<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
SCHEDULE 14D-9
------------------------
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
KOFAX IMAGE PRODUCTS, INC.
(NAME OF SUBJECT COMPANY)
KOFAX IMAGE PRODUCTS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
500200-10-0
(CUSIP NUMBER OF CLASS OF SECURITIES)
DAVID S. SILVER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
16245 LAGUNA CANYON ROAD
IRVINE, CALIFORNIA 92618-3603
(949) 727-1733
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
K.C. SCHAAF, ESQ.
STRADLING YOCCA CARLSON & RAUTH
660 NEWPORT CENTER DRIVE, SUITE 1600
NEWPORT BEACH, CALIFORNIA 92660
(949) 725-4000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
This Amendment No. 1 amends Item 4 of the Solicitation/Recommendation
Statement on Schedule 14d-9 (as amended, the "Schedule 14D-9") of Kofax Image
Products, Inc., a Delaware corporation (the "Company"), filed with the
Securities and Exchange Commission on August 3, 1999, relating to a tender offer
by Imaging Components Corporation, a Delaware corporation, for all of the
outstanding shares of the Common Stock of the Company. Unless otherwise stated
herein, the capitalized terms used but not defined herein shall have the same
meaning as set forth in the Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors. At a meeting held on July 26,
1999 (the "Board Meeting"), the Board unanimously approved the Merger Agreement
and, for the reasons hereinafter set forth, determined that the Offer and the
Merger are fair to, and in the best interests of, the Company and its
stockholders and recommended to the Company's stockholders that they tender
their Shares pursuant to the Offer and approve and adopt the Merger Agreement.
Copies of the press release announcing the Board's recommendation and the Letter
to Stockholders are attached as Exhibits 6 and 7, respectively, and are
incorporated herein by reference.
(b) Reasons for the Recommendation, Opinion of Financial Advisor. The
information set forth under "SPECIAL FACTORS -- Background of the Offer" in the
Offer to Purchase is incorporated by reference.
(1) Reasons for the Recommendation. In reaching its determination to
approve the Offer and the Merger and to recommend that the Company's
stockholders tender their Shares pursuant to the Offer, the 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 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 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 Board receives a bona fide
unsolicited takeover proposal if the 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 Board
determines in good faith, after receiving the advice of independent legal
counsel, that such action is required in order for the 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);
2
<PAGE> 3
(ix) the 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;
(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
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 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 Board, the
Board did not find it practicable to assign relative weights to the specific
factors considered in reaching its determination. Rather, the 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 Board assigned different weights to the various factors described
above. Because of the engagement of Unterberg, the fact that the 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 Board were aware of the
interests of certain members of management in the proposed transaction, the
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 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 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 Board's determination,
than the Offer and the Merger.
(2) Opinion of Financial Advisor.
3
<PAGE> 4
On July 21, 1999, C.E. Unterberg, Towbin 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 delivered orally at the
July 21, 1999 meeting of the Board and confirmed in writing on July 27, 1999.
C.E. Unterberg, Towbin does not have any obligation to confirm or update its
opinion.
C.E. Unterberg, Towbin, 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. C.E. Unterberg, Towbin was selected
by the Company to deliver a fairness opinion on this transaction based on C.E.
Unterberg, Towbin's experience as a financial advisor in mergers and
acquisitions as well as C.E. Unterberg, Towbin's investment banking relationship
and familiarity with the Company. C.E. Unterberg, Towbin 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, C.E. Unterberg, Towbin did not make or seek to
obtain appraisals of the Company's assets in connection with its analyses of the
Offer. In addition, C.E. Unterberg, Towbin 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, C.E.
Unterberg, Towbin 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 C.E.
Unterberg, Towbin assumes responsibility for their accuracy. In rendering its
opinion, C.E. Unterberg, Towbin, 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 C.E. Unterberg, Towbin
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
C.E. Unterberg, Towbin deemed appropriate; (i) considered such other
information, financial studies and analyses as C.E. Unterberg, Towbin deemed
relevant; and (j) performed such analyses, studies and investigations as C.E.
Unterberg, Towbin deemed relevant. In arriving at its fairness opinion, C.E.
Unterberg, Towbin 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 Board, C.E. Unterberg, Towbin performed and
presented certain financial and comparative analyses, with such other factors as
it deemed relevant, including, among other things:
(i) Market Trading Analyses. C.E. Unterberg, Towbin summarized their
analysis of recent trends in the prices and trading volume of the Shares,
including data with respect to (a) relative price
4
<PAGE> 5
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 Board), compared to the average
daily value of the NASDAQ Composite Index, the Standard & Poor's 500
Industrial Index and an imaging industry index during the same period and
(b) the volume of Shares traded in ranges between $5.00 and $11.99 during
the same period. C.E. Unterberg, Towbin 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 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. C.E. Unterberg, Towbin 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. C.E. Unterberg, Towbin 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
C.E. Unterberg, Towbin 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. C.E. Unterberg,
Towbin 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. C.E. Unterberg, Towbin determined that the Company's
stock performance was consistent with its operating results. C.E.
Unterberg, Towbin regarded the conclusions with respect to the
5
<PAGE> 6
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.
(iii) Comparable Transaction Analysis. C.E. Unterberg, Towbin
reviewed certain mergers and acquisitions involving technology companies.
In examining these transactions, C.E. Unterberg, Towbin 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 times
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. C.E. Unterberg, Towbin 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. C.E. Unterberg, Towbin also
reviewed the premiums paid for certain merger and acquisition transactions
involving selected technology companies. C.E. Unterberg, Towbin'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 Board, a higher premium than the median premium of comparable
transactions. In addition, C.E. Unterberg, Towbin 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,
C.E. Unterberg, Towbin 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, C.E. Unterberg, Towbin relied upon
such financial projections without independent verification.
A copy of C.E. Unterberg, Towbin's written presentation to the Board has
been 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 C.E. Unterberg, Towbin's
written analyses set forth as exhibits to the Schedule 13E-3 or C.E. Unterberg,
Towbin's oral presentation to the Board.
6
<PAGE> 7
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
KOFAX IMAGE PRODUCTS, INC.
/s/ RONALD J. FIKERT
Name: Ronald J. Fikert
Title: Vice President -- Finance,
Chief Financial Officer and
Secretary
Date: August 27, 1999
7
