<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
VOICE CONTROL SYSTEMS, INC.
(NAME OF SUBJECT COMPANY)
VULCAN MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION
AN INDIRECTLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)
(BIDDERS)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
92861B100
(CUSIP NUMBER OF CLASS OF SECURITIES)
WILLIAM E. CURRAN
PRESIDENT
1251 AVENUE OF THE AMERICAS
20TH FLOOR
NEW YORK, NEW YORK 10020
212-536-0500
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPIES TO:
NEIL T. ANDERSON, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
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$67,728,748 $13,546
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</TABLE>
* The transaction valuation set forth herein has been calculated solely for the
purpose of computing the filing fee pursuant to Exchange Act Rule 0-11. The
valuation was determined by adding (i) 13,742,639 shares of common stock, par
value $0.01 per share (the "Shares"), of Voice Control Systems, Inc.
outstanding as of May 9, 1999, (ii) 2,212,473 Shares issuable upon exercise of
outstanding stock options and (iii) 977,075 Shares issuable upon exercise of
outstanding warrants, and multiplying the sum by $4.00, the amount per Share
offered by the Bidders in the tender offer.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: None Filing Party: N/A
Form of Registration No.: N/A Date filed: N/A
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<PAGE> 2
SCHEDULE 14D-1
CUSIP NO. 92861B100
<TABLE>
<S> <C> <C>
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Koninklijke Philips Electronics N.V. (Royal Philips
Electronics)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
WC; OO
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
The Netherlands
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 Shares
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
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10 TYPE OF REPORTING PERSON
HC; CO
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</TABLE>
<PAGE> 3
SCHEDULE 14D-1
CUSIP NO. 92861B100
<TABLE>
<S> <C> <C>
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Philips Holding USA Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 Shares
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
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10 TYPE OF REPORTING PERSON
HC
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</TABLE>
<PAGE> 4
SCHEDULE 14D-1
CUSIP NO. 92861B100
<TABLE>
<S> <C> <C>
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Philips Electronics North America Corporation
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 Shares
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
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10 TYPE OF REPORTING PERSON
CO
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</TABLE>
<PAGE> 5
SCHEDULE 14D-1
CUSIP NO. 92861B100
<TABLE>
<S> <C> <C>
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Vulcan Merger Sub, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 Shares
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
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10 TYPE OF REPORTING PERSON
CO
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</TABLE>
<PAGE> 6
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Voice Control Systems, Inc., a
Delaware corporation (the "Company"), and the address of its principal executive
offices is 14140 Midway Road, Suite 100, Dallas, Texas 75244.
(b) The class of securities to which this statement relates is the common
stock, par value $0.01 per share (the "Shares") of the Company. The information
set forth in the introductory section and Section 1 of the Offer to Purchase
(the "Offer to Purchase") annexed hereto as Exhibit (a)(1) is incorporated
herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) The information set forth in Section 9 of the Offer to
Purchase is incorporated herein by reference. The name, business address,
present principal occupation or employment, the material occupations, positions,
offices or employments for the past five years and citizenship of each director
and executive officer of Koninklijke Philips Electronics N.V., a company
incorporated under the laws of The Netherlands ("Royal Philips"), Philips
Holding USA Inc., a Delaware corporation ("Philips Holding"), Philips
Electronics North America Corporation, a Delaware corporation ("Parent"), and
Vulcan Merger Sub, Inc., a Delaware corporation (the "Purchaser") are set forth
in Schedule A to the Offer to Purchase and are incorporated herein by reference.
(e)-(f) During the last five years, none of the Purchaser, Parent, Philips
Holding, Royal Philips, or, to the best of their respective knowledge, any of
the directors or executive officers of the Purchaser, Parent, Philips Holding or
Royal Philips has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
any such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such law.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the introductory section and Sections
9 and 10 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 13 of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the introductory section and Sections
7, 10, 12 and 14 of the Offer to Purchase is incorporated herein by reference.
Except as set forth in such sections of the offer to Purchase, none of the
Purchaser, Parent, Philips Holding, or Royal Philips currently has any plans or
proposals which relate to or would result in: (a) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation involving the
Company or any of its subsidiaries; (b) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries; (c) any change in the
present board of directors or management of the Company including, but not
limited to, any plans or proposals to change the number or the term of directors
or to fill any existing vacancies on the board of directors of the Company; (d)
any material change in the Company's corporate structure or business; (f)
causing a class of securities of the Company to be delisted from a national
securities exchange or cease to be authorized to be quoted in an interdealer
quotation system of a registered national
<PAGE> 7
securities association; or (g) a class of equity securities of the Company
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Securities Exchange Act of 1934, as amended.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Sections 9, 10 and Schedule A of the
Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the introductory section and Sections 9, 10
and 12 of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 of the Offer to Purchase is
incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 10 of the Offer to Purchase is
incorporated herein by reference.
(b)-(d) The information set forth in Sections 7 and 15 of the Offer to
Purchase is incorporated herein by reference.
(e)-(f) Not applicable.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase, dated May 14, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter to brokers, dealers, commercial banks, trust
companies and other nominees.
(a)(4) Letter to clients to be used by brokers, dealers, commercial
banks, trust companies and other nominees.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines to Substitute Form W-9.
(a)(7) Letter to former holders of common stock of VCS Industries,
Inc. and Voice Processing Corporation.
(a)(8) Press release, dated May 9, 1999, announcing tender offer.
(a)(9) Newspaper advertisement, dated May 14, 1999, published in
The Wall Street Journal.
(b) None.
(c)(1) Agreement and Plan of Merger, dated May 9, 1999, among
Parent, the Company and the Purchaser.
(c)(2) Employment Agreement, dated May 9, 1999, between Parent and
Peter J. Foster.
(c)(3) Employment Agreement, dated May 9, 1999, among Parent, the
Company and Dr. Thomas B. Schalk.
(c)(4) Employment Agreement, dated May 9, 1999, between Parent and
Kim S. Terry.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE> 8
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: May 14, 1999
KONINKLIJKE PHILIPS ELECTRONICS N.V.
By: /s/ ERIC P. COUTINHO
------------------------------------
Name: Eric P. Coutinho
Title: Director and Deputy Secretary
PHILIPS ELECTRONICS HOLDING USA INC.
By: /s/ WILLIAM E. CURRAN
------------------------------------
Name: William E. Curran
Title: Senior Vice President-Finance
PHILIPS ELECTRONICS NORTH AMERICA
CORPORATION
By: /s/ WILLIAM E. CURRAN
------------------------------------
Name: William E. Curran
Title: Senior Vice President and
Chief Financial Officer
VULCAN MERGER SUB, INC.
By: /s/ WILLIAM E. CURRAN
------------------------------------
Name: William E. Curran
Title: President and Chief Executive
Officer
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
(a)(1) Offer to Purchase, dated May 14, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter to brokers, dealers, commercial banks, trust
companies and other nominees.
(a)(4) Letter to clients to be used by brokers, dealers, commercial
banks, trust companies and other nominees.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines to Substitute Form W-9.
(a)(7) Letter to former holders of common stock of VCS Industries,
Inc. and Voice Processing Corporation.
(a)(8) Press release, dated May 9, 1999, announcing tender offer.
(a)(9) Newspaper advertisement, dated May 14, 1999, published in
The Wall Street Journal.
(b) None.
(c)(1) Agreement and Plan of Merger, dated May 9, 1999, among
Parent, the Company and the Purchaser.
(c)(2) Employment Agreement, dated May 9, 1999, between Parent and
Peter J. Foster.
(c)(3) Employment Agreement, dated May 9, 1999, among Parent, the
Company and Dr. Thomas B. Schalk.
(c)(4) Employment Agreement, dated May 9, 1999, between Parent and
Kim S. Terry.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VOICE CONTROL SYSTEMS, INC.
AT
$4.00 NET PER SHARE
BY
VULCAN MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON FRIDAY, JUNE 11, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1
HEREIN) AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE
$0.01 PER SHARE (THE "SHARES"), OF VOICE CONTROL SYSTEMS, INC. (THE "COMPANY")
ON A FULLY DILUTED BASIS, AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT
PURSUANT TO THE OFFER AND (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR BEEN TERMINATED. CERTAIN OTHER CONDITIONS TO
CONSUMMATION OF THE OFFER ARE DESCRIBED IN SECTION 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT (AS DEFINED IN THE INTRODUCTION HERETO) AND DECLARED ITS ADVISABILITY,
APPROVED THE OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND UNANIMOUSLY
RECOMMENDS THAT THE HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should (1) complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions in the Letter of Transmittal,
including any required signature guarantees, and mail or deliver the Letter of
Transmittal or such facsimile with such stockholder's certificate(s) for the
tendered Shares and any other required documents to Citibank, N.A., Depositary
for the Offer (the "Depositary") (2) follow the procedure for book-entry tender
of Shares set forth in Section 3 or (3) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders 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
they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to D.F. King & Co.,
Inc., Information Agent for the Offer (the "Information Agent"), at the address
and telephone number set forth on the back cover of this Offer to Purchase.
Requests for additional copies of this Offer to Purchase and the Letter of
Transmittal may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
May 14, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
INTRODUCTION................................................ 1
THE TENDER OFFER............................................ 2
1. Terms of the Offer................................... 2
2. Acceptance for Payment and Payment for Shares........ 3
3. Procedure for Tendering Shares....................... 4
4. Rights of Withdrawal................................. 6
5. Certain United States Federal Income Tax Consequences
of the Offer........................................... 7
6. Price Range of Shares; Dividends..................... 8
7. Effect of the Offer on the Market for the Shares;
Stock Quotation, Margin
Regulations and Exchange Act Registration......... 8
8. Certain Information Concerning the Company........... 9
9. Certain Information Concerning the Purchaser and
Parent................................................. 11
10. Background of the Offer; Contacts with the Company;
Employment Agreements.................................. 13
11. Certain Conditions of the Offer...................... 16
12. Purpose of the Offer; Plans for the Company; the
Merger................................................. 18
13. Source and Amount of Funds........................... 24
14. Dividends and Distributions.......................... 24
15. Certain Legal Matters................................ 25
16. Fees and Expenses.................................... 27
17. Miscellaneous........................................ 28
SCHEDULE A
Information Concerning the Directors and Executive
Officers of:
Koninklijke Philips Electronics N.V., Philips Holding
USA Inc., Philips Electronics North America Corporation
and Vulcan Merger Sub, Inc.............................. A-1
</TABLE>
<PAGE> 3
TO THE HOLDERS OF SHARES OF
VOICE CONTROL SYSTEMS, INC.:
INTRODUCTION
Vulcan Merger Sub, Inc., a Delaware corporation (the "Purchaser"), and a
wholly owned subsidiary of Philips Electronics North America Corporation, a
Delaware corporation ("Parent"), and an indirect wholly owned subsidiary of
Koninklijke Philips Electronics N.V., a company incorporated under the laws of
The Netherlands ("Royal Philips"), hereby offers to purchase all of the
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
Voice Control Systems, Inc., a Delaware corporation (the "Company"), at $4.00
per Share, net to the seller in cash without interest, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together with any amendments or supplements hereto
or thereto, collectively constitute the "Offer"). Tendering stockholders will
not be obligated to pay brokerage fees or commissions or, subject to Instruction
6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer. The Purchaser will pay all charges and expenses
of the Depositary and the Information Agent.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE AT LEAST A MAJORITY OF
THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS, AND (2) ANY WAITING PERIOD
UNDER THE HSR ACT AND THE REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF
SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. CERTAIN OTHER
CONDITIONS TO CONSUMMATION OF THE OFFER ARE DESCRIBED IN SECTION 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND DECLARED ITS ADVISABILITY, APPROVED THE OFFER AND THE MERGER,
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE HOLDERS OF SHARES AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE FACTORS
CONSIDERED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ARRIVING AT ITS DECISION
TO APPROVE THE OFFER AND THE MERGER AND TO RECOMMEND THAT STOCKHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES ARE DESCRIBED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9, WHICH IS BEING MAILED
TO STOCKHOLDERS OF THE COMPANY HEREWITH.
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of May 9, 1999, by and among the Company, Parent
and the Purchaser, pursuant to which, after completion of the Offer, the
Purchaser will be merged with and into the Company or, at the option of Parent,
the Company will be merged with and into the Purchaser (either such merger, the
"Merger") and each issued and outstanding Share (other than Shares owned by
Parent, Purchaser or any other subsidiary of Parent (collectively, the "Parent
Companies") or Shares held by stockholders ("Dissenting Stockholders")
exercising appraisal rights pursuant to Section 262 of the Delaware General
Corporate Law (the "DGCL")) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive an amount in cash, without interest, equal to the price paid
for each Share pursuant to the Offer.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
<PAGE> 4
THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer
(including the terms and conditions set forth in Section 11 (the "Offer
Conditions") and if the Offer is extended or amended, the terms and conditions
of such extension or amendment), the Purchaser will accept for payment, and pay
for all Shares validly tendered on or prior to the Expiration Date and not
withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00
midnight, New York City time, on Friday, June 11, 1999, unless and until the
Purchaser shall, subject to the terms of the Merger Agreement, have extended the
period for which the Offer is open. In such a case, the term "Expiration Date"
shall mean the latest time and date on which the Offer, as so extended by the
Purchaser, shall expire.
The Offer is conditioned on, among other things, there being validly
tendered and not withdrawn at least a majority of the outstanding Shares.
ACCORDING TO THE COMPANY, AS OF MAY 9, 1999 THERE WERE 13,742,639 SHARES
OUTSTANDING, 2,212,473 SHARES SUBJECT TO ISSUANCE UPON EXERCISE OF OUTSTANDING
STOCK OPTIONS PURSUANT TO THE COMPANY'S STOCK OPTION AND INCENTIVE PLANS AND
977,075 SHARES SUBJECT TO ISSUANCE UPON EXERCISE OF CERTAIN OUTSTANDING WARRANTS
TO PURCHASE SHARES. Based on the foregoing, the Purchaser believes that if all
of the Shares subject to issuance as set forth above are considered to be
outstanding on a fully diluted basis on the Expiration Date, this condition
would be satisfied if at least 8,466,094 Shares are validly tendered and not
withdrawn prior to the Expiration Date.
The Purchaser may, without the consent of the Company, (i) extend the
Offer, if on the scheduled expiration date of the Offer any of the conditions to
the Purchaser's obligation to purchase Shares are not satisfied, until such time
as such conditions are satisfied or waived, (ii) extend the Offer for a period
of up to 30 business days after all of the Offer Conditions have been satisfied
or waived if it reasonably determines such extension is appropriate in order to
enable it to purchase at least 90% of the outstanding Shares in the Offer and
(iii) extend the Offer for any period required by any regulation, rule,
interpretation or position of the Securities and Exchange Commission (the "SEC")
applicable to the Offer. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares. If the
Purchaser accepts any Shares for payment pursuant to the terms of the Offer, it
will accept for payment all Shares validly tendered prior to the Expiration Date
and not withdrawn, and, subject to the terms and conditions of the Offer,
including but not limited to the Offer Conditions, it will accept for payment
and promptly pay for all Shares so accepted for payment. The Purchaser's right
to delay payment for Shares which it has accepted for payment is limited by Rule
14e-1(c) under the Securities Exchange Act of 1934 (the "Exchange Act"), which
requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer. The Purchaser is not required to extend the Offer.
Subject to the applicable rules and regulations of the SEC, applicable law
and the Merger Agreement, the Purchaser may, without the consent of the Company,
terminate the Offer and not accept for payment any Shares if any of the
conditions to the Purchaser's obligation to purchase Shares are not satisfied.
Any extension, delay, termination or amendment of the Offer will be
followed as promptly as practicable by public announcement thereof. In the case
of an extension, Rule 14(e)-1(d) under the Exchange Act requires that the
announcement be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that any material change in the information published, sent
or given to stockholders in connection with the Offer be promptly disseminated
to stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public
2
<PAGE> 5
announcement other than by issuing a press release or other announcement. If it
makes a material change in the terms of the Offer or the information concerning
the Offer, or if it waives a material condition of the Offer, the 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 Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and will be furnished by the Purchaser to brokers, dealers, banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including the
Offer Conditions and, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser will accept for
payment, and will pay for, Shares validly tendered and not withdrawn as soon as
practicable after the Expiration Date. In addition, subject to applicable rules
of the SEC, the Purchaser expressly reserves the right to delay acceptance for
payment of or payment for Shares in order to comply, in whole or in part, with
any applicable law including the HSR Act. Parent intends to file a Notification
and Report Form under the HSR Act on May 18, 1999 and, accordingly, unless
earlier terminated or extended by a request for additional information, the
waiting period under the HSR Act is scheduled to expire at 11:59 p.m., New York
City time, on June 2, 1999. In all cases, payment for Shares tendered and
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such Shares (or a confirmation of
a book-entry transfer of such Shares (a "Book-Entry Confirmation") into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility"), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment Shares validly tendered and not withdrawn if and when the Purchaser
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares pursuant to the Offer. Payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering stockholders for
the purpose of receiving payments from the Purchaser and transmitting such
payments to the tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON
THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH
PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares tendered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set forth
in Section 3, such Shares will be credited to an account maintained with the
Book-Entry Transfer Facility), as soon as practicable following expiration or
termination of the Offer.
The Purchaser reserves the right to transfer or assign in whole or in part
from time to time to one or more direct or indirect subsidiaries of Parent the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer. However, any such transfer or assignment will not relieve the Purchaser
of its obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3
<PAGE> 6
3. PROCEDURE FOR TENDERING SHARES
Valid Tender
To tender Shares pursuant to the Offer, (a) a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions of the Letter of Transmittal, with any required signature
guarantees, certificates for Shares to be tendered, and any other documents
required by the Letter of Transmittal, must be received by the Depositary prior
to the Expiration Date at one of its addresses set forth on the back cover of
this Offer to Purchase, (b) such Shares must be delivered pursuant to the
procedures for book-entry transfer described below (and a Book-Entry
Confirmation of such delivery received by the Depositary, including an Agent's
Message (as defined below) if the tendering stockholder has not delivered a
Letter of Transmittal), prior to the Expiration Date, or (c) the tendering
stockholder must comply with the guaranteed delivery procedures set forth below.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, 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.
Book-Entry Delivery
The Depositary will establish accounts 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. Any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
transfer of Shares by causing the Book-Entry Transfer Facility to transfer such
Shares into the Depositary's account in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer, either the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must, in any case, be transmitted
to and received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase by the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedures described below.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at a Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED 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,
IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY INSURED REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Signature Guarantees
Except as otherwise provided below, all signatures on a Letter of
Transmittal must be guaranteed by a financial institution (including most
commercial banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). Signatures on a Letter of
Transmittal need not be guaranteed (a) if the Letter of Transmittal is signed by
the registered holders (which term, for purposes of this section, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security
4
<PAGE> 7
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal or (b) if such Shares are tendered for the account of an Eligible
Institution. See Instructions 1 and 5 of the Letter of Transmittal. If the
certificates for Shares are registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made or certificates
for Shares not tendered or not accepted for payment are to be returned to a
person other than the registered holder of the certificates surrendered, then
the tendered certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
holders or owners appear on the certificates, with the signatures on the
certificates or stock powers guaranteed as described above. See Instructions 1
and 5 of the Letter of Transmittal.
Guaranteed Delivery
A stockholder who desires to tender Shares pursuant to the Offer and whose
certificates for Shares are not immediately available, or who cannot comply with
the procedure for book-entry transfer on a timely basis, or who cannot deliver
all required documents to the Depositary prior to the Expiration Date, may
tender such Shares by following all of the procedures set forth below:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to all such Shares,
together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal), and any other required
documents, are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the New York Stock Exchange, Inc.
(the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Other Requirements
Notwithstanding any provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares (b) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal) and (c) any other documents
required by the Letter of Transmittal. Accordingly, tendering stockholders may
be paid at different times depending upon when certificates for Shares or
Book-Entry Confirmations with respect to Shares are actually received by the
Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE OF THE
SHARES BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
Tender Constitutes an Agreement
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
5
<PAGE> 8
Appointment
By executing a Letter of Transmittal as set forth above, the tendering
stockholder irrevocably appoints designees of the Purchaser as such
stockholder's proxies, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after May 14, 1999. All such proxies will be considered coupled
with an interest in the tendered Shares. Such appointment is effective when, and
only to the extent that, the Purchaser deposits the payment for such Shares with
the Depositary. Upon the effectiveness of such appointment, all prior powers of
attorney, proxies and consents given by such stockholder will be revoked, and no
subsequent powers of attorney, proxies and consents may be given (and, if given,
will not be deemed effective). The Purchaser's designees will, with respect to
the Shares for which the appointment is effective, be empowered to exercise all
voting and other rights of such stockholder as they, in their sole discretion,
may deem proper at any annual, special or adjourned meeting of the stockholders
of the Company, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, the Purchaser must be able to exercise full voting rights with
respect to such Shares immediately upon the Purchaser's payment for such Shares.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any tender of Shares will be determined by the
Purchaser in its sole discretion, which determination will be final and binding.
The Purchaser reserves the absolute right to reject any and all tenders
determined by it not to be in proper form or the acceptance for payment of or
payment for which may, in the opinion of the Purchaser's counsel, be unlawful.
The Purchaser also reserves the absolute right to waive any defect or
irregularity in the tender of any Shares of any particular stockholder whether
or not similar defects or irregularities are waived in the case of other
stockholders. No tender of Shares will be deemed to have been validly made until
all defects and irregularities relating thereto have been cured or waived. None
of the Purchaser, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and instructions thereto) will be final and binding.
4. RIGHTS OF WITHDRAWAL
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after July 13, 1999.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. Any such notice
of withdrawal must specify the name of the person having tendered the Shares to
be withdrawn, the number of Shares to be withdrawn and the names in which the
certificate(s) evidencing the Shares to be withdrawn are registered, if
different from that of the person who tendered such Shares. 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 any Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry tender as
set forth in Section 3, 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 and otherwise comply with the Book-Entry Transfer
Facility's Procedures. If certificates for Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, the name of the registered
holder and the serial numbers of the particular certificates evidencing the
Shares to be withdrawn must also be furnished to the Depositary as aforesaid
prior to the physical release of such certificates. All questions as to the form
and validity (including time of
6
<PAGE> 9
receipt) of any notice of withdrawal will be determined by the Purchaser, in its
sole discretion, which determination shall be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give such
notification. Withdrawals of tender for Shares may not be rescinded, and any
Shares properly withdrawn will be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by following
one of the procedures described in Section 3 at any time prior to the Expiration
Date.
If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Shares, or is unable to accept for payment Shares pursuant to the
Offer, then for any reason, without prejudice to the Purchaser's rights under
this Offer, the Depositary may, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
General
Sales of Shares pursuant to the Offer and the exchange of Shares for cash
pursuant to the Merger will be taxable transactions for U.S. federal income tax
purposes and may also be taxable under applicable state, local, foreign and
other tax laws. For U.S. federal income tax purposes, a stockholder whose Shares
are purchased pursuant to the Offer or who receives cash as a result of the
Merger will realize gain or loss equal to the difference between the adjusted
basis of the Shares sold or exchanged and the amount of cash received therefor.
Such gain or loss will be capital gain or loss if the Shares are held as capital
assets by the stockholder and will be long-term capital gain or loss if the
stockholder's holding period in such Shares for U.S. federal income tax purposes
is more than one year at the time of the sale or exchange. Long-term capital
gain of a non-corporate stockholder is generally subject to a maximum tax rate
of 20%. In addition, a stockholder's ability to use capital losses to offset
ordinary income is limited.
Backup Withholding
In order to avoid "backup withholding" of U.S. federal income tax on
payments of cash pursuant to the Offer or the Merger, a stockholder surrendering
Shares in the Offer or the Merger must, unless an exemption applies, provide the
Depositary with such stockholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 included as part of the Letter of Transmittal
and certify under penalties of perjury that such TIN is correct and that such
stockholder is not subject to backup withholding. If a stockholder does not
provide such stockholder's correct TIN or fails to provide the certifications
described above, the Internal Revenue Service (the "IRS") may impose a penalty
on such stockholder and payment of cash to such stockholder pursuant to the
Offer or the Merger may be subject to backup withholding tax of 31%. All
stockholders surrendering Shares pursuant to the Offer or the Merger should
complete and sign the main signature form and the Substitute Form W-9 included
as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to Purchaser and the
Depositary). Certain stockholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Foreign stockholders should complete and sign the main signature form and Form
W-8, Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL SITUATIONS
SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF EMPLOYEE
STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE NOT UNITED
STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE SPECIFIC TAX CONSEQUENCES TO THEM, IN THEIR PARTICULAR CIRCUMSTANCES, OF
THE
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<PAGE> 10
OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE,
LOCAL, FOREIGN OR OTHER TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded on the Nasdaq Stock Market's National Market under
the symbol "VCSI." The following table sets forth, for the calendar quarters
indicated, the high and low per share sales prices for the Shares on the Nasdaq
National Market:
<TABLE>
<CAPTION>
SALES PRICE
--------------
CALENDAR YEAR HIGH LOW
- ------------- ----- -----
<S> <C> <C>
1997:
First Quarter............................................. $9.00 $5.50
Second Quarter............................................ 5.88 4.38
Third Quarter............................................. 5.94 3.63
Fourth Quarter............................................ 4.22 2.50
1998:
First Quarter............................................. 7.50 2.25
Second Quarter............................................ 7.53 3.09
Third Quarter............................................. 3.31 1.56
Fourth Quarter............................................ 3.00 1.50
1999:
First Quarter............................................. 5.00 1.75
Second Quarter (through May 13, 1999)..................... 3.91 2.88
</TABLE>
On May 7, 1999, the last full trading day prior to the public announcement
of the terms of the Offer and the Merger, the reported closing price for the
Shares on the Nasdaq National Market was $3.1875 per Share. On May 13, 1999 the
last full trading day prior to commencement of the Offer, the reported closing
price for the Shares on the Nasdaq National Market was $3.875 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Purchaser has been advised by the Company that the Company did not pay
dividends on its Shares during the years ended December 31, 1997 or 1998 and has
not paid any dividends in 1999. The Merger Agreement prohibits the Company from
declaring or paying any dividends without the consent of Parent.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION, MARGIN
REGULATIONS AND EXCHANGE ACT REGISTRATION
Market for Shares
The purchase of Shares by the Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and may reduce the
number of stockholders, which could adversely affect the liquidity and market
value of the remaining Shares held by the public.
Stock Quotation
The Shares are traded on the Nasdaq National Market. According to published
guidelines of the Nasdaq National Market, the Shares might no longer be eligible
for quotation on the Nasdaq National Market if, among other things, either (i)
the number of Shares publicly held was less than 750,000, there were fewer than
400 holders of round lots, the aggregate market value of publicly held Shares
was less than $5,000,000, net tangible assets were less than $4,000,000 and
there were fewer than two registered and active market makers for the Shares, or
(ii) the number of Shares publicly held was less than 1,100,000, there were
fewer than 400 holders of round lots, the aggregate market value of publicly
held Shares was less than $15,000,000, and either (x) the Company's market
capitalization was less than
8
<PAGE> 11
$50,000,000 or (y) the total assets and total revenue of the Company for the
most recently completed fiscal year or two of the last three most recently
completed fiscal years did not exceed $50,000,000 and there were fewer than four
registered and active market makers. Shares held directly or indirectly by
directors, officers or beneficial owners of more than 10% of the outstanding
Shares are not considered as being publicly held for this purpose. According to
the Company's 1998 Annual Report on Form 10-KSB, there were 1,838 holders of
record of Shares as of March 17, 1999.
If the Shares were to cease to be quoted on the Nasdaq National Market, the
market for the Shares could be adversely affected. It is possible that the
Shares would be traded or quoted on other securities exchanges or in the
over-the-counter market, and that price quotations would be reported by such
exchanges, or through NASDAQ or other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of stockholders and/or the aggregate market value of the Shares
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration of the
Shares under the Exchange Act and other factors.
Exchange Act Registration
The Shares are currently registered under the Exchange Act. Registration of
the Shares may be terminated by the Company upon application to the SEC if the
Shares are not listed on a national securities exchange, quoted on an automated
inter-dealer quotation system or held by 300 or more holders of record.
Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
its stockholders and to the SEC and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b) and the requirement to furnish a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a) and the related requirement to
furnish an annual report to stockholders, no longer applicable with respect to
the Shares. Furthermore, the ability of "affiliates" of the Company and persons
holding "restricted securities" of the Company to dispose of such securities
pursuant to Rule 144 under the Securities Act of 1933, as amended, may be
impaired or eliminated. The Purchaser intends to seek to cause the Company to
apply for termination of registration of the Shares as soon as possible after
consummation of the Offer if the requirements for termination of registration
are met.
Margin Regulations
The Share are presently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve Board (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, the Shares might no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations in which event the Shares would be ineligible as
collateral for margin loans made by brokers. In any event, the Shares will cease
to be "margin securities" if registration of the Shares under the Exchange Act
is terminated.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
General
The Company is a Delaware corporation with its principal executive offices
located at 14140 Midway Road, Suite 100, Dallas, Texas 75244.
The Company is a leading supplier of speech recognition and related speech
input technologies. It offers a selection of speech recognition and speaker
verification products and vocabulary libraries. These products employ a
proprietary phonetic approach to speech recognition developed by the Company
over the past 20 years. The Company has distributed more than 2.5 million speech
recognizers in 30 countries. The Company markets its technologies to systems
integrators and original
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<PAGE> 12
equipment manufacturers (OEMs) in the telecommunications, desktop computing and
consumer electronics markets. The Company's technology has been used in many
applications worldwide, including telephone network automation, telephone
banking, government services, network-based cellular telephone voice dialing and
automotive-based cellular voice dialing.
Financial Information
Set forth below is certain summary consolidated financial information for
each of the Company's last three fiscal years for the period ended December 31,
1998 as contained in the Company's 1997 Annual Report on Form 10-KSB for the
year ended December 31, 1997 and its 1998 Annual Report on Form 10-KSB for the
year ended December 31, 1998 and for the three months ended March 31, 1998 and
March 31, 1999 as contained in the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999. More comprehensive financial information is
included in such reports (including management's discussion and analysis of
financial condition and results of operation) and other documents filed by the
Company with the SEC, and the following summary is qualified in its entirety by
reference to such reports and other documents and all of the financial
information and notes contained therein. Copies of such reports and other
documents may be examined at or obtained from the SEC and NASDAQ in the manner
set forth below.
VOICE CONTROL SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.................... $13,577,420 $14,429,867 $ 14,225,691 $ 3,772,067 $ 2,768,043
Gross profit............. 10,855,486 11,208,238 11,522,009 3,039,730 2,489,952
Net loss................. (2,794,573) (439,258) (16,216,791) (456,303) (1,286,161)
Basic and diluted net
loss per share......... (0.34) (0.04) (1.25) (.04) (.09)
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............. $19,804,470 $19,033,515 $11,827,578 $18,507,825 $10,735,116
Working capital........... 14,683,595 15,648,857 7,156,841 15,099,481 6,265,048
Long-term debt............ -- -- 18,283 -- 18,283
Stockholders' equity...... 16,203,210 17,327,602 10,089,763 16,764,926 8,952,520
</TABLE>
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase has been taken from or based upon
publicly available documents and records on file with the SEC and other public
sources and is qualified in its entirety by reference thereto. Although Parent,
the Purchaser and the Information Agent have no knowledge that would indicate
that any statements contained herein based on such documents and records are
untrue, Parent, the Purchaser and the Information Agent do not take
responsibility for the accuracy or completeness of the information 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 Parent, the Purchaser or the Information
Agent.
During the course of the due diligence conducted by Royal Philips and
Parent of the Company in April 1999 and the negotiations between Royal Philips
and Parent and the Company, the Company made available to representatives of
Royal Philips and Parent certain non-public information regarding
10
<PAGE> 13
the Company's projected operating performance and financial position for the
twelve months ended December 31, 1999. Specifically, the Company projected total
sales for 1999 of $19.6 million, a 37.9% increase from 1998 sales, gross profit
of $17.9 million, a 55.7% increase from 1998 gross profit, and a net loss for
1999 of $916,000 compared to a net loss of $16.2 million for 1998. The
projections further indicated that stockholders' equity would be approximately
$9.3 million at December 31, 1999, an approximate 7.7% decrease from the level
at December 31, 1998.
The Company has advised the Purchaser that it does not as a matter of
course make public any projections as to future performance or earnings and the
foregoing projections are included in this Offer to Purchase only because this
information was provided to Royal Philips and Parent. The projections were not
prepared with a view to public disclosure or compliance with the published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. The projections
were based on estimates and assumptions that are inherently subject to
significant economic and competitive uncertainties, all of which are difficult
to predict and many of which are beyond the Company's control. Accordingly,
there can be no assurance that the projected results can be realized or that
actual results will not be materially higher or lower than those projected. None
of the Company, Royal Philips, Parent or the Purchaser or their respective
advisors assumes any responsibility for the accuracy of the projections. The
inclusion of the foregoing projections should not be regarded as an indication
that the Company, Royal Philips, Parent, the Purchaser or any other person who
received such information considers it an accurate prediction of future events.
Neither the Company, Royal Philips, Parent nor the Purchaser intends to update,
revise or correct such projections if they become inaccurate.
Available Information
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and other
information with the SEC relating to its business, financial condition and other
matters. Information concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company and other matters is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the SEC.
Such reports, proxy statements and other information are available for
inspection at the public reference room at the SEC's offices at 450 Fifth
Street, N.W., Washington, D.C., 20549 and also should be available for
inspection and copying at the regional offices of the SEC located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60611. Copies may be obtained by
mail, upon payment of the SEC's customary charges, by writing to its principal
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
can be obtained electronically through the SEC's website at http://www.sec.gov.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
General
The Purchaser is a Delaware corporation and a wholly owned subsidiary of
Parent. To date it has engaged in no activities other than those incident to its
formation and the commencement of the Offer. The principal offices of the
Purchaser are located at 1251 Avenue of the Americas, New York, New York 10020.
Parent is a Delaware corporation, a wholly owned subsidiary of Philips
Holding USA Inc. ("Philips Holding") and an indirect wholly-owned subsidiary of
Royal Philips. Parent's activities vary from integrated manufacturing and
marketing entities to marketing organizations that sell products imported from
Royal Philips and its affiliates or third parties. Based upon sales, Parent's
largest businesses are consumer electronics, lighting, semiconductors and
components. Parent's principal offices are located at 1251 Avenue of the
Americas, New York, New York 10020.
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<PAGE> 14
Philips Holding is a Delaware corporation and a wholly owned subsidiary of
Royal Philips. Philips Holding does not engage in any activities other than
those incident to its role as a holding company of Royal Philips. Philips
Holding's principal offices are located at 1251 Avenue of the Americas, New
York, New York 10020.
Royal Philips is a company incorporated under the laws of The Netherlands
and is the parent company of the Philips Group. The activities of the Philips
Group are organized into product divisions which are responsible for Royal
Philips' worldwide business policy. Royal Philips has manufacturing and sales
organizations in over 60 countries. Royal Philips delivers products, systems and
services in the fields of lighting, consumer electronics and communications,
domestic appliances and personal care, components, semiconductors, medical
systems, business electronics and information technology. Royal Philips'
principal executive offices are located at Rembrandt Tower, Amstelplein 1, 1096
HA Amsterdam, The Netherlands.
Financial Information
Set forth below is certain summary consolidated financial information of
Royal Philips derived from its Annual Report on Form 20-F for the year ended
December 31, 1998. The complete set of financial statements of Royal Philips for
the year ended December 31, 1998 as well as the notes thereto and additional
comprehensive financial information (including management's discussion and
analysis of financial condition and results of operations) is included in the
Royal Philips Form 20-F for the year ended December 31, 1998 and other documents
filed by Royal Philips with the SEC. The summary set forth below is qualified in
its entirety by reference to the Philips Form 20-F and such other documents and
all of the financial information and notes contained therein. Copies of such
other documents may be examined at or obtained from the SEC and the NYSE in the
manner set forth in Section 8 above.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
SELECTED CONSOLIDATED FINANCIAL INFORMATION(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998 1998(2)
NLG NLG NLG US$
------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
(Dutch GAAP)
Sales.............................................. 59,707 65,358 67,122 35,514
Income from continuing operations.................. 278 2,712 1,192 631
Net income......................................... (590) 5,733 13,339 7,058
Basic net income per common share.................. (1.73) 16.41 37.05 19.60
Diluted net income per common share................ (1.73) 16.09 36.75 19.44
(U.S. GAAP)
Net income (loss).................................. (866) 5,881 13,090 6,926
Basic net income per common share.................. (2.53) 16.83 36.36 19.24
Diluted net income per common share................ (2.53) 16.51 36.06 19.08
BALANCE SHEET DATA:
(Dutch GAAP)
Total assets....................................... 48,278 51,394 62,041 32,826
Working capital.................................... 788 3,471 1,785 944
Long-term debt..................................... 7,512 7,072 6,140 3,249
Other group equity................................. 616 1,232 533 282
Stockholders' equity............................... 13,956 19,457 31,292 16,557
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998 1998(2)
NLG NLG NLG US$
------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
(U.S. GAAP)
Total assets....................................... 48,387 51,634 62,289 32,957
Stockholders' equity............................... 15,003 20,735 32,362 17,123
</TABLE>
- ---------------
(1) Restated to reflect the sale of PolyGram N.V. and to present the Philips
Group accounts on a continuing basis for all years presented.
(2) Dutch Guilders (NLG) are translated into U.S. Dollars ($) at a rate of NLG
1.89 = $1.00, the Noon Buying Rate of the Federal Reserve Bank of New York
on December 31, 1998. The presentation of the U.S. Dollar amounts should not
be construed as a representation that the Dutch Guilder amounts could be so
converted into U.S. Dollars at the rate indicated or at any other rate.
Royal Philips' financial statements are prepared in accordance with
generally accepted accounting principles in The Netherlands ("Dutch GAAP"),
which differ in certain significant respects from generally accepted accounting
principles in the U.S. ("U.S. GAAP"). Royal Philips, however, believes that the
differences between Dutch GAAP and U.S. GAAP are not material to a decision by a
holder of Shares whether to sell, tender or hold the Shares.
Other Information
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the directors and
executive officers of Royal Philips, Philips Holding, Parent and the Purchaser
are set forth in Schedule A to this Offer to Purchase.
None of the Purchaser, Philips Holding, Parent or Royal Philips, or, to the
best of their knowledge, any of the persons listed in Schedule A hereto nor any
associate or majority-owned subsidiary of any of the foregoing, beneficially
owns or has a right to acquire any equity securities of the Company. In
addition, none of the Purchaser, Philips Holding, Parent or Royal Philips, or,
to the best of their knowledge, any of the persons or entities referred to
above, nor any director, executive officer or subsidiary of any of the
foregoing, has effected any transaction in such equity securities during the
past 60 days.
None of the Purchaser, Philips Holding, Parent or Royal Philips, or, to the
best of their knowledge, any of the persons listed in Schedule A hereto, has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as set forth in Sections 10 and 12, there have
been no contacts, negotiations or transactions since January 1, 1996 between
Royal Philips, Philips Holding, Parent or the Purchaser, or, to the best of
their knowledge, any of the persons listed in Schedule A hereto, on the one
hand, and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors, or a sale or other transfer of a material amount of
assets. None of the Purchaser, Parent or Royal Philips, or, to the best of their
knowledge, any of the persons listed in Schedule A hereto, has since January 1,
1996 had any transaction with the Company or any of its executive officers,
directors or affiliates that would require disclosure under the rules and
regulations of the SEC applicable to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; EMPLOYMENT AGREEMENTS
Background of the Offer and Contacts with the Company
In August 1998, representatives of Royal Philips and Parent identified the
Company as an acquisition target which would assist it in developing its speech
recognition technology business. In Septem-
13
<PAGE> 16
ber 1998, Peter Wisgerhof, Treasurer of Philips Business Electronics, a product
division of Royal Philips, and other on his behalf, contacted Peter J. Foster,
the then Chief Executive Officer of the Company, about the possible benefits and
principal objectives of a business combination in which Royal Philips (or one of
its affiliates) would acquire the Company. After an introductory meeting on
October 16, 1998, the Company and Royal Philips entered into a nondisclosure
agreement to govern the exchange of nonpublic information between them.
In November and December of 1998, Mr. Wisgerhof and Corina Kuiper, Strategy
Planning Manager of Philips Business Electronics, and other representatives of
Royal Philips and Parent held additional discussions with Mr. Foster and Kim S.
Terry, Vice President Finance of the Company, to exchange information regarding
potential strategic opportunities between the companies. As a result of these
discussions, in early December 1998, Mr. Foster, Ms. Terry and the then
newly-appointed Chief Executive Officer of the Company, Ronald H. Larkin,
traveled to Aachen, Germany to visit Philips' speech technology research
laboratories and to meet with representatives of Philips Electronics' speech
processing business unit, Philips Speech Processing.
Discussions among the parties continued into 1999. In mid-January 1999, the
parties agreed that Philips would conduct preliminary due diligence of the
Company later that month. On February 10, 1999, Mr. Wisgerhof and Peter Besting,
New Business Development Manager for the Philips Speech Processing business
unit, met in London with Sir John Lucas-Tooth, member of the board of directors
of the Company, to discuss general information about the Company, how the
Company would fit into the long-term strategy of Philips Business Electronics,
the potential synergies of a transaction and how next to proceed towards an
acquisition transaction.
During March and early April of 1999, representatives of Royal Philips and
Parent continued discussions with Sir John Lucas-Tooth, Neal J. Robinson,
Chairman of the Board of Directors of the Company, and Mr. John Torkelsen, a
member of the board of directors of the Company, regarding a potential
acquisition of the Company. In a conversation on April 14, 1999, Mr. Robinson
indicated that the Company would be interested in pursuing a transaction with
Philips but that any steps would have to be taken quickly. In that conversation,
Mr. Robinson and Stephen Havering, Deputy Director of Corporate Mergers and
Acquisitions for Royal Philips, agreed that representatives of Royal Philips and
Parent would be invited to Dallas, Texas to conduct a one-week due diligence
investigation of the Company's business. They further agreed that if Royal
Philips and Parent remained interested at the conclusion of the week, Royal
Philips and Parent would present an informal proposal containing material terms
of an acquisition of the Company by Royal Philips.
From April 19 to April 23, 1999, representatives of Royal Philips and
Parent met with Company representatives in Dallas to conduct a due diligence
investigation of the Company. At the conclusion of these meetings on April 23,
Mr. Wisgerhof, Mr. Havering, Eric Coutinho, Director of the Corporate Legal
Department at Royal Philips, and other internal and external legal advisors met
with Mr. Robinson in Williamsburg, Virginia to discuss the terms of a potential
transaction. At this meeting, Mr. Havering proposed that Parent would acquire
the Company in a cash tender offer at a price of $4.00 per Share.
Between April 24 and April 28, 1999, Mr. Robinson and Mr. Havering had
various discussions regarding the terms of the proposal. On April 28, 1999, Mr.
Robinson briefed each of the directors of the Company individually regarding the
status of the negotiations.
On May 3, 1999, Mr. Havering and other representatives of Royal Philips and
Parent presented the acquisition proposal to the Board of Management of Royal
Philips. During this meeting, the Board of Management approved proceeding with
the acquisition of the Company on the terms proposed, subject to the completion
of additional due diligence and satisfactory terms and conditions of a
definitive agreement to be negotiated. On May 4, 1999, Parent's counsel sent to
the Company and its counsel a proposed merger agreement setting forth the basis
upon which Parent would be prepared to proceed with a transaction to acquire the
Company.
14
<PAGE> 17
The Board of Directors of the Company met on May 4, 1999. In this meeting,
the Board authorized a committee composed of certain directors and officers of
the Company to continue negotiating a transaction in which Royal Philips or
Parent would acquire the Company at a purchase price of $4.00 per Share, subject
to the further review by the Board of all of the material terms of the
transaction.
Between May 6 and May 8, 1999, Mr. Havering, Mr. Robinson and the legal
advisors of Parent and the Company negotiated the terms of the Merger Agreement.
In addition, during this period, Mr. Havering and representatives of the Royal
Philips Business Electronics division, Philips Speech Processing business unit
and Parent met with Mr. Foster, Ms. Terry, Mr. Larkin and Dr. Thomas Schalk,
Chief Technical Officer of the Company, regarding their employment with the
Company after an acquisition by Parent and the Purchaser.
On May 9, 1999, the negotiations of the Merger Agreement were completed and
the Merger Agreement was finalized. In addition, the negotiations regarding the
terms of employment of each of Mr. Foster, Dr. Schalk and Ms. Terry were
completed and final terms were agreed upon. Later on May 9, 1999, the Board of
Directors of the Company unanimously adopted the Merger Agreement and approved
the transactions contemplated therein. Shortly thereafter, the Merger Agreement
was executed and delivered. A short time later, the employment agreements with
Mr. Foster, Dr. Schalk and Ms. Terry were executed and delivered.
Employment Agreements
Prior to the execution of the Merger Agreement, the Company had entered
into a severance agreement with its former chief executive officer, Mr. Peter J.
Foster, and an employment agreement with Dr. Thomas B. Schalk which provided
for, among other things, the payment of severance amounts and benefits upon
certain terminations of employment in connection with a change in control of the
Company. Pursuant to Mr. Foster's severance agreement, Mr. Foster will receive a
payment of $75,000 upon the successful purchase of Shares pursuant to the Offer
(the "Effective Date") in consideration for his services in the negotiations
with Royal Philips relating to the Offer.
As of the Effective Date, any prior agreements between the Company and Mr.
Foster and Dr. Schalk, respectively, will be superseded by new employment
agreements entered into with Parent in connection with the Merger (except with
respect to any amounts that remain due and owing under such agreements based on
events occurring prior to the Effective Date). In connection with the Merger,
Ms. Kim S. Terry also entered into an employment agreement with Parent on
similar terms. The defined term "Parent" as used in this description of
employment agreements includes the subsidiary of Parent with which the executive
is employed during the employment term. The new employment agreements have
two-year terms (the "Term") commencing on the Effective Date. Copies of the new
employment agreements are filed as Exhibits (c)(2), (c)(3) and (c)(4) to the
Tender Offer Statement on Schedule 14D-1 to which this Offer to Purchase is an
exhibit and are incorporated herein by reference and the following summary is
qualified in its entirety by reference to such agreements.
Pursuant to the new employment agreements, Mr. Foster will serve as Senior
Vice President of the surviving company in the Merger, Dr. Schalk will serve as
Senior Vice President and Chief Technical Officer of the surviving company in
the Merger and Ms. Terry will serve as the Vice President-Operations and Finance
of the surviving company in the Merger, with base salaries of $230,000, $180,000
and $160,000, respectively. Each of them will be entitled to an annual bonus
upon achievement of certain targets with a target bonus opportunity of $90,000
for Mr. Foster and 30% of the base salary for Dr. Schalk and Ms. Terry. The
actual bonus paid may be higher or lower than the target bonus (subject to a
minimum of $20,000 for Dr. Schalk in the first year of the term) depending upon
performance. Mr. Foster will also receive a discretionary expense account of up
to $30,000 for each 12-month period during the Term for expenses relating to his
position.
Each of these three executive officers will be eligible to participate in a
long-term incentive plan (the "LTIP") during the Term of his or her employment.
Under the LTIP, each executive will receive a guaranteed payment equal to 50% of
$260,000 for Mr. Foster and 50% of the applicable base salary as
15
<PAGE> 18
of June 1999 for Dr. Schalk and Ms. Terry, payable in three substantially equal
installments if the officer is actively employed by Parent on the date which is
(A) six months following the Effective Date, (B) 12 months following the
Effective Date and (C) 18 months following the Effective Date, respectively, one
such installment to be paid following each of the dates described in clauses
(A), (B) and (C) above if the employment condition has been satisfied on such
date. Under the LTIP, each officer will have the opportunity to earn an
additional long-term incentive payment equal of to 25% of $260,000 for Mr.
Foster and 25% of the applicable base salary as of June 1999 for Dr. Schalk and
Ms. Terry if certain business synergies and objectives are achieved during the
18-month period following the Effective Date and the executive remains actively
employed by Parent 18 months following the Effective Date.
Under the employment agreements, if an executive's employment is terminated
by Parent without cause or if the executive terminates his or her employment
upon a material breach (as those terms are defined in employment agreements),
Parent will pay to the executive (A) base salary accrued through the date of
termination and (B) a payment equal to his or her base salary payable for the
greater of (i) the remainder of the Term, or (ii) 12 months (18 months, in the
case of Dr. Schalk) (the "Coverage Period"), and (C) a payment equal to the sum,
pro-rated through the date of termination, of (i) the Target Bonus for the
calendar year in which the termination occurs, and (ii) the guaranteed payment
under the LTIP. Mr. Foster will continue to receive his discretionary expense
account during the Coverage Period. In consideration of these payments, the
executive officers have agreed, among other things, not to engage in competition
with the Company for a period of 12 months (24 months in the case of Dr. Schalk)
following the termination of such executive's employment.
Effect of the Merger on Employee Benefit and Stock Plans
In addition to the provisions relating to employment agreements described
above, the Merger Agreement contemplates that certain additional actions will be
taken in respect of employee benefit and stock plans in which executive officers
of the Company are eligible to participate. Parent shall cause the Company (or
if the Purchaser is the surviving entity in the Merger, the Purchaser) for a
period of one year following the Merger to provide benefits (other than
stock-related benefits) to Company employees that are in the aggregate
substantially comparable to those provided by the Company prior to the Merger.
In accordance with the Merger Agreement, the Company will take all
necessary action to cause each option to purchase Shares (whether or not
exercisable) to be surrendered and canceled as of the effective time of the
Merger for a cash payment equal to the excess, if any, of the consideration paid
in the Merger (which is the same amount per Share to be paid in the Offer) over
the per Share exercise price of the option multiplied by the number of Shares
subject to the option. Notwithstanding the foregoing, 200,000 options held by
Mr. Larkin shall be canceled and surrendered without consideration therefor.
11. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, but subject to the terms
and conditions of the Merger Agreement (and provided that the Purchaser shall
not be obligated to accept for payment any Shares until expiration or
termination of all applicable waiting periods under the HSR Act), the Purchaser
(x) shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the
Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and (y) may delay the acceptance for payment of or (subject to such rules and
regulations, including Rule 14e-1(c)) payment for, any tendered Shares, in each
case if a majority of the total Shares outstanding on a fully diluted basis and
as will permit the Purchaser to effect the Merger without the vote of any person
other than the Purchaser shall not have been properly and validly tendered
pursuant to the Offer and not withdrawn prior to the expiration of the Offer
(the "Minimum Condition"), or, if on or
16
<PAGE> 19
after the date of the Merger Agreement, and at or before the time of acceptance
for payment of any of such Shares, any of the following events shall occur:
(a) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under the
Merger Agreement;
(b)(i) any of the representations and warranties of the Company set
forth in this Agreement that are qualified by materiality or by Material
Adverse Effect (as defined in the Merger Agreement) shall not have been
true and correct as of the date of the Merger Agreement or shall not be
true and correct on the Expiration Date of the Offer (and any extensions
thereof) as though made on and as of such date or (ii) except for such
inaccuracies as, individually or in the aggregate, have not had and would
not be reasonably likely to have a Material Adverse Effect, the
representations and warranties of the Company set forth in the Merger
Agreement that are not qualified by materiality or by Material Adverse
Effect, shall not have been true and correct as of the date of the Merger
Agreement or shall not be true and correct as of the expiration date of the
Offer (and any extensions thereof) as though made on and as of such date;
(c) there shall be threatened, instituted or pending any action,
litigation or proceeding (hereinafter, an "Action") by any governmental
entity: (i) challenging the acquisition by Parent or the Purchaser of
Shares or seeking to restrain or prohibit the consummation of the Offer or
the Merger; (ii) seeking to prohibit or impose any material limitations on
Parent's, the Purchaser's or any of their respective affiliates' ownership
or operation of all or any material portion of the business or assets of
the Company and its subsidiaries taken as a whole or the business or assets
of any significant subsidiary of Royal Philips, or to compel Parent or the
Purchaser to dispose of or hold separate all or any portion of Parent's or
the Purchaser's or the Company's business or assets (including the business
or assets of their respective affiliates and subsidiaries) as a result of
the Offer or the Merger; (iii) seeking to impose material limitations on
the ability of Parent or the Purchaser effectively to acquire or hold, or
to exercise full rights of ownership of, the Shares including, without
limitation, the right to vote the Shares purchased by them on an equal
basis with all other Shares on all matters properly presented to the
stockholders of the Company; or (iv) that, in any event, would,
individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect;
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed to or become applicable
to the Offer or the Merger, or any other action shall have been taken,
proposed or threatened, by any court or other governmental entity, that is
reasonably expected to result in any of the effects of, or have any of the
consequences sought to be obtained or achieved in, any Action referred to
in clauses (i) through (iv) of paragraph (c) above;
(e)(i) the Company's stockholders' equity as determined on a
consolidated basis in accordance with U.S. GAAP shall be less than
$6,000,000 or (ii) Parent shall not have received a certificate signed by
the Chief Executive Officer and the Vice President Finance of the Company,
dated the Expiration Date of the Offer, certifying that the Company's
stockholders' equity determined on consolidated basis in accordance with
U.S. GAAP is greater than or equal to $6,000,000;
(f) any change or development shall have occurred that, individually
or in the aggregate, is reasonably likely to have a Material Adverse
Effect; or
(g) the Merger Agreement shall have been terminated by the Company or
Parent or the Purchaser in accordance with its terms;
which, in the reasonable judgment of Parent and the Purchaser, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or the Purchaser) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions may be asserted by Parent or the Purchaser
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition. The
17
<PAGE> 20
conditions set forth in paragraphs (a) through (g) above are for the sole
benefit of Parent and the Purchaser and may be waived by Parent or the
Purchaser, by express and specific action to that effect, in whole or in part at
any time and from time to time in their sole discretion.
A public announcement will be made of a material change in, or waiver of,
such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver.
Even if all of the Offer Conditions have been satisfied pursuant to the
Merger Agreement, the Purchaser has the right, without the consent of the
Company, to extend the Offer for a period of up to 30 business days if it
reasonably determines that such an extension is appropriate in order to enable
it to purchase at least 90% of the outstanding Shares in the Offer.
12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER
Purpose of the Offer
The purpose of the Offer is to acquire for cash as many outstanding Shares
as possible as a first step in acquiring the entire equity interest in the
Company.
If the Purchaser acquires over 50% of the outstanding Shares (on a
fully-diluted basis) pursuant to the Offer, it will have the vote necessary
under Delaware law to approve the Merger of the Purchaser with and into the
Company, or at the option of Parent, of the Company with and into the Purchaser.
Therefore, if at least 8,466,094 Shares are acquired pursuant to the Offer or
otherwise, the Purchaser will be able to and intends to effect the Merger
without a meeting of stockholders. Under the DGCL, if the Purchaser owns at
least 90% of the outstanding Shares, the Purchaser could effect the Merger using
the "short-form" merger procedures without prior notice to, or any action by,
any other stockholder of the Company.
If the Purchaser acquires Shares pursuant to the Offer, the Purchaser
intends to conduct a detailed review of the Company and its assets, business,
operations, properties, policies, corporate structure, capitalization and the
responsibilities and qualification of the Company's management and personnel and
consider what, if any, changes the Purchaser deems desirable in light of the
circumstances which then exist. The Purchaser does not presently contemplate any
major changes in the operations of the Company.
The Merger
The Merger Agreement provides that the closing of the Merger will take
place on the first business day on which the last to be satisfied or waived of
the conditions set forth in the Merger Agreement shall be satisfied or waived,
or at such other place and time and/or on such other date as the Company and
Parent may agree. Upon consummation of the Merger, each Share issued and
outstanding immediately prior to the effective time of the Merger (other than
Shares owned by the Parent Companies or Shares held by Dissenting Stockholders)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive, without interest, an amount in
cash equal to the price paid per Share pursuant to the Offer.
The description of the Merger and the Merger Agreement included herein is
qualified by reference to the Merger Agreement which is filed as an exhibit to
the Tender Offer Statement on Schedule 14D-1 to which this Offer to Purchase is
an exhibit.
Vote Required to Approve Merger
The DGCL requires, among other things, that the adoption of any plan of
merger or consolidation of the Company must be approved by the Board of
Directors of the Company and, if the "short form" merger procedure described
above is not available, by the holders of a majority of the Company's
outstanding Shares. The Board of Directors of the Company has approved the
Offer, the Merger and the Merger Agreement; consequently, the only additional
action of the Company that may be necessary to
18
<PAGE> 21
effect the Merger is adoption of the Merger Agreement by such stockholders if
the "short form" merger procedure described above is not available. Under the
DGCL, the affirmative vote of holders of a majority of the outstanding Shares
(including any Shares owned by the Purchaser) is generally required to adopt the
Merger Agreement. If the Purchaser acquires, through the Offer or otherwise,
voting power with respect to at least a majority of the outstanding Shares
(which would be the case if the Minimum Condition were satisfied and the
Purchaser were to accept for payment Shares tendered pursuant to the Offer), it
would have sufficient voting power to effect the Merger without the vote of any
other stockholder of the Company.
THE MERGER AGREEMENT PROVIDES THAT IF ANY TAKEOVER STATUTE IS OR SHALL
BECOME APPLICABLE TO THE TRANSACTIONS CONTEMPLATED THEREBY, THE COMPANY AND THE
BOARD OF DIRECTORS OF THE COMPANY MUST GRANT SUCH APPROVALS AND TAKE SUCH
ACTIONS AS ARE NECESSARY SO THAT THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT MAY BE CONSUMMATED AS PROMPTLY AS PRACTICABLE ON THE TERMS
CONTEMPLATED THEREBY AND OTHERWISE ACT TO ELIMINATE THE EFFECTS OF SUCH STATUTE
OR REGULATION ON THE TRANSACTIONS CONTEMPLATED THEREBY.
Conditions to the Merger
The obligations of the Company, the Purchaser and Parent to effect the
Merger are subject to the satisfaction or waiver of certain conditions set forth
in the Merger Agreement, including (i) the purchase by the Purchaser, Parent or
their affiliates of Shares pursuant to the Offer, (ii) the receipt of
stockholder approval, if required, (iii) no statute, rule or regulation shall
have been enacted or promulgated by any federal, state, local or foreign court,
arbitral tribunal, administrative agency or commission or other governmental or
regulatory authority or administrative agency which prohibits the consummation
of the Merger, and there shall be no order or injunction of a court of competent
jurisdiction in effect precluding consummation of the Merger; and (iv) clearance
from the appropriate agencies pursuant to the HSR Act shall have been obtained
or the waiting period thereby shall have expired or been terminated. In
addition, Parent and the Purchaser's obligations to effect the Merger are
subject to the further conditions that (i) the representations and warranties
contained in the Merger Agreement are true in all material respects as of the
time of the Merger, except with respect to changes permitted by the Merger
Agreement, (ii) the Company shall have fulfilled its obligations under the
Merger Agreement with respect to employee benefits and benefit plans and (iii)
holders of not more than five percent of the outstanding Shares shall have
exercised appraisal rights under Section 262 of the DGCL.
Acquisition Proposals
The Merger Agreement provides that neither the Company nor any of its
subsidiaries nor any of the respective officers and directors of the Company or
its subsidiaries shall, and the Company shall direct and use its best efforts to
cause its employees, agents and representatives not to, directly or indirectly
initiate, solicit, encourage or otherwise facilitate, any inquiries or the
making of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving the Company, or any
purchase of more than 15% (on a fair market value basis) of the assets of the
Company and its subsidiaries on a consolidated basis, or any purchase of, or
tender offer for, more than 15% of any equity securities of the Company (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"), except that the Company shall have the right, if, and only to the
extent that, the Company's Board of Directors concludes in good faith after
consultation with outside legal counsel that such actions are required to comply
with the fiduciary duties of the Company's Board of Directors under applicable
law in response to a bona fide, written Acquisition Proposal not solicited on or
after the date of the Merger Agreement, to engage in negotiations concerning,
provide confidential information or data to, or have discussions with, any
person relating to an Acquisition Proposal. The Company has agreed to notify
Parent immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with the Company or any of its subsidiaries.
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Termination of the Merger Agreement
The Merger Agreement may be terminated and the transactions contemplated
thereby abandoned at any time prior to the Merger, before or after approval by
holders of Shares: (a) by the mutual consent of Parent (also acting on behalf of
the Purchaser) and the Company, by action of their respective Boards of
Directors; or (b) by action of the Board of Directors of either Parent or the
Company if (i) the Purchaser shall not have accepted for payment any Shares
pursuant to the Offer prior to September 15, 1999; provided, however, that such
right to terminate the Merger Agreement shall not be available to any party
whose failure to perform any of its obligations under the Merger Agreement
results in the failure of any Offer Condition or (ii) any governmental entity
shall have issued an Order which shall have become final and non-appealable.
In addition, the Merger Agreement may be terminated by action of the Board
of Directors of Parent, if (x) (i) the Company shall have failed to comply in
any material respect with any of the covenants or agreements under the Merger
Agreement or (ii) a representation or warranty of the Company set forth in the
Merger Agreement shall have been inaccurate when made or shall thereafter become
inaccurate, except for such inaccuracies which, when taken together (in each
case without regard to any qualification as to materiality or a Material Adverse
Effect contained in the applicable representations and warranties) would not
reasonably be likely to have a Material Adverse Effect, and, with respect to any
such breach, failure to perform or inaccuracy that can be remedied, the breach,
failure or inaccuracy is not remedied within 15 business days after the giving
of written notice of such breach, failure or inaccuracy to the Company; (y) the
Board of Directors of the Company shall have withdrawn or modified in a manner
adverse to Parent or the Purchaser its approval or recommendation of the Offer,
the Merger Agreement or the Merger or shall have adopted or recommended any
Acquisition Proposal, or the Board of Directors of the Company, upon request by
Parent, shall fail to reaffirm such approval or recommendation within 10
business days after such request if an Acquisition Proposal is pending, or shall
have resolved to do any of the foregoing; or (z) if the Company or any of the
other persons or entities shall have initiated, solicited or otherwise
facilitated another Acquisition Proposal for the Company other than solely to
fulfill fiduciary obligations under applicable law as advised in writing by
counsel.
The Merger Agreement may also be terminated by action of the Board of
Directors of the Company, (x) if Parent or the Purchaser (or another Parent
Company) (i) shall have breached in any material respect any of the
representations, warranties, covenants or agreements contained in the Merger
Agreement (other than any immaterial covenants or agreements) and, with respect
to any such breach that can be remedied within 15 business days after the
Company has provided Parent with written notice of such breach, or (ii) shall
have failed to commence the Offer within the time agreed upon in the Merger
Agreement or (y) if (i) the Board of Directors of the Company receives a written
offer not solicited on or after the date of the Merger Agreement, with respect
to a merger, reorganization, share exchange, consolidation or sale of all or
substantially all of the Company's assets or a tender or exchange offer not
solicited on or after the date hereof for more than 50% of the outstanding
Shares is commenced, and with respect to which the Board of Directors of the
Company concludes in good faith, after consultation with an independent
financial advisor and its outside counsel, that approval, acceptance or
recommendation of such transaction is required by the fiduciary duties of the
Company's Board of Directors under applicable law (any such transaction, a
"Superior Proposal") and (ii) the Company has given Parent three business days'
prior written notice of its intention to terminate the Merger Agreement to
accept the Superior Proposal, which notice shall indicate the name of the person
making such Superior Proposal and the material terms of such Superior Proposal,
and Parent shall have failed to offer to amend the Offer so that it is at least
as favorable to the stockholders of the Company as the Superior Proposal.
Termination Payments
The Merger Agreement provides that if (x)(i)(A) the Offer shall have
remained open for a minimum of at least 20 business days, (B) after the date of
the Merger Agreement, any corporation, partnership, person, other entity or
group other than Parent or the Purchaser or any of their respective subsidiaries
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or affiliates shall have become the beneficial owner of 15% or more of the
outstanding Shares or made any Acquisition Proposal, and (C)(1) the Minimum
Condition shall not have been satisfied or (2) the Offer is terminated by Parent
due to a breach of the Company's obligations with respect to initiating or
soliciting other Acquisition Proposals or because September 15, 1999 has passed
without the purchase of any Shares pursuant to the Offer; or (ii) Parent shall
have terminated the Merger Agreement as a result of the board of directors of
the Company having withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger Agreement or
the Merger or having adopted or recommended another Acquisition Proposal or
having failed to reaffirm its approval or recommendation within 10 business days
after a request if an Acquisition Proposal is pending; or (iii) the Company
shall have terminated the Merger Agreement after having received a Superior
Proposal and having given Parent three days' notice of its intent to terminate
and Parent shall have failed to amend the Offer to match the Superior Proposal;
and (y) within 18 months of such termination (or the Expiration Date of the
Offer in the case of (C)(1) above), the Company consummates an Acquisition
Proposal, then, upon consummation of such Acquisition Proposal, the Company
shall promptly, but in no event later than five business days after the date of
a request by Parent for payment of such fee, pay Parent a fee of $2,000,000,
plus all documented fees and expenses incurred by Parent or the Purchaser in
connection with the Merger Agreement, the Offer and the Merger up to a maximum
amount of $1,000,000.
Treatment of Stock Options
The Merger Agreement provides that prior to the Merger, the Company shall
take all actions as may be necessary such that at the effective time of the
Merger, each stock option outstanding pursuant to the Company's stock option
plans ("Option"), whether or not then exercisable, shall be canceled and only
entitle the holder thereof, upon surrender thereof, to receive an amount in cash
equal to the excess, if any, of the per Share consideration paid in the Merger
over the exercise price per Share of such Option multiplied by the number of
Shares previously subject to such Option, less all applicable withholding taxes.
Such payment shall be made by the Company as soon as administratively feasible
after the Merger.
Treatment of Warrants
In the Merger, each outstanding warrant to purchase Shares which has not
been exercised at the time of the Merger will be treated in accordance with the
terms of each individual warrant.
Treatment of Other Employee Benefits
The Merger Agreement provides that, for a period of one year following the
Merger, it will cause the Company to continue to provide employees with benefits
under employee benefit plans (other than stock option or other plans involving
the potential issuance of securities of the Company) which in the aggregate are
substantially comparable to the benefits provided by the Company to such
employees immediately prior to the Merger, provided that employees covered by
collective bargaining agreements need not be provided such benefits.
Composition of the Board of Directors
If requested by Parent, the Company will, subject to compliance with
applicable law, immediately following the acceptance for payment of, and payment
by the Purchaser for, more than 50% of the outstanding Shares (on a fully
diluted basis) pursuant to the Offer, take all actions necessary to cause
persons designated by Parent to become directors of the Company so that the
total number of such persons (after all such actions have been taken) equals at
least that number of directors, rounded up to the next whole number, which
represents the product of (x) the total number of directors on the Board of
Directors multiplied by (y) the percentage that the number of Shares so accepted
for payment and paid for plus any Shares beneficially owned by Parent or its
affiliates on the date of the Merger Agreement bears to the number of Shares
outstanding at the time of such payment. In furtherance thereof, if
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requested by Parent, the Company will increase the size of the Board, or use its
best efforts to secure the resignation of directors, or both, as is necessary to
permit Parent's designees to be elected to the Company's Board of Directors;
provided, however, that prior to the effective time of the Merger, the Company's
Board of Directors shall always have at least one member who is not an officer,
designee, stockholder or affiliate of Parent or Parent's affiliates.
Conduct of Business of the Company
Pursuant to the Merger Agreement, the Company has agreed that, prior to the
Merger, unless consented to in writing by Parent, it and each of its
subsidiaries will conduct its business only in the ordinary and usual course and
will use its best efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees and
business associates.
Prohibited Actions by the Company
Under the Merger Agreement, the Company has agreed that, prior to the
Merger, unless consented to in writing by Parent, neither it nor any of its
subsidiaries will:
(a) (i) sell or pledge or agree to sell or pledge any stock owned by
it in any of its subsidiaries; (ii) amend its certificate of incorporation
or by-laws; (iii) split, combine or reclassify the outstanding Shares; or
(iv) declare, set aside or pay any dividend payable in cash, stock or
property with respect to the Shares;
(b) (i) issue, sell, pledge, dispose of or encumber any additional
shares of, or securities convertible or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of its capital stock of any class of the Company or its subsidiaries or any
other property or assets other than, in the case of the Company, Shares
issuable pursuant to options outstanding on the date hereof under the
Company stock option plans, Shares issuable upon exercise of warrants to
purchase Shares or Shares issuable pursuant to the terms of the Company's
Stock Purchase Plan; (ii) transfer, lease, license, guarantee, sell,
mortgage, pledge, dispose of or encumber any assets or incur or modify any
indebtedness or other liability other than in the ordinary and usual course
of business; (iii) acquire directly or indirectly by redemption or
otherwise any shares of the capital stock of the Company; or (iv) authorize
capital expenditures individually or in the aggregate in excess of $200,000
or make any acquisition of, or investment in, assets or stock of any other
person or entity;
(c) other than (i) the employment agreements entered into in
connection with the Merger Agreement, (ii) as required by law, (iii) as
required under a plan existing as of the date of the Merger Agreement, (iv)
as specifically provided in the Merger Agreement, (A) grant any severance
or termination pay to, or enter into any employment or severance agreement
with any director, officer or other employee of the Company or such
subsidiaries; or (B) establish, adopt, enter into, make any new grants or
awards (or accelerate the vesting or increase the value of any benefit)
under or amend, any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, employee
stock ownership, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees;
(d) settle or compromise any material claims or litigation or, except
in the ordinary and usual course of business, modify, amend or terminate
any of its material contracts or waive, release or assign any material
rights or claims;
(e) make any tax election or permit any insurance policy naming it as
a beneficiary or a loss payable payee to be canceled or terminated without
notice to Parent, except in the ordinary and usual course of business;
(f) (i) terminate the employment of any employee who is covered by a
change in control, employment, termination or similar agreement, except for
Cause (as defined in such agreements)
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or (ii) permit circumstances to exist that would provide such employee with
Good Reason (as defined in such agreements) to terminate employment;
(g) hire any new employees except in the ordinary and usual course of
business;
(h) permit any person not participating in the Company's Stock
Purchase Plan as of the date of the Merger Agreement to participate in such
plan or permit any present participant in the Company's Stock Purchase Plan
to increase his or her percentage contribution under such plan; or
(i) authorize or enter into an agreement to do any of the foregoing.
Indemnification of Officers and Directors
The Merger Agreement provides that from and after the Merger, Parent agrees
that it will indemnify and hold harmless each present and former director and
officer of the Company, determined as of the effective time of the Merger (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in such person's capacity as a director or officer of the Company in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Merger, whether asserted or claimed
prior to, at or after the Merger, to the fullest extent that the Company would
have been permitted under Delaware law and its certificate of incorporation or
by-laws in effect on the date of the Merger Agreement to indemnify such person.
The Merger Agreement also provides that the surviving corporation in the Merger
shall maintain the Company's existing officers' and directors' liability
insurance ("D&O Insurance") for a period of two years after the Merger so long
as the annual premium therefor is not in excess of the last annual premium paid
prior to the date hereof (the "Current Premium"); provided, however, if the
existing D&O Insurance expires, is terminated or canceled during such two year
period, the surviving corporation in the Merger will use its best efforts to
obtain as much D&O Insurance as can be obtained for the remainder of such period
for a premium not in excess (on an annualized basis) of the Current Premium. In
the Merger Agreement, the Company represented to Parent that the Current Premium
is $75,000. Notwithstanding the foregoing, the Surviving Corporation may replace
the D&O Insurance with coverage provided by Parent's D&O insurer with respect to
events occurring on or prior to the Merger so long as the coverage provided by
Parent's D&O policy with respect to such events are, in the aggregate,
substantially the same as, or more favorable than, the D&O Insurance with
respect to such events.
Appraisal Rights
Holders of Shares do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, each holder of Shares who has neither
voted in favor of the Merger nor consented thereto in writing will be entitled
to an appraisal by the Delaware Court of Chancery of the fair value of such
holder's Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid. In determining such fair value, the Court may
consider all relevant factors. The value so determined could be more or less
than the consideration to be paid in the Offer and the Merger. Any judicial
determination of the fair value could be based upon considerations other than or
in addition to the market value of the Shares, including, among other things,
asset values and earning capacity.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses such holder's right to
appraisal as provided in the DGCL, each Share of such stockholder will be
converted into the right to receive the per Share amount paid by the Purchaser
in the Offer in accordance with the Merger Agreement. A stockholder may withdraw
his demand for appraisal by delivery to Parent of a written withdrawal of such
holder's demand for appraisal and acceptance of the Merger.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
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FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Rule 13e-3
The Merger would have to comply with any applicable federal law operative
at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable
to certain "going private" transactions. The Purchaser does not believe that
Rule 13e-3 will be applicable to the Merger unless the Merger is consummated
more than one year after the termination of the Offer. If applicable, Rule 13e-3
would require, among other things, that certain financial information concerning
the Company and certain information relating to the fairness of the Merger and
the consideration offered to minority stockholders be filed with the SEC and
disclosed to minority stockholders prior to consummation of the Merger.
13. SOURCE AND AMOUNT OF FUNDS
The Purchaser estimates that the total amount of funds required to purchase
all of the outstanding Shares (other than those already owned by Parent)
pursuant to the Offer and the Merger and to pay related fees and expenses will
be approximately $60 million. The Purchaser will obtain these funds from Royal
Philips, either directly or indirectly, or via other subsidiaries of Royal
Philips, through loans, advances or capital contributions. Any loan from Royal
Philips to the Purchaser, its indirect wholly owned subsidiary, would be made at
arm's length interest rates that Royal Philips customarily uses for its
intercompany transactions. It is currently anticipated that such funds will be
generated internally from cash reserves of Royal Philips and its subsidiaries.
No final decisions have been made, however, concerning the method Royal Philips
will employ to obtain such funds. Such decisions, when made, will be based on
Royal Philips' review from time to time of the advisability of particular
actions, as well as on prevailing interest rates and financial and other
economic conditions.
14. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in Section 12 without the consent of
Parent. Nothing herein shall constitute a waiver by the Purchaser or Parent of
any of its rights under the Merger Agreement or a limitation of remedies
available to the Purchaser or Parent for any breach of the Merger Agreement,
including termination thereof.
If, on or after the date of the Merger Agreement, the Company should (1)
split, combine or otherwise change the Shares or its capitalization, (2) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares or (3) issue or sell additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, to acquire any of the foregoing, other
than Shares issued pursuant to the exercise of stock options and warrants
outstanding as of the date of the Merger Agreement or Shares issuable pursuant
to the Company Stock Purchase Plan, then, subject to the provisions of Section
11 above, the Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the Merger Consideration and other terms of the Offer,
including, without limitation, the number or type of securities offered to be
purchased.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any cash dividend on the Shares or other distribution on the
Shares, or issue with respect to the Shares any additional Shares, shares of any
other class of capital stock other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, payable or distributable to stockholders of
record on a date prior to the transfer of the Shares purchased pursuant to the
Offer to the Purchaser or its nominee or transferee on the Company's stock
transfer records, then, subject to the provisions of Section 11 above, (1) the
per Share price to be paid in the Offer may, in the sole discretion of the
Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (2) the whole of any such noncash dividend, distribution or
issuance to be
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received by the tendering stockholders will (a) be received and held by the
tendering stockholders for the account of the Purchaser and will be required to
be promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer, or (b) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance and
subject to applicable law, the Purchaser will be entitled to all rights and
privileges as owner of any such noncash dividend, distribution, issuance or
proceeds and may withhold the entire per Share price to be paid in the Offer or
deduct from such price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
15. CERTAIN LEGAL MATTERS
General
Except as otherwise disclosed herein, based upon an examination of publicly
available filings with respect to the Company, Parent and the Purchaser are not
aware of any licenses or other regulatory permits which appear to be material to
the business of the Company and which might be adversely affected by the
acquisition of Shares by the Purchaser pursuant to the Offer or of any approval
or other action by any governmental, administrative or regulatory agency or
authority which would be required for the acquisition or ownership of Shares by
the Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is currently contemplated that such approval or action would be
sought or taken. There can be no assurance that any such approval or action, if
needed, would be obtained or, if obtained, that it will be obtained without
substantial conditions or that adverse consequences might not result to the
Company's or Parent's business or that certain parts of the Company's or
Parent's business might not have to be disposed of in the event that such
approvals were not obtained or such other actions were not taken, any of which
could cause the Purchaser to elect to terminate the Offer without the purchase
of the Shares thereunder. The Purchaser's obligation under the Offer to accept
for payment and pay for Shares is subject to certain conditions set forth in
Section 11.
Antitrust Compliance
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission ("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 the Purchaser is subject to these requirements.
Pursuant to the HSR Act, Parent intends to file a Notification and Report
Form with respect to the acquisition of Shares pursuant to the Offer and the
Merger with the Antitrust Division and the FTC on May 18, 1999. Under the
provisions of the HSR Act applicable to the purchase of Shares pursuant to the
Offer, such purchases may not be made until the expiration of a 15-calendar day
waiting period following the filing by Parent. Accordingly, the waiting period
under the HSR Act will expire at 11:59 p.m., New York City time, on June 2,
1999, unless early termination of the waiting period is granted or Parent
receives a request for additional information or documentary material prior
thereto. If either the FTC or the Antitrust Division were to request additional
information or documentary material from Parent, the waiting period would expire
at 11:59 p.m., New York City time, on the tenth calendar day after the date of
substantial compliance by Parent with such request unless the waiting period is
sooner terminated by the FTC or the Antitrust Division. Thereafter, the waiting
period could be extended only by agreement or by court order. Only one extension
of such waiting period pursuant to a request for additional information is
authorized by the rules promulgated under the HSR Act, except by agreement or by
court order. Any such extension of the waiting period will not give rise to any
withdrawal rights not otherwise provided for by applicable law. Although the
Company is required to file certain information and documentary material with
the Antitrust Division and the FTC in connection with the Offer, neither the
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Company's failure to make such filings nor a request from the Antitrust Division
or the FTC for additional information or documentary material made to the
Company will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the Purchaser's
purchase of Shares, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by the Purchaser or the
divestiture of substantial assets of Parent, the Company or any of their
respective subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if a challenge
is made, what the result will be. Section 11 of this Offer to Purchase contains
a description of certain conditions to the Offer that could become applicable in
the event of such a challenge.
Neither Parent, the Purchaser nor the Company believes that the antitrust
and competition laws of certain other foreign jurisdictions require notification
of the transaction or the observance of pre-consummation waiting periods.
State Takeover Laws
A number of states have adopted laws and regulations applicable to offers
to acquire securities of corporations which are incorporated in such states
and/or which have substantial assets, stockholders, principal executive offices
or principal places of business therein. In Edgar v. MITE Corporation, the
Supreme Court of the United States held that the Illinois Business Takeover
Statute, which made the takeover of certain corporations more difficult, imposed
a substantial burden on interstate commerce and was therefore unconstitutional.
In CTS Corporation v. Dynamics Corporation of America, the Supreme Court held
that as a matter of corporate law, and in particular, those laws concerning
corporate governance, a state may constitutionally disqualify an acquiror of
"control shares" (ones representing ownership in excess of certain voting power
thresholds e.g. 20%, 33% or 50%) of a corporation incorporated in its state and
meeting certain other jurisdictional requirements from exercising voting power
with respect to those shares without the approval of a majority of the
disinterested stockholders.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined
generally as any beneficial owner of 15% or more of the outstanding voting stock
of the corporation) unless, among other things, the corporation's board of
directors has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company's Board of Directors has approved the Merger Agreement
and the Purchaser's acquisition of Shares pursuant to the Offer and, therefore,
Section 203 of the DGCL is inapplicable to the Offer and the Merger.
Based on information supplied by the Company, the Purchaser does not
believe that any state takeover laws purport to apply to the Offer or the
Merger. Neither the Purchaser nor Parent has currently complied with any state
takeover statute or regulation. The Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and if an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Merger, the Purchaser
might be required to file certain information with, or to receive approvals
from, the relevant state authorities, and the Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer, or be
delayed in consummating the Offer or the Merger. In such case, the Purchaser may
not be obliged to accept for payment or pay for any Shares tendered pursuant to
the Offer.
26
<PAGE> 29
If it is asserted that one or more state takeover laws applies to the Offer
and it is not determined by an appropriate court that such act or acts do not
apply or are invalid as applied to the Offer, the Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, the Purchaser might be unable to accept
for payment any Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for payment any Shares tendered.
Exon-Florio
Under Section 721 of Title VII of the United States Defense Production Act
of 1950, as amended by Section 5021 of the Omnibus Trade and Competitiveness Act
of 1988 ("Exon-Florio"), the President of the United States is authorized to
prohibit or suspend acquisitions, mergers or takeovers by foreign persons of
persons engaged in interstate commerce in the United States if the President
determines, after investigation, that such foreign persons in exercising control
of such acquired persons might take action that threatens to impair the national
security of the United States and that other provisions of existing law do not
provide adequate authority to protect national security. Pursuant to
Exon-Florio, notice of an acquisition by a foreign person is to be made to the
Committee on Foreign Investment in the United States ("CFIUS"), which is
comprised of representatives of the Departments of the Treasury, State,
Commerce, Defense and Justice, the Office of Management and Budget, the United
States Trade Representative's Office and the Council of Economic Advisors and
which has been selected by the President to administer Exon-Florio, either
voluntarily by the parties to such proposed acquisition, merger or takeover or
by any member of CFIUS.
A determination that an investigation is called for must be made within 30
days after notification of a proposed acquisition, merger or takeover is first
filed with CFIUS. Any such investigation must be completed within 45 days of
such determination. Any decision by the President to take action must be
announced within 15 days of the completion of the investigation. Although
Exon-Florio does not require the filing of a notification, nor does it prohibit
the consummation of an acquisition, merger or takeover if notification is not
made, such an acquisition, merger or takeover thereafter remains indefinitely
subject to divestment should the President subsequently determine that the
national security of the United States has been threatened or impaired. Neither
Royal Philips nor the Purchaser believes that the Offer or the Merger threatens
to impair the national security of the United States and neither Royal Philips
nor the Purchaser intends to notify CFIUS of the proposed transaction.
16. FEES AND EXPENSES
The Purchaser has retained D.F. King & Co., Inc. to act as Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interviews and may
request brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent will
receive reasonable and customary compensation for such services, plus
reimbursement of out-of-pocket expenses and the Purchaser will indemnify the
Information Agent against certain liabilities and expenses in connection with
the Offer, including liabilities under the federal securities laws.
The Purchaser will pay the Depositary reasonable and customary compensation
for its services in connection with the Offer, plus reimbursement for
out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including liabilities under
the federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by the Purchaser for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance
27
<PAGE> 30
with the laws of such jurisdiction. However, the Purchaser may, in its sole
discretion, take such action as it may deem necessary to make the Offer in any
such jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
Neither the Purchaser nor Parent is aware of any jurisdiction in which the
making of the Offer or the acceptance of Shares in connection therewith would
not be in compliance with the laws of such jurisdiction.
The Purchaser and Parent have filed with the SEC a Statement on Schedule
14D-1 pursuant to Rule l4d-3 of the General Rules and Regulations under the
Exchange Act, furnishing certain additional information with respect to the
Offer, and may file amendments thereto. Such Statement and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
principal office of the SEC in Washington, D.C. in the manner set forth in
Section 8.
No person has been authorized to give any information or make any
representation on behalf of Parent or the Purchaser 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.
VULCAN MERGER SUB, INC.
May 14, 1999
28
<PAGE> 31
SCHEDULE A
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF
ROYAL PHILIPS, PHILIPS HOLDING, PARENT AND THE PURCHASER
The following tables set forth the name, business address, present
principal occupation and material positions held within the past five years of
each director and executive officer of Royal Philips, Philips Holding, Parent
and the Purchaser.
DIRECTORS AND EXECUTIVE OFFICERS OF KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)*
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------- --------- ----------------------------------------------
<S> <C> <C>
Cor Boonstra.............. President; Chairman of President, Chairman of the Board of Management
the Board of Management and the Group Management Committee of Royal
and Group Management Philips Electronics. Chairman of Philips
Committee Lighting Division from 1994 to 1995. Prior to
1999, Member of the Supervisory Board of
PolyGram N.V. Currently, Member of the
Supervisory Board of Sara Lee DE N.V., Vendex
International N.V., Hunter Douglas
International N. V., Technical University
Eindhoven. Member of the Board of Directors of
The Seagram Company Ltd.
Jan H.M. Hommen........... Executive Vice-President; Executive Vice-President, Member of the Board
Member of the Board of of Management and the Group Management
Management and the Group Committee and Chief Financial Officer of Royal
Management Committee; Philips Electronics. Prior to 1997, Chief
Chief Financial Officer Financial Officer of Alcoa International
Holdings Co. From 1997 to 1999, Member of the
Supervisory Board of PolyGram N.V.
Adri Baan................. Executive Vice-President; Executive Vice-President, Member of the Board
Member of the Board of of Management, the Group Management Committee,
Management and the Group and Chairman of The Consumer Electronics
Management Committee; Division of Royal Philips Electronics. Prior
Chairman of the Consumer to 1998, Chairman of the Philips Business
Electronics Division Electronics Division of Royal Philips
Electronics.
Arthur P.M. van der
Poel.................... Executive Vice-President; Executive Vice-President, Member of the Board
Member of the Board of of Management, Member of the Group Management
Management and the Group Committee and Chairman of the Semiconductors
Management Committee; Division of Royal Philips Electronics. Member
Chairman of the of the Board of Directors of Taiwan
Semiconductors Division Semiconductor Manufacturing Company Ltd.
</TABLE>
- ---------------
* Each person has a business address at Rembrandt Tower, Amstelplein 1, 1096 HA
Amsterdam, The Netherlands and is a citizen of The Netherlands, unless a
different address and/or citizenship is indicated under his or her name.
A-1
<PAGE> 32
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------- --------- ----------------------------------------------
<S> <C> <C>
Y.C. Lo................... Executive Vice-President; Executive Vice-President, Member of the Board
Republic of China Member of the Board of of Management, Member of the Group Management
Management and the Group Committee and, prior to 1999, Chairman of the
Management Committee Components Division of Royal Philips
Electronics. Prior to 1996, Chairman of the
Board of Directors of Philips Taiwan Ltd and
Member of the Board of Directors of Taiwan
Semiconductor Manufacturing Company Ltd.
John W. Whybrow........... Executive Vice-President; Executive Vice-President, Member of the Board
United Kingdom Member of the Board of of Management, Member of the Group Management
Management and the Group Committee and Chairman of the Lighting
Management Committee; Division of Royal Philips Electronics. Since
Chairman of the Lighting 1997, Director of Wolseley PLC.
Division
Roel Pieper............... Executive Vice-President; Executive Vice-President, Member of the Board
Member of the Board of of Management and Member of the Group
Management and the Group Management Committee. Chief Executive Officer
Management Committee of Tandem Computers from 1996 to 1997 and
Chief Executive Officer of Ungermaan-Bass from
1993 to 1995.
Ad H.A. Veenhof........... Member of the Group Member of the Group Management Committee,
Management Committee; Chairman of the Domestic Appliances and
Chairman of the Domestic Personal Care Division of Royal Philips
Appliances and Personal Electronics. Prior to 1996, Member of the
Care Division Management of Philips Consumer Electronics.
Hans M. Barella........... Member of the Group Member of the Group Management Committee of
Management Committee; Royal Philips Electronics. Chairman and Member
Chairman of the Medical of the Management Committee of the Medical
Systems Division Systems Division of Royal Philips Electronics.
Fred B. Bok............... Member of the Group Member of the Group Management Committee and
Management Committee; Chairman of the Business Electronics Division
Chairman of the Business of Royal Philips Electronics. Member of the
Electronics Division Board of Directors of FEI Company of the
United States and Member of the Supervisory
Board of Toolex International B.V. Prior to
April 1998, Chairman of the Philips Industrial
Electronics Division.
Gerard J. Kleisterlee..... Member of the Group Member of the Group Management Committee and
Management Committee; Chairman of the Components Division of Royal
Chairman of the Philips Electronics. Member of the Board of
Components Division Directors of Taiwan Semiconductor
Manufacturing Company Ltd. Prior to January 1,
1999, Chairman of the Philips Taiwan Ltd.
Jan P. Oosterveld......... Member of the Group Member of the Group Management Committee and
Management Committee; Senior Director of Corporate Strategy of Royal
Senior Director of Philips Electronics. Prior to 1997, Management
Corporate Strategy. of Philips Key Modules.
</TABLE>
A-2
<PAGE> 33
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------- --------- ----------------------------------------------
<S> <C> <C>
Arie Westerlaken.......... Member of the Group Member of the Group Management Committee,
Management Committee; General Secretary, Chief Legal Officer and
General Secretary; Chief Secretary to the Board of Management of Royal
Legal Officer; Secretary Philips Electronics. Member of the Supervisory
to the Board of Board of ASM Lithography Holding N.V. From
Management 1990 to 1994, Chief Legal Officer of DAF N.V.
Nico J. Bruijel........... Member of the Group Member of the Group Management Committee
Management Committee responsible for Corporate Human Resources
responsible for Corporate Management of Royal Philips Electronics.
Human Resources Member of the Supervisory Board of Business
Management Creation Europe B.V. Prior to July 1998,
General Management of Philips Japan. Prior to
1996, Management of Philips Lighting Division.
Ad Huijser................ Member of the Group Member of the Group Management Committee and
Management Committee and Head of Corporate Research of Royal Philips
Head of Corporate Electronics. Prior to 1999, Managing Director
Research of Philips Research Coordination. Prior to
1998, Manager of Philips Multimedia Center.
Prior to 1996, Chairman of the Management
Committee of the Philips Research
Laboratories.
L.C. van Wachem........... Chairman of the Retired. Member of the Supervisory Board of
Supervisory Board Royal Philips Electronics since 1993. Member
of the Supervisory Boards of N.V. Koninklijke
Nederlandsche Petroleum Maatschappij, ABB Asea
Brown Boveri Ltd., Akzo Nobel N.V., Bayer AG,
BMW AG, and Zurich Versicherungs-Gruppe;
Member of the Board of Directors of IBM
Corporation, ATCO Ltd, and Credit Suisse
Holding.
W. de Kleuver............. Vice-Chairman and Retired. Member of the Supervisory Board of
Secretary of the Royal Philips Electronics since 1998. Prior to
Supervisory Board September 1998, Executive Vice-President,
Member of the Board of Management and the
Group Management Committee of Royal Philips
Electronics. Prior to 1996, Member of the
Group Management Committee and Chairman of the
Components Division of Royal Philips
Electronics.
W. Hilger................. Member of the Supervisory Retired. Member of the Supervisory Board of
Germany Board Royal Philips Electronics since 1990. Prior to
1994, Chairman of the Board of Management of
Hoechst A.G. Currently, Member of the
Supervisory Boards of Dresdner Bank A.G.,
Mannesmann AG, Alusuisse Lonza, Huls AG, IBM
Deutschland GmbH; Chairman of the Supervisory
Boards of Victoria Versicherung AG and
Victoria Lebensversicherung AG.
</TABLE>
A-3
<PAGE> 34
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------- --------- ----------------------------------------------
<S> <C> <C>
C.J. Oort................. Member of the Supervisory Retired. Member of the Supervisory Board of
Board Royal Philips Electronics since 1995. Chairman
of the Supervisory Boards of Royal Dutch
Airlines KLM and the Robeco group; Member of
the Supervisory Boards of KPN Koninklijke PTT
Nederland (KPN and TPG since June 26, 1998),
Northern Telecom International Finance, BCE
Telecom International Holdings, BCE Tele-
Direct Publications International, Hoogenbosch
Retail Group; Member of the Board of Stichting
HBG, Stichting Koninklijke Nedlloyd, Stichting
Koninklijke van Ommeren; Advisory Board Member
of Price Waterhouse (the Netherlands). Prior
to 1995, Professor of Economics, University of
Maastricht.
L. Schweitzer............. Member of the Supervisory Member of the Supervisory Board of Royal
34 Quai du Point du Jour Board Philips Electronics since 1997. Chairman and
BP 103 92109 Chief Executive Officer of La Regie Nationale
Boulogne des Usines Renault; Member of the Boards of
Bilancourt Pechiney, Banque Nationale de Paris, Credit
Cedex, France National, and I.F.R.I.
France
Sir Richard Greenbury..... Member of the Supervisory Member of the Supervisory Board of Royal
United Kingdom Board Philips Electronics since 1998. Chairman and
CEO of Marks & Spencer plc and former
non-executive member of the Board of Directors
of Lloyds TSB, ICI and Zeneca.
J.M. Hessels.............. Member of the Supervisory Member of the Supervisory Board of Royal
Board Philips Electronics since 1999. Chief
Executive Officer of Vendex International N.V.
Member of the Supervisory Boards of
Koninklijke Van Ommeren N.V., Amsterdam
Exchanges N.V., Amsterdam Airport Schiphol
N.V., Staal Bankiers N.V. and BAM Holding N.V.
</TABLE>
A-4
<PAGE> 35
DIRECTORS AND EXECUTIVE OFFICERS OF PHILIPS HOLDING USA INC.*
<TABLE>
<CAPTION>
NAME, BUSINESS ADDRESS AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
CITIZENSHIP OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------- --------- ----------------------------------------------
<S> <C> <C>
John T. Losier............ Chairman of the Board; President and Chief Executive Officer of
President; Director Philips Electronics North America Corporation
since November 1, 1998. Prior to that time,
Vice President of Global Accounts at Compaq
and Senior Vice President of Worldwide Sales,
Marketing, Services and Support at Tandem
Computers.
William E. Curran......... Senior Vice President -- Senior Vice President and Chief Financial
Finance; Treasurer Officer of Philips Electronics North America
Corporation since February, 1996. Prior to
that time, Vice President, Chief Operating
Officer and Chief Financial Officer of Philips
Medical Systems.
Belinda W. Chew........... Senior Vice President; Senior Vice President, General Counsel and
Secretary Secretary of Philips Electronics North America
Corporation since January 1999. Prior to that
time, General Counsel of Philips Consumer
Communications L.P. Prior to October 1997,
Counsel of Philips Electronics North America
Corporation.
Paul S. Friedlander....... Assistant Secretary Vice President, Tax and Customs Administration
of Philips Electronics North America
Corporation.
</TABLE>
- ---------------
* Each person has a business at 1251 Avenue of the Americas, New York, NY 10020
and is a citizen of U.S.A., unless a different address and /or citizenship is
indicated under his or her name.
A-5
<PAGE> 36
DIRECTORS AND EXECUTIVE OFFICERS OF PHILIPS ELECTRONICS NORTH AMERICA
CORPORATION*
<TABLE>
<CAPTION>
NAME, BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
AND CITIZENSHIP OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --------- ----------------------------------------------
<S> <C> <C>
John T. Losier Chairman of the Board; President and Chief Executive Officer of
President; Chief Philips Electronics North America Corporation
Executive Officer; since November 1, 1998. Prior to that time,
Director Vice President of Global Accounts at Compaq
and Senior Vice President of Worldwide Sales,
Marketing, Services and Support at Tandem
Computers.
William E. Curran Senior Vice President Senior Vice President and Chief Financial
and Chief Financial Officer of Philips Electronics North America
Officer; Director Corporation since February 1996. Prior to that
time, Vice President, Chief Operating Officer
and Chief Financial Officer of Philips Medical
Systems.
Belinda W. Chew Senior Vice President; Senior Vice President, General Counsel and
Secretary; General Secretary of Philips Electronics North America
Counsel Corporation since January 1999. Prior to that
time, General Counsel of Philips Consumer
Communications L.P. Prior to October 1997,
Counsel of Philips Electronics North America
Corporation.
William A. Enser Senior Vice President, Senior Vice President, Business Development
Business Development and Process Improvement of Philips Electronics
and Process North America Corporation. Prior to January
Improvement 1998, President of Philips Electronic
Instruments Company, a division of Philips
Electronics North America Corporation.
Robert F. Matthews Senior Vice President, Senior Vice President, Human Resources of
Human Resources Philips Electronics North America Corporation.
Prior to July 1994, Manager, Financial
Leadership Development and Human Resources of
General Electric Company.
</TABLE>
- ---------------
* Each person has a business at 1251 Avenue of the Americas, New York, NY 10020
and is a citizen of U.S.A., unless a different address and/or citizenship is
indicated under his or her name.
A-6
<PAGE> 37
DIRECTORS AND EXECUTIVE OFFICERS OF VULCAN MERGER SUB, INC.*
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME, BUSINESS ADDRESS OR EMPLOYMENT AND
AND CITIZENSHIP OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
---------------------- --------- ----------------------------
<S> <C> <C>
William E. Curran....... President and Chief Executive Senior Vice President and Chief Financial
Officer; Director Officer of Philips Electronics North
America Corporation since February, 1996.
Prior to that time, Vice President, Chief
Operating Officer and Chief Financial
Officer of Philips Medical Systems.
Belinda W. Chew......... Vice President and Secretary; Senior Vice President, General Counsel and
Director Secretary of Philips Electronics North
America Corporation since 1999. Prior to
that time, General Counsel of Philips
Consumer Communications L.P. Prior to
October 1997, Counsel of Philips
Electronics North America Corporation.
Eric P. Coutinho........ Vice President and Treasurer Director of the Corporate Legal Department
Rembrandt Tower at Royal Philips Electronics.
Amstelplein 1
1096 HA
Amsterdam
The Netherlands
</TABLE>
- ---------------
* Each person has a business at 1251 Avenue of the Americas, New York, NY 10020
and is a citizen of U.S.A., unless a different address and/or citizenship is
indicated under his or her name.
A-7
<PAGE> 38
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for the Shares and any other required documents
should be sent by each stockholder of the Company or his broker-dealer,
commercial bank, trust company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Courier:
CITIBANK, N.A. CITIBANK, N.A. CITIBANK, N.A.
Corporate Trust Window P.O. Box 685 915 Broadway
111 Wall Street, 5th Floor Old Chelsea Station 5th Floor
New York, New York 10043 New York, New York 10113 New York, New York 10010
</TABLE>
By Facsimile Transmission (For Eligible Institutions Only):
(212) 505-2248
Confirm Receipt of Facsimile by Telephone Only:
(800) 270-0808
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to the Information
Agent at the telephone number and location listed below. You may also contact
your broker, dealer, commercial bank or trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Bankers and Brokers call collect: (212) 425-1685
All Others Call Toll Free: (800) 769-5414
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
VOICE CONTROL SYSTEMS, INC.
AT
$4.00 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE DATED MAY 14, 1999
BY
VULCAN MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY JUNE 11, 1999, UNLESS THE OFFER IS EXTENDED.
The Letter of Transmittal, certificates for Shares (as defined below) and
any other required documents should be sent or delivered by each stockholder of
the Company or his broker, dealer, commercial bank or other nominee to the
Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
CITIBANK, N.A. CITIBANK, N.A. CITIBANK, N.A.
P.O. Box 685 915 Broadway Corporate Trust Window
Old Chelsea Station 5th Floor 111 Wall Street, 5th Floor
New York, New York 10113 New York, New York 10010 New York, New York 10043
</TABLE>
<TABLE>
<S> <C>
Facsimile Transmission: Confirm Facsimile by Telephone Only:
(For Eligible Institutions Only) (800) 270-0808
(201) 505-2248
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION VIA A FACSIMILE 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 either if
certificates are to be forwarded herewith or, unless an Agent's Message (as
defined in Section 3 of the Offer to Purchase (as defined below)) is utilized,
if delivery is to be made by book-entry transfer to the Depositary's account at
The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to
the procedures set forth in Section 3 of the Offer to Purchase.
<PAGE> 2
Stockholders whose certificates evidencing Shares ("Share Certificates") are not
immediately available or who cannot deliver their Share Certificates and all
other documents required hereby to the Depositary prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase) or who cannot comply with the
book-entry transfer procedures on a timely basis must tender their Shares
according to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
SHARE OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATES* TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL SHARES:
- ----------------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the
Depositary are being tendered hereby. See Instruction 4.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):
- --------------------------------------------------------------------------------
Window Ticket Number (if any):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
----------------------------------------------------------------------
Account Number (if delivered by Book-Entry Transfer):
-------------------------------------------------------------
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 Vulcan Merger Sub, Inc., a Delaware
corporation (the "Purchaser"), a wholly owned subsidiary of Philips Electronics
North America Corporation, a Delaware corporation ("Parent"), and an indirect
wholly owned subsidiary of Koninklijke Philips Electronics N.V., a company
incorporated under the laws of The Netherlands ("Royal Philips"), the
above-described shares of common stock, par value $0.01 per share (the
"Shares"), of Voice Control Systems, Inc., a Delaware corporation (the
"Company"), at $4.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated May 14,
1999, (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Offer"). The undersigned understands that the Purchaser
reserves the right to transfer or assign, in whole or in part, from time to
time, to Parent or one or more direct or indirect wholly owned subsidiaries of
Parent, the right to purchase Shares tendered pursuant to the Offer.
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms and subject to the conditions of the Offer
(including the Offer Conditions and, if the Offer is extended or amended, the
terms and conditions of any extension or amendment), 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 cash dividends, distributions, rights, other Shares or other
securities issued or issuable in respect of such Shares on or after May 14, 1999
(collectively, "Distributions") and irrevocably appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares and all Distributions with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
the fullest extent of such stockholder's right with respect to such Shares (and
any Distributions) (a) to deliver such Share Certificates evidencing such Shares
and all Distributions, or transfer ownership of such Shares and all
Distributions on the account books maintained by the Book-Entry Transfer
Facility together, in either 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 (adjusted, if
appropriate, as provided in the Offer to Purchase), (b) present such Shares and
all Distributions 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 all Distributions, all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints the Purchaser, its officers and
designees, and each of them, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution, to the full extent of the
undersigned's rights, including to exercise such voting and other rights as each
such attorney and proxy or his (or her) substitute shall, in his (or her) sole
discretion, deem proper, and otherwise act (including pursuant to written
consent), with respect to all of the Shares tendered hereby which have been
accepted for payment by the Purchaser (and any and all Distributions), which the
undersigned is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned meeting), or written
consent in lieu of such meeting, or otherwise. This proxy and power of attorney
is coupled with an interest in the Shares tendered hereby 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, without further action, revoke all
prior proxies and consents granted by the undersigned with respect to such
Shares (and all Shares and other securities issued in Distributions in respect
of such Shares), and no subsequent proxy or power of attorney or written consent
shall be given (and if given or executed, shall be deemed not to be effective)
with respect thereto by the undersigned. 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 and other rights with respect to such Shares (and
any associated Distributions), 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 all Distributions, and that when such Shares are accepted
for payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title
3
<PAGE> 4
thereto, free and clear of all liens, restrictions, charges and encumbrances,
and that none of such Shares and Distributions will be subject to any adverse
claim. The undersigned, upon request, shall execute and deliver any signature
guarantees or 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 all other Securities. In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof, the Purchaser shall be entitled to
all rights and privileges as owner of such Distributions and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as determined by the Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred pursuant to this
Letter of Transmittal 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 successors, assigns, heirs, executors, administrators
and legal representatives 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 Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, the Purchaser may not be required to accept for payment any of the
Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates evidencing Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates evidencing Shares not tendered or accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." If 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
evidencing Shares not purchased (together with accompany documents as
appropriate) in the name(s) of, and deliver said check and/or return such Share
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 the 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 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 the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be issued in the name of someone other than the
undersigned.
Issue: [ ] Check and/or [ ] Certificate(s)
To:
-------------------------------------------------------
Name(s) (Please Print)
------------------------------------------------------------
Address:
-------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
------------------------------------------------------------
(Taxpayer Identification or Social Security No.)
(See Substitute Form W-9)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be sent to someone other than the undersigned,
or to the undersigned at an address other than that shown under
"Description of Shares Tendered."
Mail: [ ] Check and/or [ ] Certificate(s)
To:
-------------------------------------------------------
Name (Please Print)
Address:
-------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
------------------------------------------------------------
5
<PAGE> 6
STOCKHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
Dated: --------------------------- , 1999
(Must be signed by registered holder(s) as name(s) appear(s) on 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, agents, officers of a corporation or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 5.)
- --------------------------------------------------------------------------------
(NAME(S))
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE)
- --------------------------------------------------------------------------------
CAPACITY (FULL TITLE)
- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
<TABLE>
<S> <C>
- ----------------------------------------------------------- -----------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER (HOME) TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
- ----------------------------------------------------------- -----------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER (BUSINESS)
</TABLE>
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
X
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
NAME (PLEASE PRINT OR TYPE)
<TABLE>
<S> <C>
- ----------------------------------------------------------- -----------------------------------------------------------
FULL TITLE NAME OF FIRM
- ------------------------------------------------------------------------------------------------------------------------
ADDRESS
- ------------------------------------------------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- -----------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
</TABLE>
Date: ---------------------------, 1999
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as provided below, all signatures on
this Letter of Transmittal must be guaranteed by a financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion Program
or the Stock Exchange Medallion Program (each, an "Eligible Institution").
Signatures on a Letter of Transmittal need not be guaranteed (a) if this Letter
of Transmittal is signed by the registered holders (which term, for purposes of
this document, includes any participant in the Book-Entry Transfer Facility's
systems whose name appears on a security position listing as the owner of the
Shares) of Shares tendered herewith and such registered holder has not completed
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal, or (b) if such Shares are
tendered for the account of an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders
either if Share Certificates are to be forwarded herewith or if a tender of
Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or confirmation ("Book-Entry
Confirmation") of any book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of Shares delivered by book-entry transfer as well
as a properly completed and duly executed letter of transmittal, must be
received by the Depositary, at one of the addresses set forth herein on or prior
to the Expiration Date (as defined in Section 1 of the Offer to Purchase). If
Share Certificates are forwarded to the Depositary in multiple deliveries, a
properly completed and duly executed Letter of Transmittal must accompany each
such delivery.
Stockholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-entry
transfer procedures on a timely basis may tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
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 provided by the Purchaser, must
be received by the Depositary prior to the Expiration Date and (iii) the Share
Certificates evidencing all physically tendered Shares (or Book-Entry
Confirmation with respect to such Shares), as well as a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in Section 3 of the Offer to Purchase.
If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal must accompany each
such delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED 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,
IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY INSURED REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
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 under "Description of
Shares Tendered" is inadequate, the certificate numbers and/or the number of
Shares tendered should be listed on a separate signed schedule and attached
hereto.
7
<PAGE> 8
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any Share
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 cases,
new Share Certificate(s) evidencing 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 on this Letter of Transmittal,
as soon as practicable after the Expiration Date. All Shares represented by
Share 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 held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several 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 is signed by the registered holder(s) of the
Shares evidenced by Share Certificates 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 evidencing Shares not tendered or
purchased are to be issued in the name of a person other than the registered
holder(s), in which case the Share Certificate(s) evidencing the Shares tendered
hereby must be endorsed or accompanied by appropriate stock powers, in either
case signed exactly as the name(s) of the registered holder(s) appear(s) on such
Share Certificate(s). Signatures on such certificates and stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holder or holders appear on the Share Certificate(s). Signatures
on such Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificates or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or any person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. 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 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 evidencing Shares not tendered or purchased are to be registered in
the name of, any person other than the registered holder(s), or if Share
Certificates evidencing tendered Shares 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(s) or such other
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 not submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent and/or any Share Certificates
are to be returned to someone other than the signer above, or to the signer
above but at an address other than that shown in the box entitled "Description
of Shares Tendered" above, the appropriate boxes on this Letter of Transmittal
should be completed. Stockholders tendering
8
<PAGE> 9
Shares by book-entry transfer may request that Shares not purchased be credited
to such account maintained at any of the Book-Entry Transfer Facilities as such
stockholder may designate under "Special Delivery Instructions." If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facilities designated above.
8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to, or additional copies of the Offer to Purchase,
this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained
from, the Information Agent at the telephone numbers and addresses set forth
below. Stockholders may also contact their broker, dealer, commercial bank or
trust company.
9. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under
the "backup withholding" provisions of federal tax law, the Depositary may be
required to withhold 31% of the purchase price of Shares purchased pursuant to
the Offer. To prevent backup withholding, each tendering stockholder should
complete and sign the Substitute Form W-9 included in this Letter of Transmittal
and either: (a) provide the stockholder's correct taxpayer identification number
("TIN") and certify, under penalties of perjury, that the TIN provided is
correct (or that such stockholder is awaiting a TIN), and that (i) the
stockholder has not been notified by the Internal Revenue Service ("IRS") that
the stockholder is subject to backup withholding as a result of failure to
report all interest or dividends, or (ii) the IRS has notified the stockholder
that the stockholder is no longer subject to backup withholding; or (b) provide
an adequate basis for exemption. If "Applied for" is written in Part I of the
substitute Form W-9, the Depositary will retain 31% of any payment of the
purchase price for tendered Shares during the 60-day period following the date
of the Substitute Form W-9. If the stockholder furnishes the Depositary with his
or her TIN within 60 days of the date of the Substitute W-9, the Depositary will
remit such amount retained during the 60-day period to the stockholder and no
further amounts will be retained or withheld from any payment made to the
stockholder thereafter. If, however, the stockholder has not provided the
Depositary with his or her TIN within such 60-day period, the Depositary will
remit such previously-retained amounts to the IRS as backup withholding and
shall withhold 31% of any payment of the purchase price for the tendered Shares
made to the stockholder thereafter unless the stockholder furnishes a TIN to the
Depositary prior to such payment. In general, an individual's TIN is the
individual's Social Security number. If a certificate for tendered Shares is
registered in more than one name or is not in the name of the actual owner,
consult the Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance on which number to report. If the
Depositary is not provided with the correct TIN or an adequate basis for
exemption, the stockholder may be subject to a $50 penalty imposed by the IRS
and backup withholding at a rate of 31%. Certain holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. In order to satisfy the
Depositary that a foreign individual qualifies as an exempt recipient, such
foreign individual must submit a statement (generally, IRS Form W-8), signed
under penalties of perjury, attesting to that individual's exempt status. A form
for such statements can be obtained from the Depositary.
If payment for tendered Shares is to be made, pursuant to Special Payment
Instructions, to a person other than the tendering stockholder, backup
withholding will apply unless such other person, rather than the tendering
stockholder, complies with the procedures described above to avoid backup
withholding.
For further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how an individual who does not
have a TIN can obtain one and how to complete the Substitute Form W-9 if Shares
are held in more than one name), consult the Guidelines of the IRS for
Certification of Taxpayer Identification Number on Substitute Form W-9 attached
to this Letter of Transmittal.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Shares to be deemed invalidly tendered, but may require the Depositary to
withhold 31% of the amount of any payments for such Shares. Backup withholding
is not an additional federal income tax. Rather, the federal income tax
liability of a person 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, provided the appropriate information is furnished to the
IRS.
Additional copies of this Letter of Transmittal may be obtained from the
Information Agent in connection with the Offer (the "Information Agent"). The
address and telephone number of the Information Agent are set forth below.
9
<PAGE> 10
Any questions or requests for assistance should be directed to the
Information Agent at the address and telephone number set forth above.
IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH SHARE CERTIFICATES OR
CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE
EXPIRATION DATE.
10
<PAGE> 11
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Name: -------------------------------------------------------------------------
FORM W-9
Address:-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE ----------------------------------------------------------------------------------
REQUEST FOR TAXPAYER Check appropriate box:
IDENTIFICATION NUMBER (TIN)
AND CERTIFICATION
Individual [ ] Corporation [ ]
Partnership [ ] Other (specify) [ ]
-----------------------
- ---------------------------------------------------------------------------------------------------------------------------
PART I. Please provide your taxpayer identification number in the space at right. If SSN: ------------------------------
awaiting TIN, write "Applied For." or
EIN:-------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PART II. For Payees exempt from backup withholding. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9."
- ---------------------------------------------------------------------------------------------------------------------------
PART III. CERTIFICATION
Under penalties of perjury, I certify that:
(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
(2) I am not subject to backup withholding either because: (a) I have not been notified by the IRS that I am subject to
backup withholding as a result of a failure to report all interests or dividends, or (b) the IRS has notified me 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 subject
to backup withholding because of underreporting 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 item (2).
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 MERGER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE> 12
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Bankers and Brokers call collect: (212) 425-1685
CALL TOLL FREE: (800) 769-5414
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VOICE CONTROL SYSTEMS, INC.
AT
$4.00 NET PER SHARE
BY
VULCAN MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 11, 1999, UNLESS THE OFFER IS EXTENDED.
May 14, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Vulcan Merger Sub. Inc., a Delaware corporation (the "Purchaser"), a wholly
owned subsidiary of Philips Electronics North America Corporation, a Delaware
corporation ("Parent"), and an indirect wholly owned subsidiary of Koninklijke
Philips Electronics N.V., a company incorporated under the laws of The
Netherlands ("Royal Philips"), is offering to purchase all of the outstanding
shares of common stock, par value $0.01 per share (the "Shares"), of Voice
Control Systems, Inc., a Delaware corporation (the "Company"), at $4.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated May 14, 1999 (the "Offer to Purchase")
of the Purchaser and in the related Letter of Transmittal (which, as amended or
supplemented from time to time, together constitute the "Offer"). Please furnish
copies of the enclosed materials to those of your clients for whom you hold
Shares registered in your name or in the name of your nominee.
Enclosed herewith are the following documents:
1. Offer to Purchase, dated May 14, 1999.
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer;
3. Letter to stockholders of the Company from Chairman of the Board of the
Company, accompanied by the Company's Solicitation/Recommendation
Statement on Schedule 14D-9; and
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard
to the Offer;
5. Notice of Guaranteed Delivery;
<PAGE> 2
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9;
7. Return envelope addressed to Citibank, N.A., the Depositary.
Payment for Shares accepted for payment pursuant to the Offer will be in
all cases made only after timely receipt by Citibank, N.A. (the "Depositary"),
of (a) certificates for (or a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to) such Shares, (b) a Letter of Transmittal,
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer effected pursuant to the procedures set
forth in Section 3 of the Offer to Purchase, an Agent's Message, and (c) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE FOR SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING PAYMENT PURSUANT TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of May 9, 1999, by and among the Company, Parent
and the Purchaser, pursuant to which, after completion of the Offer, the
Purchaser will be merged with and into the Company or, at the option of Parent,
the Company will be merged with and into the Purchaser (either such merger, the
"Merger") and each issued and outstanding Share (other than Shares owned by
Parent, the Purchaser or any other subsidiary of Parent or Shares held by
stockholders exercising appraisal rights under Delaware law) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into and represent the right to receive the price per Share paid by
Purchaser pursuant to the Offer, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND DECLARED ITS ADVISABILITY, APPROVED THE OFFER AND THE MERGER,
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE HOLDERS OF SHARES AND UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF SHARES
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
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), the Purchaser will be deemed to have accepted for payment, and
will pay for, all Shares validly tendered and not properly withdrawn by the
Expiration Date (as defined in the Offer to Purchase) if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of the tenders of such Shares for payment pursuant to the Offer.
Payment for Shares purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates evidencing such Shares or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined in
the Offer to Purchase), (ii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and (iii) any other
documents required by the Letter of Transmittal. The Offer is not being made to,
nor will tenders be accepted from, or on behalf of, holders of Shares in any
jurisdiction in which the making or acceptance of the Offer would not be in
compliance with the laws of such jurisdiction. In any jurisdiction where the
securities or blue sky laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed made on behalf of registered brokers or dealers
that are licensed under the laws of such jurisdiction. An envelope in which to
return your instructions to us is enclosed. If you authorize tender of your
Shares, all such Shares will be tendered unless otherwise indicated in such
instruction form. Please forward your instructions to us as soon as possible to
allow us ample time to tender Shares on your behalf prior to the expiration of
the Offer.
In order to tender Shares pursuant to the Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (in the case of any book-entry
transfer), and any other documents required by the Letter of Transmittal, should
be sent to the Depositary, and either certificates representing the tendered
Shares should be delivered or such Shares must be delivered to the Depositary
pursuant to the procedures for book-entry transfers, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
Neither Parent nor the Purchaser will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent and the
Depositary as described in the Offer to Purchase) in connection with the
2
<PAGE> 3
solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed
upon request for customary mailing and handling expenses incurred by you in
forwarding the enclosed offering materials to your clients.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JUNE 11, 1999, UNLESS THE OFFER IS
EXTENDED.
Any inquiries you may have with respect to the Offer may be addressed to
the Information Agent at the address and telephone numbers set forth on the back
cover page of the Offer to Purchase. Requests for additional copies of enclosed
materials may be directed to the Information Agent.
Very truly yours,
Vulcan Merger Sub, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY
PERSON THE AGENT OF ROYAL PHILIPS, THE PURCHASER, PARENT, THE COMPANY, ANY
AFFILIATE OF THE COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE
YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY REPRESENTATION ON BEHALF
OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE
OR THE LETTER OF TRANSMITTAL.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VOICE CONTROL SYSTEMS, INC.
AT
$4.00 NET PER SHARE
BY
VULCAN MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON FRIDAY, JUNE 11, 1999 UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated May 14, 1999
(the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer"),
relating to the Offer by Vulcan Merger Sub, Inc., a Delaware corporation (the
"Purchaser"), a wholly owned subsidiary of Philips Electronics North America
Corporation, a Delaware corporation ("Parent"), and an indirect wholly owned
subsidiary of Koninklijke Philips Electronics N.V., a company incorporated under
the laws of The Netherlands ("Royal Philips"), to purchase all of the
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
Voice Control Systems, Inc., a Delaware corporation (the "Company"), at $4.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer. Also enclosed is the letter to stockholders
of the Company from the Chairman of the Board of the Company accompanied by the
Company's Solicitation/Recommendation Statement on Schedule 14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL ACCOMPANYING THIS LETTER IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of the
Shares held by us for your account, pursuant the terms and conditions set forth
in the Offer.
Your attention is directed to the following:
1. The offer price is $4.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions of the
Offer.
2. The Offer is being made for all of the outstanding Shares.
<PAGE> 2
3. The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of May 9, 1999, by and among the Company,
Parent and the Purchaser, pursuant to which, after completion of the
Offer, the Purchaser will be merged with and into the Company or, at the
option of Parent, the Company will be merged with and into the Purchaser
(either such merger, the "Merger") and each issued and outstanding Share
(other than Shares owned by Parent, the Purchaser or any other
subsidiary of Parent or Shares held by stockholders exercising appraisal
rights under Delaware law) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into and
represent the right to receive the price per Share paid by the Purchaser
pursuant to the Offer, without interest.
4. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND DECLARED ITS ADVISABILITY, APPROVED THE OFFER AND THE
MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF SHARES AND UNANIMOUSLY RECOMMENDS THAT
THE HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date that number of
Shares which represents a majority of the total voting power of all
shares of capital stock of the Company outstanding on a fully diluted
basis, and which will permit the Purchaser to effect the Merger without
the vote of any person other than the Purchaser. Subject to the terms of
the Merger Agreement, the Offer is also subject to other terms and
conditions, including receipt of certain regulatory approvals, set forth
in the Offer to Purchase. Any or all conditions to the Offer may be
waived by the Purchaser.
6. The Offer and withdrawal rights will expire at 12:00 midnight, New York
City time, on Friday, June 11, 1999, unless the Offer is extended.
7. Any stock transfer taxes applicable to the sale of Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing and returning to us the
instruction form set forth below. Please forward your instructions to us in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form set
forth below.
Payment for Shares accepted for payment pursuant to the Offer will be in
all cases made only after timely receipt by Citibank, N.A. (the "Depositary"),
of (a) certificates for (or a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to) such Shares, (b) a Letter of Transmittal,
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer effected pursuant to the procedure set
forth in Section 3 of the Offer to Purchase, an Agent's Message, and (c) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE FOR SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING PAYMENT PURSUANT TO THE OFFER.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities or blue sky laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed
made on behalf of the Purchaser by the registered brokers or dealers that are
licensed under the laws of such jurisdiction. An envelope in which to return
your instructions to us is enclosed. If you authorize tender of your Shares, all
such Shares will be tendered unless otherwise indicated in such instruction
form. Please forward your instructions to us as soon as possible to allow us
ample time to tender Shares on your behalf prior to the expiration of the Offer.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VOICE CONTROL SYSTEMS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated May 14, 1999 and the related Letter of Transmittal, in
connection with the offer by Vulcan Merger Sub, Inc., a Delaware corporation
(the "Purchaser"), a wholly owned subsidiary of Philips Electronics North
America Corporation, a Delaware corporation ("Parent"), and an indirect wholly
owned subsidiary of Koninklijke Philips Electronics N.V., a company incorporated
under the laws of The Netherlands ("Royal Philips"), to purchase for cash all of
the outstanding shares of common stock, par value $0.01 per share (the
"Shares"), of Voice Control Systems, Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer and the related Letter of Transmittal.
Dated: , 1999
NUMBER OF SHARES TO BE TENDERED:
SHARES*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S)
- --------------------------------------------------------------------------------
PLEASE PRINT NAME(S)
- --------------------------------------------------------------------------------
PLEASE PRINT ADDRESS(ES)
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER(S)
- --------------------------------------------------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
- ---------------
* Unless otherwise indicated, it will be assumed that all your Shares are to be
tendered.
3
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
VOICE CONTROL SYSTEMS, INC.
BY
VULCAN MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form, or a form substantially equivalent to this form, must be used to accept
the Offer (as defined below) if the certificates representing shares of common
stock, par value $0.01 per share (the "Shares"), of Voice Control Systems, Inc.,
a Delaware corporation (the "Company"), are not immediately available or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date (as defined in the Offer to Purchase) or the procedures for
book-entry transfer cannot be completed on a timely basis. Such form may be
delivered by hand or transmitted by facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution (as defined
in Section 3 of the Offer to Purchase). See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Courier:
CITIBANK, N.A. CITIBANK, N.A. CITIBANK, N.A.
Corporate Trust Window P.O. Box 685 915 Broadway, 5th Floor
111 Wall Street, 5th Floor Old Chelsea Station New York, New York 10010
New York, New York 10043 New York, New York 10113
</TABLE>
By Facsimile Transmission (For Eligible Institutions Only):
(212) 505-2248
Confirm Receipt of Facsimile by Telephone Only:
(800) 270-0808
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Vulcan Merger Sub, Inc., a Delaware
corporation (the "Purchaser"), a wholly owned subsidiary of Philips Electronics
North America Corporation, a Delaware corporation, and an indirect wholly owned
subsidiary of Koninklijke Philips Electronics N.V., a company incorporated under
the laws of The Netherlands, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated May 14, 1999 (the "Offer to Purchase"),
and the related Letter of Transmittal (which, as amended or supplemented from
time to time, together constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares indicated below pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase.
- ------------------------------------------------------------
Number of Shares:
-----------------------------------
Share Certificate Numbers (if available):
----------------------------------------------------------
----------------------------------------------------------
If Shares will be delivered by book-entry transfer,
Account Number:
-------------------------------------
Date: , 1999
- ------------------------------------------------------------
- ------------------------------------------------------------
Name(s) or Record Holder(s):
-----------------------------------------------------------
-----------------------------------------------------------
PLEASE TYPE OR PRINT
Address(es):
-------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
ZIP CODE
Telephone Number:
-----------------------------------------------------------
AREA CODE
Signature(s):
-----------------------------------------------------------
-----------------------------------------------------------
SIGNATURES
- ------------------------------------------------------------
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program or any other eligible guarantor institution as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (each, an "Eligible
Institution"), hereby guarantees that either the certificates representing the
Shares tendered hereby in proper form for transfer, or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company (pursuant to procedures set forth in Section 3 of the
Offer to Purchase), together with a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message (as defined in the
Offer to Purchase)) and any other documents required by the Letter of
Transmittal, will be received by the Depositary at one of its addresses set
forth above within three (3) New York Stock Exchange trading days after the date
of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal,
certificates for Shares and any other required documents to the Depositary
within the time period shown herein. Failure to do so could result in a
financial loss to such Eligible Institution.
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ZIP CODE
Area Code and
Telephone Number:
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
Name:
- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT
Title:
- --------------------------------------------------------------------------------
Dated:
- ---------------------------------------------------------------------------,1999
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES ARE TO BE DELIVERED WITH THE LETTER OF
TRANSMITTAL.
3
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: e.g.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: e.g., 00-0000000. The table below will help determine the name and
number to give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under state law
5. Sole proprietorship The owner(3)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE NAME AND
EMPLOYER
FOR THIS TYPE OF ACCOUNT IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
6. A valid trust, estate, or pension The legal entity(4)
trust
7. Corporate account The corporation
8. Association, club, religious, The organization
charitable, educational or other
tax-exempt organization account
9. Partnership account The partnership
10. A broker or registered nominee The broker or
nominee
11. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your Social Security Number or
Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A TAXPAYER IDENTIFICATION NUMBER
Persons without a taxpayer identification number should apply for one and
write "Applied for" in Part 1 of Substitute Form W-9. Individuals should file
Form SS-5, Application for a Social Security Card (or, in the case of resident
aliens who do not have and are not eligible for Social Security numbers, Form
W-7, Application for Individual Taxpayer Identification Number). Corporations,
partnerships or other entities should file Form SS-4, Application for Employer
Identification Number. Form SS-5 may be obtained from local Social Security
Administration offices. Forms W-7 and SS-4 may be obtained from the IRS by
calling 1-800-TAX-FORM (1-800-829-3676).
NOTE: Writing "Applied for" in Part 1 means that you have already applied for a
TIN or that you intend to apply for one soon.
The following persons are exempt from backup withholding on payments from
the sale of Shares pursuant to the Offer:
- A corporation.
- An organization exempt from tax under Section 501(a) of the Internal
Revenue Code.
- An individual retirement plan ("IRA").
- A custodial account under Section 403(b)(7) of the Internal Revenue Code.
- The United States or any of its agencies or instrumentalities.
- A State, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
- A foreign government or any of its political subdivisions, agencies or
instrumentalities.
- A foreign central bank of issue.
- A dealer in securities or commodities required to register in the United
States or a possession of the United States.
- A futures commission merchant registered with the Commodities Futures
Trading Commission.
- A real estate investment trust.
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A common trust fund operated by a bank under Section 584(a) of the
Internal Revenue Code.
- A financial institution.
- A person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker.
Such persons should nevertheless complete Substitute Form W-9 to avoid
possible erroneous withholding. An exempt person should enter the correct TIN in
part I, write "Exempt" in Part II, and sign and date the form.
PRIVACY ACT NOTICE. -- Section 6109 of the Internal Revenue Code requires most
recipients of dividend, interest, or other payments to give taxpayer
identification numbers to payers who must report the payments to IRS. The IRS
uses the numbers for identification purposes and to help verify the accuracy of
individuals' tax returns. The IRS may also provide this information to the
Department of Justice for civil and criminal litigation and to states, cities
and the District of Columbia to help carry out their tax laws.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividend,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VOICE CONTROL SYSTEMS, INC.
AT
$4.00 NET PER SHARE
BY
VULCAN MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON FRIDAY, JUNE 11, 1999, UNLESS THE OFFER IS EXTENDED.
To Certain Former Holders of Common Stock of VCS Industries, Inc., Voice
Processing Corporation and/or
PureSpeech, Inc.:
Our records show that you formerly were a holder of common stock of VCS
Industries, Inc., an Illinois corporation ("Industries"), Voice Processing
Corporation, a Delaware corporation ("VPC"), and/or PureSpeech, Inc., a Delaware
corporation ("PureSpeech"). As a result of one of the mergers described in the
following three situations, your shares of Industries, VPC and/or PureSpeech
were converted into the right to receive shares of common stock, par value $0.01
per share (the "Shares"), of Voice Control Systems, Inc., a Delaware corporation
(the "Company"). The following is a description of each merger and its
respective share exchange ratio.
Effective August 11, 1994, Industries merged with and into Scott
Instruments Corporation (the "Industries Merger"), which changed its name to
"Voice Control Systems, Inc." following completion of the merger. In connection
with the Industries Merger, each share of Industries outstanding immediately
prior to the effective time of the Industries Merger was converted into the
right to receive 0.6530225 of a Share of the Company.
Effective November 4, 1996, VPC was merged with and into the Company (the
"VPC Merger"). In connection with the VPC Merger, each share of VPC was
converted into the right to receive 0.87091 of a Share of the Company.
Effective April 14, 1998, a subsidiary of the Company was merged with and
into PureSpeech (the "PureSpeech Merger"). In connection with the PureSpeech
Merger, each share of PureSpeech was converted into the right to receive 0.1422
of a Share of the Company.
Enclosed for your consideration is an Offer to Purchase, dated May 14, 1999
(the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer"),
relating to the Offer by Vulcan Merger Sub, Inc., a Delaware corporation (the
"Purchaser"), a wholly owned subsidiary of Philips Electronics North America
Corporation, a Delaware corporation ("Parent"), and an indirect wholly owned
subsidiary of Koninklijke Philips Electronics N.V., a company incorporated under
the laws of The Netherlands, to purchase all of the outstanding Shares, at $4.00
per Share, net to the seller in cash, upon the
<PAGE> 2
terms and subject to the conditions set forth in the Offer. Also enclosed is the
letter to stockholders of the Company from the Chairman of the Board of the
Company accompanied by the Company's Solicitation/Recommendation Statement on
Schedule 14D-9.
Your attention is directed to the following:
1. The offer price is $4.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions of the
Offer.
2. The Offer is being made for all of the outstanding shares.
3. The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of May 9, 1999, by and among the Company,
Parent and the Purchaser, pursuant to which, after completion of the
Offer, the Purchaser will be merged with and into the Company or, at the
option of Parent, the Company will be merged with and into the Purchaser
(either such merger, the "Merger") and each issued and outstanding Share
(other than Shares owned by Parent, the Purchaser or any other
subsidiary of Parent or Shares held by stockholders exercising appraisal
rights under Delaware law) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into and
represent the right to receive the price per Share paid by the Purchaser
in the Offer, without interest.
4. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND DECLARED ITS ADVISABILITY, APPROVED THE OFFER AND THE
MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF SHARES AND UNANIMOUSLY RECOMMENDS THAT
THE HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date that number of
Shares which represents a majority of the total voting power of all
shares of capital stock of the Company outstanding on a fully diluted
basis, and which will permit the Purchaser to effect the Merger without
the vote of any person other than the Purchaser. Subject to the terms of
the Merger Agreement, the Offer is also subject to other terms and
conditions, including receipt of certain regulatory approvals, set forth
in the Offer to Purchase. Any or all conditions to the Offer may be
waived by the Purchaser.
6. The Offer and withdrawal rights will expire at 12:00 midnight, New York
City time, on Friday, June 11, 1999, unless the Offer is extended.
7. Any stock transfer taxes applicable to the sale of Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
As a result of the aforementioned mergers, you are a stockholder of the
Company and are entitled to participate in the Offer. If you wish to tender any
or all of your Shares, please do so by completing, executing and returning to us
the Letter of Transmittal enclosed herein. Please send it to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer. Note that if you tender your Shares you will NOT receive $4.00 multiplied
by the number of shares of Industries, VPC or PureSpeech you are holding, but
rather will receive $4.00 multiplied by the number of Shares of the Company
after taking into account the share exchange ratios of the applicable merger(s).
Payment for Shares accepted for payment pursuant to the Offer will be in
all cases made only after timely receipt by Citibank, N.A. (the "Depositary"),
of (a) certificates for (or a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to) such Shares, (b) a Letter of Transmittal,
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer effected pursuant to the procedure set
forth in Section 3 of the Offer to Purchase, an Agent's Message, and (c) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE FOR SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING PAYMENT PURSUANT TO THE OFFER.
2
<PAGE> 3
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities or blue sky laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed
made on behalf of the Purchaser by the registered brokers or dealers that are
licensed under the laws of such jurisdiction. An envelope in which to return
your instructions to us is enclosed. If you authorize tender of your Shares, all
such Shares will be tendered unless otherwise indicated in such instruction
form. Please forward your instructions to us as soon as possible to allow us
ample time to tender Shares on your behalf prior to the expiration of the Offer.
3
<PAGE> 1
Amsterdam, May 9, 1999 99019
PHILIPS TO ACQUIRE VCS TO EXTEND SPEECH TECHNOLOGY
LEADERSHIP INTO NORTH AMERICA
Royal Philips Electronics of the Netherlands (AEX:PHI, NYSE:PHG) and Voice
Control Systems, Inc of the United States (NASDAQ:VCSI) announced today that
they have signed a definitive merger agreement for Philips to acquire all of the
outstanding shares of VCS for $4.00 per share, for a total transaction value of
approx. $59 million. VCS will become a key part of Philips Speech Processing, a
business unit of Philips Business Electronics. Senior members of the VCS
management team will play leading roles in the new merged company.
The transaction is structured as a cash tender offer followed by a cash merger
to acquire any shares not previously tendered. Philips expects to commence its
cash tender offer on Friday May 14, 1999. The cash tender offer is subject to
Philips receiving at least a majority of the fully diluted shares of VCS in the
tender offer, as well as receipt of customary regulatory approvals.
"I am proud to announce this acquisition since speech technology is of strategic
importance to Philips," said Fred Bok, President and CEO of Philips Business
Electronics Division. "By joining forces, VCS's experienced staff and proven
products truly complement Philips Speech Processing's product and services
offering and will put Philips in a unique position in the industry. Philips now
offers the widest spectrum of speech recognition technologies, ranging from
simple voice commands to full natural dialogue capabilities in the main
markets."
VCS was one of the first companies to enter the speech technology market about
two decades ago. VCS is a leading company for small vocabulary, highly robust
speech technology in the telephony environment, especially for IVR (Interactive
Voice Response) applications. VCS has an extensive installed base, centered in
North America, extending into Europe, Asia-Pacific and Latin America. It is also
a leading provider of speech enhanced auto attendants.
VCS will expand Philips' technology portfolio with over 50 languages. Philips
will now be able to offer to its customers the broadest range of languages in
the industry. "Through this acquisition, we can really offer our customers a
one-stop-shop portfolio", said Ron van den Bos, President and CEO of Philips
Speech Processing. "It fully supports our strategy to offer world-class products
and services. VCS's patents relating to voice dialing and speaker verification
will further strengthen our position in the telecommunications and automotive
markets."
"Philips' technology will be a welcome expansion for our installed base of over
2.5 million recognizers", said Peter Foster, Board Member of VCS. "We believe
that VCS's partners and customers will greatly benefit from the combined product
offerings and Philips long-term commitment to speech technologies."
<PAGE> 2
ABOUT THE COMPANIES
PHILIPS SPEECH PROCESSING IS A PIONEER AND ONE OF THE GLOBAL MARKET LEADERS IN
SPEECH RECOGNITION, NATURAL DIALOGUE AND LANGUAGE UNDERSTANDING TECHNOLOGIES. A
DEVELOPER OF VOICE ENABLED TELEPHONY APPLICATIONS, PHILIPS HAS A LARGE INSTALLED
BASE OF SPEECH RECOGNITION AND NATURAL DIALOGUE SYSTEMS IN EUROPE AND IS A MAJOR
SPEECH TECHNOLOGY PROVIDER IN NORTH AMERICA. ITS NATURAL DIALOGUE PLATFORM
SPEECHMANIA AND SPEECHPEARL SPEECH RECOGNITION ENGINES ARE USED FOR BANKING,
TRAVEL, AUTO ATTENDANTS SPEECH PORTALS AND WHITE AND YELLOW PAGES AUTOMATION.
PHILIPS HAS MORE THAN 40 YEARS EXPERIENCE IN THE DEVELOPMENT AND MARKETING OF
SPEECH PRODUCTS AND DEVELOPED THE FIRST COMMERCIALLY AVAILABLE PC BASED NATURAL,
CONTINUOUS SPEECH RECOGNITION ENGINE FOR SPEECH TO TEXT APPLICATIONS IN 1993.
PHILIPS' LINE OF END USER SOFTWARE (FREESPEECH 98 AND FREESPEECH 2000 FOR SOHO
AND CONSUMER MARKETS, AND SPEECHPRO FOR THE PROFESSIONAL DICTATION USERS) IS
AVAILABLE IN 16 LANGUAGES AND ITS VOCON SPEECH RECOGNIZER FOR EMBEDDED SYSTEMS
HAS BEEN SUCCESSFULLY INTEGRATED IN CONSUMER ELECTRONICS PRODUCTS AND DEVICES.
PHILIPS HAS SET UP SPEECHSOLUTIONS DESIGN CENTERS AROUND THE GLOBE, SUPPORTING
R&D AND THE ESTABLISHMENT OF INDUSTRY STANDARDS, AND IS A MEMBER IN VARIOUS
STANDARDIZATION BODIES SUCH AS ECTF, SAPI, HAVI, HOMEAPI, VXML, W3C AND
VOICETIMES. INTERNET: WWW.SPEECH.PHILIPS.COM.
VCS IS A LEADING SPEECH SOFTWARE PLATFORM PROVIDER, OFFERING VOCABULARIES IN
OVER 50 LANGUAGES WITH MORE THAN 2.5 MILLION SPEECH RECOGNIZERS, INCLUDING
500,000 IN TELECOM, INSTALLED IN 30 COUNTRIES. SPEECH-DRIVEN APPLICATIONS USING
VCS PRODUCTS ARE USED TODAY IN TELECOMMUNICATIONS, AUTOMOTIVE AND CONSUMER
ELECTRONICS TO ENABLE COMPUTERS AND ELECTRONIC DEVICES TO UNDERSTAND AND PROCESS
HUMAN SPEECH. VCS IS HEADQUARTERED IN DALLAS, TEXAS, WITH REGIONAL OFFICES IN
CAMBRIDGE, MASSACHUSETTS, SAN JOSE, CALIFORNIA, AND PORTSMOUTH, ENGLAND. THE
COMPANY'S STOCK IS TRADED ON THE NASDAQ NATIONAL MARKET SYSTEM UNDER THE SYMBOL
VCSI. FOR MORE INFORMATION VISIT THE COMPANY'S WEB SITE AT
HTTP://WWW.VOICECONTROL.COM.
For further information:
Philips Media Relations
Alison Screeton, tel: +31 20 59 77216
VCS
Kim Terry, tel: +1 972 726 1200
ROYAL PHILIPS ELECTRONICS OF THE NETHERLANDS IS ONE OF THE WORLD'S BIGGEST
ELECTRONICS COMPANIES AND EUROPE'S LARGEST, WITH SALES OF US$ 33.9 BILLION IN
1998. IT IS A GLOBAL LEADER IN COLOR TELEVISION SETS, LIGHTING, ELECTRIC
SHAVERS, COLOR PICTURE TUBES FOR TELEVISIONS AND MONITORS, AND ONE-CHIP TV
PRODUCTS. ITS 228,800 EMPLOYEES IN MORE THAN 60 COUNTRIES ARE ACTIVE IN THE
AREAS OF LIGHTING, CONSUMER ELECTRONICS, DOMESTIC APPLIANCES, COMPONENTS,
SEMICONDUCTORS, MEDICAL SYSTEMS, BUSINESS ELECTRONICS, AND IT SERVICES (ORIGIN).
PHILIPS IS QUOTED ON THE NYSE, LONDON, FRANKFURT, AMSTERDAM AND OTHER STOCK
EXCHANGES. NEWS FROM PHILIPS IS LOCATED AT WWW.NEWS.PHILIPS.COM
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase, dated May 14, 1999, and the related Letter of
Transmittal and any amendments or supplements thereto, and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. 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 will be deemed to be made on behalf of the Purchaser (as defined below) by
one or more registered brokers or dealers that are licensed under the laws of
such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Voice Control Systems, Inc.
at
$4.00 Net Per Share
by
Vulcan Merger Sub, Inc.
a wholly owned subsidiary of
Philips Electronics North America Corporation
and an indirect wholly owned subsidiary of
Koninklijke Philips Electronics N.V.
(Royal Philips Electronics)
Vulcan Merger Sub, Inc., a Delaware corporation (the "Purchaser"), and a wholly
owned subsidiary of Philips Electronics North America Corporation, a Delaware
corporation ("Parent"), and an indirect wholly owned subsidiary of Koninklijke
Philips Electronics N.V. (Royal Philips Electronics), a company incorporated
under the laws of The Netherlands, is offering to purchase all outstanding
shares of common stock, par value $0.01 per share (the "Shares"), of Voice
Control Systems, Inc., a Delaware corporation (the "Company"), at $4.00 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated May 14, 1999, and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Tendering
stockholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by the Purchaser pursuant to the Offer. The
purpose of the Offer is to acquire for cash as many outstanding Shares as
possible as a first step in acquiring the entire equity interest in the Company.
Following the consummation of the Offer, the Purchaser intends to effect the
Merger (as defined below).
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 11, 1999, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn prior to the expiration of the Offer at least a
majority of the outstanding Shares on a fully diluted basis and (2) any waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder applicable to the purchase of Shares
pursuant to the Offer having expired or been terminated. Certain other
conditions to the Offer are described in Section 11 of the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of May 9, 1999, by and among the Company, Parent and the
Purchaser, pursuant to which, after completion of the Offer, the Purchaser will
be merged with and into the Company or, at the option of Parent, the Company
<PAGE> 2
will be merged with and into the Purchaser (either such merger, the "Merger")
and each issued and outstanding Share (other than Shares owned by Parent, the
Purchaser or any other subsidiary of Parent or Shares held by stockholders
exercising appraisal rights pursuant to Section 262 of the Delaware General
Corporate Law) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and represent the right to receive an
amount in cash, without interest, equal to the price paid for each Share
pursuant to the Offer. The Merger Agreement is more fully described in the Offer
to Purchase.
The Board of Directors of the Company has unanimously adopted the Merger
Agreement and declared its advisability, approved the Offer and the Merger,
determined that the Offer and the Merger are fair to, and in the best interests
of, the holders of Shares and unanimously recommends that holders of Shares
accept the Offer and tender their Shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased Shares validly tendered and not withdrawn, if and
when the Purchaser gives oral or written notice to Citibank, N.A. (the
"Depositary") of the Purchaser's acceptance for payment of such Shares pursuant
to the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for the
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to the tendering stockholders whose Shares have
been accepted for payment. Under no circumstances will interest on the purchase
price for Shares be paid, regardless of any extension of the Offer or any delay
in making such payment.
In all cases, payment for Shares tendered and accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (a)
certificates for such Shares or timely confirmation of the book-entry transfer
of such Shares into the Depositary's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (b) a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message (as
defined in Section 3 of the Offer to Purchase) in lieu of the Letter of
Transmittal), and (c) any other documents required by the Letter of Transmittal.
The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday,
June 11, 1999, unless and until the Purchaser, in its sole discretion, subject
to the terms of the Merger Agreement, shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date on which the Offer, as so extended by the
Purchaser, shall expire. Subject to the terms of the Merger Agreement and the
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission"), the Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to the Depositary. Any such extension will be followed as promptly as
practicable by public announcement thereof to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date of the Offer. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares.
Subject to the applicable rules and regulations of the Commission, applicable
law and the Merger Agreement, the Purchaser also expressly reserves the right,
in its sole discretion, at any time or from time to time, (i) to terminate the
Offer and not accept for payment any Shares if any of the conditions referred to
in Section 11 of the Offer to Purchase are not satisfied, and (ii) to waive any
<PAGE> 3
condition, or otherwise amend the Offer in any respect, in each case, by giving
oral or written notice of such termination, waiver or amendment to the
Depositary and by making public announcement thereof.
Tenders of Shares made pursuant to the Offer are irrevocable except that Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after July 13, 1999.
For a withdrawal to be effective, a written, or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of the Offer to Purchase. Any such notice of withdrawal
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the names in which the certificate(s)
evidencing the Shares to be withdrawn are registered, if different from that of
the person who tendered such Shares. The signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution (as defined in Section
3 of the Offer to Purchase), unless such Shares have been tendered for the
account of any Eligible Institution. If Shares have been tendered pursuant to
the procedures for book-entry transfer as set forth in Section 3 of the Offer to
Purchase, 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 and otherwise comply with the Book-Entry Transfer Facility's procedures.
If certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, the name of the registered holder and the serial
numbers shown on such certificates must also be furnished to the Depositary as
aforesaid prior to the physical release of such certificates. All questions as
to the form and validity (including time of receipt) of any notice of withdrawal
will be determined by the Purchaser, in its sole discretion, which determination
shall be final and binding. None of Parent, the Purchaser, the Depositary, the
Information Agent (listed below), or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give such notification. Withdrawals of
tenders of Shares may not be rescinded, and any Shares properly withdrawn will
be deemed not to have been validly tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by following one of the procedures described
in Section 3 of the Offer to Purchase at any time prior to the Expiration Date.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the Letter of Transmittal and, if required,
other relevant materials, will be mailed by the Purchaser to record holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the Company's stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the Letter of the Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance may be directed to the Information Agent
at the address and telephone number set forth below. Requests for additional
copies of the Offer to Purchase and the related Letter of Transmittal may be
directed to the Information Agent or to brokers, dealers, commercial banks or
trust companies. Such additional copies will be furnished at the Purchaser's
expense. The Purchaser will not pay any fees or commissions to any broker or
<PAGE> 4
dealer or any other person (other than the Information Agent) for soliciting
tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect (212) 425-1685
All Others Call Toll Free (800) 769-5414
May 14, 1999
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
Among
PHILIPS ELECTRONICS NORTH
AMERICA CORPORATION,
VOICE CONTROL SYSTEMS, INC.
and
VULCAN MERGER SUB, INC.
Dated as of May 9, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
The Tender Offer
1.1. Tender Offer.............................................................1
ARTICLE II
The Merger; Closing; Effective Time
2.1. The Merger...............................................................3
2.2. Closing..................................................................4
2.3. Effective Time...........................................................4
ARTICLE III
Certificate of Incorporation and By-Laws
of the Surviving Corporation
3.1. The Certificate of Incorporation.........................................4
3.2. The By-Laws..............................................................5
ARTICLE IV
Officers and Directors
of the Surviving Corporation
4.1. Officers and Directors...................................................5
4.2. Actions by Directors.....................................................5
4.3. Boards of Directors; Committees..........................................5
ARTICLE V
Conversion or Cancellation of Shares in the Merger
5.1. Conversion or Cancellation of Shares.....................................6
5.2. Payment for Shares.......................................................7
5.3. Appraisal Rights.........................................................8
5.4. Transfer of Shares After the Effective Time..............................9
ARTICLE VI
Representations and Warranties
6.1. Representations and Warranties of the Company............................9
i
<PAGE> 3
6.2. Representations and Warranties of Parent and Merger
Sub .............................................................22
ARTICLE VII
Covenants
7.1. Interim Operations of the Company.......................................24
7.2. Acquisition Proposals...................................................26
7.3. Meetings of the Company's Stockholders..................................27
7.4. Filings; Other Action...................................................28
7.5. Access .................................................................28
7.6. Notification of Certain Matters.........................................29
7.7. Publicity...............................................................29
7.8. Benefits................................................................29
7.9. Indemnification; Directors' and Officers' Insurance ....................30
7.10. Takeover Statutes.......................................................32
ARTICLE VIII
Conditions
8.1. Conditions to Obligations of Parent and Merger Sub......................32
8.2. Conditions to Obligations of the Company................................33
ARTICLE IX
Termination
9.1 Termination by Mutual Consent...........................................34
9.2. Termination by either Parent or the Company.............................34
9.3. Termination by Parent...................................................35
9.4. Termination by the Company..............................................35
9.5. Effect of Termination and Abandonment...................................36
ii
<PAGE> 4
ARTICLE X
Miscellaneous and General
10.1. Payment of Expenses....................................................38
10.2. Survival...............................................................38
10.3. Modification or Amendment..............................................38
10.4. Waiver of Conditions...................................................38
10.5. Counterparts...........................................................39
10.6. Governing Law..........................................................39
10.7. Notices................................................................40
10.8. Entire Agreement, etc..................................................41
10.9. Definitions of "Subsidiary," "knowledge" and
"Material Adverse Effect"............................................41
10.10. Obligation of Parent...................................................42
10.11. Captions...............................................................42
10.12. Severability...........................................................42
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of May 9, 1999, among Philips Electronics North America Corporation, a
Delaware corporation ("Parent"), Voice Control Systems, Inc., a Delaware
corporation (the "Company"), and Vulcan Merger Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"), the Company and Merger
Sub sometimes being hereinafter collectively referred to as the "Constituent
Corporations."
RECITALS
WHEREAS, the Boards of Directors of Parent and the Company each have
determined that it is in the best interests of their respective shareholders for
Parent to acquire the Company upon the terms and subject to the conditions set
forth herein; and
WHEREAS, in connection with the transactions contemplated by this
Agreement, Parent has entered into employment agreements with certain executives
of the Company set forth on Schedule 1 hereto; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
The Tender Offer
1.1. Tender Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Article IX hereof and none of the events set
forth in Annex A hereto (the "Offer Conditions") shall have occurred or be
existing, within five business days of the date hereof, Merger Sub will commence
a tender offer (the "Offer") for all of the outstanding shares of common stock,
<PAGE> 6
par value $0.01 per share (the "Shares"), of the Company at a price of $4.00 per
Share in cash, net to the seller. The obligation of Merger Sub to accept for
payment and pay for any Shares tendered pursuant to the Offer shall be subject
only to the satisfaction or waiver of the Offer Conditions. It is understood and
agreed that Merger Sub may from time to time extend the expiration date of the
Offer after all of the Offer Conditions have been satisfied or waived for a
period of up to thirty (30) business days (or a greater period with the consent
of the Company) if it reasonably determines such extension is appropriate in
order to enable it to purchase at least 90% of the outstanding Shares in the
Offer. Subject to the terms and conditions of the Offer, Parent will promptly
pay for all Shares validly tendered and not withdrawn pursuant to the Offer that
it is obligated to purchase thereunder as soon as practicable after the
expiration of the Offer. The Company's Board of Directors shall recommend
acceptance of the Offer to its stockholders in a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to be filed with the
Securities and Exchange Commission (the "SEC") upon commencement of the Offer;
provided, however, that the Company's Board of Directors may thereafter amend or
withdraw its recommendation in accordance with Section 7.2.
(b) Parent and Merger Sub agree, as to the Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"), Offer to Purchase and related Letter of
Transmittal (all of which together constitute the "Offer Documents") and the
Company agrees, as to the Schedule 14D-9, that such documents shall, in all
material respects, comply with the requirements of the Securities Exchange Act
of 1934 (the "Exchange Act") and the rules and regulations thereunder and other
applicable laws. The Company and its counsel, as to the Offer Documents, and
Merger Sub and its counsel, as to the Schedule 14D-9, shall be given an
opportunity to review such documents prior to their being filed with the SEC.
Parent, Merger Sub and the Company each agrees promptly to correct any
information provided by it for use in the Offer Documents or the Schedule 14D-9
that shall have become false or misleading in any material respect. Parent and
Merger Sub further agree to take all steps necessary to cause the Schedule 14D-1
as so corrected to be filed with the SEC and the other Offer Documents as so
corrected to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. The Company further
agrees to take all steps necessary to cause the
-2-
<PAGE> 7
Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws.
(c) In connection with the Offer, the Company will cause its
Transfer Agent to furnish promptly to Merger Sub a list, as of the most recent
practicable date, of the record holders of Shares and their addresses, as well
as mailing labels containing the names and addresses of all record holders of
Shares, any non-objecting beneficial owner lists and lists of security positions
of Shares held in stock depositories. The Company will furnish Merger Sub with
such additional information (including, but not limited to, updated lists of
holders of Shares and their addresses, mailing labels, non-objecting beneficial
owner lists and lists of security positions) and such other assistance as Parent
or Merger Sub or their agents may reasonably request in communicating the Offer
to the record and beneficial holders of Shares.
ARTICLE II
The Merger; Closing; Effective Time
2.1. The Merger. (a) Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 2.3) Merger Sub shall be
merged with and into the Company and the separate corporate existence of Merger
Sub shall thereupon cease (the "Merger"). The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in Section 3.1. The Merger shall have the
effects specified in the Delaware General Corporation Law (the "DGCL").
(b) In its discretion, Parent may, for any reason, by written notice
to the Company and in lieu of the provisions set forth in the first two
sentences of Section 2.1(a), elect to cause the Company to merge with and into
Merger Sub at the Effective Time, in which case, at the Effective Time, the
Company shall be merged with and into Merger Sub and the separate corporate
existence of the
-3-
<PAGE> 8
Company shall thereupon cease; provided, however, that the Company shall not be
deemed to have breached any of its representations, warranties or covenants set
forth in this Agreement solely by reason of such election. In such circumstance,
the merger of the Company into Merger Sub shall be deemed the "Merger" for all
purposes hereunder and Merger Sub shall be deemed the "Surviving Corporation"
for all purposes hereunder.
2.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York at 10:00 A.M. on the first business day on which the last to be fulfilled
or waived of the conditions set forth in Article VIII hereof shall be fulfilled
or waived in accordance with this Agreement or (ii) at such other place and
time and/or on such other date as the Company and Parent may agree.
2.3. Effective Time. As soon as practicable following the Closing,
and provided that this Agreement has not been terminated or abandoned pursuant
to Article IX hereof, the Company and the Parent will cause a Certificate of
Merger (the "Certificate of Merger") to be executed and filed with the Secretary
of State of Delaware as provided in Section 251 of the DGCL. The Merger shall
become effective on the date on which the Delaware Certificate of Merger has
been duly filed with the Secretary of State of Delaware, and such time is
hereinafter referred to as the "Effective Time." Unless Parent and the Company
agree otherwise, the Certificate of Merger shall specify that the Merger will
become effective upon its filing with the Secretary of State of the State of
Delaware.
ARTICLE III
Certificate of Incorporation and By-Laws
of the Surviving Corporation
3.1. The Certificate of Incorporation. The Certificate of
Incorporation of the Company (the "Certificate") in effect at the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation, until
duly amended in accordance with the terms thereof, and the DGCL, except that
Article Fourth of the Company's Certificate shall be amended to read in its
entirety as follows:
-4-
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"The aggregate number of shares which the Corporation shall have the
authority to issue is 1,000 shares of Common Stock, par value $0.01 per
share."
3.2. The By-Laws. The By-Laws of Merger Sub in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the DGCL.
ARTICLE IV
Officers and Directors
of the Surviving Corporation
4.1. Officers and Directors. The directors of Merger Sub and the
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
4.2. Actions by Directors. For purposes of Article IX and Sections
10.3 and 10.4, no action taken by the Board of Directors of the Company after
consummation of the Offer and prior to the Merger shall be effective unless such
action is approved by the affirmative vote of at least a majority of the
directors of the Company which are not officers of Parent or designees,
stockholders or affiliates of Parent.
4.3. Boards of Directors; Committees. (a) If requested by Parent,
the Company will, subject to compliance with applicable law, immediately
following the acceptance for payment of, and payment by Merger Sub for, more
than 50% of the outstanding Shares (on a fully-diluted basis) pursuant to the
Offer, take all actions necessary to cause persons designated by Parent to
become directors of the Company so that the total number of such persons (after
all such actions have been taken) equals at least that number of directors,
rounded up to the next whole number, which represents the product of (x) the
total number of directors on the Board of Directors multiplied by (y) the
percentage that the number of Shares so accepted for payment and paid
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for plus any Shares beneficially owned by Parent or its affiliates on the date
hereof bears to the number of Shares outstanding at the time of such payment. In
furtherance thereof, if requested by Parent, the Company will increase the size
of the Board, or use its best efforts to secure the resignation of directors, or
both, as is necessary to permit Parent's designees to be elected to the
Company's Board of Directors; provided, however, that prior to the Effective
Time, the Company's Board of Directors shall always have at least one member who
is neither an officer of Parent nor a designee, shareholder or affiliate of
Parent or Parent's affiliates. At such time, the Company, if so requested, will
use its best efforts to cause persons designated by Parent to constitute the
same percentage of each committee of such board, each board of directors of each
subsidiary of the Company and each committee of each such board (in each case to
the extent of the Company's ability to elect such persons). The Company's
obligations to appoint designees to the Board of Directors shall be subject to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall
promptly take all actions required pursuant to such Section and Rule in order to
fulfill its obligations under this Section 4.3 and shall provide for inclusion
in the Schedule 14D-9 being mailed to shareholders contemporaneously with the
commencement of the Offer such information with respect to Parent and its
designees as is required under such Section and Rule in order to fulfill its
obligations under this Section 4.3 (provided that Parent shall have provided to
the Company on a timely basis all information required to be included under such
Section and Rule with respect to the designees of Parent).
ARTICLE V
Conversion or Cancellation of Shares in the Merger
5.1. Conversion or Cancellation of Shares. The manner of converting
or canceling shares of the Company and Merger Sub in the Merger shall be as
follows:
(a) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent,
Merger Sub or any other subsidiary of Parent (collectively, the "Parent
Companies")) or Shares which are held by stockholders ("Dissenting
Stockholders") exercising appraisal rights pursuant to
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Section 262 of the DGCL) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the right to receive,
without interest, an amount in cash (the "Merger Consideration") equal to $4.00
or such greater amount which may be paid pursuant to the Offer. All such Shares,
by virtue of the Merger and without any action on the part of the holders
thereof, shall no longer be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
Shares shall thereafter cease to have any rights with respect to such Shares,
except the right to receive the Merger Consideration for such Shares upon the
surrender of such certificate in accordance with Section 5.2 or the right, if
any, to receive payment from the Surviving Corporation of the "fair value" of
such Shares as determined in accordance with Section 262 of the DGCL.
(b) At the Effective Time, each Share issued and outstanding at the
Effective Time and owned by any of the Parent Companies, and each Share issued
and held in the Company's treasury at the Effective Time, shall, by virtue of
the Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
(c) At the Effective Time, each share of Common Stock, par value
$0.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Merger Sub or the holders of such shares, be converted into one hundred (100)
shares of the Surviving Corporation, provided, however that if Parent has made
the election provided for in Section 2.1(b) hereof, each such share of Merger
Sub shall remain outstanding and each certificate therefor shall continue to
evidence one share of Common Stock of the Surviving Corporation.
5.2. Payment for Shares. Parent shall make available or cause to be
made available as and when needed to the paying agent appointed by Parent, which
paying agent shall be reasonably acceptable to the Company (the "Paying Agent"),
amounts sufficient in the aggregate to provide all funds necessary for the
Paying Agent to make payments pursuant to Section 5.1(a) hereof to holders of
Shares issued and outstanding immediately prior to the Effective Time. Promptly
after the Effective Time, the Surviving
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Corporation shall instruct the Paying Agent to mail to each person who was, at
the Effective Time, a holder of record (other than any of the Parent Companies)
of issued and outstanding Shares a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any of such Shares in
exchange for payment therefor. Upon surrender to the Paying Agent of such a
certificate, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the Surviving Corporation
shall promptly cause to be paid to the persons entitled thereto a check in the
amount to which such persons are entitled, after giving effect to any required
tax withholdings. No interest will be paid or will accrue on the amount payable
upon the surrender of any such certificate. If payment is to be made to a person
other than the registered holder of the certificate surrendered, it shall be a
condition of such payment that the certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the certificate
surrendered or establish to the satisfaction of the Surviving Corporation or the
Paying Agent that such tax has been paid or is not applicable. 180 days
following the Effective Time, the Surviving Corporation shall be entitled to
cause the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) made available to the Paying Agent which have not
been disbursed to holders of certificates formerly representing Shares
outstanding on the Effective Time, and thereafter such holders shall be entitled
to look to the Surviving Corporation only as general creditors thereof with
respect to the cash payable upon due surrender of their certificates.
Notwithstanding the foregoing, neither the Paying Agent nor any party hereto
shall be liable to any holder of certificates formerly representing Shares for
any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law. The Surviving Corporation shall pay all
charges and expenses of the Paying Agent in connection with the exchange of cash
for Shares and Parent shall reimburse the Surviving Corporation for such charges
and expenses.
5.3. Appraisal Rights. If any Dissenting Stockholder shall be
entitled to be paid the "fair value" of
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his or her Shares, as provided in Section 262 of the DGCL, the Company shall
give Parent notice thereof and Parent shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the Shares held by such Dissenting Stockholder shall thereupon be
treated as though such Shares had been converted into the Merger Consideration
pursuant to Section 5.1.
5.4. Transfer of Shares After the Effective Time. No transfers of
Shares shall be made on the stock transfer books of the Surviving Corporation at
or after the Effective Time.
ARTICLE VI
Representations and Warranties
6.1. Representations and Warranties of the Company. Except as set
forth in the corresponding section of the Disclosure Letter, dated the date
hereof, delivered by the Company to Parent prior to the execution hereof (the
"Disclosure Letter"), the Company hereby represents and warrants to Parent and
Merger Sub that:
(a) Corporate Organization and Qualification. Each of the Company
and its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation and
is in good standing as a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification, except for such failure to so qualify or be in such good
standing, which, when taken together with all other such failures, is not
reasonably likely to have a Material Adverse Effect. Each of the Company and its
subsidiaries has the corporate requisite power and authority to carry on its
respective businesses as they are now being conducted. The Company has made
available to Parent a complete and correct copy of the Company's Certificate and
By-Laws and the comparable governing instruments of each of its
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subsidiaries, each as amended to date. The Company's Certificate and By-Laws and
the comparable governing instruments of each of its subsidiaries so delivered
are in full force and effect.
(b) Authorized Capital. As of the date hereof, the authorized
capital stock of the Company consists of 20,000,000 Shares, of which 13,742,639
Shares were outstanding and 300,000 shares of Preferred Stock, par value $1.00
per share, none of which were outstanding. All of the outstanding Shares have
been duly authorized and are validly issued, fully paid and nonassessable. The
Company has no Shares subject to issuance, except that, as of the date hereof,
there were 2,212,473 Shares subject to issuance pursuant to the Company 1997
Non-Qualified Stock Option Plan, the PureSpeech, Inc. 1997 Stock Option Plan,
the Voice Processing Corporation 1996 Stock Plan, the Voice Processing
Corporation 1989 Stock Plan, the VCS Industries, Inc. 1986 Incentive Stock Plan
and the Company 1992 Stock Option Plan (together, the "Company Option Plans")
and 977,075 Shares subject to issuance pursuant to outstanding warrants to
purchase Shares (the "Warrants"). In addition, as of the date hereof, $30,988.58
has been contributed by employees for the purchase of Shares under the Company's
1998 Employee Stock Purchase Plan (the "Company Stock Purchase Plan" and,
together with the Company Option Plans, the "Company Stock Plans"). The Company
has provided Parent with copies of all certificates evidencing Warrants that as
of the date hereof have been issued by the Company or its predecessors (except
as set forth in Section 6.1(b)(iii) of the Disclosure Letter), all agreements
entered into by the Company or its predecessors with respect to any outstanding
Warrant and copies of all forms of certificates evidencing Warrants that the
Company may be required to issue under the terms of any outstanding Warrants.
Section 6.1(b)(i) of the Disclosure Letter sets forth a list of all outstanding
Warrants, together with the names of the holders, exercise prices and expiration
dates of all such outstanding Warrants. Section 6.1(b)(ii) of the Disclosure
Letter sets forth a list of all outstanding options to purchase Shares under the
Company Option Plans, together with the names of the holders, exercise prices
and expiration dates of all such outstanding options. Each of the outstanding
shares of capital stock of each of the Company's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned, either
directly or indirectly, by the Company free and clear of all liens, pledges,
security interests, claims or other
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encumbrances. Except as set forth above, there are no shares of capital stock of
the Company authorized, issued or outstanding and except as set forth above,
there are no preemptive rights or any outstanding subscriptions, options,
warrants, rights, convertible securities of the Company or any of its
subsidiaries or other agreements or commitments of any character relating to the
issued or unissued capital stock or other securities of the Company or any of
its subsidiaries. After the Effective Time the Surviving Corporation will have
no obligation to issue, transfer or sell any Shares or common stock of the
Surviving Corporation pursuant to any Compensation and Benefit Plan (as defined
in Section 6.1(h)(i)).
(c) Corporate Authority. Subject only to approval of this Agreement
by the holders of a majority of the outstanding Shares, the Company has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms. The Board of Directors of the Company has unanimously approved this
Agreement, the Offer and the Merger.
(d) Governmental Filings; No Violations. (i) Other than those
notices, reports, filings, consents, registrations, approvals, permits or
authorizations provided for in Section 2.3, or as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the
Exchange Act and by the European Commission (collectively, the "Regulatory
Filings"), no notices, reports or other filings are required to be made by the
Company with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Company from, any governmental or
regulatory authority, agency, commission or other entity, domestic or foreign
("Governmental Entity"), in connection with the execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, except for those the failure of which to be made or
obtained would not, individually or in the aggregate, be likely to have a
Material Adverse Effect or to prevent the consummation of, or materially impair
the Company's ability to consummate, the transactions contemplated hereby.
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(ii) Except as set forth in the Disclosure Letter, the execution and
delivery of this Agreement by the Company does not, and the consummation by the
Company of the transactions contemplated by this Agreement will not, constitute
or result in (i) a breach or violation of, or a default under, the Certificate
or By-Laws of the Company or the comparable governing instruments of any of its
subsidiaries, (ii) a breach or violation of, a default under or the triggering
of any payment or other material obligations pursuant to, any of the Company's
existing Compensation and Benefit Plans (as defined herein) or any grant or
award made under any of the foregoing, (iii) a breach or violation of, or a
default under, the acceleration of or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of notice or
the lapse of time) pursuant to, any provision of any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation ("Contracts") of the
Company or any of its subsidiaries or any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or non-governmental permit or
license to which the Company or any of its subsidiaries is subject or (iv) any
change in the rights or obligations of any party under any of the Contracts,
except, in the case of clause (iii) or (iv) above, for any such breach,
violation, default, triggering, acceleration or change that, individually or in
the aggregate, would not be reasonably likely to have a Material Adverse Effect
or to prevent the consummation of, or materially impair the Company's ability to
consummate, the transactions contemplated hereby. Schedule 6.1(d)(ii) of the
Disclosure Letter sets forth a list of (x) all material consents required under
any Contracts to be obtained prior to consummation of the transactions
contemplated by this Agreement (whether or not subject to the exception set
forth with respect to clauses (iii) and (iv) above) and (y) any Contracts
containing any covenants of the Company or any of its subsidiaries not to
compete in any line of business or with any person. The Company will use its
best efforts to obtain the consents referred to in the Disclosure Letter.
(e) Company Reports; Financial Statements. The Company has delivered
to Parent each registration statement, schedule, report, proxy statement or
information statement prepared by it since December 31, 1998 (the "Audit Date"),
including, without limitation, the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998 in the
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form (including exhibits and any amendments thereto) filed with the Securities
and Exchange Commission (the "SEC") (the "Company Report"). As of its date, the
Company Report did not contain, and no Company Report filed with the SEC
subsequent to the date hereof will contain, any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading. Each of the consolidated balance sheets included in
or incorporated by reference into the Company Report (including the related
notes and schedules) fairly presents the consolidated financial position of the
Company and its subsidiaries as of its date and each of the consolidated
statements of income and of changes in financial position included in or
incorporated by reference into the Company Report (including any related notes
and schedules) fairly presents the results of operations, retained earnings and
changes in financial position, as the case may be, of the Company and its
subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which will not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Other than the Company Report, the
Company has not filed any other definitive reports or statements with the SEC
since December 31, 1998.
(f) Absence of Certain Changes. Except as set forth in the
Disclosure Letter, since December 31, 1998, the Company and its subsidiaries
have conducted their respective businesses only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course of
such businesses and there has not been (i) any change or development in the
business of the Company and its subsidiaries that, individually or in the
aggregate, is reasonably likely to have, a Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution
with respect to the capital stock of the Company; or (iii) any change by the
Company in accounting principles, practices or methods. Section 6.1(f) of the
Disclosure Letter sets forth, since December 31, 1998, all increases in the
compensation payable or which could become payable by the Company and its
subsidiaries to their directors, officers or employees pursuant to any contract,
arrangement or otherwise, all amendments to any
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Compensation and Benefit Plans and all claims for reimbursement or compensation
from the Company made or, to the knowledge of the Company, threatened to be made
by any director, officer or employee of the Company or any other amounts payable
to any director, officer or employee of the Company outside the ordinary course
of business.
(g) Litigation and Liabilities. Except as disclosed in the Company
Report filed with the SEC prior to the date hereof or the Disclosure Letter,
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries or (ii)
obligations or liabilities, whether or not accrued, contingent or otherwise,
including, without limitation, those relating to matters involving any
Environmental Law (as hereinafter defined), in each of cases (i) and (ii), other
than those that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect.
(h) Employee Benefits.
(i) All bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock and stock option plans, all employment, termination,
severance, welfare, fringe benefit, compensation, medical or health contract or
other plan, contract, policy or arrangement which covers employees or former
employees (the "Employees") and current and former directors of the Company or
its subsidiaries or their respective predecessors (the "Compensation and Benefit
Plans"), including, but not limited to, "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), are listed in Schedule 6.1(h)(i) of the Disclosure Letter.
True and complete copies of all Compensation and Benefit Plans and such other
benefit plans, contracts or arrangements, including, but not limited to, any
material trust instruments and/or insurance contracts, if any, forming a part of
any such plans and agreements, and all amendments thereto have been made
available to Parent.
(ii) All Compensation and Benefit Plans are in material compliance
with applicable law and all Compensation and Benefit Plans which are employee
benefit plans, other
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than "multiemployer plans" within the meaning of Sections 3(37) of ERISA,
covering Employees (the "Plans"), to the extent subject to ERISA, are in
substantial compliance with ERISA. Each Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), has received a favorable determination
letter from the Internal Revenue Service, and the Company has no knowledge of
any circumstances likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the Company,
threatened material litigation relating to the Compensation and Benefit Plans.
Neither the Company nor any of its subsidiaries has engaged in a transaction
with respect to any Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject the Company or any of its
subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material.
(iii) No material liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by the Company or any of its
subsidiaries with respect to any ongoing, frozen or terminated "single-employer
plan," within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which is
considered one employer with the Company under Section 4001 of ERISA or Section
414 of the Code (an "ERISA Affiliate"). None of the Company, its subsidiaries or
any ERISA Affiliate has contributed to a "multiemployer plan", within the
meaning of Section 3(37) of ERISA, at any time on or after September 26, 1980.
No notice of a "reportable event," within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(iv) All material contributions required to be made under the terms
of any Plan have been timely made. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA. Neither the Company nor
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any of its subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(v) There has been no material adverse change in the financial
condition of any single-employer plan since the last day of the most recent Plan
year.
(vi) Neither the Company nor any of its subsidiaries have any
obligations for retiree health and life benefits under any Compensation and
Benefit Plan. There are no restrictions on the rights of the Company or any of
its subsidiaries to amend or terminate any such Plan without incurring any
material liability thereunder.
(vii) All Compensation and Benefit Plans covering foreign employees
comply with applicable local law, except for any non-compliance which would not
be material to the Company. Except as disclosed in the Company Report filed with
the SEC prior to the date hereof, neither the Company nor any of its
subsidiaries has any material unfunded liabilities with respect to any Pension
Plan which covers foreign Employees.
(viii) Except as set forth in Section 6.1(h)(viii) of the Disclosure
Letter, the consummation of the transactions contemplated by this Agreement will
not (x) entitle any employees of the Company or any of its subsidiaries to
severance pay or (y) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of the Compensation and
Benefit Plans.
(ix) No payment (or acceleration of benefits) required to be made to
any Employee as a result of the transactions contemplated by this Agreement
under any Compensation and Benefit Plan or otherwise will, if made, constitute
an "excess parachute payment" within the meaning of Section 280G of the Code.
Notwithstanding the foregoing, the Company is not a party to any Contract
pursuant to which it could be liable to indemnify any "disqualified individual"
as defined in Section 280G(c) of the Code for any excise tax under Section 4999
of the Code with respect to any "excess parachute payment."
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(i) Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders, fees in connection
with the transactions contemplated herein, except as set forth in Section 6.1(i)
of the Disclosure Letter.
(j) Takeover Statutes. No "fair price", "moratorium", "control share
acquisition" or other similar antitakeover statute or regulation (including,
without limitation, the DGCL) (each a "Takeover Statute") is applicable to the
Offer, the Merger or the transactions contemplated thereby or hereby.
(k) Environmental Matters. Except as disclosed in the Company Report
filed with the SEC prior to the date hereof or the Disclosure Letter and except
for such matters that, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect (i) the Company and its subsidiaries
have complied with all applicable Environmental Laws; (ii) the properties
presently or formerly owned or operated by the Company or its subsidiaries
(including, without limitation, soil, groundwater or surface water on, under or
adjacent to the properties, and buildings thereon) (the "Properties") do not
contain, and have not contained, any Hazardous Substance (as hereinafter
defined) other than as permitted under applicable Environmental Law, do not
contain, and have not contained, any underground storage tanks, do not have any
asbestos present and have not been used as a sanitary landfill or hazardous
waste disposal site; (iii) neither the Company nor any of its subsidiaries has
within the last five years received any notice, demand letter or request for
information from any Governmental Entity or any third party that the Company may
be in violation of, or liable under, any Environmental Law and none of the
Company, its subsidiaries or the Properties are subject to any court order,
administrative order or decree arising under any Environmental Law and (iv) no
Hazardous Substance has been disposed of, transferred, released or transported
from any of the Properties during the time such Property was owned or operated
by the Company or one of its subsidiaries, other than as permitted under and as
would not reasonably be expected to result in any liability under any applicable
Environmental Law.
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"Environmental Law" means any applicable Federal, state, foreign or
local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any governmental entity,
relating to the protection, preservation or restoration of the environment,
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource), or to human health or safety, or the exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as now in effect. "Hazardous Substance"
means any substance presently listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, under any
Environmental Law, whether by type or by quantity, including any substance
containing any such substance as a component.
(l) Intellectual Property.
(i) The Company and/or each of its subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use, all material patents,
copyrights, trademarks, trade names, service marks, and any applications
therefor, trade secrets, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or materials
that are used in the business of the Company and its subsidiaries as currently
conducted, and all material patents, trade secrets, proprietary information,
copyrights, trademarks, trade names and service marks held by the Company and/or
its subsidiaries are valid and subsisting.
(ii) Except as disclosed in Company Report filed prior to the date
hereof:
(A) neither the Company nor any of its subsidiaries is, nor
will the Company or any of its subsidiaries be as a result of the
execution and delivery of this Agreement or the performance of the
Company's obligations hereunder, in violation of any licenses, sublicenses
or other agreements as to which the Company or any of its subsidiaries is
a party or pursuant to which the Company or any of its
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subsidiaries is authorized to use any third-party patents, trademarks,
tradenames, service marks, copyrights, trade secrets, technology, know-how
or computer software (collectively, "Third-Party Intellectual Property
Rights"), in each case which violation would, individually or in the
aggregate, reasonably be likely to have a Material Adverse Effect;
(B) no litigation or material claims with respect to (I) the
patents, copyrights, trademarks and service marks, trade names, and any
applications therefor, trade secrets, know-how, technology or computer
software owned by the Company or any of its subsidiaries (collectively,
the "Company Intellectual Property Rights"); or (II) Third-Party
Intellectual Property Rights are currently pending or, to the knowledge of
the Company, are threatened by any person;
(C) there is no pending litigation or material claims or
threats alleging that the activities or conduct of business of the Company
or any of its subsidiaries infringes upon, violates, misappropriates or
constitutes unauthorized use of Intellectual Property rights of any third
party; and
(D) to the knowledge of the Company, there is no material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee of
the Company or any of its subsidiaries.
(iii) Each of the Company and its subsidiaries has taken all steps
that are reasonably required to protect the rights of the Company and its
subsidiaries in its confidential information and trade secrets. Without limiting
the foregoing, the Company and each of its subsidiaries has and enforces a
policy of requiring (A) each of its employees and consultants to execute
agreements providing that each employee or consultant (I) will keep all
proprietary information of the Company and/or the applicable subsidiaries
confidential and (II) thereby assigns to the Company and/or the applicable
subsidiary all rights that such employee or consultant otherwise would have in
Company Intellectual Property Rights developed by such employee or consultant
while in the employ of the Company and/or the applicable subsidiary and (B)
requiring each of its contractors to execute agreements providing that each
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contractor will keep all proprietary information of the Company and/or the
applicable subsidiaries confidential. Complete and current copies of each such
agreement have been made available to Parent. Except as disclosed in Section
6.1(l)(iii) of the Disclosure Letter, all former employees whose employment
terminated within the past two years, consultants and contractors of the Company
and each subsidiary have executed similar confidentiality and assignment
agreements. Except under confidentiality obligations, there has been no material
disclosure of any Company or subsidiary confidential information or trade
secrets.
(iv) Section 6.1(l)(iv) of the Disclosure Letter sets forth a list
of all contract or license agreements granting any right to use or practice any
Intellectual Property Rights, to which the Company or any of its subsidiaries is
a party as either licensee or licensor, involving payments to or by the Company
or its subsidiaries in excess of $50,000.
(m) Tax Matters.
(i) The Company and its predecessors have timely filed or caused to
be filed all federal, state, local and foreign tax returns and tax reports
required to be filed by, or with respect to, the Company and its subsidiaries
and their predecessors on or prior to the date hereof, except to the extent that
any failure to so file would not, individually or in the aggregate, reasonably
be likely to adversely affect the Company in any material manner. Such returns
and reports are complete and accurate in all material respects. The Company and
its subsidiaries and their predecessors have timely paid (A) all taxes shown as
due on such tax returns and (B) all taxes for which no return is required to be
filed, except to the extent that any failure to so pay would not, individually
or in the aggregate, reasonably be likely to adversely affect the Company in any
material manner. No material issues have been raised in writing by the relevant
taxing authority in connection with any examination of the tax returns and
reports referred to in the first sentence of this clause (i).
(ii) The Company will timely file or cause to be filed all federal,
state, local and foreign tax returns and tax reports required to be filed by, or
with respect to, the
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Company and its subsidiaries between the date hereof and the Effective Time,
except to the extent that any failure to so file would not, individually or in
the aggregate, reasonably be likely to adversely affect the Company in any
material manner. Such returns and reports will be complete and accurate in all
material respects.
(iii) No waivers of statutes of limitations have been given or
requested with respect to any material taxes of the Company or its subsidiaries.
(iv) The Company is not, nor was it at any time during the five-year
period ending on the date on which the Effective Time occurs, a "United States
real property holding corporation" within the meaning of Section 897(C) of the
Code.
(n) Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by the Company or any of its subsidiaries are with
reputable insurance carriers, provide adequate coverage for risks incident to
the business of the Company and its subsidiaries and their respective properties
and assets in character and amount generally comparable with those carried by
persons engaged in similar businesses and subject to generally comparable perils
or hazards. All such policies are in full force and effect and no notice of
cancellation, termination or default has been received with respect to any such
policy. All premiums due and payable on such policies covering all periods up to
and including the Closing Date have been paid in full or accrued.
(o) Product Warranties. (i) There are no material warranties,
express or implied, written or oral, with respect to the products of the Company
or any of its subsidiaries ("Company Products"), except as set forth in Section
6.1(o)(i) of the Disclosure Letter; (ii) as of the date hereof there are no
pending or threatened material claims with respect to any such warranty; and
(iii) there are no material pending, or, to the knowledge of the Company as of
the date hereof, threatened, product liability claims against or involving the
Company or any of its subsidiaries or any Company Product and no such claims
have been settled or adjudicated since December 31, 1996.
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(p) Year 2000. The Company has taken all actions necessary and
adequate to ensure that all computer software and data processing devices (i)
used by the Company and/or any of its subsidiaries in its management information
systems, or (ii) utilized in or by any Company Products, including any Company
Products sold and/or installed prior to the date hereof, are present or will in
1999 become "Year 2000 Compliant" and the Company will not incur costs
associated with ensuring such Year 2000 Compliance in an amount that would
reasonably be likely, individually or in the aggregate, to have a Material
Adverse Effect. "Year 2000 Compliant" means that the product or software
accurately processes and stores date/time data (including, but not limited to
calculating, comparing, displaying, recording and sequencing operations
involving date/time data) during, from and into and between the twentieth and
twenty-first centuries, and the years 1999 and 2000, including correct
processing of leap year data.
(q) Government Contracts. Except as set forth in Section 6.1(q) of
the Disclosure Letter, the Company does not have any agreements, contracts or
arrangements with any Governmental Entity.
6.2. Representations and Warranties of Parent and Merger Sub. Parent
and Merger Sub represent and warrant to the Company that:
(a) Corporate Organization and Qualification. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
in good standing as a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification except for such failure to so qualify or to be in such good
standing, which, when taken together with all other such failures, is not
reasonably likely to have a material adverse effect on the financial condition,
properties, business or results of operations of Parent and its subsidiaries,
taken as a whole, or on the ability of Parent on Merger Sub to perform their
obligations under this Agreement.
(b) Corporate Authority. Parent and Merger Sub each has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and
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deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement is a valid and binding agreement of Parent and Merger Sub
enforceable against Parent and Merger Sub in accordance with its terms.
(c) Governmental Filings; No Violations. (i) Other than the
Regulatory Filings, no notices, reports or other filings are required to be made
by Parent and Merger Sub with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Parent and Merger Sub from,
any Governmental Entity in connection with the execution and delivery of this
Agreement by Parent and Merger Sub and the consummation of the transactions
contemplated hereby by Parent and Merger Sub, except for those the failure of
which to be made or obtained would not, individually or in the aggregate,
reasonably be likely to prevent the consummation of, or materially impair the
ability of Parent or Merger Sub to consummate the transactions contemplated by
this Agreement.
(ii) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the consummation of the transactions contemplated hereby
by Parent and Merger Sub will not, constitute or result in (i) a breach or
violation of, or a default under, the Certificate of Incorporation or By-Laws of
Parent or Merger Sub or (ii) a breach or violation of, a default under, the
acceleration of or the creation of a lien, pledge, security interest or other
encumbrance on assets (with or without the giving of notice or the lapse of
time) pursuant to, any provision of any Contract of Parent or Merger Sub or any
law, ordinance, rule or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which Parent or Merger Sub
is subject, except, in the case of clause (ii) above, for any such breach,
violation, default or acceleration that, individually or in the aggregate, is
not reasonably likely to prevent the consummation of, or materially impair the
ability of Parent or Merger Sub to consummate, the transactions contemplated
hereby.
(d) Funds. Parent has or will have the funds necessary to consummate
the Offer and the Merger.
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ARTICLE VII
Covenants
7.1. Interim Operations of the Company. The Company covenants and
agrees that, prior to the Effective Time (unless Parent shall otherwise agree in
writing and except as otherwise contemplated by this Agreement):
(a) the business of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent
consistent therewith, each of the Company and its subsidiaries shall use
its best efforts to preserve its business organization intact and maintain
its existing relations with customers, suppliers, employees and business
associates;
(b) the Company shall not (i) sell or pledge or agree to sell or
pledge any stock owned by it in any of its subsidiaries; (ii) amend its
Certificate or By-Laws; (iii) split, combine or reclassify the outstanding
Shares; or (iv) declare, set aside or pay any dividend payable in cash,
stock or property with respect to the Shares;
(c) neither the Company nor any of its subsidiaries shall (i)
issue, sell, pledge, dispose of or encumber any additional shares of, or
securities convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital
stock of any class of the Company or its subsidiaries or any other
property or assets other than, in the case of the Company, Shares issuable
pursuant to options outstanding on the date hereof under the Company
Option Plans, shares issuable upon exercise of the Warrants or shares
issuable pursuant to the terms of the Company Stock Purchase Plan; (ii)
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any assets or incur or modify any indebtedness or other liability
other than in the ordinary and usual course of business; (iii) acquire
directly or indirectly by redemption or otherwise any shares of the
capital stock of the Company; or (iv) authorize capital expenditures
individually or in the aggregate in excess of $200,000 or make any
acquisition of, or investment in, assets or stock of any other person or
entity;
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(d) other than (i) the employment agreements entered into in
connection with this Agreement, (ii) as required by law, (iii) as required
under a plan existing as of the date hereof, (iv) as set forth in Section
7.1(d) of the Disclosure Letter or (v) as otherwise provided herein,
neither the Company nor any of its subsidiaries shall (A) grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of the Company or
such subsidiaries; or (B) establish, adopt, enter into, make any new
grants or awards (or accelerate the vesting or increase the value of any
benefit) under or amend, any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
employee stock ownership, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees;
(e) neither the Company nor any of its subsidiaries shall settle or
compromise any material claims or litigation or, except in the ordinary
and usual course of business, modify, amend or terminate any of its
material Contracts or waive, release or assign any material rights or
claims;
(f) neither the Company nor any subsidiary shall make any tax
election or permit any insurance policy naming it as a beneficiary or a
loss payable payee to be canceled or terminated without notice to Parent,
except in the ordinary and usual course of business;
(g) neither the Company nor any of its subsidiaries shall (i)
terminate the employment of any Employee who is covered by a change in
control, employment, termination or similar agreement, except for Cause
(as defined in such agreements) or (ii) permit circumstances to exist that
would provide such Employee with Good Reason (as defined in such
agreements) to terminate employment;
(h) neither the Company nor any of its subsidiaries shall hire any
new employees except in the ordinary and usual course of business;
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(i) the Company shall not permit any person not participating in the
Company Stock Purchase Plan as of the date hereof to participate in such
plan or permit any present participant in the Company Stock Purchase Plan
to increase his or her percentage contribution under such plan; and
(j) neither the Company nor any of its subsidiaries will authorize
or enter into an agreement to do any of the foregoing.
7.2. Acquisition Proposals. The Company agrees that neither the
Company nor any of its subsidiaries nor any of the respective officers and
directors of the Company or its subsidiaries shall, and the Company shall direct
and use its best efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries) not to, directly or
indirectly initiate, solicit, encourage or otherwise facilitate (including by
providing any confidential information or data to or having any negotiations or
discussions with any person (other than Parent or its affiliates) making or
inquiring with respect to making an Acquisition Proposal), any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to stockholders of the Company) with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving the Company, or
any purchase of more than 15% (on a fair market value basis) of the assets of
the Company and its subsidiaries on a consolidated basis (including any such
purchase of assets effected indirectly through the purchase of such
subsidiaries), or any purchase of, or tender offer for, more than 15% of any
equity securities of the Company (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"), except that the Company shall have
the right, if, and only to the extent that, the Company's Board of Directors
concludes in good faith after consultation with outside legal counsel that such
actions are required to comply with the fiduciary duties of the Company's Board
of Directors under applicable law in response to a bona fide, written
Acquisition Proposal not solicited on or after the date hereof, to engage in
negotiations concerning, provide confidential information or data to, or have
discussions with, any person relating to an Acquisition Proposal. The Company
will immediately cease
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and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing. The
Company will take the necessary steps to inform the individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 7.2. The Company will notify Parent immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Company or any of its subsidiaries. The Company also will promptly request each
person which has heretofore executed a confidentiality agreement in connection
with its consideration of acquiring the Company to return all confidential
information heretofore furnished to such person by or on behalf of the Company.
7.3. Meetings of the Company's Stockholders. If adoption of this
Agreement by the Company's stockholders is required by law following
consummation of the Offer, the Company will take, consistent with applicable law
and its Certificate and By-Laws, all action necessary to convene a meeting of
holders of Shares as promptly as practicable to consider and vote upon the
adoption of this Agreement. Subject to fiduciary requirements of applicable law,
the Board of Directors of the Company shall recommend such adoption and the
Company shall take all lawful action to solicit such adoption. At any such
meeting of the Company, all of the Shares then owned by the Parent Companies
will be voted in favor of adoption of this Agreement. The Company's proxy or
information statement with respect to such meeting of shareholders (the "Proxy
Statement"), at the date thereof and at the date of such meeting, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
the Company in reliance upon and in conformity with written information
concerning the Parent Companies furnished to the Company by Parent specifically
for use in the Proxy Statement. The Proxy Statement shall not be filed, and no
amendment or supplement to the Proxy Statement will be made by the Company,
without consultation with Parent and its counsel.
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7.4. Filings; Other Action. Subject to the terms and conditions
herein provided, the Company and Parent shall: (a) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act and other Regulatory Filings with respect to the Offer and the Merger;
and (b) use their respective reasonable best efforts to promptly take, or cause
to be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
soon as practicable; provided, however, that neither Parent nor Merger Sub will
be required to divest or hold separate any of their, the Company's or any of
their respective affiliates' businesses or assets.
7.5. Access. Upon reasonable notice, the Company shall (and shall
cause each of its subsidiaries to) afford Parent's officers, employees, counsel,
accountants and other authorized representatives ("Representatives") access,
during normal business hours throughout the period prior to the Effective Time,
to its properties, books, Contracts and records and, during such period, the
Company shall (and shall cause each of its subsidiaries to) furnish promptly to
Parent all information concerning its business, properties and personnel as
Parent or its Representatives may reasonably request, provided that no
investigation pursuant to this Section 7.5 shall affect or be deemed to modify
any representation or warranty made by the Company and provided, further, that
the foregoing shall not require the Company to permit any inspection, or to
disclose any information, which in the reasonable judgment of the Company would
result in the disclosure of any trade secrets of third parties or violate any
obligation of the Company with respect to confidentiality if the Company shall
have used reasonable efforts to obtain the consent of such third party to such
inspection or disclosure. All information exchanged pursuant to this Section 7.5
shall be subject to the confidentiality agreement, dated October 16, 1998 (the
"Confidentiality Agreement"), between the Company and Philips International BV.
All requests for information made pursuant to this Section shall be directed to
an executive officer of the Company or such person as may be designated by any
such officer. Upon any termination of this Agreement, Parent will collect and
deliver to the Company all documents obtained by it or any of its
Representatives then in their possession and any copies thereof.
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7.6. Notification of Certain Matters. The Company shall give prompt
notice to Parent of: (a) any notice of, or other communication relating to, any
material environmental matter, or any material default or event that, with
notice or lapse of time or both, would become a material default, received by
the Company or any of its subsidiaries subsequent to the date of this Agreement
and prior to the Effective Time, under any Contract to which the Company or any
of its subsidiaries is a party or is subject; and (b) any change or development
that, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect. Each of the Company and Parent shall give prompt notice to the
other party of any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement.
7.7. Publicity. The initial press release by the parties hereto with
request to this Agreement shall be a joint press release and thereafter the
Company and Parent shall consult with each other prior to issuing any press
releases or otherwise making public statements with respect to the transactions
contemplated hereby and prior to making any filings with any Governmental Entity
or with any national securities exchange with respect thereto.
7.8. Benefits. (a) Stock Options. Except as set forth in Section
7.8(a) of the Disclosure Letter, prior to the Effective Time, the Company shall
take all such actions as may be necessary such that at the Effective Time each
stock option outstanding pursuant to the Company Option Plans ("Option"),
whether or not then exercisable, shall be canceled and shall thereafter only
entitle the holder thereof, upon surrender thereof, to receive an amount in cash
equal to the excess, if any, of the Merger Consideration over the exercise price
per Share of such Option multiplied by the number of Shares previously subject
to such Option, less any required withholding taxes. Promptly following the
execution of this Agreement, the Company shall mail to each person who is a
holder of outstanding stock options granted pursuant to the Company Option Plans
(regardless of whether such stock options are vested or exercisable at the time)
a letter in a form acceptable to Parent which describes the treatment of and
payment for such options pursuant to this Section 7.8(a) and provides
instructions for use in obtaining payment for such options hereunder. Each such
holder shall sign a release by
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which such holder effectively relinquishes all rights with respect to such
holder's outstanding stock options upon payment therefor in accordance with this
Section 7.8(a) prior to or as soon as practicable following the Closing. The
Company shall take all actions necessary to cause the Company Stock Plans to be
terminated effective as of the Effective Time; provided, however, that the
Company shall be permitted, immediately prior to the Effective Time, to issue
Shares pursuant to the terms of the Company Stock Purchase Plan in respect of
amounts contributed as of such date under such plan.
(b) Employee Benefits. Parent agrees that, for a period of one year
following the Effective Time, it will cause the Company to continue to provide
the Employees with benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of securities of the
Company or of any of the Parent Companies) which in the aggregate are
substantially comparable to the benefits currently provided by the Company to
such employees immediately prior to the Effective Time, provided that employees
covered by collective bargaining agreements need not be provided such benefits.
Notwithstanding the foregoing, nothing contained herein shall in any way limit
or restrict the ability of Parent or the Surviving Corporation following the
Effective Time to modify, amend or terminate any Compensation and Benefit Plan,
in accordance with the terms of such Compensation and Benefit Plan, or to
terminate the employment of any employee.
7.9. Indemnification; Directors' and Officers' Insurance. (a) From
and after the Effective Time, Parent agrees that it will indemnify and hold
harmless each present and former director and officer of the Company, determined
as of the Effective Time (the "Indemnified Parties"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in such person's
capacity as a director or officer of the Company in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company would have been
permitted under Delaware law and its Certificate of Incorporation or By-Laws in
effect on the date hereof to indemnify such
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person (and Parent shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of Section 7.9, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof and Parent shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Parent or the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
Parent or the Surviving Corporation and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and Parent or the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that Parent shall be obligated pursuant to this paragraph (b) to pay
for only one firm of counsel for all Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest (ii) the Indemnified Parties will cooperate
in the defense of any such matter and (iii) Parent shall not be liable for any
settlement effected without its prior written consent; and provided further that
Parent shall not have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(c) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") for a period of
two years after the Effective Time so long as the annual premium therefor is not
in excess of the last annual premium paid prior to the
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date hereof (the "Current Premium"); provided, however, if the existing D&O
Insurance expires, is terminated or canceled during such two year period, the
Surviving Corporation will use its best efforts to obtain as much D&O Insurance
as can be obtained for the remainder of such period for a premium not in excess
(on an annualized basis) of the Current Premium. The Company represents to
Parent that the Current Premium is $75,000. Notwithstanding the foregoing, the
Surviving Corporation may replace the D&O Insurance with coverage provided by
Parent's D&O insurer with respect to events occurring on or prior to the
Effective Time so long as the coverage provided by Parent's D&O policy with
respect to such events are, in the aggregate, substantially the same as, or more
favorable than, the D&O Insurance with respect to such events.
7.10. Takeover Statutes. If any Takeover Statute is or shall become
applicable to the transactions contemplated hereby, the Company and the Board of
Directors of the Company shall grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate the effects of such statute or regulation on the transactions
contemplated hereby.
ARTICLE VIII
Conditions
8.1. Conditions to Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to consummate the Merger shall
be subject to the satisfaction or waiver, where permissible, prior to the
Effective Time, of the following conditions:
(a) Stockholder Approval. If adoption of this Agreement by the
holders of Shares is required by applicable law, the Agreement shall have been
duly adopted by the holders of a majority of the Shares, in accordance with
applicable law and the Certificate and By-Laws of the Company;
(b) Purchase of Shares. Merger Sub (or one of the Parent Companies)
shall have purchased Shares pursuant to the Offer;
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(c) Governmental and Regulatory Consents. The waiting period
applicable to the consummation of the Merger under the HSR Act and any
applicable waiting periods relating to the Regulatory Filings shall have expired
or been terminated and, other than the filings provided for in Section 2.3, all
filings required to be made prior to the Effective Time by the Company with, and
all consents, approvals and authorizations required to be obtained prior to the
Effective Time by the Company from, any Governmental Entity in connection with
the execution and delivery of this Agreement by the Company and the consummation
of the transactions contemplated hereby by the Company, Parent and Merger Sub
shall have been made or obtained (as the case may be);
(d) Litigation. No United States or state court or other
Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and prohibits consummation of the transactions contemplated
by this Agreement or imposes material restrictions on Parent or the Company in
connection with consummation of the Merger or with respect to their business
operations, either prior to or subsequent to the Merger (collectively, an
"Order");
(e) Compliance; Consents. The representations and warranties
contained in Section 6.1 shall be true in all material respects as of the
Effective Time as though made at and as of the Effective Time, except for
changes contemplated by this Agreement and the Company shall have obtained the
necessary consents to the Merger of the parties set forth in the Disclosure
Letter;
(f) Other Obligations. The Company shall have fulfilled its
obligations under Section 7.8; and
(g) Dissenting Stockholders. Holders of not more than five percent
of the outstanding Shares shall have exercised appraisal rights as provided in
Section 262 of the DGCL.
8.2. Conditions to Obligations of the Company. The obligations of
the Company to consummate the Merger shall be subject to the satisfaction or
waiver, where
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permissible, prior to the Effective Time, of the following conditions:
(a) Stockholder Approval. If adoption of this Agreement by the
holders of Shares is required by applicable law, the Agreement shall have been
duly adopted by the holders of a majority of the Shares, in accordance with
applicable law and the Certificate and By-Laws of the Company;
(b) Purchase of Shares. Merger Sub (or one of the Parent Companies)
shall have purchased Shares pursuant to the Offer;
(c) Governmental Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act and any applicable waiting periods
relating to the Regulatory Filings shall have expired or been terminated and,
other than the filings provided for in Section 2.3, all filing required to be
made prior to the Effective Time by Parent and Merger Sub with, and all
consents, approvals, permits and authorizations required to be obtained prior to
the Effective Time by Parent and Merger Sub from, any Governmental Entity in
connection with the execution and delivery of this Agreement by Parent and
Merger Sub and the consummation of the transactions contemplated hereby by
Parent, Merger Sub and the Company shall have been made or obtained (as the case
may be); and
(d) Order. No Order shall be in effect.
ARTICLE IX
Termination
9.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by holders of Shares, by the mutual consent of Parent
(also acting on behalf of Merger Sub) and the Company, by action of their
respective Boards of Directors.
9.2. Termination by either Parent or the Company. This Agreement may
be terminated and the Merger may be abandoned by action of the Board of
Directors of either Parent or the Company if (i) Merger Sub shall not have
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<PAGE> 39
accepted for payment any Shares pursuant to the Offer prior to September 15,
1999; provided, however, that the right to terminate this Agreement pursuant to
this Section 9.2(i) shall not be available to any party whose failure to perform
any of its obligations under this Agreement results in the failure of any Offer
Condition or (ii) any Governmental Entity shall have issued an Order which shall
have become final and non-appealable.
9.3. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption, if necessary, by holders of Shares, by action of the Board of
Directors of Parent, if (x)(i) the Company shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement or (ii) a representation or warranty of the Company set forth in this
Agreement shall have been inaccurate when made or shall thereafter become
inaccurate, except for such inaccuracies which, when taken together (in each
case without regard to any qualification as to materiality or a Material Adverse
Effect contained in the applicable representations and warranties) would not
reasonably be likely to have a Material Adverse Effect, and, with respect to any
such breach, failure to perform or inaccuracy that can be remedied, the breach,
failure or inaccuracy is not remedied within 15 business days after the giving
of written notice of such breach, failure or inaccuracy to the Company; (y) the
Board of Directors of the Company shall have withdrawn or modified in a manner
adverse to Parent or Merger Sub its approval or recommendation of the Offer,
this Agreement or the Merger or shall have adopted or recommended any
Acquisition Proposal, or the Board of Directors of the Company, upon request by
Parent, shall fail to reaffirm such approval or recommendation within 10
business days after such request if an Acquisition Proposal is pending, or shall
have resolved to do any of the foregoing; or (z) if the Company or any of the
other persons or entities described in Section 7.2 shall take any actions that
would be proscribed by Section 7.2 but for the exception therein allowing
certain actions to be taken if required by fiduciary obligations under
applicable law as advised in writing by counsel.
9.4. Termination by the Company. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by holders of Shares by action of the Board of
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<PAGE> 40
Directors of the Company, (x) if Parent or Merger Sub (or another Parent
Company) (i) shall have breached in any material respect any of the
representations, warranties, covenants or agreements contained in this Agreement
(other than any immaterial covenants or agreements) and, with respect to any
such breach that can be remedied within 15 business days after the Company has
provided Parent with written notice of such breach, or (ii) shall have failed to
commence the Offer within the time required in Section 1.1 or (y) if (i) the
Board of Directors of the Company receives a written offer not solicited on or
after the date hereof, with respect to a merger, reorganization, share exchange,
consolidation or sale of all or substantially all of the Company's assets or a
tender or exchange offer not solicited on or after the date hereof for more than
50% of the outstanding Shares is commenced, and with respect to which the Board
of Directors of the Company concludes in good faith, after consultation with an
independent financial advisor and its outside counsel, that approval, acceptance
or recommendation of such transaction is required by the fiduciary duties of the
Company's Board of Directors under applicable law (any such transaction, a
"Superior Proposal") and (ii) the Company has given Parent three business days'
prior written notice of its intention to terminate this Agreement to accept the
Superior Proposal, which notice shall indicate the name of the person making
such Superior Proposal and the material terms of such Superior Proposal, and
Parent shall have failed to offer to amend the Offer so that it is at least as
favorable to the stockholders of the Company as the Superior Proposal.
9.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article IX, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in Section 9.5(b) below and Section 10.2 and except that nothing herein
will relieve any party from liability for any wilful and material breach of its
covenants under this Agreement.
(b) If:
(x) (i) (A) the Offer shall have remained open for a minimum of at
least 20 business days, (B) after the date hereof any
corporation, partnership, person, other entity or
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<PAGE> 41
group (as defined in Section 13(d)(3) of the Exchange
Act) other than Parent or Merger Sub or any of their
respective subsidiaries or affiliates (collectively, a
"Person") shall have become the beneficial owner of 15%
or more of the outstanding Shares or made any
Acquisition Proposal, and
(C) (1) the Minimum Condition (as defined in Annex A) shall
not have been satisfied or (2) the Offer is terminated
pursuant to Section 9.3(x) due to a breach of the
Company's obligations under Section 7.2 or pursuant to
Section 9.2(i) without the purchase of any Shares
thereunder; or
(ii) Parent shall have terminated this Agreement pursuant to
Section 9.3(y); or
(iii) the Company shall have terminated this Agreement pursuant to
Section 9.4(y); and
(y) within eighteen months of such termination (or the expiration date
of the Offer in the case of (C)(1) above), the Company consummates
an Acquisition Proposal
then, upon consummation of such Acquisition Proposal, the Company shall
promptly, but in no event later than five business days after the date of a
request by Parent for payment of such fee, pay Parent a fee of $2,000,000, plus
all documented fees and expenses incurred by Parent or Merger Sub in connection
with this Agreement, the Offer and the Merger up to a maximum amount of
$1,000,000, which amounts shall be payable in same day funds. The Company
acknowledges that the agreements contained in this Section 9.5(b) are an
integral part of the transactions contemplated in this Agreement, and that,
without these agreements, Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 9.5(b), and, in order to obtain such payment, Parent or
Merger Sub commences a suit which results in a judgment against the Company for
the fee set forth in this paragraph (b), the Company shall pay to Parent or
Merger Sub its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest
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<PAGE> 42
on the amount of the fee at the prime rate of Citibank N.A. on the date such
payment was required to be made.
ARTICLE X
Miscellaneous and General
10.1. Payment of Expenses. (a) Except as otherwise set forth in
Section 9.5, whether or not the Merger shall be consummated, each party hereto
shall pay its own expenses incident to preparing for, entering into and carrying
out this Agreement and the consummation of the Merger.
(b) Except as otherwise provided in the fifth sentence of Section
5.2 of this Agreement, all state, local, foreign or provincial sales, use, real
property transfer, stock transfer or similar taxes (including any interest,
penalties or additions thereto) attributable to the transactions contemplated by
this Agreement shall be timely paid by Parent or Merger Sub.
10.2. Survival. The agreements of the Company, Parent and Merger Sub
contained in Sections 5.2 (but only to the extent that such Section expressly
relates to actions to be taken after the Effective Time), 5.3, 5.4, 7.8, 7.9,
7.11 and 10.1 shall survive the consummation of the Merger. The agreements of
the Company, Parent and Merger Sub contained in Sections 7.5, 9.5 and 10.1 shall
survive the termination of this Agreement. All other representations,
warranties, agreements and covenants in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
10.3. Modification or Amendment. Subject to the applicable
provisions of the DGCL, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties.
10.4. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
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<PAGE> 43
10.5. Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
10.6. Governing Law.
(a) GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties
hereby irrevocably submit to the jurisdiction of the courts of the State of New
York and the Federal courts of the United States of America located in the State
of New York solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and in respect of the transactions contemplated hereby and thereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in
or by such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a New
York State or Federal court. The parties hereby consent to and grant any such
court jurisdiction over the person of such parties and over the subject matter
of such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 10.7 or in
such other manner as may be permitted by law shall be valid and sufficient
service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
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<PAGE> 44
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.6.
10.7. Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent or Merger Sub:
Philips Electronics North America Corporation
1251 Avenue of the Americas
20th Floor
New York, NY 10020
Attention: General Counsel
Fax: (212) 536-0505
with a copy to:
Koninklijke Philips Electronics N.V.
Rembrandt Tower
Amstelplein 1
1096 HA Amsterdam
The Netherlands
Attention: General Secretary
Fax: (011) (31 20) 59 77150
Neil T. Anderson, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fax: (212) 558-3588
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<PAGE> 45
if to the Company
Voice Control Systems, Inc.,
14140 Midway Road
Dallas, Texas 75244
Attention: Kim S. Terry
Fax: (972) 726-1211
with a copy to:
William G. Milne, Esq.,
13760 Noel Road, Suite 101
Dallas, Texas 75240
Fax: (972) 386-5233
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
10.8. Entire Agreement, etc. This Agreement (including the
Disclosure Letter and any exhibits or Annexes hereto) (a) constitutes the entire
agreement, and supersedes all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, other
than the Confidentiality Agreement, with respect to the subject matter hereof,
and (b) shall not be assignable by operation of law or otherwise and is not
intended to create any obligations to, or (except with respect to the provisions
of Section 7.9) rights in respect of, any persons other than the parties hereto;
provided, however, that Parent may designate, by written notice to the Company,
another wholly owned direct or indirect subsidiary to be a Constituent
Corporation in lieu of Merger Sub, in the event of which, all references herein
to Merger Sub shall be deemed references to such other subsidiary except that
all representations and warranties made herein with respect to Merger Sub as of
the date of this Agreement shall be deemed representations and warranties made
with respect to such other subsidiary as of the date of such designation.
10.9. Definitions of "Subsidiary," "knowledge" and "Material Adverse
Effect". When a reference is made in this Agreement to a subsidiary of a party,
the word "subsidiary" means any corporation or other organization whether
incorporated or unincorporated of which at least a majority of the securities or
interests having by the terms thereof ordinary voting power to elect at least a
majority
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<PAGE> 46
of the board of directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its subsidiaries, or by such
party and one or more of its subsidiaries. When the word "knowledge" is used in
this Agreement with reference to the Company or its management or officers, such
word will be deemed to refer to the actual knowledge of the executive officers
of the Company and such other officer that has primary responsibility for the
subject matter with respect to which "knowledge" is being considered. For
purposes of this Agreement, "Material Adverse Effect" means any material adverse
effect on the financial condition, properties, business or results of operations
of the Company and its subsidiaries taken as a whole (excluding any change or
development resulting from the announcement of this Agreement or the
transactions contemplated hereby).
10.10. Obligation of Parent. Whenever this Agreement requires Merger
Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of Parent to cause Merger Sub to take such action.
10.11. Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
10.12. 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
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 an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
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<PAGE> 47
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
PHILIPS ELECTRONICS NORTH AMERICA
CORPORATION
/s/ William E. Curran
------------------------------------------
By: William E. Curran
Title: Senior Vice President and
Chief Financial Officer
VULCAN MERGER SUB, INC.
/s/ William E. Curran
------------------------------------------
By: William E. Curran
Title: President and Chief
Executive Officer
VOICE CONTROL SYSTEMS, INC.
/s/ Kim S. Terry
------------------------------------------
By: Kim S. Terry
Title: Vice President Finance
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<PAGE> 48
Annex A
Certain Conditions of the Offer. Notwithstanding any other provision
of the Offer, but subject to the terms and conditions of the Merger Agreement
(and provided that Merger Sub shall not be obligated to accept for payment any
Shares until expiration or termination of all applicable waiting periods under
the HSR Act and any applicable waiting periods relating to the Regulatory
Filings, in each case with respect to the Offer and/or the Merger (the
"Regulatory Condition")), Merger Sub (x) shall not be required to accept for
payment or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) promulgated under the Exchange Act (relating to Merger
Sub's obligation to pay for or return tendered Shares promptly after termination
or withdrawal of the Offer), pay for, and (y) may delay the acceptance for
payment of or (subject to such rules and regulations, including Rule 14e-1(c))
payment for, any tendered Shares, in each case if a majority of the total Shares
outstanding on a fully diluted basis and as will permit Merger Sub to effect the
Merger without the vote of any person other than Merger Sub shall not have been
properly and validly tendered pursuant to the Offer and not withdrawn prior to
the expiration of the Offer (the "Minimum Condition"), or, if on or after the
date of the Merger Agreement, and at or before the time of acceptance for
payment of any of such Shares, any of the following events shall occur:
(a) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under the
Merger Agreement;
(b) (i) any of the representations and warranties of the Company set
forth in this Agreement that are qualified by materiality or by Material
Adverse Effect shall not have been true and correct as of the date of the
Merger Agreement or shall not be true and correct on the expiration date
of the Offer (and any extensions thereof) as though made on and as of such
date or (ii) except for such inaccuracies as, individually or in the
aggregate, have not had and would not be reasonably likely to have a
Material Adverse Effect, the representations and warranties of the Company
set forth in the Merger Agreement that are not qualified by materiality or
by Material Adverse Effect, shall not have been
A-1
<PAGE> 49
true and correct as of the date of the Merger Agreement or shall not be
true and correct as of the expiration date of the Offer (and any
extensions thereof) as though made on and as of such date;
(c) there shall be threatened, instituted or pending any action,
litigation or proceeding (hereinafter, an "Action") by any Governmental
Entity: (i) challenging the acquisition by Parent or Merger Sub of Shares
or seeking to restrain or prohibit the consummation of the Offer or the
Merger; (ii) seeking to prohibit or impose any material limitations on
Parent's, Merger Sub's or any of their respective affiliates' ownership or
operation of all or any material portion of the business or assets of the
Company and its subsidiaries taken as a whole or the business or assets of
any significant subsidiary of Koninklijke Philips Electronics N.V., or to
compel Parent or Merger Sub to dispose of or hold separate all or any
portion of Parent's or Merger Sub's or the Company's business or assets
(including the business or assets of their respective affiliates and
subsidiaries) as a result of the Offer or the Merger; (iii) seeking to
impose material limitations on the ability of Parent or Merger Sub
effectively to acquire or hold, or to exercise full rights of ownership
of, the Shares including, without limitation, the right to vote the Shares
purchased by them on an equal basis with all other Shares on all matters
properly presented to the shareholders of the Company; or (iv) that, in
any event, would, individually or in the aggregate, reasonably be likely
to have a Material Adverse Effect;
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed to or become applicable
to the Offer or the Merger, or any other action shall have been taken,
proposed or threatened, by any court or other Governmental Entity, that is
reasonably expected to result in any of the effects of, or have any of the
consequences sought to be
A-2
<PAGE> 50
obtained or achieved in, any Action referred to in clauses (i) through
(iv) of paragraph (c) above;
(e) (i) the Company's stockholders' equity as determined on a
consolidated basis in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP") is less than $6,000,000 or (ii) Parent shall not
have received a certificate signed by the Chief Executive Officer and the
Vice President Finance of the Company, dated the expiration date of the
Offer (as such date may be extended by Parent), certifying that the
Company's stockholders' equity determined on consolidated basis in
accordance with U.S. GAAP is greater than or equal to $6,000,000;
(f) any change or development shall have occurred that, individually
or in the aggregate, is reasonably likely to have a Material Adverse
Effect; or
(g) the Merger Agreement shall have been terminated by the Company
or Parent or Merger Sub in accordance with its terms;
which, in the reasonable judgment of Parent and Merger Sub, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or Merger Sub) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment
for Shares.
The foregoing conditions may be asserted by Parent or Merger Sub
regardless of the circumstances (including any action or inaction by Parent or
Merger Sub) giving rise to such condition. The conditions set forth in
paragraphs (a) through (g) above are for the sole benefit of Parent and Merger
Sub and may be waived by Parent or Merger Sub, by express and specific action to
that effect, in whole or in part at any time and from time to time in their sole
discretion.
A-3
<PAGE> 51
Schedule 1
Employment Agreements
Peter Foster
Dr. Thomas Schalk
Kim Terry
<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 9, 1999, by and between Philips Electronics
North America Corporation ("Philips") and Peter J. Foster ("Employee").
WHEREAS, Voice Control Systems, Inc. (the "Company"), Employee's former
employer, has entered into an Agreement and Plan of Merger, dated as of May 9,
1999 with Merger Sub and Philips (the "Merger Agreement"); and
WHEREAS, Philips desires to secure the continued services and
employment of Employee following the successful consummation of the Offer (as
such term is defined in the Merger Agreement) with the Company or such other
subsidiary designated by Philips; and
WHEREAS, the parties desire to enter into an agreement setting forth
the terms and conditions of the employment of Employee with the Company or such
other subsidiary designated by Philips on and after the successful consummation
of the Offer;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:
1. Employment. For all purposes under this Agreement, references to the
Company shall be deemed to refer to the subsidiary of Philips which employs
Employee during the Term, as defined below. The Company hereby agrees to employ
Employee, and Employee agrees to serve as an employee of the Company, on the
terms and conditions set forth in this Agreement, effective upon the purchase of
Shares by Merger Sub pursuant to the Offer (as such terms are defined in the
Merger Agreement) (the "Effective Date"); it being understood that the
employment obligations undertaken by the Company hereunder shall not become
effective, and shall become null and void, in the event that such purchase of
Shares does not occur.
2. Term. The "Term" shall be the period commencing on the Effective
Date and ending on the second anniversary of the Effective Date.
3. Duties and Responsibilities. During the Term, Employee shall serve
as the Senior Vice President, Philips Speech Processing Telephony North America,
and shall be responsible for the general and active management of the business
of the Company with such duties and responsibilities that are customary for such
position. Employee shall perform such other duties and shall have such other
authority and power as the Board of Directors of the Company, or any executive
committee thereof, may from time to time prescribe during the Term. Employee
shall devote substantially all Employee's working time, attention and energies
during normal business hours (other than absences due to illness or vacation) to
the performance of Employee's duties for the Company. Employee may engage in
other outside activities, including community
<PAGE> 2
activities, provided that such activities do not unreasonably interfere with
Employee's performance of Employee's duties with the Company.
4. Place of Performance. The principal place of employment of Employee
shall be at the Company's offices in Dallas, Texas. Employee acknowledges that
he may be required to travel on Company business in connection with the
performance of his duties hereunder without violation of this Section 4.
5. Compensation and Related Matters.
(a) Base Salary and Bonus. During the Term the Company shall
pay Employee a base salary at the rate of not less than $230,000 ("Base Salary")
which shall be annually reviewed by the Company. Employee's Base Salary shall be
paid in approximately equal installments in accordance with the Company's
customary payroll practices. Employee's performance and Base Salary shall be
reviewed annually. If Employee's Base Salary is increased by the Company, such
increased Base Salary shall then constitute the Base Salary for all purposes of
the Agreement other than Section 5(c), below. The Employee shall be eligible to
receive an annual bonus opportunity equal to $90,000 (the "Target Bonus"). The
actual bonus payment, which may be higher or lower than the Target Bonus, will
be determined, by Philips in consultation with Employee, according to the level
of achievement of performance targets established by Philips in consultation
with Employee. The bonus will be paid no later than during the first quarter
after the end of the relevant calendar year, or if this Agreement is terminated
due to its expiration during a calendar year, no later than ninety (90) days
following such termination.
(b) Benefit Plans. Employee shall be entitled to participate
in such employee benefit plans and insurance programs applicable to the Company,
or which it may adopt from time to time, for its executive management or
supervisory personnel generally, in accordance with the eligibility requirements
for participation therein. Notwithstanding the foregoing, Employee shall not be
entitled to receive severance pursuant to any severance plan applicable to the
Company if the Employee is entitled to receive payments pursuant to Section 8(b)
of this Agreement. Nothing herein shall be construed so as to prevent the
Company from modifying or terminating any employee benefit plans or programs, or
employee fringe benefits, it may adopt from time to time; provided that any such
modification or termination is made, or occurs, in connection with modifications
or terminations that are applicable to all similarly situated executives of
Philips.
2
<PAGE> 3
(c) Long-Term Incentive Plan. Employee shall be eligible to
participate in a long-term incentive plan (the "LTIP") during the Term, as
specified below. Payments under the LTIP will be based on two components:
(i) Guaranteed Payment. The Employee will be eligible
to receive a guaranteed payment ("Guaranteed Payment") equal
to 50% of $260,000 which shall become payable to Employee in
three (3) substantially equal installments if Employee is
actively employed by the Company on the date which is (A) six
(6) months following the Effective Date, (B) twelve (12)
months following the Effective Date and (C) eighteen (18)
months following the Effective Date, respectively, one such
installment to be paid following each of the dates described
in clauses (A), (B) and (C) above if the employment condition
has been satisfied on such date.
(ii) Earned Payment. The Employee will have the
opportunity to earn an additional long-term incentive payment
("Earned Payment") equal to up to 25% of $260,000 if (A)
business synergies and objectives (as defined by Philips in
consultation with Employee) during the eighteen (18) month
period following the Effective Date are achieved and (B)
Employee remains actively employed by the Company on the date
which is eighteen (18) months following the Effective Date;
provided, however, that Employee's performance in relation to
such objectives shall be measured every six (6) months,
beginning with the date which is six (6) months following the
Effective Date, and if the objectives have been achieved after
such six (6) month period, Employee shall be paid an amount
equal to one-third of the Earned Payment as soon as
practicable thereafter, but in no event later than thirty (30)
days after each such six (6) month period.
(d) Expenses. The Company shall promptly reimburse Employee
for all reasonable business expenses, including cellular telephone usage, upon
the presentation of reasonably itemized statements of such expenses in
accordance with the Company's policies and procedures now in force or as such
policies and procedures may be modified with respect to all employees of the
Company. In addition, the Company shall reimburse Employee for discretionary
expenses of up to $30,000 during each twelve (12) month period during the Term
to be used for expenses which in Employee's sole discretion are related to
Employee's job or position at the Company.
6. Termination. This Agreement shall be terminated upon the earliest to
occur of the following:
3
<PAGE> 4
(a) Expiration. The expiration of the Term.
(b) Death. The death of Employee.
(c) Disability. If, as a result of Disability, Employee shall
have been substantially unable to perform the duties of Employee's employment
hereunder for a period of ninety (90) consecutive days or any ninety (90) days
within a period of two hundred seventy (270) days and within thirty (30) days
after written Notice of Termination is given by the Company after such ninety
(90) day period, Employee shall not have returned to the substantial performance
of duties on a full-time basis. For purposes of this Agreement, "Disability"
shall have the same meaning as that term is defined in the Long Term Disability
Plan applicable to employees of the Company; provided, that, if no such plan
exists, "Disability" shall have the same meaning as provided in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended.
(d) Cause. The Company terminates Employee for Cause. For
purposes of this Agreement, the Company shall have "Cause" to terminate
Employee's employment upon Employee's (i) willful and continued failure to
substantially perform Employee's duties with the Company (other than any such
failure resulting from incapacity due to physical or mental illness) after a
written demand for substantial performance is delivered to Employee which
identifies the manner in which the Company believes that Employee has not
substantially performed Employee's duties and Employee is given a reasonable
opportunity to correct any such deficiency in performance, or (ii) willful
misconduct (but excluding any action that Employee reasonably believes is in the
best interests of the Company) which is demonstrably and materially injurious to
the Company or to any entity in control of, controlled by or under common
control with the Company (an "Affiliate"), including, but not limited to, any
breach of Sections 9 and 10 hereof or gross negligence or gross misconduct, or
(iii) the conviction of, or plea of guilty or nolo contendere to, a felony
involving moral turpitude, or (iv) habitual drug or alcohol abuse by Employee.
(e) Without Cause. The Company terminates Employee's
employment hereunder without Cause by providing Employee with a Notice of
Termination.
(f) Voluntary Termination. Employee terminates this Agreement
and Employee's employment hereunder at any time upon ninety (90) days prior
written notice to the Company.
(g) Material Breach. Employee terminates employment because of
a material breach of this Agreement by the Company. For purposes of this
Agreement, a "material breach" shall be deemed to occur upon a failure by the
Company to comply with any material provision of Sections 4 and 5 (other than
Section 5(c)(ii)) of this Agreement without Employee's written consent,
including (i) any reduction in Base
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<PAGE> 5
Salary, Target Bonus opportunity and Guaranteed Payment under the LTIP, when
considered in the aggregate, or (ii) a relocation of the Employee to a location
more than 50 miles from the Employee's present location, which in the case of
any alleged breach, has not been cured in all material respects within thirty
(30) days after written notice of such noncompliance has been given by Employee
to the Company.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Employee by the
Company or by Employee (other than termination pursuant to Section 6(a) or (b)
hereof) shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 11. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee under the provisions so indicated.
(b) Date of Termination. "Date of Termination" shall mean (i)
if Employee's employment is terminated by reason of Employee's death, the date
of death, (ii) if Employee's employment is terminated pursuant to Section 6(c)
hereof, thirty (30) days after Notice of Termination is given (provided that
Employee shall not have returned to work on a regular basis during such thirty
(30) day period), (iii) if Employee's employment is terminated pursuant to
Sections 6(d), 6(e) or 6(g), the date specified in the Notice of Termination,
and (iv) if Employee's employment is terminated pursuant to Section 6(f), the
date specified in a Notice of Termination which shall not be less than ninety
(90) days following the date of such Notice, unless determined by the Company in
its sole discretion.
8. Amounts Due Upon Termination. In the event Employee's employment
terminates during the Term, the Company shall provide Employee with the payments
set forth below. Employee acknowledges and agrees that the payments set forth in
this Section 8 constitute liquidated damages for termination of employment
during the Term.
(a) If Employee is terminated following expiration of the Term
under Section 6(a), or pursuant to Sections 6(b), 6(c), 6(d), or 6(f), the
Company shall pay Employee all accrued but unpaid Base Salary through the Date
of Termination at the rate in effect at the time Notice of Termination is given
and reimburse Employee for incurred regular, as opposed to discretionary,
expenses pursuant to Section 5(d), and the Company shall have no further
obligations to Employee under this Agreement; provided, that, Employee shall be
entitled to any other benefit or payment provided pursuant to any plan or policy
of the Company in accordance with such plan's or policy's terms.
(b) If Employee's employment is terminated pursuant to
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<PAGE> 6
Sections 6(e) or 6(g), the Company shall pay to Employee (A) Base Salary accrued
through the Date of Termination and (B) a payment equal to the sum of Employee's
Base Salary and Employee's discretionary expense account payable for the greater
of (i) the remainder of the Term, or (ii) twelve (12) months, and (C) a payment
equal to the sum, pro-rated through the Date of Termination, of (i) the Target
Bonus for the calendar year in which the termination occurs, and (ii) the
Guaranteed Payment under the LTIP. All such payments shall be made no later than
30 days following such termination. Employee shall also be entitled to
reimbursement for regular, as opposed to discretionary, expenses incurred
pursuant to Section 5(d) and to any other benefits or payments provided pursuant
to any plan or policy of the Company in accordance with such plan's or policy's
terms, subject to 5(b).
9. Fair Dealing/Non-Competition/Non-Solicitation.
(a) Employee recognizes and acknowledges that, during the term
of his employment by the Company, he will have access to and become familiar
with various trade secrets and other confidential or proprietary information of
the Company. Trade secrets, proprietary information and confidential information
encompass, without limitation, anything which is owned by the Company and is
regularly used in the operation of the business of the Company to obtain a
competitive advantage over the Company's competitors who do not know, have
access to, or utilize such information or trade secrets. Proprietary information
further includes, but is not limited to, records, files, documents, bulletins,
publications, manuals, financial data and information, marketing plans and
proposals, accounting control procedures, and information concerning and the
identity of customers, prospects and suppliers. Trade secrets further include,
but are not limited to, specifications, software programs, both the source code
and the object code, documentation, flow charts, diagrams, schematics, data,
data bases, and business and production methods and techniques. Employee further
recognizes and acknowledges that the trade secrets and other confidential or
proprietary information of the Company are valuable, special and unique and that
the protection thereof is of critical importance to the Company in maintaining
its competitive position. Employee, therefore, covenants and agrees that, except
as required by his employment hereunder or with the express prior written
consent of the Company or as required by court order, he shall not, during the
term of his employment by the Company or at anytime thereafter, either directly
or indirectly, make independent use of, publish or otherwise disclose any of the
aforesaid trade secrets or other confidential or proprietary information of the
Company (whether acquired, learned, obtained or developed by him alone or in
conjunction with others) to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever or allow any other person, firm,
corporation, association or other entity to make use of, publish or disclose any
of the aforesaid trade secrets or other confidential or proprietary information.
Employee agrees not to use, steal, or appropriate such items or versions
thereof, whether copied or reconstructed from memory or otherwise, in any
manner. Employee further recognizes and acknowledges that in order to enable
Company
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<PAGE> 7
to perform services for its clients, those clients may furnish to
Company confidential information concerning their business affairs, property,
methods of operation or other data; that the goodwill afforded to Company
depends upon, among other things, Company and its employees keeping such
services and information confidential. Employee therefore covenants and agrees
that he shall keep all such client services and information confidential and
shall not disclose any such information to any third party. Such client
information shall be subject to all of the restrictions to which Company's
confidential information is subject under this Agreement.
(b) Employee agrees not to disclose or use any protected
secret of any of his former employers.
(c) During the term of this Agreement, Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition with the business of Company, or to use in any manner
whatsoever for his own benefit, directly or indirectly, any business opportunity
rightfully belonging to Company.
(d) Employee agrees that during the term of the Agreement and
thereafter he shall not interfere with Company's relationship with any customer
or supplier or with the due performance of any understanding, agreement or
contract, whether written or oral, between Company and any of its customers or
suppliers. Without limiting the generality of the preceding sentence, Employee
agrees that for twelve (12) months following termination of his employment,
Employee will not solicit business from or perform services for any person or
entity which was a customer of the Company at the time of the termination of
employment, whether such solicitation is made or such services are performed on
Employee's own behalf or on behalf of any other person, firm, corporation,
association or other entity, unless such solicitation or service is not
competing, directly or indirectly, with the Company.
(e) Employee agrees upon his termination of employment that he
shall not enter or engage in competition with the Company in the development or
marketing of any speech recognition product or service in the United States,
either as an individual on his own, or as a partner or a joint venturer, or as
an employee, agent, officer, director or shareholder for any other person, or
otherwise for the period starting at the termination and continuing for a period
of twelve (12) months after the date of the termination of his employment.
(f) Employee expressly recognizes and acknowledges that the
Company has expanded substantial resources, energies and efforts in connection
with the aforesaid trade secrets, proprietary information, and customer and
supplier relationships, that the protection and confidentiality thereof are
critical to the growth, development and success of the Company and that
compliance with the restrictive covenants contained in
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<PAGE> 8
this Agreement is necessary to protect the business and good will of the
Company. As a result, Employee further recognizes that the Company will suffer
substantial, irreparable and continuing injuries, damages and costs attendant
thereto in the event of the breach of this Agreement. Therefore, the existence
of any claim or cause of action of Employee against Company, whether predicated
under this Agreement or otherwise, shall not constitute a defense to the
enforcement by Company of the covenants on the part of the Employee in this
Section 9. Further recognizing that money damages may not provide adequate
relief, the Employee agrees that, in the event that he breaches the provision of
this Section 9, Company shall be entitled to a preliminary or permanent
injunction in order to prevent the continuation of such harm. Employee further
agrees that any and all sums collected by Employee, or any company owned,
controlled, employing or employed by Employee, directly or indirectly, in
violation of this Agreement, shall be constructively held by Employee in trust
for Company. Nothing in this Agreement shall be construed to prohibit the
Company from also pursuing any other remedy, the parties having agreed that all
remedies are cumulative.
(g) Employee hereby assigns and agrees to assign to the
Company or its subsidiaries or affiliates, as appropriate, its successors,
assigns or nominees, his entire right, title and interest in any developments,
designs, patents, inventions and improvements, trade secrets, trademarks,
copyrightable subject matter or proprietary information which Employee made or
conceived, or may make or conceive, either solely or jointly with others while
providing services to Company or with the use of the time, material or
facilities of Company, or resulting from any task assigned to him or work
performed by him for or on behalf of Company. It is further agreed that, without
charge to Company, but at its expense, Employee will execute and deliver all
such further papers as may be necessary, including original applications and
applications for renewal, extension or reissue of patents, trademark
registrations or copyright registrations, in any and all countries, to vest
title thereto in Company, its successors, assigns or nominees. Either during or
after employment with Company, Employee will not disclose to anyone outside of
Company, nor use in other than Company business, except with the prior written
permission of an officer of the Company, any developments, designs, inventions
and improvements, trade secrets, works of authorship, proprietary information or
proprietary things developed by him while providing services to Company.
10. Successors; Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of Employee, his heirs, executors,
administrators, beneficiaries and assigns and shall be binding upon and shall
inure to the benefit of the Company and its successors, including, following the
Effective Time, Philips Speech Processing Telephony North America.
11. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States
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<PAGE> 9
certified or registered mail, return receipt requested, postage prepaid,
addressed, in case of Employee, to the last address on file with the Company and
if to the Company, to its executive offices or to such other address as any
party may have furnished to the others in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
12. Resolution of Differences Over Breaches of Agreement. The parties
shall use good faith efforts to resolve any controversy or claim arising out of,
or relating to this Agreement or the breach thereof, first in accordance with
the Company's internal review procedures, except that this requirement shall not
apply to any claim or dispute under or relating to Section 9 of this Agreement.
If despite their good faith efforts, the parties are unable to resolve such
controversy or claim through the Company's internal review procedures, then such
controversy or claim shall be resolved by a court of law having jurisdiction
thereof. If any contest or dispute shall arise between the Company and Employee
regarding any provision of this Agreement, the parties shall be responsible for
paying all of its own legal fees and expenses incurred in connection with such
contest or dispute.
13. Governing Law; Venue. This Agreement is governed by, and is to be
construed and enforced in accordance with, the laws of the State of New York,
without regard to principles of conflicts of laws. If, under such law, any
portion of this Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation or ordinance, such portion shall be deemed
to be modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement, and the invalidity of any such portion shall not
affect the force, effect and validity of the remaining portion hereof. The
parties agree and consent that Dallas County, Texas shall be the proper venue
for the resolution of any disputes arising hereunder.
14. Amendment. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Employee and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
15. Survival. The respective obligations of, and benefits afforded to,
Employee and Company as provided in Section 9 of this Agreement shall survive
the termination of this Agreement.
16. No Conflict of Interest. During the Term, Employee shall not
directly, or indirectly render service, or undertake any employment or
consulting agreement with another entity without the express written consent of
the Company.
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17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto (and in the case of the Company, its predecessors and
successors) in respect of the subject matter contained herein and supersedes all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto in respect of such subject matter,
including, but not limited to, the Employment Agreement by and between VCS
Industries, Inc. and Employee, dated as of June 18, 1993 and any and all
amendments made subsequent thereto and the Severance Agreement entered into
during 1999 (collectively, the "Prior Agreement"), and as of the Effective Date,
such Prior Agreement shall be void and of no further force or effect (except as
to any sums that remain due and owing to Employee thereunder as of the Effective
Date as a result of events occurring prior to the Effective Date. Any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled, as of the successful consummation of
the Offer. Employee acknowledges that in consideration of the benefits to be
provided hereunder, Employee has agreed to terminate the Prior Agreement.
19. Guaranty. Philips hereby guarantees the obligations of the Company
undertaken hereby.
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20. Section Headings. The section headings in this Agreement are for
convenience of reference only, and they form no part of this Agreement and shall
not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PHILIPS ELECTRONICS NORTH
AMERICA CORPORATION
By:/s/ William E. Curran
------------------------------------
Title: Senior Vice President and Chief
Financial Officer
/s/ Peter J. Foster
----------------------------
Peter J. Foster
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<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 9, 1999, by and between Philips Electronics
North America Corporation ("Philips"), Voice Control Systems, Inc. (the
"Company") and Dr. Thomas B. Schalk ("Employee").
WHEREAS, the Company, Employee's current employer, has entered into an
Agreement and Plan of Merger, dated as of May 9, 1999 with Merger Sub and
Philips (the "Merger Agreement"); and
WHEREAS, Philips and the Company desire to secure the continued
employment of Employee following the successful consummation of the Offer (as
such term is defined in the Merger Agreement) with the Company or such other
subsidiary designated by Philips; and
WHEREAS, the parties desire to enter into an agreement setting forth
the terms and conditions of the employment of Employee with the Company on and
after the successful consummation of the Offer;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:
1. Employment. The Company hereby agrees to employ Employee, and
Employee agrees to serve as an employee of the Company, on the terms and
conditions set forth in this Agreement, effective upon the purchase of Shares by
Merger Sub pursuant to the Offer (as such terms are defined in the Merger
Agreement) (the "Effective Date"); it being understood that the employment
obligations undertaken by the Company hereunder shall not become effective, and
shall become null and void, in the event that such purchase of Shares does not
occur. For all purposes under this Agreement, references to the Company shall be
deemed to refer to the subsidiary of Philips which employs Employee during the
Term, as defined below.
2. Term. The "Term" shall be the period commencing on the Effective
Date and ending on the second anniversary of the Effective Date.
3. Duties and Responsibilities. During the Term, Employee shall serve
as the Vice President and Chief Technical Officer of the Company with such
duties and responsibilities that are customary for such position and shall
include those that are assigned to the Employee by the Company during the Term.
Employee shall devote substantially all Employee's working time, attention and
energies during normal business hours (other than absences due to illness or
vacation) to the performance of Employee's duties for the Company. Employee may
engage in other outside activities, including community activities, provided
that such activities do not unreasonably interfere with Employee's performance
of Employee's duties with the Company.
<PAGE> 2
4. Place of Performance. The principal place of employment of Employee
shall be at the Company's offices in Dallas, Texas. Employee acknowledges that
he may be required to travel on Company business in connection with the
performance of his duties hereunder without violation of this Section 4 by the
Company.
5. Compensation and Related Matters.
(a) Base Salary and Bonus. During the Term the Company shall
pay Employee a base salary at the rate of not less than $180,000 ("Base Salary")
which shall be annually reviewed by the Company. Employee's Base Salary shall be
paid in approximately equal installments in accordance with the Company's
customary payroll practices. Employee's performance and Base Salary shall be
reviewed annually. If Employee's Base Salary is increased by the Company, such
increased Base Salary shall then constitute the Base Salary for all purposes of
the Agreement other than Section 5(c), below. The Employee shall be eligible to
receive an annual bonus opportunity equal to 30% of Employee's Base Salary (the
"Target Bonus"). The actual bonus payment, which may be higher or lower than the
Target Bonus, will be determined, by Philips in consultation with the Senior
Vice President, Philips Speech Processing Telephony North America, according to
the level of achievement of performance targets established thereby; provided,
however that the annual bonus payable to Employee in respect of the first twelve
months of the Term shall not be less than $20,000. The annual bonus will be paid
to Employee on a quarterly basis during the Term.
(b) Benefit Plans. Employee shall be entitled to participate
in such employee benefit plans and insurance programs applicable to the Company,
or which it may adopt from time to time, for its executive management or
supervisory personnel generally, in accordance with the eligibility requirements
for participation therein. Notwithstanding the foregoing, Employee shall not be
entitled to receive severance pursuant to any severance plan applicable to the
Company if the Employee is entitled to receive payments pursuant to Section 8(b)
of this Agreement. Nothing herein shall be construed so as to prevent the
Company from modifying or terminating any employee benefit plans or programs, or
employee fringe benefits, it may adopt from time to time; provided that any such
modification or termination is made, or occurs, in connection with modifications
or terminations that are applicable to all similarly situated executives of
Philips.
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(c) Long-Term Incentive Plan. Employee shall be eligible to
participate in a long-term incentive plan (the "LTIP") during the Term, as
specified below. Payments under the LTIP will be based on two components:
(i) Guaranteed Payment. The Employee will be eligible
to receive a guaranteed payment ("Guaranteed Payment") equal
to 50% of Employee's Base Salary applicable as of June, 1999
which shall become payable to Employee in three (3)
substantially equal installments if Employee is actively
employed by the Company on the date which is (A) six (6)
months following the Effective Date, (B) twelve (12) months
following the Effective Date and (C) eighteen (18) months
following the Effective Date, respectively, one such
installment to be paid following each of the dates described
in clauses (A), (B) and (C) if the employment condition has
been met on such date
(ii) Earned Payment. The Employee will have the
opportunity to earn an additional long-term incentive payment
("Earned Payment") equal to up to 25% of Employee's Base
Salary applicable as of June, 1999 if (A) business synergies
and objectives (as defined by Philips in consultation with the
Senior Vice President, Philips Speech Processing Telephony
North America) during the eighteen (18) month period following
the Effective Date are achieved and (B) Employee remains
actively employed by the Company on the date which is eighteen
(18) months following the Effective Date; provided, however,
that Employee's performance in relation to such objectives
shall be measured every six (6) months, beginning with the
date which is six (6) months following the Effective Date, and
if the objectives have been achieved after such six (6) month
period, Employee shall be paid an amount equal to one-third
of the Earned Payment as soon as practicable thereafter, but
in no event later than thirty (30) days after each such six
(6) month period.
(d) Expenses. The Company shall promptly reimburse Employee
for all reasonable business expenses, including cellular telephone usage, upon
the presentation of reasonably itemized statements of such expenses in
accordance with the Company's policies and procedures now in force or as such
policies and procedures may be modified with respect to all employees of the
Company.
6. Termination. This Agreement shall be terminated upon the earliest to
occur of the following:
(a) Expiration. The expiration of the Term.
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<PAGE> 4
(b) Death. The death of Employee.
(c) Disability. If, as a result of Disability, Employee shall
have been substantially unable to perform the duties of Employee's employment
hereunder for a period of ninety (90) consecutive days or any ninety (90) days
within a period of two hundred seventy (270) days and within thirty (30) days
after written Notice of Termination is given by the Company after such ninety
(90) day period, Employee shall not have returned to the substantial performance
of duties on a full-time basis. For purposes of this Agreement, "Disability"
shall have the same meaning as that term is defined in the Long Term Disability
Plan applicable to employees of the Company; provided, that, if no such plan
exists, "Disability" shall have the same meaning as provided in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended.
(d) Cause. The Company terminates Employee for Cause. For
purposes of this Agreement, the Company shall have "Cause" to terminate
Employee's employment upon Employee's (i) willful and continued failure to
substantially perform Employee's duties with the Company (other than any such
failure resulting from incapacity due to physical or mental illness) after a
written demand for substantial performance is delivered to Employee which
identifies the manner in which the Company believes that Employee has not
substantially performed Employee's duties and Employee is given a reasonable
opportunity to correct any such deficiency in performance, or (ii) willful
misconduct (but excluding any action that Employee reasonably believes is in the
best interests of the Company) which is demonstrably and materially injurious to
the Company or to any entity in control of, controlled by or under common
control with the Company (an "Affiliate"), including, but not limited to, any
breach of Sections 9 and 10 hereof or gross negligence or gross misconduct, or
(iii) the conviction of, or plea of guilty or nolo contendere to, a felony
involving moral turpitude, or (iv) habitual drug or alcohol abuse by Employee.
(e) Without Cause. The Company terminates Employee's
employment hereunder without Cause by providing Employee with a Notice of
Termination.
(f) Voluntary Termination. Employee terminates this Agreement
and Employee's employment hereunder at any time upon ninety (90) days prior
written notice to the Company.
(g) Material Breach. Employee terminates employment because of
a material breach of this Agreement by the Company. For purposes of this
Agreement, a "material breach" shall be deemed to occur upon a failure by the
Company to comply with any material provision of Sections 4 and 5 (other than
Section 5(c)(ii)) of this Agreement without Employee's written consent,
including (i) any reduction in Base Salary, Target Bonus opportunity and
Guaranteed Payment under the LTIP, when
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<PAGE> 5
considered in the aggregate, or (ii) a relocation of the Employee to a location
more than 50 miles from the Employee's present location, which in the case of
any alleged breach, has not been cured in all material respects within thirty
(30) days after written notice of such noncompliance has been given by Employee
to the Company.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Employee by the
Company or by Employee (other than termination pursuant to Section 6(a) or (b)
hereof) shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 11. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee under the provisions so indicated.
(b) Date of Termination. "Date of Termination" shall mean (i)
if Employee's employment is terminated by reason of Employee's death, the date
of death, (ii) if Employee's employment is terminated pursuant to Section 6(c)
hereof, thirty (30) days after Notice of Termination is given (provided that
Employee shall not have returned to work on a regular basis during such thirty
(30) day period), (iii) if Employee's employment is terminated pursuant to
Sections 6(d), 6(e) or 6(g), the date specified in the Notice of Termination,
and (iv) if Employee's employment is terminated pursuant to Section 6(f), the
date specified in a Notice of Termination which shall not be less than ninety
(90) days following the date of such Notice, unless determined by the Company in
its sole discretion.
8. Amounts Due Upon Termination. In the event Employee's employment
terminates during the Term, the Company shall provide Employee with the payments
set forth below. Employee acknowledges and agrees that the payments set forth in
this Section 8 constitute liquidated damages for termination of employment
during the Term.
(a) If Employee is terminated following expiration of the Term
under Section 6(a),or pursuant to Sections 6(b), 6(c), 6(d), or 6(f), the
Company shall pay Employee all accrued but unpaid Base Salary through the Date
of Termination at the rate in effect at the time Notice of Termination is given
and reimburse Employee for incurred expenses in accordance with Section 5(d),
and the Company shall have no further obligations to Employee under this
Agreement; provided, that, Employee shall be entitled to any other benefit or
payment provided pursuant to any plan or policy of the Company in accordance
with such plan's or policy's terms.
(b) If Employee's employment is terminated pursuant to
Sections 6(e) or 6(g), the Company shall pay to Employee (A) Base Salary accrued
through the Date of Termination and (B) a payment equal to the Base Salary
payable for
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<PAGE> 6
the greater of (i) the remainder of the Term, or (ii) eighteen (18) months, and
(C) a payment equal to the sum, pro-rated through the Date of Termination, of
(i) the Target Bonus for the calendar year in which the termination occurs, and
(ii) the Guaranteed Payment under the LTIP. All such payments shall be made no
later than 30 days following such termination. Employee shall also be entitled
to reimbursement for incurred expenses pursuant to Section 5(d) and to any other
benefits or payments provided pursuant to any plan or policy of the Company in
accordance with such plan's or policy's terms, subject to Section 5(b).
9. Fair Dealing/Non-Competition/Non-Solicitation.
(a) Employee recognizes and acknowledges that, during the term
of his employment by the Company, he will have access to and become familiar
with various trade secrets and other confidential or proprietary information of
the Company. Trade secrets, proprietary information and confidential information
encompass, without limitation, anything which is owned by the Company and is
regularly used in the operation of the business of the Company to obtain a
competitive advantage over the Company's competitors who do not know, have
access to, or utilize such information or trade secrets. Proprietary information
further includes, but is not limited to, records, files, documents, bulletins,
publications, manuals, financial data and information, marketing plans and
proposals, accounting control procedures, and information concerning and the
identity of customers, prospects and suppliers. Trade secrets further include,
but are not limited to, specifications, software programs, both the source code
and the object code, documentation, flow charts, diagrams, schematics, data,
data bases, and business and production methods and techniques. Employee further
recognizes and acknowledges that the trade secrets and other confidential or
proprietary information of the Company are valuable, special and unique and that
the protection thereof is of critical importance to the Company in maintaining
its competitive position. Employee, therefore, covenants and agrees that, except
as required by his employment hereunder or with the express prior written
consent of the Company or as required by court order, he shall not, during the
term of his employment by the Company or at anytime thereafter, either directly
or indirectly, make independent use of, publish or otherwise disclose any of the
aforesaid trade secrets or other confidential or proprietary information of the
Company (whether acquired, learned, obtained or developed by him alone or in
conjunction with others) to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever or allow any other person, firm,
corporation, association or other entity to make use of, publish or disclose any
of the aforesaid trade secrets or other confidential or proprietary information.
Employee agrees not to use, steal, or appropriate such items or versions
thereof, whether copied or reconstructed from memory or otherwise, in any
manner. Employee further recognizes and acknowledges that in order to enable
Company to perform services for its clients, those clients may furnish to
Company confidential information concerning their business affairs, property,
methods of operation or other data; that the goodwill afforded to Company
depends upon, among other things,
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<PAGE> 7
Company and its employees keeping such services and information confidential.
Employee therefore covenants and agrees that he shall keep all such client
services and information confidential and shall not disclose any such
information to any third party. Such client information shall be subject to all
of the restrictions to which Company's confidential information is subject under
this Agreement.
(b) Employee agrees not to disclose or use any protected
secret of any of his former employers.
(c) During the term of this Agreement, Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition with the business of Company, or to use in any manner
whatsoever for his own benefit, directly or indirectly, any business opportunity
rightfully belonging to Company.
(d) Employee agrees that during the term of the Agreement and
thereafter he shall not interfere with Company's relationship with any customer
or supplier or with the due performance of any understanding, agreement or
contract, whether written or oral, between Company and any of its customers or
suppliers. Without limiting the generality of the preceding sentence, Employee
agrees that for twenty-four (24) months following termination of his employment,
Employee will not solicit business from or perform services for any person or
entity which was a customer of the Company at the time of the termination of
employment, whether such solicitation is made or such services are performed on
Employee's own behalf or on behalf of any other person, firm, corporation,
association or other entity, unless such solicitation or service is not
competing, directly or indirectly, with the Company.
(e) Employee agrees upon his termination of employment that he
shall not enter or engage in competition with the Company in the development or
marketing of any speech recognition product or service in the United States,
either as an individual on his own, or as a partner or a joint venturer, or as
an employee, agent, officer, director or shareholder for any other person, or
otherwise for the period starting at the termination and continuing for a period
of twenty-four (24) months after the date of the termination of his employment.
(f) Employee expressly recognizes and acknowledges that the
Company has expanded substantial resources, energies and efforts in connection
with the aforesaid trade secrets, proprietary information, and customer and
supplier relationships, that the protection and confidentiality thereof are
critical to the growth, development and success of the Company and that
compliance with the restrictive covenants contained in this Agreement is
necessary to protect the business and good will of the Company. As a result,
Employee further recognizes that the Company will suffer substantial,
irreparable and continuing injuries, damages and costs attendant thereto in the
event of the breach of
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<PAGE> 8
this Agreement. Therefore, the existence of any claim or cause of action of
Employee against Company, whether predicated under this Agreement or otherwise,
shall not constitute a defense to the enforcement by Company of the covenants on
the part of the Employee in this Section 9. Further recognizing that money
damages may not provide adequate relief, the Employee agrees that, in the event
that he breaches the provision of this Section 9, Company shall be entitled to a
preliminary or permanent injunction in order to prevent the continuation of such
harm. Employee further agrees that any and all sums collected by Employee, or
any company owned, controlled, employing or employed by Employee, directly or
indirectly, in violation of this Agreement, shall be constructively held by
Employee in trust for Company. Nothing in this Agreement shall be construed to
prohibit the Company from also pursuing any other remedy, the parties having
agreed that all remedies are cumulative.
(g) Employee hereby assigns and agrees to assign to the
Company or its subsidiaries or affiliates, as appropriate, its successors,
assigns or nominees, his entire right, title and interest in any developments,
designs, patents, inventions and improvements, trade secrets, trademarks,
copyrightable subject matter or proprietary information which Employee made or
conceived, or may make or conceive, either solely or jointly with others while
providing services to Company or with the use of the time, material or
facilities of Company, or resulting from any task assigned to him or work
performed by him for or on behalf of Company. It is further agreed that, without
charge to Company, but at its expense, Employee will execute and deliver all
such further papers as may be necessary, including original applications and
applications for renewal, extension or reissue of patents, trademark
registrations or copyright registrations, in any and all countries, to vest
title thereto in Company, its successors, assigns or nominees. Either during or
after employment with Company, Employee will not disclose to anyone outside of
Company, nor use in other than Company business, except with the prior written
permission of an officer of the Company, any developments, designs, inventions
and improvements, trade secrets, works of authorship, proprietary information or
proprietary things developed by him while providing services to Company.
10. Successors; Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of Employee, his heirs, executors,
administrators, beneficiaries and assigns and shall be binding upon and shall
inure to the benefit of the Company and its successors, including, following the
Effective Time, Philips Speech Processing Telephony North America.
11. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed, in case of Employee, to the last address on file with the
Company and if to the Company, to its executive offices or to such other address
as any party may have furnished to the others in writing in accordance herewith,
except that notices of change of address shall be effective
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<PAGE> 9
only upon receipt.
12. Resolution of Differences Over Breaches of Agreement. The parties
shall use good faith efforts to resolve any controversy or claim arising out of,
or relating to this Agreement or the breach thereof, first in accordance with
the Company's internal review procedures, except that this requirement shall not
apply to any claim or dispute under or relating to Section 9 of this Agreement.
If despite their good faith efforts, the parties are unable to resolve such
controversy or claim through the Company's internal review procedures, then such
controversy or claim shall be resolved by a court of law having jurisdiction
thereof. If any contest or dispute shall arise between the Company and Employee
regarding any provision of this Agreement, the parties shall be responsible for
paying all of its own legal fees and expenses incurred in connection with such
contest or dispute.
13. Governing Law; Venue. This Agreement is governed by, and is to be
construed and enforced in accordance with, the laws of the State of New York,
without regard to principles of conflicts of laws. If, under such law, any
portion of this Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation or ordinance, such portion shall be deemed
to be modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement, and the invalidity of any such portion shall not
affect the force, effect and validity of the remaining portion hereof. The
parties agree and consent that Dallas County, Texas shall be the proper venue
for the resolution of any disputes arising hereunder.
14. Amendment. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Employee and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
15. Survival. The respective obligations of, and benefits afforded to,
Employee and Company as provided in Section 9 of this Agreement shall survive
the termination of this Agreement.
16. No Conflict of Interest. During the Term, Employee shall not
directly, or indirectly render service, or undertake any employment or
consulting agreement with another entity without the express written consent of
the Company.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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<PAGE> 10
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto (and in the case of the Company, its predecessors and
successors) in respect of the subject matter contained herein and supersedes all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto in respect of such subject matter,
including, but not limited to, the Employment Agreement by and between VCS
Industries, Inc. and Employee, dated as of June 18, 1993 and any and all
amendments made subsequent thereto (the "Prior Agreement"), and as of the
Effective Date, such Prior Agreement shall be void and of no further force or
effect (except as to any sums that remain due and owing to Employee thereunder
as of the Effective Date as a result of events occurring prior to the Effective
Date). Any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and canceled, as of the successful
consummation of the Offer. Employee acknowledges that in consideration of the
benefits to be provided hereunder, Employee has agreed to terminate the Prior
Agreement.
19. Guaranty. Philips hereby guarantees the obligations of the Company
undertaken hereby.
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<PAGE> 11
20. Section Headings. The section headings in this Agreement are for
convenience of reference only, and they form no part of this Agreement and shall
not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PHILIPS ELECTRONICS NORTH
AMERICA CORPORATION
By:/s/ William E. Curran
------------------------
Title: Senior Vice President and
Chief Financial Officer
VOICE CONTROL SYSTEMS, INC.
By:/s/ Kim S. Terry
------------------------
Title: Vice President Finance
/s/ Dr. Thomas B. Schalk
----------------------------
Dr. Thomas B. Schalk
11
<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 9, 1999, by and between Philips Electronics
North America Corporation ("Philips") and Kim Terry ("Employee").
WHEREAS, Voice Control Systems, Inc. (the "Company"), Employee's
current employer, has entered into an Agreement and Plan of Merger, dated as of
May 9, 1999 with Merger Sub and Philips (the "Merger Agreement"); and
WHEREAS, Philips desires to secure the continued employment of Employee
following the successful consummation of the Offer (as such term is defined in
the Merger Agreement) with the Company or such other subsidiary designated by
Philips; and
WHEREAS, the parties desire to enter into an agreement setting forth
the terms and conditions of the employment of Employee with the Company or such
other subsidiary designated by Philips on and after the successful consummation
of the Offer;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:
1. Employment. For all purposes under this Agreement, references to the
Company shall be deemed to refer to the subsidiary of Philips which employs
Employee during the Term, as defined below. The Company hereby agrees to employ
Employee, and Employee agrees to serve as an employee of the Company, on the
terms and conditions set forth in this Agreement, effective upon the purchase of
Shares by Merger Sub pursuant to the Offer (as such terms are defined in the
Merger Agreement) (the "Effective Date"); it being understood that the
employment obligations undertaken by the Company hereunder shall not become
effective, and shall become null and void, in the event that such purchase of
Shares does not occur.
2. Term. The "Term" shall be the period commencing on the Effective
Date and ending on the second anniversary of the Effective Date.
3. Duties and Responsibilities. During the Term, Employee shall serve
as the Vice President - Operations and Finance of the Company with such duties
and responsibilities that are customary for such position and shall include
those that are assigned to the Employee by the Company during the Term. Employee
shall devote substantially all Employee's working time, attention and energies
during normal business hours (other than absences due to illness or vacation) to
the performance of Employee's duties for the Company. Employee may engage in
other outside activities, including community activities, provided that such
activities do not unreasonably interfere with Employee's performance of
Employee's duties with the Company.
<PAGE> 2
4. Place of Performance. The principal place of employment of Employee
shall be at the Company's offices in Dallas, Texas. Employee acknowledges that
she may be required to travel on Company business in connection with the
performance of her duties hereunder without violation of this Section 4.
5. Compensation and Related Matters.
(a) Base Salary and Bonus. During the Term the Company shall
pay Employee a base salary at the rate of not less than $160,000 ("Base Salary")
which shall be annually reviewed by the Company. Employee's Base Salary shall be
paid in approximately equal installments in accordance with the Company's
customary payroll practices. Employee's performance and Base Salary shall be
reviewed annually. If Employee's Base Salary is increased by the Company, such
increased Base Salary shall then constitute the Base Salary for all purposes of
the Agreement other than Section 5(c), below. The Employee shall be eligible to
receive an annual bonus opportunity equal to 30% of Employee's Base Salary (the
"Target Bonus"). The actual bonus payment, which may be higher or lower than the
Target Bonus, will be determined, by Philips in consultation with the Senior
Vice President, Philips Speech Processing Telephony North America, according to
the level of achievement of performance targets established thereby. The bonus
will be paid no later than during the first quarter after the end of the
relevant calendar year or if this Agreement is terminated due to its expiration
during a calendar year, no later than ninety (90) days following such
termination.
(b) Benefit Plans. Employee shall be entitled to participate
in such employee benefit plans and insurance programs applicable to the Company,
or which it may adopt from time to time, for its executive management or
supervisory personnel generally, in accordance with the eligibility requirements
for participation therein. Notwithstanding the foregoing, Employee shall not be
entitled to receive severance pursuant to any severance plan applicable to the
Company if the Employee is entitled to receive payments pursuant to Section 8(b)
of this Agreement. Nothing herein shall be construed so as to prevent the
Company from modifying or terminating any employee benefit plans or programs, or
employee fringe benefits, it may adopt from time to time; provided that any such
modification or termination is made, or occurs, in connection with modifications
or terminations that are applicable to all similarly situated executives of
Philips.
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<PAGE> 3
(c) Long-Term Incentive Plan. Employee shall be eligible to
participate in a long-term incentive plan (the "LTIP") during the Term, as
specified below. Payments under the LTIP will be based on two components:
(i) Guaranteed Payment. The Employee will be eligible
to receive a guaranteed payment ("Guaranteed Payment") equal
to 50% of Employee's Base Salary applicable as of June, 1999
which shall become payable to Employee in three (3)
substantially equal installments if Employee is actively
employed by the Company on the date which is (A) six (6)
months following the Effective Date, (B) twelve (12) months
following the Effective Date and (C) eighteen (18) months
following the Effective Date, respectively, one such
installment to be paid following each of the dates described
in clauses (A), (B) and (C) above if the employment condition
has been satisfied on such date.
(ii) Earned Payment. The Employee will have the
opportunity to earn an additional long-term incentive payment
("Earned Payment") equal to up to 25% of Employee's Base
Salary applicable as of June, 1999 if (A) business synergies
and objectives (as defined by Philips in consultation with the
Senior Vice President, Philips Speech Processing Telephony
North America) during the eighteen (18) month period following
the Effective Date are achieved and (B) Employee remains
actively employed by the Company on the date which is eighteen
(18) months following the Effective Date; provided, however,
that Employee's performance in relation to such objectives
shall be measured every six (6) months, beginning with the
date which is six (6) months following the Effective Date, and
if the objectives have been achieved after such six (6) month
period, Employee shall be paid an amount equal to one-third
of the Earned Payment as soon as practicable thereafter, but
in no event later than thirty (30) days after each such six
(6) month period.
(d) Expenses. The Company shall promptly reimburse Employee
for all reasonable business expenses, including cellular telephone usage, upon
the presentation of reasonably itemized statements of such expenses in
accordance with the Company's policies and procedures now in force or as such
policies and procedures may be modified with respect to all employees of the
Company.
(e) Signing Bonus. In addition to the foregoing, Employee
shall be paid a bonus of $10,000 in consideration of her entering into this
Agreement, which shall be payable within one month following the Effective Date.
6. Termination. This Agreement shall be terminated upon the
earliest
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<PAGE> 4
to occur of the following:
(a) Expiration. The expiration of the Term.
(b) Death. The death of Employee.
(c) Disability. If, as a result of Disability, Employee shall
have been substantially unable to perform the duties of Employee's employment
hereunder for a period of ninety (90) consecutive days or any ninety (90) days
within a period of two hundred seventy (270) days and within thirty (30) days
after written Notice of Termination is given by the Company after such ninety
(90) day period, Employee shall not have returned to the substantial performance
of duties on a full-time basis. For purposes of this Agreement, "Disability"
shall have the same meaning as that term is defined in the Long Term Disability
Plan applicable to employees of the Company; provided, that, if no such plan
exists, "Disability" shall have the same meaning as provided in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended.
(d) Cause. The Company terminates Employee for Cause. For
purposes of this Agreement, the Company shall have "Cause" to terminate
Employee's employment upon Employee's (i) willful and continued failure to
substantially perform Employee's duties with the Company (other than any such
failure resulting from incapacity due to physical or mental illness) after a
written demand for substantial performance is delivered to Employee which
identifies the manner in which the Company believes that Employee has not
substantially performed Employee's duties and Employee is given a reasonable
opportunity to correct any such deficiency in performance, or (ii) willful
misconduct (but excluding any action that Employee reasonably believes is in the
best interests of the Company) which is demonstrably and materially injurious to
the Company or to any entity in control of, controlled by or under common
control with the Company (an "Affiliate"), including, but not limited to, any
breach of Sections 9 and 10 hereof or gross negligence or gross misconduct, or
(iii) the conviction of, or plea of guilty or nolo contendere to, a felony
involving moral turpitude, or (iv) habitual drug or alcohol abuse by Employee.
(e) Without Cause. The Company terminates Employee's
employment hereunder without Cause by providing Employee with a Notice of
Termination.
(f) Voluntary Termination. Employee terminates this Agreement
and Employee's employment hereunder at any time upon ninety (90) days prior
written notice to the Company.
(g) Material Breach. Employee terminates employment because of
a material breach of this Agreement by the Company. For purposes of this
Agreement, a "material breach" shall be deemed to occur upon a failure by the
Company
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<PAGE> 5
to comply with any material provision of Sections 4 or 5 (other than Section
5(c)(ii)) of this Agreement without Employee's written consent, including (i)
any reduction in Base Salary, Target Bonus opportunity and Guaranteed Payment
under the LTIP, when considered in the aggregate, or (ii) a relocation of the
Employee to a location more than 50 miles from the Employee's present location,
which in the case of any alleged breach, has not been cured in all material
respects within thirty (30) days after written notice of such noncompliance has
been given by Employee to the Company.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Employee by the
Company or by Employee (other than termination pursuant to Section 6(a) or (b)
hereof) shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 11. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee under the provisions so indicated.
(b) Date of Termination. "Date of Termination" shall mean (i)
if Employee's employment is terminated by reason of Employee's death, the date
of death, (ii) if Employee's employment is terminated pursuant to Section 6(c)
hereof, thirty (30) days after Notice of Termination is given (provided that
Employee shall not have returned to work on a regular basis during such thirty
(30) day period), (iii) if Employee's employment is terminated pursuant to
Sections 6(d), 6(e) or 6(g), the date specified in the Notice of Termination,
and (iv) if Employee's employment is terminated pursuant to Section 6(f), the
date specified in a Notice of Termination which shall not be less than ninety
(90) days following the date of such Notice, unless determined by the Company in
its sole discretion.
8. Amounts Due Upon Termination. In the event Employee's employment
terminates during the Term, the Company shall provide Employee with the payments
set forth below. Employee acknowledges and agrees that the payments set forth in
this Section 8 constitute liquidated damages for termination of employment
during the Term.
(a) If Employee is terminated following expiration of the Term
under Section 6(a), or pursuant to Sections 6(b), 6(c), 6(d), or 6(f), the
Company shall pay Employee all accrued but unpaid Base Salary through the Date
of Termination at the rate in effect at the time Notice of Termination is given
and reimburse Employee for incurred expenses pursuant to Section 5(d), and the
Company shall have no further obligations to Employee under this Agreement;
provided, that, Employee shall be entitled to any other benefit or payment
provided pursuant to any plan or policy of the Company in accordance with such
plan's or policy's terms.
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<PAGE> 6
(b) If Employee's employment is terminated pursuant to
Sections 6(e) or 6(g), the Company shall pay to Employee (A) Base Salary accrued
through the Date of Termination and (B) a payment equal to the Base Salary
payable for the greater of (i) the remainder of the Term, or (ii) twelve (12)
months, and (C) a payment equal to the sum, pro-rated through the Date of
Termination, of (i) the Target Bonus for the calendar year in which the
termination occurs, and (ii) the Guaranteed Payment under the LTIP. All such
payments shall be made no later than 30 days following such termination.
Employee shall also be entitled to reimbursement for incurred expenses pursuant
to Section 5(d) and to any other benefits or payments provided pursuant to any
plan or policy of the Company in accordance with such plan's or policy's terms,
subject to Section 5(b).
9. Fair Dealing/Non-Competition/Non-Solicitation.
(a) Employee recognizes and acknowledges that, during the term
of his employment by the Company, he will have access to and become familiar
with various trade secrets and other confidential or proprietary information of
the Company. Trade secrets, proprietary information and confidential information
encompass, without limitation, anything which is owned by the Company and is
regularly used in the operation of the business of the Company to obtain a
competitive advantage over the Company's competitors who do not know, have
access to, or utilize such information or trade secrets. Proprietary information
further includes, but is not limited to, records, files, documents, bulletins,
publications, manuals, financial data and information, marketing plans and
proposals, accounting control procedures, and information concerning and the
identity of customers, prospects and suppliers. Trade secrets further include,
but are not limited to, specifications, software programs, both the source code
and the object code, documentation, flow charts, diagrams, schematics, data,
data bases, and business and production methods and techniques. Employee further
recognizes and acknowledges that the trade secrets and other confidential or
proprietary information of the Company are valuable, special and unique and that
the protection thereof is of critical importance to the Company in maintaining
its competitive position. Employee, therefore, covenants and agrees that, except
as required by his employment hereunder or with the express prior written
consent of the Company or as required by a court order, she shall not, during
the term of his employment by the Company or at anytime thereafter, either
directly or indirectly, make independent use of, publish or otherwise disclose
any of the aforesaid trade secrets or other confidential or proprietary
information of the Company (whether acquired, learned, obtained or developed by
him alone or in conjunction with others) to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever or allow any
other person, firm, corporation, association or other entity to make use of,
publish or disclose any of the aforesaid trade secrets or other confidential or
proprietary information. Employee agrees not to use, steal, or appropriate such
items or versions thereof, whether copied or reconstructed from memory or
otherwise, in any
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<PAGE> 7
manner. Employee further recognizes and acknowledges that in order to enable
Company to perform services for its clients, those clients may furnish to
Company confidential information concerning their business affairs, property,
methods of operation or other data; that the goodwill afforded to Company
depends upon, among other things, Company and its employees keeping such
services and information confidential. Employee therefore covenants and agrees
that she shall keep all such client services and information confidential and
shall not disclose any such information to any third party. Such client
information shall be subject to all of the restrictions to which Company's
confidential information is subject under this Agreement.
(b) Employee agrees not to disclose or use any protected
secret of any of her former employers.
(c) During the term of this Agreement, Employee shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition with the business of Company, or to use in any manner
whatsoever for his own benefit, directly or indirectly, any business opportunity
rightfully belonging to Company.
(d) Employee agrees that during the term of the Agreement and
thereafter she shall not interfere with Company's relationship with any customer
or supplier or with the due performance of any understanding, agreement or
contract, whether written or oral, between Company and any of its customers or
suppliers. Without limiting the generality of the preceding sentence, Employee
agrees that for twelve (12) months following termination of his employment,
Employee will not solicit business from or perform services for any person or
entity which was a customer of the Company at the time of the termination of
employment, whether such solicitation is made or such services are performed on
Employee's own behalf or on behalf of any other person, firm, corporation,
association or other entity, unless such solicitation or service is not
competing, directly or indirectly, with the Company.
(e) Employee agrees upon her termination of employment that
she shall not enter or engage in competition with the Company in the development
or marketing of any speech recognition product or service in the United States,
either as an individual on his own, or as a partner or a joint venturer, or as
an employee, agent, officer, director or shareholder for any other person, or
otherwise for the period starting at the termination and continuing for a period
of twelve (12) months after the date of the termination of her employment.
(f) Employee expressly recognizes and acknowledges that the
Company has expanded substantial resources, energies and efforts in connection
with the aforesaid trade secrets, proprietary information, and customer and
supplier relationships, that the protection and confidentiality thereof are
critical to the growth, development and
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<PAGE> 8
success of the Company and that compliance with the restrictive covenants
contained in this Agreement is necessary to protect the business and good will
of the Company. As a result, Employee further recognizes that the Company will
suffer substantial, irreparable and continuing injuries, damages and costs
attendant thereto in the event of the breach of this Agreement. Therefore, the
existence of any claim or cause of action of Employee against Company, whether
predicated under this Agreement or otherwise, shall not constitute a defense to
the enforcement by Company of the covenants on the part of the Employee in this
Section 9. Further recognizing that money damages may not provide adequate
relief, the Employee agrees that, in the event that he breaches the provision of
this Section 9, Company shall be entitled to a preliminary or permanent
injunction in order to prevent the continuation of such harm. Employee further
agrees that any and all sums collected by Employee, or any company owned,
controlled, employing or employed by Employee, directly or indirectly, in
violation of this Agreement, shall be constructively held by Employee in trust
for Company. Nothing in this Agreement shall be construed to prohibit the
Company from also pursuing any other remedy, the parties having agreed that all
remedies are cumulative.
(g) Employee hereby assigns and agrees to assign to the
Company or its subsidiaries or affiliates, as appropriate, its successors,
assigns or nominees, his entire right, title and interest in any developments,
designs, patents, inventions and improvements, trade secrets, trademarks,
copyrightable subject matter or proprietary information which Employee made or
conceived, or may make or conceive, either solely or jointly with others while
providing services to Company or with the use of the time, material or
facilities of Company, or resulting from any task assigned to her or work
performed by her for or on behalf of Company. It is further agreed that, without
charge to Company, but at its expense, Employee will execute and deliver all
such further papers as may be necessary, including original applications and
applications for renewal, extension or reissue of patents, trademark
registrations or copyright registrations, in any and all countries, to vest
title thereto in Company, its successors, assigns or nominees. Either during or
after employment with Company, Employee will not disclose to anyone outside of
Company, nor use in other than Company business, except with the prior written
permission of an officer of the Company, any developments, designs, inventions
and improvements, trade secrets, works of authorship, proprietary information or
proprietary things developed by him while providing services to Company.
10. Successors; Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of Employee, her heirs, executors,
administrators, beneficiaries and assigns and shall be binding upon and shall
inure to the benefit of the Company and its successors, including, following the
Effective Time, Philips Speech Processing Telephony North America.
11. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be
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deemed to have been duly given when delivered either personally or by United
States certified or registered mail, return receipt requested, postage prepaid,
addressed, in case of Employee, to the last address on file with the Company and
if to the Company, to its executive offices or to such other address as any
party may have furnished to the others in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
12. Resolution of Differences Over Breaches of Agreement. The parties
shall use good faith efforts to resolve any controversy or claim arising out of,
or relating to this Agreement or the breach thereof, first in accordance with
the Company's internal review procedures, except that this requirement shall not
apply to any claim or dispute under or relating to Section 9 of this Agreement.
If despite their good faith efforts, the parties are unable to resolve such
controversy or claim through the Company's internal review procedures, then such
controversy or claim shall be resolved by a court of law having jurisdiction
thereof. If any contest or dispute shall arise between the Company and Employee
regarding any provision of this Agreement, the parties shall be responsible for
paying all of its own legal fees and expenses incurred in connection with such
contest or dispute.
13. Governing Law; Venue. This Agreement is governed by, and is to be
construed and enforced in accordance with, the laws of the State of New York,
without regard to principles of conflicts of laws. If, under such law, any
portion of this Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation or ordinance, such portion shall be deemed
to be modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement, and the invalidity of any such portion shall not
affect the force, effect and validity of the remaining portion hereof. The
Parties agree and consent that Dallas County, Texas shall be the proper venue
for the resolution of any disputes arising hereunder.
14. Amendment. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Employee and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
15. Survival. The respective obligations of, and benefits afforded to,
Employee and Company as provided in Section 9 of this Agreement shall survive
the termination of this Agreement.
16. No Conflict of Interest. During the Term, Employee shall not
directly, or indirectly render service, or undertake any employment or
consulting agreement with another entity without the express written consent of
the Company.
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17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto (and in the case of the Company, its predecessors and
successors) in respect of the subject matter contained herein and supersede all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto in respect of such subject matter. Any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled, as of the Effective Date.
19. Guaranty. Philips hereby guarantees the obligations of the Company
undertaken hereby.
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20. Section Headings. The section headings in this Agreement are for
convenience of reference only, and they form no part of this Agreement and shall
not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PHILIPS ELECTRONICS NORTH
AMERICA CORPORATION
By:/s/ William E. Curran
--------------------------------
Title: Senior Vice President and
Chief Financial Officer
/s/ Kim Terry
-----------------------------------
Kim Terry
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