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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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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
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Kofax Image Products, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 16245 Laguna Canyon Road, Irvine, California 92618-3603. The
title of the class of equity securities to which this Statement relates is the
Company's Common Stock, par value $.001 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a tender offer (the "Offer") by Imaging
Components Corporation, a Delaware corporation ("Purchaser"), a company formed
by Dresdner Kleinwort Benson Private Equity Partners L.P. ("Private Equity
Partners") and DICOM GROUP plc ("DICOM"), together with certain members of the
Company's management, to purchase all of the outstanding Shares at $12.75 per
Share (the "Merger Consideration"), net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated August 3,
1999 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer"), copies of which are filed as Exhibits 1 and 2
to this Schedule 14D-9. The Offer is more fully described in the Offer to
Purchase and in a Tender Offer Statement on Schedule 14D-1 dated August 3, 1999
(the "Schedule 14D-1") filed with the Securities and Exchange Commission (the
"Commission").
The Offer is being made by Purchaser pursuant to an Agreement and Plan of
Merger, dated as of July 27, 1999, by and among Purchaser, Imaging Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Purchaser
("Merger Sub"), and the Company (the "Merger Agreement"), a copy of which is
filed as Exhibit 3 hereto and is incorporated herein by reference. Based on the
information in the Schedule 14D-1, the principal executive offices of Purchaser,
Merger Sub and Private Equity Partners are located at 75 Wall Street, 24th
Floor, New York, New York 10005, and the principal offices of DICOM are located
at Business Building Forren West, Grundstrasse 14CH-6343, Rotkreuz (Zug)
Switzerland.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements or
arrangements or understandings or any actual or potential conflicts of interest
between the Company and its affiliates and: (1) the Company, its executive
officers, directors or affiliates; or (2) Purchaser, Merger Sub or their
executive officers, directors or affiliates. Certain contracts, agreements,
arrangements and understandings between the Company and certain of its directors
and officers are described in Annex A to this Schedule 14D-9 pursuant to Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Rule 14f-1 issued under the Exchange Act in connection with Purchaser's
right (after consummation of the Offer) to designate persons to be appointed to
the Board of Directors of the Company (the "Board") other than at a meeting of
the stockholders of the Company. In considering the recommendations of the
Board, the stockholders of the Company should be aware that certain members of
the Board and certain of the Company's officers have interests in the Merger and
the Offer which are described herein and in Annex A and incorporated by
reference herein and which may present them with certain conflicts of interest.
For example, the consummation of the Offer and/or the Merger will accelerate the
vesting of unvested stock options for certain officers of the Company. See
"Certain Information Concerning the Company's Executive Officers and Executive
Compensation" and "Compensation Pursuant to Plans" contained in Annex A. Each of
the members of the Board was aware of these potential conflicts and considered
them along with the other factors described in Item 4(b) below.
Management Commitment Letter. Purchaser has obtained a commitment letter
from certain members of management of the Company, including David S. Silver,
Dean A. Hough, Ronald J. Fikert, Richard M. Murphy and Kevin Drum (the
"Management Group"), dated as of July 27, 1999, providing for an equity
contribution to Purchaser in the form of an exchange of an aggregate of
approximately 94,118 Shares owned
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by them for shares of Purchaser's capital stock. It is anticipated that each
member of the Management Group, except for Mr. Hough, will participate in the
management of the Purchaser and the Company after the Effective Time of the
Merger. See "SPECIAL FACTORS -- Interests of Certain Persons in the Offer and
the Merger" and "SPECIAL FACTORS -- Purpose of the Offer and the Merger; Plans
for the Company" in the Offer to Purchase, which is incorporated herein by
reference.
Stock Option Plans. Under the Company's Amended and Restated Incentive
Stock Option, Nonqualified Stock Option and Restricted Stock Purchase Plan
adopted in 1992, the 1996 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan and the 1997 Stock Option Plan for Non-Employee
Directors (the "Stock Option Plans"), as of July 27, 1999, executive officers
and directors of the Company held outstanding options to purchase an aggregate
of 197,500 Shares at a weighted average exercise price of $7.55 per share. Of
these, options to purchase an aggregate of 17,500 Shares are vested as of the
date hereof and options to purchase an aggregate of 35,000 Shares will vest
between the date hereof and August 31, 1999. Options that are not vested shall
become fully vested and exercisable conditioned upon consummation of the Merger
(as defined in the Merger Agreement). Pursuant to the terms of the Merger
Agreement, each outstanding option granted under the Stock Option Plans or
otherwise will be canceled at the Effective Time (as defined in the Merger
Agreement) and each holder of a cancelled option will be entitled to receive, at
the Effective Time or as soon as practicable thereafter, from the Company, in
consideration for the cancellation of such option, an amount in cash equal to
the product of (i) the number of Shares previously subject to such option and
(ii) the excess, if any, of the Merger Consideration over the exercise price per
Share previously subject to such option (the "Option Consideration"). Directors
and executive officers of the Company will, as a result, be entitled to receive
approximately $1,027,000 as a result of the Merger, based on the number of
options held by them as of July 27, 1999. See "SPECIAL FACTORS -- Interests of
Certain Persons in the Offer and the Merger" in the Offer to Purchase, which is
incorporated by reference.
Merger Agreement and Voting Agreement. Purchaser, Merger Sub and the
Company entered into the Merger Agreement on July 27, 1999. In connection with
the Merger Agreement, Purchaser entered into a Voting Agreement with certain
officers and directors of the Company and certain other stockholders of the
Company pursuant to which each of such persons agreed, subject to the terms and
conditions of the Voting Agreement, to tender the Shares owned by such persons
in the Offer, to vote their Shares in favor of the Merger at any meeting of
stockholders, to vote against any action that would result in a material breach
of the Merger Agreement or which could reasonably be expected to interfere with
or delay the Merger, and not to transfer any of their respective Shares other
than pursuant to the Merger Agreement. The Merger Agreement and the Voting
Agreement are filed, respectively, as Exhibits 3 and 4 hereto, and are
summarized in the "INTRODUCTION" to and in "SPECIAL FACTORS -- Interests of
Certain Persons in the Offer and the Merger" and "SPECIAL FACTORS -- The Merger
Agreement" of the Offer to Purchase, which summaries are incorporated herein by
reference.
Indemnification; Directors' and Officers' Insurance. Pursuant to the Merger
Agreement, Purchaser and Merger Sub have agreed that all rights of
indemnification in favor of directors, officers, employees or agents of the
Company existing prior to the Merger pursuant to the Company's Certificate of
Incorporation and Bylaws shall remain in effect after the Merger. In addition,
Purchaser has agreed that the Company shall maintain in effect for not less than
six (6) years from the effective time of the Merger, directors' and officers'
liability insurance with the same coverage or substantially similar coverage to
the directors' and officers' liability insurance policies effective prior to the
Merger; provided, that the Company shall not be required to pay annual premiums
in excess of 150% of the aggregate annual premiums in effect prior to the
Merger. See "SPECIAL FACTORS -- Interests of Certain Persons in the Offer and
the Merger" in the Offer to Purchase, which is incorporated herein by reference.
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
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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);
(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;
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(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.
In view of the variety and nature of the factors considered by the Board,
the Board did not attempt 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 did not
consider it as necessary to appoint a special committee or to retain an
unaffiliated representative to negotiate the terms of the Merger Agreement on
behalf of the public stockholders.
(2) Opinion of Financial Advisor.
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
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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; and (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 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.
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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 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
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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.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained C. E. Unterberg, Towbin as the Company's financial
advisor on May 26, 1999, in connection with a possible sale of the Company.
Under the engagement letter, the Company agreed to pay C. E. Unterberg, Towbin
for its services as financial advisor and for rendering its opinion an aggregate
of $150,000, with $50,000 payable upon signing of its engagement letter and
$100,000 payable at the time a written opinion is delivered to the Company's
Board of Directors. These fees have been paid by the Company and will not affect
the cash that will be received by the stockholders of the Company.
The Company also has agreed to reimburse C. E. Unterberg, Towbin for its
reasonable travel and other out-of-pocket expenses (including reasonable fees
and expenses of legal counsel) and to indemnify C. E. Unterberg, Towbin and its
affiliates, its directors, officers, agents, employees and affiliates against
certain liabilities. C. E. Unterberg, Towbin is retained for the entirety of
this specific transaction.
Except as described above, neither the Company nor any person acting on its
behalf has retained any other person to make solicitations or recommendations to
security holders on its behalf concerning the Offer.
8
<PAGE> 9
ITEM 6. RECENT OFFER AND THE MERGER AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for a disposition of seven thousand five hundred (7,500) shares
on June 1, 1999 by David S. Silver, to the best of the Company's knowledge, no
transactions in the Shares have been effected during the past 60 days by the
Company or by any executive officer, director, affiliate or subsidiary of the
Company.
(b) To the best of the Company's knowledge, except for an aggregate of
approximately 94,118 Shares to be retained by the Management Group and exchanged
for shares of Purchaser's capital stock, all of its executive officers,
directors, affiliates or subsidiaries presently intend to tender all Shares
which are held of record or beneficially owned by such persons pursuant to the
Offer. See "SPECIAL FACTORS -- Interests of Certain Persons in the Offer and the
Merger" in the Offer to Purchase, which is incorporated herein by reference.
ITEM 7. CERTAIN NEGOTIATIONS AND OFFER AND THE MERGER BY THE SUBJECT COMPANY.
(a) Except as described herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in an extraordinary transaction, such as a merger or reorganization,
involving the Company or any of its subsidiaries, a purchase, sale or transfer
of a material amount of assets by the Company or any of its subsidiaries, a
tender offer for or other acquisition of securities by or of the Company, or any
material change in the present capitalization or dividend policy of the Company.
(b) None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 Offer to Purchase dated August 3, 1999.
Exhibit 2 Letter of Transmittal.
Exhibit 3 Agreement and Plan of Merger dated as of July 27, 1999 by
and among Purchaser, Merger Sub and the Company.*
Exhibit 4 Voting Agreement dated as of July 27, 1999 by and among
Purchaser, Merger Sub, David S. Silver, Dean A. Hough,
Ronald J. Fikert, Richard M. Murphy, Kevin Drum, Alexander
P. Cilento, William E. Drobish, B. Allen Lay and Southern
California Ventures.*
Exhibit 5 Opinion of C.E. Unterberg, Towbin, dated July 27, 1999.
Exhibit 6 Press Release issued by the Company on July 28, 1999.*
Exhibit 7 Letter to Stockholders of the Company, dated August 3, 1999.
</TABLE>
- ---------------
* Not included in copies mailed to stockholders.
9
<PAGE> 10
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 3, 1999
10
<PAGE> 11
ANNEX A
ADDITIONAL INFORMATION PROVIDED PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This information is being furnished in connection with the designation by
the Purchaser, pursuant to the Merger Agreement, of persons to be elected to the
Company's Board of Directors other than at a meeting of the Company's
stockholders. The Merger Agreement provides that, promptly upon the payment by
Purchaser pursuant to the Offer for such number of Shares which represent at
least a majority of the outstanding Shares and from time to time thereafter,
Purchaser shall be entitled to designate members of the Company's Board of
Directors such that Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, will have a number of representatives on the Board of Directors,
rounded up to the next whole number, equal to the product obtained by
multiplying the number of directors on the Board of Directors by the percentage
that the number of Shares purchased by Merger Sub bears to the total number of
Shares outstanding on a fully diluted basis.
The Company has agreed to use its reasonable best efforts, upon request by
Purchaser, to promptly increase the size of the Board of Directors to the extent
permitted by its Certificate of Incorporation and/or secure the resignations of
such number of directors as is necessary to enable Purchaser's designees to be
elected to the Board of Directors and use its best efforts to cause Purchaser's
designees to be so elected. The Company has agreed to take all action necessary
to effect any such election, including the mailing to its stockholders of the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder.
This information supplements certain information set forth in the Schedule
14D-9. The information set forth herein (including information incorporated by
reference) concerning Purchaser, Merger Sub and Purchaser's designees was
provided to the Company by Purchaser and Merger Sub. The Company assumes no
responsibility for the accuracy or completeness of such information. You are
urged to read this information carefully; however, you are not required to take
any action with respect to this information.
INFORMATION WITH RESPECT TO THE PURCHASER'S DESIGNEES TO THE
BOARD OF DIRECTORS
The Purchaser has stated in the Offer to Purchase that Purchaser expects
the following persons to be designated as directors (the "Designees") of the
Company following consummation of the Offer. Purchaser has informed the Company
that each of the Designees below has consented to serve as a director if
appointed or elected. None of the Designees is currently a director of, or holds
any positions with, the Company. Purchaser has further advised the Company that
none of the Designees or any of their affiliates beneficially owns any equity
securities or rights to acquire equity securities of the Company, nor has any
such person been involved in any proceedings or transactions with the Company or
any of its directors, executive officers or affiliates that is required to be
disclosed under the rules and regulations of the Commission, other than
transactions among Purchaser, Merger Sub and the Company described in the
Schedule 14D-9. The Designees are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PURCHASER AND MERGER SUB
---- --- --------------------------------------
<S> <C> <C>
Otto Schmid.......................... 61 President
Arnold von Buren..................... 47 Secretary
Alexander P. Coleman................. 32 Vice President
George N. Fugelsang.................. 59 Director
</TABLE>
Otto Schmid is President of Purchaser and Merger Sub. In 1991, he
co-founded DICOM and has served as Chairman and Chief Executive since its
formation. In 1978, he joined ACU Infomatik AG, a Swiss distribution company for
computer peripherals, and became a director with responsibility for corporate
development. In 1969 he co-founded and was managing director at Wirtschafts
Mathematik AG, a Swiss service company for mathematical statistics and applied
mathematics. Dr. Schmid is a Swiss national with degrees in mathematics and in
economics from the University of Zurich, where he completed a doctoral thesis in
business forecasting.
A-1
<PAGE> 12
Arnold von Buren is Secretary of Purchaser and Merger Sub. Mr. Von Buren
has served as Deputy Chief Executive of DICOM since November 1996. He joined ACU
Informatik AG in Switzerland in 1983, working in sales and administration, and
co-founded and became general manager of Computerway in 1989. Mr. Von Buren is a
Swiss citizen with a degree in Economics and Business Administration. He has
worked in the computer industry since 1978, including three years in the USA.
Alexander P. Coleman is Vice President of Purchaser and Merger Sub. He is
an investment partner of the SBIC and a Vice President of Dresdner Kleinwort
Benson North America LLC, which he joined in January 1996, to source and execute
private equity transactions. Mr. Coleman is an active board member with a number
of companies. Mr. Coleman has been involved in management buyouts, cross-border
equities, expansion financings and venture capital since joining Citicorp
originally in 1989. Mr. Coleman holds an MBA from the University of Cambridge
and a BA in economics from the University of Vermont. Mr. Coleman is a United
States citizen.
George N. Fugelsang is expected to be a non-executive member of the Board
of Directors of Purchaser and Merger Sub. He joined Dresdner Bank AG in February
of 1994, at which time he was named President of Dresdner Securities (USA) Inc.
On April 1, 1994, he was named Senior General Manager Dresdner Bank AG, and
Chief Executive, North America. Fugelsang is currently President and CEO of
Dresdner Kleinwort Benson North America Inc. He is a member of the Management
Board of Dresdner Kleinwort Benson, Dresdner Bank's Global Investment Banking
subsidiary. Mr. Fugelsang, age 59, is a United States citizen.
INFORMATION WITH RESPECT TO THE COMPANY
1. CERTAIN INFORMATION CONCERNING THE COMPANY AND THE COMPANY'S BOARD OF
DIRECTORS
GENERAL
The Shares comprise the only class of voting stock of the Company
outstanding and each Share is entitled to one vote. There were 5,243,956 Shares
outstanding on July 27, 1999.
The Company's Board of Directors currently consists of 6 members.
THE CURRENT MEMBERS OF THE BOARD
To the extent the Company's Board of Directors will consist of persons who
are not the Purchaser's Designees, the Board is expected to consist of those
persons who are currently directors of the Company who have not resigned.
The information presented below sets forth, as of July 27, 1999, as to each
director, his age and principal occupation and business experience and the
period during which each has served as a director of the Company. In addition,
as to each director who is also an executive officer, his employment history
with the Company is included. See "Committees of the Board of Directors" for
information concerning the composition of Board committees. See "Security
Ownership of Certain Beneficial Owners and Management" for the aggregate number
of Shares beneficially owned by each director as of July 27, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
David S. Silver........................... 41 Chairman of the Board, President and Chief
Executive Officer
Dean A. Hough............................. 41 Vice President Engineering and Director
David C. Seigle(1)(2)..................... 59 Director
Alexander P. Cilento(2)................... 50 Director
William E. Drobish(1)(2).................. 60 Director
B. Allen Lay(1)........................... 64 Director
</TABLE>
- ---------------
(1) Members of the Compensation Committee
(2) Members of the Audit Committee
A-2
<PAGE> 13
David S. Silver co-founded the Company in August 1985 and has served as
President and Chief Executive Officer and a director of the Company since its
inception. From 1982 to 1985, Mr. Silver was employed by FileNet Corporation, a
manufacturer of document image processing systems, as a member of the
development team for the FileNet imaging system. Prior to 1982, Mr. Silver held
various engineering positions with MAI Basic Four Corporation, a manufacturer of
computer equipment and associated application software programs.
Dean A. Hough co-founded the Company in August 1985 and has served as a
Vice President and a Director of the Company since that time. From 1983 to 1985,
Mr. Hough was employed by FileNet Corporation, where he participated in the
development of a variety of the imaging components of the FileNet imaging
system. Prior to 1983, Mr. Hough held various design and engineering positions
with MAI Basic Four Corporation and Scientific Atlanta, a manufacturer of
scientific instruments and equipment.
David C. Seigle has been a member of the Company's Board of Directors since
1992. From 1996 to 1998, Mr. Seigle was president of Technology's Edge, a
franchisor of technology integrators. From 1992 to 1996 Mr. Seigle was a
consultant and private investor. From 1982 to 1991, Mr. Seigle was employed by
FileNet Corporation in various positions, including Senior Vice President of
International Operations from 1987 to 1991. Mr. Seigle is currently a director
of Interface Systems, Inc., a manufacturer and distributor of computer
peripherals and software.
Alexander P. Cilento has been a member of the Company's Board of Directors
since 1986. Since 1991, Mr. Cilento has been a General Partner of Aspen Venture
Partners, a private venture capital investment partnership. From 1985 through
1991, Mr. Cilento was employed by 3i Securities Corporation, a venture capital
investment firm, where he served as Vice President.
William E. Drobish has been a member of the Company's Board of Directors
since 1986. Since 1998, Dr. Drobish has been President of Ditrans, a developer
of digital transceivers for wireless communications and since 1984 an instructor
at the University of California, Irvine's Extension Program. Dr. Drobish was a
founder, Vice President, director and Secretary of Silicon Systems, Inc., a
manufacturer of integrated circuits.
B. Allen Lay has been a member of the Company's Board of Directors since
1990. Since 1982, Mr. Lay has been a general partner of Southern California
Ventures, a private venture capital investment partnership. Mr. Lay also serves
as a director of the following public companies: PairGain Technologies, Inc., a
provider of telecommunications products; and ViaSat, Inc., a provider of
wireless telecommunications products.
BOARD MEETINGS AND ATTENDANCE
The Board of Directors of the Company held a total of six (6) meetings
during the fiscal year ended June 30, 1999. Each incumbent Director attended at
least seventy-five percent (75%) of the aggregate of the number of meetings of
the Board and the number of meetings held by all committees of the Board on
which he served. There are no family relationships between any director,
executive officer or any of the Designees.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee and an Audit Committee.
The functions of the Compensation Committee include advising the Company on
salaries and incentive compensation for employees of, and consultants to, the
Company. The Compensation Committee, which currently consists of Messrs. Lay,
Drobish and Seigle, held one (1) meeting during the fiscal year ended June 30,
1999, with 100% attendance. The Audit Committee is responsible for recommending
to the Board of Directors the appointment of the Company's outside auditors,
examining the results of audits and reviewing internal accounting controls. The
Audit Committee, which consists of Messrs. Cilento, Drobish and Seigle, held one
(1) meeting during the fiscal year ended June 30, 1999, with 100% attendance.
The Board of Directors does not have a nominating committee. Instead, the Board
of Directors, as a whole, identifies and screens candidates for membership on
the Company's Board of Directors.
A-3
<PAGE> 14
COMPENSATION OF DIRECTORS
1997 Stock Option Plan for Non-Employee Directors. Pursuant to the
Company's 1997 Stock Option Plan for Non-Employee Directors, as amended, each
non-employee director receives an initial grant of options to purchase 10,000
shares of the Company's Common Stock upon commencement of service as a director
which option vests and becomes exercisable at a rate of twenty five percent per
year over the four year period following the grant date. In addition, upon each
anniversary of the initial grant of options during a non-employee director's
term of office, such non-employee director shall receive an additional option
covering 2,500 shares of the Company's Common Stock, with the same vesting
schedule as the initial grant. The exercise price of options granted under this
plan is 100% of the fair market value on the date of grant. During the fiscal
year ended June 30, 1999, options were granted to each of Messrs. Drobish,
Seigle, Lay and Cilento to purchase 2,500 shares of the Company's Common Stock.
Director Fees. The Company's Board of Directors has approved the payment of
the following fees to non-employee directors for attendance at meetings of the
Board of Directors, the Annual Meeting of Stockholders and committee meetings:
$1,250 for each scheduled meeting of the Board of Directors attended, $1,000 for
the Annual Meeting of Stockholders and $750 plus travel expenses for each
committee meeting that is not scheduled on the same day as a meeting of the
Board of Directors.
2. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 27, 1999 certain information
regarding the beneficial ownership of the Company's outstanding Common Stock by
(i) each person known to the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock, (ii) each director, (iii) each of the
Named Executive Officers and (iv) all directors and executive officers as a
group. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OWNERSHIP(1) PERCENTAGE OF CLASS(%)
---------------- -------------------- -----------------------
<S> <C> <C>
Wellington Management Company, LLP(2)............... 513,500 9.8
75 State Street
Boston, Massachusetts 02109
ROI Capital Management, Inc.(3)..................... 448,700 8.6
17 E. Sir Francis Drake Blvd., Suite 225
Larkspur, California 94939
Sigma Partners(4)................................... 355,086 6.8
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
David S. Silver(5).................................. 402,500 7.6
16245 Laguna Canyon Road
Irvine, CA 92618
Dean A. Hough(6).................................... 365,000 6.9
16245 Laguna Canyon Road
Irvine, CA 92618
David C. Seigle(7).................................. 12,500 *
William E. Drobish(7)(8)............................ 132,500 2.5
Ronald J. Fikert(9)................................. 62,500 1.2
Kevin Drum(10)...................................... 55,000 1.0
Richard Murphy(6)................................... 74,444 1.4
Alexander P. Cilento(7)............................. 15,115 *
B. Allen Lay(7)(11)................................. 100,407 1.9
All executive officers and directors as a group (9
persons)(12)...................................... 1,219,966 22.4
</TABLE>
- ---------------
* Less than 1%
A-4
<PAGE> 15
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options currently exercisable or which will become exercisable upon
consummation of the Offer, are deemed outstanding for computing the
percentage of the person holding such options but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated by footnote and subject to community property laws where
applicable, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned by them.
(2) Based solely on a Schedule 13G filed by Wellington Management Company, LLP,
which reported stock ownership as of December 31, 1998.
(3) Based solely on a Schedule 13G filed by ROI Capital Management, Inc., Mark
T. Boyer and Mitchell J. Soboleski, which reported stock ownership as of
October 26, 1998.
(4) Based solely on a Schedule 13G filed by Sigma Partners, Sigma Management
and Sigma Associates, which reported ownership as of December 31, 1998.
(5) Includes 60,000 shares of Common Stock issuable upon the exercise of stock
options which will become fully exercisable upon consummation of the Offer
or the Merger.
(6) Includes 20,000 shares of Common Stock issuable upon exercise of stock
options which will become fully exercisable upon consummation of the Offer
or the Merger.
(7) Includes 12,500 shares of Common Stock issuable upon the exercise of stock
options which will become fully exercisable upon consummation of the Offer
or the Merger.
(8) Consists of shares held by the Drobish Family Trust, dated November 12,
1980. Mr. Drobish disclaims beneficial ownership of the shares owned by the
Drobish Family Trust, dated November 12, 1980, except to the extent of his
pecuniary interest therein.
(9) Includes 25,000 shares of Common Stock issuable upon the exercise of stock
options which will become fully exercisable upon consummation of the Offer
or the Merger. Also includes 37,500 shares held by the Fikert Family Trust,
dated June 30, 1986. Mr. Fikert disclaims beneficial ownership of the
shares owned by the Fikert Family Trust except to the extent of his
pecuniary interest therein.
(10) Includes 22,500 shares of Common Stock issuable upon the exercise of stock
options which will become fully exercisable upon consummation of the Offer
or the Merger.
(11) Includes 42,806 shares owned by Southern California Ventures and 45,101
shares owned by Lay Ventures. Mr. Lay, a director of the Company, is a
General Partner of Southern California Ventures and a limited partner of
Lay Ventures. Mr. Lay disclaims beneficial ownership of the shares held by
Southern California Ventures and Lay Ventures except to the extent of his
pecuniary interest arising from his partnership interest in Southern
California Ventures and his limited partnership interest in Lay Ventures.
(12) Includes an aggregate of 197,500 shares of Common Stock issuable upon the
exercise of stock options which will become fully exercisable upon
consummation of the Offer or the Merger.
3. CERTAIN INFORMATION CONCERNING THE COMPANY'S EXECUTIVE OFFICERS AND EXECUTIVE
COMPENSATION
EXECUTIVE OFFICERS
Set forth in the table below are the names, ages and current offices held
by all executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
David S. Silver........................... 41 President and Chief Executive Officer
Dean A. Hough............................. 41 Vice President, Engineering
Ronald J. Fikert.......................... 50 Vice President, Finance
Richard Murphy............................ 52 Vice President, Sales
Kevin Drum................................ 40 Vice President, Marketing
</TABLE>
A-5
<PAGE> 16
Executive officers are elected by and serve at the discretion of the Board.
None of the executive officers has any family relationship to any Director or
any other executive officer of the Company. Set forth below is a brief
description of the business experience for all of the executive officers, except
Mr. Silver and Mr. Hough. See "The Current Members of the Board."
Richard M. Murphy joined the Company as a Vice President, Sales in November
1989. From 1984 to 1989, Mr. Murphy held various sales management positions with
Emulex Corporation, a manufacturer of computer storage, communications, graphics
and peripheral products, where he served as Vice President, Domestic Sales from
September 1987 to January 1989 and as Vice President, North American Sales from
January 1989 to November 1989. Prior to 1984, Mr. Murphy held various sales
positions with Hamilton-Avnet Electronics, Kierulff Electronics and Telefile
Computer Products.
Ronald J. Fikert joined the Company as Vice President, Finance in February
1990. From March 1989 to February 1990, Mr. Fikert worked as an independent
management consultant. From 1984 to 1989, Mr. Fikert was employed by General
Monitors, a manufacturer of sensing, monitoring and detection equipment, where
he served as Controller. From 1979 to 1984, he was employed by Modular Command
Systems, a manufacturer of electronic communications hardware and software, as
Vice President, Finance and Secretary. Prior to joining Modular Command Systems,
Mr. Fikert was Director of Finance for Esterline Electronics, a manufacturer of
electronic products, and was an accountant with Arthur Andersen & Co. Mr. Fikert
is a Certified Public Accountant.
Kevin Drum joined the Company in November 1992 and was promoted to Vice
President, Marketing in July 1995. Prior to that time, his positions with the
Company included Director of Marketing and Senior Product Manager. From 1984 to
1992, Mr. Drum was employed by Emulex Corporation, where he served as a senior
product manager from 1988 to 1992.
A-6
<PAGE> 17
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation received for the fiscal years
ended June 30, 1999, 1998 and 1997 by the Company's Chief Executive Officer and
its other most highly compensated executive officers (collectively, the "Named
Executive Officers") whose aggregate salary and bonus exceeded $100,000 for the
fiscal year ended June 30, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- AWARDS
FISCAL YEAR ---------------------
ENDED SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION JUNE 30 SALARY($) BONUS($)(1) OPTIONS/SARS COMPENSATION($)(2)
--------------------------- ----------- --------- ----------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
David S. Silver............... 1999 $160,008 $ -- 60,000 $750
President and Chief 1998 145,000 59,458 -- 750
Executive Officer 1997 135,000 64,893 -- 750
Dean A. Hough................. 1999 125,004 -- 20,000 750
Vice President -- 1998 118,000 19,806 -- 750
Engineering 1997 114,078 21,083 -- 750
Ronald J. Fikert.............. 1999 118,004 -- 20,000 750
Vice President -- Finance, 1998 109,000 23,250 -- 750
Chief Financial Officer 1997 103,843 23,908 -- 750
and Secretary
Richard Murphy(3)............. 1999 109,008 59,948 20,000 750
Vice President -- Sales 1998 104,000 60,405 -- 750
1997 100,000 76,761 -- 750
Kevin Drum.................... 1999 115,008 -- 20,000 750
Vice President -- Marketing 1998 109,000 21,528 -- 750
1997 102,290 22,295 -- 750
</TABLE>
- ---------------
(1) Bonus amounts earned by each of the Named Executive Officers for the fiscal
year ended June 30, 1999 have not been determined as of August 3, 1999.
(2) Consists of matching payments made under the Company's 401(k) Plan.
(3) Bonus amounts for Mr. Murphy include $59,948, $43,547 and $59,895 in sales
commissions earned by Mr. Murphy during fiscal years 1999, 1998 and 1997,
respectively.
A-7
<PAGE> 18
STOCK OPTIONS
The following table sets forth certain information concerning grants of
options to each of the Named Executive Officers during the year ended June 30,
1999. In addition, in accordance with the rules and regulations of the
Commission, the following table sets forth the hypothetical gains or "option
spreads" that would exist for the options. Such gains are based on assumed rates
of annual compound stock appreciation of 5% and 10% from the date on which the
options were granted over the full term of the options. The rates do not
represent the Company's estimate or projection of future Common Stock prices,
and no assurance can be given that any appreciation will occur or that the rates
of annual compound stock appreciation assumed for the purposes of the following
table will be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF PERCENTAGE OF POTENTIAL REALIZED VALUE AT
SECURITIES TOTAL OPTIONS ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE OR STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH) DATE 5% 10%
---- ------------- -------------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David S. Silver...... 60,000 20.9% $6.94 August 25, 2003 $115,010 $254,143
Dean A. Hough........ 20,000 7.0 $6.94 August 25, 2003 38,337 84,714
Ronald J. Fikert..... 20,000 7.0 $6.94 August 25, 2003 38,337 84,714
Richard Murphy....... 20,000 7.0 $6.94 August 25, 2003 38,337 84,714
Kevin Drum........... 20,000 7.0 $6.94 August 25, 2003 38,337 84,714
</TABLE>
- ---------------
(1) The options vest over a four year period with 25% becoming exercisable on
each anniversary of the grant date such that the options are 100% vested
four years after the grant date.
(2) Options to purchase an aggregate of 286,900 shares of Common Stock were
granted to employees, including the Named Executive Officers, during the
fiscal year ended June 30, 1999.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning all option
exercises, and the number of shares covered by both exercisable and
unexercisable stock options for the Named Executive Officers as of June 30,
1999. Also reported are the values for "in the money" options that represent the
positive spread between the exercise prices of any of such existing stock
options and the closing sale price of the Company's Common Stock as of June 30,
1999.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JUNE 30, 1999 AT JUNE 30, 1999(1)
SHARES ACQUIRED VALUE ------------------------------ ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
---- ------------------ ----------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David S. Silver....... -- -- -- 60,000 -- $168,750
Dean A. Hough......... -- -- -- 20,000 -- 56,250
Ronald F. Fikert...... -- -- 3,750 21,250 $27,188 65,313
Richard M. Murphy..... -- -- -- 20,000 -- 56,250
Kevin Drum............ 32,500 $141,634 -- 22,500 -- 74,375
</TABLE>
- ---------------
(1) Calculated based on a fair market value equal to the reported closing price
of the Company's Common Stock on The Nasdaq National Market at June 30,
1999, of $9.75 per share, less the applicable exercise price, and does not
take into account the Offer or any grants of options made after June 30,
1999.
(2) Options that are not exercisable become fully exercisable upon consummation
of the Offer.
A-8
<PAGE> 19
4. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1999, the Company's Board of
Directors, based upon recommendations of the Compensation Committee, established
the levels of compensation for the Company's executive officers. David S.
Silver, the Chairman of the Board, President and Chief Executive Officer of the
Company participated in the deliberations of the Board regarding executive
compensation, but did not participate in the process or decisions of the Board
of Directors regarding his compensation.
5. COMPENSATION PURSUANT TO PLANS
STOCK INCENTIVE PLANS
The Company adopted an Amended and Restated Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan (the "1992 Plan")
in September 1992. The 1992 Plan covers an aggregate of 1,250,000 shares of
Common Stock. In November 1996, the 1992 Plan was terminated. In June 1996, the
Company adopted its 1996 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan (the "1996 Plan"). The 1996 Plan covers an
aggregate of 800,000 shares of Common Stock.
The 1992 Plan and the 1996 Plan (collectively, the "Plans") provide for the
granting of "incentive stock options," within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), nonstatutory options and
the sale of shares of restricted stock. Under the Plans, options to purchase
shares of the Company's Common Stock and the rights to purchase restricted
shares of Common Stock may be granted to directors, officers and employees of
the Company, except that incentive stock options may not be granted to
non-employee directors. The Plans are administered by the Board of Directors. As
of July 27, 1999, there were 580,555 options outstanding under the Plans and
538,769 shares of restricted stock had been issued and sold under the Plans.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") originally
covering an aggregate of 150,000 shares of Common Stock was adopted by the Board
of Directors and approved by the Company's stockholders in August 1997 and
amended to increase the shares available under the Purchase Plan by 200,000 to
350,000 in April 1999. The Purchase Plan, which is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code,
is implemented by twelve-month offerings with purchases occurring at three-month
intervals. The Purchase Plan is administered by the Board of Directors. The
Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 15% of an employee's compensation. The
price of stock purchased under the Purchase Plan will be 85% of the lower of the
fair market value of the Common Stock at the beginning of the offering period or
on the applicable purchase date. As of July 27, 1999, Richard Murphy and Ronald
J. Fikert were each entitled to purchase 1,529 shares of Common Stock under the
Purchase Plan at $6.80 per share. No other executive officers of the Company
participate in the Purchase Plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors
and officers and may indemnify its employees and other agents to the fullest
extent permitted by law. The Company believes that indemnification under its
Bylaws covers at least negligence and gross negligence by indemnified parties,
and permits the Company to advance litigation expenses in the case of
stockholder derivative actions or other actions, against an undertaking by the
indemnified party to repay such advances if it is ultimately determined that the
indemnified party is not entitled to indemnification. The Company has purchased
liability insurance for its officers and directors.
In addition, the Company's Certificate of Incorporation provides that,
pursuant to Delaware law, its directors shall not be liable for monetary damages
for breach of the directors' fiduciary duty to the Company and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the
directors'
A-9
<PAGE> 20
fiduciary duty, and in appropriate circumstances equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
The Company has entered into separate indemnification agreements with its
directors and officers. These agreements require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors or officers (other than liabilities
arising from actions not taken in good faith or in a manner the indemnitee
believed to be opposed to the best interests of the Company) to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified and to obtain directors' insurance if available on
reasonable terms. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted to
directors, officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Commission,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. The Company believes that its Certificate of
Incorporation and Bylaw provisions and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers.
Pursuant to the Merger Agreement, Purchaser and Merger Sub have agreed that
all rights of indemnification in favor of directors, officers, employees or
agents of the Company existing prior to the Merger pursuant to the Company's
Certificate of Incorporation and Bylaws shall remain in effect after the Merger.
In addition, Purchaser has agreed that the Company shall maintain in effect for
not less than six (6) years from the effective time of the Merger, directors'
and officers' liability insurance with the same coverage or substantially
similar coverage to the directors' and officers' liability insurance policies
effective prior to the Merger; provided, that the Company shall not be required
to pay annual premiums in excess of 150% of the aggregate annual premiums in
effect prior to the Merger.
A-10
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 1 Offer to Purchase dated August 3, 1999.
Exhibit 2 Letter of Transmittal.
Exhibit 3 Agreement and Plan of Merger dated as of July 27, 1999 by
and among Purchaser, Merger Sub and the Company.*
Exhibit 4 Voting Agreement dated as of July 27, 1999 by and among
Purchaser, Merger Sub, David S. Silver, Dean A. Hough,
Ronald J. Fikert, Richard M. Murphy, Kevin Drum, Alexander
P. Cilento, William E. Drobish, B. Allen Lay and Southern
California Ventures.*
Exhibit 5 Opinion of C.E. Unterberg, Towbin, dated July 27, 1999.
Exhibit 6 Press Release issued by the Company on July 28, 1999.*
Exhibit 7 Letter to Stockholders of the Company, dated August 3, 1999.
</TABLE>
- ---------------
* Not included in copies mailed to stockholders.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
AT
$12.75 NET PER SHARE
BY
IMAGING COMPONENTS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT
PACIFIC TIME, ON TUESDAY, AUGUST 31, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER (AS DEFINED HEREIN) IS CONDITIONED UPON, AMONG OTHER THINGS, (I)
THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER SUCH NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE (THE
"SHARES"), OF KOFAX IMAGE PRODUCTS, INC. (THE "COMPANY") WHICH, TOGETHER WITH
THE SHARES THEN OWNED DIRECTLY OR INDIRECTLY BY IMAGING COMPONENTS CORPORATION
(THE "PURCHASER") AND ITS WHOLLY OWNED SUBSIDIARY, IMAGING ACQUISITION
CORPORATION ("MERGER SUB"), WOULD CONSTITUTE MORE THAN FIFTY PERCENT (50%) OF
THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION")
AND (II) THE SATISFACTION OF THE OTHER CONDITIONS DESCRIBED IN "CERTAIN
CONDITIONS OF THE OFFER."
-------------------------
THE BOARD OF DIRECTORS OF THE COMPANY BY THE UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT (A) HAS DETERMINED THAT THE MERGER AGREEMENT (AS DEFINED
HEREIN) AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER (AS DEFINED HEREIN), ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY
AND THE SHAREHOLDERS OF THE COMPANY, (B) HAS APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, AND (C) RECOMMENDS ACCEPTANCE OF THE OFFER BY SHAREHOLDERS OF THE
COMPANY.
-------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (a) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions set forth therein, have
such shareholder's signature thereon guaranteed if required by Instruction 1
thereto, mail or deliver the Letter of Transmittal (or such facsimile thereof)
and any other required documents to IBJ Whitehall Bank & Trust Company, who is
acting as depositary in connection with the Offer (the "Depositary"), and either
deliver the Share Certificates (as defined herein) to the Depositary along with
the Letter of Transmittal (or a facsimile thereof) or deliver such Shares
pursuant to the procedures for book-entry transfer set forth in "The Tender
Offer -- Procedures for Tendering Shares" or (b) request such shareholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such shareholder. A shareholder having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee, must
contact such broker, dealer, commercial bank, trust company or other nominee if
such shareholder desires to tender such Shares.
Any shareholder who desires to tender Shares and whose Share Certificates
are not immediately available, or who cannot comply with the procedures for
book-entry transfer described in this Offer to Purchase on a timely basis, may
tender such Shares by following the procedures for guaranteed delivery set forth
in "The Tender Offer -- Procedures for Tendering Shares."
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other related materials may be
directed to MacKenzie Partners, Inc. (the "Information Agent") or Dresdner
Kleinwort Benson North America LLC (the "Dealer Manager") at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
-------------------------
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. Logo]
The Dealer Manager for the Offer is:
[Dresdner Kleinwort Benson Logo]
August 3, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER AND MERGER............ 1
INTRODUCTION................................................ 5
SPECIAL FACTORS............................................. 8
Background of the Offer................................... 8
Recommendation of the Board of Directors; Fairness of the
Offer and the Merger................................... 11
Opinion of the Financial Advisor.......................... 11
Purpose of the Offer and the Merger; Plans for the
Company................................................ 11
Appraisal Rights.......................................... 13
Certain Effects of the Offer and the Merger............... 14
Interests of Certain Persons in the Offer and the
Merger................................................. 14
Source and Amount of Funds................................ 16
The Merger Agreement...................................... 17
Certain United States Federal Income Tax Consequences..... 28
Effect of the Offer on the Market for the Shares; Exchange
Act Registration;
Margin Regulations..................................... 28
THE TENDER OFFER............................................ 30
1. Terms of the Offer; Expiration Date.................. 30
2. Acceptance for Payment and Payment for Shares........ 32
3. Procedures for Tendering Shares...................... 33
4. Withdrawal Rights.................................... 35
5. Price Range of Shares; Dividends..................... 35
6. Certain Information Concerning the Company........... 36
7. Certain Information Concerning Purchaser, Merger Sub,
DICOM and Private Equity Partners.................... 39
8. Dividends and Distributions.......................... 40
9. Certain Conditions of the Offer...................... 40
10. Certain Legal Matters; Regulatory Approvals.......... 42
11. Fees and Expenses.................................... 43
12. Miscellaneous........................................ 44
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, MERGER SUB,
DICOM AND PRIVATE EQUITY PARTNERS...................... I-1
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY........... II-1
ANNEX A
TEXT OF SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW......................................... A-1
</TABLE>
i
<PAGE> 3
QUESTIONS AND ANSWERS ABOUT
THE OFFER AND MERGER
Q: WHAT IS THE OFFER?
A: Imaging Components Corporation, a Delaware corporation ("Purchaser"), is
offering to purchase all outstanding shares of common stock, par value $0.001
per share (the "Shares"), of Kofax Image Products, Inc., a Delaware corporation
(the "Company"), at a price of $12.75 per Share, net to the seller in cash,
without interest (the "Offer Price"). Certain members of the Company's
management (the "Management Group") will retain some of their Shares as set
forth on Schedule 2.8 to the Merger Agreement (as defined herein) (the "Retained
Shares"). The members of the Management Group and certain other of the Company's
shareholders, who beneficially own an aggregate of approximately 19.5% of the
current outstanding Shares (17.5% on a fully diluted basis) entitled to vote at
any meeting of the shareholders of the Company, have agreed to tender all of the
Shares owned by them other than the Retained Shares and to vote all Shares owned
by them in favor of the Merger Agreement and the transactions contemplated
thereby and against any competing offer, pursuant to a Voting Agreement dated
July 27, 1999, by and among Purchaser, Imaging Acquisition Corporation, a
Delaware corporation ("Merger Sub"), each member of the Management Group and
such other of the Company's shareholders signatory thereto (the "Voting
Agreement").
Q: WHAT ARE THE CONDITIONS TO THE OFFER?
A: The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer such
number of Shares which, together with the Shares then owned directly or
indirectly by Purchaser and Merger Sub, would constitute more than 50% of the
Shares then outstanding on a fully diluted basis (the "Minimum Condition") and
(ii) the satisfaction of the other conditions described in "The Tender
Offer -- Certain Conditions of the Offer."
Q: WHAT WILL HAPPEN IN THE MERGER?
A: After the purchase of Shares pursuant to the Offer, Merger Sub will be
merged with and into the Company with the Company continuing as the surviving
corporation and becoming a wholly owned subsidiary of Purchaser (the "Surviving
Corporation"). At the effective time of the Merger (the "Effective Time"), each
Share issued and outstanding immediately prior to the Effective Time other than
(i) Shares held by the Company or any subsidiary of the Company, (ii) Shares
held by Purchaser, Merger Sub, or any other subsidiary of Purchaser, if any,
(iii) the Retained Shares, and (iv) Shares held by shareholders who have
demanded and perfected, and have not withdrawn or otherwise lost, appraisal
rights, if any, under the Delaware General Corporations Law (the "DGCL"), will
be canceled and converted automatically into the right to receive $12.75 in
cash, or any higher price that may be paid per Share in the Offer, without
interest (the "Merger Consideration"). Each Share held by the Company as
treasury stock or held by Purchaser, Merger Sub or any subsidiary of Purchaser,
Merger Sub or the Company immediately prior to the Effective Time shall be
canceled, retired and cease to exist, and no consideration shall be delivered
with respect thereto. Each Retained Share issued and outstanding immediately
prior to the Effective Time shall be exchanged for (as provided in and subject
to the limitations set forth in the Merger Agreement) and become a number of
fully paid and nonassessable shares of Purchaser as determined pursuant to a
formula set forth in the Merger Agreement.
Q: WHO WILL OWN THE COMPANY AFTER THE MERGER?
A: After the Merger, the Company will become a privately held company owned
by Purchaser. Purchaser will be owned by DICOM GROUP plc ("DICOM"), Dresdner
Kleinwort Benson Private Equity Partners LP ("Private Equity Partners"), Green
Shoots Ltd. ("GSL") and the Management Group, whose members are:
David S. Silver
Dean A. Hough
1
<PAGE> 4
Ronald J. Fikert
Richard M. Murphy
Kevin Drum
Certain other employees of the Company may also become members of the
Management Group. DICOM, Private Equity Partners, GSL and the Management Group
are referred to herein as the "Equity Investors."
Q: WHY IS THE COMPANY BEING ACQUIRED?
A: The management of DICOM and the Company have had a long-standing
relationship and have considered a combination and other strategic possibilities
involving the two companies in the past. In March 1999, the Company and DICOM
began reexploring a possible combination. After extensive discussion with their
financial and legal advisors, DICOM and the Company decided to structure the
transaction as an acquisition of the Company by Purchaser. DICOM is to be given
a call option to acquire in the next 18 months the interests of Private Equity
Partners and GSL in Purchaser. Separately, DICOM intends to conduct a secondary
public offering on the Neuer Markt of the Frankfurt Stock Exchange, Germany's
market for emerging growth companies. If successful, DICOM intends to use the
proceeds from the offering to exercise its call option. Furthermore, the Board
of Directors of the Company and the Equity Investors each believes that the
acquisition is in the best interest of the shareholders of the Company. With its
existing product line, the Company is exposed to a number of market variables,
primarily through direct competition and original equipment manufacturer product
enhancements, which could significantly adversely effect its operating
performance. The inclusion of DICOM as an Equity Investor represents additional
product and market opportunities for the Company and its employees, and is
intended to decrease risk and improve operating performance. The markets for
document imaging and document management and forms processing are fragmented,
and this transaction is part of the current trend towards consolidation of the
industry. To review the background and reasons for the Offer and the Merger in
greater detail, please see "Special Factors -- Background of the Offer"
beginning on page 8.
Q: WHY HAS THE MANAGEMENT GROUP DECIDED TO RETAIN AN OWNERSHIP INTEREST IN THE
COMPANY FOLLOWING THE MERGER?
A: A significant number of Shares and options held by members of the
Management Group will be converted into the right to receive cash consideration
per Share at the same Offer Price as all other holders of Shares. However,
Messrs. Silver, Hough, Murphy, Fikert and Drum have decided to retain a portion
of their current ownership interest in the Company. As described in "Special
Factors -- Background of the Offer," the Management Group offered an expression
of interest in participating economically in the Purchaser. Furthermore, because
these individuals have been integral to the Company's success in the past, DICOM
and Private Equity Partners believe their involvement is integral to the
Company's success in the future and therefore reacted positively to the interest
of these individuals and encouraged their participation.
Q: WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE OFFER AND THE MERGER TO ME?
A: You will receive an immediate cash premium (36% higher than the per
Share closing price of $9.375 per Share on July 27, 1999, the last trading date
before the Merger Agreement was announced) for your Shares that you may not
otherwise receive in the future. You will not have the opportunity to
participate in the Company's future earnings and growth, but you will not bear
the risk of any decrease in the Company's value.
Q: WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE TRANSACTIONS TO THE EQUITY
INVESTORS?
A: Upon completion of the Offer and the Merger, DICOM, GSL and Private
Equity Partners will indirectly own through Purchaser approximately 94.4% of the
Company for a cash investment of $20.1 million. The Management Group will invest
$1.2 million and indirectly own through Purchaser approximately 5.6% of
2
<PAGE> 5
the Company. Like you, the Management Group will also receive an immediate cash
premium for their equity interests in the Company that are not otherwise
retained. The Equity Investors will have the opportunity to participate in the
Company's future earnings and growth, but they will bear the risk of any
decrease in the Company's value. As a result of the Offer and the Merger, the
Company will have significant amounts of indebtedness that may reduce the future
value of the Company. The Equity Investors expect that the Company will be able
to repay this indebtedness with cash generated from its operations, although it
may not be able to do so.
Q: WHAT WILL I RECEIVE PURSUANT TO THE OFFER?
A: You will receive $12.75 in cash, without interest, for each of your
Shares. For example: If you own 100 shares of the Company common stock, upon
completion of the Offer you will receive $1,275.00 in cash.
Q: HOW MANY VOTES ARE REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT?
A: Under the DGCL, if Purchaser acquires, pursuant to the Offer, at least
90% of the Shares then outstanding, Purchaser will be able to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the Company's shareholders. If, however, Purchaser acquires,
pursuant to the Offer, less than 90% of the Shares then outstanding, a vote of
the Company's shareholders will be required under the DGCL to approve the
Merger, and a significantly longer period of time will be required to effect the
Merger. If such a vote of the Company's shareholders is necessary, approval of
the Merger will require the affirmative vote of a majority of the Shares
outstanding as of the record date. Pursuant to the Voting Agreement, the
Management Group and certain other shareholders of the Company, who beneficially
own an aggregate of approximately 19.5% of the current outstanding Shares
entitled to vote at any meeting of the shareholders of the Company, have agreed
to vote all Shares owned by them in favor of the Merger Agreement and the
transactions contemplated thereby. Therefore, assuming the number of then
outstanding Shares remains the same as the number of current outstanding Shares
holders of only more than an additional 30.5% of outstanding Shares would need
to vote in favor of the Merger Agreement and the transactions contemplated
thereby for the Merger to be approved.
Q: CAN I WITHDRAW MY SHARES ONCE I HAVE TENDERED?
A: Yes. Your tendered Shares may be withdrawn at any time prior to the date
that the Offer expires, and, unless the Shares have been accepted for payment by
Purchaser pursuant to the Offer, they may also be withdrawn at any time after
the date that the Offer expires. If Purchaser (i) extends the Offer, (ii) is
delayed in its acceptance for payment of Shares or (iii) is unable to accept
Shares for payment pursuant to the Offer for any reason, then your tendered
Shares may be retained on behalf of Purchaser, and your tendered Shares may not
be withdrawn except under the circumstances described in "The Tender
Offer -- Withdrawal Rights." To withdraw your tendered Shares, you must follow
the instructions set forth therein.
Q: WHEN DO YOU EXPECT THE OFFER AND MERGER TO BE COMPLETED?
A: We are working to complete the Offer and Merger by the beginning of
September 1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER AND MERGER TO ME?
A: To review your potential tax consequences in greater detail, see page
28.
The tax consequences of the Merger will depend on your personal situation.
You should consult your tax advisor for a full understanding of the tax
consequences of the Offer and the Merger to you.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANY?
A: The Company files annual, quarterly and current reports, proxy
statements and other information with the Commission. You may read and copy
these reports, statements and other information at the Commission's public
reference room at (i) Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, (ii) Seven World Trade Center, Suite 1300, New York, New
York 10048 and (iii) the Citicorp Center,
3
<PAGE> 6
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call
the Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. You can also request copies of these documents, for a
copying fee, by writing to the Commission. The Company's filings can also be
reviewed by accessing the Commission's Internet site at http://www.sec.gov,
which contains reports, proxy and information statements and other information.
Q: WHAT DO I NEED TO DO NOW?
A: After you carefully read this document, if you would like to tender your
Shares, just follow the instructions set forth in this Offer to Purchase under
"The Tender Offer -- Procedures for Tendering Shares" and in the Letter of
Transmittal which has been sent to you with this Offer to Purchase. In all
cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (a) certificates representing such
Shares (the "Share Certificates") or timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Shares, if such procedure is
available, into the Depositary's account at a "Book-Entry Transfer Facility"
pursuant to the procedures set forth in this Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares," (b) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, or, in the case of a
book-entry transfer, an Agent's Message (as defined herein) and (c) any other
documents required by the Letter of Transmittal.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this document, or if you would like
to ask any additional questions about the Offer and/or Merger, you should
contact the Company's Information Agent or the Dealer Manager for the
transactions:
Information Agent:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll Free (800) 322-2885
Dealer Manager:
DRESDNER KLEINWORT BENSON NORTH AMERICA LLC
75 Wall Street
New York, New York 10005
(212) 429-2000 ext. 2958
or
Call Toll Free (800) 457-0245 ext. 2958
4
<PAGE> 7
To the Holders of Shares of Common Stock of Kofax Image Products, Inc.:
INTRODUCTION
Imaging Components Corporation, a Delaware corporation ("Purchaser"),
hereby offers to purchase all outstanding shares of common stock, par value
$0.001 per share (the "Shares"), of Kofax Image Products, Inc., a Delaware
corporation (the "Company"), at a price of $12.75 per Share, net to the seller
in cash, without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions, or, subject to Section 2.13 of the Merger Agreement (as defined
herein) and except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
IBJ Whitehall Bank & Trust Company, who is acting as depositary in connection
with the Offer (the "Depositary"), MacKenzie Partners, Inc., who is serving as
information agent in connection with the Offer (the "Information Agent") and
Dresdner Kleinwort Benson North America LLC, who will be the dealer manager in
connection with the Offer (the "Dealer Manager"), incurred in connection with
the Offer. See "The Tender Offer -- Fees and Expenses."
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") BY THE
UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, (A) HAS DETERMINED THAT THE MERGER
AGREEMENT (AS DEFINED HEREIN) AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER (AS DEFINED HEREIN), ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY AND THE SHAREHOLDERS OF THE COMPANY, (B) HAS
APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (C) RECOMMENDS ACCEPTANCE OF
THE OFFER BY SHAREHOLDERS OF THE COMPANY.
The Company's financial advisor, C.E. Unterberg, Towbin (the "Financial
Advisor"), has delivered to the Company Board a written opinion, dated July 27,
1999, to the effect that, as of such date and based upon and subject to certain
matters stated in such opinion, the $12.75 per Share cash consideration to be
received by the holders of Shares in the Offer and the Merger was fair from a
financial point of view to such holders. A copy of the opinion of the Financial
Advisor is filed as an exhibit to the statement on Schedule 13E-3 (together with
any exhibits, annexes, amendments or supplements thereto, the "Schedule 13E-3")
filed by Purchaser and Merger Sub with the United States Securities and Exchange
Commission (the "Commission") and is incorporated herein by reference and is
also filed as an exhibit to the Solicitation/Recommendation Statement on
Schedule 14D-9 filed by the Company with the Commission in connection with the
Offer (together with any exhibits, annexes, amendments or supplements thereto,
the "Schedule 14D-9"), which is being mailed to Company shareholders herewith
and should be read carefully in its entirety. The opinion of the Financial
Advisor is directed to the Company Board and relates only to the fairness of the
cash consideration to be received in the Offer and the Merger by holders of
Shares from a financial point of view, does not address any other aspect of the
Offer or the Merger or related transactions, and is not intended to constitute,
and does not constitute, a recommendation to any shareholder as to whether such
shareholder should tender Shares in the Offer or how such shareholder should
vote if a vote is held on the Merger.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES WHICH, TOGETHER WITH THE SHARES THEN OWNED DIRECTLY OR INDIRECTLY BY
PURCHASER, WOULD CONSTITUTE MORE THAN 50% OF THE SHARES THEN OUTSTANDING ON A
FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (ii) THE SATISFACTION OF THE
OTHER CONDITIONS DESCRIBED IN "THE TENDER OFFER -- CERTAIN CONDITIONS OF THE
OFFER."
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of July 27, 1999 (the "Merger Agreement") among Purchaser, Merger Sub and the
Company. The Merger Agreement provides, among other things, for the making of
the Offer and further provides that, following the purchase of Shares pursuant
to the Offer, upon the terms and subject to the conditions set forth in the
Merger Agreement, and in
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accordance with the Delaware General Corporation Law (the "DGCL"), Merger Sub
will be merged with and into the Company (the "Merger"). Following consummation
of the Merger, the separate corporate existence of Merger Sub will cease and the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will become a wholly-owned subsidiary of Purchaser. At the effective time of
the Merger (the "Effective Time"), each Share issued and outstanding immediately
prior to the Effective Time other than (a) Shares held by the Company or any
subsidiary of the Company, (b) Shares held by Purchaser, Merger Sub, any other
subsidiary of Purchaser, if any, (c) the Shares held by the Management Group as
set forth on Schedule 2.8 to the Merger Agreement (collectively, the "Retained
Shares"), and (d) Shares held by shareholders who have demanded and perfected,
and have not withdrawn or otherwise lost, appraisal rights, if any, under the
DGCL will be canceled and converted automatically into the right to receive
$12.75 in cash, or any higher price that may be paid per Share in the Offer,
without interest (the "Merger Consideration"). The Merger Agreement is more
fully described in "Special Factors -- Purpose of the Offer and the Merger;
Plans for the Company" and "Special Factors -- The Merger Agreement." The
consummation of the Merger is subject to the satisfaction or waiver of certain
conditions, including the approval of the Merger Agreement by the requisite
vote, if any, of the shareholders of the Company.
Each Share held by the Company as treasury stock or held by Purchaser,
Merger Sub or any subsidiary of Purchaser, Merger Sub or the Company immediately
prior to the Effective Time shall be canceled, retired and cease to exist, and
no consideration shall be delivered with respect thereto. Each Retained Share
issued and outstanding immediately prior to the Effective Time shall be
exchanged for (as provided in and subject to the limitations set forth in the
Merger Agreement) and become (i) a number of fully paid and nonassessable shares
of Class B Common Stock, par value $0.001 per share, of the Purchaser
("Purchaser Class B Common") equal to (x) 20% of the Offer Price divided by (y)
$10.00 and (ii) a number of fully paid and non-assessable shares of Class A
Common Stock par value $0.001 per share, of the Purchaser ("Purchaser Class A
Common") equal to (x) 80% of the Offer Price divided by (y) $10.00, upon the
surrender of the certificate previously representing such shares of Retained
Shares.
As described above, the members of the Management Group will not tender the
Retained Shares but have, along with certain other shareholders of the Company,
agreed to tender all Shares owned by them other than the Retained Shares,
pursuant to a Voting Agreement dated July 27, 1999 by and among Purchaser,
Merger Sub, each member of the Management Group and such other of the Company's
shareholders signatory thereto (the "Voting Agreement"), a copy of which is
filed as an exhibit to the Tender Offer Statement on Schedule 14D-1 and
Statement on Schedule 13D (together with any exhibits, annexes, amendments or
supplements thereto, the "Schedule 14D-1") filed by Purchaser with the
Commission, and is incorporated herein by reference. In addition, pursuant to
the Voting Agreement, the members of the Management Group and certain other
shareholders of the Company have agreed to vote all Shares owned by them in
favor of the Merger Agreement and the transactions contemplated thereby and
against any competing offer.
The Company has advised Purchaser that as of the close of business on July
27, 1999, 5,243,956 Shares of common stock were issued and outstanding, and
580,555 Shares were reserved for issuance and issuable pursuant to outstanding
stock options granted by the Company to employees and directors ("Existing Stock
Options") and 34,000 Shares were issuable pursuant to the Company's 1997
Employee Stock Purchase Plan. As of the close of business on July 27, 1999,
neither Purchaser nor Merger Sub owned any Shares. Purchaser believes that the
Minimum Condition would be satisfied if Purchaser acquired 2,929,256 Shares of
common stock. As described in "Special Factors -- Interests of Certain Persons
in the Offer and the Merger" and "Special Factors -- The Merger Agreement,"
shareholders owning approximately 1,022,466 Shares have agreed to tender such
Shares.
Under the DGCL, if Purchaser acquires, pursuant to the Offer, at least 90%
of the Shares then outstanding, Purchaser will be able to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the Company's shareholders. If, however, Purchaser acquires,
pursuant to the Offer, less than 90% of the Shares then outstanding, a vote of
the Company's shareholders will be required under the DGCL to approve the
Merger, and a significantly longer period of time will be required to effect the
Merger.
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The Merger Agreement provides that, promptly following the purchase of and
payment for Shares by Purchaser pursuant to the Offer, Purchaser shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as will give Purchaser representation on the
Company Board equal to the product of the number of directors on the Company
Board (giving effect to any increase in the number of directors pursuant to the
Merger Agreement) and the percentage that the number of Shares so purchased by
Purchaser bears to the total number of Shares then outstanding (on a fully
diluted basis). In the Merger Agreement, the Company has agreed to use its
reasonable best efforts to cause Purchaser's designees to be so elected to the
Company Board. The Company's obligation to appoint designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all action required
pursuant to such Section and Rule in order to fulfill its obligations under the
Merger Agreement and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under such
Section and Rule in order to fulfill its obligations under the Merger Agreement
(provided that Purchaser and Merger Sub shall have provided to the Company on a
timely basis all such information with respect to Purchaser's designees).
Following the election of Purchaser's designees and until the Effective Time,
any amendment of the Merger Agreement or the Certificate of Incorporation or
Bylaws of the Company, any termination of the Merger Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Purchaser or Merger Sub, any waiver of any of the
Company's rights hereunder, or any transaction between Purchaser (or any
affiliate or associate thereof) and the Company shall require the concurrence of
a majority of the Company's directors (or the concurrence of the sole remaining
director, if there is only one remaining) then in office who are directors of
the Company on the date hereof, or are directors designated by such persons or
person.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase and in the attached Schedules and
Annexes, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Purchaser does not assume any
responsibility (i) for the accuracy or completeness of the information
concerning the Company furnished by the Company or contained in such documents
and records or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information but
which are unknown to Purchaser or (ii) for information furnished by the
Financial Advisor.
The Offer to Purchase includes information required to be disclosed
pursuant to Rule 13e-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which Rule governs so-called "going private" transactions
by certain issuers or their affiliates. Purchaser does not concede as a result
of providing such information or otherwise complying with Rule 13e-3 that it (or
any of its affiliates) are affiliates of the Company or subject to the
requirements of such Rule.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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SPECIAL FACTORS
BACKGROUND OF THE OFFER.
In 1992, DICOM and the Company established a commercial relationship
involving DICOM'S distribution of the Company's products in Europe. DICOM has
since become the Company's second largest distributor in Europe and its largest
distributor in South East Asia.
In June 1998, Dr. Otto Schmid, Chairman and Chief Executive Officer of
DICOM, and Dominique Vinay, Chief Executive Officer of Quadratec SA
("Quadratec"), a French software manufacturer in which DICOM had a 6.4% equity
stake, met with David S. Silver, President and Chief Executive Officer of the
Company, Ronald J. Fikert, Vice President of Finance of the Company, Richard
Murphy, Vice President of Sales of the Company and Kevin Drum, Vice President of
Marketing of the Company, at the Company's headquarters in Irvine, California.
DICOM, the Company and Quadratec decided not to pursue a transaction involving
all three of the companies and no further discussions were held.
In March 1999, Dr. Schmid, Arnold von Buren, Deputy Chief Executive of
DICOM, and Christoph Loslein, Executive Director of DICOM, concluded that
DICOM's goal of developing the global market for data and document capture might
be served by a business combination involving DICOM and the Company.
In an e-mail message subsequently sent to Mr. Silver, Dr. Schmid requested
the opportunity to present DICOM's ideas with respect to a possible merger of
the two companies to the Company's management. The Company agreed to such a
presentation, and April 19, 1999 was fixed as the date that DICOM's presentation
should take place.
On April 19, 1999, at the Company's headquarters, Dr. Schmid and Mr. von
Buren met with Messrs. Silver, Fikert, Murphy and Drum and proposed a merger of
DICOM and the Company.
On May 1, 1999, at a hotel in Rome, Mr. Drum presented an overview of the
Company and its product lines at DICOM's annual country manager meeting. In a
separate meeting, Dr. Schmid and Mr. Drum discussed possible merits of the
proposed merger.
On May 6, 1999, at the offices of Dresdner Kleinwort Benson ("DrKB") in New
York City, Dr. Schmid and Mr. von Buren met Dresdner Kleinwort Benson Corporate
Finance ("DrKB Corporate Finance"), Adam Lichtenstein of Private Equity Partners
and Dresdner Bank AG - Global Finance ("DrKB Global Finance"), to discuss
structuring and financing alternatives to the proposed transaction.
Mr. Simon Littlewood, an independent financial consultant, was appointed by
DICOM to act as a project leader on behalf of DICOM.
On May 7 and May 8, 1999 at a hotel in New York City, Dr. Schmid, Mr. von
Buren and Olle Nilsson, a country manager of one of DICOM's subsidiaries, met
with Messrs. Silver, Murphy and Drum and to discuss the proposed merger. The
participants addressed the long-term goals, future growth and earnings
potential, core competencies, geographical coverage, management strengths and
weaknesses of the Company and DICOM. An outline for a business plan (an overall
mission and strategy statement with a description of possible acquisition and
divestiture candidates) for the merged companies was drafted. Both DICOM and the
Company believed the proposed combination had merit and decided to pursue a
transaction.
During the meetings on May 7 and May 8, DICOM suggested that it would be
willing to pay a price of around $12.00 per Share for the Company. The Company
proposed a price of $13.00 per Share. The participants agreed the Company would
consider the discussions over the next several days and the Company's management
would inform its board of directors about the results of the meetings that took
place on May 7 and May 8.
In an e-mail message dated May 15, 1999, Mr. Silver indicated that the
Company remained interested in a possible transaction. The Company and DICOM
agreed that meetings should take place on May 18 through May 20 to further
develop the strategic benefits of the proposed combination. On May 18-20, 1999,
at the
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offices of Stradling Yocca Carlson & Rauth, the Company's legal counsel, in
Newport Beach, California, Mr. von Buren and Mr. Loslein met with Messrs. Murphy
and Drum for such purposes.
On May 18, 1999, at the offices of Kirkland & Ellis in New York City, Mr.
Littlewood met with Private Equity Partners, DrKB Global Finance, DrKB Corporate
Finance and attorneys from Kirkland & Ellis to discuss structural alternatives
for the proposed transaction. One such structure included a private equity
investment from Private Equity Partners whereby DICOM would be given a call
option to acquire within 18 months Private Equity Partners' interest in the
Company.
On June 2, 1999, at DrKB's offices in Frankfurt, Germany, Dr. Schmid, Mr.
Loslein and John Incledon, a Non-Executive Director of DICOM, met with
representatives of DrKB Corporate Finance from New York and Frankfurt to discuss
structural alternatives for the transaction and a potential equity offering of
DICOM shares on the Neuer Markt of the Frankfurt Stock Exchange. If successful,
DICOM would use the proceeds from such an offering to exercise its call option,
among other things.
On June 2, 1999, Mr. Silver provided information to the Company's Board of
Directors relating to the merger opportunity and, during a conference call on
June 3, 1999, the Board approved moving forward with the proposed transactions.
On June 3, 1999, at DrKB's offices in Frankfurt, Germany, Dr. Schmid, Mr.
Loslein and Mr. Incledon met with Messrs. Silver, Drum and Murphy and
representatives of DrKB Corporate Finance from New York and Frankfurt to share
conclusions about structural alternatives for the transaction and a potential
equity offering of DICOM shares on the Neuer Markt of the Frankfurt Stock
Exchange. One of the transaction structures presented included the transaction
described herein. The Company's management offered an expression of interest in
participating with the Equity Investors on an economic basis in the post-merger
company.
On June 4, 1999, at DICOM's offices in Rotkreuz, Switzerland, the DICOM
Board agreed that a potential combination of the businesses of DICOM and the
Company presented possible synergies. The DICOM Board (i) decided that the most
efficient way to structure the proposed transaction would include a private
equity investment in the Company; (ii) determined that DICOM should partner with
DrKB and its affiliates to
(a) assist and advise DICOM on the transaction,
(b) provide, along side DICOM, equity financing for the Purchaser and
(c) provide debt financing for the Purchaser;
and (iii) authorized further discussion and negotiation with all parties
involved.
On June 17, 1999, at DrKB's offices in New York City, Messrs. von Buren and
Littlewood met with DrKB Corporate Finance and Alexander Coleman and Mr.
Lichtenstein of Private Equity Partners to finalize structure and financing for
the proposed transaction.
On June 18, 1999, at DrKB's offices in New York City, Messrs. Silver and
Fikert presented an overview of the Company and Mr. von Buren presented the
business plan of the combined companies to Mr. Littlewood, Private Equity
Partners, DrKB Global Finance and DrKB Corporate Finance.
On June 29, 1999 at the Company's headquarters in Irvine, California, Dr.
Schmid engaged in several individual discussions with members of the Company's
management team about their future role in a combined company. In addition, the
Company, DICOM and Private Equity Partners entered into a non-binding letter of
intent outlining the general terms and conditions of a proposed transaction and
confidentiality agreements. The letter of intent outlined the terms and
conditions on which DICOM, through a newly-formed entity, would consider
sponsoring the acquisition of all of the Shares at a purchase price of $12.75
per Share, the terms on which the new company would obtain financing for the
transaction and restrictions on the Company's ability to initiate or negotiate
any other acquisition proposal unless the failure to do so might cause the
members of the board to breach their fiduciary duties under applicable law. The
letter of intent and
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confidentiality agreements were presented to and, after discussion, approved by
the Company's Board at a special meeting held on June 29, 1999.
During the period from June 30, 1999 to July 27, 1999, DICOM, Private
Equity Partners and DrKB Global Finance, with assistance from DrKB Corporate
Finance, Kirkland & Ellis and Arthur Andersen LLP, performed customary due
diligence, including meetings and discussions with the Company.
On July 14, 1999, the Purchaser's legal counsel delivered a draft of the
Merger Agreement to the Company's counsel. During the period from July 14, 1999
to July 21, 1999, representatives for the Purchaser and the Company, and their
legal counsel, continued negotiations regarding the terms and conditions of the
Offer and the Merger. During such time, representatives of the Company also
discussed certain financial terms of the Offer and the Merger with the Financial
Advisor.
On July 19, Private Equity Partners met with its internal Commitment
Committee and received approval, subject to satisfactory resolution of the terms
and conditions of the Offer and Merger to commit equity financing in Purchaser
of up to $16 million.
At a meeting of the Company Board on July 21, 1999, the Company Board
reviewed the Merger Agreement and the terms and conditions of the Offer and the
Merger. During this meeting, the Company Board reviewed certain financial terms
of the Offer and the Merger with the Company's Financial Advisor and reviewed
the Merger Agreement and legal aspects of the proposed transactions with the
Company's counsel. During the meeting, the Company Board expressed its
satisfaction with the proposed transaction, subject to the resolution of certain
issues to the Company Board's satisfaction and, at the conclusion of the
meeting, the Company Board requested additional information from management
concerning the nature of financing commitments received by Purchaser and the
termination fee and expense provisions of the Merger Agreement. From the
afternoon of July 21, 1999 to July 26, 1999, legal counsel for the parties
continued negotiations concerning those issues and other provisions of the
Merger Agreement.
On July 22, 1999, after the Company Board reviewed the terms of the Merger
Agreement and outlined the remaining issues to be negotiated, legal counsel for
the Purchaser provided the Management Group with drafts of various documents
relating to their equity participation in the Purchaser. From July 23, 1999 to
July 26, 1999, the Management Group negotiated the terms of their agreements
with Purchaser.
On July 26, 1999, the Company Board met by conference call to discuss the
resolution of the final issues and the final forms of the Merger Agreement and
the Voting Agreement were presented to, and after discussion were approved by,
the Company Board. Separately, the DICOM Board met by conference call to discuss
the resolution of the final issues and final forms of the Merger Agreement and
the Voting Agreement and the DICOM Board approved such agreements and
transactions contemplated thereby. In addition, Private Equity Partners was
satisfied with the resolution of the final issues and final forms of the
agreements contemplated therein. Finally, the respective boards of directors of
Purchaser and Merger Sub met by conference call to discuss the final issues and
final forms of the Merger Agreement and the Voting Agreement and approved such
agreements and the transactions contemplated therein.
During the evening of July 26, 1999 and through late afternoon on July 27,
1999, the Management Group continued negotiations relating to the forms of their
management agreements with representatives of the Purchaser, after which the
Management Group entered into a commitment letter to exchange the Retained
Shares for shares of capital stock of the Purchaser and to enter into agreements
in substantially the forms negotiated with Purchaser.
The Merger Agreement was executed and delivered at approximately 8:30 p.m.,
Pacific Time on July 27, 1999. The Equity Investors issued a press release on
behalf of Purchaser before the opening of U.S. stock markets on July 28, 1999
announcing the Merger Agreement. The Company issued a press release on July 28,
1999 announcing the Merger Agreement. On August 3, 1999, Purchaser commenced the
Offer.
On August 2, 1999, the Purchaser and Merger Sub, after their respective
boards of directors approved and authorized such assignment and assumption,
agreed to assign to Purchaser all rights granted to Merger
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Sub under the Merger Agreement with respect to the right to offer to purchase
and the right to purchase the Company's Shares in the Offer.
RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE OFFER AND THE MERGER.
THE COMPANY. At a meeting held on July 26, 1999, the Company Board
unanimously (i) determined that the Offer and the Merger, taken together, are
fair to and in the best interests of the Company's shareholders, (ii) approved
the Merger Agreement and the transactions contemplated thereby, and (iii)
decided to recommend to the Company's shareholders that they accept the Offer
and tender their Shares pursuant to the Offer and adopt the Merger Agreement.
The Company Board did not consider it necessary to appoint a special
committee or to retain an unaffiliated representative to negotiate the terms of
the Merger Agreement on behalf of the unaffiliated holders of Shares for the
following reasons: (i) the Company Board is comprised of a majority
disinterested directors, (ii) the engagement of the Financial Advisor and (iii)
the disinterested members of the Company Board were aware of the interests of
the members of the Management Group in the proposed transactions when deciding
to approve the transactions.
A description of the factors upon which the Company Board has based its
conclusion that the Offer and the Merger, taken together, are fair and in the
best interests of the Company's shareholders is contained in the Schedule 14D-9
which is being mailed to the Company's shareholders herewith and should be read
carefully and in its entirety. Such description is incorporated herein by
reference.
PURCHASER, MERGER SUB, DICOM AND PRIVATE EQUITY PARTNERS. Each of
Purchaser, Merger Sub, DICOM and Private Equity Partners regards the acquisition
of the Company as an attractive investment opportunity because it believes that
the Company's future business prospects, with DICOM as an Equity Investor and
the Company's new capital structure, and the upside potential from the possible
exercise of the DICOM call option are favorable. Although the investment will
involve a substantial risk to holders of Purchaser's common stock, each of
Purchaser, Merger Sub, DICOM and Private Equity Partners believes that the
long-term value of the equity investment could appreciate significantly. Each of
Purchaser, Merger Sub, DICOM and Private Equity Partners believes that the price
per share offered hereby and the Merger Consideration is fair to the Company's
shareholders. In reaching this conclusion, it has taken into consideration the
recent and historical prices of the Shares, see "The Tender Offer -- Price Range
of Shares; Dividends", and its due diligence review of the Company. Its
conclusion as to the fairness of the Offer and the Merger also is supported by
the conclusions of the Company Board and by the fact that the terms of the
transactions were negotiated with the Company Board and its representatives at a
time when each of Purchaser, Merger Sub, DICOM and Private Equity Partners did
not beneficially own any Shares. Each of Purchaser, Merger Sub, DICOM and
Private Equity Partners did not assign a particular weight to any one factor.
OPINION OF THE FINANCIAL ADVISOR.
A copy of the opinion and analysis of the Financial Advisor with respect to
the Offer and the Merger are filed as exhibits to the Schedule 13E-3, and are
contained in the Schedule 14D-9 which is being mailed to the Company's
shareholders herewith and should be read carefully and in its entirety. Such
opinion and analysis are incorporated herein by reference.
PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
PURPOSE OF THE OFFER AND THE MERGER.
The purpose of the Offer and the Merger is for Purchaser to acquire control
of, and the entire equity interest in, the Company. The purpose of the Merger is
for Purchaser to acquire indirect ownership of all Shares not purchased pursuant
to the Offer. Upon consummation of the Merger, the Company will become a wholly
owned subsidiary of Purchaser. The Offer is being made pursuant to the Merger
Agreement. The acquisition of the entire equity interest in the Company has been
structured as a cash tender offer followed by
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a cash merger (except for certain Shares held by the Management Group which will
be exchanged for Purchaser's shares) in order to provide a prompt and orderly
transfer of ownership of the equity interest in the Company held by shareholders
of the Company from such shareholders to Purchaser and to provide the
shareholders of the Company with cash for all of their Shares (except for the
Retained Shares).
Under the DGCL and the Company's Certificate of Incorporation, the approval
of the Company Board and, unless the Merger is consummated pursuant to the
short-form merger provisions under the DGCL as described below, the affirmative
vote of the holders of a majority of the outstanding Shares is required to
approve the Merger Agreement. The Company Board has unanimously approved the
Merger Agreement.
As described above, the Company Board has approved the Merger and the
Merger Agreement in accordance with the DGCL and rendered inapplicable the
restrictions on mergers contained in Section 203 of the DGCL. Except in the case
described in the next sentence, the Company Board will be required to submit the
Merger Agreement to the Company's shareholders for adoption at a shareholders'
meeting convened for that purpose in accordance with the DGCL. However, if
Purchaser acquires more than 90% of the outstanding Shares, Purchaser intends to
cause Merger Sub to effect the Merger without a meeting of the Company's
shareholders under Section 253 of the DGCL. If Purchaser cannot cause the Merger
Sub to effect the Merger pursuant to Section 253 of the DGCL and shareholder
approval is required, under the DGCL and the Company's Certificate of
Incorporation, the Merger Agreement must be adopted by the affirmative vote of
holders of a majority of the outstanding Shares. If required, the Company has
agreed to convene a meeting of its shareholders as soon as practicable following
the consummation of the Offer for the purpose of adopting the Merger Agreement
and to include in any proxy or information statement required for such meeting
the unanimous recommendation of the Company Board that the Company's
shareholders vote in favor of the adoption of the Merger Agreement.
The Merger Agreement provides that, promptly following the purchase of and
payment for Shares by Purchaser pursuant to the Offer, Purchaser shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as will give Purchaser representation on the
Company Board equal to the product of the number of directors on the Company
Board (giving effect to any increase in the number of directors pursuant to the
Merger Agreement) and the percentage that number of Shares so purchased by
Purchaser bears to the total number of Shares then outstanding (on a fully
diluted basis). In the Merger Agreement, the Company has agreed to use its
reasonable best efforts to cause Purchaser's designees to be so appointed or
elected to the Company Board. The Company's obligation to appoint designees to
the Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly take all action
required pursuant to such Section and Rule in order to fulfill its obligations
under the Merger Agreement and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under such Section and Rule in order to fulfill its obligations under
the Merger Agreement (provided that Purchaser shall have provided to the Company
on a timely basis all such information with respect to Purchaser's designees).
Following the election of Purchaser's designees and until the Effective Time,
any amendment of the Merger Agreement or the Certificate of Incorporation or
Bylaws of the Company, any termination of the Merger Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Purchaser or Merger Sub, any waiver of any of the
Company's rights hereunder, or any transaction between Purchaser (or any
affiliate or associate thereof) and the Company shall require the concurrence of
a majority of the Company's directors (or the concurrence of the sole remaining
director, if there is only one remaining) then in office who are directors of
the Company on the date hereof, or are directors designated by such persons or
person.
PLANS FOR THE COMPANY.
It is expected that, initially following the Merger, the business and
operations of the Company will, except as set forth in this Offer to Purchase,
be continued by the Company substantially as they are currently being conducted.
Purchaser will continue to evaluate the business and operations of the Company
during the pendency of the Offer and after the consummation of the Offer and the
Merger, and will take such actions as it deems appropriate under the
circumstances then existing. Purchaser intends to seek additional information
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about the Company during this period. Thereafter, Purchaser intends to review
such information as part of a comprehensive review of the Company's business,
operations, capitalization and management with a view to optimizing exploitation
of the Company's potential in conjunction with Purchaser's businesses. It is
expected that the business and operations of the Company would form an important
part of Purchaser's future business plans.
It is anticipated that, upon the consummation of the Merger, the current
officers of the Company, except for Dean A. Hough who has resigned as an officer
of the Company effective August 31, 1999, will maintain their respective
positions as officers of the Surviving Corporation. The members of the
Management Group will become shareholders of Purchaser. It is also anticipated
that Mr. Silver will become an executive officer and a director of Purchaser and
that at the Effective Time, Mr. Silver and the other directors of Purchaser will
become the directors of the Surviving Corporation.
Except as indicated in this Offer to Purchase, Purchaser does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries or any
material change in the Company's capitalization or dividend policy or any other
material changes in the Company's corporate structure or business, or the
composition of the Company Board or the Company's management.
APPRAISAL RIGHTS.
Shareholders do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, shareholders of the Company at the time
of the Merger who do not vote in favor of the adoption of the Merger Agreement
will have the right under the DGCL to dissent and demand appraisal of, and
receive payment in cash of the fair value of, their Shares outstanding
immediately prior to the effective date of the Merger in accordance with Section
262 of the DGCL.
Under the DGCL, dissenting shareholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of such merger or similar business combination)
and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Shareholders should recognize that the value so determined
could be higher or lower than the per Share price to be paid pursuant to the
Offer or the Merger Consideration.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling shareholder of a corporation involved in a merger
has a fiduciary duty to other shareholders that requires that the merger be fair
to other shareholders. In determining whether a merger is fair to minority
shareholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the shareholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority shareholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
The foregoing summary of the rights of objecting shareholders does not
purport to state all of the procedures to be followed by shareholders desiring
to exercise any available appraisal rights. The preservation and exercise of
appraisal rights requires strict adherence to the applicable Provisions of the
DGCL. A copy of Section 262 of the DGCL is attached hereto as Annex A and the
foregoing summary is qualified in its entirety by reference to Annex A.
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CERTAIN EFFECTS OF THE OFFER AND THE MERGER.
As a result of the Offer, Purchaser will acquire an interest in the
Company's net book value and net earnings in proportion to the number of Shares
acquired in the Offer. If the Merger is consummated, Purchaser's direct and
indirect common equity interest in such items and in the Company generally will
increase to 100% and Purchaser will be entitled to all benefits resulting from
that interest, including all income generated by the Company's operations and
any future increase in the Company's value. Similarly, Purchaser will also bear
the risk of losses generated by the Company's operations and any decrease in the
value of the Company after the Merger. Subsequent to the Merger, current
shareholders of the Company will cease to have any equity interest in the
Company, will not have the opportunity to participate in the earnings and growth
of the Company after the Merger and will not have any right to vote on corporate
matters. Similarly, such shareholders will not face the risk of losses generated
by the Company's operations or decline in the value of the Company after the
Merger. As a result of the indebtedness to be incurred in connection with the
financing of the Offer and the Merger (the "Financing"), the consolidated
indebtedness (including guaranteed indebtedness) of the Company will be greater
than it was prior to the Financing, the equity of the Company may be lower than
its equity prior to the Financing, the interest rates on such debt may be higher
than the interest rates on the Company's current consolidated indebtedness, a
substantial portion of the Company's assets will be pledged to secure such
indebtedness and the new debt may contain more restrictions on the Company's
operations than the Company's existing consolidated debt, thereby possibly
reducing the Company's financial and operating flexibility. In addition,
substantial cash payments will be necessary to repay the Financing. See "Special
Factors -- Source and Amount of Funds."
The Shares are currently traded on the Nasdaq National Market. See "The
Tender Offer -- Price Range of Shares; Dividends." Following the consummation of
the Merger, the Shares will no longer be quoted on the Nasdaq National Market
and the registration of the Shares under the Exchange Act will be terminated.
Accordingly, after the Merger there will be no publicly traded equity securities
of the Company outstanding and the Company will no longer be required to file
periodic reports with the Commission. See "Special Factors -- Effect of the
Offer on the Market for the Shares; Exchange Act Registration; Margin
Regulations." It is expected that if Shares are not accepted for payment by
Purchaser pursuant to the Offer and the Merger is not consummated, the Company's
current management, under the general direction of the Company Board, will
continue to manage the Company as an ongoing business.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER.
The Company Board did not consider it necessary to appoint a special
committee or to retain an unaffiliated representative to negotiate the terms of
the Merger Agreement on behalf of the unaffiliated holders of Shares for the
following reasons: (i) the Company Board is comprised of a majority
disinterested directors, (ii) the engagement of the Financial Advisor and (iii)
the disinterested members of the Company Board were aware of the interests of
the members of the Management Group in the proposed transactions when deciding
to approve the transactions. See "Special Factors -- Background of the Offer and
the Merger", "Special Factors -- Recommendation of the Board of Directors;
Fairness of the Offer and the Merger" and "The Tender Offer -- Certain Legal
Matters and Regulatory Approvals".
VOTING AGREEMENT. Concurrently with the execution and delivery of the
Merger Agreement, Purchaser and Merger Sub entered into a Voting Agreement (the
"Voting Agreement") with each of Messrs. Silver, Hough, Fikert, Murphy and Drum
and William Drobish, Alexander P. Cilento, B. Allen Lay, and Southern California
Ventures (each, a "Stockholder", and collectively the "Stockholders"). The
following is a summary of the Voting Agreement, which summary is qualified in
its entirety by reference to the Voting Agreement, a copy of which is filed as
an exhibit to the Schedule 14D-1 and is incorporated herein by reference.
The Voting Agreement provides that each Stockholder will validly tender the
Shares set forth opposite such Stockholder's name on Exhibit A to the Voting
Agreement (the "Subject Shares") in the Offer and will not withdraw any Shares
so tendered. Each Stockholder also agrees to vote the Subject Shares (a) in
favor of the adoption and approval of the Merger Agreement and the transactions
contemplated thereby and
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(b) against any action or agreement that would result in a breach of any
covenant, representation or warranty contained in the Merger Agreement or could
reasonably be expected to impede, interfere with, delay or postpone or attempt
to discourage the consummation of the Merger or any of the transactions
contemplated by the Merger Agreement. Each Shareholder has agreed not to purport
to vote (or execute a consent with respect to) such Subject Shares (other than
in accordance with the requirements of the Voting Agreement) or grant any proxy
or power of attorney with respect to any Subject Shares, deposit any Subject
Shares into a voting trust or enter into any agreement, arrangement or
understanding with any person (other than the Voting Agreement), directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of such Subject Shares, or agree to do any of the foregoing. The Voting
Agreement also provides that no Shareholder shall sell, transfer, pledge,
encumber, assign or otherwise dispose of or hypothecate (including by gift or by
contribution or distribution to any trust or similar instrument or to any
beneficiaries of the Stockholders) (collectively, "Transfer"), or enter into any
contract, option or other arrangement or understanding (including any profit
sharing arrangement) with respect to the Transfer of, any of the Subject Shares
other than pursuant to the terms thereof and the Merger Agreement. The Voting
Agreement shall terminate, and no party to the Voting Agreement shall have any
rights or obligations thereunder and the Voting Agreement shall become null and
void and have no further effect upon the earliest to occur of (x) the Effective
Time or (y) termination of the Merger Agreement pursuant to Section 7.1 thereof.
MANAGEMENT COMMITMENT LETTER. Purchaser has obtained a commitment letter
from the Management Group dated as of July 27, 1999 (the "Management Commitment
Letter"). The following is a summary of the Management Commitment Letter, which
summary is qualified in its entirety by reference to the Management Commitment
Letter, a copy of which is filed as an exhibit to the Schedule 14D-1 and is
incorporated herein by reference. The Management Commitment Letter provides for
an equity contribution to Purchaser in the form of an exchange of the Retained
Shares for shares of Purchaser's capital stock (the "Purchaser Shares") as set
forth in the Merger Agreement. The Management Commitment Letter further provides
for the execution and delivery of a Stockholders Agreement, a Registration
Rights Agreement and an Executive Stock Agreement substantially (A) in the form
of, and (B) on the terms and conditions set forth on, Exhibit A, Exhibit B and
Exhibit C attached to the Management Commitment Letter and on other terms and
conditions reasonably satisfactory to the parties thereto. The Stockholders
Agreement in the form of Exhibit A to the Management Commitment Letter provides
for customary restrictions on transfer, "first-offer-rights", and preemptive
rights with respect to the Purchaser Shares. The Stockholder Agreement also
provides for a call option that grants DICOM the right to acquire all (but not
less than all) Purchaser Shares held by Private Equity Partners and GSL within
eighteen months after the Effective Time. The Registration Rights Agreement in
the form of Exhibit B to the Management Commitment Letter provides for certain
rights for the holders of Purchaser Shares to require Purchaser to register
Purchaser Shares held by them under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities Act"). In
addition, the holders of Purchaser Shares have certain rights to participate in
publicly registered offerings of Purchaser Shares initiated by Purchaser or
third parties. The Executive Stock Agreement in the form of Exhibit C to the
Management Commitment Letter provides that the Management Group will exchange
their Retained Shares in the Merger for Purchaser Shares as set forth in the
Merger Agreement. The Executive Stock Agreement also provides for customary
"buy-back" rights, restrictions on transfer and such other provisions customary
for key employees employed by information technology firms.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the
Merger Agreement, Purchaser and Merger Sub have agreed that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its subsidiaries as provided in their
respective charters or Bylaws (or other similar governing instruments) or
otherwise in effect as of the date hereof with respect to matters occurring
prior to the Effective Time shall survive the Merger and shall continue in full
force and effect. To the maximum extent permitted by the DGCL, such
indemnification shall be mandatory rather than permissive, and the Surviving
Corporation shall advance expenses in connection with such indemnification
(subject to the Surviving Corporation's receipt of an undertaking by the
indemnified party to return such advanced expenses to the Surviving Corporation
if it is determined by a final, non-appealable order of a court of competent
jurisdiction that such indemnified party is not entitled to retain such advanced
expenses).
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The Merger Agreement further provides that Purchaser shall cause the
Surviving Corporation to maintain in effect for not less than six (6) years from
the Effective Time the policies of the directors' and officers' liability and
fiduciary insurance most recently maintained by the Company (provided that the
Surviving Corporation may substitute policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the Effective
Time; provided, however, that in satisfying its obligation, the Surviving
Corporation shall not be obligated to pay premiums in excess of 150% with
respect to such current insurance.
In the event the Surviving Corporation or its successor (i) is consolidated
with or merges into another person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any other person in a single
transaction or a series of related transactions, Purchaser has agreed that it
will make or cause to be made proper provision so that the successor or
transferee of the Surviving Corporation shall comply in all material respect
with these terms.
SHARE OWNERSHIP. As of the date hereof the members of the Management Group
owns or beneficially owns the following number of the Shares: Mr.
Silver--342,500; Mr. Hough--345,000; Mr. Fikert--37,500; Mr. Murphy--54,444; and
Mr. Drum--32,500.
COMPANY STOCK OPTIONS. The Merger Agreement provides that at the Effective
Time, each outstanding, vested and exercisable option to purchase Shares
(including those options that will become exercisable upon a change in control
of the Company) (a "Stock Option" or collectively "Stock Options") issued
pursuant to the Amended and Restated Incentive Stock Option, Nonqualified Stock
Option and Restricted Stock Purchase Plan, the 1996 Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan, and the 1997 Stock
Option Plan for Non-Employee Directors (collectively the "Company Plans") or
issued outside the Company Plan via special grants by the Company's Stock Option
Committee to certain employees, shall be converted into and shall become the
right to receive a cash payment per Stock Option, without interest, determined
by multiplying (i) the excess, if any, of the Offer Price over the applicable
per share exercise price of such Stock Option by (ii) the number of Shares
underlying the Stock Options immediately prior to the Effective Time. At the
Effective Time, all outstanding options to purchase Shares (including those
options that are not exercisable at the time of the Merger) shall be canceled
and be of no further force or effect except for the right to receive cash to the
extent provided in the Merger Agreement. Prior to the Effective Time, the
Company shall take all actions (including, if appropriate, amending the terms of
any Company Plan) that are necessary to give effect to the transactions
contemplated by the Merger Agreement. Based on Merger Consideration of $12.75,
the officers and directors of the Company will receive approximately $1,026,805
in the aggregate in respect of their Stock Options and, as of August 31, 1999,
approximately $10,430 in the aggregate in respect of their rights under the 1997
Stock Plan. Messrs. Silver, Hough, Fikert, Murphy and Drum will receive
$348,720, $116,240, $167,490, $116,240, and $141,865 respectively, and each of
Messrs. Cilento, Drobish, Lay and Mr. David Seigle will receive $34,063 in
respect of their Stock Options. Calculated as of August 31, 1999, Mr. Fikert and
Mr. Murphy will receive approximately $1,035, and $9,395 in respect of their
rights under the 1997 Stock Option Plan.
SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to consummate the Offer
and the Merger, including the net payment to holders of in-the-money options,
and to pay related fees and expenses, is estimated to be approximately $75
million. Purchaser plans to obtain all funds needed for the Offer and the
proposed Merger through (x) capital contributions by DICOM, Private Equity
Partners and GSL, and (y) borrowings with one or more commercial banks in
respect of which Purchaser has obtained two commitment letters from various
branches of Dresdner Bank AG - Global Finance (DrKB Global Finance) (the
"Commitment Letters") providing for (i) $50 million senior secured credit
facilities (the "Senior Facilities"), comprised of (A) a $23 million bridge loan
facility (the "Bridge Facility"), (B) a $22 million term loan facility (the
"Term Facility"), and (C) a $5 million revolving credit facility (the "Revolving
Facility"), and (ii) $10 million senior subordinated secured notes (the "Senior
Subordinated Notes", and together with the Senior Facilities,
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the "Credit Facilities"). The Commitment Letters indicate DrKB Global Finance's
willingness to provide funding on customary terms and conditions. Any debt
incurred to fund the purchase of Shares in the Offer under the Bridge Facility
is expected to be repaid at the Effective Time from cash and marketable
securities held by the Company.
Based upon the Commitment Letters and the related term sheets thereto, the
Credit Facilities will contain (i) restrictive covenants that limit the Borrower
with respect to, among other things, creating liens upon its assets, disposing
of material amounts of assets other than in the ordinary course of business,
capital expenditures and acquisitions exceeding a certain amount, and (ii) a
covenant that the Borrower will reduce its debt ratio below a certain threshold
if DICOM exercises its call option to acquire the interests of Private Equity
Partners and GSL in Purchaser. As used herein, "Borrower" refers to Purchaser
prior to the Effective Time and Company, as the Surviving Corporation in the
Merger, immediately after the Effective Time.
The Borrower will also be required to meet certain financial tests under
the Credit Facilities. Obligations under the Credit Facilities will be secured
by substantially all the assets of Purchaser and its subsidiaries and by pledges
of 100% of the capital stock of all subsidiaries of the Borrower and 100% of the
capital stock of the Borrower; provided that the Senior Subordinated Notes will
be secured on a junior and subordinated basis to the Senior Facilities.
Purchaser has obtained commitment letters from DICOM and Private Equity
Partners providing for the common equity financing of an amount, in the
aggregate, equal to $20.0 million.
Purchaser further has obtained the Management Commitment Letter, as
described under "Special Factors -- Interests of Certain Persons in the Offer
and the Merger" above, providing for an equity contribution, in the aggregate,
equal to $1.2 million. Such contribution shall come in the form of an exchange
of the Retained Shares for shares of Purchaser's capital stock as set forth in
the Merger Agreement.
THE MERGER AGREEMENT.
The following is a summary of the material terms of the Merger Agreement, a
copy of which is filed as an exhibit to the Schedule 14D-1 and is incorporated
herein by reference. Such summary is qualified in its entirety by reference to
the Merger Agreement and the Letter Agreement, dated as of August 2, 1999 (the
"Letter Agreement") pursuant to which Merger Sub assigned to Purchaser, and
Purchaser accepted all of Merger Sub's right, title and interest in and to all
of the rights granted to Merger Sub under the Merger Agreement, with respect to
the right to offer to purchase, and the right to purchase, the Company's shares
in the Offer. A copy of the Letter Agreement is also attached as an exhibit to
the Schedule 14D-1.
THE OFFER. The Merger Agreement provides that if none of the events or
conditions set forth in "The Tender Offer -- Certain Conditions to the Offer"
(the "Conditions") shall have occurred and be existing, as promptly as
practicable after, but in no event later then five (5) business days after, the
public announcement of the execution of the Merger Agreement by the parties
thereto, Purchaser is required to commence the Offer for all the outstanding
Shares, at the Offer Price. Purchaser shall accept for payment all Shares which
have been validly tendered and not withdrawn pursuant to the Offer as promptly
as practicable after the expiration of the Offer provided that all conditions to
the Offer shall have been satisfied or waived by Purchaser. The obligation of
Purchaser to accept for payment, purchase and pay for Shares tendered pursuant
to the Offer is subject only to the Conditions and to the Minimum Condition.
Purchaser has expressly reserved the right to increase the Offer Price or to
make any other changes in the terms and conditions of the Offer (provided that,
unless previously approved by the Company in writing, no change may be made
which decreases the Offer Price, which changes the form of consideration to be
paid in the Offer, which reduces the maximum number of Shares to be purchased in
the Offer, which imposes conditions to the Offer in addition to the Conditions,
which amends any other term of the Offer in a manner adverse to the holders of
Shares, which extends the Offer except as provided below (provided that the
Offer may not, without the Company's consent, be extended beyond sixty days (60)
after the Commencement of the Offer) or which amends or waives the Minimum
Condition).
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The Merger Agreement provides that the Offer Price is to be paid net to the
sellers of Shares in cash, less any required withholding of taxes, upon the
terms and subject to the Conditions of the Offer. No Shares held by the Company
or any of its subsidiaries will be tendered in the Offer.
The Merger Agreement provides that the Offer will expire at midnight,
Pacific Time, on the date that is twenty (20) business days (which means each
Monday, Tuesday, Wednesday, Thursday, or Friday that banks located in New York,
New York are not required or permitted by law to be closed) after the Offer is
commenced; provided, however, that without the consent of the Company or the
Company Board, Purchaser may (i) extend the Offer, if at the scheduled
expiration date of the Offer any of the conditions to the Offer shall not have
been satisfied or waived, until such time as such conditions are satisfied or
waived, (ii) extend the Offer for any period required for any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer, (iii) extend the Offer for any reason on one or more occasions for an
aggregate period of not more than ten (10) business days beyond the latest
expiration date that would otherwise be permitted under clause (i) or (ii) of
this sentence if on such expiration date the Minimum Condition has been
satisfied but the number of Shares validly tendered, together with shares then
owned directly or indirectly by Purchaser, constitute at least seventy five
percent (75%) but less than ninety percent (90%) of all outstanding Shares, or
(iv) extend the Offer for any reason on one or more occasions for an aggregate
period of not more than ten (10) business days beyond the initial expiration
date or the latest expiration date that would otherwise be permitted under
clauses (i), (ii), or (iii) of this sentence. Subject to the terms and
conditions of the Offer and the Merger Agreement, Purchaser has agreed to accept
for payment, and pay for, all Shares validly tendered and not withdrawn pursuant
to the Offer that Purchaser becomes obligated to accept for payment and pay for
pursuant to the Offer, as promptly as practicable after the expiration of the
Offer.
COMPANY ACTION. The Company has approved of and consented to the Offer.
The Company Board, at a meeting duly called and held, has, subject to the terms
and conditions set forth in the Merger Agreement, unanimously, (i) determined
that the Merger Agreement and the transactions contemplated thereby, including
the Offer and the Merger, are fair to, and in the best interests of, the
shareholders of the Company, (ii) approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, in all
respects, such approval constituting approval of the Offer, the Merger Agreement
and the Merger for purposes of Section 251 of the DGCL, and similar provisions
of any other similar state statutes that might be deemed applicable to the
transactions contemplated by the Merger Agreement, and (iii) resolved to
recommend that the shareholders of the Company accept the Offer, tender their
Shares to Purchaser and approve and adopt the Merger Agreement and the Merger.
The Company consents to the inclusion of such recommendation and approval in the
Offer to Purchase, Letter of Transmittal and related documents (the "Offer
Documents"); provided, however, that such recommendation may be withdrawn,
modified or amended in accordance with the Merger Agreement.
The Merger Agreement provides that the Company will file with the
Commission a Solicitation/ Recommendation Statement on Schedule 14D-9 containing
the recommendation described above, and promptly mail the Schedule 14D-9 to the
shareholders of the Company.
COMPANY BOARD AND COMMITTEES. The Merger Agreement provides that promptly
upon the payment by Purchaser for Shares pursuant to the Offer and from time to
time thereafter, subject to compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder, Purchaser shall be entitled to designate
up to such number of directors, rounded up to the next whole number, on the
Company Board as will give Purchaser representation on the Company Board equal
to the product of the number of directors on the Company Board (giving effect to
any increase in the number of directors as provided in the Merger Agreement) and
the percentage that such number of Shares so purchased bears to the total number
of outstanding Shares on a fully diluted basis, and the Company shall use its
reasonable best efforts to, upon request by Purchaser, promptly, at the
Company's election, either increase the size of the Company Board or secure the
resignation of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Company Board and to cause Purchaser's designees
to be so elected. Following the election of Purchaser's designees and until the
Effective Time, any amendment of the Merger Agreement or the Certificate of
Incorporation or Bylaws of the Company, any termination of the Merger Agreement
by the
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Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Purchaser or Merger Sub, any waiver of any of
the Company's rights hereunder, or any transaction between Purchaser (or any
affiliate or associate thereof) and the Company shall require the concurrence of
a majority of the Company's directors (or the concurrence of the sole remaining
director, if there is only one remaining) then in office who are directors of
the Company on the date hereof, or are directors designated by such persons or
person.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions set forth in the Merger Agreement, and in accordance with the
DGCL, at the Effective Time, Merger Sub will be merged with and into the
Company. The Merger Agreement provides that the Merger will become effective
upon the filing of the Merger Agreement and an agreement or certificate of
merger with the Secretary of State of the State of Delaware, in such form as
required by, and in accordance with applicable provisions of, the DGCL
(including, if possible, the procedures permitted by Section 253 thereof) (the
"Effective Time"). As a result of the Merger, the separate corporate existence
of Merger Sub will cease, and the Company will continue as the Surviving
Corporation.
Pursuant to the Merger Agreement, each Share issued and outstanding
immediately prior to the Effective Time other than (i) Shares held by the
Company or any subsidiary of the Company, (ii) Shares held by Purchaser, Merger
Sub or any other subsidiary of Purchaser, if any, (iii) the Retained Shares, and
(iv) Shares held by shareholders who have demanded and perfected, and have not
withdrawn or otherwise lost, appraisal rights, if any, under the DGCL, will be
canceled and converted automatically into the right to receive $12.75 in cash,
or any higher price that may be paid per Share in the Offer, without interest
(the "Merger Consideration"). Each Share held by the Company as treasury stock
or held by Purchaser, Merger Sub or any subsidiary of Purchaser, Merger Sub or
the Company immediately prior to the Effective Time shall be canceled, retired
and cease to exist, and no consideration shall be delivered with respect
thereto. Each Retained Share issued and outstanding immediately prior to the
Effective Time shall be exchanged for (as provided in and subject to the
limitations set forth in the Merger Agreement) and become (i) a number of fully
paid and nonassessable shares of Class B Common Stock, par value $0.001 per
share, of the Purchaser ("Purchaser Class B Common") equal to (x) 20% of the
Offer Price divided by (y) $10.00 and (ii) a number of fully paid and
non-assessable shares of Class A Common Stock par value $0.001 per share, of the
Purchaser ("Purchaser Class A Common") equal to (x) 80% of the Offer Price
divided by (y) $10.00, upon the surrender of the certificate previously
representing such shares of Retained Shares.
The Merger Agreement provides that the directors of Merger Sub at the
Effective Time will be the directors of the Surviving Corporation and that the
officers of Merger Sub at the Effective Time will be the officers of the
Surviving Corporation, in each case, until successors are duly elected or
appointed and qualified in accordance with applicable law. The Merger Agreement
also provides that the Certificate of Incorporation of the Company in effect at
the Effective Time will be the Certificate of Incorporation of the Surviving
Corporation, and that the Bylaws of the Company will be the Bylaws of the
Surviving Corporation, in each case, until amended in accordance with applicable
law.
SHARES OF DISSENTING HOLDERS. The Merger Agreement provides that
notwithstanding anything to the contrary contained in the Merger Agreement, any
holder of Shares with respect to which appraisal rights, if any, are granted by
reason of the Merger under the DGCL and who does not vote in favor or consents
in writing to the Merger and who otherwise complies with the provisions of
Section 262 of the DGCL ("Dissenting Shares") shall not be entitled to receive
any Merger Consideration pursuant to the terms of the Merger Agreement, unless
such holder fails to perfect, effectively withdraws or loses his or her right
appraisal right under the provisions of Section 262 of the DGCL. If any such
holder so fails to perfect, effectively withdraws or loses his or her
dissenters' rights under the DGCL, each Dissenting Share of such holder shall
thereupon be deemed to have been converted, as of the Effective Time, into the
right to receive the Offer Price.
Any payments relating to Dissenting Shares shall be made solely by the
Surviving Corporation and no funds or other property have been or will be
provided by Purchaser, Merger Sub or any of Purchaser's other
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direct or indirect subsidiaries for such payment, nor shall the Company make any
payment with respect to, or settle or offer to settle, any such demands.
EXCHANGE OF SHARE CERTIFICATES. The Merger Agreement provides that IBJ
Whitehall Bank & Trust Company or another bank or trust company designated by
Purchaser and reasonably acceptable to the Company, shall act as the exchange
agent (in such capacity, the "Exchange Agent"), and shall otherwise take all
action necessary to provide the Exchange Agent on a timely basis, as and when
needed after the Effective Time, funds necessary to provide for the payment for
the benefit of the holders of Shares, for the exchange of a certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Share Certificates") that were converted into the right to receive the
Offer Price. The Merger Agreement provides that Purchaser will deposit, or will
cause to be deposited, with the Exchange Agent, for the benefit of the holders
of Shares, the Merger Consideration to be paid in respect of the Shares. The
Depositary is acting as the Exchange Agent. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Merger Consideration out of the amount
so deposited by Purchaser to holders of Shares entitled thereto. The amount
deposited by Purchaser with the Exchange Agent shall not be used for any other
purpose. Any and all amounts earned on such funds paid over to the Surviving
Corporation.
Pursuant to the Merger Agreement, as soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of
Share Certificates formerly representing Shares converted into the right to
receive the Merger Consideration pursuant to the Merger Agreement: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Share Certificates shall pass, only upon delivery of the
Share Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Purchaser and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Share Certificates in
exchange for a cash payment of the proper Merger Consideration. Upon surrender
of a Share Certificate for cancellation to the Exchange Agent or to such other
agent or agents as may be appointed by Purchaser, together with such letter of
transmittal, duly executed, the holder of such Share Certificate shall be
entitled to receive in exchange therefor by check an amount equal to (A) the
Offer Price, multiplied by (B) the number of Shares represented by such Share
Certificate, which such holder has the right to receive, and the Share
Certificate so surrendered shall forthwith be canceled provided, that any Share
Certificate (or portion thereof) representing Retained Share shall not be
entitled to such cash amount, but a number of shares of Purchaser Class A Common
and Purchaser Class B Common as set forth in the Merger Agreement. No interest
shall be paid or accrued on any Merger Consideration upon the surrender of any
Share Certificates. In the event of a transfer of ownership of Shares which is
not registered in the transfer records of the Company, payment of the proper
Merger Consideration may be paid to a transferee if the Share Certificate
representing such Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer or other taxes required as a result of such payment to
a person other than the registered holder of such shares have been paid. Until
surrendered and exchanged, each Share Certificate (other than Share Certificates
representing Excluded Shares) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender an amount equal
to (A) the Offer Price, multiplied by (B) the number of Shares represented by
such Share Certificate. In the event that any Share Certificate shall have been
lost, stolen or destroyed, the Exchange Agent shall pay, upon the making of an
affidavit of that fact by the holder thereof, the proper Merger Consideration,
provided, however, that Purchaser may, in its discretion, require the delivery
of a suitable bond and/or indemnity.
The Merger Agreement further provides that the Merger Consideration paid
upon the surrender for exchange of Shares shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares, subject formerly
represented thereby. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Share Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged.
Pursuant to the Merger Agreement, any portion of the Merger Consideration
which remains undistributed to the shareholders of the Company for six months
after the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any shareholders of the Company who have not theretofore
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complied with the terms of the Merger Agreement shall thereafter look only to
the Surviving Corporation for payment of their claim for any Merger
Consideration.
COMPANY STOCK OPTIONS; 1997 STOCK PLAN. The Merger Agreement provides that
at the Effective Time, each outstanding, vested and exercisable option to
purchase Shares (including those options that will become exercisable upon a
change in control of the Company) (a "Stock Option" or collectively "Stock
Options") issued pursuant to the Amended and Restated Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan, the 1996 Incentive
Stock Option, Nonqualified Stock Option and Restricted Stock Purchase Plan, and
the 1997 Stock Option Plan for Non-Employee Directors (collectively the "Company
Plans") or issued outside the Company Plan via special grants by the Company's
Stock Option Committee to certain employees shall be converted into and shall
become the right to receive a cash payment per Stock Option, without interest,
determined by multiplying (i) the excess, if any, of the Offer Price over the
applicable per share exercise price of such Stock Option by (ii) the number of
Shares underlying the Stock Options immediately prior to the Effective Time. At
the Effective Time, all outstanding options to purchase Shares (including those
options that are not exercisable at the time of the Merger) shall be canceled
and be of no further force or effect except for the right to receive cash to the
extent provided in the Merger Agreement. Prior to the Effective Time, the
Company shall take all actions (including, if appropriate, amending the terms of
any Company Plan) that are necessary to give effect to the transactions
contemplated by the Merger Agreement.
The Merger Agreement further provides that, unless terminated prior to the
Effective Time in accordance with its terms, the Company's 1997 Employee Stock
Purchase Plan (the "1997 Stock Plan") shall be terminated as of the Effective
Time. Unless the 1997 Stock Plan is terminated prior to the Effective Time in
accordance with its terms, the Company shall take such actions as are necessary
or appropriate to cause the last day of the then current Offering Period (as
such term is used in the 1997 Stock Plan) to be the last trading day on which
the Shares are traded on the Nasdaq National Market immediately prior to the
Effective Time (the "Final Company Exercise Date"); provided, that such change
shall be conditioned upon the consummation of the Merger. On the Final Company
Exercise Date, and subject to the participants' right to receive invested cash
as provided in the 1997 Stock Plan, the Company shall apply the funds credited
as of such date under the 1997 Stock Plan within each participant's account to
the purchase of whole Shares in accordance with the terms of the 1997 Stock
Plan, it being agreed that the number of Shares so purchased shall not exceed
the number of Shares issuable under the 1997 Stock Plan, as represented in
Section 3.2 of the Merger Agreement.
CONDUCT OF BUSINESS PRIOR TO CONSUMMATION OF THE MERGER. Pursuant to the
Merger Agreement, the Company Board has agreed not to permit the Company or its
subsidiaries to conduct its business in any manner other than in the ordinary
course of business and in a manner consistent with past practice. The Company
has agreed that, among other things and subject to certain exceptions, between
the date of the Merger Agreement and the Effective Time, other than with
Purchaser's or Merger Sub's prior written consent or as set forth in Schedule
5.1 of the Disclosure Schedule to the Merger Agreement, the Company and its
subsidiaries shall not, voluntarily or involuntarily, take any of the following
actions:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend or modify (except as required hereby) the terms of the
Company Plans or authorize for issuance, issue, sell, deliver or agree or
commit to issue (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities or equity equivalents
(including, without limitation, any phantom stock or stock appreciation
rights), except for the issuance or sale of shares of common stock pursuant
to the exercise of Stock Options or under its 1997 Stock Plan;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any capital stock of its
subsidiaries;
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(d) (i) incur or assume any indebtedness for borrowed money except for
indebtedness not exceeding $100,000 in the aggregate, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person, except for obligations not exceeding $100,000 in the aggregate,
(iii) except for investments not exceeding $100,000 in the aggregate, make
any loans, advances or capital contributions to, or investments in, any
other person (other than to subsidiaries of the Company or customary loans
or advances to employees in the ordinary course of business consistent with
past practice), (iv) pledge or otherwise encumber shares of capital stock
of the Company's subsidiaries, or (v) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any
material lien thereupon except for liens securing indebtedness for borrowed
money not exceeding $100,000 in the aggregate;
(e) except as may be required by law or as contemplated by the Merger
Agreement, (i) enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan,
fund or other arrangement for the benefit or welfare of any director,
officer or employee in any material manner, or (ii) except for normal
salary increases and bonus payments in the ordinary course of business
consistent with past practice, increase in any material manner the
compensation of any director, officer or employee or agent, or (iii) pay
any material benefit not required by any plan and arrangement as in effect
as of the date hereof (including, without limitation, the granting of stock
appreciation rights or performance units), or (iv) create, issue or
increase any severance agreement or stay bonus with any officer, director
or employee;
(f) acquire, sell, lease or dispose of any assets outside the ordinary
course of business which have a value in the aggregate in excess of
$100,000;
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or cash management practices used by it;
(h) authorize or make any new capital expenditure or expenditures
which, individually, is in excess of $100,000 or, in the aggregate, are in
excess of $500,000;
(i) make any tax election or settle or compromise any income tax
liability material to the Company and its subsidiaries taken as a whole;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the notes
thereto) of the Company and its subsidiaries in the Company's most recent
Annual Report on Form 10-K (the "Recent SEC Reports") or incurred in the
ordinary course of business consistent with past practice;
(k) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any
subsidiary or the Company; or
(l) take, or agree in writing or otherwise to take, any of the actions
described in paragraphs (a) through (k) above or any action which would
cause or constitute a breach of any of the representations or warranties of
the Company contained in the Merger Agreement.
NO SOLICITATION. The Merger Agreement provides that the Company shall not,
nor shall it permit any of the subsidiaries to, nor shall it authorize or permit
any officer, director or employee of, or any investment banker, attorney or
other advisor or representative of, the Company or any of the subsidiaries to
(i) solicit or initiate, encourage, or facilitate, directly or indirectly, any
inquiries relating to, or the submission of, any proposal or offer, whether in
writing or otherwise, from any person other than Purchaser, Merger Sub or any
affiliates thereof (a "Third Party") to acquire beneficial ownership (as defined
under Rule 13(d) of the Exchange Act) of all or a material portion of the assets
of the Company or any of its subsidiaries or 20% or more of any class of equity
securities of the Company or any of its subsidiaries pursuant to a merger,
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consolidation or other business combination, sale of shares of capital stock,
sale of assets, tender offer, exchange offer or similar transaction with respect
to either the Company or any of its subsidiaries, including any single
transaction or series of related transactions, which is structured to permit
such Third Party to acquire beneficial ownership of any material portion of the
assets of or 20% or more of the equity interest in either the Company or any of
its subsidiaries (a "Takeover Proposal"), (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information or data with
respect to or access to the properties of, or take any other action to knowingly
facilitate the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal or (iii) enter into any agreement
with respect to any Takeover Proposal, approve or recommend or resolve to
approve or recommend any Takeover Proposal or enter into any agreement or
understanding requiring it to abandon, terminate or fail to consummate the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement. Notwithstanding the foregoing sentence, prior to the expiration of
the Offer, if the Company Board receives a bona fide Takeover Proposal by a
Third Party that was not solicited or initiated, or encouraged or facilitated,
directly or indirectly, by the Company, any of the subsidiaries or any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of the subsidiaries, the terms of which
the Company Board determines in good faith (after consulting and receiving
advice from the Company's independent financial advisor and independent legal
counsel) are more favorable from a financial point of view to the holders of
Shares than the Offer, the Merger and other transactions contemplated by this
Agreement (taking into account any adjustments to the terms and conditions
proposed in writing by Purchaser within three (3) business days after Purchaser
and Merger Sub receive notice of such Takeover Proposal) and taking into account
any differences in the conditions set forth in the Superior Proposal, in the
aggregate, from the conditions set forth herein (a "Superior Proposal"), then
the Company may, in response to an unsolicited request therefor and subject to
compliance with the Merger Agreement furnish information with respect to the
Company and the subsidiaries to, and participate in discussions and negotiations
directly or through its representatives with, such Third Party, subject to a
confidentiality agreement; provided, that the Company Board first determines in
good faith, after receiving the advice of independent legal counsel, that such
action is required in order for the Company Board to comply with its fiduciary
duties to the Company's stockholder under applicable law, and the Company shall
not have violated any of the restrictions set forth in Section 5.2 of the Merger
Agreement; provided, however, that any such Takeover Proposal shall not be
deemed to be a Superior Proposal if any financing required to consummate the
transaction contemplated thereby is not committed on terms substantially similar
to those obtained by or for the benefit of Purchaser or Merger Sub in connection
with the Offer and the Merger and such commitment is not likely, in the
reasonable judgment of the Company's Board (after consultation with its
independent financial advisor), to be obtained by such third party within a
reasonable period of time. The Company shall advise Purchaser orally and in
writing of (i) any Takeover Proposal or any inquiry with respect to or which
could reasonably be expected to lead to any Takeover Proposal received by any
officer or director of the Company or, to the knowledge of the Company, any
financial advisor, attorney or other advisor or representative of the Company,
(ii) the material terms of such Takeover Proposal (including a copy of any
written proposal), and (iii) the identity of the person making any such Takeover
Proposal or inquiry promptly following receipt of such Takeover Proposal or
inquiry. The Company will keep Purchaser duly informed of the status and details
of any such Takeover Proposal or inquiry in a timely manner.
ACCESS TO INFORMATION. The Merger Agreement provides that until the
Effective Time, the Company will provide to Purchaser and Merger Sub and their
authorized representatives reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the Company and
its subsidiaries, will permit Purchaser and Merger Sub to make such inspections
as Purchaser and Merger Sub may reasonably require and will cause the officers
of the Company and those of its subsidiaries to furnish Purchaser and Merger Sub
with such financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as Purchaser or
Merger Sub may from time to time reasonably request. All of such information
shall be treated as Confidential Information pursuant to the terms of the
Confidentiality Agreement, dated June 29, 1999, between the Company and DICOM,
the provisions of which are incorporated by reference into the Merger Agreement.
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SHAREHOLDERS MEETING; PROXY STATEMENT. The Merger Agreement provides that,
if a vote of the Company's shareholders is required by law, the Company will, as
promptly as practicable following the acceptance for payment of Shares by
Purchaser pursuant to the Offer, take, in accordance with applicable law and its
Certificate of Incorporation and Bylaws, all action necessary to convene a
special meeting of holders of Shares (the "Shareholders Meeting") to consider
and vote upon the approval of the Merger, if such approval is required. The
Company shall, as promptly as practicable, prepare and file with the Commission
a preliminary proxy statement for the solicitation of a vote of holders of
Shares approving the Merger (the "Proxy Statement"), which shall include the
unanimous recommendation of the Company Board that shareholders of the Company
vote in favor of the approval and adoption of this Agreement and the written
opinion of the Financial Advisor that the cash consideration to be received by
the shareholders of the Company pursuant to the Merger is fair to such
shareholders from a financial point of view. The Company shall use all
reasonable efforts to respond to any comments of the Commission and its staff
and as promptly as practicable after responding to such comments to the
satisfaction of the staff cause the Proxy Statement to be mailed to the
shareholders of the Company. Notwithstanding the foregoing, if Purchaser, Merger
Sub and/or any other subsidiary of Purchaser shall acquire at least ninety
percent (90%) of the outstanding Shares, the parties shall take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a Shareholders Meeting in
accordance with Section 253 of the DGCL. Purchaser and Merger Sub agree to cause
all Shares purchased pursuant to the Offer and all other Shares owned by
Purchaser and Merger Sub or any subsidiary of Purchaser to be voted in favor of
the Merger.
ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the terms and
conditions in the Merger Agreement, Purchaser, Merger Sub and the Company agree
to use all reasonable efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective as
promptly as practicable the transactions contemplated by the Merger Agreement,
including, without limitation, (a) cooperation in the preparation and filing of
the Schedule 14D-9, the Proxy Statement, any filings that may be required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and any
amendments thereto; (b) the taking of all action reasonably necessary, proper or
advisable to secure any necessary consents under material contracts; (c)
contesting any legal proceeding relating to the Offer or the Merger and (d) the
execution of any additional instruments necessary to consummate the transactions
contemplated thereby. Subject to the terms and conditions of the Merger
Agreement, Purchaser and Merger Sub agree to use (i) all reasonable efforts to
cause the Effective Time to occur as soon as practicable after the shareholder
vote, if any, with respect to the Merger and (ii) their respective best efforts
to satisfy the conditions precedent set forth in the Commitment Letters (as
defined in the Merger Agreement) (provided that nothing herein shall be deemed
to be an obligation of Purchaser or Merger Sub to increase the Offer Price). In
addition, Purchaser and Merger Sub will not consent or agree to any amendment,
waiver, modification or early termination of the Commitment Letters in any
manner adverse to Purchaser or Merger without the Company's prior written
consent, which shall not be unreasonably withheld.
CONSENTS. The Merger Agreement provides that Purchaser, Merger Sub and the
Company each will use all commercially reasonable efforts to obtain consents of
all third parties to material contracts and governmental entities necessary,
proper or advisable for the consummation of the transactions contemplated by the
Merger Agreement.
PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that Purchaser, Merger
Sub and the Company, as the case may be, will consult with one another and seek
one another's approval before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by the Merger
Agreement, including, without limitation, the Offer or the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation and approval, except as may be required by applicable law or by
obligations pursuant to any listing agreement with The Nasdaq Stock Market, as
determined by Purchaser, Merger Sub or the Company, as the case may be.
TRANSACTION LITIGATION. The Merger Agreement provides that the Company
shall give Purchaser and Merger Sub the opportunity to participate in the
defense or settlement of any litigation against the Company and its directors
directly relating to any of the transactions contemplated by Merger Agreement;
provided, that
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no such settlement shall be agreed to without Purchaser's consent, which consent
shall not be unreasonably withheld.
DELISTING. The Merger Agreement provides that each of the parties hereto
shall cooperate with each other in taking or causing to be taken, all actions
necessary to delist all of the Company's securities from the Nasdaq National
Market System and to terminate registration under the Exchange Act; provided,
that such delisting and termination shall not be effective until after the
Effective Date.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective
obligations of the parties to effect the Merger are subject to the satisfaction
or waiver of the following conditions prior to the Effective Time: (a) if
required by the DGCL, the Merger Agreement shall have been approved and adopted
by the affirmative vote of the shareholders of the Company; (b) no federal,
state or foreign court or tribunal or administrative, governmental or regulatory
body, agency or authority (a "Governmental Entity") or federal, state or foreign
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
then in effect (which order or other action the parties hereto shall use their
reasonable efforts to vacate or lift) and has the effect of making the
consummation of the Merger illegal under applicable law; (c) any waiting period
applicable to the Merger and other transactions described in the recitals to the
Merger Agreement under the HSR Act shall have terminated or expired, and any
other governmental or regulatory notices or approvals required with respect to
the transactions contemplated by the Merger Agreement (the absence of which
would reasonably be expected to have a Company Material Adverse Effect) shall
have been either filed or received; and (d) Purchaser shall have accepted for
payment and purchased all Shares validly tendered and not withdrawn pursuant to
the Offer.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations by the Company as to the Company's corporate
organization and qualification, the Company's subsidiaries, capitalization,
authority, filings with the Commission and other governmental authorities,
material contracts, financial statements, the absence of certain changes or
events concerning the Company's corporate organization and qualification, the
absence of undisclosed liabilities, the truth of information supplied by the
Company, litigation, labor matters, employee benefit matters and ERISA, taxes,
compliance with applicable laws, environmental matters, real property,
intellectual property, year 2000 compliance, insurance, suppliers and customers,
restrictions on business activities, brokers, conduct of business, expenses,
dividends, state takeover statutes, related party transactions and the opinion
of the Financial Advisor.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the
Merger Agreement, Purchaser and Merger Sub have agreed that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its subsidiaries as provided in their
respective charters or Bylaws (or other similar governing instruments) or
otherwise in effect as of the date hereof with respect to matters occurring
prior to the Effective Time shall survive the Merger and shall continue in full
force and effect. To the maximum extent permitted by the DCGL, such
indemnification shall be mandatory rather than permissive, and the Surviving
Corporation shall advance expenses in connection with such indemnification
(subject to the Surviving Corporation's receipt of an undertaking by the
indemnified party to return such advanced expenses to the Surviving Corporation
if it is determined by a final, non-appealable order of a court of competent
jurisdiction that such indemnified party is not entitled to retain such advanced
expenses).
The Merger Agreement further provides that Purchaser shall cause the
Surviving Corporation to maintain in effect for not less than six years from the
Effective Time the policies of the directors' and officers' liability and
fiduciary insurance most recently maintained by the Company (provided that the
Surviving Corporation may substitute policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the Effective
Time; provided, however, that in satisfying its obligation, the Surviving
Corporation shall not be obligated to pay premiums in excess of 150% with
respect to such current insurance.
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In the event the Surviving Corporation or its successor (i) is consolidated
with or merges into another person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any other person in a single
transaction or a series of related transactions, Purchaser has agreed that it
will make or cause to be made proper provision so that the successor or
transferee of the Surviving Corporation shall comply in all material respect
with these terms.
TERMINATION. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of this Agreement by the shareholders of the Company:
(a) by mutual written consent of Purchaser, Merger Sub and the
Company;
(b) by Purchaser, Merger Sub or by the Company
(i) if (x), the Offer shall have terminated or expired in
accordance with its terms without Purchaser's having accepted for
payment any Shares pursuant to the Offer or (y) the Offer shall not have
been consummated prior to October 15, 1999; provided, that the right to
terminate this Agreement pursuant to this clause (i) shall not be
available to any party if it is in material breach of its obligation
hereunder and such breach is the principal cause of, or resulted in, the
failure of the Offer to have been consummated on or before such date; or
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the acceptance for payment of, or payment for,
Shares pursuant to the Offer and such order, decree or ruling or other
action shall have become final and nonappealable; provided, that the
party seeking to terminate the Merger Agreement pursuant to this clause
(ii) shall have used all commercially reasonable efforts to remove such
order, decree, ruling, judgment or injunction;
(c) by Purchaser or Merger Sub prior to the purchase of Shares
pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in the
Merger Agreement which (i) would give rise to the failure of the Offer
Condition set forth in paragraph (b) of Annex A to the Merger Agreement and
(ii) cannot be or has not been cured within 10 business days after the
giving of written notice thereof to the Company by Purchaser or Merger Sub;
(d) by Purchaser or Merger Sub prior to the purchase of Shares
pursuant to the Offer if either Purchaser or Merger Sub is entitled to
terminate the Offer as a result of the occurrence of any event set forth in
paragraphs (e) or (j) of Annex A to the Merger Agreement;
(e) by the Company if the Company Board has received a Superior
Proposal and the Company furnishes information with respect to the Company
and the subsidiaries to, and participates in discussions and negotiations
directly or through its representatives with a Third Party, subject to a
confidentiality agreement, after the Company Board determined in good
faith, after receiving the advice of independent legal counsel, that such
action is required in order for the Company Board to comply with its
fiduciary duties to the Company's stockholder under applicable law;
provided, that (i) the Company has complied with all provisions of Section
5.2 of the Merger Agreement, (ii) the Company may not terminate this
Agreement pursuant to this clause (e) unless and until three (3) business
days have elapsed following delivery to Purchaser of a written notice of
such determination by the Company Board (which notice shall include the
identity of the Third Party making such Superior Proposal and a copy of all
documentation relating to such Superior Proposal), and (iii) the Company
delivers payment to the Purchaser of the Termination Fee and the Expenses
contemporaneously with such termination;
(f) by the Company prior to the purchase of Shares pursuant to the
Offer if (i) any of the representations or warranties of Purchaser or
Merger Sub set forth in this Agreement that are qualified as to materiality
shall not be true and correct in any respect or any such representations or
warranties that are not so qualified shall not be true and correct in any
material respect, or (ii) Purchaser or Merger Sub shall have failed to
perform in any material respect any material obligation or to comply in any
material
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respect with any material agreement or covenant of Purchaser or Merger Sub
to be performed or complied with by it under this Agreement and such
untruth, incorrectness or failure cannot be or has not been cured within 10
business days after the Company's giving of written notice to Purchaser or
Merger Sub, as applicable.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall become void and have no effect, without any liability on the
part of any party or its affiliates, directors, officers or shareholders, other
than the provisions concerning fees and expenses (discussed below), public
announcements, confidentiality the nonsurvival of most of the representations
and warranties made in the Merger Agreement, assignment, validity, notices,
governing law, construction and interpretation, parties in interest,
severability, specific performance, counterparts and waiver of jury trial.
Nothing shall relieve any party from liability for any breach of the Merger
Agreement prior to such termination.
FEES AND EXPENSES. As provided in the Merger Agreement, whether or not the
Merger is consummated, all costs and expense incurred in connection with the
Merger Agreement and the transactions contemplated by the Merger Agreement,
including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses.
The Company shall pay, or cause to be paid, by wire transfer of immediately
available funds to Purchaser (i) the documented reasonable out-of-pocket fees
and expenses incurred by or paid by or on behalf of Purchaser and its affiliates
(including, but not limited to, DICOM and Private Equity Partners) in connection
with the Offer, the Merger or the consummation of any of the transactions
contemplated by the Merger Agreement, including all reasonable fees and expenses
of law firms, commercial banks, investment banking firms, accountants, experts
and consultants to Purchaser and its affiliates ("Purchaser Expenses") not to
exceed $1,750,000 and, if applicable, (ii) $1,500,000 (the "Termination Fee")
under the circumstances and at the times set forth as follows:
(i) if the Company terminates this Agreement under paragraph (e)
above, the Company shall pay the Purchaser Expenses and the Termination Fee
concurrently with such termination in accordance with paragraph (e) above;
(ii) if Purchaser or Merger Sub terminates the Merger Agreement under
paragraph (c) above or paragraph (d) above, (x) the Company shall pay the
Purchaser Expenses upon demand, and (y) if concurrently with such
termination or within 270 days thereafter (A) the Company enters into a
merger agreement, acquisition agreement or similar agreement with respect
to a Takeover Proposal, or a Takeover Proposal is consummated, involving
any party other than Purchaser or any of its affiliates (1) with whom the
Company had any discussions with respect to a Takeover Proposal, (2) to
whom the Company furnished information with respect to or with a view to a
Takeover Proposal or (3) who had submitted a proposal or expressed any
interest publicly in a Takeover Proposal, in the case of each of clauses
(1), (2) and (3), after the date hereof and prior to such termination, or
(B) the Company enters into a merger agreement, acquisition agreement or
similar agreement with respect to a Superior Proposal, or a Superior
Proposal is consummated, then, in the case of either (A) or (B) above, the
Company shall pay the Termination Fee upon consummation of such Takeover
Proposal or Superior Proposal; and
(iii) notwithstanding clause (ii) above, if the Purchaser or Merger
Sub terminates this Agreement under paragraph (c) above as a result of the
Company's material breach of Section 5.2 of the Merger Agreement, the
Company shall pay the Purchaser Expenses and the Termination Fee upon
demand.
In no event shall the Purchaser Expenses and the Termination Fee be payable
by the Company more than once. Any such payments shall be made to the Purchaser
by wire transfer of immediately available funds.
In the event that the Company terminates this Agreement under paragraph (f)
above or the Purchaser or Merger Sub terminates the Merger Agreement solely as a
result of the failure of the condition set forth in paragraph (k) of Annex A to
the Merger Agreement, Purchaser shall pay, or shall cause to be paid by wire
transfer of immediately available funds to the Company the documented reasonable
out-of-pocket fees and expenses incurred by or paid on behalf of the Company in
connection with the offer, the Merger or the consummation of any of the
transactions contemplated by the Merger Agreement, including all reasonable
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fees and expenses of law firms, investment banking firms, accountants, experts
and consultants to the Company (the "Company Expenses") not to exceed $400,000.
The obligation of Purchaser to pay the Company Expenses pursuant to the Merger
Agreement has been guaranteed by DICOM in its commitment letter to Purchaser.
Each of the parties hereto acknowledge that all amounts payable under the
fees and expenses provisions of the Merger Agreement shall constitute liquidated
damages in lieu of any actual damages for termination of the Merger Agreement.
AMENDMENT. Subject to applicable law, the Merger Agreement may be amended
by the Company, Purchaser and Merger Sub by action taken by or on behalf of the
respective board of directors of the Company, Purchaser and Merger Sub at any
time prior to the Effective Time; provided, that after the approval and adoption
of the Merger Agreement and the transactions contemplated thereby by the
shareholders of the Company (if required by applicable law) no amendment shall
be made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon the consummation of the Merger. The
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of the parties.
EXTENSION; WAIVER. The Merger Agreement provides that at any time prior to
the Effective Time, each party may (a) extend the time for the performance of
any of the obligations or other acts of the other party or parties, (b) waive
any inaccuracies in the representations and warranties of the other parties
contained therein or in any document, certificate or writing delivered pursuant
thereto or (c) waive compliance by the other parties with any of the agreements
or conditions contained therein which may be legally waived. Any agreement on
the part of any party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party to assert any of its rights shall not constitute a waiver of such
rights.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes. In general,
a shareholder will recognize gain or loss for United States federal income tax
purposes equal to the difference between the amount of cash received in exchange
for the Shares sold and such shareholder's adjusted tax basis in such Shares.
Such gain or loss will be capital gain or loss if the Shares constitute capital
assets in the hands of the shareholder. In the case of an individual holder of
Shares, any such capital gain generally will be subject to a maximum United
States federal income tax rate of 20% if the holder's holding period in such
shares was more than one year at the Effective Time or at the time of
consummation of the Offer. Any resulting capital loss will be subject to certain
limitations on deductibility for United States federal income tax purposes.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
SHAREHOLDERS, SUCH AS FINANCIAL INSTITUTIONS, BROKER-DEALERS, SHAREHOLDERS WHO
ACQUIRED SHARES PURSUANT TO THE EXERCISE OF OPTIONS OR OTHERWISE AS
COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES, FOREIGN CORPORATIONS AND PERSONS WHO RECEIVED PAYMENTS IN RESPECT OF
OPTIONS OR WARRANTS TO ACQUIRE SHARES.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE
URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF THE UNITED STATES ALTERNATIVE MINIMUM TAX, STATE AND LOCAL, AND
FOREIGN TAX LAWS.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT REGISTRATION;
MARGIN REGULATIONS.
POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES. The purchase
of Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public. The purchase of Shares
pursuant to the Offer can also be expected to reduce the number of holders of
Shares. Purchaser cannot predict whether the reduction in the number of Shares
that might otherwise trade publicly would have an adverse or beneficial effect
on the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price therefor.
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STOCK QUOTATION. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the National
Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in
the Nasdaq National Market, which require that an issuer have at least 200,000
publicly held shares, held by at least 400 stockholders or 300 stockholders of
round lots, with a market value of at least $1,000,000, and have net tangible
assets of at least $1,000,000, $2,000,000 or $4,000,000, depending on
profitability levels during the issuer's four most recent fiscal years. If these
standards are not met, the Shares might nevertheless continue to be included in
The Nasdaq Stock Market, with quotations published in the NASD Automatic
Quotation System ("Nasdaq") "additional list" or in one of the "local lists."
However, if the number of holders of the Shares were to fall below 300, or if
the number of publicly held Shares were to fall below 100,000 or there were not
at least two registered and active market makers for the Shares, the NASD's
rules provide that the Shares would no longer be "qualified" for the Nasdaq
Stock Market reporting, and The Nasdaq Stock Market would cease to provide any
quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. As of July 27, 1999, there were approximately
186 holders of record or through nominee or street name accounts with brokers of
Shares and there were 5,243,956 Shares outstanding. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NASD for continued inclusion in the Nasdaq National
Market or in any other tier of The Nasdaq Stock Market and the Shares are no
longer included in the Nasdaq National Market or in any other tier of The Nasdaq
Stock Market, as the case may be, the market for Shares could be adversely
affected.
In the event that the Shares no longer meet the requirements of the NASD
for continued inclusion in any tier of The Nasdaq Stock Market, it is possible
that the Shares would continue to trade in the over-the-counter market and that
price quotations would be reported by other sources. The extent of the public
market for the Shares and the availability of such quotations would, however,
depend upon the number of holders of Shares remaining at such time, the
interests in maintaining a market in Shares on the part of securities firms, the
possible termination of registration of the Shares under the Exchange Act, as
described below, and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. The purchase of the Shares pursuant to the Offer may result in the
Shares becoming eligible for de-registration under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Shares. The termination of registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission, and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement in connection with meetings of
shareholders meetings pursuant to Section 14(a) of the Exchange Act, and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for reporting on The Nasdaq National Market.
MARGIN REGULATIONS. The Shares may currently be "margin securities" under
the regulations of the Company Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), which would have the effect, among other things,
of allowing brokers to extend credit on the collateral of such Shares for the
purpose of buying, carrying or trading in securities ("Purpose Loans").
Depending upon factors, such as the number of record holders of the Shares and
the number and market value of publicly held Shares, following the purchase of
Shares pursuant to the Offer, the Shares might no longer constitute "margin
securities" for purposes of the Federal Reserve Board's margin regulations and,
therefore, could no longer be used as collateral for Purpose Loans made by
brokers. In addition, and in any event, if registration of the Shares under the
Exchange Act were terminated, the Shares would no longer constitute "margin
securities."
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THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date (as defined herein) and not withdrawn, as
described under "Withdrawal Rights." The term "Expiration Date" means 12:00
Midnight, Pacific Time, on August 31, 1999, unless and until Purchaser, in its
reasonable judgment (but subject to the terms and conditions of the Merger
Agreement), shall have extended the period during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Purchaser, shall expire. The Offer is subject
to the Minimum Condition and to certain other conditions. See "The Tender
Offer -- Certain Conditions of the Offer."
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period of time during which the Offer is
open, including the failure of any of the conditions specified in "The Tender
Offer -- Certain Conditions of the Offer" to be satisfied, by giving oral or
written notice of such extension to the Depositary. During any such extension,
all Shares previously tendered and not withdrawn will remain subject to the
Offer, subject to the rights of a tendering shareholder to withdraw his Shares.
See "The Tender Offer -- Withdrawal Rights."
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement), at any time and from time to time, (a)
to delay acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for, any Shares in order to comply
with any applicable laws, (b) to terminate the Offer and not accept for payment
any Shares upon the failure of any of the conditions specified in "The Tender
Offer -- Certain Conditions of the Offer" to be satisfied and (c) to waive any
condition or otherwise amend the Offer in any respect, by giving oral or written
notice of such delay, termination, waiver or amendment to the Depositary and by
making a public announcement thereof.
If Purchaser extends the Offer, if Purchaser (whether before or after its
acceptance for payment of the Shares) is delayed in its acceptance for payment
of or payment for any Shares validly tendered and not withdrawn in the Offer or
if Purchaser is unable to accept for payment or pay for such Shares pursuant to
the Offer for any reason, then, without prejudice to Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and
such Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in "The Tender Offer -- Withdrawal
Rights." Purchaser acknowledges that (a) Rule 14e-1(c) under the Exchange Act
requires Purchaser to pay the consideration offered or to return the Shares
tendered promptly after the termination or withdrawal of the Offer and (b)
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (a) above), any Shares upon the occurrence of any of the
conditions specified in "The Tender Offer -- Certain Conditions of the Offer"
without extending the period of time during which the Offer is open.
The Merger Agreement provides that Purchaser shall not, without the prior
written consent of the Company, make any change in the terms or conditions of
the Offer which would change the form of consideration to be paid, decrease the
Offer Price or the number of Shares sought in the Offer, impose additional or
broadened conditions to the Offer other than those set forth in the Merger
Agreement, amend any other term of the Offer (including the conditions of the
Offer) in a manner adverse to the holders of Shares, extend the Offer except as
set forth below, or amend, or waive the satisfaction of, the Minimum Condition.
The Merger Agreement provides that if on any scheduled expiration date of the
Offer all conditions to the Offer shall not have been satisfied or waived, the
Offer may be extended by Purchaser from time to time without the consent of the
Company (i) if at the scheduled expiration date of the Offer any of the
conditions to the Offer shall not have been satisfied or waived, until such time
as such conditions are satisfied or waived, (ii) for any period required by any
rule, regulation, interpretation or position of the Commission or the staff
thereof applicable to the Offer, (iii) for any other reason on one or more
occasions for not more than ten
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(10) business days beyond the latest expiration date applicable under the
preceding clauses (i) or (ii) if on such expiration date the Minimum Condition
has been satisfied but the number of Shares validly tendered, together with
Shares then owned directly or indirectly by Purchaser, constitute at least
seventy-five percent (75%) but less than ninety percent (90%) of all outstanding
Shares, or (iv) extend the Offer for any reason on one or more occasions for an
aggregate period of not more than ten business days beyond the initial
expiration date or the latest expiration date that would otherwise be permitted
under clauses (i), (ii) or (iii) of this sentence; provided, that the Offering
may not, without the Company's consent be extended by and 60 days after the
commencement of the Offer.
Any extension, delay, termination, material waiver or material amendment
will be followed as promptly as practicable by public announcement thereof, such
announcement, in the case of an extension to be made no later than 9:00 a.m.,
Pacific Time, on the next business day (as defined herein) after the previously
scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c)
and 14d-6(d) under the Exchange Act, which require that material changes be
promptly disseminated to shareholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which Purchaser may
choose to make any public announcement, Purchaser shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release to the Dow Jones News Service.
If (subject to the terms and conditions of the Merger Agreement) Purchaser
makes a material change in the terms of the Offer or the information concerning
the Offer, or if Purchaser waives a material condition of the Offer, Purchaser
will extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and
14e-1 under the Exchange Act. The minimum period during which the Offer must
remain open following material changes in the terms of the Offer or information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the changed terms or information. In the Commission's
view, an offer should generally remain open for a minimum of five(5) business
days from the date a material change is first published, sent or given to
shareholders. With respect to a change in price or a change in percentage of
securities sought (other than an increase in the number of Shares sought not in
excess of two percent (2%) of the outstanding Shares), a minimum ten (10)
business-day period is required to allow for adequate dissemination to
shareholders and investor response. As used in this Offer to Purchase, "business
day" has the meaning set forth in Rule 14d-1 under the Exchange Act.
Accordingly, if, prior to the Expiration Date, Purchaser decreases the number of
Shares being sought, or increases or decreases the consideration offered
pursuant to the Offer, and if the Offer is scheduled to expire at any time
earlier than the period ending on the 10th business day from the date that
notice of such increase or decrease is first published, sent or given to holders
of Shares, the Offer will be extended at least until the expiration of such ten
(10) business-day period.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to increase the Offer Price, such increase in the
Offer Price will be applicable to all shareholders whose Shares are accepted for
payment pursuant to the Offer, whether or not such Shares were tendered prior to
the date of such increase, and, if at the time notice of such increase in the
Offer Price is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the period ending on the
10th business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten (10) business-day period.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
shareholder list, and will be furnished, for subsequent transmittal to
beneficial owners of Shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing.
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2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will purchase, by accepting for payment, and will pay
for, any and all Shares which are validly tendered prior to the Expiration Date
(and not properly withdrawn in accordance with "The Tender Offer -- Withdrawal
Rights") promptly after the later to occur of (a) the Expiration Date and (b)
subject to compliance with Rule 14e-1(c) under the Exchange Act, the
satisfaction or waiver of the conditions set forth in "The Tender
Offer -- Certain Conditions of the Offer." All conditions of the Offer must be
satisfied or waived prior to the Expiration Date, provided, however, the
Expiration Date may be extended in accordance with the terms of the Merger
Agreement. Purchaser expressly reserves the right, in its discretion, to delay
acceptance for payment of, or, subject to applicable rules of the Commission,
payment for, Shares in order to comply, in whole or in part, with any applicable
law.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see "The Tender
Offer -- Certain Legal Matters; Regulatory Approvals".
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (a) certificates
representing such Shares (the "Share Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such
procedure is available, into the Depositary's account at a "Book-Entry Transfer
Facility" pursuant to the procedures set forth in "The Tender
Offer -- Procedures for Tendering Shares," (b) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, or, in the case of a
book-entry transfer, an Agent's Message (as defined herein) and (c) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against the participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment. Payment for
Shares accepted pursuant to the Offer will be made by deposit of the purchase
price therefor with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payments from Purchaser and
transmitting payments to such tendering shareholders. Under no circumstances
will interest on the purchase price for Shares be paid by Purchaser, regardless
of any delay in making such payment. Upon the deposit of funds with the
Depositary for the purpose of making payments to tendering shareholders,
Purchaser's obligation to make such payment shall be satisfied and tendering
shareholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares pursuant
to the Offer. Subject to Section 2.13 of the Merger Agreement and except as
otherwise provided in Instruction 6 of the Letter of Transmittal, Purchaser will
pay any stock transfer taxes incident to the transfer to it of validly tendered
Shares as well as any charges and expenses of the Depositary, the Information
Agent and the Dealer Manager.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in "The Tender Offer -- Procedures for Tendering Shares," such Shares
will be credited to an account maintained at such Book-Entry Transfer Facility),
as promptly as practicable following the expiration or termination of the Offer.
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3. PROCEDURES FOR TENDERING SHARES.
VALID TENDER OF SHARES. In order for Shares to be validly tendered
pursuant to the Offer, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message (in the case of any book-entry transfer) and
any other required documents, must be received by the Depositary at its address
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date, and either (a) the Share Certificates evidencing tendered Shares must be
received by the Depositary at such address or Shares must be tendered pursuant
to the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case, prior to the
Expiration Date, or (b) the tendering shareholder must comply with the
guaranteed delivery procedures described below. No alternative, conditional or
contingent tenders will be accepted.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's Message
in connection with a book-entry delivery of Shares, and any other required
documents must, in any case, be transmitted to and received by the Depositary at
its address set forth on the back cover of this Offer to Purchase prior to the
Expiration Date or the tendering shareholder must comply with the guaranteed
delivery procedures described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
SIGNATURE GUARANTEE. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agent's Medallion Program (each, an "Eligible Institution"), unless the
Shares tendered thereby are tendered (a) by a registered holder of Shares who
has not completed either the box entitled "Special Delivery Instructions" or the
box entitled "Special Payment Instructions" on the Letter of Transmittal or (b)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(a) the tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
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(c) in the case of a guaranteed delivery of Shares, the Share
Certificates for all tendered Shares, in proper form for transfer, or a
Book-Entry Confirmation, together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) with
any required signature guarantee (or, in the case of a book-entry transfer,
an Agent's Message) and any other documents required by such Letter of
Transmittal, are received by the Depositary within three Nasdaq Stock
Market trading days after the date of execution of the Notice of Guaranteed
Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (a) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, if available, (b) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) or, in the case of a book-entry transfer, an Agent's Message
and (c) any other documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by Purchaser, in its sole discretion, whose determination will be
final and binding on all parties, and which discretion may be delegated to the
Depositary or other persons. In addition, Purchaser's or Purchaser's designees'
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding. None of
Purchaser, Merger Sub, DICOM, Private Equity Partners, the Company, the
Depositary, the Information Agent, the Dealer Manager or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any such notification.
Purchaser reserves the absolute right to reject any or all tenders of any Shares
determined by it not to be in proper form or if the acceptance for payment of,
or payment for, such Shares may, in the opinion of Purchaser's counsel, be
unlawful. Purchaser also reserves the absolute right, in its sole discretion, to
waive any of the conditions of the Offer or any defect or irregularity in any
tender with respect to Shares of any particular shareholder, whether or not
similar defects or irregularities are waived in the case of other shareholders.
No tender of Shares will be deemed to have been validly made until all defects
and irregularities have been cured or waived.
APPOINTMENT AS PROXY. By executing a Letter of Transmittal, as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Purchaser (and any and all noncash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after July 27, 1999). All such proxies
shall be considered coupled with an interest in the tendered Shares. This
appointment will be effective if, when and only to the extent that Purchaser
accepts such Shares for payment pursuant to the Offer. Upon such acceptance for
payment, all prior proxies given by such shareholder with respect to such Shares
and other securities will, without further action, be revoked, and no subsequent
proxies may be given. The designees of Purchaser will, with respect to the
Shares and other securities for which the appointment is effective, be empowered
to exercise all voting and other rights of such shareholder as they, in their
sole discretion, may deem proper at any annual, special, adjourned or postponed
meeting of the Company's shareholders, by written consent or otherwise, and
Purchaser reserves the right to require that, in order for Shares or other
securities to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares.
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering shareholder and
Purchaser upon the terms and subject to the conditions of the Offer.
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<PAGE> 37
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date, and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after the Expiration Date. If Purchaser extends
the Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering shareholders are
entitled to withdrawal rights as described in the paragraph below. Any such
delay will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover page of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and
the name of the registered holder of such Shares if different from that of the
person who tendered such Shares. If Share Certificates evidencing Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such Share Certificates, the serial numbers
shown on such Share Certificates must be submitted to the Depositary and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in "The Tender Offer -- Procedures for
Tendering Shares," any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "The Tender Offer -- Procedures for Tendering Shares."
5. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Annual Report to its stockholders for the fiscal
year ended June 30, 1998 (the "Company's 10-K"), the Shares are listed and
principally traded on The Nasdaq Stock Market, Inc.'s National Market (the
"Nasdaq National Market") under the symbol "KOFX." The Company completed its
initial public offering on October 10, 1997 at an offering price of $11.00 per
Share. The following table sets forth, for the quarters indicated, the high and
low sales prices per Share on the Nasdaq National Market.
<TABLE>
<CAPTION>
DATE LOW HIGH
- ---- --- ----
<S> <C> <C>
FISCAL 1998:
Second Quarter (from October 10, 1997).................... 4 11 3/4
Third Quarter............................................. 5 8
Fourth Quarter............................................ 6 1/8 8 1/4
FISCAL 1999:
First Quarter............................................. 6 1/4 7 5/8
Second Quarter............................................ 5 7/8 8 3/4
Third Quarter............................................. 7 3/8 10 1/2
Fourth Quarter............................................ 7 7/8 10
FISCAL 2000:
First Quarter (through July 27, 1999)..................... 9 3/8 9 7/8
</TABLE>
On July 27, 1999, the last trading day prior to the public announcement of
the signing of the Merger Agreement, the closing price per Share as reported on
the Nasdaq National Market was $9.375. The Company has never declared or paid
any cash dividends on the Shares. See "Special Factors -- Purpose of the Offer
and the Merger." As of July 27, 1999, there were approximately 186 holders of
record of the Shares. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
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<PAGE> 38
6. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including without limitation
financial information, has been furnished by the Company or has been taken from
or based upon publicly available documents and records on file with the
Commission and other public sources. Neither Purchaser, Merger Sub, DICOM nor
Private Equity Partners assumes any responsibility for the accuracy or
completeness of the information concerning the Company furnished by the Company
or contained in such documents and records, or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to Purchaser, Merger Sub,
DICOM or Private Equity Partners.
GENERAL. The Company's principal executive offices are located at 16245
Laguna Canyon Road, Irvine, California 92618 and its telephone number is (949)
727-1733. The Company is a leading supplier of both application software and
image processing products for the imaging, workflow and document management
market. The Company specializes in the document and data capture and document
storage product segments, of the market, which are essential to helping paper
intensive organizations economically and reliably capture and store critical
business information through a worldwide network of distributors, system
integrators and value-added resellers. The Company sells its products to a wide
variety of document imaging, workflow and document management solution providers
including value-added resellers, system integrators, independent software
vendors and computer companies.
FINANCIAL INFORMATION. Set forth below is certain selected summary
consolidated financial information relating to the Company and its subsidiaries
which has been excerpted or derived from the audited financial statements
contained in the Company's 10-K and the unaudited financial statements contained
in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 (the "Company's 10-Q"). More comprehensive financial information is
included in the Company's 10-K, the Company's 10-Q and other documents filed by
the Company with the Commission. The financial information that follows is
qualified in its entirety by reference to such reports and other documents,
including the financial statements and related notes contained therein. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission in the manner set forth below.
36
<PAGE> 39
KOFAX IMAGE PRODUCTS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
--------------------------- -----------------
1998 1997 1996 1999 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales.................................... $33,375 $29,266 $24,964 $28,091 $24,434
Cost of sales................................ 7,819 7,720 7,926 6,384 5,781
------- ------- ------- ------- -------
Gross profit................................. 25,556 21,546 17,038 21,707 18,653
Operating expenses:
Sales and marketing........................ 10,706 9,565 7,456 8,572 7,785
Research and development................... 7,826 6,653 5,090 6,461 5,742
General and administrative................. 2,672 1,936 1,748 2,315 1,943
Acquired in-process research and
development costs....................... -- -- 4,177 -- --
------- ------- ------- ------- -------
Total operating expenses................ 21,204 18,154 18,471 17,348 15,470
------- ------- ------- ------- -------
Income (loss) from operations................ 4,352 3,392 (1,433) 4,359 3,183
Other income, net............................ 759 69 200 809 477
------- ------- ------- ------- -------
Income (loss) before provision (benefit)..... 5,111 3,461 (1,233) 5,168 3,660
Provision (benefit) for income taxes......... 1,968 1,326 (500) 1,821 1,409
------- ------- ------- ------- -------
Net income (loss)............................ $ 3,143 $ 2,135 $ (733) $ 3,347 $ 2,251
======= ======= ======= ======= =======
Basic net income (loss) per share............ $ .75 $ 1.37 $ (0.82) $ 0.63 $ 0.59
======= ======= ======= ======= =======
Diluted net income (loss) per share.......... $ .62 $ .52 $ (0.82) $ 0.62 $ 0.45
======= ======= ======= ======= =======
Basic weighted average common shares......... 4,197 1,319 1,305 5,282 3,830
======= ======= ======= ======= =======
Diluted weighted average common shares....... 5,073 4,126 1,305 5,412 4,957
======= ======= ======= ======= =======
Net income (loss) applicable to common
stockholders............................... $ 3,143 $ 1,801 $(1,067) $ 3,347 $ 2,251
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF MARCH 31,
--------------------------- -----------------
1998 1997 1996 1999 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $24,149 $ 8,676 $ 6,949 $27,709 $23,495
Total assets................................. 32,115 16,327 14,141 36,644 31,655
Long-term debt, net of current maturities.... -- 427 799 -- --
Redeemable convertible preferred stock....... -- 7,146 6,812 -- --
Stockholders' equity......................... 27,625 5,108 3,294 30,641 27,148
</TABLE>
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<PAGE> 40
CERTAIN PROJECTIONS AND OTHER INFORMATION. The Company does not as a
matter of course make public forecasts as to future sales or earnings. However,
during discussions regarding the Merger, the Company provided DICOM with
information which included projections of the Company's financial performance
from fiscal year 1999 to fiscal year 2004. A summary of the projections which
were provided is set forth below. The projections have not been updated to,
among other things, reflect actual 1999 results, and do not give effect to the
Offer or the Merger.
<TABLE>
<CAPTION>
FY99 FY00 FY01 FY02 FY03 FY04
------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
Total Revenue...................... $38,318 $46,555 $57,468 $71,637 $87,776 $104,618
Operating Income................... 6,195 8,461 12,132 15,212 19,413 23,769
Net Income......................... 4,739 5,984 8,390 10,463 13,243 16,119
Fully Diluted Earnings Per Share... $ 0.87 $ 1.06 $ 1.42 $ 1.70 $ 2.07 $ 2.42
</TABLE>
The following assumptions, among others, were used by management of the
Company and its subsidiaries in developing the foregoing projections:
1. Revenues will increase annually, with increases ranging from 19.2%
to 24.7%. Ascent Capture software revenues are projected to increase faster
than image processing hardware revenue. This is primarily because of the
company's entry into the data capture market with the release of Ascent
Capture version 4.0.
2. Cost of goods sold will remain relatively stable between 23.2% and
24.6%, depending on the mix of products between hardware and software.
3. Operating expenses are projected to decrease from approximately
61.2% in FY99 to 54.0% in FY04, as a percentage of revenues (not in
absolute dollars) primarily as a result of expense management, and a
reduction in engineering expenses.
4. Operating income will increase from approximately 16.2% in FY99 to
22.7% in FY04.
5. The Company's effective tax rate is expected to remain at
approximately 38.5% through FY04.
In addition to these specific assumptions, management assumed that it would
not lose any market share to competitors and that raw material costs will not
change substantially.
BECAUSE THE ESTIMATES AND ASSUMPTIONS UNDERLYING THE ABOVE PROJECTIONS ARE
INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES BEYOND
THE COMPANY'S CONTROL, THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS
COULD BE REALIZED, OR THAT ACTUAL RESULTS WOULD NOT BE HIGHER OR LOWER THAN
THOSE PROJECTED. MOREOVER, THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO
COMPLYING WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. UNDER NO
CIRCUMSTANCES SHOULD THE INCLUSION OF THE ABOVE PROJECTIONS BE REGARDED AS A
REPRESENTATION, WARRANTY OR PREDICTION THAT ANY PARTICULAR RESULT WILL BE
ACHIEVED OR THAT THE COMPANY, PURCHASER, MERGER SUB, DICOM OR PRIVATE EQUITY
PARTNERS CONSIDER IT AN ACCURATE PREDICTION OF FUTURE EVENTS OR THAT PURCHASER,
MERGER SUB, DICOM OR PRIVATE EQUITY PARTNERS AGREE WITH THE ASSUMPTIONS
UNDERLYING SUCH PROJECTIONS. THE PROJECTIONS ARE INCLUDED IN THIS OFFER TO
PURCHASE ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO DICOM.
ADDITIONAL INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act, and, in accordance therewith, is required to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted
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<PAGE> 41
to them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
disclosed in proxy statements distributed to the Company's shareholders and
filed with the Commission. Such reports, proxy statements and other information
should be available for inspection at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and also should be available for inspection at the
Commission's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048 and the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such materials may also be
obtained by mail, upon payment of the Commission's prescribed rates, by writing
to its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
material may also be accessed electronically by means of the Commission's World
Wide Web site on the Internet at http://www.sec.gov.
7. CERTAIN INFORMATION CONCERNING PURCHASER, MERGER SUB, DICOM AND PRIVATE
EQUITY PARTNERS.
PURCHASER. Purchaser is a newly formed Delaware corporation with its
principal executive offices currently located at 75 Wall Street, New York, New
York 10005. Purchaser was organized in connection with the Offer and the Merger.
All interests in Purchaser are or will be owned by DICOM, Private Equity
Partners, GSL and/or an affiliate or affiliates thereof and the Management
Group. Pursuant to the terms and conditions of a Stockholders Agreement to be
entered into by and among the Stockholders of Purchaser concurrently with the
Merger, DICOM shall have the option to acquire all (but not less than all)
outstanding shares of Purchaser held by Private Equity Partners and GSL and
their permitted transferees.
Until immediately prior to the time that Purchaser purchases Shares
pursuant to the Offer, it is not anticipated that Purchaser will have
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger.
MERGER SUB. Merger Sub is a newly formed Delaware corporation organized in
connection with the Offer and the Merger and has not carried on any activities
other than in connection with the Offer and the Merger. The principal offices of
Merger Sub are currently located at 75 Wall Street, New York, New York 10005.
All interests in Merger Sub are or will be owned by Purchaser.
DICOM. DICOM is a holding company organized under the laws of England and
Wales. DICOM holds a group of businesses that distribute document imaging
processing equipment in Europe and certain computer peripherals in Switzerland.
DICOM is a publicly traded company and listed on the London Stock Exchange under
the ticker symbol "DCM." DICOM publicly discloses its financial statements and
is subject to periodic reporting requirements under the laws of England and
Wales and the regulations of the London Stock Exchange.
PRIVATE EQUITY PARTNERS. Private Equity Partners is a private investment
partnership formed in 1997 to acquire minority stakes in public or private
companies through equity or debt securities and is licensed by the US
government's Small Business Administration as a Small Business Investment
Company (SBIC). Private Equity Partners has $250 million of committed internal
capital and represents a commitment by Dresdner Bank AG to increase its direct
investing as part of the $2.0 billion of private equity investment it currently
manages worldwide, of which $550 million is invested throughout the United
States. Its general partner, Dresdner Kleinwort Benson Equity LLC, a Delaware
limited liability company ("Private Equity LLC"), with its principal offices
located at 75 Wall Street, 24th Floor, New York, New York 10005, is engaged in
the business of investment management. Its single limited partner, Dresdner Bank
AG a corporation organized under the laws of Germany, is one of Europe's largest
commercial banks with approximately $448 billion in assets and $225 billion in
funds under management as of March 31, 1999. Since neither Private Equity
Partners, nor Private Equity LLC are subject to the periodic reporting
requirements of the Exchange Act, Private Equity Partners and Private Equity LLC
do not publicly disclose their financial statements, however, Dresdner Bank AG
is a publicly traded company and listed on various European stock exchanges and,
thus, is subject to various periodic reporting requirements.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history for each of the directors and
executive officers of Purchaser, Merger Sub, DICOM and Private Equity Partners
are set forth in Schedule I hereto. The name, citizenship, business address,
principal occupation or
39
<PAGE> 42
employment, and five-year employment history for each of the directors and
executive officers of the Company are set forth in Schedule II hereto.
Except for Christoph Lostein, Executive Director of DICOM, who owns 1,000
Shares which he purchased on October 10, 1997 at a price of $11.00 per Share and
except as set forth in this Offer to Purchase, (i) none of Purchaser, Merger
Sub, DICOM, Private Equity Partners, nor, to the best knowledge of Purchaser,
Merger Sub, DICOM and Private Equity Partners, any of the persons listed in
Schedule I hereto, or any associate or majority owned subsidiary of such
persons, beneficially own any equity security of the Company; (ii) none of
Purchaser, Merger Sub, DICOM, Private Equity Partners, nor to the best knowledge
of Purchaser, Merger Sub, DICOM and Private Equity Partners, any of the other
persons or entities referred to in clause (i) above, have effected any
transaction in any equity security of the Company during the past 60 days; (iii)
none of Purchaser, Merger Sub, DICOM, Private Equity Partners, nor, to the best
knowledge of Purchaser, Merger Sub, DICOM and Private Equity Partners, any of
the other persons or entities referred to in clause (i) above, have any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, without limitation, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any securities of the Company, joint venture, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss, or
the giving or withholding of proxies; (iv) none of Purchaser, Merger Sub, DICOM,
Private Equity Partners, nor, to the best knowledge of Purchaser, Merger Sub,
DICOM and Private Equity Partners, any of the other persons or entities referred
to in clause (i) above have had any transactions with the Company, or any of its
executive officers, directors or affiliates that would require reporting under
the rules of the Commission; (v) there have been no contacts, negotiations, or
transactions between Purchaser, Merger Sub, DICOM and Private Equity Partners,
or their respective subsidiaries, or, to the best knowledge of Purchaser, Merger
Sub, DICOM and Private Equity Partners, any of the other persons or entities
referred to in clause (i) above, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale of other transfer or a material
amount of assets.
8. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the Merger Agreement, the Company will not, prior to the
Merger, without the prior written consent of Purchaser or Merger Sub, split,
combine or reclassify any shares of its capital stock, declare, set aside or pay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, or redeem or otherwise
acquire any shares of capital stock of, securities convertible into or
exercisable for, or options to acquire equity securities of, the Company or any
securities of any of its subsidiaries.
Payment of dividends and distributions by the Company is subject to certain
restrictions contained in agreements in respect of the Company's credit
arrangements.
9. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, Purchaser shall not be
required to accept for payment purchase or pay for any validly tendered Shares
(subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act), and may delay in accordance with Section
1.1(b) of the Merger Agreement the acceptance for payment of, or the payment
for, any validly tendered Shares (subject to the restrictions referred to
above), may amend the Offer consistent with the terms of the Merger Agreement,
or may terminate the Offer if (i) immediately prior to the expiration of the
Offer (as extended in accordance with the Offer), the Minimum Condition shall
not have been satisfied, (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated (the "HSR Condition") or (iii) at any
time on or after the date of the Merger Agreement and prior to the Expiration
Date, any of the following events shall occur and be continuing:
(a) There shall be threatened in writing or pending any suit, action
or proceeding by a federal, state or foreign court or tribunal or
administrative, governmental or regulatory body, agency or authority (a
40
<PAGE> 43
"Governmental Entity") (but only if such suit, action or proceeding is
deemed by Purchaser to have a reasonable likelihood of success) (i) seeking
to prohibit or impose any material limitations on the ownership or
operation by the Company, Purchaser, Merger Sub or any of their respective
subsidiaries of a material portion of the businesses or assets of the
Company, Purchaser, Merger Sub or any of their respective subsidiaries
which could reasonably be expected to result in a change, effect, event,
occurrence, condition or development that is or is reasonably likely to be
materially adverse to (A) the assets, liabilities, properties, results of
operations, or conditions (financial or otherwise) of the Company and its
subsidiaries, taken as a whole, or (B) the ability of the Company to
perform its obligations under the Merger Agreement (a "Company Material
Adverse Effect") as a result of the Offer or any other transactions
contemplated by this Agreement, (ii) seeking to compel the Company,
Purchaser, or Merger Sub to dispose of or hold separate any material
portion of their respective business or assets as a result of the Offer or
any other transactions contemplated by Merger Agreement, (iii) seeking to
restrain or prohibit the making or consummation of the Offer or the Merger
or the consummation of any of the other transactions contemplated by the
Agreement or the Voting Agreement, (iv) seeking to impose material
limitations on the ability of Purchaser or Merger Sub, or rendering
Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares pursuant to the Offer or the Merger, or (v) seeking to impose
material limitations on the ability of Purchaser effectively to exercise
full rights of ownership of the Shares accepted for payment pursuant to the
Offer, including the right to vote such Shares on all matters properly
presented to the Company's shareholders. There shall be any statute, rule
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated or applicable to the Offer or the Merger, or any other action
shall be taken by any Governmental Entity, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) above.
(b) Any of the representations and warranties of the Company set forth
in the Merger Agreement, without, for purposes of this paragraph (b) only,
giving effect to any qualifications as to materiality, shall not be true
and correct in any material respect as of the date of the Merger Agreement
and as of consummation of the Offer as though made on or as of such date
(except for those representations and warranties that address matters only
as of a particular date, which need to be true and correct as of such
particular date), or the Company shall have breached or failed to comply
with, in any material respect, any obligation, agreement or covenant
required by the Merger Agreement to be performed or complied with by it,
which in either case could reasonably be expected to have a Company
Material Adverse Effect.
(c) It shall have been publicly disclosed that any person (which
includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) other than Purchaser, Merger Sub or any of their affiliates
and stockholders of the Company listed on Schedule 2.8 of the Merger
Agreement, and (i) shall have acquired or announced its intention to
acquire beneficial ownership of more than 20% of the outstanding Shares or
(ii) shall have entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Shares or a merger, consolidation or other business combination
with or involving the Company, any of its subsidiaries or any of their
material assets; provided, that clause (i) hereof shall not continue after
the date on which the Minimum Condition is satisfied.
(d) The Merger Agreement shall have been terminated in accordance with
its terms.
(e) Prior to the purchase of Shares pursuant to the Offer, the Company
Board (i) shall have withdrawn or modified (including by amendment of the
Schedule 14D-9) in a manner adverse to Purchaser or Merger Sub its approval
or recommendation of the Offer, the Merger Agreement or the Merger (ii)
shall have recommended a Takeover Proposal (as defined in the Merger
Agreement), or (iii) shall have adopted any resolution to effect any of the
foregoing.
(f) There shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
the American Stock Exchange, or in Nasdaq National
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<PAGE> 44
Market System, (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not
mandatory), or (iii) any limitation by any United States Governmental
Entity that has a material adverse effect generally on the extension of
credit by banks or other financial institutions, in the case of any of the
situations in clauses (i) through (iii) inclusive, existing on the date
hereof, a material acceleration or worsening thereof.
(g) The Company shall commence a case under any chapter of Title XI of
the United States Code or any similar law or regulation; or a petition
under any chapter of Title XI of the United States Code or any similar law
or regulation is filed against the Company which is not dismissed within 30
business days.
(h) Any party identified with an asterisk on Exhibit A to the Voting
Agreement other than Purchaser or Merger Sub shall have breached or failed
to perform any of its agreements under such agreement or breach any of its
representations and warranties in such agreement or any such agreement
shall not be valid, binding and enforceable; provided, that this clause (h)
shall be deemed satisfied upon the satisfaction of the Minimum Condition.
(i) There shall have occurred any events or changes which have had, or
could reasonably be expected to have or constitute, individually or in the
aggregate, a Company Material Adverse Effect.
(j) The Company shall have less than $22,991,000 of freely available
cash or cash equivalents ("Minimum Cash"); provided, that the following
adjustments may be made, without duplication, to Minimum Cash: (i) in the
event the Offer is not consummated before August 15, 1999, Minimum Cash
shall be reduced by $750,000 (representing employee bonuses), (ii) in the
event the Offer is not consummated before September 15, 1999, Minimum Cash
shall be reduced by $1,000,000 (representing payment of the Company's
Federal income taxes), (iii) in the event the Offer is not consummated
before October 15, 1999, Minimum Cash shall be reduced by $800,000
(representing payment of the Company's Federal income taxes), (iv) Minimum
Cash shall be determined without giving effect to Company Expenses, and (v)
Minimum Cash may be reduced by an amount not to exceed $1,350,000 in the
aggregate (such aggregate amount, the "Operating Cash Shortfall") so long
as the Company's consolidated non-cash, net working capital (i.e., current
assets (excluding cash and cash equivalents) less current liabilities as
determined in accordance with generally accepted accounting principles,
applied on a basis consistent with the preparation of the financial
statements described in the Merger Agreement) ("Working Capital") exceeds
$2,098,000 (the Company's Working Capital as of June 30, 1999) (less up to
$500,000 for capital expenditures made by the Company in accordance with
Section 5.1(h) of the Merger Agreement) by an amount equal to or greater
than such Operating Cash Shortfall. The condition set forth in this clause
(j) shall be satisfied upon the presentation of evidence, documentation and
information by the Company to Purchaser that the Minimum Cash, and all
adjustments thereto (including with respect to the Operating Cash Shortfall
and working capital) as of the consummation of the Offer.
(k) Purchaser or Merger Sub shall have not received the cash proceeds
of equity and debt financing in an amount necessary to consummate the
Offer, the Merger and the other transactions contemplated by the Agreement
and to pay all fees and expenses in connection therewith and to provide
adequate working capital for the Surviving Corporation, all on terms and
conditions satisfactory to the Purchaser and Merger Sub.
10. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
GENERAL. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to Purchaser and discussions of representatives of Purchaser with
representatives of the Company during Purchaser's investigation of the Company,
neither Purchaser nor Merger Sub is aware of any license or other regulatory
permit that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or, except as set forth
below, of any approval or other action by any domestic (federal or state) or
foreign governmental, administrative or regulatory authority or agency which
would be required prior to the acquisition of Shares by Purchaser pursuant to
the Offer. Should
42
<PAGE> 45
any such approval or other action be required, it is Purchaser's present
intention to seek such approval or action. Except as described under "The Tender
Offer -- Certain Conditions to the Offer," Purchaser does not currently intend
to delay the purchase of Shares tendered pursuant to the Offer pending the
outcome of any such action or the receipt of any such approval (subject to
Purchaser's right to decline to purchase Shares if any of the conditions
described under "The Tender Offer -- Certain Conditions to the Offer" shall have
occurred). There can be no assurance that any such approval or other action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to the business of the Company, Purchaser or
Merger Sub or that certain parts of the businesses of the Company, Purchaser or
Merger Sub might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or other
action or in the event that such approval was not obtained or such other action
was not taken. Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed herein.
STATE TAKEOVER LAWS. Purchaser has not attempted to comply with any state
takeover statutes in connection with the Offer. Purchaser reserves the right to
challenge the validity or applicability of any state law allegedly applicable to
the Offer and nothing in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of that right. In the event that any
state takeover statute is found applicable to the Offer, Purchaser might be
unable to accept for payment or purchase Shares tendered pursuant to the Offer
or be delayed in continuing or consummating the Offer. In such case, Purchaser
may not be obligated to accept for purchase or pay for, any Shares tendered. See
Section 9 ("The Tender Offer -- Certain Conditions of the Offer").
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by Purchaser pursuant to the Offer are not
subject to such requirements.
MARGIN CREDIT REGULATIONS. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
its current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
VISIONSHAPE, INC. ANTITRUST LITIGATION. According to the Company, the
Company was sued on September 26, 1997 in the Superior Court of Orange County,
California, by VisionShape, Inc. ("VisionShape") alleging antitrust and other
violations based upon an alleged tie between the Company's accelerator boards
and software. This case was dismissed by the Superior Court on July 15, 1998 but
VisionShape has appealed. According to the Company, the Company does not believe
the claim to have any merit.
11. FEES AND EXPENSES.
Except as set forth below, Purchaser will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will, upon
request, be reimbursed by Purchaser for customary mailing and handling expenses
incurred by them in forwarding offering materials to their customers.
The Merger Agreement provides, except in certain cases in which the Merger
is not consummated, that all fees, costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such fees, costs and expenses, whether or not the
transactions contemplated by the Merger Agreement are consummated.
43
<PAGE> 46
Purchaser has retained IBJ Whitehall Bank & Trust Company as the
Depositary, MacKenzie Partners, Inc. as the Information Agent, and Dresdner
Kleinwort Benson North America LLC as the financial adviser and the Dealer
Manager in connection with the Offer. The Information Agent may contact holders
of Shares by mail, telephone, telex, telecopy, telegraph and personal interview,
and may request banks, brokers, dealers and other nominee shareholders to
forward materials relating to the Offer to beneficial owners.
Purchaser will pay reasonable and customary fee to the Depositary and the
Information Agent and will also reimburse the Depositary, the Information Agent
and the Dealer Manager for certain out-of-pocket expenses. Purchaser and Merger
Sub have agreed to indemnify the Depositary and Information Agent against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the United States federal securities laws.
It is estimated that the expenses incurred by the Company, Purchaser and
Merger Sub in connection with the Offer and the Merger will be approximately as
set forth below:
<TABLE>
<S> <C>
Filing Fees................................................. $ 30,000
Financial Advisory Fees and Expenses........................ 1,425,000
Accounting Fees and Expenses................................ 200,000
Financing and Commitment Fees............................... 1,377,000
Legal Fees and Expenses..................................... 865,000
Printing and Mailing Costs.................................. 132,000
Miscellaneous............................................... 571,000
----------
Total:...................................................... $4,600,000
==========
</TABLE>
The Surviving Corporation will be responsible for all of the foregoing fees
and expenses if the Effective Time occurs. Under certain circumstances, the
Company is obligated to reimburse the Purchaser for its Expenses and to pay a
Termination Fee; and under certain other circumstances, Purchaser and Merger Sub
are obligated to reimburse the Company for its Expenses. See "Special
Factors -- The Merger Agreement."
12. MISCELLANEOUS.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid United
States state statute. If Purchaser becomes aware of any such valid United States
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such United States state statute. If, after such good faith effort, Purchaser
cannot comply with any such United States state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER, MERGER SUB OR THE COMPANY NOT CONTAINED
IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
44
<PAGE> 47
Purchaser, Merger Sub, DICOM and Private Equity Partners have filed the
Schedule 14D-1, together with all exhibits thereto, and the Company has filed
the Schedule 14D-9, together with all exhibits thereto. Such statements, and any
amendments thereto, which furnish certain additional information with respect to
the Offer, may be examined and copies may be obtained at the same places and in
the same manner set forth in "The Tender Offer -- Certain Information Concerning
the Company" (except that they will not be available at regional offices of the
Commission).
Imaging Components Corporation
August 3, 1999
45
<PAGE> 48
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF PURCHASER, MERGER SUB, DICOM AND PRIVATE EQUITY PARTNERS
1. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments, and business addresses thereof for the past five years of each
person who is or who is currently expected to be a director or executive officer
of Purchaser. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Purchaser.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------- -------------------------------------------
<S> <C> <C>
1. Otto Schmid................................ Dr. Schmid is President of Purchaser and
c/o DICOM GROUP plc Merger Sub and a member of the Board of
Business Building Forren West Directors. In 1991, he co-founded DICOM and
Grundstrasse 14 has served as Chairman and Chief Executive
CH-6343 Rotkreuz (Zug) since its formation. Dr. Schmid, age 61, is
Switzerland a Swiss national with degrees in
mathematics and in economics from the
University of Zurich, where he completed a
doctoral thesis in business forecasting in
1970. In 1969 he co-founded and was
managing director at Wirtschafts Mathematik
AG, a Swiss service company for
mathematical statistics and applied
mathematics. In 1978, he joined ACU
Infomatik AG, a Swiss distribution company
for computer peripherals, and became a
director, with responsibility for corporate
development.
2. Arnold von Buren........................... Mr. von Buren is Secretary of Purchaser and
c/o DICOM GROUP plc Merger Sub and a member of the Board of
Business Building Forren West Directors. He has served as Deputy Chief
Grundstrasse 14 Executive of DICOM since November 1995. Mr.
CH-6343 Rotkreuz (Zug) von Buren, age 47, is, a Swiss citizen,
Switzerland with a degree in Economics and Business
Administration. He has worked in the
computer industry since 1978, including
three years in the USA. He joined ACU
Informatik AG in Switzerland in 1983,
working in sales and administration, and he
co-founded and became general manager of
Computerway in 1989.
3. Alexander P. Coleman....................... Mr. Coleman is Vice President of Purchaser
c/o Dresdner Kleinwort Benson and Merger Sub and a member of the Board of
Private Equity LLC Directors. He is an Investment Partner of
75 Wall Street, 24th Floor the SBIC and a Vice President of Dresdner
New York, New York 10005-2889 Kleinwort Benson North America LLC. He
joined Dresdner Kleinwort Benson in
January, 1996, and is an active board
member with a number of portfolio
companies. Mr. Coleman has been involved in
management buyouts, cross-border equities,
expansion financings and venture capital
since joining Citicorp originally in 1989.
Mr. Coleman, age 32, is a United States
citizen.
</TABLE>
I-1
<PAGE> 49
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------- -------------------------------------------
<S> <C> <C>
4. George N. Fugelsang........................ Mr. Fugelsang is expected to be a
c/o Dresdner Kleinwort Benson non-executive member of the Board of
Private Equity LLC Directors of Purchaser and Merger Sub. He
75 Wall Street, 24th Floor joined Dresdner Bank AG in February of
New York, New York 10005-2889 1994, at which time he was named President
of Dresdner Securities (USA) Inc. On April
1, 1994, he was named Senior General
Manager Dresdner Bank AG, and Chief
Executive, North America. Fugelsang is
currently President and CEO of Dresdner
Kleinwort Benson North America Inc. He is a
member of the Management Board of Dresdner
Kleinwort Benson, Dresdner Bank's Global
Investment Banking subsidiary. Mr.
Fugelsang, age 59, is a United States
citizen.
5. David S. Silver............................ Mr. Silver is expected to be Chief
c/o Kofax Image Products, Inc. Executive Officer and a Director of
16245 Laguna Canyon Road Purchaser. He co- founded Kofax Image
Irvine, California 92618 Products, Inc. (the "Company") in August
1985 and has served as President and Chief
Executive Officer and a director of the
Company since its inception. From 1982 to
1985, Mr. Silver was employed by FileNet
Corporation, a manufacturer of document
image processing systems, as a member of
the development team for the FileNet
imaging system. Prior to 1982, Mr. Silver
held various engineering positions with MAI
Basic Four Corporation, a manufacturer of
computer equipment and associated
application software programs. Mr. Silver,
age 41, is a United States citizen.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB. The following table
sets forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments, and business addresses thereof for the past five years of each
director and executive officer of Merger Sub. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Merger Sub.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Otto Schmid............................... See Part 1 of this Schedule I.
2. Arnold von Buren.......................... See Part 1 of this Schedule I.
3. Alexander P. Coleman...................... See Part 1 of this Schedule I.
4. George N. Fugelsang....................... See Part 1 of this Schedule I.
</TABLE>
I-2
<PAGE> 50
3. DIRECTORS AND EXECUTIVE OFFICERS OF DICOM. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments, and business addresses thereof for the past five years of each
person currently a director or executive officer of DICOM. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with DICOM.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Otto Schmid............................... Dr. Schmid is Chairman and Chief
DICOM GROUP plc Executive. In 1991, he co-founded DICOM
Business Building Forren West and has served as Chairman and Chief
Grundstrasse 14 Executive since its formation. Dr. Schmid,
CH-6343 Rotkreuz (Zug) age 61, is a Swiss national with degrees
Switzerland in mathematics and in economics from the
University of Zurich, where he completed a
doctoral thesis in business forecasting in
1970. In 1969 he co-founded and was
managing director at Wirtschafts
Mathematik AG, a Swiss service company for
mathematical statistics and applied
mathematics. In 1978, he joined ACU
Infomatik AG, a Swiss distribution company
for computer peripherals, and became a
director, with responsibility for
corporate development.
2. Arnold von Buren.......................... Mr. von Buren has served as Deputy Chief
DICOM GROUP plc Executive since November 1995. Mr. von
Business Building Forren West Buren, age 47, is, a Swiss citizen, with a
Grundstrasse 14 degree in Economics and Business
CH-6343 Rotkreuz (Zug) Administration. He has worked in the
Switzerland computer industry since 1978, including
three years in the USA. He joined ACU
Informatik AG in Switzerland in 1983,
working in sales and administration, and
he co-founded and became general manager
of Computerway in 1989.
3. Walter Greifeneder........................ Mr. Greifeneder, age 42, is Deputy Chief
DICOM GROUP plc Executive, with Board responsibility for
Business Building Forren West the General Distribution (Trade) business
Grundstrasse 14 units. An Austrian citizen, he is chairman
CH-6343 Rotkreuz (Zug) and chief executive of ELSAT. Following
Switzerland the acquisition of ELSAT in November 1996,
he was appointed Deputy Chief Executive of
the Group with responsibility for General
Distribution.
4. Christoph Loslein......................... Mr. Loslein, age 32, is Executive Director
DICOM GROUP plc with Board responsibility for the
Business Building Forren West Solutions and Applications business unit.
Grundstrasse 14 A German citizen, he worked for Pyramid
CH-6343 Rotkreuz (Zug) Computer GmbH, a computer systems company,
Switzerland in Germany from 1986 to 1993, initially as
purchasing manager, then as marketing
manager and latterly as sales manager and
an executive director. In 1993 he joined
the Old DICOM GROUP to start its German
operations and was also given Group
responsibility for Focused Distribution in
November 1996, roles he relinquished when
he assumed his current position in
September 1997.
</TABLE>
I-3
<PAGE> 51
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
5. Urs Niederberger.......................... Mr. Niederberger, age 33, is Finance
DICOM GROUP plc Director. A Swiss citizen, he obtained a
Business Building Forren West degree in Economics and Business
Grundstrasse 14 Administration at the Lucerne Business
CH-6343 Rotkreuz (Zug) School and is a Swiss qualified Financial
Switzerland Management Consultant ("Dipl.
Treuhandexperte"). He worked as an
accountant for a number of companies
between 1987 and 1990. Since then he has
worked for DICOM, from 1993 to 1996 as a
consultant with Visura Consulting, part of
BDO International. He became Chief
Financial Officer in October 1997.
6. Bruce Powell.............................. Mr. Powell, FCA, WA (Cantab), age 50, a
DICOM GROUP plc British citizen, is a non-executive
Business Building Forren West director. He has been involved in a group
Grundstrasse 14 executive role with the flotation on the
CH-6343 Rotkreuz (Zug) London Stock Exchange and subsequent
Switzerland operational management of Acal Group plc
and VideoLogic Group Plc. He is a
non-executive director of AIT Group plc
and non-executive chairman of Dataform
Group Ltd. and a director of ChemMedllCa
Pharmaceuticals Ltd.
7. Paul Gerny................................ Mr. Gerny, age 57, a Swiss citizen, is
DICOM GROUP plc Strategic Advisor of the European Managing
Business Building Forren West Board of SEI, a leading European
Grundstrasse 14 distributor of electronic components, and
CH-6343 Rotkreuz (Zug) a non-executive director of a major
Switzerland Australian document management company
among other interests. He was also elected
as Chairman and Chief Executive of Aspro
Technology Ltd., a leading Power Supply
company, based in Switzerland and Peoples
Republic of China.
8. John Incledon............................. Mr. Incledon, age 61, a British citizen,
DICOM GROUP plc is a non- executive director. After
Business Building Forren West National Service and five years working in
Grundstrasse 14 engineering, he obtained an MBA at Harvard
CH-6343 Rotkreuz (Zug) Business School. He then spent four years
Switzerland in the New York office of Ernst & Young
before joining NM Rothschild & Sons. For
the last 25 years he has worked in
corporate finance, mainly with technology
based international companies. He has
served as a director of listed and
privately held companies in the United
States and in Europe for over 20 years and
has extensive experience of distribution
businesses.
</TABLE>
I-4
<PAGE> 52
4. DIRECTORS AND EXECUTIVE OFFICERS OF PRIVATE EQUITY PARTNERS. The
following table sets forth the name, current business address, citizenship and
present principal occupation or employment, and material occupations, positions,
offices or employments, and business addresses thereof for the past five years
of each person currently a director or executive officer of Private Equity
Partners. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Private Equity Partners.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Christopher Wright........................ Mr. Wright is head of the Global Private
Dresdner Kleinwort Benson Equity businesses of Dresdner Kleinwort
Private Equity LLC Benson, and chairman of the Group Private
75 Wall Street, 24th Floor Equity Board, Mr. Wright, age 42, has
New York, New York 10005-2889 spent over 16 years financing and advising
private companies in the US, Canada, Asia
and Europe. Mr. Wright joined Kleinwort
Benson Limited in London in 1978. Mr.
Wright is a British citizen.
2. Iain D. Leigh............................. Mr. Leigh is a Managing Investment Partner
Dresdner Kleinwort Benson for Dresdner Kleinwort Benson Private
Private Equity LLC Equity Partners LLC, a Director of
75 Wall Street, 24th Floor Kleinwort Benson Limited, and President of
New York, New York 10005-2889 Kleinwort Benson (U.S.) Asset Managers
LLC. He has held a number of senior
operations financial positions in the
Group in Asia and Europe. He moved to New
York in 1990 and currently has
responsibilities for sourcing and
executing private equity transactions, Mr.
Leigh, age 43, is a British citizen.
3. Jonathan S. Walker........................ Mr. Walker, age 51, is a Senior Investment
Dresdner Kleinwort Benson partner of the SBIC, a Board member of
Private Equity LLC Kleinwort Benson Limited and a member of
75 Wall Street, 24th Floor the Investment Committee of KBMF I. Mr.
New York, New York 10005-2889 Walker is on the Board of a number of
investor companies. Mr. Walker is a
British citizen.
4. Alexander P. Coleman...................... Mr. Coleman is Vice President of Purchaser
Dresdner Kleinwort Benson and Merger Sub. He is an Investment
Private Equity LLC Partner of the SBIC and a Vice President
75 Wall Street, 24th Floor of Dresdner Kleinwort Benson North America
New York, New York 10005-2889 LLC. He joined Dresdner Kleinwort Benson
in January, 1996 and is an active board
member with a number of portfolio
companies. Mr. Coleman has been involved
in management buyouts, cross-border
equities, expansion financings and venture
capital since joining Citicorp originally
in 1989. Mr. Coleman, age 32, is a United
States citizen.
</TABLE>
I-5
<PAGE> 53
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT, MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
------------------------------------------ ------------------------------------------
<S> <C> <C>
5. G. Volkert H. Doeksen..................... Mr. Doeksen is an Investment Partner of
Dresdner Kleinwort Benson the SBIC, a First Vice President of
Private Equity LLC Dresdner Kleinwort Benson North America
75 Wall Street, 24th Floor LLC and a Board member of Kleinwort Benson
New York, New York 10005-2889 Limited. He joined Kleinwort Benson's
London office in 1992, to set up the
bank's Dutch and Belgian corporate finance
activities. Mr. Doeksen moved to the New
York office in October 1994. Mr. Doeksen,
age 36, is a citizen of the Netherlands.
6. Richard H. Wolf........................... Mr. Wolf is an Investment Partner of the
Dresdner Kleinwort Benson SBIC and a portfolio manager with
Private Equity LLC Kleinwort Benson (U.S.) Asset Managers LLC
75 Wall Street, 24th Floor with substantial transactional experience
New York, New York 10005-2889 in structuring private equity and debt
investments. Mr. Wolf, age 39, currently
acts as a portfolio manager for an off-
shore closed end mezzanine and venture
capital fund and previously acted as
portfolio manager for a privately held
mezzanine and venture capital fund. Mr.
Wolf is a United States citizen.
</TABLE>
I-6
<PAGE> 54
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. The following table sets
forth the name, current business address and present principal occupation or
employment, and material occupations, positions, offices or employments, and
business addresses thereof for the past five years of each person currently a
director or executive officer of the Company. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with the
Company. Each individual listed below is a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C> <C>
1. David S. Silver........................ Mr. Silver co-founded the Company in August 1985 and has
Kofax Image Products, Inc. served as President and Chief Executive Officer and a
16245 Laguna Canyon Road director of the Company since its inception. From 1982
Irvine, California 92618 to 1985, Mr. Silver was employed by FileNet Corporation,
a manufacturer of document image processing systems, as
a member of the development team for the FileNet imaging
system. Prior to 1982, Mr. Silver held various
engineering positions with MAI Basic Four Corporation, a
manufacturer of computer equipment and associated
application software programs.
2. Dean A. Hough*......................... Mr. Hough co-founded the Company in August 1985 and has
Kofax Image Products, Inc. served as a Vice President and a Director of the Company
16245 Laguna Canyon Road since that time. From 1983 to 1985, Mr. Hough was
Irvine, California 92618 employed by FileNet Corporation, where he participated
in the development of a variety of the imaging
components of the FileNet imaging system. Prior to 1983,
Mr. Hough held various design and engineering positions
with MAI Basic Four Corporation and Scientific Atlanta,
a manufacturer of scientific instruments and equipment.
3. Richard M. Murphy...................... Richard M. Murphy joined the Company as a Vice
Kofax Image Products, Inc. President, Sales in November 1989. From 1984 to 1989,
16245 Laguna Canyon Road Mr. Murphy held various sales management positions with
Irvine, California 92618 Emulex Corporation, a manufacturer of computer storage,
communications, graphics and peripheral products, where
he served as Vice President, Domestic Sales from
September 1987 to January 1989 and as Vice President,
North American Sales from January 1989 to November 1989.
Prior to 1984, Mr. Murphy held various sales positions
with Hamilton-Avnet Electronics, Kierulff Electronics
and Telefile Computer Products.
4. Ronald J. Fikert....................... Mr. Fikert joined the Company as Vice President, Finance
Kofax Image Products, Inc. in February 1990. From March 1989 to February 1990, Mr.
16245 Laguna Canyon Road Fikert worked as an independent management consultant.
Irvine, California 92618 From 1984 to 1989, Mr. Fikert was employed by General
Monitors, a manufacturer of sensing, monitoring and
detection equipment, where he served as Controller. From
1979 to 1984, he was employed by Modular Command
Systems, a manufacturer of
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* Will no longer be an officer effective as of August 31, 1999.
</TABLE>
II-1
<PAGE> 55
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C> <C>
electronic communications hardware and software, as Vice
President, Finance and Secretary. Prior to joining
Modular Command Systems, Mr. Fikert was Director of
Finance for Esterline Electronics, a manufacturer of
electronic products, and was an accountant with Arthur
Andersen & Co. Mr. Fikert is a
5. Kevin Drum............................. Mr. Drum joined the Company in November 1992 and was
Kofax Image Products, Inc. promoted to Vice President, Marketing in July 1995.
16245 Laguna Canyon Road Prior to that time, his positions with the Company
Irvine, California 92618 included Director of Marketing and Senior Product
Manager. From 1984 to 1992, Mr. Drum was employed by
Emulex Corporation, where he served as a senior product
manager from 1988 to 1992.
6. Alexander P. Cilento................... Mr. Cilento has been a member of the Company's Board of
Kofax Image Products, Inc. Directors since 1986. Since 1991, Mr. Cilento has been a
16245 Laguna Canyon Road General Partner of Aspen Venture Partners, a private
Irvine, California 92618 venture capital investment partnership. From 1985
through 1991, Mr. Cilento was employed by 3i Securities
Corporation, a venture capital investment firm, where he
served as Vice President.
7. William E. Drobish..................... Mr. Drobish has been a member of the Company's Board of
Kofax Image Products, Inc. Directors since 1986. Since 1998, Dr. Drobish has been
16245 Laguna Canyon Road President of Ditrans, a developer of digital
Irvine, California 92618 transceivers for the wireless industry, and since 1984
an instructor at the University of California, Irvine's
Extension Program. Dr. Drobish was a founder, Vice
President, director and Secretary of Silicon Systems,
Inc., a manufacturer of integrated circuits. Dr. Drobish
is also a director of Technology Modeling Associates,
Inc., a provider of physical simulation software to
support integrated circuit design and manufacturing.
8. B. Allen Lay........................... Mr. Lay has been a member of the Company's Board of
Kofax Image Products, Inc. Directors since 1990. Since 1982, Mr. Lay has been a
16245 Laguna Canyon Road general partner of Southern California Ventures, a
Irvine, California 92618 private venture capital investment partnership. Mr. Lay
also serves as a director of the following public
companies: PairGain Technologies, Inc., a provider of
telecommunications products; ViaSat, Inc., a provider of
wireless telecommunications products; and Helisys, Inc.,
a provider of rapid prototyping systems.
9. David C. Seigle........................ Mr. Seigle has been a member of the Company's Board of
Kofax Image Products, Inc. Directors since 1992. From 1996 to 1998, Mr. Seigle was
16245 Laguna Canyon Road president of Technology's Edge, a franchisor of
Irvine, California 92618 technology integrators. From 1992 to 1996 Mr. Seigle was
a consultant and private investor. From 1982 to 1991,
Mr. Seigle was employed by FileNet Corporation in
various positions, including Senior Vice President of
International Operations from 1987 to 1991. Mr. Seigle
is currently a director of Interface Systems, Inc., a
manufacturer and distributor of computer peripherals and
software.
</TABLE>
II-2
<PAGE> 56
ANNEX A
The following is the text of Section 262 of the Delaware General
Corporation Law:
262 APPRAISAL RIGHTS -- (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger of consolidation nor consented thereto in writing
pursuant to sec. 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
A-1
<PAGE> 57
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of (1)such
stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of (1)such
stockholder's shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such
action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subscription and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall not
be more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record shall be such effective date. If no record date
is fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the
A-2
<PAGE> 58
value of the stock of all such stockholders. Notwithstanding the foregoing, at
any time within 60 days after the effective date of the merger or consolidation,
any stockholder shall have the right to withdraw (1)such stockholder's demand
for appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement will
be mailed to the stockholder within 10 days after (1)such stockholder's written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
(1)such stockholder's certificates of stock to the Register in Chancery, if such
is required, may participate fully in all proceedings until it is finally
determined that (2)such stockholder is not entitled to appraisal rights under
this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
A-3
<PAGE> 59
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded (1)appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of (1)such stockholder's demand for an
appraisal and an acceptance of the merger or consolidation, either within
60 days after the effective date of the merger or consolidation as provided
in subsection (e) of this section or thereafter with the written approval
of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms
as the Court deems just.
(i) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting
corporation. (Last amended by Ch. 339, L. '98, eff. 7-1-98.)
- ---------------
Ch. 339, L. '98, eff. 7-1-98, added matter in italic and deleted (1)"his" and
(2)"he".
A-4
<PAGE> 60
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each shareholder of the
Company or such shareholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Hand or By Overnight By Facsimile:
P.O. BOX 84 Courier: (212) 858-2611
BOWLING GREEN STATION IBJ WHITEHALL BANK & TRUST (FOR ELIGIBLE INSTITUTIONS ONLY)
NEW YORK, NEW YORK COMPANY
10274-0084 ONE STATE STREET Confirm by Telephone
ATTN: REORGANIZATION NEW YORK, NEW YORK 10004 (212) 858-2103
OPERATIONS DEPARTMENT ATTN: SECURITIES PROCESSING
WINDOW,
SUBCELLAR ONE, (SC-1)
</TABLE>
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at its telephone numbers and
location listed below. You may also contact your broker, dealer, bank, trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. Logo]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
[Dresdner Kleinwort Benson LOGO]
75 WALL STREET
NEW YORK, NEW YORK 10005
(212) 429-2000 EXT. 2958
OR
CALL TOLL FREE (800) 457-0245 EXT. 2958
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
KOFAX IMAGE PRODUCTS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 3, 1999,
BY
IMAGING COMPONENTS CORPORATION
-------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
PACIFIC TIME, ON TUESDAY, AUGUST 31, 1999 UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Hand or By Overnight By Facsimile:
P.O. BOX 84 Courier: (212) 858-2611
BOWLING GREEN STATION IBJ WHITEHALL BANK & TRUST (FOR ELIGIBLE INSTITUTIONS ONLY)
NEW YORK, NEW YORK 10274-0084 COMPANY
ATTN: REORGANIZATION OPERATIONS ONE STATE STREET Confirm by Telephone
DEPARTMENT NEW YORK, NEW YORK 10004 (212) 858-2103
ATTN: SECURITIES PROCESSING
WINDOW,
SUBCELLAR ONE, (SC-1)
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders of Kofax
Image Products, Inc. either if certificates (as defined below) are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase, dated August 3, 1999 (the "Offer to Purchase")) is utilized, if
delivery of Shares is to be made by book-entry transfer to an account maintained
by the Depositary at the Book-Entry Transfer Facility (as defined in the Offer
to Purchase under "The Tender Offer -- Acceptance for Payment and Payment for
Shares") pursuant to the procedures set forth in the Offer to Purchase under
"The Tender Offer -- Procedures for Tendering Shares." Stockholders who deliver
Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders" and other Stockholders are referred to as "Certificate
Stockholders." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
This Letter of Transmittal must be accompanied by certificates for Shares
(the "Share Certificates") unless the holder complies with the procedures for
guaranteed delivery. Holders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary on or prior to the Expiration Date (as defined in
the Offer to Purchase under "The Tender Offer -- Terms of the Offer; Expiration
Date") or who cannot complete the procedures for book-entry transfer on a timely
basis, must tender their Shares according to the guaranteed delivery procedures
set forth in the Offer to Purchase under "The Tender Offer -- Procedures for
Tendering Shares." See Instruction 2.
<PAGE> 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF TENDERED SHARES
- --------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES TOTAL NUMBER
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY OF SHARES
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S) NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL SHARES
- --------------------------------------------------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Share Certificates delivered to the Depositary are being
tendered. See Instruction 4.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER
FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution:
Account Number: Transaction Code Number:
------------------------------- -------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
IF DELIVERED BY BOOK-ENTRY TRANSFER CHECK BOX [ ]
Account Number: Transaction Code Number:
------------------------------- -------------------------------
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to IMAGING COMPONENTS CORPORATION, a
Delaware corporation (the "Purchaser"), the above described shares of common
stock, par value $0.001 per share (the "Shares"), of Kofax Image Products, Inc.,
a Delaware corporation (the "Company"), pursuant to Purchaser's offer to
purchase all Shares at $12.75 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated August 3, 1999 (the "Offer to Purchase"), and in this
Letter of Transmittal (which together with the Offer to Purchase constitute the
"Offer"), receipt of which is hereby acknowledged. The undersigned understands
that the Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its subsidiaries or affiliates the right
to purchase all or any portion of the Shares tendered pursuant to the Offer.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of and payment for the Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns, and transfers to, or
upon the order of, the Purchaser all right, title and interest in and to all of
the Shares that are being tendered hereby and any and all dividends,
distributions (including distributions of additional Shares) or rights declared,
paid or issued with respect to the tendered Shares on or after July 27, 1999 and
payable or distributable to the undersigned on a date prior to the transfer to
the name of the Purchaser or nominee or transferee of the Purchaser on the
Company's stock transfer records of the Shares tendered herewith, and
constitutes and irrevocably appoints IBJ Whitehall Bank & Trust Company (the
"Depositary") the true and lawful agent, attorney-in-fact and proxy of the
undersigned to the full extent of the undersigned's rights with respect to such
Shares with full power of substitution (such power of attorney and proxy being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Share Certificates (and any such other Shares or securities or rights), or
transfer ownership of such Shares (and any such other Shares or securities or
rights) on the account books maintained by the Book-Entry Transfer Facility,
together in either such case with all accompanying evidences of transfer and
authenticity, to or upon the order of the Purchaser, upon receipt by the
Depositary, as the undersigned's agent, of the purchase price, (b) present such
Shares (and any such other Shares or securities or rights) for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any such other Shares or
securities or rights), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Purchaser
as the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper, and otherwise act
(including pursuant to written consent) with respect to all of the Shares
tendered hereby (and any and all other Shares or other securities or rights
issued or issuable in respect thereof on or after July 27, 1999) which have been
accepted for payment by the Purchaser prior to the time of such vote or action
which the undersigned is entitled to vote at any meeting of stockholders
(whether annual or special and whether or not an adjourned meeting) of the
Company, or by written consent in lieu of such meeting, or otherwise. This power
of attorney and proxy is coupled with an interest in the Company and in the
Shares and is irrevocable and is granted in consideration of, and is effective
upon, the acceptance for payment of such Shares by the Purchaser in accordance
with the terms of the Offer. Such acceptance for payment shall revoke, without
further action, any other power of attorney or proxy granted by the undersigned
at any time with respect to such Shares and no subsequent powers of attorney or
proxies will be given (and if given will be deemed not to be effective) with
respect thereto by the undersigned. The undersigned understands that the
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares, the Purchaser is able to exercise full voting rights with respect
to such Shares and other securities, including voting at any meeting of
stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities or rights
issued or issuable in respect thereof on or after July 27, 1999) and that, when
the same are accepted for payment by the Purchaser, the Purchaser will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered hereby (and any such other Shares or securities or rights).
3
<PAGE> 4
All authority herein conferred or herein agreed to be conferred shall not
be affected by, and shall survive, the death or incapacity of the undersigned
and any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares" and in the instructions hereto and
acceptance for payment of such Shares will constitute a binding agreement
between the undersigned and the Purchaser upon the terms and subject to the
conditions set forth in the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or issue or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and any accompanying
documents, as appropriate) to the undersigned at the address(es) shown below the
undersigned's signature. In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please issue
the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or return certificates to, the person or persons so indicated. Stockholders
tendering Shares by book-entry transfer may request that any Shares not accepted
for payment be returned by crediting such account maintained at such Book-Entry
Transfer Facility as such stockholder may designate by making an appropriate
entry under "Special Payment Instructions." The undersigned recognizes that the
Purchaser has no obligation pursuant to the "Special Payment Instructions" to
transfer any Shares from the name(s) of the registered holder(s) thereof if the
Purchaser does not accept for payment any of the Shares so tendered.
4
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7)
To be completed ONLY if certificates not tendered or not purchased and/or the
check for the purchase price of Shares purchased are to be issued in the name of
someone other than the undersigned, or if Shares tendered by book-entry transfer
which are not purchased are to be returned by credit to an account maintained at
a Book-Entry Transfer Facility other than that designated on the front cover.
Issue: [ ] check and/or [ ] certificates to:
Name
- -----------------------------------------------
(PLEASE PRINT)
Address
- ---------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(See Substitute Form W-9 on Back Cover)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7)
To be completed ONLY if Share Certificates are not tendered or not purchased
and/or the check for the purchase price of Shares purchased are to be sent to
someone other than the undersigned, or to the undersigned at an address other
than that shown on the front cover.
Mail: [ ] check and/or [ ] certificates to:
Name
- -----------------------------------------------
(PLEASE PRINT)
Address
- ---------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(See Substitute Form W-9 on Back Cover)
5
<PAGE> 6
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
- ----------------------, 1999
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the necessary information.
See Instruction 5.)
Name(s):
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Tax Identification or Social Security No.:
- ---------------------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
- ------------------------------, 1999
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of the Shares tendered
herewith, unless such holder(s) has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
this Letter of Transmittal or (ii) if such Shares are tendered for the account
of a firm that is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agent's Medallion Program (each, an "Eligible Institution"). In all other cases,
all signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined below) is utilized, if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in the Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares." Share Certificates, or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at a Book-Entry Transfer Facility, as well
as this Letter of Transmittal (or a facsimile hereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's Message in
the case of a book-entry delivery, and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date. Stockholders whose
Share Certificates are not immediately available or who cannot deliver their
Share Certificates and all other required documents to the Depositary prior to
the Expiration Date or who cannot complete the procedures for delivery by
book-entry transfer on a timely basis may tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in the Offer to Purchase under "The
Tender Offer -- Procedures for Tendering Shares." Pursuant to such procedure:
(i) such tender must be made by or through an Eligible Institution; (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Purchaser, must be received by
the Depositary on or prior to the Expiration Date; and (iii) the Share
Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in
proper form for transfer, together with a Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed, with any
required signature guarantees (or, in the case of a book-entry delivery, an
Agent's Message) and any other documents required by this Letter of Transmittal,
must be received by the Depositary within three NASDAQ National Market System
("NASDAQ") trading days after the date of execution of such Notice of Guaranteed
Delivery, as provided in the Offer to Purchase under "The Tender
Offer -- Procedures for Tendering Shares." If Share Certificates are forwarded
separately to the Depositary, a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) must accompany each such
delivery.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
7
<PAGE> 8
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal or facsimile thereof, waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate schedule attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal is signed.
4. PARTIAL TENDERS. (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY) If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, new Share Certificate(s) for the
remainder of the Shares that were evidenced by the old Share Certificate(s) will
be sent to the registered holder, unless otherwise provided in the appropriate
box marked "Special Payment Instructions" and/or "Special Delivery Instructions"
on this Letter of Transmittal, as soon as practicable after the acceptance for
payment of, and payment for, the Shares tendered herewith. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the Share Certificate(s) without alteration, enlargement
or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on Share
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Share
Certificates.
If this Letter of Transmittal or any Share Certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and should submit proper
evidence satisfactory to the Purchaser of their authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment is to be made to, or Share
Certificates for Shares not tendered or purchased are to be issued in, the name
of a person other than the registered owner(s). Signatures on such Share
Certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the Share Certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner(s) appear(s) on the Share
Certificates. Signatures on such Share Certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Subject to Section 2.13 of the Merger Agreement
and except as set forth in this Instruction 6, the Purchaser will pay or cause
to be paid any stock transfer taxes with respect to the transfer and sale of
purchased Shares to it or its order pursuant to the Offer. If, however, payment
of the purchase price is to be made to, or if Share Certificates not tendered or
purchased are to be registered in the name of, any person other than the
registered holder, or if tendered Share Certificates are registered in the name
of any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered holder or
such person) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
8
<PAGE> 9
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares purchased is to be issued in the name of and/or Share
Certificates for unpurchased Shares are to be returned to a person other than
the person(s) signing this Letter of Transmittal or if a check is to be sent
and/or such Share Certificates are to be returned to someone other than the
signer of this Letter of Transmittal or to an address other than that shown on
the front cover hereof, the appropriate boxes on this Letter of Transmittal
should be completed. Stockholders tendering Shares by book-entry transfer may
request that Shares not purchased be credited to such account maintained at such
Book-Entry Transfer Facility as such stockholder may designate hereon. If no
such instructions are given, such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated above. See
Instruction 1.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its
sole discretion to waive any of the specified conditions of the Offer (except
the Minimum Condition), in whole or in part, in the case of any Shares tendered.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase and this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the MacKenzie Partners, Inc. at its address set forth below.
10. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the stockholder or other payee to a $50 penalty. In addition, payments
that are made to such stockholder or other payee with respect to Shares
purchased pursuant to the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any Share
Certificate(s) has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the Share Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost or destroyed Share Certificates have been
followed.
9
<PAGE> 10
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF), TOGETHER
WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY
TRANSFER, AN AGENT'S MESSAGE AND ANY OTHER REQUIRED DOCUMENTS MUST BE RECEIVED
BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR
TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED
PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE
EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES
FOR GUARANTEED DELIVERY.
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR NAME, ADDRESS AND TIN Name: ----------------------------------
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW. Address:--------------------------------
------------------------------------------
Social Security or Employer
Identification Number
-------------------------------------------------------------------------------------------------
Department of the PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
Treasury Internal
Revenue Service (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or
NUMBER (TIN) (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) ABOVE IF YOU HAVE BEEN NOTIFIED BY THE
IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OR
DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER BEING NOTIFIED BY THE IRS THAT YOU WERE SUBJECT
TO BACKUP WITHHOLDING YOU RECEIVED ANOTHER NOTIFICATION FROM THE IRS THAT YOU ARE NO LONGER
SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS OUT SUCH ITEM (2).
-------------------------------------------------------------------------------------------------
PART 3 [ ] CHECK THIS BOX IF YOU HAVE NOT BEEN ISSUED A TIN AND HAVE APPLIED FOR ONE OR INTEND
TO APPLY FOR ONE IN THE NEAR FUTURE.
SIGN HERE [ARROW] Signature: ---------------------------------------------- Date: -------------------- , 1999
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within sixty
(60) days.
Signature: -------------------------------------- Date: ---------------- , 1999
10
<PAGE> 11
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, Share Certificates and
any other required documents should be sent or delivered by each stockholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
<TABLE>
<S> <C> <C>
By Mail: By Hand or By Overnight Courier: By Facsimile:
P.O. BOX 84 IBJ WHITEHALL BANK & TRUST (212) 858-2611
BOWLING GREEN STATION COMPANY (FOR ELIGIBLE INSTITUTIONS ONLY)
NEW YORK, NEW YORK 10274-0084 ONE STATE STREET
ATTN: REORGANIZATION OPERATIONS NEW YORK, NEW YORK 10004 Confirm by Telephone
DEPARTMENT ATTN: SECURITIES PROCESSING
WINDOW, (212) 858-2103
SUBCELLAR ONE, (SC-1)
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below, and
will be furnished promptly at the Purchaser's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. Logo]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LOGO
75 WALL STREET
NEW YORK, NEW YORK 10005
(212) 429-2000 EXT. 2958
OR
CALL TOLL FREE (800) 457-0245 EXT. 2958
<PAGE> 1
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
AMONG
KOFAX IMAGE PRODUCTS, INC.
IMAGING COMPONENTS CORPORATION
AND
IMAGING ACQUISITION CORPORATION
DATED AS OF JULY 27, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
THE OFFER.........................................................................................................2
Section 1.1 The Offer.......................................................................................2
Section 1.2 Company Action..................................................................................4
Section 1.3 Company Board and Committees; Section 14(f) of the Exchange Act.................................5
ARTICLE 2
THE MERGER........................................................................................................6
Section 2.1 Merger..........................................................................................6
Section 2.2 Effective Time..................................................................................6
Section 2.3 Closing of the Merger...........................................................................6
Section 2.4 Effects of the Merger...........................................................................6
Section 2.5 Certificate of Incorporation and Bylaws.........................................................6
Section 2.6 Directors.......................................................................................7
Section 2.7 Officers........................................................................................7
Section 2.8 Conversion of Shares............................................................................7
Section 2.9 Shares of Dissenting Holders....................................................................8
Section 2.10 Exchange of Certificates........................................................................8
Section 2.11 Stock Options; 1997 Stock Plan.................................................................10
Section 2.12 Additional Actions.............................................................................11
Section 2.13 Withholding Taxes..............................................................................11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................................11
Section 3.1 Organization and Qualification; Subsidiaries...................................................11
Section 3.2 Capitalization of the Company and its subsidiaries.............................................12
Section 3.3 Authority Relative to this Agreement; Consents and Approvals...................................13
Section 3.4 SEC Reports; Financial Statements..............................................................14
Section 3.5 Information Supplied...........................................................................14
Section 3.6 Consents and Approvals; No Violations..........................................................15
Section 3.7 Material Contracts.............................................................................15
Section 3.8 No Undisclosed Liabilities; Absence of Changes.................................................16
Section 3.9 Litigation.....................................................................................16
Section 3.10 Compliance with Applicable Law.................................................................16
Section 3.11 Employee Plans.................................................................................17
Section 3.12 Environmental Laws and Regulations.............................................................18
Section 3.13 Intellectual Property; Software................................................................20
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.14 Certain Business Practices.....................................................................21
Section 3.15 Labor Matters..................................................................................21
Section 3.16 Insurance......................................................................................21
Section 3.17 Tax Matters....................................................................................22
Section 3.18 Brokers........................................................................................23
Section 3.19 Real Estate....................................................................................23
Section 3.20 Opinion of Financial Advisor...................................................................24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB.........................................................................................24
Section 4.1 Organization...................................................................................24
Section 4.2 Authority Relative to this Agreement...........................................................25
Section 4.3 Information Supplied...........................................................................25
Section 4.4 Consents and Approvals; No Violations..........................................................25
Section 4.5 No Prior Activities............................................................................26
Section 4.6 Brokers........................................................................................26
Section 4.7 Financing......................................................................................26
ARTICLE 5
COVENANTS........................................................................................................27
Section 5.1 Conduct of Business of the Company.............................................................27
Section 5.2 No Solicitation................................................................................28
Section 5.3 Access to Information..........................................................................30
Section 5.4 Shareholders Meeting; Proxy Statement..........................................................30
Section 5.5 Additional Agreements; Reasonable Efforts......................................................30
Section 5.6 Consents.......................................................................................31
Section 5.7 Public Announcements...........................................................................31
Section 5.8 Indemnification; Directors' and Officers' Insurance............................................31
Section 5.9 Notification of Certain Matters................................................................32
Section 5.10 SEC Filings....................................................................................32
Section 5.11 Takeover Statutes..............................................................................32
Section 5.12 Transaction Litigation.........................................................................32
Section 5.13 Delisting......................................................................................33
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER.........................................................................33
Section 6.1 Stockholder Approval...........................................................................33
Section 6.2 No Order.......................................................................................33
Section 6.3 HSR Act........................................................................................33
Section 6.4 Offer..........................................................................................33
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER...................................................................................34
Section 7.1 Termination....................................................................................34
Section 7.2 Effect of Termination..........................................................................35
Section 7.3 Fees and Expenses..............................................................................35
Section 7.4 Amendment......................................................................................36
Section 7.5 Extension; Waiver..............................................................................37
ARTICLE 8
MISCELLANEOUS....................................................................................................37
Section 8.1 Nonsurvival of Representations and Warranties..................................................37
Section 8.2 Entire Agreement; Assignment...................................................................37
Section 8.3 Validity.......................................................................................37
Section 8.4 Notices........................................................................................37
Section 8.5 Governing Law..................................................................................38
Section 8.6 Construction; Interpretation...................................................................38
Section 8.7 Parties in Interest............................................................................39
Section 8.8 Severability...................................................................................39
Section 8.9 Specific Performance...........................................................................39
Section 8.10 Counterparts...................................................................................39
Section 8.11 Waiver of Jury Trial...........................................................................39
</TABLE>
iv
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July
27, 1999 is made by and among KOFAX IMAGE PRODUCTS, INC., a Delaware corporation
(the "Company"), IMAGING COMPONENTS CORPORATION, a Delaware corporation
("Parent"), and IMAGING ACQUISITION CORPORATION, a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub").
WHEREAS, the Board of Directors of the Company (the "Company Board"),
the Parent and Merger Sub has, in light of and subject to the terms and
conditions set forth herein, (i) determined that each of the Offer (as defined
in the recitals) and the Merger (as defined in Section 2.1) is fair to, and in
the best interests of, their respective shareholders and (ii) approved and
adopted this Agreement and the transactions contemplated hereby and resolved to
recommend acceptance of the Offer and approval and adoption of this Agreement by
their respective shareholders;
WHEREAS, in furtherance thereof, it is proposed that Parent and Merger
Sub shall commence a tender offer (as it may be amended from time to time as
permitted by this Agreement, the "Offer") to acquire all of the outstanding
shares of common stock of the Company, par value $0.001 per share (the "Common
Stock"), at a price equal to $12.75 per share (such amount, or any greater
amount per share paid pursuant to the Offer, being hereinafter referred to as
the "Per Share Amount"), net to the seller in cash, subject to reduction for any
applicable federal back-up withholding or stock transfer taxes payable by such
seller, in accordance with the terms and subject to the conditions provided
herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition to Parent's and Merger Sub's willingness to enter into this
Agreement, Merger Sub and certain holders of Shares (as defined in Section
2.8(a)) have entered into Voting Agreements (as amended, restated or modified
from time to time, collectively, the "Voting Agreements") in the form attached
as Exhibit A.
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, Parent
and Merger Sub hereby agree as follows:
<PAGE> 6
ARTICLE 1
THE OFFER
SECTION 1.1 THE OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 7.1 and none of the events or conditions
set forth in Annex A (the "Offer Conditions", and each an "Offer Condition")
shall have occurred and be existing, as promptly as practicable after, but in no
event later than five (5) Business Days after, the public announcement of the
execution of this Agreement by the parties hereto, Parent shall cause Merger Sub
to, and Merger Sub shall, commence (within the meaning of the Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act")) the Offer for all the
outstanding Shares (as defined in Section 2.8) at the Per Share Amount. The
obligation of Merger Sub to accept for payment, purchase and pay for Shares
tendered pursuant to the Offer shall be subject only to the Offer Conditions and
to the further condition that a number of Shares which, together with Shares
then owned directly or indirectly by Parent and Merger Sub, would, at the
minimum, be more than fifty percent (50%) of the Common Stock then outstanding
on a fully diluted basis (which, for purposes of this Agreement, assumes the
full exercise and/or conversion of all options, warrants or other securities
exchangeable for or convertible into Common Stock) shall have been validly
tendered and not withdrawn prior to the expiration date of the Offer (the
"Minimum Condition"). Parent and Merger Sub expressly reserve the right to
increase the price per Share payable in the Offer or to make any other changes
in the terms and conditions of the Offer; provided, that unless previously
approved by the Company in writing, no change may be made that (i) decreases the
Per Share Amount payable in the Offer, (ii) changes the form of consideration to
be paid in the Offer, (iii) reduces the maximum number of Shares to be purchased
in the Offer, (iv) imposes conditions to the Offer in addition to the Offer
Conditions, (v) amends any other term of the Offer (including the Offer
Conditions) in a manner adverse to the holders of the Common Stock, (vi) extends
the Offer except as provided in Section 1.1(b) (provided that the Offer may not,
without the Company's consent, be extended beyond 60 days after the commencement
of the Offer), or (vii) amends, or waives the satisfaction of, the Minimum
Condition. It is agreed that the Offer Conditions are for the sole benefit of
Parent and Merger Sub and may be asserted by Merger Sub or Parent regardless of
the circumstances giving rise to any such condition (other than any action or
inaction by Merger Sub or Parent which constitutes a breach of this Agreement)
or may be waived by Merger Sub or Parent (other than the Minimum Condition) in
whole or in part at any time and from time to time, in their respective sole
discretion. The failure by Merger Sub or Parent at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. The Company agrees that no Shares held by the Company or
any of its subsidiaries will be tendered in the Offer. "Business Day" means each
Monday, Tuesday, Wednesday, Thursday, or Friday that banks located in New York,
New York are not required or permitted by law to be closed.
(b) So long as this Agreement has not been terminated in
accordance with the terms hereof, and subject to the terms and conditions
hereof, the Offer shall expire at midnight, Pacific Time, on the date that is
twenty (20) Business Days after the Offer is commenced; provided,
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<PAGE> 7
that (subject to the proviso in clause (vi) of Section 1.1(a)) without the
consent of the Company or the Company Board, Merger Sub may (i) extend the
Offer, if at the scheduled expiration date of the Offer any of the Offer
Conditions shall not have been satisfied or waived, until such time as such
conditions are satisfied or waived, (ii) extend the Offer for any period
required for any rule, regulation, interpretation or position of the Securities
and Exchange Commission ("SEC") or the staff thereof applicable to the Offer,
(iii) extend the Offer for any reason on one or more occasions for an aggregate
period of not more than ten (10) Business Days beyond the latest expiration date
that would otherwise be permitted under clause (i) or (ii) of this sentence if
on such expiration date the Minimum Condition has been satisfied but the number
of Shares validly tendered, together with Shares then owned directly or
indirectly by Merger Sub, constitute at least seventy-five percent (75%) but
less than ninety percent (90%) of all outstanding Shares, or (iv) extend the
Offer for any reason on one or more occasions for an aggregate period of not
more than 10 Business Days beyond the initial expiration date or the latest
expiration date that would otherwise be permitted under clauses (i), (ii) or
(iii) of this sentence. Subject to the terms and conditions of the Offer and
this Agreement, Merger Sub shall and Parent shall cause Merger Sub to, accept
for payment, and pay for, all Shares validly tendered and not withdrawn pursuant
to the Offer that Merger Sub becomes obligated to accept for payment and pay for
pursuant to the Offer as promptly as practicable after the expiration of the
Offer.
(c) On the date of the commencement of the Offer, Parent and
Merger Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-l
with respect to the Offer which will reflect the existence of this Agreement
(together with any supplements or amendments thereto and any other related
documents, including an offer to purchase and a related letter of transmittal
and summary advertisement and, if required, a Rule 13e-3 Transaction Statement
on Schedule 13E-3 (collectively the "Offer Documents") and shall mail the Offer
Documents to the Company's stockholders. The Offer Documents will comply in all
material respects with the provisions of applicable federal securities laws. The
Offer Documents shall not, on the date filed with the SEC and on the date first
published or sent or given to the Company's shareholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Merger Sub and the Company each agrees to correct promptly
any information provided by it for use in the Offer Documents if and to the
extent that it shall have become false or misleading in any material respect,
and each of Parent and Merger Sub further agrees to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Company and its counsel shall be given a
reasonable opportunity to review and comment on the Offer Documents and all
amendments and supplements thereto, in each case prior to their filing with the
SEC or dissemination to stockholders of the Company, and the Parent and Merger
Sub shall consider such comments in good faith. Parent and Merger Sub shall
provide the Company and its counsel with any comments Parent, Merger Sub or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments, including a copy of any
such comments that are made in writing.
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<PAGE> 8
(d) The parties understand and agree that the Per Share Amount
has been calculated based upon the accuracy of the representation and warranty
set forth in Section 3.2(a) and that, in the event the number of outstanding
Shares, capital stock or capital stock equivalents of the Company issuable upon
the exercise of, or subject to, options or other agreements exceeds the amounts
specifically set forth in Section 3.2(a) by more than 20,000 Shares (including
without limitation as a result of any stock split, reverse stock split, stock
dividend, including any dividend or distribution of securities convertible into
capital stock or capital stock equivalent of the Company, recapitalization, or
other like change occurring after the date of this Agreement, but excluding any
Shares issued pursuant to the 1997 Stock Plan (as defined in Section 2.11(d)) in
accordance with, and subject to, Section 2.11(d)), the Per Share Amount shall be
appropriately adjusted downward. The provisions of this Section 1.1(d) shall
not, however, affect the representation set forth in Section 3.2(a).
SECTION 1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer
and represents and warrants that the Company Board, at a meeting duly called and
held, has, subject to the terms and conditions set forth herein, unanimously,
(i) determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are fair to, and in the best interests of,
the shareholders of the Company, (ii) approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, in all
respects and that such approval constitutes approval of the Offer, this
Agreement and the Merger for purposes of Section 251 of the Delaware General
Corporation Law (the "DGCL"), and similar provisions of any other similar state
statutes that might be deemed applicable to the transactions contemplated
hereby, and (iii) resolved to recommend that the shareholders of the Company
accept the Offer, tender their Shares thereunder to Merger Sub and approve and
adopt this Agreement and the Merger. The Company consents to the inclusion of
such recommendation and approval in the Offer Documents; provided, that such
recommendation may be withdrawn, modified or amended in accordance with the
provisions of Section 5.2. The Company further represents and warrants that C.E.
Unterberg, Towbin (the "Financial Advisor") has delivered to the Company Board
its written opinion that the cash consideration to be received by the
shareholders of the Company pursuant to the Offer and the Merger is fair to such
shareholders from a financial point of view. The Company has been authorized by
the Financial Advisor to permit, subject to the prior review and consent by the
Financial Advisor (such consent not to be unreasonably withheld), the inclusion
of the fairness opinion (or a reference thereto) in the Schedule 14D-9 (as
defined in Section 1.2(b)) and, if required, the Schedule 13E-3.
(b) Contemporaneously with the commencement of the Offer as
provided in Section 1.1, the Company hereby agrees to file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pertaining to the Offer
(together with any amendments or supplements thereto, the "Schedule 14D-9")
containing the recommendation described in Section 1.2(a) and to promptly mail
the Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders,
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<PAGE> 9
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Company with
respect to information supplied by Parent or Merger Sub in writing for inclusion
in the Offer Documents or the Schedule 14D-9. The Company, Parent and Merger Sub
each agrees to correct promptly any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Merger Sub and its counsel shall
be given a reasonable opportunity to review and comment on the Schedule 14D-9
before it is filed with the SEC, and the Company shall consider such comments in
good faith.
(c) In connection with the Offer, the Company will cause its
transfer agent to promptly furnish to Parent and Merger Sub mailing labels,
security position listings and any available listing or computer files
containing the names and addresses of the record holders of Shares as of a
recent date and shall furnish Merger Sub with such additional information and
assistance (including, without limitation, updated lists of shareholders,
mailing labels and lists of securities positions) as Merger Sub or its agents
may reasonably request in communicating the Offer to the record and beneficial
holders of Shares. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent, Merger Sub and their
affiliates, associates, agents and advisors shall hold in confidence the
information contained in any such labels, listings and files and use such
information only in connection with the Offer and the Merger, and, if this
Agreement shall be terminated, will deliver all copies of such information then
in their possession and control.
SECTION 1.3 COMPANY BOARD AND COMMITTEES; SECTION 14(F) OF THE
EXCHANGE ACT.
(a) Promptly upon the payment by Merger Sub for Shares
pursuant to the Offer and from time to time thereafter, Merger Sub shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as will give Merger Sub representation on the
Company Board equal to the product of the number of directors on the Board
(giving effect to any increase in the number of directors pursuant to this
Section 1.3) and the percentage that such number of Shares so purchased bears to
the total number of outstanding Shares on a fully diluted basis, and the Company
shall use its reasonable best efforts to, upon request by Merger Sub, promptly,
at the Company's election, either increase the size of the Board or secure the
resignation of such number of directors as is necessary to enable Merger Sub's
designees to be elected to the Company Board and to cause Merger Sub's designees
to be so elected.
(b) The Company's obligation to appoint designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly take all action
required pursuant to such Section and Rule in order to fulfill its obligations
under this Section 1.3 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
such Section and Rule in
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<PAGE> 10
order to fulfill its obligations under this Section 1.3 (provided that Parent
and Merger Sub shall have provided to the Company on a timely basis all such
information with respect to Merger Sub's designees).
(c) Following the election of Merger Sub's designees pursuant
to this Section and until the Effective Time, any amendment of this Agreement or
the Certificate of Incorporation or Bylaws of the Company, any termination of
this Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of parent of Merger Sub, any
waiver of any of the Company's rights hereunder, or any transaction between
Parent (or any affiliate or associate thereof) and the Company shall require the
concurrence of a majority of the Company's directors (or the concurrence of the
sole remaining director, if there is only one remaining) then in office who are
directors of the Company on the date hereof, or are directors designated by such
persons or person (the "Continuing Directors"). The Continuing Directors shall
have the authority to retain such counsel and other advisors at the expense of
the Company as are reasonably appropriate to assist them in the exercise of
their duties in connection with this Agreement. In addition, the Continuing
Directors shall have the authority to institute any action on behalf of the
Company to enforce performance of this Agreement.
ARTICLE 2
THE MERGER
SECTION 2.1 MERGER. At the Effective Time (as defined below) and upon
the terms and subject to the conditions of this Agreement and in accordance with
the DGCL, Merger Sub shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation"), and the separate corporate existence
of Merger Sub shall cease.
SECTION 2.2 EFFECTIVE TIME. Subject to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 2.3) or as
soon thereafter as is practicable, the parties shall cause an agreement or
certificate of merger to be executed and filed with the Secretary of State of
the State of Delaware, in such form as required by, and in accordance with
applicable provisions of, the DGCL (including, if possible, the procedures
permitted by Section 253 thereof), at which time the Merger shall become
effective (the time the Merger becomes effective being referred to herein as the
"Effective Time").
SECTION 2.3 CLOSING OF THE MERGER. The closing of the Merger (the
"Closing") shall take place at a time and on a date to be specified by the
parties, which shall be no later than the second Business Day after satisfaction
(or waiver) of the latest to occur of the conditions precedent set forth in
Article 6 (the "Closing Date"), at the offices of Kirkland & Ellis, 153 East
53rd Street, New York, New York 10022, unless another time, date or place is
agreed to in writing by the parties.
SECTION 2.4 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 259 of the DGCL.
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SECTION 2.5 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of the Company in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The Bylaws of Merger Sub in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 2.6 DIRECTORS. The directors of Merger Sub at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
SECTION 2.7 OFFICERS. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
SECTION 2.8 CONVERSION OF SHARES.
(a) At the Effective Time, each share of Common Stock issued
and outstanding immediately prior to the Effective Time (individually a "Share"
and, collectively, the "Shares"), other than (i) Shares held by the Company or
any subsidiary of the Company, (ii) Shares held by Parent, Merger Sub, any other
subsidiary of Parent or Merger Sub, if any, (iii) the Shares held by persons and
entities as set forth on Schedule 2.8 hereto (collectively, the "Retained
Shares"), and (iv) Dissenting Shares (as defined in Section 2.9(a)), (the Shares
of subsection (i) through (iv), collectively the "Excluded Shares"), shall, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holder thereof, be canceled and extinguished and be converted
into and shall become the right to receive a cash payment per Share, without
interest, equal to the Per Share Amount (the "Merger Consideration") in
accordance with the terms hereof. From and after the Effective Time, the holders
of certificates evidencing ownership of Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided for herein or by applicable law.
(b) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, each issued and outstanding share
of the common stock, par value $0.001 per share, of Merger Sub shall be
converted into one share of common stock, par value $0.001 per share, of the
Surviving Corporation.
(c) At the Effective Time, each Share held by the Company as
treasury stock or held by Parent, Merger Sub or any subsidiary of Parent, Merger
Sub or the Company immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holder thereof, be canceled, retired and cease to exist, and no
consideration shall be delivered with respect thereto.
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(d) Each Retained Share issued and outstanding immediately
prior to the Effective Time shall be exchanged for (as provided in and subject
to the limitations set forth in this Article 2) and become (i) a number of fully
paid and nonassessable shares of Class B Common Stock, par value $0.001 per
share, of the Parent ("Parent Class B Common") equal to (x) 20% of the Per Share
Amount divided by (y) $10.00 and (ii) a number of fully paid and non-assessable
shares of Class A Common Stock par value $0.001 per share, of the Parent
("Parent Class A Common") equal to (x) 80% of the Per Share Amount divided by
(y) $10.00, upon the surrender of the certificate previously representing such
shares of Retained Shares.
SECTION 2.9 SHARES OF DISSENTING HOLDERS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any holder of Shares with respect to which appraisal rights, if any,
are granted by reason of the Merger under the DGCL and who does not vote in
favor of or consents in writing to the Merger and who otherwise complies with
the provisions of Section 262 of the DGCL ("Dissenting Shares") shall not be
entitled to receive any Merger Consideration pursuant to Section 2.8(a), unless
such holder fails to perfect, effectively withdraws or loses his or her
appraisal right under the provisions of Section 262 of the DGCL. If any such
holder so fails to perfect, effectively withdraws or loses his or her appraisal
rights under the DGCL, each Dissenting Share of such holder shall thereupon be
deemed to have been converted, as of the Effective Time, into the right to
receive the Per Share Amount pursuant to Section 2.8(a).
(b) Any payments relating to Dissenting Shares shall be made
solely by the Surviving Corporation, and no funds or other property have been or
will be provided by Merger Sub, Parent or any of Parent's other direct or
indirect subsidiaries for such payment, nor shall the Company make any payment
with respect to, or settle or offer to settle, any such demands.
(c) The Company shall give Merger Sub prompt notice of any
demands received by the Company for the payment of fair value for shares, and
Merger Sub shall have the right to direct all negotiations and proceedings with
respect to such demands.
SECTION 2.10 EXCHANGE OF CERTIFICATES.
(a) IBJ Whitehall Bank & Trust Company or another bank or
trust company designated by Parent and reasonably acceptable to the Company
shall act as the exchange agent (in such capacity, the "Exchange Agent") for the
benefit of the holders of Shares for the exchange of a certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates") that were converted into the right to receive the Per Share
Amount pursuant to Section 2.8(a), all in accordance with this Article 2. At the
Effective Time, Parent shall deposit, or shall cause to be deposited, with the
Exchange Agent, and shall otherwise take all action necessary to provide the
Exchange Agent on a timely basis, as and when needed after the Effective Time,
funds necessary to provide for the payment for the benefit of the holders of
Shares, cash in U.S. dollars in an amount equal to the Merger Consideration
multiplied by the aggregate outstanding Shares (other than the Excluded Shares)
to be paid pursuant to Section 2.8(a). The Exchange Agent shall, pursuant
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to irrevocable instructions, deliver the Merger Consideration out of the amount
so deposited by Parent to holders of Shares entitled thereto. The amount
deposited by Parent with the Exchange Agent shall not be used for any other
purpose. Any and all amounts earned on such funds paid over to the Surviving
Corporation.
(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of Certificates
formerly representing Shares converted into the right to receive the Merger
Consideration pursuant to Section 2.8(a): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify); and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for a cash payment of the proper
Merger Consideration pursuant to Section 2.8(a). Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent and Merger Sub, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor by check an amount equal to (A) the Per Share Amount,
multiplied by (B) the number of Shares represented by such Certificate, which
such holder has the right to receive pursuant to the provisions of this Article
2, and the Certificate so surrendered shall forthwith be canceled; provided,
that any Certificate (or portion thereof) representing Retained Share shall not
be entitled to such cash amount, but a number of shares of Parent Class A Common
and Parent Class B Common as set forth in Section 2.8(d). No interest shall be
paid or accrued on any Merger Consideration upon the surrender of any
Certificates. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, payment of the proper Merger
Consideration may be paid to a transferee if the Certificate representing such
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer or other taxes required as a result of such payment to a person other
than the registered holder of such shares have been paid. Until surrendered and
exchanged as contemplated by this Section 2.10, each Certificate (other than
Certificates representing Excluded Shares) shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender an
amount equal to (A) the Per Share Amount, multiplied by (B) the number of Shares
represented by such Certificate, as contemplated by this Section 2.10.
(c) In the event that any Certificate shall have been lost,
stolen or destroyed, the Exchange Agent shall pay, upon the making of an
affidavit of that fact by the holder thereof in form and substance reasonably
acceptable to Parent, the proper Merger Consideration as may be required
pursuant to Section 2.8; provided, that Parent may, in its discretion, require
the delivery of a suitable bond and/or indemnity.
(d) The Merger Consideration paid upon the surrender of
Certificates in accordance with the terms hereof shall be deemed to have been
paid in full satisfaction of all rights pertaining to Shares formerly
represented thereby. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to
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the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article 2.
(e) Any portion of the Merger Consideration which remains
undistributed to the shareholders of the Company for six months after the
Effective Time shall be delivered to the Surviving Corporation, upon demand, and
any shareholders of the Company who have not theretofore complied with this
Article 2 shall thereafter look only to the Surviving Corporation for payment of
their claim for any Merger Consideration.
(f) Notwithstanding Section 2.11(e), neither Parent nor the
Company shall be liable to any holder of a Certificate formerly representing
Shares for any Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
SECTION 2.11 STOCK OPTIONS; 1997 STOCK PLAN.
(a) At the Effective Time, each outstanding, vested and
exercisable option to purchase shares of Common Stock (including those options
that will become exercisable upon a change in control of the Company) (a "Stock
Option" or collectively "Stock Options") issued pursuant to the Amended and
Restated Incentive Stock Option, Nonqualified Stock Option and Restricted Stock
Purchase Plan, the 1996 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan, and the 1997 Stock Option Plan for Non-Employee
Directors (collectively the "Company Plans") or issued outside any Company Plan
via special grants by the Company's Stock Option Committee to certain employees
shall be converted into and shall become the right to receive a cash payment per
Stock Option, without interest, determined by multiplying (i) the excess, if
any, of the Per Share Amount over the applicable per share exercise price of
such Stock Option by (ii) the number of shares of Common Stock underlying the
Stock Options immediately prior to the Effective Time. At the Effective Time,
all outstanding options to purchase shares of Common Stock (including those
options that are not exercisable at the time of the Merger) shall be canceled
and be of no further force or effect except for the right to receive cash to the
extent provided in this Section 2.11. Prior to the Effective Time, the Company
shall take all actions (including, if appropriate, amending the terms of any
Company Plan) that are necessary to give effect to the transactions contemplated
by this Section 2.11.
(b) Prior to the Effective Time, Parent and the Company shall
establish a procedure to effect the surrender of Stock Options in exchange for
the cash payment to which the holder of a Stock Option shall be entitled under
Section 2.11(a), and, upon surrender of such Stock Option, Parent shall pay to
the holder thereof in cash the amount, if any, to which such holder shall be
entitled thereunder.
(c) The Parent, Merger Sub and the Company hereby acknowledge
and agree that the Surviving Corporation shall not assume or continue any Stock
Options, or substitute any additional options for such Stock Options. On or
before the Effective Time, the Company shall, consistently with the terms of the
Company Plans and other agreements and arrangements
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evidencing Stock Options, or to the extent permissible under applicable law,
accelerate the unvested portion of all outstanding Stock Options, conditioned
upon the consummation of the Merger.
(d) Unless terminated prior to the Effective Time in
accordance with its terms, the Company's 1997 Employee Stock Purchase Plan (the
"1997 Stock Plan") shall be terminated as of the Effective Time. Unless the 1997
Stock Plan is terminated prior to the Effective Time in accordance with its
terms, the Company shall take such actions as are necessary or appropriate to
cause the last day of the then current Offering Period (as such term is used in
the 1997 Stock Plan) to be the last trading day on which the Common Stock of the
Company is traded on the Nasdaq National Market immediately prior to the
Effective Time (the "Final Company Exercise Date"); provided, that such change
shall be conditioned upon the consummation of the Merger. On the Final Company
Exercise Date, and subject to the participants' rights to receive invested cash
as provided in the 1997 Stock Plan, the Company shall apply the funds credited
as of such date under the 1997 Stock Plan within each participant's account to
the purchase of whole shares of Common Stock in accordance with the terms of the
1997 Stock Plan, it being agreed that the number of shares of Common Stock so
purchased shall not exceed the number of shares issuable under the 1997 Stock
Plan, as represented in Section 3.2.
SECTION 2.12 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Merger Sub or the Company or otherwise to carry
out this Agreement, the officers and directors of the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of Merger
Sub or the Company, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of Merger Sub or the Company, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 2.13 WITHHOLDING TAXES. Parent and Merger Sub shall be entitled
to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from
the Merger Consideration payable to a holder of Shares or amounts payable to a
holder to the Stock Options pursuant to the Merger any withholding and stock
transfer Taxes and such amounts as are required under the Internal Revenue Code
of 1986, as amended (the "Code"), or any applicable provision of state, local or
foreign Tax law. To the extent that amounts are so withheld by Parent or Merger
Sub, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares or the Stock Options in respect
of which such deduction and withholding was made by Parent or Merger Sub and
Parent shall provide, or cause the Exchange Agent to provide, to the holders of
such Shares written notice of the amounts so deducted or withheld.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as presently
conducted.
(b) Except as set forth on Section 3.1(b) of the disclosure
schedule delivered by the Company to Parent concurrently herewith (the
"Disclosure Schedule") or as disclosed in filings with the SEC made prior to the
date hereof and since, and including, the filing of the Company's most recent
Annual Report on Form 10-K (the "Recent SEC Reports"), the Company has no equity
interests in any corporations, partnerships, limited liability companies, trusts
or similar business entities. The Company has no significant subsidiaries, as
that term is defined in Rule 1-02(w) of Regulation S-X.
(c) The Company is duly qualified or licensed to do business
and in good standing in each jurisdiction in which the property owned, leased or
operated by it, or the nature of the business conducted by it, makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not have,
individually or in the aggregate, a Company Material Adverse Effect. The term
"Company Material Adverse Effect" means any change, effect, event, occurrence,
condition or development that is or is reasonably likely to be materially
adverse to (i) the assets, liabilities, properties, results of operations, or
conditions (financial or otherwise) of the Company and its subsidiaries, taken
as a whole, or (ii) the ability of the Company to perform its obligations under
this Agreement.
(d) The Company has heretofore delivered to Merger Sub or
Parent accurate and complete copies of the Certificate of Incorporation and
Bylaws, each as amended to date and currently in effect, of the Company and each
of its subsidiaries.
SECTION 3.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of
(i) 40,000,000 shares of Common Stock, of which, as of the date hereof,
5,243,956 shares were issued and outstanding (excluding shares held as treasury
shares), and 194,884 shares of Common Stock are held as treasury shares and (ii)
5,000,000 shares of preferred stock, no shares of which are issued or
outstanding. All of the Shares have been validly issued, and are fully paid,
nonassessable and free of preemptive rights. As of the date hereof, (i) 580,555
shares of Common Stock were reserved for issuance and issuable upon, or
otherwise deliverable in connection with, the exercise of outstanding Stock
Options
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and (ii) 34,000 shares of Common Stock are issuable under the 1997 Stock Plan
pursuant to Section 2.11(d). Section 3.2(a) of the Disclosure Schedule sets
forth the outstanding Stock Options. Except as set forth above, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or its subsidiaries convertible into
or exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options or other rights to acquire from the Company or its
subsidiaries, and no obligations of the Company or its subsidiaries to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (e.g., phantom stock or stock appreciation
rights). Except for the Voting Agreements and agreements issued under the
Company Plans, there are no stockholder, voting, repurchase or similar
agreements or understandings to which the Company is a party or otherwise bound
relating to the transfer, voting or repurchase of any shares of capital stock of
the Company.
(b) Except as set forth on Schedule 3.2(b) of the Disclosure
Schedule, or as publicly disclosed by the Company, all of the issued and
outstanding shares of capital stock of each subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and are owned
by the Company, directly or indirectly, free and clear of any Lien (as
hereinafter defined) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). There are no securities of the Company or its subsidiaries
issued and outstanding that are convertible into or exchangeable for, no options
or other rights to acquire from the Company or its subsidiaries, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly, of any capital stock
or other ownership interests in, or any other securities of, any subsidiary.
There are no outstanding contractual obligations of the Company or its
subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares
of capital stock or other ownership interests in any subsidiary. For purposes of
this Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, claim, security
interest or encumbrance of any kind in respect of such asset.
(c) The affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve the Merger.
SECTION 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT; CONSENTS AND
APPROVALS.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Company Board, and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the then outstanding Shares). This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid, legal and binding
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<PAGE> 18
agreement of the Company, enforceable against the Company in accordance with its
terms, except (i) to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally and (ii) that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding thereof may be brought.
(b) The Company Board has duly and validly approved, and taken
all corporate actions required to be taken by the Company Board for the
consummation of, the transactions, including the Offer and the Merger,
contemplated hereby and resolved to recommend that the shareholders of the
Company approve and adopt this Agreement subject to Section 5.2.
SECTION 3.4 SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Company has filed all required forms, reports and
documents with the SEC since October 10, 1997 (the "SEC Reports"), each of which
has complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act,
each as in effect on the dates such forms, reports and documents were filed. The
Company has delivered to Merger Sub or Parent, in the form filed with the SEC
(including any amendments thereto), (i) its Annual Report on Form 10-K for the
fiscal year ended June 30, 1998, (ii) all definitive proxy statements relating
to the Company's meetings of shareholders (whether annual or special) held since
October 10, 1997, (iii) its Quarterly Reports on Form 10-Q for the quarters
ended September 30, 1998, December 31, 1998 and March 31, 1999, and (iv) all
other reports or registration statements filed by the Company with the SEC since
October 10, 1997. None of such forms, reports, registration statements or
documents, including, without limitation, any financial statements or schedules
included or incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company and its
subsidiaries included in the Annual Report on Form 10-K referred to in the
second sentence of this Section 3.4(a) and the unaudited consolidated interim
financial statements of the Company and its subsidiaries included in the
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1999 (A)
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (B) have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered thereby, except as may be indicated in the notes thereto and
except, in the case of unaudited statements, as may be permitted under the
Exchange Act, and (C) fairly present the consolidated financial position of the
Company and its subsidiaries as of the dates thereof and their consolidated
results of operations, financial condition, cash flow and changes in financial
position for the periods then ended (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments).
(b) The Company has heretofore made available to Merger Sub or
Parent a complete and correct copy of any amendments or modifications, which
have not yet been filed with
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the SEC, to agreements, documents or other instruments which previously had been
filed by the Company with the SEC pursuant to the Exchange Act.
SECTION 3.5 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
Offer Documents, the Proxy Statement or provided by the Company in the Schedule
14D-9 will, at the respective times that the Offer Documents, the Proxy
Statement, and the Schedule 14D-9 or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
SECTION 3.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming the truth
and accuracy of the representations and warranties of Parent and Merger Sub in
Section 4.4, except for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the Hart- Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the filing
and recordation of the Certificate of Merger with the Secretary of State of the
State of Delaware as required by the DGCL, no filing with or notice to, and no
permit, authorization, consent or approval of, or order of, any court or
tribunal or administrative, governmental or regulatory body, agency or authority
(a "Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Company Material Effect. Neither the execution, delivery
and performance of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (a) conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws (or
similar governing documents) of the Company or any of its subsidiaries, (b)
except as set forth on Schedule 3.6 of the Disclosure Schedule, result in a
violation or breach of, or cause acceleration, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under any of the terms,
conditions or provisions of any Material Contracts (as defined in Section
3.7(a)), or (c) violate any order, writ, injunction, decree, law, statute, rule
or regulation of any court, or any Governmental Entity having jurisdiction over
the Company or any of its subsidiaries or any of their respective properties or
assets, except in the case of (b) or (c) for violations, breaches or defaults
which would not have, individually or in the aggregate, a Company Material
Adverse Effect.
SECTION 3.7 MATERIAL CONTRACTS.
(a) Except as set forth in the SEC Reports filed prior to the
date of this Agreement or Section 3.7 of the Disclosure Schedule, neither the
Company nor any of the subsidiaries is a party to or bound by any (i) "material
contract" (as such term is defined in Item 601(b)(10) of Regulations S-K
promulgated by the SEC), (ii) non-competition agreement or any other agreement
or obligation which purports to limit in any material respect the manner in
which, or the localities in which, all
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or any material portion of the business of the Company and the subsidiaries,
taken as a whole, may be conducted, (iii) transaction, agreement, arrangement or
understanding with any affiliate of the Company or such subsidiary that would be
required to be disclosed under Item 404 of Regulation S-K promulgated by the
SEC, (iv) material acquisition, merger, asset purchase or sale agreement, (v)
agreement which provides for, or relates to, the incurrence by the Company or
any subsidiary of indebtedness for borrowed money in excess of $100,000
(including any interest rate or foreign currency swap, cap, collar, hedge or
insurance agreements, or options or forwards on such agreements, or other
similar agreements for the purpose of managing the interest rate or foreign
exchange risk associated with its financing), (vi) agreement with any executive
officer of the Company or any of the subsidiaries the benefits of which are
contingent or vest, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or any of the subsidiaries of
the nature contemplated by this Agreement, (vii) agreement with respect to any
executive officer of the Company or any of the subsidiaries providing any term
of employment or compensation guarantee, or (viii) contract or other agreement
which would prohibit or materially delay the consummation of the Merger or any
of the transactions contemplated by this Agreement (all contracts of the type
described in clauses (i) through (viii) being referred to herein as "Material
Contracts"). Each Material Contract is valid and binding on the Company (or, to
the extent a subsidiary of the Company is a party, such subsidiary) and is in
full force and effect, and the Company and each subsidiary have performed in all
material respects all material obligations required to be performed by them
under each Material Contract.
(b) Except as set forth on Schedule 3.7 of the Disclosure
Schedule or as disclosed in the Recent SEC Reports, none of the Company or its
subsidiaries is in default, in conflict with or violation (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation), in any material respect, of any term, condition or
provision of (i) its Certificate of Incorporation or Bylaws (or similar
governing documents), or (ii) any Material Contract, except in the case of (ii)
for violations, breaches or defaults that would not have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.8 NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES.
(a) Except (i) as set forth on Schedule 3.8 of the Disclosure
Schedule or as disclosed in the Recent SEC Reports, or (ii) liabilities incurred
in the ordinary course of business, none of the Company or its subsidiaries has
any material liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of the Company and its subsidiaries (including the
notes thereto).
(b) Except as set forth on Schedules 3.8 and 5.1 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, since March 31,
1999, the Company and its subsidiaries have conducted their business in the
ordinary course consistent with past practice and there has not been any event,
occurrence or development or state of circumstances or facts as described in
Sections 5.1(a) through 5.1(m).
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SECTION 3.9 LITIGATION. Except as disclosed in the Recent SEC Reports,
there is no suit, litigation, arbitration, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties,
assets or business before any Governmental Entity which would have, individually
or in the aggregate, a Company Material Adverse Effect or would prevent or
substantially delay the consummation of the transactions contemplated by this
Agreement. Except as disclosed in the Recent SEC Reports, none of the Company or
its subsidiaries is subject to any outstanding order, writ, injunction or decree
that would have, individually or in the aggregate, a Company Material Adverse
Effect or would prevent or delay the consummation of the transactions
contemplated hereby.
SECTION 3.10 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in the
Recent SEC Reports, the Company and its subsidiaries hold all permits, licenses,
consents, authorizations, certificates, variances, exemptions, orders and
approvals of and from all, and has made all declarations and filings with,
Governmental Entities necessary for the lawful conduct of their respective
businesses, as presently conducted, and to own, lease, license and use its
respective properties and assets (the "Company Permits"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals which
would not have, individually or in the aggregate, a Company Material Adverse
Effect. The Company and its subsidiaries are in compliance with the terms of the
Company Permits, except where the failure so to comply would not have a Company
Material Adverse Effect. Except as disclosed in the Recent SEC Reports, the
activities or businesses of the Company and its subsidiaries are not being
conducted in violation of or in conflict with, in any material respect, any law,
rule, order, judgment, decree, ordinance or regulation of the United States, any
state, county or locality, or of any Governmental Entity of the United States,
except where the violation or conflict would not result in a Company Material
Adverse Effect. Except as disclosed in the Recent SEC Reports, no investigation
or review by any Governmental Entity of the United States, any country, any
state, county or locality or of any foreign jurisdiction with respect to the
Company or its subsidiaries is pending or, to the knowledge of the Company and
any subsidiary, threatened, nor, to the knowledge of the Company and any
subsidiary, has any Governmental Entity of the United States, any country, any
state, county or locality or of any foreign jurisdiction indicated an intention
to conduct the same, other than, in each case, those which could not have a
Company Material Adverse Effect.
SECTION 3.11 EMPLOYEE PLANS. Except as set forth on Schedule 3.11 of
the Disclosure Schedule or as disclosed in the Recent SEC Reports, there are no
employee benefit plans (including without limitation, retirement, savings,
thrift, deferred compensation, severance, stock ownership, stock purchase, stock
option, performance, bonus, incentive, vacation or holiday pay, travel, fringe
benefit, hospitalization or other medical, disability, life or other insurance,
and any other employee benefit policy, trust, understanding or arrangement of
any kind) maintained or contributed to by the Company or its subsidiaries or
with respect to which the Company or its subsidiaries has any actual or
potential liability (the "Employee Plans") except for liability that would not
have, individually or in the aggregate, a Company Material Adverse Effect. The
Employee Plans are in compliance with applicable law, including without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code, except for instances of non-compliance that would not
have,
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individually or in the aggregate, a Company Material Adverse Effect. None of the
Employee Plans are subject to Title IV of ERISA nor provide for medical or life
insurance benefits to retired or former employees of the Company or any
subsidiary (other than as required under Code Section 4980B, or similar state
law). None of the Employee Plans have any material unfunded liabilities. Except
as set forth on Schedule 3.11 of the Disclosure Schedule or as disclosed in the
Recent SEC Reports, none of the Employee Plans obligates the Company to pay any
separation, severance, termination, bonus or similar benefit solely as a result
of any transaction contemplated by this Agreement or solely as a result of a
change in control or ownership of the Company. There are no pending or, to the
knowledge of the Company, threatened actions, suits, investigations or claims
with respect to any Employee Plan, and the Company has no knowledge of any facts
that could result in any actions, suits, investigations or claims that could
reasonably be expected to result in a Company Material Effect.
SECTION 3.12 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) Except as set forth on Schedule 3.12 of the Disclosure
Schedule or as disclosed in the Recent SEC Reports, (i) each of the Company and
its subsidiaries is in compliance with all applicable Environmental Laws (as
defined in Section 3.12(g)), except for non-compliance that would not have a
Company Material Adverse Effect, which compliance includes, but is not limited
to, the possession by the Company and its subsidiaries of all material permits
and other governmental authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof, (ii) since March 31,
1999, none of the Company or its subsidiaries has received written notice of,
or, to the best knowledge of the Company, is the subject of, any material
action, cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim"), and (iii) to the knowledge of the Company, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance, or give rise to material Environmental Claims, in the
future.
(b) Except as disclosed in the Recent SEC Reports, there are
no Environmental Claims which would have a Company Material Adverse Effect that
are pending or, to the knowledge of the Company, threatened against the Company
or its subsidiaries or, to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) (i) No site or facility now owned, operated or leased by
the Company or any of its subsidiaries or, to the knowledge of the Company,
previously owned, operated or leased, is listed or, to the knowledge of the
Company proposed for listing on the national priorities List or CERCLIS,
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and liability Act of 1980, as amended ("CERCLA"), and the rules and regulations
thereunder or on any similar state or local list of sites requiring
investigation or remediation.
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(ii) Neither the Company nor any of its subsidiaries
has received any written notice of any actual or alleged violation or
any Environmental law with respect to any of its facilities, except a
violation or violations that, individually, or in the aggregate, could
not reasonably be expected to have a Company Material Adverse Effect.
(iii) The Company and its subsidiaries are not
subject to any material outstanding agreements or orders with any
Governmental or Regulatory Authority or other person respecting (A)
Environmental Laws, (B) Remedial Action or (C) any Release of a
Hazardous Material.
(iv) Neither the Company nor any of its subsidiaries
has received any written notice or request for information pertaining
to a response action (as defined by CERCLA), with respect to any of its
sites or facilities now or previously owned, operated or leased by
them, except for notices or requests that individually or in the
aggregate could not reasonably be expected to have a Company Material
Adverse Effect.
(v) To the knowledge of the Company, no Hazardous
Material is present (except in quantities for retail sale to consumers,
for store maintenance or as otherwise permitted under any Environmental
Law (as defined below)) or has been Released (as defined below) at, on
or about, any of the Company or its subsidiaries' sites or facilities,
now owned, operated or leased by them, except in compliance with
Environmental Law, and except for the presence of Hazardous Material or
such Release(s) which individually or in the aggregate could not
reasonably be expected to have a Company Material Adverse Effect.
(d) No liens have arisen under or pursuant to any
Environmental Law on any site or facility currently owned, operated or leased by
the Company or any of its subsidiaries, other than Liens that individually or in
the aggregate could not reasonably be expected to have a Company Material
Adverse Effect.
(e) There have been no material environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, or which are in
the possession of, the Company or any of its subsidiaries in relation to any
site or facility owned, operated or leased by the Company or any of its
subsidiaries, except for those the reports of which have been made available to
Parent prior to the execution of this Agreement.
(f) No sites or facilities, now or previously owned, operated
or leased by the Company or any of its subsidiaries, have or had at the time of
ownership, operation, or leasing, to the knowledge of the Company, any (i)
underground storage tanks, (ii) friable asbestos, (iii) polychlorinated
byphenyls ("PCBs"), or (iv) chlorofluorocarbons ("CFCs"), except in
circumstances which could not reasonably be expected to have individually or in
the aggregate a Company Material Adverse Effect or adversely affect the ability
of the Company to perform its obligations hereunder or to consummate the Merger.
(g) As used herein:
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(i) "Environmental Law" means any Law or order relating to the
environment or to emissions, discharges or Releases of pollutants, contaminants,
or chemicals, or industrial, toxic or hazardous substances or wastes, into the
environment (including structures, ambient air, soil, surface water, ground
water, wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
(ii) "Hazardous Material" means (A) any chemicals or other
materials or substances that are defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"pollutants," "contaminants," or words of similar import under any Environmental
Law, including petroleum, friable asbestos, PCBs, and CFCs, and (B) any other
chemical, material or substance, the presence of or exposure to which is
prohibited, limited or regulated by any Governmental or Regulatory Authority
under any Environmental Law.
(iii) "Release" means any actual or threatened (as defined
under CERCLA) release, spill, effluent, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
environment or any structure.
(iv) "Remedial Action" means all actions, including any
capital expenditures, required by a Governmental or Regulatory Authority,
required under any Environmental Law or voluntarily undertaken to (A) clean up,
remediate, remove, treat, or in any other way ameliorate or address any
Hazardous Materials Released into the environment; (B) prevent the Release, or
minimize the further Release of any Hazardous Material so it does not endanger
or threaten to endanger public health or the environment; (C) perform
pre-remedial studies and investigations or post-remedial monitoring and care
relating to a Release; or (D) bring the applicable party into compliance with
any Environmental Law.
SECTION 3.13 INTELLECTUAL PROPERTY; SOFTWARE.
(a) Each of the Company and its subsidiaries owns, or
possesses valid and enforceable third party licenses to use, all existing United
States and foreign patents, trademarks, trade names, service marks, trade dress,
Internet domain names, together with all the goodwill associated therewith,
copyrights, computer software, data, databases and documentation thereof, trade
secrets, know-how and other proprietary information, including any applications
and registrations of any of the foregoing, necessary for the operation of the
business of the Company and its subsidiaries as now conducted (the "Company
Intellectual Property Rights"), except where the failure to own or possess valid
rights to use such Company Intellectual Property Rights would not have a Company
Material Adverse Effect. The patents, registrations and applications for
registration included among the Company Intellectual Property Rights are set
forth on Section 3.13(a) of the Company Disclosure Schedule.
(b) Except as set forth on Schedule 3.13(b) of the Disclosure
Schedule,
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(i) the validity, enforceability and use of the
Company Intellectual Property Rights and the title thereto of the
Company or any subsidiary as the case may be is not being questioned in
any litigation or other proceeding to which the Company or any
subsidiary is a party, nor has any claim of infringement or
misappropriation (including, without limitation, any demand or request
that the Company or any subsidiary license any intellectual property
rights from a third party) been alleged or, to the knowledge of the
Company, threatened against the Company or any subsidiary by any third
party in connection with such third party's intellectual property
rights,
(ii) to the knowledge of the Company and its
subsidiaries, no third party is infringing or misappropriating the
Company Intellectual Property Rights,
(iii) the consummation of the transactions
contemplated hereby will not result in the loss or impairment of any
Company Intellectual Property Rights,
(iv) subject only to customary source code escrow
agreements, the Company and its subsidiaries have ownership and
possession of all source code and use and system documentation for the
material software owned by the Company or any subsidiary, and
(v) all employees and independent contractors who
have participated in the creation or development of any portion of the
Company Intellectual Property Rights have executed an agreement with
the Company and/or a subsidiary assigning all right, title and interest
in such portion of the Company Intellectual Property Rights developed
for the benefit of the Company to the Company or the subsidiary, as the
case may be.
(c) The Company and each of its subsidiaries have conducted an
inventory and assessment of the software, hardware, databases and embedded
control systems (microprocessor controlled, robotic or other device)
(collectively "Systems") used or relied on by the Company and its subsidiaries
in connection with their business or in connection with the use, operation or
enjoyment of, any material tangible or intangible asset or real property of the
Company or its subsidiaries, in order to determine which parts of the Systems
are not Year 2000 Compliant (as defined below) and to estimate the cost of
rendering such Systems Year 2000 Compliant prior to December 31, 1999 or such
earlier date on which the Systems may shut down or may produce incorrect
calculations or otherwise malfunction without becoming totally inoperable. Year
2000 Compliant means that the Systems will operate to accurately process
(including but not limited to calculating, comparing and sequencing) date
information relating to dates before, on, or after January 1, 2000, including
leap- year calculations. To the knowledge of the Company, after due inquiry, and
except as disclosed in the Recent SEC Reports, neither the Company nor any of
its subsidiaries will incur material expenses arising from or relating to the
failure of any of its Systems as a result of the advent of the year 2000, or the
transition from the twentieth century through the year 2000.
SECTION 3.14 CERTAIN BUSINESS PRACTICES. To the knowledge of the
Company, none of the Company, any of its subsidiaries or any directors,
officers, agents or employees of the Company or
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any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
SECTION 3.15 LABOR MATTERS. Neither the Company nor any of its
subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the Company or any of its subsidiaries the subject of
any proceeding asserting that the Company or any of its subsidiaries has
committed an unfair labor practice or seeking to compel it to bargain with any
labor union or labor organization, nor is there pending or, to the knowledge of
the Company, threatened any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company or any of its subsidiaries.
SECTION 3.16 INSURANCE. The Company maintains insurance policies (the
"Insurance Policies") against all risks of a character and in such amounts as
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, and all premiums due thereon have been paid
in full. None of the Insurance Policies will terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. No insurer under any Insurance Policy has
canceled or generally disclaimed liability under any such policy or, to the
Company's knowledge, indicated any intent to do so or not to renew any such
policy.
SECTION 3.17 TAX MATTERS.
(a) The Company and its subsidiaries have accurately prepared
and duly filed with the appropriate domestic federal, state, local and foreign
taxing authorities all tax returns, information returns and reports required to
be filed with respect to the Company and its subsidiaries and have paid in full
or made adequate provision for the payment of (by way of reserves on the balance
sheet or otherwise) all Taxes (as defined below). Neither the Company nor any of
its subsidiaries is delinquent in the payment of any Taxes. As used herein, the
term "Taxes" means all federal, state, local and foreign taxes, including,
without limitation, income, profits, franchise, employment, transfer,
withholding, property, excise, sales and use taxes (including interest and
penalties thereon and additions thereto).
(b) Except as set forth on Section 3.17(b) of the Disclosure
Schedule, no employee responsible for tax matters of the Company or any
subsidiary has knowledge based on personal contact with any agent of any taxing
authority of any claim made by such an authority in a jurisdiction where the
Company or any subsidiary does not file tax returns that the entity so not
filing is or may be subject to taxation by that jurisdiction.
(c) There are no security interests on any of the assets of
the Company or any subsidiary that arose in connection with any failure (or
alleged failure) to pay any Tax.
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(d) There is no dispute or claim concerning any Tax liability
of the Company or any subsidiary either (i) claimed or raised by any authority
in writing or (ii) as to which any of the employees responsible for Tax matters
of the Company or any subsidiary has knowledge based upon personal contact with
any agent of such authority. Schedule 3.17(d) sets forth those tax returns that
currently are the subject of audit.
(e) None of the Company or any subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(f) None of the Company nor any subsidiary has filed a consent
under Code Section 341(f) concerning collapsible corporations. Except as set
forth on Section 3.17(f) of the Disclosure Schedule, none of the Company nor any
subsidiary has made any payments, is obligated to make payments, or is a party
to any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G or Code
Section 162(m). None of the Company nor any subsidiary has been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii).
(g) None of the Company nor any subsidiary has any liability
for the Taxes of any person other than the Company or any subsidiary (i) under
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law), or (ii) by contract, except pursuant to contracts for the lease,
purchase or sale of goods or services in the ordinary course of business
consistent with commercial practices.
(h) None of the Company nor any subsidiary owns an interest in
an entity either treated as a partnership or whose separate existence is ignored
for federal income tax purposes.
SECTION 3.18 BROKERS. No broker, finder or investment banker (other
than the Financial Advisor pursuant to an arrangement (that may not be amended
or modified without the prior written consent of Parent) that has been disclosed
to Parent and Merger Sub prior to the date hereof) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
the Company or any subsidiary.
SECTION 3.19 REAL ESTATE.
(a) Attached as Schedule 3.19(a) is the address and legal
description of each parcel of real property owned by the Company or any
subsidiary (the "Owned Real Property"). Except as described on such Schedule,
the Company or its applicable subsidiary has good and marketable title in and to
all of the Owned Real Property subject to no Liens or other defects in title,
except for such Liens, if any, as are reflected in the Company's financial
statements included in the Recent SEC Reports or such other Liens as do not
detract in any material respect from the value or marketability of the property
subject thereto and do not materially interfere with the use of such property.
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(b) Attached as Schedule 3.19(b) is a list of all material
leases, subleases and other occupancy agreements, including all amendments,
extensions and other modifications (the "Leases") for real property (the "Leased
Real Property", collectively with the Owned Real Property, the "Real Property")
to which the Company or any subsidiary is a party. The Company or its applicable
subsidiary has a good and valid leasehold interest in and to all of the Leased
Real Property, subject to no Liens except as described in such Schedule, except
for such Liens, if any, as are reflected in the Company's financial statements
included in the Recent SEC Reports or such other Liens as do not detract in any
material respect from the value or marketability of the property subject thereto
and do not materially interfere with the use of such property. Each Lease is in
full force and effect and is enforceable in accordance with its terms in all
material respects. Except as disclosed on Schedule 3.19(b), to the knowledge of
the Company, there exists no default or condition which, with the giving of
notice, the passage of time or both, could become a material default under any
Lease. The Company has previously delivered to Parent true, complete, and
correct copies of all the Leases.
(c) The Real Property constitutes all of the material real
property owned, leased, occupied or otherwise used in connection with the
business of the Company and its subsidiaries. The Real Property and all plants,
buildings and improvements located thereon conform to all applicable building,
zoning and other laws, ordinances, rules and regulations except for violations
which would not have a Company Material Adverse Effect. All permits, licenses
and other approvals necessary to the current occupancy and use of the Real
Property have been obtained, are in full force and effect and have not been
violated, except for violations that, individually or in the aggregate, would
not have a Company Material Adverse Effect. There exists no violation by the
Company or any subsidiary of any covenant, condition, restriction, easement,
agreement or order affecting any portion of the Real Property (except for
violations that, individually or in the aggregate, would not have a Company
Material Adverse Effect). There is no pending or, to the knowledge of the
Company and its subsidiaries, any threatened condemnations proceeding affecting
any portion of the Real Property. Except as disclosed on Schedule 3.19(c), there
are no outstanding options or rights of first refusal with respect to the
purchase or use of any or the Owned Property, any portion thereof or interest
therein. Except as disclosed on Schedule 3.19(c), neither the Company nor any
subsidiary is obligated to purchase any real property.
SECTION 3.20 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of the Financial Advisor to the effect that, as of the date of this
Agreement, the consideration to be received in the Offer and the Merger by the
Company's stockholder is fair to the Company's stockholders from a financial
point of view, and a complete and correct signed copy of such opinion has been,
or promptly upon receipt thereof will be, delivered to Parent. The Company has
been authorized by the Financial Advisor to permit the inclusion of such opinion
in its entirety in the Offer Documents, the Schedule 14D-9, and the Proxy
Statement, so long as such inclusion is in form and substance reasonably
satisfactory to the Financial Advisor and its counsel.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant, on a joint and
several basis, to the Company as follows:
SECTION 4.1 ORGANIZATION.
(a) Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its businesses as now being conducted. Except as set forth
in the Commitment Letters (as defined in Section 4.7), Parent and Merger Sub
have no obligations or liabilities, and none of such parties are parties to any
litigation, which in either case if paid or determined adversely, or with
respect to which an event of default occurs, would have a material effect on
their ability to consummate the transactions contemplated hereby.
(b) Parent has heretofore delivered to the Company accurate
and complete copies of the Certificate of Incorporation and Bylaws, as currently
in effect, of Parent and Merger Sub. Each of Parent and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Parent Material Adverse Effect. The term
"Parent Material Adverse Effect" means (i) a material adverse effect on the
financial condition, properties, business or results of operations of the Parent
and Merger Sub, individually or in the aggregate or (ii) the ability of the
Parent or Merger Sub to perform its obligations under this Agreement.
SECTION 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Merger Sub and by their respective
shareholders as required by applicable law or their respective charter
documents, and no other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub and constitutes a valid, legal and
binding agreement of each of Parent and Merger Sub, enforceable against each of
Parent and Merger Sub in accordance with its terms, except (i) to the extent
that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and (ii) that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding thereof may be brought.
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SECTION 4.3 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Parent or Merger Sub for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, or the Proxy Statement (as
defined in Section 5.4(a)) will, at the respective times that the Offer
Documents, the Schedule 14D-9, the Proxy Statement or any amendments or
supplements thereto are filed with the SEC and are first published or sent or
given to holders of Shares, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
SECTION 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming the truth
and accuracy of the Company's representations and warranties contained in
Section 3.6, except for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the HSR Act and the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware as required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Parent or Merger Sub of this Agreement or the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice would not have a Parent
Material Adverse Effect or have a material adverse affect on the ability of
Parent or Merger Sub to consummate the Offer or the Merger. Neither the
execution, delivery and performance of this Agreement by Parent or Merger Sub
nor the consummation by Parent or Merger Sub of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of the
respective certificate or articles of incorporation or Bylaws (or similar
governing documents) of Parent or Merger Sub, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or Merger Sub is a party or by which
any of them or any of their respective properties or assets may be bound or (c)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or Merger Sub or any of Parent's subsidiaries or any of
their respective properties or assets, except in the case of (b) or (c) for
violations, breaches or defaults which would not have a Parent Material Adverse
Effect or have a material adverse effect on the ability of Parent or Merger Sub
to consummate the Offer or the Merger.
SECTION 4.5 NO PRIOR ACTIVITIES. Except for obligations incurred in
connection with its incorporation or organization, the making of the Offer or
the negotiation and consummation of this Agreement and the transactions
contemplated hereby, Merger Sub has neither incurred any obligation or liability
or engaged in any business or activity of any type or kind whatsoever or entered
into any agreement or arrangement with any person or entity.
SECTION 4.6 BROKERS. Except for Dresdner Kleinwort Benson North America
LLC, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission
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in connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Merger Sub.
SECTION 4.7 FINANCING. Attached hereto as Exhibit 4.7 are (i) a Senior
Facilities Commitment Letter from Dresdner Kleinwort Benson North America LLC
("DKBNA") and Dresdner Bank AG, New York and Grand Caymans Branch ("Dresdner"),
dated as of the date hereof, which provides for a commitment for senior debt
financing in an aggregate principal amount of up to $50,000,000, (ii) a Senior
Subordinated Notes Commitment Letter from DKBNA, Dresdner and Dresdner AG,
Hamburg Branch, dated as of the date hereof, which provides for a commitment for
subordinated debt financing in an aggregate principal amount of $10,000,000,
(iii) a letter from Dicom Group plc, dated as of the date hereof, which provides
for a commitment of equity financing of $4,000,000, (iv) a letter from Dresdner
Kleinwort Benson Private Equity Partners LP, dated as of the date hereof, which
provides for a commitment of equity financing of $16,000,000 (collectively, the
"Commitment Letters"). Assuming the financings contemplated by the Commitment
Letters are consummated in accordance with the terms thereof, the amounts
received thereunder by Parent and Merger Sub will provide Parent and Merger Sub
with sufficient funds to pay the aggregate amount payable in respect of the
Shares and the Stock Options upon the consummation of the Offer and the Merger
in accordance with the terms hereof. Neither Parent nor Merger Sub is presently
aware of any facts or circumstances which create a reasonable basis for Parent
or Merger Sub to believe that the conditions precedent set forth in the
Commitment Letters will not be satisfied.
ARTICLE 5
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated
by this Agreement, during the period from the date hereof to the Effective Time,
the Company will conduct its operations in the ordinary course of business
consistent with past practice, and the Company shall, and shall cause its
subsidiaries to, use its or their reasonable efforts to preserve substantially
intact its business organization, to keep available the services of its present
officers and employees and to preserve the present commercial relationships of
the Company and its subsidiaries with persons with whom the Company or its
subsidiaries do business. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, prior to the Effective
Time, the Company will not and will not permit any of its subsidiaries, without
the prior written consent of Parent or Merger Sub, or as set forth in Section
5.1 of the Disclosure Schedule, to:
(a) amend its Certificate of Incorporation or Bylaws (or other
similar governing instrument);
(b) amend or modify (except as required hereby) the terms of
the Company Plans or authorize for issuance, issue, sell, deliver or agree or
commit to issue (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
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limitation, any phantom stock or stock appreciation rights), except for the
issuance or sale of shares of common stock pursuant to the exercise of Stock
Options or under its 1997 Stock Plan;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem or otherwise acquire any capital stock of its subsidiaries;
(d) (i) incur or assume any indebtedness for borrowed money
except for indebtedness not exceeding $100,000 in the aggregate, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except for
obligations not exceeding $100,000 in the aggregate, (iii) except for
investments not exceeding $100,000 in the aggregate, make any loans, advances or
capital contributions to, or investments in, any other person (other than to
subsidiaries of the Company or customary loans or advances to employees in the
ordinary course of business consistent with past practice), (iv) pledge or
otherwise encumber shares of capital stock of the Company's subsidiaries, or (v)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material Lien thereupon except for Liens securing
indebtedness for borrowed money not exceeding $100,000 in the aggregate;
(e) except as may be required by law or as contemplated by
this Agreement, (i) enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock purchase
agreement, pension, retirement, deferred compensation, employment, severance or
other employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee in any material manner,
or (ii) except for normal salary increases and bonus payments in the ordinary
course of business consistent with past practice, increase in any material
manner the compensation of any director, officer or employee or agent, or (iii)
pay any material benefit not required by any plan and arrangement as in effect
as of the date hereof (including, without limitation, the granting of stock
appreciation rights or performance units), or (iv) create, issue or increase any
severance agreement or stay bonus with any officer, director or employee;
(f) acquire, sell, lease or dispose of any assets outside the
ordinary course of business which have a value in the aggregate in excess of
$100,000;
(g) except as may be required as a result of a change in law
or in GAAP, change any of the accounting principles or cash management practices
used by it;
(h) authorize or make any new capital expenditure or
expenditures which, individually, is in excess of $100,000 or, in the aggregate,
are in excess of $500,000;
(i) make any tax election or settle or compromise any income
tax liability material to the Company and its subsidiaries taken as a whole;
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(j) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company and its subsidiaries in the Recent SEC Reports or
incurred in the ordinary course of business consistent with past practice;
(k) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary or the Company; or
(l) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through 5.1(k) or any action which would
cause or constitute a breach of any of the representations or warranties of the
Company contained in this Agreement.
SECTION 5.2 NO SOLICITATION.
(a) The Company shall not, nor shall it permit any of the
subsidiaries to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of the subsidiaries to (i) solicit or
initiate, encourage, or facilitate, directly or indirectly, any inquiries
relating to, or the submission of, any proposal or offer, whether in writing or
otherwise, from any person other than Parent, Merger Sub or any affiliates
thereof (a "Third Party") to acquire beneficial ownership (as defined under Rule
13(d) of the Exchange Act) of all or a material portion of the assets of the
Company or any of its subsidiaries or 20% or more of any class of equity
securities of the Company or any of its subsidiaries pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock,
sale of assets, tender offer, exchange offer or similar transaction with respect
to either the Company or any of its subsidiaries, including any single
transaction or series of related transactions, which is structured to permit
such third Party to acquire beneficial ownership of any material portion of the
assets of or 20% or more of the equity interest in either the Company or any of
its subsidiaries (a "Takeover Proposal"), (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information or data with
respect to or access to the properties of, or take any other action to knowingly
facilitate the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal or (iii) enter into any agreement
with respect to any Takeover Proposal, approve or recommend or resolve to
approve or recommend any Takeover Proposal or enter into any agreement or
understanding requiring it to abandon, terminate or fail to consummate the
Offer, the Merger and the other transactions contemplated by this Agreement.
Notwithstanding the foregoing sentence, prior to the expiration of the Offer, if
the Company Board receives a bona fide Takeover Proposal by a Third Party that
was not solicited or initiated, or encouraged or facilitated, directly or
indirectly, by the Company, any of the subsidiaries or any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of the subsidiaries, the terms of which
the Company Board determines in good faith (after consulting and receiving
advice from the Company's independent financial advisor and independent legal
counsel) are more favorable from a financial point of view to the holders of
Shares than the Offer, the Merger and other transactions contemplated by this
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Agreement (taking into account any adjustments to the terms and conditions
proposed in writing by Merger Sub within three (3) Business Days after Parent
and Merger Sub receive notice of such Takeover Proposal) and taking into account
any differences in the conditions set forth in the Superior Proposal, in the
aggregate, from the conditions set forth herein (a "Superior Proposal"), then
the Company may, in response to an unsolicited request therefor and subject to
compliance with Section 5.2(b) furnish information with respect to the Company
and the subsidiaries to, and participate in discussions and negotiations
directly or through its representatives with, such Third Party, subject to a
confidentiality agreement; provided, that the Company Board first determines in
good faith, after receiving the advice of independent legal counsel, that such
action is required in order for the Company Board to comply with its fiduciary
duties to the Company's stockholder under applicable law, and the Company shall
not have violated any of the restrictions set forth in this Section 5.2;
provided, however, that any such Takeover Proposal shall not be deemed to be a
Superior Proposal if any financing required to consummate the transaction
contemplated thereby is not committed on terms substantially similar to those
obtained by or for the benefit of Parent and Merger Sub in connection with the
Offer and the Merger and such commitment is not likely, in the reasonable
judgment of the Company's Board (after consultation with its independent
financial advisor), to be obtained by such third party within a reasonable
period of time.
(b) The Company shall advise Parent orally and in writing of
(i) any Takeover Proposal or any inquiry with respect to or which could
reasonably be expected to lead to any Takeover Proposal received by any officer
or director of the Company or, to the knowledge of the Company, any financial
advisor, attorney or other advisor or representative of the Company, (ii) the
material terms of such Takeover Proposal (including a copy of any written
proposal), and (iii) the identity of the person making any such Takeover
Proposal or inquiry promptly following receipt of such Takeover Proposal or
inquiry. The Company will keep Parent duly informed of the status and details of
any such Takeover Proposal or inquiry in a timely manner.
SECTION 5.3 ACCESS TO INFORMATION. Between the date hereof and the
Effective Time, the Company will provide to Parent and Merger Sub and their
authorized representatives reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the Company and
its subsidiaries, will permit Parent and Merger Sub to make such inspections as
Parent and Merger Sub may reasonably require and will cause the officers of the
Company and its subsidiaries to furnish Parent and Merger Sub with such
financial and operating data and other information with respect to the business
and properties of the Company and its subsidiaries as Parent or Merger Sub may
from time to time reasonably request. All of such information shall be treated
as Confidential Information pursuant to the terms of the Confidentiality
Agreement, dated June 29, 1999, between the Company and Dicom Group plc, the
provisions of which are by this reference incorporated herein.
SECTION 5.4 SHAREHOLDERS MEETING; PROXY STATEMENT.
(a) The Company will, as promptly as practicable following the
acceptance for payment of Shares by Merger Sub pursuant to the Offer, take, in
accordance with applicable law and its Certificate of Incorporation and By-laws,
all action necessary to convene a special meeting of
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holders of Shares (the "Shareholders Meeting") to consider and vote upon the
approval of the Merger, if such approval is required. The Company shall, as
promptly as practicable, prepare and file with the SEC a preliminary proxy
statement for the solicitation of a vote of holders of Shares approving the
Merger (the "Proxy Statement"), which shall (subject to Section 5.4(c)) include
the unanimous recommendation of the Company Board that shareholders of the
Company vote in favor of the approval and adoption of this Agreement and the
written opinion of the Financial Advisor that the cash consideration to be
received by the shareholders of the Company pursuant to the Merger is fair to
such shareholders from a financial point of view. The Company shall use all
reasonable efforts to respond to any comments of the SEC and its staff and as
promptly as practicable after responding to such comments to the satisfaction of
the staff cause the Proxy Statement to be mailed to the shareholders of the
Company. Notwithstanding the foregoing, if Parent, Merger Sub and/or any other
subsidiary of Parent shall acquire at least ninety percent (90%) of the
outstanding Shares, the parties shall take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Shareholders Meeting in accordance with
Section 253 of the DGCL.
(b) Parent and Merger Sub agree to cause all Shares purchased
pursuant to the Offer and all other Shares owned by Parent, Merger Sub or any
subsidiary of Parent to be voted in favor of the Merger.
SECTION 5.5 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the
terms and conditions herein provided, each party agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable laws
and regulations to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including, without limitation, (a)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Proxy Statement, any filings that may be required under the HSR Act
and any amendments thereto, (b) the taking of all action reasonably necessary,
proper or advisable to secure any necessary consents under Material Contracts,
(c) contesting any legal proceeding relating to the Offer or the Merger and (d)
the execution of any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Merger Sub agree to use (i) all reasonable efforts to
cause the Effective Time to occur as soon as practicable after the shareholder
vote with respect to the Merger and (ii) their respective best efforts to
satisfy the conditions precedent set forth in the Commitment Letters (provided
that nothing herein shall be deemed to be an obligation of Parent or Merger Sub
to increase the Per Share Amount). In addition, Parent and Merger Sub will not
consent or agree to any amendment, waiver, modification or early termination of
the Commitment Letter in any manner adverse to Parent or Merger Sub without the
Company's prior written consent, which shall not be unreasonably withheld.
SECTION 5.6 CONSENTS. Parent, Merger Sub and the Company each will use
all commercially reasonable efforts to obtain consents of all third parties to
Material Contracts and Governmental Entities necessary, proper or advisable for
the consummation of the transactions contemplated by this Agreement.
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SECTION 5.7 PUBLIC ANNOUNCEMENTS. Parent, Merger Sub and the Company,
as the case may be, will consult with one another and seek one another's
approval before issuing any press release, or otherwise making any public
statements, with respect to the transactions contemplated by this Agreement,
including, without limitation, the Offer or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation
and approval, except as may be required by applicable law or by obligations
pursuant to any listing agreement with the Nasdaq Stock Market, as determined by
Parent, Merger Sub or the Company, as the case may be.
SECTION 5.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) Parent and Merger Sub agree that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its subsidiaries, as provided in
indemnification agreements or their respective charters or bylaws (or other
similar governing instruments) or otherwise in effect as of the date hereof with
respect to matters occurring prior to the Effective Time, shall survive the
Merger and shall continue in full force and effect. To the maximum extent
permitted by the DGCL, such indemnification shall be mandatory rather than
permissive, and the Surviving Corporation shall advance expenses in connection
with such indemnification as provided in such indemnification agreements. From
and after the Effective Time, Parent will fulfill and honor, and will cause the
Surviving Corporation to fulfill and honor, in all respects the indemnification
obligations described above, which shall be joint and several obligations of
Parent and the Surviving Corporation. The indemnification and liability
limitation or exculpation provisions of the Company's Certificate of
Incorporation and bylaws shall not be amended, repealed or otherwise modified
after the Effective Time in any manner that would materially adversely affect
the rights thereunder of individuals who, as of the date hereof and prior to the
Effective Time, were directors, officers, employees or agents of the Company or
its subsidiaries, unless such modification is required by applicable law.
(b) Parent shall cause the Surviving Corporation to maintain
in effect for not less than six (6) years from the Effective Time, if available,
the coverage provided by the policies of the directors' and officers' liability
and fiduciary insurance most recently maintained by the Company; provided, that
the Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage with respect to matters occurring prior to the Effective Time
and provided further that the Surviving Corporation shall not be obligated to
pay annual premiums in excess of 150% of the annual aggregate premium for
existing insurance with respect to such insurance for the next renewal of such
insurance (the "Current Premium"). If such annual premium for such insurance
would at any time exceed 150% of the Current Premium, then the Parent and the
Surviving Corporation shall cause to be maintained policies of insurance which,
in the Surviving Corporation's good faith determination, provide the maximum
coverage reasonably available at an annual premium equal to 150% of the Current
Premium.
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<PAGE> 37
(c) The directors, officers, employees and agents of the
Company and its subsidiaries entitled to the indemnification, liability
limitation, exculpation and insurance set forth in this Section 5.8. are
intended to be third party beneficiaries of this Section 5.8.
SECTION 5.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall give
prompt notice to the Company, of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty of the notifying party contained in this Agreement to
be untrue or inaccurate in any material respect as if made at the Effective Time
and (b) any material failure of the notifying party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, that the delivery of any notice pursuant to this Section
5.9 shall not cure such breach or non-compliance or limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 5.10 SEC FILINGS. Each of Parent and the Company shall promptly
provide the other party (or its counsel) with copies of all filings made by the
other party or any of its subsidiaries with the SEC or any other state or
federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
SECTION 5.11 TAKEOVER STATUTES. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States (each a "Takeover
Statute") is or may become applicable to the Offer or the Merger, the Company
will use reasonable best efforts to grant such approvals and take such actions
as are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act so as to eliminate or minimize the effects of any Takeover Statute
on any of the transactions contemplated hereby.
SECTION 5.12 TRANSACTION LITIGATION. The Company shall give Parent and
Merger Sub the opportunity to participate in the defense or settlement of any
litigation against the Company and its directors directly relating to any of the
transactions contemplated by this Agreement; provided, that no such settlement
shall be agreed to without Parent's consent, which consent shall not be
unreasonably withheld.
SECTION 5.13 DELISTING. Each of the parties hereto shall cooperate with
each other in taking or causing to be taken, all actions necessary to delist all
of the Company's securities from the Nasdaq National Market System and to
terminate registration under the Exchange Act; provided, that such delisting and
termination shall not be effective until after the Effective Date.
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ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
SECTION 6.1 STOCKHOLDER APPROVAL. This Agreement, including the Merger,
shall have been approved and adopted by the affirmative vote of the shareholders
of the Company (unless the vote of the shareholders is not required by the DGCL)
as required under the Company's Certificate of incorporation or Bylaws or the
DGCL.
SECTION 6.2 NO ORDER. No federal, state or foreign Governmental Entity
or federal, state or foreign court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect (which order or other action the parties
hereto shall use their reasonable efforts to vacate or lift) and has the effect
of making the consummation of the Merger illegal under applicable law.
SECTION 6.3 HSR ACT. Any waiting period (and any extension thereof)
applicable to the Merger and the other transactions described in the recitals to
this Agreement under the HSR Act shall have terminated or expired, and any other
governmental or regulatory notices or approvals required with respect to the
transactions contemplated hereby (the absence of which would reasonably be
expected to have a Company Material Adverse Effect) shall have been either filed
or received.
SECTION 6.4 OFFER. Merger Sub shall have accepted for payment and
purchased all Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated and the Offer
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval of this Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent, Merger Sub and the
Company;
(b) by Parent and Merger Sub or by the Company
(i) if (x), the Offer shall have terminated or
expired in accordance with its terms without Merger Sub's having
accepted for payment any Shares pursuant to the Offer or (y) the Offer
shall not have been consummated prior to October 15, 1999; provided,
that the right to terminate this Agreement pursuant to this Section
7.1(b)(i) shall not be available
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to any party if it is in material breach of its obligation hereunder
and such breach is the principal cause of, or resulted in, the failure
of the Offer to have been consummated on or before such date; or
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the Offer and such
order, decree or ruling or other action shall have become final and
nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this clause (ii) shall have used all commercially
reasonable efforts to remove such order, decree, ruling, judgment or
injunction.
(c) by Parent or Merger Sub prior to the purchase of Shares
pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of the Offer Condition set
forth in paragraph (b) of Annex A to this Agreement and (ii) cannot be or has
not been cured within 10 Business Days after the giving of written notice
thereof to the Company by Parent or Merger Sub;
(d) by Parent or Merger Sub prior to the purchase of Shares
pursuant to the Offer if either Parent or Merger Sub is entitled to terminate
the Offer as a result of the occurrence of any event set forth in paragraphs (e)
or (j) of Annex A to this Agreement.
(e) by the Company if the Company Board has received a
Superior Proposal and the Company furnishes information with respect to the
Company and the subsidiaries to, and participates in discussions and
negotiations directly or through its representatives with a Third Party, subject
to a confidentiality agreement, after the Company Board determined in good
faith, after receiving the advice of independent legal counsel, that such action
is required in order for the Company Board to comply with its fiduciary duties
to the Company's stockholder under applicable law; provided, that (i) the
Company has complied with all provisions of Section 5.2, (ii) the Company may
not terminate this Agreement pursuant to this Section 7.1(e) unless and until
three (3) Business Days have elapsed following delivery to Parent of a written
notice of such determination by the Company Board (which notice shall include
the identity of the Third Party making such Superior Proposal and a copy of all
documentation relating to such Superior Proposal), and (iii) the Company
delivers payment to the Parent of the Termination Fee and the Expenses (each as
defined in Section 7.3(b)) contemporaneously with such termination.
(f) by the Company prior to the purchase of Shares pursuant to
the Offer if (i) any of the representations or warranties of Parent or Merger
Sub set forth in this Agreement that are qualified as to materiality shall not
be true and correct in any respect or any such representations or warranties
that are not so qualified shall not be true and correct in any material respect,
or (ii) Parent or Merger Sub shall have failed to perform in any material
respect any material obligation or to comply in any material respect with any
material agreement or covenant of Parent or Merger Sub to be performed or
complied with by it under this Agreement and such untruth, incorrectness or
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failure cannot be or has not been cured within 10 Business Days after the
Company's giving of written notice to Parent or Merger Sub, as applicable.
SECTION 7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void (except for the provisions of this Section 7.2, the last sentence of
Section 5.3, Sections 5.7, 7.3 and Article 8), and there shall be no liability
or obligation on the part of any party or its affiliates, directors, officers or
shareholders, other than (a) the provisions of this Section 7.2 , the last
sentence of Section 5.3, Sections 5.7, 7.3 and Article 8, and (b) any liability
of any party for any breach of this Agreement prior to such termination.
SECTION 7.3 FEES AND EXPENSES.
(a) Except as provided in this Section 7.3, whether or not the
Merger is consummated, all costs and expense incurred in connection with this
Agreement and the transactions contemplated by this Agreement, including the
fees and disbursements of counsel, financial advisors and accountants, shall be
paid by the party incurring such costs and expenses.
(b) The Company shall pay, or cause to be paid, by wire
transfer of immediately available funds to Parent (i) the documented reasonable
out-of-pocket fees and expenses incurred by or paid by or on behalf of Parent
and its affiliates (including, but not limited to, Dicom Group plc and Dresdner
Kleinwort Benson Private Equity Partners L.P.) in connection with the Offer, the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all reasonable fees and expenses of law firms, commercial
banks, investment banking firms, accountants, experts and consultants to Parent
and its affiliates ("Purchaser Expenses") not to exceed $1,750,000 and, if
applicable, (ii) $1,500,000 (the "Termination Fee") under the circumstances and
at the times set forth as follows:
(i) if the Company terminates this Agreement under
Section 7.1(e), the Company shall pay the Purchaser Expenses and the
Termination Fee concurrently with such termination in accordance with
Section 7.1(e);
(ii) if Parent or Merger Sub terminates this
Agreement under Sections 7.1(c) or 7.1 (d), (x) the Company shall pay
the Purchaser Expenses upon demand, and (y) if concurrently with such
termination or within 270 days thereafter (A) the Company enters into a
merger agreement, acquisition agreement or similar agreement with
respect to a Takeover Proposal, or a Takeover Proposal is consummated,
involving any party other than Parent or any of its affiliates (1) with
whom the Company had any discussions with respect to a Takeover
Proposal, (2) to whom the Company furnished information with respect to
or with a view to a Takeover Proposal or (3) who had submitted a
proposal or expressed any interest publicly in a Takeover Proposal, in
the case of each of clauses (1), (2) and (3), after the date hereof and
prior to such termination, or (B) the Company enters into a merger
agreement, acquisition agreement or similar agreement with respect to a
Superior Proposal, or a Superior Proposal is consummated, then, in the
case of either (A) or (B) above, the
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Company shall pay the Termination Fee upon consummation of such
Takeover Proposal or Superior Proposal; and
(iii) notwithstanding clause (ii) above, if the
Parent or Merger Sub terminates this Agreement under Section 7.1(c) as
a result of the Company's material breach of Section 5.2, the Company
shall pay the Purchaser Expenses and the Termination Fee upon demand.
In no event shall the Purchaser Expenses and the Termination Fee be payable by
the Company more than once. Any such payments shall be made to the Parent by
wire transfer of immediately available funds.
(c) In the event that the Company terminates this Agreement
under Section 7.1(f) or the Parent or Merger Sub terminates this Agreement
solely as a result of the failure of the condition set forth in paragraph (k) of
Annex A, Parent shall pay, or shall cause to be paid by wire transfer of
immediately available funds to the Company the documented reasonable
out-of-pocket fees and expenses incurred by or paid on behalf of the Company in
connection with the offer, the Merger or the consummation of any of the
transactions contemplated by this Agreement, including all reasonable fees and
expenses of law firms, investment banking firms, accountants, experts and
consultants to the Company (the "Company Expenses") not to exceed $400,000.
(d) Each of the parties hereto acknowledge that all amounts
payable under this Section 7.3 shall constitute liquidated damages in lieu of
any actual damages for termination of this Agreement.
SECTION 7.4 AMENDMENT. Subject to applicable law, this Agreement may be
amended by the parties hereto, by action taken by or on behalf of the respective
board of directors of the Company, Parent and Merger Sub at any time prior to
the Effective Time; provided, that after the approval and adoption of this
Agreement and the transactions contemplated thereby by the shareholders of the
Company (if required by applicable law) no amendment shall be made which would
reduce the amount or change the type of consideration into which each Share
shall be converted upon the consummation of the Merger. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties.
SECTION 7.5 EXTENSION; WAIVER. At any time prior to the Effective Time
subject to Section 1.1(a) and Section 1.3(c), each party may (a) extend the time
for the performance of any of the obligations or other acts of the other party
or parties, (b) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document, certificate or writing
delivered pursuant hereto or (c) waive compliance by the other parties with any
of the agreements or conditions contained herein, which may be legally waived.
Any agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to assert any of its rights hereunder shall not
constitute a waiver of such rights.
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ARTICLE 8
MISCELLANEOUS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement pursuant to Section 7.1, as
the case may be, except for representations and warranties set forth in Sections
3.19 and 4.6.
SECTION 8.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise; provided, that
Merger Sub may assign any or all of its rights and obligations under this
Agreement to Parent or any wholly owned subsidiary of Parent.
SECTION 8.3 VALIDITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 8.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the other party as follows:
To Parent or Merger Sub:
c/o DICOM Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
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<PAGE> 43
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to
Parent or Merger Sub) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
To the Company:
Kofax Image Products, Inc.
16245 Laguna Canyon Road
Irvine, CA 92618
Attention: Chief Executive Officer
Facsimile: (949) 727-3511
with a copy (which shall not constitute notice to the
Company) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Suite 1600
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 8.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
SECTION 8.6 CONSTRUCTION; INTERPRETATION. The headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this
39
<PAGE> 44
Agreement. Article, section, exhibit, schedule, annex, party, preamble and
recital references are to this Agreement unless otherwise stated. No party, nor
its respective counsel, shall be deemed the drafter of this Agreement for
purposes of construing the provisions hereof, and all provisions of this
Agreement shall be construed according to their fair meaning and not strictly
for or against any party.
SECTION 8.7 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party and its successors and permitted
assigns and, except as provided in Section 5.8 and Section 8.2, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.8 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 8.9 SPECIFIC PERFORMANCE. The parties acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies, including arbitration,
which any party may have under this Agreement or otherwise.
SECTION 8.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 8.11 WAIVER OF JURY TRIAL. The parties to this Agreement each
hereby waives, to the fullest extent permitted by law, any right to trial by
jury of any claim, demand, action, or cause of action (i) arising under this
Agreement or (ii) in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the
transactions related hereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity, or otherwise. The parties to
this Agreement each hereby agrees and consents that any such claim, demand,
action, or cause of action shall be decided by court trial without a jury and
that the parties to this Agreement may file an original counterpart of a copy of
this Agreement with any court as written evidence of the consent of the parties
hereto to the waiver of their right to trial by jury.
* * * * *
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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
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ANNEX A
The capitalized terms used herein have the meanings set forth in the
Agreement and Plan of Merger to which this Annex A is attached.
Notwithstanding any other provisions of the Offer, Merger Sub shall not
be required to accept for payment purchase or pay for any validly tendered
Shares (subject to any applicable rules and regulations of the SEC, including
Rule 14e-1(c) under the Exchange Act), and may delay in accordance with Section
1.1(b) the acceptance for payment of, or the payment for, any validly tendered
Shares (subject to the restrictions referred to above), may amend the Offer
consistent with the terms of the Agreement, or may terminate the Offer if (i)
immediately prior to the expiration of the Offer (as extended in accordance with
the Offer), the Minimum Condition shall not have been satisfied, (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated (the "HSR Condition") or (iii) prior to the acceptance for payment of
Shares, any of the following conditions exist:
(a) There shall be threatened in writing or pending any suit, action or
proceeding by a federal, state or foreign Governmental Entity (but only if such
suit, action or proceeding is deemed by Parent to have a reasonable likelihood
of success) (i) seeking to prohibit or impose any material limitations on the
ownership or operation by the Company, Merger Sub, Parent or any of their
respective subsidiaries of a material portion of the businesses or assets of the
Company, Merger Sub, Parent or any of their respective subsidiaries which could
reasonably be expected to have a Company Material Adverse Effect as a result of
the Offer or any other transactions contemplated by this Agreement, (ii) seeking
to compel the Company, Merger Sub, or Parent to dispose of or hold separate any
material portion of their respective business or assets as a result of the Offer
or any other transactions contemplated by this Agreement, (iii) seeking to
restrain or prohibit the making or consummation of the Offer or the Merger or
the consummation of any of the other transactions contemplated by the Agreement
or the Voting Agreements, (iv) seeking to impose material limitations on the
ability of Merger Sub or Parent, or rendering Merger Sub unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the Offer or
the Merger, or (v) seeking to impose material limitations on the ability of
Merger Sub effectively to exercise full rights of ownership of the Shares
accepted for payment pursuant to the Offer, including the right to vote such
Shares on all matters properly presented to the Company's shareholders. There
shall be any statute, rule regulation, judgment, order or injunction enacted,
entered, enforced, promulgated or applicable to the Offer or the Merger, or any
other action shall be taken by any Governmental Entity, other than the
application to the Offer or the Merger of applicable waiting periods under the
HSR Act, that is reasonably likely to result, directly or indirectly, in any of
the consequences referred to in clauses (i) through (v) above.
(b) Any of the representations and warranties of the Company set forth
in the Agreement, without, for purposes of this paragraph (b) only, giving
effect to any qualifications as to materiality, shall not be true and correct in
any material respect as of the date of the Agreement and as of consummation of
the Offer as though made on or as of such date (except for those representations
and warranties that address matters only as of a particular date, which need to
be true and correct as
Annex A - 1
<PAGE> 47
of such particular date), or the Company shall have breached or failed to comply
with, in any material respect, any obligation, agreement or covenant required by
the Agreement to be performed or complied with by it, which in either case could
reasonably be expected to have a Company Material Adverse Effect.
(c) It shall have been publicly disclosed that any person (which
includes a "person" as such term is defined in Section 13(d)(3) of the Exchange
Act) other than Parent, Merger Sub or any of their affiliates and stockholders
of the Company listed on Schedule 2.8, and (i) shall have acquired or announced
its intention to acquire beneficial ownership of more than 20% of the
outstanding Shares or (ii) shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer or
exchange offer for any Shares or a merger, consolidation or other business
combination with or involving the Company, any of its subsidiaries or any of
their material assets; provided, that clause (i) hereof shall not continue after
the date on which the Minimum Condition is satisfied.
(d) The Agreement shall have been terminated in accordance with its
terms.
(e) Prior to the purchase of Shares pursuant to the Offer, the Company
Board (i) shall have withdrawn or modified (including by amendment of the
Schedule 14D-9) in a manner adverse to Parent or Merger Sub its approval or
recommendation of the Offer, this Agreement or the Merger (ii) shall have
recommended a Takeover Proposal, or (iii) shall have adopted any resolution to
effect any of the foregoing.
(f) There shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange, the
American Stock Exchange, or in Nasdaq National Market System, (ii) a declaration
of a banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), or (iii) any limitation by any United
States Governmental Entity that has a material adverse effect generally on the
extension of credit by banks or other financial institutions, in the case of any
of the situations in clauses (i) through (iii) inclusive, existing on the date
hereof, a material acceleration or worsening thereof.
(g) The Company shall commence a case under any chapter of Title XI of
the United States Code or any similar law or regulation; or a petition under any
chapter of Title XI of the United States Code or any similar law or regulation
is filed against the Company which is not dismissed within 30 Business Days.
(h) Any party identified with an asterisk on Exhibit A to any of the
Voting Agreements other than Parent or Merger Sub shall have breached or failed
to perform any of its agreements under such agreements or breach any of its
representations and warranties in such agreements or any such agreements shall
not be valid, binding and enforceable; provided, that this clause (h) shall be
deemed satisfied upon the satisfaction of the Minimum Condition.
Annex A - 2
<PAGE> 48
(i) There shall have occurred any events or changes which have had, or
could reasonably be expected to have or constitute, individually or in the
aggregate, a Company Material Adverse Effect.
(j) The Company shall have less than $22,991,000 of freely available
cash or cash equivalents ("Minimum Cash"); provided, that the following
adjustments may be made, without duplication, to Minimum Cash: (i) in the event
the Offer is not consummated before August 15, 1999, Minimum Cash shall be
reduced by $750,000 (representing employee bonuses), (ii) in the event the Offer
is not consummated before September 15, 1999, Minimum Cash shall be reduced by
$1,000,000 (representing payment of the Company's Federal income taxes), (iii)
in the event the Offer is not consummated before October 15, 1999, Minimum Cash
shall be reduced by $800,000 (representing payment of the Company's Federal
income taxes), (iv) Minimum Cash shall be determined without giving effect to
Company Expenses, and (v) Minimum Cash may be reduced by an amount not to exceed
$1,350,000 in the aggregate (such aggregate amount, the "Operating Cash
Shortfall") so long as the Company's consolidated non-cash, net working capital
(i.e., current assets (excluding cash and cash equivalents) less current
liabilities as determined in accordance with GAAP, applied on a basis consistent
with the preparation of the financial statements described in Section 3.4)
("Working Capital") exceeds $2,098,000 (the Company's Working Capital as of June
30, 1999) (less up to $500,000 for capital expenditures made by the Company in
accordance with Section 5.1(h)) by an amount equal to or greater than such
Operating Cash Shortfall. The condition set forth in this clause (j) shall be
satisfied upon the presentation of evidence, documentation and information by
the Company to the Parent that the Minimum Cash, and all adjustments thereto
(including with respect to the Operating Cash Shortfall and working capital) as
of the consummation of the Offer.
(k) Parent or Merger Sub shall have not received the cash proceeds of
equity and debt financing in an amount necessary to consummate the Offer, the
Merger and the other transactions contemplated by the Agreement and to pay all
fees and expenses in connection therewith and to provide adequate working
capital for the Surviving Corporation, all on terms and conditions satisfactory
to the Parent and Merger Sub.
Annex A - 3
<PAGE> 1
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of July 27, 1999 is
made by and among Imaging Components Corporation, a Delaware corporation (the
"Parent"), Imaging Acquisition Corporation, a Delaware corporation ("Merger
Sub"), and each of the persons named on Exhibit A hereto (each, a "Stockholder",
and collectively, the "Stockholders").
WHEREAS, Parent, Merger Sub and Kofax Image Products, Inc., a
Delaware corporation (the "Company") are concurrently herewith entering into an
Agreement and Plan of Merger dated as of the date hereof (as may be amended,
restated or modified from time to time, the "Merger Agreement") which provides
for, among other things, the merger of Merger Sub with and into the Company,
upon the terms and subject to the conditions set forth in the Merger Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in the Merger Agreement.
WHEREAS, as of the date hereof, each Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Exhibit A (the "Existing Shares" and, together with any shares of Common
Stock acquired by or issued to such Stockholder after the date hereof, the
"Subject Shares").
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent and Merger Sub have required that the Stockholders
agree, and the Stockholders have agreed, to enter into this Agreement.
WHEREAS, the Stockholders and Merger Sub desire to set forth their
agreement with respect to the voting of the Subject Shares in connection with
the Merger Agreement and the transactions contemplated thereby (the
"Transactions") upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. COVENANTS OF THE STOCKHOLDERS. Until the termination of this
Agreement in accordance with Section 5, the Stockholders agree as follows:
(a) Agreement to Vote in Favor. At any meeting of shareholders of
the Company called for purposes that include approval of the Merger Agreement
and the Transactions, or in connection with any written consent of the holders
of Shares or in any other circumstances in which the Stockholders are entitled
to vote, consent or give any other approval with respect to the Merger Agreement
and the Transactions, the Stockholders shall vote (or cause to be voted) the
Subject
<PAGE> 2
Shares in favor of adoption and approval of the Merger Agreement and the
Transactions and the approval of the terms thereof and each of the other actions
contemplated by this Agreement and the Merger Agreement and any amendments.
(b) Agreement to Tender. Within the first ten (10) Business Days
after the commencement of the Offer to tender all of their respective Subject
Shares, except, if applicable, their respective Retained Shares, into the Offer,
and not to withdraw any of their respective Shares so tendered from the Offer.
(c) Agreement to Vote Against. At any meeting of shareholders of the
Company, or in connection with any written consent of the holders of Shares or
in any other circumstances in which the Stockholders are entitled to vote,
consent or give any other approval, except as otherwise agreed to in writing in
advance by Merger Sub, the Stockholders shall vote (or cause to be voted) the
Subject Shares against the following actions:
(i) any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger
Agreement or of the Stockholders hereunder; or
(ii) any action or agreement that could reasonably be expected
to impede, interfere with, delay, postpone or attempt to discourage
the Merger and/or the Transactions, including, without limitation,
(x) the adoption by the Company of a proposal supporting a Takeover
Proposal or the repurchase by the Company or any of its Subsidiaries
of outstanding Shares for consideration in excess of the Per Share
Amount or (y) any amendment of the Company's Articles of
Incorporation or By-laws (including any amendment affecting the
voting rights of the Company's Capital Stock) or other proposal or
transaction involving the Company or any of its Subsidiaries
(including any changes in management or the directors of the
Company), which amendment or other proposal or transaction could in
any manner reasonably be expected to impede, in any material
respect, or prevent the Merger, the Merger Agreement or the
Transactions.
(d) Proxies. As security for the agreements of the Stockholders
provided for herein, the Stockholders hereby grant to Merger Sub a proxy to vote
the Subject Shares as indicated in Sections 1(a) and 1(b) above. The
Stockholders agree that this proxy shall be irrevocable during the term of this
Agreement and coupled with an interest and each of the Stockholders and Merger
Sub will take such further action or execute such other instruments as may be
necessary to effectuate the intent of this proxy and hereby revokes any proxy
previously granted by the Stockholders with respect to the Subject Shares.
(e) Transfer Restrictions. The Stockholders agree not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of or hypothecate
(including by gift or by contribution or distribution to any trust or similar
instrument or to any beneficiaries of the Stockholders) (collectively,
"Transfer"), or enter into any contract, option or other arrangement or
understanding
2
<PAGE> 3
(including any profit sharing arrangement) with respect to the Transfer of, any
of the Subject Shares other than pursuant to the terms hereof and the Merger
Agreement, or (ii) enter into any voting arrangement or understanding with
respect to the Subject Shares, whether by proxy, voting agreement or otherwise
other than this Agreement.
(f) Appraisal Rights. The Stockholders hereby irrevocably waive any
and all rights which it may have as to appraisal, dissent or any similar or
related matter with respect to the Merger including any such rights set forth in
the DGCL.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder hereby severally but not jointly represents and warrants to Merger
Sub as of the date hereof as follows:
(a) Authority; No Conflict. Such Stockholder has the requisite power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Stockholder, and this Agreement constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law), an implied
covenant of good faith and fair dealing and considerations of public policy. The
execution and delivery of this Agreement by such Stockholder does not, and the
consummation by such Stockholder of the transactions contemplated hereby will
not violate any law applicable to such Stockholder or result in a violation or
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under any contract or agreement to which
such Stockholder is a party.
(b) Shares. The Existing Shares are owned beneficially and of record
by the Stockholders. The Existing Shares constitute all of the shares of Common
Stock owned of record or beneficially by the Stockholders as at the date hereof.
All of the Existing Shares are issued and outstanding and except as set forth on
Schedule A attached hereto, the Stockholders do not own, of record or
beneficially, any warrants, options or other rights to acquire any shares of
Common Stock. Each Stockholder has sole voting power, sole power of disposition,
sole power to issue instructions with respect to the matters set forth in
Section 1 hereof, sole power to demand appraisal rights (to the extent such
rights are available) and sole power to agree to all of the matters set forth in
this Agreement, in each case with respect to all of the Existing Shares, and
will have sole voting power, sole power of disposition, sole power to issue
instructions with respect to the matters set forth in Section 1 hereof, sole
power to demand appraisal rights (to the extent such rights are available) and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Subject Shares held of record. Each Stockholder
has good and valid title to the Existing Shares and at all times during the term
hereof and on the Effective Time will have good and valid title to the Subject
Shares, free and clear of all Liens and free of any other limitation or
restriction other than restrictions under applicable securities laws.
3
<PAGE> 4
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub hereby represents and warrants to the Stockholders as of
the date hereof as follows:
(a) Authority. Each of Parent and Merger Sub has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by its respective board of directors and no other corporate action or
proceedings on the part of Parent or Merger Sub is necessary to authorize the
execution and delivery by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub,
and, assuming this Agreement constitutes a valid and binding obligation of the
Stockholders, constitutes valid and binding obligations of Parent and Merger
Sub, enforceable against them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing and
considerations of public policy.
(b) No Conflict. The execution and delivery of this Agreement by
Merger Sub does not, and the consummation by Merger Sub of the transactions
contemplated hereby will not (i) conflict with or violate the Articles of
Incorporation, By-laws or other organizational documents of Merger Sub, (ii)
conflict with or violate any law applicable to Merger Sub or by which any
property or asset of Merger Sub is bound or affected, except for such conflicts
or violations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect, or (iii) result in a violation or any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Merger Sub is a party or by which Merger Sub or any property or asset
of Merger Sub is bound or affected, except for any such breaches or defaults
which would not materially impair the ability of Merger Sub to consummate the
transactions contemplated hereby.
4. FURTHER ASSURANCES. From time to time prior to the Effective
Time, at any other party's request and without further consideration, each party
hereto shall execute and deliver such additional documents and take all such
further lawful action as may be reasonably necessary or desirable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
5. TERMINATION. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become null
and void and have no further effect upon the earliest to occur of (x) the
Effective Time or (y) termination of the Merger Agreement pursuant to Section
7.1 thereof. Nothing in this Section 5 shall relieve any party of liability for
breach of this Agreement; provided, that Merger Sub's sole remedy in the event
of a breach of this Agreement shall be as specified in Section 6(i) (provided
that injunctive relief shall
4
<PAGE> 5
also be available for any breach of Section 1(e)) and in no event shall Merger
Sub be entitled to any form of monetary damages.
6. GENERAL PROVISIONS.
(a) Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses;
provided, that Merger Sub shall pay the documented reasonable out-of-pocket fees
and expenses of the Shareholders, including the fees and disbursements of one
counsel for all Shareholders.
(b) Amendment. This Agreement may not be amended except by an
instrument in writing signed by the party to be charged therewith.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed by customary receipt of transmission) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other addresses for a party as shall be specified by like notice):
To Parent or Merger Sub:
c/o Dicom Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to Parent
or Merger Sub) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
5
<PAGE> 6
To the Stockholders:
Addresses on Exhibit A
with a copy (which shall not constitute notice to the
Stockholders) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(e) Entire Agreement; No Third Party Beneficiaries. This Agreement
and the Merger Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
(f) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Merger Sub may assign, in Merger Sub's
sole discretion, any or all of their respective rights, interests and
obligations hereunder to any affiliate of Merger Sub. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors, heirs, agents,
representatives, trust beneficiaries, attorneys, affiliates and associates and
6
<PAGE> 7
all of their respective predecessors, successors, permitted assigns, heirs,
executors and administrators.
(i) Specific Performance. The parties acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall be exclusive and in lieu of any
other remedies, including arbitration, which any party may have under this
Agreement or otherwise.
(j) Waiver of Jury Trial. The parties to this Agreement each hereby
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action, or cause of action (i) arising under this Agreement
or (ii) in any way connected with or related or incidental to the dealings of
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The parties to this Agreement
each hereby agrees and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
* * * * *
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholders have
caused this Agreement to be signed by their respective officers or other
authorized person thereunto duly authorized as of the date first written above.
IMAGING COMPONENTS CORPORATION
By: _____________________________
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By: _____________________________
Name: Alexander P. Coleman
Title: Vice President
____________________________________
DAVID S. SILVER
____________________________________
DEAN A. HOUGH
____________________________________
RONALD J. FIKERT
____________________________________
RICHARD M. MURPHY
____________________________________
KEVIN DRUM
<PAGE> 9
____________________________________
ALEXANDER P. CILENTO
____________________________________
WILLIAM E. DROBISH
____________________________________
B. ALLEN LAY
SOUTHERN CALIFORNIA VENTURES
By: _____________________________
Name:
Title:
<PAGE> 10
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF
EXISTING
STOCKHOLDERS' NAME AND ADDRESS SHARES
- ------------------------------ ------
<S> <C>
David S. Silver 342,500
16245 Laguna Canyon Road
Irvin, CA 92618
Dean A. Hough 345,000
16245 Laguna Canyon Road
Irvin, CA 92618
Ronald J. Fikert 37,500
16245 Laguna Canyon Road
Irvin, CA 92618
Richard M. Murphy 54,444
16245 Laguna Canyon Road
Irvin, CA 92618
Kevin Drum 32,500
16245 Laguna Canyon Road
Irvin, CA 92618
Alexander P. Cilento 2,615
[STREET]
[CITY]
William E. Drobish 120,000
[STREET]
[CITY]
B. Allen Lay 45,101
[STREET]
[CITY]
Southern California Ventures 42,806
[STREET]
[CITY]
</TABLE>
Exhibit A -- Page 1
<PAGE> 11
Exhibit (c)(2)
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of July 27, 1999 is
made by and among Imaging Components Corporation, a Delaware corporation (the
"Parent"), Imaging Acquisition Corporation, a Delaware corporation ("Merger
Sub"), and each of the persons named on Exhibit A hereto (each, a "Stockholder",
and collectively, the "Stockholders").
WHEREAS, Parent, Merger Sub and Kofax Image Products, Inc., a
Delaware corporation (the "Company") are concurrently herewith entering into an
Agreement and Plan of Merger dated as of the date hereof (as may be amended,
restated or modified from time to time, the "Merger Agreement") which provides
for, among other things, the merger of Merger Sub with and into the Company,
upon the terms and subject to the conditions set forth in the Merger Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in the Merger Agreement.
WHEREAS, as of the date hereof, each Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Exhibit A (the "Existing Shares" and, together with any shares of Common
Stock acquired by or issued to such Stockholder after the date hereof, the
"Subject Shares").
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent and Merger Sub have required that the Stockholders
agree, and the Stockholders have agreed, to enter into this Agreement.
WHEREAS, the Stockholders and Merger Sub desire to set forth their
agreement with respect to the voting of the Subject Shares in connection with
the Merger Agreement and the transactions contemplated thereby (the
"Transactions") upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. COVENANTS OF THE STOCKHOLDERS. Until the termination of this
Agreement in accordance with Section 5, the Stockholders agree as follows:
(a) Agreement to Vote in Favor. At any meeting of shareholders of
the Company called for purposes that include approval of the Merger Agreement
and the Transactions, or in connection with any written consent of the holders
of Shares or in any other circumstances in which the Stockholders are entitled
to vote, consent or give any other approval with respect to the Merger Agreement
and the Transactions, the Stockholders shall vote (or cause to be voted) the
Subject
<PAGE> 12
Shares in favor of adoption and approval of the Merger Agreement and the
Transactions and the approval of the terms thereof and each of the other actions
contemplated by this Agreement and the Merger Agreement and any amendments.
(b) Agreement to Tender. Within the first ten (10) Business Days
after the commencement of the Offer to tender all of their respective Subject
Shares, except, if applicable, their respective Retained Shares, into the Offer,
and not to withdraw any of their respective Shares so tendered from the Offer.
(c) Agreement to Vote Against. At any meeting of shareholders of the
Company, or in connection with any written consent of the holders of Shares or
in any other circumstances in which the Stockholders are entitled to vote,
consent or give any other approval, except as otherwise agreed to in writing in
advance by Merger Sub, the Stockholders shall vote (or cause to be voted) the
Subject Shares against the following actions:
(i) any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger
Agreement or of the Stockholders hereunder; or
(ii) any action or agreement that could reasonably be expected
to impede, interfere with, delay, postpone or attempt to discourage
the Merger and/or the Transactions, including, without limitation,
(x) the adoption by the Company of a proposal supporting a Takeover
Proposal or the repurchase by the Company or any of its Subsidiaries
of outstanding Shares for consideration in excess of the Per Share
Amount or (y) any amendment of the Company's Articles of
Incorporation or By-laws (including any amendment affecting the
voting rights of the Company's Capital Stock) or other proposal or
transaction involving the Company or any of its Subsidiaries
(including any changes in management or the directors of the
Company), which amendment or other proposal or transaction could in
any manner reasonably be expected to impede, in any material
respect, or prevent the Merger, the Merger Agreement or the
Transactions.
(d) Proxies. As security for the agreements of the Stockholders
provided for herein, the Stockholders hereby grant to Merger Sub a proxy to vote
the Subject Shares as indicated in Sections 1(a) and 1(b) above. The
Stockholders agree that this proxy shall be irrevocable during the term of this
Agreement and coupled with an interest and each of the Stockholders and Merger
Sub will take such further action or execute such other instruments as may be
necessary to effectuate the intent of this proxy and hereby revokes any proxy
previously granted by the Stockholders with respect to the Subject Shares.
(e) Transfer Restrictions. The Stockholders agree not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of or hypothecate
(including by gift or by contribution or distribution to any trust or similar
instrument or to any beneficiaries of the Stockholders) (collectively,
"Transfer"), or enter into any contract, option or other arrangement or
understanding
2
<PAGE> 13
(including any profit sharing arrangement) with respect to the Transfer of, any
of the Subject Shares other than pursuant to the terms hereof and the Merger
Agreement, or (ii) enter into any voting arrangement or understanding with
respect to the Subject Shares, whether by proxy, voting agreement or otherwise
other than this Agreement.
(f) Appraisal Rights. The Stockholders hereby irrevocably waive any
and all rights which it may have as to appraisal, dissent or any similar or
related matter with respect to the Merger including any such rights set forth in
the DGCL.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder hereby severally but not jointly represents and warrants to Merger
Sub as of the date hereof as follows:
(a) Authority; No Conflict. Such Stockholder has the requisite power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Stockholder, and this Agreement constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law), an implied
covenant of good faith and fair dealing and considerations of public policy. The
execution and delivery of this Agreement by such Stockholder does not, and the
consummation by such Stockholder of the transactions contemplated hereby will
not violate any law applicable to such Stockholder or result in a violation or
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under any contract or agreement to which
such Stockholder is a party.
(b) Shares. The Existing Shares are owned beneficially and of record
by the Stockholders. The Existing Shares constitute all of the shares of Common
Stock owned of record or beneficially by the Stockholders as at the date hereof.
All of the Existing Shares are issued and outstanding and except as set forth on
Schedule A attached hereto, the Stockholders do not own, of record or
beneficially, any warrants, options or other rights to acquire any shares of
Common Stock. Each Stockholder has sole voting power, sole power of disposition,
sole power to issue instructions with respect to the matters set forth in
Section 1 hereof, sole power to demand appraisal rights (to the extent such
rights are available) and sole power to agree to all of the matters set forth in
this Agreement, in each case with respect to all of the Existing Shares, and
will have sole voting power, sole power of disposition, sole power to issue
instructions with respect to the matters set forth in Section 1 hereof, sole
power to demand appraisal rights (to the extent such rights are available) and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Subject Shares held of record. Each Stockholder
has good and valid title to the Existing Shares and at all times during the term
hereof and on the Effective Time will have good and valid title to the Subject
Shares, free and clear of all Liens and free of any other limitation or
restriction other than restrictions under applicable securities laws.
3
<PAGE> 14
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub hereby represents and warrants to the Stockholders as of
the date hereof as follows:
(a) Authority. Each of Parent and Merger Sub has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by its respective board of directors and no other corporate action or
proceedings on the part of Parent or Merger Sub is necessary to authorize the
execution and delivery by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub,
and, assuming this Agreement constitutes a valid and binding obligation of the
Stockholders, constitutes valid and binding obligations of Parent and Merger
Sub, enforceable against them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing and
considerations of public policy.
(b) No Conflict. The execution and delivery of this Agreement by
Merger Sub does not, and the consummation by Merger Sub of the transactions
contemplated hereby will not (i) conflict with or violate the Articles of
Incorporation, By-laws or other organizational documents of Merger Sub, (ii)
conflict with or violate any law applicable to Merger Sub or by which any
property or asset of Merger Sub is bound or affected, except for such conflicts
or violations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect, or (iii) result in a violation or any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Merger Sub is a party or by which Merger Sub or any property or asset
of Merger Sub is bound or affected, except for any such breaches or defaults
which would not materially impair the ability of Merger Sub to consummate the
transactions contemplated hereby.
4. FURTHER ASSURANCES. From time to time prior to the Effective
Time, at any other party's request and without further consideration, each party
hereto shall execute and deliver such additional documents and take all such
further lawful action as may be reasonably necessary or desirable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
5. TERMINATION. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become null
and void and have no further effect upon the earliest to occur of (x) the
Effective Time or (y) termination of the Merger Agreement pursuant to Section
7.1 thereof. Nothing in this Section 5 shall relieve any party of liability for
breach of this Agreement; provided, that Merger Sub's sole remedy in the event
of a breach of this Agreement shall be as specified in Section 6(i) (provided
that injunctive relief shall
4
<PAGE> 15
also be available for any breach of Section 1(e)) and in no event shall Merger
Sub be entitled to any form of monetary damages.
6. GENERAL PROVISIONS.
(a) Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses;
provided, that Merger Sub shall pay the documented reasonable out-of-pocket fees
and expenses of the Shareholders, including the fees and disbursements of one
counsel for all Shareholders.
(b) Amendment. This Agreement may not be amended except by an
instrument in writing signed by the party to be charged therewith.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed by customary receipt of transmission) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other addresses for a party as shall be specified by like notice):
To Parent or Merger Sub:
c/o Dicom Group plc
Business Building Forren West
Grundstrasse 14
6343 Rotkreuz
ZG Switzerland
Attention: Otto Schmid
Facsimile: 011 41 41 798 3088
and
c/o Dresdner Kleinwort Benson Private Equity LLC
75 Wall Street, 24th Floor
New York, NY 10005
Attention: Alexander P. Coleman
Facsimile: (212) 429-3139
with a copy (which shall not constitute notice to Parent
or Merger Sub) to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Eunu Chun, Esq.
Facsimile: (212) 446-4900
5
<PAGE> 16
To the Stockholders:
Addresses on Exhibit A
with a copy (which shall not constitute notice to the
Stockholders) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Newport Beach, CA 92660
Attention: K.C. Schaaf, Esq.
Facsimile: (949) 725-4100
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(e) Entire Agreement; No Third Party Beneficiaries. This Agreement
and the Merger Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
(f) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Merger Sub may assign, in Merger Sub's
sole discretion, any or all of their respective rights, interests and
obligations hereunder to any affiliate of Merger Sub. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors, heirs, agents,
representatives, trust beneficiaries, attorneys, affiliates and associates and
6
<PAGE> 17
all of their respective predecessors, successors, permitted assigns, heirs,
executors and administrators.
(i) Specific Performance. The parties acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall be exclusive and in lieu of any
other remedies, including arbitration, which any party may have under this
Agreement or otherwise.
(j) Waiver of Jury Trial. The parties to this Agreement each hereby
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action, or cause of action (i) arising under this Agreement
or (ii) in any way connected with or related or incidental to the dealings of
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The parties to this Agreement
each hereby agrees and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
* * * * *
7
<PAGE> 18
IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholders have
caused this Agreement to be signed by their respective officers or other
authorized person thereunto duly authorized as of the date first written above.
IMAGING COMPONENTS CORPORATION
By:/s/ Alexander P. Coleman
-------------------------------
Name: Alexander P. Coleman
Title: Vice President
IMAGING ACQUISITION CORPORATION
By:/s/ Alexander P. Coleman
-------------------------------
Name: Alexander P. Coleman
Title: Vice President
/s/ David S. Silver
-------------------------------
DAVID S. SILVER
/s/ Dean A. Hough
-------------------------------
DEAN A. HOUGH
/s/ Ronald J. Fikert
-------------------------------
RONALD J. FIKERT
/s/ Richard M. Murphy
-------------------------------
RICHARD M. MURPHY
/s/ Kevin Drum
-------------------------------
KEVIN DRUM
<PAGE> 19
/s/ Alexander P. Cilento
---------------------------------
ALEXANDER P. CILENTO
/s/ William E. Drobish
---------------------------------
WILLIAM E. DROBISH
/s/ B. Allen Lay
---------------------------------
B. ALLEN LAY
SOUTHERN CALIFORNIA VENTURES
By:/s/ B. Allen Lay
---------------------------------
Name: B. Allen Lay
Title: General Partner
<PAGE> 20
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF
EXISTING
STOCKHOLDERS' NAME AND ADDRESS SHARES
- ------------------------------ ------
<S> <C>
David S. Silver 342,500
16245 Laguna Canyon Road
Irvin, CA 92618
Dean A. Hough 345,000
16245 Laguna Canyon Road
Irvin, CA 92618
Ronald J. Fikert 37,500
16245 Laguna Canyon Road
Irvin, CA 92618
Richard M. Murphy 54,444
16245 Laguna Canyon Road
Irvin, CA 92618
Kevin Drum 32,500
16245 Laguna Canyon Road
Irvin, CA 92618
Alexander P. Cilento 2,615
[STREET]
[CITY]
William E. Drobish 120,000
[STREET]
[CITY]
B. Allen Lay 45,101
[STREET]
[CITY]
Southern California Ventures 42,806
[STREET]
[CITY]
</TABLE>
Exhibit A -- Page 1
<PAGE> 1
EXHIBIT 5
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> 2
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.
Very truly yours,
/s/ C.E. UNTERBERG, TOWBIN
--------------------------------------
C.E. Unterberg, Towbin
<PAGE> 1
EXHIBIT 6
Wednesday July 28, 7:58 am Eastern Time
Company Press Release
Investment Group to Acquire Kofax for $12.75 per
Share in Cash
IRVINE, Calif.--(BUSINESS WIRE)--July 28, 1999--Kofax Image Products, Inc.
(Nasdaq:KOFX - news) announced today that it has entered into a definitive
agreement pursuant to which all of the outstanding shares of common stock of
Kofax Image Products, Inc. ("Kofax") will be acquired by an investment group
formed by Dresdner Kleinwort Benson Private Equity Partners, L.P. and DICOM
GROUP plc. (LSE:DCM).
Under the agreement, which has been approved unanimously by Kofax's board of
directors, the investment group will commence a tender offer for all outstanding
shares of common stock of Kofax for $12.75 per share in cash.
The tender offer for Kofax's shares is expected to commence within five business
days and is subject to receiving more than 50% of fully diluted shares, among
other conditions. Certain of Kofax's directors and executive officers holding
shares representing approximately 19.5% of Kofax's outstanding shares (17.5% on
a fully diluted basis) have agreed to tender their shares and vote in favor of
the transaction. The tender offer is expected to close by the end of August
1999. C.E. Unterberg, Towbin provided a fairness opinion to Kofax's Board of
Directors.
Commenting on the transaction, David Silver, President and CEO of Kofax, said,
"Kofax has been working together with DICOM in Europe for nearly a decade, and
this partnership will allow us to combine Kofax's expertise in product
development and core image processing technology with DICOM's strong European
sales channels and their expertise in sales and services in international
markets. DICOM shares our vision of the future of the document technologies
market and we believe this transaction will help us grow Kofax faster and on a
more global scale. We are very pleased with the premium attached to this offer
and believe this offer represents a good value for Kofax shareholders and
employees."
Otto Schmid, Chairman and CEO of DICOM, added, "We have always been impressed
with Kofax technology and expertise in document capture and image processing, as
reflected by their impressive customer roster and strong brand name. In our
view, the proposed transaction will create a leading global partnership for
products and services to the document technologies market. Although we do not
seek to change the current Kofax entity, we believe that our investment and
expertise, particularly in the European arena, will help Kofax achieve broader
market penetration and extend its already formidable reputation and market
share. We've known and respected Kofax for many years and look forward
enthusiastically to our closer business relationship."
The investment group, including some members of Kofax management, has committed
to invest $21.3 million in the aggregate and has obtained a total underwritten
commitment from Dresdner Bank AG for
<PAGE> 2
$60.0 million in debt financing for the transaction and for working capital. A
portion of this debt is expected to be repaid from Kofax's existing cash
balances, which stood at over $25.3 million as of March 31, 1999.
Based in Irvine, California and founded in 1985, Kofax is a leading supplier of
both application software and image processing products for the imaging,
workflow and document management market. The Company specializes in the document
and data capture and document storage product segments, which are essential to
helping paper intensive organizations economically and reliably capture and
store critical business information. The company sells its products through a
worldwide network of distributors, system integrators and value-added resellers.
Kofax generated $37.0 million in net sales and $5.5 million in operating profit
for the twelve months ended March 31, 1999.
DICOM GROUP plc, headquartered in Aldermaston, Berkshire, UK, is a holding
company for a group of businesses which distribute document imaging processing
(DIP) equipment in Western and Central Europe and certain computer peripherals
in Switzerland and Austria. The company provides a range of value-added services
including support and maintenance for technically complex products in the DIP
market. DICOM works with its customers and partners in 16 European and four
Asian countries in developing solutions for data and document management,
independent of manufacturer. The company also provides components and associated
services for handling digital information. DICOM generated (pound)77.5 million
($123.3 million based on yesterday's closing exchange rate of $1.5904 =
(pound)1) in revenues for the twelve months ended December 31, 1998.
Statements herein concerning the growth and strategies of Kofax and DICOM
include forward-looking statements that involve risks and uncertainties. Kofax's
and DICOM's actual results may differ materially from those suggested as a
result of various factors, including Kofax's ability to release new versions of
its software on time, customer response, continued demand for Kofax's hardware
products, its ability to forecast and achieve product mix objectives and to
increase sales and profitability. Other factors include the companies' ability
to consummate the transaction.
Interested persons should refer to the disclosure under the heading "Factors
That May Affect Future Operating Results" included in Kofax's Annual Report on
Form 10-K for the year ended June 30, 1998 as well as Kofax's recent public
filings, for information regarding risks affecting Kofax's financial conditions
and results of operations.
<PAGE> 1
EXHIBIT 7
LOGO KOFAX IMAGE PRODUCTS
16245 LAGUNA CANYON RD.
IRVINE, CA 92618-3603
PHONE: 949-727-1733
FAX: 949-727-3144
HTTP://WWW.KOFAX.COM
August 3, 1999
To Our Stockholders:
I am pleased to inform you that on July 27, 1999, Kofax Image Products,
Inc. ("Kofax") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Imaging Components Corporation ("Purchaser") and Imaging
Acquisition Corporation, a wholly-owned subsidiary of Purchaser ("Merger Sub"),
pursuant to which Purchaser has commenced a cash tender offer (the "Offer") to
purchase all of the outstanding shares of Kofax Common Stock (the "Shares"), for
$12.75 per share, net to the seller in cash. Under the Merger Agreement, the
Offer will be followed by a merger (the "Merger") in which, among other things,
any and all remaining shares of Kofax Common Stock, other than Shares purchased
by Purchaser and certain Shares owned by management, will be converted into the
right to receive $12.75 per share in cash, without interest.
YOUR BOARD OF DIRECTORS (I) HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND
THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF KOFAX,
(II) HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (III)
UNANIMOUSLY RECOMMENDS THAT KOFAX SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
In arriving at its decision, your Board of Directors gave careful
consideration to a number of factors, including, among other things, the opinion
of C.E. Unterberg, Towbin, Kofax's financial advisor, that the consideration to
be received by holders of Kofax Common Stock in the Offer and the Merger is fair
to such holders from a financial point of view. A more complete description of
the factors considered by the Board of Directors, including the nature of our
management group's interests in these transactions, is set forth in the attached
Solicitation/Recommendation Statement on Schedule 14D-9.
A more complete description of the Offer and the Merger is set forth in the
accompanying Offer to Purchase dated August 3, 1999, together with related
materials, including a Letter of Transmittal to be used for tendering your
Shares. These documents set forth the terms and conditions of the Offer and the
Merger and provide instructions as to how to tender your Shares. I urge you to
read the enclosed material carefully before making a decision with respect to
tendering your Shares in the Offer.
Sincerely,
LOGO
David S. Silver
Chief Executive Officer
