence of Hazardous
Material or such Release(s) which individually or in the aggregate could not
reasonably be expected to have a Company Material Adverse Effect.
(d) No liens have arisen under or pursuant to any Environmental Law on any
site or facility currently owned, operated or leased by the Company or any of
its subsidiaries, other than Liens that individually or in the aggregate could
not reasonably be expected to have a Company Material Adverse Effect.
(e) There have been no material environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are in the
possession of, the Company or any of its subsidiaries in relation to any site or
facility owned, operated or leased by the Company or any of its subsidiaries,
except for those the reports of which have been made available to Parent prior
to the execution of this Agreement.
(f) No sites or facilities, now or previously owned, operated or leased by
the Company or any of its subsidiaries, have or had at the time of ownership,
operation, or leasing, to the knowledge of the Company, any (i) underground
storage tanks, (ii) friable asbestos, (iii) polychlorinated byphenyls ("PCBs"),
or (iv) chlorofluorocarbons ("CFCs"), except in circumstances which could not
reasonably be expected to have individually or in the aggregate a Company
Material Adverse Effect or adversely affect the ability of the Company to
perform its obligations hereunder or to consummate the Merger.
(g) As used herein:
(i) "Environmental Law" means any Law or order relating to the
environment or to emissions, discharges or Releases of pollutants,
contaminants, or chemicals, or industrial, toxic or hazardous substances or
wastes, into the environment (including structures, ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes.
(ii) "Hazardous Material" means (A) any chemicals or other materials
or substances that are defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "pollu-
14
<PAGE> 56
tants," "contaminants," or words of similar import under any Environmental
Law, including petroleum, friable asbestos, PCBs, and CFCs, and (B) any
other chemical, material or substance, the presence of or exposure to which
is prohibited, limited or regulated by any Governmental or Regulatory
Authority under any Environmental Law.
(iii) "Release" means any actual or threatened (as defined under
CERCLA) release, spill, effluent, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
environment or any structure.
(iv) "Remedial Action" means all actions, including any capital
expenditures, required by a Governmental or Regulatory Authority, required
under any Environmental Law or voluntarily undertaken to (A) clean up,
remediate, remove, treat, or in any other way ameliorate or address any
Hazardous Materials Released into the environment; (B) prevent the Release,
or minimize the further Release of any Hazardous Material so it does not
endanger or threaten to endanger public health or the environment; (C)
perform pre-remedial studies and investigations or post-remedial monitoring
and care relating to a Release; or (D) bring the applicable party into
compliance with any Environmental Law.
SECTION 3.13 Intellectual Property; Software.
(a) Each of the Company and its subsidiaries owns, or possesses valid and
enforceable third party licenses to use, all existing United States and foreign
patents, trademarks, trade names, service marks, trade dress, Internet domain
names, together with all the goodwill associated therewith, copyrights, computer
software, data, databases and documentation thereof, trade secrets, know-how and
other proprietary information, including any applications and registrations of
any of the foregoing, necessary for the operation of the business of the Company
and its subsidiaries as now conducted (the "Company Intellectual Property
Rights"), except where the failure to own or possess valid rights to use such
Company Intellectual Property Rights would not have a Company Material Adverse
Effect. The patents, registrations and applications for registration included
among the Company Intellectual Property Rights are set forth on Section 3.13(a)
of the Company Disclosure Schedule.
(b) Except as set forth on Schedule 3.13(b) of the Disclosure Schedule,
(i) the validity, enforceability and use of the Company Intellectual
Property Rights and the title thereto of the Company or any subsidiary as
the case may be is not being questioned in any litigation or other
proceeding to which the Company or any subsidiary is a party, nor has any
claim of infringement or misappropriation (including, without limitation,
any demand or request that the Company or any subsidiary license any
intellectual property rights from a third party) been alleged or, to the
knowledge of the Company, threatened against the Company or any subsidiary
by any third party in connection with such third party's intellectual
property rights,
(ii) to the knowledge of the Company and its subsidiaries, no third
party is infringing or misappropriating the Company Intellectual Property
Rights,
(iii) the consummation of the transactions contemplated hereby will
not result in the loss or impairment of any Company Intellectual Property
Rights,
(iv) subject only to customary source code escrow agreements, the
Company and its subsidiaries have ownership and possession of all source
code and use and system documentation for the material software owned by
the Company or any subsidiary, and
(v) all employees and independent contractors who have participated in
the creation or development of any portion of the Company Intellectual
Property Rights have executed an agreement with the Company and/or a
subsidiary assigning all right, title and interest in such portion of the
Company Intellectual Property Rights developed for the benefit of the
Company to the Company or the subsidiary, as the case may be.
15
<PAGE> 57
(c) The Company and each of its subsidiaries have conducted an inventory
and assessment of the software, hardware, databases and embedded control systems
(microprocessor controlled, robotic or other device) (collectively "Systems")
used or relied on by the Company and its subsidiaries in connection with their
business or in connection with the use, operation or enjoyment of, any material
tangible or intangible asset or real property of the Company or its
subsidiaries, in order to determine which parts of the Systems are not Year 2000
Compliant (as defined below) and to estimate the cost of rendering such Systems
Year 2000 Compliant prior to December 31, 1999 or such earlier date on which the
Systems may shut down or may produce incorrect calculations or otherwise
malfunction without becoming totally inoperable. Year 2000 Compliant means that
the Systems will operate to accurately process (including but not limited to
calculating, comparing and sequencing) date information relating to dates
before, on, or after January 1, 2000, including leap- year calculations. To the
knowledge of the Company, after due inquiry, and except as disclosed in the
Recent SEC Reports, neither the Company nor any of its subsidiaries will incur
material expenses arising from or relating to the failure of any of its Systems
as a result of the advent of the year 2000, or the transition from the twentieth
century through the year 2000.
SECTION 3.14 Certain Business Practices. To the knowledge of the Company,
none of the Company, any of its subsidiaries or any directors, officers, agents
or employees of the Company or any of its subsidiaries has (i) used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
SECTION 3.15 Labor Matters. Neither the Company nor any of its
subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the Company or any of its subsidiaries the subject of
any proceeding asserting that the Company or any of its subsidiaries has
committed an unfair labor practice or seeking to compel it to bargain with any
labor union or labor organization, nor is there pending or, to the knowledge of
the Company, threatened any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company or any of its subsidiaries.
SECTION 3.16 Insurance. The Company maintains insurance policies (the
"Insurance Policies") against all risks of a character and in such amounts as
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, and all premiums due thereon have been paid
in full. None of the Insurance Policies will terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. No insurer under any Insurance Policy has
canceled or generally disclaimed liability under any such policy or, to the
Company's knowledge, indicated any intent to do so or not to renew any such
policy.
SECTION 3.17 Tax Matters.
(a) The Company and its subsidiaries have accurately prepared and duly
filed with the appropriate domestic federal, state, local and foreign taxing
authorities all tax returns, information returns and reports required to be
filed with respect to the Company and its subsidiaries and have paid in full or
made adequate provision for the payment of (by way of reserves on the balance
sheet or otherwise) all Taxes (as defined below). Neither the Company nor any of
its subsidiaries is delinquent in the payment of any Taxes. As used herein, the
term "Taxes" means all federal, state, local and foreign taxes, including,
without limitation, income, profits, franchise, employment, transfer,
withholding, property, excise, sales and use taxes (including interest and
penalties thereon and additions thereto).
(b) Except as set forth on Section 3.17(b) of the Disclosure Schedule, no
employee responsible for tax matters of the Company or any subsidiary has
knowledge based on personal contact with any agent of any taxing authority of
any claim made by such an authority in a jurisdiction where the Company or any
subsidiary does not file tax returns that the entity so not filing is or may be
subject to taxation by that jurisdiction.
16
<PAGE> 58
(c) There are no security interests on any of the assets of the Company or
any subsidiary that arose in connection with any failure (or alleged failure) to
pay any Tax.
(d) There is no dispute or claim concerning any Tax liability of the
Company or any subsidiary either (i) claimed or raised by any authority in
writing or (ii) as to which any of the employees responsible for Tax matters of
the Company or any subsidiary has knowledge based upon personal contact with any
agent of such authority. Schedule 3.17(d) sets forth those tax returns that
currently are the subject of audit.
(e) None of the Company or any subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(f) None of the Company nor any subsidiary has filed a consent under Code
Section 341(f) concerning collapsible corporations. Except as set forth on
Section 3.17(f) of the Disclosure Schedule, none of the Company nor any
subsidiary has made any payments, is obligated to make payments, or is a party
to any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G or Code Section
162(m). None of the Company nor any subsidiary has been a United States real
property holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii).
(g) None of the Company nor any subsidiary has any liability for the Taxes
of any person other than the Company or any subsidiary (i) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local or foreign law), or
(ii) by contract, except pursuant to contracts for the lease, purchase or sale
of goods or services in the ordinary course of business consistent with
commercial practices.
(h) None of the Company nor any subsidiary owns an interest in an entity
either treated as a partnership or whose separate existence is ignored for
federal income tax purposes.
SECTION 3.18 Brokers. No broker, finder or investment banker (other than
the Financial Advisor pursuant to an arrangement (that may not be amended or
modified without the prior written consent of Parent) that has been disclosed to
Parent and Merger Sub prior to the date hereof) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
the Company or any subsidiary.
SECTION 3.19 Real Estate.
(a) Attached as Schedule 3.19(a) is the address and legal description of
each parcel of real property owned by the Company or any subsidiary (the "Owned
Real Property"). Except as described on such Schedule, the Company or its
applicable subsidiary has good and marketable title in and to all of the Owned
Real Property subject to no Liens or other defects in title, except for such
Liens, if any, as are reflected in the Company's financial statements included
in the Recent SEC Reports or such other Liens as do not detract in any material
respect from the value or marketability of the property subject thereto and do
not materially interfere with the use of such property.
(b) Attached as Schedule 3.19(b) is a list of all material leases,
subleases and other occupancy agreements, including all amendments, extensions
and other modifications (the "Leases") for real property (the "Leased Real
Property", collectively with the Owned Real Property, the "Real Property") to
which the Company or any subsidiary is a party. The Company or its applicable
subsidiary has a good and valid leasehold interest in and to all of the Leased
Real Property, subject to no Liens except as described in such Schedule, except
for such Liens, if any, as are reflected in the Company's financial statements
included in the Recent SEC Reports or such other Liens as do not detract in any
material respect from the value or marketability of the property subject thereto
and do not materially interfere with the use of such property. Each Lease is in
full force and effect and is enforceable in accordance with its terms in all
material respects. Except as disclosed on Schedule 3.19(b), to the knowledge of
the Company, there exists no default or condition which, with the giving of
notice, the passage of time or both, could become a material default under any
Lease. The Company has previously delivered to Parent true, complete, and
correct copies of all the Leases.
17
<PAGE> 59
(c) The Real Property constitutes all of the material real property owned,
leased, occupied or otherwise used in connection with the business of the
Company and its subsidiaries. The Real Property and all plants, buildings and
improvements located thereon conform to all applicable building, zoning and
other laws, ordinances, rules and regulations except for violations which would
not have a Company Material Adverse Effect. All permits, licenses and other
approvals necessary to the current occupancy and use of the Real Property have
been obtained, are in full force and effect and have not been violated, except
for violations that, individually or in the aggregate, would not have a Company
Material Adverse Effect. There exists no violation by the Company or any
subsidiary of any covenant, condition, restriction, easement, agreement or order
affecting any portion of the Real Property (except for violations that,
individually or in the aggregate, would not have a Company Material Adverse
Effect). There is no pending or, to the knowledge of the Company and its
subsidiaries, any threatened condemnations proceeding affecting any portion of
the Real Property. Except as disclosed on Schedule 3.19(c), there are no
outstanding options or rights of first refusal with respect to the purchase or
use of any or the Owned Property, any portion thereof or interest therein.
Except as disclosed on Schedule 3.19(c), neither the Company nor any subsidiary
is obligated to purchase any real property.
SECTION 3.20 Opinion of Financial Advisor. The Company has received the
opinion of the Financial Advisor to the effect that, as of the date of this
Agreement, the consideration to be received in the Offer and the Merger by the
Company's stockholder is fair to the Company's stockholders from a financial
point of view, and a complete and correct signed copy of such opinion has been,
or promptly upon receipt thereof will be, delivered to Parent. The Company has
been authorized by the Financial Advisor to permit the inclusion of such opinion
in its entirety in the Offer Documents, the Schedule 14D-9, and the Proxy
Statement, so long as such inclusion is in form and substance reasonably
satisfactory to the Financial Advisor and its counsel.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant, on a joint and several
basis, to the Company as follows:
SECTION 4.1 Organization.
(a) Each of Parent and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its businesses as now being conducted. Except as set forth in the Commitment
Letters (as defined in Section 4.7), Parent and Merger Sub have no obligations
or liabilities, and none of such parties are parties to any litigation, which in
either case if paid or determined adversely, or with respect to which an event
of default occurs, would have a material effect on their ability to consummate
the transactions contemplated hereby.
(b) Parent has heretofore delivered to the Company accurate and complete
copies of the Certificate of Incorporation and Bylaws, as currently in effect,
of Parent and Merger Sub. Each of Parent and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Parent Material Adverse Effect. The term "Parent
Material Adverse Effect" means (i) a material adverse effect on the financial
condition, properties, business or results of operations of the Parent and
Merger Sub, individually or in the aggregate or (ii) the ability of the Parent
or Merger Sub to perform its obligations under this Agreement.
SECTION 4.2 Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
18
<PAGE> 60
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Merger Sub and by their respective
shareholders as required by applicable law or their respective charter
documents, and no other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub and constitutes a valid, legal and
binding agreement of each of Parent and Merger Sub, enforceable against each of
Parent and Merger Sub in accordance with its terms, except (i) to the extent
that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and (ii) that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding thereof may be brought.
SECTION 4.3 Information Supplied. None of the information supplied or to
be supplied by Parent or Merger Sub for inclusion or incorporation by reference
in the Offer Documents, the Schedule 14D-9, or the Proxy Statement (as defined
in Section 5.4(a)) will, at the respective times that the Offer Documents, the
Schedule 14D-9, the Proxy Statement or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
SECTION 4.4 Consents and Approvals; No Violations. Assuming the truth and
accuracy of the Company's representations and warranties contained in Section
3.6, except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or blue sky laws, the HSR Act and the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
as required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Parent or Merger Sub of this Agreement or the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice would not have a Parent
Material Adverse Effect or have a material adverse affect on the ability of
Parent or Merger Sub to consummate the Offer or the Merger. Neither the
execution, delivery and performance of this Agreement by Parent or Merger Sub
nor the consummation by Parent or Merger Sub of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of the
respective certificate or articles of incorporation or Bylaws (or similar
governing documents) of Parent or Merger Sub, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or Merger Sub is a party or by which
any of them or any of their respective properties or assets may be bound or (c)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or Merger Sub or any of Parent's subsidiaries or any of
their respective properties or assets, except in the case of (b) or (c) for
violations, breaches or defaults which would not have a Parent Material Adverse
Effect or have a material adverse effect on the ability of Parent or Merger Sub
to consummate the Offer or the Merger.
SECTION 4.5 No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization, the making of the Offer or
the negotiation and consummation of this Agreement and the transactions
contemplated hereby, Merger Sub has neither incurred any obligation or liability
or engaged in any business or activity of any type or kind whatsoever or entered
into any agreement or arrangement with any person or entity.
SECTION 4.6 Brokers. Except for Dresdner Kleinwort Benson North America
LLC, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Merger Sub.
19
<PAGE> 61
SECTION 4.7 Financing. Attached hereto as Exhibit 4.7 are (i) a Senior
Facilities Commitment Letter from Dresdner Kleinwort Benson North America LLC
("DKBNA") and Dresdner Bank AG, New York and Grand Caymans Branch ("Dresdner"),
dated as of the date hereof, which provides for a commitment for senior debt
financing in an aggregate principal amount of up to $50,000,000, (ii) a Senior
Subordinated Notes Commitment Letter from DKBNA, Dresdner and Dresdner AG,
Hamburg Branch, dated as of the date hereof, which provides for a commitment for
subordinated debt financing in an aggregate principal amount of $10,000,000,
(iii) a letter from Dicom Group plc, dated as of the date hereof, which provides
for a commitment of equity financing of $4,000,000, (iv) a letter from Dresdner
Kleinwort Benson Private Equity Partners LP, dated as of the date hereof, which
provides for a commitment of equity financing of $16,000,000 (collectively, the
"Commitment Letters"). Assuming the financings contemplated by the Commitment
Letters are consummated in accordance with the terms thereof, the amounts
received thereunder by Parent and Merger Sub will provide Parent and Merger Sub
with sufficient funds to pay the aggregate amount payable in respect of the
Shares and the Stock Options upon the consummation of the Offer and the Merger
in accordance with the terms hereof. Neither Parent nor Merger Sub is presently
aware of any facts or circumstances which create a reasonable basis for Parent
or Merger Sub to believe that the conditions precedent set forth in the
Commitment Letters will not be satisfied.
ARTICLE 5
COVENANTS
SECTION 5.1 Conduct of Business of the Company. Except as contemplated by
this Agreement, during the period from the date hereof to the Effective Time,
the Company will conduct its operations in the ordinary course of business
consistent with past practice, and the Company shall, and shall cause its
subsidiaries to, use its or their reasonable efforts to preserve substantially
intact its business organization, to keep available the services of its present
officers and employees and to preserve the present commercial relationships of
the Company and its subsidiaries with persons with whom the Company or its
subsidiaries do business. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, prior to the Effective
Time, the Company will not and will not permit any of its subsidiaries, without
the prior written consent of Parent or Merger Sub, or as set forth in Section
5.1 of the Disclosure Schedule, to:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend or modify (except as required hereby) the terms of the Company
Plans or authorize for issuance, issue, sell, deliver or agree or commit to
issue (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
limitation, any phantom stock or stock appreciation rights), except for the
issuance or sale of shares of common stock pursuant to the exercise of Stock
Options or under its 1997 Stock Plan;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or redeem
or otherwise acquire any capital stock of its subsidiaries;
(d) (i) incur or assume any indebtedness for borrowed money except for
indebtedness not exceeding $100,000 in the aggregate, (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except for
obligations not exceeding $100,000 in the aggregate, (iii) except for
investments not exceeding $100,000 in the aggregate, make any loans, advances or
capital contributions to, or investments in, any other person (other than to
subsidiaries of the Company or customary loans or advances to employees in the
ordinary course of business consistent with past practice), (iv) pledge or
otherwise encumber shares of capital stock of the Company's subsidiaries, or (v)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to
20
<PAGE> 62
exist any material Lien thereupon except for Liens securing indebtedness for
borrowed money not exceeding $100,000 in the aggregate;
(e) except as may be required by law or as contemplated by this Agreement,
(i) enter into, adopt or amend or terminate any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee in any material manner,
or (ii) except for normal salary increases and bonus payments in the ordinary
course of business consistent with past practice, increase in any material
manner the compensation of any director, officer or employee or agent, or (iii)
pay any material benefit not required by any plan and arrangement as in effect
as of the date hereof (including, without limitation, the granting of stock
appreciation rights or performance units), or (iv) create, issue or increase any
severance agreement or stay bonus with any officer, director or employee;
(f) acquire, sell, lease or dispose of any assets outside the ordinary
course of business which have a value in the aggregate in excess of $100,000;
(g) except as may be required as a result of a change in law or in GAAP,
change any of the accounting principles or cash management practices used by it;
(h) authorize or make any new capital expenditure or expenditures which,
individually, is in excess of $100,000 or, in the aggregate, are in excess of
$500,000;
(i) make any tax election or settle or compromise any income tax liability
material to the Company and its subsidiaries taken as a whole;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of the Company
and its subsidiaries in the Recent SEC Reports or incurred in the ordinary
course of business consistent with past practice;
(k) alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure or ownership of any subsidiary or the
Company; or
(l) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through 5.1(k) or any action which would cause or
constitute a breach of any of the representations or warranties of the Company
contained in this Agreement.
SECTION 5.2 No Solicitation.
(a) The Company shall not, nor shall it permit any of the subsidiaries to,
nor shall it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Company
or any of the subsidiaries to (i) solicit or initiate, encourage, or facilitate,
directly or indirectly, any inquiries relating to, or the submission of, any
proposal or offer, whether in writing or otherwise, from any person other than
Parent, Merger Sub or any affiliates thereof (a "Third Party") to acquire
beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of all or
a material portion of the assets of the Company or any of its subsidiaries or
20% or more of any class of equity securities of the Company or any of its
subsidiaries pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of assets, tender offer, exchange offer or
similar transaction with respect to either the Company or any of its
subsidiaries, including any single transaction or series of related
transactions, which is structured to permit such third Party to acquire
beneficial ownership of any material portion of the assets of or 20% or more of
the equity interest in either the Company or any of its subsidiaries (a
"Takeover Proposal"), (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information or data with respect to or
access to the properties of, or take any other action to knowingly facilitate
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Takeover Proposal or (iii) enter into any agreement
21
<PAGE> 63
with respect to any Takeover Proposal, approve or recommend or resolve to
approve or recommend any Takeover Proposal or enter into any agreement or
understanding requiring it to abandon, terminate or fail to consummate the
Offer, the Merger and the other transactions contemplated by this Agreement.
Notwithstanding the foregoing sentence, prior to the expiration of the Offer, if
the Company Board receives a bona fide Takeover Proposal by a Third Party that
was not solicited or initiated, or encouraged or facilitated, directly or
indirectly, by the Company, any of the subsidiaries or any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of the subsidiaries, the terms of which
the Company Board determines in good faith (after consulting and receiving
advice from the Company's independent financial advisor and independent legal
counsel) are more favorable from a financial point of view to the holders of
Shares than the Offer, the Merger and other transactions contemplated by this
Agreement (taking into account any adjustments to the terms and conditions
proposed in writing by Merger Sub within three (3) Business Days after Parent
and Merger Sub receive notice of such Takeover Proposal) and taking into account
any differences in the conditions set forth in the Superior Proposal, in the
aggregate, from the conditions set forth herein (a "Superior Proposal"), then
the Company may, in response to an unsolicited request therefor and subject to
compliance with Section 5.2(b) furnish information with respect to the Company
and the subsidiaries to, and participate in discussions and negotiations
directly or through its representatives with, such Third Party, subject to a
confidentiality agreement; provided, that the Company Board first determines in
good faith, after receiving the advice of independent legal counsel, that such
action is required in order for the Company Board to comply with its fiduciary
duties to the Company's stockholder under applicable law, and the Company shall
not have violated any of the restrictions set forth in this Section 5.2;
provided, however, that any such Takeover Proposal shall not be deemed to be a
Superior Proposal if any financing required to consummate the transaction
contemplated thereby is not committed on terms substantially similar to those
obtained by or for the benefit of Parent and Merger Sub in connection with the
Offer and the Merger and such commitment is not likely, in the reasonable
judgment of the Company's Board (after consultation with its independent
financial advisor), to be obtained by such third party within a reasonable
period of time.
(b) The Company shall advise Parent orally and in writing of (i) any
Takeover Proposal or any inquiry with respect to or which could reasonably be
expected to lead to any Takeover Proposal received by any officer or director of
the Company or, to the knowledge of the Company, any financial advisor, attorney
or other advisor or representative of the Company, (ii) the material terms of
such Takeover Proposal (including a copy of any written proposal), and (iii) the
identity of the person making any such Takeover Proposal or inquiry promptly
following receipt of such Takeover Proposal or inquiry. The Company will keep
Parent duly informed of the status and details of any such Takeover Proposal or
inquiry in a timely manner.
SECTION 5.3 Access to Information. Between the date hereof and the
Effective Time, the Company will provide to Parent and Merger Sub and their
authorized representatives reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the Company and
its subsidiaries, will permit Parent and Merger Sub to make such inspections as
Parent and Merger Sub may reasonably require and will cause the officers of the
Company and its subsidiaries to furnish Parent and Merger Sub with such
financial and operating data and other information with respect to the business
and properties of the Company and its subsidiaries as Parent or Merger Sub may
from time to time reasonably request. All of such information shall be treated
as Confidential Information pursuant to the terms of the Confidentiality
Agreement, dated June 29, 1999, between the Company and Dicom Group plc, the
provisions of which are by this reference incorporated herein.
SECTION 5.4 Shareholders Meeting; Proxy Statement.
(a) The Company will, as promptly as practicable following the acceptance
for payment of Shares by Merger Sub pursuant to the Offer, take, in accordance
with applicable law and its Certificate of Incorporation and By-laws, all action
necessary to convene a special meeting of holders of Shares (the "Shareholders
Meeting") to consider and vote upon the approval of the Merger, if such approval
is required. The Company shall, as promptly as practicable, prepare and file
with the SEC a preliminary proxy statement for the solicitation of a vote of
holders of Shares approving the Merger (the "Proxy Statement"), which shall
(subject
22
<PAGE> 64
to Section 5.4(c)) include the unanimous recommendation of the Company Board
that shareholders of the Company vote in favor of the approval and adoption of
this Agreement and the written opinion of the Financial Advisor that the cash
consideration to be received by the shareholders of the Company pursuant to the
Merger is fair to such shareholders from a financial point of view. The Company
shall use all reasonable efforts to respond to any comments of the SEC and its
staff and as promptly as practicable after responding to such comments to the
satisfaction of the staff cause the Proxy Statement to be mailed to the
shareholders of the Company. Notwithstanding the foregoing, if Parent, Merger
Sub and/or any other subsidiary of Parent shall acquire at least ninety percent
(90%) of the outstanding Shares, the parties shall take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a Shareholders Meeting in
accordance with Section 253 of the DGCL.
(b) Parent and Merger Sub agree to cause all Shares purchased pursuant to
the Offer and all other Shares owned by Parent, Merger Sub or any subsidiary of
Parent to be voted in favor of the Merger.
SECTION 5.5 Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions herein provided, each party agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable laws
and regulations to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including, without limitation, (a)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Proxy Statement, any filings that may be required under the HSR Act
and any amendments thereto, (b) the taking of all action reasonably necessary,
proper or advisable to secure any necessary consents under Material Contracts,
(c) contesting any legal proceeding relating to the Offer or the Merger and (d)
the execution of any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Merger Sub agree to use (i) all reasonable efforts to
cause the Effective Time to occur as soon as practicable after the shareholder
vote with respect to the Merger and (ii) their respective best efforts to
satisfy the conditions precedent set forth in the Commitment Letters (provided
that nothing herein shall be deemed to be an obligation of Parent or Merger Sub
to increase the Per Share Amount). In addition, Parent and Merger Sub will not
consent or agree to any amendment, waiver, modification or early termination of
the Commitment Letter in any manner adverse to Parent or Merger Sub without the
Company's prior written consent, which shall not be unreasonably withheld.
SECTION 5.6 Consents. Parent, Merger Sub and the Company each will use
all commercially reasonable efforts to obtain consents of all third parties to
Material Contracts and Governmental Entities necessary, proper or advisable for
the consummation of the transactions contemplated by this Agreement.
SECTION 5.7 Public Announcements. Parent, Merger Sub and the Company, as
the case may be, will consult with one another and seek one another's approval
before issuing any press release, or otherwise making any public statements,
with respect to the transactions contemplated by this Agreement, including,
without limitation, the Offer or the Merger and shall not issue any such press
release or make any such public statement prior to such consultation and
approval, except as may be required by applicable law or by obligations pursuant
to any listing agreement with the Nasdaq Stock Market, as determined by Parent,
Merger Sub or the Company, as the case may be.
SECTION 5.8 Indemnification; Directors' And Officers' Insurance.
(a) Parent and Merger Sub agree that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its subsidiaries, as provided in indemnification
agreements or their respective charters or bylaws (or other similar governing
instruments) or otherwise in effect as of the date hereof with respect to
matters occurring prior to the Effective Time, shall survive the Merger and
shall continue in full force and effect. To the maximum extent permitted by the
DGCL, such indemnification shall be mandatory rather than permissive, and the
Surviving Corporation shall advance expenses in connection with such
indemnification as provided in such indemnification agreements. From and after
the Effective Time, Parent will fulfill and honor, and will cause the Surviving
Corporation to fulfill and honor, in all respects the indemnification
obligations described above, which shall be joint and
23
<PAGE> 65
several obligations of Parent and the Surviving Corporation. The indemnification
and liability limitation or exculpation provisions of the Company's Certificate
of Incorporation and bylaws shall not be amended, repealed or otherwise modified
after the Effective Time in any manner that would materially adversely affect
the rights thereunder of individuals who, as of the date hereof and prior to the
Effective Time, were directors, officers, employees or agents of the Company or
its subsidiaries, unless such modification is required by applicable law.
(b) Parent shall cause the Surviving Corporation to maintain in effect for
not less than six (6) years from the Effective Time, if available, the coverage
provided by the policies of the directors' and officers' liability and fiduciary
insurance most recently maintained by the Company; provided, that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage with respect to matters occurring prior to the Effective Time
and provided further that the Surviving Corporation shall not be obligated to
pay annual premiums in excess of 150% of the annual aggregate premium for
existing insurance with respect to such insurance for the next renewal of such
insurance (the "Current Premium"). If such annual premium for such insurance
would at any time exceed 150% of the Current Premium, then the Parent and the
Surviving Corporation shall cause to be maintained policies of insurance which,
in the Surviving Corporation's good faith determination, provide the maximum
coverage reasonably available at an annual premium equal to 150% of the Current
Premium.
(c) The directors, officers, employees and agents of the Company and its
subsidiaries entitled to the indemnification, liability limitation, exculpation
and insurance set forth in this Section 5.8. are intended to be third party
beneficiaries of this Section 5.8.
SECTION 5.9 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall give
prompt notice to the Company, of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty of the notifying party contained in this Agreement to
be untrue or inaccurate in any material respect as if made at the Effective Time
and (b) any material failure of the notifying party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, that the delivery of any notice pursuant to this Section
5.9 shall not cure such breach or non-compliance or limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 5.10 SEC Filings. Each of Parent and the Company shall promptly
provide the other party (or its counsel) with copies of all filings made by the
other party or any of its subsidiaries with the SEC or any other state or
federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
SECTION 5.11 Takeover Statutes. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States (each a "Takeover
Statute") is or may become applicable to the Offer or the Merger, the Company
will use reasonable best efforts to grant such approvals and take such actions
as are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act so as to eliminate or minimize the effects of any Takeover Statute
on any of the transactions contemplated hereby.
SECTION 5.12 Transaction Litigation. The Company shall give Parent and
Merger Sub the opportunity to participate in the defense or settlement of any
litigation against the Company and its directors directly relating to any of the
transactions contemplated by this Agreement; provided, that no such settlement
shall be agreed to without Parent's consent, which consent shall not be
unreasonably withheld.
SECTION 5.13 Delisting. Each of the parties hereto shall cooperate with
each other in taking or causing to be taken, all actions necessary to delist all
of the Company's securities from the Nasdaq National Market System and to
terminate registration under the Exchange Act; provided, that such delisting and
termination shall not be effective until after the Effective Date.
24
<PAGE> 66
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of each party to effect the Merger are subject
to the satisfaction or waiver at or prior to the Effective Time of the following
conditions:
SECTION 6.1 Stockholder Approval. This Agreement, including the Merger,
shall have been approved and adopted by the affirmative vote of the shareholders
of the Company (unless the vote of the shareholders is not required by the DGCL)
as required under the Company's Certificate of incorporation or Bylaws or the
DGCL.
SECTION 6.2 No Order. No federal, state or foreign Governmental Entity or
federal, state or foreign court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect (which order or other action the parties
hereto shall use their reasonable efforts to vacate or lift) and has the effect
of making the consummation of the Merger illegal under applicable law.
SECTION 6.3 HSR Act. Any waiting period (and any extension thereof)
applicable to the Merger and the other transactions described in the recitals to
this Agreement under the HSR Act shall have terminated or expired, and any other
governmental or regulatory notices or approvals required with respect to the
transactions contemplated hereby (the absence of which would reasonably be
expected to have a Company Material Adverse Effect) shall have been either filed
or received.
SECTION 6.4 Offer. Merger Sub shall have accepted for payment and
purchased all Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE 7
Termination; Amendment; Waiver
SECTION 7.1 Termination. This Agreement may be terminated and the Offer
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval of this Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent, Merger Sub and the Company;
(b) by Parent and Merger Sub or by the Company
(i) if (x), the Offer shall have terminated or expired in accordance
with its terms without Merger Sub's having accepted for payment any Shares
pursuant to the Offer or (y) the Offer shall not have been consummated
prior to October 15, 1999; provided, that the right to terminate this
Agreement pursuant to this Section 7.1(b)(i) shall not be available to any
party if it is in material breach of its obligation hereunder and such
breach is the principal cause of, or resulted in, the failure of the Offer
to have been consummated on or before such date; or
(ii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, Shares
pursuant to the Offer and such order, decree or ruling or other action
shall have become final and nonappealable; provided, that the party seeking
to terminate this Agreement pursuant to this clause (ii) shall have used
all commercially reasonable efforts to remove such order, decree, ruling,
judgment or injunction.
(c) by Parent or Merger Sub prior to the purchase of Shares pursuant to the
Offer in the event of a breach by the Company of any representation, warranty,
covenant or other agreement contained in this Agreement which (i) would give
rise to the failure of the Offer Condition set forth in paragraph (b) of Annex
25
<PAGE> 67
A to this Agreement and (ii) cannot be or has not been cured within 10 Business
Days after the giving of written notice thereof to the Company by Parent or
Merger Sub;
(d) by Parent or Merger Sub prior to the purchase of Shares pursuant to the
Offer if either Parent or Merger Sub is entitled to terminate the Offer as a
result of the occurrence of any event set forth in paragraphs (e) or (j) of
Annex A to this Agreement.
(e) by the Company if the Company Board has received a Superior Proposal
and the Company furnishes information with respect to the Company and the
subsidiaries to, and participates in discussions and negotiations directly or
through its representatives with a Third Party, subject to a confidentiality
agreement, after the Company Board determined in good faith, after receiving the
advice of independent legal counsel, that such action is required in order for
the Company Board to comply with its fiduciary duties to the Company's
stockholder under applicable law; provided, that (i) the Company has complied
with all provisions of Section 5.2, (ii) the Company may not terminate this
Agreement pursuant to this Section 7.1(e) unless and until three (3) Business
Days have elapsed following delivery to Parent of a written notice of such
determination by the Company Board (which notice shall include the identity of
the Third Party making such Superior Proposal and a copy of all documentation
relating to such Superior Proposal), and (iii) the Company delivers payment to
the Parent of the Termination Fee and the Expenses (each as defined in Section
7.3(b)) contemporaneously with such termination.
(f) by the Company prior to the purchase of Shares pursuant to the Offer if
(i) any of the representations or warranties of Parent or Merger Sub set forth
in this Agreement that are qualified as to materiality shall not be true and
correct in any respect or any such representations or warranties that are not so
qualified shall not be true and correct in any material respect, or (ii) Parent
or Merger Sub shall have failed to perform in any material respect any material
obligation or to comply in any material respect with any material agreement or
covenant of Parent or Merger Sub to be performed or complied with by it under
this Agreement and such untruth, incorrectness or failure cannot be or has not
been cured within 10 Business Days after the Company's giving of written notice
to Parent or Merger Sub, as applicable.
SECTION 7.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void (except for the provisions of this Section 7.2, the last sentence of
Section 5.3, Sections 5.7, 7.3 and Article 8), and there shall be no liability
or obligation on the part of any party or its affiliates, directors, officers or
shareholders, other than (a) the provisions of this Section 7.2 , the last
sentence of Section 5.3, Sections 5.7, 7.3 and Article 8, and (b) any liability
of any party for any breach of this Agreement prior to such termination.
SECTION 7.3 Fees and Expenses.
(a) Except as provided in this Section 7.3, whether or not the Merger is
consummated, all costs and expense incurred in connection with this Agreement
and the transactions contemplated by this Agreement, including the fees and
disbursements of counsel, financial advisors and accountants, shall be paid by
the party incurring such costs and expenses.
(b) The Company shall pay, or cause to be paid, by wire transfer of
immediately available funds to Parent (i) the documented reasonable
out-of-pocket fees and expenses incurred by or paid by or on behalf of Parent
and its affiliates (including, but not limited to, Dicom Group plc and Dresdner
Kleinwort Benson Private Equity Partners L.P.) in connection with the Offer, the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all reasonable fees and expenses of law firms, commercial
banks, investment banking firms, accountants, experts and consultants to Parent
and its affiliates ("Purchaser Expenses") not to exceed $1,750,000 and, if
applicable, (ii) $1,500,000 (the "Termination Fee") under the circumstances and
at the times set forth as follows:
(i) if the Company terminates this Agreement under Section 7.1(e), the
Company shall pay the Purchaser Expenses and the Termination Fee
concurrently with such termination in accordance with Section 7.1(e);
26
<PAGE> 68
(ii) if Parent or Merger Sub terminates this Agreement under Sections
7.1(c) or 7.1 (d), (x) the Company shall pay the Purchaser Expenses upon
demand, and (y) if concurrently with such termination or within 270 days
thereafter (A) the Company enters into a merger agreement, acquisition
agreement or similar agreement with respect to a Takeover Proposal, or a
Takeover Proposal is consummated, involving any party other than Parent or
any of its affiliates (1) with whom the Company had any discussions with
respect to a Takeover Proposal, (2) to whom the Company furnished
information with respect to or with a view to a Takeover Proposal or (3)
who had submitted a proposal or expressed any interest publicly in a
Takeover Proposal, in the case of each of clauses (1), (2) and (3), after
the date hereof and prior to such termination, or (B) the Company enters
into a merger agreement, acquisition agreement or similar agreement with
respect to a Superior Proposal, or a Superior Proposal is consummated,
then, in the case of either (A) or (B) above, the Company shall pay the
Termination Fee upon consummation of such Takeover Proposal or Superior
Proposal; and
(iii) notwithstanding clause (ii) above, if the Parent or Merger Sub
terminates this Agreement under Section 7.1(c) as a result of the Company's
material breach of Section 5.2, the Company shall pay the Purchaser
Expenses and the Termination Fee upon demand.
In no event shall the Purchaser Expenses and the Termination Fee be payable by
the Company more than once. Any such payments shall be made to the Parent by
wire transfer of immediately available funds.
(c) In the event that the Company terminates this Agreement under Section
7.1(f) or the Parent or Merger Sub terminates this Agreement solely as a result
of the failure of the condition set forth in paragraph (k) of Annex A, Parent
shall pay, or shall cause to be paid by wire transfer of immediately available
funds to the Company the documented reasonable out-of-pocket fees and expenses
incurred by or paid on behalf of the Company in connection with the offer, the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all reasonable fees and expenses of law firms, investment
banking firms, accountants, experts and consultants to the Company (the "Company
Expenses") not to exceed $400,000.
(d) Each of the parties hereto acknowledge that all amounts payable under
this Section 7.3 shall constitute liquidated damages in lieu of any actual
damages for termination of this Agreement.
SECTION 7.4 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto, by action taken by or on behalf of the respective
board of directors of the Company, Parent and Merger Sub at any time prior to
the Effective Time; provided, that after the approval and adoption of this
Agreement and the transactions contemplated thereby by the shareholders of the
Company (if required by applicable law) no amendment shall be made which would
reduce the amount or change the type of consideration into which each Share
shall be converted upon the consummation of the Merger. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties.
SECTION 7.5 Extension; Waiver. At any time prior to the Effective Time
subject to Section 1.1(a) and Section 1.3(c), each party may (a) extend the time
for the performance of any of the obligations or other acts of the other party
or parties, (b) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document, certificate or writing
delivered pursuant hereto or (c) waive compliance by the other parties with any
of the agreements or conditions contained herein, which may be legally waived.
Any agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to assert any of its rights hereunder shall not
constitute a waiver of such rights.
27
<PAGE> 69
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement pursuant to Section 7.1, as
the case may be, except for representations and warranties set forth in Sections
3.19 and 4.6.
SECTION 8.2 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and (b) shall
not be assigned by operation of law or otherwise; provided, that Merger Sub may
assign any or all of its rights and obligations under this Agreement to Parent
or any wholly owned subsidiary of Parent.
SECTION 8.3 Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 8.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the other party as follows:
To Parent or Merger Sub:
c/o DICOM Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to Parent or Merger Sub) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
28
<PAGE> 70
To the Company:
Kofax Image Products, Inc.
16245 Laguna Canyon Road
Irvine, CA 92618
Attention: Chief Executive Officer
Facsimile: (949) 727-3511
with a copy (which shall not constitute notice to the Company) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Suite 1600
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 8.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
SECTION 8.6 Construction; Interpretation. The headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement. Article, section, exhibit,
schedule, annex, party, preamble and recital references are to this Agreement
unless otherwise stated. No party, nor its respective counsel, shall be deemed
the drafter of this Agreement for purposes of construing the provisions hereof,
and all provisions of this Agreement shall be construed according to their fair
meaning and not strictly for or against any party.
SECTION 8.7 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party and its successors and permitted
assigns and, except as provided in Section 5.8 and Section 8.2, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 8.9 Specific Performance. The parties acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies, including arbitration,
which any party may have under this Agreement or otherwise.
SECTION 8.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.11 Waiver of Jury Trial. The parties to this Agreement each
hereby waives, to the fullest extent permitted by law, any right to trial by
jury of any claim, demand, action, or cause of action (i) arising under this
Agreement or (ii) in any way connected with or related or incidental to the
dealings of
29
<PAGE> 71
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The parties to this Agreement
each hereby agrees and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
* * * * *
30
<PAGE> 72
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
KOFAX IMAGE PRODUCTS, INC.
By: /s/ DAVID S. SILVER
------------------------------------
Name: David S. Silver
Title: President
IMAGING COMPONENTS CORPORATION
By: /s/ ALEXANDER P. COLEMAN
------------------------------------
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By: /s/ ALEXANDER P. COLEMAN
------------------------------------
Name: Alexander P. Coleman
Title: Vice President
31
<PAGE> 73
ANNEX A
The capitalized terms used herein have the meanings set forth in the
Agreement and Plan of Merger to which this Annex A is attached.
Notwithstanding any other provisions of the Offer, Merger Sub shall not be
required to accept for payment purchase or pay for any validly tendered Shares
(subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act), and may delay in accordance with Section
1.1(b) the acceptance for payment of, or the payment for, any validly tendered
Shares (subject to the restrictions referred to above), may amend the Offer
consistent with the terms of the Agreement, or may terminate the Offer if (i)
immediately prior to the expiration of the Offer (as extended in accordance with
the Offer), the Minimum Condition shall not have been satisfied, (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated (the "HSR Condition") or (iii) prior to the acceptance for payment of
Shares, any of the following conditions exist:
(a) There shall be threatened in writing or pending any suit, action or
proceeding by a federal, state or foreign Governmental Entity (but only if such
suit, action or proceeding is deemed by Parent to have a reasonable likelihood
of success) (i) seeking to prohibit or impose any material limitations on the
ownership or operation by the Company, Merger Sub, Parent or any of their
respective subsidiaries of a material portion of the businesses or assets of the
Company, Merger Sub, Parent or any of their respective subsidiaries which could
reasonably be expected to have a Company Material Adverse Effect as a result of
the Offer or any other transactions contemplated by this Agreement, (ii) seeking
to compel the Company, Merger Sub, or Parent to dispose of or hold separate any
material portion of their respective business or assets as a result of the Offer
or any other transactions contemplated by this Agreement, (iii) seeking to
restrain or prohibit the making or consummation of the Offer or the Merger or
the consummation of any of the other transactions contemplated by the Agreement
or the Voting Agreements, (iv) seeking to impose material limitations on the
ability of Merger Sub or Parent, or rendering Merger Sub unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the Offer or
the Merger, or (v) seeking to impose material limitations on the ability of
Merger Sub effectively to exercise full rights of ownership of the Shares
accepted for payment pursuant to the Offer, including the right to vote such
Shares on all matters properly presented to the Company's shareholders. There
shall be any statute, rule regulation, judgment, order or injunction enacted,
entered, enforced, promulgated or applicable to the Offer or the Merger, or any
other action shall be taken by any Governmental Entity, other than the
application to the Offer or the Merger of applicable waiting periods under the
HSR Act, that is reasonably likely to result, directly or indirectly, in any of
the consequences referred to in clauses (i) through (v) above.
(b) Any of the representations and warranties of the Company set forth in
the Agreement, without, for purposes of this paragraph (b) only, giving effect
to any qualifications as to materiality, shall not be true and correct in any
material respect as of the date of the Agreement and as of consummation of the
Offer as though made on or as of such date (except for those representations and
warranties that address matters only as of a particular date, which need to be
true and correct as of such particular date), or the Company shall have breached
or failed to comply with, in any material respect, any obligation, agreement or
covenant required by the Agreement to be performed or complied with by it, which
in either case could reasonably be expected to have a Company Material Adverse
Effect.
(c) It shall have been publicly disclosed that any person (which includes a
"person" as such term is defined in Section 13(d)(3) of the Exchange Act) other
than Parent, Merger Sub or any of their affiliates and stockholders of the
Company listed on Schedule 2.8, and (i) shall have acquired or announced its
intention to acquire beneficial ownership of more than 20% of the outstanding
Shares or (ii) shall have entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer for
any Shares or a merger, consolidation or other business combination with or
involving the Company, any of its subsidiaries or any of their material assets;
provided, that clause (i) hereof shall not continue after the date on which the
Minimum Condition is satisfied.
(d) The Agreement shall have been terminated in accordance with its terms.
Annex A - 1
<PAGE> 74
(e) Prior to the purchase of Shares pursuant to the Offer, the Company
Board (i) shall have withdrawn or modified (including by amendment of the
Schedule 14D-9) in a manner adverse to Parent or Merger Sub its approval or
recommendation of the Offer, this Agreement or the Merger (ii) shall have
recommended a Takeover Proposal, or (iii) shall have adopted any resolution to
effect any of the foregoing.
(f) There shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange, the
American Stock Exchange, or in Nasdaq National Market System, (ii) a declaration
of a banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), or (iii) any limitation by any United
States Governmental Entity that has a material adverse effect generally on the
extension of credit by banks or other financial institutions, in the case of any
of the situations in clauses (i) through (iii) inclusive, existing on the date
hereof, a material acceleration or worsening thereof.
(g) The Company shall commence a case under any chapter of Title XI of the
United States Code or any similar law or regulation; or a petition under any
chapter of Title XI of the United States Code or any similar law or regulation
is filed against the Company which is not dismissed within 30 Business Days.
(h) Any party identified with an asterisk on Exhibit A to any of the Voting
Agreements other than Parent or Merger Sub shall have breached or failed to
perform any of its agreements under such agreements or breach any of its
representations and warranties in such agreements or any such agreements shall
not be valid, binding and enforceable; provided, that this clause (h) shall be
deemed satisfied upon the satisfaction of the Minimum Condition.
(i) There shall have occurred any events or changes which have had, or
could reasonably be expected to have or constitute, individually or in the
aggregate, a Company Material Adverse Effect.
(j) The Company shall have less than $22,991,000 of freely available cash
or cash equivalents ("Minimum Cash"); provided, that the following adjustments
may be made, without duplication, to Minimum Cash: (i) in the event the Offer is
not consummated before August 15, 1999, Minimum Cash shall be reduced by
$750,000 (representing employee bonuses), (ii) in the event the Offer is not
consummated before September 15, 1999, Minimum Cash shall be reduced by
$1,000,000 (representing payment of the Company's Federal income taxes), (iii)
in the event the Offer is not consummated before October 15, 1999, Minimum Cash
shall be reduced by $800,000 (representing payment of the Company's Federal
income taxes), (iv) Minimum Cash shall be determined without giving effect to
Company Expenses, and (v) Minimum Cash may be reduced by an amount not to exceed
$1,350,000 in the aggregate (such aggregate amount, the "Operating Cash
Shortfall") so long as the Company's consolidated non-cash, net working capital
(i.e., current assets (excluding cash and cash equivalents) less current
liabilities as determined in accordance with GAAP, applied on a basis consistent
with the preparation of the financial statements described in Section 3.4)
("Working Capital") exceeds $2,098,000 (the Company's Working Capital as of June
30, 1999) (less up to $500,000 for capital expenditures made by the Company in
accordance with Section 5.1(h)) by an amount equal to or greater than such
Operating Cash Shortfall. The condition set forth in this clause (j) shall be
satisfied upon the presentation of evidence, documentation and information by
the Company to the Parent that the Minimum Cash, and all adjustments thereto
(including with respect to the Operating Cash Shortfall and working capital) as
of the consummation of the Offer.
(k) Parent or Merger Sub shall have not received the cash proceeds of
equity and debt financing in an amount necessary to consummate the Offer, the
Merger and the other transactions contemplated by the Agreement and to pay all
fees and expenses in connection therewith and to provide adequate working
capital for the Surviving Corporation, all on terms and conditions satisfactory
to the Parent and Merger Sub.
Annex A - 2
<PAGE> 75
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of July 27, 1999 is made by
and among Imaging Components Corporation, a Delaware corporation (the "Parent"),
Imaging Acquisition Corporation, a Delaware corporation ("Merger Sub"), and each
of the persons named on Exhibit A hereto (each, a "Stockholder", and
collectively, the "Stockholders").
WHEREAS, Parent, Merger Sub and Kofax Image Products, Inc., a Delaware
corporation (the "Company") are concurrently herewith entering into an Agreement
and Plan of Merger dated as of the date hereof (as may be amended, restated or
modified from time to time, the "Merger Agreement") which provides for, among
other things, the merger of Merger Sub with and into the Company, upon the terms
and subject to the conditions set forth in the Merger Agreement. Capitalized
terms used but not otherwise defined herein shall have the meanings set forth in
the Merger Agreement.
WHEREAS, as of the date hereof, each Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Exhibit A (the "Existing Shares" and, together with any shares of Common
Stock acquired by or issued to such Stockholder after the date hereof, the
"Subject Shares").
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Merger Sub have required that the Stockholders agree, and
the Stockholders have agreed, to enter into this Agreement.
WHEREAS, the Stockholders and Merger Sub desire to set forth their
agreement with respect to the voting of the Subject Shares in connection with
the Merger Agreement and the transactions contemplated thereby (the
"Transactions") upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. COVENANTS OF THE STOCKHOLDERS. Until the termination of this Agreement
in accordance with Section 5, the Stockholders agree as follows:
(a) Agreement to Vote in Favor. At any meeting of shareholders of the
Company called for purposes that include approval of the Merger Agreement and
the Transactions, or in connection with any written consent of the holders of
Shares or in any other circumstances in which the Stockholders are entitled to
vote, consent or give any other approval with respect to the Merger Agreement
and the Transactions, the Stockholders shall vote (or cause to be voted) the
Subject Shares in favor of adoption and approval of the Merger Agreement and the
Transactions and the approval of the terms thereof and each of the other actions
contemplated by this Agreement and the Merger Agreement and any amendments.
(b) Agreement to Tender. Within the first ten (10) Business Days after the
commencement of the Offer to tender all of their respective Subject Shares,
except, if applicable, their respective Retained Shares, into the Offer, and not
to withdraw any of their respective Shares so tendered from the Offer.
(c) Agreement to Vote Against. At any meeting of shareholders of the
Company, or in connection with any written consent of the holders of Shares or
in any other circumstances in which the Stockholders are entitled to vote,
consent or give any other approval, except as otherwise agreed to in writing in
advance by Merger Sub, the Stockholders shall vote (or cause to be voted) the
Subject Shares against the following actions:
(i) any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or of the
Stockholders hereunder; or
<PAGE> 76
(ii) any action or agreement that could reasonably be expected to
impede, interfere with, delay, postpone or attempt to discourage the Merger
and/or the Transactions, including, without limitation, (x) the adoption by
the Company of a proposal supporting a Takeover Proposal or the repurchase
by the Company or any of its Subsidiaries of outstanding Shares for
consideration in excess of the Per Share Amount or (y) any amendment of the
Company's Articles of Incorporation or By-laws (including any amendment
affecting the voting rights of the Company's Capital Stock) or other
proposal or transaction involving the Company or any of its Subsidiaries
(including any changes in management or the directors of the Company),
which amendment or other proposal or transaction could in any manner
reasonably be expected to impede, in any material respect, or prevent the
Merger, the Merger Agreement or the Transactions.
(d) Proxies. As security for the agreements of the Stockholders provided
for herein, the Stockholders hereby grant to Merger Sub a proxy to vote the
Subject Shares as indicated in Sections 1(a) and 1(b) above. The Stockholders
agree that this proxy shall be irrevocable during the term of this Agreement and
coupled with an interest and each of the Stockholders and Merger Sub will take
such further action or execute such other instruments as may be necessary to
effectuate the intent of this proxy and hereby revokes any proxy previously
granted by the Stockholders with respect to the Subject Shares.
(e) Transfer Restrictions. The Stockholders agree not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of or hypothecate
(including by gift or by contribution or distribution to any trust or similar
instrument or to any beneficiaries of the Stockholders) (collectively,
"Transfer"), or enter into any contract, option or other arrangement or
understanding (including any profit sharing arrangement) with respect to the
Transfer of, any of the Subject Shares other than pursuant to the terms hereof
and the Merger Agreement, or (ii) enter into any voting arrangement or
understanding with respect to the Subject Shares, whether by proxy, voting
agreement or otherwise other than this Agreement.
(f) Appraisal Rights. The Stockholders hereby irrevocably waive any and
all rights which it may have as to appraisal, dissent or any similar or related
matter with respect to the Merger including any such rights set forth in the
DGCL.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
hereby severally but not jointly represents and warrants to Merger Sub as of the
date hereof as follows:
(a) Authority; No Conflict. Such Stockholder has the requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Stockholder, and this Agreement constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law), an implied
covenant of good faith and fair dealing and considerations of public policy. The
execution and delivery of this Agreement by such Stockholder does not, and the
consummation by such Stockholder of the transactions contemplated hereby will
not violate any law applicable to such Stockholder or result in a violation or
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under any contract or agreement to which
such Stockholder is a party.
(b) Shares. The Existing Shares are owned beneficially and of record by
the Stockholders. The Existing Shares constitute all of the shares of Common
Stock owned of record or beneficially by the Stockholders as at the date hereof.
All of the Existing Shares are issued and outstanding and except as set forth on
Schedule A attached hereto, the Stockholders do not own, of record or
beneficially, any warrants, options or other rights to acquire any shares of
Common Stock. Each Stockholder has sole voting power, sole power of disposition,
sole power to issue instructions with respect to the matters set forth in
Section 1 hereof, sole power to demand appraisal rights (to the extent such
rights are available) and sole power to agree to all of the matters set forth in
this Agreement, in each case with respect to all of the Existing Shares, and
will have sole voting power, sole power of disposition, sole power to issue
instructions with respect to the matters set
2
<PAGE> 77
forth in Section 1 hereof, sole power to demand appraisal rights (to the extent
such rights are available) and sole power to agree to all of the matters set
forth in this Agreement, in each case with respect to all of the Subject Shares
held of record. Each Stockholder has good and valid title to the Existing Shares
and at all times during the term hereof and on the Effective Time will have good
and valid title to the Subject Shares, free and clear of all Liens and free of
any other limitation or restriction other than restrictions under applicable
securities laws.
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub hereby represents and warrants to the Stockholders as of
the date hereof as follows:
(a) Authority. Each of Parent and Merger Sub has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by its respective board of directors and no other corporate action or
proceedings on the part of Parent or Merger Sub is necessary to authorize the
execution and delivery by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub,
and, assuming this Agreement constitutes a valid and binding obligation of the
Stockholders, constitutes valid and binding obligations of Parent and Merger
Sub, enforceable against them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing and
considerations of public policy.
(b) No Conflict. The execution and delivery of this Agreement by Merger
Sub does not, and the consummation by Merger Sub of the transactions
contemplated hereby will not (i) conflict with or violate the Articles of
Incorporation, By-laws or other organizational documents of Merger Sub, (ii)
conflict with or violate any law applicable to Merger Sub or by which any
property or asset of Merger Sub is bound or affected, except for such conflicts
or violations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect, or (iii) result in a violation or any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Merger Sub is a party or by which Merger Sub or any property or asset
of Merger Sub is bound or affected, except for any such breaches or defaults
which would not materially impair the ability of Merger Sub to consummate the
transactions contemplated hereby.
4. FURTHER ASSURANCES. From time to time prior to the Effective Time, at
any other party's request and without further consideration, each party hereto
shall execute and deliver such additional documents and take all such further
lawful action as may be reasonably necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
5. TERMINATION. This Agreement shall terminate, and no party shall have
any rights or obligations hereunder and this Agreement shall become null and
void and have no further effect upon the earliest to occur of (x) the Effective
Time or (y) termination of the Merger Agreement pursuant to Section 7.1 thereof.
Nothing in this Section 5 shall relieve any party of liability for breach of
this Agreement; provided, that Merger Sub's sole remedy in the event of a breach
of this Agreement shall be as specified in Section 6(i) (provided that
injunctive relief shall also be available for any breach of Section 1(e)) and in
no event shall Merger Sub be entitled to any form of monetary damages.
6. GENERAL PROVISIONS.
(a) Costs and Expenses. All costs and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses; provided, that Merger Sub
shall pay the documented reasonable out-of-pocket fees and expenses of the
Shareholders, including the fees and disbursements of one counsel for all
Shareholders.
3
<PAGE> 78
(b) Amendment. This Agreement may not be amended except by an instrument
in writing signed by the party to be charged therewith.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed by customary receipt of transmission) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other addresses for a party as shall be specified by like notice):
To Parent or Merger Sub:
c/o Dicom Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to Parent or Merger Sub)
to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
To the Stockholders:
Addresses on Exhibit A
with a copy (which shall not constitute notice to the Stockholders) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(e) Entire Agreement; No Third Party Beneficiaries. This Agreement and
the Merger Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
4
<PAGE> 79
(f) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in Merger Sub's sole discretion, any
or all of their respective rights, interests and obligations hereunder to any
affiliate of Merger Sub. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors, heirs, agents, representatives, trust
beneficiaries, attorneys, affiliates and associates and all of their respective
predecessors, successors, permitted assigns, heirs, executors and
administrators.
(i) Specific Performance. The parties acknowledge that irreparable damage
would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall be exclusive and in lieu of any
other remedies, including arbitration, which any party may have under this
Agreement or otherwise.
(j) Waiver of Jury Trial. The parties to this Agreement each hereby
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action, or cause of action (i) arising under this Agreement
or (ii) in any way connected with or related or incidental to the dealings of
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The parties to this Agreement
each hereby agrees and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
* * * * *
5
<PAGE> 80
IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholders have caused
this Agreement to be signed by their respective officers or other authorized
person thereunto duly authorized as of the date first written above.
IMAGING COMPONENTS CORPORATION
By:
------------------------------------
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By:
------------------------------------
Name: Alexander P. Coleman
Title: Vice President
--------------------------------------
DAVID S. SILVER
--------------------------------------
DEAN A. HOUGH
--------------------------------------
RONALD J. FIKERT
--------------------------------------
RICHARD M. MURPHY
--------------------------------------
KEVIN DRUM
--------------------------------------
ALEXANDER P. CILENTO
<PAGE> 81
--------------------------------------
WILLIAM E. DROBISH
--------------------------------------
B. ALLEN LAY
SOUTHERN CALIFORNIA VENTURES
By:
------------------------------------
Name:
Title:
<PAGE> 82
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF
EXISTING
STOCKHOLDERS' NAME AND ADDRESS SHARES
------------------------------ ---------
<S> <C>
David S. Silver............................................. 342,500
16245 Laguna Canyon Road
Irvin, CA 92618
Dean A. Hough............................................... 345,000
16245 Laguna Canyon Road
Irvin, CA 92618
Ronald J. Fikert............................................ 37,500
16245 Laguna Canyon Road
Irvin, CA 92618
Richard M. Murphy........................................... 54,444
16245 Laguna Canyon Road
Irvin, CA 92618
Kevin Drum.................................................. 32,500
16245 Laguna Canyon Road
Irvin, CA 92618
Alexander P. Cilento........................................ 2,615
[STREET]
[CITY]
William E. Drobish.......................................... 120,000
[STREET]
[CITY]
B. Allen Lay................................................ 45,101
[STREET]
[CITY]
Southern California Ventures................................ 42,806
[STREET]
[CITY]
</TABLE>
Exhibit A -- Page 1
<PAGE> 83
ANNEX B
EXECUTION COPY
AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
MADE AS OF SEPTEMBER 9, 1999
This Amendment (the "Amendment"), dated as of September 9, 1999, is made by
and among KOFAX IMAGE PRODUCTS, INC., a Delaware corporation (the "Company"),
IMAGING COMPONENTS CORPORATION, a Delaware corporation ("Parent"), and IMAGING
ACQUISITION CORPORATION, a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub").
Reference is made to that certain Agreement and Plan of Merger (the
"Agreement") dated as of July 27, 1999, by and among the Company, Parent and
Merger Sub.
Schedule 2.8 to the Agreement sets forth certain Retained Shares that were
contemplated by the parties at the time of executing the Agreement.
The Parties desire to amend and restate Schedule 2.8 to the Agreement in
its entirety to reflect their agreement regarding modification of the Retained
Shares.
Therefore, in consideration of the foregoing, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged the
parties hereby agree as follows:
I. REPLACEMENT OF EXHIBIT A. Schedule 2.8 to the Agreement is hereby
deleted in its entirety and replaced with Exhibit A attached to this Amendment.
II. LIMITED AMENDMENT. Except as amended by this Amendment and as the
context may otherwise require to give effect to the intent and purpose of this
Amendment, the Agreement shall remain in full force and effect without any other
amendments or modifications.
III. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, all of which shall be considered one and the same Amendment, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
IV. ENTIRE AGREEMENT. The Agreement and the other agreements referred to
therein and the other agreements executed by the parties on the date thereof (as
the same may be amended from time to time in accordance with their terms), as
amended by this Amendment, contain the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, whether written or oral,
relating to such subject matter.
V. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Delaware.
VI. HEADINGS. The headings herein are included for convenience of
reference only and do not constitute a part of this Amendment.
Annex B - 1
<PAGE> 84
IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS AMENDMENT TO BE DULY
EXECUTED AS OF THE DATE FIRST WRITTEN ABOVE.
KOFAX IMAGE PRODUCTS, INC.
By: /s/ RONALD J. FIKERT
------------------------------------
Name: Ronald J. Fikert
Title: Chief Financial Officer
IMAGING COMPONENTS CORPORATION
By: /s/ ALEXANDER P. COLEMAN
------------------------------------
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By: /s/ ALEXANDER P. COLEMAN
------------------------------------
Name: Alexander P. Coleman
Title: Vice President
Annex B - 2
<PAGE> 85
EXHIBIT A
SCHEDULE 2.8
RETAINED SHARES
<TABLE>
<CAPTION>
KOFAX EMPLOYEES RETAINED SHARES
- --------------- ---------------
<S> <C>
David S. Silver............................................. 39,216
Dean A. Hough............................................... 23,530
Richard M. Murphy........................................... 15,686
Ronald J. Fikert............................................ 10,000
Kevin Drum.................................................. 7,843
Roland Borrey............................................... 22,248
Donald M. Field............................................. 11,765
Anthony Macciola............................................ 7,989
Roy Couchman................................................ 2,331
Total............................................. 140,608
</TABLE>
<PAGE> 86
ANNEX C
C. E. UNTERBERG, TOWBIN
FOUR EMBARCADERO CENTER
SUITE 580
SAN FRANCISCO, CALIFORNIA 94111
(415) 659-2222 FAX (415) 392-1113
July 27, 1999
Board of Directors
Kofax Image Products Incorporated
16245 Laguna Canyon Road
Irvine, CA 92618
Dear Sirs:
We understand that Kofax Image Products, Inc. ("Kofax" of the "Company"),
and Imaging Components Corporation ("Imaging"), have entered into an Agreement,
dated as of July 27, 1999 (the "Agreement") pursuant to which Kofax will become
a wholly owned subsidiary of Imaging (the "Acquisition"). In connection with the
Acquisition, and in accordance with the terms and conditions of the Agreement,
Imaging will issue $12.75 in cash for each share of Kofax's Common Stock (the
"Acquisition Consideration").
You have requested our opinion with respect to the fairness of the
Acquisition Consideration, from a financial point of view, to the shareholders
of Kofax.
In connection with our review, we have, among other things:
(i) reviewed the Agreement;
(ii) reviewed publicly available financial information with respect to
the business operations of the Company including, but not limited to,
audited financial statements for the fiscal years ended June 30, 1996, 1997
and 1998, and the unaudited financial statements for the first, second and
third quarters of fiscal 1999 and the unaudited financial statements for
the fiscal year ended June 30, 1999;
(iii) held discussions with Imaging to determine its ability to secure
financing necessary to affect the purchase price;
(iv) reviewed certain internal financial and operating information
relating to Kofax (including financial projections) prepared by the
management of Kofax;
(v) held discussions with certain members of Kofax senior management
concerning their past and current operations, financial condition and
business prospects and the potential financial effect of the Acquisition of
Kofax by Imaging if the Acquisition were consummated;
(vi) reviewed a comparison of operating results and other financial
information of Kofax with other companies that we deemed appropriate;
(vii) reviewed the historical market prices and reported trading
activity of Kofax shares;
(viii) compared the financial terms of the Acquisition and the premium
paid over the Company's current, historical and average stock price with
the financial terms and premiums paid of certain other merger, acquisition
and business combination transactions which we deemed appropriate; and
(ix) considered such other information, financial studies and analyses
as we deemed relevant and performed such analyses, studies and
investigations, as we deemed necessary.
<PAGE> 87
Kofax Image Products, Inc.
July 27, 1999
Page 2
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us. With respect to any
financial projections, we assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performances of Kofax. We have also assumed that the
Acquisition will predominately be an all cash offer.
We have not conducted a physical inspection of the properties or facilities
of Kofax or Imaging or made any independent valuation or appraisal of the
assets, liabilities, patents or intellectual property of Kofax and Imaging, nor
have we been furnished with any such valuations or appraisals. Our opinion is
necessarily based upon economic, market and other conditions as in effect on,
and the information made available to us, as of the date of this letter.
We understand that in considering the Acquisition, the Board of Directors
of the Company has considered a wide range of financial and non-financial
factors, many of which are beyond the scope of this letter. This letter is not
intended to substitute for the Board's exercise of its own business judgment in
reviewing the Acquisition. Our opinion expressed herein was prepared for the
benefit and use of the Board of Directors of Kofax in its consideration of the
Acquisition and does not constitute a recommendation to Kofax's shareholders as
to how they should vote at the shareholder's meeting in connection with the
Acquisition.
It should be understood that, although subsequent developments may affect
this opinion, C.E. Unterberg, Towbin does not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which the shares of the Company will actually trade at any time.
Based upon and subject to the foregoing considerations, it is our opinion
as financial advisors that, as of the date hereof, the Acquisition Consideration
is fair from a financial point of view to the shareholders of Kofax.
/s/ C.E. Unterberg
C.E. Unterberg, Towbin
<PAGE> 88
ANNEX D
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
D-1
<PAGE> 89
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
D-2
<PAGE> 90
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.
D-3
<PAGE> 91
(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".
D-4
<PAGE> 92
ANNEX E
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of July 27, 1999 is made by
and among Imaging Components Corporation, a Delaware corporation (the "Parent"),
Imaging Acquisition Corporation, a Delaware corporation ("Merger Sub"), and each
of the persons named on Exhibit A hereto (each, a "Stockholder", and
collectively, the "Stockholders").
WHEREAS, Parent, Merger Sub and Kofax Image Products, Inc., a Delaware
corporation (the "Company") are concurrently herewith entering into an Agreement
and Plan of Merger dated as of the date hereof (as may be amended, restated or
modified from time to time, the "Merger Agreement") which provides for, among
other things, the merger of Merger Sub with and into the Company, upon the terms
and subject to the conditions set forth in the Merger Agreement. Capitalized
terms used but not otherwise defined herein shall have the meanings set forth in
the Merger Agreement.
WHEREAS, as of the date hereof, each Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Exhibit A (the "Existing Shares" and, together with any shares of Common
Stock acquired by or issued to such Stockholder after the date hereof, the
"Subject Shares").
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Merger Sub have required that the Stockholders agree, and
the Stockholders have agreed, to enter into this Agreement.
WHEREAS, the Stockholders and Merger Sub desire to set forth their
agreement with respect to the voting of the Subject Shares in connection with
the Merger Agreement and the transactions contemplated thereby (the
"Transactions") upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. COVENANTS OF THE STOCKHOLDERS. Until the termination of this Agreement
in accordance with Section 5, the Stockholders agree as follows:
(a) Agreement to Vote in Favor. At any meeting of shareholders of the
Company called for purposes that include approval of the Merger Agreement and
the Transactions, or in connection with any written consent of the holders of
Shares or in any other circumstances in which the Stockholders are entitled to
vote, consent or give any other approval with respect to the Merger Agreement
and the Transactions, the Stockholders shall vote (or cause to be voted) the
Subject Shares in favor of adoption and approval of the Merger Agreement and the
Transactions and the approval of the terms thereof and each of the other actions
contemplated by this Agreement and the Merger Agreement and any amendments.
(b) Agreement to Tender. Within the first ten (10) Business Days after
the commencement of the Offer to tender all of their respective Subject Shares,
except, if applicable, their respective Retained Shares, into the Offer, and not
to withdraw any of their respective Shares so tendered from the Offer.
(c) Agreement to Vote Against. At any meeting of shareholders of the
Company, or in connection with any written consent of the holders of Shares or
in any other circumstances in which the Stockholders are entitled to vote,
consent or give any other approval, except as otherwise agreed to in writing in
advance by Merger Sub, the Stockholders shall vote (or cause to be voted) the
Subject Shares against the following actions:
(i) any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or of the
Stockholders hereunder; or
<PAGE> 93
(ii) any action or agreement that could reasonably be expected to
impede, interfere with, delay, postpone or attempt to discourage the Merger
and/or the Transactions, including, without limitation, (x) the adoption by
the Company of a proposal supporting a Takeover Proposal or the repurchase
by the Company or any of its Subsidiaries of outstanding Shares for
consideration in excess of the Per Share Amount or (y) any amendment of the
Company's Articles of Incorporation or By-laws (including any amendment
affecting the voting rights of the Company's Capital Stock) or other
proposal or transaction involving the Company or any of its Subsidiaries
(including any changes in management or the directors of the Company),
which amendment or other proposal or transaction could in any manner
reasonably be expected to impede, in any material respect, or prevent the
Merger, the Merger Agreement or the Transactions.
(d) Proxies. As security for the agreements of the Stockholders provided
for herein, the Stockholders hereby grant to Merger Sub a proxy to vote the
Subject Shares as indicated in Sections 1(a) and 1(b) above. The Stockholders
agree that this proxy shall be irrevocable during the term of this Agreement and
coupled with an interest and each of the Stockholders and Merger Sub will take
such further action or execute such other instruments as may be necessary to
effectuate the intent of this proxy and hereby revokes any proxy previously
granted by the Stockholders with respect to the Subject Shares.
(e) Transfer Restrictions. The Stockholders agree not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of or hypothecate
(including by gift or by contribution or distribution to any trust or similar
instrument or to any beneficiaries of the Stockholders) (collectively,
"Transfer"), or enter into any contract, option or other arrangement or
understanding (including any profit sharing arrangement) with respect to the
Transfer of, any of the Subject Shares other than pursuant to the terms hereof
and the Merger Agreement, or (ii) enter into any voting arrangement or
understanding with respect to the Subject Shares, whether by proxy, voting
agreement or otherwise other than this Agreement.
(f) Appraisal Rights. The Stockholders hereby irrevocably waive any and
all rights which it may have as to appraisal, dissent or any similar or related
matter with respect to the Merger including any such rights set forth in the
DGCL.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
hereby severally but not jointly represents and warrants to Merger Sub as of the
date hereof as follows:
(a) Authority; No Conflict. Such Stockholder has the requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Stockholder, and this Agreement constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law), an implied
covenant of good faith and fair dealing and considerations of public policy. The
execution and delivery of this Agreement by such Stockholder does not, and the
consummation by such Stockholder of the transactions contemplated hereby will
not violate any law applicable to such Stockholder or result in a violation or
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under any contract or agreement to which
such Stockholder is a party.
(b) Shares. The Existing Shares are owned beneficially and of record by
the Stockholders. The Existing Shares constitute all of the shares of Common
Stock owned of record or beneficially by the Stockholders as at the date hereof.
All of the Existing Shares are issued and outstanding and except as set forth on
Schedule A attached hereto, the Stockholders do not own, of record or
beneficially, any warrants, options or other rights to acquire any shares of
Common Stock. Each Stockholder has sole voting power, sole power of disposition,
sole power to issue instructions with respect to the matters set forth in
Section 1 hereof, sole power to demand appraisal rights (to the extent such
rights are available) and sole power to agree to all of the matters set forth in
this Agreement, in each case with respect to all of the Existing Shares, and
will have sole voting power, sole power of disposition, sole power to issue
instructions with respect to the matters set forth in Section 1 hereof, sole
power to demand appraisal rights (to the extent such rights are available) and
2
<PAGE> 94
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Subject Shares held of record. Each Stockholder
has good and valid title to the Existing Shares and at all times during the term
hereof and on the Effective Time will have good and valid title to the Subject
Shares, free and clear of all Liens and free of any other limitation or
restriction other than restrictions under applicable securities laws.
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub hereby represents and warrants to the Stockholders as of
the date hereof as follows:
(a) Authority. Each of Parent and Merger Sub has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by its respective board of directors and no other corporate action or
proceedings on the part of Parent or Merger Sub is necessary to authorize the
execution and delivery by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub,
and, assuming this Agreement constitutes a valid and binding obligation of the
Stockholders, constitutes valid and binding obligations of Parent and Merger
Sub, enforceable against them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing and
considerations of public policy.
(b) No Conflict. The execution and delivery of this Agreement by Merger
Sub does not, and the consummation by Merger Sub of the transactions
contemplated hereby will not (i) conflict with or violate the Articles of
Incorporation, By-laws or other organizational documents of Merger Sub, (ii)
conflict with or violate any law applicable to Merger Sub or by which any
property or asset of Merger Sub is bound or affected, except for such conflicts
or violations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect, or (iii) result in a violation or any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Merger Sub is a party or by which Merger Sub or any property or asset
of Merger Sub is bound or affected, except for any such breaches or defaults
which would not materially impair the ability of Merger Sub to consummate the
transactions contemplated hereby.
4. FURTHER ASSURANCES. From time to time prior to the Effective Time, at
any other party's request and without further consideration, each party hereto
shall execute and deliver such additional documents and take all such further
lawful action as may be reasonably necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
5. TERMINATION. This Agreement shall terminate, and no party shall have
any rights or obligations hereunder and this Agreement shall become null and
void and have no further effect upon the earliest to occur of (x) the Effective
Time or (y) termination of the Merger Agreement pursuant to Section 7.1 thereof.
Nothing in this Section 5 shall relieve any party of liability for breach of
this Agreement; provided, that Merger Sub's sole remedy in the event of a breach
of this Agreement shall be as specified in Section 6(i) (provided that
injunctive relief shall also be available for any breach of Section 1(e)) and in
no event shall Merger Sub be entitled to any form of monetary damages.
6. GENERAL PROVISIONS.
(a) Costs and Expenses. All costs and expenses incurred in connection with
this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses; provided, that Merger Sub
shall pay the documented reasonable out-of-pocket fees and expenses of the
Shareholders, including the fees and disbursements of one counsel for all
Shareholders.
(b) Amendment. This Agreement may not be amended except by an instrument
in writing signed by the party to be charged therewith.
3
<PAGE> 95
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed by customary receipt of transmission) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other addresses for a party as shall be specified by like notice):
To Parent or Merger Sub:
c/o Dicom Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to Parent or Merger Sub) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
To the Stockholders:
Addresses on Exhibit A
with a copy (which shall not constitute notice to the Stockholders) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(e) Entire Agreement; No Third Party Beneficiaries. This Agreement and the
Merger Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(f) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination
4
<PAGE> 96
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby may be consummated as originally contemplated to the fullest
extent possible.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in Merger Sub's sole discretion, any
or all of their respective rights, interests and obligations hereunder to any
affiliate of Merger Sub. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors, heirs, agents, representatives, trust
beneficiaries, attorneys, affiliates and associates and all of their respective
predecessors, successors, permitted assigns, heirs, executors and
administrators.
(i) Specific Performance. The parties acknowledge that irreparable damage
would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall be exclusive and in lieu of any
other remedies, including arbitration, which any party may have under this
Agreement or otherwise.
(j) Waiver of Jury Trial. The parties to this Agreement each hereby
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action, or cause of action (i) arising under this Agreement
or (ii) in any way connected with or related or incidental to the dealings of
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The parties to this Agreement
each hereby agrees and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
* * * * *
5
<PAGE> 97
IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholders have caused
this Agreement to be signed by their respective officers or other authorized
person thereunto duly authorized as of the date first written above.
IMAGING COMPONENTS CORPORATION
By: /s/ ALEXANDER P. COLEMAN
------------------------------------
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By: /s/ ALEXANDER P. COLEMAN
------------------------------------
Name: Alexander P. Coleman
Title: Vice President
/s/ DAVID S. SILVER
------------------------------------
DAVID S. SILVER
/s/ DEAN A. HOUGH
------------------------------------
DEAN A. HOUGH
/s/ RONALD J. FIKERT
------------------------------------
RONALD J. FIKERT
/s/ RICHARD M. MURPHY
------------------------------------
RICHARD M. MURPHY
/s/ KEVIN DRUM
------------------------------------
KEVIN DRUM
/s/ ALEXANDER P. CILENTO
------------------------------------
ALEXANDER P. CILENTO
/s/ WILLIAM E. DROBISH
------------------------------------
WILLIAM E. DROBISH
/s/ B. ALLEN LAY
------------------------------------
B. ALLEN LAY
<PAGE> 98
SOUTHERN CALIFORNIA VENTURES
By: /s/ B. ALLEN LAY
------------------------------------
Name: B. Allen Lay
Title: General Partner
<PAGE> 99
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF
EXISTING
STOCKHOLDERS' NAME AND ADDRESS SHARES
- ------------------------------ ---------
<S> <C>
David S. Silver............................................. 342,500
16245 Laguna Canyon Road
Irvin, CA 92618
Dean A. Hough............................................... 345,000
16245 Laguna Canyon Road
Irvin, CA 92618
Ronald J. Fikert............................................ 37,500
16245 Laguna Canyon Road
Irvin, CA 92618
Richard M. Murphy........................................... 54,444
16245 Laguna Canyon Road
Irvin, CA 92618
Kevin Drum.................................................. 32,500
16245 Laguna Canyon Road
Irvin, CA 92618
Alexander P. Cilento........................................ 2,615
[STREET]
[CITY]
William E. Drobish.......................................... 120,000
[STREET]
[CITY]
B. Allen Lay................................................ 45,101
[STREET]
[CITY]
Southern California Ventures................................ 42,806
[STREET]
[CITY]
</TABLE>
Exhibit A -- Page 1
